The Dow Jumps Triple Digits to Fresh 2016 Highs

Optimism is in the air. The birds are chirping. Greece got another bailout. And the Fed is lying about hiking rates.

Markets are celebrating the breakout of the charts today, as money managers scramble behind mountains of cocaine to get their market orders filled. Just about everything is up, aside from retail. They cater to a miserly genteel folk of 350 million moribund people. The real economy is doing just fine, dutifully employed and without health insurance.

Oil is on the cusp of breaking $50, copper is moving higher again and gold is in the pits. This is what one would call a ‘risk on’ melt up, one that has been predicted by The Option Addict for a long time. For a moment, it looked like OA might’ve fallen off a mountainside and hit his head. But, alas, he’s come though again with yet another sage call. For those of you attending this quarter’s online boot camp, you’ve certainly gotten your money’s worth.

Where do we go from here? I discussed this in Exodus yesterday. When the algos get overbought, it typically means the rally will continue, at least for another 10 trading days. The stats, quite frankly, are unbelievable, with the market climbing 27 out of the last 29 overbought occasions. It’s simply a byproduct of momentum begetting more momentum.

Jim Chanos has said for a long time that Alibaba is a smoke and mirrors funhouse of accounting comedy. Apparently, the SEC is delving into the great Chinese company, curious as to the accounting of their ‘Singles Day’ nonsense.

For those uninformed, Jack Ma, CEO of Alibaba, created the holiday to celebrate people who eschewed family and marriage, classic Orwellian horseshit of the very first magnitude. As such, the enslaved Chinese are propelled to buy cheap goods in droves that day, mainly through BABA, who grossed $14 billion in sales on that day alone.

The SEC wants to have a peak under the hood.

“The SEC advised us that the initiation of a request for information should not be construed as an indication by the SEC or its staff that any violation of the federal securities laws has occurred,” the company said. “This matter is ongoing, and, as with any regulatory proceeding, we cannot predict when it will be concluded.”

Shares of BABA are off in early trade.

This is getting redundant, but it bears repeating and vigilant analysis. Something is afoot with the consumer. Between record low credit card utilization rates and the fact that no one seems to be spending any money on clothes and gadgets anymore, a starkly different America stands before it, rich and healthy, crazier than ever.

Express just warned. Their fashion sense is an abomination for all of mankind.

Reports Q1 (Apr) earnings of $0.25 per share, $0.02 worse than the Capital IQ Consensus of $0.27; revenues rose 0.1% year/year to $502.91 mln vs the $521.32 mln Capital IQ Consensus. Comparable sales (including e-commerce sales) decreased 3% vs. guidance for up low single digits.

Inventory was $281.3 million compared to $265.9 million at the end of the prior year’s first quarter, and includes
approximately $58.6 million related to Express Factory Outlet stores this year compared to approximately $35.4 million in the prior year’s first quarter. Retail inventory decreased by 3% in the aggregate.

Co issues downside guidance for Q2, sees EPS of $0.15-0.19 vs. $0.29 Capital IQ Consensus Estimate; sees comps down mid single digits.

Co lowers guidance for FY17, sees EPS of $1.41-1.54 (Prior $1.56-1.71) vs. $1.66 Capital IQ Consensus Estimate; sees comps down mid to low single digits (Previously guided for up low single digits)

The shares are down a bunch this morning, 15 some odd percent.

Update: via the call

Positive comps early in quarter were overshadowed by slowdown that began in mid-March (notes high base)
“Selling was strong during February and first half of March”
Saw significant drop of traffic during April
driven primarily by traffic declines, starting in Mid-March
on track to achieve comps guidance for Q2 (3 weeks into quarter)
Closed 41 stores since announcement of 50 store initiative/ doesn’t plan closing more than 50
Identified $14 mln in expense savings; ~$7 mln benefit in 2H of 16
Sees 90s trends becoming popular
launched first of 3 online order management systems during the quarter
$41.5 mln in shares repurchases durinig the quarter w/ $30 mln left in program
Q1 Capex $18 mln
Expects Q2 Operating margin to contract by 250 bps
FY Capex remains $110-115 mln
Still on track for double-digit operating margin gains
e-commerce sales were down 1% to $77 mln
demand is looking “very positive” in response to question about e-commerce sales acceleration

I realize some of you believe we’re in some stock market Renaissance, but it hasn’t gone anywhere in 18 months. Moreover, we’re still down for the year.

Jeff Gundlach touched upon that and said he thinks there’s a 50/50 chance of a June hike. He’s been an arch opponent to the Fed banter and rate hike threats, citing a sundry of reasons for the Fed to not hike, such as the economy sucks–yadda, yadda, yadda.

“The market is not incredibly healthy,” Gundlach said in a telephone interview, noting recent corporate earnings have come in weak. Gundlach, who oversees $95 billion at Los Angeles-based DoubleLine, said the S&P 500 index “has gone nowhere in the past 12 months to 18 months.”

On the Federal Reserve, Gundlach said it is still 50/50 odds that the U.S. central bank will raise interest rates in June. He said many Fed officials are “dying to raise rates,” but that it is Fed chair Janet Yellen’s opinion that matters the most.

“All that matters is Yellen. She is still there. I feel like we are back in December again, where everyone thinks that there is a super secret that some Fed officials have this knowledge that the economy is really good.”

Jeff is boss hog, manager of $95 billion, the new bond King.

Apparently, the good senator from Tennessee traded the shares of CBL so well, the WSJ is now running reports on him, pointing to possible insider trading allegations. I know Corker has been a supporter of Trump and the WSJ editorial board have been livid, Bayer foam mouthed, haters of The Donald. Nonetheless, the good Senator has been trading CBL like a wizard. In this country, that is illegal and can get you 200 lashes at the gibbet.

The WSJ witch hunt continues.

In regard to Mr. Corker, Stephen Lebovitz said that “nobody at CBL has disclosed to him or to any other outside party any insider information, and we are unaware of any claim or allegation by any regulatory agency that suggests otherwise. We strongly deny any such allegations.”

Many of Mr. Corker’s trades were large. Fifteen of the trades were valued between $500,001 and $1 million; 30 were valued between $1 million and $5 million; and three were larger than $5 million, according to the senator’s financial disclosure filings. The filings require disclosure of stock holdings and transactions, but only in broad ranges of value.

A Journal analysis of Mr. Corker’s trading in CBL shows that he didn’t make money on every trade and in some cases he lost money.

In a 2011 article on Mr. Corker’s CBL investments, Mr. Corker said that by tracking the company’s stock for many years, he noticed that its shares traded within a range. “I’ve bought it heavily when it is at the low end of that range and then I hold it until there is upward movement, when I sell,” he said in a statement at the time.

In November, the Journal reported that Mr. Corker had failed to properly disclose several CBL trades on his personal financial statements filed with Congress.

In one of these purchases, Mr. Corker bought between $1 million and $5 million in CBL shares on Nov. 29, 2011, according to updated financial-disclosure statements that he filed after questions from the Journal. The stock rose nearly 7% the next day and continued to climb. He sold the stock in May 2012 for between $5 million and $25 million after the stock had risen 42%, representing a gain of between $420,000 and $2.1 million, according to a Journal analysis of the trade.

In another case, Mr. Corker failed to disclose that he bought CBL stock near its low of $2.07, according to the updated financial-disclosure statements. On March 9, 2009, accounts in the name of his daughters made a pair of purchases worth a total of $200,000 to $500,000. The first time any CBL shares were sold from those accounts, on May 12, 2010, the stock had risen to about $16. That transaction likely made a gain of at least $1 million.

According to Mr. Corker’s office, losses on other CBL trades in his children’s accounts in 2010 erased that gain. The same accounts had paid about $24 a share for more than $2 million of CBL shares in 2008. A year later, the stock hit $2 and closed Monday at $10.29.

Mr. Corker later amended his financial statements and blamed the errors on his former accountant.

Ms. Johnson, the Corker spokeswoman, said she believes the questions into Mr. Corker have been prompted by the Campaign for Accountability, a nonpartisan organization that has filed several complaints with the Senate Ethics Committee about Mr. Corker’s financial activity.

I don’t like Senator Corker or any Senator for that matter. But I hate these stone throwers ever more. The vilification of success is rampant in this country. From what I’m reading, Corker traded CBL because he liked to. He got accustomed to its ranges and made some money doing it. What’s so fucking surprising about that? We do this every day.

Separately, CBL is under investigation by the FBI and the SEC for accounting irregularities, which is the main reason why the stock is getting poleaxed this morning.

Same store sales at the high end retailer plunged by 9%. Asian and European comps down by 15%.

The company is blaming shitty consumers as a reason for their shitty earnings. Downside guidance was provided, as well as store closings.

Reports Q1 (Apr) earnings of $0.64 per share, excluding $0.05 tax benfit, $0.04 worse than the Capital IQ Consensus of $0.68; revenues fell 7.4% year/year to $891.3 mln vs the $914.97 mln Capital IQ Consensus.

Comparable store sales declined 9% vs. ests near -5%. On a constant-exchange-rate basis that excludes the effect of translating foreign-currency-denominated sales into U.S. dollars, worldwide net sales declined 7%, and comparable store sales declined 9%.

Americas sales -9%; comps -10% — management attributing the declines to varying degrees of softness in spending by U.S. customers and foreign tourists.

Asia Pac sales -8%; comps -15%. Japan +8%; comps +12%. Europe -9%; comps -15%.

Co issues downside guidance for Q2, sees EPS similar rate YoY to Q1 (down ~15% from $0.85) vs. $0.79 Capital IQ Consensus Estimate.

Co issues guidance for FY17, reaffirms mid single digit EPS decline vs. -2% consensus to $3.75; lowers FY17 revs to low single digit decline from $4.1 bln last year (previously near last year’s level) vs. $4.1 bln Capital IQ Consensus; worldwide gross retail square footage increasing 2%, net through 11 openings, 6 relocations and 10 closings; (iii) operating margin below the prior year’s 19.7% (excluding the prior year’s charges due to an expected increase in gross margin more than offset by SG&A expense growth; a modest year-over-year strengthening of the U.S. dollar; net inventories unchanged from the prior year.

“As expected, this was a difficult quarter in terms of both sales and earnings growth. We faced numerous challenges, including continued pressure from foreign tourist spending in Europe, the U.S. and Asia, particularly in Hong Kong. However, we are continuing to take actions that are intended to strengthen sales growth with local customers in the U.S. and around the world. From a strategic perspective, we believe that our initiatives will enhance our ability to provide our customers with extraordinary products and experiences and ultimately contribute to improved financial results. We remain focused on generating sustainable long-term sales and earnings growth.”

Meanwhile, futures are higher.

One of the mechanics from Fast Money tried to get technical on Ed, citing the indelible fact that all world markets look like a flaming bag of refuse and that the SPY had the look of a rolling top. Yardeni was having none of that shit. He stood up and cold prison smacked the bear for even uttering the words ‘rolling top.’

In all truthfulness, Yardeni is as smart as a bag of moon rocks in the sun. Nevertheless, the man has an intense following, almost as popular as President Nixon did after the Watergate scandal.

He’s always worth a listen, especially if you’re deaf.

Some of you might pine for Nike Air Jordan’s because you bought them when you were young, healthy, and with hair. Aside from the donning of rubber sneakers on grown men being nothing short of infantile, consider the reliance that both Nike and FL have on Michael Jordan, a brand that grosses $2.6 billion in revenues per annum.

What if Mike went OJ and cut someone’s head off? Then what? Then you’re fucked.

Both Nike and FL are shorts, in my opinion, for a sundry of reasons. Personally, I believe the NBA is a laughable farce. I never liked the sport, always felt my time was better off doing anything at all but basketball. Okay, the truth is I once started to play basketball as a teenager and had my face split open for me on the rock head of my best friend. Aside from that, basketball hasn’t been good since Larry Johnson hit a 4 pointer in the Knicks playoff’s winship.

Cramer has turned negative on the group, beguiled by the uncertainty of a sector that is dependent upon a criminal element in the culture to spur sales.

Let it be known that profound piker extraordinaire, Jeff Immelt, CEO of GE, purchased 67,600 shares of his companies stock, on May the 20th, 2016, in an effort to look like he’s doing something. Rumor has it, Jeff just gallivants around the office all day, polishing up Jack Welch’s trophies and talking shit about Six Sigma management style, in an effort to fit in with the rest of the execs.

Also, I have heard rumors about the internets that Jeff had to borrow the $2 million or so from one of his neighbors to buy the stock, as all of his liquid assets are tied up in some scheme that one of his half-wit cousins got him involved in.

The conversation went something like this:

Jeff: Hi neighbor, can I borrow a cup of two million dollars?

Neighbor: Sure, Jeff. I hope it’s to buy some of that GE stock of yours.

Jeff: Thank ya neighbor. I’ll be sure to give you back the 2 million in a few weeks or so, after I cash my tax check. It’s mighty fine of you to just let me borrow the millions.

Neighbors: No problem. Take your time Jeff.

GE’s stock is down 3.2% for the year, an embarrassment of monumental proportions.

The very first thing I wanted to see this morning was the market, 800-900 points lower. Instead, it gapped up by 200. I wanted to be skeptical. Bear in mind, I haven’t any skin in the game, ever since burning out like a race car engine in 2015. Since that momentous occasion, I’ve favored a more reasonable, disastrous scenario and was entreated to a small appetizer of it in early 2016.

Markets dropped like a fat man having a heart attack and I was delighted, not because I benefitted by it in any way, but because I wanted the world to burn (extra Joker). But today’s action is very strong and very convincing. If I was managing money today, I’d likely allocate a bunch of money into the stupidest stocks in the world, only to get blown to smithereens before settlement day. Or, I might just profit by it, grotesquely, then go brag to my idiot friends about how smart I was for buying stocks into a feverish lift.

Who wants to read about some skeptic on a joyous 200 point rally day? It’s like gathering around the fireside during Xmas festivities to tell the kids that Santa is a farce.

Enjoy the day. “The Fly” was wrong in his short term calls of apocalypse. But he will be right in the end, just know that.