Roaring 2010s: NY Fed Lowers GDP Forecast for Q2 to 0.8%

Responding to recent data, the NY Fed lowered their GDP forecast for Q2 to 0.8% from 1.2%. My best guess, they’re responding to corporate earnings out of AAPL and MSFT and realizing what fools they been all along.

Almost simultaneously, Fed’s Kaplan is out saying he’d support a June or July rate hike. Serious question, what do you think is going on here?

Obama will be the only President to finish a term without enjoying at least a 3% GDP growth rate. At the same time, markets have soared.

But you’re looking at it all wrong.

Obama did great for the globalists, the oligarchs with slave factories in China and Vietnam. But he did almost nothing for the real America economy, measured by wages and cost of living crosses.

Markets have gone up with the profits realized by multinationals overseas.

Say what you want about China bottoming, oil bottoming, Europe picking up steam and the U.S. red fucking hot, so hot, we need to hike rates and fast. The world’s largest company, the crown jewel of capitalism and slave labor, Apple, is ripping through the floor boards, inexorably lower, forcing Tim ‘Gay as a $3 bill’ Cook to halt his ‘experience’ on Grindr.

Forget about rate hikes. The decline in market cap for AAPL alone is a form of capital constraint or economic tightening. Over the past few month’s, hundreds of billions in market cap has disappeared. In the past two days, $50 billion in market cap has evaporated, along with it the legacy of a certain T. Cook.

There are two types of CEOs in this world–autocrats who manage/operate and innovators who create/take risk.

Apple is no longer run by an innovator, which is currently being priced into the stock for the very first time since Steve Jobs died.

It goes lower.

I’m actually a big fan of FCX. Many of my old clients still own the stock because of me, long from as low as $7. Had I been managing money when the stock collapsed to the $3’s, I probably would’ve bought it.

The price of copper is ripping higher again, to 6 month highs, as the whole commodity space lifts…because inflation (duh).

But remember this statement from the recent conference call on April the 26th, 2016.

FCX says recent improvement in stocks and bonds could mean it considers other types of capital raises.
Expects to meet Spring collateral test at the end of Q2; is extremely confident in meeting that goal;
If leverage is greater than 6x, lenders would get 100% of proceeds; says will have ability to repay term loans and other debt; Debt levels have improved which opens up opportunities; focused on absolute leverage reduction. Comfortable with current maturity schedule.
Says was extremely frustrated to see were stock and debt was trading at and not having the money to buy them.

There are two things to note from that.

1. The company is going to file a secondary offering to raise capital. I’d bet my fucking life on it.
2. The company is pissed the fuck off about selling core assets to deleverage and are equally pissed off that they could not buy stock or bonds when they collapsed back in February.

While a secondary offering might be the best thing for the company, long term, as they get to keep some valuable assets, it’s a risk to the share price in the interim.

Buyers beware.

This is an old school favorite of mine. For those of you who were readers back in the Fly on Wall St days, if you recall, I had Danny aka Spydercrusher do a video about Hansen Natural’s foray into the coffee beverage market.

Last night, the company destroyed earnings. This is one of the index members in my semi-annually managed portfolio inside Exodus. Also, I’m an avid drinker of Monster white and blue when I go to the gym.

Gross sales for the 2016 first quarter increased 9.5 percent to $777.5 million from $710.2 million in the same period last year. Excluding acceleration of deferred revenue, gross sales increased 16.0 percent for the 2016 first quarter. Net sales for the 2016 first quarter increased 8.5 percent to $680.2 million from $626.8 million in the same period last year. Excluding acceleration of deferred revenue, net sales increased 15.9 percent for the 2016 first quarter. Unfavorable currency exchange rates had the effect of reducing gross sales by approximately $15.1 million and net sales by approximately $12.3 million in the 2016 first quarter.

Lastly, there’s the partnership with Coca-Cola that seems to be bearing fruits.

“Additionally, we are pleased to note continued progress on the implementation of our strategic alignment with Coca-Cola bottlers internationally. In particular, we have concluded agreements with Coca-Cola Amatil and will be launching our Monster Energy® drinks in Australia and New Zealand in May 2016 with Coca-Cola Amatil. We are also pleased to report that we have reached agreements with a number of other international Coca-Cola bottlers for distribution of our Monster Energy® drinks. In the United States, the Coca-Cola bottlers have expanded the number of outlets in which Monster Energy® drinks are available, and we are seeing improvements in our levels of distribution.

My best guess, KO acquires MNST for upwards of $200 within two years.

Interestingly, shares of MDVN are slightly lower for the day. Clearly, by the statement issued by Sanofi, they intend to go straight to shareholders and make the case for their bid. Insiders hold a little more than 1% of the company, so they’re vulnerable to a shareholder revolt.

My best guess: SNY sweetens the bid and MDVN succumbs to the pressure and agrees to be acquired.

The co states that combining with Medivation represents a compelling strategic and financial opportunity to drive immediate and certain value for Medivation’s shareholders while benefiting patients and both companies’ respective stakeholders. Sanofi’s all-cash proposal represents over a 50 percent premium to Medivation’s two-month volume weighted average trading price (VWAP) prior to takeover rumors. Sanofi is a disciplined acquirer and has a strong acquisition track-record. While to date Medivation has chosen not to enter into discussions regarding this value-creating transaction, Sanofi remains committed to the combination and looks forward to engaging directly with Medivation shareholders with regard to our proposal.

Sanofi affirms that while to date Medivation has chosen not to enter into discussions regarding this value-creating transaction, Sanofi remains committed to the combination and looks forward to engaging directly with Medivation shareholders with regard to our proposal.

The Hong Kong housing bubble is probably the biggest in the world right now, maybe second to London’s. But, unlike London, things are starting to fall apart, rather quickly, in Hong Kong now, as the economic woes from the mainland spread to its ancillary holdings.

craziest housing bubble ever

Over the past quarter, underwater mortgages in Hong Kong surged 15x to 1,432, up from 95 the previous quarter. Moreover, the value of said mortgages are in the area of $630 million.

Property sales are at 25 years lows and the price declines are staggering.

For the month of February, property prices are down 3.5% and -21% over the past year. Prices have dropped for 6 consecutive months and not a peep out of it from the media.

Production is essentially flat year over year. Let’s recap the current and apparent oversupply situation in the oil patch.

Russian production: all-time highs

Saudi and OPEC production: all-time highs

CVX oil production: all-time highs

The King of the Frackers, PXD’s oil production: all-time highs

etc., etc., etc.

Boy, this price decline has really hurt oil production, no? That’s how oil bottomed, right? All of the marginal players stopped producing and the supply/demand situation tipped the scales into the bulls favor, right?

None of that shit happened. These companies are drilling faster than ever. Supply is at record levels. The terminals at Cushing, OK are brimming with light sweet crude.

Highlights of the CVX quarter, courtesy of Briefing.com.

• Reports Q1 (Mar) loss of $0.39 per share, $0.23 worse than the Capital IQ Consensus of ($0.16); revenues fell 31.9% year/year to $23.53 bln vs the $22.74 bln two analyst estimate.
• Co said, “Our Upstream business was impacted by a more than 35% decline in crude oil prices. Our Downstream operations continued to perform well, although overall industry conditions and margins this quarter were weaker than a year ago. Our efforts are focused on improving free cash flow,” Watson stated. “We are controlling our spend and getting key projects under construction online, which will boost revenues. We announced first LNG production and first cargo shipment from Train 1 at the Gorgon Project in March. Production from the Angola LNG plant is imminent and a cargo shipment is expected in May. Earlier in the year, we started up production at the Chuandongbei Project in China, and we continue to ramp up production in the Permian Basin and elsewhere.”
• Upstream: Worldwide net oil-equivalent production was 2.67 mln barrels per day in first quarter 2016, compared with 2.68 mln barrels per day in the 2015 first quarter
  • Production increases from project ramp-ups in the United States, Nigeria and other areas, and production entitlement effects in several locations, were offset by the Partitioned Zone shut-in and normal field declines.
• International: International upstream operations incurred a loss of $609 mln in first quarter 2016 compared with earnings of $2.02 bln a year earlier.
  • The decrease was due to lower crude oil and natural gas realizations, the absence of a first quarter 2015 reduction in statutory tax rates in the United Kingdom, and lower gains on asset sales. Partially offsetting these effects were higher liftings and lower exploration expenses. Foreign currency effects decreased earnings by $298 mln in the 2016 quarter, compared with an increase of $522 mln a year earlier.
  • International downstream operations earned $488 mln in first quarter 2016 compared with $717 mln a year earlier. The decrease was primarily due to lower margins on refined product sales, partially offset by lower operating expenses and a favorable change in effects on derivative instruments. Foreign currency effects decreased earnings by $48 mln in first quarter 2016, compared with an increase of $54 mln a year earlier.
    Refinery crude oil input of 795,000 barrels per day in first quarter 2016 increased 13,000 barrels per day from the year-ago period, mainly due to lower turnaround activity, partially offset by the divestment of Caltex Australia Limited
• Downstream: U.S. downstream operations earned $247 mln in first quarter 2016 compared with earnings of $706 mln a year earlier
  • The decrease was primarily due to lower margins on refined products, an asset impairment, higher operating expenses primarily due to planned turnaround activity in first quarter 2016, and lower earnings from the 50%-owned Chevron Phillips Chemical Company LLC. Refinery crude oil input in first quarter 2016 increased 4% to 957,000 barrels per day from the year-ago period

The company just issues 52 million shares at more than a 10% discount to yesterday’s closing price. Before this, the company had 178 million shares. For those of you with rudimentary math skills, that equates to a little more than a 29% dilution to the current shareholder base.

The stock is sharply lower in the pre-market, obviously.

The reason for the filing? It’s simple. They want to survive.

They intend to use the proceeds to pay down a $1.5 billion credit facility. The banks in 2008-2009 did the same thing. You should know what you’re getting involved with, prior to buying into the energy space. Starting 2017, there is going to be a hell-storm of debt starting to mature. To meet the expenses or refinance the debt, companies will either tap the bond market or file dilutive jaw-breaking secondaries, like the AKS one today.

Enjoy.

Good, you all deserve to lose money, betting long in a market destined for horrible things.

Dow futures are off by 70, which is amusingly hilarious, since The Facebook, LinkedIn, Amazon and so many other fantastic companies beat estimates. This is classic misdirection. You are provided with a few sexy bullet points, while the whole system underneath erodes and rots away.

Both the CAC and DAX are sharply lower, by 1.7% and 1.9%, respectively.

Both gold and yen aren’t supposed to go up with stocks, right? The Japanese banking system is fighting tooth and nail to undermine its currency, yet it rises on a daily basis, now at 18 month highs.

Traditionally, gold had risen with inflation. But since that’s non existent and deflation is the real enemy, as indicated by the explicit actions of virtually every central bank in the world, one has to surmise the recent run in gold is due to more of a fear trade, not inflation hedge.