You Won’t Believe Which Sector is Bucking the Trend Today

You’ve got to be fucking kidding me. It’s like the market has an author and his name is Stephen King, the horror novel guy. If you told me a few weeks ago that stocks would knife lower by 200+ and biotech would be up, I’d think you were nuts. That’s exactly what’s transpiring today, the lowest probability trade is the imperial one. This is Murphy’s law 101: whatever could go wrong, will go wrong.

How does one prepare for a series of never-ending black swan events, low probability strategies that randomly changes directions for the ultimate “fuck you market”?

You don’t. Trading this mess requires space magic, Goldman Sachs branded crystal balls. If you’ve relegated your investments for long term holds, then this is simply vaudeville for you– a good, wretched show.

Eighty percent of stocks are lower today. What else more is there to say? I knew when I saw SHAK reverse Friday’s gains that all would be lost. It’s not so much that SHAK controls the world, in that, SHAK is a litmus test for risk. Despite a multitude of reasons to buy stocks, people are still panicked out over the specter of higher interest rates.

We can go through the motions and discuss how fucking idiotic the Fed is for wanting to raise rates, just so they could lower them later–“when they really need to.” But this whole cat and mouse game with the shorts is quixotic. There isn’t a debate here, or a back and forth about who’s winning.

Look, if you haven’t been long FANG (Facebook, Amazon, Netflix, Google), or something similar to them, you’ve been shining shoes for the past year, a giant sucker in a sea of suckers.

That’s the bad news.

The good news is Option Addict has caved into popular demand and will be doing a clinic for those who missed the iBC Conference. It will last for several days, one hour per day, touching on all of the salient points that he made then with some updates to reflect what the market has done since then. This is a great opportunity for those who couldn’t come to the event. Don’t miss it.

Goldman is out with a research note, of the crystal ball varietal–predicting US corporations will spend upwards of $2 trillion next year. They even bothered to tell us exactly how it might play out.

BEHOLD.

1. Capital expenditure, research and development
Goldman is calling for $650 billion in capex and $256 billion in R&D spending, reflecting growth of 1 percent and 5 percent respectively. The firm points out that the energy sector accounts for 30 percent of S&P 500 capex, which means “lower for longer” oil prices are weighing on capital spending. “Our forecast of a roughly $50 per barrel Brent crude price in 2016 and recently slashed spending budgets by both Chevron and Exxon suggest a further decline of 20 percent in energy capex during 2016,” the team says in the note. R&D is a different story, however, with energy only accounting for 2 percent of total S&P 500 R&D spending.

2. Mergers and acquisitions
After a blockbuster 2015, Goldman expects cash M&A spending to come in at $300 billion in 2016, that’s an 8 percent increase but still lower than previous growth rates. “The pace of growth in S&P 500 cash M&A spending will decelerate in 2016 relative to the 50 percent surge experienced in 2015. Although two months of the year still remain, cash M&A has totaled $191 billion year-to-date, higher than the 2014 full-year total of $185 billion. Healthcare accounted for almost 50 percent of cash deal activity this year. We expect cash M&A during the second half will decelerate considerably relative to activity in the first half,” Kostin and team say.

3. Buybacks, buybacks and more buybacks
Goldman says companies will spend $608 billion on buybacks in 2016 even in the face of increasing valuations. “Despite weak activity during the first half of 2015, buyback activity will remain robust. Following 9 percent growth in 2014 and an estimated 10 percent growth in 2015, we expect S&P 500 gross buybacks will rise by another 7 percent to $608 billion in 2016. More than 80 percent of S&P 500 firms engage in share repurchases, roughly double the number of firms buying back stock 20 years ago.”

4. Dividends for everyone
Led by financials and tech, Goldman expects dividends to increase 7 percent to $432 billion. “Consensus forecasts imply that the financials sector will grow dividends by 10 percent in 2016, the highest growth rate of any sector, while energy dividends are expected to come under pressure. Slowing global growth has weighed on long-term dividend prospects,” the note says.
Goldman has some recommendations for investors seeking to capitalize on its spending predictions. Even though the bank has vocally opposed hefty buybacks, the analysts recommend investors buy firms that have high total cash returns relative to those investing in growth, as the former group is typically rewarded by markets.

There’s no debating: US corporations are flush with cash and have no idea how to spend it. Typically, they cavort on the golf course and smoke cigars with their mates, then order their underlings to buy back billions of dollars in share repurchases, whilst “cutting the fat” by firing people and reducing “overhead”.

Good shit.

Without question, House Saud’s deliberate plans to break the backs of non-OPEC producting nations, specifically the U.S. and its shale oil, is working.

The oil and gas industry has cut $200 billion from investments this year as low prices discourage new projects, leading to cuts in crude supplies equal to half the daily output of Saudi Arabia, according to the kingdom’s Prince Abdul Aziz bin Salman.

Nearly 5 million barrels a day of projects have been deferred or cancelled, Bin Salman, who is also vice oil minister for Saudi Arabia, said in prepared remarks set to be delivered to energy ministers meeting in Doha Monday. Saudi Arabia pumped 10.38 million barrels a day in October, according to data compiled by Bloomberg.

Oil prices have dropped 42 percent in the past year as Saudi Arabia led the Organization of Petroleum Exporting Countries in maintaining production in the face of a global glut rather than make way for booming U.S. output. Supply from outside the 12-member group will start to decline next year, after oil prices near $150 a barrel in 2008 proved unsustainable, Bin Salman said, according to the prepared remarks.

Saudi Commitment

“A prolonged period of low oil prices is also unsustainable, as it will induce large investment cuts and reduce the resilience of the oil industry, undermining the future security of supply and setting the scene for another sharp price rise,” Bin Salman said in the remarks. “As a responsible and reliable producer with long-term horizon, the kingdom is committed to continue to invest in its oil and gas sector, despite the drop in the oil price.”

In the meantime, our big oil conglomerates will buy up distressed assets, while the chaff simply go away. Jobs will be lost, investments ruined. In the end, Saudi Arabia will be left standing, with our military by their side ready to protect their fields from danger, the same fields that caused pink slips to be doled out, generously, in the Bakken Shale.

Happy Monday.

I am not dismissive of this news, because big oil likes to buy quality distressed assets when oil is cheap. They’ll let the offal flush down the toilet; then buy their assets in liquidation. But companies like Apache have staying power, despite the fact they’ve been shedding billions in losses over the past year.

The Houston-based company rejected the initial offer and is working with financial adviser Goldman Sachs Group Inc. on defense, said the people, who asked not to be identified because deliberations are private. The potential buyer, who couldn’t immediately be identified, sent a letter to Apache in the past few weeks and it’s unclear whether talks will resume, one of the people said.

APA’s market cap is $18 billion, whose shares have fallen over 35% over the past year. Other stocks that might move in sympathy, if at all, include DVN and PXD.

APA is up 12% in pre-market trade.

I recall about a decade ago, ‘clean coal’ was all the rage, as men with the black lung shoveled their way onto the CNBC to dicuss their revolutionary “green” coal that was going to change the world. Now we can see, all of that shit was a lie.

Global use of the most polluting fuel fell 2.3 percent to 4.6 percent in the first nine months of 2015 from the same period last year, according to a report released Monday by the environmental group Greenpeace. That’s a decline of as much as 180 million tons of standard coal, 40 million tons more than Japan used in the same period.

“These trends show that the so-called global coal boom in the first decade of the 21st century was a mirage,” said Lauri Myllyvirta, Greenpeace’s coal and energy campaigner.

China Declining

In China, responsible for about half of global coal demand, use in the power sector fell more than 4 percent in the first three quarters and imports declined 31 percent, according to the report. Since the end of 2013, the country’s electricity consumption growth has largely been covered by new renewable energy plants.

“The coal industry likes to point to China adding a new coal-fired power plant every week as evidence that coal demand will pick up in the future, but the reality on the ground is rather different,” according to the report. “Capacity utilization of the plants has been plummeting. China is now adding one idle coal-fired power plant per week.”

U.S. Electricity

The share of coal used to generate electricity in the U.S. will fall to 36 percent this year from 50 percent a decade ago. More than 200 coal-fired power plants, with total capacity of 83 gigawatts, have been scheduled for retirement, including 13 gigawatts expected to retire this year.

Coal consumption in the 28-nation European Union was flat in the first nine months, after declining a record 6.5 percent in 2014, according to Greenpeace.

In India, domestic coal production has been on the rise, with sales by Coal India increasing 7 percent in the first nine months, and consumption increasing about 5 percent. India’s efforts to promote renewable energy is also eating into demand for coal, and stockpiles in the country have increased sharply.

“Coal is in terminal decline, and those countries investing in coal for export markets are making reckless decisions,” Myllyvirta said.

With ACI on the verge of bankruptcy and BTU highly distressed, I say “good riddance” to this arcane industry, one that selfishly enslaves the morons from W. Virginia and stymies human innovation. These coal men, these relics from antiquity, should all perish under the fires of their own making.

The last thing that I care about is saving the world from global warming. Fuck the planet and everyone on it. However, I am sick and tired of seeing coal mines and people go into them. On the teevee, we get to see Iron Man and his kickass energy sources, revolutionary stuff that powers robots to destroy villains. Once I turn off the teevee, I see my fucking utility bill that derives from the usage of Victorian era technology.

What’s up with that?

Pray pardon as I get my calash and horses ready to deliver bankruptcy notices to all of the luddite coal men in the Appalachia.

Many years ago, Goldman Ball Sachs coined the acronym BRIC, as a cool and new way to promote wanton investment into the world’s shittiest markets: Brazil (I spell it with a Z, fuckers), Russia, India, and China. They had the media sucking their dicks because of it, with James Cramer touting BRIC almost every night on his clown show, featured on CNBC.

Well, all bad ideas, eventually, die. And so does the BRIC’s of shit. Goldman is merging their BRIC fund with their emerging market fund, effectively shutting it, the fuck, down.

Fourteen years after former Goldman Sachs economist Jim O’Neill coined the acronym that ushered in an unprecedented investment boom, the biggest emerging markets are now sputtering. Russia and Brazil have fallen into recessions. China, long an engine of the world’s growth, is poised for its weakest expansion since 1990.

The downfall of the BRIC fund, which had lost 88 percent of its assets since a 2010 peak, also underscores how the strategy of bundling disparate countries into a single investment theme is losing its appeal among investors.

“The promise of BRIC’s rapid and sustainable growth has been challenged very much for the last five years or so,” said Jorge Mariscal, the chief investment officer of emerging markets at UBS Wealth Management, which oversees about $1 trillion. “The BRIC concept was popular. But nothing is eternal.”

What does it all mean? Well, for one it means the Wall Street marketing apparatus is no longer actively promoting the investment in BRIC, because they’ve lost their dirty fucking shirts in it and have abandoned their BRIC profit centres. Also, it’s an acknowledgement of something almost everyone already knew: the BRIC nations are scandalous bastards, undeserving of hard western currency.

Lastly, it might mean the bottom is in for BRIC, since despondency usually correlates with overly depressed prices. Bear in mind, sometimes prices are down for a reason and cheap prices could always get cheaper.

About 4 years ago I became obsessed with classical music. Many of my long term readers probably noticed an uptick of classical music pieces being used here, references to certain composers and orchestras. When I get interested in something, anything, I tend to overdo it and get immersed in it.

At any rate, I discovered Philip Glass’s music and was immediately sold. If you’re listening to Glass, you either think he’s a complete moron, or a genius.

This documentary about him is more than just the music. It highlights his struggles, the journey from NYC taxi cab driver to a world renowned composer.

I enjoyed it a great deal and I hope you do too.

We were supposed to close down 1,000 points; but the market traded up a little.

It was a fucked week for commodities, REITs, utilities and good for banks, hospitals and semis. It’s rather fitting to see the best sector (REITs) and the safest (UTES) get ravaged this week, as the destructive forces of this insidious tape moves from one area of the market to the next–leveling everything in its wake.

Social media had a good week too, buoyed by AWAY and FB.

My SHAK position disappointed me today, closed down a point. I honestly believed those numbers warranted a much higher price today. You get what you get and you don’t bitch about the outcome. Some of you need to good old fashioned Irish discipline.

I was flat for the day, but up more than 10% since last month’s lows. My largest position is COST, by a factor of 2, followed by SHAK, CNC, PAH, AAPL and JAZZ.

For those of you on the fence about joining Exodus, just know that my portfolio is listed there with real time alerts for my buys/sales. My brain is superior to everyone that you follow on Twitter and talk to in real life. iBankCoin is an imperial power amidst a sea of rabble rousing catamites. See to your sins, repent, and join us in our never ending quest to complete the Orbital Space Cannon (OSC), which will be used for offensive purposes only.

UPDATE: Like our Facebook page, else feel my wrath.

I don’t even know what to say anymore. I guess higher rates will make CHK go away, finally, and pave the way for a better CHK. And, higher rates will help my mother save for retirement, since she hates stocks and loves CDs. Aside from that, raising rates is like sticking your face into the blades of a blender, on purpose. Sure, you’ll come out alive and in one piece; but you’ll be ugly as fuck.

Investors are suffering through the worst commodity collapse in a generation. Bulls can blame the cooling economy in China, the world’s largest consumer of metals, grains and energy. The nation’s slowest pace of the growth in two decades is stamping out demand and leaving the world oversupplied with everything from aluminum to wheat. The prospect that U.S. borrowing costs will rise for the first time nine years is compounding concern that raw-material users will slow or abandon plans for expansion, eroding consumption.

“It’s all about the jobs report and the outlook for the Fed liftoff,” James Cordier, founder of Optionsellers.com in Tampa, Florida, said in a telephone interview. “The quantitative easing in the U.S. that began almost a decade ago boosted commodities, mainly because of the weaker dollar. The infrastructure spending in China has changed dramatically. Both of those are now behind us.”

I guess you cannot have the market you want; but, instead, you get the market you are given.