An Update on FANG v TWDFM

Although risk assets are selling off today, the integral TWDFM names vastly outperforming–especially FANG.

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As long as the TWDFM core remains intact, immune to petty setbacks, I believe the rally will continue in risk assets. Watch them closely, for they are vital components to the mood of this tape.

Carson Block, the renowned independent research analyst who became famous for correctly targeting fraudulent, dog eating, Chinese companies–shorting them to zero, has started a hedge fund–seeded with $100 million.

It seems he’s now branching out past his celestial borders, targeting European “filth”, because people don’t pay attention to how dirty their companies are in Europe, apparently.

“You just find a lot of filth there,” Block told Reuters when speaking of European securities on the sidelines of the Absolute Return Symposium in New York on Wednesday.

The short seller’s publicly disclosed recent forays into Europe include a bet against French supermarket operator Casino Group, where Block is wagering the company’s stock will fall because of its high debt burden.

He is also shorting the stock of Rallye SA, the majority shareholder of Casino, and TeliaSonera, a dominant telephone company in Finland and Sweden.

Block recently launched a $100 million hedge fund after years of churning out research at his firm Muddy Waters LLC. He is best known for targeting the shares of China-based companies that he believed were frauds.

Block, a trained lawyer who started his career as an equity analyst, also said he expects become more active in shorting corporate bonds, something activists have generally shied away from.
Credits rated just above junk status, or BBB-, are a category of bonds where Block expects to find plenty of opportunity to find new short ideas.

“We are going to do more credit-based shorts going forward,” Block said.

He also noted that he his avoiding shorting biotechnologies, addling they “do not make for good shorts” because the companies’ scientific claims are hard to verify or discredit.

In case you’re worried about Block cessating his provocative Chinese fraud reports, do not worry. Block enjoy them too much to ignore.

Even as his focus moves to other geographies, Block has not forgotten about Asia. “We always pay attention to China because we love to short stock frauds,” he said.

Perhaps Pope Francis will endorse Hillary Clinton next?

For me, the best thing about Donald J. Trump is the fact that so many people seem to hate him. It’s odd, especially since he’s way ahead in all of the polls.

It’s almost like a real life government-media conspiracy unfolding before our eyes.

The Pope weighs in, ahead of a hotly contested S. Carolina primary, filled with very religious voters.

In a freewheeling conversation on his flight home from a visit to Mexico, Francis told reporters, “A person who thinks only about building walls, wherever they may be, and not building bridges, is not Christian.”

Trump, a real estate developer and former reality TV star, said, “If and when the Vatican is attacked by ISIS, which as everyone knows is ISIS’s ultimate trophy, I can promise you that the pope would have only wished and prayed that Donald Trump would have been president,” Trump said in a speech in Kiawah Island, South Carolina, using an acronym for the Islamic State militant group.

“For a religious leader to question a person’s faith is disgraceful. I am proud to be a Christian and as president I will not allow Christianity to be consistently attacked and weakened,” Trump said.

“No leader, especially a religious leader, should have the right to question another man’s religion or faith,” Trump said.

“The pope is a very political person. I think he doesn’t understand the problems our country has. I don’t think he understands the danger of the open border that we have with Mexico,” Trump told the Fox Business Network.

Despite this company smashing and exceeding estimates in every quarter since coming public, an analyst over at JMP securities thinks the party is over.

He downgraded the stock today, citing an unfavorable outlook for growth, slashing the price target from $220 to $165.

As a result, the stock is being flayed to the tune of 10%.

We’re all accustomed to panic, nowadays. At the first sign of dark clouds, everyone assumes we are in for a thousand day flood. Hence, people board the ark, amidst the zebra and boa constrictor, in search for safe haven.

The risk aversion carries out to any low risk, high yielding vehicle, such as REITs, utilities and mega cap staples.

A refreshing change in the demeanor of this market squall is the availability of gold as an effective hedge.

If, for whatever reason, none of the above appeals to your investment pallet, have a look at the Japanese yen. No bear raid worth its salt is absent the paranoia induced yen carry trade unravel analogue.

Point being, aside from selling short, you have numerous hedging options available to you. There is no excuse, in this day and age, for you to sit there, idle, as the market inflicts damage to your net worth.

Without question, Walmart’s horrible quarter threw a wet towel over the fiery heads of investors this morning. Couple that with the BREXIT fears (UK leaving the EU) and there is good cause for consternation, following a decent sized run.

Nevertheless, crude is higher and losses are somewhat manageable, at least in the early going. I will not sully the good name of this site to make bold predictions about the price action of the next 5 hours or so. Instead, I will reiterate my belief that the market will rally through April. Furthermore, the lion share of losses to come will commence from May through November, turning eager investors into landfill.

My SPY sales, which constitute 75% of my holdings, will begin early next week. A full schedule of my sales are posted inside of the blog section of Exodus. The other 25% of my assets are in long dated U.S. treasury bonds, via TLT–which has the dual purpose of providing me with income and stability against harrowing stock market losses.

It’s simply my belief that 2016 is not a year to be bold. Instead of running the fields like a lion after its prey, you should be the mouse, scurrying about the baseboards in search of crumbs.

Canaccord analyst, M. Graham, is an admitted loser when it comes to predicting the moves in Amazon. The stock was through the roof, and more, last year and he missed it. Therefore, ergo, he’s trying to recapture lightning in a bottle now, since the stock is well off its highs.

“[Amazon’s] stock is down by about 25 percent, and the valuation is as reasonable as it has been in years,” said Michael Graham of Canaccord Genuity. “We believe Amazon’s stock is unlikely to truly retreat into ‘value’ territory as long as top-line momentum is strong, and we expect this to persist for the foreseeable future.”

“We regrettably missed last year’s big move in Amazon’s stock,” Graham said. “While we were confident in top-line growth prospects, we were concerned that margins would expand more slowly than consensus expected. This view was marginally vindicated by Amazon’s fourth quarter [earnings] report, wherein the company guided for a slower margin ramp. This, combined with general market weakness, has caused the stock to drop about 25 percent since the start of the year. We are therefore taking this opportunity to upgrade the stock and re-join the majority which we believe is correct in this instance.”

Amazon is a great company. But seeing this upgrade, with a price target of $750 wreaks of jinx. I believe this man to be the very bane of research reports for Amazon. Therefore, it should probably be taken with a heavy grain of salt, until he proves otherwise.

Its been fascinating watching Hugh morph from a bear pornographer to raging bull. I do believe he’s banned from CNBC Europe, however, as I haven’t seen him there in years. Maybe it has something to do with this performance.

Hendry is getting some press at BBG this morning, fading the view of Kyle Bass and his “kill China” thesis.

“It would be profoundly silly,” he said. “Our lives, every member of this room’s life would change dramatically,” he added. “Chinese people are becoming wealthier and they’re spending. To have a 20 percent devaluation strikes at the heart of that policy.”

If, by chance, you’re lucky enough to be reading this, then you are aware of the impending short squeeze that promises to wreak havoc upon those who are still betting against stockS. It is going to be severe and make reading the Zerohedge chronicles exceedingly difficult this morning.

European markets continue to surge.

Perhaps the market is warming to the notion of production freezes? Either way, crude is higher.

The net result is a hockey stick move in US futures.

In my opinion, recent gains in the market have been due to the numerous statements out of the Fed heads, including the hawkish Bullard, suggestive of a significant change in rhetoric, from the inane to normal.

Add this to the sundry of factors that point towards a dramatic economic slump, in the not too distant future. These statistics will either predict the next recession, or create a great opportunity to invest in distressed assets.

Contracts for delivery in the summer months are currently priced less than $20 a barrel higher than crude oil. If those premiums were realized, they would be the smallest since 2010, when the U.S. unemployment rate was above 9 percent.

That’s too low, Goldman analyst Damien Courvalin said in a research note Wednesday. Last year, gasoline’s premium fluctuated from $23 to $33 a barrel above crude as American drivers drove a record number of miles.

Gasoline’s premium has slipped this year as record production boosted inventories to highest level since at least 1990. Refineries have already started cutting back output, though, and several will soon temporarily shut down for maintenance.

That should boost gasoline enough that the only way summer premiums could be as low as they’re currently priced is if the U.S. economy began to shrink, causing driving demand to fall, Courvalin said.

“The demand implied by such margins would be consistent with a U.S. recession, which our U.S. economist team estimates has only a 15 percent to 20 percent probability of occurring,” Courvalin said in the note.

I claim no expertise in the premiums required for gasoline traders. I do know, however, that there is a dislocation between reality and the one that the analyst community are living in now.

By summer, I suspect we’ll find out who was right, looking back on these confusing research notes.