Stock market bulls gored by Obama bluster, options, Citi mess
WASHINGTON, March 27, 2014 – U.S. stocks opened with a nice rally Wednesday morning but soon ran into serious, chilling headwinds that seem to blow in from all directions. And we’re not just talking about the latest blustery East Coast cold snap.
ETF investing guru Dave Fry perhaps described this best:
“Markets were going along smoothly as bulls were positive about new economic data. This was fine until Obama drew a new red line this time aimed at his partners in the G-7 and NATO saying: ‘…the international order is being tested’…and, Russia’s ‘aggression must be met by condemnation.’ Does this pass as another red line or just more words? I’ll leave that to you.”
Obama rattled his virtual sabers in Brussels, indicating that more U.S. and Western nation sanctions might be in the offing whether Russian dictator president Vladimir Putin commits any further outrages in the Ukraine or not. We’re sure Putin is quaking in his boots (not). And that’s just the problem.
Need proof? Check out this rather shocking video of the President yesterday as he concluded his remarks, apparently at a Brussels presser. You’ll hear the typical, banal talking points at the beginning of the video, but don’t allow yourself to be lulled to sleep. Wait for it. Where’s the applause?
That’s right. Aside from one quickly cowed individual, utter silence. For all their screaming about “Cowboy Bush,” the Euros knew the Texan had their collective backs and would honor treaty obligations.
A hat tip to ZeroHedge for uncovering this video and also for the following observations, referring to Obama (not Putin) and thick with cynicism:
“… does [this] mean that everyone saw right through the endless bluster, hollow rhetoric and empty promises of the man tasked with reading from a teleprompter, and currently in charge of one of the world’s most totalitarian states? Because either someone is getting fired for forgetting to turn on the “applause” sign, or Europeans no longer care for the lies uttered by Obama on all topics NSA-related (and all other topics too). One wonders: how long until the US president finally gets the same treatment in his own country?”
With a newly belligerent Russian bear at their recession-weakened doors, the under-militarized European governments are petrified because their socialist hero, Barack Obama, winner of the Nobel Peace Prize before the last of his furniture was placed in the White House, doesn’t actually give a damn about them. He’s just going through the motions before his next tee time, and the Euros know that they’re likely going to have to deal with the current problem on their own.
Our feckless U.S. president has become notable for drawing firm lines in the sand before quickly erasing them. Aside from oppressing the American people with Obamacare and executive orders and the run-amok EPA, Obama never wants to take any political risk that might actually accomplish something, fearing the consequences to his rep if such a risky move would fail.
Given the president’s unprecedented, historic lack of follow-through on anything beside creeping socialism, hurling hollow or apparently hollow threats at the Russian bear can only cause anxiety in the markets as yesterday’s action demonstrated. Given the Kremlin’s recent responses to the Administration, we can just hear the gales of laughter echoing in the halls wherever Putin’s revived Politburo may be convening.
In the U.S., news of the president’s latest indulgence in Amateur Hour sent already-nervous markets tanking. They were already spooked, apparently, by a bizarrely executed but substantial purchase of puts on the S&P 500 mini, about $200 million worth. Simply stated, a put is essentially an option bet that the underlying security will go down. What this purchase likely meant was that the purchaser was making a huge bet that the S&P 500 would collectively tank, and fairly soon, although in the options world, there are other interpretations.
In any event, the market didn’t like this either, so between Obamanation and the series of big put transactions, the market got pummeled.
An additional problem: after the close, it was reported that Citigroup flunked the government’s latest big-bank stress test, putting their latest bid to raise their dividend and return capital to shareholders in limbo. Although it’s clearly illegal, traders in the know—we call them “they” or “them”—had the news in hand ahead of time and likely hammered the market into the close as well.
Today’s trading may repeat a pattern that’s become more regular over the last few trading sessions. Dip buyers rally the market for an hour or two, at which point the sellers come in to take advantage of higher prices, driving the market into the ground. It’s getting ugly out there.
Be careful. We hope to have more observations in Market Maven later today.