JP Morgan analyst: Stock gravy train nearing end of the line

Wall Street stock trading action endures its usual Blue Monday, as December—with its now-likely Federal Reserve interest rate boost—looms ever larger.

E-Trade Baby spooked by market action.
The E-Trade Baby gets spooked by today's market action. (Screen shot from College Humor YouTube video parody.)

WASHINGTON, Nov. 30, 2015 – Trading on this last day of November is as lackluster and in some ways as nonsensical as it has been for much of this year. Traders and HFTs are still trying to game the ever-more-likely chance of a Federal Reserve interest rate increase this morning, even though it would seem to have largely been discounted by now.

But as we’ve mentioned from time to time this year, 2015 began and will likely end with a slow drip of relentless but cautious selling on the part of large investors, most of whom seem to be betting on a lackluster to really bad 2016.

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Not only is 2016 an unusually fraught national election year. It also marks the eighth and final year of an administration that has worked full time to destroy this country’s remaining competitive advantages, preferring instead to further enhance the Great Recession’s already tasty, job-destroying goodness, something dear to every post-colonialist’s and socialist’s heart.

We won’t count the ways—high taxes, assaults on natural resource and energy companies, zero U.S. border controls are just the start—because you’ve likely experienced them. We’ll simply have more of them in 2016 as something like that Nixon-Carter Era stagflation will likely take hold.

But don’t listen to little guys like us. Check out this news from one of JP Morgan’s major stock strategists, via ZeroHedge:

Year end is usually a time when Wall Street strategists, so close to that holiday bonus check they can practically smell it, break out optimistic forecasts for the next year and tell their clients to forget any of the pain experienced in the current year and focus on the coming upside. Not so from JPMorgan, however, whose equity strategist Mislav Matejka has just released a note in which the bank lays out why it is the most bearish on stocks it has been in the past 6 years, and with a call that will make every E-trade baby accustomed to BTFDing shiver in their diapers: “The long period of indiscriminately buying any dip might be coming to an end.

For our new readers, “BTFD” is inside-trading slang for “Buy the effing dip,” which means that every time the market tanks, you jump in and buy more stock at “bargain” prices. That worked just swell from circa 2009 to circa 2014, but it’s been an iffy strategy this year and might be a worse one in 2016, according to Matejka.

About that E-trade Baby… the reference is to the E-Trade baby spoof appearing in this vintage satirical video:

Hang in there baby. We’ve been there, done that.

But like the baby, we’ve been seeing the early and steady warning signs confirming this JP Morgan analyst’s point of view over the last 11 months. While JP Morgan (symbol: JPM) indicates that a new wave of selling might not fully take hold for upwards of six months or so, professionals will take the hint (if they haven’t already figured this out on their own) and will steadily, quietly dump whatever shares they don’t much like anymore, making a resumption of our aborted early Santa Claus Rally increasingly dubious.

We’ll just watch and wait in the meantime. As for everyone else: We’re now entering the final month of Tax Year 2015. If you need losses to dodge a nasty hit to your 2015 tax bill, now’s probably the best time to take them. To max them out, dump the offending stocks on a bad down day. To trim the red ink a bit, get rid of those unpleasant shares on a day when they’re rallying.

In any event, the pros have been dumping their dogs earlier and earlier in December in recent years. There’s no reason why you should wait for them to drive your own dogs down further, ensuring you of worse losses than you’d planned to take.

Yeah, there’ll be some rallies between now and then. But everything continues to feel thin and suspect. Don’t let yourself get into the situation that the E-Trade baby encountered in the vintage satirical YouTube video we’ve posted here for your edification and amusement.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17