Market Refuses to Go Lower; Higher Prices Ahead

Like I said earlier, we had every excuse to trade down today. Europe was down. Oil was crushed. Hell, today is a Friday. All sorts of bad things could happen over the weekend. By the time Monday comes around, for all we know, the Chinese, Russians and the Italians could all be bankrupted.

But we didn’t go down.

There’s an old Wall Street adage that says ‘never short a dull market.’ Today was definitely a snooze fest, one that gently rocked the short to sleep, whispering in their ears that all was well and next week would bring forth gains, of the bountiful varietal.

This is how it begins, the effervescent movements in equity prices that lay waste to short sellers–causing great pain and anguish.

Heading into next week, I am 75% long SPY (basis $185), 25% TLT (basis $120.42). I will begin selling out of my SPY positions on Tuesday of next week, in one-third allotments, and should be in a 75% cash position by the end of the week. I am merely a servant to the sublime nature of the mathematical precision of Exodus.

My bubble basket was up 1.65% today, indicative of extreme risk taking.

From everything that I can gather, information on the surface and below, markets are heading higher next week.

Enjoy the run.

Standford business professor, Anat Admati, spells out doom for the Italian banks. She doesn’t really offer a light at the end of the tunnel, just the fact that the tunnel is dark, ominous and without mercy.

Italian banks are saddled with a supernatural level of NPLs. The Germans and the French have orchestrated to keep Greece afloat for the benefit of their stupid banks, spreading out the toxic waste to every orifice of Europe.

The chickens, inexorably, will be coming home to roost one day and the Italian banks will most likely be the first to die from their ‘roosting.’

What better way to start the weekend than with bat-shit, jungle crazy, John McAfee? Admittedly, he made a great sermon in this interview, highlighting the hypocrisy of the Federal government, in that he’s offered to hack this one phone for free but hasn’t been taken up on the offer.

Reason being: McAfee says the government wants a dark overlord, Lord of the Rings, type shit to monitor everything through a backdoor into your iPhone. He says if such a weapon were created, it would be a black day for American and ultimately mark the beginning of the end of the United States as a world power.

He furthers, we are 20 years behind other countries in the ongoing cyber-war and that the FBI is old and slow, hampered by bureaucracy.

He said he could unlock this one phone and it would take just 3 weeks and that any hacker worth his salt could do the same.

But we’re not.

Crude is off almost 5%. European stocks are off by 1%+. Gold and bonds are higher, yet the NASDAQ is up.

Why?

Tech stocks are being accumulated. Stocks like GRPN, YELP, YHOO and even ETSY are higher. While commodity related names get poleaxed into oblivion, WDAY, PANW, QUNR and DATA are up.

Inside Exodus, my bubble basket is higher by 0.5%, while the commodity basket is off by 2.7%.

Thanks to AMAT, semis are up too.

In my opinion, this is indicative of institutional accumulation in undervalued, or beaten down, tech names, whose growth prospects are now attractive relative to their valuations. The rallies are too broad based for it to be a coincidence.

As an investor, you’re running out of spots to place your money. If you’re not interested in gold or bonds, what can you buy? Do you want to chase CLX and MO after the runs they’ve been on? They’re not cheap. You’re not buying commodities. The cycle is over.

The only place that makes sense, if you’re a bull, is tech. For the most part, balance sheets are clean. They’re making a lot of money and valuations have shrunk.

Whether or not this thesis ends up being correct remains to be seen. As of right now, looking at the screen in front of me, this is the bet that is being placed by money managers.

How many of you go clothes shopping on amazon? I don’t get that. Nevertheless and apparently, plenty of people do. The traditional moat that higher end retailers once enjoyed have been destroyed by niche online websites like Net-a-Porter, and I suppose, to some extent, Amazon. I think the problem with Nordstrom have more to do with a shifting demographic of young people who dress like hobos, than an overall apathy of cladding oneself with garb made from cotton.

Have you seen some of these young people running about the earth? They look like extras from the Mad Maxx remake. Call me olde fashioned, but I’m not a fan of the dystopian society look.

In this morning’s take on Nordstrom’s miss, Faber and Cramer had a nice kitschy conversation about the struggling retailer, bemused by the powers vested in Amazon.

JWN is down 40% over the past 12 mos.

Does she get paid to say things like ‘oil can’t go down forever” or “the dollar can’t keep going higher”? To me, this sounds like a person digging in her heels in a sunk cost fallacy. You know, the guy who keeps buying GPRO from $90 because he’s already lost so much, he might as well lose more.

Or the guy at the casino who won’t give up because of all of the time and money he’s lost. He justifies throwing good money after bad because of the sunk cost fallacy.

My current expectation is that the U.S. economy will work through this episode of market turbulence and the soft patch of economic data to regain its footing for moderate growth,” she said in prepared remarks at a Global Interdependence Center event in Sarasota, Florida.

Mester also said she still expects inflation to return to the Fed’s 2-percent target, even though it will remain “lower for longer” than previously thought.

“I take less of a signal from the downward moves in market-based measures of inflation compensation…these more likely reflect changes in liquidity premia and inflation risk premia rather than changes in inflation expectations,” she said.
Mester acknowledged, however, that policy will likely need to remain accommodative “for some time” given slow growth abroad, the strong dollar, more restrictive financial conditions and the hard-hit energy sector.

She noted that the impact of China’s slowdown on the global economy, market volatility and the risks of low oil prices need to be considered, but that it was still “premature” to make a material change to her outlook.

Consumer spending had started the year “on a strong note,” Mester said, and would continue to be supported by low oil prices.

Plainly, the Fed has been wrong, very wrong, on inflation–currently saddled at 1.4%, well below their target.

To say this:

“Oil prices cannot continue to decline indefinitely, nor can the dollar continue to appreciate forever,” she said. “At some point, both will regain some stability and the effect of previous changes on inflation will dissipate.”

You have a problem with your core thesis. Stop doubling down on a bad bet, Loretta. The inflation monster isn’t going to rear its head anytime soon. Moreover, making moronic speeches like this only serves to shatter investor confidence; hence, creating the deflationary environment that you’re trying to defeat.

It was just revealed that “Broadway” Bill ‘Montauk’ Ackman upped his retarded sized VRX position from 8.5% to 9% yesterday. Today, Wells Fargo did a Larry David “eh, not impressed”, starting the drug maker with an underperform, affixing a price target of $65-68 to it.

Wells Fargo analyst David Maris started Valeant Pharmaceuticals (VRX) with an Underperform rating and $65-$68 price target range. The drugmaker closed yesterday down 58c to $94.07. Valeant has not explained how the unwinding of Philidor, which represented 6.8% of revenue, results in a 36.6% reduction in earnings, Maris tells investors in a research note. The analyst rolled out coverage of ten companies in the Specialty Pharmaceuticals space, eight of them with Outperform ratings. Valeant is his only Underperform rated name in the space. His focus Outperform calls are on Teva (TEVA) and Amphastar Pharmaceuticals (AMPH)

There are so many hedge funds wrapped up in VRX. If someone ever wanted to inflict maximum damage to the industry, they’d just have to target VRX as a way to communicate with them.

VRX is down almost 4% in the pre-market.

This is the part of the B movie when you start to throw popped corn at the screen for being so absurd. The dialogue of this market is cringe-worthy and it feels like we’re all actors in a  poorly staged opera. Out of all the things to worry about, the UK potentially leaving the EU was not one of them.

Nevertheless, here we are.

`We don’t know what would come our way with a Brexit,” said Gabriel Felbermayr, director of the Center for International Economics at the Ifo Institute in Munich and one of the authors of the report. “But what is completely sure is that it would create enormous uncertainty, and there is very good empirical evidence to show how poisonous uncertainty is for trade flows and economic development.”

Very nice.

Economic ramifications?

Sure, got that too.

Dow futures are off by 75, crude 2% and the DAX -1.14%.

It’s all one large mystery, something entirely unneeded right now.

Once settled, I assume markets will pretend to be relieved and find an excuse to trade higher. So stupid.

According to recent reports, Uber is losing $1 billion per annum in China, thanks to what they call a ‘fierce competitor’ called Didi Kuaidi.

This competitor, according to Uber, is “unprofitable in every city they exist in, but they’re buying up market share’ nonetheless.

Uber has gone from 1% share in China at the beginning of 2015 to 30-35%, only to get crushed by the Chinese competitor, who has partnered with Uber’s arch nemesis, Lyft, and is backed by the very powerful Chinese-born companies, Tencent and Alibaba.

According to the last capital raise, Uber is valued at $62.5 billion, presently conducting business in more than 300 countries.

Your local, and gigantic, global bank thanks you for charging this year’s holiday shopping season onto one of their numerous 29.99% interest bearing credit cards. As such, profits have rebounded to pre-crisis levels; and with it, the compensation of the Ceasars who operate these denizens of criminality have soared.

Simultaneously, the share prices of these respective banks have slumped, mightily.

Let’s review the numbers.

Citi’s CEO, M. Corbat, increased by 27% to the paltry sum of $16.5 million (note: Corbat has zero homeruns and zero hits for the year)

Citi’s CFO, J. Gerspach, increased by 20% to a mere $9 million.

Citi’s Chief of their Institutional Clients Group enjoyed an 18.5% increase to $16 million.

Citi’s share price is down 25% over the past 12 months.

Bank of America’s CEO, B. Moyniham enjoyed a 23% spike to $16 million.

Bank of America’s share price is down 24% over the past 12 months.

And, lastly, JP Morgan’s own J. Dimon ‘earned’ $27 million in 2015, up 35%.

Jp Morgan’s share price was up a fantastical 0.11% over the past 12 months, which is more than enough to bestow a 35% hike to Dimon.

On the austere side, Morgan Stanley’s CEO, J. Gorman, was racked with a 7% reduction to the miserly annual pay of $21 million.

Morgan Stanley’s share price is down 33% over the past 12 months.

Goldman Sach’s CEO, Brooklyn’s own, Lloyd Blankfein, was penalized with a 4% pay cut to fall in at $23 million.

Goldman Sach’s share price is down 21% over the past 12 months.

Indeed.