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October 5, 2005

Bull Burgers

Bulls were slow roasted over the trading pit today, as major equity indices got walloped for about 1.5%. The carnage was pretty much across the boards. Homeys and techies got pounded equally hard, with some of my favorites taking it on the chin: Intel down 1.7%, Toll Brothers down 2.5%, Centex down 2.4%, F5 Networks down 3.5%, and Best Buy down 2.2%.

The only noticeable "greenies" today were Freddie Mac and Research in Motion. Fred was up nearly 3% on their announcement of a stock-buyback plan. The rally strikes me as rather perverse given the fact that they simultaneously announced a preferred stock offering. The net result of this maneuver will be to transfer equity from one class (common stock) to another (preferred stock), except that they will now be paying interest on the money. Furthermore, the interest is treated on the balance sheet as a dividend, so it's not even tax-deductible! How this adds value to FRE is beyond me.

Why RIMM was up on a day like this is also beyond me. I'll right it off to a technical bounce.

Another quandary for the day is oil's $2 drop. Granted, I turned short-term bearish on oil at the beginning of September, but a headline on BBC this morning seems to be the type to scare up oil prices. The news is that British officials are accusing Iran of supporting Iraqi insurgents. If this type of riff doesn't smell like a precursor to an invasion, or at least bombing, of Iran, I don't know what does. The story will have to be followed closely to see if it grows legs.

Disclosure: Short RIMM, CTX, INTC, FFIV; Long INTC, TOL Puts

 

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