WASHINGTON, December 11, 2015 – Anyone looking for really good trading tips this week is going to be bitterly disappointed. Whether you get them for free from this column, or pay a lot of money to get them from guys who have more than enough money to advertise, it doesn’t matter. Increasingly, every tip you get is likely to be wrong.
That’s because U.S. markets, and world markets for that matter, are now flying absolutely blind. Known knowns are vastly outnumbered by unknown unknowns, leading even the most sage experts to confess they don’t know what the heck to do when it comes to investing these days. In fact, there are so many unknown unknowns flying about these days that they’re beginning to look like that horrible horde of flying monkeys that traumatized all of us when we were kids watching “The Wizard of Oz” for the very first time on TV.
Nothing works in today’s markets except selective shorting and mattress money. Fundamental analysis, technical analysis, charts, waves, trendlines, moving averages—all are now subject to easy violation and wreckage. Part of this is clearly due to the destruction of monetary value by international sovereign banks which, having increasingly indulged the wealthy and gamed the system in their favor since Bretton Woods, are now billing us for their criminal acts and wondering why we have no money left to buy stuff. They’re either stupid or utterly obvlivious. More likely, both.
In the meantime, we have the stock market as our last best hope for making money. Except that most of us haven’t during 2015 because of all the above.
For that reason, we’ll repackage and repeat the essence of what we noted Thursday in this column, where we observed that any near-term rally would be more like a dead cat bounce. With oil continuing to head straight for the lowest pit in Dante’s Hell, and with the Fed gearing up to make some non-decision next week that will likely please no one, we simply need to look at the odds and make investment decisions accordingly.
Financials remain a likely hold for now if you have them in your portfolio. They are weak now, and any more Fed dithering on the interest rate front is likely to weaken them further. But they are profitable for the most part and most still pay at least modest dividends. Since the Fed—via legislation, not choice—is primarily geared toward protecting these institutions, they will survive the current mess and will prosper some day, though not during this Administration.
With the continuing problems plaguing a number of companies in the oil patch—ranging from Chesapeake (symbol: CHK) due to indebtedness, to Kinder Morgan (KMI) due to the prudent act of slashing their rich dividend—selling in this sector appears to be reaching a climax that may not peak until the end of tax-loss selling season on the last day of December. There may be a buying opportunity here at some point, but right now, the oil patch remains terribly speculative until and unless we can establish a firm bottom in prices.
Some high-yielding, relatively safe preferred stocks may offer at least a temporary haven, that is, if they’re not considered “junk” class. These preferreds may prove even more tempting if they’re selling below par (which is usually $25 per share), carry a decent but not too-high yield and—most important of all—have a mandatory redemption date that’s not much past, say, 2024. We’ll discuss these in a future column.
But that’s about it for now, and certainly it’s proving dangerous to buy on any market dip these days which is disconcerting for traders who’d reliably made money for doing precisely that between the years 2009-2014.
We’re slowly raising cash once again, even if it means dumping a few of our stocks for a loss. If things get much worse from here, that will prove to have been a wise move. If we miss a short but intense rally—which should actually happen shortly due to oversold market conditions—oh, well. The way things are going, such rallies will likely prove to have been extraordinarily exciting dead cat bounces anyway, trapping investors in long positions that will, overnight, transform themselves into nasty losses.
Right now, cash is king. We’re looking at a lot of things. But in 2015, we’ve been burned one-too-many times by scooping up bargains that become much bigger bargains the following week.
Let’s keep our powder dry at least until the Fed gets past its latest non-event next Wednesday. If the market likes what it hears, fine; we miss a rally that won’t last too long. If the populace readies the tar and feathers after next week’s diktat, well, we may very well be glad to be sitting on all that cash.
(But beware of those flying monkeys still hovering about, just waiting to scoop it up and deliver it back to Washington where our government thinks it belongs.)