Chavez, oil and Iran: How will dictator’s death affect US/World market

Chavez squandered his country's wealth, distributing much of his country’s rich oil revenues to bad actors around the world while letting his own infrastructure collapse.

Funeral of Hugo Chavez.
"Don't cry for me, Venezuela." Mourners, likely paid, bewail the death of Marxist dictator Hugo Chavez. (Via Wikipedia)

WASHINGTON, March 6, 2013 – If left-leaning media reports are to be taken at face value, an unprecedented wave of grief is sweeping across Latin America. Hugo Chavez, the Southern Hemisphere’s latest failed Communist dictator is dead, bringing cascades of tears to the eyes of those who prefer some flavor of Marxist redistributionism in their local government. Even America’s Democrats are noticeably crestfallen.

In truth, tears should be shed instead for countless hapless Venezuelan citizens. Chavez squandered his country’s wealth, distributing much of his country’s rich oil revenues to bad actors around the world while letting his own infrastructure collapse after expropriating the businesses of foreign-owned companies like ConocoPhillips and ExxonMobil.

Like his friends in Iran, he promptly allowed production facilities to facilitate (the better to redistribute more money to buy votes), and also, like Iran, production—and the revenue that it brings—has drastically declined as a result.

There’s been some speculation that foreign oil companies might return to fix things over time and get production back up. But that’s dubious if elements of the current Venezuelan regime remain in power after next month’s likely dubious election results.

Nonetheless, oil futures are pointing slightly down this morning, even after the latest negative news (which any sentient being already knew) concerning Iran’s likely successful drive toward creating and manufacturing nuclear weapons.

Complicating today’s trading further this morning is the Fed’s impending release of its latest bank stress test data. There are likely to be no tremendous surprises here, but there can always be an outlier here or there. America’s biggest banks and most of its smaller ones seem to be on the mend these days, with some—particularly select regionals—returning to outright prosperity, all courtesy of U.S. taxpayers who have, as yet, seen minimal results in their own bottom lines.

When you add yesterday’s bullish news from China, what this all boils down to, apparently, is a news stalemate with a positive bias. And combined with the Fed’s bottomless QE punchbowl, Dow Jones Industrial (DJI) futures are up a hefty 48 points this morning at 8:00 a.m. EST, while the S&P 500 and NASDAQ futures are up a respectable 5.75 points and 3.75 points respectively.

That’s what we’re looking at now at any rate for the 9:30 a.m. start of trading this morning. It’s hard to say if we start our journey on the Road to Parabolic today. Bears still lurk outside the margins, and profits remain to be taken on the latest run. We remain cautious, but we’re being forced to sneak back in at least a little bit lest we miss too much of this latest irrational ride.

Trading today’s market

As we’ve just indicated, it looks like the bulls will rule a today’s opening bell. If we start nibbling back in today, we’ll likely start by taking a look at IBB, the biotech ETF. We should have done that Monday when it started blasting ahead with a reasonably good looking chart. A pullback would be nice for picking up at least some shares of this high-priced ETF, but we might not get one and may have to jump onto the caboose and hope the train keeps steaming ahead.

We are sneaking back in to a couple of MLPs and REITs we reluctantly sold over the last couple of weeks, taking very nice capital gains in the process. Those dividends, however, remain too tempting to leave behind, and we’ll be trying to slip back into old faves like Invesco (IVR) and the now somewhat overpriced Penny Mac (PMT). Ditto Alon Partners (ALWD) a newish issue which has blessed us twice now with 30%+ returns, and perhaps CVR Refining LP (CVRR) which looks like it still has a few points left in its current run.

None of these stocks are participating hugely in the current rally. They’re inherently conservative and bought by most for their outsized dividends, with capital gains as an afterthought—this in a market that’s looking right now for large point gains. But we still prefer to be safe rather than sorry in an environment where the main purpose of government today seems to be doing anything to the economy, or the American people, to assure that Democrats sweep the House races in 2014 while retaining the Senate. That’s a hell of a comedown for what was once the world’s greatest democracy. But that’s the way it goes today when beneficent dictators like the late Hugo Chavez get all the good press, thus influencing legions of low-information voters worldwide.

Enjoy what at least promises to be a wonderful day on Wall Street. We’ll be back tomorrow we think—dire threats from the weatherman appear to be a bust at least thus far. If not, and if we get another Snowmageddon here in DC, we’ll be back online when we can.

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.

Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times. 

Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward. 

References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any ar500ticle under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles. 



Follow Terry on Twitter @terryp17


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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17