Thursday, June 18, 2009

Money In

The WSJ is reporting today that equity funds in the U.S. had net inflows for the 13th week in a row. Given the fact that the move the market had off the March bottom through last week caught many or most by surprise, Portfolio Managers will be reluctant to let new money accumulate earning 1% or so. The fear of falling farther behind is powerful.

One aspect of where the money is going continues to be troubling. Equity funds generally are not restricted to only buying common stocks. Most can get some commodity/credit/real estate exposure if they want it. The following argument is way too easy:

"You have to buy commodities. China's economy is recovering and they are buying all they can get their hands on."
"But the rest-of-world economy still sucks and there's too much inventory."
"Doesn't matter. Oil is going higher."

It doesn't feel to me like oil should be above $70. Luckily for commodity "investors", I am still not in charge of that. If oil and other commodity prices roll over, my fear is that market participants will extrapolate that the global economy does still stink, and sell other assets as a result.


RIMM reports tonight. The stock is up big. It should be tough for them to put up numbers that are materially better than expected.


Who is going to buy PALM? I think someone will, as the new product has good buzz and PALM needs some backing. DELL? MOT?


Morgan Stanley has comments today that even if Sun Micro's revenue shrinks 20% post-merger, the deal will be at least $0.15 accretive. That in itself comes pretty close to make an otherwise head-scratching deal a good one.

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