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July 4, 2018 | Wall Street’s Perpetual Motion Machine

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Americans don’t know how to handle the Fourth of July when it falls on a Wednesday. Do we punt the entire week? Work Monday and Tuesday, then take a five-day weekend?  The show will go on as usual at Rick’s Picks, but your editor has decided not to get too exercised about covering all of the bases on Thursday and Friday. The stock market is a tough read right now anyway, the moreso because of Monday’s devious price action. Seasonality powerfully favors bulls in the days immediately before and after Independence Day. If so, and stocks are statistically likely to move higher ahead of the weekend, then why did the Masters of the Universe gap the FAANGs up sharply on the opening bell? This trapped bulls, short-covering bears and rubes, making them less likely to support stocks into week’s end.  AMZN, our bellwether of bellwethers, was a case in point. It gapped $9 to $1725, then slid to $1692 –hardly a vote of confidence from insiders who make their living leveraging the order book.

 

Buybacks Keeping Bull Afloat

Portfolio managers will commence Q3 buying on Thursday, perhaps coming to the rescue. But maybe not. CNBC reported that although corporate buybacks set a record in Q2, investors sold stock-based funds in June more aggressively than ever.  It’s no stretch to suggest, as this article did, that buybacks are the only thing keeping the stock market afloat these days. It’s worse than that, actually, since buybacks push stock prices and earnings multiples higher and higher without producing any economic growth. The companies evidently have nothing better to do with their spare cash, not that Wall Street cares. Although it’s hard to see how this seeming perpetual motion machine could seize up, nothing could be more certain than that it eventually will.

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July 4th, 2018

Posted In: Rick's Picks

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