Trading Diary: Winter solstice has put stocks to sleep

We make small moves Thursday, but lazy markets will likely dominate the remainder of 2016, Trump-Santa Claus Rally or not.

Cover illustration, 1912 edition of "Night Before Christmas." (Image in public domain)

WASHINGTON, December 22, 2016 – Our columns will get shorter and shorter during the remainder of 2016’s year-end holiday season, mainly because trading volume—and thus the reliability of stock pricing—tends to rapidly decline right around this time of year.

But that Christmas spirit makes trading treacherous as modest buys and sells by Wall Street Scrooges can sometimes trigger computer programs that get out of control, resulting in mispriced stocks and absurd losses in otherwise perfectly good stocks. This generally makes us unwilling to place our bets until the old year passes, lest we permit ourselves to be outfoxed by essentially meaningless low-volume individual stock and market moves.

On the other hand, friends, families, office parties and holiday travel plans replace stocks and bonds as a central focus in mid- to late-December, which is actually a good thing. Active investors like the Prudent Man often neglect key social interactions throughout much of the calendar year, and this time of year affords us the opportunity to catch up with what we’ve been missing.

Read also: Trump-Santa Claus Rally running out of steam?

So, like most of our fellow individual investing fanatics, we’re going to curtail our own investment activities and observations to a minimum into the New Year rather than making moves now we might later regret.

Trading Diary

Those late-week negatives we’ve just noted have caused us to execute a couple of unexpected trades today on both offense and defense.

First of all, we dumped a recently acquired, broker recommendation list position in the ghost of Eastman Kodak. This once quintessentially American industrial giant blew up rapidly in the early 2000s, given its slow and mostly futile response to the almost overnight revolution in the printing, photography and movie industries. As a result, Kodak had to file for bankruptcy, having hit the point of no return during the Great Recession.

In short, what happened here that most of Kodak’s once world-leading businesses simply cratered. As in, who buys film any more? Who owns a Kodak camera? Who’s bought a Kodak copier recently? You get the picture.

Re-listed now under the symbol KODK after re-emerging from bankruptcy, this now severely shrunken company seems mostly interested in selling off its remaining patents and assets, leaving them with not much else, save for a modestly promising 3-D printer and associated businesses.

Recently, the significant value of Kodak’s remaining assets put the common stock itself back on the apparent comeback trail. Hence the brokerage recommendation. But much of that recommendation was probably based on the crucial sale of another piece of Kodak technology that was supposed to happen about now.

But it didn’t.

The stock has been selling off big-time over the last couple of days. Losing nearly 7% so soon after we acquired the shares led us to sell the investment today, as we have rules in place that don’t allow us to let our losses run. (Only our profits.) Hindsight tells us we should have jumped into the stock when this recommendation was fresh, not three weeks after. KODK will probably jump again when the company actually sells more assets, probably some time next year. But as for now at least, we won’t be around for that event.

On the flip side, as the 4-week run-up in financial stocks has begun to wheeze a bit, we sold our modest position in vulture capitalist/financial investment firm Blackstone (BX) for a quick 12 percent profit, more than offsetting the loss in KODK. We’d only been in BX for about 6 weeks this time around. But we’d collected one good dividend, and, after the Kodak hit, we decided we’re not about to ride this volatile investment company stock down past this point.

We should point out that we’ve just placed this stock and one of its competitors, KKR (KKR) on our Year-end Bounceback lists. (Here and here.) That means it’s likely we’ll get back in again if it drops much further as we think the stock has a good way to go in 2017. We are still holding KKR, which was also down today. But recently at least, it’s been a bit less volatile, is still way up from where we bought it, so we’ll hold it as long as we can—i.e., as long as it makes sense.

Hopefully we’ll re-enter BX once again when the Scrooges lose interest in dumping these shares. We thing this one is great for the longer haul, but market behavior is market behavior.

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17