Freaky Friday: Stocks meander in a slough of confusion

Like the 1976 Disney film and its 2003 remake, 2015's market mood trades personalities and souls about every other day. What's an investor to do?

Freaky Friday still.
Lindsay Lohan and Jamie Lee Curtis inadvertently swap souls and personalities in the 2003 remake of the 1976 Disney Classic "Freaky Friday." (Screen capture from promo video.)

WASHINGTON, February 6, 2015 – Investors and traders are enduring yet another dull, boring, trendless Freaky Friday today as stocks meander up, down, sideways, and wherever. Like the 1976 Disney film “Freaky Friday” and its 2003 Lindsay Lohan remake, 2015’s market mood swaps bullish and bearish personalities and souls about every other day, a little bit like Lindsay herself these days. What’s an investor to do?

Bears are trashing everything, bulls claim they’re buying everything, bears are predicting the end of the Euro, bulls are claiming that American employment and business are on a record breaking tear—and all of them are liars simply talking their respective books, hoping that the likes of you and your friendly Market Maven will get sucked into yet another money-losing trade. So let’s fool ‘em and stay on the sidelines today.

Making sense out of this market is about as tough as making sense of CNBC’s endless shilling for the Obama Administration. Boring.

CNBC’s occasionally useful online news mash-up was back in typical form Friday morning, airing interviews and reports praising the Obama Administration’s alleged job-creation brilliance while trashing the Republicans who’ve held Congress this year about long enough to unpack the moving boxes in their new offices.

Here’s just one doozy:

The January jobs report showing a gain of 257,000 positions and a slight rise to 5.7 percent in unemployment had no weak spots, leaving Republicans scrambling for a new angle to attack the economy under President Barack Obama.

Seriously? Does anyone even proofread or copyedit this nonsense? Let’s rebut reporter Ben White’s solipsistic assertion, snipped from his misleadingly asinine headline, “Jobs report leaves GOP grasping for ammo”:

  1. As we’ve been writing in this column since 2010, it’s long been a truth universally acknowledged by the rational that it will take a sustained period of job creating proceeding at a 300,000 plus jobs created per week to get back to what’s generally regarded as full employment in the U.S. Under the current Administration, that magic number has been hit, at best, for two or three weeks, tops. Perhaps that’s why nobody mentions this number anymore and why 257,000 jobs created is supposed to be good.
  2. Who says that the “slight rise to 5.7 percent” for unemployment has “no weak spots”? What does that even mean? Doesn’t a “slight rise” mean that unemployment has gotten “slightly worse” not “slightly better”? Isn’t that a “weak spot”?
  3. So—we have mediocre job creation and an uptick in the official (and grossly underestimated) unemployment rate. What does that lead reporter-propagandist Ben White to conclude? That these non-wonderful current stats have left “Republicans scrambling for a new angle to attack the economy under President Barack Obama.” How pathetic is that?

The above-quoted sentence is yet another example of the “magical realism” today’s pathetic excuses for financial reporters offer as news and insight; in this case, fake but accurate statistics.

The real unemployment rate—the Department of Labor’s unpublicized U-6 measure, which also includes individuals who’ve lost unemployment benefits (and are no longer counted) and others who are underemployed, still hovers somewhere around 10 or perhaps 11 percent. And, with jobs being created at a less than 300K clip per week, the U.S. will never regain statistical full employment in this writer’s lifetime. Spinning this as a positive and blaming Republicans for not recognizing this falsehood as truth is about as dishonest as it gets.

Furthermore, with jobs getting slashed in the oil patch in January—a situation that’s likely to continue during the first calendar quarter—incoming weekly stats will show deterioration rather than improvement. No wonder the public is completely confused about everything. Ditto the markets. What’s true is false. What’s false is true. It’s enough to make you head spin. Which, at least in part, is what gives us Freaky Fridays.

The rest of a day like today can easily be blamed on the HFTs. After Thursday’s big up-move, the computers and algorithms predictably shifted into reverse today to harvest yesterday’s run-up and, likely, to short stocks ahead of a pre-planned Monday bear attack. Yawn.

The manipulation of markets today has become so obvious that it doesn’t even need to be investigated any more. It just needs to be stopped. But why would SEC officials want to do that, since many of them are angling for future jobs with the companies they’re supposed to be regulating, among them, the HFTs. The Decline of the West continues apace.

Today’s trading tips

About the only way to invest in stocks these days, at least until this market-gyrating volatility settles down, is to pick up good, well-priced, likely long-term holds on big down days, and then just forget about them as the HFTs have their jollies. Looking at 2015’s endless trading loops with their heart-stopping leaps and soul-crushing waterfall declines is bound to give the average investor a coronary.

Best strategy now is to keep holding a fair bit of cash while—for now—investing in smaller and midcap stocks in the U.S. Smaller and midcap companies tend to do less business internationally, unlike the majors—those mega-companies that depend on international sales and trade for a major portion of corporate income. The current strong dollar will make a mess of returns in this area, likely leading large-caps to underperform for a quarter or two.

Meanwhile, tiny sneak re-entries into the oil patch might be productive here. As we related in our columns yesterday, no one can call a bottom in oil prices, not really. This is a market that quickly and reliably makes a liar out of any pundit, so why try? Our tentative hypothesis is that oil hovers between $40-$60 for what the Fed would like to call “a considerable period.”

For that reason, if we enter, exit, and re-enter this trade with caution and without overcommitting on any given trade, we increase our odds of making money. But this isn’t a game for the faint-of-heart. Right now, we only like two companies in the oil patch: international giant Royal Dutch Shell (RDSA, or RDS/A with some brokerages); and a pair of relatively non-volatile ETFs, SDOG (a variation on the Dogs of the Dow dividend investment strategy but more broadly deployed) and SPLV (the S&P 500, but juggled so as to remove most of the volatility).

BTW, yes, Royal Dutch Shell is indeed a big international conglomerate. But it has a huge U.S. presence and is vertically integrated, so that parts of the company (like the refining part) benefit greatly even exploration and drilling is losing its shirt. Thus, the company is boringly balanced, pays a good dividend that’s well covered, and its diversification insulates it greatly (though not entirely) from market gyrations.

Banks are getting interesting right now. But so far our only major bets here are on the Bank of America “A” warrants (BAC/WS/A at least at Schwab, your symbol may vary) and another relatively unknown bank we’ve just picked up, First Niagara (FNFG), a well-managed regional whose problems digesting pieces of failed banks seem to be coming to an end.

Otherwise, boring. So if you can, why don’t you start your weekend early?

See you Monday. Unless Greece decides to form an alliance with Russia. (And CNBC decides to spin it as a positive for the Administration.)

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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