WASHINGTON – Thursday trading action in US stocks looked sloppy, to say the least. After starting the day off fractionally down, the Dow, the S&P 500 and the NASDAQ decided to tank. The Nazz was by far the worst, off a nasty 244.71 points for a painful 2.29% loss. Investors continued to dump overinflated tech stocks, part of a weeklong fit of coronavirus blues. The dumpers likely included the largely millennial Robinhood idiots who inflated the techs to absurd heights to begin with, along with continued wild buying of gold and silver.
Coronavirus blues return after Wednesday’s Pfizer sunshine
Thursday’s action reversed the fairly placid Wednesday afternoon we slept through yesterday. Plus-side news then included an announcement that the US government would pay Pfizer (trading symbol: PFE) and its partner, German pharma company BioNTech a big chunk of coin to reserve doses of their fast-developing coronavirus vaccine.
“The U.S. agreed to pay Pfizer and German-partner BioNTech $1.95 billion to produce 100 million coronavirus vaccines if it proves to be safe and effective. The Department of Health and Human Services added the U.S. can acquire an additional 500 million doses of the drug under the agreement.
“Pfizer rose more than 3%. BioNTech’s U.S.-listed shares gained 7.5%.”
Pfizer added to those gains today, even amidst the general carnage. But the coronavirus blues, plus mediocre employment numbers rained on the market’s formerly positive parade today.
Ohio House speaker bribery scandal clobbers big utility stock
Bad news on Wednesday: Ohio-based utility First Energy (FE) took it in the ear for a second day after being questioned in a big-time Ohio political scandal that snared the GOP speaker of the Ohio House. Unfortunately, we owned some of those shares, which tanked some 20% on fears of legal action.
We bought more of the now-deeply discounted shares Wednesday afternoon, then gradually shed the whole position today, making up some of the net loss with some gains as FE shares predictably recovered a few points of Wednesday’s swan dive. We’ll probably dive back in to this high-yielder when the smoke clears, but that might not be for another year or two.
Big-name techs continue to tank. Robinhood idiots to blame?
On the other hand, we felt forced to dump our small but significant holdings in Amazon (AMZN), Alphabet / Google (GOOGL), Apple (AAPL) and Facebook (FB). We took tiny losses in the latter pair, while we reaped nice gains in AMZN and GOOGL – roughly 9%.
Problem is, we’d have had nicer gains earlier in the week if we’d dumped them sooner, to the tune of 14-20%. Wish we’d figured out when the pros were going to flush out the Robinhood idiots and amateurs. But Amazon’s over $100 per share gain a few trading days ago should have been our cue. Shame on us for missing that one.
The youthful investors who’ve started using their Robinhood trading accounts as a substitute for a visit to Vegas… well, we need to start trying to figure out what they’re up to from time to time. They all move at once into or out of given hot or momentum-style stocks, sort of like a Borg hive. Catch the move right, win a prize. Miss the signal, and your portfolio lays an egg.
The Robinhood idiots’ reality distortion field
Whatever their root cause, these mass market moves distort stocks’ trajectories, wreaking havoc with investors like us who watch the charts and actual earnings for clues. Now, along with compensating for the headline-trading high-speed trading firms whose machines lurch ahead with massive buy and sell orders based only on the day’s headlines, the Robinhood idiots are proving another irrational force to be reckoned with. We’ll learn and adapt.
ZeroHedge elaborates further
“As precious metals accelerated higher in the last few days, we joked (kinda) on Twitter that the surge in momentum would soon become a magnet for the new trading gurus manning their desks at home – whether in China or Chinatown – and send it to new all time highs.
“All gold needs to hit 2,500 is for China’s momentum maniacs or the Robinhooders to start chasing it
“One day later, it’s happening as Robinhood users flood into the gold and silver ETFs. For SLV, the number of RH users holding the ETF has surged from around 15,000 to 20,000 in the last few days making it the 16th most popular pick on Robinhood as of the past 24 hours.”
To hitch a ride, we’ve been quietly buying into the easiest way to trade gold via ETF – IAU – to play that current game. The companion silver ETF – SLV – is proving harder to catch, as the Sherwood Forest gang has already inflated this one to levels we last saw when in the business professionally, back in the early 1980s.
Remembering the Hunt Brothers’ silver debacle. Lesson: Don’t fight the Fed
That was when silver bullion (sans ETFs) soared to somewhere around $55.00 per ounce before then-Fed Chair Paul Volcker kneecapped the Hunt Brothers (who’d effectively cornered the silver trade. Volcker suddenly announced he was hiking the margin interest rate on silver from the usual 10% to a whopping 50%.
The resulting gargantuan margin calls that hit the Hunt Brothers wiped them out in a trice. Silver took an unprecedented swan dive back toward reality. And some of us thought we’d be out of the brokerage business and out on the street selling apples the following morning.
But the damage was contained and mostly limited to the Hunts. And no one has ever tried to corner silver ever since. Hopefully, our irrationally exuberant Robinhood friends will eventually learn that their brilliant market moves will always work. Until they don’t.
Anyhow, while mourning the fact we could have made more money on the super-techs we held, we’ll be ready to try them again once the current holders decide to yell “Uncle.” Probably in the next few days.
Back to those coronavirus blues. And maybe a U-shaped recovery
Meanwhile, we’re expecting the market to mope around for a while. Why? More coronavirus blues. The media has, for now at least, thoroughly soured investors on the V-shaped recovery scenario by continuing to trumpet highly misleading coronavirus case numbers. These idiots actually know that the per capita death totals continue on a downward trajectory. But, due to more testing combined with false reporting on numbers of cases from numerous jurisdictions, case numbers are the way to make the Trump administration look inept. So that’s the way the Marxist Media rolls.
We’re adjusting our portfolios now to (regretfully) reflect a high likelihood of a U-shaped recovery. That’s still good. But way less exciting for Mr Market and for the Trump campaign as well.
– Headline image: Cartoon by Branco. Reproduced with permission and by arrangement with LegalInsurrection.