Former Fed Governor, Robert Heller, Sees Three Rate Hikes in 2016

I am building a case of wide spread mental instability amongst our current and former Federal Reserve members. It’s one thing to have made a mistake and live up to it. It’s entirely another thing to say you were wrong and then continue the same path, knowing you’re making matters worse.

Enter former Fed Governor, Robert Heller–born in Germany.

With his own mouth, he says things are fucked up and how GDP will only grow at 1%. Yet, in the very same breath, he’s calling for 3 rate hikes in 2016.

Why?

Heller is only the first of many Fed heads to make a media appearance, post Yellen meeting. Prepare to have your minds boggled over the days and weeks to come, as one Fed head after the next discusses the virtues of tightening into the teeth of a world ending deflationary vortex.

All of the bull market mavens are getting their brains blown out in 2016. I will not beat around the bush, most of these guys were once great investors. They got rich and fat, started to walk around like pigs, chortling about Wall Street. Now they’re being slaughtered.

Rather poetic, if I don’t say so myself.

These are approximate returns based off recent SEC filings.

Tiger Global: -18% (NFLX, JD)

Greenlight Cap: -15% (AAPL, GM)

Pershing Sq: -11% (VRX, APD)

Paulson: -12% (VRX, AGN)

Icahn: -15% (CVI, AAPL)

Lone Pine: -10% (VRX, PCLN)

Berkshire: -8.5% (WFC, KHC)

Third Point: -8.5% (Dow, AMGN)

Say what you want about the theatrics of Guacamole Jim: he knows the market and has his pulse on the emotions of investors–better than most. Tonight, he went over a laundry list of things that needs to happen for the market to find a bottom. One of my favorite parts, naturally, is when he panned today’s Fed statements and claimed “they know nothing.”

Give the market a few percent lower to the downside and Jim is going to go ‘full postal’ on Yellen and her band of hawkish clowns. The drama, it’s almost too much to bear.

Controversial CEO, Elizabeth Holmes, and her crazy company Theranos–stacked with geriatric old men on the board–has enjoyed enormous private sector success–as the VC community ate her bowl of dog food up and gave it 3 Michelin stars. The valuation of Theranos was upwards of $10 billion, before the Wall Street journal, and others, went to war with them.

Their board. Note Henry Kissinger is no longer on the list.

Apparently, the Center for Medicaid and Medicare (CMS) thinks they’re full of shit too and has issued them a letter–warning them to comply else face the wrath of government.

Theranos’ response:

“This survey of our Newark, CA lab began months ago and does not reflect the current state of the lab. As the survey took place we were simultaneously conducting a comprehensive review of our laboratory’s systems, processes and procedures to ensure that we have best-in-class quality systems,” the company said.

“We value engagement with our regulators, and are committed to ensuring that all our labs operate at the highest standards. We are still reviewing the report, but we addressed many of the observations during the survey and are actively continuing to take corrective action. A full plan of correction will be submitted to CMS within days.”

This ends badly for investors of Theranos.

Shares of Facebook are sharply higher after demolishing earnings expectations. They did, however, hedge the fantastic numbers with a little sandbagging, pointing to FX headwinds and hard year over year comps.

Facebook prelim Q4 $0.79 vs $0.68 Capital IQ Consensus Estimate; revs $5.84 bln vs $5.37 bln Capital IQ Consensus Estimate

Despite the stock trading above 30x 2016 earnings and 15-17x sales, depending on estimates, it is the only game in town, if you’re interested in having exposure to the seemingly endless horde of zombies–stuck to their phones like fucking imbeciles–crashing their cars into walls of stone, just so that they could heart an instagram picture or like someone’s inane Facebook status.

Notes from call (via Briefing.com)

Top 100 advertisers who advertised on Facebook also advertised on Instagram.
In Q4, the average price per ad increased 21% while total ad impressions increased 29% y/y; first quarter since Q3 2013 that total ad impressions increased on a y/y basis; driven by an increase in mobile ad impressions and was partially offset by decline in ad impressions delivered on personal computers consistent with the ongoing declines in PC usage.
In Q4 we also benefited to a lesser extent from increases in ad inventory from Instagram and the Audience Network.
Expect to continue to see FX headwinds, especially in 1H due to tougher comps.
Faces tougher comps given strong 2015 performance.
2016 is another significant investment year for FB
Expect y/y expense growth rate to be GAAP 30-40%; Non-GAAP 45-55% y/y
CapEx to be in the range of $4.0-4.5 bln;
Building a new data center in Ireland

Sales and earnings have gone parabolic.

With a market cap well over $200 billion, Zuckerberg has proven, once again, that the Winklevoss twins were right to have entrusted him with such a revolutionary idea, many years ago. The social network is alive and well, providing law enforcement authorities with the intel they need to toss careless criminals into raping prison cells for boasting about their heinous crimes on the platform, as well as entertaining a wide swath of people–whose dreary lives are made infinitely worse by seemingly perfect people posting pictures of their wonderful lives, happy and joyful, for the explicit purposes of attaining a faux popularity through arbitrary expressions of passive approval.

Long live Tsar Zuckerberg.

At the end of the day, we’re all just dust and shadows. The Federal Reserve, led by a maniacal psychopath out of Brooklyn, has destroyed a long and rich history between the world’s leading central bank and global markets. Because of this, the end of the world shall commence.

For those of you interested in saving yourselves, there is still room left on the ark. Last I checked, TLT was trading at $126. Granted, I got onto the ark at $120 and have been enjoying its comforts ever since–lodged in a specialty cabin, adjacent to some zebras and parrots; but there is still some room next to the anacondas for you and your family to seek refuge.

Never say “The Fly” didn’t look out for your well being. This is all being plotted out, methodically, inside of the hallowed halls of Exodus.

They’re off 3% as a group today. For the year, Amazon is down more than 15%, NFLX 20%, FB 10% and GOOGL 8% for the year.

Collectively, the FANG banger stocks have shed more than $125 billion in market cap since the beginning of 2016.

Kudlow is always bullish on America; hence the name Larry of America was affixed to him back in the 90s. He seems to think the Fed is simply clamming up, scared to do anything. He’s not worried about deflation and wants easy money.

He was happy to reiterate the Fed has been reinvesting MBS, instead of just allowing them to mature. He said if we should ever see that statement removed, “all hell would break loose.”

The Former Chairman of the Atlanta Fed, Dorothy Weaver, is a dove. However, even though she believes the Fed shouldn’t hike rates–her arrogance and disconnect with the markets leads her to believe Yellen did the right thing by not communicating with the market.

Weaver said:

“No way they’re gonna be signaling what happens in March. Why do we think there’s gonna be this ultimate clarity?”

There you have it folks. The reason why Bernanke worked and Wall Street trusted him is because he communicated with the market. He didn’t speak in riddles and cruelly allow the market to suffer during malevolent draw-downs, when he could help reverse it. Unlike Yellen, Bernanke was concerned with wealth creation/destruction and saw capital markets for what they truly are: the last great bastion of hope and prosperity for millions of Americans.

This Fed simply doesn’t care. Therefore, you get this.

The production of the ark continues, undeterred by today’s FOMC meeting.

If you look at that chart, you will see that production of the ark halted before the Fed statement, as traders got their hopes up for a non insane Yellen. As soon as their statement was released, talking about assholes things like the labor market, the builders of the ark, the smartest money, got back to work and continued their work.

I sold off another tranche of SPY. I am 25% TLT, 33% SPY and 42% cash.