WaveStrength Macro Outlook for November 30, 2006
Yet Another Shoe Falls
by Adam Lass
Yesterday I warned you that we might already be in a recession. Today, we received yet another indication that this is not an evil nightmare, but rather cold, hard reality.
The Institute for Supply Management has announced that its Chicago Purchasing Managers’ Index fell from 53.5 in October to 49.9 for November, confirming that we really are experiencing an economic contraction.
This index last dipped into the negative in August 2005: The Dow Jones Industrials proceeded to give up 325 points over the next six weeks.
Previous to that, you have to go back to May 2003. The Dow was at 8,850.
Now I completely expect the cheerleaders to deny all this. The last time we experienced a recession the same crowd denied it the entire time until the truth was so evident that they would appear to be complete fools to continue.
By then, it was nearly over, and they switched to taking credit for ending the very recession they had denied days earlier.
Whatever.
On to happier details: All you WaveStrength Options Weekly readers who were holding VZ DU April 37.50 calls when Verizon Communications (VZ: NYSE) spun off Idearc Inc. (IAR:NYSE) now own VRF DU April 37.50 Calls.
The former settled for 100 shares of VZ and is up some 30% today, currently trading for 65 cents. The latter, good for 100 shares of VZ and 5 shares of IAR, is up 9% today and is trading for $1.20.
It took me two hours of calling around to find the right guy at the exchange who could explain it instead of just reciting the stupid press. Lord help me, I think I will shoot myself in the foot if I ever get involved in another spin-off.
But in the end, up is up, and up is good, right?