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Oil, Brexit, Orlando and Fed fears hit Tuesday trading hard

Written By | Jun 14, 2016

WASHINGTON, June 14, 2016 – Wall Street couldn’t wait ‘til the end of the week for its latest Freaky Friday. That’s happening today, as the market continues tormenting traders and investors alike with the kind of action that can only be compared to the Chinese water torture. (Is that phrase still politically correct?)

Drip, drip, drip. Stocks continue to dribble down for the most part, and even the Maven’s super-conservative mostly short-term term preferred stocks are getting nicked, albeit not as badly as some others. Oil continues to drift down after the recent $51 bbl. high for WTI, and this is adding to the gloom and doom, with investors fearing the linkage of oil to stock averages—thought by some to have dissipated, they may be back again like those TV People in “Poltergeist.”

In addition to oil, the guilty parties Tuesday were the same ones that have tormented nearly anyone involved in stocks since around mid-week last week:

  1. Continuing fears that the “Brexit”—Great Britain’s plebiscite, scheduled for an up or down popular vote next week—will find a significant UK majority voting in favor of exiting the European Union altogether. (More on this in a sec.) The elites have really got their panties in a knot on this one, not only in the UK but around the world.
  2. The ISIS-inspired Orlando massacre has exposed the rotten core of what’s left of the Obama administration’s “policy” on both the military and Homeland Security, the latter of which, for eight years, has been vastly more concerned with homegrown “right-wing terrorists” than with the likely mass import of Islamofascists, courtesy of this administration’s de-Americanization ideology. Existential fears like this cause investors to sell and, at least in a former universe, head for precious metals as a hedge against Armageddon.
  3. Our Hamlet-like Federal Reserve meets today and tomorrow and will deliver its latest muddled interest rate and economic message Wednesday afternoon. Although the analyst consensus now strongly supports the notion that the Fed won’t raise those rates either this month or for the rest of the summer—largely due to more frequent Black Swan-style events like Orlando and the potential Brexit—it ain’t over ‘til it’s over, and the Fed’s latest tea-leaves reading won’t show up until 2 p.m. EDT Wednesday. As usual, insiders and elites will know the answer well ahead of time, so we’ll watch how they trade late Wednesday morning to get a clue.

A great deal of international emotion is being carried along with Reason No. 1. While elites in both the Democratic and Republican parties continue to trash Donald Trump for trash-talking the Islamofascists and their “counter-reformation” Crusade, voters out there in flyover country are loving it.

Neglected, dissed and marginalized now for decades, with their jobs and livelihoods rotting away, they blame our current economic and political mess on the elite overlords who control everything and who, inexplicably to most, are systematically destroying what made the U.S. a great nation and a beacon of freedom for the oppressed around the world.

In addition, the Great Unwashed are sick and tired and, yes, furious at being sneered at, disrespected and accused of “racism” 24/7, even after having elected and America’s first black Communist and post-colonialist president. Twice. They see Washington’s elites and the nation’s oligarchs united in an single-minded attempt to kill off any possibility of real wage increases or real (as opposed to fake) full employment.

Worst of all, they see the elites as dedicated to destroying our national identity. And Donald Trump, for all his myriad faults and excesses, is seen as The One who’ll finally put an end to this country’s downward spiral of asinine political correctness, as lately exemplified by the extremist cadre of imaginary gender inventors.

The elites are furious at these rubes for even daring to have an opinion. But they have failed to see that America’s rubes are reflected in the growing populist rebellions in the eurozone, which brings us back to the Brexit. Having smugly assumed that UK voters would want to stay in the EU, British pols have been shocked this week as the polls turned sharply against them. Clueless, like their elite pals in the U.S., they never saw it coming.

While a vote favoring the Brexit could still turn one way or another, it, like Donald Trump, reflects a growing fury among the European masses, most notably now in Germany but also in Spain, in Italy and spreading elsewhere. It’s a rage that will know no bounds. Neither Germans nor Brits nor Spaniards nor any other nationality have any desire at all to be effectively exterminated, particularly by a never-ending wave of bloodthirsty foreigners who absolutely refuse to assimilate.

Most Westerners know full well that a majority of Muslims don’t love Islamofascist violence either. But so long as Western governments tolerate it and, worse, tell their own frightened and intimidated people to shut up about it “because of racism,” these people will be increasingly prone to react decisively to put an end to this, and it will not be pretty.

Such a growing mass of opinion is not racism, the favorite charge of wealthy Western elitists. It’s survival, pure and simple. And it’s this that the elites refuse to get, mainly because they’re so incredibly wealthy that none of this violence and political indifference affects them in the least.

While we try not to get totally political in this column, the American and international left, since the 1960s, has succeeded in politicizing everything, scoring them victory after victory for some kind of warped modern socialism that more closely resembles Superman’s “Bizarro World.” In so doing, they have destroyed the post-World War II Western consensus, and may be on the verge of reaping a whirlwind.

This is the cosmic, existential fear that now stalks the current stock market, and it will continue to fester and grow as the first Tuesday in November approaches. Donald Trump and the potential for a Brexit is just the tip of this dangerous iceberg, and even if both he and next week’s vote go down to defeat, this almost revolutionary game is far from over. It’s precisely the fear of open revolt and chaos that has many shrewd investors pulling out of markets altogether, and it could make our recent, predictably negative summer trading environment all the more frightening and volatile.

It’s a real mess. As William Butler Yeats wrote in a different time and under different circumstances, “The center cannot hold.” Actually, in 2016, the center is already shattered beyond recovery. What comes next is anyone’s guess. But fewer and fewer investors are willing to put money on it. Hence, the ongoing market malaise.

Trading diary

Not much to report. The Maven’s highly defensive portfolio has been holding up well until this morning, at least, as the telltale McClellan Oscillator continues to dive for the bottom, a sign that we could get a short term break in the recent bearish action. (Or not.)

We’re back up to about 40 percent cash and wish we’d moved more quickly, but them’s the breaks. At least we moved somewhat. Plus, we’ve already started hedging the remains of our portfolios again with the double-short S&P 500 ETF, aka SDS, a symbol that always amuses us for its once and future historical associations.

We are getting clobbered in our re-established positions in major financial management/vulture capitalist firms Blackstone (BX), Carlyle Group (CG) and KKR (KKR), and aren’t looking too hot after our re-entry into Teekay Tankers (TNK).

On the other hand, we’re still up rather nicely on our Allergan Preferred (AGN/PRA), although it’s off somewhat today. If the market gets scared to death and drives AGN/PRA down into the low $800 range again, we might actually nibble at a few more shares, given its (virtually assured) redemption at $1,000 per share in early 2018, plus its nice dividend.

Having taken our own advice yesterday, we’d imposed a trailing stop on our position in one-month old IPO SiteOne Landscaping (SITE) and, bang, we were taken out this morning, having still registered a wonderful gain of 34 percent in just one month’s time.

Our other May IPO, U.S. Foods (USFD), however, is beginning to look sickly, after initially popping up to a nice premium. It’s being sold hard today and our paper gain has just about vanished. Unfortunately, under our brokerage house’s rules, we’re honor bound to hold these shares for about two more weeks. With the Fed and the Brexit vote coming up… well, we’d say for sure that we won’t make anything like 34 percent on this one, if we make anything at all.

We’ve put in for IPO shares of PSAV, Inc. This major convention and video support company will be priced Thursday evening, and we’ll decide if we want to stay with it, which could be a dicey proposition in this environment. Having been taken private years ago, it’s awash in debt as such issues usually are. But it’s apparently on the verge of making an actual profit anyway. We’ll see how it’s priced and decide at the last moment.

Otherwise, except for hedging with SDS and gold and silver ETFs, we’re done buying for the present until this latest squall—or hurricane—blows over. But we still expect a pretty nasty summer anyway, so we’re advising all our friends and readers to be careful out there.

Terry Ponick

Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Senior Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17