Markets Closed Soft, Just Like Yellen

Today was a very polarizing day for stocks. There were two camps, with clear divisions. There were the have’s and have nots, in the new ‘Fed hiking this June’ world. The have’s were the banks, semis and healthcare names, while the have nots were gold, oil, copper, steel and retail.

Naturally, nothing this neat and organized ends up lasting. But the rationale behind these moves is that the banks profit from wider spreads, semis have great balance sheets, and healthcare doesn’t give a shit if rates are 0% or 40%. Costs are still going higher.

On the other end of the spectrum, anything commodity based got taken down because the dollar was strong and borrowing costs went up, which is especially harmful to industries with lots of debt. Speaking of which, retail is levered up with debt too, which is why it fell hard today. Both copper and steel are red herrings for the overall growth picture in China. A stronger dollar will cause dislocations in China’s FX chicanery, which is what occurred in early 2016. Remember? Ergo, this scenario bodes poorly for Chinese growth.

But the market wasn’t being entirely true to this mantra, with the Dow off by just 4 and the Nasdaq up 23. The market, with an infantile demeanor, wanted to have its cake and eat it too. Well, I’ve got news for you: this hogwash, abstract, that was passed on as intelligent market positioning today will not last.

It isn’t you getting the market wrong, but the market itself that is broken. I struggled with this new paradigm for more than 2 years, always second guessing my actions in the face of market moves that defied logic.

So here we are, post minutes, and markets are reeling on news the Fed is really serious about hiking rates. Well, duh. What did you think all of those fancy speeches were about?

Investors have their heads in the sand, or worse. The nanny state, created by the Fed and the plurality of policies that caused people to become reliant upon artificial forces, are to blame for this market being so nefariously wretched in its manner and mechanism.

“Most participants judged that if incoming data were consistent with economic growth picking up in the second quarter, labor markets continued to strengthen, and inflation making progress toward the committee’s 2 percent objective, then it likely would be appropriate for the committee to increase the target range for the federal funds rate in June,” according to the minutes.

Some policymakers were wary about a slowdown in U.S. economic growth during the first quarter, when gross domestic product expanded at a two-year low of 0.5 percent. But others argued that ongoing robust job growth suggested the economy was still on track and the growth data could be flawed.
“Most pointed to the steady improvement in the labor market as an indicator that the underlying pace of economic activity had likely not deteriorated,” according to the minutes.

Markets were up nearly 100, then down 100, now off by 50. Wherever it ends up, the outcome is the same. Markets are inexorably broken, a byproduct of a system enjoying the last throws of its monstrous success, teetering and flailing from the thousands of microscopic cracks in its structure that are starting to wear it down.

I’ll sit here waiting for the next Exodus oversold signal, patiently.

All you need to know about today’s bullish action is the big moves in the banks, coupled with upwards moves in government yields.

Banks benefit from higher yields, especially if the spreads widen. In the past, like yesterday, the market would freak the fuck out over the expectation of an impending rate hike.

Wall Street loves low rates.

But today, in all of its grind house splendor, stocks are rallying higher; because today, it’s a good thing that the Fed wants to hike rates 7 times through 2017.

I tip my hat to those of you who are able to deal with this chop, going out there like the maniacs you are and trading it. After doing it for two decades, in some of the craziest fucking trades and markets ever seen before, I am happy to say that I no longer have the desire to play checkers inside of the insane asylum.

This truly is fascinating. Imagine the indignation the c level execs feel now, being sued by nomadic desert people from a sparsely populated, unstable place like Libya. The one caveat, however, is that these barbarous savages control Libya’s $67 billion sovereign wealth fund, essentially money stolen by Gaddafi from the Libyan people. It’s worth noting, however, that infighting for control of the fund is ongoing in British courts (extra Bleak House). The funds have been frozen since Gaddafi was ousted 4 years ago.

Now the fund is going after all of the fuckers who did business with Gaddafi. In the case with Socgen, they claim $58.5 million in bribes were paid to a Panamanian based company to curry the favor of Gaddafi and the wealth fund.

In the ongoing litigation, the Libyan Investment Authority (LIA) is pursuing Societe Generale for some $2.1 billion in relation to a series of disputed trades, including derivatives, entered into between late 2007 and 2009, before Colonel Muammar Gaddafi was ousted.
The hearing may provide an update on the timing of the case, which was expected to go to trial in January 2017.
The LIA claims Societe Generale paid at least $58.5 million to a Panamanian-registered company called Lenaida for advisory services related to the disputed trades.
At the time, Lenaida was controlled by Libyan businessman Walid Giahmi, who is said to have been close to Gaddafi’s son Saif. Giahmi is also named as a defendant in the suit.
On April 8, 2014, the U.S. Department of Justice served Societe Generale with a subpoena requesting it produce documents relating to transactions with Libyan entities and individuals, including the LIA.
Societe Generale said it was cooperating with the U.S. authorities.

In regard to Goldman Sachs, the LIA merely states that Goldman conducted $1 billion in trades that were both ‘unsuitable and ultimately worthless.’

Goldman vehemently denies the allegations. I am sure they believe the trades were entirely suitable.

I told you so.

Dumb shits. This is KBIO all over again.

This is the sort of stuff that really draws my ire. Some fuckhead jobs site with a blog section posted an article that very confidently stated OXY was to purchase APA for a mere $25 bill, peanut shells.

My bullshit meter went fucking apeshit when I read it. But it was too early in the morning to lay into them. But after a few cups of coffee and some carbs, I think I’m ready to opine.

You fucking assholes.

37 | APA | (56.34 +1.22)
Apache shares see heavy pullback from pre-market highs; Hearing the company has issued a statement saying today’s town hall meeting referenced in the M&A article earlier refers to layoffs, not any potential M&A activity

The company held a townhall meeting to announce layoffs, not a fucking merger. I hope you enjoy chatting with the vultures over at the SEC.

The sages at Goldman published a strongly worded research note today, warning clients that the market is sheepishly awaiting to be executed by a psychotic Fed, who seem to be hell bent on higher rates. Moreover, they believe valuations are at peak levels and the risk-reward ratio doesn’t warrant outsized equity exposure, until economic growth suggests otherwise.

In short, gents, they see a storm coming. Time to board up the windows and stock up on dry goods and live out the rest of your days in the cellar.

“Until we see sustained signals of growth recovery, we do not feel comfortable taking equity risk, particularly as valuations are near peak levels,” the Goldman analysts wrote in their research published on May 17. “Our equity strategists have become more defensive, owing to heightened drawdown risk and growth scarcity.”

The firm remains overweight cash mainly due to the market ‘only’ expecting zero or one additional interest rate hike from the Federal Reserve through the rest of 2016.

“We believe the market’s dovish pricing of the Fed increases rate shock risk, in which case both equity and bonds could sell off. We are also not convinced the emerging market rally is sustainable,” the analysts said, echoing some of the recent sentiment expressed by Jan Hatzius, Goldman’s chief economist

Their model allocation.

Reg FD anyone?

Nestled away in the bowels of an obscure oil and gas jobs site is the ho hum news of a fucking $25 billion mega merger, between Occidental Petroleum and Apache.

Oil and Gas People Exclusive: Occidental Petroleum are about to announce they are taking over Apache Corporation in a deal thought to be worth at least $25 Billion. Apache Corporation have called a town hall meeting today where they are expected to announce the takeover to their staff.

It’s too early for this shit.

Shares of APA are surging.

I guess they didn’t have the testicular fortitude to compete and simply ceded share to others.

The Target miss, although delightful and meaningful, is just another notch in Jeff Bezos belt of disasters being afflicted unto others by Amazon. Jeff and his wacky eyes probably bulge with glee after reading these horrid earnings reports.

Nevertheless, earnings power is still strong at Target, but comps and guidance are coming down…a lot.

As such, shares are being harrowed in the pre-market, as the stock plunges towards annual lows.

Via Briefing

Reports Q1 (Apr) earnings of $1.29 per share, excluding non-recurring items, $0.10 better than the Capital IQ Consensus of $1.19; revenues fell 5.4% year/year to $16.2 bln vs the $16.31 bln Capital IQ Consensus.

Comps +1.2% vs. +1.5-2.5% guidance (estimates near +1.6%); more than offset by the impact of the sale of the pharmacy and clinic businesses.

Comparable digital channel sales grew 23% and contributed 0.6 % points to comparable sales growth.
EBIT +4.9% to $1.32 bln.

EBITDA and EBIT margin rates were 11.5% and 8.2%, respectively, compared with 10.5% and 7.4%, respectively, in 2015.
First quarter gross margin rate was 30.9%, compared with 30.4% in 2015, reflecting the benefit of the sale of the Company’s pharmacy and clinic businesses, combined with the benefit of the Company’s cost savings initiatives, partially offset by investments in promotions.

Co issues downside guidance for Q2, sees EPS of $1.00-1.20, excluding non-recurring items, vs. $1.36 Capital IQ Consensus; comps flat to down 2% vs. ests near +1.9%.

Co sees FY17 EPS within $5.20-5.40 prior range achievable, excluding non-recurring items, vs. $5.27 Capital IQ Consensus Estimate.

Forget about gold, silver and oil. Those are idiot commodities. The true industrial commodity, one that has accurately predicted both rallies and drops, is copper.

Plain and simple, the recent price action has been raising eyebrows around many dinner tables in recent weeks, sometimes more than eyebrow at a time, if you could believe that.

I’m sure it means nothing at all. Maybe China found a way to grow without copper.