China’s Privately Held Companies Are Crushing State Owned

So much for socialism. When China was booming, so many people praised the “command economy” of China as a model to strive for. People cited the bogged down ways of American capitalism as something too bureaucratic, especially when compared to the dog eating ways of the Great Walled ones of the orient.

Well, well, well: what do we have here?

Privately held Chinese enterprises are poleaxing state owned companies by 100% over the past 5 years, and 40% over the past year.

Chinese markets continue to soften, inspite of a stronger Yuan. Most people think China will need to devalue the Yuan further, so this two day winning streak is simply another ploy by the devil’s people republic to buoy markets. It’s too bad that 90% of stakeholders are farmers with dirt in their eyes.

NASDAQ futures have turned higher. But oil is still weak down 1.8%.

Dow futures are off by 150. Asian markets are set to drop by 2%. Chinese markets are capable of going all the way, losing 5,10 even 30% of its value in a single session. Keep in mind, 90% of Chinese investors are retail.

Oil is off by 2% and the yen is at 4 month highs v the dollar. The fucking world is ending.

I’m expecting a gap lower and reversal of misfortune tomorrow, leading to a joyous respite to an otherwise apocalyptic start to 2016.

What sort of person, following Wall Street’s worst start to a New Year, sashays onto a stage to throw fireballs at Wall Street? Donald J. Trump is the donkey kong of Presidential candidates, ripping through populist topics like a fucking Reddit message board, appealing to the masses…of West Virginia.

“There’s a bubble,” Trump told his audience in southeastern Iowa, noting the nation’s high level of debt. “You see the stock market is starting to, you know, see what’s going on,” he said. “It’s starting to have some very bad weeks and some very bad numbers.”

“I’m really good at that stuff,” he said in Iowa. “I know Wall Street. I know the people on Wall Street. We’re going to have the greatest negotiators of the world, but at the same time I’m not going to let Wall Street get away with murder. Wall Street has caused tremendous problems for us. We’re going to tax Wall Street.”

Trump also highlighted his independence from campaign contributions. “I don’t care about the Wall Street guys,” he said. “I’m not taking any of their money.”

Truth be told, Trump appeals to my anarchistic side and I’d much rather have him in office than Hill of Beans Clinton. I’m bearish on stocks for a variety of reasons, none of which include a Donald Trump tax hike on Wall Street, which is brand new reason for concern.

Also, let’s not forget his position on China. He fucking hates them with all of his life force. Here’s Trump on trade, recorded just yesterday.

Back in the 30’s, The Thin Man series of movies was huge, sort of like our James Bond. Back in the 50’s, there was even a teevee series called The Thin Man, but with different actors.

There were 6 Thin Man movies in all, starring William Powell and Myran Loy. They are classic whodunnit stories, the first done in 1934.

It’s a thematic film, with the couple spending their days and night’s drinking martinis, trying to solve murder mysteries. What’s not to like?

That was some week, huh? I lit up the blogosphere, firing out 16 blogs per day, tossing bowling balls at your favorite bloggers from atop my citadel.

Brief and to the point: I am accepting 2 new bloggers to the iBC ranks in the Peanut Gallery. Show me some passion, God damn it, or nothing at all.

Email me: Flybroker at gmail.com.

Good day.

It was a jarring weak, one that resulted in a 6.3% loss for the market, even worse in the oil patch. I entered 2016 in cash and TLT–but have been legging into SPY as the market fell. As of the close of trade, I am fully invested in SPY, with a cost basis just above $197.

Do not fear for my hide lads, for I am prepared to initiate a Martingale investment strategy, delving into the degeneracy of leverage to accomplish my goals. Let’s be honest here, shall we? You’re all dicking around in commodity and tech stocks. I’m invested in SPY, immune to stock specific risk.

I still own a full position in TLT and will not sell it until the yield curve inverts.

In other news, billionaires got their clocks punched the fuck off for them, shedding nearly $200 billion in a week of tumult.

The world’s 400 richest people lost almost $194 billion this week as world stock markets began the year with a shudder on poor economic data in China and falling oil prices.

Forty-seven billionaires lost $1 billion or more during the worst week for U.S. stocks since 2011, according to the Bloomberg Billionaires Index. The combined drop was almost seven times the $29 billion lost in the first five trading days of 2015. The 400 people on the index had a combined $3.7 trillion at the end of the week, compared with more than $4 trillion a year ago.

If forced to make a call, I think markets are going full helicopter blades on shorts next week. Sentiment is do dreary and everyone is leaning bearish. I’ve been down this road too many times and know that whenever I congratulate my good friend, Zerohedge, more than 10 times in a week, it’s time for a little mean reversion.

I’m down less than 3% in my SPY position, up on TLT, in complete and total control of my destiny. “The Fly” wins all the time, especially when everyone else is in the streets with tinned cups.

Fascinating topic. Stripper wells, old, legacy, wells that have seen better days, litter the oil rich parts of the United States. Some of these wells produce just a few barrels per day; but it adds up when you take into account the hundreds of thousands of rigs out there. If the price of WTI goes under $30, most of these little fuckers are operating without profit and might opt to shut in.

Stripper wells are wells nearing the end of their lives that each produce very low volumes of 15 b/d or less. Collectively, they account for a surprisingly large amount of output — as much as 1 million b/d of crude from about 410,000 oil wells, or about 11% of the US’ total oil production of around 9.1 million b/d, according to the National Stripper Well Association website.

“The low $30s/b is about it,” as far as the economic threshold, Mike Cantrell, chairman of the Oklahoma City-based National Stripper Well Association, said. “We’re not making any money … at below $30.”

In general, stripper wells operate on a basic program where the expenses include electricity to run the pump jacks and artificial lift to help oil flow better out of the well, as well as anti-corrosion chemicals, insurance, repairs and hired labor unless the owner does the day-to-day work.

“Some [wells] are actually economic” right now, Cantrell said. “Just as long as your revenue exceeds your expenses, you can keep going.”
He and others say all stripper wells are not necessarily at risk even at current low prices. Because the economics of each well are so different, and have such mixed variables, they will not necessarily go under, they say.

And sometimes the wells keep pumping oil for other reasons. Cantrell said a friend who operates stripper wells and whose company has “a lot” of leverage, is forced to keep his wells going.

“He said, ‘I have no choice, I have to keep their revenue going whether I like it or not because the banker wants to see the production’,” Cantrell said.
Other wells may continue to operate at breakeven because shutting them down costs even more.

“Let’s say you get down to a point where you’re breaking even or a little negative. If I shut the well down, I have to submit it to abandonment,” which incurs expenses and a required regulatory process, energy economist James Williams, who founded and runs energy consultancy WTRG Economics, said.
“Sometimes there is a limit on how long you can go without producing a well before you’re required to go through official abandonment procedures,” Williams said. “So it may be best to keep it going for awhile until oil prices go back up.”

“The role of stripper wells will be greatly diminished going forward until such time we see commodity prices bounce back,” Sheridan said. Stripper wells “are kind of America’s reserve supply,” he added.

I haven’t heard anyone talk about this yet; once crude breaks $30, look for a spate of headlines discussing this topic. Stupid, dumb shit stripper wells getting shut in because the banker said it wasn’t viable anymore. This could lead to a long term recovery in crude. A washing out of the excess is always good for an injured market.

Of course it will. Truth be told, when was the last time The House of Saud gave two shits about what the other members had to say? They’ve been driving the oil price into the dirt, because of the fact that Aramco has 10x the proven crude reserves than Exxon Mobile. They have staying power.

When Aramco ipo’s, and if they include the upstream business, we might very well see OPEC nations leave the union. It’s a huge crock of shit. It’s just a matter of formality now, which will soon end once The House of Saud whores its oil business to the world during desperate times.

A lot of Debbie Downers out there, talking about end of days scenarios. “The Fly” is here to cheer you up now, for the sake of the week end. First I beat you unmercifully with bad news, then I assuage your fears by showing you this (no Large Marge).

YTD gains

WMT +5.5%
TWX +11.7%
STZ +4.4%
ABX +15%
GG +8%
CRI +4.8%
JCP +8%
SPF +8%
FLIR +8.6%
GNC +5%
PLCE +11%

There. Feel better? I know I do, knowing the grandmother’s are back to coupon cutting over at JCP and babies still need pajamas from CRI and how barbarous vagrants are still partaking in vagrant forms for alcoholism thru STZ.