Stifel: The Fed Are Wearing Beer Goggles

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.

We’re gonna hike rates, soon, fast and hard. No, nevermind, we’re not gonna raise rates because THE FUCKING WORLD IS BURNING DOWN. After further review, we’re gonna hike rates. We really mean it this time. Oh shit, I forgot I had a doctors appointment and can’t raise rates at this time. We’ll have to raise rates later, no idea when that might be. I’m starting to think we might need to raise rates. Then again, maybe we shouldn’t.

The fuck.

“Directionally, the movement in investor expectations towards a flatter path for U.S. short-term interest rates seems broadly appropriate,” Dudley said in remarks prepared for a speech Monday at a conference in Bali.

Directionally speaking of course.

However, “it is premature to rule out further monetary policy tightening this year,” Dudley said, spelling out that investors may be giving insufficient weight to the chance of the economy performing better than expected, or headwinds from abroad fading.

“If the incoming information validates my view of the outlook, then I believe that U.S. monetary policy will likely need to move at a faster pace than implied by futures prices towards a more neutral posture as the labor market tightens further and U.S. inflation rises,” he said.

Don’t test us, sons. Your bets in the futures markets are reckless. If that data comes in hot, we’ll be hiking rates so hard your head will do a 360 like that exorcist bitch.

Dudley said interest rates are low because investors appreciate that the FOMC “needs to take a risk management approach in its conduct of monetary policy,” especially at a time when the outlook for the U.S. consumer is softening, credit remains tight, the U.S. presidential election could dampen business investment, and the Fed has fewer tools to fight a downturn in the economy than an upswing.

Rates are low as fuck because the world economy sucks, really bad. Plus. Donald Trump is gonna fuck up the apple card and the whole world is gonna burn. That credit is tight with negative to zero rates, worldwide. Ain’t that a bitch?

“Consider the many different channels of potential Brexit influence — not only the impact on international trade and global interest rates and currencies, but also on bank equity prices and on political uncertainty,” he said.

That BREXIT shit is a real downer. Plus, have you seen them banks stocks lately? The fuck out of here, talking about interest rate hikes. We can’t do that now. If things change, however, then we’ll do it.

Mr. Gang from Citi has all sorts of terrible things to say about China’s economy tonight. He’s warning of ‘financial leakage’, the constant flow of funds leaving that God forsaken walled nation in search for better opportunity. No one cares. It’s crickets all night through all day long. People know of all these fucked up problems, how China is inexorably screwed and how the UK is going to leave the EU in shambles.

No.one.cares.

QE for life. Counterfeit dollars slushing into index ETFs will save the day.

If you’re not a very good stock picker, I advise you to be true to yourself and either join the hall of men and gentlemen inside Exodus (now including The Pelican Room) or bear witness to the greatness that is The Option Addict in After Hours with Option Addict, which is a nightly summary of Jeff’s take on the market, including his top ideas.

For the better part of the past few months, markets have been ripping to new highs. Yet, at the same time, very defensive sectors have been leading.

For example, gold stocks surged by 13% last week, while the SPY “ripped” higher by 0.2%.

Look at some of those gains, courtesy of Exodus.

Year to date, silver stocks are up 241%. Gold stocks are up 182%. Foreign utilities are up 62%.

Aside from steel stocks, which are benefitting from a potential Trump presidency and duties applied to Chinese steel, the vast majority of the top sectors are in precious metals, REITs or utilities.

On the downside, solar stocks are off by 37%, tankers down 30%, and biotechs have been beaten about the head by 24%, year to date.

As much shit that is discussed, GOOGL is only up 1.5% for the year. AAPL is flat. MSFT is up 3.5%. And AMZN and FB are dominating the field with +12% and +18% gains, respectively. The biggest mega cap gains are in defensive stocks like T, WMT, JNJ and VZ. Some of the old aristocracy, including NKE, GILD, AGN, BIDU, GS and WFC are all down double digits this year.

Who needs a bear market with a bull market like this?

It greatly behooves me to report that Jeffrey Hannibal Gundlach isn’t a fan of the ark any more. Moreover, he isn’t a fan of anything. His mood is entirely dire and is predicting doom, as he eagerly waits for it in his mega mansion, sprawling, estate.

The only respite, by the Bond King’s calculations, is to remain inside of the gold mine and wait for the economy to implode.

The artist Christopher Wool has a word painting, ‘Sell the house, sell the car, sell the kids.’ That’s exactly how I feel – sell everything. Nothing here looks good,” Gundlach said in a telephone interview. “The stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.”

Gundlach, who oversees more than $100 billion at Los Angeles-based DoubleLine, said the firm went “maximum negative” on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent.

“We never short in our mainline strategies. We also never go to zero Treasuries. We went to lower weightings and change the duration,” Gundlach said.

Currently, the yield on the 10-year Treasury note is 1.45 percent, which has translated into some profits so far for DoubleLine.

“The yield on the 10-year yield may reverse and go lower again but I am not interested. You don’t make any money. The risk-reward is horrific,” Gundlach said. “There is no upside” in Treasury prices.

Gundlach reiterated that gold and gold miners are the best alternative to Treasuries and predicted gold prices will reach $1,400. U.S. gold on Friday settled up at $1,349 per ounce.

Gundlach lambasted Federal Reserve officials yet again for talking up rate hikes for this year while the latest GDP data showed disappointing economic growth. “The Fed is out to lunch. Does the Fed look at what’s going on in the economy? It is unbelievable,” he said.

Overall, Gundlach said the Bank of Japan’s decision on Friday to stick with its minus 0.1 percent benchmark rate – and refrain from deeper cuts – reflects the limitations of monetary policy. “You can’t save your economy by destroying your financial system,” he said.

DOOM!

I do agree that the market should be down massively. But, then again, I like to scream fire in a crowded room. My support for treasuries lies in Japan and Germany, where rates are negative. As long as competing government bonds are negative, I believe our treasuries offer a unique arb for advantageous investors.

The empire strikes back. It’s hard to believe just 1 week after U.S. Government officials accused Russia of hacking into the DNC, leaking the emails via Wikilwaks, this cyber attack on Russian agencies is just a mere coincidence.

Perhaps this is an example of 21st century ‘mutual destruction’? Instead of building nuclear silos and long range. missiles, we send out geek squads to shut shit down via the internets.

The hack reportedly targeted a number of government bodies.
A “professional” cyber attack has hit Russian government bodies, the country’s intelligence service says.

A “cyber-spying virus” was found in the networks of about 20 organisations, the Federal Security Service (FSB) said.

It said the hack had been “planned and made professionally”, and targeted state organisations, scientific and defence companies, as well as “country’s critically important infrastructures”.

The malware allowed those responsible to switch on cameras and microphones within the computer, take screenshots and track what was being typed by monitoring keyboard strokes, the FSB said.

I haven’t read anyone discuss this topic today. There are thousands of Germans taking to the streets today, demanding that Merkel step down due to her open door immigration policy. After about a dozen people have been killed in terror attacks over the past week, it appears the German people have had enough.

Horst Seehofer, the conservative premier of Bavaria, said he did not share Merkel’s ‘we can do it’ credo on accommodating the almost 1.1 million migrants and refugees who arrived in 2015.
Speaking after a meeting with the Bavarian government in Tegernsee, he added that the solutions to date were ‘too inadequate.’
Stressing he had no wish to start a quarrel with Merkel’s party, Seehofer said it was important to look ‘reality’ in the face.
An axe rampage, a shooting spree, a knife attack and a suicide bombing in the span of a week stunned Germany, leaving 13 people dead, including three assailants, and dozens wounded.
Three of the four attackers were asylum seekers, and two of the assaults were claimed by the Islamic State group.
‘Merkel must go’ has been trending on social media, with people posting powerful pictures including one claiming that she has blood on her hands after recent attacks.
A new survey found that 83 per cent of Germans see immigration as their nation’s biggest challenge – twice as many as a year ago.

No one really knows how Merkel got the Bundesbank to go along with insane European QE. If you recall, it took a long time to get Merkel to come around to feeding into the degeneracy that was and still is PIGS. One thing is for certain, should a new leader replace Germany, her economic policies with the ECB will come into question, threatening the very fabric of fairy dust that is holding the EU together.