Poof! Your Money Is Gone

The market is descending back into the pits of fear and uncertainty. Iran’s oil minister thought the idea of a production freeze was laughable. His country just had economic sanctions lifted and they want to sell more oil.

I acquired a basket of doomsday valuables… QID, TLT, GLD, FXY, and canned tuna fish. Lots of tuna fish. 

Cheerios

Sold all my stocks, I’m not interested in owning them anymore.

Two days ago I made my first equity short sale of the year, Monster Energy (MNST). Citron Research helped validate a pre-existing suspicion that sugar water doesn’t deserve a +40X earnings multiple and all hope of doing well in China is exactly that, hope.

Over the past fews days I liquidated longs into whatever strength I could get. During my final liquidations this afternoon I started shorting the Nasdaq via leveraged inverse ETF, QID. Technology has many more LinkedIns on deck to blow.

I sincerely urge you to safeguard your essential retirement funds. No matter how hard you disagree with the underlying fundamentals, fighting the market isn’t worth it. Stocks will rationally or irrationally be sold down to absurd levels due to sheer panic and absurdity.

The scariest chart right now is the Nasdaq’s 20 year monthly chart. Excellent risk/reward, for the short side.

China may not be able to create a recession, but a stock market collapse sure can… and before you snicker “no it can’t lolz” in the comment section like a demented Stocktwit’s asshat… google what caused the great depression.

That’s all folks, all we need now is another rate hike.

America & friends were dealt a disadvantageous hand in the oil resource game. Our foes got the upper hand and we’ve fed their fat bellies ever since. But we aren’t utterly screwed… Innovation made it possible to sell resources that use to have no value. Leveraging this opportunity is essential in order to challenge our enemies in the energy markets.

The Saudi’s are scared of our ingenuity, and because their frivolous life-styles are completely dependent on the price of that thick black gooey shit under their feet they’re wiling to embrace economic warfare to defend it. They’ve successfully orchestrated lower oil prices to levels aimed at bankrupting our blossoming (and highly leveraged) industry.

To be honest, their strategy was ingenious, well timed, and caught everyone off guard. Kudos to the Kings of the desert & beheadings.

We must defend O&G for our national security. The industry has already moved the middle of our country into a recession. Luckily the east and west coasts are picking up the slack, growing at a steady 2-4% (perhaps benefiting a bit from lower oil)

We all should support a government equity investment into our own natural resources. The investment would immediately be label as a “bailout”, which the populous still believes was the wrong thing to do in 2008… this notion is fucking hilarious… Never mind that fact the public profited handsomely from bailing out the banks for a second and let me scare the hell out of you.

Here is an illustration of what would have happened without a bank bailout…

If the second congressional bailout vote failed… like the first one… the credit market would have frozen the next day.

Companies would be unable to access their credit facilities to make payroll. After realizing they are not getting paid, workers stop working.

A week later super markets run out of food. The food distribution network is shattered because truck drivers ran for the hills with shotguns in search of hidden caves.

Peanut butter and tuna fish become the most valuable items in north america. Goldbugs realize they’ve really just acquired a bunch of shiny rocks, roaming bands of pirates fight for control of areas rumored to still have tuna fish…

Either two things happen after that: cannibalism… or a Chinese invasion.

Ok, so now you know. Lets get back to this O&G bailout idea…

If the government properly conducted due diligence and defended only the best wells and reserves… meaning some companies should not get bailed out if their assets are garbage… regardless of political contributions (there will be scandals, I’m sure) tax payers would profit extremely well in 2-3 years. Oil will continue to have value until Americans, Germans, or some Asian country invents a better energy resource…. So if we just purchase our own assets at below market values we are just being savvy investors. Besides making money, a bailout of the Oil & Gas industry would take a recession completely off the table… GDP growth would rise to 4% and we’d enter into a golden age of wealth and prosperity.

If America really wanted to be nefarious…

Bail out O&G… OPEC gets tired of losing a fortune with low oil prices and cuts production… thinking it will raise prices… America one ups them and INCREASES production… catching OPEC by surprise and unprepared for their game of economic chicken lasting longer than calculated… America keeps production high and prices low until the middle east is in a deep economic recession… and we buy Dubai in foreclosure… Just an idea.

Follow me on twitter @GOODGREED

The recession propaganda machine was just switched off at CNBC headquarters.

Tomorrow you will hear about the new bull market… fueled by 7% Chinese GDP growth.

A massive short covering rally is underway in oil

The Nikkei just ripped 6%

Good night bears. Sleep tight.

I’ve been underwater and tapped out on my equity risk for the past few days. Friday I made a ballsy SPY trade, purchasing far out of the money weekly calls that expire Jan. 22nd.

With a 3 day weekend ahead I saw two scenarios on Tuesday:

1) Market gaps up, bears would be trapped and bulls chase.

2) Market gaps down and flushes out Tuesday or Wednesday.

For case #2 I placed bids on more of the same weekly calls GTC at absurd levels no one would think could get hit.

I only wanted to pay for two days of time premium because the move I am anticipating will be very quick and extreme.

Around noon I started getting filled… captured lottery ticket with strikes between $189 and $191… at prices below $.30.

The market was pricing in a 5-10% probability these contracts will go in the money.

I figured it was more like a 25% chance…

Needless to say I am swinging for a right tail payout.

I tweeted out these trades… follow me @GOODGREED

Update: The weeklies hit over 100% profit around 3:30p.m.

Held for the grand slam.

“Bitcoin the currency is going nowhere. There is nothing behind it, and if it was big the governments would stop it”

“The Blockchain is a technology that is very real. If it proves to be cheap and secure it will be adopted for a lot of things”

“Apple pay will be adopted more”

China, the world’s biggest concern is set to announce 7% GDP growth. On an absolute basis they grew more than the year before, and are still the world’s fastest growing major economy. Nonetheless, 7% growth will likely be spun as a negative…

WSJ: 

“Our GDP of year grew by around 7% or, in other words, nearly 7%,” Mr. Li told a gathering of foreign and Chinese delegates to the AIIB at a state guesthouse in Beijing. Mr. Li said given its large size, in absolute terms the Chinese economy grew by more in 2015 than the year before, and it is still one of the world’s fastest-growing major economies.

The economy is around $10 trillion, and China’s annual growth rate in 2014 was 7.3%. Mr. Li said China achieved “rather sufficient” employment in 2015, expanding by a wider margin than expected. China exceeded its target of creating 10 million urban jobs.

China’s economy has appeared to many economists and analysts to be decelerating faster than the government has acknowledged, weighed down by debt, excess industrial capacity and an overbuilt housing market. As official statistics have stayed buoyant, doubts have been raised about their reliability.

Recurring plummets in China’s stock markets and botched attempts to bolster them have further compounded questions about the government’s ability to manage the economy. Premier Li said China faced a difficult economic environment at home and abroad. “However, China is resilient,” he said. Its 900 million workforce, including some 150 million skilled professionals, will continue to help shift the economy, from “one built on natural resources to one built on human resources” in pursuit of a medium-high rate of growth, he added.

Progress is already being made in restructuring, he said, with services now accounting for half the economy and consumption contributing nearly 60% of economic growth. The economy has traditionally depended on investment and exports.

China’s actual impact on US economic growth is widely overblown. Being the second largest economy in the world its easy to see how this could be a misconception.

The impact of a Chinese economic slowdown will be minimal because we simply do not sell a lot of stuff to China.  

Only 7.6% of U.S. exports go to China.

Total US Exports ($B): $1,620,532

Top Buyers:

1) Canada $312,421

2) European Union: $276,142

3) Mexico $240,249

4) China $123,676

Obviously this doesn’t make much sense, China is 10X the size of Canada yet they buy 3X more stuff than China. Certainly the Chinese could afford more of our products, but it wouldn’t be in their best interest. China would rather compete and give their domestic companies exclusive access to their most-treasured domestic market.

These nationalistic trade policies have effectively quarantined Chinese problems from contagion in America and the EU, whom they also unfairly trade with.

Commodity related business are the exception, they’re doomed. Their demise shouldn’t be a surprise, they’re cyclical industries… boom & bust… and right now they’re bust. But have no fear, America is creating much more human-capital intensive jobs that will be far more valuable in a future economy.

Albert Edwards, a strategist at Société Générale and notorious perma-bear came out of the woodwork this morning to scare the life out of you with a bold call that the S&P 500 will fall to 550 points, a 75% decline from recent highs.

At an investment conference in London, Edwards said: “Developments in the global economy will push the US back into recession. The financial crisis will reawaken. It will be every bit as bad as in 2008-09 and it will turn very ugly indeed. Can it get any worse? Of course it can.” He explained that while value of currencies in emerging markets was on the decline, the appreciation of the US dollar was crushing the corporate sector and that the credit expansion in the country was not for real economic activity, but was borrowings to finance share buybacks.

Edwards stressed that the US economy was in far worse shape than what the US Federal Reserve had realized and that America’s central bank had failed to learn the lessons of the housing bubble that led to the financial crisis and slump in 2008-09. “They didn’t understand the system then and they don’t understand how they are screwing up again. Deflation is upon us and the central banks can’t see it,” he said.

The Société Générale strategist compared US with Japan and said that the dollar had risen by as much as the Japanese yen in the 1990s – a move which had then put Japan into deflation and caused solvency problems for banks in the Asian country, according to The Guardian. Regarding the euro, he said that efforts by the European Central Bank to push for growth and lower the euro would not matter in the event of a fresh downturn. “If the global economy goes back into recession, it is curtains for the eurozone,” he said.

Rising unemployment that would be associated with another recession would not be accepted by countries such as France, Spain and Italy. “What a disaster the euro has been: it is a doomsday machine in favor of the German economy,” Edwards claimed. He also said that the declining demand for credit in China was another sign of the crisis to come. “That happens when people lose confidence that policymakers know what they are doing. This is what is going to happen in Europe and the US.”

Duly noted.

Just bought SPY $189.35

Currently long  122%… fucking hysterical.

Ambarella has been decimated over the past couple of days on nothing fundamental other than CES. GPRO has been also getting hammered, and right now AMBA is it’s proxy, rightfully or not. Since breaching support around $50-$48 the stock has been cascading lower on relatively low volume. The controlled nature of the selling had the feel of a forced liquidation, a possible margin call.

Volume-wise there are no signs of capitulation however the price move is extreme enough to warrant a bounce. However, overall market sentiment may have to turn bullish in order to permit this.

Forward p/e right now is 14x. Revenue growth over the next five years is projected to be >20%/yr…. So I think this valuation is attractive and anything lower would be even sexier. In a worse case scenario, AMBA’s floor could be around $30.

What happened at CES?

The main exhibit was a demonstration of their video electronic image stabilization for 4K video. This technology is critical in the drone market, where current manufacturers must install an expensive, large, and heavy mechanism on their drones in order to achieve the stability AMBA’s new SoCs showed off.  In addition the SoCs can now record 4Kp120, which is 4K footage shot at a high enough frame rate to allow for slow motion playback, as far as I know this is a first in the industry. Those two technologies should provide AMBA with enough edge to dominate the drone market in 2016.

A demonstration of the image stability technology can be view below:

In automobiles, AMBA showed off an electronic mirror that integrates streaming footage from car’s rear camera and a demo of how AMBA SoCs can map the environment around a car to assist in autonomous driving and parking.

I still like AMBA’s story, they have exposure in many emerging industries and from a growth at value perspective, I can’t think of a better opportunity in the market right now. Nonetheless, AMBA can’t shake off its reputation for being GPRO dependent. The chart looks like shit and the 43% short interest, which I once thought was a positive catalyst is starting to alarm me that I may be missing something. I’ve got very little confidence in GPRO until I get more color on their drone’s features, price and release date.

As of now I am still long AMBA but have given up buying anymore on the left side because the voices in my head are telling me not to fight the market on this stock.