China Burns Yuan Short Sellers to the Ground

The popular trade to bet against the Chinese currency has gone awry, laying waste to scores of hedge funds who bet against the command economy. There was nothing short of tumult about a month ago, as capital fled the country at a record pace, forcing the government to use its forex reserves to defend the currency.

Over the past month, they’ve been largely successful in reversing the trend, sending the yuan to 4 month highs. The net result, for hedge funds like Pershing Square?

Hundreds of millions in losses.

Seven months after a shock devaluation spurred hedge funds and other speculators to wager on further declines, the yuan’s unexpected resilience has turned many of those bets into losers. At least $562 million of options that pay out if the currency drops below 6.6 per dollar — its weakest point since the devaluation — have expired worthless since August. Another $807 million will lapse within three months.

While those figures provide just a glimpse into the potential losses for pessimistic speculators, what’s clear is that the Chinese government has proven a stronger adversary than many traders anticipated. Policy makers have gone to extreme lengths to prop up the yuan — ramping up intervention, clamping down on capital outflows and waging a rare verbal campaign to restore confidence in the currency. Bears now face a difficult choice: They can abandon the trade, or hunker down for what could become a costly waiting game.

“China wants to have control over the yuan and will do whatever it can to ensure that no one else decides what direction it goes in,” said Hilmi Unver, the head of alternative investments at Notz Stucki & Cie, a Swiss money manager that allocates $3 billion to hedge funds on behalf of clients. “Is it worth fighting against a huge economy and policy maker that could take you out? No.”

Betting against first world governments is a hard trade, one that should be considered a black swan event. For those who lost money in betting against the yuan, hoping the Chinese would capitulate, you deserve everything you’ve received, and more.

I’d like to take a break from dividing and conquering the readers of iBankCoin by moving away from the political jargon to remind you that doom is just around the bend.

In spite of the fact that oil has been on an effervescent run higher, the balance sheets of scores of high cost producers are racked with an unsustainable amount of debt.

Crude oil at $28 or $40 isn’t enough to stop the inevitable.

Bondholders are paying dearly for backing a shale boom that was built on high-yield credit. Since the start of 2015, 48 oil and gas producers have gone bankrupt owing more than $17 billion, according to law firm Haynes and Boone. Fitch Ratings Ltd. predicts $70 billion of energy, metal and mining defaults this year, and notes that $77 billion of energy bonds are bid below 50 cents, according to a note Thursday.

A representative at Energy XXI declined to comment. Representatives for SandRidge and Goodrich didn’t respond to requests seeking comment.

“Absent a material improvement in oil and gas prices or a refinancing or some restructuring of our debt obligations or other improvement in liquidity, we may seek bankruptcy protection,” Energy XXI said in a March 7 public filing.

Restructuring Plan

Goodrich Petroleum is asking shareholders and bond investors to approve a restructuring deal that would convert its unsecured debt and preferred shares into common stock. For the plan to work, shareholders must approve it at a March 14 meeting and enough bondholders need to participate by the March 16 exchange deadline.

“Absent a successful completion of the recapitalization plan, the company will have no alternatives other than to seek protection through the bankruptcy courts,” Walter Goodrich, chairman and chief executive officer, said on a March 9 conference call.

Missed interest payments and potential defaults include:

Energy XXI, with $2.875 billion in debt, and SandRidge Energy, which owes $4.131 billion, both failed to pay interest due Feb. 16 and will default unless they reach agreements with their creditors by March 17.

Ultra Petroleum, which owes $3.197 billion, said last week it has until April 30 to hammer out a deal with its lenders.

Goodrich Petroleum, which owes $455 million, said this week that it won’t pay interest due March 15 and April 1, and that it’s asking bondholders and shareholders to participate in a restructuring plan.

Chaparral Energy Inc., with $1.798 billion in debt, missed a payment on March 1, starting the clock on a 30-day grace period.

Pacific Exploration & Production Corp., with $5.428 billion in debt, likewise has until the end of the month under an extension granted by its creditors.

Venoco Inc., facing $708 million in debt, skipped an interest payment last month. The company must cut a deal with creditors by March 17.

Warren Resources Inc., which owes $453 million, said last month that it may file bankruptcy without a creditor deal. The company faced a default on March 2, when a 30-day grace period for a missed interest period had been set to expire.

A representative at Pacific declined to comment, and one at Warren Resources said the company would release more information about its restructuring at a later time. Representatives for Ultra Petroleum, Chaparral and Venoco didn’t return calls and e-mails requesting comment.

“Asset managers bought the story that we’d have $100 oil forever,” said Tim Gramatovich, chief investment officer with Peritus Asset Management in Santa Barbara. “Bondholders are left holding the bag.”

Gonna get those millionaire and billionaires out and replace them with these fuckheads.

The Bernard Sanders people need to remember to take their psychotropics before heading outside.

Following yesterday’s “disturbance” in Chicago, the decepticon democrats are out and about trying to destroy Optimus Prime aka Trump in Ohio.

This is the preferred movie for Trump protesters, everywhere. Before heading out to throw beer bottles at police officers, they watch Al Pacino in Scarface, masterfully playing a Cuban drug lord (no Rubio) whilst consuming inhuman levels of cocaine through his nose.

This movie will forever be endeared by criminals, for it paints a vivid and vibrant picture of how one could go from rags to riches, in the cocaine business, without being sawed in half by a chinasaw inside some seedy hotel room.

This movie has it all: ambition, success, absurd violence, corruption, revenge: The American Dream!

This is a spectacle. The people from Chicago are a reprehensible lot. Thousands of B. Sanders/ H. Clinton supporters and every day beer guzzling morons, took to the streets in a most violent manner to shut down Trump’s rally.

Trump canceled the event, which was to be attended by 25,000 people due to security concerns.

The vast majority of these people are a barbarous sort, marijuana smoking vagabonds in search of strong alcoholic beverage. As you can see by the video below, a good number of these booze hounds have found said beverages and have subsequently cast aside decorum in favor of wanton depravity.

A revolution is coming. It’s time for America to become great again. Moreover and most importantly, it’s time for a 1,000 mile wall to be constructed at the Mexican border, paid for by the tax payers of Mexico.

The peace loving Obama-ites in Chicago have taken to the streets, outraged that Donald J. Trump decided to hold a rally in their wretched city. The reason? I am sure the black people of Chicago are terribly concerned for the Mexicans down south attempting to enter the country. With the specter of the wall being built, there is a good chance that they will not be able to enter, unfettered, anymore.

Naturally, the liberal minded folks in Chicago are very concerned for the human rights of others, whilst punching Trump supporters in the face and then shooting their guns into the torsos of their neighbors.

THE BARBARIANS ARE AT THE GATES.

Depravity is back. With the ECB in the market for all of the corporate debt in the world, investors are panicking for yield, scouring their local newspapers for common stock opportunities that might offer a better return than zero.

The NASDAQ raced higher by 86, spearheaded by oil stocks, which are now higher by 28% over the past two weeks.

Everything lifted, sans gold and bonds, as 81% of stocks traded higher, converging from the wretched breadth endured during yesterday’s session.

Optimism, for lack of a more appropriate word, is back. Even money hemorrhaging biotechs are in vogue.

The winter has passed and warmer climes are just over the horizon. Let’s just hope the sun isn’t too hot and your car isn’t made from dynamite sticks, else you might blow up and mushroom cloud into the after-life.

Over the past two days Exodus has been flagging the financials oversold. I discussed it briefly, due to the very accurate history of the signals. Today the banks are running like freed slaves. I do not claim victory in this endeavor, as I didn’t have a horse in the race. Perhaps if I wasn’t so stubborn, I would’ve done something about it. But that’s another matter to be worked out with my inner demons.

Today, there is another interesting call being made and I am going to tell you what it is, in spite of a certain fuckhead who’s been menacing me with his childish complaints.

This should come as no surprise to you, so I feel at liberty to discuss it. We all know that oil and gas stocks are overbought. The only question you should have  is how does one quantify it and what are the past results of selling short into overbought levels, such as now?

This signal is flawless by the 5th trading day; which means if you shorted it on Monday, you should expect profits by the first day of the following week. Some of the levered ETFs, like ERX, are overbought too and the potential profits of leveraging this trade is tempting. But short squeezes are brutal affairs and it’s best not to get too aggressive while these little speedboats are racing across the waters.

Wait for them to hit a rock, then pounce on them with medieval intentions. Moor their little ships and then crush them into the octopi infested waters.

Who wants to get American boots on the ground? The junior varsity ‘B-team’ as Obama like to call them, ISIS, reportedly used the chemical agent known as ‘mustard gas’ in a recent attack near Kirkuk.

“The random gas attack against the town of Taza is a big crime and the response will be tough,” Abadi said in a statement posted on his website on Friday. He said he sent a team of medics to Taza, south of Kirkuk.

Rudaw news agency reported that mustard gas was used in the assault, which took place on Wednesday and killed a 3-year-old girl, citing local health department official Burhan Abdullah. Dozens of people were wounded and some are in a serious condition, Rudaw said.

Fuckheads like Rubio and Cruz want to send troops to that hell hole, in order to secure, well, hell.

No thanks. Indiscriminate bombing from low altitudes works for me.