Tuesday, November 24, 2015
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I sold out of my COST trading position and redeployed those assets into more FCX, SHAK, PAH and I started a new position in VRX.

There’s too much smart money in VRX for this to be a scam. The most likely scenario is, the big scam are the lies that are being purported by the media. If it was just Ackman in VRX, I’d consider the fact that he might be Ron Johnson wrong on VRX.

But there’s too many very capable and competent managers long the stock.

It goes higher.

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Death Come to Us All: $KBIO Has Crashed


The party is over. Just stay away from this stock. It’s 100% scam.


That’s what they call a ‘widow maker’ in my business. Do yourselves a favor and stick to market caps greater than a billion, just as a rule of thumb. You’ll save yourself a lot of heartache.

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Goldman Predicts the Future and There’s a Boatload of Money In It


Goldman is out with a research note, of the crystal ball varietal–predicting US corporations will spend upwards of $2 trillion next year. They even bothered to tell us exactly how it might play out.


1. Capital expenditure, research and development
Goldman is calling for $650 billion in capex and $256 billion in R&D spending, reflecting growth of 1 percent and 5 percent respectively. The firm points out that the energy sector accounts for 30 percent of S&P 500 capex, which means “lower for longer” oil prices are weighing on capital spending. “Our forecast of a roughly $50 per barrel Brent crude price in 2016 and recently slashed spending budgets by both Chevron and Exxon suggest a further decline of 20 percent in energy capex during 2016,” the team says in the note. R&D is a different story, however, with energy only accounting for 2 percent of total S&P 500 R&D spending.

2. Mergers and acquisitions
After a blockbuster 2015, Goldman expects cash M&A spending to come in at $300 billion in 2016, that’s an 8 percent increase but still lower than previous growth rates. “The pace of growth in S&P 500 cash M&A spending will decelerate in 2016 relative to the 50 percent surge experienced in 2015. Although two months of the year still remain, cash M&A has totaled $191 billion year-to-date, higher than the 2014 full-year total of $185 billion. Healthcare accounted for almost 50 percent of cash deal activity this year. We expect cash M&A during the second half will decelerate considerably relative to activity in the first half,” Kostin and team say.

3. Buybacks, buybacks and more buybacks
Goldman says companies will spend $608 billion on buybacks in 2016 even in the face of increasing valuations. “Despite weak activity during the first half of 2015, buyback activity will remain robust. Following 9 percent growth in 2014 and an estimated 10 percent growth in 2015, we expect S&P 500 gross buybacks will rise by another 7 percent to $608 billion in 2016. More than 80 percent of S&P 500 firms engage in share repurchases, roughly double the number of firms buying back stock 20 years ago.”

4. Dividends for everyone
Led by financials and tech, Goldman expects dividends to increase 7 percent to $432 billion. “Consensus forecasts imply that the financials sector will grow dividends by 10 percent in 2016, the highest growth rate of any sector, while energy dividends are expected to come under pressure. Slowing global growth has weighed on long-term dividend prospects,” the note says.
Goldman has some recommendations for investors seeking to capitalize on its spending predictions. Even though the bank has vocally opposed hefty buybacks, the analysts recommend investors buy firms that have high total cash returns relative to those investing in growth, as the former group is typically rewarded by markets.


There’s no debating: US corporations are flush with cash and have no idea how to spend it. Typically, they cavort on the golf course and smoke cigars with their mates, then order their underlings to buy back billions of dollars in share repurchases, whilst “cutting the fat” by firing people and reducing “overhead”.

Good shit.

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Saudia Arabia is Winning the Oil Game


Without question, House Saud’s deliberate plans to break the backs of non-OPEC producting nations, specifically the U.S. and its shale oil, is working.

The oil and gas industry has cut $200 billion from investments this year as low prices discourage new projects, leading to cuts in crude supplies equal to half the daily output of Saudi Arabia, according to the kingdom’s Prince Abdul Aziz bin Salman.

Nearly 5 million barrels a day of projects have been deferred or cancelled, Bin Salman, who is also vice oil minister for Saudi Arabia, said in prepared remarks set to be delivered to energy ministers meeting in Doha Monday. Saudi Arabia pumped 10.38 million barrels a day in October, according to data compiled by Bloomberg.

Oil prices have dropped 42 percent in the past year as Saudi Arabia led the Organization of Petroleum Exporting Countries in maintaining production in the face of a global glut rather than make way for booming U.S. output. Supply from outside the 12-member group will start to decline next year, after oil prices near $150 a barrel in 2008 proved unsustainable, Bin Salman said, according to the prepared remarks.

Saudi Commitment

“A prolonged period of low oil prices is also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise,” Bin Salman said in the remarks. “As a responsible and reliable producer with long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price.”

In the meantime, our big oil conglomerates will buy up distressed assets, while the chaff simply go away. Jobs will be lost, investments ruined. In the end, Saudi Arabia will be left standing, with our military by their side ready to protect their fields from danger, the same fields that caused pink slips to be doled out, generously, in the Bakken Shale.

Happy Monday.

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Yellen must have a fucking hard on after reading these numbers.

October Nonfarm Payrolls 271K vs 181K consensus; Prior revised to 137K from 142K

October Hourly Earnings +0.4% vs +0.2% Briefing.com consensus; Prior 0.0%

The unemployment rate is at 5%.

These are the best numbers of 2015, which is sure to cause investors to believe the Fed will hike rates in December. The dollar is spiking hard, up 1.25% v the euro. Futures aren’t really moving too much, which is suspect as fuck.

UPDATE: The market is pricing in a 74% chance of a Dec rate hike.

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It appears the bullshit payment traansaction company is going to have its first down round. But don’t worry about their awesome VC investors. They’ll be taken care of.

The investors, including the private equity firm Rizvi Traverse and an arm of JPMorgan Chase, will benefit from a provision they negotiated that is known as a ratchet. Increasingly common in startup financings, ratchets are promises that investors will be issued additional shares if the company’s IPO prices at a disappointing value.

In Square’s case, investors bought $150 million of stock last year at a price of $15.46 per share, giving the company a reported valuation of $6 billion. What the numbers didn’t show was that investors had secured provisions to significantly limit their risk of losing money.

Now, if the IPO doesn’t translate to 20% gains for these late-stage investors, Square has promised to issue them enough additional shares to create that return, the filing shows.

The provision is buried in a single paragraph deep into the IPO prospectus. If the IPO prices below $18.56 per share, the ratchet will be triggered, the filing says.

The fuck? It must be good to be a banker.

It looks like Square’s IPO filing places the proposed valuation at around $4.1 billion, well under the private value of $6 billion. Dollars to donuts says it trades even lower once public.

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Ahead of the most important economic data of the year, the jobs report, Jeff Gundlach is shooting his trebuchet at the Fed, trying to reason and teach mathematics and philosophy to a classroom of orangutans.

DoubleLine Capital co-founder Jeffrey Gundlach, widely followed for his investment calls, warned on Thursday that the U.S. Federal Reserve should not raise rates in December as economic and financial conditions have become vulnerable.
Gundlach said the Goldman Sachs Financial Conditions Index shows the market has already tightened for the Fed as the index sits at its worst level since 2014 and the Great Recession.
Gundlach, speaking at the Inside Fixed Income conference, also cited trailing earnings, which are not trending in the right direction. It also appears “the dollar has started another leg up,” he noted.
The biggest reason the Fed should not raise rates is the implied inflation rate in bond market pricing, he said. Implied inflation for the next two years is “darn near zero,” said Gundlach, whose Los Angeles-based DoubleLine was overseeing $81 billion in assets under management as of the end of the third quarter.
“Junk bonds are signaling with clarion bells: Do not raise interest rates,” Gundlach said. Excessive issuance of covenant-lite debt is yet another sign of danger in the credit markets, he added. Junk bonds should be sold on strength, he said.
If oil stays below $50, downgrades will come to the investment-grade bond market, he said

That last line is the most important. Any person in this market knows that there is debilitating deflationary pressures out there: fuck the jobs market. Take a look at prices and whole industries being ruined before your eyes, as the Apple-Amazon vortex of deep deflation makes its way to a shopping mall near you.

Anyone who is calling for a Fed rate hike is 99% bearshitter, 1% human being. Logic doesn’t exist in the Fed rate hike camp, with the U.S. oil and gas industry in tatters, and a $100 billion debt crisis looming in the on-deck circle.

Fed hikes: dollar rages on, oil crushed, $100 billion in debt goes kaput: panic and tragedy strikes Wall Street 2008 style.

Related: Double Line Capital just reported its 21st consecutive month of inflows, currently managing over $50 billion in assets.

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It’s like they took the analysts who issued reports on SHAK, skulled fucked them, then threw them down a flight of stairs, lined with mustard, and then tossed hamburgers at them.

Here are the results, which were much better than what I expected.

Shake Shack prelim Q3 $0.12 vs $0.07 Capital IQ Consensus Estimate; revs $53.3 mln vs $47.27 mln Capital IQ Consensus Estimate
Shake Shack sees FY15 revs $189-190 mln from $171-174 vs $180.33 mln Capital IQ Consensus Estimate; sees FY16 $237-242 vs. $228 mln consensus

Huge numbers. I cannot stress to you how good these numbers are and what it means for the stock. The bear case has been demolished. Barring some sort of fucked up cosmic event, SHAK should rain down a serious pummeling onto the faces of short sellers tomorrow, scorched earth motherfuckers (extra Les Grossman).

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Remember the agony you felt at 4am, watching stupid chinese stocks careen lower.

I am removing some of my risk from the table now. I sold out of NK and XON (both for massive gains) and tossed the proceeds in a Federally insured money market account, yielding peanuts.

I am very interested in smoking one more bowl of the crack smoke, however. At the moment, I am looking for some choice short squeeze ideas.


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Trump Bashes Yellen Again: We May Have a Problem Here


Trump is out talking shit about Yellen today, which is perfectly all right, as long as he doesn’t go off the rails and suggest we jack rates higher.

“Janet Yellen is highly political, and she’s not raising rates for a very specific reason – because Obama told her not to,” the Republican presidential candidate said at a press conference in New York. “Because he wants to be out playing golf in a year from now … he doesn’t want to see a bubble burst during his administration.”

Oh shit, wait. What?

I like Dondald Trump, but for reasons that worry me. I actually own a Trump apprentice action figure doll. I bought it years ago so that I could press the button to make Donald fire people for me. I’ve read one of his books and think he’s a good businessman, including his crazy eyed bankruptcies on Wall Street that ruined so many morons who were attracted to the Trump brand.

I marvel at the fact that southerners, who innately hate yankee New Yorkers, are supporting him–just because they are out of options. Trump is like a soundboard of the American disgruntled. I think, for me, he represents a certain anarchy that naturally appeals to me, which probably isn’t good for the stock market, but excellent for financial news, however.

Look, building gigantic fucking walls, telling the Chinese to fuck their mothers, and jacking up interest rates isn’t exactly a recipe for “making America great again.” These are all cool things, especially when afforded the liberties of thinking they will never actually happen. But Trump is ahead in the polls and we both know that lunatic Dr. Carson doesn’t stand a chance.

We may need to begin formulating what a Trump presidency means for the S&P 500, which is like the funniest shit in the world; because you know it’s bad.

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