Janet Yellen Warns of Corporate Fuckeries and Wanton Indebtedness

Want the worse case scenario wrapped up in a nice bow, you lazy fuckers? Well here it is — your generations crash to come — the reason you’ll hate the essence of life and America — the thing you didn’t see coming until it happened.

Heading into 2007, the Fed hiked rates 17 times, from 1% to 5.25%, until it broke the housing market. We all saw it coming. You didn’t need to be smart or keen to know it was going to cause dislocations. Those on Wall Street at the time knew of the CMOs and CLOs, the CDOs that were neatly tucked away like little time bombs, patiently waiting in the midst to destroy the world. Since the crash of 2008, Wall Street has been borrowing more money than ever. As a point in fact, corporate debt has more than trebled and that’s so wonderful for stock buybacks and bonuses, and expansion — the hiring of unlimited amounts of salesmen designed to propel growth to new heights — the effervescent temerity that kept the whores of Babylon content these past 10 years.

This out tonight: Janet Yellen warns of poor underwriting on America’s $9 trillion + problem.

“Corporate indebtedness is now quite high and I think it’s a danger that if there’s something else that causes a downturn, that high levels of corporate leverage could prolong the downturn and lead to lots of bankruptcies in the non-financial corporate sector,” Yellen told economist and New York Times columnist Paul Krugman at the City University of New York on Monday.

“I think a lot of the underwriting of that debt is weak. I think investors hold it in packages like the subprime packages … the same thing has happened. It’s called CLOs, or collateralized loan obligations,” she added.

The comparison to the infamous practice of securitizing large amounts of subprime mortgage loans into bundles may spook some investors who recall the consequences of the housing crisis between 2007 and 2010. Corporate indebtedness has ballooned in recent years, with companies now carrying a $9.1 trillion debt load compared to just $4.9 trillion in 2007.

What splendour! What gravitational fuckery! What wonder!

This is precisely what you want to see in a downward spiraling tape: a boring close. Nothing too crazy. Heck, even the Russell closed lower on the day. Breadth was abysmal and nothing really looks good — aside from SAAS.

Bulls need at a minimum 2 more up days — strong from open to close. We need some hollow candles on those charts. Volume isn’t necessary, just price stabilization. There are leadership stocks in software readying to shoot higher. All we need is a little Fezziwhig joy and Xmas spirit and off we go.

Recapping what I did today: I covered all of my shorts this morning and re-upped my position on TLT to maximum and bought some NUGT. My cash is 60%.

If I see stocks open strong tomorrow, I will very likely allocate heavily on the long side.

This is the biggest crock of shit rally in stocks in a long time.

Get this. A ‘rogue court’ in authoritarian China banned QCOM and AAPL from selling in China, so both Apple and Qualcomm appealed, and both stocks reversed and went higher.

A Chinese court has banned the sale and import of most iPhone models in a stunning decision sure to escalate the nasty trade war between the United States and China.

The ban does not cover the new iPhone XS, iPhone XS Plus or iPhone XR, which were not yet available when Qualcomm filed its lawsuit. The phones covered by the ban make up about 10% to 15% of current iPhone sales in China, according to Daniel Ives, analyst at Wedbush Securities.

The court granted a pair of preliminary injunctions requested by Qualcomm, an American microchip maker. Qualcomm claims that Apple violates two of its patents in the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X. The patents allow people to edit and resize photos on a phone and to manage apps by using a touchscreen, according to Qualcomm.

The practical effect of the injunction is not yet clear. The ruling was announced publicly Monday but put into effect last week, but Apple said in a statement that all iPhone models remain available in China.

“If Apple is violating the orders, Qualcomm will seek enforcement of the orders through enforcement tribunals that are part of the Chinese court system,” Don Rosenberg, general counsel for Qualcomm, said in a statement.
Apple accused Qualcomm of playing dirty tricks, including asserting a patent that had already been invalidated by international courts, and other patents that it had never before used. Apple said it will pursue a legal response in court.

“Qualcomm’s effort to ban our products is another desperate move by a company whose illegal practices are under investigation by regulators around the world,” Apple said.

Apple on Monday filed a request for the court to reconsider its decision. Qualcomm applauded the ruling, saying Apple owes it money for using its technology.

“We deeply value our relationships with customers, rarely resorting to the courts for assistance, but we also have an abiding belief in the need to protect intellectual property rights,” Don Rosenberg, general counsel for Qualcomm, said in a statement. “Apple continues to benefit from our intellectual property while refusing to compensate us.”

Here’s how traders should be viewing this news: fucking terribly. Unlike what Cramer is saying, I think this is a major shot across America’s bow. This isn’t a material court injunction, but most likely a foreshadowing of things to come. If you think we can shut down China without reciprocity, you’re fucking insane.

That being said, we’re oversold and very overdue a reversal.

I increased my TLT position to 15% of my trading account and bought some NUGT, to go along with my miner positions in KL, AU, and WPM.

Very simply put: there is nothing remotely interesting about playing the long side here. The easy money has been made short — but I suspect asset allocators are going to be looking for safe haven now, especially since old man stocks are selling off too. This bodes especially terrific for gold, which is now the defacto safe haven currency with bitcoin in shambles.

The Dow is down a lot more than the Nasdaq today — because there is strength in many software names, especially SAAS. I’d advise you to take it with a grain of salt and use any strength to raise cash.

My cash is now 60%.

NOTE: Starting tomorrow, my Capstone Programme begins. What this means for readers, frankly, is a little less Fly. I will be posting in Exodus when time permits and then here on the grifter blog. If you require more of Le Fly, sign up to Exodus or Capstone — you damned misers.

I sold both LABD and SOXS for 5%+ gains. The SOXS position was a 15% holding, so the gain was nice. I sold because we were down over 200 and semis were still strong. The logic is obvious. Any reversion in the market will be led higher by semis. Ergo, it was my obligation to close out those positions.

There is a bit of a conundrum in stocks now. The technicals are dreadful, very late 2007ish. However, we’re oversold and shorting into OS tapes is stupid. I’d prefer to short more into a rally — because in a bear market rallied fail.

We’re rangebound, but inside of this range are large red candles, indicative of major distribution. Even though I closed out my shorts, I am not willing to buy yet. There is always the risk we leg lower outside of this range. If that should happen, my shorts will be applied like a figure four fucking leg lock, in fairly short order. To get me long again, in my trading account, I’d need to see an exhaustion day, a really do nothing day following an early sell off. A little boredom is needed.

It’s also worth noting, old man stocks have broken their uptrend and the only safe havens are gold and bonds.

Any idea how horrible that is?

I stepped in and bought a lot more TLT here, seeing it’s the safest way to keep my money safe.

Cash is now ~60%.

If you would only hearken back to the halcyon days of 2008 when men were men, you’d see the pattern then repeating itself now. We’re in a FAGBOX, chopping around, after confirming a head and shoulders top. I know technical analysis can be tedious, so let me describe this to you in real terms.

Stocks were doing really well for a long time and people made a lot of money. Then they dropped, tried to get back up, and then dropped again. Only this time, the decline was accompanied by some fear, which made it drop even more. Now we’re in a range, vacillating around, unhealthily, obviously waiting for another leg lower.

The bias is to the downside, especially with strong bonds, gold, and weak oil. We can rally hundreds of points from here and still be in a range. In the past, these ranges are often extended for several months and then broken in dramatic fashion. My best guess — much lower by mid- January.

In an amazing feat of claw-back excellence, the law firm Picard has managed to regain ALL LOSSES for Madoff’s many powerful victims. At the height of his scheme, the fund was worth $65b, of that $19-20b was principle.

The law firm Picard is very close indeed to making a full recovery.

“That kind of recovery is extraordinary and atypical,” said Kathy Bazoian Phelps, a bankruptcy lawyer at Diamond McCarthy LLP in Los Angeles who isn’t involved in the case. Recoveries in Ponzi schemes range from 5 percent to 30 percent, and many victims don’t get anything, Phelps said.

What’s equally amazing is the fees Picard has been able to siphon from the public via SIPC.

For its work, the trustee’s firm has been paid $1.67 billion over the past decade by SIPC, not from the customer funds. The industry group also provided $639 million in advances—up to $500,000 each—to victims who were waiting for claims to be paid.

Some people never lose. Happy holiday’s to Madoff victims.

All of the writing that we’re in a bear market is on the wall. However, even with that being said, nothing goes straight up or down. This generations Lehman or General Electric and the boogey man resides in high yield and the enormous amount of debt on corporate balance sheets. Those worry about student debt are foolish. However, if this drama with China doesn’t recede, there is a real threat to America’s top universities who host scores of intelligent Chinese students.

Expect a lot of chop inside of this downward and do not anticipate a reversal to the upside anytime soon. Most spikes will likely be met with trepidation and end up failing. Trump’s two magic bullets, the China trade war deal and Fed pause have been expended. If he doesn’t broker a deal with China soon, this market is going to get fucked in a way you’ve never seen before. More than $150 billion in US sales are born in China and not having that strong trading relationship, in spite of how unfair it was, will cause irreparable damage to our multi-nationals and also the US consumer — who will inevitably get hit with price hikes.

The manner of this downturn is pretty standard, with losses stacked in the smaller cap stocks. But it’s also worth noting, Tootsie Roll is the big winner the past three months. If you look at those defensive stocks now, you’ll notice they’re also struggling here — which has created an environment with our safe havens.

I barrel into tomorrow a strong man — heavily long SOXS, LABD, TLT, and gold. I will most likely book profits tomorrow, however, as I suspect the market will soon consolidate recent losses before making a fresh leg lower. The true action, mark my words, lies ahead for us in January.

My sessions begin next week. Don’t be scared — I’m quite affable.

Here’s what I want to go over first.

I spent some time and created some decks highlighting the many reasons you need to fear for a bear market. Many of these things have been talked about before, but none as eloquent and with poise as I am prepared to orate.

The second is the most important subject for any trader, beginner to expert.  It’s the psychological aspects of trading — knowing when to buy and sell and how to think about positions and/or strategies. It is the foundation from which everything else will be formulated on. Without being sound minded and having clear goals, you’re building a house of cards destined to fail. I know because I too failed before and have seen dozens of good friends and family beguiled by the same rigors.

The last topic for next week will be a technical look at the markets — by presenting some data. What are the most important sectors, stocks, data points, to pay attention to? How will we know if any bounce is legit or a head fake? WHAT IN THE FUCK IS GOING ON? I intend to broach all of these subjects, AND MORE.

You can join Capstone and cancel if you’re only interested in one session. That’s fine. It’s a subscription based service that is designed to put members thru a Fly styled boot camp. At the end of 12 months, I expect you to curse wildly whilst drinking gimlets, reading from leather-bound books, and smoking an nice estate pipe — women too.

It appears the attorneys for Meng Wanzhou are having a difficult time convincing the Canadian that their client isn’t a flight risk. Part of that concern might stem from the fact that her crimes are political in nature, based upon sanctions are are wholly subjective. She was tossed back into her cell on Friday, to face the judge on Monday. I suspect she will be held without bail, in spite of the fact that she’s willing to wear an ankle bracelet, surrender her passports, and live in Canada until the trial is finished.

China is not amused.

Chinese Vice Foreign Minister Le Yucheng summoned Canada’s ambassador to Beijing, John McCallum, on Saturday to deliver the warning, according to a statement from the Chinese Foreign Ministry.

The statement doesn’t mention the name of Huawei’s chief financial officer, Meng Wanzhou, though it refers to a Huawei “principal” taken into custody at U.S. request while changing planes in Vancouver, as was Ms. Meng. The statement accuses Canada of “severely violating the legal, legitimate rights of a Chinese citizen” and demands the person’s release.

“Otherwise there will be severe consequences, and Canada must bear the full responsibility,” said the statement, which was posted online late Saturday.

Phone calls to the Canadian Embassy rang unanswered while the Canadian government’s global affairs media office didn’t immediately respond to an email request for comment.

What ‘severe’ measure might China take? Will they, perhaps, stop making toys for them, or cease buying their oil. Or will they, by chance, attack Vancouver with their missiles and burn it to the ground? I think not.

In a statement cited by official news agency Xinhua, China’s Vice Foreign Minister Le Yucheng said Meng’s detention was a “severe violation” of her rights and interests as a Chinese citizen.

“Such a move ignores the law and is unreasonable, unconscionable, and vile in nature,” the news agency quoted Le as saying in the statement.