WASHINGTON, October 27, 2016 – It was another gloomy trading day on Thursday, as tired and election-weary Wall Street funds, trading firms and individual investors continued dumping shares across the boards, apparently fearing the results of the upcoming Presidential Election.
Averages were minimally down, with the S&P 500 nearly flat while the tech-heavy NASDAQ, influenced by another down day for Apple (symbol: AAPL) was somewhat worse, off over 0.50 percent.
Apple announced “disappointing” Q4 2016 results earlier this week, leading investors to dump shares of Apple stock. It’s follow-up new product announcements today met with equal disdain, dropping the tech giant’s shares another $1.43 (-1.25 percent) to close at 114.51. Analysts were apparently underwhelmed by Apple’s sexy (and expensive) new MacBook Pro models, despite their thinner profiles, greater computing power, and considerably improved interactive features, including a larger trackpad and some touchscreen capabilities via a new “touch bar.”
Apple also announced a number of improvements to Apple TV and a major upgrade to its video-film suite, Final Cut Pro X.
But, just as in the 1990s, when the tech punditocracy regularly predicted Apple’s imminent demise, the company’s post-Jobs efforts by Tim Cooke have been bashed more-or-less constantly, ignoring the company’s continuing excellence and earning power in a difficult environment in which smartphones like the iPhone are gradually becoming commoditized. The fact that Apple has maintained bigger margins by far than the average tech company never crosses the minds of these idiots, so the stock continues to languish, priced far lower than many of its underperforming brethren. Go figure.
Personally, the Maven dislikes Cooke’s idiotic PC grandstanding and virtue signaling, par for the course in richer-than- and holier-than-thou Silicon Valley. At least if you want to be invited to the best parties. But from a business standpoint, it’s hard to fault Cooke for keeping Apple in profit city even when both the consumer market and the stock market continue to give off unpleasant recessionary odors.
Meanwhile, politics continue to weigh on Wall Street in often confusing ways. Investors are dumping stocks indiscriminately in all sectors, hitting a different group every day, or so it seems, leaving nothing immune from the mindless, defensive selling.
Wall Street—particularly Goldman Sachs—remains squarely behind Her Hillariness, proving once again that Democrats, not Republicans, are indeed the real party of the rich. Given this obvious fact, however, why is this market selling off? Shouldn’t the inevitable coronation of the Smartest Woman In the World as America’s next POTUS—which, according to the media, is a slam-dunk—shouldn’t this be ample cause for HFTs, fat cats, too-big-to-fail banking institutions and other assorted robber barons to buy stocks hand over fist like there’s no tomorrow?
Maybe not. In the first place, there’s always that fear of another taper tantrum, as the Fed is virtually guaranteed to raise interest rates after Hillary and her Wikileaks-proven Corruptocrats have successfully gamed the system and stolen the election in a landslide.
But perhaps worse—what if all those massive Trump rallies in flyover country are rendering all those Clinton up by +50 polls are… inaccurate. What if the Great Unwashed inhabiting Flyover Country arise to overwhelm the smug East and West Coast elites, and vote-swarm The Donald to victory, like those millions of fast-moving zombies in the film “World War Z” surged over city after city like some inexorable phalanx of army ants destroying everything in their path?
Perhaps that’s why the otherwise financial website of cable channel CNBC—often a reliable source for financial news and numbers—has spent the past month devoting from one-third to one-half of its headline stories to transparently asinine anti-Trump “stories.” After all, if Hillary already has things in the bag, why wouldn’t we be seeing stories now on how our next President will continue America’s fundamental transformation? Ergo, who cares about an obvious has-been like that blowhard Donald Trump, who’s even been completely abandoned by his own political party?
Fact is, it isn’t in the bag for Hillary at all. Wall Street is nervous that all the media’s left-wing bullshit—if you’ll pardon the Maven’s imperfect French—is simply making The Donald more powerful. No matter how hard you hit him, he’s like the “TV People” in the original “Poltergeist” film: “He’s ba-a-ack!” For that reason, investors across the board are creeping away from investing in the stock market. They fear a YUGE selloff if Trump manages to Trump the elites. So they’re not likely to come back in any numbers until either one of three things happens:
- Hillary wins so decisively that there’s no point in pulling an Al Gore.
- Trump wins so decisively that there’s no point in pulling an Al Gore.
- Both the popular and electoral vote numbers and/or the obviousness of Democrat-led voter fraud, mainly in the larger cities, brings out an army of lawyers and politicos that will make Gore’s “count the votes in select, Democrat-leading precincts” strategy look like the proverbial Sunday School Picnic.
In that third scenario, only determined short sellers will win in the 2016 year-end investment game, which will be catastrophically ugly.
Not much to report. Reluctantly, we dumped more shares of our once quite-large position in Teekay Tankers (TNK). The company remains obstinate in its irregular and opaque financial reporting, making it really difficult to gauge when they will right-size their financing and stop cutting their once handsome dividend.
We still believe TNK will recover, and quite nicely. But with TNK shares approaching penny stock status, we’re defensively lightening up before the company reports likely lackluster quarterly results. The already substantial number of short sellers could very well pancake what’s left of this stock, and we don’t feel like hanging around for that, particularly if the November election results cause widespread panic and chaos.
We’ve also cut our position in Schwab’s REIT ETF (SCHH), which has persistently remained in a long-term, slo-mo swan dive. SCHH is actually a fine and highly representative passive investment in the REIT sector. But sheer interest rate irrationality is causing everybody and his brother to clear out of this sector. So once again, it’s best for us not to hang around here either until somewhere, somehow, the “all-clear” signal is sounded.
We got brave and did pick up a modest number of shares in consumer giant Procter & Gamble (PG). It’s been pulling back steadily from its recent spike-high based on quarterly earnings that handily beat they cynics’ numbers, and the company is likely to continue improving its prospects via its newish strategy of dumping marginal brands to focus on those that still make a ton of money. Apparently, that strategy has begun to work big time. So any temporary swoon in this one will probably remain a buying opportunity.
Unless, once again, a close-election horror show begins to play out throughout the end of the year.
Although their shares were anemic in today’s deadly-dull trading action, we continue to hold and intend to add to our positions in Blackstone Group (BX) and KKR (KKR), both of which reported nifty numbers reflecting their careful deployment of big money (many billions of dollars) betting on just which leveraged buyouts will eventually earn them genuine robber-baron profits.
We’re also interested in local giant Carlyle Group (CG), but are holding off until we see a clearer pattern develop. The stock has been dead money for over a year, and we’d like to see some chance we’ll get a nice move in 2017 before committing any funds to this one.
Finally, after it reported a nasty quarter and sank in this treacherous market, we added to our position in oil refiner Marathon Petroleum Corp. (MPC) even as it sank. If it sinks further, we’ll add more. That’s because in light of its lousy quarter, it’s increasing the pace at which it sends infrastructure “dropdowns”—oil and gas pipelines and such—to its affiliated Master Limited Partnership, MPLX, LP (MPLX).
Too complicated to explain here why this is good for MPC, although its very good for dividend-starved investors in MPLX who will likely see that company’s dividend increase dramatically. But clarifying a complicated balance sheet and focusing the company on its main business—the (hopefully) lucrative refining of oil and the delivery of much-in-demand petroleum products—is always a good thing.
MPC predictably tanked again today, so we bought more shares. And indeed the stock seemed to stabilize somewhat by mid-afternoon, closing well off its earlier lows. Fingers crossed.
Finally, there’s tonight’s IPO pricing for Blackline, Inc. (proposed symbol: BL). Somewhat irritatingly, its announced pricing range increased this morning from an earlier $13-15 to the current $16-17, apparently indicating above-average interest in this new issue, which offers a specialized cloud-environment for continuously updating corporate accounting procedures.
Like most tech IPOs, BL makes no money and doesn’t look like it will generate any green ink any time soon. But tech investors tend not to care about such piddly things, looking for growth, growth, growth, and the hell with the balance sheet. Up until now, at least, BL seems to be delivering the growth part while planning (via its prospectus) to use much of its IPO proceeds to delivering.
Like all IPOs, this one is ultimately a crapshoot. We’ll look at final pricing, which usually shows up somewhere between 7 p.m. and midnight for such issues, and then make our final decision as to whether to go for some shares or not.
As always, however, our discount broker will allocate whatever amount of shares it gets, meaning that if we decide this one’s still a go, we may or may not get any shares at all. The rich guys always get most of them, but we do occasionally get lucky, as we did on the recent Nutanix (NTNX) IPO. NTNX blasted up nearly 200 percent after its opening trade about 3 weeks ago, which marked a nifty product for those able to immediately flip those shares.
That’s something the Maven could have done, too, but to do so with his current broker, he’d have been banned from IPOs for the next 90 days. Rules here are complicated.
The Maven hates this particular one, yet he respects it, as the “syndicate”—the brokerage firms that actually front the money to first buy all the IPO shares themselves before selling them to individual and corporate investors—are, for 30 days, legally permitted to “stabilize” the pricing of such an issue after opening day, the better to eventually maintain a normal and mostly rational market for the new shares.
As an non-participant in the syndicate, our discount broker apparently has an agreement with the real underwriters to prod its own investors to hold their shares in that initial period in exchange for actually getting the shares. Fair enough. But it tends to allow the rich “flippers” with other firms to skim the cream.
NTNX, originally priced at $16 per share, soared almost immediately to $40 within hours of its opening trade before settling into the mid-30s. Predictably, it’s been slowly sinking ever since. It lost another buck thirty-six today, closing at a still very respectable $27.43. That’s a roughly 71.5 percent improvement over the originally issued shares. But it sure is sad to see that 200 percent or so slowly fly out the window while we hold.
We’ll let you know how this one turns out. Ditto another IPO, Extraction Oil and Gas (XOG), which has been up and down and is currently sitting at $22.06, up 16 percent from its IPO price of $19 per share. Being in the oil and gas industry and not a high-tech “unicorn,” this IPO was bound to be less sexy than NTNX. But in this market, if we can hold at least some of this profit through that 30-day period, XOG, like NTNX, will have clearly outperformed our longer-term holdings in this phenomenally anemic market.