Wall Street's pre-election mosh pits

Thrashing, crowdsurfing stocks continue to churn.

WASHINGTON, November 1, 2012 – After the Beatles and the Stones, the Maven’s enrollment in pop music’s ongoing Kollege of Musical Knowledge lapsed. With a mother who was formerly the star singer in a roving territory band, and enmeshed himself in a life-long love affair with classical music and big band jazz, the Maven clearly lacked in post-British Invasion hip-ness from the get go—although he occasionally indulged in secret below-the-radar affairs with doo-wop from time to time, mainly out of an abiding affection for redundant piano triplets. Post-big band nostalgia will do things like that to you on occasion.

In any event, the Maven has been thrashing about lately for suitable verbal and pictorial metaphors and similes to help illustrate the kind of market action we’ve been getting for much of the fall. With “thrashing” being the apt general description. Spend a couple of days getting excited about big up-moves, declare a new bull market and, ta-da! Down she goes. Or, watch the market take a not-too-graceful multi-session swan dive, declare you’ve seen a bear, and wham—the mother of all rallies will ensue. And for those times in between, you get a mushy, churning action, resembling a bucketful of worms, or maybe something like a rugby scrum.

But perhaps the most apt contemporary metaphor we can think of is the mosh pit, something spawned in the pop world that invented itself after the Maven started a family and commenced trying to live a respectable life. He watched from afar as pop music degenerated into a Babel of styles, ranging from phony bands with dubbed sound and singing (i.e., the Monkees or, worse, Milli Vanilli), or went in an entirely different set of directions and sub-directions as in heavy metal, punk, post punk, grunge, and whatever—with a generalized focus on the complete and utter destruction of the inner ear.

And instead of dancing in the aisles, the “mosh pit” evolved, a sort of post-modernist drum circle in which dancers thrashed like professional wrestlers off their meds (or, better, on them) and where expressions of passion led to bloody noses, black eyes, and concussions rather than romance.

We could never relate to mosh pits, slam dancing, or crowd surfing. But we can’t help but think of this kind of random, seething scrum of youthful humanity when we watch the markets these days, particularly when you consider that physical trading areas on commodities exchanges are still known as “pits.”

Follow us here. Fundamental analysis remains useful in picking stocks. But then again, who cares about value when any clown on Wall Street can plant a rumor and wreck your position with impunity, courtesy of a craven and useless SEC. Ditto the dark arts of the technical analysts, chartists at heart whose equivalent deck of Tarot Cards consisted of real or virtual graph paper festooned with squiggly little lines and candlesticks whose dark magic often predicted, with surprising accuracy, the next move up or down in stocks, bonds, or options.

But recently, with minor things like the Future of Capitalism and the Rise of Socialism on the line—not to mention the deviousness of brilliant supercomputers that spew mighty fusillades of phony bids and move mountains and markets on the tiniest of phony, planted rumors—trying to invest in this market is like the increasingly aging Maven trying to defeat a nine year-old in one of the latest trendy electronic/video/computer games. Not gonna happen.

The kid already knows all the secret moves (memorized while homework was supposedly being done), lives in a different, more cynical reality, and has utter contempt for anyone over fifteen anyway. No known fundamentals or charts can defeat this kid, who’s always ten to fifteen moves ahead of you.

Which, in the end, is just the way professional Wall Street has been behaving lately. With algos and HFTs having eliminated rationality from individual investing, individuals no longer invest a lot, even though many do participate indirectly through their shrinking or moribund 401(k)s. And they’re not likely to come back, viewing their odds of winning a few bucks are somewhat less than those of a 4th rate band member who stage-dives into a crowd actually assuming he’ll be caught by someone in the drug-invested sea of humanity below. Not gonna happen. So why try.

Well, actually, we do try here and sometimes we even win a few. Our small investment in the double-short yuan ETF (YCS) is going nicely so far, as the Chinese (apparently) are inflating, at least a little bit. (But beware the supposed reveal of the new Chicom government later this month, conveniently scheduled, like the next series of European can-kicking meetings, after the U.S. elections next week.)

Meanwhile, we got lucky, landing a paltry number of shares in Thursday’s Restoration Hardware (RH) IPO which have promptly popped from a high offering price of 24 to a current 31. That’s almost enough to eradicate the pasting we took on last month’s LifeLock (LOCK) IPO debacle, and it shows that at least small pockets of justice remain in this world.

Nonetheless, things still remain weird on Wall Street. Oil dropped this morning, and with it oil company stocks, all of them spooked by word that the U.S. is temporarily allowing foreign-flag tankers to haul refined fuel up from the Gulf to ports and ultimately gas stations and fuel oil depots in the hard hit NYC metro area, due to the offlining of local refineries in the wake of Hurricane Sandy.

Building more refineries over the past thirty years might have helped alleviate this problem ahead of time without these “emergency measures.” (It might have added lots of union jobs, too.) But then, the eco-fascists have successfully prevented any new refinery* from being built over the same timeframe, given the fossil-fuel hatred that’s apparently hardwired into their DNA at birth.

In any event, the “shortage” will probably be alleviated before the Maven uploads this piece, in which case you can expect oil and oil stocks to do a 180 before doing it again.

Caution remains the watchword until the political outlook starts to clear, hopefully by next Wednesday. However, if we end up with another political mosh pit like the one we had in Y2K, it might be time to short everything in site and head for the West Virginia hills to fully enjoy our Second Amendment rights and the vast quantity of canned food we’ve put away for just such an occasion.

Have a good weekend, and enjoy the calm before the next storm. We’ll be bank in our bunkers here on Monday.

  *We have read, though, that the current Administration did recently approve the construction of a very small new refinery in the vicinity of the Bakken Shale.

 

Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He continues to own a position in IAU has added a small position in YCS, and has just acquired a small position in the Restoration Hardware IPO (RH).

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.

Read more of Terry’s news and reviews at Curtain Up! in the Entertain Us neighborhood of the Washington Times Communities. For Terry’s investing and political insights, visit his Communities columns, The Prudent Man and Morning Market Maven, in Business.

Follow Terry on Twitter @terryp17

 


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Terry Ponick

Now writing on investing, politics, music, movies and theater for the Washington Times Communities, Terry was formerly the longtime music and culture critic for the Washington Times print edition (1994-2009) before moving online with Communities in 2010.  

 

 

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