Market Talk

The stock market has recovered all its losses suffered after the Japan earthquake/tsunami/nuclear crisis, shrugging off at least the economic consequences of the event. That’s a posture that seems entirely premature, and the New York Times had a story Saturday that illustrates why it’s too soon to make conclusions about the disaster’s impact on the global economy.

The NYT headline reads “Global Supply Lines at Risk as Shipping Lines Shun Japan,” and the gist is that some shipping companies are reluctant to call on ports in Tokyo Bay because of concerns about radiation spewing from the damaged Fukushima Daiichi nuclear plant.

Cargo carriers have a lot at stake. As the story notes, they’re obviously concerned about the safety of their crews, but they also don’t want to risk contaminating cargo or their ships. One industry source explained that a vessel may need to be scrapped “if quarantined even temporarily for radioactivity, because they would face extra coast guard checks for years at subsequent destinations.”

Sounds extreme, but those extra inspections would make it hard for a ship to stay on schedule, and who wants to ship cargo on a vessel that’s always delayed?

So it’s no small matter, this reticence to sail into Tokyo and Yokohama. As the Times story says, those ports “are normally Japan’s two busiest, representing as much as 40 percent of the nation’s foreign container cargo.” Continue reading…

It took about three months (which is a little longer than we initially expected) but GM shares finally reached another milestone: they breached below their November $33 IPO price.

As you recall, it was one of the most highly anticipated and hyped-up IPOs in years, and got off to a bit of a shaky start as shares flirted with breaking the IPO price throughout its first week of trading. Of course, the underwriters weren’t about to let this thing flop right away, and the stock eventually gained a little momement, carried along by a buoyant mood in the stock market overall.

It hit a high of $39.48 in early January, but it’s been mostly downhill since then, even as the broader market continued higher. The sell-side analysts have (naturally) been unabashedly bullish, with more than 70% calling the stock a buy, or some equivalent rating.

GM made $510 million in its fourth-quarter, and full-year profit of $4.7 billion. Investors don’t appear to be impressed, with the stock currently down 4% at $33.20; earlier as low as $32.05.

All that hype, and the best GM shares could muster was a 3.6% pop above the IPO price – and that was with a whip-flailing closing flourish like you’d see at Belmont racetrack.

As we noted earlier this week, the build-up to this event reminded us of the Blackstone IPO in June 2007, with the suggestion being that like BX, GM’s IPO session may produce a high-water mark for the stock, at least for the foreseeable future. The 3.6% premium to the $33 IPO price at the close seems meager. BX, at least, gained 13% in its opening day. It eventually slumped below its $31/share IPO price two sessions later.

Will it take that long for GM?

Stock trades (or we should say churns) more than 452 million shares, roughly 10% of the total NYSE composite volume for the session.

At its best, GM shares rose more than 9% to $35.99 early on, and at their worst were only up 2.7% at $33.89 during the final half-hour of trading.

The good old days in Detroit.

The Detroit auto is a wild time, or at least it used to be. Auto companies went over the top trying to outdo each other with their elaborate stage shows. In 2007, Chrysler actually hired a team of cowboys to parade bulls through the streets of downtown Detroit to introduce a new Jeep model.

(The stunt didn’t work out so well. First off, it forced hundreds of journalists out into the freezing cold, which we didn’t exactly appreciate. Second, some of the bulls got, shall we say, amorous outside Cobo Hall, which clearly diverted attention away from the car.)

After the worst year for the auto industry in, well, probably ever, and the historic bankruptcies of GM and Chrysler, this year’s show, from what I’m reading, is a scaled-down version of its former self, much like the Detroit auto industry is a scaled-down version of itself. The “life after death” metaphors are flying all over the much-beleaguered city (as an aside: I was shocked by Detroit the first time I went there for the show. It seemed like half of downtown was just flat-out abandoned. I have never seen a major American city that looks quite like it.)

Continue reading…