Iran oil tanker attack, Broadcom smackdown roil Friday stocks
WASHINGTON. Iran attacked two big oil tankers in the Gulf of Oman Thursday. (Or not.) In turn, that Iran oil tanker attack gave a nice kick to the per barrel price of crude oil, which has gotten absolutely creamed in recent weeks. Meanwhile, in computer chip land, Broadcom (trading symbol: AVCO) shares encountered smackdown territory Friday, a key victim of the ongoing US ban against Huawei which buys (or bought) chips from Broadcom. This, in turn, drove the lemmings to extend clobbering time to the whole batch of chip stocks, more or less. Which then hit the other averages, as the pin action that started with Broadcom continued.
Add to all this the usual Washington political crappola, and you have utter confusion on Wall Street.
Stocks up, stocks down, rinse, repeat
In other words, after a brief bullish party that occurred after we turned the calendar page from May to June, confusion and negativity once again reign supreme for investors. Along with loads and loads of headline risk.
That’s one reason why columns have been a bit light here this week. It’s not for lack of information. Fact is, stock and bond prices are dealing with entirely too much information. Just like we are here. Add that to never-ending speculation about if and when the Fed will cut the interest rates. You know, the rates the nation’s central bank never should have increased in the first place. And you get low, iffy volume in most stocks as the market slowly lets the air out of investor’s Q1 market gains.
It’s really depressing.
Running a Caucus Race
The same thing happened in cut time last fall. It’s just taking longer and longer as investors race around an endless circle in something resembling the Mad Hatter’s Caucus Race. They have yet to discover the finish line. We can’t find it either. What’s the point in booking gains if Mr. Market takes them all back next quarter. Might as well stuff those excess dollars inside our mattresses, like Americans sometimes did in the 1930s when banks were folding left and right.
The (apparent) Iran oil tanker attack
Just after Iranian funded Yemen-based Houthi “rebels” shot what they called a “cruise missile” into the terminal of a civilian airport located in the extreme southwestern corner of Saudi Arabia, two foreign-flagged oil tankers, one of them Japanese, got hit with… something.
The US claimed Iran attacked at least one of the vessels with a submerged mine. Or, barring that, a portable mine or explosive package that one of the crew on an an approaching Iranian small boat more or less glued onto the vessel’s hull. The latter was how the military was interpreting a muddy live-action photograph of the small boat’s approach.
At any rate, the last time we looked, the war of words between the US and Iran continued. We’ve learned to be skeptical of any accusation leveled by any country involved in the Middle East. US intelligence has been snookered (or has fibbed) more than once. On the other hand, given its extraordinarily bad behavior since its ruinous Islamic “revolution” decades ago, the Iranian government can be relied upon to lie about absolutely everything whether they need to or not.
Was the (apparent) Iran oil tanker attack a diplomatic goof?
What made the apparent Iran oil tanker attack rather bizarre is that key Japanese government officials were actually in Tehran for high-level talks when the attack on one of that country’s commercial vessels occurred, as CNBC reported.
“The war of words between the U.S. and Iran took a dangerous turn after two ships were attacked in the Gulf of Oman. One of the tankers was operated by a Japanese company.
“They were hit Thursday, the same day Japanese Prime Minister Shinzo Abe met with Iran’s Supreme Leader Ayatollah Ali Khamenei and President Hassan Rhouhani.”
Truly bizarre. We’ll likely here more contradictory stories this weekend.
Are the mad mullahs at it again?
That said, Iran’s murderous ayatollahs and their minions claim they DID NOT DO IT. And so it goes. The result? Oil prices and the spot price of gold got a nice kick upstairs Thursday and today, a welcome turn of events for both oil aficionados, oil companies and gold bugs. All have suffered greatly in recent months as Mr. Market has beaten down the price of their favorite investments rather severely.
Oil prices gone wild
CNBC offered a nice bullet point summation of the recent gyrations in oil prices in a Thursday piece on this volatile topic.
- Oil prices have been slammed by worries about the slowing global economy and trade conflicts, but a tanker attack in the Middle East revives geopolitical fears and put a premium back in oil prices.
- Analysts said Brent oil could trade in a range of as low as $50 to as high as $80 per barrel or more, depending on whether the market is worried about a global economic slowdown or threats Middle East oil supply.
- “I think the oil traders don’t know how to deal with Iran risk, but they do know how to conceptualize a trade war destroying demand. They can’t distinguish in the Middle East between what is noise and what is the brink of a shooting war,” said RBC strategist Helima Croft. “The summer is going to be this: What war is going to dominate the market? A trade war, or a shooting war?”
The latest China Syndrome continues
The China Syndrome continues. That was a nice turn in CNBC’s final bullet point, somehow managing to switch the topic to the US-China trade war because it makes President Trump look bad. Even though leaders of both political parties actually agree the US needs to get tough on the Chi-coms. Their easy game of conquering the US and its businesses by stealing all America’s good must end at long last.
We’ll see how that works out in the upcoming G-20 meeting at which President Trump may (or may not) have a sit-down with his “good friend” Chinese President Xi. Maybe our “good friends” in North Korea can put in the good word, eh?
Traders whack chipmaker Broadcom, a proxy for the US-China trade war
Meanwhile, chipmaker Broadcom (AVGO) took a big hit today after stating that dropping its business with Huawei will badly gore its earnings numbers going forward. As we write this at 12:30 p.m. ET Friday, Broadcom shares are in freefall, down a whopping, painful 20 points. This frightened the rest of the semiconductor stocks as well, goring the tech-heavy NASDAQ en route.
An unwelcome Friday development for sure. Particularly for Broadcom.
Moving on from hapless Broadcom, we encounter an even more hapless stock in our own portfolio. Yes, we finally threw in the towel on half our remaining position in Allergan (AGN) Thursday. The shares seem to be hitting a fresh patch of quicksand known as a buyers’ strike. In other words, buyers of this stock no longer seem to exist. Taking the loss yesterday instead of today proved to be a sadly good idea.
Allergan shares hit a brand new low of $121 per share Thursday. AGN shares then proceeded to outdo themselves on the downside today. They’re off almost a full $5 per share as we finish this column. They’re flirting with $116 per share and perhaps lower. The current culprit? An ongoing absence of buyers as indicated by the rapidly-declining trading volume in these once popular shares.
With sellers just dumping, dumping, dumping, who knows where the bottom in this stock might actually be? The shares at one point last fall were regaining altitude, almost achieving a new yearly high of $200 per share. (After trading a year-and-a-half earlier at about $285 per share!) The stock is now off roughly 20 percent just this year alone. Based on that near-$200 high point.
Forrest Gump’s mom was right: Stupid is as stupid does
At this point, we’d challenge Allergan’s management to stop ingesting Stupid Pills and do a little something two help out the likely less than 2 dozen remaining investors in the stock before they turn the lights out and leave the building. Allergan’s shares offer definitive proof that most of the time, investors – even big funds – can’t dislodge incompetent upper management.
In any event, we’re still hanging on to a much smaller position in these shares. But the lesson here for us (and for you for that matter): Never, ever, ever ensnare yourself in an oversized position in any stock EVER. Way too much risk, particularly if you’re a little guy and not a malefactor of great wealth.
Have a good weekend. But keep your eye on the news.
– Headline image: One of two oil tankers apparently attacked by Iran in the Gulf of Oman.
Image via VOA video, a US government agency and therefore presumptively royalty-free.