Gundlach: U.S. Stocks ‘Dead Money’, Even Money on June Rate Hike

I realize some of you believe we’re in some stock market Renaissance, but it hasn’t gone anywhere in 18 months. Moreover, we’re still down for the year.

Jeff Gundlach touched upon that and said he thinks there’s a 50/50 chance of a June hike. He’s been an arch opponent to the Fed banter and rate hike threats, citing a sundry of reasons for the Fed to not hike, such as the economy sucks–yadda, yadda, yadda.

“The market is not incredibly healthy,” Gundlach said in a telephone interview, noting recent corporate earnings have come in weak. Gundlach, who oversees $95 billion at Los Angeles-based DoubleLine, said the S&P 500 index “has gone nowhere in the past 12 months to 18 months.”

On the Federal Reserve, Gundlach said it is still 50/50 odds that the U.S. central bank will raise interest rates in June. He said many Fed officials are “dying to raise rates,” but that it is Fed chair Janet Yellen’s opinion that matters the most.

“All that matters is Yellen. She is still there. I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good.”

Jeff is boss hog, manager of $95 billion, the new bond King.

Apparently, the good senator from Tennessee traded the shares of CBL so well, the WSJ is now running reports on him, pointing to possible insider trading allegations. I know Corker has been a supporter of Trump and the WSJ editorial board have been livid, Bayer foam mouthed, haters of The Donald. Nonetheless, the good Senator has been trading CBL like a wizard. In this country, that is illegal and can get you 200 lashes at the gibbet.

The WSJ witch hunt continues.

In regard to Mr. Corker, Stephen Lebovitz said that “nobody at CBL has disclosed to him or to any other outside party any insider information, and we are unaware of any claim or allegation by any regulatory agency that suggests otherwise. We strongly deny any such allegations.”

Many of Mr. Corker’s trades were large. Fifteen of the trades were valued between $500,001 and $1 million; 30 were valued between $1 million and $5 million; and three were larger than $5 million, according to the senator’s financial disclosure filings. The filings require disclosure of stock holdings and transactions, but only in broad ranges of value.

A Journal analysis of Mr. Corker’s trading in CBL shows that he didn’t make money on every trade and in some cases he lost money.

In a 2011 article on Mr. Corker’s CBL investments, Mr. Corker said that by tracking the company’s stock for many years, he noticed that its shares traded within a range. “I’ve bought it heavily when it is at the low end of that range and then I hold it until there is upward movement, when I sell,” he said in a statement at the time.

In November, the Journal reported that Mr. Corker had failed to properly disclose several CBL trades on his personal financial statements filed with Congress.

In one of these purchases, Mr. Corker bought between $1 million and $5 million in CBL shares on Nov. 29, 2011, according to updated financial-disclosure statements that he filed after questions from the Journal. The stock rose nearly 7% the next day and continued to climb. He sold the stock in May 2012 for between $5 million and $25 million after the stock had risen 42%, representing a gain of between $420,000 and $2.1 million, according to a Journal analysis of the trade.

In another case, Mr. Corker failed to disclose that he bought CBL stock near its low of $2.07, according to the updated financial-disclosure statements. On March 9, 2009, accounts in the name of his daughters made a pair of purchases worth a total of $200,000 to $500,000. The first time any CBL shares were sold from those accounts, on May 12, 2010, the stock had risen to about $16. That transaction likely made a gain of at least $1 million.

According to Mr. Corker’s office, losses on other CBL trades in his children’s accounts in 2010 erased that gain. The same accounts had paid about $24 a share for more than $2 million of CBL shares in 2008. A year later, the stock hit $2 and closed Monday at $10.29.

Mr. Corker later amended his financial statements and blamed the errors on his former accountant.

Ms. Johnson, the Corker spokeswoman, said she believes the questions into Mr. Corker have been prompted by the Campaign for Accountability, a nonpartisan organization that has filed several complaints with the Senate Ethics Committee about Mr. Corker’s financial activity.

I don’t like Senator Corker or any Senator for that matter. But I hate these stone throwers ever more. The vilification of success is rampant in this country. From what I’m reading, Corker traded CBL because he liked to. He got accustomed to its ranges and made some money doing it. What’s so fucking surprising about that? We do this every day.

Separately, CBL is under investigation by the FBI and the SEC for accounting irregularities, which is the main reason why the stock is getting poleaxed this morning.

Same store sales at the high end retailer plunged by 9%. Asian and European comps down by 15%.

The company is blaming shitty consumers as a reason for their shitty earnings. Downside guidance was provided, as well as store closings.

Reports Q1 (Apr) earnings of $0.64 per share, excluding $0.05 tax benfit, $0.04 worse than the Capital IQ Consensus of $0.68; revenues fell 7.4% year/year to $891.3 mln vs the $914.97 mln Capital IQ Consensus.

Comparable store sales declined 9% vs. ests near -5%. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 7%, and comparable store sales declined 9%.

Americas sales -9%; comps -10% — management attributing the declines to varying degrees of softness in spending by U.S. customers and foreign tourists.

Asia Pac sales -8%; comps -15%. Japan +8%; comps +12%. Europe -9%; comps -15%.

Co issues downside guidance for Q2, sees EPS similar rate YoY to Q1 (down ~15% from $0.85) vs. $0.79 Capital IQ Consensus Estimate.

Co issues guidance for FY17, reaffirms mid single digit EPS decline vs. -2% consensus to $3.75; lowers FY17 revs to low single digit decline from $4.1 bln last year (previously near last year’s level) vs. $4.1 bln Capital IQ Consensus; worldwide gross retail square footage increasing 2%, net through 11 openings, 6 relocations and 10 closings; (iii) operating margin below the prior year’s 19.7% (excluding the prior year’s charges due to an expected increase in gross margin more than offset by SG&A expense growth; a modest year-over-year strengthening of the U.S. dollar; net inventories unchanged from the prior year.

“As expected, this was a difficult quarter in terms of both sales and earnings growth. We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong. However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the U.S. and around the world. From a strategic perspective, we believe that our initiatives will enhance our ability to provide our customers with extraordinary products and experiences and ultimately contribute to improved financial results. We remain focused on generating sustainable long-term sales and earnings growth.”

Meanwhile, futures are higher.

One of the mechanics from Fast Money tried to get technical on Ed, citing the indelible fact that all world markets look like a flaming bag of refuse and that the SPY had the look of a rolling top. Yardeni was having none of that shit. He stood up and cold prison smacked the bear for even uttering the words ‘rolling top.’

In all truthfulness, Yardeni is as smart as a bag of moon rocks in the sun. Nevertheless, the man has an intense following, almost as popular as President Nixon did after the Watergate scandal.

He’s always worth a listen, especially if you’re deaf.

Some of you might pine for Nike Air Jordan’s because you bought them when you were young, healthy, and with hair. Aside from the donning of rubber sneakers on grown men being nothing short of infantile, consider the reliance that both Nike and FL have on Michael Jordan, a brand that grosses $2.6 billion in revenues per annum.

What if Mike went OJ and cut someone’s head off? Then what? Then you’re fucked.

Both Nike and FL are shorts, in my opinion, for a sundry of reasons. Personally, I believe the NBA is a laughable farce. I never liked the sport, always felt my time was better off doing anything at all but basketball. Okay, the truth is I once started to play basketball as a teenager and had my face split open for me on the rock head of my best friend. Aside from that, basketball hasn’t been good since Larry Johnson hit a 4 pointer in the Knicks playoff’s winship.

Cramer has turned negative on the group, beguiled by the uncertainty of a sector that is dependent upon a criminal element in the culture to spur sales.

Let it be known that profound piker extraordinaire, Jeff Immelt, CEO of GE, purchased 67,600 shares of his companies stock, on May the 20th, 2016, in an effort to look like he’s doing something. Rumor has it, Jeff just gallivants around the office all day, polishing up Jack Welch’s trophies and talking shit about Six Sigma management style, in an effort to fit in with the rest of the execs.

Also, I have heard rumors about the internets that Jeff had to borrow the $2 million or so from one of his neighbors to buy the stock, as all of his liquid assets are tied up in some scheme that one of his half-wit cousins got him involved in.

The conversation went something like this:

Jeff: Hi neighbor, can I borrow a cup of two million dollars?

Neighbor: Sure, Jeff. I hope it’s to buy some of that GE stock of yours.

Jeff: Thank ya neighbor. I’ll be sure to give you back the 2 million in a few weeks or so, after I cash my tax check. It’s mighty fine of you to just let me borrow the millions.

Neighbors: No problem. Take your time Jeff.

GE’s stock is down 3.2% for the year, an embarrassment of monumental proportions.

The very first thing I wanted to see this morning was the market, 800-900 points lower. Instead, it gapped up by 200. I wanted to be skeptical. Bear in mind, I haven’t any skin in the game, ever since burning out like a race car engine in 2015. Since that momentous occasion, I’ve favored a more reasonable, disastrous scenario and was entreated to a small appetizer of it in early 2016.

Markets dropped like a fat man having a heart attack and I was delighted, not because I benefitted by it in any way, but because I wanted the world to burn (extra Joker). But today’s action is very strong and very convincing. If I was managing money today, I’d likely allocate a bunch of money into the stupidest stocks in the world, only to get blown to smithereens before settlement day. Or, I might just profit by it, grotesquely, then go brag to my idiot friends about how smart I was for buying stocks into a feverish lift.

Who wants to read about some skeptic on a joyous 200 point rally day? It’s like gathering around the fireside during Xmas festivities to tell the kids that Santa is a farce.

Enjoy the day. “The Fly” was wrong in his short term calls of apocalypse. But he will be right in the end, just know that.

Remember when America was a tired, rustbelt laden, country of Walmart eating fat pigs, bloated with 39% credit card debt?

Well, those days are seemingly behind us.

Credit card utilization has fallen to its lowest point on record, at just 22.3%, further emboldening the idea that the American consumer is a miserly, miserable sort, always Scrooging about the thoroughfare in search of discounts.

Total available credit spiked to a record high of $2.5 trillion, none of which will be spent at the mall.

On one hand, this all bodes very well for the balance sheets of Americans. On the other, it speaks to a profound change in the American culture. We’ve become a lot of organic chicken eating cheapskates, too busy partaking in evening jogs and yoga classes than to spend all of our fuck you money at the mall.

Basically, we’ve become Japan.

Sixty two billion is chicken feed for the bird brains over at Monsanto. Plainly and without equivocation, they rejected the Bayer Aspirin companies repulsive, $62 billion, all cash offer.

With Monsanto under their wings, the Bayer folks might inject their GMO technology into their line of polyurethane foam products, in order to convert ordinary Americans into monsters.

Word on the street is that Monsanto wants more money, a lot more money.

Bayer on Monday made public its offer of $122 a share in cash, or a 37 percent premium. Monsanto shares rose 1.9 percent to $108 at 11:53 a.m. in New York. A representative at Monsanto declined to comment. Reuters reported the Monsanto board’s decision earlier on Tuesday.

Bayer will likely come back with a higher bid, Jonas Oxgaard, an analyst with Sanford C. Bernstein & Co. in New York, said Tuesday in a note, adding that an offer below $135 per share would be “challenging” for Monsanto to agree to.

Shares of MON are higher by 2.5% to $109.

BCEI shares are undergoing a ‘Bonanza’ of selling this morning, after a redetermination of their finances revealed they were fucked. Their line of credit was slashed from $475 mill to $200 mill.

This is a small taste of what is soon to come to the oil patch, come 2017.

The Borrowing Base under the Credit Agreement was reduced from $475 million to $200 million, which amount will remain in effect until it is redetermined or adjusted in accordance with the Credit Agreement and will continue to be secured by certain of the Company’s Oil and Gas Properties.

As of May 20, 2016, the Company had $288 million in borrowings outstanding under the Credit Agreement and no outstanding letters of credit. As a result of this May 2016 redetermination, the Company now has a Borrowing Base Deficiency of $88 million. The Company received notice of this deficiency on May 20, 2016. The Company is currently in compliance with all of the Credit Agreement’s financial and non-financial covenants.
Under the terms of the Credit Agreement, the Company must pursue one of the following options to address the Borrowing Base Deficiency: (A) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to repay Advances such that the Borrowing Base Deficiency is cured within 30 days after the Deficiency Notice Date; (B) pledge, within 30 days after the Deficiency Notice Date, additional Oil and Gas Properties acceptable to the Lenders, which the Lenders deem sufficient in their sole discretion to eliminate the Borrowing Base Deficiency; (C) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to repay Advances in six monthly installments equal to one-sixth of the Borrowing Base Deficiency, with the first such installment due 30 days after the Deficiency Notice Date and each following installment due 30 days after the preceding installment; or (D) within 20 days after the Deficiency Notice Date, deliver to the Administrative Agent written notice of the Company’s election to combine the options in clause (B) and (C) above, and indicating the amount to be repaid in installments and the amount to be provided as additional Collateral.