WASHINGTON, July 16, 2014 – Stocks fluttered over the net and back like a shuttlecock yesterday as Fed head Janet Yellen tacked here and there during her first day of testimony on Capitol Hill. Yellen tanked markets in the morning hinting interest rate hikes were nigh, then backed off to dovish mode in the afternoon.
As chair, Yellen still hasn’t mastered the fine art of Fedspeak. Of course, Ben Bernanke was criticized for the same thing early in his tenure, so this may take time.
But Yellen does seem a bit less certain as Chair than the Bernank ever did, so markets may remain highly unpredictable until and unless she gets the hang of public communication in a position that remains, as it has since January 2009, the last remaining bastion of leadership in dysfunctional DC.
Industrial production was reported up in the second quarter, a relief to those claiming Q1’s disastrous numbers were really, really due to the Polar Vortex, caused without a scientific doubt by
global warming climate change.
Meanwhile, other stuff has fluttered across the tape since last night, ranging from a bullish report on China growth (which will probably be followed by a bearish one today); to Bank of America taking a $4 billion litigation hit; to an increase in foreign holdings of U.S. Treasury debt in May; to the fact that millennials in this country seem to by acquiring homes later in life than previous generations.
Regarding that last one, gee, who knew? With mortgage-sized education debts to pay, part-time jobs at Mickey D’s for degree-holders, and (despite claims to the contrary) the absolute unwillingness of banks to lend any money to anyone but Warren Buffett and retired Congressmen, it’s a wonder that any millennials are considering buying homes at all.
But such breathless reporting of the obvious is typical of today’s financial press, members of whom seem to have no clue about what’s going on anywhere in the country outside of Manhattan and (maybe) Silicon Valley. That’s where all their successful, liberal pals pull down the big bucks and live like the 1% they all love to denounce. Who needs to follow the travails of young mouth-breathers anywhere else.
It’s just after 9:30 a.m. now and the market has popped up nicely on all the (mostly) happy talk this morning, with the Dow, the S&P and the NASDAQ all up. But, as we’ve seen, things can turn on a dime, so keep your eye on today’s Yellen testimony. And don’t ignore the incredibly tense situation on Israel’s Gaza border today.
The bomb-happy Palestinians, courtesy of those fun-loving Hamas dudes, seem to have invented the modern death wish with their ruthlessly and relentlessly stupid acts, whose history dates back to the 1967 Six Day War that invented the “Palestinian” nationality. It’s what you get almost anywhere when your politicians promote a consistent policy of 100% hatred for anyone that isn’t them. But then again, Hamas thrives on destruction and class and ethnic hatred.
On this side of the Atlantic, Barack Obama knows and practices this policy, too. But most Americans, apparently, do not, the end result of the NEA- and university-led destruction of our educational system via systematic disinformation disguised as learning. Doesn’t augur well for what’s left of this country either.
But we digress. Let’s check out:
Today’s trading tips
We took a bath on our gold position (SGOL) yesterday, misunderestimating the conviction of the bears, but we continue to hold. Ditto silver (SIVR), although we did exit our small palladium position (PALL) with a slight profit just for the heck of it.
Meanwhile, oddly enough, banks have looked reasonably good this quarter thus far, even as the Feds look to extort more money from the majors to punish them for the bad loan portfolios the Feds forced them to buy, typical of today’s Washington. Having run out of excuses to raise taxes, they collect them anyway by other names: “fines” in Obamacare; judgments and “fines” against banks and large companies; and ditto for Big Tobacco which is now a major and continuing source of Federal and state income.
In any event, big banks may be nearing the end of the Government’s Great Chain of Extortion, so could be ticking up now or soon.
We’ve jumped into some Bank of America warrants (BAC/WS/A) as a proxy for that bank. We started yesterday. This morning’s litigation expenses slapped them down, so we’re trying for some more to average down. And hope to collect on the position eventually before the end of the year. It’s been a reliable trade for us in the past.
Aside from that, we’re slowly raising cash. We can’t shake the thought that the stock balloon is going to get pricked sometime soon, so we’re reluctant to go all in. Keeping cash enables us to put on short positions as hedges if the market starts tanking. So we are keeping a fair bit of our powder dry.