WASHINGTON, March 6, 2015 – As the Maven opined here Thursday, the bottom fell out of the stock market Friday, with all averages down, big time. As of 2 p.m. EST, the Dow Jones Industrials were down a whopping 235 points, marginally better than its earlier negative 250 handle. The S&P 500 was down a sickening 24 points and the tech-heavy NASDAQ, in spite of a rally in Apple (AAPL) was off an equally nauseating 44 points.
The guilty party? This morning’s Federal jobs report, which showed a gain of 295,000 new hires last month, above expectations of 240,000 but, significantly, below the 257,000 figure reported for January. The (phony) unemployment rate fell to 5.5 percent and hourly wages scootched up a barely detectable 0.1 percent, missing estimates and coming in significantly lower than January’s bizarre 0.5 uptick.
You’ll note we describe these numbers with a certain amount of cynicism. While the numbers are accurate, more or less, they don’t reflect at all the real employment and inflation situation in the U.S. and have not for many a year.
The far more reliable U-6 unemployment number, which includes both the underemployed and those who’ve dropped off unemployment rolls and are therefore no longer counted (!) still remains stubbornly over 10 percent, a number it’s equaled or exceeded ever since the Great Recession poked it’s ugly head out of the ground.
But, as is true 24/7 with the Obama Administration, the hell with the truth. This is G-R-R-REAT news, says Tony the Tiger, eliciting wholesale, massive selling and shorting by the high-frequency traders (HFTs) who wage a constant battle—a real life War Against the Machines—knocking off small traders, individual investors and tons of mutual funds and ETFs in their ongoing effort to obliterate IRAs, 401(k)s, small investment accounts, and everything else for their own greedy benefit.
It’s all part of the “good news is bad” meme that’s infected this market at least since 2008. The reason? If you get good news on the employment front, that means that people are going back to work. And people going back to work mean wage increases. And wage increases mean inflation. Boo! Scared yet?
If you aren’t, we’ll convince you. The worst thing of all about increasing employment is that we might encounter that dreaded boogie man known as “wage-push inflation.” And wage-push inflation means real inflation, even though it also means that wage earners might be catching up, in reality, to the real purchasing power they had back in, say, 1985. That really is scary.
It’s all disgusting and ugly, indicating the whole system has cast the taxpayers that fund it adrift on a globally melting ice floe. The whole show is based on numbers that don’t reflect the real world for the average Joe Sixpack. And if the Fed ultimately acts on that, well, you ain’t seen nothin’ yet.
On the other hand, the silent game around the world seems to be that since the U.S. undertook the first massive “stimulus” effort, so, too, must it undertake the painful task of restoring interest rates back to so-called normal levels.
The tragedy is that the Fed has first lowered, and now anticipates increasing interest rates in a way that continues to enrich the 1% even as it continues to rob the 99%, those whom this Fed and this Administration have never, ever helped.
But hey, the market, like the government and like every increasingly rich HFT firm in New York are having fun and sitting pretty with all the money, so what’s not to like if you’re one of them.
What we’re left with is today’s nutty market move, which, we suspect, will abate slightly this afternoon before tanking again on Monday and scaring the gonads off anyone who’s still long this market.
Days like today remind us of that head space alien amusingly named “Eros” in Ed Wood’s immortal “Plan 9 from Outer Space,” who tells those clueless Earthlings, “You’re stupid! Stupid!” Given that Jonathan Gruber already told us the elites think of us all in that way anyway, why should we be surprised. It’s days like this that we find ourselves starting to believe this.
Today’s trading tips
We will stay with our trading stance of yesterday, namely nipping into viable oil stocks (multi-nationals like Royal Dutch Shell (RDSA, at least at Schwab), a limited number of MLPs, namely of refiners like Calumet (CLMT), and raising our new position in the short S&P 500 ETF, whose symbol is SH. If things get nastier, we might also add the double-short S&P 500 ETF, aka SDS. We regret not getting into more SH this morning before the averages really tanked, but we’ll try again on any relief rally.
We should have jumped into short Euro ETF EUO yesterday as well, as one of our advisory services would have had us do. Maybe on a pullback.
Ditto on our too-small position in the HEDJ ETF. That’s a basket of European stocks that hedges against the decline in the Euro, a major blessing for U.S. investors who want to take advantage of the all-new European QE, now set to begin with Monday’s trading.
Short term at least, the Eurozone stocks are taking off and leaving the U.S. markets in the dust. But such gains can be killed by currency translations, and the only way to avoid them is to actually buy these securities in the foreign currency—a tough job if you’re operating in the U.S. system without a lotta money.
HEDJ takes care of this, and so far it’s been a standout for us, even today, as it’s only off twelve cents.
With regard to those oils, BTW, oil is off slightly today, dropping these stocks as well, but that’s to be expected, given all the dire stories coming out today that pretty soon, everybody will be giving away oil and gasoline for free. So we’ll let ‘em go down some more and do a little more buying a little lower.
Ditto Ireland-based FLY, an aircraft leasing company with a swell dividend we’ve been riding for awhile now. However, we might get out of FLY today—it’s down about 14 cents right now—just as a way of taking a profit in a down market.
And that said, we have been selling some positions, but not enough to insulate ourselves against the ongoing catastrophe of today’s panic in the Street. Yet as we noted yesterday, the averages were cruisin’ for a bruisin’ and presto-changeo, that scenario is certainly unfolding right now, and we’re not inclined to panic out here like the HFTs want us to and expect us to.
How far down will things go? Who knows. This may not be “the big one” as Redd Foxx used to say on his show. But until the interest rate issue is resolved one way or another, this market is unlikely to gain any traction.
Careful today and Monday, too. For us, we’re going to shovel some of yesterday’s snow and get back on the road and try to enjoy life. Because we’re sure not enjoying it here.