Small Cap Stocks Are Down 24% Over the Past 6 Months

This is a staggering statistic, especially for the people who tell us the market is doing just fine. Over the past 6 months, the median return for stocks with market caps under $1 billion is -24%.

This encompasses over 2,000 equities.

On the large cap front, the median return for stocks with caps over $1 billion is -9.7%.

Again, this data set accounts for over 2,000 stocks.

In other words, the small cap degeneracy class is mired in a horrifically bad bear market–a real kick to the nuts type of tape. The larger cap varietal is in correction mode, smashing old men like accordions–fleecing them for all of their dividend gains.

data provided by Exodus

Hilarious stuff out of the mentally ill Marc Faber.

He thinks stocks are going to rally from here, saying we might’ve put the lows in for the month. HOWEVER, U.S. equities will trade lower by as much as 40% in 2016, and have nothing to do with China. He points to homebuilder stocks and lack of wealth creation, in real estate and stocks, as a reason for stocks to trade lower, as the economy languishes into the pits of hades.

The wealth effect theory is a self fulfilling prophecy and hasn’t really done much, other than help the 1% get into the 0.5%, over the past 5 years. The economy is in the tank because confidence is waning. Confidence is waning due to lack of leadership. Period. End of Story.

This is standard operating procedure in the great satanic republic of China. Without a doubt, should I ever find myself within its border, I too would go missing.

The billionaire founder of Metersbonwe, one of China’s best-known fashion brands, has gone missing, the latest in a series of Chinese business people and financiers apparently ensnared in the country’s anti-corruption campaign.

Metersbonwe suspended trading in its shares on the Shenzhen stock exchange on Thursday while the company said it was investigating reports in the Chinese media that Zhou Chengjian, its chairman, had been picked up by police.

The company is a household name on the Chinese high street and Mr Zhou was China’s 65th-richest man last year, according to the Hurun Rich list, with a fortune of Rmb26.5bn ($4.01bn)

I think this is the 7th of 20th occurrence in recent months. China isn’t fucking around, clearly. Mess around in red China; find yourself in the back of a
mobile execution van.

The Chinese government, with its FX reserves of $3.4 trillion, announced it intervened to buoy its currency. They’ve been trying to stem losses in the Yuan since the summer, allocating more than $100 bill per mo in the process.

“State-owned banks were offering dollar liquidity around 6.59, suspected to be on behalf of the central bank,” said a trader at a European bank in Shanghai. “This happened both today and yesterday.”

The Yuan was rallying v the dollar for the first time in 9 days. But now it’s about flat. The question is: can it hold?

Dow futures are higher by 126.

China is up 1.6%.

Oil is up 1.3%.

All of this is fine and dandy; but there’s an underlying uneasiness to this tape. It’s suspect.

These are the sort of “squalls” I’ve read about in the best investment book ever written, 28 Years in Wall Street, by Henry Clews. This day and age, we all act like robber barons, pillaging one another, so we might as well get markets like them.

The Dow is down a thousand points this week.

How extensive is the damage to individual stocks? Take a look at this median year to date carnage.

Some of the highlights include: Shippers down 15%, Auto Dealerships down 14.4%, Oil and Gas down 12%, Biotech down 11.4%. The only sector that has evaded the market’s wrath is gold, +10%.

The best performing ETFs for the year are LABD (+40%), UVXY (+33%), DWTI (+33%).

Mega cap underperformers of note are AAPL (-8%), MSFT (-5.3%), AMZN (-10%), WFC (-7.5%), JPM (-7.5%), BABA (-10%), CX (-16.4%), BHP (-12%), VLKPY (-14%).

Side note: This is the worst start to the S&P 500 ever.

The Gross man is right. The Fed had a window of opportunity to hike rates and squandered it. Instead, we are stuck with fucking assholes thinking the market is primed for a 100 bps hike into the teeth of a global equity collapse. If it wasn’t so god damned funny, it’d be sad.

The open looked promising, with the Dow halving its losses and people generally giddy about the specter that it’d close green.

Not gonna happen.

By the grace of the Devil himself, markets are now plunging to new lows, down over 400 points. There is wild speculation regarding China, as they’ve taken measures to completely annihilate themselves. They’ve suspended circuit breakers and now will enjoy the full panic of an investor class better fit for a hoe, than a brokerage account. And that’s the farm tool, you ignoramus.

I expect the Chinese market to fall good and hard tonight, emulating, and ironically copying, previous market crashes held here, right in America. The Chinese and their piracy ways will now feel the wrath of investor enmity.

Municipal bond yields are plunging, as well as sovereign bond yields of western nations. These are safe havens and will continue to do well, as we sink to lower levels.

Aside from my SPY position, I will continue to hold TLT until the yield curve inverts.

I’ve searched far and wide for an elixir to cure the every day bear market crash/cataclysm, and I’ve found it.

BEHOLD in the glory of all of its proven oil reserves: The Royal family of the House of Saud bestows upon you, its subjects, shares of ARAMCO!

Sell your Chevron and Exxon Mobile and make room in your portfolios for one more oil stock. The House of Saud, a family we’ve all come to intimately love and endure, are showing UNPARALLELED generosity by permitting us to give them some of our dollars–in exchange for non-voting shares of their most prized possession.

ARAMCO.

If it all comes crashing down, so be it. I can’t just sit here, watching these letters with numbers decrease in value without doing anything.

I told you 2016 would be a transitional year for “The Fly”, a year in which I eschewed the risk of individual non-systematic stocks, in exchange for broader tactical allocations using the power of Exodus.

To that end, I added to my SPY position at $195.12, reducing my basis to $198ish. Details are inside of the hallowed halls. My risk is mitigated by holding period, which is inflexible, the diversified nature of SPY, my TLT position and my calculator brain.

It’s not how the market opens, but how it closes.

So here are the two main issues we’re dealing with.

1. Chinese slowdown, which is exposing how rank amateur they truly are, in regard to dealing with the complexities of being a first world economic power. They’re not ready.

2. The Federal Reserve and their stubborn, delusional, policy to hike interest rates into the teeth of a meltdown.

I’ve mentioned this over and over, ever since the Fed started jawboning about hiking rates.

As for the Chinese, they’re simply too green, and not the organic type, to instill confidence in world markets. They have no idea (extra Cramer) what they’re doing.

Cramer sums it up here.

UPDATE: The Chinese gov’t “tweeted” on Weibo that they’re suspending their insane circuit breaker rule. This should get interesting. Down 20% anyone?