WASHINGTON, July 22, 2014 – Tuesday is proving to be an okay but fairly boring day for stock traders. It’s the peripheral activity that promises more fun.
First of all, as we’ve reported elsewhere, a three-judge appellate court panel has just effectively trashed the bulk of Obamacare’s subsidy system, due primarily to the sloppy wording of this rushed, miserably drafted, uni-party effort to cram socialized medicine down everyone’s throats.
Meanwhile, we learn via ZeroHedge (who learned of it via Bloomberg), that U.S. Judge Thomas P. Griesa has greeted Argentina’s stall-ball tactics, geared to head off that country’s likely default on its bonds, with stony silence as next week’s put-up-or-shut-up deadline looms.
Looks bad for Argentina’s
socialistas Peronistas. Although, given who’s currently in charge of that country’s fiscal mess, maybe we should change the lyrics of that famous song from “Evita” to “Don’t cry for US, Ms. Cristina.” We’re referring to Argentina’s current Prez, of course, as well as the members of her inner Dunciad.
This story is in many ways too Byzantine to cover here. But suffice it to say that the Argies are likely to default on their bond obligations, as most socialist inevitably do in one way, shape, or form. And in so doing, that country will again become, as it has before, a financial pariah, sending their own financial systems—and perhaps, for a time, other countries’ bonds including ours—into trading turmoil.
For now, fixed income investors, just be aware of this unpleasant standoff as well as potential bond selling panics in given markets next week. Bonds, we’d observe, are boring. Until they’re not.
Speaking of Argentina and the Dunciad, insanity doesn’t only afflict Washington, Argentina, the Kremlin and the Gaza Strip. It also affects many current, New York-based Masters of the Universe, including Jedi Master Hedge Fund Guru Bill Ackman.
You know, the fellow that brilliantly rewarded investors in JC Penney (JCP), wrecking that former retail giant before packing his bags and leaving it to others to clean up his mess? Well, he’s at it again, having aimed another negative salvo of virtual punches at his current favorite punching bag, nutrition supplement company Herbalife (HLF).
Mr. Bill’s been waging a longtime vendetta against HFL, which was long a decent stock to own. That is, until Bill decided to tee off on these folks some time back and accuse them of running a Ponzi scheme in a big, media-filled negative PR campaign in which he starred as the shining knight, the Capitalist Without Sin.
His initial charges leveled against that firm sent that stock’s shares to the very pits of Hades before it made a nice recovery. But not before loads of small and institutional investors got burned as they lost tons of money dumping their shares in a panic.
Mr. Bill didn’t care, of course. His main motivation, then and now, was that he had established a huge short position in HLF, one that he still maintains. And crushing HLF stock with wild and largely unproven charges of corporate malfeasance did, can, and still likely will serve to enhance his position, in which, of course, he makes money if the stock goes down.
Ackman’s latest calculated salvo was unloaded yesterday, crushing HLF once again. Yet this morning, HLF is back off the mat and rocketing back up again.
Why the SEC puts up with this kind of obvious market manipulation via PR blasts and coordinated social media followups simply amazes the Maven. But there it is.
Fortunately, at least some in the financial media have begun to call Ackman on this game. “Ackman misfires on Herbalife ‘death blow,’ shares surge” trumpets a USA Today headline today.
With a big, implied “LOL,” Forbes chortles “Bill Ackman’s Big Herbalife Reveal Bombs With Investors.” Bloomberg chimes in with a headline that’s only slightly more gracious: “Herbalife Plunges as Ackman Vows to Unveil Enron-Like Fraud.”
Sure. Let’s kill off Shaklee and Amway, too, those health and/or cleaning supply outfits that, similar to Herbalife and even, to some extent, Avon (AVP) and Tupperware (TUP), whose armies of mostly part-time employees make a little or a lot of money via personal selling of products. These are jobs for the little guy in a still-bad economy, something the impervious rich, like Bill Ackman, just don’t seem capable of understanding.
The thought that a Master of the Universe like Ackman actually “cares” about the little guy that Herbalife allegedly damages is both patronizing and laughable. Far more harm has been done to investors in the stock by his grandstanding shenanigans on the very slim chance that Ackman is actually right about the company.
“It’s time to shut the company down,” Ackman has proclaimed as reported by CNBC. “This company is a travesty and also a tragedy.” So, too, is Bill Ackman’s pointless, investor damaging grandstanding, we’d observe. Perhaps his ego is on the line, having misfired badly with the JC Penney mega-disaster.
The Maven has been irritated for years at Wall Street’s increasing lawlessness, as exemplified by blatant, public stock manipulation like we’re seeing here. But, as usual, our toothless government fails to do anything about it. We’d ask where the justice in this country has gone, except that our current joke of an Attorney General, Eric Holder, already knows. And so do we.
To the Bat Cave!
We’re lightening up a bit on our gold hedge this morning, selling a few shares of SGOL. If we can’t catch a bid on gold this week with all the national and international disasters currently unfolding, that doesn’t augur too well for the yellow stuff. And we’re only using it as a hedge anyway.
Aside from that, we’re only snugging up some small positions in Schwab’s ETFs today, particularly in SCHE, the Schwab equivalent of EEM, the ETF that follows emerging markets. Weak early this year, emerging markets have been gathering force recently even as capitalist bigwig economies are floundering in stasis. We’re not sure how long this will last, but the trend is generally your friend. So we continue to pick up shares in this ETF on any significant dip.
Aside from stuff like this, we still find little to be excited about in this market, which looks like it’s in sort of a rolling, summer doldrums-style correction.
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