WASHINGTON, March 16, 2017 – Yesterday’s bull romp became Thursday’s instant replay of the rest of March thus far—another downer of a day on Wall Street. Logic is quickly dissipating in this market as the sideways-to-down correction of the Trump Rally seems to have resumed.
Precious metals, healthcare and, to some extent, tech all got hit and at least a third of Wednesday’s big market gains were quickly erased today. This is getting to be not so fun. We’re not going to overreact, but we are resuming our cash raise.
Having seen our remaining shares of Silver Wheaton (symbol SLW) move up briefly into capital gains territory, we dumped them today even though we may soon regret it. After a severe 2-3 week decline in both gold and silver, both metals caught a serious bid Wednesday and again today—and maybe tomorrow.
But in the meantime, our two mining positions—SLW and major mining company Newmont (NEM) got beaten about the metaphorical head and shoulders Thursday, and we have begun to fear the disconnect between these stocks and the metals they mine.
Instead of dumping our larger position in Newmont for a loss, we may wait it out by buying puts against all or part of our stock holding in the company. That way, we could “put” the stock to someone else at a higher price, thereby avoiding much if not all of a potential loss. We’ll see what things look like Friday morning and then decide.
It’s ditto for the fast-fading shares of Snap Inc.’s failing IPO (stock symbol SNAP). After blasting off like a rocket after last week’s IPO, the stock has been inexorably sinking toward its $17 IPO price, leaving all those hapless little snowflake millennials, who bought 3-5 shares because they “loved” Snapchat, holding the back as bears happily shorted the daylights out of the new issue.
Making things worse, brokerage after brokerage has gleefully rated the stock a sell with target prices at or below the IPO price. This is fairly unusual these days, as firms usually try to keep these IPOs lofty for at least a while. But we suspect that many of these investment houses are expressing the same irritation with Snap’s elusive, selfish and control-freaky CEO as this writer did last week, with the main irritation being that the IPO shares don’t carry the usual voting privileges as the usual common stock does.
The company’s lack of a clear path toward profitability is also cited, but that’s BS. Pretty much any tech that goes the IPO route is worthless on paper. Investors bet on the likelihood of future growth and so, at least for a time, are willing to look the other way when it comes to earnings. Not so with this puppy. The CEO’s attitude likely has a lot to do with it.
At any rate, as we mentioned, we did get in on 100 shares of this just for the hell of it. We figured the stock would gradually sink, which puts us at a disadvantage, as we have a soft agreement with out brokerage that we won’t dump IPO shares back on the market until the 31st day after the purchase.
For this reason, we not only have to bet that an IPO is going to pop. We also have to reasonably believe that it will hold at least a bit of that pop for 31 days so we can get rid of it at a profit.
That’s what we thought might happen with SNAP, but the last week’s serious sinking spell is making us rethink this one. The shares closed down another 4.25 percent today, ending up at the $19.89 per share mark. At this rate, it won’t take long before it drops below that weak-looking $17 floor. We’re honor bound not to dump the shares before early next month, but we don’t want to take a beating either should these shares continue to waterfall in the wrong direction. So once again it may be “protect the position with a put” time.
Even after this mess, we’re assessing another IPO that starts trading tomorrow, and will likely request shares in this one, a strangely-named cloud company that calls itself MuleSoft (proposed symbol: MULE). We’ll likely give this one a try and see if we get shares. (We may not.)
On the other hand, we’ve decided to take a pass on the other IPO available to us, a small oil and gas well drilling outfit called ProPetro Holding Corp. (proposed symbol, no kidding, is PUMP). With the clobbering of fossil fuel prices this week, it seems like a bad time to do this IPO. But then again, Snap, Inc.’s all-knowing IPO thought it would be a swell idea to offer shares without voting rights.
We shall see what happens tomorrow. It’s always something.