WASHINGTON, April 18, 2017 – Tuesday was yet another lousy day on Wall Street in a more or less endless April of lousy days. A gathering armada of variables is spooking traders, investors and institutions alike, even as a U.S. Navy armada is headed for waters somewhere near North Korea. Or actually, not, according to the latest reports, which claim the “armada” is just now exiting Australian-Indonesian waters.
More variables: First of all, we have the upcoming (or incoming) French election, which now looks like either a hard right-winger and/or a hard left-winger may be the two opponents left standing after this weekend’s balloting. The latest polls have super-conservative Marine Le Pen sinking slowly in the Gallic sunset, her candidacy hit out of the blue by the hard globalists in the EU that have accused her of what we’d call “campaign irregularities.” Funny how that timing works.
But then again, we know what those polls taught us with their wide misses as they jauntily predicted overwhelming defeat for both the Brexit vote and the obviously absurd presidential candidacy of Donald J. Trump in 2016. True, Le Pen has never quite lived up to her early, vote-getting hype. Still, one must doubt polls coming in from most areas across the globe, given their consistent overweighting of socialists, globalists and like-minded “liberal” parties that generally look like fascists to us.
At any rate, worries about a Le Pen upset still abound, if for no other reason than her powerful desire to dump the Euro, head back to the French franc, pull French forces from the front lines of NATO and the NATO command, and basically turn the Eurozone (and the euro) into Chaos Manor.
Result: More uncertainty.
But in some respects, worst of all for Tuesday trading action was a disappointing Q1 report from the only entity in the world to equal the financial force of the nefarious George Soros: Goldman Sachs (symbol: GS). This crucial, influential and perpetually profitable investment-banking giant was profitable again in Q1, but not earth-shatteringly so, its numbers undercut, surprisingly, by mediocre results from the company’s trading arm.
The report hit Wall Street like the proverbial ton of bricks.
Result: Total uncertainty.
Many years ago, while trying to earn a living by peddling life insurance, I learned one of several lessons that have proved useful in most areas of life; namely, that your average life insurance company would far more readily write a reasonably priced policy on the life of an individual whose cancer had been in remission for five years or more than it would write any policy for an individual with a vague but not firmly diagnosed stomach ailment.
Illogical? Not really. Insurance companies offer and price policies based on giant databases and actuarial tables that determine risk beyond any reasonable doubt. Like Las Vegas casinos, these companies are out to win the vast majority of insurance “bets.”
In the case of the cancer patient who’s been in remission for five years or more, health stats generally regard such a patient as effectively “cured,” in the sense that his or her risk factor has, according to medical statistics, returned to that of any normal individual who’s never been diagnosed with cancer.
But that vague tummy ache? Ah, that very vagueness is what troubles the insurer. It could be nothing more than chronic but harmless indigestion. But it could be something much, much worse. Without a diagnosis, however, the insurance company has no way of gauging how much worse, however, making this potential insured far more of a statistical risk than that five-year cancer survivor. So the insurance company will often turn this prospective policyholder down.
Chronic uncertainty = Too much risk.
That’s what we’re dealing with in today’s markets. Too much potential risk. Each of the three factors we’ve just listed piles on more and more uncertainty and investor risk. So, like a life insurance company, investors are either selling or just walking away from stocks right now, and, if anything, are momentarily shifting attention back to the relative stability of bonds.
As for stocks, this yo-yo market could continue indefinitely, at least until some of the key risk variables can be removed. Sellers and short-sellers will likely dominate current action until sunnier, less risky skies prevail. Until then, cash is increasingly our friend. So let’s stay there, pretty much, for now.