Hillary Clinton, Wall Street’s favored candidate has been clobbered in the polls by the FBI's own October surprise. Trading remains thin and nervous in all markets as investors search for places to hide.
WASHINGTON, October 31, 2016 – Happy Halloween, 2016 style! Tonight’s scary, spooktacular event will once again highlight the little kiddies (and some older ones) going door-to-door in any number of creative costumes ranging from monsters to superheroes to fairy godpersons. Clown costumes of all kinds, however, are apparently not a good idea this year. (Neither are Anthony Weiner masks.)
For Wall Street and for most rabid Democrats, however, the scariest costume of all might be worn by some little kid who sashays up to the front door in a suit and tie, wearing a mask in the likeness of James Comey, the once “heroic” and now satanic FBI Director who, this weekend, put the Hillary Clinton Email Scandal case, or something like it, back on the nation’s front burner, courtesy of Anthony Weiner’s, er, laptop. The motivation, not to mention the newly uncovered evidence that led to Comey’s surprising action were both defensively spun by the MSM this weekend as they drew their wagons around their beloved Crooked Hillary.
Wall Streeters in the know were trading defensively early last week before pancaking stocks Friday afternoon after the Comey bombshell was released. Market averages are still playing the Kilroy game in Monday trading action as they bounce from mildly down to a minimal number of points on the upside.
Traders and institutions alike are increasingly nervous, as they perceive an increasing risk that their favored crooked Democrat could actually lose the Presidential election to the out-of-control goofball most famous—to them, at least—as the real estate magnate who took a bath on casinos and later gained fame for declaring “You’re fired!” on his NBC reality show sitcom, “The Apprentice.” The horror! The horror!
With a potential post-election (of course) Federal Reserve interest rate hike viewed as an 85 percent certainty on the Street, even the most seasoned traders fear an epic market swan dive on the morning of November 9, once the election results have presumably come in. If Hillary wins, stocks will almost certainly rally, at least at this point; whereas if The Donald ends up with the brass ring… well, it might be a good idea to have already put on some short positions just in case.
A third scenario—either a deadlock throwing the presidential decision to the House or, worse, one that plays out like the agonizing 2000 election in spades or one that’s hung up on credible accusations of massive voting fraud—could be just as bad for stocks as a Trump win.
All this is completely irrational, of course. But in a market dominated by high-frequency traders (HFT’s) supercomputers and their algorithmic sidekicks—all of which prefer to trade on news and rumors rather than on facts, figures and projections—chaos is likely what will get, perhaps even if HRC wins the prize, albeit under the cloud of a potential indictment. In other words, placing your bets in this market is not much different from rolling the dice in a game of craps.
We unloaded our last batch of shares in Teekay Tankers (symbol: TKN) this morning, throwing in the towel on what was once a good idea. We have come to agree with some other commentators that TKN remains opaque on their massive debt situation. It’s been holding the stock’s price back for quite some time now, a situation that hasn’t been helped one bit as they cut their once handsome dividend back again and again and again.
Down to 6 cents per share now, TNK’s November dividend is likely to be cut once again, down to the company’s promised absolute, rock-bottom minimum, 3 cents per share. This is prudent under current circumstances, as it allows Teekay to pay off that overly large debt even faster than it would if they’d maintained their earlier fat dividend for investors.
The downside is simple, though. Investors buy shares in master limited partnerships (MLPs) like Teekay precisely for the income that’s provided by those juicy dividends. So when those dividends either go away or get minimal, the same thing happens to investors in the stock: they go away and/or get minimal. That’s been happening to TNK for the better part of 2016 at this point, so it’s time to go before they report another anemic to rotten quarter and lower that dividend again, sending the shares down to penny stock territory, a volatile, risky place where we usually fear to tread.
Our largest position right now—Allergan’s preferred stock “A” (AGN/PRA) has also been getting clobbered, making our largest portfolio look pretty sick as we move toward the midpoint of Q4 2016. Like most pharmaceutical company stocks, the increasing disaster known as Obamacare is savaging most companies in that industry, including Allergan common (AGN) with no apparent end or bottom in sight.
AGN/PRA, in addition to its fine dividend, deeply-discounted share price and almost imminent maturity (03/01/2018 to be precise) should be immune to the common stock’s action, save for one simple fact: it’s a convertible preferred. In other words, a holder of AGN/PRA could convert his or her shares to AGN in an approximate ratio of 2.8 common shares for a single share of AGN/PRA.
AGN/PRA’s convertibility didn’t seem to be influencing the stock too heavily many months ago so we didn’t worry about it. But now investors are hammering AGN/PRA roughly three times as hard as they’re hammering the common, which action is not pretty either.
This has been extremely frustrating and, to us, silly, since AGN/PRA shares—which today have sunk as low as $760 per share (to yield over 7 percent), will all be redeemed in March, 2018 for $1,000 per share.
But, as we’ve outlined above, Mr. Market is in a tizzy. Of the two presidential candidates, HRC has essentially threatened to crucify the pharmaceutical industry if elected, making this one stock sector where she doesn’t have a lot of corporate fans. So if the polls that have already anointed here are actually correct, American pharma giants like AGN have a lot to worry about. Hence, the unavoidably rotten action in pharma stocks.
Would a Trump victory bring happiness to these shares? Maybe, maybe not. But in the meantime, it hasn’t been too much fun to own shares in any major drug manufacturer, and both AGN and AGN/PRA are no exceptions—save for that great big quarterly dividend of $13.75 per share that the preferred shares will be paying out until the end of Q1 2018.
Re: everything else, the Maven is holding his positions, considering upping his position in SDS the double-short S&P 500 average PDF, and drinking Maalox by the quart.
It’s all part of our ongoing Wall Street “Trick or Treat!” 2016 style.
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