WASHINGTON, June 2, 2016 – June is bustin’ out all over on Wall Street. The problem is, stock and bond traders and investors don’t seem to know which way it’s bustin’. The usual suspects—Saudi oil extortionists, an intrusive federal government, and big-mouth CEOs guarding their turf—are making investors nervous with their latest round of blustering Thursday.
Meanwhile, Donald Trump is apparently ready at long last to square off against The Great Bloviator, People’s President Barack Hussein Obama. It’s almost enough to make the Carl Icahns of the world stuff all their considerable cash inside a very big mattress. More on Carl anon. Lots of news today, so hang in there.
The Saudis, OPEC and oil
To elaborate on what we’ve just tossed out, according to several sources, the Young Guns of the Saudi royal family are out on the hustings again talking oil down and playing their increasingly costly market share game. The Saudis themselves, perhaps knowingly, are without a doubt putting a bullet in the collective head of OPEC. That’s causing short-term damage, particularly to the more idiotic governments in the cartel, mainly the Socialist People’s Paradise twins Venezuela and Iran. (See also: Bernie Sanders.)
For various reasons, both these very different utopias are near economic death due to currently predominating low oil prices, which is pretty much all these rogue countries produce aside from violence and phony revolutions. Even non-OPEC members like our friends in
the Soviet Union Russia are hurting as well. But the Saudis don’t care and oil wobbled somewhat this morning, although it’s now trying to regain the $50 WTI handle at around 1 p.m. today EDT.
CFPB vs. Payday Lenders
Back in the U.S.S.A., the increasingly worrisome and likely unconstitutional Consumer Financial Protection Bureau (CFPB), which is essentially answerable to no one, is after those bank-like firms known as “payday lenders.” Those who need to make use of them probably regard them as legal loan sharks, and they are more or less right.
Payday lenders essentially advance small loans to impecunious, unfortunate, or just plain credit-unworthy borrowers who need, say, a few hundred bucks to get them to their next payday. Interest rates are high enough to make your eyeballs pop out and, if these short-term loans aren’t paid off promptly, they roll over and collect even higher rates of interest.
In most states they are legal, however, and the real problem is this: Like the middle class, even the modest cadre of what we used to call the “working poor” can’t get any kind of loan from the bank any more unless they have enough money not to need the loan. So, for that reason alone, the payday lender loan sharks are actually providing a necessary service since most banks cater only to the wealthy these days. That’s primarily because it’s good business for them and keeps those corporate bonuses flowing.
In the meantime, where’s everyone else to go? We don’t like this lending segment either, but just trying to put them out of business—which is really what the CFPB is up to—doesn’t solve the problem and is only going to end up making the desperate even more desperate.
Jamie Dimon attacks liar loans… for autos?
Making this idiocy even more fun is JP Morgan (symbol: JPM) CEO Jamie Dimon, who this morning is out on the bafflegab circuit proclaiming that scads of current auto loans being made to substandard customers are going to blow up the banking system and the economy again. That may be right. But where was Jamie when JPM and the other big banks were busy blowing up the banking system with lucrative (but ultimately disastrous) subprime loans back in the day?
Rubbing salt into irritated consumers’ already thin skin
Both the government and the elite classes are so far removed from reality today that it’s become both infuriating and riotously funny to hear them popping off about how great our economy is, given that they know nothing about how that’s working for the average American peon like you and me. To cap this off with a more or less non-financial anecdote, the FDA is now starting to make noises about setting new regulations that would severely reduce salt in our diets by ordering “gradual” reductions in everything from processed foods to restaurant menus.
It’s remarkable how badly the government wants to insert itself into every facet of our lives. But such outrageous intrusiveness accomplishes two important aims for anyone who works in government:
- More rules and regulations mean more enforcement, which means you get to grow your taxpayer-supported, non-income generating government agency even bigger, creating more promotion opportunities for everyone.
- None of these regulations will end up improving anything, but will make it appear that the government cares for us, allowing us to tolerate an increase the government’s size without actually solving any of the hundreds of more serious and pressing problems that plague our economy.
And, oh yeah, “moral, health oriented” intrusions like this one and Nanny Bloomberg’s failed jumbo soft drink fiasco draw attention away from vile politicians who generally do nothing except amass their own wealth during an election year.
Trump puts Obama on notice
And speaking of election year, let’s get around to Washington’s self-chosen Destructor, Donald Trump. Out on the campaign trail yesterday, The Donald, who’s been tarring and feathering the Clintonistas for a week or two now, decided to put Washington’s own Teflon Don, aka Barack Obama, on notice. Trump is hinting that “The One” himself is going to get dissed if he doesn’t stop sniping at Trump and the Republicans during the campaign—as Obama has been doing quite pointedly recently.
Obama has met his match in Donald Trump when it comes to trash talking. But he seems oblivious to it, although obliviousness is not news with this sorry excuse of a president. Let’s pick up the plotline from The Hill, with a hat tip to ZeroHedge for bringing it to our attention. (Bold terms below appear as-is from the source):
“‘This is a president who doesn’t have a clue,’ Trump said during a rally in Sacramento, Calif., before threatening to unleash harsher attacks should Obama become more vocal against him.
“‘He’s going to start campaigning. Well, if he campaigns, that means I’m allowed to hit him just like I hit Bill Clinton, I guess, right?’ Trump said.
“‘If he doesn’t, I don’t care. But if he campaigns, and I think he wants to, because he wants to keep this terrible agenda going where everybody is ripping us, where the world is ripping us off…’
“Obama hit Trump during a PBS town hall that aired Wednesday, referencing Trump’s promise to bring jobs back to the United States while discussing manufacturing…
“Obama also went after Trump during a speech Wednesday afternoon at a high school in Indiana in what was billed as an official White House event on the economy.
“The audience booed at one of Obama’s veiled references to Trump. ‘No booing,’ Obama said. ‘We’re voting.’ He also blasted the businessman’s tax plan and pledge to roll back Wall Street reform regulations as ‘crazy.’”
The only crazy one that day was Barack Obama, whose nearly eight years of nonstop craziness has brought the once-great United States to the Eve of Destruction. And how about that “No booing,” sermon? Typical not only of Obama’s arrogance but that of Washington’s and Wall Street’s wealthy elite and political classes as well. No booing for them. But they get to boo us. All the time, every time.
Prediction: The more Obama disses The Donald, the more votes Trump will collect. Keep it up, Barry.
Of course, there’s a price to be paid for this kind of political circus in an election year. We contend that at least some of that price is currently being paid by investors who no longer know what to believe—or even if the Fed is really, really, really going to raise interest rates in a couple of weeks.
Hence, the uncertainty in today’s markets, all other situations considered. Markets tend to like to go with what’s predictable in politics, which means that any time Democrats lose their grip on the White House, their crony capitalist Big Business sponsors get very nervous and start disinvesting. Happens all the time, given the still apparently unknown fact that the Democrats are the wholly owned subsidiary of Big Business, not the Republicans.
Meanwhile, the country has been going to economic hell for coming up on eight years now, as pictured in the chart below. (Month and year numbers are hard to see here, but the shaded areas encompass the Obama presidency, with the last year on these charts designated as December 2014).
A picture is still worth 1,000 words. This picture is all you need to know every time you hear the worst president in American history telling you how great his administration has been for you and your families. UPDATE: Friday’s disastrous job numbers add an exclamation point to the chart above.
The Fed and interest rates
Finally, there’s the Fed. The nation’s head bankers (and stock market manipulators) have been making major noises indicating they’d be thrilled to raise their own interest rates. Very, very soon. Maybe. That’s got markets gyrating even more than normal in this weird election year. As to whether the Federal Reserve will raise their benchmark rate in two weeks, as increasing numbers of analysts think they will, July could actually be a better bet, depending on employment rates, depending on inflation rates, depending on… well, you get it. This will keep markets in a relative tizzy. Until it doesn’t.
Right now, calling this one probably gets you worse odds than the quarter slots in Vegas. Which is also a major reason why current markets seem to be treading water on low volume.
We’re standing pat today as we did yesterday, but can’t resist pointing out a bit of very good news for the Maven’s main portfolio, which contains a good-sized position in Allergan Preferred A shares (AGN/PRA at our brokerage. Your symbol may vary).
To wit, one of Wall Street’s greatest current buccaneers announced this week that he’s taken what we could regard as (to quote The Donald) a YUGE position in Allergan (AGN) common shares in the aftermath of that company’s scuttled Pfizer (PFE) merger beat down.
Since such announcements can come as much as a calendar quarter after the fact, Icahn likely started scooping up Allergan shares either just before or just after both companies abandoned their merger attempt, courtesy of a hostile Washington administration.
The Maven, for his part, started accumulating those AGN/PRA shares right after the merger was terminated, an event that caused a swan dive for both the common and preferred shares of Allergan. Given the preferred’s deep discount after that plunge—made in sympathy, we suspect, with the common—we couldn’t resist scooping up these expensive shares, given that we could purchase them in the $800 per share range for a reasonably safe stock that will mature at par ($1,000 per share) less than two years from now, on March 1, 2018, to be precise.
We’re not sure if Icahn is getting involved in the high-dividend paying preferred shares of Allergan as well. But if he isn’t, someone else is. The stock has been recovering big time from its recent lows over roughly the last 10 trading days.
Still priced in the mid-$800 range, these shares are still a pretty good deal, given that upcoming maturity date. If shares drop back a bit, we may pick up some more.
Thank you, Mr. Icahn, where ever you are.
*Cartoon by Branco, reprinted with permission and by arrangement with ComicallyIncorrect.