Wednesday’s markets: Oil isn’t everything—it’s the only thing

The machines have now tied the movement of nearly all stocks to the violently erratic daily moves in oil futures contracts. The nonsense needs to stop.

A west Texas oil pumpjack at sunset. (Via Wikipedia)

WASHINGTON, Feb. 24, 2016 – It’s really becoming the silly season these days if you’re still involved with trying to make at least a little money in stocks and bonds. First off, whatever you do is bound to be wrong. Second, whatever you buy or sell, it’s all about the price of crude oil. Third: Regarding the price of oil, everybody always lies.

Case in point: We got a big jump in the market recently when, for no apparent reason, we got a 6+ percent rally in the price of crude in one day. The jump in crude was based on the Saudis and Russians coming to absolutely no agreement at all except to “freeze” current oil production. Which is absolutely no news at all.

Tuesday, yet another Saudi sheik stated what should have been the obvious: The Saudis have absolutely no plan to trim their oil output, ever. But they’ll probably meet with their OPEC pals next month to discuss stuff. As we noted in another piece, this whole situation is now a process. Which means we get a whole lot of pomp and circumstance signifying nothing. As in that roughly 40-year Middle East “peace process” we’ve heard so much about.

Wall Street thought about the latest non-news coming out of the Saudi oil patch, added that to its negative thoughts about the ever-building U.S. crude oil surplus, and BAM! After retreating dramatically yesterday, the price of WTI crude futures Wednesday morning took another negative 3 percent bashing.

But wait… mid-morning, we received confirmation that indeed, those oil inventories were filling up at that big oil depository facility in Cushing, Oklahoma. But at the same time, the U.S. was experiencing a significant drawdown in gasoline inventories, so, Hurray! Could the nation’s elite actually imagine that folks might consume more gasoline if it were cheap enough? Who knew??

Oil (WTI) immediately reversed this morning’s slide and is now UP over 1 percent. Stocks, which, of course, have been slavishly following oil prices in lockstep for whatever reason, have now recovered some Dow points. The Dow Jones Industrials (DJI) are sitting at around -109 as of 1:30 p.m. EST Wednesday, having recovered roughly 100 points from their earlier low. Perhaps even God doesn’t know where oil—or stocks—will end up by today’s closing bell.

All this manic action is the very definition of insanity, and proof if you ever needed it that today’s markets are broken perhaps beyond recognition. It’s the computerized and high-speed trading that’s doing this, predicating each and every move in nearly all stocks on the daily gyrations (and headlines) involving the price of crude oil. That’s why nobody’s tried-and-true trading systems are working any more.

No actual investor—the kind of individual who places market bets on earnings and value—can make any real money in this environment, since it’s now all about buy-sell churn that’s set in motion daily by headlines and rumors that are used by the supercomputers as the sole reason for massive buy and sell orders.

Gold and silver are catching a bid as we write this and may finally be commencing a move out of the two-year bear market in precious metals. U.S. Treasurys also seem rather happy in the current environment since everyone wants to buy them now, the better to stamp the stupid volatility out of their portfolios so they can gobble fewer Tums every morning.

We’ll just leave you with this comment on the current nonsense: if U.S. voters don’t wake up this fall and vote in across the boards a slate of candidates that will first halt and then reverse the disastrous “fundamental change” that’s been happening in Washington, we might not have any markets to write about by the time 2020 rolls around. It’s getting that bad.

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