Yesterday's Ridiculous Whipsaw

Equities start the day slightly lower after yesterday’s ridiculous whipsaw. Speaking of yesterday, CBS celebrated the 50yr anniversary of the animated classic “Rudolph” by once again showing it to a generation of kids who could care less. Ingrates, all of them. My son said he’d rather play some stupid Minecraft than watch a piece of TV history. How do we feel about this show? It it timeless? I don’t know, if there’s one lesson to take away from really bad claymation it’s this: Rudolph’s dad is a complete jerk, and so is Santa. I mean come on, with authority figures like that no wonder Rudolph has PTSD. Price action on Tuesday was as random as Yukon Cornelius. We puked on Europe and Crude then rallied just because. Look, here’s the deal with December stock markets, you get random sharp selloffs because the herd wants to lock in winning trades. But those kind of selloffs are shallow because that pressure doesn’t last very long. It’s like pounding Egg Nogg, the first few sips taste great but the will to continue falters rapidly. Does anyone think we’re going to get some massive correction with 14 trading days to go? Absent some kind of major macro event we will likely see sharp, quick selloffs and slow grinds higher. People aren’t going to rock their yearly performance with 2 weeks to go right?

After the open it was all eyes on Crude oil, again, as it touched $60.5 late in the morning (down another 4%). You know what other trip down movie nostalgia lane we could take? Trading Places. Remember when Billy Ray talked about pork producers panicking, worried they wouldn’t have enough money to buy that GI Joe with the Kung Fu grip? That’s commodity investors right now. God I love that movie so much, it’s the absolute pinnacle of finance related comedy. So I’ve seen about 5 research pieces calling the bottom in oil over the past few weeks and none of them have been right. Oversold? Sure, but what does that matter. OPEC doesn’t seem to care. Shouldn’t they be mad at this whole thing? Lashing out by cutting production to zero?  Heck I’m mad for filling up my imitation luxury vehicle yesterday, I SUCK. The biggest losers in the S&P were absolutely dominated by energy: DNR / OKE / CHK / NE / NBR / DVN. In fact there was only 1 energy name in the index that was positive on the day, DO, so congratulations guys! By lunch we sat on 2,045, down 0.7% an all anyone could talk about was fracking and shale. It’s funny isn’t it? One day we debate the merits of being short gamma and the next we try to figure out whether borate-crosslinked fluids are better for fracking than organometallic one’s. Ahhh…the never ending quest for temporary expertise.

The final hour saw the market full puke and we closed down 1.6% to 2,026. Well, I still don’t think we’ll see a massive selloff to end the year. Sharp moves? Sure, they can happen. I just find it hard to believe the S&P will give it all back in just 13 days, we’ll see I guess. Energy stocks though….the pain is real. As I watched banks fall in 2008-2009 I thought to myself “self, these are good companies being punished, time to step in and buy some”. We all know how that turned out don’t we? Things that are cheap can get even cheaper. Energy stocks have crashed, are crashing, may crash more. I thought banks were dead for decades back in 2009, that the system would take an incredibly long time to heal. But it healed pretty quickly, and a lot of people bought WFC at 7 and Citigroup at 1. Are there energy companies out there that will implode? Probably. But others won’t, so we need to dig thru the wreckage. These kinds of events wash out weak hands and provide incredible opportunity for those with long enough time horizons. The energy sector is blood in the streets, and we know what they say about blood in the streets…

Final Score:  Dow -151bps, S&P500 -164bps, Nasdaq -163bps, Rus2k -221bps.   

News Highlights:

So dancing really isn’t my thing, I give it a shot but end up looking like Elaine from Seinfeld.  Anyway, these people…wow

Have a good night