Short Interest Down: Quicksilver, Chevron to Follow

quicksilver sell offToday’s jump of more than 2.5% may invite some side liners to join the game, but the shorts are still the largest player, this type of move is too strong for the economy’s current condition. Don’t be surprised by this move, short interest saw this coming.

Short interest results for the first half of April showed a decline for both the Exchange and NASDAQ. Though it was the first time since mid December that short interest fell, trust me the bulls are not coming to town just yet.

The 4.8% and 2.9% drop for the NASDAQ and NYSE respectively, is largely due to the shorts covering. The run beginning last month and continuing today has left many bears scrambling, while many bulls have come out of the shadows and are testing the waters. It’s a typical scenario for this type of market. All the ultra-conservatives may feel inclined to slowly invest again, but nothing to stir the market in their favor. Plus there are still too many signs the economy is struggling. One strong day or even month is not enough to counteract the past two years.

The awful GDP rating is a clear indicator of how the economy has been performing, yet the past two months have been full of misguided rays of hope. Don’t be fooled. With the market standing on superficial optimism, the bears may be in for a killing.

A sector to put on your radar is consumer spending, especially retail clothing stores. Recently Quicksilver’s founding partner came in and cleaned house, firing many of the top executives. The company has more than a 20% drop compared to their competitors in 2008.

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Bad investments such as Rossignol (which they purchased for 560 million in 2005 and sold for 50 million just last year) and the 900 million of debt which 50% comes due this year, has put the surfing giant on thin ice. Quicksilver is actively selling DC for about 500 million in hopes of eliminating their debt obligations. This year, Moody’s included Quicksilver on its Bottom Rung list of companies most likely to default on its debt. With luxury spending down considerably, Quicksilver may have seen its days, look for shorting opportunities.

Another major US company is on the chopping block as Chevron Texaco fights a 12 billion dollar lawsuit from the indigenous people of Ecuador. The Ecuadorians are claiming Texaco, which Chevron purchased in 2001, released 18.5 billion gallons of petroleum waste and waste water into the environment in the 1970s and 1980s.chevron sell off

Though Texaco was in partnership with PetroEcuador, the state oil company, the lawsuit blames Texaco for not fulfilling their clean-up obligations once the company left Ecuador. The court appointed scientific experts claim Chevron could pay as much as 27 billion in damages. The case is being tried in Ecuador and is expecting a decision during this year. A 27 billion dollar check would put considerable strain on Chevron sending their stock to all time lows.

Both Quicksilver and Chevron have major battles on the horizon; look to capitalize as times continue to heat up.

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-Chad Carlson

6 comments:

  1. Anna Kay Says:

    Looks like Chevron will have to pay up!! Good... the mess that was left behind in Ecuador cannot go unpunished!
    To find out more, see this blog: www.thechevronpit.blogspot.com

  2. 5U Says:

    What do you think the run rate EBITDA for Quicksilver is?

    Debt has popped big the last month. It's about 20 to 30 points off its lows. Looks like there is a puttable convert that is pushing towards par also.

  3. 5U Says:

    i looked at the 10k over the weekend

    No convert..that s another quicksilver

    Just 238mm of credit lines under short term debt that is coming due. Probably gets rolled out but this company is a mess. That being said shorting $2 stocks aint my ball game.

    If it gets killed on a sell off I may actually buy it just to play the extension of the credit line. Banks don't want to deal with bankruptcies right now. Especially trendy retailers that over extended themselves with bloated inventory.

  4. Anonymous Says:

    what do you mean advised to take profits? I thought you were staying on side lines this whole upturn ? was you not advising family and freinds the same as you have been advising on web?
    thanks
    MJH

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