WASHINGTON, March 27, 2013 — Very short column today as we work on a longer story for our companion column, The Prudent Man.
The market tanked this morning, partially in reaction to yesterday’s minor bout of irrational exuberance, and partially as a result of disturbing news coming out of Europe—namely, that Cypriots are in a near-riotous mood with regard to their current government and banking crises, while Italy seems absolutely incapable of establishing a working government.
This chaos is entirely at variance with the swell Cyprus travel poster we discovered in a number of places recently, as reproduced above. Such quiet tranquility seems to be receding into the far-distant past with regard to the sinking feeling most Cypriots have today.
The later is all the more concerning as any bad news out of Italy—a major economy that’s been on the fiscal edge for years now—is likely to put serious pressure on a Eurozone that doesn’t need any more at the moment.
Our own markets blasted down this morning on this news, given that the only traders in evidence this week, by and large, have been the HFT machines that react only to positive or negative news rather than anything substantive with regard to the companies they trade in volume.
We’d conclude that most of 2013’s first-quarter portfolio “window dressing” has now concluded, as most pros don’t wait until the last minute to do this—the last minute in this case being tomorrow at 4 p.m. EDT due to the traditional Good Friday trading holiday. This will lead to a rocky and unpredictable today and tomorrow as the HAL 9000s will be in charge.
These HFT trading programs are actually incredibly bovine when it comes to any kind of value investing, but they’re the only game in town, statistically, so you have to play the headlines up and down to ride along with them. Meanwhile, senior SEC officials sit on their hands, awaiting the day they can retire from the government and go make real money with the HFTs, the hedgies, and the 1 percenters. After all, why would they want to offend anyone who’s running their next gravy train?
Nothing much today except what football and March Madness fans would call “The Big D”: Defense. Read on:
Today’s market moves:
Same Maven algorithm in place today. Take profits where and when you can and raise cash. Who knows what will happen in what’s left of March. And once the patently illegal “window dressing” of portfolios is a thing of the past for the current quarter, April could get nasty if the “sell in May” aficionados push the sell buttons en masse a bit early. Working against this, sometimes, is the raft of tax refunds that start flowing toward, or being anticipated by taxpayers who are owed substantial refunds. This is “buy” money waiting to happen.
That said, we’ve had a recent history of miserable market performance between roughly May 1 and November 1 of each year. Some years are different, yes, but some are not. We’d actually expect a big correction soon, followed by one last burst of upward exuberance before things get worse. Then again, in this market, nearly any rational prediction gets kicked in the teeth the following day, so take our sage advice with a grain of salt.
As for the Maven, he continues to anticipate tonight’s scheduled IPO pricing and tomorrow’s scheduled trading of food giant Pinnacle (proposed symbol PN). The IPO could, in fact, be adversely affected by today’s nonsense, and we’d suppose there’s a remote chance it will be postponed. But the hype has been positive on this one so far, so we’ve reserved a lot of shares in advance with our broker. As indicated yesterday, however, just because you reserve IPO shares doesn’t mean you’ll get them. If the issue gets “hot,” the Fat Cats will want—and will get—more which could leave us with few if any shares in the end.
Alternatively, we could chicken out at the end, too, depending on how this issue is priced. It’s all kind of a game, really, but the Maven tends to win more often than lose, so he keeps playing the percentages, but only with a small piece of the portfolio. Take your own counsel on this one, assuming you can line up any shares. In a market like this, you know what can happen to the best-laid plans.
NOTE, repeated from yesterday:
U.S. Markets have a short week this week because of the Good Friday holiday. Bond markets will close early at 2 p.m. THURSDAY, while equity markets will keep their usual hours. On FRIDAY, all markets will be closed for trading.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate.
Any positions mentioned above describe this author’s own investment decisions and should not be construed as either buy or sell recommendations. The current market is highly treacherous and all investors travel at their own risk, so caution should be exercised at all times.
Illustrations, charts, commentary, and analysis are only the author’s view of current or historical market activity and don’t constitute a recommendation to buy or sell any security or contract. Views, indications, and analysis aren’t necessarily predictive of any future market or government action. Rather they indicate the author’s opinion as to a range of possibilities that may occur going forward.
References to other reporters, analysts, pundits, or commentators are illustrative only and do not necessarily represent an endorsement of such individuals’ points of view. If specific investment vehicles are mentioned in any article under this column heading, the author will always fully disclose any active or contemplated investments in said vehicles.