Watching Iron for Market Direction

The iron and steel sector is down 65% for the year. The Chinese, apparently, have ceased building ghost cities, gambling, eating, and also shopping. They do, however, still actively partake in accounting fraud and wanton pollution.

The iron sector embodies the hidden depression that has ravaged markets over the past two years. I’ve seen many of my friends check out of the business these past two years, after decades of service. The market is the great fortune creator and destroyer, depending on what side of the trade you’re on.

STLD, CRS, AKS are interesting, especially CRS.

A few years back CRS built a revolutionary plant that was designed to slash expenses and help them kill it. In other words, their expenses are likely a fraction of their competitors, which is why the share price is still in the $30’s.

As for the longevity of this rally: No idea. I am, however, wholly unimpressed.

This is actually a really good company, who sells software without a salesteam. They bootstrapped from a $10k credit card loan to a valuation that exceeds $3 billion, scaling via the web.

The company does about $319 million in revenues, is profitable, and super efficient.

This is truly an amazing success story, but I’m sure Wall Street will get carried away and make a mockery of itself with an absurd opening for TEAM today.

There is a certain level of seriousness oddly absent from the white house.

It looks like the President and his wife very much enjoy the splendour of the oval office.

Sandridge, as well as many other US oil producers, are what industry insiders call ‘zombie companies.’ They’re completely broke, unable to fund operations, only able to pay off the interest on debt.

Well, things are SD have gotten so real, the company has rescinded a former luxury bestowed upon its employees: free soda pop in the break room.

Squeezed, companies are taking a knife to operations. Goodrich reported in its third-quarter filing that it had frozen salaries and laid off 30 percent of its workers.

To raise cash, SandRidge put its 30-story tower up for sale in May, but has yet to find a buyer. In April, it laid off at least 130 employees, or 20 percent of its workers based there, records show.

To pinch pennies, SandRidge has eliminated free sodas from break rooms, one employee said.

Some companies that have halted nearly all drilling and fracking are now warning in regulatory filings their output could drop, which could make cash even tighter and hasten an expected decline in U.S. crude output.

Shares of SD have been reduced to drill bits this year, down to .25 cents.

Everyone’s favorite ice cube marinator sums up 2015.

This is actual Armageddon of the fracking industry. I am not exaggerating when I say CHK is destined for a pineapple coffin, sooner rather than later.

The accounting rules that were manipulated by a certain AUBREY McCLENDON are about to boomarang onto the faces of the gluttonous fracking industry, like a motherfucker in a factory filled with nothing but mothers.

Across the American shale patch, companies are being forced to square their reported oil reserves with hard economic reality. After lobbying for rules that let them claim their vast underground potential at the start of the boom, they must now acknowledge what their investors already know: many prospective wells would lose money with oil hovering below $40 a barrel.

Companies such as Chesapeake, founded by fracking pioneer Aubrey McClendon, pushed the Securities and Exchange Commission for an accounting change in 2009 that made it easier to claim reserves from wells that wouldn’t be drilled for years. Inventories almost doubled and investors poured money into the shale boom, enticed by near-bottomless prospects.

But the rule has a catch. It requires that the undrilled wells be profitable at a price determined by an SEC formula, and they must be drilled within five years.

Time is up, prices are down, and the rule is about to wipe out billions of barrels of shale drillers’ reserves. The reckoning is coming in the next few months, when the companies report 2015 figures.

“There was too much optimism built into their forecasts,” said David Hughes, a fellow at the Post Carbon Institute and formerly a scientist with the Geological Survey of Canada. “It was a great game while it lasted.”

The rule change will cut Chesapeake’s inventory by 45 percent, regulatory filings show. Chesapeake’s additional discoveries and expansions will offset some of its revisions, the company said in a third-quarter regulatory filing. Gordon Pennoyer, a spokesman for Oklahoma City-based Chesapeake, declined to comment further.

Other examples include Denver-based Bill Barrett Corp., which will lose as much as 40 percent, and Oasis Petroleum Inc., based in Houston, which will erase 33 percent, according to filings. Larry Busnardo, a Bill Barrett spokesman, declined to comment. Richard Robuck of Oasis didn’t respond to questions.

Drillers met the rule’s profitability provision last year due to a quirk in the SEC’s pricing formula. The agency’s yardstick is an average of the prices on the first day of each month during the calendar year. The price came to $95 a barrel at the end of 2014, even though oil was trading below $50 by the time the companies reported reserves in February and March. The 2015 average, including the Dec. 1 price, comes out to $51 a barrel.

“They got such a break with the price for last year, but it sure as hell isn’t going to happen this year,” said Ed Hirs, a managing director at Houston-based Hillhouse Resources, an independent energy company.

Writedowns, which are reported on a quarterly basis, point to sizable revisions. The 61 companies in the Bloomberg North American Independent Explorers and Producers index have announced impairments of $143.8 billion in the past year.

 

This is the end game that the House of  Saud have been clamoring for, the complete and utter dissolution of the American oil and gas space. From hereonforth, American leaders will have to bow down and klss the scepter of our Saudi King. Our claims of energy independence were laughably homosexual in the face of cock shrinking declines. Producers puffed out their fat stomachs and walked around Houston with ridiculous hats, with production costs of $80 per barrel. Now that oil is $38ish, those same men are in the streets completely naked, and eating food out from the corner trash can.

The write downs are coming. There will be blood.

Who knows what’s going on here? I hope to dear heavens you people aren’t believing anything what the people are saying on the teevee? Those people are designed to lose you money. They are genetically dispositioned to crush the Joe Blow investor, bedraggled microbes, beer swilling, bodega loitering, CATAMITES!

Most of my stocks were up today. But I’m most enthused about my VRX position, mostly because I have a new nemesis on Twitter who somehow believes that I am an Ackman shill. I war born to rain fire onto the heads of Pershing Square. Read my archives, mate; I’m hardly a fan.

Moving on, I’m interested to see how the year winds up. Will we  descend into anarchy amidst half goat, half human species attacking the NYSE in a physically demeaning manner? Or, will Bill Ackman and his friends ramp shit up in a light volume charade, clown raping trapped short sellers in the process–completely bankrupting them for the New Year’s?

Only time will tell. In the meantime, I boldly ask that you spread our brand of financial literacy across your landscapes. Raise our flags over your homes and attack our enemies with vigor. They are everywhere, literally.

Don’t you love end of year Federal Reserve rates hikes into a recession? This story is making the rounds today. iBC’s own, “The Devil” , called me on this today, praising the track record of Marko Kolanovic, suggesting we could be fucking doomed if the Fed hikes rates the wrong way.

A report from JPMorgan’s global quantitative and derivatives team, led by Marko Kolanovic, emphasizes the necessity of not roiling the markets. Extenuating circumstances in the options market could provoke a wave of selling pressure in equities precisely when the Fed seeks to ease markets into a new rate regime, Kolanovic warned.

“This important event falls at a peculiar time–less than 48 hours before the largest option expiry in many years,” wrote Kolanovic, noting that $1.1 trillion worth of Standard & Poor’s 500-stock index options–of which $670 billion are puts–will expire on Dec. 18. Roughly one-third of the puts poised to expire are at or near the money, with strike prices from 1,900 to 2,050.

“Clients are net long these puts and will likely hold onto them through the event and until expiry,” the strategist wrote. “At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market.

The Fed shouldn’t be hiking rates in the first place. But this adds a brand new dimesion to the level of fuckery that is likely to take place next week. I’d love to see a zero bid market and the lads over at Zerohedge celebrating over the coffins of the American investor. But that never seems to happen.

Neverthless, December is usually a quiet month. The only caveat to that thinking is the fucking Fed is going to hike into a recession.

I spoke too soon. This fucker isn’t done going lower. However, now that I’ve said that, we’re liable to rally.

Market has reversed nearly 200 points in Dow wins. We’re now descending into the 5th ring of hell, fending off centaurs and blood sucking bats.

This has the feel of end of year tax loss selling, fuckery at its finest.

I gave you a heads up last night. Consider it a pagan X-mas present come early. Free trials are over, fucker. No more peeking under the X-Mas tree. Should I find you doing it again, I’ll give your head a 2 for 1 split.

Commodity related stocks are roaring today. Just yesterday I was combing over the spreadsheets of embattled oil names, hoping they’d go bust. Well, here we are today praising their virtue. Following a larger than expected drawdown in crude, reported by EIA, oil is off to the races.

Both FCX and KMI cut the divvy, a good thing. I called for this on Tuesday.

The world isn’t how you want it. We are facing an unprecedented decline in commodity demand, as China decelerates. The Jim Rogers commodity run has been over for years and will not be back any time soon. Nevertheless, even a dead body twitches at the morgue.

Even with this rally, I am unimpressed. Most of it is due to DOW-DD tie up, so don’t get too enthused.

It’s been a belittling year. Don’t let the internet make you feel like a fucking moron, even though, odds are, you might be just that. Surfing the web, you will find sociopaths taking pictures of themselves inside of luxury cars, outside luxury hotels, all thanks to stock market wins. The truth is, they’re nothing more than traveling salesmen, like a toaster salesmen circa 1953.

This is a hard tape, but we’ll get through it.