WASHINGTON – Stocks rallied right out of the gate Tuesday morning. Mr Market just couldn’t wait to revive last week’s bullish move, or so it seemed. But, after a day in which stocks pretty much across the boards displayed an almost cockeyed optimism, things began to fade by midafternoon, as the Dow wilted into negative territory. And that’s where things stand as I punch out this column after taking the Veterans Day holiday off. As of 3 p.m. ET, an hour before today’s closing bell, the Dow is off approximately 30 points and looks like it wants to close lower. Impeachment and China are the likely culprits.
(UPDATE: The Dow still closed off, although it narrowed the gap to minus 6.74 at the close.)
On the other hand, the other two widely-followed averages – the broader-based S&P 500 and the tech-heavy NASDAQ – are up fractionally, as they have been for much of the day. Even so, both continue to hover near flatline territory. They could follow the Dow and take a dive by today’s 4 p.m. market close. Even so, however, given today’s trading tempo, any move from this point is likely to be small.
Mr Market plays impeachment and China hide-and-seek
Essentially, Mr Market continues to play hide-and-seek with the large imponderables that dominate the minds of traders and investors as we head for the Thanksgiving-Christmas holiday buying Axis of Evil. (Or, of Good if you’re a die-hard retail capitalist.) Among potential events making investment Nervous Nellies quiver in terror: the still chaotic US-China trade war situation, the impending Trump impeachment farce, the impending (or not) Brexit, the worsening anarchy in Mexico. China and impeachment lend uncertainty to the market. And investors, like insurance underwriters, hate uncertainty.
And… who knows what else? (Like Hillary entering the 2020 election sweepstakes – again.)
Fighting favorable seasonality
Typically, the last month or two of the calendar year are very good indeed for investors. Most expect the same thing to unfold in the closing weeks of 2019. That said, some investors have short memories. They forget that Mr Market gave nearly everyone (except the shorts) a big, fat lump of coal in their stockings to close out 2018.
So, fingers crossed for 2019.
As for this occasionally nimble investor, after getting hit in September, our portfolios are – at the moment – back in majorly positive territory. After our surprise 2018 shellacking, we’re likely to dump any given stock that shows signs of weakness from now until the end of the year, just for the sheer hell of it. For example, we dumped shares of retail REIT Site Centers (trading symbol: SITC) this morning after we saw it experiencing the 4th or 5th trading day in a row of a substantial dump-a-thon. (Some optimistic traders are rotating portfolios out of relatively safe bonds, REITs and Consumer Staples / Durables and into more volatile Consumer Cyclicals and Financials.
So I decided to grab our still existing profit in this issue by selling the shares this morning before Mr Market took back our entire profit on this property-owning REIT’s shares. I might get back in if this one bottoms out, as I think it was a knee-jerk reaction to the sudden resignation of the company’s CFO (Chief Financial Officer), effective at the end of this month.
When CFOs depart…
As CBNC’s Jim Cramer preaches quite often, when you see a company’s CFO (Chief Financial Officer) head for the exits for any reason – including death, I presume – it’s best to just bail out of its shares. Such situations often end up worse than our current Impeachment and China paranoia.
More often than not, according to Cramer, a CFO departure is always a big red flag, indicating that something spooky may be going on with the company’s shares or ledger books. Sure, that’s not always the case. But still, the usual investor reaction is to just bail without waiting to find out why the CFO left (or was sacked).
We saw our once profitable holdings of US Foods get whacked a month ago after its CFO took a hike, forcing us to observe the Cramer rule and get out for a loss. Before that loss got bigger. Which it did. And we’ve seen this happen many times before, confirming, at least for us, the correctness of the Cramer Rule of CFOs.
Maddeningly, likely because of lawyers, employment contracts, HR rules, accounting trickery or all of the above, companies maddeningly refuse to provide many details on CFO exits. So once the dead is done or en route, the best you and I can do is figure that the reason for that CFO exit is likely something that is not good. Maybe it’s nothing. Maybe it’s just a simple retirement on schedule. But no matter. Most investors, like Cramer, just jam the exits when a CFO leaves.
The Fed vs. Trump and the Trade War
On the other hand, now that the Fed is finally, if reluctantly, cutting interest rates, the value of our rather sizeable portfolio of preferred stocks is getting hit a bit by all the government’s pushing and pulling on interest rates. These mini-battles and mini-outcomes make the usual stability of most preferred stocks look more like a game of Whack-a-Mole. It’s disconcerting, but what can you do? President Trump is right on this point, no matter what the media lies to you about.
To keep waging his trade war and get real concessions out of a Communist China that, as a dictatorship, can wage a trade war forever, requires some cooperation by government agencies and Congress. Unfortunately, we’re still in the midst of this nation’s very first coup d’état attempt, and it ain’t over yet. This creates an exploitable opening for any adversary choosing to exploit it.
And, of course, the Chi-coms have been doing just that. Why would President Xi want to give up all the free high-tech technology he’s been stealing from the US for decades? It’ll take a lot to dissuade him from this course of action.
But when you see that your international adversary is besieged by his own government from all sides, you have an inclination to stall negotiations until they take their leader out, replacing him with the kind of patsy President that, over several administrations, has allowed the Chi-coms to steal us blind. Hence, the continuing Wall Street obsession with impeachment and the trade war with China.
The pro-Marxist Democrats deprive the US of negotiating leverage at just the wrong time
The Democrat-dominated Deep State is playing a game that benefits only them and not the American people, for whom they care not one whit. And the Chinese government loves this. Yet a more cooperative Fed could change all that by keeping the US economy roaring even as China’s economy sinks into oblivion. Which would force them to negotiate.
That’s what Trump has been trying to tell the Fed. But they, like so much of Washington today, are totally under the thumb of the unelected Deep State. They’d rather depose Trump than win a significant economic victory. And so it goes. The American people, betrayed by the Democrat-led Deep State, would risk the destabilization of impeachment and America’s last chance to restrain the rapacious Communist government of China. All just to get Trump out and regain political control of America. Perhaps forever. Need proof? This is why the House has not passed a single piece of meaningful legislation since the Democrats took over the House.
All of which adds to what’s already making Mr Market drink a lot of Maalox as we try to close out 2019 on a positive note. Good luck to us all, as we try to catch a final, bullish ride to close out 2019 on a brilliant note. But beware of the negative affects exerted by the fear of impeachment and China.
– Headline image: Cartoon by Branco. Adapted for CDN with permission and by arrangement with Comically Incorrect.