iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,374 Blog Posts

WHAT A RELIEF, MAN!

Markets surged higher today, with almost 90% of stocks participating in the rally.

Oil traders rejoiced in the splendor of a 9% surge in WTI, popping champagne bottles filled with light sweet crude and spraying it in each other’s faces at the close of trade. It was a relief rally, the very definition of the term.

Markets are still lower by 7.5% for the year and the vast majority of stocks are still lower double digits.

Where do we go from here?

With my money, I am levered long SPY. I sold out of some yesterday and a little more today–but still have a margin balance–due to my 25% weighting in TLT. I will be unwinding the entire SPY position, methodically, until 2/2. Details of the plan are in the blog section of Exodus.

Year to date, my losses are less than 3%. I’ve managed the rout with exemplary precision and will work towards moving from red to black over the next few weeks, maybe less.

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Stock Art: By Far the Dumbest Shit I’ve Seen in Years

Don’t get me started on the world of art. Believe me, I enjoy art more than most. But this is the sort of shit that makes me pray to the Gods for complete destruction to strike down the art collections of the morons who bid for them.

This child of 24 years of age, is holed up in a NYC art studio, losing 10’s of thousands of dollars trading in the apocalypse, while drawing squiggly lines on canvas and selling them to submentals for 10k a pop.

What sort of shit is this?

A privileged spoiled brat is “doing art”, while losing vast sums of dollars in the stock market. The fuck.

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Depleted Credit Lines Might Leave Banks Holding the Oil Wells

A bloomberg analyst broached this discussion today. She was a little naive in thinking the silly little bankers, who’ve been bending everyone and everything over a barrel for the past 17,000 years, were just going to cede to the oil companies and give them all sorts of money–that would be flushed directly down and into a toilet bowl.

That’s not exactly how it works.

The credit lines are tied to the value of the property. If the properties are some backwards wells in the Bakken and they depreciate: banks will decrease the line of credit. Right now, as is the case with CHK cutting their divvy payments for their preferred stock–saving $170 mill in the process to be earmarked for buying back distressed debt–energy companies are deciding whether to draw down credit lines to buy back debt –trading at bankruptcy prices–or draw it down to extend their lives.

In other words, do you buy back the debt and hope for higher crude, or keep cash in the bank and wait it out–perhaps missing an opportunity to retire debt at 50 cents on the dollar?

She seems to think the banks are morons, beholden to collateral values when crude was $100. If oil companies draw down their lines of credit and go bust, banks have first claim to assets and will own the wells–just like they owned the houses in 2008.

Is that a good thing for banks? Probably not. But they’ll make it through the other side.

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Citi: Quantitative Tightening Has Been Driving Stocks Lower

Sometimes the most simple explanations are the best, and also the least expected.

Citi is out with a note suggesting that recent turmoil in foreign currencies is forcing these disheveled governments to pare down their FX reserves, sell U.S. Treasuries, in order to help defend their own currencies. The result has been one of extraordinary tightening, leaving stocks in the sewer, floating about with the rats and feces.

A siphoning of the global liquidity punch bowl is fueling the 2016 downdraft in global equities, says Matt King, Citigroup Inc.’s head of credit product strategy, jumping on a thesis first promulgated by Deutsche Bank in September.

Individual stock markets aren’t responding primarily to domestic liquidity conditions but rather to the state of monetary policy globally, King reasons.

Although direct economic linkages between emerging and developed markets are minuscule, in many cases, all equity markets have been affected by central bank stimulus—leaving them interconnected as the provision of liquidity becomes less ample.

After global stocks crumbled following the relatively small devaluation of the Chinese yuan in August, Deutsche Bank’s George Saravelos floated the idea that sales of foreign exchange reserves by emerging-market central banks, particularly China’s, were the driving force behind this turmoil.

Central banks in the developing world have divested some of their foreign exchange reserves in an attempt to prop up the value of their domestic currencies amid the carnage in commodity prices. This development, in theory, puts upward pressure on U.S. Treasury yields as central bankers sell the debt, effectively tightening global liquidity and weighing on risk assets.

“Previous doubts as to whether such ‘quantitative tightening’ mattered for developed markets have unfortunately been addressed, at least in an empirical sense: the quality of the correlation speaks for itself,” he wrote.

Emerging market central bankers are draining liquidity even as their peers in Europe and Japan are refilling the punch bowl, King observes, causing the pace of net purchases to decline considerably:

Spreads on junk-rated corporate bonds also closely track total central bank liquidity, according to Citi.

“The fact that global central bank liquidity correlates so well with market movements raises a number of awkward issues,” the strategist writes. “Not only does it point to further downside if money continues to leave emerging markets,” he says; it also may “suggest that [developed market] central banks are not fully masters of their own destiny.”

In conclusion, we live in a global economy, one that is interlocked with one another. The domino effect is real and or central bank is to blame for the FX disaster. If the Fed would back off and foster a weaker dollar environment, the spigot would be turned on and we’d enjoy a 1,000 point rally.

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DECLARATION: THIS RALLY SHALL HOLD

I am going to give you a look inside Exodus to show you what I look at, when trying to evaluate the market.

The Indices are higher; but that’s only part of the story. We want to look behind the curtain to see how the key actors are performing. For the day, with exception of a few, like FCX (which is news related), they are doing great.

Market breadth is most important to me, which is now in the mid 80% range.

We can break it down further and see where the weakness lies and if those industries are vital to today’s rally.

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Aluminum is the only industry lower today, out of 200 plus in Exodus. Do you believe it can derail today’s rally? Is AA that important?

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One little industry is lower. Who gives a shit?

As a whole, today’s rally is broad based, robust, and ripe to pressure short sellers to buy back shares.

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Here is my short squeeze screen, featured in what we call “the grid”– up more than 3.3% for the day, on a median basis.

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It runs 8 pages deep, which tells me shorts are covering.

Lastly, I look at risk. I do this by monitoring my ‘Bubble Basket’, which is an index of stocks that I built, filled with high valuation momo stocks, that is the perfect barometer for risk appetite.

It is up nearly 2%, with only a few laggards.

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Only disaster can derail today’s rally. I think we close at the highs.

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One Does Not Simply Ignore Indonesia

Shares of FCX are getting poleaxed again, down 7%, after the Indonesian gov’t told them to set aside $530 mill for a fucking smelter. Also, just the other day, the Chief of FCX Indonesia resigned. And, to boot, Freeport is trying to sell a stake to the gov’t of Indonesia for $2.7 bill.

The whole scheme screams fuckery, largess.

The Indonesians smell blood in the waters and are now demanding the cash strapped FCX deposit $530 mill, for a retarded smaller, that’s only 14% complete.

The Indonesian unit of Freeport McMoRan Inc must put a further $530 million into an escrow account, a government official said, among other requirements for the miner to extend its permit to export copper concentrate from Indonesia.

The funds are intended to be a guarantee that the Phoenix, Arizona-based company will complete a smelter in Indonesia, which is pushing to boost returns from its natural resources.

The amount would add to an estimated $80 million the U.S. mining giant set aside in July to obtain its current export permit, which is set to expire on Jan. 29.

The requirement adds to pressure on Freeport, whose stocks have tumbled 36 percent this month and hit their lowest in more than 15 years on Wednesday, hammered by falling prices for copper and oil, which the company also produces.

“This money is the remaining amount they should have spent on their smelter so far,” Coal and Minerals Director General Bambang Gatot told reporters on Friday, adding that his team had not heard back from Freeport on the requirement.

A Freeport Indonesia spokesman told Reuters the company was still in discussions with the government on the matter.

According to Gatot, the smelter project, estimated to be worth up to $2.5 billion, is now 14 percent complete.

Energy Minister Sudirman Said said on Wednesday the new smelter should be 60 percent complete by now.

“We have warned them from a long time ago,” Said said, referring to the export permit deadline.

So their export license is going to expire on 1/29, which would completely screw the company over and Indonesia knows that. So, they’re tightening the vise on their heads. I bet they’d love to just seize all of the assets and kick FCX out.

These are the risks when doing business in the land of the savage.

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How valuable is their Indonesian properties? They value one of their mines there at $16.2 billion. Without Indonesia, FCX is bankrupt.

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Markets Poised For a Face Ripping Rally

It’s been a long time since the market truly went higher. Despite seeing futures up 225 and oil up more than 5%, I am sure the weak jawed bulls will somehow muck up today’s rally. Nevertheless, the ground is set for a huge 100 NASDAQ day.

Bearish sentiment was so high, long term bears in the comments section were so glib, you just knew today’s eventuality would materialize, sooner rather than later.

Even so, I will use the lift to reduce my SPY exposure, selling out of another tranche of my SPY.

Would I chase this rally on the open?

Recent trends dictate opening lifts should be sold, not bought.

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JAPAN JUST WENT UP A GAZILLION POINTS

No words–just melt up. News is unimportant. Bears will rue the day they decided to sell short the market yesterday, for today’s trading session will devastate and appall them.

Full compliment rally in both NIKKEI and crude. U.S. futs are following in kind.

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See you in a few hours.

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Here Are the Top Performing, Non Levered, Non Inverse, ETF’s– Year to Date

The inverse genre of the ETF world are ripping jaws off bulls and face kicking them to the moon. But most FINRA regulated advisors are clown’d by being banned from buying and selling these products–unless clients send a letter in telling them to buy them. It’s wholly retarded, one of the many instances in life where a small, but loud, minority of morons ruin a good thing for everyone else. In other words, back in 2009, when the market took off, idiot brokers and advisors kept clients in these short term products and rode them down 99.9999%–which forced FINRA to move against these time bombs–removing a very vital hedging product from responsible managers.

So, I’m removing them from this screen and giving you the best performing, non levered-inverse, ETFs for 2016.

HDGE +13.3% (bear strategy, non-levered)

ZROZ +7.6% (zero gov’t bonds)

EDV +6.9% (gov’t bonds)

BBN +5.2% (taxable munis)

TLT +4.35% (gov’t bonds)

IAU +4.1% (gold trust)

GLD +3.96% (gold)

PHYS +3.55% (physical gold)

FXY +2.2% (yen)

CORN +2.1% (corn)

SOYB +1.1% (soybeans)

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Banks Tied to Oil

This is not a revolutionary idea, to observe regional banks that may have significant loan exposure to the oil and gas field. Using very simple search methods in Exodus, I isolated some banks with big short positions that have been underperforming this year–as well as banks domiciled in oil rich regions of the country.

Here’s what I came up with

ABTX

BOKF

CFR

FFIN

GNBC

HBHC

HTH

MLS

PB

sbsi

TCBI

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