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Mary Meets a Lamb

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June 17, 2012 – Comments (0) | RELATED TICKERS: USU , SCX , BP

The market surge that started last week continued this week, causing many "investors" to believe a corner has been turned, the market correction is at an end, and happy times are surely right at hand.

Certainly that may be the thought for many, at least at first glance, but don't be fooled by the hype and stupidity that is Wall Street. Just consider the lyrics of The Wall Street Song, and don't let it happen to you.

Your legs were spread but the bear is now dead
So there is no more need for kindness.

Just bend at the waist as we increase the pace
And get you back to blindness.

Portfolio Commentary
The Wax Ink portfolio was down 0.5% for the week, sinking on the backs of two of the portfolio's long held companies.

By comparison, the Dow was up 1.7%, the Nasdaq was up 0.5%, the S&P 500 was up 1.3%, and the Russell 2000 was up 0.3%.

Year to date, the Wax Ink Portfolio is down 0.4%, while the Dow is up 4.5%, the Nasdaq is up 10.3%, the S&P 500 is up 6.8% and the Russel 2000 is up 4.1%.

Admittedly, I was a bit perplexed that the portfolio was so far off when compared to the broader indices. Sure there were a couple of holdings that were a drain on the portfolio during the week. But to fall 0.5% when the broader markets were up, on average, 0.95% for the week? What's wrong with this picture?

Market Commentary
The $125 billion handout Spain is receiving to shore up its banks, is widely considered to be too little to late to do much good. The broader markets increased, on average, 0.95% for the week.

Cyprus asked the World Bank for some cash to shore up its banks. Granted the economy of Cyprus is like a fart in a whirlwind when it comes to the Eurozone economy, but still, it highlights that another Eurozone country is in trouble. The broader markets increased, on average, 0.95% for the week.

JP Morgan Chase (NYSE: JPM) testified before the Senate Banking Committee that everything at the bank was cool and the $2 billion they lost trading crap that they had no understanding of was all good, and the bank would be solidly profitable in the current quarter. The broader markets increased, on average, 0.95% for the week.

May retail sales were down 0.2%. They were expected to be down 0.1%. The broader markets increased, on average, 0.95% for the week.

May producer price data was expected to decline by 0.7%. Instead it increased by 1.0%. The broader markets increased, on average, 0.95% for the week.

Initial jobless claims increased from 380,000 to 386,000. The expected number was 375,000. The broader markets increased, on average, 0.95% for the week.

The June Empire Manufacturing Survey, the Fed's estimate of manufacturing activity, declined to 2.3 from 17.1. The broader markets increased, on average, 0.95% for the week.

The University of Michigan’s consumer sentiment number declined to 74.1 from 79.3. A decline to 77.0 was anticipated. The broader markets increased, on average, 0.95% for the week.

So with all of this negative economic data, why were the broader markets up almost 1%? The most obvious reason is short covering.

As the markets began to fall weeks ago, those with high speed trading platforms (read as not you or me) went short in the market.

Now as it looked like the market was could turn upward, the short positions needed to be closed. This created demand for shares and caused the broader markets to rise.

Another lesser factor is quantitative easing. With all of the poor economic data and economic growth seeming to decline, the markets are trying to determine if the Fed will act in some positive manner which could help the global economy and thereby help investors.

Personally I don't think that will happen, but then, I know less about this stuff than a hog knows about the hereafter.

Equity Commentary
The Wax Ink Portfolio didn't exactly benefit from the broader markets last week but there were a few holdings that ended the week on a happy note including uranium enrichment company USEC, Inc. (NYSE: USU), up 51%, small tool company The L.S. Starrett Company (NYSE: SCX) up 8%, and oil and gas company BP plc, (NYSE: BP), up 6%.

Those holdings that really stunk up the joint last week included airplane repair and maintenance company AAR Corporation (NYSE: AIR), down 13%, business equipment maker Verifone Systems, Inc. (NYSE: PAY), down 13%, and communications equipment company Tellabs, Inc. (Nasdaq: TLAB), down 7%.

Political Commentary
Politics is without a doubt the world's dumbest profession.

The new controversy is some drool and slobber television show that displays what folks are saying is President George W. Bush's head on a stick. Personally I didn't see the resemblence at all, but I'll let you decided for yourself.

Is this President Bush, or just a clay head on a clay stick? Stomachs with too much gas need to know!


Wax

Wax Ink is comprised of individual investors, NOT licensed or registered with ANY government agency. Please obtain the advice of a registered investment professional.

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