WASHINGTON, May 2, 2012 – Oops. Looks like yesterday’s swell, almost record-breakingly bullish Wall Street trading day will reverse itself this morning. Given the continuing low volume, the market has gotten quickly overbought and is ripe for a smacking. Same old, same old. Even our Trading Kitty (above) is getting bored. Maybe it really is time to sell in May and go away.
Go away is more or less what happened to yesterday’s failed OWS demos. Wall Street operated as normal, par for the course. OWS declared victory, also as usual as Marxists create their own facts and stick to them. However, the nasty, anarcho-syndicalist underbelly of this weird movement was exposed yesterday as well, as OWS actions turned violent in Seattle. Worse still, the FBI nabbed four domestic terrorists in Cleveland yesterday for attempting to blow up a major suburban bridge. Few bothered to report that the ringleader was also a key OWS figure in the Cleveland subsidiary of the Soros-SEIU funded movement. Hmmm.
But back to the market. Futures were looking weak this morning, just because. But we waited to write this until the 8:30 a.m. employment number put out by ADP, the payroll-processing people. According to ADP’s green eyeshade dudes and dudettes, employment was something of a dud in April. CNBC lists the unsurprising news:
“Private-sector employment increased by just 119,000 in April, according a report from ADP that puts a dent into the notion that the jobs market is on the path to a solid recovery.”
The CNBC website also points out a phenomenon we’ve been observing in all the employment figures for the last few months, namely that ADP’s “March number was revised downward from 209,000 to 201,000, according to the report, which is done in conjunction with Macroeconomic Advisors.”
Government numbers on employment and unemployment—due out on Friday—generally end up a bit more conservative than ADP’s and it’s hard to know whose methodologies are superior. But the bottom line is this: both ADP and the government have been consistently revising their previous-week estimates down (for employment) and up (for joblessness) by small but significant increments in 2012, which actually means that both employment and unemployment have pretty much remained in stasis this year.
What that means to you and me is that things appear to improve in these stats. But as most people outside Washington know, nothing much is changing. Things aren’t really getting much better. But for people who’ve run through unemployment comp and/or have lost their homes, it’s probably hard for things to get worse, either.
Bottom line is that numbers like this, correctly interpreted, will give the bears a chance to have some real fun this morning, so we expect a quick whipsaw down in the market averages. Folks will remain touchy for the rest of the week, making action again very unpredictable. Plus, hedgies, according to the rumor mill, are also worried about the effects of Sunday’s election in France.
If Sarkozy loses to the Socialist (which the polls deem quite likely), or even if he’s forced to deal with a coalition government situation after winning a Pyrrhic victory, this actually could put the European semi-bailout plan in jeopardy, as France’s agreements with Germany underpin the whole thing and a Socialist would most likely want to re-set the game clock, throwing world markets into an uproar.
All this presents a very negative tone for the market going forward, which is why the bears are so adamant and why insiders continue to sell bucket loads of their companies’ stock.
Paradoxically, an awful lot of technical indicators are pointing to a big rally over the next couple of weeks. Maybe they’re right, as blowback today could be sufficient to clear overbought conditions.
Problem is, as retail investors, you and moi don’t know what we don’t know, so the investing climate remains treacherous.
Again, perhaps the best strategery here (one of my favorite Bushisms) is to stay somewhat cash-y and keep limited funds in high-yielding utilities and/or REITs and MLPs. The utilities yield 4-5% in many cases (via dividends), and REITs and MLPs by law must return at least 90% of their profits back to shareholders, resulting, in some cases, in eye-popping yields ranging from 8-18%, far better than parking your moolah in Treasurys, though not quite as safe.
Our philosophy here is that you have to stay at least a little bit ahead of inflation, even in this low-inflation environment, in order to actually make money. So upping your portfolio’s value via yield rather than capital gain seems prudent for the moment as politicians the world over continue to kick the economic can down the road to save their own hides at our expense.
So let’s emulate our kitty today when it comes to our own kitties. Let’s keep our powder dry, our litterboxes clean, then yawn a bit as we sit back and watch the Extreme Fighters of the bull and bear camps have at it.
(Again the usual disclaimers apply. In this uncertain market, the best we can do is provide a few guideposts and remain hiding in our refurbished fallout shelters.)
Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington. For Terry’s investing and political insights, visit his Communities column, The Prudent Man, in Business.
Follow Terry on Twitter @terryp17
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