WASHINGTON, February 24, 2014 – Instead of its usual trading Blue Monday—something the Maven predicted last week after options expiration—the market has perverse chosen to move ever higher today, or at least as of 1 p.m. EST this afternoon. The Dow is up a hefty 180 points or so, and the S&P 500 is striving for a huge 20-point up day itself.
We remain worried as things are terribly overbought here. But if folks get more bullish, buying panics start setting in, something we haven’t seen in awhile. Combined with shorts getting blown away by the pressure of a short-squeeze like this—which forces them, remember, to BUY to close out a position, the latest rally continues apace. It’s off to the races for sure. Until it isn’t.
We’re being forced to roll back our hedge position of HDGE, although we’re still retaining some of it vs. that bad day that’s sure to come. Some day. We’re holding gold via SGOL, which is up again, but not adding to the position today. And we’re contemplating latching onto at least a few really cheap shares of telco provider Frontier (FTR) which pays a hefty dividend and which reports today after the bell.
You can never tell with these stocks that are reporting after the bell, though. The earnings news to be reported is supposed to be a secret until it’s reported. But, as we’ve often said here, the mysterious inside cognoscenti we call “they” always know the numbers in advance. And “they” will usually (but not always) telegraph their move at some point in the day today.
Thus far, FTR is up a bit, but you never know. There’s also a substantial short position in this stock which the shorts will stoutly defend if they can. So we can’t catch the real move “they” are or soon will make. “They” could also throw us a head fake. If things are still stable to up around 3:30 p.m., we might just make a move. Iffy, though.
The other thing that perturbs us today has been the beating administered to Kinder Morgan Partners (KMP), a master limited partnership (MLP) that’s been reliable for us for years always in terms of its yield, in the form of a predictably fat dividend; but also in terms of capital gain potential, somewhat unusual in an MLP.
Unfortunately, influential Barrons decided to kneecap the stock in a weekend article, and it’s been down close to 5 percent today at several points. The stock is probably feeling as if it were blindsided by “The Thing” from Marvel’s Fantastic Four, who loved to announce a battle by declaring “It’s clobberin’ time!”
Late this morning, a Deutsche Bank analyst rebutted Barrons, which had essentially criticized KMP’s accounting and reporting practices. The DB analyst claims this is an old story and that no one has ever gone after KMP, ever, for the kinds of practices Barron’s alleges. We shall see. We hate it when this happens.
At any rate, we are shedding tears over our expensive position in this stock today, but are still holding because KMP continues to pay a really swell dividend. And we like dividends, which generally pay out even when bad things happen to the underlying stock. Usually, anyway.
Meanwhile, you can jump to our detail column, The Prudent Man, to catch the latest on the Netflix-Verizon-Comcast brouhaha involving poor download speeds and crummy output with regard to Netflix’ streaming content. It’s all about money, of course—money you’ll likely soon have to pay to help resolve the issues among these giant broadband and content bullyboys.
Netflix’ stock (NETF) is also getting beat up, of course, because it looks like the solution to the current brouhaha will be for Netflix to fork over more $$ to the greedy broadband monopolies. On the other hand, Netflix wanted a free ride for its bandwidth-hogging content, so in the end, they’re all to blame for the higher bills you’ll be seeing shortly. No real trades here, though, as far as we can see.
So other than what we just mentioned we’ll keep our powder dry today rather than chase too many things in this rally. There’s just no point in chasing stocks. They get clobbered in a day or two after a rally like this, so if you still like stocks you’ve been watching, you can usually get them on markdown if you hold your fire today.