Update on My Book; Looking At $550 Billion in Oil and Gas Debt as a Threat

My cash is less than 5%. I am exposed to grande fuckery, largess into the pagan holiday’s.

Why am I doing this, when up 15% in an otherwise horrid tape?

I’m probably hoping for miracles.

COST remains my largest position by a factor of 2. PAH is number two, a bet on Ack, Ack Ack attack Ackman.

SHAK is my third largest holding and my biggest disappointment, down 13% from my basis.

CNC is number 4 and it fucked my face in today, all thanks and praise to UNH and the entire healthcare system in shambles.

After that is AAPL, JAZZ and PANW.

My risk profile is moderate. My appetite to leverage up and get bold is zero.

I believe, almost emphatically, we’re in a clandestine bear market, which will reveal itself as a true monster in 2016. As always, I am looking forward to being wrong about that and instead making money on the long side. I fear the greatest risk to the system is the oil and gas debt going bad.

According to Exodus, there is $550 billion in oil and gas debt, whose underlying stock’s debt/eq levels are greater than 2. For truly distressed debt/eq levels, above 5, the total debt is $103 billion. So you see how this can get ugly, fairly quickly, Should equity prices continue to languish and debt/eq levels rise, a half a trillion dollars in oil and gas debt can face rape the global economy into the debilitating inferno, often described to us by that sage Dante.

I spoke about this earlier this week and the timing was rather good, if I don’t say so myself.

CHK bonds are plunging to new lows and there is a problem here. As debt/eq levels rise, capital raises will become impossible.

Nine of the energy producer’s unsecured notes plummeted, some losing more than 12 cents on the dollar, as it was the most actively traded company in the junk-debt market. Credit-default swaps, which are used by investors to protect against defaults, rose to the highest ever.

The company’s $1.1 billion of unsecured notes due 2017 dropped 12.2 cents to 70.75 cents on the dollar at 11:48 a.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. One of its biggest bonds, the $1.5 billion of floating-rate notes due 2019, fell 7.4 cents to 43.6 cents at 11:48 a.m. in New York, the data show.

Five-year CDS contracts rose 5.5 percentage points to 53.5 percent upfront, according to S&P Capital IQ. Swaps are used to protect investors against losses on company debt, and the price increases along with doubt about a firm’s creditworthiness.

I know the lot of you would rather gossip about the evil Martin Shkreli all day long; but this is far more important. CHK’s $12 billion in debt is only the tip of the iceberg, of what could doom $100’s of billions in commodity related debt.

At some point, banks will need to start writing this stuff down. It will be interesting to see how the market responds to suchness (extra Mrs. Fly).

New SEC documents show a Marek Biestek, long term friend and partner of Marty, a 200,000 share position in KBIO.

As far as I can tell, he’s merely an investor trying to make a few bucks. If he sold out of KBIO today at around $15, good old Marek might’ve netted $2.8 million in profits. It’s good to have friends like Marty.

This gent has a Twitter account and he goes by MANIAC8480. How fitting.

But peep what he retweeted yesterday afternoon. He was mocking someone with his RT, already knowing that vey soon Marty’s SEC filing would be known and he’d be a rich man.

If this isn’t insider trading, I don’t know what is anymore.

Having experience in investing in shipping companies, I can tell you that, aside from China sucking wind, part of the problem with shipping rates are zombie ships. Because of cheap, available credit, there are scores of shipping companies out there, flooding the seven seas with tonnage capacity, forcing prices lower. These fuckers will work for crackers and spam.

The Baltic Dry Index, a measure of shipping rates for everything from coal to ore to grains, fell to 504 points on Thursday, the lowest data from the London-based Baltic Exchange going back to 1985. Among the causes of shipowners’ pain is slowing economic growth in China, which is translating into weakening demand for imported iron ore that’s used to make the steel.

“The main issue is the lack of demand for iron ore from China,” Eirik Haavaldsen, a shipping analyst at Pareto Securities AS in Oslo, said by phone. “This market is looking like a disaster and the rates are a reflection of that. It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

In this one instance, Federal Reserve hikes will help clear the market of weak balance sheets and permit this industry to begin to recover. Without mass bankrupticies and liquidations, the BDI will remain depressed.

I don’t even know what to think about this. I guess the Chinese are serious about cracking down on corruption, something we all know is a real issue. We see it in the share price of WYNN, as that company is unable to properly ruin lives and steal from families in Macau, forced to rely upon Vegas for its winnings.

HANGZHOU, Nov. 19 (Xinhua) — Police in east China’s Zhejiang Province have busted the country’s largest underground banking case, which involved transactions totalling 410 billion yuan (64 bln U.S. dollars), the Ministry of Public Security said Thursday.

A total of 100 suspects from eight gangs have been detained since the police launched the investigation in September last year.

Police say the gangs were loosely united by a ringleader, Zhao, who operated dozens of shell companies in Hong Kong. The companies were involved in foreign exchange transactions and money laundry.

In December 2014, arrest warrants were issued for 56 suspects and more than 3,000 bank accounts were frozen. It took almost a year for police to sort through the over 1.3 million suspicious transactions.

One gang boss, Yang, told Xinhua that many customers wanted to avoid China’s strict supervision on foreign exchange trade. The gang could earn over 50,000 yuan a day thanks to this.

China has faced an “increasingly arduous and complicated” problem with unapproved financial institutions often used for laundering money obtained from corruption, online gambling and fraud, the ministry said in September.

Police have shut down 37 such banks since August, according to the ministry.

Also on Thursday, police in south China’s Guangdong Province said they had busted 10 unapproved banks, responsible for 51.6 billion yuan in illegal transactions, earlier this month

Don’t act sanctimonious. This country went through the same rigors of growth in the 19th century. So the Chinese are 125 years behind us. One has to start somewhere.

I feel so bad for this poor little injured, piece of fucking shit unicorn. I hope it trades from 9 straight to zero. Apparently, this is a 56% discount to the last round of financing. DOWN ROUND FOR YOU (soup Nazi voice).

The steeper discount to $9 – a 42 percent drop from a year ago – suggests widespread uncertainty about the profitability of the payments industry and the future of Square itself, which has seen slowing revenue growth.

The weaker price set on Wednesday puts Square’s market capitalization at $2.9 billion, a far cry from the $6 billion valuation it had earned from private investors.

“The way that Square was valued as a private company is they were just going to disrupt everything and change payments,” said Andrew Chanin, chief executive officer of PureFunds, an exchange-traded fund that includes mobile payments companies. “And the reality is not that.”

Square has raised $243.5 million in its Wall Street debut, about $80 million less than expected.

What will @Jack do? If I were him, I’d fire myself from Square and go full retard into Twitter. Square is, essentially, doomed. Companies like PYPL will eat their lunch, make them regret ever coming public.

The world of Frederick Wilson is fracturing, ever so slowly.

Theese will not be margin calls, but Fed calls–meaning they’re due immediately. I suspect many brokers and individual investors will take hits on this. If the broker or client can’t cover the deficit to get back to zero, ultimately, the firm takes the hit.

Making the rounds is one trader asking for donations to cover his hit. Last night, I went over a scenario that I thought might play out today, and it happened. Take a look.

I feel for this guy.

I do recall a situation that I was in, circa 2000, when the dot coms collapsed. My partner and I had a client who went balls to the wall long, just before the crash. His account was heavily margined and his stocks fell so hard, so fast, it went to zero, AND MORE. I was very young and appalled by the sheer ferocity of the market. My partner executed one of the best sales calls I’ve ever heard, convincing the client to send in $250k, just to get back to zero. Otherwise, as dictated by the rules of the game, the hit would be ours to absorb. I had enough fucking problems of my own, than have to deal with that.

As for the unfortunate trader featured above: don’t beat yourself up over this. It was the Black Swan event to end all Black Swans. But know, these things happen from time to time.

Learn from the experience. Pick yourself up; and hopefully, get back in the game a smarter trader.

If you want to donate a few bucks, here is the fund me page.

Help poor Billy out, would you? Where is your pagan holiday spirit? Buy some PAH and VRX and tell your friends to send him some money to manage, so he can average down at this cheap levels.

Ackman’s $14.5 billion Pershing Square Capital Management paid roughly $186 per share for its 21.4 million shares of Valeant. The stock closed at $72.58 on Wednesday. Last year, the hedge fund was one of the industry’s best performers with a 40 percent gain.

It should be noted, Ack-attack netted 40% last year, is worth billions, and owns a $100 million apartment in NYC, totally vacated, just because he felt like buying it.

Having said that, I went in with Billy on this PAH. Thus far, my brains are all over the floor, next to his.

FML

This will be a very, very big deal, the biggest ever. Can you blame them? U.S. tax rates are onerous and our politicians are monumentally idiotic.

If true, this bid puts the shares at a 20-20% premium to yesterday’s closing price.

Pfizer Inc is in talks to acquire Allergan Plc for $370-$380 per share, according to a person familiar with the matter, valuing the potential deal at around $150 billion, the healthcare sector’s biggest.

Judging by the pinless hand grenade action in all china related commodities, dry bulk shipping rates, U.S. industrials who do business in China, for all intents and purposes, China is a major drag on worldwide swag.

In a word, we are swagless because China is filled with dickless, communist, liars.

Morgan Stanley tends to agree.

No economy over the past half century has expanded at 6 percent or more as its labor force shrank, according to Ruchir Sharma, the head of emerging markets for Morgan Stanley Investment Management. China, which must grow at least 6.5 percent a year to meet its goal of doubling 2010 gross domestic product by 2020, is more likely to expand between 4 percent and 5 percent as the country’s working-age population contracts, he said.

“Based on historical evidence, the probability that China can grow at 6 percent or more is essentially zero,” Sharma a long-time bear on Chinese stocks who made the Bloomberg Markets 50 Most Influential list this year, said in a phone interview from New York on Wednesday. He cited his own study of the growth path of 200 countries over the last 50 years and said it’s one reason he’s pessimistic on Chinese equities.

The Chinese need to get the dicks out of their ears, Jack Ma out of their wallets, and put some boots on the ground in Syria, start a war or “conflagration” somewhere like the US of A.

I am fairly certain China circles down the toilet bowl for good in 2016.