Stick Save Shenanigans That Won’t Work Twice

As I write this the stock market has recovered from a rout that has not only broken a few prior records, it’s shattered some into smithereens. One is the “large number” type that gets people’s attention. e.g. “Dow Falls 1000 Points at Market Open.” This one alone garners far more attention to the average “Mom or Pop” investor than the understanding of real market turmoil when you read that the major futures indexes are halted. e.g., The circuit breakers have been tripped and as to help quell further panic – they are shut down for a prescribed amount of time before trading can be resumed.

There is far too much to dissect of what is transpiring today, but in my opinion – none of it is any good. However, one thing has stood out to me that I am still shaking my head at for I just can’t get my head around.

This morning as I was watching the financial media on television I was switching back and forth, jumping around listening to what was being said. Personally I haven’t watched a CNBC™ morning show in years, yet, with a day like today I couldn’t help to see just how they were parsing the events taking place. Especially how the buzzer banging impresario Jim Cramer was going to parse the morning’s event. It seemed I tuned in at just the right time for what I saw just flabbergasted me. So much so I hit the record button on my DVR out of instinct just to review as to make sure what I saw truly just happened. And, to my astonishment once again: it did.

Right before the markets opening as it seemed the wheels were coming off Mr. Cramer produced a letter he said he received from Tim Cook, CEO of Apple™. The letter was produced it seemed to me as to bolster his contention that the China fears may be over done and the fear of China’s slowdown might impair Apple’s stock by revenue deterioration. Here’s what he read:

Jim,

As you know, we don’t give mid-quarter updates and we rarely comment on moves in Apple stock. But I know your question is on the minds of many investors.

I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.

Obviously I can’t predict the future, but our performance so far this quarter is reassuring. Additionally, I continue to believe that China represents an unprecedented opportunity over the long term as LTE penetration is very low and most importantly the growth of the middle class over the next several years will be huge.

Tim

There are two things that jumped out at me which I could not shake. One was, as he was just about to read it, he seems to be discounting his once favorite of favorite global weather-vanes Caterpillar™ with a now discounted wave-of-hand for relevancy and produces the above as some new touch stone that only he possesses. Well, fair enough. However, I’m not a securities expert. But (and it’s a very big but) how does Mr. Cramer have what by all means has all the appearance of something that reeks of “insider trading knowledge?” While at the same time: Reads in on air?! Then implies more than once that only he has. (i couldn’t find the clip where he read it, yet here is a link where he once again states “that no one else had from Tim Cook.”

Where is the issue you might be asking. It’s the second or middle paragraph. Again:

I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.

(emphasis added)

Maybe it’s just me, but to my eyes, ears, and thinking – that’s actionable proprietary information. Maybe I’m wrong, but if I were a hedge fund manager, or in control of any HFT, algorithmic, headline trading operation: I know what I could (and would) do with that once it hit the air waves, let alone, what one could reasonably infer if you were in possession of such a document. Yet, as I said earlier: How would Mr. Cramer not see the same?

Something is wrong with this picture in my view. How wrong? I have no idea. Yet, it just seems awfully strange that the only stock that could rescue the market from falling off a cliff via a HFT fueled surge happened at precisely the same spot as the last stick save.

2015-08-24-TOS_CHARTSOn Tuesday of last week I posted the above chart. At the time we were within the top oval on the right. I postulated there was real concern in my view and caution should be the order of the day. I also stated (for we had not sold off at all at that point) a breaking of that gold line was significant and would more or less require some form of intervention or jawboning from the Fed. as to help stabilize it. Well, we didn’t get a Fed. official this time however, what we did get was another stick save precisely at the exact same point previous.

I can not help but wonder: Was Mr. Cramer’s action an act of desperation believing (or hoping) such information needed to be said as to save the markets from its dilemma, and the authoritative bodies would or might look the other way because of the rout being squelched? (Apple by the way is actually green as in positive territory as I type this) Or, was this some form of a new style in plunge protectionism we haven’t witnessed previously? Because, after all. One would also think Mr. Cook would know better also.

This is why I’m very confused. Although I do believe Mr. Cramer is capable of making catastrophic blundering advice. (need I remind anyone of Bear Sterns?) Mr. Cook signing his name to something of this sort just seems odd. Very odd.

Personally, I’m giving the benefit of the doubt to Mr. Cook. Maybe I’m seeing into something that really isn’t there. However, as I’ve stated many times. The reason for my uneasiness is borne from what we’ve all witnessed when smart people have done dumb things. e.g., Brian Williams.

“It’s not what people do too you that’s the hard part. It’s how you have to treat everyone going forward that’s truly the hardest.”

© 2015 Mark St.Cyr