WASHINGTON, June 26, 2014 – Something’s bugging this stock market as June’s rather unexpected (by the Maven) bull run seems to be running out of steam, not to mention volume. As of about 3:30 p.m. EDT, the Dow is off about 37, the S&P 500 is off 5, and the tech-heavy NASDAQ is off a bit over 11.
Worries persist of course over Putin’s intentions in the Ukraine and the Islamofascists’ intentions in Syria and Iraq, although we know none of these players are up to anything that might exactly benefit the American people. But likely haunting the market, which tends to be forward-looking by roughly 6-9 months, could be the generally expected rise in interest rates as well as the elephant hiding in the room: that great big, hulking Obamacare monster whose full fury, via a likely unconstitutional executive order, is waiting to pounce after the November elections.
We’re referring, of course, to the unilateral delay in implementing this unpopular law as it applies to small and large businesses that now won’t be hit with the consequences until FY 2015. That said, we’re wondering how the Administration plans to finesse the likely very large price increases carriers will be implementing for 2015 insurance rates that should be unveiled (we think) in late September in preparation for the 2015 enrollment period.
This also assumes, of course, that the still dysfunctional software in Federal and local exchange systems is actually working properly by the fall which, in light of past experience, is a dubious assumption at best. It also assumes that companies will happily carry the usual full roster of full time employees and opt to cover at least a portion of their health coverage as before.
The big unknowns: how many employees will be reduced to “part time” status to avoid corporate coverage expenses; how many jobs will never materialize because they’ve now become too expensive per non-robotic employee; how far wages and raises will be damped to absorb the new costs; and, perhaps most interestingly, how many employees will simply be jettisoned to deal with the malfunctioning Obamacare websites on their own as companies opt to get out of covering employees entirely.
To change our metaphor a bit, this whole mess, which should have been out there and been dealt with by now, is still the underside of a huge, hulking iceberg, the submerged portion no one sees, the part that could gouge a huge hole in the side of the U.S.S. Titanic Government and sink it quickly with scarcely any warning to those on board—mainly U.S. taxpayers.
This again has investors hedging their bets as this disastrous program’s intentionally misleading rollout makes corporate profit, loss, and sales numbers very difficult to predict beyond the next quarter or so.
In short, business has been almost irretrievably damaged since Obamacare became law, leading immediately and directly to an essential freeze on hiring in many industries. No one, including the government, knows what the price of this seemingly invisible monster will be, so nearly everyone (except free-spending Congressional Democrats and RINOs) is shilly-shallying around, waiting to see what happens before making any decisions.
The compliant MSM and financial media, of course, have been more than happy to bury this story lest they damage their incumbent Democrat pals.
And the administration, whether intentionally or not, has helped bury this horror story further, distracting even the generally well-informed with its feckless but still arrogant Middle East non-policy; its worsening IRA political repression scandal, which now includes (apparently) an unknown number of deliberately destroyed hard disksful of incriminating emails; its currently visible but (as usual) unsolved VA scandal; and its basic inability to do anything at all aside from deploying the occasional Alinskyite smears, slanders, and free-speech repression tactics against opponents, all of which have become the calling card of this ideological White House whose operations are clearly modeled on the efficiencies of the traditional Chicago gangster-era machine.
Business, in short, abhors uncertainty far more than it abhors bad news, which, if you think about it, can at least be counter-attacked when known. Little if anything is known here, so business and government fiddle while the people burn. Fat cats have been excepted of course, since nearly all of them are in cahoots with the Democrats, aka “the people’s party.” What a joke. Too bad reflexive low-information, permanent Democrat voters aren’t in the loop, but media silence and things like IRA coercion against truth-tellers has helped to keep all this off TV and out of the papers.
So we get the low-volume nonsense of our current market where every up and down move is suspect, at least until a few of the Big Boys come back from the Hamptons after July 4, probably to short the market if they haven’t done so already.
Meanwhile, we labor in place here in Mavenville, picking up a few stocks, selling a few, and ready to implement a short strategy at a moments’ notice with cash in hand.
Little to recommend, save for perhaps looking for a bounce in U.S. refiners which got face-planted yesterday when the Administration semi-surprised everyone by approving limited export of certain American crude products later this year. The approval didn’t amount to much, but on low volume, news of this made the HFT robots frantic to sell and short the whole U.S. refining group with tremendous violence.
The trading knocked our current favorite, Calumet (CLMT) down badly and damaged better known names like Valero (VLO), Marathon Petroleum (MPC), and Tesoro (TSO) far worse. But it’s overdone and there’s a selective buying opportunity hiding in there at least for day traders.
On the IPO front, we reluctantly sampled the minimal number of shares in our first IPO buy of the week, Service Master (SERV), the fire cleanup, Terminex, Merry Maid people. SERV was priced slightly below the indicated spread at $17 per share and is trading slightly up from that now.
Tonight, both Michaels (MIK), the hobby store people, and NextEra Partners (NEP) an alternative energy spinoff of the former Florida Power and Light, will be priced. Given final pricing, we’re likely to grab at least a few shares of MIK if we can get ‘em, but are still not quite sure about NEP as this type of IPO tends to have a sinking spell right after the offering. But the final offering price of both will count heavily in our decision.
Aside from that, we’re preparing for another short sojourn starting tonight. But we’ll be back in action next week starting on Monday, trying to game a holiday-shortened, post quarter-end trading week. Things could get nasty on even lower volume, so stay tuned and be sure to hold some cash.
* Above Cartoon by Branco, courtesy of LegalInsurrection.