Monday, February 8, 2016
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Dr. Fly

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Gold, Treasuries Rise; Stocks Set to Dive Headlong into Cement Blocks


Gold is soaring this morning, as futures plunge into the dark, rabble-rousing, sea of perfidy. Investors, for reasons inexplicable to the layman, are now viewing gold as a safe haven, something that has been absent from the industry for more than 4 years.



The traditional ‘risk off’ trade, long bonds, is working again this morning.



Gentlemen, get aboard the ark. Feel free to bring your gold bricks. We can use them to bash the skulls in of the cows onboard.

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Cullen Frost CEO Gives Cheery Assessment of His Personal Apocalypse


I’m going out on a limb here to suggest this guy is completely full of shit. Who is he kidding with the olde “everything is cheery and fine here in oil hell” anyways? During an interview this morning on CNBC, former Fed head, Dick Evans, gave a very positive assessment of Cullen Frost’s oil portfolio, saying all was well, nothing to see here. I got flashbacks of Baghdad Bob while watching this man spin a yarn.

In all fairness to Dick, it’s his job to stay positive and lift morale throughout the ranks. His stock has been sledgehammered to the tune of 33% over the past 3 months and Wall Street is screaming “you’re full of shit” after each and every one of this Polyana “we are a diverse economy in Texas” interviews.

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European Markets Rocked for 2.5%; U.S. Futures Plummet as ‘Negative Feedback Loop’ Worsens


The Dax is off by 2.7& and NASDAQ futures are lower by 62, Dow futures off by 170, as the ‘negative feedback loop’ of a worsening Fed stance on monetary policy, Oil, and China (FOC’d) weigh on the minds of investors.

The dollar is higher by 0.4% v the euro and breakfast hasn’t even been served in Princeton, NJ yet.

At the end of the day, this week is all about Yellen’s testimony. There is a growing consensus out there that she will dig in her heels on a March Fed rate hike, which is sure to leave traders astounded with elephantine losses.

“I don’t think we should expect Yellen to throw the towel on a March hike,” said Thomas Costerg, a senior U.S. economist at Standard Chartered Bank in New York. “She may emphasize the positives in the U.S. economy, particularly the still-strong labor market. Looking ahead, she may sound more cautious, and she will likely highlight that the negatives are mostly from abroad and that they are watching the global picture closely.”

Yellen talks Wednesday.

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The Real Reason Behind Peyton Manning’s Ridiculous Super Bowl Budweiser Plugs

Feb 7, 2016; Santa Clara, CA, USA; Denver Broncos quarterback Peyton Manning (18) celebrates after defeating the Carolina Panthers in Super Bowl 50 at Levi's Stadium. Mandatory Credit: Kelley L Cox-USA TODAY Sports

Apparently, he owns an interest in two Bud distributorships.

Following the Broncos’ super bowl win, when asked what he’d do next, Peyton Manning, in two different discussions, said he’d go kiss his wife and children, then go drink a whole lot of Budweiser.

He pulled this shit in the AFC championship win too. It just went under the radar, due to the obscurity of his degenerate favoritism towards swill.

Following the Broncos’ 24-17 AFC divisional playoff victory over the Chargers in 2014, Manning was asked if retirement was weighing on his mind.

“It’s really not,” he responded. “What’s really weighing on my mind is how soon I can get a Bud Light in my mouth after this win.”

A Budweiser spokeswoman said the company did not pay Peyton to promote the brand, but were delighted by it nonetheless.

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Morgan Stanley: Get Aboard the Ark!


It’s becoming quite the fashionable trade these days, boarding the ark and all, waiting for the floods. Meanwhile, I’ve was building the ark when all of you were out frolicking about the prairie, enjoying the sunshine and the green grass. Now that markets have plunged and bonds have risen, everyone wants a seat.

With yields on U.S. 10-year notes within half a percentage point of an all-time low, Morgan Stanley strategists say there’s more room for them to fall as economic data underperform economists’ estimates. They also recommend bullish positions in bunds and gilts. The yield on the Bloomberg Global Developed Sovereign Bond Index dropped to 0.77 percent on Friday, extending its decline to the lowest level since at least the start of 2010.

“Despite the meaningful decline in sovereign yields since the Fed lifted off in December, we would rather overstay our welcome than miss a continuation of the move to lower yields,” analysts led by New York-based Matthew Hornbach, head of global interest rate strategy, wrote in a client note dated Feb. 6. “We do not think Fed Chair Yellen’s testimony will loosen financial conditions enough for global yield curves to steepen.”

Well I have news for you late comers: we have very little space left on the ark. If you want to come aboard, I have a few seats left next to the Venus fly traps and the mongoose. Other than that, you’re gonna have to pray for dryer climes.

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Larry David: Bern Your Enthusiasm


Curb your enthusiasm is one of my favorite shows of all time. During this presidential campaign, Larry has been impersonating Bernie Sanders and killing it.

Yesterday he did two skits that I felt sharing on this Super’d Bowl sunday, one of which has a cameo appearance of Mr. Sanders himself.

And here is Larry’s monologue.

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Gundlach: Waiting to Allocate ‘Enormous’ Amounts to Corporate Credit


The new bond King, Jeffrey Gundlach, who has been very bearish on markets due to the Federal Reserve position on rates, is both worried and opportunistic in recent comments.

He cites ‘frightening’ equity valuations of some major financial institutions, that are trading below 2009 crisis levels, as something to worry about. On the other hand, he sees corporate credit as the ‘next opportunity’, with 100% gains out there for the picking.

“We see the price of major financial stocks, particularly in Europe, which are truly frightening,” Gundlach said. “Do you know that Credit Suisse, which is a powerhouse bank, their stock price is lower than it was in the depths of the financial crisis in 2009? Do you know that Deutsche Bank is at a lower price today than it was in 2009 when we were talking about the potential implosion of the entire global banking system?”

Gundlach, 56, said he’s considering buying corporate bonds later this year as prices continue to fall, including investing his personal money.

‘Next Opportunity’

“The whole question for me is when am I going to buy enormous amounts of corporate credit, because it’s crystal clear that that’s the next opportunity that’s out there,” Gundlach said. “There’s plenty of things out there that will have 100 percent returns. It’s a whole question of: Don’t tell me what to buy, tell me when to buy it.”

Debt related to energy and mining is still very risky, because of weakness in China’s economy and a worldwide oil glut, he said.

“There’s simply no bullish case for oil right now,” Gundlach said.

“My guess is if you get defaulted on, you’re probably going to get something like 70 cents anyway,” he said.

Naturally, it’s not a question of what to buy, as Gundlach said, but when.

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Saturday Cinema with Le Fly: This is the End


This is a playful tale about real Hollywood actors, enduring the apocalypse. After last week’s trade, I felt my audience deserved to be entreated to this movie about the devil, flying dragons and Danny Mcbride as a cannibal warlord, who roams the earth in search of soylent green.

This is a really bad movie, but also hilarious. I envision the real end of the world will be exactly like this.


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This was a momentum memorial, laying to rest all of the cool kid stocks–causing the longs of those stocks to simply give up and capitulate.

Look at the losses amidst many of the favorites, like PANW, CRM and LNKD.




This comeuppance was inevitable. The playing field is in the process of being reset. In all market squalls, opportunities arise. The same narrative is being written now. At some point, there will be a series of sublime entry points; but we’re not there yet. If you recall what I said about 2008-2009, following a hard January, in both years February fell hard too.

If you’re looking to buy bargains, wait for February to mature and then take a stab when people are throwing themselves down open manholes.

To summarize my position: I have been 75% cash/25% TLT for a week. I am trading the oversold signals inside Exodus, exclusively now, with SPY being my weapon of choice. We’re not oversold yet–thanks to the intuitive nature of the algorithms. Having learned from the recent declines, the system’s oversold threshold is now deeper, which means stocks need to get really scary for it to spit out an oversold signal for the overall market.

It’s ridiculous to believe the Fed is still in play. The speculation game is cruel and unforgiving. But this Federal Reserve hawkish position is a gift, if you think about it for what it is. They’re telling you to sell stocks. Stop fighting the Fed and understand that having a robotic long only allocation is 2013 thinking. Get flexible or risk being eliminated from the playing field.

Cheer up. It’s only money.

Reminder: Get aboard the ark.

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