Thursday, July 28, 2016
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Bearish BofA/Merrill Analyst Turns Bullish: ‘It’s Too Late to Be Bearish’

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Ajay Kapur, Head of Asia-Pacific strategy at BofA/Merrill, blessed with a glorious mane, has declared ‘it’s too late to be bearish.’ Silly fools, the time for bearish calls on Asian equities was five years ago, said Ajay. All of the naysayers make for great philosophers, espousing a lexicon of bad news events that loom, imminently. Following several martinis, discussing policy amongst a room of pseudo-intellectuals, Ajay is more than capable of holding his own, rather matter of factly dismissing the folly of both the booze hound and morosophically demented.

Ajay Kapur has been bouncing around Wall Street like a molotov cocktail, these past few years. He’s been at Deutsche Bank, Citi and of course Morgan Stanley, just to name a few. In this very candid, and quite eloquent interview, Lord Kapur graced the Bloomberg audience with a head of hair fit for a king, black as night and long and flowing like a tumultuous Bay of Bengal high tide.

Very succinctly, as a chief representative of BofA/Merrill Asia, Mr. Ajay Kapur III chides those who believe there are any risks to equities, especially in China. A meridian of splendour and luxuriate gains await those able to remove themselves from the onion patch and into the Shanghai 50 Composite. The doom and gloomers, who Ajay claim have been wrong about Japan for many, many decades, in spite of the fact that that the NIKKEI hit a record high in 1989 and has gone down ever since then, shall commiserate with one another–cast out as the ‘family idiot’ and dispatched into the sea, indelibly, a loser. These small, yet trivial, facts are a great annoyance to Sir Kapur. His avocation and occupation is ‘to make money’, in addition to mollycoddling the masses into a sweeping stupor, just prior to a ceaseless bedevilment of the markets– an absolute and primordial dessert storm that will lead to ‘his clients’ extinction from the field of play.

Henceforth, buy stocks!

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With Nonesuch Authority: It’s Time to Bet Against Dr. Copper

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Fuck copper and the horse it rode in on. For the better half of the past year, the price of copper has been meandering, slivering even, like a snake. Most traders are unsure as to the immediate direction and simply chalk it up to Chinese nonsense. But the shares of FCX have risen to fantastic levels. Bear in mind, I left a whole book of clients long many shares of FCX in the single digits. But enough is enough.

Base metal shares have risen to absurd levels. Look to the price of X to understand what I am speaking of. By the way, that is a high risk pick of mine, heading into the elections.

Come hither as I divulge to you a great secret, small peasants.

The sublime harmony of mathematical precision (SHOMP) is suggesting that you sell or sell short shares of FCX.

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I understand that to many of you selling short is equal to a Faustian Bargain, one wrought with sacrilege and scandal. But I beg of you to look towards the numbers. The algorithms that I’ve developed have a keen understanding of how FCX trades. Its never been wrong, in 9 previous instances, over the past year.

Nevertheless, and this was mentioned during today’s chat room session inside the new Pelican Room inside Exodus, I prefer to sell short XLE. It too is flagged overbought and has incredible stats. But the timing of said short is in the details.

Such details will only be shared with the top hatted gents inside of our hallowed halls.

You can droll about the house again, pandering to your teevee box, ingesting cheese’d doodles whilst watching rotten tomatoes commit eloquent acts of unpatriotic sophistry for an otherwise beguiled and morosophical audience.

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Peak Grass Fed: $WFM Warns and the Shares Are Tumbling Lower

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True story, I spend anywhere from $2-4k per month at Whole Foods and other various grocery outlets. I am what one might call a ‘foodie’ and prefer to ingest food that isn’t tainted by the Monsanto corporation. I know, grass fed and organic foods are a scam. But maybe it isn’t. Maybe you’re just a stupid little shit who enjoys being poisoned by canned foods.

At any rate, I eagerly, and with great energy, despise what Whole Foods has become. Instead of the hipster disruptor it used to be. It now has the feel of a large, oppressive, purveyor of fucked up vegetables. Its employees HATE the place. I make an effort to talk to almost everyone there, just to get the feel for the place. Often times, a stranger might confuse me to be a sociopath, when in fact I’m just doing research.

I live in an area that is chockful of farms and locally sourced food. When the apocalypse comes and all of you are starving to death because the Shop Right is out of stuff, I’ll be fine dining on locally sourced steaks. The quality of the food that I can acquire locally far exceeds the stuff that Whole Foods marks up as premium provisions.

Shopping at Whole Foods used to be an exciting adventure. Now I fucking loathe it.

Success has defeated them, to borrow a phrase. The barbarians at Kroger are heaving at their door, waiting to connect a death blow.

Reports Q3 (Jun) earnings of $0.37 per share, in-line with the Capital IQ Consensus of $0.37; revenues rose 2.0% year/year to $3.7 bln vs the $3.72 bln Capital IQ Consensus. Comps -2.6%, just below estimates.

Co issues downside guidance for Q4, sees EPS of $0.23-0.24 vs. $0.25 Capital IQ Consensus Estimate; sees Q4 revs of +2% to ~$3.51 bln vs. $3.56 bln Capital IQ Consensus

Q4 to date comps -2.4%: While the co is hopeful that comps will improve over the remainder of the quarter as comparisons get easier and sales-building initiatives gain traction, the Company expects some ongoing offsetting impact from its value strategy and disinflation.

Pricing power is waning. Competition is growing. I’m afraid this company is doomed.

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Zuckerworld: $FB Smashes Earnings Expectations, Shares Soar in the After Hours

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Shares of Faced Book are higher by 6.5% in the after-hours after crushing estimate on both the top and bottom line. Is there really any surprise here? The company has a virtual monopoly on social media, with Snapchat being the one rebel hold out.

The company now sports 1.57b monthly active users. Mobile advertising is now 84% of total ad revenues, an amazing turn for a company who didn’t know what they were doing just a few years ago.

  • Reports Q2 (Jun) earnings of $0.97 per share, $0.15 better than the Capital IQ Consensus of $0.82; revenues rose 59.2% year/year to $6.44 bln vs the $6 bln Capital IQ Consensus.

Second Quarter 2016 Operational Highlights

  • Daily active users (DAUs)- DAUs were 1.13 billion, better than expected, on average for June 2016, an increase of 17% y/y; Q1 +16%, Q4 +17%
    • Mobile DAUs- Mobile DAUs were 1.03 billion on average for June 2016, an increase of 22% y/y; Q1 was +24%, Q4 was +25%
  • Monthly active users (MAUs)- MAUs were 1.71 billion, better than expected, as of June 30, 2016, an increase of 15% /y-
    • Mobile MAUs were 1.57 billion as of June 30, 2016, an increase of 20% year-over-year; Q1 and Q4 was 21%
  • Mobile advertising revenue- Mobile advertising revenue represented approximately 84% of advertising revenue (Expectations were for approx 82.7%) for the second quarter of 2016, up from approximately 76% of advertising revenue in the second quarter of 2015.
  • Capital expenditures- Capital expenditures for the second quarter of 2016 were $995 million.

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Fed Does Nothing; Esther George Wanted 50bps Hike

Esther L. George the president and chief executive officer of the Federal Reserve Bank of Kansas City at the Federal Reserve Denver Branch in Denver Colorado, Thursday, December 20,  2012.    Joe Amon, The Denver Post

Come on son, Esther George has done lost her mind. Here is the Fed statement. They’re beginning their shit talking spree of faux rate hike intentions.

Federal Reserve releases FOMC statement from July 26-27 meeting Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

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My Bull Thesis for Bonds Has Never Looked Stronger

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Say what you want about my feverish hankering for bonds, via TLT. This singular position is up more than 17% for the year, absolutely poleaxing everything in its wake.

Repeatedly, I hear people telling me ‘get off the ark man, it’s gonna sink.’

Fuck you, no it’s not.

The bull case for bonds has never been stronger. Central banks are in easing mode, which bodes well for bond buying lunatics. The more QE, the lower yields go. Over in Japan, the JGBs are at record low yields.
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Over in Germany, yields cratered by more than 5bps to -0.08%.
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You do understand this is all interconnected, right? Arb players will continue to ping off JGBs to Bunds and then to Treasuries. This is how this trade has played out for the past 8 years and it’s how it will continue to trade in the future.

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What if the Fed hikes rates?

It will only affect short dated bonds, the 2yr, not 30yr treasuries. As long as Japan and Germany wallow in negative territory, there is a profound bull case to be made for our very cheap and very attractive bonds.

I will remain long TLT, with 25% of my assets, until the yield curve inverts.

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DOWN GOES OIL

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An inventory build of 1.7m barrels v expectations of a 2.25m draw is to blame for today’s rout. Frankly speaking, this decline has been pervasive for several months now. Wall Street has been ignoring the pressures on crude, in exchange for cocaine rallies. Truth be told, we’re at 3 month lows, off by 12% for the month and the sector looks both bleak and dreadful.

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Humans are a simple creature. Oil hits $39 and the fucking hounds from hell will be unleashed upon stocks. In the meantime, enjoy your pastoral views.

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FBI’s Comey: A ‘Diaspora’ of Terrorist Attacks to Strike the West Soon

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They’re preparing us for more attacks, so that it seems normal. This is classic military conditioning, training the populous to accept a standard of living less than ideal because, well, there isn’t anything we can do about it.

Director Comey is out with startling words today, in reference to a swath of new attacks he sees coming to both Europe and the United States.

“At some point there’s going to be a terrorist diaspora out of Syria like we’ve never seen before,” Comey said Wednesday at a cybersecurity conference in New York.

“This is an order of magnitude greater than anything we’ve ever seen before,” he said, comparing the potential to previous attacks directed or inspired by the group. “We saw the future of this threat in Brussels and in Paris

I’d say this bodes poorly for restaurant stocks.

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U.S. Steel Surges to Fresh 52 Week Highs on Positive Outlook

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This is my singular high risk pick in Exodus and one of the 15 GARP stocks that I’ve chosen for the 2nd half of 2016. In my estimation, this is the best way to play a Trump presidency, as his policies proposed will directly benefit companies like X.

Shares are crushing higher after the company beat estimates and offered some positive guidance.

“The significant improvements we have made to our earnings power through our Carnegie Way transformation will become more apparent as market prices recover from the very low levels at the end of 2015. While we began to realize some benefit from recent price increases in the second quarter, we will see better average realized prices, primarily in our Flat-Rolled and European segments, in the second half of the year. Our Carnegie Way journey continues to create improvements in our business model that will enable us to be profitable across the business cycle.”

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Any move against Chinese dumping or surge in polls for Trump will breathe new life into X. On the flip side, should Hillary rise in the polls, this might lose some of its gusto.

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Wall Street Repudiates @Jack; Shares of $TWTR Reel Lower Amidst Flurry of Downgrades

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Multiple firms are stepping aside on TWTR this morning and downgrading the stocks, following yesterday’s earnings disappointment. The overall hope is that live events will propel free cash flow and make Twitter great again. However, most analysts believe management is complacent and comfortable with the status quo, one that is okay with tepid new user growth.

As such, shares are reeling and will likely continue to struggle until next quarter.

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27-Jul-16 07:28 ET | TWTR | (18.45 )
Twitter downgraded to Hold from Buy at Cantor Fitzgerald following earnings

27-Jul-16 06:53 ET | TWTR | (18.45 )
Twitter target lowered to $17 from $20 at RBC Capital Mkts — “#MissAndLower”
Firm noted rev of $602MM missed Street at $608MM, importantly with Ad Rev of $534MM below ests of $540MM. But EBITDA of $175MM (29% Margin) was above Street expectations at $154MM. TWTR Q3 Rev guide of $590-610MM was about 14% below the Street at the mid-pt; EBITDA disappointed, too (18% below Street at mid-pt). Ad Pricing pressure seems to be a significant factor, which syncs with the Twitter advertiser challenges firm has detected in their survey work. They remain cautious on co’s ability to show meaningful user growth in the NT, but mgmt sounded confident in product & marketing improvements.

Axiom Capital downgrades TWTR to Hold from Buy and lowers their tgt to $16 from $18 following the Q2 report. In late May, with the shares at ~$13 and near their bear case valuation scenario, firm viewed the risk-reward of owning the shares at that level as favorable, with news events in the quarter presumably driving usage, live events and Periscope driving engagement and ad growth, and M&A potential driving the stock toward their previous $18 price target, which the stock met heading into the earnings results. However, firm was disappointed by the continued weak user growth (+3% YoY, +3M MAUs), the miss on advertising revs, and the guidance materially below their 3Q ests, implying O&O advertising growth in the HSD. Mgmt cited increased competition for social media ad budgets, a continuation of lower advertiser demand, and ad pricing at a premium to other platforms. These headwinds are expected to persist and there is very little visibility into the timing of O&O advertising growth re-acceleration. Co’s saving grace, and quite frankly its last stand, is live events/Periscope which should in theory drive up engagement and drive advertising to the platform. They are optimistic on live events but firm is unsure if this will be enough at this time to offset the current challenges. As a result they are moving to the sidelines.

Wedbush lowers their TWTR tgt to $14 from $20 following earnings. Firm notes co remains “the place to go” for live broadcast, but mgmt appears complacent about the status quo and unfocused on the lack of user growth. Until co is focused on attracting new users, driving increased use by its existing users, and demonstrating its value proposition to people who don’t use the service, firm expects it to grow very slowly. They think that its service is too complicated and difficult to use for the average Internet user despite multiple changes. They attribute recent share price appreciation to speculation that co may be acquired, but in their view, there is no clear-cut potential buyer

Canaccord Genuity downgrades TWTR to Hold from Buy and lowers their tgt to $16 from $20 following earnings. Firm notes, “We are late to downgrade the stock, and we think downside is fairly limited, but for us the character of the potential turnaround has changed over the past two quarters from “fix the product and revenue will follow” to “build a live mobile video business.” While we believe the company has a good chance of achieving this, it will likely take several quarters to know. Twitter could still be an attractive acquisition, and we view this as significant upside risk, but for now we believe fundamentals will be sufficiently challenged to move to the sidelines.”

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