WASHINGTON, September 8, 2016 – Weirdness and indirection continued to grip Wall Street Thursday as all three major averages—the DJI, the S&P 500 and the NASDAQ—are currently down. The NASDAQ, in fact, is doing the worst, off 38.67 points as of 2 p.m. EDT, a negative 0.8 percent, likely due in part to heavily weighted Apple’s (symbol: AAPL) current downtrend. That’s largely the result of the market’s poor reception of the company’s newly announced iPhone 7.
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Meanwhile, confusion reigns elsewhere in the market as the Dow Jones trannies—aka, the nickname for the Dow transports, PC fans—have been trending down, usually a bad sign for stocks The financial sector looks a bit anemic as well, perhaps due to the apparently sinking hope that Janet Yellen and her band of Merry Persons will forgo kicking interest rates up a notch next week, which would actually have helped the banks. A lot. Hence the anemic financials.
That, in turn, has made preferred stocks and similar more or less fixed income vehicles more popular for traders, at least for this week, since an interest rate increase almost inevitably causes the price of these issues to decline. Ditto the non-mortgage REITs now liberated into their own S&P 500 sector and now subject to buying by various ETFs, which now have to rebalance portfolios by buying select REITs to reflect the new S&P mix. If rates don’t go up while they’re all doing that buying, that will certainly help.
In the oil patch, a September surprise—a big drawdown in crude supplies, indirectly due at least in part to the recent Gulf hurricane—has goosed crude oil prices today with WTI up $1.89 bbl. to stand at $47.40, a whopping 4.18 percent jump and with Brent up a nearly as impressive $1.83 bbl. to stand at $49.81, a nifty 3.81 percent improvement. It remains to be seen, however, whether this move has any staying power.
Back to interest rates and the Fed, stocks continued to puzzle through the Fed’s latest Beige Book release, which noted among other things that the U.S. might see some modest wage growth coming down the road. At some point soon.
Given that under the Obama administration, anything that might help the average American citizen, however, we’d assume that “soon” means sometime after Obama can relax and play golf 100 percent of the time as opposed to the piddling 75 percent of the time he can spend on it now in his final year as President Emeritus.
According to CNBC, the easy money policy of the world’s central banks has reached the law of diminishing returns. Of course, you don’t have to make the big bucks to figure that one out. Only the wealthy bankers and political appointees to prime government positions have gotten rich during the Obama administration. If you’re not in that crowd, you’ve seen little benefit and virtually no wage increase since 2008 or even before. That said, according to CNBC’s report,
“‘Central banks are pushing on a rope now. You can’t get much more out of conventional or unconventional monetary policy without structural changes,’ Wunderlich’s [Art] Hogan said.
“Investors have been closely eyeing each data set, looking for clues about whether the Fed will raise interest rates in September. Market expectations for a rate hike in September were 18 percent, according to the CME Group’s FedWatch tool.
“‘The market is just playing better poker than the Fed right now,’ said Tom Siomades, head of Hartford Funds Investment Consulting Group. ‘They know the Fed isn’t going to do anything after that … jobs report.’
“‘The Fed is going to hold its breath until December and hope everything is OK,” he said.”
Siomades could be wrong, of course. But then again, it’s increasingly clear the Fed either doesn’t know what it’s doing any more, or is afraid to jack rates next week and spook markets, which might damage the chances of that Hillary Clinton landslide her leftist lackeys in the media continue promoting.
In case you never noticed, the Fed generally tries to keep the party of the White House incumbent happy in an Election Year—Bush father and son excepted. This, more than anything else, may assure that the next interest rate increase, if any, will happen in December at the earliest. Janet wouldn’t want to crash the market prior to the anointing of Her Hillaryness. You heard it first right here.
Gold and silver are taking a break today. If prices go low enough, we may nibble at a bit more of both metals by adding incremental share purchases of gold and silver ETFs SGOL and SIVR, both of which we already hold and are buying on dips. Likewise, as Apple (AAPL) tanks, we may nibble on this one at some point.
We are also looking to pick up at least one property owning REIT—the kind that’s been put in the new S&P REIT sector and adding to holdings in Schwab’s large-cap ETF, SCHX, the closest commission-free (for Schwab customers) ETF we can find to correlate with Dow Jones sized companies in which our income-oriented portfolio is largely deficient.
We’d like to move toward a more standard mix of investments. But the juicy yields of our substantial preferred stock holdings are keeping us above water at the moment, so we’d like to stay in many of these as long as possible.
We’ve also, once again, begun a small hedge with the double-bearish S&P 500 ETF, symbol SDS. That position is down right now just a bit. But if the market rallies, we might pick up a bit more. We just don’t trust this current bull run, and the world governmental, immigration, fiscal and military situations are so fluid right now that nearly any negative surprise could make Wile E. Coyote’s worst canyon plunge look like a Sunday lark.
See you tomorrow.