WASHINGTON, April 20, 2015 – Heading today’s article is a screen grab of our old pal and favorite stock market metaphor, Warner Brothers’ hapless cartoon character Wile E. Coyote.
In this recent cartoon, Wile E. is attempting to catch the Roadrunner by bungee jumping off a high bridge while the intrepid bird consumes a pile of bird seed conveniently placed on the highway below. Battered by cars and trucks every time he attempts to grab the bird, however, Wile E. swings up and down, up and down until he’s predictably smithereened.
That’s just the way trading or investing in the 2015 edition of Wall Street Follies feels. High-frequency traders (HFTs) are likely having a good time with this, perhaps even causing some of the swings with well-placed rumors cleverly “leaked” to accommodating reporters.
But mostly it’s this news-driven market itself, panicking up or down depending on the hourly buzz. It’s a frustrating mess. In perhaps an even better metaphor, CNBC’s old hand Art Cashin likened trading this market to “commuting by roller-coaster.” Even Wile E. can’t top that one.
After Friday’s brutal beating, which took the Dow down over 350 points at one point and nearly obliterated tech stocks, Monday’s Dow is up well over 200 points as we write this article, circa 11 a.m. EDT, with the S&P 500 and the NASDAQ up nearly as impressively. All the averages appear to be following on to Friday’s late rally—a rally, however, that wasn’t enough to erase most of Friday’s sickening drop in nearly all stocks.
Oil continues its positive trajectory this morning, trading in the mid-$50 per share range, helping out the energy sector a bit. Techs are also happy this morning. Corporate bond funds are catching a slight bid since no one any longer has a clue as to what our current Babel of a Federal Reserve Bank even thinks, as each one of the usual talking heads there seems to be doing a verbal Huck Finn and lighting out for the territories.
Also confounding to serious investors are those inscrutable Chi-coms who seem to have lost their ironclad confidence lately, tacking to and fro depending on what worries them at the moment.
Part of Friday’s big market drop here was the negative effect of the Chinese government’s (probably wise) decision to slam small investors over there for their recent wildly speculative excesses. The government’s action came just as the Chinese averages—at least the ones we track—were in the midst of the mother of all parabolic ascents. Meaning that prior to Friday’s intervention, Chinese averages were skyrocketing almost straight up. And you know how that usually ends.
So, without warning, the Chinese government substantially raised margin rates on traders, causing cascades of margin calls and slamming Chinese stocks down hard in overwhelmingly violent negative action.
China’s suddenly zombified markets terrified other world markets as well, including ours, all of which proceeded to tank in sequence as the trading action followed the sun westward on Friday. By the time our own markets made that late rally attempt, most traders and investors were already bleeding from the eyeballs.
But today, oh, those crafty Chi-coms. Looks like they’re relaxing the credit squeeze on their banks as of Monday, and surprise! Like Wile E. Coyote, who’s just been smacked by another truck mid-bungee, the market is flying back up this morning. Who knows what wacky trick those fun-loving almost-capitalist Communist oligarchs will pull out of their magic hats tomorrow?
There’s no point in exploring this craziness in depth. The situation over there will only change again, making us all look like idiots. Again.
What the Maven is trying to articulate, with as little exasperation as possible, is that there is likely no possible intelligent response to the vagaries of this market.
Factoring in the Chinese policy carnival along with ISIS joyous celebration of Christian genocide in the Middle East, the continuing, exasperating nonsense by the feckless Commies currently running Greece, the also-continuing imperialistic adventures of Russia’s Vlad the Impaler, and the utter fecklessness of America’s caricature of a president and the rich tech moguls and Wall Street fat cats who love him… well, intelligent investing has become almost impossible these days.
We’ll just sit today out, and forego new trading tips that might turn out to be another bungee jump in the wrong direction. The smoke will clear sooner or later, and we’ll give making money a try once again.