Oil and High Yield Credit at Biggest Divergence Since 2010

Forget about the market for a second and just focus on oil. Oil sub $40 will begin to truly wreak havoc on some energy credits out there, especially the high yield junk. At the moment, the high yield market is completely ignoring the dip in oil. This cannot last for too much longer.

One of the preferred methods of judging this is via HYG. As you can see, it has a bit of a rolling over look to it.

There are numerous ways to play this. I will formulate a strategy tonight.

Thank heavens I came across this note from Citi. All this time I was wondering why crude was going lower and it didn’t affect the overall market. Now I know. The drop is simply a case of stupid as shit bears, unfamiliar with the basic laws of mathematics. According to this sage at Citi, supply is coming in and demand is very high. It’s only a matter of time before prices fucking skyrocket.

For leisurely reading.

Worldwide oil supply is at record highs. Rig count has gone up for 5 consecutive weeks.

OPEC supply at record highs.

Citi is an ass.

Much to Frederick Wilson’s delight, Citi came out with a bullish note on Etsy this morning, citing ‘stickiness’ amongst other nonsensical things. The stock is higher by 17%, mostly by people who’ve never attempted to do business on that PIECE OF SHIT WEBSITE.

“We have confidence in the stickiness of the seller-base despite the fact roughly half of them sell via other channels,” Kelley wrote Monday in a note initiating coverage of the company. “We also believe Etsy has built a fairly well-established brand when it comes to creating a marketplace where people can find truly unique items.”

A few months ago, I purchased a table on that asshole site, made by some dipshit from down south. I paid a fairly large sum of cash and never received my table. I emailed the person and she never bothered to get back to me. After looking for a way to complain to Etsy, I found it to be nearly impossible, so I gave up. My next course of action is to file a complaint through my bank and have them deal with it. Out of all the websites I’ve done business on, Etsy is by far the worst. They offer zero protection to the buyer. If the seller wants to rip you off and never have to deal with you again, they can! Also, there’s no way for me to even leave a review for this person, to warn others of the scam. I suppose it’s because I’m not a star member of the service and haven’t done enough business. Who the fuck knows?

All I know is ETSY is a rotten hamburger, while Amazon is the dry aged prime rib.

Fourteen new cases of Zika have been reported in Miami, which is causing officials in that city to panic. The Governor of Florida, Rick Scott, has officially asked the CDC for emergency assistance.

“We may well see other infections in that area,” CDC Director Tom Frieden said during a conference call with reporters where he issued the warning. The CDC has sent an emergency team to the state to assist in efforts to fight the virus, and Frieden said that pregnant women who have been in the area after June 15 should talk to a doctor and get tested.

Florida Department of Health officials said Monday they’ve identified at least 14 cases of Zika in Miami that were transmitted by mosquito. They’re the first known cases of local mosquito transmission in the U.S., where most cases have been traced to travel outside the country. The state said that all of the known transmissions are thought to have occurred in an area of Miami about a square mile in size.

The virus can cause birth defects when pregnant women become infected, though most adults have only mild symptoms, if they know they’re sick at all. The CDC recommended that women who’ve visited the area not get pregnant for 8 weeks after returning.

There isn’t a cure for Zika, or even a treatment. Investors seem hopeful that XON can come up with something and have been bidding the stock up. INO is another play. On the downside are the airlines. Who the fuck wants to travel to Florida now?

There are two schools of thought at play here. One lies in the fact that markets are dislocated from reality, ignoring the slack in the global economy and deleterious effects the decline in WTI will have on the heavily invested energy sector. The other side of that coin is pervasive central bank planning that will succor asset prices, which will, inevitably, lead to higher prices.

If you’re into buying gold stocks, due to the central bankers, it’s hard to buy them here–following a 1 week 15% gain.

If you’re looking to buy equities, it’s a little scary to do so, as oil breaks $40 to the downside.

REITs, UTES? That’s a hard trade too, since those sectors have been bid up to new highs.

Where is a lad to place his hard earned cash?

For me, the sole destination for all of these questions is the ark, via TLT. Also, I just added a short position, which was mentioned in Exodus today. On the long side, I like nothing–but Exodus is spitting out oversold signals for some key names.

Bottom line: Ignoring the drop in crude over the past month has proven to be a profitable course of action. Whether this trend will continue is anyone’s guess. With my money, I prefer to sell short the basic materials and remain idle in treasuries and cash.

This is the ebb tide. Time to make a move.

Fucking nuts, as it pertains to menacing markets with higher rates. What this lassie doesn’t seem to understand, being that she drinks from the tap water in St. Louis, is that the Fed never really intended to hike. It’s all a game of smoke and mirrors, extend and pretend. It’s the manipulative practices of a few bedeviled bankers that has us all tied up in spaghetti strands, desperately in search for a meatball.

WTI just broke $40 to the downside, off by a staggering 4% for the day. Energy stocks are being HARANGUED by losses, now off 5% for the session. And, naturally, the NASDAQ is +15. But reality is beginning to set it, just a little. The Dow is down 60, reversing earlier losses.

You’d have to be insane to ignore this price action in crude.

Repeat after me.

The price of crude really does matter. The price of crude really does matter.

Now go write that in your book 500 times until it sinks in.

By the time you’re finished, I am fairly certain the market would’ve recovered all of its losses and soared to new, record, perverted highs.

It took me 4 hours to write a post, as I marveled at the sheer stupidity of markets spiraling towards new record levels, all the while oil plunged lower to 3 month lows. At first I wondered if it was just me being a sour grape, some guy lancing out at the bulls who seem quite content with oil diving lower. But then I reminded myself that math does exist and how debt was something to be feared, not embraced.

Every down tick in crude is a nail in the coffin of an energy company. In turn, 10 nails are reserved for energy employees and 20 nails for the bank that lent the money in the first place.

“What the fuck is this whack a doodle talking about?”

God damn it, there is at least $600b in debt that is either distressed or soon to be distressed, should their share prices drop any lower.

Here we are celebrating record highs, smugly popping corks of champagne into each other’s noses, as the energy sector is encumbered by debilitating losses.

As I write this, crude is actually a little lower, off by 2.9%. Is this wanton dismissal of a sector beguiled by huge levels of debt normal? Absolutely not. Can it last much longer? I can guarantee you it will not.

Bad news for rickshaw operators in China. The government has been paid off enough to permit Uber to merge with China’s largest ride hailing service, dubbed Didi Chuxing.

The combined entity will be valued at $35 billion, providing Uber will a government blessed stranglehold on app generated livery services in the country. Uber will receive a 20% stake in the combined entity and Didi will make a $1b investment in Uber at an absurd $68 billion valuation. Numerous other companies will attain stakes in the joint merger, including Baidu.

“As an entrepreneur, I’ve learned that being successful is about listening to your head as well as following your heart,” Travis Kalanick, chief executive officer of Uber, wrote in a blog post obtained by Bloomberg. “Uber and Didi Chuxing are investing billions of dollars in China and both companies have yet to turn a profit there. Getting to profitability is the only way to build a sustainable business that can best serve Chinese riders, drivers and cities over the long term.”

No word on how many Chinese politicians and generals have attained stakes in this newly formed monopoly.