Meanwhile…China is Falling Apart Again

They just devalued their currency to the lowest level in 5 years.

Their markets have been quietly sucking immense human sausage, undergoing the worst 4 week sell off since 2012. The fraudulent heavy Shanghai composite of down 4% this month and 20% for the year–making it the single worst performing stock market amongst the 93 indexed by Bloomberg.

Over the past 12 months, China is down 43%.

Back in January, the market threw a fit when China devalued its currency. Now the market views this as something of a good things. Truly bizaare.

Rally on.

BHP wants to up production to meet the green energy demand, since windmills and solar panels use an inordinate amount of copper. This isn’t really talked about when discussing the bull or bear case of copper. But green energy initiatives being pushed worldwide is a boon for producers of copper.

If this comes to fruition, massive copper shortages by 2013 thanks to fucking windmills, the shares of FCX and BHP will be significantly higher.

This is precisely what I’ve been talking about–men with their heads in the sand, ignoring the capricious comments by every single Fed member–menacing the public with rate hike promises.

Liste to me. If the Fed doesn’t hike in June or July, they would have squandered any semblance of credibility they have left. Crude has rallied to a point where they are now forced to act, for better or for worse. I do believe, emphatically, if they do not follow through with their asshole speeches, markets will hate them for it. They must be true to their word.

Apparently, the surrender monkies from BNP Paribas don’t believe any of it. They’re probably taking shots each time the Fed says they’re gonna hike rates–getting drunk, having a grande old time.

Egg will be all over this man’s face, in short order.

TLT is up almost 3% for the month and 9% for the year, making it the best performing asset class next to gold for 2016. Only mentally ill person’s with behavioral issues short stocks into hot dog and hamburger weekend aka Memorial Day. It’s important that we recognize the market for what it’s doing and not what we want it to do. For the most part, it has gone nowhere for 2016. The SPY is up 3% and the Nasdaq is off by 2% for 2016, hardly a ringing endorsement for equity longs.

Since the February bottom, many sectors have raced higher, ingratiating many timely traders with big gains. But if you’ve been tracking your investments through monthly statements or logging online once per quarter to see the balance, 2016 has been one giant circle jerk.

My position has been consistant from January the 1st, 2016, until now. Markets are bounded by the debt in the oil and gas sector and the ineptitude of the retail industry to siphon money out from the pockets of a miserably miserly consumer. None of these issues have been resolved just yet. Although crude at $50 is far better than $25, it doesn’t alleviate the debt burden that looms for scores of underprivileged energy companies, who will face this issue, in earnest, starting 2017.

Other than that, the whole negative rates scenario has left a bad taste in my mouth, regarding the health of the banking system. I’d much rather buy dips, via Exodus, and stay long TLT until the yield curve inverts.

Nevertheless, it was a do-nothing day, some might call it a solid and useful consolidation day, holding the gains enjoyed over the past week. I expect more of the same tomorrow, followed up with rampant selling by mid to late next week.

This is the 4th time this year that one of Tyson’s poultry facilities have been infiltrated. Although this isn’t market moving news now, should the public continue to become exposed to the horrors of the corporate meat industry, it may begin to weigh on the shares of TSN, SAFM and PPC.

There’s a video floating around, which I have no interest in viewing or sharing with my audience, that shows images of deformed, sick, birds, in rancid conditions, fat and without the ability to walk properly–due to being bred so expeditiously.

“I think the industry is starting to learn that it’s going to cost more to continue to abuse animals as consumers learn about these cruel practices, and act accordingly in what they choose to purchase at stores and restaurants as well as in pushing elected representatives to increase the legal protections for animals,” Matt Rice, the director of investigations for Mercy, told USA TODAY.

The last video showed disheveled poultry workers wearing fucking diapers on the line, because they’re not permitted to go the bathroom. They’ve got work to do. Ain’t got no time for bathroom breaks.

Another video shows birds covered in shit, enveloped by insects, with a front end loader dumping hundreds of dead birds into a dumpster.

In October, Tyson fired at least two employees who worked at its Carthage, Miss. processing facility after Mercy released secretly-recorded video that showed the company’s slaughterhouse workers punching, throwing and pulling the heads off live broiler chickens.

Two contract farmers in Tennessee pleaded guilty to misdemeanor animal cruelty after Mercy published video in August that showed the operators clubbing small and sickly chickens to death. The farm produced chicken for Tyson that was sold to McDonald’s. Tyson’s cut ties with the farmers as McDonald’s decried the activity in the video as unacceptable.

The group also managed to film undercover video in July of a Delaware facility, which they say supports their view that the company’s breeding practices lead to it contract farmers growing birds that live brief, torturous lives.

Enjoy your McNuggets.

Everyone is a fucking artist these days, or allured by art. Just a few decades ago, people in Brooklyn grew up throwing stones at one another. A regular prank we’d play as kids was to ring someone’s doorbell, then douse whoever opened the door with an old school seltzer bottle–straight out of the movies. Or, we’d take a few M-80 firecrackers and drop them down a manhole, then watch the waterbugs scramble out from it after the detonation. Some of my dirtier friends would then compete with one another by seeing who could step on the most waterbugs.

This was life back in the 80s, early 90s. Now everyone is gay, flashing testicles inside of the ladies room, going to art museums.

A pair of glasses were left on the floor at San Francisco Museum of Modern Art and people thought it was art.

The fuck out of here.

I like to think they imagined the floored glasses to represent the dumbing down of culture, or perhaps the viewing of life through a lens, possibly with a nice, lower-case title like ‘myopia’ or ‘real eyes (real lies)’.

The teen tweeted the moment on 24 May and it’s already attracted over 45,000 retweets, ironically making the whole event a sort of modern art piece itself.

Khayatan previously had similar success with a baseball cap and a bin.

Classic bug eyes action in this clip. B. Gross is talking about shorting credit–‘because the system is broken.’ He believes the whole house of fucking cards will come down in ramshackles. Fucking ramshackles. But, having been a bond guy for 40 years, he can’t get himself to do it, just yet.

He’s working on it.

Gross is 72 and looking like a fresh summer bug in a rug.

The funniest thing about all of this jawboning by the Fed is that the market doesn’t believe them. Admit it, you don’t believe they’ll hike in June, July or at anytime in 2016. Expert after expert issue statements and voice opinions during interviews doubting the specter.

Well, apparently, the specter is real, whether you want to believe it or not.

“If incoming data continue to support those expectations, I would see it as appropriate to continue to gradually raise the federal funds rate. Depending on the incoming data and the evolving risks, another rate increase may be appropriate fairly soon,” Powell said.

He said it will be important to see a strengthening of growth in the second quarter along with “strong” job growth, further reductions in the unemployment rate and other measures of slack, and increases in wages.

After each retail sales miss, the Federal Reserve cravenly concoct new speeches to warn Americans of a tightening credit noose to come.

David Snoddy from Nezu Asia makes the case for widely overpriced consumer staples and other stodgy names with real businesses, cash flows, and dividends. Historically, the safest stocks have never been so expensive.

Snoddy posits, I think very correctly, that the negative interest rate and negative rate environment has created an flight out of bonds into safe stocks, like GIS, CL and CLX. Moreover, these same stocks are viewed as defensive by many, which have attracted another school of investor, one interested in hedging or mitigating market risk.

“The guys that have been tooting the horn about defensive, high-yield stocks globally for the last two years, I think they’re missing that point,” Snoddy, 48, who ran the Tokyo office of Julian Robertson’s Tiger Management before setting up Nezu Asia, said in an interview last week. “It becomes more important how much yield I can get from this thing, because I can’t get it anywhere else.”

Snoddy uses Japan, a market he’s worked in for decades, to illustrate his point. He’s invested in Nippon Telegraph & Telephone Corp., the former monopoly carrier that still counts the state as its largest shareholder with a 35 percent stake. The company has an projected equity dividend yield of 2.5 percent, according to data compiled by Bloomberg. That compares with about 0.32 percent for Japan’s 30-year government bonds, while more than 70 percent of the nation’s sovereign debt trades at yields below zero.

“How different is your NTT credit risk relative to the Japanese government?” Snoddy said. But “it would take me about eight years of JGB 30-year yield to get one year of NTT yield. I think that’s a big difference.”

Snoddy favors an investing approach called growth at a reasonable price, with a focus on companies that generate cash flow to finance their own expansion, and says that attribute has become more important in the era of minus rates.

Many people “have been saying consumer defensives and quality companies are more expensive versus the market than they’ve ever been,” Snoddy said. “But that’s on a price-to-earnings or price-to-book basis. On a cash-flow basis I don’t know that’s necessarily true.”

For Snoddy, valuing companies against their profits doesn’t capture the whole picture. In the era of negative interest rates, defensives and other quality stocks with good dividends naturally have more worth, so measuring against cash flow is also important.

“If you think about what a global low-interest-rate environment does to the value of cash machines, then it makes sense that they would be more expensive,” he said.

Along the same thinking is why I am bullish on US treasuries. Why buy Eurobonds or JGBs when you can own a 30yr treasury for 2.63%? It’s not a bad yield, in this world of crazy.

This new reality poses significant risk to high growth and small cap stocks, who do not enjoy giant and predictable cash flows. Get it?

In my opinion, if you want to own stocks, make sure they are large cap and with giant free cash flows.

NOTE: Inside Exodus, I manage a growth at a reasonable price index, which is updated twice per annum. I will be revamping the 15 stock portfolio in June to focus on this exact theme.

These are the best pending home sales numbers in a decade, up 5.1% for the month. The market is wholly unimpressed, however, since people are numb to the fact that economics are transient occurrences. QE is forever.

No one has any money to buy homes in the Midwest, a region in the country best described as ‘fly over country.’ Sales declined there for the month, comically.

The vast majority of new sales are occurring in both the west coast and southern, confederate, regions of America.

Regionally, pending home sales in the Northeast climbed 1.2 percent for the month and are 10.1 percent above a year ago. In the Midwest, the index declined 0.6 percent for the month and is 2.0 percent above April 2015. Pending home sales in the South jumped 6.8 percent monthly and are 5.1 percent higher than last April. The index in the West rose 11.4 percent monthly and is now 2.8 percent above a year ago.