Now This is My Sort of Sordid Market

I feel like the Devil on here, always prognosticating doom. But the voices inside of my head tell me to say these things.

Pardon the lack of news on the site today. There was a lot of things to cover, such as J. Boehner calling Rafael Cruz ‘Lucifer in the Flesh’ and what not. But I’ve been a little busy dealing with some things, which have–inexorably– led to this.

Say, for example, someone put a shotgun to my head, demanding to know where I thought the markets would be by X-mas. Although reticent to work under such undue pressures, finally, I’d succumb and offer my advice. Without question, I’d say we’d be 30% lower from where we are today. See, that’s the statement of a madman, one steeped with bedlam, from a man wholly interested in seeing everything rip from its roots.

This is all true, but for good and just reasons.

Markets will knife lower. When it does, you will all flock to these halls hoping for a ride on my ark, at which point I will hit you with my solid oak oars and tell you to be gone.

Back to reality, the SPY is lower by 0.35% and the whole centaur on the NYSE dream of mine is nothing more than fantasy.

To dream is to live, is it not?

Boy have I missed out on one heck of a run. Then again, I was burnt the fuck out, like a frozen waffle left in the oven at 500 degrees for 2 hours. I’ve been trading these stupid stocks my whole life, ever since I was 10. When I was a teenager, I took some money that was given to me through a lawsuit and started to make my mark.

I became a stock broker, made buckets of coin, became cynical and jaded, made an egregious error in 2014, then burnt out. That pretty sums up my career, one that I do not look back upon as an experience worth my time.

Writing this blog, creating stuff in Exodus, banning readers, ranting and raving, that’s what I was born to do.

I WAS BORN TO RANT AND RAVE.

Stocks do not want lower today. The clowns are out in full force, sashaying around in the wrong bathrooms, buying the wrong stocks, for all the wrong reasons.

There is going to be a brutal sort of hell to pay for all of this perfidy. When it happens, you’ll be able to find me on the ark. I’m always on that thing, watching the waves and examining cloud formations.

He said it, not me.

Scott Minerd from Guggenheim said it’s time to nibble on the ark. Now is a good time to buy treasuries, following their pullback.

“It is impossible to get the timing of anything exactly right. You have to ask yourself, ‘Are you a speculator or an investor?'” Minerd said in an interview in New York.
“We are investors and we believe it is a pretty good period to start nibbling on Treasuries.”

I’m not gonna say a single bad thing about Scott. That guy looks like he could punch a hole through a cinder block. But, I will say this: Scott, one does not nibble on the ark. One takes starvation mode chunks out it and prays for salvation.

The morons at the NY Fed had forecaste upwards of 1% growth, no? Jar my memory.

It looks like the Atlanta Fed’s GDPNow models worked, only missing by a tenth of one percent.

*ECONOMY IN U.S. GREW 0.5% IN FIRST QUARTER VS 0.7% FORECAST

Spin it however you like: these are abysmal numbers (thunderous lightning strikes spire atop castle).

Dow futs are lower by 133.

Abbot is buying St. Jude Medical for $25 billion. STJ is higher by 25% in the pre market.

More interestingly, ABBV is buying privately held Stemcentrx for $5.8 billion. Stemcentrx is a Peter Thiel backed company. That man had signed a deal with the devil, which explains his wanton success.

Stemcentrx, a closely held biotech firm based in South San Francisco, California, has five experimental drugs in human trials. The leading candidate is for small cell lung cancer, targeted at a protein called DLL3 that is expressed in 80 percent of small cell lung cancer patients’ tumors and not in healthy tissue, according to a statement on Thursday. Patients are enrolling in a final-stage test of the company’s lead drug, called Rova-T, which could be on the market by 2018 if approved, Chief Executive Officer Rick Gonzalez said.

“We have dedicated ourselves to oncology and we view it as our second major growth platform,” he said in a telephone interview. “Stemcentrx in particular fits well as a major platform play for us in solid tumors.”

Lastly, MDVN received a bid from SNY for $9.3 billion, a modest 8% premium to yesterday’s close. I am almost certain the primadonnas at MDVN will ask for moar.

I won’t make too much out of these deals, as the healthcare industry is rife with misdirection and convoluted motives. But the investment bankers must be glad to see activity.

Don’t worry, we’ll be up by 9:45am.

The Bank of Japan didn’t provide markets with additional crack-cocaine. Subsequently, investors are throwing infantile tantrums, selling off the NIKKEI and U.S. futures.

The yen is soaring v the dollar up by 2%. The NIKKEI had been higher by 2%, but is now off by 2.5%. S&P futures are down 10.

Poor Japan will have to make due with a paltry budget of just 80 fucking trillion yen, to buy up excess ETF supply.

The Chipotle CFO, John Hartung, is a smart man. He’s probably a great CFO and an even better merchant of Mexican styled chicken sandwiches. However, he has no idea how deep the rabbit hole goes, in regards to his brand being tarnished due to the recent spate of ecoli related illnesses, born out of his restaurants. Truth is, none of us know how Chipotle will end up, or where the stock will be in 6-12 months from now.

But this is what we do know. The stock is off by almost 50% since the outbreak occurred. Sales have plummeted to the tune of 30%, while costs have risen. The company is intent on leveraging into this maelstrom by opening up another 220 stores and also buying back $750 million worth of its stock.

For the quarter, the company lost $26 million, compared to netting $122 million the year prior.

Due to the share buybacks and operating losses, the companies cash position has dwindled to $250 million.

As of Q1 of 2016, the company had purchased $641 million worth of stock at an average cost of $463, for an unrealized loss of around $64 million.

Management is making a huge gamble with shareholder money, pretending they know what’s in store for the share price and gambling on whether or not another ecoli outbreak will be reported in one of their stores. Should that occur, this stock is going to get absolutely poleaxed. Why on earth is management taking on so much risk, when they themselves don’t even know the root causes of the contamination?

If they want to open another 220 stores, which will underperform by all historical CMG metrics, they should refrain from tossing money into a flaming barrel of garbage by buying back shares.

Here is a snippet of his testimony. Captivating stuff.

I hope the company bankrupts itself and everyone goes to prison…for life sentences.

Joe Papa aka Mr. Potato Head will be paid $67.4 million for the top spot at the retarded pharmaceutical company dubbed Valeant.

Papa, who is to take over the drugmaker next month, will get a $1.5 million salary, a target bonus of $2.25 million, and a special $8 million cash payment to compensate him for lost shares of Perrigo Co., which he ran until it was announced this week that he was taking over Valeant. In addition, he’ll get restricted stock and options worth $56 million. The value of the stock is based on Valeant’s April 27 closing price.

With the amount of options granted, should Papa be able to turn this disaster around, he stands to make an absolute fortune.

Never mind the inconvenient truth that Papa had failed to preserve shareholder value at PRGO over the past 3 years, whose share have scathingly fell lower to the tune of -50%.

Outstanding positions in the repo market has dropped by 18% this year, as Chinese bond traders scurry about like rats to unwind blockheaded high yield positions. With NPLs soaring by 50%, year over year, bond traders are facing immense pressure as the maturity wall looms.

“It looks like everybody is cutting their leverage, passively or pro-actively, as pessimistic sentiment continues to brew,” said Wang Ming, chief operating officer at Shanghai Yaozhi Asset Management LLP, which oversees 15 billion yuan of fixed-income securities. “Carry trades have become riskier.”

State-owned China Railway Materials has suspended their bond trading schemes, citing ‘repayment issues.’ This has the bond nerds over at PIMCO pondering the very existence of life.

“When you have a large SOE who suddenly suspends its bond trading, you think: ‘How many more are there?’” said Raja Mukherji, the Hong Kong-based head of Asian credit research at Pimco, which oversees about $1.5 trillion worldwide. “It kind of leads to a bit of panic in the onshore market. Investors are likely to want to look at their portfolio and sell some of the bonds.”

Despite signs of distress, bond traders don’t think their will be extensive carnage in the Chinese corporate bond markets–because the government won’t allow it to happen.

“We don’t think there will be a big correction in the corporate bond market unless continuous and large-scale defaults trigger a liquidity crisis in the financial system,” said Wei, a money manager at Bosera Asset Management Co. in Shenzhen. “The probability of such systemic risks is very low given regulators’ good care for the market.”

I’ll bottom line it for you. A weak corporate bond market is oppressive for liquidity, which in turn is bad for stocks. As NPLs rise in China, there need for capital is greater than ever. This, of course, could become a problem.

“The volatility in funding costs, coupled with exposing credit risks, are draining the liquidity in the bond market,” Sun said. “Given the market expectation of a neutral monetary policy stance, investors may continue to be forced to de-leverage.”

As you were. The Facebook earnings were great and oil has bottomed and China has bottomed and Europe is picking up steam.