Welcome to February: Futures Hammered, Oil Hammered

Torture awaits you at the open.

Futures are sharply lower. Naturally, oil is in the sewers also, which is getting everyone all panicky again.

In other news, Goldman upgraded MU today. That must be worth at least 1 NASDAQ point, no?

The construction of the Ark, via TLT, continued–undeterred.

Who’s kidding who with this bullshit rumor?

From some website that has the gall and audacity to require me to sign up for their content, called “The Information”, is spreading scandalous scallawag this morning, which in turn is getting Business Insider to report on it, regarding a potential Andreeesen/Silver Lake acquisition of Twitter (lolz). Men like Andreesen dump stocks like Twitter onto an unsuspecting public; they don’t absorb it and its losses onto their ledgers.

Marc Andreessen and private equity firm Silver Lake have considered some sort of deal, according to several people. The two teamed up on Skype back in the day, and Andreessen’s love for Twitter is, um, obvious. He was also an angel investor in the company.

I don’t know if anything is active, and a spokespeople for Andreessen Horowitz and Silver Lake declined to comment. One idea being floated around in general is a PIPE deal where private investors buy a piece of a public equity via newly issued shares. These deals are generally done when companies are desperate for cash, and public investors won’t give it to them, which doesn’t seem to be Twitter’s issue.

I’d bet my frank and both beans that this deal is pure fiction, written by an aspiring novelist.

Nevertheless, Twitter is higher by an astounding 6.5% on this “news.”

Goldman is out with a note of doom, regarding the miners and how they’re soooo much worse than oil companies. They’re especially brutal to the coal miners, pointing to a recent Alpha Natural mine auction gone awry. Essentially, coal miner are now worth $00.00. They offer nothing in return for hard labor and are simply wealth destroyers, whereby the owners of these properties bleed out and die, without ever making a profit.

Environmental concerns are haranguing the miners, unlike the cool purveyors of crude oil–who get to sell their ware unimpeded.

“Many of the [mining] structures are no longer assets but rather liabilities due to environmental regulations,” write Goldman analysts led by Head of Commodities Research Jeffrey Currie. “This suggests that, in order to delay the environmental costs of mine rehabilitation, the penalties associated with employee layoff and non-performance of commercial obligations, owners will operate the facilities until they run out of cash and are obliged to suspend operations.”

“[Last] week we saw Alpha Natural Resources cancel an auction of 35 coal mines at the last minute due to a lack of interest, illustrating the fact that some mining assets burdened with outstanding liabilities and negative margins are left without any residual value,” Goldman notes.

“Theoretically, once an energy market breaches storage capacity, prices need to collapse below cash costs to immediately re-balance supply with demand. In practice, however, operational stress in energy is a local, not global concept as breaching storage capacity happens most likely in landlocked locations, but it does whittle away at the global supply overhang,” the analysts write. “In contrast, metals can be ‘piled high’ in low-cost locations almost anywhere in the world with far greater density, i.e. dollar per square foot, than energy.”

To illustrate the point, Goldman calculates that $1 billion worth of gold would, at current spot prices, fit into a generously-sized bedroom closet, while $1 billion worth of oil would take up 17 very large crude carriers, each with a capacity of more than a quarter of a million deadweight metric tons.
With an estimated 12 months of cash reserves left for some U.S. coal miners, financial stress needs to deepen before the supply-demand balance even begins to resolve itself.

“This leads us to forecast that oil prices will outperform the base and bulk commodities once the current inflection phase has run its course, likely at some point in the second-half of 2016,” Goldman concludes. “On a macro basis this also suggests that some of the slowdown in global manufacturing maybe more permanent, as high cost producers of capex commodities shutter facilities on a more permanent basis, particularly in the west.”

Miners have 12 months of cash left, then we’ll never hear from them again.

Good news for you Mexican food lovers out there. According to the WSJ, the CDC is about to wrap up its investigation of CMG’s poisonous food products and give it the old clear to eat and not die again for consumers.

Since the ecoli outbreak, just 20 people of the 53 stricken ill with Mexican hell were hospitalized and NO ONE died.

The salsa lovers at BofA/Merrill are all over this shit (pun intended) and have upgraded the stock this morning.

A JP Morgan strategist just was on the tele discussing China and how we’re all morons for getting worried about a declining Chinese PMI, in what he describes as the “old Chinese economy.” He posits, the Chinese government has been signaling they’d be moving away from an industrial production economy and into services; therefore, ergo, it’s only logical to see PMI contract.

Moreover, he’d like you to pay close attention to services and consumption levels in China. Debt levels on a government level are low and they’re moving towards a more mature and stable economy, one perhaps functional sans graft and wanton corruption.

“People are surprised to see China permit the “old economy” to slow, because they have monkey sized brains and are devoid of cognitive thinking.” –JP Morgan (okay, I was paraphrasing a little there.)

As society moves away from cash to paying for everything digitally, debt straddled governments are moving interest rates into negative territory. Essentially, this is a brazen tax being levied onto the public–to better perpetuate a false sense of stability in government balance sheets. By charging you to borrow your money, basic laws of nature and decency are are being egregiously discarded and burned at the altar of the banks. Eventually, the world spits out the crooked and the corrupt and replaces them with newer, less belligerent, forms of crooked and corrupt gentlemen. This is how the world has worked for thousands of years–yet we still have never landed on the moon.

At the present, more than $5.5 trillion in government bonds are trading with a negative yield. Theoretically, the more governments borrow, the more they make!

How splendid.

This is a very depraved and sordid scandal in the making that will end up with people in the streets with kerosine lanterns and pitched forks.

Here is a list of nations with negative 2yr bond yields, as well as nations approaching negative territory.

Austria -0.41% (85% debt/gdp)

Belgium -0.39% (106% debt/gdp)

Czech -0.09% (41% debt/gdp)

Denmark -0.21% (45% debt/gdp)

Finland -0.41% (59% debt/gdp)

France -0.38% (95% debt/gdp)

Germany -0.48% (75% debt/gdp)

Ireland -0.26% (110% debt/gdp)

Italy 0.01% (132% debt/gdp)

Japan -0.11%  (230% debt/gdp)

Netherlands -0.44%  (69% debt/gdp)

Slovakia 0.01%  (54% debt/gdp)

Spain 0.01%  (98% debt/gdp)

Sweden -0.55% (44% debt/gdp)

Switzerland -0.94% (up to 15yr durations now trading with negative yields) (34% debt/gdp)

United States 0.77% (102% debt/gdp)

The only nations with government budget surpluses were Denmark and Germany, with Switzerland coming in at -0.10%. Everyone else is spending more than they’re taking in–like sailors of the drunken varietal.

This is definitely related to the spreads between mainland yuan and offshore. Nevertheless, the boiling hot real estate market in Hong Kong just got tossed into sub-zero temperatures.

New and and secondary homes sales fell to just 3,000 units–the lowest figure since 1991. The lowest number in recent times was back in November of 2008, when 3,786 unit sales were recorded.

As you can see, real estate prices have been booming in Hong Kong, sans 2008, for quite some time.

“The Hong Kong residential market is all about sentiment,” said Joanne Lee, senior manager of the Hong Kong research and advisory team at Colliers International Group Inc. “Falling stock-market prices, the economy weakening, China’s economy weakening and increases in the interest rate will all have an impact,” she said.

The Hang Seng is off by 0.3% and the Shanghai is off by 0.9%.

For the sixth consecutive month, the key gauge for the manufacturing sector in China contracted–missing estimates–painting an eloquent picture of a FOXCONN induced terror– ravaging the countryside of a coal infested atmosphere.

Related: U.S. futures are lower by 0.5%. Europe is set to feel the blade first, enjoying the first day of February as it did January–with heavy losses.

Commodities are getting the business too.

What a scandalous month, one that will live in infamy for eternity (extra drama club). For the site, traffic boomed, as persons of quality searched for expert opinions and to find news–pertaining to the commodity collapse of 2016. As for investors: they had their face knocked about–unless of course you were listening to me and heeded my most dire predictions of wanton cataclysm.

Here is some useful information, regarding the winners and losers of 2016.

Winners

Small Cap (-8.65% as a group)

SDPI +122%
SGOC +116%
HMY +91%
DRD +74%
BITI +72%

Mid Cap (-6.5% as a group)

SBGL +45%
AFFX +39%
WX +36%
OLLI +31%
BURL +25%

Large Cap (-5.1% as a group)

HCC +47%
FSL +45%
ABX +35%
AR +25%
AU +19%

Mega Cap (over $50 bill in cap) (-3.9% as a group)

DCM +10%
VZ +9.3%
TWX +8.8%
WMT +8.2%
RAI +8.2%

Losers

Small cap

ISH -88%
TKMR -70%
SRPT -69%
EGLE -62%
EGL -58%

Mid Cap

ALKS -59%
RARE -49%
HALO -49%
RDUS -47%
PBYI -46%

Large Cap

ETE -37%
MBLY -36%
INCY -35%
MDVN -32%
FCX -32%

Mega Cap

LFC -24%
AXP -22%
CX -19%
MTU -18.5%
GILD -18%

Top/Bottom performing ETFs

LABD +131%
BIS +53%
UVXY +36%
YANG +35%
FAZ +25%

———————————–

LABU -66%
BIB -39%
UWTI -37%
CHAU -36%
GASL -36%

Top/Bottom performing industries

Water utilities +7.9%
Gas utilities +6%
Foreign utilities +4%
Diversified utilities +4%
Gold +3%

————————————

Biotech -25%
Auto dealerships -25%
Shipping -23%
Diagnostic substances -20%
Drug delivery -19%

Performance by Sectors

Basic Materials -9.4%
Consumer Goods -5%
Financial -7%
Healthcare -11%
Industrial goods -7.2%
Services -6.3%
Technology -7.5%
Utilities +3.9%

Most Heavily Traded

BAC -16%
MSFT -0.7%
AAPL -7.7%
FB +7.2%
GE -6.5%

Raw Commodities

Gold +5.4%
Silver +3%
Corn +2%
Cattle +1.7%
Soybeans +0.5%

—————————-

Sugar -15%
Cocoa -15%
Gasoline -13%
Oil -12%
Palladium -11%

Rocky III is my favorite Wall Street movie. It’s a tale about a guy who’s living high off the hog–rich hedge fund manager–ranked #1 by CNBC and Forbes magazine. He made his money during the great bull run, picking up stocks that moved with the market. Even though he came up from nothing, the success he enjoyed, while on top, led him to believe he was a genius–when in fact it was the market doing the heavy lifting for him.

His top analyst, an older gent, named Mickey, knew otherwise.

Mickey tried to warn Rocky of the coming bear market; but Rock wouldn’t listen. When preparing for it, Rock would listen to happy music, invite a bunch of friends and media over to watch him study–and generally take it easy. This drove Mick nuts, as he knew what the bear market meant and how it would affect Rocky’s flagship fund.

I won’t ruin this movie for you by giving away too much. But let’s just say, the bear market came, killed Mickey, utterly destroyed Rocky’s bullshit bull market portfolio, and forced Rock to rethink the very essence of who he was–get back to his roots by hiring an old retired hedge fund manager, who was once his greatest competition, to be his new analyst, and generally reexamine his entire approach to investing.

The bear market was hard and strong and didn’t give a shit about anyone. It just knocked shit down, took no prisoners, whirl-winning through the market place.

Here’s a clip of Rocky getting destroyed by the bear market