The 3:30 Ramp Has Failed; BEHOLD To Be Introduced to the Slide

In spite of the fact that our good friend, Ramp Capital LLC, has dedicated his life’s work towards the purchase of SPY contracts between the minutes of 3:30-4pm, every single day, one only has to gaze into the mirror to know that this is a plan forged in an asylum, destined for failure.

While some of us traverse handicap ramps, hoping to sneak into the DMV before 4pm, others are Captain’s of gigantic arks, festooned with zebra, giraffe and other African wild-life, even humans!

Ladies and gentlemen, the ramp that you so slavishly adored, caressed like a retarded monkey on its death-bed, has been shattered to pieces by marauding bandits, globalists who’d love to see your investment banking gig ‘transcend’ into a 9-5 at Walmart. All of your monies are theirs, thrust into digital accounts by which interest is drawn from and not granted. It’s an Orwellian nightmare come true, a cashless society of transvestite, gunless, cowards, protesting for freedom to urinate in gender neutral lavatories, whilst every God given freedom, every decent thing about mankind, is left in ruins.

BEHOLD, the catamite economy, as you transfix yourselves into a state of abhorrent intoxication, destined for extinction.

Happy Friday!

The gurus at JP Morgan, home of the London Whale, have an economic model that use consumer sentiment, manufacturing sentiment, building permits, auto sales and unemployment to predict the future, in economic terms (extra Gartman). The chances of a stark raving mad recession over the next 12 month has jumped from 30% to 36% from May 5th.

“Our preferred macroeconomic indicator of the probability that a recession begins within 12 months has moved up from 30% on May 5 to 34% last week to 36% today,” JPMorgan’s Jesse Edgerton wrote. “This marks the second consecutive week that the tracker has reached a new high for the expansion.”

JPMorgan’s proprietary model considers the levels of several economic indicators, including consumer sentiment, manufacturing sentiment, building permits, auto sales, and unemployment.

The probability of a recession occuring in the next 12 months has never been higher, JPMorgan says.

“The unemployment rate enters the model in two ways,” Edgerton explained. “As a near-term indicator, we watch for increases in the unemployment rate that occur near the beginning of recessions. So this morning’s move down in the unemployment rate lowered the recession probability in our near-term model. But we also find the level of the unemployment rate to be one of the most useful indicators of medium-term recession risk. So the move down in unemployment raises the model’s view of the risk of economic overheating in the medium run and raises the ‘background risk’ of recession.”

The ‘background risk’ of a recession is poppycock. The numbers aren’t too daunting, at 36%. Even if there was a recession, from an investment standpoint, that might be beneficial. The earnings recession has been embedded in the market since 2014. If we confirmed recession, it would give the next President the clout he needed to enact aggressive fiscal stimulus and not depend on the speech givers at the Fed.

Let’s not forget, any economic drawdown will be met with feverish QE.

Doublespeak, son.

It’s the globalization of the Federal Reserve, an institution, like Michael Knight (extra kit),  who does not exist in the government’s eyes and has never been audited. Brainard makes the case to ‘moderate’  Fed tightening, in spite of the fact there has never been a Fed tightening cycle with so many months in between hikes than now.

They’re fucking with us. The Fed has jawboned for higher rates over the past 6 month, with relentless stupidity. Following one milquetoast jobs report, Brainard is out talking greasy about the Fed needing to chill the fuck out because China is fucked.

“In this environment, prudent risk management implies there is a benefit to waiting for additional data to provide confidence that domestic activity has rebounded strongly and reassurance that near-term international events will not derail progress toward our goals,” Brainard said in a speech on Friday in Washington.

“Several factors suggest that the appropriate path to return monetary policy to a neutral stance could turn out to be quite shallow and gradual in the medium term,” she told an audience at the Council on Foreign Relations.

“While the easing in financial conditions since mid-February is very welcome, it is important to recognize that some of the conditions underlying recent bouts of turmoil largely remain in place, and an important reason for the fading of this turbulence was the expectation of more gradual U.S. monetary policy tightening,” she said.

Global markets remain fragile, she said, with sensitivity to exchange-rate movements remaining elevated. That is consistent with research suggesting “cross border financial transmission is likely to be amplified” as long as interest rates set by major central banks remain near zero, she said.

“The fragility of the global economic environment is unlikely to resolve any time soon,” she said.

“We cannot rule out a significant adverse reaction to such an outcome in the near term, such as a substantial jump in financial risk premiums,” she said. “Because international financial markets are tightly linked, an adverse reaction in European financial markets could affect U.S. financial markets, and, through them, real activity in the United States.”

QE for life. The story ends with a hydrogen bomb detonation.

I have several portfolios in Exodus to track risk. The Bubble Basket is the riskiest shit on the face of the earth, whole index members deserve death. It’s down 1.95% today.

The Old Man portfolio was constructed as a counter-balance to the Bubble Basket, built around the same time. It is higher by 0.18% today.

Year to date, the BB is off by 14%, while the OM is higher by 10%.

What does it all mean, cocksuckers?

It means that if you weren’t speed chopping carrots with your balls on the table, long commodity stocks, you lost money play momo in 2016. The money has gone, consistently, into the yield camp.

Work hard. Invest your money. Double it every 5 years or so. Repeat.

All of the things we’ve seen coming out of retail was communicated in the May jobs report. Things definitely got slower and Cramer tries to piece it all together.

This is so predictable it makes my eyes roll when I see it. So we get a little bit of bad news and everyone and everything is freaking out again.

Dollar/Euro cross- bananas
Dollar/Yen cross- insane

Gold- soaring

Utilities- through the roof

The Ark floats. Any questions?

The logic is very binary, almost too clean. No Fed hikes equals weaker dollar, equals higher gold, equals flight for yield, since rates won’t be going higher. This also means that banks will not get enjoy a better yield curve, especially with poor economic conditions, a double whammy for those fuckers.

Goldman and others are down more than 3% for the day.

The other prevailing trend is record low yields for German bunds.  Let’s not even mention Swiss yields, which are now negative up to 20 years out.

All of this leads me to one simple conclusion, one that I’ve held since late 2015. The negative yield phenomenon is feeding on itself. It’s the deflationary vortex I always warned about. Because of this reality in both Europe and Japan, U.S. bonds are incredibly undervalued, leaving a great arbitrage trade to be had in bonds v bunds. Why buy a 30 yr bund for 0.75% when you can get a bond at 2.6%? Is the bund safer, saddled with Greece, Portugal, Spain, Italy etc? I don’t think so. The bond markets aren’t trading naturally. It’s the creation of money, out of thin air, and the monetization of debt, that is causing yields to crash. It reminds me of this painting by Goyo of Saturn devouring his son.

Sure, some stocks will do well. Look at AVGO and AMBA today. It’s very possible that the easy money environment will continue to permit stocks to trade higher, based off some expectation. The downside is complete disaster, of course. None of what you see on your screens is real. The fiction of markets has been perverted by central banks. Should the debt bubble pop, forget about the stock market. You’ll all need to figure out how to buy food.

But as long as the charade continues and things plod along, yields will continue to press lower and the bond-bund arbitrage will continue to look more and more attractive, which is why I am long TLT with 25% of my assets until the yield curve inverts.

Gold has been the single best performer of 2016, consistently outperforming, especially on big down days. Off the worse than expected jobs report, gold is rallying hard, higher by 2.6%, based on the assumption that the Fed cannot hike rates during a period of economic uncertainty.

The multiplier effect is working by a factor of 3x today, with gold shares skyrocketing by 8.65%.

Year to date, gold is only up 17% or so, but the median return for the gold sector is +141%. That’s one hell of a multiplier.

I believe this company is located in Staten Island, NY, so buyer beware.  The stock is higher by 45% this morning on much better than expected results, stemming from their deal with Walmart for their coffee brand ‘Cafe Caribe.’ They will be rolling out their product in Walmart store later this month, followed up by another 200 stores in an unnamed regional supermarket chain.

It’s worth noting their sales to Green Mountain Coffee, now privately held, were abysmal.

• Q2 EPS $0.14 vs. ($0.33) last year.
• Net sales -29% to $21,406,939, reflecting lower coffee prices during the quarter and reduced wholesale transactions with Keurig Green Mountain, Inc. of ~$8,158,000.
• Gross profit as a percentage of net sales increased to 15.5% for the three months ended April 30, 2016 from (3.6%) for the three months ended April 30, 2015, due to improved margins on our wholesale and roasted business as well as a decrease in losses quarter to quarter on our hedging operations.
• “sales of our flagship brand, Café Caribe, continue to increase in both existing and new markets, including our anticipated initial roll-out by Wal-Mart at an expected 400 stores later this month as well as an expected additional roll-out by a large regional supermarket chain at an expected 200 stores later this summer.”

Let’s wrap up this morning’s Fed and jobs report drama with one little blog post.

Coming into these jobs numbers, markets expected a July Fed rate hike, at least at a 58% chance of it happening. The June hike, in spite of all the Fed’s jawboning, was never priced into stocks.

The numbers came in very light, at 38k v 160k, likely because we’re entering into the teeth of a deleterious recession.

Now, the expectations for a June hike are at a clown car 4% and just 42% for July. This puts people like Charlie Evans, who said this morning the Fed should hike twice in 2016 in a bad spot. If the Fed opts to hike in June or July, it will be against the will of the market, something that should not go over very well for equity longs.

Fed’s Evans said in an interview this morning that two more rate hikes for 2016 is his forecast, but that doesn’t necessarily mean both should happen this summer.

Really?

That’s a bit disingenuous and  tone deaf, considering the fact we are in a Presidential election cycle and it’s customary for the Fed to refrain from jarring the economy ahead of it, due to preserving the facade of impartiality amongst the candidates.

“Two rate hikes in 2016, that’s my own call for that, if the data continue to be in line with my outlook, that’s a slow and gradual increase this year,” said Evans, an alternate member of the Federal Open Market Committee.
“Timing’s not really that important, you mentioned possibly two summer hikes, that would be a little bit more than I’d say is … priced in to the dots certainly and the market expectations,” Evans added.
“Timing’s not really that critical for my viewpoint, as long as by the end of this year we’re at just a little under 1 percent,” Evans added.

I guess the Fed can do one this summer and another in December, just before Xmas.

Merry fucking Xmas, in advance, jackasses. Santa Yellen has a special surprise coming for you.