***Official*** 2016 Stock Market Thread

[Imp]

Thinking ahead... could this fire be the thing that breaks Canada's economy?

Billions in insurance payouts = losses for banks/insurance companies when they're one of the sectors doing okay.

Energy sector already losing money is now shutting production so less revenue, assuming no insurance against business interruption -- but then more bank/insurance losses.

National Bank -- they're relatively small in Canada -- seems to be putting more money aside for energy losses.

National Bank says it will take a $195-million after-tax provision for bad loans in the second quarter, with the bulk of that related to credit losses in the beleaguered oil and gas sector.

http://www.cbc.ca/news/business/national-oil-gas-provision-1.3568475

 

[Charmonium]

I could see that if the low rates were being made available to the average "Joe". I am still getting offers for credit at 10 - 20%. And the offers all start "You can lower the rate on your cards with this promotion". I already have a prime rate card so I am not going to bite.

Also, Joe has to have a job with a income so he thinks he can pay on the loan. And most?/a lot of the jobs in past few years are part time/low pay. When the housing bubble burst. People saw the largest asset lose value and or lost it altogether. With income falling and middle income jobs drying up. A lot of people who can qualify are reluctant to do so. That along with the rest who can't qualify means the available credit and low rates are going to businesses.

Some of those will be mismanaged, poorly managed, and/or producing only because funds are easy to get/or financed. They would have filed bankruptcy in a normal rate environment. Now they compete with well run efficient companies. More production = lower cost. Leading to deflation.

Does any of this rambling make any sense? Or am I off base/not seeing it correctly.

The TELSA business plan seems to be "Lose on every sale and make it up in volume".

I would think there are more like it. What business owner/founder wants to give up? Especially if the additional loses are on the taxpayer...

.

I think you've got the idea. The main issue is trust. Trust in the financial system, in your counterparties, even in the govt. After a credit crisis, there is very little trust. So companies don't want to borrow because they don't want to be dependent upon a line of credit that could evaporate tomorrow. That means that they sock more money away rather than investing in plant, machinery and people.

The one exception here seems to be stock buybacks. Companies seem to be willing to do this but my guess is that they see this as money in the bank. If there's a recession, debt service on the loans is almost trivial. And once the recession is over, they can sell the stock to raise cash. It also has other perqs like boosting EPS as you noted.

On the other side of the equation you have the banks and shadow banks. They're being required to have much higher capital than they were previously and that means that they have lend less for each unit of capital.

Also, they're human. Well, semi-human. They got badly burned in the crisis and so they are loath to lend to anyone with less than a stellar credit rating.

 

[Imp]

The one exception here seems to be stock buybacks. Companies seem to be willing to do this but my guess is that they see this as money in the bank. If there's a recession, debt service on the loans is almost trivial. And once the recession is over, they can sell the stock to raise cash. It also has other perqs like boosting EPS as you noted.

In the shorter term, there's also owner/executive bonuses as an incentive. If all you care about is the next quarter, use credit to bump up share prices, sell your shares, profit, get fired or resign before any problems come up.


And the Canada wildfire thing... I realized a double-whammy concerning the property crash in Fort McMurray: banks, insurers, or home owners are forced to realize the loss in their properties.

 

[Charmonium]

Since that trend started Bloomberg always reports top and bottom line numbers so you can see if there is anything dodgey going on. If top line is down but eps is up, that's probably creative accounting.

The fire does appear to be affecting oil. According to Wikipedia, the Athabasca oil sands (which I think are the ones near McMurry) produce 1.3M barrels per day. So if worldwide excess production is in the 1-2M barrel range, we're probably in for another oil rally.

 

[ponyo]

Stanley Druckenmiller said during his talk at 2016 Ira Sohn Conference that M&A and buybacks were $2 trillion last year. That's whole lot of money being spent on buybacks and buying overvalued companies. He was very bearish regarding the market and the Fed.

 

[Charmonium]

Stanley Druckenmiller said during his talk at 2016 Ira Sohn Conference that M&A and buybacks were $2 trillion last year. That's whole lot of money being spent on buybacks and buying overvalued companies. He was very bearish regarding the market and the Fed.

Isn't Druckenmiller a perma-bear?

Bill Gross echoed the sentiment though when he said that the central banks will have to become the engines of fiscal policy by buying all of the debt that govts are going to have to issue to restart their economies.

I don't really follow his logic and it wouldn't be the first time old bill was wrong. I guess we'll see.

 

[ponyo]

I never viewed Druckenmiller as perma-bear but I don't follow him that closely. But he's a legend and you can't argue against his performance record. I just agree with many of the points he made at the conference including gold.

Anyone know a good vehicle to short Saudi riyal?

 

[monkeydelmagico]

Anyone know a good vehicle to short Saudi riyal?

Nope, cause nobody is silly enough to try it. The house of Saud's pockets are way too deep. Their ability to defend dollar peg has got to be right up there with the Chinese.

 

[ponyo]

Nope, cause nobody is silly enough to try it. The house of Saud's pockets are way too deep. Their ability to defend dollar peg has got to be right up there with the Chinese.

Which would make it even all that better if not too many people are doing it. But plenty of bright people are doing it. It's not my idea. I got the idea from Zach Schreiber. I think it's brilliant but I don't know how to execute it.

http://www.bloomberg.com/news/articles/2016-05-05/pointstate-s-schreiber-says-saudi-riyal-peg-massively-overvalued

 

[Imp]

"Economists" talking about how the oil shutdowns in Canada due to the fire will affect GDP...

http://www.cbc.ca/news/business/fort-mcmurray-economists-1.3570061

I did a CTRL+F to search for "insurance" after reading it and not seeing it in the discussion... no results in the body of the article. Guess those billions of insurance dollars will come from a fairy and have no impact on the economy.

Oh wait, it was "economists" from banks. Guess it wouldn't be a great idea to talk about the billion dollar write-downs for both energy loans and insurance claims.

 

[Imp]

Oh, and the job numbers sucked in both Canada and the U.S.

The economy added just 160,000 jobs in April, while the unemployment rate remained at 5 percent.

...

Adding to the disappointment around the jobs report was a downward revision in February and March jobs of 19,000 workers, and a slight decline in the participation rate to 62.8 percent.

http://www.cnbc.com/2016/05/06/job-growth-shifts-to-slower-gear-along-with-economy.html

 

[eng2d2]

Thinking ahead... could this fire be the thing that breaks Canada's economy?

Billions in insurance payouts = losses for banks/insurance companies when they're one of the sectors doing okay.

Energy sector already losing money is now shutting production so less revenue, assuming no insurance against business interruption -- but then more bank/insurance losses.

National Bank -- they're relatively small in Canada -- seems to be putting more money aside for energy losses.



http://www.cbc.ca/news/business/national-oil-gas-provision-1.3568475

Don't you guys have a printing press?

 

[Imp]

Don't you guys have a printing press?

Absolutely. The central bank even got rid of most of its gold reserves.

 

[Charmonium]

Jobs were below predictions but hourly wage was up. Some analysts seem to think they balance out. So the May report will probably be a deciding factor for a June hike. But I'm still going with July.

 

[Kwatt]

Jobs were below predictions but hourly wage was up. Some analysts seem to think they balance out. So the May report will probably be a deciding factor for a June hike. But I'm still going with July.

I am going with after the election. Nobody wants to screw up with a new Pres. coming in...

.

 

[Imp]

I was going with June, but I'm really leaning towards one and done now. Maybe in September or after the election.

I'm pretty sure June is 99% out because the "market" predictions say so and, more importantly, the Brexit vote is June 23 -- FOMC is June 15?

Edit:

Real Estate Institute of Western Australia (REIWA) figures show the number of properties available to rent in Perth is nearly three times above what is considered to be the long-term average.

http://www.abc.net.au/news/2016-05-07/vacant-rental-properties-in-perth-reach-record-levels/7392614

No problem there. Everyone appears to have a rental property or wants a tenant to pay their mortgage/supplement income, but purchase prices are fairly steady. And the central bank there dropped their interest rate recently, but don't worry...

And even better news out of China. Somewhat questionable source but not really given the subject (i.e. country). One giant mess just waiting to tip over.

Mainland China’s bad debts are at least nine times the official number and still growing as the economy slows down despite government stimulus measures, a seasoned market watcher has warned.

http://www.scmp.com/business/market...bt-ratio-least-nine-times-official-number-and

 

[Charmonium]

I never viewed Druckenmiller as perma-bear but I don't follow him that closely. But he's a legend and you can't argue against his performance record. I just agree with many of the points he made at the conference including gold.

Anyone know a good vehicle to short Saudi riyal?

A lot of those same "experts" were telling you to buy gold in 2011. Hyper-inflation they said. The collapse of Western civilization they said.

Well, gold did go to 1900/oz and if you sold then, good for you. But no one was saying sell at 1900. They were all saying buy, buy, buy even thought the chart of spot gold was hyperbolic.

So I'm sorry but I don't care who the expert is or what their track record is. They're all still human and have been wrong more times than you will ever know - at least until the day you decide to follow their advice and find out the hard way.

 

[FelixDeCat]

Whats up with Chesapeake?

One analyst said the stock might only be worth only $1 on Friday afternoon and the damn thing fell out of bed. He said despite better than expected Q1 "earnings" it might be overvalued relative to peers. Either $2, $3, or $4 could happen in the near term and maybe back to $7 in the long term all based on the price of oil and especially natural gas (its main holding).

I think Im going to stay short the couple of puts and not do any more.

 

[ponyo]

A lot of those same "experts" were telling you to buy gold in 2011. Hyper-inflation they said. The collapse of Western civilization they said.

Well, gold did go to 1900/oz and if you sold then, good for you. But no one was saying sell at 1900. They were all saying buy, buy, buy even thought the chart of spot gold was hyperbolic.

So I'm sorry but I don't care who the expert is or what their track record is. They're all still human and have been wrong more times than you will ever know - at least until the day you decide to follow their advice and find out the hard way.

I didn't buy gold because of Druckenmiller. I bought gold last year because I wanted some PM in my portfolio. I know Druckenmiller makes mistakes like everyone else. I remember him buying the techs and dotcom in late 1999 and early 2000 and marking the top of the Dotcom bubble. He got killed.

He talks about his IBM short, love of Google & Amazon, and his Dotcom mistake in this 2013 Bloomberg interview.
http://www.bloomberg.com/news/videos/b/cb28145f-0bb5-4cfc-9c69-0b78cb43bba9

He also briefly mentioned possible commodities trouble but he talked about that more in his earlier talk at the Ira Sohn Conference in Spring of 2013. You have to scroll down to around middle of the page to read about Druckenmiller. But he nailed the upcoming commodities crash due to China slowdown. You have to give the man credit when credit is due.
http://thereformedbroker.com/2013/05/08/notes-from-the-ira-sohn-conference-spring-2013/

 

[FelixDeCat]

Genworth might be my next probable short put target, maybe to $6 or $7 by 1/2017, although buying the stock outright for the long term also looks good. The stock seems to have a two year cycle of booms and busts. This could mean that by 2018 its back to $15 or higher.

 

[Charmonium]

I didn't buy gold because of Druckenmiller. I bought gold last year because I wanted some PM in my portfolio. I know Druckenmiller makes mistakes like everyone else. I remember him buying the techs and dotcom in late 1999 and early 2000 and marking the top of the Dotcom bubble. He got killed.

He talks about his IBM short, love of Google & Amazon, and his Dotcom mistake in this 2013 Bloomberg interview.
http://www.bloomberg.com/news/videos/b/cb28145f-0bb5-4cfc-9c69-0b78cb43bba9

He also briefly mentioned possible commodities trouble but he talked about that more in his earlier talk at the Ira Sohn Conference in Spring of 2013. You have to scroll down to around middle of the page to read about Druckenmiller. But he nailed the upcoming commodities crash due to China slowdown. You have to give the man credit when credit is due.
http://thereformedbroker.com/2013/05/08/notes-from-the-ira-sohn-conference-spring-2013/

As long as someone has a cogent argument backed up by verifiable facts, I'll listen to them and give their opinions the weight they deserve. My problem is with people that go on television solely for the purpose of talking their book.

It used to be that that when you had an analyst on and they were giving you recommendations, they had to disclose any interest in what they were hyping. And not only them but their family as well. what ever happened to that. I can't remember the last time I saw any sort of disclosure. The interviewer will normally ask what positions they have but they don't have to answer and even if they do, I don't think it's legally binding so they can lie their asses off.

These guys have better shit to do than take time out to do an interview. So if they are doing it, it's for one of 2 reasons, maybe both - a) to talk their book and get the suckers invested so they can cash out and/or b) ego.

The fact that someone makes a good call is great and they deserve some credit for that if they consistently get things right. But financial history is littered with people that everyone else thought was a guru because they had a string of impressive guesses. It's like psychics. You only remember when they get it right. No on ever holds them accountable for the times they fuck you up the ass.

 

[Imp]

Genworth might be my next probable short put target, maybe to $6 or $7 by 1/2017, although buying the stock outright for the long term also looks good. The stock seems to have a two year cycle of booms and busts. This could mean that by 2018 its back to $15 or higher.

Genworth the mortgage insurer?

Good luck with that one. I hear they insure mortgages in Canada and Australia. Average price for residential property in Toronto is like $600k now on ~$80k average household income, over a million in Vancouver on ~$75k average. But don't worry, it's all rich Chinese nationals who for some reason still need mortgages according to a study...

The fact that someone makes a good call is great and they deserve some credit for that if they consistently get things right. But financial history is littered with people that everyone else thought was a guru because they had a string of impressive guesses. It's like psychics. You only remember when they get it right. No on ever holds them accountable for the times they fuck you up the ass.

Robert Shiller is probably the only one I'd listen to. But I think he's smart enough, Ivy League professor and all, to not give timelines or spread doom & gloom.

Honestly, they all have books to sell. Even Shiller.

 

[ponyo]

It looks like Zerohedge posted the Stan Druckenmiller's whole Sohn Conference speech from few days ago.

http://www.zerohedge.com/news/2016-05-07/stan-druckenmiller-endgame-his-full-apocalyptic-presentation

 

[Charmonium]

Robert Shiller is probably the only one I'd listen to. But I think he's smart enough, Ivy League professor and all, to not give timelines or spread doom & gloom.

Honestly, they all have books to sell. Even Shiller.

I'm more inclined to trust academics as well since at least their work has been peer reviewed and not based on magical ability to divine the future.

And you're right, they tend not to make timing predictions but more macro observations. I think you can be right about macro trends if you have enough information to shape your opinion. But even there, the timing is really the bitch of it. We know that eventually certain things are likely to happen but they could take years or even decades. And as the saying goes, the market can remain irrational longer than you can remain solvent.

On the book thing. I'm going to assume you understand that talking book means hyping your current holdings to the unwashed masses.

 

[Charmonium]

It looks like Zerohedge posted the Stan Druckenmiller's whole Sohn Conference speech from few days ago.

http://www.zerohedge.com/news/2016-...ler-endgame-his-full-apocalyptic-presentation

Well, that's the kiss of death right there. Zero is a complete whack job. His only claim to fame is that he has some amazing industry sources so there have been times when he's beat everyone else in terms of revealing things. But his analysis is complete crackpot gibberish.