The Crude Story is Being Tarred and Blackened

WTI is down another percent today, widening its losses to 14% over the past month. For the most part, oil stocks have stupidly ignored this horrendous price action and have traded like grocery store stocks.

The fuck out of here.

Down, down, down.

WLL and CLR are your coal mine canaries. The blood will flow, heavy and with ceaseless consistency. You’d be wise to liquidate your entire portfolio and go swimming in St. Bart’s, should crude break $40 to the downside.

I know, who cares about those latins? Truth is, the jingoistic mentality of this country could see our stocks rise amidst nuclear detonations in Europe. We’re at a point in this cycle that the gains are excessive to the point of madness.

It’s the sort of tape you chase. You get lured into the fray by a sundry of tantalizing moves, like FB, AAPL or even N and GRUB. We’re in the midst of a truly special time for stocks and I am going to make sure that I miss out on every single second of it.

Both Italy and Spain are down in excess of 1.5%, led lower by banks.

Unicredit is down 4% and about a dozen other banks are lower by 3%.

Afraid to go outside of your housing tenements? That Taco John’s or Kansas Fried Turkey is looking real good, from your window view. If only you could get the food without having to risk going outside and possibly get robbed or shot.

Hey, we live in a very high tech world these days. It’s not like how we grew up in the 90s, playing games with numbers on our beepers. I read a report last week that stated restaurant stocks are weak (Extra Hillary) because people are afraid of the anarchy. The analyst said to buy PZZA. I like that play, and also DPZ. But it’s not the reason why I wrote this damned article.

Order via your phones, jackasses. GRUB specializes in placating the coward and the sloth. They just crushed the quarter.

Reports Q2 (Jun) earnings of $0.23 per share, $0.04 better than the Capital IQ Consensus of $0.19; revenues rose 36.6% year/year to $120.2 mln vs the $114.25 mln Capital IQ Consensus. EBITDA $37.6 mln vs. $30-32 mln guidance.

Active Diners were 7.35 million, a 24% year-over-year increase from 5.93 million Active Diners in the second quarter of 2015. Daily Average Grubs were 271,100, a 23% year-over-year increase from 220,100 Daily Average Grubs in the second quarter of 2015.

Gross Food Sales were $733 million, a 29% year-over-year increase from $568 million in the second quarter of 2015.

Co issues upside guidance for Q3, sees Q3 revs of $116-119 mln vs. $113.82 mln Capital IQ Consensus; EBITDA $30-32 mln.
Co issues upside guidance for FY16, raises FY16 revs to $480-488 mln from $465-480 mln vs. $473.30 mln Capital IQ Consensus; raises EBITDA to $136-142 mln from $125-133 mln.

The other obvious play is YELP. It’s one of my go to apps. As a food and a very brave man, I enjoy the many luxuries that YELP affords me. They also have an order in feature, which of course caters to the dystopian world we’re delving into.

This has been to most widely talked deal in the history of deals. I recall reading about a possible deal a decade ago. I used to own a large amount of N and always liked the company. As a matter of fact, I believe software stocks are the best speculative investments out there.

Look at this article, dated 2007.

It was his company from the start. Larry Ellison is merely playing parlour tricks today.

Now the big question is, who’s next? Everyone will go out and buy WDAY and SPLK today, hoping to catch a tailwind. The truth is, after dropping $10b on N, I very much doubt Oracle is going to make another big acquisition any time soon.

Nevertheless, here are the software stocks to watch, courtesy of Exodus.

If forced to pick two, I’d say WDAY and CSOD are next.

Ajay Kapur, Head of Asia-Pacific strategy at BofA/Merrill, blessed with a glorious mane, has declared ‘it’s too late to be bearish.’ Silly fools, the time for bearish calls on Asian equities was five years ago, said Ajay. All of the naysayers make for great philosophers, espousing a lexicon of bad news events that loom, imminently. Following several martinis, discussing policy amongst a room of pseudo-intellectuals, Ajay is more than capable of holding his own, rather matter of factly dismissing the folly of both the booze hound and morosophically demented.

Ajay Kapur has been bouncing around Wall Street like a molotov cocktail, these past few years. He’s been at Deutsche Bank, Citi and of course Morgan Stanley, just to name a few. In this very candid, and quite eloquent interview, Lord Kapur graced the Bloomberg audience with a head of hair fit for a king, black as night and long and flowing like a tumultuous Bay of Bengal high tide.

Very succinctly, as a chief representative of BofA/Merrill Asia, Mr. Ajay Kapur III chides those who believe there are any risks to equities, especially in China. A meridian of splendour and luxuriate gains await those able to remove themselves from the onion patch and into the Shanghai 50 Composite. The doom and gloomers, who Ajay claim have been wrong about Japan for many, many decades, in spite of the fact that that the NIKKEI hit a record high in 1989 and has gone down ever since then, shall commiserate with one another–cast out as the ‘family idiot’ and dispatched into the sea, indelibly, a loser. These small, yet trivial, facts are a great annoyance to Sir Kapur. His avocation and occupation is ‘to make money’, in addition to mollycoddling the masses into a sweeping stupor, just prior to a ceaseless bedevilment of the markets– an absolute and primordial desert storm that will lead to ‘his clients’ extinction from the field of play.

Henceforth, buy stocks!

Fuck copper and the horse it rode in on. For the better half of the past year, the price of copper has been meandering, slivering even, like a snake. Most traders are unsure as to the immediate direction and simply chalk it up to Chinese nonsense. But the shares of FCX have risen to fantastic levels. Bear in mind, I left a whole book of clients long many shares of FCX in the single digits. But enough is enough.

Base metal shares have risen to absurd levels. Look to the price of X to understand what I am speaking of. By the way, that is a high risk pick of mine, heading into the elections.

Come hither as I divulge to you a great secret, small peasants.

The sublime harmony of mathematical precision (SHOMP) is suggesting that you sell or sell short shares of FCX.

I understand that to many of you selling short is equal to a Faustian Bargain, one wrought with sacrilege and scandal. But I beg of you to look towards the numbers. The algorithms that I’ve developed have a keen understanding of how FCX trades. Its never been wrong, in 9 previous instances, over the past year.

Nevertheless, and this was mentioned during today’s chat room session inside the new Pelican Room inside Exodus, I prefer to sell short XME. It too is flagged overbought and has incredible stats. But the timing of said short is in the details.

Such details will only be shared with the top hatted gents inside of our hallowed halls.

You can droll about the house again, pandering to your teevee box, ingesting cheese’d doodles whilst watching rotten tomatoes commit eloquent acts of unpatriotic sophistry for an otherwise beguiled and morosophical audience.

True story, I spend anywhere from $2-4k per month at Whole Foods and other various grocery outlets. I am what one might call a ‘foodie’ and prefer to ingest food that isn’t tainted by the Monsanto corporation. I know, grass fed and organic foods are a scam. But maybe it isn’t. Maybe you’re just a stupid little shit who enjoys being poisoned by canned foods.

At any rate, I eagerly, and with great energy, despise what Whole Foods has become. Instead of the hipster disruptor it used to be. It now has the feel of a large, oppressive, purveyor of fucked up vegetables. Its employees HATE the place. I make an effort to talk to almost everyone there, just to get the feel for the place. Often times, a stranger might confuse me to be a sociopath, when in fact I’m just doing research.

I live in an area that is chockful of farms and locally sourced food. When the apocalypse comes and all of you are starving to death because the Shop Right is out of stuff, I’ll be fine dining on locally sourced steaks. The quality of the food that I can acquire locally far exceeds the stuff that Whole Foods marks up as premium provisions.

Shopping at Whole Foods used to be an exciting adventure. Now I fucking loathe it.

Success has defeated them, to borrow a phrase. The barbarians at Kroger are heaving at their door, waiting to connect a death blow.

Reports Q3 (Jun) earnings of $0.37 per share, in-line with the Capital IQ Consensus of $0.37; revenues rose 2.0% year/year to $3.7 bln vs the $3.72 bln Capital IQ Consensus. Comps -2.6%, just below estimates.

Co issues downside guidance for Q4, sees EPS of $0.23-0.24 vs. $0.25 Capital IQ Consensus Estimate; sees Q4 revs of +2% to ~$3.51 bln vs. $3.56 bln Capital IQ Consensus

Q4 to date comps -2.4%: While the co is hopeful that comps will improve over the remainder of the quarter as comparisons get easier and sales-building initiatives gain traction, the Company expects some ongoing offsetting impact from its value strategy and disinflation.

Pricing power is waning. Competition is growing. I’m afraid this company is doomed.

Shares of Faced Book are higher by 6.5% in the after-hours after crushing estimate on both the top and bottom line. Is there really any surprise here? The company has a virtual monopoly on social media, with Snapchat being the one rebel hold out.

The company now sports 1.57b monthly active users. Mobile advertising is now 84% of total ad revenues, an amazing turn for a company who didn’t know what they were doing just a few years ago.

• Reports Q2 (Jun) earnings of $0.97 per share, $0.15 better than the Capital IQ Consensus of $0.82; revenues rose 59.2% year/year to $6.44 bln vs the $6 bln Capital IQ Consensus.

Second Quarter 2016 Operational Highlights

• Daily active users (DAUs)- DAUs were 1.13 billion, better than expected, on average for June 2016, an increase of 17% y/y; Q1 +16%, Q4 +17%
  • Mobile DAUs- Mobile DAUs were 1.03 billion on average for June 2016, an increase of 22% y/y; Q1 was +24%, Q4 was +25%
• Monthly active users (MAUs)- MAUs were 1.71 billion, better than expected, as of June 30, 2016, an increase of 15% /y-
  • Mobile MAUs were 1.57 billion as of June 30, 2016, an increase of 20% year-over-year; Q1 and Q4 was 21%
• Mobile advertising revenue- Mobile advertising revenue represented approximately 84% of advertising revenue (Expectations were for approx 82.7%) for the second quarter of 2016, up from approximately 76% of advertising revenue in the second quarter of 2015.
• Capital expenditures- Capital expenditures for the second quarter of 2016 were $995 million.

Come on son, Esther George has done lost her mind. Here is the Fed statement. They’re beginning their shit talking spree of faux rate hike intentions.

Federal Reserve releases FOMC statement from July 26-27 meeting Information received since the Federal Open Market Committee met in June indicates that the labor market strengthened and that economic activity has been expanding at a moderate rate. Job gains were strong in June following weak growth in May. On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months. Household spending has been growing strongly but business fixed investment has been soft. Inflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports. Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will strengthen. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further. Near-term risks to the economic outlook have diminished. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; James Bullard; Stanley Fischer; Loretta J. Mester; Jerome H. Powell; Eric Rosengren; and Daniel K. Tarullo. Voting against the action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate to 1/2 to 3/4 percent.

Say what you want about my feverish hankering for bonds, via TLT. This singular position is up more than 17% for the year, absolutely poleaxing everything in its wake.

Repeatedly, I hear people telling me ‘get off the ark man, it’s gonna sink.’

Fuck you, no it’s not.

The bull case for bonds has never been stronger. Central banks are in easing mode, which bodes well for bond buying lunatics. The more QE, the lower yields go. Over in Japan, the JGBs are at record low yields.

Over in Germany, yields cratered by more than 5bps to -0.08%.

You do understand this is all interconnected, right? Arb players will continue to ping off JGBs to Bunds and then to Treasuries. This is how this trade has played out for the past 8 years and it’s how it will continue to trade in the future.

What if the Fed hikes rates?

It will only affect short dated bonds, the 2yr, not 30yr treasuries. As long as Japan and Germany wallow in negative territory, there is a profound bull case to be made for our very cheap and very attractive bonds.

I will remain long TLT, with 25% of my assets, until the yield curve inverts.