Trader Talk

Alibaba era starts with closing the book--on investors big and small

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Alibaba is turning the page on its new closing the book!

On its initial public offering, that is. Sources told CNBC early Friday that the Chinese e-commerce giant plans to stop taking orders for its IPO early, an indication of sizzling demand. So what does this mean for investors?

Strong demand for Alibaba generates $1 billion

As far as I can see, the deal timing has not changed. The roadshow is not ending, and it is extremely unlikely the timing (pricing Thursday night for Friday morning trading) will change. If reports are accurate, it only means investors might have to declare how much they want a day or so earlier than expected.

Normally, you close the order book a day or two before the price.

If they have enough orders to cover everything at the high end of the price talk ($60—$66 is the range) than the usual procedure would be for the company and its bankers to go back to its biggest buyers and say: 'we are now talking about $70 or higher. Who's in?' That may prompt the company to announce a new range. Expect for that to happen relatively soon.

There's already analyst coverage among those who are not participating in the deal. Webush initiated yesterday with an Outperform rating and an $80 price target.


What to make of the recent commodity weakness? Much of it is due to the strength in the and the weakness in the euro and the yen. If the greenback stabilizes, that would be a big help.

However, there are also macro events impacting commodities, like China. The country is going from a decade of massive infrastructure investment—which fueled the global commodity boom—to encouraging consumer consumption as a path to growth. Given that backdrop, it would be natural to expect declining commodity prices.

And look at crude prices. Yesterday, much was made of the the downward revision in the International Energy Agency's (IEA) demand forecast. The IEA called the slowdown in demand "nothing short of remarkable." Demand is expected to grow by only 0.9 million barrels a day in 2014, which is pretty paltry for a global market of roughly 93 million barrels a day.

But much of the demand decline is due to more energy efficient devices, particularly cars. That is not a sign of weakness, it's a sign that technologies are getting more efficient. On the supply side, the U.S. is adding capacity. That is a huge help for the oil industry, and for the country's energy security. Overall, cheaper crude should be good for the stock market.

However, where does that leave oil stocks? Are they expensive if West Texas Intermediate goes from $91 to a range somewhere in the low $80's?

Some of the shale plays become less attractive when oil goes into that range. However, you can already predict investors will step in and buy into the decline. Many shale names are down 5 to 10 percent this month, making them a bargain.

I expect that to stabilize. After all, how many companies can provide you with 20 or 30 percent growth a year in terms of production? Not many. Even if prices are down 30 percent, earnings growth would be substantial.

--By CNBC's Bob Pisani