Oil soars, but Friday stocks succumb to the blahs. Rally over?
WASHINGTON, April 8, 2016 – Both Thursday and today, the Maven has been lacking the inspiration to write really insightful stuff, although he hopes you enjoyed his extended Wednesday Pfizer-Allergan “fail” rant.
Today the “oil production freeze” rumor mill was once again pumping more vigorously than a Gulf of Mexico oil rig blowout. The result? The price of West Texas Intermediate crude (WTI), which had been tanking (pun intended) for much of this week, caught a serious bid Friday, up at the trading close an impressive $2.46 bbl. and ending at $39.66 bbl. Brent crude, the generally accepted world benchmark, actually closed flat today, unchanged at $41.94 bbl. Strange, but so is everything else in 2016.
Dave Fry of ETF Digest, an excellent ETF-oriented investment service to which we’ve long subscribed, put up a very short Friday column indicating his continuing disgust with the manipulations and shenanigans occurring in U.S. markets that go up and down like jumping jacks for no apparent reason. We agree with Dave that there’s no longer any rhyme or reason in markets currently, given that they no longer trade on real information.
Regarding the latest “for sure” oil production freeze the Saudis, Iranians, et. al. are absolutely, positively sure to enforce—the story that drove today’s WTI rally—Dave provided the following comment and image before taking the evening off:
“A quick inspection shown below is a current satellite photo of thirty super tankers lined up near Basra Iraq features the tsunami of oil ready to hit the markets.”
So much for that rumored “freeze.” A picture is still worth a thousand words. We’ll accept the phony rumors for now, however, as they helped out in our modest and risky oil patch gambles. But we’re fully aware this story can turn on a dime, depending on whether the deep-pocketed HFTs are long or short in oil and oil service stocks. (We’re betting they’re going short again after the recent oil short squeeze blowout.)
Nothing much more concrete to report on Friday’s bizarre action, although we’re still feeling some repercussions from the Pfizer-Allergan merger fail, courtesy, once again, of Obama’s cretinous toadies and petty bureaucrats. Watch for these political hacks and clowns to destroy what’s left of American capitalism this summer and fall with another cascade of crippling “rules” and “executive orders,” all of which unconstitutionally usurp the powers of our supine, Republican-led Congress. God help us if we get another “community organizer” in the White House in January 2017.
Is it at all surprising that Donald Trump (who himself was stumbling this week under the weight self-inflicted political gaffes) has dominated our political discussion for months? More and more voters—including the Maven—are wondering whether it mightn’t just be best at this point to elect some bull in a China closet like The Donald who’ll simply blow up the evil federal hydra so we can just start all over again with a clean slate.
If something like this doesn’t happen soon, it’s inevitable we’ll become the world’s biggest-ever banana republic, eclipsing even the clueless communist whack-jobs who’ve utterly eviscerated once largely prosperous oil giant, Venezuela. We’ve laughed at and ridiculed such miserable dictatorial clowns for years, confident that something like this could never happen here in the Land of the Free and the Home of the Brave. Maybe our hubris was a bit premature.
Anyhow, we’ll make the best of what’s happening currently as we adapt our fast-evolving, non-fundamental, non-technical investment strategy in an attempt to profit from the market’s nonstop, unregulated irrationality. Details on this to come as soon as we figure out how to articulate them.
Friday’s trading tips
We’re trying to stay mostly in cash, but we still can’t resist moving in and out of the current, highly tradable oil patch. In an effort to do something different, while getting a few more international stocks into our somewhat unbalanced portfolio, we are, at least for now, taking small positions in a pair of European oil giants, the French oil conglomerate Total SA (pronounced “toe-TALL,” symbol: TOT) and the massive Dutch conglomerate Royal Dutch Shell (RDSA on most tickers).
Both firms clearly have their own troubles, but have been quite proactive in clearing out non-productive garbage from their balance sheets. Both pay pretty decent dividends, too. Like all oil majors right now, they’re as risky as heck. But we plan to add a few shares each time they get hit, which they will, hopefully trading back out when the HFTs pump them up again.
We’ve also been building an asininely large position in Teekay Tankers (TNK), an offshore limited partnership that contracts oil tankers like the ones pictured above to transport crude all over the globe. These shares were massacred recently due to major problems experienced by Teekay Corp. (TK), its umbrella managing company for lack of a better term—problems, however, that have little to do with TNK’s excellent track record.
TNK has actually lagged TK somewhat in recent days as both attempt to recover lost ground from earlier this year. But that’s okay with us. We’ve been buying TNK shares at abnormally cheap prices in the $3.50 per share range. With shares down nearly 50 percent to date, we think (and certainly hope) they’re bottoming now and will recover most of that 50 percent drop when investors wake up to both the yield and to reality.
In the meantime, we’re happy to collect this stock’s currently absurd 13+ percent yield, keeping in mind, however, that TNK is now allowing that dividend to “float,” depending on quarterly results. Scuttlebutt is, however, that this floating dividend will, at least for a year or two, significantly exceed what TNK had formerly been paying. Fingers crossed.
See you again either Sunday or Monday, depending on what we dig out in the meantime.