Introducing the Newest Hawk to the Board: Fed’s Kaplan

He comes across as a very intelligent, well meaning, man. He declares himself to be as centrist (really, who doesn’t?, as opposed to Fed’s Rosengren who just said the latest Fed rate hike went smoothly and was largely “uneventful.”

What the fuck?

Anyway, back to Kaplan. He flat out says his bias is towards “normalizing rates”, which is doublespeak for hiking them. He hedges himself by saying he’s data dependent. Providing everything goes as swimmingly as the last Fed hike, according to Rosengren, Kaplan thinks 2-3 hikes for 2016 is a solid, fucking, idea.

We all know Summers is right. Hell, using the Fed’s own inflation goals of 2%, there is no way the Fed should be hiking interest rates. Nevertheless, here we are, sitting like morons, waiting for the Fed to trip over themselves down a flight of stairs.

In a Bloomberg interview this morning, Summers talks about how inflation rearing its ugly head was remote, manageable, and how the focus should be on growth.

I know, all of you are going to win the Power’d ball tonight, then use the winnings to live out your loafing, self righteous, pathetic lives in sheer gluttony. As for me, I will not be partaking in the homeless man’s weekly gambit. Instead, like any gentleman of distinguishable honor, I will press my rights in the stock’d market.

As we speak, GM upped their earnings forecast. The price of crude is rallying, after whistling past the cemetery. And, SPY futures are comfortably higher.

Once upon a time, I compiled a list of lottery winners and solicited them to invest in stocks. I was young, go getting, and always trying new ideas to get clients. This was the biggest fucking waste of time ever. They were all miserable people, completely devoid of happiness. On more than one occasion, I was told by people who won 20-30 million dollars that the lotto win destroyed their lives. I guess the same could be said about this devil of a stock market.

But let’s stay focused and positive. Everything is lined up for a decent run. Let’s all visit our Voodoo physicians this morning and make blood sacrifices so that we might enjoy some marginal upside in our investments, before resuming the broken elevator cable ride version of this fucked up avocation.

This is non-financial and I hate to distract the audience from all of the awesome fire and brimstone being thrusted upon us, but how the fuck does this happen? Seriously, we’ve been in the Middle East for decades, with a major military force since the 90’s, how in the world did we permit some fuckheads in a flotilla take our boats and 10 Navy sailors?

Did Obama discuss this during his State of the Union, or what some of the morons in the media like to call it SOTU?

“If upon discussion and interrogation, it becomes clear that they intended to carry out intelligence tasks and unrelated work, our authorities will assuredly take necessary measures, Iran does not joke with its national interests,” Sharif told the Tasnim news agency on Wednesday.

The incident risks deepening tensions ahead of the implementation of the U.S.-led July nuclear accord between world powers and Iran, which will lift financial and oil sanctions on the Islamic Republic in return for the curbing of its nuclear activities. It was reported just hours before President Barack Obama was set to deliver his final State of the Union address.

Two U.S. naval craft entered Iranian territorial waters at 4:30 p.m. on Tuesday, the Guards said in a statement on their news website, Sepahnews.ir. The nine men and 1 woman are safe and “in good shape” and were taken to nearby Farsi Island, according to the statement published Wednesday.

U.S. officials said unspecified mechanical trouble with one of the boats caused them to drift into Iranian waters, according to The Associated Press.

“The American presence in the Persian Gulf has never been harmless,” said Guards navy commander Admiral Ali Fadavi, according to the Iranian Students’ News Agency. At the same time he said “the release process for two U.S. boats will not take long and the Guards will act following orders.”

What an inexcusable display of weakness. Then again, I suppose our official foreign policy is to bow down to any Persian demands, which obviously entails surrendering vessels and personnel upon request.

No one likes coal anymore, not even folks from W. Virginia.

The Chinese are moving away from coal, most likely in favor of burning human skeletons instead. While 62% of energy derives from coal, that number is expected to drop mightily as the Chinese citizenry tire from wearing gas masks to the grocery store, choking on coal infused smog during their morning commute.

Overseas shipments into the world’s largest energy consumer declined about 30 percent to 204.06 million metric tons last year, the least since 2011, according to preliminary data released by the Beijing-based General Administration of Customs on Wednesday. The contraction was the largest since 2004, when Bloomberg started tracking the data. Imports in December rose a second month to 17.6 million tons.

Coal demand in China has slid as its economy slows and shifts toward consumer-led growth while the government seeks to cuts industrial overcapacity and curb pollution. The world’s biggest producer of carbon emissions is also trying to cut the use of coal as smog has blanketed cities from Shanghai to Beijing, forcing factories and schools to close and intensifying social unrest.

RIP W. Virginia.

Both Japan and Hong Kong are up 2.5%, while China is flat–unable to rally amidst a flood of forced liquidations from a retail clientele in shambles.

WTI is up 1.5%. DAX futures are up 1.3%. And U.S. futures are up 0.5%. Lots of people are quoting much higher futures data out of the U.S., because they’re morons and do not account for fair value.

Separately, Obama gave his final state of the union address tonight and kindly asked all of you who keep disparaging the U.S. economy, talking shit about it going in decline, to STOP PEDDLING FICTION. The economy is fucking booming. After all, the powerball is $1.5 billion. What country doles out winnings like that?

A fucking rich one, that’s who.

Traitor. Smugly, he apologizes for the dog eating ways of China. Many years ago, Jim uprooted his family and moved to Singapore to raise his children, where he proudly teaches them mandarin because english, apparently, is the language of the savage. In a Bloomberg interview today, he discussed how nothing was extraordinary about current Chinese fuckery. Moreover, he’s short U.S. junk bonds and stocks and generally despises the country that made him a very rich man.

He’s dismissive of China’s currency concerns, saying it has been the best performing currency over the past decade and how a small decline is normal, especially since Chinese citizens are now permitted (Extra Orwell) to take money out from their great walled, lizard eating, nation.

Jeffrey Gundlach, manager of $53 billion King Dollars, hates Janet Yellen’s Fed almost as much as I do. He’s been warning about their idiocy and was right in predicting a market slump. Today he held a conference call to discuss markets and the price of crude, which he said bottomed today, from a technical point of view (whatever the fuck that means).

Here are some highlights.

“This is a capital-preservation market, not a money-making environment,” said Gundlach, co-founder of Los Angeles-based DoubleLine Capital. For economic growth, “2016 is not looking all that great, potentially.”

“We could be looking at a really ugly situation during the first quarter of 2016,” he said. “It’s particularly more likely to happen if the Fed keeps banging this drum of raising interest rates against falling inflation.”

“You don’t have to try to call a direction right now,” he said. “If it’s going to move, it’s going to move big and we’re going to play a go-with-it strategy.”

“Oil goes below $40, it’s frightening for geopolitical behavior,” he said. “Guess what, folks? It’s below $40 and this frightening political behavior is upon us. And, also, compounding the problem is that we have a lame-duck president, who I think will do absolutely nothing in response to military activity or other bad actors out there.”

Gundlach thinks oil can trade back to $45.

Anyone reading me over the past few months knows I’ve been harping on the capital structure of the basic resource sector. Any time markets crater and underlying fundamentals deteriorate, there is cause for concern with heavily debt burdened companies.

Since summer, as the prices of these stocks dropped, their debt/equity ratios have swelled, effectively cutting off a vital source of funding for an industry that will need to restructure a ton of debt, starting in 2017.

Cramer mentioned it tonight in his Mad Money monologue. You can view the clip here.

While it’s true, the $300 billion number is an accurate one, it isn’t forward thinking. Prices have dropped drastically for crude and other commodities in recent weeks, which is bound to hurt revenues and earnings forecasts for the respective industries, no?

Using Exodus, I scanned for basic resource companies that aren’t exactly distressed, but teetering–between 2-4.99x debt/eq. The numbers are nothing less than demonic.

In addition to the $300 billion in debt that is going to need restructuring, there is another $345 billion right behind it, who will become highly distressed should their share prices continue to fall.

Some names to keep an eye on are:

OGZPY (Russian oil giant)- $82 billion

ETE- $32 billion

VALE- $32 billion

PKX- $23 billion

FCX- $23 billion

MT- $20 billion

ACH- $15 billion

CHK- $12 billion

RIG- $9 billion

YZC- $7.5 billion

TCK- $7 billion

GGB- $7 billion

The list stretches long and wide.  There are 68 companies in all in this soon to be distressed debt group of shit.  The median 1 yr decline for these companies was -66%. Year to date, these stocks are down 23%.

Do you see where this is going?

Behind these companies are the “premier names”, with debt/eq levels ranging from 0.5 to 1.99–who have a collective debt burden of $999 billion.  In all, there is upwards of $2 trillion in basic resource debt.

As you know, “The Fly” has been  quite busy providing the masses with news and information, working 22 hour days (that shit it true), going without rest or sitting back on my laurels. At the same time, he’s been creating an investment masterpiece for those initiated inside of Exodus.

Before 2015 ended, I cleared out over 30 positions, stocks that I’ve held for years, because I anticipated a ghostly first month of trade for 2016. I positioned into TLT and cash, waiting for my market timing algorithms to tell me when to allocate into SPY.

Over the past week, I’ve been staggering into SPY, every morning, without emotion, and now I am 166% long with a cost basis of 195.57. I will make my final purchase tomorrow and then wait to unwind the position, in layers, as the mandatory 10 day holding period expires.

This will be my best call ever.

I’m only revealing this game plan for you because these are extraordinary times and I want to help. When things settle down, out of respect for paying members, I will be a bit more mum about my actions.

The market will  cooperate, rest assured. Today’s 100 point gain, in the face of absurd negativity, was just the beginning of what I imagine will be a 3-4% run in the general indices.

Remember to sell the rips.