Sunday, February 21, 2016

2/21/16 Bad News Bears

http://www.bloomberg.com/news/articles/2016-02-21/yuan-bears-who-beat-hedge-funds-to-the-trade-see-pain-spreading

Jim Walker.  Raoul Pal.  John Mauldin.  David Tepper.  Kyle Bass.

Here's my take.  The next 10-20% move in the global markets will be higher.  At that point, sure.  I may decide to cash out and reload after a sizable decline.  How big a decline?  Basically, back to where we are now!

106 comments:

  1. 2nd - Hope you are right. I dipped my toe into longs a bit on Friday. Now 30% long (AAPL, NFLX, BAC, NQ, TNA, XIV).

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    1. I'm tempted to take a 5% position in UWTI and let it ride for a month or two. I just don't see how the news can possibly get any worse for crude oil. Then again, the news has been so bad for nat gas for so long and yet here we are at $1.80 Natty

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    2. Mike, why aren't you tempted to stash away some UNG until NG rebounds above $2? The $1.70-$1.80 area has provided support since 2000:

      http://www.barchart.com/chart.php?sym=NGY00&t=BAR&size=M&v=0&g=1&p=MN&d=X&qb=1&style=technical&template=

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  2. One stock stood out to me in my search for stocks breaking out above their 200 DMA in spite of the recent carnage: ASPS. I think Cooperman has a 9% or so stake in them. They also own the site www.owners.com which I think is a FSBO type site. Interesting one. I plan on taking a stake tomorrow.

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  3. I'm sure you guys have heard the back story on this. Pretty crazy. I just finished a house for this guy.

    http://www.pionline.com/article/20160128/ONLINE/160129840/citadel-names-new-head-of-surveyor-capital-equity-group

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  4. Middle East Equity selling was $213 billion last year and could double this year - this is a headwind for the market, so rising oil will help with this as well. Read this weekend the big producers are thinking $50 could be the right price to generate more income for producers but not high enough to overly encourage fracers, etc.

    http://www.bloomberg.com/news/articles/2016-02-22/sovereign-wealth-funds-seen-selling-404-billion-of-equities

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  5. TA - I'm thinking TA closes the gap down from $12 on this run?

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    1. DB - On the list of runners too but it's the most heavy derivatives bank they're all-in going for world dominance.

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  6. Wonder how long the recession is bound to last?
    BXE - I'm starting to think this one isn't headed for bankruptcy, FWIW, but remains pressured for a while.
    Natty is probably a buy down here, or getting close I think. Thing is even if it goes up contracts roll forward and that can eat into upside.

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  7. "Their bearish stance has gained traction in global markets this year, with share prices from New York to Riyadh and Sydney sliding as investors shifted into gold and sovereign bonds"

    So these guys are all on one side of the boat, gold and those bonds are already pricy aren't they? I don't know what "sovereign bonds" means so will let the experts hash that out for me.

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  8. Not a good start to the week for the five bears listed below! DJIA +195 points. S&P500 +1.32%, EEM (emerging markets) +2%, EWZ (Brazil) +5%(!), FXI (China 'H' Shares) +2.2%, ASHR (China 'A' Shares) +2.34%,. VT (total world stock market) +1.22%. Crude oil +(another) 6%. And for good measure, the Yuan is up +0.4%.

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  9. TD showing NAT gas storage at/near all-time highs for this time of year and weather forecasts not supportive for heavy usage. Saying may pass all-time storage high hit in April, 2012.

    So, that's probably why prices are down here.

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  10. David, I'mm invested in Euro-banks. The concerns with them are more around capital levels and risks of writedowns more than their exposure to oil. I'd think most of their oil exposure would be through the Euro energy giants like Shell, BO, Total and they are all safe still.

    I own ING, DB, SCBFF. ING is the safest and a good buy now with high probability. DB and SCBFF are riskier, but have potention big upside if they can get things going. DB is the cheapest large bank in the world now.

    I also own Dutch insurer AEG, which owns Transamerica in the US. If you have a longer timeframe, this should be a very good one.

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  11. TCK and other base metals rocking again today with TCK up 18%.

    Seems like short covering, but many rallies start with short covering.

    Thinking about buying miner LUN.TO - like it best and it's shares are still substantially down and cheap if you believe higher base metal prices are coming.

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  12. CENX - Ripping tits off again. Any higher and I might be at break-even, heaven forbid. Umm, where's that recession so dear to me?

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  13. Okay so... fixed income might be at risk and TBT might be worth watching?

    "there is a big discrepancy in the health care inflation rates of the CPI and PCE measures. If the gap closes in favor of the former, then complacent FI markets could get a very rude awakening indeed."

    http://macro-man.blogspot.de/2016/02/slippery-slopes.html

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  14. My retail purchases working out well GPS now up 17% and RET-A.TO up over 10%.

    Just wish I had been more aggressive with size.

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  15. Boy if we go straight up to breakeven on the year it will be the most detested thing since the last 15 times since 2009 it went straight up after a selloff. I have longs on in this rally and will just let them sit so I can see just how high short covering drives this sucker.

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    1. Yeah, market needs a new batch of muppets to fleece, just a question of when.

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  16. Oh great, just discovered I own an managed "abandoned" brokerage account from decades ago that's eating itself with management fees. How nice is that? So of course the income generated by this superbly "managed" account doesn't cover management fees.

    Sounds like it's meeting someone's expectation, wouldn't you say?

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    1. we got the same thing in the mail. I wonder if this is something the industry is being forced to clean up.

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    2. Could be, it's over when we see dangling shiny fishing lures with treble hooks.
      URI - Another gap down that will likely fill, then who knows....

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  17. I decided to finally take a leap into oil stuff. I still have UWTI but I added 2% stakes in the following:
    BTE
    DNR
    HLX
    SDRL

    I don't pretend to have any clue how to value oil. But I do know that the way it is trading tells me that the odds of a bottom being in are higher than people are giving it credit for. And if that happens and we see a rally to say $50 then we will see many of these companies rip 100% higher in the matter of a few weeks. I have 2-3% positions in each.

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  18. I wonder why the base metal miners are rallying and what it says about their expectation of oil prices...

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    1. Main thing is they're hosed if they cannot turn a profit while servicing their debt. If that's the reality then expect they're just going up in attempt of suckering another hopeful batch of muppets?

      Last time Saudi Arabia squashed US oilers (as they always have done to their competition), POTUS finally asked Saudi's for relief and the whole thing withered more slowly into the sunset. This time, POTUS hates oil so damn well rejoices in the punishment no matter the cost.

      The puzzle that's not clear in my head was why Hillary was so positive and supportive of fracking? Surely that bugs POTUS to no end unless he knew it was just Hillary up to her same old insider tricks.

      I dunno if POTUS can be trusted, last year he advised not bo buy large cars and SUV style vehicles due to gasoline prices wouldn't be low for long yet now he does an about face saying oil should be taxed $10 due to supply will be higher for longer. The whle time I could see his lips were moving, you know what that means!

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  19. "Natty is probably a buy down here, or getting close I think. Thing is even if it goes up contracts roll forward and that can eat into upside."

    That is definitely a valid concern. But if you look at the futures curve:

    http://www.barchart.com/commodityfutures/Natural_Gas_Futures/NG?search=NG*

    the degree of contango is very small now by historical levels, less than 5% per month...

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    1. Placed a buy limit order for more UGAZ at $0.9

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  20. They keep coming up with reasons why the current rally will end:

    http://blogs.barrons.com/asiastocks/2016/02/22/shanghai-jumps-2-4-why-chinas-rebound-will-halt-by-early-march/?mod=yahoobarrons&ru=yahoo

    It may, but I don’t think so. I even like the fact that recent gains have been achieved on lower than average volume. Why? That much more fuel to power indexes higher down the road!

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    1. DJIA +230 points. SPX +1.37%. RSX (Russia) +3.2%. EEM +2.4%. EWZ (Brazil) +6.26%. VT (total world stock market) +1.6%.

      In my opinion, the global rally is the real deal.

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    2. I can make the argument that chart-wise, we are in a similar juncture to October, 2011, before the market really took off. Or if you believe in Elliot Wave, could say we are at the beginning of Wave 5 up, before a corrective a-b-c takes place. Can see the improving economy driving the market up the next couple years.

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    3. 2nd, I agree with you regarding the global rally. EEM made a higher low since the mid-January bottom, and today and made a higher high. If EEM is rallying, there cannot be too much risk left for USA either...

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  21. Just thinking about that Zika Virus and remember a couple of years ago with the Ebola virus how the stocks like APT.TO jumped from like $1 to over $10. Maybe if this spreads, these stocks could be good for another go.

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  22. Replies
    1. Might be a result of the tons of new orders from Saudi Arabia? I keep hearing Saudi's are planning to produce electricity for export to Europe.

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  23. If I look at a chart of the market during say 1990 when we had a mini recession as soon as we got out of the bottoming the market just skyrocketed. Granted the market is expensive right now but you could make the case that the decline in earnings will go away as soon as the benefits of low oil filter through the system (maybe they are doing that right now). So maybe we're on the verge of seeing a big jump in earnings and we see the market at new highs by the summer. Crazier things have happened.

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  24. http://www.factset.com/websitefiles/PDFs/earningsinsight/earningsinsight_2.19.16

    "Did S&P 500 Companies With Higher Global Exposure Report Lower Earnings Growth in Q4?
    Coming into the Q4 earnings season, there were concerns in the market about the impact of the
    stronger U.S. dollar (relative to last year) and the impact of lower global economic growth on the sales
    and earnings of companies in the S&P 500. At this point in time, 87% of the companies in the index have
    reported actual results for the fourth quarter. Thus, did companies in the S&P 500 with more global
    exposure report weaker sales and earnings growth relative to companies in the S&P 500 with less global
    exposure?
    The answer is yes. FactSet Geographic Revenue Exposure data (based on the most recently reported
    fiscal year data for each company in the index) can be used to analyze global sales exposure for all the
    companies in the S&P 500. For this particular analysis, the index was divided into two groups: companies
    that generate more than 50% of sales inside the U.S. (less global exposure) and companies that generate
    less than 50% of sales inside the U.S. (more global exposure). Aggregate earnings and revenue growth
    rates were then calculated based on these two groups. The results are listed below.
    The blended (combines actual results for companies that have reported and estimated results for
    companies yet to report) earnings decline for the S&P 500 for Q4 2015 is -3.6%. For companies that
    generate more than 50% of sales inside the U.S., the blended earnings growth rate is 2.7%. For
    companies that generate less than 50% of sales inside the U.S., the blended earnings decline is -11.2%.
    The blended sales decline for the S&P 500 for Q4 2015 is -3.7%. For companies that generate more than
    50% of sales inside the U.S., the blended sales growth rate is 0.8%. For companies that generate less
    than 50% of sales inside the U.S., the blended sales decline is -13.0%."

    I started buying up some TNA on Friday. The forward P/E on the Russell 2000 is about 15 (vs 16ish for the S&P) despite this important fact above. I could see the Russell outperforming going forward, assuming we don't crash ha!

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  25. VRX - I've got like a $50 target on VRX, is it there yet? Wouldn't surprise me, considering the news might go considerably lower? Was $86 in premarket.

    Wonder what else out there is woefully overstated and/or exposed to toxic CLO's?

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  26. what do u guys think about this:
    https://www.youtube.com/watch?v=oARjZ_Vq7dU

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    1. It reminds me of that 2nd tsunami of foreclosures that never came.

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    2. what do you think about all of this global collapse talk?

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    3. Sounds similar to 1998 when the currency crisis. The thing is 1998 is still reasonably fresh in people's minds so it is less likely to cause similar contagion to 1998 as people are watching and thinking about how to avoid it.

      But it could be an isue for sure. 1998 was a fast selloff and a good buying opportunity.

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  27. PXD/DVN/COG...all well received and over subscribed.

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    1. Feels very March 2009ish for this sector

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  28. CENX - Handle of C&H forming or will this simply find new lower lows?

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    1. One of the Contra the heard guys bought it last December in the $3 range. Has a target of $23

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  29. That interview with the FIT ceo was horrible.

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  30. It was hard, getting up this morning....

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  31. SPWR - Sheesh, down again. Has this solar power thing peaked already, like everything else too much money chasing returns thus excess capacity?

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  32. Pick me a vehicle for going short, TZA perhaps?

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    1. Small caps are actually pretty attractive here in my opinion. Trading at almost 10% discount to s&p relative to eps and they have little overseas exposure. Companies with more domestic focus in the s&p had significantly better earnings last quarter

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    2. I'm looking for the best short hedge in case I need it, a best choice plan in advance.

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    3. TZA short placed almost anytime today would be underwater.

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  33. AAPL - Gates says FBI isn't requesting access through Tim Cook's back door, just wants the data.

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  34. Heroin deaths up 15%, where is the flood of heroin coming from and how is it the more resources devoted the worse the problem becomes?

    I'm not buying the claim subscription painkillers are to blame for increased imported heroin.

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  35. This JPM news is so ridiculously overblown. We are talking a $1.5 billion potential hit on a trillion dollar plus balance sheet. Shit they paid like 10x that in fines

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    1. Obviously, doing God's work is a thankless job in our newly open, PC, free market environmentally conscious socially acceptable civilization?

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    2. And very impressive margin on sales.

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  36. Mike, if distress is spreading all over the globe, then why did EEM make a higher low and a higher high since its mid-January bottom?

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    1. Who knows why things happen in the short term?

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    2. Same reason TZA is a good short, b/c distress is morphing into duress. Always short into the hole.

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  37. When was the 1st time the FED forecast a recession in advance, or raised rates in anticipation of or leading to a recession, don't they always recognize the recession in retrospect?

    I suspect we're looking into several years of falling equities prices and EM's falling apart.

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  38. WY - What a slippery piglet... Looks like a run is coming.

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  39. There were some big losses today under the hood.

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  40. You guys cited DeMark when he turned bullish. His new call was triggered today with SP close of 1921.27.

    FWIW

    Tom DeMark Warns If The S&P Closes Below This Level, It Could "Wreak Havoc To The Downside"

    As Bloomberg reports, a top in the S&P 500 would also be confirmed should the S&P 500 finish below 1,926.82 on Tuesday, or close less than 1,917 on Wednesday or Thursday, DeMark said.

    If any of those S&P 500 triggers occur, the benchmark index will decline at least 8.2 percent from Monday’s close to 1,786, a level last seen in February 2014, according to DeMark. Should the market top correspond with what he referred to as “bad news,” the S&P 500 could see deeper selling down to 1,736, an 11 percent decline. DeMark sees the ongoing market rally as temporary relief as investors exit short positions.

    “We’ve seen some pretty vicious short-covering come in, which has caused the market to move up,” said DeMark. “When that happens, it really plays havoc with the market once the downside move begins.”

    “The foundation of the ongoing rally is suspect,” DeMark, based in Scottsdale, Arizona, said in a phone interview. “The temporary buying produces a price vacuum beneath the market and accelerates the subsequent decline. The decline is going to be sharp.”

    http://www.zerohedge.com/news/2016-02-23/tom-demark-warns-if-sp-closes-below-level-it-could-wreak-havoc-downside

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    1. He's been right on the money the last few major calls calling the bottom last August, the top in oil and the recent bottom pretty much right on, so he's been getting some good press lately. PLus, he has the reputation as "technician to the hedge fund stars" and "his Screen is on Steve Cohen's Computer", but he made some bad calls a couple years ago calling for another depression, etc.

      So, he's hot now, and may even been partially responsible for yesterday and today's market downturn.

      He's got a blog at http://practicaltechnicalanalysis.blogspot.ca/

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  41. T3d -- Band Structure says Down ... FWIW ...
    http://www.screencast.com/t/oXhJuLBo

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    1. Fib-Draw (using TheFibDoctor approach .. http://stocktwits.com/TheFibDoctor w/ -23.6 target)

      http://www.screencast.com/t/C8uyHrstWavr

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  42. US indexes pull back -1%, overseas markets even more. A welcome development, and preferable to an unbroken rise.

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  43. IEP - This stock needs an activist investor.

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  44. ENPH/EYES - No surprise there, expected that.

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    1. "Enphase: Inverter pricing pressure continues to impact top line and margins
      February 24, 2016 03:35 AM ET"

      Huge moat, inverters are?

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  45. FBI - Should I forward this link over to those FBI guys?
    http://www.dummies.com/how-to/content/how-to-crack-ios-passwords.html

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  46. Replies
    1. Someone has to pay for those 20,000 Saudi Prince royalties.

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    2. TEP is coming off today as well, as confirmation? CLMT has refinery exposure there also off today. It's not clear to me who exactly owns the majority of regional refinery capacity though, seemed like EDP or ETP, for some reason up until recently didn't realize TEP was associated.

      Perhaps M&A has confused my ability to keep track....

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  47. If you want to learn something everyday, don't come to TT lolz

    "First of all, Apple ought to give the security for that phone," Trump

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  48. Used car dealer network - I'm thinking these guys have a nice tailwind.

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  49. On the bright side, my aluminum is flat and refiner is positive.
    Not sure how to value FCAU post-split (lost track) but doesn't appear encouraging at the moment.

    Governor just noted the new state budget money for solar and corporate tax cuts were removed.

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  50. Paper/Forest Products: Pulp: Inventories jump, shipments increase on growth in Asia
    February 24, 2016 07:27 AM ET

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  51. Kyle, thanks for the charts.

    BB, what makes you think this is DeMarks blog?

    http://practicaltechnicalanalysis.blogspot.ca/

    About me is a person Named Krasi from Bulgaria. I like the breath indicators and agree with your assessment of DeMark.

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    1. Whoops - you are right.

      I started typing Tom Demark into google and BLOG game up, so I clicked on it and this was the first one, so I just quickly read the header and assumed it was his, but it is actually Krasi using some Demark approaches.

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  52. East Palo Alto - I used to cruise through this area on my way home from running a demo batch of wafers on a Saturday evening, out of interest.

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  53. POT, have been watching this sector (POT MOS TNH CF) and this one's acting like it wants to bottom.

    Also note that SP cash failed yesterday at 50d sma.

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  54. My refiner is up nearly a full $1, that's pretty impressive IMO. Of course nobody cares so I'll just not mention this anymore.

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  55. Is farming still big in Md.? Still shrinking.

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  56. CLMT - This one just might pull through though, assuming Canada doesn't entirely abandon oil sand production. The reality is this refiner probably isn't worth consideration given Canada would rather build aircraft.

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  57. Okay let me give a shot at adding to the ignorance by observing that gold moves up each and every time FED heads appear on TV proclaiming rates must be lifted (dialog that doesn't fail to create confusion). Further, my personal belief is these guys are more interested in stroking their personal egos as opposed to contributing something enlightening.

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  58. CPRT - Wonder who the early bozos were? Used low mileage vehicles are gonna be the incredible value talk of the town, IMO

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  59. Hmm... Stumbled onto the Saint Lewis FED Financial stress Index:
    https://research.stlouisfed.org/fred2/series/STLFSI

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  60. UGA - Apparently, somebody bought a little gasoline.

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  61. Bought into US Bank USBI. One of these steady eddy types that show move up with rates. The Contra the Heard guy put me onto this and has a target of $23.44 - it is at $8.50.

    Cheap on a p/b basis, which provides safety. Somewhat expensive on a p/e basis, but sounds like they have got the business cleaned up and are in a position to grow which will helps earnings and the multiples people are willing to pay.

    Might buy more, hard to buy as doesn't trade a whole lot. Also still own that KTHN bank on the OTC market - this one is better as it is a regular stock.

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    1. I'm leaning toward after Trump takes office though, I think he hates bankers and knows how to screw them good.

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  62. "TZA short isn't working, WTF???"

    How about now :)

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