WASHINGTON, March 12, 2015 – What did we tell you? Wednesday’s smash-mouth stock market magically transformed itself Thursday morning into a kind of mid-Lent carnival. As of noon Thursday, the Dow was up nearly 200 points, with the S&P 500 up 20 and the NASDAQ up an even healthier 25.5. Guess this gets us prepared for another Freaky Friday.
Trading action has gotten beyond silly at this stage, and the punditocracy’s Thursday theories as to the reasons are even sillier. The first story we got was that the market was celebrating “strength in the euro.” That battered currency, which bottomed yesterday at about $1.05 (dollars to buy one euro), is back up slightly over $1.06 Thursday, so that’s supposedly why the bulls are buying again. We’d guess the effect of the euro’s roughly nine-month slide from $1.40 to $1.05-06 has been magically negated by this one-penny rise, right?
Next, more pundits jumped on the fact that Bank of America (BAC) and a couple of European banks operating in this country—Santander (SAN) and Deutsche Bank (DB)—are still apparently out of joint when it comes to the Fed’s annual “stress tests.” Gosh, what else is new?
The Feds are still tormenting BAC for the continued fallout due to their federally forced purchase of the criminal enterprise once known as Countrywide. And SAN and DB are generally tracking with the European Central Bank’s (ECB) bogus “stress tests” which lack any resemblance to real-life stress; so it’s natural that they’d flunk America’s (perhaps) too-hard real stress tests.
At any rate, the conclusion this set of pundits is reaching is that since some banks are still dicey, stress test-wise, the Fed really will raise rates later rather than sooner. We are supposed to be impressed with this kind of feeble reasoning.
Of course, pundits are also celebrating the continuing alleged decline in unemployment, continuing (as is the U.S. government, at least officially) to ignore the continuing bad U-6 unemployment number, which still tags more broadly defined unemployment at around 10 percent. These same pundits also ignore stagnant wages for the majority of working stiffs, dating back at least a decade and perhaps three depending on how you measure it.
Turns out some measurements being used track only management and supervisory salaries, which, of course, have been going up fairly decently. But as for people who actually make stuff and do stuff as opposed to those who give the orders, such raises as they may achieve are far behind the ever-increasing prices of goods and services.
But who cares? Those are the little people. They don’t count.
But these happy employment and wage pundits continue to push the bull button (or at least say they’re doing it), which at least in part is why we get days like today.
The only intelligent statement we read this morning was from Peter Cardillo, Rockwell Global Capital’s chief market economist. Cardillo told CNBC’s hot young chicks and blow-dries, “I think this is just a bit of a temporary rally and we’ll see resumption of [the] decline. This rally is not going to be long lasting.” We agree. Perhaps tomorrow will balance out today’s irrational exuberance. After all, you know all about our recent spate of Freaky Fridays.
More than likely, what we’re seeing today is more High Frequency Traders (HFT) pumping of averages so they can send down a fusillade of shorts on Friday and/or Monday. It’s really pathetic. Worse, it’s even clearer evidence that the only functioning governments remaining in this shambles of a once-great country are in non-blue states that still prize fiscal freedom, fiscal sense, balanced budgets, and pension plans that are at least flirting with solvency.
The whole back-and-forth of this market reminded us this morning of two different metaphors: the Wheel of Fortune (“round and round and round she goes”); and the signature tune from “A Funny Thing Happened on the Way to the Forum”: “Tragedy tomorrow, comedy tonight.”
In our case, we’re getting the comedy right now. The tragedy should show up shortly.
Today’s trading tips
We’ve had to partially back out of some of our oil patch positions due to stop orders. We still hold Kinder Morgan (KMI) and Calumet (CLMT), having actually added a bit more of the latter yesterday after they’re surprise secondary offering crushed the share price. We hate them for that.
But that kind of surprise comes with MLP territory, and we have to admit that with oil’s recent (and now perhaps aborted) run-up, if Calumet were going to seize the time to get the maximum price on its offering, this was the time to do it, before oil dropped back and the Fed (perhaps) announces its intentions next week.
We’re maintaining for now our VIX hedge, holding shares in the VIX volatility index ETF, symbol VXX.
But that’s about it. Absolutely any move in this environment will be regretted within 48 hours. It’s a sad state of affairs for experienced investors. Absolutely none of the usual methodologies are working, and logic has completely vanished in this massively manipulated playpen for the rich.
See you tomorrow. Your guess is as good as the Maven’s as to what tomorrow’s excuses and reasoning will be.