Wall Street woes: Consumers tapped out, Greek saga continues

Washington is now 100 percent disconnected from the majority of American citizens. Monday’s markets continue to reflect the mood.

Economic cartoon.
A slight mod to an old 1912 financial cartoon explains a little something about America's dead-in-the-water economic growth.

WASHINGTON, June 8, 2015 – After the portfolio-damaging boredom investors endured last week, Monday’s Wall Street trading action looks like this week will offer more of the same. Perhaps Janney Montgomery Scott chief investment analyst said it best on CNBC this morning: “Probably another listless session in the absence of any hard data. Certainly the Greek saga continues.”

So does the Middle Class Consumer Strike. None other than the official Federal Reserve Media Mouthpiece, the Wall Street Journal’s Jon Hilsenrath, complained that the main reason the economy isn’t on Easy Street already is that the stupid American consumer isn’t spending his tush off buying stuff and getting deeper in debt.

Sorry, Jon. Your swell salary blinds you to the fact that your Federal Reserve pals have been giving free money to banks for seven years now to help them clean up their balance sheets.

Meanwhile, Joe Consumer and his dwindling number of middle-class friends are still trying to clear their balance sheets and have been doing so for years without any help at all from the government. So why should they climb back into hock again when they’re trying to get out? They’ve learned their lesson. Help is only for those who don’t need it. They’re getting out of the debt system. They’re going Galt. They won’t come back.

Observationally, the Maven can’t really do any better than this right now. There is indeed an absence of hard data. The consumer is indeed on strike.

Meanwhile, the Greeks and the Eurozone keep kicking that can down the road as Greece’s Communist government blindly keeps doing what Communists always do when negotiating with capitalists—even the alleged capitalists in the “Troika”: Stall, lie, never agree to anything you can’t renege on, and, from a position of weakness, exhaust the other side with your intransigence.

The Euro-Greek soap opera is slouching toward some kind of bad conclusion. We just don’t know what it is. In the meantime, U.S. investors, worried about the potential for some Lehman-like contagion, continue to dump stocks as wealthier ex-shareholders head out for the Hamptons and wait for this latest economic house of cards to collapse in its own unique way.

Meanwhile, back home, the federal government, the media and most politicians continue to lie to the electorate, offering false wage and job stats, false economic recovery hope, false military analysis, you name it: a veritable Potemkin Village of lies and deceit.

The middle class knows it’s all lies and that the people no longer have any control over what was once their government. But, as Marxists always knew about the petit bourgeoisie, they’re afraid to do anything about it lest something bad happen to them—even as something bad is happening to them.

It’s this kind of environment that has the Maven wondering whether he too should head out to the Hamptons for the summer and put this column on holiday until he feels like returning.

Sadly, that’s not a viable option, as the Maven is in no position to afford the Hamptons. Nor would he want to, given the sneers and snarkiness he’d have to endure from the 1 percenters who run the place. They don’t appreciate even temporary visits from peons with less than $50 million net worth.

So, the Maven will sit here and try to figure out what, if anything, is going on underneath this market’s surface that might eventually make us a bit of money. And when he does, he’ll share. Middle-class investors, after all, have to stick together. One needs the company of companions in what Jack London called “The Fellowship of Pain.”

Today’s trading tips

The averages seem to have resumed their normal Monday ways today, with all major averages off a bit less than 0.3 percent as of the noon hour EDT. After staying around a bit too long, the Maven has been peeling off shares invested in mortgage REITs, utilities and preferred stocks that don’t have an expiration date.

The market seems convinced that the Fed will stick to its story and raise interest rates in September or December, and that will keep these stocks under continuing pressure until capital losses in investment accounts begin to exceed their generous yields.

We hate to part with those outsized yields, but when Mr. Market decides to make a move, you have to acknowledge it and get out of the way, even if you lose a bit of principal to do so. Otherwise, out-of-favor stocks keep going down and you get hosed.

On the other hand, we’re considering getting back into our longtime favorite REIT, Two Harbors (symbol: TWO). Why? They’ve diversified into other areas, including lucrative mortgage servicing, thus taking a chunk of interest rate volatility out of the stock. Pennymac (PMT) and New Residential (NRZ) have also been diversifying a bit and are worth at least a look here.

We’re also looking into regional banks and certain insurance companies. We’re already in tiny bits of Cleveland-based KeyCorp (KEY) and the still high-yielding but analyst-hated New York Community Bank (NYCB). We missed last week’s massive upward move in Utah’s Zion Bancorp (ZION). But if we get a pullback, we might pick up a few shares of this one, too.

Banks, particularly regionals, seem to finally be on a tear (fingers crossed), given that they may finally be able to make money again if interest rates start scootching up, as it looks like they might later this year. Then again, you never know what the government will do TO you at any given time, even though they say they’re doing it FOR you.

Stay tuned. We’re still here. And although we can’t afford the Hamptons, nearby Virginia Beach could work. At least it would be more fun.

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