Cramer: ‘We Have Oil Coming Out of Our Eyeballs’

I am going to challenge Cramer’s thesis here, featured in the video below, that the market is insane for following oil lower and that a drop in oil isn’t truly a harbinger of poor economic output anymore because, well umm, technical innovation is causing people to use less crude.  My core concern for a sharply lower stock market was never predicated around a pure economic downturn, but a bursting of a gigantic, cataclysmic, trillion dollar energy bubble that was built on the backs of much higher oil prices. I don’t give a shit if companies, like Cramer suggested, have found ways to drill oil cheaply, when the issue here is tied to debt loads and sovereign government that cannot  survive or refinance their debt at $40 crude.

If we were to take Cramer’s pollyanna view of energy seriously and suggest that technological innovation is truly advancing at a pace that will decoupled economic output from crude consumption numbers, then our friends in the middle east and the wide swath of energy companies with gigantic debt loads out there are far more doomed than even I previously expected.

They will drill as much and as fast as possible, selling at any price, knowing that prices are heading lower–due to a sweeping drop in demand. It will be like one gigantic margin call where Quatar, Iran, UAE, Saudi Arabia, Russia and American oil conglomerates all throw oil at the markets at once, in order to unload inventory.

Prices will crash. Banks will get severely ruined. Markets will drop. Economic activity will grind to a halt. The end.

I’ve seen this company do this for the past decade and always come out ahead, at the end of the proverbial day. Alongside TEAM, CRM is the best publicly traded software company on the market. But tonight’s earnings were a little soft, in terms of guidance, so investors are bailing on the stock–sending it lower by 8%.

• Reports Q2 (Jul) earnings of $0.24 per share, excluding non-recurring items, $0.02 better than the Capital IQ Consensus of $0.22; revenues rose 25.0% year/year to $2.04 bln vs the $2.02 bln Capital IQ Consensus.
  • Subscription and support revenues were $1.89 billion, an increase of 24% y/y.
  • Professional services and other revenues were $151 million, an increase of 33% y/y.
  • Cash generated from operations was $251 million, a decrease of 18% y/y. Total cash, cash equivalents and marketable securities finished the quarter at $1.72 billion.
  • Deferred revenue on the balance sheet as of July 31, 2016 was $3.82 billion, an increase of 26% y/y, and 27% in constant currency. Unbilled deferred revenue, representing business that is contracted but unbilled and off balance sheet, ended the second quarter at approximately $8.0 billion, up 29% y/y. This includes approximately $300 million related to unbilled deferred revenue from the Demandware acquisition.
• Issues downside guidance for Q3, sees EPS of $0.20-0.21, excluding non-recurring items, vs. $0.24 Capital IQ Consensus Estimate; sees Q3 revs of $2.11-2.12 bln vs. $2.13 bln Capital IQ Consensus Estimate.
• Co issues guidance for FY17, reaffirms EPS of $0.93-0.95, excluding non-recurring items, vs. $0.95 Capital IQ Consensus Estimate; raises FY17 revs to $8.275-8.325 bln (prior $8.26-8.32 bln) but still below $8.35 bln Capital IQ Consensus Estimate.

If I’m a long term investor of CRM, there’s no way I am selling on this tepid guide down in guidance. Year to date, the stock is flat for the year, but higher by 17% over the past 6 months.

Why would China sit back and watch Europe, Japan and the U.S. enjoy all of the fun, without partaking in some hijinx themselves?

Jefferies is out with a report that says recent actions by the PBOC to expand lending facilities to state owned banks is QE, in a backdoor, secretive fashion.

Essentially, China is increasing the amount of money they’re lending to state owned banks, who in turn take the money to buy Chinese gov’t bonds. China takes the money, says ‘thank you very much’, and then spends it on making fucking islands in the middle of the China Sea.

The analysts say the PBOC has increased lending to state-owned banks, with the latter subsequently snapping up Chinese government bonds aided, in part, by the central bank’s liquidity infusions.

In order to offset the contraction of the PBOC’s balance sheet due to capital outflows and dollar repayments, the central bank engaged in a form of ‘backdoor QE’ in our view. Alongside the introduction of short-term monetary instruments such as Medium-term Lending Facility (MLF) and Standing Lending Facility (SLF), the PBOC has moved away from using conventional interest rate and RRR cuts.

Wei Yao, China economist at Societe Generale SA, adds: “You might not want to call this QE as it’s not a textbook definition, especially since reliance on these new and short-dated instruments, relative to the average-weighted maturity of Chinese government bonds, would expose banks to duration mis-matches.” But she adds that the introduction of new lending instruments should be seen in a bigger context: “The PBOC is transforming its balance sheet to that of a Western central bank by increasing the weight allocated to domestic assets.”

How wonderful.

QE for life. Get in the matrix.

Central banks will continue to conduct QE operations, indefinitely, because they’ve proven to keep yields low, markets high, and the people docile.

My favorite part of today’s commentary was when the Prince of the Marinated Iced Cube said Saudi Arabia needed to pull oil out of the ground and sell it at whatever price, because in 10-20 years it might not have much value at all.

The catamites in Italy are taking bold steps to fight terrorist threats in the country, foisted upon them by unchecked migration of people from war stricken areas in the middled east.

Starting mid-September, over 500,000 18 year olds in Italy (EU citizens only, thanks) will be eligible to receive vouchers of $500, redeemable at museums, concerts, and cinema.

The fuckery is strong in Italy.

“It sends a clear message — a welcome for those who reach the age of 18 and a reminder of how crucial culture is, both for personal enrichment and for strengthening the social fabric of the country,” Tommaso Nannicini, the official in charge of the program, was quoted as saying last week.

According to the Italian government, the program is also intended to send a message to militant groups. When the scheme was announced last year, Prime Minister Matteo Renzi implied that extremists should be countered not only militarily, but also ideologically. The announcement came days after militant attacks in Paris killed at least 130 people. “They imagine terror, we answer with culture. They destroy statues, we love art. They destroy books, we are the country of libraries,” Renzi reportedly said, referring to a “cultural battle.”

But Italy’s approach is viewed as unprecedented: The government expects to spend about $300 million on the program, depending on how many eligible recipients claim the money. Theoretically, all 18-year-old European Union citizens living in Italy are allowed to apply. The program runs out at the end of next year.

Opposition parties have criticized the scheme as populist, but counterterrorism experts and international observers say it could be more effective than some other past efforts to counter youth radicalization.

Although the program was launched with the declared intent to counter radicalization efforts, the government has since been careful to label it a “culture bonus.”

“It is hard to say what is the best approach. But what we can say is what is the wrong one: a spying system that stigmatizes and excludes people,” Maina Kiai, the U.N. special rapporteur on the rights to freedom of peaceful assembly and of association, said in a recent interview that focused on counter-radicalization schemes in Europe.

So, in summary, instead of spying on citizens of Europe, trying to find criminal elements in the country who are intent on blowing up people in cafes, they’re going to hug them, toss flowers at their AK-47s, and send them to the movies–gratis. I am certain that this ‘culture bonus’ is a secret way of tossing money out of helicopters, without actually saying they’re doing it. This is a trial run for a much larger programme.

Before you start celebrating the end of the bull market, just know that the government has one more trick up its sleeve: FRIDAY’S JOBS REPORT.

Please recall that it was the May jobs report that got the Fed off the hook of hiking rates. After that report, markets ripped higher on the prospect of a very easy and accommodative policy. Ever since the economy has been showing signs of strength, the fucking assholes who control this market like muppets have been keeping stocks in a very tight range, as if to say ‘go ahead, fuck with me.’

It’s worth noting that the Fed has never hiked rates without the market already pricing it in. It’s not a conspiracy theory to say the Fed is entirely beholden to equity markets and has no power to control policy, without first gaining permission from the stock Gods.

Right now, the market is pricing in a 35% chance of a September hike. El Erian thinks that number is more like 60% and says it will spike to 80%, if in fact the Friday’s jobs report comes in strong.

In short, let’s all pray, in unison, that jobs were lost in the month of August, and that men and women were tossed out onto the scorching hot concrete by employers and told to ‘fuck off’, as their jobs were shipped off to Mexico to lower wage workers. If our prayers are answered, retroactively (extra EU), we will all enjoy splendour and hedonistic ascension in the stocked market.

Cramer paints the EU has a low sort of unsophisticated rubes, desperate and craven from cash. David Faber brings up the U.S. Treasury interfering with the proposed PFE-AGN deal and posits the question if the EU was getting revenge on America for that display for retroactive fuckery.

The Dow isn’t even down 100, but there is panic in the streets. Market breadth stands at a paltry 24% and the VIX is spiking today. With markets down 5 out of the past 6 days, investors are starting to take journeys to the Joshua Tree, or the Burning Man, in order to find the definition of life.

Investing isn’t supposed to be filled with pauses and downfalls. It’s supposed to be gay giraffes driving iced cream trucks, while listening to Cold Play.

You little shits have had it too good for too long. It’s time for a little risk reversion.

The stupid VIX index is lifting, but nowhere near panic levels.

Here are today’s leading ETFs, all of which are bearish.

So who did it?

The media was sucking Obama’s dick yesterday for killing an ISIS leader. Today, Russia issues a statement, calling bullshit on US reports, suggesting it was their raids that killed him.

This appeared to contradict the US statement which said that Adnani was targeted by coalition forces conducting a ‘precision strike near Al Bab, Syria’, 16 miles from where the Russians said they had killed him.

The Pentagon said yesterday: ‘We are still assessing the results of the strike, but Al-Adnani’s removal from the battlefield would mark another significant blow to ISIL. Al-Adnani has served as principal architect of ISIL’s external operations and as ISIL’s chief spokesman. He has coordinated the movement of ISIL fighters, directly encouraged lone-wolf attacks on civilians and members of the military and actively recruited new ISIL members.’

Maybe Obama should press the reset button with Putin again.

There was nothing good about this report, because the world is awash in crude. During the decline in crude, thus far, only marginal players, pikers who are rarely invited to galas in Houston, have been wiped out. All of the majors are drilling more than fucking ever, including all of OPEC.

Crude oil inventories had a build of +2.276 mln (consensus called for a build of +0.921 mln barrels)

Keep buying crude, you stupid shits. By fall, you’re gonna get the skin from your face ripped off and your skull stomped out into clown dust.