WASHINGTON, April 26, 2012 – Doesn’t your heart go out to the little tyke pictured above? At the edge of the playground, he’s obviously attempted an impressive entrance or exit via the chain link fence. But instead of impressing his pals—and maybe a few of the young ladies as well—all he’s accomplished is the execution of a perfect, excruciatingly painful and exquisitely embarrassing wedgie, the trauma of which will haunt him ‘til the end of time.
That’s a little bit how yours truly feels this morning writing what will be a circumstance-shortened column on this morning’s open. Once this is done and posted, your friendly Maven will be off on a journey to the wilds of Western Maryland to meet with a contractor who’s in the process of repairing one of the college student rental houses that Mrs. Maven and I purchased some years ago. We’d had hopes that the cash flow might augment what’s sure to be a pitiable and dwindling pittance we’ll be getting from what remains of Social Security.
Hope, however, as I’ve often told Mrs. M, is not a plan, and so it is in this case. Having evicted the former tenants for nonpayment of their second semester rent, we’re now stuck with roughly a $10K repair bill and a $3K city water bill. It’s what happens when undisciplined young gents, many in receipt of subsidized Federal student loans, conclude their academic year is better off spent playing beer pong 24/7 as opposed to attending classes that they, their parental units, and you and I are allegedly paying for. A few dozen failed synapses later, and you can guess what they did to the house. Wedgie.
While yours truly is en route to the outback, the market, too, will be doing its thing, most likely attempting to get back to its slow-drip, wealth-destroying ways after yesterday’s Apple and Bernank-supported bout of irrational exuberance.
Actually, the drip, drip, drip of earnings reports this quarter has been pretty good, given the overall tone of the economy. But this morning’s futures are wobbling between slightly up and slightly down in all markets, indicating that we’re likely to get back to the Chinese water torture motif that’s characterized April’s market action. Part of the fear and trepidation is due to the possibility that a major company might “miss” analysts’ earnings estimates.
More likely, though, European fears will continue to dominate, although there’s also some fear of this morning’s employment report, which is likely to continue in its current, mediocre pattern indicating the “recovery,” such as it is, may be close to stalling.
That said, while such events affect the market tone, what we’re really seeing is continued selling behind the scenes, very quietly, as the hedge funds and corporate insiders continue to unload stock to the few excited buyers who remain in the game. Even yesterday’s massive Apple rally was in actuality only just punishment for the shorts who’d been dumping that great money machine for roughly the last ten trading days.
When Apple blew out the analysts’ earnings estimates, big time—(unexpectedly?)—the shorts knew they’d better head for the exits pronto, resulting in a massive, breathtaking short squeeze. Good for ‘em. As Dean Wormer once said, “I hate those guys!” Come to think of it, that line would work with regard to my former Animal House tenants as well. Wedgie.
So what we can expect today is more happy or unhappy nonsense in the market. It’s a good idea to continue raising cash during rallies and maybe nibbling at REITs, master limited partnerships, and utilities. Analysts say these high dividend-paying stocks have had their day, but given their current track record, we’d ignore the chatter at least for now. None of these guys have been very prescient lately, anyway, so maybe it’s time to cut those “bonuses” they expect every year. If we can’t make money, why should they?
Wedgies all around.
Have a good one, and I’ll be back tomorrow.
Disclosures: Terry maintains active trading and investment portfolios and owns real estate in Virginia, West Virginia, and Maryland.
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.
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