January 2016

[admin]

We're sort of mystified at Jim Cramer for the following:

TheStreet’s Action Alerts PLUS Portfolio Manager Jim Cramer isn’t a fan of the volatility index, or VIX, amid the global markets sell off. ‘I’m not a big fan of the VIX as a measure of anything,’ Cramer said. ‘What I like to do is actually sense the real anxiety of the market and I think the anxiety is manifested by something like a Twitter – where it’s pretty clear that people think it’s 2008 again. That was systemic risk, this is cyclical risk and I’m taking systemic off the table for all but China.’ Stocks across the globe have been sinking since Monday, triggered by worries over the health of China’s economy and what may happen to China stocks once its 6-month stock sale ban for its biggest investors (put in place last summer) expires Friday. Though various reports suggest China will extend the ban in an effort to prevent a further stock slump.

Jim Cramer Likes Bank of America, Isn’t a Fan of the Volatility Index - Video - TheStreet

The sell-off has little to do with the Chinese stock market, but everything to do with the capital outflow and a loomind devaluation of the yuan.

• China poses the biggest risk for the world economy.
• The country is struggling to contain strong capital outflows.
• As a result, the yuan and Chinese forex reserves are falling, raising the odds of a self-fulfilling prophesy of a substantial devaluation that would wreck havoc on the world economy.

The China Crisis Is Real And Dangerous | Seeking Alpha

[admin]

Saudi Arabia has shot itself in the foot to such an extent that they're mulling over rather unprecedented measures:

Saudi Arabia is considering an IPO of Saudi Aramco, the world’s biggest crude oil producer, deputy crown price Mohammed bin Salman says in an interview with The Economist.Saudi officials say the company is worth "trillions of dollars," which would make it worth at least double Apple's ~$555B market cap; in the energy sector, Exxon Mobil's current market cap is ~$324B.Aramco’s oil production is double its nearest rivals and accounts for more than 10% of global output, but the slump in crude prices to 12-year lows has squeezed revenue for oil producers including Saudi Arabia.Such a move would be an "epochal change in the oil industry,” says Bob McNally, founder of Washington-based consultant The Rapidan Group and a former senior oil White House official. “Saudi Arabia is getting ready to ride the oil-price roller-coaster, not control it."

Saudis considering IPO for Saudi Aramco, bin Salman says | Seeking Alpha

Their reserves are unmatched, in the order of 10x those of ExxonMobil, which would value the company at $2.5 trillion...

[admin]

Rosenblatt downgraded INVN to neutral with a $10 target, Samsung had disappointing smartphone sales, there is talk of Apple having the same problems so it looks like INVN is going nowhere for the moment..

[admin]

Rosenblatt downgraded INVN to neutral with a $10 target, Samsung had disappointing smartphone sales, there is talk of Apple having the same problems so it looks like INVN is going nowhere for the moment..

But INVN is also heavily oversold and at a multi-year, multi support level..

[admin]

Time for some cooling off:

A dramatic market rise followed by an equally spectacular fall, such as a doubling in prices that is followed by a halving in value, is often regarded as a bubble followed by a bust. Seeking out such events, Goetzmann analyzes returns for 42 stock markets around the world from 1900 through 2014. He finds that bubble-and-bust episodes are uncommon, and urges caution in drawing conclusions from the widely-reported and discussed great bubbles of history.

www.nber.org/digest/jan16/w21693.html

[admin]

Most stocks are already in a bear market, unless China implodes this suggests that we're closer to the bottom and we're not going to repeat 2008, in our view. See our latest article:.

• Most stocks are in a bear market already, given that the US indices were held up by a few very large gains of some titans like Amazon and Netflix.
• Earnings are moving downwards on average, although mostly due to energy and materials.
• The quality of earnings also leaves much to be desired.
• Yet this is all about China, but even if China devalues substantially this won't repeat 2008, we feel.

It's A Bear Market Already! | Seeking Alpha

[admin]

Considerable risks remain in China:

China is perilously close to a devaluation crisis as the yuan threatens to break through the floor of its currency basket, despite massive intervention by the central bank to defend the exchange rate. The country burned through at least $120bn of foreign reserves in December, twice the previous record, the clearest evidence to date that capital outflows have reached systemic proportions. “There is certainly a sense that the situation is spiraling out of control,” said Mark Williams, from Capital Economics.

Capital flight pushes China to the brink of devaluation - Telegraph

China’s reserves have dwindled from $4 trillion to $3.33 trillion and are no longer far from the $2.6 trillion deemed to be the prudent threshold by the International Monetary Fund, given China’s $1.2 trillion dollar liabilities.

Capital flight pushes China to the brink of devaluation - Telegraph

But it is not all doom and gloom, whilst the problems exist in 'old China' (smokestack, stateowned industry), with lots of overcapacity and debts, the new China (services, consumer goods, technology, innovation) is buzzing along:

Though some industries suffer from overcapacity, there’s still a significant shortage in health care and education…. The moment you show the direction, a lot of resources and energy in the country will come forward.

Can China Pull Off the Great Economic Recasting?

That 'direction' must come from the new 5 year plan..

[admin]

We're selling short 1 July Vix future at $22.35

[admin]

We're probably a little early with this trade, as the market might very well have another downleg, but volatility is mean reversing and this future expires in July, we have half a year for things to calm down...

[admin]

Here is what, according to Jim Cramer, is necessary for stabilizing the markets:

What will it take for the stock market to finally find a bottom? Jim Cramer laid out a checklist for his Mad Money viewers Monday to find out.

First, Cramer said the Federal Reserve needs to change its narrative. The Fed needs to know its own strength for moving markets and stop letting individual governors speak whenever they feel like it. The Fed needs one voice and needs to return to a "data-driven" model and stop talking about hiking rates four times in 2016.

Second, Cramer said there needs to be more political certainty on who our candidates might be and whether or not they're going to take a pro-business or anti-business stance on the issues at hand.

Third, Cramer said China needs to clean up its act. The Shanghai stock market needs to return to its 2014 levels and the Chinese government needs to provide some real stimulus.

Next, Cramer noted that commodities need to find a bottom. The stock market cannot stage a meaningful rally with so many raw materials continuing their free fall. Entire emerging market economies depend on commodities finding a foothold.

Continuing with his list of what's wrong with the market and what needs to change before a solid bottom can be formed, Cramer said oil prices need to stop going down. With seemingly no end in sight, falling oil makes investing in oil companies big and small worrisome.

Sixth on Cramer's list is the geopolitical situation, which needs to improve. We simply cannot worry about ISIS, Syria, Russia and now North Korea all at the same time.

Next, Cramer said the zombie companies -- those with huge, unsurmountable debt including Chesapeake Energy (CHK - Get Report) and Freeport-McMoRan (FCX -Get Report)  -- need to be put to death.

Eighth, the dollar needs to stop going high while, ninth and tenth, mergers and acquisitions and initial public offerings need to return. Cramer said the markets also need to fully realize the peak in certain industries, such as housing, autos and even cell phones.

Next, Cramer said the markets need broader leadership and investors' lists of favorite stocks need to expand beyond Facebook (FB - Get Report) , a stock Cramer owns for his charitable trust, Action Alerts PLUS, and Tesla Motors (TSLA - Get Report) .

Finally, Cramer said overall sentiment needs to get a lot worse, finally forcing all those thinking about selling to actually sell so we can at last create that tradable bottom.

Good luck to that! Not in our lifetime, it appears..