Daily Archives: February 10, 2008

Venezuelan Strong Man Threatens To Cut Oil To US

Venezuela nut-case and president-for-life Hugo Chavez says no more oil for Uncle Sam.  American’s most profitable company, Exxon (NYSE: XOM), has court cases pending to try to get reparations for assets taken from it in the South American country.

According to The Associated Press "Exxon Mobil has gone after the assets of Venezuela’s state oil company, Petroleos de Venezuela SA, in U.S., British and Dutch courts as it challenges the nationalization of a multibillion dollar oil project by Chavez’s government last year."

Chavez characterizes Exxon management as "outlaws". Whether that is true or not, it appears that taking the company’s assets without compensation is against international law.

Chavez also claims that if he stops shipping oil to the US, the price per barrel for crude will rise to $200. If no other countries move to temporarily ease the situation, that could happen. But it is hard to imagine that OPEC would allow the situation to spin out of control and trigger a worldwide panic. OPEC will do what it can to be helpful if only for PR purposes.

Chavez will find out quickly enough that his country is likely to be hurt more than the US is if he halts exports. His economy requires the level of oil sales to remain constant for it to stay even modestly prosperous. Cutting off oil to the US would be cutting his own throat.

Douglas A. McIntyre

Posted on: February 10, 2008 – 8:09 pm in Oil & Gas,

Zacks Fund Survey: A Win For Bear Stearns, A Blow To Morgan Keegan

The mutual fund industry is particularly brutal because each fund is graded every day on performance. The cruelty of that system hit small finance house Morgan Keegan especially hard in the second half of 2007. Research firm Zacks did a study for Barron’s which tracked the "best stocks" lists of the major brokerages.

Morgan Keegan was honored as the worst stock picker of the July 1 to December 31, 2007 period. Its favorite stocks fell an aggregate 17.3% against an average return for all brokers in the survey of negative 2.9%.

Bear Stearns (NYSE: BSC), which did not have much of a year otherwise, posted the best numbers, up 12.1% followed by Goldman Sachs (NYSE: GS) at 5% and Morgan Stanley (NYSE: MS) at 1.7%. The rest of the firms measure had negative returns.

Morgan Keegan, better luck this year.

Douglas A. McIntyre

Posted on: February 10, 2008 – 12:18 pm in Mutual Funds, , ,

A Lesson For GM (GM) And Ford (F): Chrysler Cuts Its Throat

Like some many unsuccessful companies before it, Chrysler wants to cut its way to profitability. The privately-held company, run by Home Depot (NYSE: HD) exile Robert Nardelli, will probably chop its number of brands 50% and dealerships by a third.

According to The Wall Street Journal "over the next three years or so, the now closely held auto maker plans to drop as many as half of the approximately 30 vehicles it now produces, a move likely to cut sales at least for a while." A while may be forever.

It is not believable to think that Toyota (NYSE: TM), Honda (NSYE: HMC), and, to a lesser extent, GM (NYSE: GM) will not market vehicles directly into the niches which Chrysler gives up. Toyota especially has the dealer network and broad brand line-up to do this.

Chrysler, which has about 12% of the domestic market will try to do with much less than that, perhaps 8%. But, it cannot source its production overseas to support lower revenue like Honda, Nissan, and BWM do.

A car company willing to purposefully cut its market share in an environment where it has at least a dozen legitimate competitors is a company risking its sales will not find a sustainable bottom.

With its current trouble, Ford (NYSE: F) may be looking at similar plans.

Don’t do it.

Douglas A. McIntyre

Posted on: February 10, 2008 – 11:48 am in Autos, , , , ,