On the heels of the Dow moving back toward the 24,000 level, there was an overreaction in one of the world’s largest silver producers.
A Little Help From…
By Bill Fleckenstein President Of Fleckenstein Capital
April 30 (King World News) – The early going saw the market modestly higher, with the Dow leading the charge and gaining about 0.5%, while the other two major indices were up a fair bit less. The Dow was helped by a 3% move in Apple that appeared to be a function of expectations for a large return of capital to its shareholders....
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Dodging the Arrow
I covered my short last Friday because I just wasn’t sure what the end of the month would bring or what the reaction to the earnings release might be. By that I mean, Apple has problems, but others have finally concluded that as well, even if almost no one is seriously negative about it.
I don’t see how Apple can possibly report anything operationally that could be construed as good news, nor do I think they can return enough capital to make a difference, but these days the market is still predominantly a voting machine and not a weighing machine. Thus, people could decide that whatever lukewarm news Apple produces is good enough to attempt to jam it higher.
One More Bite
In any case, my best guess is that it will decline on the news, and possibly a lot, though it could obviously rally. Regardless, we will know on Wednesday. (I took advantage of today’s rally and bought puts.)
Turning back to the action, in the afternoon the market slid into the red and stayed there, losing over 0.5%. Away from stocks, green paper was the flavor of the day, as folks were excited about “peace” with North Korea, trade problems on all fronts being “resolved” amicably, and whatever other good cheer dollar bulls could find. Fixed income was slightly higher, oil was a nonevent, and the metals were under pressure, led by silver, which at one point was down almost 3% before bouncing to cut those losses to 1%. Gold fell about 1% before trimming that to 0.5%.
Machine Learnings
The miners were a mixed bag. Some were OK, and some were quite weak. Pan American in particular lost about 4% because of a temporary shutdown at a mine they have operated for over 20 years. (If the mine was a zero, which it isn’t, it would only reduce the NAV by about 15%). To me it was a gross overreaction, especially because there was a strike at the same mine eight years ago, but on the other hand silver was weak, too. It just goes to show that computers will do what computers do until such time as they get reprogrammed.
Included below is one question and answer from the Q&A’s with Bill Fleckenstein.
Pan American Silver…The Computers Are Crazy
Question: Looks like end of the month portfolio rebalance on PAAS? We don’t know how the stock will react to earnings , but do you think earnings will be strong enough to carry the stock upwards?
Answer from Fleck: “It’s down in a huge overreaction to a mine strike at Huaron that started about five days ago — a mine that has been producing for them for about 20 years. It’s pretty silly, really. As for earnings, I have no idea what number will make it go up or down. It is impossible to know, the computers are so crazy.”
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