Deutsche Bank problems put the big chill on stock market action
WASHINGTON, September 29, 2016 – Relatively short column again today, but not for lack of information. After what seems like years of boredom, some interesting patterns seem to be emerging in Thursday trading action, which finds stocks tanking hugely as petrified politicos and bankers alike tremble at the prospect of seeing Germany’s big Deutsche Bank heading down the same trail as Lehman Brothers did in late 2008.
Frankly, this is comparing apples to oranges. At this point, we don’t see Deutsche Bank collapsing, although it’s clearly in trouble. But Mr. Market has his virtual knickers in a bunch, and, as we approach the 2 p.m. EDT hour, stocks are getting mertilized across the board. The Dow Jones Industrials are currently down 244 points and change (-1.31 percent); the broader based S&P 500 is down 25 points and change (-1.77 percent); and the tech heavy NASDAQ is off 60 points, a negative 1.12 percent move. Stocks in the financial sector and any stock that’s currently popular for yield… all of them are getting clobbered in sympathy with the Deutsche Bank financial mess. Scary.
So yesterday, oil ruled. Today, it still rules, except that all the Nervous Nellies are fleeing from (or shorting) stocks in general, and dumping utilities in particular since increasing fuel prices may have a negative impact on profitability. At the same time, for some reason, the market has also decided to fear our still nonexistent inflation problem, so TIPS and other variable interest rate stocks and ETFs are in vogue, at least for today.
Sadly, however, it’s hard to make much out of these disparate information bits and bytes. There’s no real evidence for anything in the end, and since technical and fundamental analysis has been entirely gamed and subsequently obliterated by the world’s major central banks, we no longer have a compass point, save for sage advice from the late, great New York Yankee Oracle, Yogi Berra: “It ain’t over ‘til it’s over.”
In other words, today’s sell-a-thon will be over when it’s over, which is… whenever.
Back to the NASDAQ for a moment… Apple (symbol: AAPL) isn’t helping that average much today through no fault of its own. Barclays analysts decided to trash the stock this morning, cutting its price target from $115 per share to $114, which the stock was already flirting with until Barclays pulled the plug on an already bad day.
We predict that this latest bad-mouthing of Apple, like most of the rest of today’s nonsense, will be laid to rest as of Apple’s next quarterly earnings report. But, as always, when such patent nonsense comes out on an already bad day, lots of other stocks get lost in the funhouse, too. It’s a grim fairy tale.
Days like this one are sickening to individual investors like the Maven. Positions get hammered right and left for no particular reason. For example, our beloved (and very large) position in Allergan preferred A (AGN/PRA, your brokerage’s symbol may vary) is again under the mertilizer ray, getting pancaked as traders pound the shares for what’s currently a $17.78 loss. Ulp.
Likewise, our small position in Apple is getting smooshed to the tune of negative two bucks per share, while our position in French oil giant Total (TOT), which was nicely up this morning on oil’s current upbeat mood, has dropped considerably, although it’s still up on the day. And as for our Teekay Tankers (TNK)… well, we don’t want to talk about that one either. It was up decently, but now its definitely not.
What is up, at least a bit, is the Powershares Variable Preferred Stock ETF (VRP). We’ve been quietly adding to our position in this one in tiny bits because A. We’ve long expected some kind of interest rate hike which, after a time delay, increases the dividend of this ETF. That’s because, as its description implies, it owns and operates a portfolio consisting of variable rate preferred stocks, meaning that the yield and perhaps the price of this ETF will go up and down in tandem with interest rates.
Since U.S. interest rates have been more or less flat for quite some time, so has VRP, which we like partly for the variable concept and partly because our brokerage lets us acquire tiny squibs of stock without commission. Your brokerage probably has a similar arrangement with this one or another vehicle.
In an environment of at least potentially rising interest rates, fixed rate preferreds will get hit, pricewise, while variables will catch the bid. Of course if Yellen chickens out again in December, you know what will happen with variable rate ETFs like VRP. Ergo, eternal vigilance is in order here to preserve your returns.
We started buying Walmart, too a couple of weeks ago, and, while retail is doing okay today more or less, Walmart (WMT) is taking a hit, so we may load up on some more of that one, because our portfolio is underweight large caps at the moment and the prognosis for WMT seems pretty good at the moment.
Finally, we’ve put in for a fair amount of shares in Nutanix’ IPO, scheduled to price tonight sometime after today’s market close. Our brokerage lists the boiler plate description for this company (proposed symbol: NTNX) as follows:
“Nutanix, Inc designs and develops computing and storage infrastructure solutions. The Company provides data center and desktop virtualization, disaster recovery, testing, and development solutions.”
Okay. Sounds cool, even though, as another one of those Silicon Valley “unicorns,” NTNX has yet to get even close to profitability. And even though the Maven has no clue how to pronounce this company’s name, which sounds like some kind of spreadable food product from Australia.
The issue looks like it’s heating up, however, meaning the rich guys will probably get it all and we won’t get any. But then again, you never know. Coming later this evening on a dismal trading day like the one we’re getting today, it’s not clear what market sentiment will actually end up doing to this tech IPO.
But we’ll all find out tomorrow.