A lot of things just don't add up. How could the Baltic Freight Index be up 40% in a short period of time, while bulk commodities (nickel, iron, copper) and their representative companies are pretty much all hitting 52-week lows?
How could the travel and leisure stocks like Hyatt Hotels (H), Wyndham Worldwide (WYN) and Starwood Hotels and Resorts (HOT) all disappoint, while everything else in the sector do amazingly well?
How could the stock prices of Mastercard (MA) and Visa (V) surge on merely decent but not great quarters?
How could Akamai (AKAM) slump in after-hours yesterday and then shoot up today?
How could some stocks like AmerisourceBergen (ABC) be so charmed? The company saw margin pressure and was still be up anyway.
How could Charles River Laboratories (CRL) be down after the best quarter I can recall, with biotech companies throwing money at them? Could people really be selling the stock off of a disastrous quarter by Parexel (PRXL), even though these two companies are in two entirely different parts of the medical food chain?
How could Take-Two Interactive (TTWO) be up so much, simply because the company did exactly what it said it would do, which is to make a lot of money with its existing catalogue of games?
I attribute much of this to a total lack of liquidity. There are only a few big accounts trying to buy or sell stocks, and there is no one else on the other side. These are some of the more exaggerated moves I can recall, and they are happening because no broker is willing to help any client get a trade done. No broker will short stock to a large account or buy a stock from a large account.
The earnings season has become one of the most frightening times I can recall, for both longs and shorts. The moves are simply unfathomable, compared to previous reporting periods, because of the lack of liquidity. When people want out, there's no price at which they won't sell. When people want in, there's no price they won't buy.
That, and not the earnings, is the theme of this bizarre period. You would think that there would be more players, more stocks, and thicker markets. But that requires brokers taking risk. The biggest current risk for brokers is a government investigation over potential violations of rules (including the Volcker rule) against running an internal hedge fund. We might have to get used to the bizarre present state of the market.
