SANTA FE, New Mexico, August 3, 2015 — Boy, did we pick a heck of a week to visit the Santa Fe Opera out here in America’s sunny but occasionally monsoony West. Just as markets were struggling to find their footing, President Obama – America’s one-man economic wrecking crew – went after America’s energy boom once again this morning, blowing the price of oil–and energy stocks–right out of the water.
This current howitzer blast of presidential poppycock is backed by false and ridiculous climate assertions, provided courtesy of his loyal cadre of global warming climate change hoaxsters who also fund these efforts, even to the point of writing EPA reports for that agency.
The destructive effects of this radical (but expected) energy policy decision will hurt workers in many states, including New Mexico, which, unknown to many in this country, has a strong energy and mining industry that’s about to take a hit.
Stocks, already wobbly on the morning, reacted to this news swiftly. Stocks in general and energy stocks in particular took a nosedive after this latest anti-energy fusillade was delivered. Coal stocks, at this point approaching bankruptcy status and nearly nonexistent, price-wise, were badly hurt. Again.
But crude oil, including both West Texas Intermediate (WTI) and Brent Crude benchmarks got the stuffing knocked out of them as well, with Brent trading below $50 bbl. and WTI waterfalling 4 percent, settling at $45.17 bbl., off nearly $2 in a single session. Oil companies and related stocks were hammered accordingly. The ripple effect has gradually spread into the entire market. The Dow was down 91 points and change while other averages suffered as well.
Politics aside, adding insult to injury was the continuing plunge in the price of Apple (symbol: AAPL) stock, which sank nearly 3 percent today to $118.30 per share, adding to last week’s losses. Worries about the apparent Apple Watch non-event have been replaced by a real fear that iPhone sales will begin to plunge, courtesy of the Chinese stock market collapse.
Like the corrosive effects of Obama’s energy policies on jobs and wages in this country, the breathtaking erosion in the average Chinese citizen’s savings and investment funds — courtesy of this year’s massively collapsed, margin-driven Chinese bull market — is almost certainly going to have a similar economic effect on consumption in that country.
The iPhone has become widely popular in China. But despite it’s popularity, as more and more potential Chinese customers lose their ability to spend on discretionary items–like iPhones–the less of them Apple will sell. This, in turn, will lead to–surprise–massive job cuts in supporting tech industries in both China and the U.S.
Add these potential cuts to the cuts already underway in America’s (and China’s) energy industries, and it’s “Recession, here we come!”
Hence, today’s violent market reaction in tech, which already piles on the negative news in the energy sector. Looks like we’ll need to put on our helmets and strap ourselves in for this week’s ride.
Today’s trading tips
As Outer Banks, North Carolina lifeguards might say when they detect dangerous riptides close to shore, if you’re an average investor like the Maven, “Stay out of the water.”
We’ve been slowly reducing our positions, often for modest losses, alas, as we fear even greater declines may occur in markets this month. There’s really no support for capitalism in this country any more, particularly by the Leviathan also known as the U.S. government whose policy seems to be that Americans will be better controlled by the Feds and the oligarchy when they’re mostly impoverished.
Under such situations, taking bullish positions right now is approaching the status of suicidal. Short positions can work, and have worked occasionally for us this year. But these, along with double- and triple-short ETFs have to be watched like a hawk by individual investors. And if you have a 9-5 job and can’t do that, it’s best to avoid them, unless you use a full-service broker who really cares about your account and will do this job for you.
With great regret, we’ve retreated more and more to cash as we’re suggesting. But we continue to maintain positions in regional banks, which, thus far, are holding up well.
Warren Buffett has long said that he prefers to invest when he sees blood running in the streets. We’re not quite seeing that yet. But the day might yet come, and perhaps soon, when we wake up in the morning and actually see the streets running with red. That’ll be the day that, after a heavy slug of Maalox, we decide to jump back in with both fiscal feet once again.
Until that day, let’s vow to pretty much stay out of the current debacle.