WASHINGTON, November 3, 2016 – The crushing late October-early November bear market continued in Thursday trading action. Averages were actually not off too much, at least on the surface. But today’s modest decline in the averages masked the increasingly savage downside action in a considerable number of sectors and individual issues.
A great number of individual stocks, including oil and interest sensitive issues as well as tech and healthcare/pharmaceuticals, were smithereened again today, with Allergan (symbol: AGN) particularly hard hit after reporting a way-off-the-mark quarter Wednesday.
Oil’s continuing decline—its second this year after the price of crude hit the magic $50+ handle on the upside—didn’t help. Neither did a surprise UK court ruling that considerably complicated the current government’s “fast Brexit” plan. Back to the drawing board. Meanwhile, the beleaguered pound sterling caught a bid after weeks of steady declines while markets elsewhere, including the U.S., reacted negatively due to the confusion.
However, the major reason behind the continuing, unusually fierce market declines in this usually positive investing season, is Wall Street’s continuing uncertainty with regard to next week’s presidential election. While most polls—perhaps fraudulently—still put Hillary Clinton ahead, other perhaps more reputable polls like Rasmussen are giving Donald Trump a 2-5 point edge.
Wall Street was betting on HRC, however. But after last week’s stunning weekend Wikileaks document dumps as well as FBI chief Jim Comey’s surprise, Lazarus-like re-opening of the Clinton email case, as well as word that a continuing investigation of the Clinton Foundation has been ongoing injected fear and loathing into an already-struggling and directionless stock market.
The current result of all this news is a real fear on the part of the media, banking and government elites that their preferred gal, Crooked Hillary, may not actually end up serving as America’s next president. In other words, all the millions and millions of corporate, PAC, individual and, of course illegal dollars contributed to the Clinton campaign may yield a zero return.
Worse, should Trump actually overcome the odds and come out on top, he’s be the first president in modern memory to owe precisely zero to either the wealthy bigwigs, the so-called intelligentsia, the MSM and the Washington elites. That is very upsetting to those whose vast wealth and livelihood have been largely derived from their ability to channel government largess—aka, taxpayer money—into their own collective pockets.
The very idea that after so many cushy years, these clowns may actually be on the outs is one petrifying notion. Worse, it could be the beginning of the end for the socialists and globalists who are systematically destroying Western-style democracy and eliminating the middle class.
That’s really what’s got Wall Street in a pickle: the increasing potential of a Donald Trump upset, protest win against the bought-and-paid-for Democrat establishment candidate, Hillary Clinton.
Even worse—based on some as yet unconfirmed information being leaked so far only on Alex Jones’ “Infowars,”—even more horrific stuff on Bill, Hillary, the Clinton Foundation, Anthony and Huma and the much-ballyhooed “Lolita Express,” including salacious videos all could be in the offing. According to Infowars and a secretive yet reasonably well-known intelligence source, an alleged “counter coup” is being waged against the corrupt Clinton organization by highly-placed individuals in the U.S. intelligence community.
It’s all juicy stuff to be sure, but both this writer and CDN will need to check its credibility further before we get on this particular train.
However, the very fact this kind of info is out there adds even more uncertainty to the current presidential scenario. I.e., if Hillary does win and is then indicted, what happens next. Add to that the possibility of voter fraud—a probability, actually, in major cesspools of corruption like Philadelphia—and a contested photo finish like we saw in the 2000 contest. Traders, investors and institutions alike are quite logically frightened about what happens next and are only being prudent as they lighten up on their holdings.
In such situations, cash is king, and a lot of it has been raised over the last week to 10 days, all or most of which has been in reaction to the messiest and most uncertain election scenario in most of our lifetimes.
We were sickened once again by the continuing spectacular swan dive in our beloved—and overheld—shares of Allergan preferred (AGN/PRA). With one share each of AGN/PRA redeemable at the owner’s discretion for nearly 3 shares apiece of AGN common stock, the preferred issue, which normally would be far less volatile, is getting hammered by its relationship to the common shares.
The downside became considerably more violent Wednesday and again today by AGN’s absolutely rotten quarterly earnings report. Much of that big negative number was due to transitions being made in the aftermath of Allergan’s failed merger with Pfizer (PFE) after the Federal government essentially terminated the transaction.
But the rest of the bad news was, by the CEO’s own admission, due some misjudgment with regard to the penalty the company would take as a couple of its major drugs came off patent and went generic.
As a result, AGN has lost, by our estimates, a good 10-15% of its value just over the last few days and, linked to the common as it is, AGN/PRA has been hammered just as badly or worse for a generally stable stock with a now impressive current yield of nearly 8 percent.
This violent down move in both stocks has put our collective portfolio back in the red for FY 2016, right after we thought we’d dug ourselves out of the January-February hell-move in nearly all stocks.
Things are falling apart in the U.S. where the Federal government appears to have become completely untethered from the individual citizens it’s supposed to represent. Next week’s vote will be one kind of climax. But more nastiness is likely to come in both the government and the stock market until some kind of common ground is found that might allow this country to get itself back on track.
We’re slowly unloading shares of this and that, sometimes for a loss, and raising our defensive position in the double-short S&P 500 ETF, aka SDS. In this kind of chaos, it’s the simplest way to protect what you’ve got left in your portfolio.
*Cartoon by Branco, reproduced here with permission and by arrangement with LegalInsurrection.