WASHINGTON, May 7, 2012 — Already on the mat from last week’s brutal beating, stocks look like they’re ready to get bruised and battered again. The financial punditocracy has been sowing doubt and fear all weekend in response to the apparent resurgence of socialism in Europe. And indeed, when it comes to the election results in France and Greece, they may have a point. Markets don’t like this at all.
French President Nicolas Sarkozy was toppled Sunday by François Hollande, described by Fox News as “an unassuming and bespectacled Socialist.” Meanwhile, in sunny, carefree Greece, Greek citizens ousted the current coalition in an apparently pro-socialist vote that seemed to favor a return to that country’s quaint and touching custom of mass kleptocracy. Greece is more of a mess than France, however, as additional elections may be needed to sort out some kind of working majority.
The French and Greek tallies were really votes against Euro-protecting austerity measure pushed by the conservative German government. It’s as if, one by one, Europe’s tottering governments, already weakened by nearly 70 years of faux-socialism to begin with, are fighting a metaphorical World War III against the German government, which they apparently see as attempting to dominate them once again, this time using the weapon of fiscal common sense. Quel horreur!
Naturally, Asian markets swooned on the news this morning, aided and abetted by continued government missteps in India as politicians there attempted, unsuccessfully again, to crack down on investor tax evasion which is rampant. European markets are headed in a downward direction as well. Quelle surprise!
This brings us back to Wall Street where U.S. markets, already whipped around by last week’s bearish tailwinds, is poised to open significantly lower as that old “sell in May” adage is appearing to be fully operational once again.
Oddly, we may get a nice bounce here soon, as the market is, once again, rapidly approaching a short-term oversold signal on the durable McClellan Oscillator. Meanwhile, investors with chips still on the table continue to suffer, risking the loss of the nice gains they copped in the irrationally exuberant 2012 Q1 stock market rally.
But strange things seem to be happening beneath the surface. Natural gas, which is seemingly being given away almost for free these days, got a price bump up last week, no doubt due at least in part to drillers shutting down some operations to wait for a better price. That forward momentum seems to be continuing in this morning’s bets on natural gas futures.
All it would take to get this market positive again would be a move by the Feds to encourage natural gas engine conversions and filling station development. Drop a green light for the Keystone oil pipeline into the brew and we’d be off to the races. But with resurgent socialism in Europe and with America’s own tenacious Socialist still in the Washington saddle, Happy Days are unlikely to be Here Again for the U.S. economy anytime soon, which has Wall Street in its current selling and short-selling funk.
We’d continue to peel back any wobbly positions on those rare upward blips this week. We’d love to be bullish and always hope for the best, but hope is never a very productive investment strategy.
REITs and MLPs continue to look good for their high yields as do certain U.S. electric utilities. True, like other stocks, their prices will get pushed down somewhat along with everything else. But these often slow-moving investments are insulated by their yields which you can collect while the market continues to get smacked down by events, rumors, and HFT algorithms, the latter of which the SEC has no intention of looking at in spite of the continuing damage they inflict upon investor confidence.
Also, at long last, it might be time to look at (but maybe not yet buy) some natural gas plays. Somebody will make a fortune on this stuff at some point, but probably not yet. Who knows? Tomorrow, that tiger in our tank might be American-made liquid natural gas (LNG) rather than the traditionally Gulf Gold brew that’s favored by OPEC, the Iranians, and Hugo Chavez. Quel dommage! Tant pis!
(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.
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