WASHINGTON, Sept. 14, 2012 – As we write this, it’s nearly 11 a.m. EDT and the Dow is up nearly sixty points—this after a really finger-lickin’ good day for the bulls, who started a huge rally. After a dull, mopey morning yesterday, the rumors started flowing and then the Fed announced a very open-ended version of QE3. This new, market-goosing program involves, effectively, the purchasing of as many mortgage instruments as the Fed can get its collective hands on for an “indefinite period,” which means basically forever. Well, until the unemployment rate ratchets down below, say, 7% which, at the rate we’ve been going lately, might be when the Maven is up there somewhere trading futures with St. Peter.
We’ll have more to say about Uncle Ben and his Nearly-in-Rosslyn (Virginia) Mountain boys over in our Prudent Man column as soon as we can find the time. At the moment, we’re still exhausted from staying up until nearly 1:30 a.m. this morning catching the third installment of the Metropolitan Opera’s recent, costly, hi-tech “Ring” cycle on PBS. Why PBS refuses to start airing these puppies earlier than 9 p.m. EDT is beyond me, unless they’re pitching these “Great Performances” at the newly or forcibly retired older demographic which, in the DC area anyway, no longer has to get up in time to get around the Beltway or early enough to evade the HOV (“high occupancy vehicle”) restrictions on arteries like I-66 or the dreaded I-95.
But back to the market. Apple’s potential sales for its new iPhone 5 are already off the charts, according to a number of articles, WSJ reporters, assorted pundits, and other longstanding Apple haters notwithstanding. Most of the pooh-poohing in the financial media yesterday involved stuff the iPhone 5 didn’t have as opposed to all the swell stuff “everyone” else has.
From a business standpoint, however, all this carping misses the financial boat. Apple still delivered a desirable product, just in time to hit consumer upgrade cycles. But the real interesting stuff in this new iPhone was the boring stuff. Namely, the magical silicon and software that will finally enable Apple iPhone sales to take off in China, the promised consumer land of any American company that can figure out how to get around the labyrinth the Chi-coms create around any American entry. Take that, business punditocracy! They’re a group that, collectively, (except for Gasparino and Santelli) is nearly obtuse as the blow-dried MSM types who shill 24/7 for the business-hostile Obama Administration to win in November, sending the rest of American businessmen off to Galt’s Gulch.
Apple stock is nicely up right now, so there.
When we’re talking really big stocks, we’re talking Dow stocks, usually—Apple excepted because the Dow folks really don’t know how to incorporate this monster in the industrials and Apple probably doesn’t care. So the formerly big and now big enough stocks we’re talking about today are Kraft (KFT) and United Health.
Kraft, itself a spinoff from the original Phillip Morris Company (now Altria [MO]) has decided to spin off its grocery business as a new company called Mondelez (weird name, but so is Altria) effective October 1. Mondelez. Sounds like an old Bing Crosby-Bob Hope-Dorothy Lamour “Road” picture.
What remains of Kraft will become too small for the Dow Industrials, so it will be replaced with health insurance giant United Health Group (UNH) later this month in a triumph of Obamacare over cheese, condiments, and snacks. Est-ce que vous avez le Gray Poupon?
Since the Dow Jones people have all sorts of magic in their mathematical hats, this late September swap of big players won’t really change the actual average, though, in any significant way, although it will lessen trading eagerness a bit for the Kraft twins and increased it for UNH, given that index funds will all need to make this swap in their own portfolios as well.
As for the current market, today will probably be at least modestly up until, maybe mid-afternoon, when algos and scaredy-cats may either abandon positions or short various stocks lest the news from the Middle East worsen more than it already has or encourage Iran to do something foolish or murderous, which it will probably do at some point anyway.
President Obama no doubt wasn’t counting on this kind of early “October surprise” to damage his ad hominem run at Mitt Romney’s “lack of foreign policy experience,” and the spin doctors are already working 24/7 to blame this debacle on Mitt and on the filmmaker who provided the alleged pre-text for the preplanned murderous rampage that happened and may still be happening in Egypt and Libya.
In any event, Wall Street’s cold-hearted types aren’t really so much affected by the murder of the American Ambassador to Libya as they are about the possibility of what this might do to oil futures and eventually to Western economies. So, to avoid what’s usually known as “headline risk,” some of them will probably bail on high-beta (volatile) positions and head out early for their taxpayer-subsidized weekend homes. Then again, who knows what the stupid algos and HFTs will do next, since their trading is based mostly on headline “news” and has little to do with actual value investing. What a world.
After a tremendous and exhilarating ride yesterday, we bailed on our leveraged silver and gold ETFs, just because. They were still getting goosed this morning, but they’re looking toppy, so we scooted out of DGP and ACQ (doublegood silver and doublegood gold) and the regular silver ETF (SLV) as well. We do remain in one of the two most frequently traded regular gold ETFs, however (IAU).
We are contemplating adding some new and nearly new preferred stocks to our various portfolios to increase yield, as we don’t expect the current rally to go on forever. Conservative investors might find this idea appealing. If so, switch over to our other column, The Prudent Man, for a dissertation on how these investments might work in your portfolio, although as always, travel at your own risk.
We need to run and fill in that other column for you now, so happy trading (for a change), and have a good weekend.
Disclaimer: The author of this column maintains several active trading and investment portfolios and owns residential and investment real estate. He intends to nibble on the preferred stocks mentioned above as the occasion warrants.
He sold his positions in leveraged gold and silver ETFs DGP and ACQ near yesterday’s market close, as well a small, day-traded position in regular silver ETF SLV. He currently a position in IAU, a gold ETF.
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.
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