WASHINGTON, Aug. 17, 2015 – Staying alive during this summer’s insane market actions and reactions, those traders still remaining at their duty stations battle daily to navigate the dangerous space between what the ancient Greeks believed were the twin terrors of Scylla and Charybdis.
Today, we re-cast that more colorful seagoing metaphor as being caught between a rock and a hard place, but the results often seem the same. Avoiding one obstacle often causes us to crash into the other, meaning all we get to do is choose how we lose. Not a comforting thought when you’re just trying to make a honest buck or two.
Having returned at last from a rather exhilarating, two-week trip to sunny (and monsoony) New Mexico, the Maven notes that markets and traders are still experiencing the same kind of quiet desperation that plagued them in July. At that point, only the threat of much-lower oil prices and that long-threatened Fed interest rate increase perturbed the markets.
Indeed, the oil price threat continues this afternoon. Oil is veering dangerously close to $40 bbl. for West Texas Intermediate, and bears are now cheering that price down to $30—although we’re not convinced this decline has that far to go.
Oil (and deflating commodity prices) aside, however, while we were out West, it was China’s surprise devaluation of the yuan that added considerably to investor fears that the once seemingly invulnerable Chinese economic juggernaut was collapsing into fiscal Armageddon.
All this having been noted, we are in some ways simply dealing with yet another boring, bearish summer on Wall Street and indeed on world markets as well. As everyone knows, any European worker-bee who can avoid working at all in August has done precisely that.
Increasingly, U.S. workers have followed suit over the years, packing in July and August vacations before they have to get the kids back to their schools, many of which now open for fall semester business well before Labor Day, as opposed to earlier customs. This mass rush to vacation time tends to deplete the cadre of saner heads on Wall Street, leaving traders to the high-frequency traders who regularly fly the Jolly Roger and to easily panicked hedge funds and a few rich amateurs.
Ergo, we’re in trading doldrums time, making these sudden confrontations with Scylla and Charybdis all the more terrifying because fears and rumors seem scarier and more easily exaggerated. Trading volume is light (except on days the market stages mini-crashes), market direction seems to lack conviction, and exogenous or “unexpected” events simply carry greater shock value because many of the wizened, calming market gurus and prognosticators are on vacation.
The Maven—along with many, many of these grizzled market vets—can’t really make heads or tails of the current goings on in stocks and bonds. Navigating its treacherous shoals successfully is increasingly iffy, so, like many, we’ve reduced holding and have raised quite a bit of cash.
The real Scylla and Charybdis hazard in this scenario, we think, ultimately pits a nervous Federal Reserve against a lame-duck president who is absolutely determined to wreck as much of America’s traditions, spirit and economic might as he can in the less than 17 months remaining in his disastrous second term.
Barack Obama is the scarier of the two hazards because he’s systematically destroying the middle-class even as he purports to be “saving” them, thus knocking the stuffing out of the hard-working, loyal citizens who’ve always made this country great. What a nasty piece of work this great “uniter” has turned out to be.
On the other hand, the confused and bumbling Federal Reserve, under the uncertain leadership of a confused and flustered Janet Yellen, seems hell-bent on slouching toward an interest rate increase that’s not yet necessary. Such an increase could prove just as disastrous to employment and growth as the Fed’s ill-fated 1937 interest rate increase. That blunder knocked the props out from under a very tentative and feeble economic recovery that only World War II was tragically able to salvage.
The quality of leadership in this country is approaching non-existent, and perhaps it’s that issue that troubles markets the most. Because of this, stocks can’t get traction; oil continues to wobble and decline toward our ultimate, predicted bottom estimate of roughly $40 bbl. for West Texas Intermediate; and consumers continue not to spend since they’ve learned what happens when they obey the oligarchy, do their duty, and get too far in hock—at which point they invariably lose their jobs.
That’s because, as we now know full well, it’s consumers that actually have to repay loans as opposed to politicians and oligarchs who contrive—via creative bankruptcies, federal rescues, and key loopholes in the tax code—to avoid paying back much of anything at all while being made whole once again by those crazy, bag holding taxpayers. What a country!
Despite Monday’s relatively positive market tone, based on apparently good news in housing and construction, this remains a nasty, treacherous and unpredictable market. Bargains already exist. But any day, they might be subject to further markdowns. So everyone waits, waits and waits.
It’s all extraordinarily boring, actually. In this persistently indecisive environment, we’ll take a pass on Trading Tips today. Energy is oversold, select banking issues are still a good buy, but heck, maybe they’ll even be a better buy tomorrow.