WASHINGTON, May 27, 2015 – We’re back, more or less, from a lazy holiday weekend. Horrified at yesterday’s market rout, which cost us more than a few dineros (modern usage), we’re delighted at today’s recovery. But we don’t see a lot of objective truth in either move.
Oil prices have backed off their recent highs of around $62 bbl. and change for West Texas Intermediate (WTI) and are back within the trading range we assumed months ago in this column, having figured prices would bounce awhile between $45-ish and $60-ish per barrel. True, we may have been slightly low on the “ish” part of the 60 handle, but this is close enough for us. You can never nail this stuff down to the last cent.
Part of the price drop over the last few days, however, has been due to renewed dollar strength vs. the euro over the past few days, with the euro dropping to about $1.08 this morning after tickling the $1.14 range within the last 10 trading days or so.
Our thinking on the currency issue is similar to our thinking on oil price bands. It’s clear to us that The Powers That Be (TPTB) pretty much don’t want the euro to drop much below $1.05 or rise much above $1.12 for the indefinite future, so you’ll see things get manipulated at either extreme. This in turn, restricts the up and down moves in the price of oil, at least during those times when geopolitics is not taking a front seat.
In the immediate future, at least, we suspect that oil will stay within our earlier estimated range, perhaps near the top of it, until or unless something blows up big-time in the Middle East (always a possibility under the non-foreign, post-colonial policy of our current feckless administration); or until Greece’s Communist government actually agrees to something instead of continuing “negotiations” with the ECB.
These shenanigans, which are increasingly Greek to us, continue to resemble Uncle Ho’s “negotiations” with the U.S. concerning the fate of Vietnam in the early 1970s. But apparently everyone has already forgotten that cynical, stall-ball model. (Do people learn any actual history in high school or college anymore?)
At any rate, traders were nervous about Greece Tuesday and are happy about Greece today. Who knows what they’ll think tomorrow? The HFTs must be having loads of fun trading this stuff, but we don’t.
In other news, the IPO market may be heating up again with news that gourmet sandwich franchise Jimmy John’s is getting ready for an IPO. Potential investors are licking their chops as their investment mouths water over what may be another fad stock that will give them an outsized pop, much as Shake Shack (symbol: SHAK) did not so long ago.
SHAK itself had been doing quite until just recently, pounding its way back up to the $80s, a considerable increase from its $20-something IPO price. The latest run up in the stock was apparently inspired by rumors of an exciting new chicken sandwich offering, as if Col. Sanders and Chik-fil-A hadn’t gotten there first. Or Wendy’s or Mickey D’s for that matter.
Anyhow, when those rumors dissipated and when the Jimmy John’s rumors surfaced simultaneously, SHAK was promptly driven right back down again into the mid-70s, as per the chart above, which we’ve borrowed from the muckraking financial site ZeroHedge.
BTW, wee frequently read ZH whenever we want to get terrified about this business or that, or when we feel like getting apoplectic about the constant market interference of governments and the kleptocrats who own and operate them. We are rarely disappointed.
No trading tips again today. This is a market that really wants to be bullish. Except when it doesn’t. Yesterday and today are two examples of this kind of market whiplash. We’ve been stung about it for nearly six months running now, and we’re just not going to expose our positions to any more of this kind of manipulation by TPTB, not to mention the Fed, which treats interest rate policies these days the way Hamlet treated decisiveness.
It’s all BS. If the Royal Smart Guys don’t watch out, they’re going to cause a lot more trouble than all this phony financial tuning is worth. Don’t listen to their stories. Instead, pay heed to Deep Throat’s famous advice: Follow the money.