WASHINGTON, November 13, 2014 – Thursday’s trading is shaping up to be pretty much like Wednesday’s. Major stock groups are getting hit, damaging major averages. Trading interest is low, encouraging the usual low-volume mischief by HFTs. And there’s no real catalyst for buyers now that earnings season is pretty much over.
News continues to come out regarding those big fines being levied against major international banks like Citi and JP Morgan Chase for trading and futures manipulation by both the U.S. and the U.K. governments.
Of course, the concurrent, large-ish slaps on corporate wrists plus the firings of a few of the guilty traders won’t really solve the problem. It’s been going on for decades (at least) and likely with the collusion of regulators who eventually want high-paying jobs with the miscreants. And it’s likely to continue in a subtler manner in the months and years ahead.
The banking system is still rigged against the average Joe and will likely remain that way until the mob begins to set up guillotines for the guilty in public squares.
Our vintage anti-Tweed Machine Thomas Nast cartoon above simply expresses the political side of longstanding public-private financial corruption. New York Democrat Boss Tweed, foreground left, points the fingers of blame as do the rest of this cartoon’s motley miscreants.
If you’ll forgive the metaphor, this cartoon perfectly represents the circle-jerk of blame wherein something really bad has happened but no one is to blame. Things haven’t really changed much in 2014, as the current bank situation would seem to prove.
To wit: Politicians pretend they’re doing something to fix the system and levy big fines on the offending institutions, which, of course, neither accept nor deny their guilt. Governments sack and occasionally incarcerate a few of the offenders (but not the big fish who donate to politicians’ campaigns). Both sides generate propaganda aimed at convincing the multitudes that the guilty have been punished, the problem has been solved, and bad stuff will never happen again. And business and corruption then resume their normally scheduled programming.
Nothing to see here, folks, move along.
BTW, we always wonder: where in Hades do those big, fat fines go. Back to the taxpaying citizen who was directly or indirectly screwed by the manipulation? The Maven, in over six decades on this planet, has yet to receive a reparations check from the government.
So we have to assume that these big fines are really a special tax, the bulk of which goes to indirectly pay off the institutions that got hit. You gotta love this near-perfect, closed system organized and perpetuated by those perennial rent-seekers: large corporations and greedy politicians.
In other words, Boss Tweed may be long gone. But his Democrat successors and their crony capitalist buddies are continuing the Big Scam unabated.
In the meantime, some banking stocks have been hit, messing with those market averages in a noticeably negative way.
Meanwhile in the oil patch, we learned Thursday morning that U.S. crude inventories actually dropped across the boards by some 1.7 million barrels. That should have encouraged bulls. But everyone still fears oversupply, a fear supported by other data including a drop in Chinese demand and a rise in the U.S. Cushing OK hub inventory.
The latter doesn’t negate the over-all drop in inventory. But Wall Street’s HFTs and other assorted lemmings that trade, often selectively, by headline, are in a bad mood where oil is concerned. As a result, prices were driven down this morning close to the $75 per barrel experts say Big Oil needs to maintain profitability and keep on drilling.
Meanwhile, it looks like Congress, in light of November 4, may start moving that Keystone XL Pipeline legislation again in an attempt to get that ridiculously stalled pipeline project moving after years of caving into the Luddite ecofreaks who want fossil fuels to simply go away.
Keystone should have been approved years ago and would be functioning today if it had. But jobs, fuel prices and the economy are not a priority of the current A Administration, which likely still opposes this project, which nearly everyone else supports.
Enter the Administration’s media apologists to make the most absurd argument of the year against Keystone. This from CNBC:
As Congress rushes to approve the long-delayed Keystone XL pipeline, it is questionable whether or not the project will make as much of a difference as proponents expect. Since June, crude oil has declined by 28 percent, pushing the price that oil from new wells in Canada may command below what the expected cost will be to produce it.
That observation is transcendentally hilarious. It’s just another way of saying, “See, Keystone opponents were right, and this is proof. Not only is this pipeline hazardous to the pipe dreams of radical environmentaloids. It now doesn’t even make economic sense. Ha-ha! We told you so!” Logic was never the strong suit of idiots like this, who manufacture excuses for their stupidity with the quickness and efficiency of the Chinese who crank out new iPhones.
In any event and as we’ve already noted, today’s positive-news-turned-negative has absolutely mertilized* the Maven’s pair of oil holdings, specifically Hess (HES) and Anadarko (APC), both of which are down sharply this morning due in large part to the news.
Ironically, the solar IPO the Maven picked up for a quick, cynical trade last month, Vivint Solar (VSLR) is again down big time today.
First, it was clobbered by those November 4 results which hint at a day when those big, taxpayer subsidies that allegedly make solar profitable will be taken away.
But second, VSLR was clobbered again earlier this week by reporting lousy numbers right after brokers and underwriters had driven it up with glowing recommendations. Not surprisingly, the vulture lawyers are already out, threatening a class action suit against the company and its underwriters for disseminating false information and screwing investors.
This wouldn’t be the first time, of course, that these greedy trial lawyers were actually right. But at the very least, the action in all three of our stocks—HES, APC, and VSLR—proves just how treacherous any energy stocks happen to be right now, given the current investment climate.
The action here is so ridiculous, particularly since the latest Polar Vortex is about to engulf the East Coast and the South, that we’re inclined to buy more big oil right here, and perhaps even some shares in a natural gas company or two just as a contrarian move.
As for VSLR, we’ll likely drop those shares for a net 5-6% loss later today, having bought some shares at a lower price to ease the pain. With IPOs, you win some, you lose some. This one was a loss.
Today’s trading tips:
We’re not very enthusiastic about anything today. If you come back here tomorrow, our mood might have improved. But Monday or Tuesday might be better bets. Fridays are usually weird and Mondays usually are the reaction to whatever happened Friday.
We are, however, contemplating dumping shares of American Electric Power (AEP). We bought it for the dividend late in the summer, anticipating a nasty September-October trading environment, which indeed did happen. But now we’re seeing signs that trading is rotating to other sectors, meaning that they’re dumping utilities. Why should we get in their way? We can buy the utils back when they’re marked down.
We continue to hold First Energy (FE), however. AEP is a better utility, at least right now. But FE is finally stabilizing, and that 4% dividend is irresistible.
*Mertilized. Interesting partial background to this now rarely used term, which is not a typo.
It seems that, back as early as the 1920s, the predecessor term to this one was street slang for “murderized,” which, in turn, was just another way of saying that something or somebody was wiped out or annihilated. But most of us Boomers remember it as one of Moe’s and Curly’s greatest threats: “I’ll murderize him!” Except that with their New York accent, the Stooges pronounced it “moiderized.” Or, as many of us Midwesterners heard it, “moitilized.” Which for us, regularized to “mertilized.” Which is probably the current term’s real secret origin.
As proof, we offer two panels from an episode of the late, lamented, brilliant “Calvin and Hobbs,” as we watch the legendary Spaceman Spiff trying to get out of intergalactic trouble. We’ve underlined the use of this term (in the past tense) in panel 2.
With apologies to secretive cartoonist Bill Watterson–a once and current Ohio resident, who grew up in the Cleveland area around the same time the Maven did–it seems that Spaceman Spiff was also familiar with the Midwesternized usage of “mertilize” as well. It’s clear that both Bill and the Maven were big-time fans of those ubiquitous “Three Stooges” re-runs that were a staple of after-school TV back in the day. Hence, the current mertilization of “murderized.” Aren’t you glad you read this column?