Larry of America Kudlow: Lower Rates is a Sign of Weakness

This is rudimentary stuff, taught in the very first class of economics 101. But it bears repeating, since many people still don’t seem to grasp what’s taking place here. Because the Fed is opting for a lower rate environment, inherently, that means the economy and the global economies that were now serve, are WEAK, not strong. Each and every time a Fed official gets on the teevee and tell you that the economy is doing terrific and how American exceptionalism is causing us to outpace the catamites in Europe, they are lying.

We all suspected China was building some sort of copper weapon to destroy democracy and free will. While we haven’t sorted out the exact details, thus far, there is incontrovertible evidence suggesting that they’ve been hoarding Dr. Copper like abject morons, much to the detriment of investors who bought the whole global growth ruse–hook, line and sinker.

According to Hoffman and Gilmartin, real copper demand from China is 54% lower than what has been previously reported.

The Chinese have been using copper to engage in trade, in some a backwardly barter system caused by the stupid nature of the Chinese financial fraud that we support today.

The decline in Chinese copper demand for household appliances and electronics since 2011 doesn’t jibe with the headline demand statistics, the analysts note, which show the country’s total copper demand increased of 45 percent from 2011 to 2015.

Moreover, when benchmarked against cement—another material widely used for construction purposes—copper’s rapid rise in China looks particularly suspicious. While cement intensity, or percentage used per square meter, rose 11 percent in the time period, copper intensity surged an astounding 117 percent.

Putting all this together, Hoffman and Gilmartin conclude that “real Chinese demand may be 54 percent lower than anticipated” after stripping out the demand for copper tied to the carry trade.

This is astounding, really. The discrepancy between faux demand and actual demand is in the order of 7 million metric tonnes. But, no worries, the Chinese have just enacted policy that will permit their pension funds to invest in common stocks.

After all, what could go wrong?

If you’re encumbered by a slew of higher interest rate plays, you might need to switch your policy–post Yellen’s dovish speech. I suppose people didn’t believe her during her last testimony, especially following the speeches of her lieutenants. I think it’s fair to say there is a schism at the Fed, two distinct parties with varying views on monetary policy.

As markets rise to daily highs, the Dow up triple digits and the NASDAQ higher by more than 70, underneath the surface of this rally is a depraved scramble for yield.

Gold is higher, due to a seemingly easy American central bank strategy.

Gold stocks are, by far, the biggest winners of the day. The sector, as a whole, is higher by more than 5%.

Without the specter of higher rates, asset allocators are racing towards the safety of U.S. treasuries, whose yields are considerably higher than our European counterparts.

The dollar has fallen by the wayside. Yellen has mentioned the stronger dollar as something of an albatross. The currency wars are here to stay.

Utilities continue to outshine every sector in the market, year to date. With gains in excess of 16%, utilities continue to attract investors who’ve shed their books of energy related dividend payers, in favor of something a bit less toxic.

The market’s devotion to every syllable of what the Fed says never ceases to amaze me. Come tomorrow, there might be a hawkish Fed comment that shifts today’s dichotomy. But for now, it appears the market will be supported by a globalist Federal Reserve policy, one that offers succor to multi-nationals and preys upon European exporters.

At some point, actual profits and actual revenue growth will matter. For now, we can all pretend that every ailment of the economy has been remedied and lower interest rates is precisely all we need to permit XYZ to beat analyst earnings expectations.

Back in the old days, the Federal Reserve would never, ever, dare to utter the words ‘global growth’ when describing American monetary policy. There is no doubt that the world has changed and American policy must now envelope the economies of China, Europe and other major trading partners. This isn’t to the benefit, per se, of the America people. Make no mistake, our multi-national corporations are the ones who benefit most from a policy that heralds in easy money for an undetermined amount of time. By extension, speculators in the stock market also stand to benefit. As corporate profits are bolstered by robust foreign markets, the share prices should appreciate here.

My position, as I’ve stated here on numerous occasions, is that the Fed should not hike rates. Deflationary forces are clearly the greater risk. Aside from my abhorrently high grocery bill, which has more to do with my aversion to GMOs than the availability of cheap produce and meats, prices have been dropping–across the board.

This is a significant speech and part in Federal Reserve history. Yellen is effectively on record saying that our central bank is beholden to foreign markets–because of the fact that so many of our corporations have picked up and left American lands, abandoned and scuttled factories, in favor for slave labor abroad. The slaves shall toil, working feverishly to produce products to be sold in Walmart and Target. Americans will buy those wares, at exceedingly cheap prices. But the funnel is narrowing. The availability of respectable paying jobs is lessening.

Twenty years hence, I doubt our infrastructure will be able to support the policy of chasing cheap labor around the globe in order to produce products to be sold cheaply to an orangutan brain’d consumer, who by then will be wholly dependent on government assistance.

In spite of the efforts of Yellen’s cohorts at the Fed, she struck a dovish tone during today’s speech and the market was elated by it.

However, her thinking is fairly binary with regard to the economy and the role she intends to play in it. It’s almost as if she’s resigned herself to be the fireman. Effectively, she intends to hike rates so that she can lower them later when the economy weakens.

Still, the Fed can hike if the economy grows faster, she said. But if the economy falters, she added, the Fed can “provide only a modest degree of additional stimulus.”

“I consider it appropriate for the committee to proceed cautiously in adjusting policy,” Yellen said in the text of prepared remarks Tuesday. “This caution is especially warranted because, with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric.”

“Yellen has doubled down on the dovishness from the March statement and press conference,” said Neil Dutta, head of U.S. economics at Renaissance Macro Research LLC in New York. “Global economic developments are cited very prominently.”

Yellen said the FOMC “would still have considerable scope” to ease policy if rates hit zero again, pointing to forward guidance on interest rates and increases in the “size or duration of our holdings of long-term securities.”

“While these tools may entail some risks and costs that do not apply to the federal funds rate, we used them effectively to strengthen the recovery from the Great Recession, and we would do so again if needed,” she said.

Stocks are ripping to the upside, with notable weakness still found in basic resources.

Crude is giving zero fucks about Yellen’s speech.

To recap: SPY up + TLT up + XLE down= “The Fly” wins again.

The rally of the past 5 weeks was built on a house of sugar. It was an alluring idea, one wrought with fantasy and wonder. The global economy, out of nowhere and without reason, was bottoming and 5 years of broad commodity sell offs were coming to an abrupt end. Steel prices were on the mend. Copper and oil careened higher, helping the shares of WLL, FCX and many other surge to recent heights.

While nothing is etched in stone and it’s all very possible that the house of sugar might solidify and become a monument for decades to come, it’s not very likely, is it?

Don’t look now, but oil and copper are on a losing streak, damaging the narrative of reflation and the need for higher interest rates.

Conversely, money keeps pouring into treasuries. Why do I call it an ark? It’s a play on words, really. It symbolizes safety and a method by which the layman, or giraffe, might escape the catastrophic floods to come. In this case, the floods will be more in a metaphorical sense, as a deluge of sellers hit the market in a frenzy to sell what’s rapidly losing value.

I remain 50% short XLE, 25% long TLT and 25% long SPY.

Fed’s Williams is out talking reckless again, ahead of Chair Yellen’s speech due today. The highlights are more of the same from a very dangerous and delusional Fed.

You want something actionable? Fear this. They are building consensus around the idea that inflation is the real threat. Apparently, 0.6% GDP growth means ‘we’re on track’ and ‘we’re chugging along’.

These are dangerous people and their actions are becoming less and less predictable.

“My view is essentially, let’s just stay on track. Let’s not get sidelined by the noise and distraction commentary can sometimes cause.”

“We’re not quite where I’d like us to be, but recent developments have been very encouraging and add to my confidence that we’re on course to reach our (inflation) goal,” he said, citing an uptick in oil prices and a stabilizing dollar.

Overall, the U.S. economy “keeps chugging ahead,” he said.

“The last few months have actually been looking really good on CPI and PCE prices and I do want that to continue,” he said during an audience Q&A session.

“If it continues for the next few months, I will be pushing forward my inflation forecasts,” Williams said.

“There is some upside risk that we’ll hit our inflation target sooner.”

“I don’t see a looming global crisis,” Williams said, adding that he continues to think China will avoid a hard landing.

If the U.S. economy performs as well as it did last year, it will be able to handle steady interest rate increases in 2016, Williams said.

“If we have inflation moving clearly towards 2 percent, if the U.S. economy continues to improve the way it did last year…I think the economy could easily handle two or more (rate) increases this year,” he told reporters.

Should Yellen mirror this refuse, I expect markets will take a material turn for the worse, as this is extremely hawkish rhetoric.

Gameover for the clowns over at SUNE. They should’ve stayed a pathetic semiconductor company called WFR. Now that they’re this nefarious solar company with tracking stock smoke and mirrors, they’ll be forced to simply go away, twist in the wind with the sand of time.

Terraform is out with a warning of the first magnitude. It appears the end is near and GLBL is trying to warn investors that an eventuality of the highest order of seriousness  is about to transpire.

* Sees filing of annual report on form 10-k for fiscal year ended December 31, 2015 to be delayed beyond march 30, 2016

* Expect to file a form 12b-25 on or prior to march 30, 2016

* Currently have identified a material weakness in internal controls over financial reporting

* Have not yet completed all steps and tasks necessary to finalize financial statements and other required disclosures
* Sunedison has not performed as obligated under management services deal, in particular with respect to financial reporting, control matters

* Sunedison has not or may not be able to perform under other agreements, including deal with respect to contribution of projects in Uruguay, India

* Sunedison has not or may not be able to perform under other deals, including pending dropdown of some India project portfolio of 425 MW bought by Terraform Global Llc

* If Sunedison does not perform under some agreements, it could have a material adverse effect on Terraform global

* Due to Sunedison’s liquidity difficulties, there is a substantial risk that Sunedison will soon seek bankruptcy protection

* If Sunedison seek bankruptcy protection it would have a material adverse effect on Terraform global

* In addition, Sunedison, inc. Has experienced delays in completing construction of Bora Bora wind power project

* In event Sunedison seeks bankruptcy protection, Terraform global will have sufficient liquidity to support its ongoing operations

* Sunedison has not performed as obligated under management services agreement

* Terraform global llc, Sunedison Holdings corp may agree to substitute projects initially anticipated to be transferred with different project

* Sunedison holdings corporation has not yet proposed any substitute projects

* In active discussions with credit lenders to obtain extension with regarding required delivery of form 10-k for year ended Dec 31, 2015

Shares of SUNE and GLBL are plunging, as well as the shares of the related TERP.

The assholes over the Luxor Capital are trying to avoid the inevitable. Instead of accepting their fate into the blackhole of funds who’ve failed before them, they’ve created a special purpose vehicle in which 12% of their assets will be placed to avoid sending it back to investors wanting out.

I get it. You can’t believe how the market treated you and you’re hell bent on getting it back. Word to the wise: accept your fate and stop with the parlour tricks. If your investors want out, let them get out.

Luxor Capital, a $3.8 billion hedge fund that has been losing money for months, said on Monday it will not be returning exiting investors cash in full, keeping a portion locked up until some illiquid investments can be sold.
Instead of returning all exiting clients’ assets in cash, investors will receive 88 percent of their money back while 12 percent of the investments will be held in a so-called special purpose vehicle, Luxor’s founder, Christian Leone, wrote in a letter seen by Reuters.
“For those investors in the Fund that have submitted withdrawal requests for March 31, 2016 and for subsequent withdrawal dates, we will transfer a pro rata share of the applicable assets into a special purpose vehicle (SPV),” Leone wrote.
Only clients who asked to get their money out on April 1 and July 1 will see a portion of their money put into the SPV and the fund will not charge any fees on these assets.
Special purpose vehicles and side pockets are permitted at hedge funds but they are often viewed as a last resort that sour investors, and they have not been widely used since the 2008 financial crisis when many hedge funds posted heavy losses.
But consultants have said that if illiquid positions become large, then it is prudent to segregate them and not charge fees until gains are realized.
After sending the letter, Leone held a brief conference call with investors where he identified the four illiquid securities being put into the special purpose vehicle. Together they make up 12 percent of the portfolio, he said.
They include food delivery service Delivery Hero, which Leone said makes up more than half of the exposure and has seen a “multifold appreciation since we initially made the investment.” Additionally private equity investments in online food ordering service Foodpanda and drilling company Ascent Resources are in the SPV as well as preferred stock of Altisource Asset Management.
But in 2015 it lost 19.2 percent when the average fund lost about 1 percent and it started 2016 with a 5.2 percent loss in January. This unnerved some clients, including Rhode Island’s state pension fund, which gave Luxor $50 million to invest in 2014, to exit. Last week its investment committee voted to pull its money out at the end of June and the fund told Reuters that it expected to receive $35 million back.
Luxor did not say when it expects to return the rest, saying only “We will continue to actively manage the assets held by the SPV until we can liquidate them in an orderly manner.”

The market has been brutal in recent years. Anyone who says otherwise, or pretends that its been easy, is either laying or a fraud, or this market was built for him. Either way, there is no shame in accepting defeat and moving on. There is shame, however, in being a sore loser.

EgyptAir MS181 was hijacked by a man claiming to have a suicide belt on. He ranted and raved, threatened to blow up the plane. Then, he made the plane land in Cyprus, where he released the women and children. Then he released everyone except a few foreigners and the crew. Then he said the reason why he hijacked the plane was to contact his ex-wife who lives in Cyprus.

Fuck this shit and this guy. I am going to sleep.