Market Talk

There were two things I saw last week that put the fear of God in me. Both came Wednesday. One seems to be improving; the other remains a wild card, and that’s why I bring it up.

That was the first time I saw close-up pictures of the mangled Fukushima Daiichi nuclear plant. The walls that contain two of the reactors are completely gone. The upper third is missing from another. Seeing those pictures, it was pretty obvious to me that a total meltdown was a very real possibility. Those pictures were worth more than 1,000 words, and every word was absolutely shocking.

The Fukushima 50 have had some success in stabilizing the plant as of Sunday, and I fervently pray they are ultimately successful. God bless their courage. Were that others were so dedicated.

The second thing caught my attention Wednesday was the yen’s frenzied spike just after 5 p.m. New York time. The yen, which had been strengthening since last Friday’s earthquake, suddenly broke through all resistance and spiked higher. Lightning fast. Straight up. It was a black-swan kind of thing. Shorts were forced to sell, and that only contributed to the rise. It was chaotic.

“I can almost guarantee you that a few (hedge) funds out there were hurt very, very badly,” Dennis Gartman, who edits and publishes The Gartman Letter, said via email.  “No one ever escapes that sort of action entirely.”

I’ve had the feeling since last Friday that the ramifications of Japan’s nightmare are going to be larger than people initially suspected, and they are going to end up in places where people don’t expect, and in a world as tightly connected as the one in which we live, that increases the odds that one haywire event will have a cascading and destructive effect. Something like the yen’s sudden jerk has the potential to spark a global unwinding. It’s a scary thing to contemplate.

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There’s been an awful lot of news escaping the North Africa and the Middle East today, and it’s all pushing crude prices higher. There have been a raft of rumor, vehemently denied, that Saudi tanks were moving into Bahrain. That tanked Saudi stocks.

Libya remains in a state of civil war, there are reports that Iranian police fired teargas on protesters, Oman is deploying troops amid its strife and Yemen’s separatists are already looking at a future past the monarchy. Clearly, this is driving up oil prices. Lately, the Nymex benchmark is up 1.6% at $98.49, and the Brent benchmark is up 1.7% at $113.66.

As we wrote yesterday, keep your eye on the $103-$104/barrel level of Nymex crude – a move over that could have serious repercussions – and remember that the revolt spreading across the Africa and Arabia isn’t going to be tied up in a neat little bow like some half-hour sitcom at the top of the hour, and it’s likely to go off in directions that absolutely nobody is expecting.

Nobody is seriously talking about $4 gas, or $5 gas, but it is a real possibility. Which means that if it comes, nobody will be ready for it. GM’s chairman this morning said the industry isn’t ready for $5 gas. The national average for regular unleaded is $3.37, according to AAA. We know the spike from last week will be working its way to the pump over the next couple weeks, so expect prices will keep rising. If the popular revolt keep spreading, if crude prices climb over that $103 range, and the oil market – about as festering a pit of hot money and speculation as there is – drives it ever higher, you will see $4 gas here in the States.

“I don’t think the industry learned a lot of lessons from 2008—they will this time around,” Daniel Akerson said at the Geneva motor show. “It would not be a good thing to see $5-a-gallon gas right now.”

You know what? It wasn’t just the auto industry that didn’t learn the lessons of 2008. But they may yet get the chance to take a make-up test.

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.

GM grooved one today for the State of the Union speech tomorrow night.

You can almost hear it already. President Obama standing before Congress, citing examples of the strengthening economic recovery. “And just yesterday,” the president will say, “General Motors — back from bankruptcy, a thriving public company once again — showed us a heartening example of its increasingly brighter prospects.  It’ll add a third shift and 750 jobs at its assembly plant in Flint, Michigan.” (Pause for applause from both sides of the aisle.)

It’s a feel-good moment, no doubt, but one in which we remain just cynical enough to take some shots at.

Look at the details. Is GM planning to increase production of its best-selling fuel-efficient vehicles in an attempt to satisfy what it expects to be increased demand as oil prices climb near (or above) $100 a barrel again? Nah.

They’re expanding production of big pickup trucks, the Chevy Silverado and GMC Sierra. They get about 15 mpg city, 20 highway — not awful for a big truck, but not cheap to fill up, either.

Here’s the amusing part. According to WSJ’s Sharon Terlep, GM’s North American head, Mark Reuss, says the increased production is a response to an uptick in residential and commercial construction. Say what? Is that on planet Earth, Mr. Reuss? December housing starts fell more than 4% to a 529,000 seasonal rate, lowest level in more than a year. Sure, starts are up about 11% since hitting an all-time low in April 2009, but back during the halcyon days, starts were regularly clocking in at more than two million annually. Continue reading…

The double-dip in home prices is “almost” here, according to S&P after the monthly Case-Shiller home-price index was released. Given that the report covers October, “almost” may have “already” come.

Late spurt — it is an options expiration day after all — pushes US stocks into the black for the day, albeit ever so slightly. Stocks bounce around, caught between the hope there’s a solution to the Irish problem and fear that China’s imposing a solution to its inflation problem – one that will have sour effects on world growth.

DJIA adds 22 to 11203, up about 10 points on the week. S&P 500 gains 3 to 1199.69, just a hair’s breath under the psychologically key 1200 level. Nasdaq Comp rises 4 to 2518. Traders erased earlier losses, but don’t seem to have any real desire to push things higher. Why go into this weekend long? Ireland is still up in the air, there’s chatter China might raise rates over the weekend.

This state of affairs might persist next week, given it’s Thanksgiving, but there’s a heavy data calendar for a short week. Oh, and don’t forget, it was Thanksgiving week last year that Dubai dropped its debt bombshell on the world.

GM rises in its second day of trading, but by just a few pennies.

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.

On today’s Market Hub, we get the Market Talk team together to talk about the rally, Ireland and GM. Be sure to watch to the end as John just grooves one to me and I take the gratuitous cheap shot. I couldn’t help myself, really.

General Motors is the single greatest company that has ever existed. Every American should go out today and buy a GM car, buy two, and buy GM stock, and a GM baseball cap, and GM teddy bears, and…whoa, settle down, fella. Excuse me, there, got a little caught up in the hype.

GM, the company that once was the very definition of industrial America, and then became one among the many very definitions of corporate America’s failure, is back in the public market today, courtesy of a very big, very well-hyped IPO.

Shares are up in the 7-8% range this morning in its initial trading, but the real trick will be to see where the stock is at the closing bell. And the closing bell after that, and the closing bell after that, and the closing bell after that. But for now, this GM thing is being celebrated as a true success story.

But let’s not kid ourselves. GM still has a lot of hurdles. This isn’t some Google, some hot tech IPO for a company with a seemingly limitless future in front of it. This is a failed car company that is trying to get back into a highly competitive business, both here and overseas. We already know the very probable limits of what GM can achieve in an industry where the major competitors are Ford and Chrysler (I know, it’s Chrysler, still,) as well as Toyota, Nissan and Honda. Still, that’s not the main focus today.

“This was the single best decision of the bailout era,” Barry Ritholtz writes about GM over at The Big Picture. “It seemed to be the only decision that was not made in a panic. It adhered to the rules of capitalism — when your company is insolvent, it goes into reorganization or dissolution. The brutal, Darwinian rules of the market and of bankruptcy applied — not the influence of lobbyists, or special favors from Senators.”

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US equity markets ready to spring higher when regular trading begins, joining rallying stocks overseas on growing optimism for a favorable resolution to Ireland’s debt and banking problems, and easing concerns about tighter monetary policy in China.

Euro spikes, dollar tumbles; stocks, commodities soar, you know the drill. Another Euro-zone fire may get doused, but embers still smolder on the periphery. This is no QE2 trade, by the way, as Treasurys sell off.

GM’s hyped-up IPO also may be feeding bullish sentiment. Weekly jobless claims at 8:30 a.m.; Philly Fed’s November business outlook, October leading indicators both due at 10:00 a.m. Also a trio of Fed officials speak in the afternoon.

S&P futures up 11.70, DJ futures up 84. Ten-year note slides, yield at 2.93%.