The Market Always Surprises… ALWAYS!

by FI Fighter on September 30, 2016

in Stock Investing Thoughts, Stock Portfolio Updates

market-1

So, just when everybody thought they knew what was going to happen next, the markets in turn said, “Just kidding… Haha, I sure fooled you, didn’t I?

As ALWAYS, the retail investor can only be found scratching their head after a day chock-full of surprises….

In other words, who in their right mind saw this coming?

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Deutsche Bank up over 14% on rumors that the company has reached a settlement agreement with the U.S. Department of Justice (DOJ) to reduce their $14 billion fine (from The Guardian — The penalty aims to settle allegations, dating back to 2005, about the way the bank selected mortgages, packaged them into bonds and sold on to investors. These bonds are known as residential mortgage-backed securities) to less than half, $5.4 billion.

From Bloomberg.

db-rumors

 

“The reports of Deutsche Bank’s death are were greatly exaggerated!”

 

But when you stop and think about it… are you really surprised in the least bit?

As usual, once the mainstream media starts front-running a story, the exact opposite of what everyone thinks will happen, happens (but who really knows what the hell is going on behind the scenes right now… Maybe the German government is indeed working on a bail out plan? Would it shock you if they were?)…

I would imagine that a lot of shorts piled on in most recently (filled with immense GREED, thinking DB was just on the verge of fully collapsing), and are now finding themselves in a great deal of pain on a short-term trade gone wrong…

And this is precisely the reason why I stopped trying to short the markets via put options altogether (the time expiration can destroy you if you are wrong… like really, really wrong).

But in the big picture, I don’t think this changes the fundamental story one bit — Even if the DOJ settlement rumors turn out to be true, no, I don’t think a slight reduction in penalties is going to somehow “magically” fix all that ails Deutsche Bank… They got (much) more than 99 problems… that’s for sure!

In other news, the “safe haven” traders also got a bit of surprise on Friday… I bet the goldbugs didn’t see this “smackdown” coming…

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Weren’t gold and silver supposed to be rocketing out to da moooooooon amidst all this turbulence in the European banking sector?!?

 

What gives?

 

Surprise, surprise…

 

As always…

 

Moving back to Europe, we have the following headlines to close out this week.

From CNBC.

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Germany’s second largest bank by assets, Commerzbank, announced an overhaul of its structure on Thursday following what it called “current market rumors.”

The lender said Thursday that it would make a net reduction of 7,300 jobs at the company and will stop paying dividends for the time being amid a drive to sustainably increase its profitability by 2020. The cost of the restructure would be in the region of 1.1 billion euros ($1.2 billion), it said in a statement, and the plans would be ratified by its supervisory board on Friday.

 

And rumors out in the Netherlands…

From NLTIMES.NL.

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ING CEO Ralph Hamers is preparing for a major reorganization that will cost thousands of jobs as well as the autonomy of the countries where the bank is located, Financieele Dagblad reports. According to the newspaper, this plan is expected to save billions of euros in cost cuts.

The reorganization will be officially announced at ING’s Investor Day on Monday. During this day, investors, analysts and media are informed about the bank’s strategy.

 

 

There you go, just like that, we’ve got a trifecta of problems (and potential problems) emanating out from Europe this week across some major banks!

 

Let’s not forget about Wells Fargo back in the states either!

 

From CNBC.

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Wells Fargo faces possible bans from doing business with the city of Chicago and the state of Illinois in the wake of its sales scandal that erupted earlier this month.

Alderman Edward Burke, who heads the Chicago City Council’s finance committee, introduced an ordinance on Friday that would suspend the bank from acting in several capacities, including as a municipal depository, bond underwriter and financial adviser.

“The city council should not engage in any business for the next two years with this institution that has deceived, defrauded and duped its customers,” Burke said in a statement.

Illinois Treasurer Michael Frerichs set a Monday news conference to announce “plans to suspend billions of dollars in investment activity with Wells Fargo,” according to an advisory from his office on Friday.

Wells Fargo staff opened checking, savings and credit card accounts without customer say-so for years to satisfy managers’ demand for new business, according to a $190 million settlement with regulators reached on Sept. 8. The bank said it fired 5,300 employees over the issue.

 

There wasn’t much to see during the long summer doldrum months, but it sure looks like they were saving the “blockbuster new hits” for this autumn season!

 

With all these headwinds, how any investor could have any remote interest in throwing their hard-earned dollars into the financials sector right now is really beyond me…

 

I’m avoiding financials like the plague…

 

So, in terms of investing approach/strategy, what am I going to do now?

 

Well, exactly the same thing that I’ve been doing over the last year or so… Trying to figure out ways to hoard more cash… Nothing has changed on that front… For the most part, I think my mining stock positions are all more or less setup across the board (gold/silver/lithium/graphite/uranium), that is until any post-crash events finally unfold… I still might initiate some small buy orders here and there, but I don’t feel the need/rush to have to do anything more at this time.

One thing’s for certain — Regardless of how tempting it might be to try and short DB right now, I’m going to refrain from playing the short game entirely (whether it be through put options or direct shorting)… We live in a day and age where Central Banks can move mountains on just rumors alone…

Nah, I’m going to stick to the long-approach, ONLY… It’s just easier less frustrating that way… If I was short DB, I’d probably be asking myself on the daily, “How has this thing not collapsed yet? Just how on earth are they managing to keep it propped up still?

Haha, too much drama for an early retiree…

But I did tell myself over a year ago that if DB stock ever broke $10/share (which it did briefly in Europe on Friday!), I would then really start to pay attention to any developing news that was relevant to the company… which I have started to do.

Please keep in mind — Even if the demise of Deutsche Bank is just around the corner (both imminent and inevitable), stocks (and markets) never come crashing down in a straight-line fashion… In other words, the GREEN days (even if they are few and far in between) will shock you to the upside… like today, to the tune of over 14% gains in one trading session!

 

Just something to be aware of…

 

Anyway, I’m sure the results of Friday’s trading session came as a surprise to many, many investors/speculators…

 

We are now in October (well, at least out here in Asia), and I expect this upcoming fall season to be plenty volatile, surprising, and altogether unpredictable!

 

Happy Hunting!

{ 3 comments… read them below or add one }

1 MalankoNo Gravatar October 1, 2016 at 4:08 am

Hi Fifighter,

The German banks aren’t doing to great, in the background there is also a problem regarding the Italian banks. However the governments are keeping the public calm by saying there won’t be a bail out but a bail-in where deposit holders have to bleed for the bank’s losses and under capitalization.

http://www.reuters.com/article/us-eurozone-italy-banks-dijsselbloem-idUSKCN0ZR2BM

Cheers,

Malanko

Reply

2 FI FighterNo Gravatar October 1, 2016 at 4:35 am

Malanko,

That’s right, it’s a mess across the board, and I didn’t even mention the Italian banks… I thought 3 headlines was plenty enough for just one week…

Lots of headwinds right now, so I’m content with sitting on the sidelines and being patient before I step back into the game.

All the best!

Reply

3 Jay GNo Gravatar October 1, 2016 at 4:13 pm

Recently initiated some positions in gold/silver miners on the pullback. In the immediate short term this looks to be a European issue and probably bullish for the dollar (and therefor bearish for gold). Won’t be complaining about this as I’m looking for better entry points into my favorite names.

The real worry is a total market collapse. We know the miners won’t be immune to a broad sell-off. Thinking about buying some VIX calls as some short term insurance… It’s getting wild out there.

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