Friday markets: Wall Street traders, stocks drowning in oil

Photo of a waterfowl drowning in oil
Photo of an unfortunate waterfowl drowning in oil during a Black Sea oil spill in 2006.) Photo by Igor Golubenkov. (CC 2.0, see link below article.)

WASHINGTON, December 12, 2014 – Short column today because we’re still in the grips of this week’s same old, same old. In other words, oil prices are dropping again today, far more quickly, as usual, than they are at your local gas pump. Finally dropping below $60 per bbl. for the first time since the horrendous price swings of 2009, crude is off another two bucks and change today, trading at $58.73 as we write this around 2:45 p.m. EST.

The bad news here is that oil companies are getting slaughtered on Wall Street once again. Fearing this, we bailed out of our last oil and oil-related holdings yesterday, tacking a shellacking in the process.

When the market turns against you like this and unless you like to stay glued to your computer madly, desperately trading options or inverse ETFs against this big move, your best bet is to just get out of the way. Which is what we did. The fullblown oil panic dominating this week’s trading is so overdone and so unpredictable that it’s best to just get out of the way and let the HFTs take remaining traders to the woodshed for a major shakedown. Which is precisely what they’re doing.

As a result of this week’s oil-based punishment, nearly every area of the market is suffering, including gold, which, you’d think, might hold up as a hedge. Problem is, hedge to what? This big oil price drop is incredibly DEflationary. So other commodities and resources are getting hosed, too, including the precious yellow stuff.

As oil prices continue to drop, the dollar continues to strengthen, which screws up the inflationary story for gold bugs. So gold goes down, too. Some traders wonder why, as the dollar has actually weakened against the Euro for the past two trading days. But this temporary weakness is likely due to profit-taking after the dollar’s big, ongoing run.

The Euro will likely begin to sink again sometime soon, although it’s not certain why, as the Germans continue to thwart Draghi’s intent to inflate. Those Europeans. They’re still tough to parse.

What we’re getting at is that we’re paring positions right and left, some even for a profit, but most not so much. In a bad downdraft like this, it’s best to trim your losses at a predetermined point (ours is generally a 5% loss), collect your remaining chips, and come back later to play on a sunnier day.

We hate it. But if you keep watching your stocks go down to protect your ego, it’s the best way to eliminate your investing stash entirely, because the house will take all in crashes like this week’s.

Of course all the bad news obscures the good news. In spite of their intent to screw our heroic U.S. frackers, who’ve cause the oil glut to begin with, the Saudis and their continued pump-away philosophy are damaging Czar Vladimir, Venezuela’s Commie overlords and Iran’s mad mullahs, all of whom were dependent upon their big oil profit cushions since none of the three have bothered to develop actual economies.

With a rapid drop like this—well, it’s the best thing anyone’s done for U.S. foreign policy in the last six years of our current, juvenile, Marxist administration. Thanks, Saudis. (We think.)

The other winners in this waterfall cascade of oil prices are heretofore hapless working class Americans. American workers, and, more specifically, non-unionized, middle-class American workers, have not seen anything resembling a real salary increase since, well, since the Reagan years. They’re getting that raise at the pump right now, although their Obamacare premium and/or deductible increases will likely eat up some of this.

But the oil price drop, followed slowly by a decrease in prices at the pump, is literally putting money back into beleaguered working class, middle class consumers in a way that their own employers refuse to do. And just in time for Christmas, too, which is why retailers are not getting too badly smacked around this week.

Of course, this is all actually the opposite of what President Obama and the ecofreaks who currently control the EPA and domestic policy did NOT want to see.

As prices at the pump sink, energy becomes more affordable even as the average Joe has more to spend. In addition, fossil fuels, which the government currently is attempting to price out of existence, are now headed so low that they’re making all that heavily subsidized solar and wind power the government is pushing (with your money), more outrageously overpriced than ever.

So much for that plan. No wonder “The Goracle” (aka, the odious Al Gore), can’t even draw half an audience to hear his latest global warming climate change diatribe, as happened earlier this week.

Bottom line: all this chaos simply makes it too treacherous to invest actively right now. True, there’s the occasional freak opportunity. We did get lucky enough earlier this week to snag a mere 100 shares of the Lending Club Corporation (LC), which promptly singshotted up 57%. It’s up another $1.67 right now at $25.12, a whopping 68% increase from its $15 IPO price. The company is a pioneer in the area of peer-group lending, an idea whose time has clearly come, given the banks’ current proclivity to lend money only to individuals whose balance sheets resemble Warren Buffett’s. That’s not you and moi, BTW.

Were it not for the occasional stroke of luck like this one, however, the Maven’s portfolio would look far worse this week than it already does, so thank heaven for small favors.

It’s just too wild out there right now. So let’s stabilize our portfolios by holding on to the boring, dividend paying stuff that’s still relatively safe (retail, insurance, select healthcare issues); keep the rest in cash; and wait for everyone to stop freaking out and for the McClellan Oscillator (an excellent indicator of short-term bottoms) to exceed negative extremes which could fuel a nice rally, or at least give us escape velocity to get rid of a few more stocks at less than disgraceful markdowns.

This happens sometimes. Those who don’t like it are probably better off in near-zero rate CDs. But in general, in spite of his occasional beatings, the Maven has done far better investing in stocks than anything else. So after applying the necessary Band-Aids and dressings, he’ll likely get back in the fray fairly soon. We’ll let you know when that happens.

In the meantime, enjoy the weekend with your newfound wealth, with a respectful (tongue-in-cheek) hat tip toward Mecca.

*Header Photo by Igor Golubenkov (NGO: Saving Taman), November 12, 2006, on Tuzla Spit. Via Flickr. Access link here.

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