WASHINGTON, January 29, 2015 – Stocks and bonds are in a state of utter confusion this week, amply reflected in Thursday’s chaotic trading action. Up, down, sideways, who knows where the market will go next, save for the fact that HFTs are having bucketloads of fun and profit while harried investors are losing their derrières, trading one way while the market goes another. Before reversing on a dime.
Today’s a case in point. We started out with a brief, hard up-open. Then started back down, resuming crash city with averages resuming yesterday’s post-Fed swan dive. Now we’re soaring again, with the Dow up 134 points at 1:50 p.m. EST, and S&P 500 up nearly 10 and the NASDAQ, loaded with tech, is up a nice 16 and change.
Guilty parties behind this yo-yo action? The Fed, which made its latest confusing, inscrutable pronouncements yesterday on interest rates. The announcement seemed to be benign. But then the HFTs got hold of the headlines, twisted them in a negative direction, and quickly sledgehammered Wednesday’s early rally down, down, down, dumping and shorting stocks on heavy volume like there was no tomorrow. Add politics, oil prices, deflationary fears, and look out below!
Investors holding long positions certainly couldn’t be faulted for thinking there really would be no tomorrow, as the cascade down was rapid and violent, spiking the volatility measure known as the VIX, big time.
The new Commie-led Greek government didn’t help either, outright defying and/or repudiating pretty much everything that country had negotiated with the Eurozone and tempting disaster. Frankly, we don’t have much sympathy either for the Greeks or the Eurozone.
Slowly and surely since the end of the Second World War, Europe fashioned for itself a soft and lazy socialism. The average poor family lives minimally but lazily off the guaranteed dole. Unionized employees, both government and industry alike, have crippled innovation and productivity for decades with monster pay packages, rigid work rules, and bankruptcy-inducing pension levels.
Meanwhile, politicians, academics, elites, and just plain idle rich people ruthlessly pillage from what little middle class is left in Europe, while they themselves avoid most of the taxes they impose on everyone else.
Greece has been a particularly bad example of this, beaureaucratizing their citizens and businesses to death, taxing them to the hilt, hugely swelling its already oversized and overpaid government sector, and then taxing everyone even more. Meanwhile, Greek elites and politicians have made an art and science out of never paying the huge taxes they impose. When 2007-2009 hit that hapless country, the bottom fell out of the whole, stupid structure as those chickens came home to roost with a vengeance.
So, while the ascendant Greek Marxist cadre, like all Marxist cadres, is odious to the nth degree, we still find it hard to fault the Greeks for lashing out against their corrupt elites, thus putting those Marxists in power. With the average Greek citizen having been given a royal screwing for upwards of 7 years now while wealthy Greek pols and tycoons continue to party on their Parthenon-sized yachts, you can forgive the average Greek citizen for voting for the Commies as their only remaining alternative, short of violent revolution. Where else could they turn?
Sadly, their new Marxist government will ultimately screw its patrons the way Hugo Chavez, et. al., screwed the Venezuelan people. In the end, everybody will be equal—equally miserable—save for Party members who’ll wind up with more worthless currency than they know what to do with.
Beware: What we’re watching over there is President Obama’s dream for this country. Despite the 2014 election results, it’s not clear that Americans fully comprehend what’s happened on this side of the Atlantic, at least in part because they only dimly understand basket cases like Venezuela and now Greece. Until they do, we ourselves will lose what little change we have to pull our own fat out of the fiscal fire, so to speak.
This, the erratic, confused Fed, wobbly oil and commodity prices which still seem to be in deflationary mode all combine to make for mass quantities of investing uncertainty. Hence the wild gyrations on Wall Street, exacerbated by those Masters of Disaster, the HFTs, who continue to get away with high crimes and monetary misdemeanors as they destroy pensions, 401(k)’s, and any other money that’s not parked behind a low-yielding but safe firewall.
It’s these wealthy clowns and their pals who keep the Great Recession crisis going strong, roughly a good 7-8 years after the ugliness began. Unlike the average citizen, they’ve never been hurt and never will be because U.S. regulators will never enforce the securities laws on them and they know it.
If this all continues much longer, Obama will have his dearest wish. The U.S. will become another hat-in-hand burned-out crisp of a Third World country. And it’s this that markets fear most of all.
Meanwhile, we continue to enjoy brief up moments in the market, but suspect such moves all the same. The government’s easy money game is being wound down before it ever helped the middle class, courtesy of Obama and the feckless Harry Reid-led Senate which could have helped all these years but never accomplished a damned thing except for never holding a vote on anything.
The Wall Street casino will soon cease to be fun if this keeps up much longer. And the 1% will likely pack up their chips and go home to enjoy life, having fleeced the 99% of anything that wasn’t tied down, spending all that ill-gotten middle class money all the way. Meanwhile, Obama will retire to Hawaii and his golf game, reappearing from time to time to raise funds for his latest phony charities, all of which will boost leftist causes rather than doing any actual good. It’s disgusting.
That’s not the way it’s supposed to work. But that’s the way it rolls. Just look to Greece for what could happen next if Obama and his vicious Obamamaniacs are able to “help the middle class” any more than they already have.
Today’s trading tips
Well, again, we don’t really have any good tips today, largely because of what we discussed in our rant above. Every move these days is a wrong one, and no rational or experienced trader or investor can scalp the market’s wild gyrations one way or another without having a supercomputer close at hand. We don’t, so we’ll be slowly backing out of positions until things settle down, whenever that might be.
Meanwhile, for those who can get hold of shares, the much-anticipated Shake Shack (SHAK) IPO will be formally priced tonight.
Here’s the latest on that from Forbes:
A burger, fries, and milkshake at Shake Shack can easily run you up to $20. Its IPO is now nearly as expensive.
On Wednesday morning, Shake Shack raised its initial public offering range to $17-19 per share — up from $14-16 a week ago. The company’s valuation at the top of that range now approaches $675 million, and it would net about $95 million selling 5 million shares.
If you trade with a full service brokerage, you may be able to pick up 100 shares of this IPO, but likely no more, unless you’re a member-in-good-standing of the 1%. That’s because brokerages typically save out most of their share allotment in “hot” IPOs to shell out as gifts to their fat cat customers.
Those customers have to pay the IPO price for their shares, of course. But if the issue does indeed prove to be “hot” on the first day of trading, they’ll “flip” the stock and pocket fantastic profits in a New York minute, to the tune of 25-75% or so on their original investment, which they’ll hold, likely, for less than an hour before dumping it.
People like you and the Market Maven who trade at discount houses to save money on commissions likely won’t be able to get hold of any SHAK shares at all, so we’ll have to watch the 1% have all the fun.
Our only advice here is two-fold. Since it looks like this issue will be “hot” (actually a technical term on Wall Street), it’s likely to pop big time on the open. If you’re lucky enough to be able to put in for shares, this one looks like a good shot for at least a quick flip.
If not, do not chase it, a common mistake of non-professional investors. You’re likely to get hosed at some point as the fat cats happily dump their shares your way as they reap massive profits. You’re left holding the bag most of the time.
The clue in tonight’s pricing is this. As Forbes already reported, the IPO price range has moved up, a generally clear signal that interest is high and that shares will be scarce. But what we’ll need to see tonight is SHAK shares that are priced even higher for their final price. That nearly always indicates that the brokerages bringing the issue public know they can squeeze even more money out of buyers without getting them PO’d.
So look for that clue. There’s never any guarantee, of course. The Maven has seen issues priced up and priced up again, only to collapse right after a big IPO opening trade. Facebook (FB) was the classic example of this, and people who chased it after the open were slaughtered, after a huge multi-week down move whose effects lasted nearly a year.
So beware. And good luck. Otherwise, stay in cash or CDs. Right now, any move is the wrong move in this market.