Art Cashin: Levels to Look For to Find Support

The great iced cube marinator would like to have a word before heading out to the pub for a Friday evening of scotch on the rocks.

The amount of commodity related debt whose share prices are trading under $5 is now an astounding $526 billion.

Equity markets are all but closed to these companies. How will they restructure their enormous debt loads? Thru bankruptcy court.

Here are some choice names.

PBR: $125 billion

VALE: $31 billion

FCX: $21 billion

MT: $20 billion

SDRL: $12 billion

CHK: $12 billion

SID: $11 billion

LINE: $10 billion

BTU: $6 billion

SD: $4 billion

UPL: $3.4 billion

Right behind it, stocks trading between $5-6, is another $23 billion in debt. All of those fuckers will go down the drain too.

CNX, WLL, AMID, CELP, ATW.

Thank God our Federal Reserve is aware of the credit issues in these companies who employ thousands of Americans.

Some of today’s more alarming drops in the oil patch include: OAS (-15%), ATW (-17%), WLL (-14.5%), REI (-11%), BBG (-10%), RDC (-8%), MWE (-8%), RIG (-7%), PBR (-8%), APC (-7.5%), CNQ (-6.6%), APA (-6%), DVN (-6%), SM (-15%), CWEI (-12%), SN (-11%), ECA (-10%), MEP (-10%), SEMG (-13%), ETE (-10%), NSH (-10%), TRGP (-9%), WES (-9%), WMB (-8%).

If you’re looking for a scapegoat, go ahead and blame the Fed. There inability to calm markets is indicative of the type of leader Janet Yellen is. She will go down as the worst Federal Reserve chief in the history of the United States. She’s permitted her band of moronic Fed governors run ragged across America, giving one submental speech after the next, praising the virtues of JACKING UP INTEREST RATES INTO THE FUCKING TEETH OF A CATACLYSMIC DECLINE!

Asshats!

Breadth is at 93% to the downside. The median loss for the oil and gas sector is nearing 8%, FOR THE DAY. Solar is down 7%, tankers 7%, REITs -6%, Biotech -6%.

Because of the downside moves in oil and gas stocks, debt/equity levels have soared, pushing the levels of distressed debt to $330 billion. Moreover, the second layer of fucked companies, just behind that 330 billion, whose debt to equity levels are between 2-5, now have $390 billion in debt. All in all, we have ourselves a grand olde fashioned crisis. Don’t listen to what the Fed guys are saying. These chickens are coming home to roost. Banks will need to write these loans down and soon.

2nd tier of fucked oil companies

Brent is now below $29.

Like all rational life forms on the planet earth, Larry of America Kudlow doesn’t understand why the Fed is committing to hiking rates “every quarter for the next 3 years.” World wide deflation has flung all markets into wheeled chairs and now Janet Yellen is taking those chairs and kicking them down a flight of stairs.

Larry posits: The Fed is operating on a model that hasn’t worked in 30 years and how the unemployment numbers aren’t accurate. Deflationary pressures, world wide, is the concern. Manhood aside, the Fed should be easing now.

“This is not the time to raise rates.”

Amen.

The hedge less hedge funds that we all know too well are getting smoked out in 2016. With today’s decline, funds like Pershing Sq., Greenlight and Valueact move deep into the mid double digit loss column for the year.

And it’s not even the mid point of January.

But no large fund that I’m tracking is down more than this one: Baker Brothers.

Early last year, and for the past 3 years, whatever they touched turned to gold. Now they just look insane. Their losses are in excess of 20% for the year now, based off their reported positions.

The once hot biotech sector has been absolutely destroyed in 2016, with dozens of stocks down 20-50% so far. The vast majority of these stocks came public over the past 3 years, during the great biotech boom. Now they’ve gone bust.

Out of all the distressed sectors, this one is definitely worth watching. The demographic shifts will favor healthcare for decades to come. Baker Brothers had the best research in the biz. I could only imagine how some of the less astute biotech funds are doing this year.

Dreadful.

Santa Claus swooping down and kicking Fed’s Dudley in the cranium. Also, we need crude to stop going lower. The fuck. It isn’t enough to see oil stocks stabilize. This God foresaken commodity must get a grip of itself.

We also need to see large cap tech assert itself, whether it be MSFT, ORCL, AAPL or CRM. We know INTC isn’t going to provide succor today, after that abysmal conference call.

How about some momentum oriented stocks going higher, like biotech, cyber security or solar?

Lastly, TLT needs to sell off and breadth must steadily improve. Right now we’re at 93% negative market breadth. Should that number double, I’d be intrigued about seeing the market reverse.

At the end of the day, we all know stocks are oversold. Emotions aren’t even playing a factor, at this stage in the rout. This is liquidation, full mercy, people getting margin calls and meeting them through sales. With the long weekend ahead, buyers are on strike.

The only safe haven is bonds. Everything else is into the toilet bowl and down. The tell was yesterday’s breadth of just 73%, clearly a sign that institutional participation was lacking. Now, here we are, on a down 3% open for the NASDAQ. It has the flush out feeling that you’d look for on a capitulatory bottoming out trade. The only problem with that theory is it’s happening on a Friday and we’re off on Monday.

When markets are in panic mode, conventional wisdom eschews weekends, especially those with holiday’s attached to them. I know, it’s wholly idiotic and you’re sick and tired of falling off the cliff–hitting your head and knees about the rocks. But, rest assured, this will all be over soon enough.

I can almost promise you there will be an attempt to reverse this thing and make a run for higher prices. It might be tempting to jump onboard, if only for a brief trade. Just know, there is a strong chance any and all rallies will be repealed this afternoon, as the nilly willies liquidate their holdings, and their wives smash them about their heads with frying pans for losing the family nest egg.

Can you explain this to me? The second I saw Grandma Yellen and her idiot smile, I knew we were in for a severe beat-down. But this type of tone deaf jargon out of the Fed is completely insane. Fed’s Dudley made a speech today and didn’t mention the markets at all. He said inflation was still a concern and how employment data suggested the economy was smoking, fucking, pistol hot, and how rate hikes, more or less, are still on track for 2016.

You’ve got to be kidding me.

Watch the clip.

Dow futures are down 370.

Talk about spinning a yarn.

Goldman is out with useless garbage this morning, declaring oil to be sowing the seeds of a future bull market, all is good and merry. Rejoice in the calamity of sharply lower crude, for it will lead us to everlasting strength in the commodity.

What sort of shit are they on over there? With this sort of doublespeak, Goldman must be short the commodity, hoping to rope in a few last minute suckers.

“The key theme for 2016 will be real fundamental adjustments that can re-balance markets to create the birth of a new bull market, which we still see happening in late 2016,” analysts Jeff Currie and Damien Courvalin wrote.

The market will signal it’s ready to rally when the forward price curve, which currently shows a steep discount on immediate commodity supplies, starts to flatten out, the analysts said. The end of that discount would demonstrate that there’s enough demand to whittle down oil that’s piled up in storage tanks, they said.

“A flat curve near cash costs is historically the buy signal for passive investors and we believe the current bear market will end the same way,” Currie and Courvalin said. “Such a signal is what will shift us to being bullish commodities.”

Goldman, which has warned that the oil market might not re-balance unless prices fall to $20 a barrel, forcing production cuts among shale operators, said this remains a possibility. Still, the $20 scenario remains an outlier rather than their most-likely case, and would only be realized if oil storage space runs out. As that’s unlikely, the bank said it’s sticking with its forecast of $40 a barrel for the first half.

I suppose an argument can be made that the housing collapse was sowing the seeds for another bull market too. But in the interim, as it was happening, it didn’t help not one iota to think that way. People got wiped out trying to catch the falling knife. This Goldman note is abhorrently irresponsible.

What’s important to remember here, lads, is we’re permitting Iranian crude to come back onto the markets now–because they’ve earned it by capturing our vessels, taking our navy crewmen in custody, albeit temporarily, and agitating a ‘student mob’ to burn down the Saudi Arabian embassy in Tehran.

Oh, they’ve also promised to stop trying to make those devilish nuclear bombs.

Dow future are hitting the rocks.

Both WTI and Brent are lower between 3.5 to 5%, under $30 per barrel.

The key theme for 2016 will be real fundamental adjustments that can rebalance markets to create the birth of a new bull market, which we still see happening in late 2016,” Goldman said in a report.

Others were more concerned about the impact of new exports from Iran. While experts warned that not all sanctions may be lifted immediately once the agreement on its nuclear program came into effect, any additional oil would add to a glut that has pushed prices into a deep slump since mid-2014.

“In the very short term, another price drop cannot be excluded in particular after sanctions against Iran are being lifted,” Commerzbank analyst Carsten Fritch told Reuters Global Oil Forum.

“That means a drop toward $25 is quite possible, but not much lower than that.”

The end is now.