|Dow||+20.42 to 18,058.69|
|S&P 500||+4.97 to 2,112.93|
|Nasdaq||+20.89 to 5,056.06|
|10-YR Yield||-.025 to 1.947%|
|Gold||+$6.90 to $1,193.80|
|Crude Oil||+$1.37 to $57.53|
The broad market is snoozing. Snoring. Going nowhere … fast!
We get up toward 2,110-2,120 on the S&P 500 … and we fail to break out. We get down to around 2,040-2,050 … and we fail to break down.
For the Dow Industrials, the numbers are different: Roughly 17,600-18,200. But the story is the same — rangebound trading where neither the bulls nor the bears can get the upper hand.
What’s causing this standoff? And is there any way to beat the boredom and make some real money?
Let’s start with the cause: Radically divergent views on economic activity, monetary policy, earnings trends and more!
The bulls say the economy is going to rebound after a weak first quarter, the Federal Reserve will keep policy easy, and earnings will pick up once the effect of the dollar’s surge on multinationals wears off. The bears say we’re heading back toward recession, that the Fed will have to start raising rates off zero percent anyway, and that the pressure on profits is far from temporary.
|Some beaten-down energy stocks are simply too juicy to pass up.|
Me? I think you need to follow a couple of different strategies in this environment if you want to make money:
First, look at beaten-down sectors like energy that are simply too juicy to pass up! I’ve made my Safe Money subscribers some nice profits by ignoring the S&P 500, and focusing on energy stocks that got destroyed last year. They’re benefiting from a turn in the underlying fundamentals, the “catch up” effect, corporate M&A, and more!
Second, take advantage of the irrational investor panic in other markets, like those overseas! Everyone hated Russian, Brazilian, Chinese, or other foreign stocks at the turn of the year. But that drove their shares to such bargain-basement levels that the profit opportunities were enormous.
Third, here in the U.S., zero in on special situations and stocks with the best Weiss Ratings you can find. After all, not every stock out there is sitting around like a bump on a log!
|“Foreign stocks, bonds, and currencies are running circles around the S&P 500.”|
One example: A specialty retailer that should benefit from an increased focus on healthy living, and that I identified as a potential takeover or merger target. It just jumped yesterday amid confirmation of those theses.
Or how about one of my favorite players in the aerospace industry? That business is in the midst of a multi-year bull market for demand, production, and pricing. I zeroed in on a high-yielding aircraft leasing firm there several months ago. It’s rated a top-notch “A” (“Buy”) by our Weiss Ratings. And its shares just hit a seven-year high!
Meanwhile, what do you think about these flat-lining markets? Are we going to break up, break down, or keep marking time? How are you positioning yourself for the next major move? Are you profiting from big moves in sectors like aerospace or energy? Here’s the Money and Markets website address; let me hear your voice there!
|Our Readers Speak|
Are the “Flash Boys” running amok in our capital markets, and is there anything we can — or should — do to stop them? That’s the hot topic you’re debating online.
Reader Victor K. said: “The Flash Crash is getting a lot of press today. It was clearly caused by high frequency trading with the intent to drive down prices of a given commodity.
“It is no different, however, than the actions of the 6 big bullion banks using the same techniques to suppress the prices of precious metal. It should all be policed and prosecuted. But it never will be. Do you think the government will prosecute itself?”
Reader John added: “This sounds like the U.S. trying to pass the buck to another country. Remember when the U.S. extradited three RBS Bank employees from the U.K. for what was legal in their country, but was illegal in the U.S.?
“I suggest they look closer to home. What this guy made, if indeed he did, was peanuts in the overall market — hardly a crash situation.”
And Reader Richard J. said: “We definitely have NOT seen the end of this type of computerized tampering. The ‘bad’ guys are always looking for ways to trick, or cheat their way to prosperity. It is a weakness in human behavior.
“I am more upset at the lack of timely and effective policing of the stock market in general, and the lack of severe punishment for illegal, unethical behaviors. When the pain is greater than the pleasure, then we will see this type of behavior greatly diminished. In other words, punish the offender(s) swiftly and so severely that others would not even think of attempting cheating.”
Thanks for weighing in. I agree with Richard that a major regulatory and prosecutorial flaw lately is that no one seems to go to jail for anything! Banks and scumbag traders rig everything from forex to gold to stocks to interest rates (see the Deutsche Bank story below). They get a slap on the wrist, or a fine that comes out of shareholders’ pockets, and they go back to business as usual!
Meanwhile, with regards to energy shares, Reader Chuck B. said:
“Now might be a good time to buy energy stocks, especially strong and solvent producers. But you might just have a bit of a wait before such stocks do more than bounce up and down in a narrow range. Even when oil prices begin rising there could be some little while before the producers follow suit.”
Bur Reader Jim added some thoughts that are more in line with my view. He said: “Whether this is the exact time to buy oil or not is not important, if you play it smart. If you buy Exxon Mobil (XOM, Weiss Ratings: C) while it is on sale, your downside is cushioned by the fact they are integrated and they are one of the most powerful financial institutions in the world.
“They are very well managed. You get a bond beating, ultra-safe 3.2 percent dividend. Every dollar rise in the oil price adds $1.4 billion to their bottom line. Great leverage and a measure of safety. It doesn’t get much better.”
Thanks for those views, guys. I’ve made it clear that energy stocks offer the most compelling valuations, and juicy potential returns, in three decades. And I agree that so much risk has already been squeezed out, your potential downside is very limited … while your potential upside is absolutely tremendous!
Anything else you want to add? Then don’t hesitate! Head over to the website and share those comments!
|Other Developments of the Day|
There are a lot of things our government could do that make so much sense, you wonder why it hasn’t! One of those things is to lift the ban on U.S. crude oil exports. It’s been on the books since the Arab oil embargo of the 1970s, but makes zero sense in this globally interconnected world.
That’s especially true now that we have tons of oil piling up here in domestic storage tanks … U.S. futures prices remain well below global averages … and when those low prices are killing jobs and economic growth in several U.S. states. Heck, the Obama administration is getting ready to lift sanctions on IRANIAN oil exports, but won’t do the same for domestic producers? It’s beyond stupid.
Fortunately, as this Wall Street Journal story notes, intense lobbying pressure may finally break the logjam over legislation to lift the ban in Congress. That can’t come soon enough as far as I’m concerned.
Did you hear the one about a mega-bank that paid a mega-penalty for rigging a mega-market somewhere? Well, there was another one today! This time it’s Deutsche Bank (DB, Weiss Ratings: B-), and the market was interest rates.
Specifically, DB is shelling out a record $2.5 billion fine and firing seven workers as part of a settlement with regulators in the U.S. and U.K. But even that isn’t the end of this sorry process. It’s still being probed for foreign exchange, mortgage, and asset-backed security shenanigans … as well as potential violations of U.S. sanctions. Gotta love the banking industry!
There’s a new theory on the first-quarter economic weakness we’re seeing: It’s all the fault of “residual seasonality.” Now hold on! Don’t let your eyes glaze over.
The general idea is that our government’s economic wonks are failing to properly adjust for the fluctuation in economic activity that comes with the change in the seasons. That has consistently led to disappointing first-quarter GDP reports, in both weak and strong economies, for the past couple of decades.
Will statisticians need to make more changes to fix this? Will that result in revisions to past GDP reports? Only time will tell.
How will Europe deal with its migrant crisis? That’s the subject of an emergency European Union summit being held today. More than 1,700 immigrants have died so far this year trying to reach Europe from war-torn, poverty-stricken nations in Africa and the Middle East.
Should oil exports be allowed as I suggest? Do you think the GDP books are cooked? Is there any way that Europe can humanely deal with its immigrant crisis, without inflaming anti-immigrant protestors at home? Here’s the link to the website where you can sound off!
Until next time,