The Fed Reveals “Plot” That Gets Rates to 4% by 2018

This doesn’t make any sense to me.

The Fed released that “dot plot” today, suggesting that if everything goes according to plan, rates will go to 1.5% by the end of 2016 and 4% by 2018.

Are they fucking insane? The euro would be worth, what, 0.25 v the dollar and oil $5 if this coup plays out?

In order to get to 1.5%, the Fed will need to raise rates 5 times next year and another 10 times after that.

Actually, if I’m not mistaken, the “Maestro”, Allan Greenspan, jacked rates higher 16 times before nearly ending western finance as we knew it, back in the good old housing bubble days, no?

Will someome explain to me how the Federal government will finance 22-24 trillion in debt when rates are at 4%? I’ll wait.

Anyone want to impart some knowledge as to how the Fed thinks they can get to 4% by 2018, or even 1.5% by 2016?

Stocks are up. Yes, humans are crazy and behave impulsively. I am looking down the road here and cannot fathom the market being okay with this psychotic monetary policy.

The madness. When will it stop.

Fed hiked by 25 bps, just because.

Because why?

Because they can.

First Fed hike since 2006.

One and done? Hardly. The Fed just released their “dot plot” and they see rates rising to– get this — 4% by 2018 and by 1.5% by the end of 2016.

I sold out of more than half of my CNC position and added to FCX and JAZZ.

The JAZZ purchase was a much larger buy, assets wise. But my heart is in the FCX trade, which has done nothing but harangue me ever since I bought it.

I increased my FCX position by 30%

Actually, this looks like a really good bet, all things considered.

The growth for MBLY is great; but valuation is obscene. Then you read someething like this and wonder how MBLY will establish a moat for their software.

Will they become the Tivo of auto-piloted cars?

George Hotz, also known as Geohot, hacked the iPhone in 2007 while he was still in high school. A few years later, he made a similar exploit by hacking the PlayStation and releasing his code online, which resulted in a lawsuit from Sony.

Since then, Hotz had stints at several high-profile tech companies such as Google, Facebook, SpaceX and most recently at the AI firm Vicarious at which he worked as a researcher until last July according to his LinkedIn profile.

Now we learn that Hotz was approached by Tesla to help develop the company’s Autopilot system, according to a video released today by Bloomberg.

Hotz was apparently not a fan of Mobileye’s system and thought he could build a better one by himself. According to Bloomberg, Musk wanted to contract Hotz to develop the system for Tesla or to simply work for the company:

“Frankly, I think you should just work at Tesla. I’m happy to work out a multimillion-dollar bonus with a longer time horizon that pays out as soon as we discontinue Mobileye.”

Hotz replied:

“I appreciate the offer. but like I’ve said, I’m not looking for a job. I’ll ping you when I crush Mobileye.”

Musk answered with his well-known one-word email “OK”.

The now 26-year old hacker decided to found his own company, comma.ai, to develop level 3 autonomous driving systems, which translate into about 99% self-driving.

The fuck?

Naturally, this time is different, posits that Goldman strategist who queries as to why the Fed is hiking rates now.

He knows it’s wrong; but for some reason, he just can’t get himself to cast aspersions at the all mighty Fed. They must have some sort of New World Order agreement in place that the Vampire Squid and Fed Mothership can never be at odds with one another.

Liftoff by the Federal Reserve “comes at an awkward time for U.S. credit markets,” writes Charles Himmelberg, chief credit strategist at Goldman Sachs.

That’s because high-yield credit spreads are flashing a warning sign, rising to levels that have been historically consistent with a U.S. recession:

“In our view, oil prices remain the epicenter of both credit risk and credit risk sentiment,” the strategist wrote.

“It is true that corporate leverage has risen over the past 4-5 years to levels that have not prevailed since the 1990s but, absent elevated recession risk, this does not justify current spread levels,” wrote Himmelberg.

“And even if rates rise much faster than we anticipate, these low long-term rates are locked in, and debt maturities over the next few years are unusually low due to the high pace of refinancing activity over the past several years,” the strategist added.

The pain will be contained to these energy and materials sectors, Goldman suggests. Any broader reduction in access to credit will ultimately support the asset class as the market will not be forced to digest more supply from new issues, and further down the road, refinancing activity.

As such, elevated high-yield spreads aren’t a sufficient cause to halt the U.S. economy’s forward progress, concludes Goldman.

“For the broader economy, while developments in credit markets bear close monitoring, we do not yet see a case for a more far-reaching credit crunch,” asserts Economist Zach Pandl.

In summary, it will be contained to the energy markets, the fuckery that is. Also, we must keep a watchful eye on those pesky credit markets. But, rest assured, there will be no credit crunch.

#timestamp

End of year chicanery is in full effect, classic Ackman. Yesterday his VRX ran like a freed prisoner. Today, PAH is lighting fire to the faces of shorts.

This is actually my largest position, so a move of this magnitude helps Le Fly greatly. For the year, I am up nearly 18%. But I feel as if I’ve traded 200 years worth of markets to earn it.

All in all, a great year for me, despite doing nothing for the past 6 months. This end of year push is exaclty what I need to get the adrenaline pumping again.

It was a good run, with lots of drama along the way. From 2009 until now, the market has increased by $15 trillion in market capitalization, largely thanks to the actions of the Federal Reserve.

I am not going to glorify the actions of The Bearded Clam, aka Dr. Benjamin Bernanke, today. Instead, I will attempt to document and editorialize what I believe will end up being a massive mistake by the Yellen Fed.

Everything changes after today. The Fed backstop that saved our bacon since 2009 is gone.

RIP-QE

Keep your chin up Billy Albert. You’ve made billions of dollars over the past decade, own a $100 million apartment in NYC just for shits and giggles, and you do it for the sex.

Don’t let 2015 get you down, a year when you doubled and tripled down in a biotech stock gone mad,  played with dynamite sticks in a pyramid scheme short sale that Carl Icahn keeps afloat for the sake of his entertainment, and having an all in all bad time of it playing Gordon Gekko this year.

Calm yourself and harness the superiority of your genetical make up, outstrip your pathetic peers and make 2016 the best year ever.

Ackman laments in a letter to shareholders:

“If the year finishes with our portfolio holdings at or around current values, 2015 will be the worst performance year in Pershing Square’s history, even worse than 2008 during the financial crisis.

Ackman emphasized his firm’s low redemption levels.
“Our net redemptions were nominal at $39 million or 0.2 percent of capital for the third quarter, and $13 million or 0.1 percent in the fourth quarter,” he said in the letter.
The firm’s Pershing Square Holdings fund dropped 19.7 percent during the first 11 months of the year, marking a sharp contrast with last year’s 40 percent gain when Ackman ranked as one of the $3 trillion hedge fund industry’s biggest stars.
As a so-called activist investor who tends to make only a handful of concentrated bets and then pushes management to perform better, the 49-year old Ackman has seen much of last year’s profits eaten away as his bets on drug company Valeant Pharmaceuticals and Platform Specialty Products tumbled in the third quarter.
Still, Ackman, who oversees money for state pension funds, endowments and wealthy investors, said the portfolio’s intrinsic value increased even as its mark-to-market value, which reflects the daily stock price, has declined “substantially.”
Ackman said again in the letter that he is sticking with Valeant – which surged 16.41 percent on Tuesday – saying, “We do not believe that Valeant’s long-term earnings prospects have materially changed.”
As of early November, Valeant’s stock price had plunged 70 percent from its peak in August. But the stock has since recovered some ground as Ackman and other large investors bought more shares. In the last weeks Ackman used over-the-counter options transactions. He said in the letter that if the stock price rises to $165 or more by January 2017, “We will make more than 10 times our net investment over this period.”

 

Oh shit. Ack-attack is gonna turn his VRX shit hole into a 10 bagger. I’m long, wearing 3-d glasses, and got my popcorn ready for rapid consumption.

Here is Billy Albert’s shareholer letter in its entirety.

Lots of jargon going around with regards to high yield. The play was to scheme your way into an oil well, through these derivative based ETFs that were tied to the debt of oil and gas properties. You got paid 8% for your troubles, as Bernie Maddoff managed your money with excellent efficiency.

Well, all of that has come to an abrupt end. The oil boom is over. Everyone is getting George Bush’d now.

Note: some of these aren’t exactly “high yield” per se, but nefarious nevertheless. I figured the more data the merrier.

Here are the worst performing high yield ETFs, ytd, courtesy of Exodus.

Kayne Anderson MLP (KYN) -61.8%
Stonegate Mortgage (SGM) -61%
Allianz GI Convertible (NCZ) -39%
LMP Capital and Income (SCD) -26%
Calamos Convertible (CHY) -21%
PIMCO High Yield (PHK) -19%
Credit Suisse High Yield (DHY) -14%

Now let’s explore which closed ends have underperformed over the past month, during this oil debacle.

Kayne Anderson (KYN) -33%
Macquarie Global Infrastructure (MGU) -9.5%
Franklin Universal Trust (FT) -7.6%
Calamos Convertible -7.5%
Dreyfus High Yield (DHF) -7.2%
Western Asset Global (EHI) -7%

The past week…

KYN -11%
PHK -6.6%
PTY -5.8%
NCT -5.7%
DHY -5%

#fuckery

Long both PAH and VRX, waiting eagerly by the pagan X-mas tree for a jewish Santa Ackman to bestow MOAR gifts upon my person.

It was a solid day, all things considered. I was not impressed by the breadth of this rally, coming in at 74%. The big show down is tomorrow, when the fucking Federal Reserve convenes to destroy the U.S. economy by hiking rates into an earnings slump.

Nevertheless, we can still rally. In 2008, the market rallied for all sorts of stupid shit, then melted away into hell when people figured it all out. Take the trade. Enjoy the egg’d nog. Don’t trust anyone. There are rapists out there.