WASHINGTON, February 2, 2017 – With all the anti-Trump hysteria ongoing in the nation’s capital and elsewhere, it was easy to forget (and most headline writers did) that today is the day on which legendary groundhog Punxsutawney Phil (or his successor) makes his annual trip outside of his burrow to predict how much more of Winter 2016-2017 we’ll have to endure.
Sure enough, according to the Weather Channel,
“Punxsutawney Phil saw his shadow on Thursday morning, predicting six more weeks of winter during Groundhog Day festivities at Gobbler’s Knob, a small hill just outside Phil’s hometown.
“Members of the Punxsutawney Groundhog Club’s Inner Circle revealed Phil’s forecast by poem, as is tradition.
“‘It’s mighty cold weather, you’ve been braving,’ this year’s verse read. ‘Is it more winter or is it spring that you’re craving? Since you’ve been up all night and starting to tottle, I, Punxsutawney Phil, shall not dawdle,’ the proclamation read. ‘My faithful followers, I could clearly see a beautiful, perfect shadow of me. Six more weeks of winter, it shall be!’”
More startling was the rumor—currently unsubstantiated—that Phil had also predicted, off camera, to one of his political handlers that Wall Street’s now extended Trump-Santa Claus Rally would also continue over the next six weeks. At least. This could mark the very first time Phil has ventured into the labyrinth of stock-picking, so the Maven will have to take his comments under advisement for now.
On the heels of Wednesday’s fiery, Apple-inspired rally, Phil’s rumored prediction seemed more than apt. But Mr. Market likes to make a liar out of nearly every prognosticator from time to time, and as a result, stocks and all three major averages went virtually flatline Thursday as traders and investors alike reacted to the bullish rumor from Gobbler’s Ridge with a hearty “Meh.”
After spending the day in negative territory, the Dow Jones Industrials ended the day off barely a fraction of a percent as the tech-heavy NASDAQ reacted likewise. The broader-based S&P 500 was a bit more positive, closing in the green zone by an impressive 0.06 percent. Ho-hum. It appears Mr. Market will believe that six-week rally extension when he sees it.
Taking the bloom off today’s action was a slight drop in the price of crude oil, along with unexpectedly disappointing numbers from Amazon (symbol: AMZN), which tanked by $34.40 per share to close at $805.55, off a nasty 4.1 percent.
That’s disappointing for a company that’s singlehandedly destroying what’s left of American’s traditional department stores by delivering merchandise across the country faster and better and with a wider selection and more perks for shopping at the online giant. But AMZN will bounce again some day. It usually does.
Snapchat to go IPO
Elsewhere, after today’s closing bell, CNBC actually confirmed another hot rumor:
“Snap officially filed for an IPO on Thursday, and told investors it ‘may never achieve or maintain profitability.’
“Snapchat’s revenue growth is astounding — and so are its losses. Here are the highlights.
- Net revenue: $404.48 million in 2016, up from $58.66 million in 2015
- Net loss: $514.64 million in 2016, wider than $372.89 million in 2015
- Loss from operations: $ 520.39 million in 2016, up from $381.73 million in 2015
- Usage: 161 million Daily Active Users in the December quarter (60 million Daily Active Users in the United States and Canada)
- Average revenue per user: $1.05 in the December quarter ($2.15 in North America)
- Time spent: 25 to 30 minutes a day
- Headcount: 1,859 employees”
You have to give these guys an A+ for honesty by stating right up front that their company “may never achieve or maintain profitability.” That indefinite and perhaps perpetual lack of profitability won’t prevent crazed investors from bidding the daylights out of the IPO shares when they first hit the market, however, just as they did for the Facebook (FB) and Twitter (TWTR) IPOs, with ultimately mixed results.
But what the heck? Wouldn’t you like to be the first kid on your block to own essentially worthless shares of a trendy and trending tech company? Bragging rights count when you’re talking about your investment portfolio, although most of those big gains your friends boast about are actually fish stories masking big losses they’ll never admit to.
The Maven doesn’t really care about such things. He’s only in it for the money, and over the years, he’s learned that by judiciously picking out promising IPOs, he can make short term money roughly two out of three rolls of the dice. Given that bidding for Snap’s IPO shares is likely to be irrationally frenzied, the Maven will probably put in for this one as a pure spec. Even so, he’s not likely to get any shares anyway. In the real world of IPOs, shares of a hot IPO usually end up going primarily to the 1 percent as a way for brokerage houses to reward those precious “whales” for their business, to borrow Las Vegas parlance.
As silly as this is, we do occasionally get an allocation of shares even in “hot” IPOs according to some mysterious formula our brokerage employs to make the system marginally more fair to us little guys. But this is random. Some time back, we didn’t get a single share of the Facebook (FB) IPO, bought it in the aftermarket just for an experiment, and promptly got hosed. On the other hand, we did get 100 shares of Twitter (TWTR), and made a huge profit in a very short period of time. Now Facebook rules and Twitter can’t seem to give itself away. Go figure.
Memory Lane: The sad, sad tale of A123
In our long history of dialing for IPOs, our absolute favorite initial offering in recent history remains the September 2009 issuance of new shares of now-defunct company A123, a highly touted domestic commercial battery maker of tomorrow. Or at least it was highly touted as such a beast by those in Washington responsible for halting the rising of the oceans.
A123 (former symbol: AONE) company went public, with heavy support from the American taxpayer, courtesy of the Obama Administration. These miscreants could never resist giving our money away—no strings attached—to hapless solar, battery and “alternative energy source” companies like A123 and the notorious Solyndra, none of which would ever make a profit while providing plenty of perks and high salaries for the Obama supporters who owned an/or ran them. (Into the ground.) The taxpayer’s profit on these massive boondoggles: To date, precisely 0 percent.
The Maven crassly figured A123 would be toast, though not right away as this allegedly eco-friendly new offering was making eco-freak investors wax orgasmic, guaranteeing a big interest in acquiring shares.
Lucking out and getting a small allocation of shares, yours truly sat on them for a few weeks after the IPO as insane traders jumped on board bidding those shares higher and higher. When it looked like they’d peaked, the Maven jumped off his position, selling it for a tidy profit.
A123 shares headed a bit higher, and then turned south, slowly sinking into the primordial slime. They declared their corporate end-of-days (bankrupcty) just three years later in 2012 after burning through all that money and then some, not to mention more government grants via middle class taxpayers who had yet to recover from the allegedly concluded Great Recession.
We knew this would happen, but also wanted to take a ride on this rocket before the predictable red ink did it in. In the aftermath of the company’s bankruptcy, pieces of enterprise were eventually picked up by some Chinese company (it figures), which had a big laugh at how they acquired assets funded the American taxpayer and investor so cheaply. So it goes. We got on board, cynically took advantage of the numskulls who bet on this sure loser, and then bailed well in advance of corporate Armageddon. Bet you never read about this eco-charade in any newspaper.
Back in 2017, aside from today’s facts, rumors and likely falsehoods, today’s market action was actually fairly dull and boring. In reality, the ongoing post-election rally is still going sideways, which is where it will stay until some real news arrives to push the averages decisively up.