IPOs: A Dark Rider Cometh for the Stock Market, and He's Calling on an iPhone

By Ann Sosnowski

Stock Market Moves: Kicking Off the Third Quarter in Style

Blue-Chip Investing
The day Blackstone hit the ticker at $36.45 it ran a whole 4.25% to a nice round $38. Certainly there were no additional BX billionaires minted that way that day.

Blue-Chip Investing
IPOs: A Dark Rider Cometh for the Stock Market, and He’s Calling on an iPhone

I have seen the dark rider. His name is Blackstone and his face is a dark glass… with Apple icons all over it. Wow, what a lead: no way you can put that down, eh? If nothing else, you’ve just gotta find out what Lass was drinking over the weekend.

Seriously, have you seen the current share price for the recently IPO’ed Blackstone Group (BX:NYSE)? After months of furious M&A and IPO activity, this was supposed to be the big Kahuna, the one bit of action that was going to justify all the column inches devoted to an ordinarily BORING realm of biz.

This deal has even got Congress’ knickers in a knot. And anything that could distract those guys and gals from their ritual hanging of President George’s effigy has to be important, right? Seems that Messrs. James and Schwarzman’s accountants found a way to carry over Blackstone’s super-sweet 15% capital-gains rate, rather than pay the 35% corporate income rate that mere mortal companies must endure.

The punch line to this particular joke? The details on this deal have been floating around inside the “beltway regulation-o-sphere” for the better part of a year before these clowns even thought to tax the “carried interest” partners earn through 20% incentive fees. Now they have to make for future deals rather than the one that has them all hot and bothered.

Ahhh, but what of those lucky, lucky few who were privileged enough to help make James and Schwarzman overnight billionaires? Honestly, they are not so lucky. In fact, they are getting hosed, big time. Fire-hosed. Water-main hosed.

The day BX hit the ticker at $36.45, it rose a whole 4.25% to a nice round $38. Certainly there were no additional BX billionaires minted that way that day.

A fluke, you say? Naaah. In fact, that was the good news: Since that high, it has peeled as much as $9.25, a loss of more than 24%. For the past few trading days, it has been crawling along below $30, unable to stand up and face the light of day.

Or is it just the investors who have lost $7.5 million dollars on this boondoggle?

But I said that this was no mere singular event, but rather a ghostly harbinger of things to come, and I expect you’d like some ‘splainin. Brass tax is, there are only a few props that have been keeping this market out of the toilet.

One is that you if you keep hammering at this IPO thing, if you buy enough shares of your broker’s losers, if you call often enough, and buy his wife chocolates, you might get a piece of the next big one.

Another has been the hope that someone with too much money and not enough sense will buy out some of these dogs you can’t get rid of any other way. And finally, if you get really lucky, your fave company will invent the next “must-have” thing, the next Furby, the next WIE, or better yet, the next iPod.

Which brings us to that dark rider’s glassy visage: the iPhone. Stevo Jobs and his acolytes have been promising us for months that this would be the “It girl” of 2007. It was expected just as breathlessly as the aforementioned BX IPO.

Heck, the Mayor of Philadelphia got caught waiting in line on “I-Day.” (Sternly lectured by a formidable matron as to how murders were going unsolved while he diddled about in line, Mayor Street was forced to GIVE UP HIS PLACE IN LINE!

This is probably a good thing for his honor, because quite frankly, the iPhone is the technological equivalent of four-inch heels: very sexy, but quite impractical.

It does almost nothing well, but looks very good doing it. Telephone-wise, it is hooked up to the worst network in the biz, because no one else would tolerate Apple’s dictatorial terms. Also, you’d better learn to like Apple’s 25 cute ring tones, because that’s all you are going to get.

Its browser is cute, unless you are away from a Wi-Fi hotspot and must use network’s hideously slow data feed. Website’s got Java? Forget aboudit. Oh did you get a call while browsing: Ooops: Forgedaboud dat too! And guess what? It holds fewer tunes than a Nano. Heck, the darn thing won’t even tell you when you’ve got mail, not that any human could respond via its “virtual” keyboard.

It’s sold 500,000 of them over the past 24 hours. Apple (AAPL:NASDAQ) investors have celebrated by pushing the stock to… wait a minute: AAPL is exactly where it was last week, and the week before that.

So just how much disappointment in the next best thing will the herd absorb before it starts to wonder, indeed… starts to get angry and trample shares down to where they would be without the fluff and wonder these dream stocks are generating?

As I said in the beginning: I have seen the dark rider. And he’s sharpening his scythe.

Trading Tactics
Stock Market Moves: Kicking Off the Third Quarter in Style

Wall Street kicked off the third quarter with a bang today -- with the Dow rising 120 points in mid-afternoon trading.

New York Stock Exchange witnessed advancing issues outnumber decliners by a 3-to-1 margin on a low-volume week interrupted on Wednesday by the Fourth of July holiday. With the markets also closing early on Tuesday, I wouldn’t expect too much action leading up to tomorrow.

After all, there are no major earnings reports scheduled to be released this week -- and that means that all eyes will be on Q2 earnings season, which starts the third week of July. In fact, the accountants are crunching the Q2 numbers right now -- so you could expect to see a profit warning or two leading up to these Q3 announcements.

If you’re a regular reader of Market Report, it should not be a surprise to see energy stocks increasing today -- as crude oil shrugged off an early-session fall and it is now approaching the $71 per-barrel level.

Some have called this rise “terrorist-related uncertainty in the U.K.,” while others attribute it to the promise of a strong U.S. driving season. But whatever the reason, it’s clear (once again) that oil components like the XLE should be bought on any dips.

P.S. Thanks to everyone who wrote to me in response to my “Flying over Lake Meade” column from last week. I always appreciate your comments and welcome your feedback.

Just to share with you some comments that I received, PICO Holdings (PICO:NASDAQ), the owner of land with mineral and water rights in Nevada, was the favorite water play of a WMR reader.

Another reader highlighted Southwest Water (SWWC:NASDAQ), which operates as a water production and treatment company. It also offers services related to wastewater, utility billing and collection, and public works.