WASHINGTON, September 23, 2016 – After a tepid start to Friday morning trading, markets are trending down sharply just after the noon hour, as all the major averages seem determined to reverse Thursday’s decent, post-Fed minutes rally. The catalyst today seems to be the price of oil, which, after a sharp, hopium-inspired rally over the last few days based on the alleged promise of yet another Russian-Saudi “agreement” to trim production in order to firm the price of black gold on world markets.
As the Saudis predictably threw cold water on this latest fairy tale, oil prices took a nasty hit, with both WTI and Brent crude off roughly 3.5 percent as we near the 1 p.m. mark on Wall Street.
Our best guess is that this is the way things will go, more or less, at least through the November U.S. elections. Given the dominance of computer-generated trading and the virtually free money the Fed continues to fork over to major corporations and rich people for stock options and stock buybacks, the constant ebbing and flowing of stocks and stock sectors keeps commission-based brokerages fat and happy and in bonus territory approaching year-end.
Better yet, the current bizarre market pattern keeps the rich dudes, companies and machines happy, too, even though trading action has broken loose from all rules and methods of trading discipline, relying only on news headlines, real or bogus, to provide the excuse to trigger mass trading up and down. Hence the current bi-polar tendency in 2016 trading action. It’s depressing and demoralizing, but it keeps those rich, Democrat-loving constituencies happy, so who cares, right?
Not much else to say, going into what looks to be a lovely early-autumn weekend here in the Slough of Despond, otherwise known as Washington, DC.
After getting off to an unaccustomed nice start this morning, our oil holdings have predictably tanked, including Teekay Tankers (symbol: TNK) and our more recent acquisition, French oil giant Total (TOT). We were happy with both stocks’ rallies Thursday and are unhappy with the reversals today. But in the current energy space, we’ll keep on holding and put these shares in the “Oh, well…” Department right now.
Our Allergan preferred (AGN/PRA, your symbol may vary) is up again Friday, at least a couple of bucks, partially reversing the earlier week smackdown administered these generally safe shares which, somehow, the machines link to the action in the actual corporate stock of this American-but-domiciled-in-Ireland pharmaceutical giant.
The common stock (AGN) was taken to the woodshed for the company’s current slap-happy spending spree, as, for the second time in the last few weeks, AGN has purchased another tiny biotech for a whopping amount of Benjamins. Though we’re in the preferred for the dividends and the March 1, 2018 redemption date, not the stock action, however, and these common-stock-lined swings are irritating nonetheless. So we’re glad to see this one recover.
Our bid for IPO shares of Apptio (APTI) was for naught. The stock priced up a buck from its expected range of $13-15 per share indicating strong demand and possible oversubscription. That was the case. They rich guys got it all, and the Maven didn’t get any. The stock popped over $7 bucks from its $16 final offering price, which kind of makes us sick. But even back in the Maven’s days as a stockbroker, he could rarely get such shares for his clients, or at least the ones who weren’t filthy rich and/or longtime big traders with the brokerage house, so this is same old, same old. It’s irritating, nonetheless, a venerable reminder of why it is that on many levels, the rich get richer.
Another IPO that was on our radar–and another we did not get–was the Ashland (ASH) IPO of its well-known subsidiary, Valvoline (VVV). VVV priced midrange last night at $22 per share and nicely popped a couple of points to $24 and change. It’s currently backed off to the $23.50 range, which is nice if it can hold against the usual barrage of rich guy flippers who got the shares and are dumping them for a quick profit. That’s legal and customary, though again probably not too many little guys got shares of this one. The reason the Maven didn’t get any was simple–his discount brokerage house wasn’t in on the deal and thus didn’t get any shares itself, so they weren’t available to customers either, unless those customers had another account with one of the lead underwriters. Or were rich.
Nonetheless, we think VVV is probably a decent longer-term commitment. Ashland still owns some 85 percent of the shares and will probably spin them off from the main company after the mandatory 180 day post IPO “lockup period” is over. Between now and then, we’re almost certain to find a better price to pick some shares up, so we’ll put this one on our watch list for now.
On our brokerage’s research recommendation list, we decided to pick up small positions in Ceco Environmental (CECE) and UMH Properties (UMH) this morning. Ceco is essentially an industrial company whose main lines of business are involved in pollution remediation equipment and devices. UMH is a newly-recategorized REIT that invests in rental real-estate, something that’s likely to remain bubbling over the next several years. UMH is taking advantage of the general impossibility for non-tech millennials to purchase their own homes or condos.
Such opportunities will continue to be impaired due to the current administration’s economic policies, which discriminate against anyone who doesn’t already have plenty of money prior to applying for a loan. I.e., UMH, at least in the near term, is in a sweet spot in real estate no matter who becomes president in January 2017. That’s because it will take a hell of a long time to undo the economic carnage that the middle and lower classes have been enduring nonstop since Barack Obama’s inauguration. Yes, that is a sad reason for investing in a company like this, but it’s also logical. And, lest we forget, if your investment picks aren’t based on reason and logic–not feelings–you will rarely, if ever, make any money in the market.
On that presumably wise note, we’ll join you by heading into the weekend.