Thank You, Happy New Year’s to You and Yours

Two thousand and fifteen was a Morton’s Fork type of market, with both long and shorts frustrated by the grind. To be fair, opportunistic short sellers cleaned house in a variety of sectors; but there wasn’t any downward momentum in the broader indices. Those who tried to manifest their destiny were expeditiously ushered to the gallows, or worse, the gibbet! It was an invidious year that will be forgotten, so I’ll stop discussing it right now.

For me, the changing of the Gregorian calendar, from one year to the next, represents opportunity. Past grievances, trials and tribulations, can be left behind, replaced by a new normal, a prosperity and happiness that can accrue over time. Everything that you did wrong this year, leave it behind and start anew. Eschew the indecorous loungers, who bog you down and stifle productivity. Form new relationships, habits, and surround yourself with positivity.

Tell the family idiot to place you on the do not call list, for the sake of posterity, if nothing else.

I want to thank all of you for visiting iBC, making it the preeminent destination for serious minded, and wholly belligerent, investors. I intend to bring the fire in 2016, offering a cornucopia of actionable strategies, designed to win on a consistent basis. I haven’t been this excited over my investment prospects since New Year’s eve, circa 2007, when I knew my portfolio of highly levered ETFs would hit pay dirt.

Cheers to the New Year (taps cane onto oak floors).

Le Fly

It was the worst year for oil exploration since George Bush blew up his fledgling oil business back in 1988. I suppose one could make the argument that a decline in drilling activity of this magnitude can only mean that the price of oil is nearing a bottom. The only problem with that theory is the House of Saud’s financial jihad, upping their oil production into the teeth of a cataclysmic oil decline and glut.

Rigs targeting crude in the U.S. fell by 2 to 536 in the past week, Baker Hughes Inc. said on its website Thursday. Natural gas rigs were unchanged at 162, bringing the total of working rigs to 698. Drillers searching for oil idled 59 percent of their rig fleet this year, the steepest annual cut since at least 1988.

The downward slide in working rigs probably will continue into the new year, crimping output from shale fields by at least 400,000 barrels a day, Andrew Cosgrove and William Foiles, analysts at Bloomberg Intelligence, said in a Dec. 28 report. Rigs designed to drill straight down into traditional fields have been hit harder than those capable of boring sideways through shale, Baker Hughes’ data showed.

For the most part, oil and gas stocks were halved in 2015, aside from the few companies who smartly hedged before the meltdown.

The best performing oil and gas stocks of 2015 were: GNE (+77%), CPE (+53%), ERN (+47%), PDCE (+32%), NFX (+15), FANG (+12%).

Almost ever other oil and gas stock traded lower.

The dollar rose by 9%, oil declined by 45%, and king coal dropped by a staggering 55%. The only commodity that bucked the preverbal trend was cocoa, rising by 9%–as African tribal leaders shoot each other for control of the cherished crops.

Make no mistake, a drop of this magnitude is bullish for the U.S. consumer, who benefits from the dramatic decrease in input costs.

The CRB Index, new lows attained on a daily basis

I see the CRB index, and then I look at the retail numbers coming out of the shopping mall cadre of dysfunctional retailers and ponder to myself: “where the hell is the money going?” Clearly, it isn’t going into casual dining, as those stocks have been less than inspiring, down 10% for the year. Retail stocks are off by 30% and Amazon is up 100%+.

Bingo!

All of the savings is going directly into Amazon, as Americans transform into a cavernous hermit class of people, couch bound, watching Netflix all day, ordering random items from the luxury of their Amazon apps.

Of course there’s also the specter of $500 billion of oil and gas debt becoming distressed, rippling its way into the general economy, ravaging stocks, reducing the world to a dystopian society reminiscent of the dust bowl days of 1932.

I remain confident in the yield curves ability to invert.

So, if I’m right about possible recession (give recession a chance, lads), the yield curve will invert, making TLT a winner for 2016. Aside from that, I will let Exodus be my illuminating mining helmet, as I explore the treacherous catacombs and underbelly of this insidious market.

The new GARP index is up in Exodus, which is a semi-annually managed portfolio of 15 stocks that I maintain. It has, in what I consider to be, the very best growth stocks with the lowest risk. Last year’s first half portfolio returned 13%; the second half gave it all back for a giant wash. I will do better in 2016.

Also, I updated the Bubble Basket, Old Man Portfolio and Tech indexes, again all found in the hallowed halls.

Moving on: I am out of the stock business. I cleared the decks for 2016 and will be solely focused on trading the oversold/overbought signals from Exodus. This will be a tremendous boon for members, since I am going to dedicate all of my time in the system and not get harangued by the stupidest shit in the world, which is individual stocks.

With a portion of my very large cash position, I purchased TLT for safe keeping. I do believe the yield curve will invert, so TLT should do well.

The only position I have listed is SHAK, a name that will either curse the devil out of me, or glorify my early bullish position on the burger chain of win.

Please note that Jeff Macke will be partaking in the day to day activities in Exodus for the entire month of January, which will include videos, community notes and the blog. It should be fun. Also, iBC’s own, “The Devil”, is now working behind the scenes in Exodus, assisting in business development strategies. I only tell you this because some of you enjoy to know what he’s up to, in regard to the site.

We added a shitload of content and writers in 2015. Finally, I’ve moved away from the me, me, me form of content, in favor of an empirically superior version that widens out the tent, significantly. The results have been nothing less than staggering, with traffic leaps of 50%, over the previous period. Plus, I am 100% happier writing about the day’s events, people behaving badly, than having to tell you about every nuance of my trading life.

This isn’t my last post of the day, so I won’t wish you all a Happy New Year’s yet. However, I do want to thank all of my readers in 2015 for coming to iBankCoin, making it the special place that we all know it is.

(Drum roll please)

The U.S. Home owner.

According to Zillow, the value of U.S. Homes rose by more tha 4% in 2015, with smoking hot markets founds in NY, CA and FL. I can attest to the absurdity of the NYC and surrounding areas markets, where bullshit homes in Brooklyn retail out for a million dollars. I mean, there is nothing redeeming about them or the neighborhoods they’re in.

According to Zillow, NYC homes rose by 8.3% in 2015.

Cali rose by 5.6%

And Florida rose by an amazing 8.6%. But who really wants to live in that bug infested cesspool?

On top of that, the value of the dollar rose by 9% in 2015, making U.S. Re especially attractive to foreign buyers, looking for a place to invest their money and get the hell out from their rapidly depreciating currency.

From my vantage point, U.S. Real estate will continue to win in 2015 because the dollar will be strong and the crazy eyed renters are gonna want to get a piece of the pin action, instead of making their landlords rich.

I don’t understand these old fuckers, rich as could be, taking outsized bets like this–murdering their clients every 5 years in the process. If you recall, it was Bill Miller who got shipwrecked in 2008, long bank stocks out the wazoo, losing 55% on his flagship Legg Mason fund. Well, in recent years, Bill, aka Asshat, has been using options to lever up his bad stock picking, long tech stocks like Apple and Amazon.

That shit got him in an elevator with its cords snapped in half this year, as he dumped an astonishing 15% in notional value of his fund into Twitter.

Bill Miller turned to an unusual strategy in mounting his comeback as a top stock picker, buying options on hard-hit technology companies to make leveraged bets with a big impact on his returns.

The tactic paid off in 2013 and 2014 as Apple Inc. and Amazon.com Inc. rebounded and helped lift Miller’s $2.3 billion Legg Mason Opportunity Trust to a top ranking. The veteran manager is having less success so far with a similar wager on Twitter Inc. that he escalated last quarter, when he owned options allowing him to buy $350 million of the stock — equal to 15 percent of the fund’s assets.

The massive wager highlights how some managers are using derivatives to boost profits in mutual funds, tightly regulated investment vehicles that have strict limits on what they can invest in. The technique allows funds to make big wagers with relatively little money up front, though they can lose that money should their bet go wrong. Proponents of the strategy include bond manager Bill Gross, who has said managers need to use leverage to juice up gains in a low-return environment.

“You are going to get a much bigger pop to the upside,” said Abraham Goodfriend, founder of Yedid Capital Management, a Miami Beach, Florida-based firm that employs options. “The downside is, if you are wrong you are going to lose all your money” paid for the contracts.

Miller bought options on 9 million shares of Twitter in the third quarter, filings show. The drop in value of the options may be one reason the fund lost 4.6 percent over the past month and ranked among the bottom 5 percent of peers, according to data compiled by Bloomberg, though it’s still ahead of 95 percent for 2015.

Bill enjoyed huge success in wanton directional long gambles in both Apple and Amazon. He erred on the side of lunacy by going apeshit to the upside bullish on something he knows very little about.

In the first half of 2015, the fund bought 400,000 Twitter shares plus January 2017 calls entitling it to buy 1 million more at $35 each. Opportunity Trust purchased an additional 100,000 shares outright and increased its option exposure to 10 million shares in the third quarter, when warnings of slow user growth by then-interim Chief Executive Officer Jack Dorsey sent the stock sliding.

The fund spent $60 million, or $6.71 a share, on the options acquired in the third quarter. By Sept. 30, the contracts traded at $3.40, and by Dec. 30 they had tumbled to $1.40 as Twitter’s stock closed at $22.23, leaving the calls further out of the money though they have more than a year to recover.
Twitter calls were among Opportunity Trust’s “top detractors” in the third quarter, Miller and co-portfolio manager Samantha McLemore wrote in a shareholder report, when the fund’s 10.5 percent drop exceeded the 6.4 percent decline in the benchmark S&P 500.

What the fuck? Someone tell Bill to chill out and enjoy the splendor of his Baltimore offices, play some golf, dodge some local bullets, and quit playing in the sandbox of sub-mentals.

Bill and I have a long, rich, history, as you can see by this video.

I realize the bigger story here is Berkowitz from Fairholme getting fed up with the utter horseshit going on at Lampert’s den of iniquity, also known as Sears-Kmart. Eddie Lampert is the worst merchant in the history of retail, single handedly destroying two gigantic retail chains at the same time.

Lampert embodies mediocrity. As a point in fact, he should sell some ESL Mediocrity branded perfume inside of his shit-box chains of gorilla raping stores.

Eddie deserves to be eating out from a garbage can, instead of enjoying the lap of luxury, for what he did to Sears.

Enter Fairholme.

Do you mean to tell me Berkowitz has nothing better to do with his time, or client assets, than to plow it back into SHLD, as it circles the toilet bowl?

Representatives of Fairholme “will be in contact” with Sears management, board and other significant shareholders regarding its views on the company’s long-term prospects, according to the filing. Those communications “may include proposing or considering” actions to be taken at Sears.

Fairholme has been a Sears investor for more than a decade, having first reported acquiring shares of the Hoffman Estates, Illinois-based retailer during the third quarter of 2005. Based on the most recent data available, Sears ranks as Fairholme’s largest stock holding, comprising about 20 percent of the firm’s reported equity investments.

Quarterly Loss

Until last year, Fairholme reported its Sears stake as a passive investment taken in the ordinary course of business. In September 2014, when Fairholme began to report the stake on the SEC form that active investors are required to use, the money manager reserved the right to communicate with Sears management and the board, but didn’t say it had any plans to do so. That hadn’t changed until now.

Berkowitz began buying more Sears stock on Dec. 3, the same day that the department-store chain announced a $454 million third-quarter loss and its shares fell 6.9 percent. That day, Fairholme bought 418,500 shares at $18.90 each, according to filings.

Since then, the money-management firm has bought Sears stock on almost every day of December, including the purchase of 390,100 shares since Christmas Eve, according to a regulatory filing Tuesday. Fairholme funds and accounts have bought about 1.45 million shares in the retailer this month, though the total has been partly offset by sales at other accounts the Miami-based firm oversees.

As of Dec. 29, Fairholme and Berkowitz controlled 27.8 million shares, the equivalent of a 26 percent stake.

Apparently not.

So, Berkowitz has purchased SHLD “every single day” in December. His press release reads like a veiled threat to the catamites at ESL: “we’ll be in contact”, changing from a passive stake to active.

Both of these out of touch circus clowns are going to lose their mustaches on this stock.

Good luck.

The great American frontier, Williston, North Dakota, where young men traveled far and wide to seek out riches, is now on the other side of Mt. Prosperity.

Property tied to the greatness of American oil production is now completely and entirely distressed.

The rating company said that the debt, which has been put on its watch list in the past 24 months, represents more than a third of almost $340 million of commercial mortgage-backed securities tied to the shale hubs of North Dakota. The loans, created in 2013 and 2014, “have run into trouble as the slump in oil prices weighs on demand for commercial real estate in the oil and gas patch hubs of North Dakota,” Morningstar said in a report issued Wednesday.

The Williston area of North Dakota commanded some of the highest apartment rents in the country when oil prices were booming, drawing investment in new buildings to accommodate an influx of workers since 2006. The reversal in oil prices has prompted tens of thousands of job cuts, hurting demand for housing and other real estate in energy hubs such as Williston, Houston and Calgary.

The four largest North Dakota loans on Morningstar’s watch list are in special servicing, the company said. It forecast combined losses of about $16.5 million should three of those loans be liquidated. The three were used to finance the Strata Estate Suites apartment complexes in Watford City and nearby Williston, the Value Place Williston hotel and the Roosevelt East Apartments in Williston.

I had a client whose parent owned thousands of acres of worthless land up there for decades. Back in 2006, they were offered and accepted $40 million to lease it. That property would be worthless today.

I want to be very clear with all of you, so that you understand my seriousness. I am selling all of my trading positions. I do have long term positions that will not be discussed here any longer. Reason being: I believe we are in the 2nd inning of a long, drawn out, misery for stocks. The writing is all over the wall. The lot of you are simply too sub-mental to see it for what it’s worth.

Stocks suffered a decline today. Of course they did. Don’t you see the patterns? We trade up, then right back down. Who wins? Hardly anyone, unless of course you’re purposely being tactiful in buying dips and selling rips. Lucky for me, this is precisely what I designed Exodus to do.

As of yesterday, I pared down all of my positions and all but eliminated non-systematic risk from my portfolios. I am sitting in upwards of 50% cash. Expect that number to swell in the coming days ahead. Although I am hopeful for an early January gorilla run higher, I am not counting on it. Moreover, I’d much rather buy the margin calls, than swim with the hedonistic momentum bots, hoping for things to get better.

In 2016, Le Fly will be a new man, one who eschews risk and chases kids off his lawn with his sword tipped cane. This market is a ball, a ball made from titanium with a uranium core, ready to blow the fuck up and disintegrate all relics of yesteryear’s roaring bull market.

I am forcing you to our Faced book page, because that’s where the young whipper snappers go to play internet games with one another.

Predictions are not to be taken seriously. What we see in the market now may not be what we see 3,6 or even two weeks from today. Part of my skill set is being able to adjust, rapidly, to a changing landscape, so sticking to a static plan isn’t exactly my forte.

Nevertheless, the people want predictions. Therefore, the people will get them.

BEHOLD: My predictions for 2016 (be sure to like and share, you lazy clam diggers)