Markets Are Crashing; Time to Listen to Marc Faber

We’re creatures of habit. When things get hard, tough, most people tend to take the path of least resistance. In regard to the markets, it’s very easy to believe “the end is near” because it means we don’t have to try hard. After all, how could we make money or outperform when the world is ending. It’s wholly ridiculous to listen to positivity, when all we see it bloody red murder.

Enter Marc Faber: the doom and gloom we all need on a really bad day.

He’s always a great pick-me up, especially on days like this. Marc Faber is a very sick man, albeit a very funny one.

James Galbraith, University of Texas professor and economist aka Boss of all Bosses, takes the Fed to task for the inane strategy that is currently ravaging world markets, which is “hike now, in order to cut later.”

Really, Janet “fucking” Yellen? The assumption that rates needs to go higher now, so that you’ll have some “ammo” later, makes no sense at all and is causing the very issues that you’re trying to avert.

So, my life isn’t all about throwing tomatoes at Mr. Gartman. When he’s right, he’s right. With regard to the Fed, he is most certainly right when he says they’ve lost their fucking minds (I’m paraphrasing here).

We are heading for a brick wall made from dynamite sticks.

Dow futures are plunging lower, down 359. Crude is off by 4%. European markets are off by 3.5%. If matters could not get worse, the plague has broken out in Madagascar, killing 63 since August out of 174 cases. The days of man walking the earth are ending.

Have a pleasant day.

I cannot remember a worse start to the New Year, since 2008. Apparently, this is measurably worser off. We haven’t seen loss like this since the good olde days of 2000. Bear in mind, the first 5 days of the first week in January usually sets the tone for the rest of the year. With commodity prices cratering, China derailed and the Fed delusional to the point of sheer madness, we find ourselves mired in the midst of a runaway market…to the downside.

When I saw “we”, I mean it–strictly–in the royal sense, as I am in cash, TLT, and a side platter of SPY. I’d also like to remind everyone that the core issue here is the Federal Reserve’s inability to quell market fears. China is slowing; we get that. But, I have to believe if the market understood that the Fed would do everything it could to maintain market stability, we’d be singing a different tune now–one authored by a Mr. Rick “Boss” Ross.

Dow futures are off by 250.

I don’t see what the problem is here. Jim Rogers is long China and says this ‘correction’ is normal, since the Chinese market “went up” last year and did very, very well.

The fuck.

“This is insane,” Chen Gang, chief investment officer at Shanghai Heqi Tongyi Asset Management Co., said in an interview on Thursday. “We were forced to liquidate all our holdings this morning,” said Chen, whose firm manages about 300 million yuan ($45.5 million).

The Shanghai Heqi Tongyi manager, whose fund started mid-year in 2015, regretted the timing of its launch and said it “couldn’t be worse.” Chen isn’t alone in criticizing the circuit-breaker rule introduced Monday, which many say exacerbates a liquidity squeeze as investors rush for the exits before trading halts kick in. Under the new rule, a drop of 5 percent suspends trading for 15 minutes, while a decline of 7 percent halts the market for the rest of the day.
“A trading break of 15 minutes or even longer wouldn’t ease their nerves or get them a clear picture of the fundamentals,” said Polar Zhang, a Beijing-based analyst at BOC International Holdings Ltd. “On the contrary, it’s draining liquidity as everybody tries to get out of the door before the door is closed. ”

Nothing to see here. As you were.

How’s that trade working out for you, Jim?

The legendary famed bow’d tied one, living out his winter years in the great satanic continent of Asia, is long China, short U.S. equities. He also said crude was putting in a messy bottom, just prior to falling 6% in a single session.

The point here isn’t to admonish someone for being so wrong, in such a short period of time. There is a comedic aspect to his wrongness. More to the point: Jim was telling people to sell their NYC real estate back in 2009, in exchange for a fucking farm, since he was and still is bullish on commodities. A once legendary investor, indeed. But now he’s a fucking clown and should be masqueraded around Wall Street with big white shoes and a styrofoam button nose.

Circuit breakers kicked in after the Shanghai got decimated, losing 7.3% in a few minutes of frantic trade. Government officials shut the whole kit and kaboodle down, then threw pies in each other’s faces.

“The yuan’s depreciation has exceeded investors’ expectations,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Investors are getting spooked by the declines, which will spur capital outflows.”

Under the mechanism which became effective Monday, a move of 5 percent in the CSI 300 triggers a 15-minute halt for stocks, options and index futures, while a move of 7 percent close the market for the rest of the day. The CSI 300 of companies listed in Shanghai and Shenzhen fell as much as 7.2 percent before trading was suspended.

Related: Hong Kong is down over 600, or 3%, the NIKKEI is off by 1.2% and S&P futures are off by 21. Crude is off by 2%. The reasons behind the sell off dwarf in comparison to the animal spirits that have seized control of the emotions of investors. Sellers will continue to sell until exhausted. At which point, the market will bottom and we’ll be throwing balls of cocaine at one another again.

Crazy old T. Boone Pickens, who is getting the stuffing kicked out of him in his oil investments, went on Mad Money tonight to exclaim that oil was “close to a bottom” and that “it’ll be back to $70-75 by year end.”

The fuck?

I am sure there were plenty of smart, formerly successful, investors who said stocks would race all the way back–in the winter of 1929.

Oil is dead and isn’t coming back anytime soon.

It isn’t even panic anymore. Investors are resigned to the idea that the whole ball of wax will go up in flames. Double digit losses in the basic resource space, across the board. As a group, oil stocks fell more than 6% today–as WTI and Brent fell 6% for the session–an amazing achievement onto itself.

More important than the equity picture is the state of the oil and gas credit markets. Companies like CHK and UPL are done, toast. However, there are other names that are starting to look like–they too–might soon succumb to the pressures of the market. Here are some oil and gas stocks to keep your eyes on, as the “next shoes to drop”, so to say.

(stock, debt/eq level, amount of debt)

VNR, 4.8x, $1.9 billion
DNR, 4.8x, $3.3 billion
EPE, 4.3x, $4.9 billion
TRGP,4.1x, $6.1 billion
WLL, 2.8x, $5.2 billion

Big Game problems

PBR, 4.7x, $127 billion
VALE, 2x, $32 billion
ETP, 1.6x, $32 billion
WMB, 1.2x, $23 billion
MT, 2.7x, $20 billion
LNG, 1.8x, $16 billion
RIG, 2x, $8.7 billion

On the bright side, both JNK and HYG are flat on the day.