Stocks, metals off to the races. Irrational exuberance returns?

Stocks, metals off to the races. Irrational exuberance returns?

Having determined that Janet Yellen’s Federal Reserve is backing off sequential interest rate hikes—for now—Wall Street parties hardy in Thursday trading. Oil up. Way up. Metals also in play.

Just like the Marx Brothers, stocks are off to the races. (Public domain movie poster via Wikipedia. In the public domain because it was published in the United States between 1923 and 1977 and without a copyright notice)

WASHINGTON, March 17, 2016—Like our friends the Marx Brothers above, Thursday’s markets, at least as of mid-afternoon, are clearly “off to the races.” Following Wednesday afternoon’s surprisingly robust afternoon rally kicked off by the Fed’s announcement, Thursday trading opened rather anemically, before kicking into gear around 11 a.m. EDT.

That’s been a well-developed pattern this year, even on moderately bearish days. 11 a.m. is when European trading closes, and for some reason, this usually kicks off at least a mini-rally in U.S. markets. Like many market tricks these days, however, we continue to have no clue as to why this is.

Thursday action

Today’s rally has also been helped by sharp up-moves in precious metals, copper, commodities, agricultural products, currencies of oil producing countries and, by Jove, oil itself which is surging around the $40 level this afternoon, with WTI at $39.93 (up $1.52 or 4 percent) and Brent somewhat higher (as per longstanding tradition), sitting right now at $41.37 (up $10.4 or 2.58 percent).

Oil traders are apparently thrilled at news of an upcoming OPEC confab, even though Iran has vowed to ignore any agreement at all that would limit their planned for mass sale of black gold. But hey, no matter. It just seems that traders (or perhaps TPTB or so-called “sovereign funds”) have decided that oil was down far enough for long enough to start wrecking even the economies of the perps, like the Saudis. Ergo, time to goose those futures.

If these moves in stocks and commodities are sustained for any period of time, the Fed may finally get its inflation wish and resume jacking up rates. But in the meantime, it looks like that’s off the plate now at least until June. Which could mean we party here and get back to our once-hallowed “sell in May and go away” tradition. Anybody’s guess at this point, though. As always, the machines and algos will call the shots. To be continued.

We rarely buy on nifty up days, preferring not to chase this and that. But if we get a little selling in silver this afternoon or tomorrow, we may nip back in to Swiss silver ETF (symbol: SIVR), which we’d sold for a small profit a few days back when it started to weaken.

Transports are finally starting to look good again, but here, too, things can be slippery. Southwest (LUV) looks decent here, perhaps one or two others. But we remain nervous, at least in the air transport sector given the government’s ongoing price-fixing investigation of the majors. We hate headline risk and that’s making us sit on the fence re: air transport, for now.

We note that our stack of preferred stocks are backing off just a bit today as they have been doing all week. That’s a pretty good sign that investors are starting to see the “risk on” signal blinking green, which in turn means, traders bail out of the safe stuff and start piling on risk again. We shall see.

Jolly Roger time: More on Wall Street’s manipulative pirates

Meanwhile, one fly in the bullish ointment is the current work of serial stock wrecker Bill Ackman, whose serious damage to Canadian mega-drug kingpin Valeant (VRX) has trashed that stock so badly that Ackman’s funds are being forced to liquidate other holdings to answer margin calls.

Snackmaker and Kraft spinoff Mondelez (MDLZ) was sold off heavily yesterday by Ackman, most likely to meet margin calls on his large position in VRS. He may get hit again. ZeroHedge provided a handy chart of other Ackman holdings that may necessarily get the axe as his VRX position continues to take a hit, implying you should be aware of what’s going on if you hold these stocks:


As we noted yesterday, Valeant is the second major stock that’s been wrecked by Ackman’s manipulative antics. We are starting to get seriously irritated at these wealthy, amoral hedgers and outright pirates like Ackman, Icahn and the elusive Soros who manipulate the hell out of their positions and underlying companies, claiming to “create shareholder value” when they’re only it for themselves but only announcing what they’ve done after they establish their positions. That way, when you and I overreact (as we so often do), they profit from our buying or selling panics. Why is this a good thing for the transparency of markets?

Ackman was also behind the disastrous Herbalife (HLF) short that first badly damaged that company’s stock when Ackman mounted public attacks on their supposedly “illegal” business model. But HLF withstood his withering, public attacks, designed to kill the stock and make money for his large short position. The opposite ultimately happened, after a long, costly battle by HLF that cost both the company and its shareholders money to defend.

While Ackman got his comeuppance here (as he did in his very different JCP bet, where he jousted with Icahn using the stock as hostage, after he’d already killed the retailer by installing a clueless new CEO), we’ve long wondered how trumpeting your shorts to the public and smearing the company you’ve shorted is somehow “legal.”

We’re also watching the antics of the equally flamboyant Whitney Tilson, who apparently shorted Lumber Liquidators (LL) massively before putting CBS’ “60 Minutes” up to trashing that company. Allegedly, LL knowingly imported Chinese bamboo flooring materials whose off-gassing formaldehyde content exceeded current government limits. If you were holding that stock when CBS aired its manipulative (and very pro-Tilson) hit piece on LL, well, you’re portfolio is a lot lighter today, isn’t it?

Massively shorting a company, then getting a huge negative hit piece to air on a major TV newsmagazine to support your short position is, I believe, patently illegal rumor-mongering and stock manipulation. Ditto Ackman’s similar game with Herbalife.

Neither these antics nor countless other incidents of stock manipulation fun and games have anything to do with the “charges” lodged against victim companies, whether those charges ultimately prove true or not. If you’re a famous investor and trash a stock after you’ve established a major short position in it, that’s manipulation, pure and simple.

Ditto if you buy a ton of a stock you like—as Icahn did with Apple (AAPL)—and then announce that you’re “negotiating” with the company to create a big dividend and “return shareholder value” to stockholders. This is simply a way of putting on your pirate hat and entering a company’s value to steal part of its carefully accumulated cash hoard.

Since this kind of public tap-dancing also creates interest in the stock, regardless of anything else, our bigwigs’ little “announcement” game induces the little guys to buy, buy, buy, helping the rich guy, to amass ridiculous profits on the long position he’d already established before you broadcast your commercial to the public.

All this crap goes unpunished under the current, corrupt administration in Washington. Smaller investors and funds are stripped again and again of their opportunity to make a fair profit for themselves as these pirates sneak in and manipulate stocks before anyone ever knows about it. Only after they’ve established the position they want do they get on their soapbox and proclaim their love (or hate) for company X. Then, we all work to make money for them by massively buying and selling positions in company X as they have predetermined ahead of time.

I am seriously trying to understand why Washington thinks this kind of blatant stock manipulation is legal. Oh, wait… big campaign contributions. Duh!

(End of diatribe.)

Moving toward trading tips

If the market backs off somewhat Friday, Monday or Tuesday, we might finally have enough confidence again to start offering daily trading tips. Things look good today, but experience over the past year or so has shown us that we can no longer really trust anyone at all, so we’re indulging in caution right now.

Happy St. Patrick’s Day, BTW. Bottoms up tonight. See you tomorrow.

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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