Crude Closes Down 4.7%; Every Downtick is a Doom Filled One

Crude down 4.7% isn’t an ordinary day at the office. More than that, it ruins a sector beguiled and hamstrung by a debt load it can no longer service. In order for James Cramer and his band of roving idiots to get erect over the prospects for crude oil stocks again, the commodity needs to sustain $60, a level it has not reached–thus far.

Bear in mind, there is a wall of debt coming due in 2017. Now that we’re in the 2nd half of 2016, investors will begin to price in the horseshit.

Let me explain.

According to Exodus, the amount of distressed debt in the basic resource space is $136 billion. These numbers are based upon companies having access to capital, gauged by their debt/equity ratios. In other words, the higher their stock prices go, the more access to capital they possess. Naturally, the opposite applies to when these stocks are getting hammered lower.

For example, the amount of debt for companies just below distressed, from 2-4.99x debt/eq is a staggering $446 billion. With crude stocks down 6% for the day, you can see how this can snowball quickly, into a problem that will ruin many days and nights for many bankers.

While BREXIT was an important tipping point for the scales of freedom v tyranny, the crux of the issues for this market has always been in the oil and gas space. Aside from the negative rate issue, this is my primary concern for 2017 and beyond.

Tell me how this is going to help the ailing Deutsche Bank?

Whereas H. Clinton might get off scot-free, the EU will not. Anyone who is a supporter of the EU, I beg you to defend the actions of its central bank, a bank which has caused misery on a biblical scale across europe. For the love of black holes and swans, the entirety of the German yield curve is on the precipice of disaster–now negative up to 15 years in duration.

German bunds at -0.185% is the backdrop for markets to work against. Sure, equities look damned good against those negative rates. But, then again, only an idiot would construe those rates to be a result of normal economic circumstances.

Ladies and gents, these are times wrought with financial penny dreadfuls. Nothing about this is normal, so cast aside any models you might have which helps you to sleep well at night.

Dark days are ahead. Board the fucking ark, already.

It was a cunning trap laid by nefarious banking powers in the east. I’m sure House Rothschild (shh, they don’t exist) will be more than happy to lend Russia money, in exchange for them declaring war on one of their neighbors.

Apparently, one of Russia’s giant sovereign wealth funds will be depleted by next year, due to the drop in crude coupled with excessive spending.

Russia will exhaust one of its two sovereign funds next year, according to a finance ministry proposal seen by Reuters, having by that point run through $87 billion since the beginning of 2014 to fill holes in the budget left by a slump in oil prices.

Russia will also spend over the next three years about a third of another of its funds on covering the budget shortfall, the proposal showed, even though that fund was originally intended to cover long-term deficits in the pension system.

The finance ministry proposal, which contains recommendations on spending, has been submitted to the government for its consideration but not yet approved.

Russia’s budget deficit has swollen as oil prices fell sharply from 2014 and the West imposed sanctions over the Ukraine crisis. The deficit stood at 4.3 pct of national output in the first half of 2016, up from 2.6 pct last year and against 0.5 pct in 2014.

At current rates of spending, it has been clear for some time that the Reserve Fund – which at the start of 2014 stood at $87 billion – would run out around 2017.

This is just a small taste of what is to come in 2017, should the price of crude remain depressed.

Save gold and silver, the commodity sector is enduring a harsh repudiation of last week’s rally, with corn, wheat and oil getting crushed into little fucking pieces.

Again, and this bears reminding, as sovereign bond yields dive deeper into negative territory so does the world into a deflationary vortex. Under such conditions, asset prices and commodities will get crushed. The only reason why gold is higher is because people are viewing central banks as crazy wall eyed fucking lunatics, willing to do anything possibile to denigrate and debase their currencies, in order to save banks from having to write down losses. At the end of the day, this is what it’s all about. The EU got deep into QE, only after coming to grips with the fact that it didn’t want their banks to write down bad Greek loans. Since then, they’ve been busy little bees at the printing press, trying to paper over the losses. But they cannot.

The only way to remedy this situation is by defaulting on the debt and permitting the system to reset. One does not grow out of 100-250% debt to GDP. You simply write it down and start fresh.

America the beautiful. We still have the most attractive sovereign bond yields, especially now that German bunds are -0.16%. Why not take a ride aboard the ark instead, currently yielding a tad over 1.3%? It’s a no brainier.

As you can see, stocks are being harassed by sellers this morning following an overtly naive audience of hecklers who bid stocks up last week after their cocaine supplies dwindled to new lows.

“It’s really just currency and yields. By watching currencies, watching yields, you get a pretty good sense of what’s on investors’ minds and right now it looks like slowing economic growth,” said Jack Ablin, chief investment officer at BMO Private Bank.

“As of Friday’s close in the U.S., that assumed Brexit was no big deal, that it was a non-event,” said Peter Boockvar, chief market analyst at The Lindsey Group. “That was naive.”

“At the end of the day it still leaves a lot of questions about global economic activity,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.

“I think it’s a market in need of a catalyst,” he said.

Indeud.

TLT is trading north of $142 this morning.

I bet you thought we were out from the woods? Well, think again, for the market is very much mired in the same woods that loomed dreadful post BREXIT vote.

The pound is getting hammered into dust, down to 31 yr lows.

Crude oil is getting Gartman’d, off by more than 3%.

And lastly, but most chiefly, the world is encumbered with plunging German yields, now at new lows. It’s worth noting a divergence between European periphery nations v German exists today. I’ll keep track of these annoying pests for you, rest assured.

All of these items are weighing on stocks this morning, with the DAX off by 1.7% and our beloved NASDAQ down by 35.

Welcome to the car business, fucked faced TSLA shareholders. You thought Elon Musk’s stupid electric cars were immune to the plagues of production issues that have harassed the auto industry for the past hundred years?

Think again.

Tesla on Sunday said it delivered 14,370 vehicles in the second quarter, missing its forecast of 17,000 units because of what it called an “extreme production ramp” with half of the quarter’s output in the final four weeks. The maker of electric cars and energy-storage devices now expects to deliver about 50,000 cars in the second half, according to a statement. That means 79,180 Model S sedans and Model X sport utility vehicles shipped for the full year, slightly below its previous range of 80,000 to 90,000.

But don’t worry. I’m sure all of those SCTY door to door solar panel salesmen will bail you out of this mess.

I hope all of you are enjoying your hang overs. “The Fly” isn’t harangued by such issues, having foreseen his bodies hydration concerns, which he addressed accordingly. The same can be said about his stock market positioning, neatly tucked away inside of a gold mine aboard a floating ark.

Life could not be safer.

Good morning lads. There are a sundry of issues to worry about today, such as German 10yr yields plunging to -0.16% and the Swiss 50 yr now negative for the first time ever. European markets are getting hammered into glass and NASDAQ futs are down 20, which sounds very generous when considering WTI is down 2.9%.

Analyst downgrades are chock full this morning, as many cited BREXIT as a chief concern. NFLX was one of those downgrades this morning over at Needham.

I’m sure the market will square these awful things away by 3:30 and fucking ramp into the bell, or maybe not. Either way, I’m pleased with my positioning, which includes my one short position–recently featured inside Exodus.

The EU commissioner hailing from Berlin wants action taken against the spendthrift governments of both Spain and Portugal. For some odd reason, both nations believed they could enact a budget without the explicit directives of Brussels. As such, Germany is calling on the EU to apply sanctions to both nations, as a form of punishment to teach them a lesson in fiscal budgeting.

According to the Lords at the Bundesbank, all EU budgets must adhere to the strictest budgeting of keeping deficits below 3% of annual GDP. If done correctly, all nations under the EU standard will get to enjoy debilitating German-styled deflation. Under the rules set forth, nations who do not tow the line can and will be fined up to 0.2% of their GDP.

“If the Commission wants to preserve its credibility on upholding budget rules, we have to approve sanctions against Spain and Portugal,” Commissioner Guenther Oettinger was quoted as telling German daily Bild. “If we give ourselves common rules, they must be kept to.”

The rebellious Portuguese leader offers a rebuttal to his German overlord, asking for some understanding of the situation he’s in.

Portuguese Prime Minister Antonio Costa, whose center-left government is reversing previous austerity measures with the support of the Communist Party and radical Left Bloc, is fighting possible sanctions.

Costa said Monday that the 2015 budget deficit, when stripped of one-off measures such as rescuing a failed Portuguese bank, came to 3.2 percent – only slightly over the limit.

“It makes no sense to sanction Portugal,” he told reporters in Lisbon. Costa has warned that penalties could knock Portugal’s recovery off track as it aims to get the deficit below the limit this year.

Germany frowns upon excuses. All nations must bend to their caprices and follow the rules, or else!

He appears to be burned out, unable to continue the fight necessary to further vanquish his enemies. We all suffer from fatigue, every so often. Farage feel he’s going out on a high note and wants his life back.

“I now feel that I’ve done my bit, that I couldn’t possibly achieve more,” Farage told reporters in London on Monday. “It’s right that I should now stand aside as leader. What I said during the referendum campaign is I want my country back. What I’m saying today is I want my life back. And it begins right now.”

Someone should tell him “his life” was meant to be in public service, as Prime Minister of Great Britain. As these tools clown around, denigrating his country, Farage will enjoy a life of chain smoking cigarettes in the back of a pub.

Ridiculous.