SUPER LONG

I added to my SPY position, making me 166% long into the teeth of cataclysm. As a point in fact, Le Fly gives zero fucks about your cataclysm. I will see your apocalypse and raise you with MOAR purchases of SPY.

My basis has been reduced to $195.57. I’m wholly looking for a rally of monumental, yet distinguished, proportions.

Yes, we all know the markets will decline by 30% in 2016. We’re well aware of the fact that stocks are meaningless rabble, scribbles of gibberish on little pieces of crumpled up paper.

BUT, before all of that happens, by the laws dictated by mathematics, we shall rise from the ashes and strike down those around us who attempt to get in our way of egregious displays of greatness.

What the fuck is wrong with these people? This analyst seems like a perfectly normal person, no grotesque abnormalities or disfigurements about her person. Yet, like a monster, she comes onto my teevee to say that growth has sucked and she’s downgrading her GDP projections to 1.8%, yet she still believes the Fed will hikes rates 3 times in 2016, all at the back-ass end of the year.

How?

She then delved into the absurd by discussing the Chinese yuan crisis and how it might check the Fed from going all hog wild and fucking crazy. Meanwhile, back at the ranch, she’s one of my more hawkish analysts on Wall Street, with more idiots only gearing up for two hikes.

In summary, the U.S. economy sucks and the China yuan story might derail us, cartoon style. She doesn’t think the Fed will move in March–because that’d be messenger in Sparta asking for earth and water madness. Yet, at the same notion, the Fed will green light itself to ravage the economy later on with three hikes.

Fuck out of here.

I’ve always felt bad for Harold Hamm. First his wife divorced him and won a billion dollar settlement. Then the oil markets imploded, at a time when he had no hedges. The result has been devastating to CLR, as lower prices ravaged a once proud and powerful oil company.

In a CNBC interview today, Harold Hamm discussed the state of the oil markets and how the Saudi’s made a ‘monumental mistake’, a ‘trillion dollar mistake’, by flooding the market with oil. He thinks, ultimately, oil trades back into the $50’s, once supply and demand set the market straight.

Click here to see interview.

Futures are sharply higher, after markets took an absolute drubbing to start 2016. In order for this rally to stick, we’ll need to see oil, copper and Apple trade higher.

As of yesterday’s close, I was 133% long, with approximately a 4:1 blend of SPY and TLT.

This is hugely important, not for the level of indebtedness for The House of Saud, but for how accessible credit markets are for Saudi Arabia.

With $600 in fx reserves and hardly any debt, one would surmise the amount to insure against Saudi debt would be substantionally less than the bankrupt loafers in Lisbon.

The cost of insuring the kingdom’s debt more than doubled in the past 12 months to 190 basis points on Thursday, the highest since April 2009, according to CMA prices compiled by Bloomberg. That’s six basis points more than contracts linked to debt from Portugal, whose rating is seven levels below Saudi Arabia’s Aa3 investment grade at Moody’s Investors Service. The Arab nation’s credit-default swaps traded at 185 basis points on Monday.

The sole problem is that 80% of Saudi Arabia’s revenues comes from oil. They’ve dug themselves a nice grave by refusing to cut production. As such, they’re scheduled to burn through $200 mill in reserves this year, at a time when credit markets are telling them to buzz off.

This likely explains the reasons why they’re exploring options to IPO Aramco.

Dark days are ahead for the Kingdom.

China never had a chance.

Recent market calamity has measurably narrowed the market cap gap between China and Japan.

China’s combined market capitalization was double Japan’s on June 12, when the value of stocks trading on Chinese equity exchanges briefly exceeded $10 trillion. The ratio narrowed to 1.2 times at yesterday’s close.

Perhaps the new bottom of the Chinese market will be when it reaches parity with Japan? I’m sure we’ll find out soon.

I have to admit feeling the same as Mr. Day, despite the horrid pin action in the stock. The company is a free cash flow generating machine and should be able to weather the storm, providing copper stops bleeding out. It’s worth noting, however, the recent rout in FCX has pushed debt/eq levels up past 3x, a dangerous game to play with the amount of debt Freeport has on its books.

Being that I sold the shares substantially higher towards year end, I am tempted to go long down here. However, I made a commitment to remove non-systematic risk from my portfolios in 2016, so I’ll have to watch the likes of Carl Icahn “have all the fun” in FCX for the time being.

In all fairness, he could’ve dumped his entire fund into FCX puts and made a bundle. But, more likely than not, a Mr. William Albert Ackman is simply idled in his luxurious office taking hits.

Some rough math here, as the institutional holdings data in Exodus is being updated right now, it looks like Billy could be down almost 10% for the year, matching his pals from Greenlight Capital and Valueact, as well as his nemesis Carl “give me three board seats” Icahn.

According to recent filings, here are Ackman’s largest holdings and YTD returns.

QSR -15%

VRX -15.2%

PAH -31%

ZTS -7%

APD -8%

MDLZ -7%

HHC -7.5%

HLF (short) -6% (yay!)

Icahn’s holdings are simply perverse.

LNG -8%

AAPL -6%

FCX -36%

PYPL -8%

HLF  -6%

FDML -18%

HTZ -19%

Einhorn’s Greenlight looks to be off to another bad start.

AAPL -6%

MU -11%

KORS -7%

SUNE -34%

DDS -4.7%

CNX -12%

GM -11%

TWX +8%

CBI -7.5%

GRMN -10.3%

As for Valueact (I’m bored by now)

VRX -15.2%

ADBE -4.4%

HAL -7.1%

MSI -5.6%

BHI -10%

CBG -13%

You get the picture. It’s a damned bloody start to the new year.

This is officially a credit crisis of interbank lending between China mainland and Hong Kong.

HIBOR was already absurdly priced last night at 13.4%; tonight it went full retard and blew out to 67%.

Separately, but related, Chinese citizens are scrambling to get out of their yuan in exchange for dollars. People on the ground say, over the past two weeks, they’ve seen a 40% spike in money changer services. The average flight out of China is 200,000 dollars.

The Shanghai is ignoring the news, flat for the session–so far.

Junk fund manager Marc Lasry no longer finds it necessary to report his asset levels to Lipper or Morningstar. His performance has been so dreadful, so cataclysmic, losing 40% of its assets since October on a -13.5% 2015 return or worse than 98% of his peer group, I am sure he’s closing the whole kit and kaboodle up, in order to go spend his billion dollar personal fortune in peace, without the distraction of having to lose the retirement funds of overzealous old folk in search of yield.

The Avenue Credit Strategies Fund has lost about 40 percent of its $1.2 billion in assets since the end of October. The fund currently has about $650 million to $700 million in assets, with about 15 percent in cash holdings and less than 5 percent in illiquid investments, according to people familiar with the situation. Avenue Capital was not immediately available to comment.

Research chiefs for Morningstar and Lipper said on Monday they had not received daily asset under management figures from the Avenue Credit Strategies Fund (ACSBX.O) since about mid-December. The fund is not required to report the figures, but not doing so is “very unusual,” said Jeff Tjornehoj, head of Americas research for Lipper, a Thomson Reuters unit.

People familiar with the situation said outflows from the Avenue Capital fund had become a distraction after an unrelated junk bond fund in early December imploded. Junk bond investors already were on edge, pulling $3.6 billion from high-yield funds in November, according to Morningstar data.

Like the Third Avenue fuckery, the market might view this as somewhat worrisome. Where there’s smoke, there’s a whole fucking village burning down.