End of Year Fuck You

Am I supposed to be grateful for this rally bestowed upon me? Fuck this rally. By the time I head to the bathroom and back, all of my stocks could be diving into the concrete again.

As I write this, the grifters in the market are taking it down again. After all, Yellen might say something dangerous tomorrow. This wonderful holiday joy that we’re experiencing now might turn into a nightmare and the market might go zero bid on us.

Listen, save yourselves the trouble. Call it a year and go drink yourself unconscious with egg nog. Hedge your clogged arteries with a good life insurance policy and call it a day.

PAH, SHAK, CNC, JAZZ and VRX: those are my largest positions. Will they go up? I hope so. Either way, I am going to begin a short basket for 2016 to profit from the calamity ahead.

Oh, you don’t think calamity awaits you?

Wait and see.

Seasons greetings.

Stocks are rallying nicely today, even oil. Just about eveything I own is up, except for YELP, naturally.

For the one millionth time over the past 4 years, Facebook is “testing” a site that will allow its users to review services.

The new Facebook site may threaten Yelp, Angie’s List Inc. and other search and customer-review websites because of the weight of friends’ opinions in making decisions about what products and local businesses people use. Facebook has long been testing related features, such as telling you which of your friends has checked in at a place you’re visiting, and what they said about it at the time.

“We’re in the early stages of testing a way for people to easily find more Pages for the services they’re interested in,” Mike Manning, a spokesman for Menlo Park, California-based Facebook, wrote in an e-mail.

MY position is so small, the loss is virtually meaningless to me. I am more interested in YELP from an emotional standpoint, as an avid user of the service. I find the company to be filled with clowns and its CEO to be a drifter incompetent. Nevertheless, the comopany is wrapping up 2015 with a bang, right in the faces of longs.

As for the rally at hand. Rallies happen, even during the worst tapes. I’ll reserve my dire outlook for when the selling begins again.

I am 97% long, zero shorts, with a dash of cash. I intend to press these gains as far as I can, then mix it up in 2016.

One more thing: Jeff Macke will be joining us in Exodus during the month of January. He will be in the notes and on the Exodus blog, mixing it up, offering advice. If you have any requests, as per what you want him to cover, let us know.

Additionally, he shit on Martin Shkreli’s Turing Pharmaceuticals. It’s ridiculous to compare Turing to the juggernaught that is Valeant.

It’d be like comparing your bullshit blog to the imperial domain of iBankCoin.

Watch.

J. “Fucking” Michael Pearson has VRX running hot this morning, up 13%.

This guy still wants to pay out dividends. On one hand, he’s saying the high cost producers are ‘hanging on by their fingernails’, or the skin on their cocks. On the other, he believes prices are laughably cheap down here, clowning those who believe that current trends will prevail and iron ore will hit $30.

“Most of that tonnage falls into the high-cost category. So at the moment, those people are hanging on by their fingernails,” he added. “But sooner or later the adjustment will take place.”

The spot iron ore price [.IO62-CNI=SI] fell to its lowest since at least 2008 at $37 (£24.4) a tonne last week amid shrinking demand for the steel-making ingredient in major consumer China.

Rio as the world’s lowest cost producer is still profitable even as prices have slumped.

When asked if prices could slide as low as $30 a tonne, Walsh said it would not be able to remain there long due to the large number of mines that would shut down.

“It’s not sustainable. It is fantasy land at that level.”

Do you know what’s ‘fantasy land’, mate? The fact that you still pay a dividend or think the China boom is simply taking a breather. Also, this is funny too. Your fucking stock chart.

Valeant pulled a rabbit out from its own ass, striking a deal with WAG for their overpriced meds. This is fantastic news for long, just in time for KRAMPUS. If you’re short the stock and ponder over your fate, just know, you are going to die today.

Valeant will cut prices by 10 percent for branded dermatology and ophthalmology products distributed by Walgreens retail pharmacies and plans to extend the model to independent retail pharmacies, the companies said Tuesday in a statement. The deal, which spans 20 years and more than 8,000 U.S. Walgreens pharmacies, starts in the first quarter and initially will cover medicines including the toenail fungus drug Jublia, acne products Solodyn and Retin-A Micro and eye drop Alrex. It will also cover Valeant’s over-the-counter products.

The drugmaker, which has come under fire for raising the prices of old medicines, also said it agreed with Walgreens to distribute more than 30 branded products at “generic prices,” reducing prices from 5 to 95 percent. Those reductions, specifically for drugs that have generic competition, are expected to take effect in the second half of next year, while the 10 percent cuts will be implemented over the next six to nine months, Valeant and Walgreens said.

“We have listened to what the marketplace is saying and we’ve taken positive steps to respond,” Valeant Chief Executive J. Michael Pearson said in the statement. “Our goal is to create a system that allows prescription medications to be dispensed and insurance claims adjudicated in an efficient manner while allowing physicians to focus their efforts on what matters most: patient care.”

Fucking toenail fungus drugs? Really? Is that what I’m invested in here? Nevertheless, the stock should scream higher today, as William Albert Ackman straps in and straps onto the short sellers who held onto this piece of shit stock one day too long.

I run an active screen thaat alerts me when a basic resource equity passes the 5x debt/eq threshold. It’s sort of an arbitrary number, but I like it. I view 5x debt/eq as a level where the debt load begins to get serious, the other side of the mountain if you will. Once it gets to 10x, rest assured, reorg is right around the corner.

As of tonight, the distressed debt that I follow in Exodus is at a new high of $291 billion. Everyone is yapping about Third Avenue and now questioning the high yield ETF space.

What do you think they’re buying?

They’re buying the debt, more or less, of the companies that I am alerting you to, CHK being the poster child.

In 2007, the sub prime debt was supposed to be a very small piece of the overall picture, something to dismiss and not worry over. Then, all of the investment grade debt turned to shit and we had ourselves an apocalypse not seen since 1929.

So, we’re all concerned over this small number of $291 billion. But it’s growing daily, with each downtick in crude and equity prices. Behind that 291 is another $1.8 trillion.

How much of that $1.8 trillion in oil and gas debt becomes high yield depends upon the underlying commodity: crude oil. Just like the value of homes dictated the condition of the debt that ravaged the world in 2008, the price of crude is going to do the same to us now.

ZIRP provided the world with excess liquidity. Over the past 10 years, oil and gas projects were financed without question and now the chickens have come home to roost.

This is 2007. The oil and gas burden is the housing debacle. We will enter a period of flux, during 2016, as the price of crude defies reason–down to $30, then $25, then $20, then $15.

Pray tell me, how much of that $1.8t will be considered “high yield” when crude is sucking dicks at $15?

That’s what we’re up against.

Good evening (extra Count Dracula).

You don’t say? This is especially suprising come out from Chinadaily.com. You’d think they’d refrain from casting aspersions on the great Chinese command economy, fearing the ever efficient mobile execution vans. But, no, on this day, 11 days prior to KRAMPUS, the admit to wanton fraud, manipulation, and gross misconduct that is sure to get them a medal of “honor amongst citzenry” in the ancient walled country of the orient.

Several local officials in China’s Northeast region sought to explain dramatic economic drops in their areas by admitting they had faked economic data in the past few years to show high growth when the real numbers were much lower, Xinhua News Agency reported on Friday.

“If the past data had not been inflated, the current growth figures would not show such a precipitous fall,” one official was quoted as saying.

The report cited several officials in the region who acknowledged they had significantly overstated data ranging from fiscal revenue and household income to GDP.

Three years ago Liaoning province’s GDP growth was reported at 9.5 percent, but its current figure?over the first three quarters of this year?is just 2.7 percent. Jilin’s growth was reported at 12 percent three years ago, but its current rate is 6.3 percent in the same period.

The revelation about the inflated figures came as the GDP growth of the three Northeast provinces ranked the lowest nationwide.

Guan Yingmin, an official in Heilongjiang province, said local investment figures were inflated by at least 20 percent, which translates to nearly 100 billion yuan ($15.7 billion).

If the local financial reports were true, some single counties’ GDP would have surpassed Hong Kong. An earlier audit by the National Audit Office found one county in Liaoning that reported annual fiscal revenues 127 percent higher than the actual number.

A staff member in the Jilin provincial finance department, who asked not to be identified, told China Daily that in past years, local officials competed each other to lure external investment projects. They reported the promised investment value, whether it had been achieved or not, as the investment figure.

I hope you can appreciate the gravity of this publication and know that everything we suspected out of China is true: lies and corruption, lack of growth, pure fuckery.

Dr. Copper and oil foretold this story. Now let’s see how it plays out.

Interesting stats for you market lovers out there, courtesy of Exodus. When sifting through the market and applying a minimum daily trading volume of 500k, the median loss for all stocks this year is 12.45%. That’s significantly more than the break evenish the broader indices are showing now, no?

Check this out. Are you lads familiar beta? Essentially, it’s a measure of volatility. When a stock has a beta of 1, it should move with the market. A beta of 2, theoretically, should move twice the market. Investment planners usually incorporate beta to asses risk in a portfolio.

When I apply a beta of 2 to my screen, the median loss skyrockets to 43.5%. That’s way more than -12.45%. That’s an outrageous loss.

When I apply a beta range of 0.5 to 1, the loss lessens to just 3.7%.

Naturally, I am stripping out all important revenue and earnings power statistics that truly guide stocks higher or lower. This exercise is merely to paint a picture of how risk averse the market has been in 2015 and to shut the pie holes of indexers who query as to the ferocity of this tape.

Get this, stocks with market caps under $1 billion are down a median of 49% this year. And that strips out low volume crap, by inserting a volume filter of 500k per day. Here, take a look.

Conversely, stocks with caps above $1 billion are off by just 7%. When we apply a beta filter under 1, the loss lessens to just 2%.

Boys and girls,

The KRAMPUS has been defeated. We’ve bear’d witness to yet another spectacular bottom in the markets. From hereon forth, equity prices will balloon to absurd valuations. The Federal Reserve will enact surprise QE on Wednesday, and the bandits, who run around cutting heads off in the middle east, will go chill and watch some NFLX.

I stand before you a changed man (no homo). Just this morning, I felt we were in for very dire straights. I read stories of panic and mayhem, predictions of the grandest crashes ever to come. Yet, at the close of trade today, the market was a winner. Please ignore the fact that FCX closed down another 6% and most commodity stocks are barreling, headlong, towards empty swimming pools lined with land mines.

‘Tis the X-mas season, a time of year to mock christianity and praise lesser religions for their taste in abject violence. Also, ’tis the time of year to buy lots of presents and line the old plastic tree with lights and baubles made in China. Also, we should expect joyous stock exchanges, filled with cheerful men, clad in X-mas attire.

In all seriousness, going from +150 in futs to negative 50 NASDAQS on the open, to a positive close is insane. And, it’s also uncharacteristic of December. I’d love to say we’ve bottomed for sure. However, current trends dictate otherwise.

I never trusted those Canadians from up north. I used to have a client who owned wells near Canada and he’d always bitch and moan about “that cheap Canadian crude” selling for 20% less than current market prices. Apparently, the Canadians are whoring themselves out for really cheap prices, almost like a terrorist regime.

Oil has slumped to levels last seen in the global financial crisis in 2009 amid a global supply glut. While the prices of benchmarks West Texas Intermediate and Brent hover in the $30s, they represent a category of crude — light and low in sulfur — that is more highly valued because it’s easier to refine. Some producers of thicker, blacker and more sulfurous varieties have suffered heavier losses and are already living in the $20s.

A blend of Mexican crude has plunged 73 percent in 18 months to $27.74 on Dec. 11, its lowest level since 2004, according to data compiled by Bloomberg. Venezuela is experiencing similar lows. Western Canada Select, which is heavy and sulfurous, has slumped 75 percent to $21.37, the least in almost eight years. Other varieties including Ecuador’s Oriente, Saudi Arabia’s Arab Heavy and Iraq’s Basrah Heavy were selling below $30, the data show.

Most places in the world, a lot of the producers they don’t really get the Brent price, and they don’t get the WTI price,” Torbjoern Kjus, an analyst at DNB ASA in Oslo, said by phone. “It’s really a dramatic situation that really cannot continue for a very long time for many producers.”

After reading stuff like this, and how ISIS is selling their crude for 1/4th of market prices, I get the sense that producers are panicking, willing to accept any price for their wares. In a liquidation, things need to get real messy before a bottom is put in. Perhaps that’s what we need then, a good old fashioned rate hike to stoke the flames of illiquidity, forcing ham and eggers to halt production and go away.