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August 18, 2005

Google Says Sell

Google decided its shares were pricey enough to sell at these levels and announced a secondary offering worth about $4 billion. Google is in no urgent need of cash. The company simply decided that the elevated stock price offered an oppotune time to raise capital. All told, they are correct. Companies that anticipate needing capital should raise it when their stock price is high, so kudos to Google for the move.

The announcement knocked almost 4% from Google's share price at the open (the stock closed down just under 2%) and put Wall Street in a selling mood, at least for tech stocks. Nothing stuck out in particular today, though it was encouragin to tsee Intel slip another 1%, and Texas Instruments showed continued weakness, down 2%.

Last night Goldman Sachs issued a revised oil price target of $68 per barrel for 2006. A few months ago, their dramatic price target of $100 marked a short term top for oil, and it's likely the timing of their current prognostication will be equally dismal. I had already turned bearish, short-term, on oil after seeing the "China & India" cover of BusinessWeek, and the Goldman revelation just adds weight to the theory. The oil market is so rife with speculation in the short-term that psychological measures are the only means of anticipation price movements. Long-term, I'm still convinced oil will go dramatically higher.

Disclosure: Short INTC; Long INTC, TXN Puts


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