WASHINGTON, September 22, 2016 – As we noted in our afternoon update to Wednesday’s column, the Federal Reserve once again backed off from its continuously implied threat to raise interest rates sooner rather than later as FY 2016 rounds third and heads for home.
The economy is still iffy, rosy Administration-boosted reports to the contrary. Plus, it’s an election year and, since nearly all of official Washington has been in the Democrat tank since FDR, the Fed is clearly not going to cause panic in the markets by a surprise interest rate increase which, at least this month, would likely have caused the market to take an epic swan dive off a never-ending cliff.
Read also our update to Wednesday’s column: Markets see-saw in positive territory, awaiting Fed message
Even so, three FOMC members dissented from the Fed’s stand-pat decision, and pressure continues to build for at least a modest December rate hike. After all, whomever the new President may be in 2017, it will be his or her problem to face as the ugly detritus of Obamanation slowly fades into a bitter, ruined-lives memory.
The economy still stinks to high heaven, at least by most accepted measures. Contrary to glowing administration accounting falsehoods, individual incomes remain essentially stagnant, as they have been for as long as most workers can remember, and U-6 unemployment—the more realistic measure no administration wants us to see—still hovers around 10 percent no matter the “official” unemployment rate of 4.8 percent, the biggest joke yet to come out of the nation’s completely corrupt and compromised capital city.
On the bright side for shareholders today, markets continue to build on Wednesday’s post-2 p.m. rally, although averages have been dipping in mid-afternoon. Ultimately, stocks should close nicely up, although likely off today’s highs or at least moderately so.
The recovering price of crude oil—now around $46 and change for West Texas Intermediate—is helping the overall market tone, even though some of this may have been due to the temporary safety shutdown of a major Southeast gasoline pipeline. That situation was apparently alleviated today after repairs were effected on that line.
Having peeled off parts of unsuccessful positions, including a few hundred shares of continuously falling Teekay Tankers (symbol: TNK) as well as a modest position in going-nowhere Occidental Petroleum (OXY) we decided to remain in the oil patch by establishing a decent new position in French oil giant Total (TOT), which, we’d guess, is actually pronounced “toe-TALL.”
To our great surprise and delight, we were able to get in at a good price just before Total announced its dividend (it’s trading ex-dividend today), including what amounts to a special dividend for current holders as well, to be paid to U.S. ADR (American Depository Receipt) holder in their choice of bucks or shares under most circumstances. Nice start. Hope it continues.
The nonsense we’ve been experiencing in our Allergan Preferred (AGN/PRA, your symbol may vary) seems just about to have run its course. Those shares have dropped about $35-40 from recent highs, as the common stock itself got clobbered for spending entirely too much on a couple of “promising” but not exactly guaranteed small biotech operations. We’ll see how this turns out. But we’d counsel management not to get too slap-happy with that big chunk of coin Israeli pharma giant Teva (TEVA) paid Allergan for its substantial generic drug business.
At any rate, the battering of the common once again irrationally battered the preferred stock as well, even though this stock has nothing to do with the action in the common, strictly speaking. We’re up to our gills, relatively speaking, in AGN/PFA, however, so we haven’t been buying any more at this juncture, not wishing to overweight our portfolio in preferred stock holdings any more than it is right now.
We’ve put in an order for shares of Apptio, Inc. (proposed symbol: APTI), one of 2016’s increasingly rare IPO’s. It’s being priced tonight, possibly between $13-15 per share, although no one knows where it will end up. Few tech issues have priced this year, and early on, several were grossly overvalued. As for this one, APTI is in the “cloud based management solutions” biz, with a tilt toward CFO functions. Like so many small tech IPOs, this one has never made a dime of profit, at least thus far, although its products are well respected and business has been growing.
As is always true with IPOs, we’ll have to see the pricing later this evening before we exercise our buy-or-pass decision, so we’ll let you know tomorrow what we did or didn’t do. Also, however, no matter what we choose, if the issue gets a fire lit underneath it, we may end up not being allocated any shares at all, as the brokerage’s best clients (i.e., the rich ones) will get them instead. As we’ve often complained, it’s as unfair as hell to us little guys, but it’s perfectly legal and also good business practice to keep your “whales” happy.
Other IPOs are on tap, including Ashland’s (ASH) partial spin off of its famous oil product subsidiary, Valvoline (proposed symbol: VVV). But our discount house isn’t in on this one, so no shares for us. If the IPO pops and then eventually takes a dip, however, we may get into this one later.
Ashland is supposed to spin off the rest of the 85 percent of shares it still owns after a 180-day “lockup” period. If the new VVV shares perform nicely, they could turn into a longer-term hold. After all, it’s almost always good to have shares of a maintenance product that most people—as in car and truck owners—will likely have to use routinely over the years.
Anyhow, we can’t get any of these IPO shares now, so we’ll just have to see where APTI takes us, or if we ourselves end up taking a pass.