Tuesday trading: Investors fearful of September interest hike

Tuesday trading: Investors fearful of September interest hike

After Monday’s respectable display of bullish irrational exuberance, Mr. Market goes negative Tuesday and tries to take it all away. Gold, oil down, dollar up.

The bears are having fun on Wall Street again, just like they did in this 1907 cartoon. (Public domain via Wikipedia)

WASHINGTON, August 30, 2016 – Newtonian physics is at work in Tuesday’s markets. For every action, there is an equal and opposite reaction. Or at least, that’s how the Maven remembers that keen observation. Yesterday the bulls were at play. Today, Mr. Market is endeavoring to take all of Monday’s green ink away, and then some.

It seems that bears have succeeded in scaring the bulls that the Federal Reserve really, really for sure is going to jack interest rates up in mid-September. Today, we’re seeing some retreats from yesterday’s bullishness, with market averages swinging wildly to and fro.

The Dow has been off as little as 40 points today, but as the Maven types away at 2:46 EDT, that average is trying to recover from a nearly 100 point drop and is sitting nervously at -75, to stand at 18,426 and change, off a bit more than 0.4 percent. This isn’t major stuff, but today, only our term preferred stocks seem to be sitting pretty, up a few cents apiece. More general ETFs are all down.

Fearing the Fed means the dollar has gained strength a penny or two against the euro, hitting dollar denominated oil prices (which are modestly down) and materials and precious metals, particularly gold. It’s clear from observation and from numerous sources that TPTB (The Powers That Be) are once again trying to force gold down below the moving average of its rather nice (up to this point) 2016 rally.

If gold keeps catching a bid, average citizens of what’s left of Western democracies will begin to wonder just how much their currencies are really worth. (Nothing, if you want to know.) TPTB knows this and it appears that they’ve arranged to start pounding on the yellow metal once again as they did throughout 2015. We have small positions in both but may exit.

The Maven himself is pretty nervy. On the other hand, even at his mightiest, the Maven can’t beat the full force of the world’s wealthy Thugocracy, so he’s always ready to beat a hasty retreat and live to fight again another day.

If you’ve just come into an inheritance and have just excitedly dumped it into a brand new brokerage account, it might be advisable to just let it sit there for a while at a pathetic 0.01 interest rate until the Fed does or doesn’t make up its mind in about 2 weeks. After all, we also have the long Labor Day weekend coming up, so there aren’t too many trading days left until the next Fed confab. Best to hold on to that cash until then, rather than give the Fed and TPTB a chance to teach you a nasty, early lesson.

Trading diary

Very boring today. We pared back tiny bits of our gold and silver ETF investments—symbols SGOL and SIVR respectively—given that TPTB, including the Gnomes of Zurich seem to have begun manipulating the precious metals again like they did in 2015. You get in their way at your peril.

Our increasing holding in Schwab’s REIT ETF (symbol: SCHH) continues its modest decline and we, perhaps foolishly, keep buying a few commission free shares (for Schwab customers only) as it slowly sinks.

We’re operating on the thesis that sometime between now and October, funds, ETFs, etc. involved in the general market or in REITS in particular will have to increase and/or adjust their positions as the S&P averages admit REITs (except for mortgage REITs) into their own official sector. (Mortgage REITs are supposed to remain in the Financial sector, BTW.)

So far, our thesis is looking dysfunctional, either because the Boyz bought all their shares earlier this summer or, due to fears of a tiny interest rate increase, which, in turn, will cause all real estate investments to immediately die a horrible death. We think this is silly and illogical. But so is much of what’s going on today both here and abroad, so we can’t exactly ignore the sentiment.

However, we continue to believe in our thesis on REITs. If we’re wrong, we’ll fess up here, unlike many of CNBC’s blowhards. This is a real life column by a real life member of the vanishing middle class. Our object here is to either show you how money can reasonably be made in this kind of artificial market environment. Or, conversely, how we’ve had our (CENSORED) handed to us on a platter and have learned yet another lesson.

Stay tuned. And if you’re in cash, stay there, too, although your decisions are your own. Things just seem kind of toppy just now.

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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