Election 2016 and potential Fed interest rate hike continue to result in up and down trading on low volume, all unlikely to resolve until November 9 or later.
WASHINGTON, October 25, 2016 – As our readers have probably already figured out, the Maven got so bored with stock trading action last week that he took off for a few days to parts unknown. Actually, he and Mrs. Maven were on holiday with friends in rural central Virginia, famous for its sights and wines but not the best place in the universe for Internet connectivity.
As it turns out, the Maven’s timing was good. The ridiculous up-one-day-down-the-next market action pretty much continued to play out while he was enjoying last week’s picture-perfect autumn weather in the Old Dominion, currently owned and operated by longtime Clinton bundler—and current Virginia governor—Terry McAuliffe.
McAuliffe is currently in the news for his PAC’s big $500K donation to the campaign of a candidate for the Virginia state legislature. A candidate who happened to be the wife of a high FBI official likely involved in the Hillary Clinton email investigation, BTW. Which FBI official is now the FBI’s #2 in command. Nothing to see here folks, move along.
In an election year when you can’t really believe the shameless media hucksters at all or anyone else for that matter, both investors and your average Joe have no clue as to who’s really going to grab the Presidential brass ring this year, even though 105 percent of the pundits and pols have already declared her Hillariness the obvious victor. That number includes the armada of feckless RINO Republicans who never supported Trump in the first place.
Given that pretty much everyone in charge of “the narrative” has been lying for years—perhaps decades—there’s a pretty good chance that all this Democrat-led triumphalism is meant to mislead. But, since no one—including their own generally robotic supporters—no longer really believes their crap, however, the best way for them to win this fall is to discourage and suppress the number of Trump enthusiasts going to the polls, even as the Dems happily pay and/or arrange to have mass quantities of illegal aliens and otherwise non-voting inner city residents to vote early and often for Hillary.
A victory by Her Hillariness would assure that the current Soros Wrecking Crew of bought-and-paid-for elites and media stooges will continue to push the kind of open borders travesty that’s already got Europeans stirred up against their own idiotic governments. How such sheer greed and stupidity should take hold in the supposedly enlightened West remains beyond our ken. But there it is.
Whomever actually wins this fall, this whole miserable scenario is not going to end well, which is what brings us back to our current bi-polar, low trading volume stock market. Pretty much every bet is going to be wrong. Pretty much every stock connected to either Clinton or Trump policies (presuming we know what they are) will promptly tank on the morning of November 9.
We’re already seeing the effects in the pharmaceuticals, which, Epi-Pen and all, have been targeted for destruction by the Smartest Woman in the History of Mankind. Since everybody with a brain knows that the severely health-and-ethics-challenged former Secretary of State will absolutely be our next president, the market has already been eviscerating these stocks.
It would be interesting indeed to see these crushed, yet profitable major companies stage a massive rally on November 9 should the Trumpster prove all the experts to be the tin-brained idiots they were, are and always will be.
Ah, but such potential scenarios are in the future. Right now, investors—including the Big Boyz—have been and continue to extract themselves from the markets lest they be horrendously wrong in their bets next month. The result is the endless skein of yo-yo days we’ve been enduring of late.
We’ll leave it at that for now. Nothing will clear up in the market until we get the final results of this election—which, shades of 2000—could turn out to take longer than overnight to resolve. And let’s not forget the Fed’s almost certain intention to raise interest rates in December, something Obama and Hillary’s minions have ordered the Fed not to do until Hillary is officially slated to ascend the throne.
Sadly, we dumped our holdings of AT&T (symbol: T) for a rather nasty loss, due to the company’s ill-received announcement this weekend that it was going to acquire cable and entertainment giant Time-Warner (TWX). Long term, T is still probably a decent investment. But given Wall Street’s immediate thumbs-down on the move—both the acquirer and the allegedly about-to-be-acquired have gotten pummeled in trading action—this whole idea is just the kind of potentially anti-competitive monopoly that gets Washington’s VIP knickers in am an anti-trust twist. Just in time for elections, too.
In such a situation, it’s best to leave at least T in the rear-view mirror for now, despite its big and quite-protected dividend. Too dangerous. You never know how low the potential acquirer will go, and in these uncertain times… well, bye-bye AT&T.
On other fronts, we sold our modest positions in the Ashford Hospitality (AHT) and UMH Properties (UMH) REITs for a small profit. Ditto our shares in TTM Techologies, Inc. (TTMI), also for a few pence profit. The new REIT S&P index in general is not off to a good start, and trading stocks in that new area—REITs that invest in properties themselves rather than mortgage REITs—has been iffy, given potential interest rate hikes.
We actually still like these stocks and others in this new sector. But in this market, if The Boyz decide they don’t like a sector, they show it in a big way that can damage the average trader’s portfolio, so it’s best to go cash here for now.
As for our IPOs, we’re still up in Nutanix (NTNX). But, as we predicted, the stock—once up nearly 200 percent after the IPO—has slowly been sold off while the Maven waits for the required 31 day hold imposed by his broker to get rid of it.
That said, we’re still up some 80 percent. If we can sell for even a 50 percent gain or so, the venture will still have been worth it in a market where it’s hard to make money.
Our other recent IPO, Extraction Oil and Gas (XOG), opened pretty much flat when it opened for trading on October 12. Disappointingly, it then sank another point or two before attracting some non-IPO interest and sneaking back up again. It’s currently sitting at $22.50 per share, up nearly 19 percent from its $19 IPO pricing. That’s likely due to the current strength in oil and gas, whose continuance is by no means guaranteed.
We’ll see if XOG can hold or increase this number over the next two weeks or so. The challenge: what happens when election results are in. We will have to hold these shares for several days after Election Day. Fingers crossed.
Our shares of Valero (VLO) are doing just fine at the moment. So are our shares of Marathon Petroleum (MPC). But oil and gas refining is still a volatile sector, one that once again could get severely hammered, particularly if the Democrats win any kind of control in November. You know how much these folks love cheap fossil fuels. Right?
We’ve signed up for shares in Blackline (proposed symbol: BL), a slightly hard-to-grasp IPO that’s supposed to be priced this Thursday evening, October 27. To oversimplify, Blackline has created a series of accounting modules that in many ways continuously update that laborious process for large companies.
By all accounts, Blackline’s accounting products have been a success. However, like most new companies involved in one facet or another of tech, profits for BL are, at the moment, essentially a mirage. For similar reasons, most such companies are chancy at the IPO stage.
Goldman Sachs is leading the underwriting charge on this one, often a good sign but not always. The trick is to price this one right. If it prices up over its potential current range of $13-15 per share, that’s probably a good sign. If it prices below $13, maybe not so much, even though that may seem counter-intuitive.
The trick for underwriters is to price the IPO as high as they can, given that they are working for their clients—in this case, BL, not us—and need to get their client companies as much cash as they can on the offering. On the other hand, if they can manage to underprice an IPO just enough to still give the client plenty of dough while allowing IPO investors to get that much-coveted upside pop of 10, 20, 30 percent or more, well, then, everyone is happy.
Goldman tends to do this, fortunately, on a fairly consistent basis. But we’ve also been screwed by a few of their offerings in the past, so a Goldman-led IPO isn’t always a slam-dunk.
Unless Putin really does declare World War III (or IV if you count the Cold War), markets will continue to remain obsessed either over Trump vs. Hillary, the Fed’s “Waiting for Godot” interest rate production, or both. Stay tuned.
*Cartoon by Branco. Reproduced here by arrangement and with permission via Legalinsurrection.Click here for reuse options!
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