DOW FUTURES -366; BLACK DEATH BREAKS OUT IN MADAGASCAR

We are heading for a brick wall made from dynamite sticks.

Dow futures are plunging lower, down 359. Crude is off by 4%. European markets are off by 3.5%. If matters could not get worse, the plague has broken out in Madagascar, killing 63 since August out of 174 cases. The days of man walking the earth are ending.

Have a pleasant day.

I cannot remember a worse start to the New Year, since 2008. Apparently, this is measurably worser off. We haven’t seen loss like this since the good olde days of 2000. Bear in mind, the first 5 days of the first week in January usually sets the tone for the rest of the year. With commodity prices cratering, China derailed and the Fed delusional to the point of sheer madness, we find ourselves mired in the midst of a runaway market…to the downside.

When I saw “we”, I mean it–strictly–in the royal sense, as I am in cash, TLT, and a side platter of SPY. I’d also like to remind everyone that the core issue here is the Federal Reserve’s inability to quell market fears. China is slowing; we get that. But, I have to believe if the market understood that the Fed would do everything it could to maintain market stability, we’d be singing a different tune now–one authored by a Mr. Rick “Boss” Ross.

Dow futures are off by 250.

I don’t see what the problem is here. Jim Rogers is long China and says this ‘correction’ is normal, since the Chinese market “went up” last year and did very, very well.

The fuck.

“This is insane,” Chen Gang, chief investment officer at Shanghai Heqi Tongyi Asset Management Co., said in an interview on Thursday. “We were forced to liquidate all our holdings this morning,” said Chen, whose firm manages about 300 million yuan ($45.5 million).

The Shanghai Heqi Tongyi manager, whose fund started mid-year in 2015, regretted the timing of its launch and said it “couldn’t be worse.” Chen isn’t alone in criticizing the circuit-breaker rule introduced Monday, which many say exacerbates a liquidity squeeze as investors rush for the exits before trading halts kick in. Under the new rule, a drop of 5 percent suspends trading for 15 minutes, while a decline of 7 percent halts the market for the rest of the day.
“A trading break of 15 minutes or even longer wouldn’t ease their nerves or get them a clear picture of the fundamentals,” said Polar Zhang, a Beijing-based analyst at BOC International Holdings Ltd. “On the contrary, it’s draining liquidity as everybody tries to get out of the door before the door is closed. ”

Nothing to see here. As you were.

How’s that trade working out for you, Jim?

The legendary famed bow’d tied one, living out his winter years in the great satanic continent of Asia, is long China, short U.S. equities. He also said crude was putting in a messy bottom, just prior to falling 6% in a single session.

The point here isn’t to admonish someone for being so wrong, in such a short period of time. There is a comedic aspect to his wrongness. More to the point: Jim was telling people to sell their NYC real estate back in 2009, in exchange for a fucking farm, since he was and still is bullish on commodities. A once legendary investor, indeed. But now he’s a fucking clown and should be masqueraded around Wall Street with big white shoes and a styrofoam button nose.

Circuit breakers kicked in after the Shanghai got decimated, losing 7.3% in a few minutes of frantic trade. Government officials shut the whole kit and kaboodle down, then threw pies in each other’s faces.

“The yuan’s depreciation has exceeded investors’ expectations,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Investors are getting spooked by the declines, which will spur capital outflows.”

Under the mechanism which became effective Monday, a move of 5 percent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 percent close the market for the rest of the day. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.2 percent before trading was suspended.

Related: Hong Kong is down over 600, or 3%, the NIKKEI is off by 1.2% and S&P futures are off by 21. Crude is off by 2%. The reasons behind the sell off dwarf in comparison to the animal spirits that have seized control of the emotions of investors. Sellers will continue to sell until exhausted. At which point, the market will bottom and we’ll be throwing balls of cocaine at one another again.

Crazy old T. Boone Pickens, who is getting the stuffing kicked out of him in his oil investments, went on Mad Money tonight to exclaim that oil was “close to a bottom” and that “it’ll be back to $70-75 by year end.”

The fuck?

I am sure there were plenty of smart, formerly successful, investors who said stocks would race all the way back–in the winter of 1929.

Oil is dead and isn’t coming back anytime soon.

It isn’t even panic anymore. Investors are resigned to the idea that the whole ball of wax will go up in flames. Double digit losses in the basic resource space, across the board. As a group, oil stocks fell more than 6% today–as WTI and Brent fell 6% for the session–an amazing achievement onto itself.

More important than the equity picture is the state of the oil and gas credit markets. Companies like CHK and UPL are done, toast. However, there are other names that are starting to look like–they too–might soon succumb to the pressures of the market. Here are some oil and gas stocks to keep your eyes on, as the “next shoes to drop”, so to say.

(stock, debt/eq level, amount of debt)

VNR, 4.8x, $1.9 billion
DNR, 4.8x, $3.3 billion
EPE, 4.3x, $4.9 billion
TRGP,4.1x, $6.1 billion
WLL, 2.8x, $5.2 billion

Big Game problems

PBR, 4.7x, $127 billion
VALE, 2x, $32 billion
ETP, 1.6x, $32 billion
WMB, 1.2x, $23 billion
MT, 2.7x, $20 billion
LNG, 1.8x, $16 billion
RIG, 2x, $8.7 billion

On the bright side, both JNK and HYG are flat on the day.

The famed doom and gloom guy, from the outskirts of the Transexual district in Thailand, predicted great calamities today with Bloomberg, via Skype. He must’ve been taking a cocaine break to do the interview; because mid-way through he broke out in laughter when comparing the U.S. credit bubble and stock market to the Titanic, suggesting it could be halved. He wants us to break apart into pieces, against the fucking rocks, in the streets, tinned cup in hand.

All very funny indeed.

He then went onto rant about gold and how cheap it was and how it could double. Immediately following the interview, it’s rumored that that he mainlined a bag of heroin and ingested some chrystal meth, through the nose.

As sure as I was sitting there, watching Dennis Gartman say oil would be “boring” for the remainder of 2016, it got shredded to pieces.

Brent crude down 6% for the day is no laughing matter. Jobs will be lost; people will suffer. The poor folks in Saudi Arabia just got their gasoline tax raised and now have to pay 20 cents per gallon.

What is the world coming to?

In other news, the dollar is at 11 yr highs. When things get sporty, and things are most certainly sporty now, investors flee to the dollar and US treasuries, which is why I am doing so well in TLT.

“The market remains bullish about the U.S. and hawkish on the Fed,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. The likelihood of several interest-rate increases this year “bodes well for dollar outperformance,” he said.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, rose 0.3 percent to 1,243.48 as of 12:34 p.m. in New York, the highest on a closing basis since data going back to January 2005. The greenback was little changed at $1.0759 per euro and fell 0.4 percent to 118.57 yen.

Bottom line: the market has done nothing but plunge over the past week. We are overdue a bounce. But when we do get that bounce, you should take it to lighten up and/or hedge.

The EIA just released a charming stat, pointing to America’s disdain for distillate fuels. Inventories came in at an astonishing 10.5 mill.

What the fuck.

Either we’ve become a land of Netflix watching hermits, driving to and fro in electric automobiles, or something is wrong with the picture.

The weather was sublime this past month. Holiday shopping season was in full effect and gasoline is cheap as fuck.

Pray tell me, how does one simply build 10.5 million barrels of gasoline in a single month?

I’ll wait for your response.

Oil is getting poleaxed.