Seneca Capital Closing Down After Twenty Years of Service

Despite what the Sohn conference founder, Doug Hirsch, says, his hedge fund is closing down because of poor returns, not due to his busy scheduled mixed with his wine tasting classes.

“I am no longer able to continue making the commitment and sacrifices required to run outside capital,” Hirsch said in the Dec. 21 letter. “Despite negligible redemption requests and increasing market opportunities that are the result of a challenging year in event-driven investing, I cannot in good faith start next year with the dedication required to manage your capital.”

I am almost certain had Seneca risen by 20% this year, Hirsch would be praising his genius this pagan holiday season, luring investors into his $500 million bucket shop.

Seneca is down 6% for the year.

According to Hedge Fund Research Inc., more than 670 hedge funds closed in the first 9 months of 2015. Wait until the data comes crawling out from the corner offices after the New Year. It’s gonna be a doozy.

Take a shot every time he says “secular.”

Ari Wald, head of technical analysis, “executive director” at Oppenheimer, is calling for the mother of bull markets, which will last “for years to come.”

Clearly, his charts tell him that “The Facebooks”, “Amazons” and “Googles” of the world are winners and believes they will continue to win. But, if you take a step back, pal, he cites MSFT as a stock that is “just getting going (+60% over the past two years).”

It’s humorous to hear a technical analyst call for a secular bull market, not having the insight into core fundamentals and news flow. Apparently, everything is already baked into the fucking charts.

Nothing to see here. Carry on. Secular bull market on its way.

So we bitched and moaned about being dependent, even ‘addicted’ to foreign crude for decades. Then we did something about it by building our own empire of black gold, only to see it come crashing down into pieces within a few short years of having built it.

Now we’re seeing the ramification of building out an industry at historically high levels of pricing. There are ancillary victims, such the the steel industry.

Foreign steel coming into the U.S. dropped 36 percent in November from a year ago, according to U.S. Census Bureau data. That’s with domestic prices at the weakest in at least nine years and new taxes on products from six countries deemed to be unfairly priced. Yet U.S. mills have idled the most capacity since the financial crisis, operating at just 61 percent in the week ending Dec. 21.

Helping explain the capacity decline is a drop in demand for steel pipes and drill bits used in the energy industry after the price of oil plunged 66 percent in the past 18 months. Previously, sales of high-margin products to oil and gas companies had helped shield U.S. mills from sluggish growth in construction and other industries.

“I don’t think imports are the only problem,” domestic mills face, Timna Tanners, a New York-based analyst at Bank of America Corp., said in an interview Tuesday. “Nobody really expected oil to stay as low as it did as long as it has.”

Shares of X are down 69% for the year.

A very common characteristic of a weak market is low breadth during market rallies. When markets rise 200, you want to see 85 or 90% market breadth, not 70%.

Today’s 70% market participation tells me this market wants lower. We are in a low volume, end of year, garbage time for stocks, so don’t take your gains too seriously. What you should be doing is heading for the fucking hills, licking your wounds, preparing to hone your strategies for 2016.

There will be lots of pain to come over the next 12 trading months. You’d be wise to heed these warnings and quit your idiot approach to investing.

Time to batten down the hatches, lads.

I sold out of PAH and reduced the size of nearly all of my positions to raise cash that will be designated towards a totally different approach to this market during 2016.

Gone are the days when you could depend on the Fed to jolt markets higher. The paradigm has shifted and the central banks favor european equities. Since 2009, I speculated in the market with confidence, knowing stock prices would always be supported and dips would be bought. Over the past two years, extreme oversold conditions were supported; but the momentum that we’ve enjoyed in previous years was absent.

It is my belief that 2016 will represent more of the same, with some potential pitfalls in the mix that might pose as a significant problem for aggressive investors. Because of this belief, coupled with the untenable facts that the Exodus Market Intelligence Platform crushed 2015 with seamless ease, I’ve come to the realization that bold change is needed in my investment approach, one that relies upon my propietary strengths, withdrawing from non-systematic risk and attempting to avoid market risk whenever possible.

What the fuck am I talking about?

I’m selling shit and will be exclusively trading the oversold signals in Exodus.

During 2015, Exodus won 81% (21 out of 26) of the time in overall market oversold mean reversion trades. In a study recently done, an investor with 100k, allocating a tranche of 33k into each OS signal would’ve yielded a 19% return for the year. The holding period for this system is 10 trading days. Risk is mitigated by holding period. Maximum drawdown for the system was 4%, trading SPY. Those gains could’ve been much higher if trading leveraged ETFs or QQQ, naturally.

People have asked me for years “why bother with all of the market noise when you have something that works so great?”

The truth is, I enjoy the daily grind and like picking stocks. But I’m not having fun anymore, dealing with the emotional mine field of a market dealing with economic uncertainty. Therefore, going forward, Le Fly will exclusively trade the OS/OB signals from Exodus, using ETFs or in some cases individual stocks. Trading will become much more disciplined and regimented, with clear lines in the sand defined by holding periods. There will be times when trading will be non-existent, sometimes for months at a time. But it will all be for the better, especially for members of our hallowed halls.

Perfect. This is exactly what an economy saddled with $20t in debt needs, soaring borrowing rates.

“The universal phenomena of dealers cutting balance sheet at year-end is contributing factor and overall because the Fed is showing pretty good control over front-end rates,” said Aaron Kohli, a fixed-income strategist in New York for BMO Capital Markets, one of 22 primary dealers that trade with the Fed.

Now the Fed will have you believe higher rates is a result of a booming economy. Jobs are on the rise, profits are strong, and people are generally happy. Yellen and her ilk believe the market needs higher interest rates, in order to stem the tide of the overwhelming inflationary pressures that lurk in the shadows.

Where exactly is the inflation?

I’m not going to offer an opinion as to the borrowing costs going higher for a government that is reckless with its balance sheet and budget. These are merely the facts. Take it for what it’s worth.

It’s too late for most natural gas stocks. One could only hope for higher utility bills at this point in the post apocalyptic cycle of natural gas. But, don’t look now, natty is on one hell of a 2 week run.

Like I said in the beginning, for stocks it’s too late. They’re already circling the toilet bowl. But you can still play this, via some handy dandy (extra Blue’s clues) 3x leveraged to the hilt ETFs!

Take UGAZ, as a case in point.

Imagine you were Broadway Bill ‘Montauk’ Ackman, down in the gutters, around 20% for the year. You scratched your silver head, thinking of a way to escape a losers fate.

“I know what to do. I’ll sell everything and buy UGAZ!”

Had B. Albert Ackman done that, sold everything and placed a mere $17 billion into UGAZ, he’d be up 60% for the year right now, celebrating by bungi jumping off skyscrapers and telling junior employees that they’re worthless piece of shits.

UGAZ is up a mere 95% over the past two weeks. Santa has been generous to the natty lovers out there this holiday season of record warmth.

FML.

Ah, this is the market we’ve grown to truly hate, the sort that tosses mixed messages, small nuances and idiosyncrasies to keep you off kilter. One second you’re planning for end of times in a nuclear bomb shelter, the next you’re popping champagne corks, UNSOLICITED, into the faces of your wives.

Everything about this market is wrong, which is why Le Fly is making wholesale changes, not only to his portfolio, but the way he invests.

TIME HAS COME FOR WANTON CHANGE AND REVOLUTION.

Commodities is where it’s at, chump. Copper and oil are higher by 3%. The Wolf Kings in China are manipulating to their black heart’s maximum desire. And, my stocks are giving me an end of year boost. I have little to complain about, other than the fact that this market drives me fucking nuts.

One day, I will become insane, tossing manhole covers at the people passing by. Until then, I remain faithfully yours, The Blogger Wolf King, writing away, into the night, telling tales both tall and small, for all of the little people below.

If you want to suck on some soup, you invest the old fashioned way. However, in China, if you want to eat meat, you learn to manipulate stocks.

PREASE PAY ME ONE THOUSAND DORRARS FOR THIS RESSON.

“We need to dance with the wolves,” says Liu, the chief executive officer at Qingdao Langwang Investment Consulting Co., a producer of online video seminars for stock investors in China’s eastern Shandong province.

For a one-time payment of 6,800 yuan ($1,050), Liu’s firm provides a crash course on stock manipulators in China: how to anticipate their targets, how to spot their trades and — most importantly — how to profit by following in their tracks. The three-month class is one of at least 100 across the country that promise insight into Zhuang Jia, a local term for market manipulators that portrays them as holding the upper hand.

“If you want to make a quick buck from the stock market, you’d better look for stocks with manipulators,” explains Chen Yifeng, a 37-year-old accountant at a state-owned company in Shanghai who has about 100,000 yuan of his personal portfolio invested in local shares. “You just need to pull out faster than them.”

Of course, not all individual investors in China are chasing after manipulated stocks. Zhang Kai, a 27-year-old consultant at a financial firm in Beijing, sold his personal equity holdings in June in part because he thinks amateur traders will struggle to make much money in shares where Zhuang Jia are active.

“It’s possible for individual investors to enjoy some soup if they follow the Zhuang Jia, but they can never eat the meat in the end,” he said.

 

Changing investor attitudes will be difficult. While the CSRC says its public announcements on manipulation fines and investigations help educate investors on the dangers of Zhuang Jia, a search on online bookstore Dangdang.com returns more than 200 titles on how to find, follow and ride the coattails of stock-market manipulators.

 

At Langwang, the investment seminar firm whose name translates to “wolf king,” students learn to track rapid price and volume changes that deviate from the broader stock market. Those are tell-tale signs of manipulation, according to Liu, the firm’s CEO. He says the best way to piggy-back on the gains is by building a “trial” position with a stop-loss order designed to limit damage if the stock reverses. If it rallies at least 5 percent, Liu suggests adding to the position.

 

“Stocks backed by major players and manipulators tend to perform much stronger,” Liu said. “The regulatory crackdown will certainly have some impact, but market manipulation will continue. It’s inevitable.”

That’s some bullshit right there. For those of you looking for EM exposure, I strongly advise you to steer clear of these “wolf kings” and buy anything else instead. The Chinese government is trying to crack down on these lunatics, en masse, which is part of the reason why their economy is in the shitter. Look at what anti-corruption measures have done to Macau. It’s a delicate game to be played and I am almost certain the Chinese aren’t ready to play it with elegance.

The gloom and doom man from the gutters of the transsexual districts in Thailand is throwing mad shade at Fed chief, grandmother Yellen, suggesting we’re already in recession, equity prices are fucking doomed, and the world as we know it is about to end.

“Ten-year U.S. Treasuries are quite attractive because of my outlook for a weakening economy,” Faber, the publisher of the Gloom, Boom & Doom Report, said in an interview with Bloomberg on Monday. “I believe that we’re already entering a recession in the United States” and U.S. stocks will fall in 2016, he said.

Bear in mind, Marc Faber has been saying this ever since the day he started to speak Dutch, or whatever the fuck his native tongue is.