Stocks are in Sell Off Mode; Crude Spared

Yesterday crude stocks were assaulted and flayed. Today, they’re the sole designation of safety amidst a barrage of sell orders. Who can sort this out on a day to day basis?

The Nasdaq is getting shredded, down nearly 50 and the Dow -100. Once again, losses are most abundant in tech, since that’s where the hot money is and the weakest hands. I don’t want to jump to conclusions and make a big deal out of a minor sell off. After all, it’s normal to sell off after long periods of gains. The fact that we hadn’t sold off and the VIX kept sinking was, in fact, abnormal. In short, the tree of prosperity must be replenished with the blood of the weak, every so often. However, all major sell offs started small, unassuming. What you want to look out for his major distribution amongst hedge fund hotels — large cap winners that have served as vessels of profit for asset managers.

Here is my list.

FB, AAPL, AMZN, NFLX, GOOGL, BABA, JD, TSLA, PYPL, ADBE, REGN, NVDA, AVGO, ORCL, CRM and PCLN.

That is your leadership above. Without them going higher, you local cocaine addicted money manager might have to cut his summering short and get back to work. If you start to see some of those names drop 5% in a single session, then you should panic.

Interestingly, rates are higher today and the yield curve widening. The 2-10 spread is approaching 100bps — very bullish for the banks. I would not be surprised to see people rotate into banks today.

Oh, the fact that crude is higher by 1.7% today is somewhat meaningless, when considering it was off by 4% yesterday. We’re stuck in this $42-48 range and the underlying equities hate it.

Much has been said about CNN’s recent foray into the subject of morality — holding opposition citizens accountable for the memes they create online. The idea that CNN would even think about investigating a person who jimmyrigged a CNN logo onto a WWF wrestling GIF is outrageous, indicative of an organization imploding from lack of leadership from within.

Who really cares about the juvenile GIF? Was it important enough to spend money and resources to find the anonymous poster?

Apparently so.

So instead of attacking Trump, the social media midgets at CNN thought it was a good idea to menace some internet troll with outing his identity, unless of course he behaved nicely hereinafter. One of the reasons they decided to withhold the identity of the Redditor is for his own safety. Very well. Then why the hell did Andrew Cuomo tweet this today?

Leave it up to mob justice, eh? Sounds very Roman of Mr. Cuomo to want the unwashed masses on Twitter to decide the fate of an apparent NAZI — who had a website with anti-semitic stuff on it. So what in the hell was this internet troll posting on his ‘racist’ website?

He posted a popular meme from the Hitler loving website, 4chan, which highlighted Jewish executives and anchors at the network.

Now you can see why CNN is really pissed at this guy — not because of the Trump meme — but because of the one above.

Tucker Carlson weighs in on the ordeal — calling CNN’s behavior ‘disgusting.’

As an aside, CNN posted this on Twitter this past July 4th, what they thought was an actual quote from Abe Lincoln.

Unbelievably, they posted a fake quote. I suppose it goes along with the whole fake news brand they’re so carefully crafting.

Oh well, the rotation was fun while it lasted. Dreams of turning spoils into riches has been placed on pause, as WTI got crushed by 4%, sending all of the oil stocks into the sewers to rot in hell.

Banks digested their gains with grace and tech reestablished their hegemony over the markets — surging ahead by more than 1%.

While people might focus on that, the real story was the continued dismantling over the auto sector — with AAP and ORLY leading the pack with horrendous losses.

Why do I always focus on the risks?

Because the only thing that matters is the drawdowns. Take it from me, a man who has made and lost more fortunes that I can count on both of my hands. While I remain dutifully long stocks and optimistic that the current trends will persist, I am, in a sense, paranoid about the potential pitfalls. When they happen, they always seem to come out of left field, they’re swift, cruel, and merciless, and they suck the energy and fun out of something that can be extremely rewarding and enriching.

I watch the risk side because hardly anyone else is doing it.

Botton line: today’s selloff in crude can be a resumption of the long winded decline we’ve seen since the beginning of the year. Couple the retail weakness with the fact that the auto sector is under siege, and there is a case to be made that the economy really isn’t doing too well — which may, in fact, bode well for an easier Fed and higher gold prices.

Or the opposite. Stay tuned.

According to Bloomberg, the Trump administration is about to screw over his pals in the refinery business by continuing one of the industries most hated rules: renewable fuel requirements.

People close to the discussions say Trump is merely helping out a few farmers in the midwest, by keeping their corn crop rich with government mandated demand at the refineries.

Others believe the President is turning his back on the refiners, an industry beset with onerous environmental rules and regulations.

Bloomberg says the EPA is going to requite 4.24b gallons of biofuels in 2018, down from 4.28b gallons in 2017 — including 238m gallons of cellulosic biofuel, down from 311m gallons.

Overall, Trump will continue to mandate the 15b gallon quota, which is the highest allowed under Federal Law — mostly fulfilled by ethanol.

According to a May forecast from the U.S. Energy Information Administration, motor fuel demand is set to climb to about 143.5 billion gallons in 2018 from about 143 billion in 2017. Given that forecast, if the conventional renewable fuel quota were fulfilled entirely by ethanol, the fuel would represent 10.5 percent of total projected gasoline consumption. Most gasoline sold in the U.S. is E10, or 10 percent ethanol. Refiners can turn to other fuels, including renewable biodiesel, to help meet the target.

The American Petroleum Institute, which represents oil producers and refiners, had asked the EPA to set lower quotas that would reflect about 9.7 percent of projected gasoline demand; some refiners had pushed a lower 9.5 percent.

The net result is somewhat clouded by an already weak energy sector. A key player in the additive space for refiners, NEU, is lower by just 1.2%. Other refiners like VLO, HFC and CVI are down roughly 3%.

Some of the ethanol/biofuels plays are marginally lower — a big nothingburger for the status quo.

The corn ETF, $CORN, was anticipating this result, judging by the recent share price action.

If you aren’t long the formerly besieged tech sector today, or my new GARP index, you’re most likely losing some money today. Today’s tape isn’t dreadful, only indicative of the ‘nifty fifty’ brand of elitism that has beset stocks for the better part of the past 3 years.

Case in point: market breadth stands at a horrendous 35% today, yet the Nasdaq is up more than 40.

The up sectors.

The down.

The remedy?

Diversify your portfolios and quit trying to hustle your way into a seven figure portfolio without working. The idea that you can swindle your way into a fortune is ridiculous. Work hard and manage your budget. The biggest impediment to creating wealth isn’t the lack of opportunity, but drawdowns. By avoiding debilitating drawdowns, you can grow your nest egg over time and tweak your investments to take on more risk, if done properly. At the vanguard of your risk analysis should be diversification — something that I am adhering to in the strictest of terms in my new weekly rebalancing, based on quantitative allocations.

Tech is hot today, maybe oil tomorrow. You have to be a fucking trading monkey magician to catch every turn. But if you’re omnipresent, in all places at all times, you can at least partake.

Tech stocks are bouncing today, rotating the hell out of oil and retail — back into the wonders and the joys of NVDA, BIDU, GOOGL, CAVM and others.

According to Cramer, the Yellen Fed can do whatever it wants. Stocks will trade up no matter what, thanks to the buoyancy in world economic growth, especially in Europe — where he says the banks have all been recapitalized.

It’s worth noting, over the past month, some tech stocks have undergone ruinous declines. Shares of NFLX are down 11% from its peak. GOOGL, INTU, AVGO, INTC and JNPR are all down in the magnitude of 7%. You should go sop them up straight away. The coast is, indelibly, clear — says Jim Cramer.

Some of the smaller semis have done much worse the past month. Case in point, BRKS, MKSI, COHU and AMBA are all down between 16 and 23%. Clearly, this insanity needs to stop. GET IN THERE and do your jobs. Buy the drip. The Yellen Fed can raise rates at their heart’s delight and nothing will happen. Please ignore the collapse in the auto sector and chalk it up to ‘a correction.’

Here are the YTD returns for the often lauded FAANG stocks.

FB +30%
AMZN +29%
AAPL +25%
NFLX +19%
GOOGL +17%

What are you waiting for? Get in there.

Forget about Goldman’s downgrade of TSLA today. Shares of ORLY are getting bludgeoned this morning, after the company said same store comps for June were +1.7% vs guidance of +3-5%.

The subsequent result of such a shortfall is sending shockwaves throughout the industry.

Both auto parts stores and dealerships are getting killed.

Why is this important?

Autos have been weak all year long. Many skeptics believe the weakness in the auto sector is indicative of an economy about to head down into recession. The health of the automobile sector, and the trannies overall, are often considered leading economic indicators.

Thus far, there’s been very little spillover into the trannies — as represented by its main ETF, IYT. I’d keep an eye on IYT, in particular FDX and the rails, to see if the weakness in the autos, in fact, begins to spillover. If it does, the market will assuredly respond negatively.

Here are the holdings for IYT.

This wasn’t a case of mistaken identity or wrongful imprisonment. Omar Khadr admitted to killing an American soldier — but was still awarded $10.5m by Canada’s supreme court, and an official apology by the Canadian government, for violating his civil rights. Nothing can be funnier than the state of doom for the civilization that pretends to exist north of our borders.

Back in 2010, Canada’s supreme court ruled that human rights were being violated at Guantanamo Bay. As such, anyone held there, who happened to be a Canadian citizen, was very likely to win lawsuits.

Enter Omar Khadr.

“The deprivation of [Khadr’s] right to liberty and security of the person is not in accordance with the principles of fundamental justice,” the court ruled.

“The interrogation of a youth detained without access to counsel, to elicit statements about serious criminal charges while knowing that the youth had been subjected to sleep deprivation and while knowing that the fruits of the interrogations would be shared with the prosecutors, offends the most basic Canadian standards about the treatment of detained youth suspects.”

Poor Omar underwent sleep deprivation. As such, Ottawa awarded him $10.5m.

Omar was 16 when he was picked up by US forces. He’s being described as a ‘child soldier’ by Canadian press — a victim in his own right. The Canadian supreme court stated that in spite of the fact that he was and still is a confessed terrorist, he should retain his rights as a Candian citizen. Moreover, by permitting American forces to detain him in Guantanamo Bay, by extension the Canadian government was complicit in violating his civil rights.

Liberalism is a mental disorder.

In 2010, Khadr pleaded guilty to killing Sgt. Chris Speer, in addition to attempted murder, conspiracy, providing support to terrorists.

“As held by this Court in Khadr 2008, Canada’s participation in the illegal process in place at Guantanamo Bay clearly violated Canada’s binding international obligations,” the Supreme Court wrote in 2010, noting that Khadr had been denied access to counsel and was unable to challenge the legality of his detention.

Khadr did sue for $20m, so the Canadian government did achieve a very minor victory here. Since Omar was released on bail in 2015, he will now get to enjoy his newly minted tax payer fortune without the inconvenience of being imprisoned for crimes he did commit.

Trump is right, you know. As much as I’d like to paint him as a psychotic — because it’s funny and for the memes, China is out of control when it comes to trade with the US. Have a look at these trade deficit numbers, which haven’t improved under Trump, and tell me this isn’t wrong.

N. Korea just fired a ballistic missile, which traveled 600 miles. Now Trump is suggesting bad trade deals with countries that do not help us are doomed, via Twitter.

The United States made some of the worst Trade Deals in world history.Why should we continue these deals with countries that do not help us?

— Donald J. Trump (@realDonaldTrump) July 5, 2017

Trade between China and North Korea grew almost 40% in the first quarter. So much for China working with us – but we had to give it a try!

— Donald J. Trump (@realDonaldTrump) July 5, 2017

I don’t get the war with N. Korea narrative. It didn’t work out the first time. I seriously doubt it would work out today, now that they have nukes. But this is the world we’re living in now, one engorged by fucking neocons. Everywhere I look, they’re there — coopting one politician after the next. Sad!

Stocks opened up higher this morning, but it’ll be short lived. Both oil and copper are lower by more than 1% and there isn’t anything to be particularly enthralled about with this morning’s upgrades and downgrades — aside from Golman’s laughable p/t reduction in TSLA from $190 to $180, so prepare for lower stock prices.

Last week we saw banks and commodities lift higher — thanks to MUH rotation. You might see the exact opposite today — people ebbing back into tech and the hell out of oils — just to throw people off kilter.

European markets are, essentially, flat, and Ethereum is down 8.5% — another ordinary day at the office.