Market Rallies; But It’s Still the Worst December Since 2002

Don’t worry yourself, lads. When the market dropped in December of 2002, it rebounded sharply…in April of 2003.

I remember it like yesterday. The recession was debilitating. We’d see stores boarded up and closed near Grand Central. NYC was a melancholy place and the stock market was the devil, reincarnate. Then all of that changed in April of 2003. It might’ve had something to do with war, or government stimulus. I cannot remember the exact details. But the foreboding nature of a December drop isn’t something to take lightly.

Sure, all isn’t lose yet. We can still squeak out a few percent to make this pig look good. But if we give back today’s rally, we’ll most likely end the month with the largest December decline since 2002.

Seventy one percent of stocks moved higher today and I made some coin in VRX, PAH, SHAK and other niceties. Barring a horrific reversal of fortune, I will end 2015 a champion of plus 15% or more. It’s nothing to be boastful of, since I am still licking the wounds of 2014.

Good day.

Our good friends in OPEC have finally accomplished the hard fought task of pushing down the price of Brent crude to parity with WTI.

This, of course, is bearish for domestic refiners and even worse for producers, as the cheap price of Brent lures our refiners into importing Brent, as opposed to buying domestically.

Market “experts” feel this relationship will resolve itself, once WTI supply builds at Cushing, OK, forcing WTI lower. What these experts aren’t concerned about is the pervasive and concerted effort of foreign producers to break the backs of U.S. producers, specifically in the shales.

The only way to accomplish a glut in WTI supplies is for our refiners to opt for Saudi oil over domestic.

How very joyous.

Today’s 100 point move in the Dow is a bit misleading, as only 55% of stocks are higher thus far. I wouldn’t put much credence into a large Santa Claus rally. However, like I said the other day, all of the conditions are present for a face ripping commodity driven rally.

Even our good friend, The Devil, is bullish on oil stocks here.

So, using some of my available cash, I bought into a distressed oil and gas name: SN.

I made a small fortune on SN in the beginning of 2015, and I hope to repeat past success now– into the dirt of the very worst commodity rout since Jim Rogers lost his bow tie in the jungles of Africa.

Bear with me.

The market isn’t a friendly environ. As a matter of fact, its been downright diabolical. Buying into SN here is almost gambling–but more of a calculated bet that the vast majority of oil bears have cleaned house and might look to cover their shorts ahead of what could be a repeat of early 2015.

Good luck with those dynamite sticks.

CNBC reported that Twitter filed for a patent for a drone. According to the company, this drone could be controlled by users.

Why?

How?

Imagine yourself in NYC, fighting with 5 million people to control a fucking drone with your phone.

When asked to comment on this fuckery, the company replied, rather smugly, “Drone Selfies.”

Can someone tell these fuckheads the stock is at new lows, the balance sheet looks like shambles, and this so called drone isn’t going to do anything but piss people off?

As an aside, Twitter drones might be rather useful for the lads in ISIS.

Appaloosa maintains a 9.5% holding in TERP and made a formal request to inspect its books, to confirm what everyone already knows.

On December 21, 2015, AMLP, on behalf of the Funds, delivered the letter to the Issuer’s corporate secretary demanding the opportunity to inspect certain of the Issuer’s books and records pursuant to Section 220 of the General Corporation Law of the State of Delaware. The purpose of the demand is to enable AMLP and certain of its affiliates to, among other things, investigate breaches of Delaware common and statutory law and breaches of fiduciary duties perpetrated on the Funds and the Issuer’s other stockholders, by the Issuer, its board of directors and certain of its officers.

I am sure the good folks at SUNE are hushmailing the catamites at TERP right now, strategizing ways out from Tepper’s diabolical snare.

This is going to be an interesting story to watch develop in 2016.

All of the doom and gloomers are crapping in their bloomers now, after Q3 GDP stats showed a robust consumer and a booming US economy. No wonder why the Fed is hell bent on tightening.

Get this: in the third quarter of 2015, the U.S. economy grew at an amazing 2% clip.

Consumer spending came in hot, flat, at 3% and home construction powered ahead at an 8.2% clip. While exports were soft due to a strong dollar, imports grew at a 2.3% clip, as gluttonous fiends sopped up all of the cheap foreign wares they could get their disfigured hands on.

No one really knows what Gartman is up to these days, with all the doublespeak. Bear in mind, I do not hate any of these talking heads. I love them. They’re like human dart boards for me.

After 4 1/2 years of punching Jim Rogers’ bow tied commodity basket in the nuts, Dennis Gartman is bullish on commodities.

What the fuck?

The great ‘command economy’ of China is having all sorts of fits trying to slow down its epic deceleration of growth. Ever since the government began to crack down on the wanton corruption and shenanigans that made China the capitalist dreamhouse Steve Wynn was born to waste shareholder money in, the economy has collapsed.

SUPRISE!

Now that growth is at 1990 lows, a year when Vanilla Ice was the shit, the PBOC is desperate to figure out ways to draw the rural rice farmer out from the fields into a ghost town condo and common stock portfolio.

Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of the government’s Central Economic Work Conference by the official Xinhua News Agency on Monday. It said the fiscal deficit ratio should be raised gradually.

Cutting costs for businesses “will be a major task” next year and the government should streamline administrative procedures, cut taxes and fees, and reduce social security contributions to help lower expenses, according to Xinhua. Financial regulators should reduce financing costs for companies and help “normalize interest rates” to benefit the economy. Authorities also should consider lower value-added taxes on manufacturing, it said.

Additional Central Economic Work Conference pledges, as outlined by Xinhua reports:

Further steps to “guard against and defuse financial risks” in 2016, and to effectively defuse local-government debt risks.

Promote “mass entrepreneurship and innovation” and continue to implement an innovation-driven strategy.

Reduce poverty by establishing a detailed register of the poor population and offering tailored assistance.

Offer more support for companies to upgrade technology and equipment, and reduce debt with “innovative financial policies.”

Beef up agricultural production to ensure food security and stable income growth for farmers by modernizing infrastructure and technology to boost capability and quality.

The case for additional stimulus has been strengthened by capital outflows after an August currency devaluation, some weaker-than-forecast economic data and the aftermath of a stock-market slide that started in June. Inflation data for November showed there’s scope for looser monetary policy, with consumer prices rising about half the government’s targeted pace and producer prices falling for a record 45th straight month.

Robust consumption and strength in services hasn’t proved enough to offset the drag from slumping old-economy sectors including steel, coal and cement. President Xi said Nov. 3 that average annual growth must be no lower than 6.5 percent in the next five years to realize China’s goal of doubling 2010 output and per capita income by 2020. Growth will slow to 6.9 percent this year and 6.5 percent next year, according to the median of estimates Bloomberg surveys of economists.

Goldman’s take

“Although the overall cyclical policy stance is set to be ’steady’, the tone on fiscal, monetary and other policies was modestly dovish,” economists at Goldman Sachs Group Inc. led by Song Yu wrote in a note. “The more positive cyclical policy tone from this conference makes us somewhat more comfortable with our forecast of only a moderate growth deceleration in 2016.”

I think it’s pretty obvious that the law of large numbers are taking hold of China. You just can’t continue to grow an economy of that size at 10% per annum without grave ramifications. The commodity super cycle is being unwound, born in China. The great engine of global growth is now sledding down the other side of the mountain. I suppose we could draw comparisons to when the US overtook Britain as dominant economic power and how our economy slowly, but surely, had to decelerate to a reasonable growth rate. The world survived and stocks kept making new highs.

On the other hand, we didn’t have an inter-connected financial system wrought with derivitive based products that could threaten our ability to finance the delivery of food back then. So, this time might be different, at least for awhile.

You think HYG is tanking now? We’re barely seeing 3% monthly moves. Back in 2008, when the world was really ending, that fucker was nosediving 10-15% per month. That was a credit crisis, formed in middle earth, designed to eliminate humans from the field of finance. This shit you see here is merely child’s play. However and having said that, what exactly is going to serve as a catalyst for better credit conditions?

Class?

“Ooh, ooh, I know. Pick me Professor Fly.”

“Yes, young Horatio, go ahead.”

“FEDERAL RESERVE RATE HIKES, AMOUNTING TO 16 IN TOTAL FROM NOW UNTIL 2018.”

Do you see the sort of evil we are facing now? The Fed is working against us and HYG is barely down, yet the market is tits up in a frenzy about it. Be warned: the price of oil drops into the $20’s next year and credit in the high yield space really starts to get sporty, you will all rue the day that you decided to pass your series 7 or 65 exams. You will pray to the Gods that you could work a garbage truck and somehow dispose of yourself into its bowels. Markets will face calamity, the ultimate beatdown, and nothing and no one will be there to catch its fall.

Janet Yellen will be, inexorably, at her local luncheonette eating a clubbed sandwich, enjoying the scenery of young whipper-snappers passing by.

NOTE: RAUL’s 2016 predictions are up.

How is it possible that the CDC is investingating ANOTHER ecoli outbreak and the company hasn’t the faintest idea where it’s coming from?

The locales are always different, yet the CDC is always there to find that pesky bacteria. If life imitated a movie and movie imitated life, I’d guess that it was the CDC, working in conjunction with somone trying to take down CMG’s share price, who was responsible for the outbreaks. In no way am I giving CMG a pass. All I am saying is, this shit is awfully suspect.

Now if it was a big hedge fund, or plankton like, diabolical competitor: MISSION ACCOMPLISHED. I’ll never eat at Chipotle’s again.

Heading into the final week of shopping, amidst throngs of hungry holiday day walkers, this is an absolute worse case scenario for CMG. Estimates are coming way down. The company is going to get hammered on year over year compares. I would not be looking to buy any dip until valuations resembles something really cheap.

Update:
CDC is investigating another, more recent outbreak of a different, rare DNA fingerprint of Shiga toxin-producing E. coli O26 (STEC O26) linked to Chipotle Mexican Grill. Because it is not known if these infections are related to the larger, previously reported outbreak of STEC O26 infections, these illnesses are not being included in the case count for that outbreak. This investigation is ongoing. 5 ill people have been identified in Kansas (1), North Dakota (1), and Oklahoma (3). The illnesses started on dates ranging from November 18, 2015 to November 26, 2015. All five (100%) reported eating at a Chipotle Mexican Grill in the week before illness started.