WASHINGTON, August 24, 2016 – We skipped Tuesday’s column to attend Seth Rogan’s “Sausage Party,” an allegedly controversial film (review incoming shortly) and were considering taking a pass today as well, as Wednesday’s market resumed the kind of low-volume, negatively biased meat grinder it’s been through much of August already.
With an occasional day or two of irrational sunlight as each “all time high” is touted by the morons in the financial media, the relentless futility of August trading is beginning to remind us, in a way, of that brutal 1987 cinematic classic, “Hamburger Hill.” That Vietnam War film charted the story of a classic battle from which few warriors on either side survived to tell the tale. The rest were ground down to oblivion by the never-ending back-and-forth action.
For seasoned traders this month, the markets have felt the same way, at least metaphorically, making individual traders wonder why they even bother any more. After a brief, starburst rally in crude this morning, black gold promptly reversed itself—hard—Wednesday and is off nearly 3 percent as we write this in the early afternoon. Word yesterday was that the habitually recalcitrant Iranians had said they’d join in the upcoming OPEC confab.
This morning, however, the rumor did an about face, something that any hardened cynic like the Maven could have predicted about nearly anything Iran’s psycho mullahs say. The immediate result: bye-bye oil rally, at least for today. Who knows what Iran’s “negotiators” may or may not say tomorrow?
Making matters worse, end of month games are being played once again with gold, silver and futures contracts expiring on Thursday. Zero Hedge was on this action first thing Wednesday morning, noting that someone, somewhere had “puked out” a huge number of gold contracts, with the result that both gold and silver were hammered hard at the open. (Heavy irony alert):
“As we detailed earlier, it made perfect sense – someone just decided in keeping with their fiduciary duty, 0840ET was the perfect time to unleash $1.5 billion of gold notional into the futures markets….
Over 10,000 contracts dumped in 1 minute… ‘normal’”
Manipulation of the gold markets, anyone? (Spelling, grammar and bolding above via Zero Hedge.)
A thinly-traded market that depends on rumors and hopium is a market that will do you in in a New York minute, so it’s best to stay loose now and not pay attention to much of anything until Janet Yellen lets loose with her latest reading of the tea leaves as Fed bigwigs near the end of their luxurious annual retreat at Jackson Hole, Wyoming.
Given the exceptionally fine and costly wining and dining they’ve been indulging in this week courtesy of the American taxpayer, it would be nice to hear something positive from the Fed about The Rest of Us; you know, the ones who, unlike the rich bankers and hedge funds, did NOT get bailed out during or after the Great Recession, (which the Maven thinks is still very much with us), except for rich people. But, to cite another movie metaphor, waiting for something positive out of any government agency in Barack Obama’s America, waiting for good news for America’s Great Unwashed is like waiting for Godot. Whenever.
We continue to make small moves, but are inclined to start corralling profits here and there. We have slightly pared our fairly big position in Teekay Tankers (symbol: TNK) just because it had become to large in a preferred stock-heavy portfolio we’re trying to diversify a bit before we get another bear raid, something we fear is imminent.
We’ve been adding shares to our growing position in Schwab’s REIT ETF (SCHH), though each small, commission-free (as Schwab customers) purchase has resulted in “averaging down”—i.e., the ETF has generally been slowly sinking this month. We’re convinced at least part of the REIT sector will rally decently as REITs are carved out as a separate investment sector by S&P between the end of this month and mid-September. But thus far, the action in SCHH seems to disagree.
We’re also starting to put partial trailing stops on a couple of stocks that have done well for us—namely Blackstone (BX) and KKR (KKR). That means if these stocks suddenly reverse on us, part of the position will be automatically sold at a certain price if we happen to be away from the console. We’ll likely be doing this with other positions, but only if they’re clearly profitable at this point.
We’ve slowly dried up our purchases of new or underpriced preferred stocks because, well, there pretty much aren’t any more of these. The pair of preferreds we’ve been trying to buy in the Gray Market seem to have been reserved for the wealthy—i.e, in the Gray Market blind bidding, we simply can’t get hit, even though thousands of shares have traded. Nice game, guys. Thanks for letting us little investors scoop up a bargain or two. NOT.
We’re also looking at a Chinese ETF, symbol ASHR. ASHR is in the process of adding coveted Chinese A shares to Western trading pots, a pioneer in this effort, not to mention Chinese stocks involved in the pending linkage to be established by early fall between the venerable Hong Kong exchange and the vigorous Shenzhen exchange. China is still a dicey proposition for small traders. Financial reports from that part of the world are about as reliable as Hillary’s recollections of anything.
But ASHR, unlike the more popular Chinese ETF, FXI, may offer a broader entrée between now and the end of October, into sectors of the Chinese market that should be able to grow in a stable, relatively honest way. Thus far, however, we’re watching and waiting on this one. Investing anywhere in China is not for the faint-of-heart, and we haven’t been particularly successful in this to date.
But we still feel, like many institutional investors, there’s got to be a championship horse hiding somewhere in that dirty barn, and we’re looking, at least in a small way, to place at least a small bet on that horse’s eventual discovery.