Wall Street Logs a Triple Digit Loss as a Triple Threat Looms

China.

How is this debt/gdp story going to play out? Will the Chinese devalue again and if so, are they prepared to inflict that sort of FX damage to their corporations? Their markets are a sham and time will not prove to be kind to them, in my opinion.

Oil.

Anything less than $60 is an exercise in futility. The vast majority of these oil companies aren’t making it through 2017. Once the defaults come streaming through, you will behold a much different market than the one you are bearing witness to right now.

Earnings.

Ah, the E word. For the past 6 weeks, you’ve all been skipping throughout the streets like Alice in Wonderland. Now, you will begin to understand what it feels like to grow at just 0.4% for the quarter. Mark my words, it will not feel good.

Markets closed down almost 1% on the NASDAQ, in a do nothing sell off that instilled fear into no one. But a storm is coming.

Board the ark.

And the fucking stock doubles on this news.

We’ve seen this play our numerous times over the year. XYZ goes bankrupt and the stock flies in anticipation of a bankruptcy court breaking up the assets. This is a dangerous game, especially for the debt laden SUNE. Some analyst who called himself ‘Mok’ thinks the assets are essentially worthless, an entire waste of time for all people involved in this God foresaken company.

“We are dropping our coverage of SUNE with a final Hold rating,” writes Mok, “following multiple media reports suggesting SUNE is preparing to file for bankruptcy amid a cash crunch as the result of an over leveraged balance sheet and unclear accounting of its liquidity.”

“With no other options for accessing additional liquidity, we believe bankruptcy is the only viable outcome for SUNE.”

Mok thinks the two YieldCos., TerraForm Global (GLBL), and TerraForm Power (TERP), will survive “assuming they are able to unwind from SUNE” and to “find buyers for SUNE’s stake.”’

‘Pennies on the dollar’, equates to 90% gorilla raping run on Wall Street.

Unfinished projects likely sold for pennies. A vast majority of the cash on hand is committed to projects, but SUNE does not have the liquidity to complete those projects. A bankruptcy proceeding would likely force the company to sell its project portfolio and pipeline to raise capital for debt repayment. The completed projects should be able to fetch market value, but given the uncertain status of those unfinished projects in its pipeline, we expect those would be sold at a substantial discount.

What went wrong? Mok sums it up.

Part of SUNE’s trouble comes from its aggressive plan to ramp-up renewable project development, requiring substantial capital to complete. Management was relying on the combination of yieldco funding, debt project financing and its own liquidity. Additionally, SUNE was counting on dropping down projects to its yieldcos, which would also need to raise capital to fund those purchases from SUNE. While the yieldco strategy was initially successful, the dividend yield eventually became too low and the need to grow the portfolio pushed those entities to become more aggressive in fund raising. Finally, the strategy to become the world’s largest renewable energy company through multiple acquisitions overextended SUNE’s financial liquidity and ultimately accelerated its cash crunch.

These stocks are idiotic and without decorum.

The Atlanta Fed has, once again, revised its GDP estimates for the first quarter, now forecasting growth of just 0.4%.

The Atlanta Fed’s program initiated its first-quarter GDP forecast at 1.2 percent in early February and reached as high as 2.3 percent in March.
The regional Fed’s forecast program downgraded its GDP estimate on the slower growth in consumer spending and a drop in equipment investment following the latest data on vehicle sales and factory orders.

This is an abomination. Do investors care about this “old news” that was soooo long ago? Nope.

The Dow is off a hundred and oil stocks are barely lower.

Ignorance is bliss.

Need I remind you of the storm that is brewing? Like a fine cup of French Roast brew, the scents are strong, but the substance is weak.

For all of the talk of doom casting its web over the markets, everything about the market has been orderly. This decline, although disheartening, isn’t evoking fear into the hearts of bulls.

Yet, all the while, and inexorably so, the ark rises.

Financials are paving the path towards hardship today, as investors finally realize that the banks are a giant waste of time.

Risk on, risk off. We hear that moronic phrase all the time. The truth is appreciably more dire, as you’re being spoonfed to believe. The manipulation of the markets have saved 2016 so far. But the vast majority of the gains were found in the very worst sectors, like oil.

If you believe oil continues higher through the summer, you might as well stay long. But if you believe prices are bound to stabilize, you’re gonna want to take up that last seat next to the aardvarks on the ark, for anything less than $60 crude equals doom for the industry in 2017–which will start getting discounted into the markets around May the 1st.

I always find it amusing to see the Yen rise during times of tumult. The yen carry trade is always a topic of discussion during hard times. Fears of imminent collapse and subsequent hand wringing rule the day when the yen reaches certain levels v the dollar.

Since the beginning of the year, the yen has been doing nothing but rise v the dollar and people are starting to take note of it.

The rise of the yen is supposed to coincide with the fall of risk. Year to date, the yen is higher by 9% v the dollar.

America is going to be so great again, once we can build the wall.

Trump released his plans that will force Mexico to pay for the wall to the people who hate him most today, The Washington Post. The media, naturally, is having a frenzy with it. Here are the memos in its entirety.

Here are the lunatics from MSNBC urinating their pants over this intelligent plan.

I don’t know how anyone in their right mind could oppose this simple plan. If you want to send your people into America and use us for a defacto welfare system for your failed state, chalk up $5-10 billion for the wall–else we will cease to permit money transfers to Mexico. Trump’s argument is they have a lot more to lose than we do, since the trade deficit is sharply in their corner. Nevertheless, both the left and the right will oppose any plan to get the wall built, for a number of reasons–most being political.

Bad debt soared by more than 50% in China last year. As such, these arduous conditions are making life cumbersome for their banks. The solution?

How about a government commanded edict to force debt holders to accept equity and shut up?

When asked about the proposal at the Boao Forum last month, Construction Bank Chairman Wang Hongzhang said he needs to think of his shareholders and wouldn’t want to see a plan that simply converted “bad debt into bad equity.” Bank of China Chairman Tian Guoli said at the same forum that it’s “hard to evaluate” how effective debt-equity swaps will be, as so much has changed in China since the tool was used to bail out the banking system during a previous crisis in the late 1990s.

The bad debt in China is ballooning and it’s only getting worse.

When including personal debt, the debt to GDP is something in the order of 260%.

This is simply moving the pea from one shell to the next. They’re going to take government-run company debt and government run bank loans and simply wash them away by converting the loans into equity. This way the corrupt state run companies can keep the scheme going a while longer. Maybe they can bamboozle more American investors into taking stakes in their great state run enterprises?

More than twenty analysts have been chiseling away at Goldman Sachs’ earnings expectation, removing 94 cents from their profit expectations over the past month or so. These cuts are the largest since the grim days of 2008-2009, representing a 45% drop from last year.

The culprit?

Everything.

The IPO pipeline is all but shut down, following years of wanton depravity, wedding the monsters from the VC world and producing the stupidest looking babies the world has ever seen.

Other banks aren’t immune to the actual doldrums on the ground. Had you simply judged profit expectations by the lackadaisical trading action over the past month, you’d be coerced into believing all was well and good. As a matter of fact, I imagine this post comes as a great surprise to many of you.

“People were holding out hope that March would get better and partially save the quarter,” Glenn Schorr, an analyst at Evercore ISI, said in an interview. “That didn’t happen. There’s no saving this quarter.”

Investment banks are off to their worst start to a new year in over a decade.

I don’t know how this is good news. The company announced their ‘ad hoc’ committee completed its task to investigate the sheer fuckery that has been taking place over there. As such, they’re finally ready to file their 10-k for 2015 on APRIL the 29th, 2016. A little late, eh?

Nonetheless, the stock is screaming higher by 14% on this news.

The co announced that the ad hoc committee of the board of directors (the “Ad Hoc Committee”) believes that its review of various Philidor and related accounting matters is complete, and that it has not identified any additional items that would require restatements beyond those required by matters previously disclosed. Given the completion of the review, Valeant’s Board has determined to dissolve the Ad Hoc Committee and that the 12 independent directors on Valeant’s Board, including the members of the Board’s Audit and Risk Committee, will assume oversight responsibility for remaining work associated with the completion of the Company’s current and restated financial statements and disclosures, as well as its assessment of related internal controls and remediation matters. As previously disclosed, the company intends to file its Form 10-K on or before April 29, 2016.

“We appreciate the efforts of the Ad Hoc Committee and its independent advisors over the past five months. After conducting more than 70 interviews and reviewing over one million documents, the Ad Hoc Committee has not identified any additional items requiring restatements beyond those matters previously disclosed. We believe it is appropriate to transfer responsibility for any continuing work to the Board’s independent directors. We continue to work diligently and are on schedule to file our Form 10-K on or before April 29, 2016.”

The company is in the process of restating the affected financial statements and the restated financial statements will be included in the company’s Form 10-K for the year ended December 31, 2015, which the company intends to file with the Securities and Exchange Commission and the Canadian Securities Regulators on or before April 29, 2016. The company believes that after giving effect to the restatement, it will have remained in compliance with all of the financial maintenance covenants in its credit facility at the end of each affected quarterly period

Now let’s see what’s on the 10-k. This upside down frown for VRX shareholders might just turn over again after its release.

European markets are diving lower, led by the DAX off by 2.4%. U.S. futures are indicating a tepid opening of -0.8% on the NASDAQ and gold and treasuries are up more than 1%.

There are a thousand and one reasons as to why stocks are lower. But know this: the market is like a glass kettle of rolling, boiling water. At any moment, the pressure from within can crack the kettle and release the contents onto your floor. Markets are, eventually, going to trade much lower. You will know so with the benefit of hindsight. But I am telling you now, as a courtesy for the many moons you’ve shared with me here.

My best advice to you is to turn off the kettle and go back to sleep.