It’s very easy to ignore the oil stocks, since they’ve been relegated to hell. But do you remember a time, not too long ago, when sharply lower equity prices in the sector meant danger for refinancing immense debt loads?
Thanks to the feverish rally in basic resources after the Trump win, investors have chilled on the idea that lower equity prices portend to some sort of danger in the bond market. We have seen zero evidence of fear in the bond market, even the junk bond market, in spite of the -35% return in the oils. This is not normal.
Since the bond market is supposed to be ‘smart’, we can conclude only two things from the recent price action.
1. Oil stocks are immensely oversold and should be bought.
2. The bond market is being artificially held up by people looking for yield and is no longer a reliable early warning system.
Which is the most probable theory? I’d say 1.
Look at the predictive mean reversion oscillator in Exodus for Major oil and gas — record oversold levels — dating back to 2009.
Assuming the sector is due to bounce, let’s examine 5 ways to play it.
1. Mega cap leadership
XOM, currently oversold 2. Short Squeeze
CRC, SN, CLR
3. Small cap deeply distressed YOLO trade
WTI, AREX, CRK
4. Technically strong
TELL, BCEI, GPRK, LNG
5. Strongest Fundamentals
CXO, IMO, GPOR
There are 48 stocks in the basic resource sector that are now flagged oversold in the system. The optimal holding period is 5 trading days. Although I’m not playing this sector now, because my model only accommodates mean reversion on a macro level, if I were to play it I’d buy a basket of deeply oversold stocks, first buying large cap, and then I’d work my way down the market cap ladder as performance in the industry improved.
Ever since the election, the democrats and establishment republicans have been ‘investigating’ Russian ties to Trump and how that all led to John Podesta’s email box to be hacked into, which of course led to Hillary Clinton losing the Presidential election. She lost, not because of her criminality, but because of fake news, obviously. It’s worth noting, in a year of arduous investigations, nothing has been proven to tie Trump to the Russians.
Yesterday, Hillary discussed the election, positing questions to the panel regarding RUSSIAN COLLUSION with Trump. She said Trump directed the release of the Podesta emails down to the second, coordinated and directed the fake news media to concoct salacious stories, fueled by the emails, colluding with Russian intelligence to steal the election from her.
In case you’re just tuning in, you did not reject the DNC establishment candidate and vote for populism because you were sick and tired of the same old corrupt DC bullshit. No, you voted for Trump because of the Russians, the ultimate King makers, coerced into the decision via a series of psyops programs, coordinated with Trump, to brainwash people into believing she was not a trustworthy candidate.
Holy shit Hillary has lost her mind. Tucker’s take.
Here are some of her sweeter moments in the interview, accusing the idiot Giant Orange President of being a criminal mastermind — directing endless schemes and plots to seize the Presidency from her claws.
“It’s important that Americans…understand that Putin wants to bring us down. He was an old KGB agent.”
“We saw evidence of [Russian involvement] and we could track it. But they were shooed away.”
“The Russians are increasingly..launching cyber attacks. A lot of the information they’ve stolen they use for internal purposes. So this was different because they went public.”
“That was the conclusion. I think it’s fair to ask how did that actually influence the campaign and how did they know what messages to deliver. Who told them? Who were they coordinating with or colluding with? I’m leaning Trump.”
“Within one hour of the Access Hollywood tapes being leaked, the Russians or say Wikileaks — same thing — dumped the John Podesta emails.”
“The Russians in my opinion could not have known how best to weaponize that information unless they had been guided by Americans.”
“My email account was turned into the biggest scandal since Lord knows when. And, you know, in the book I’m just using everything that anybody else said about it besides me to basically say this was the biggest nothing-burger ever. It was a mistake. I’ve said it was a mistake, and obviously if I could turn the clock back I wouldn’t have done it in the first place. But the way that it was used was very damaging.”
“We know it hurt us, as I explain in my book, the Comey letter which was now we know partly based on a false memo from the Russians. It was a classic piece of Russian disinformation. So for whatever reason, he dumps that on me on October 28 and I immediately start falling.”
“Well if you went all the way back, doing things that others have done before was no longer acceptable. I didn’t break any rule nobody said don’t do this. I was very responsible and not at all careless. You end up with a situation that was exploited.”
“Here’s a really telling statistic that has been validated. I had this old fashioned idea that it would matter what I would do as president. We had a great tech program and a really good set of policies. In 2008 which as the last time you had a contested election, the policies put forth by President Obama, Senator McCain got 222 minutes of airtime. In 2016 despite my best efforts, we got 32 minutes, total, over 18 months.”
“Media forces on the Republican side are entrenched and very effective. They’re beginning to call the shots on those local stations. Local TV is still incredibly powerful.”
“I have been on many speaking platforms with many men who are in office or running for office. And the crowd gets you going and I watch my male counterparts and they beat the podium and they yell and the crowd loves it. I have tried that and it’s been less than successful.”
Regarding her Goldman Sachs speeches.
“Men got paid for the speeches they made…I got paid for the speeches I made.”
“I have to say, Walt I never thought someone would throw out my entire career…because I made a couple of speeches.”
There you have it. The emails were giant ‘nothing-burgers’ that were attained by an evil genius, criminal, mastermind, named Donald Trump, with the help of the inherently evil Vlad Putin (how many Americans has Russia killed lately?). She lost thanks to a vast right wing conspiracy of media shills at the NY Times and other publications who wanted to see Trump elected.
What.the.fuck?
Notable: Trump is back to ‘Crooked Hillary’ again.
Crooked Hillary Clinton now blames everybody but herself, refuses to say she was a terrible candidate. Hits Facebook & even Dems & DNC.
Well, you know that I’m biased in this regard. Brokers are literally human dinosaurs roaming the earth, siphoning fees like parasitical insects off the wealthy, and that’s going to change in the not-too-distant future.
Having left the field of professional money management, which I belonged to for 18 long years, I can tell you first hand that stock brokers, or “advisors”, are abject morons, generally speaking. Any advisor reading this post and disagrees with my assessment isn’t being honest with himself. Take your series 65 and shove it up your ass.
Machine learning, data science, quants, algorithmic excellence, can do things that any intuitive moron can do and more. I can have any and all patterns that you enjoy on charts digitized by a programmer, or put together a coherent risk averse asset allocation model, using only the algos in Exodus, that any advisor sucking his clients dry can do for a fraction of the cost.
Very soon, FINRA and the SEC will be irrelevant bodies littered with C level students, policing a shrinking population of career criminals, while self directed investors move towards independent platforms to paint their own canvases. As much as I enjoy to build strategies and think that I am the best investor to ever to walk the planet, I know the true value is empowering you — the degenerate pavement ape in search of hobby and profit.
Anyone building tools, algos, machine learning technology, stands to do very well in FINTECH, now and in the not too distant future. If you’re running an advisory, be sure to arm your ‘advisors’ with 21st century tools that appeal to high net worth individuals.
The catamites from Morgan Stanley understand this and have provided their laughably incompetent ‘sales force’ of stockbrokers with dumbed down ‘algorithmic help.’
I was up 0.45%, with 11 out of 13 of my stocks higher for the day. When juxtaposed against market breadth of just 42% for the day, I think my model is working.
Today had all of the trimmings of risk aversion, high tech, high beta, stocks tossed into the fire, while gold, bonds, utilities and other mega cap defensive stocks were gobbled up by a risk averse Wall Street.
Crude oil down nearly 3% for the day is all you needed to see, with regards to where money isn’t going. Year to date, the carnage in the oil & gas industries have been absolutely dreadful — down in the magnitude of 35%.
With June here and seasonality working against stocks, you have every reason to get defensive. But we’re not going to crash in June. That never happens. Expect there to be some mean reversion opportunities, something, as you know, we’re keenly adept at identifying. We’re not there yet, but soon.
The broader indices mailed it in today, showing minimal losses. This is the problem I’ve had with the facade of the indices since 2014. They no longer accurately portray the true nature of the market. Agreed?
At any rate, until Friday, I will stick with my current portfolio, heavily focused on large cap stocks that produce ample free cash flow — hedged with cash and a little TLT/GLD.
The most important thing for you to know is that the animal spirits are NOT back, contrary to popular beliefs. If they were, small capped stocks would be outperforming and they’re down for the year — so there’s that.
Yesterday the country went nuts after Kathy Griffin published an ISIS inspired photo, depicting her holding the blood drenched severed head of President Trump. This small, stupid, woman didn’t know any better. She was merely following the lead of her employer — CNN. But like any drug addled addict, the lines of morality and ethics got hazy, as the whirlwind of the Presidential witchhunt increased.
She crossed the line
TMZ reports: Barron Trump was watching TV & saw @kathygriffin holding the severed head. He thought it was his dad. My heart is broken.
Griffin is out with a heartfelt apology today, begging forgiveness from you — the comedy craven burger eating sports lover — aka American.
Subsequently, CNN has fired Ms. Griffin — in line with the commentary from their stars, like Jake Tapper and Anderson Cooper — who’ve condemned this heinous act of vile stupidity.
“CNN has terminated our agreement with Kathy Griffin to appear on our New Year’s Eve program.”
Do you forgive Ms. Griffin? Can you wash aside any old sentiments you once had for decency and instead support her once again, vis a vie the purchase of concert tickets to see her perform a mock beheading of the leader of your country, all for the sake of freedom of expression and a few macabre inspired laughs?
Year to date, department stores are down 35% on a median basis and oil/gas drillers are -32%. Today, those industries, and more, are sinking into the oblivion — the dark, cavernous, winding, hallways, festooned with lost traders collecting miseries. “The Fly” does not partake in idle loss, nor will he ever commiserate with the likes of you, ‘fellow traders’ who’ve gone wayward into the bottle and out — drunk, stupid, without a plan.
The NASDAQ is down just 16, yet the only sector that is up today are defensive utilities.
Banks are getting hit again — fear of a flattening yield curve are real as the summer days are long. Your allergic reaction to information that can help you circumvent the murderholes will, eventually, lead to your downfall.
Case in point, quantitatively, I cannot be matched.
Nine out of 13 of my holdings are higher for the day, with the starkest drawdown of just 0.35%. For the day, and with the utmost gratitude to the Gods, both old and new, I am up by 0.2%. Come this Friday, all of my stocks, with exception to perhaps GLD/TLT, will be replaced with new ones — stocks that obey my model which seeks alpha. But it’s not dumb alpha, it’s smart, sort of like me, but in the form of a sublime harmony of mathematical precision.
It’s fucking looming you faggots. Are you terrified yet? You probably should be.
Contrary to popular opinion, October isn’t the worst month for markets. According to recent history, that designation now belongs to the month of June. Chalk it up to billion dollar hedge fund managers packing it in for the summer — leaving fuckhead junior at the trading turret with strict instructions not to fuck anything up.
Each and every May, the market feels terrific. After all, what’s not to like about these seasonal gains?
What usually happens around this time in the narrative is piker brokers/self-directed investors start to feel good about themselves — thanks to the gains. They start doing blow off their red bull cans, trading on margin, even partaking in high octane option trades. Then June swings around and the hubris gets in the way of smart decision making. Plus the caffeine/cocaine induced haze makes it difficult to think clearly. Markets dislocate. Junior fucks up on the trading turret. Satisfaction is demanded. People get whipped whilst swinging from gibbets across the Hamptons. July brings forth a calm normality.
Read that and weep, fuckers. The NASDAQ has been hammered in each of 6 of the past 9 years. How do you intend to grapple with those odds this month? Will you ‘play it by ear’ or simply get fucked up again and then spend the rest of the year trying to make up for your ‘June swoon’?
June, more or less, is like a giant middle finger in the face of traders — dating back a decade now.
Personally, I don’t give a shit. My quantitative model has been thoroughly vetted and I trust it will respond to negative market conditions, should they arise. Plus anyway, I still have 10% in GLD/TLT and another 20% in cash — waiting to be deployed when the market is oversold.
We have a full array of fuckery taking place this morning. Credit Suisse’s director of investment strategy and research, Nannette Hechler-Fayd’herbe, said “Animal spirits seem to be back in both the real world and the financial world.” Moreover, she stated, “We are fully invested in our portfolios” and “have no overweight in cash, in contrast to last year.”
Contrary to her animal spirits opinion, oil is getting hammered again this morning, now off by more than 2%. Interestingly, this is not having a negative affect on stocks in Europe or here, domestically. The Eurostoxx 50 is higher by 0.8% and S&P futures are better by 0.17%.
The euro is gaining against the dollar by 0.29% and gold is higher by 0.3%.
The news on oil, apparently, has to do with Libya increasing production. This makes zero sense, whatsoever, but markets are going with it.
On the analyst front, there are very few big calls this morning.
LN was upgraded at Nomura. ZBRA downgraded at Morgan Stanley. VALE upgraded at HSBC. And AVGO’s target was raised at RBC.
Axios is reporting on some unfettered rumors (my favorite type) that Gary Cohn is less interested in becoming Trump’s chief of staff and more interested in running the Fed when Yellen’s term is up in February of 2018.
Finally, we can find a place for Gary where he belongs — along with his brethren at the Fed.
Currently, there are several distinguished gents who hail from Goldman, including William Dudley, Neel Kashkari, Patrick Harker and Robert Kaplan.
Everyone knew Amazon was crushing retail, dating back at least a decade. But for some reason, very few went through with the easiest pair trade of all time — long AMZN, short shopping mall operators. What a simple, yet brilliant, trade. Is it not?
Here’s an old market cap chart of when Amazon topped Walmart. Now it’s worth two Walmarts
Here’s another old chart that captures the spirit of Amazon’s sales explosion. The current annual run rate is in excess of $140b.
So how does Amazon’s $143b in annual revenues stack up against other retailers?
According to Exodus, there are 31 companies in the Apparel Stores industry, the names you’re all familiar with when shopping at the old dead mall, whose sales equal $107b combined, with net income of $13.6b. Their composite market caps are $81.69b, the inversion of the price/sales ratio is indicative of an industry in duress.
Amazon’s $143b in annual sales and net income of just $9b is rewarded with a market capitalization of $469b.
Think about that for a moment. The entire shopping mall, sporting +1.1% quarterly revenue growth, does more net income than Amazon, on 40% less in revenues, and yet Amazon is valued at 5x what the entire mall is being sold for on the market today.
The Department Stores are an even worse comparison. TJX, M, KSS, SHLD, DDS, JCP, SRSC, SHOS and BONT combined do revenues of $129b, netting $10.17b in income, yet the composite market caps are just $68b on -4.5% quarterly revenue growth.
I get Amazon is the future and they’re growing at 22% per annum. But is it worth more than all the department stores and apparel stores combined 3x over?
And now for the most egregious juxtaposition: Amazon vs the Discount/Variety Store industry.
The Discount Variety stores include WMT, TGT, COST, DG, DLTR, BURL, PSMT, BIG, FRED and TUES. An impressive set of retailers, no doubt. Together, they sport sales of $729b with net income of $51b, enjoying median quarterly revenues growth of nearly 5%.
Their market caps combined equal $389b. If you threw in another COST, you might get to match Amazon’s market cap.
