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Tuesday Turmoil – China Sells Off, Weather Gets Cold

China's stock benchmark falls from 13-year highThe weather isn't the only thing turning cold.

Chinese stocks fell the most in three weeks, led by consumer shares and commodity producers, amid concern valuations for the most popular stocks were stretched and as metal prices slumped.  The CSI 300 Index dropped as much 1.5% before paring losses to 1% at the close. Gauges tracking energy, consumer staples and materials producers slumped more than 2%.

Some 39 Chinese companies both domestically and offshore defaulted on nearly $30 billion of bonds in 2020, pushing the total value 14% above 2019’s.  Defaults by Chinese companies are likely to top last year’s record as tighter monetary policy squeezes borrowers, according to China Merchants Securities Co.

“The central bank will implement more prudent monetary policies this year,” said Yuze Li, a credit analyst at China Merchants Securities. “More companies may face refinancing pressure. As the maturities jump, the default amounts will climb by an estimated 10%-30% from the previous year,” he said, referring to both onshore and offshore defaults.

In the dollar-bond market, the financial sector accounted for about 43% of total defaults, followed by technology and energy. ?Five state-linked companies defaulted for the first time in the onshore bond market, the most since 2016.

Meanwhile, Global Warming is making us cold as it disrupts the normal air currents and sends the frigid air mass that usually circles the arctic down to the Northern Hemisphere which is, as they say in acedemia, bad.  The icy blasts threatening to sweep across North America, Europe and Asia starting in late January are from the same weather pattern that triggered the 2014 cold snap known as the polar vortex, which plunged temperatures in Chicago to minus 16 degrees Fahrenheit.

Enjoy your outdoor dining!

Natural Gas has already been spiking but still only $2.85 and we should hit $3 or more on the /NG Futures contracts with all this cold weather ahead along with a slowdown in shale production that is slowing the supply of Nat Gas. Natural Gas Futures pay $100 per point, per contract, and $2.85 is a good support line so tight stops below limit your losses while a move to $3 would be a $1,500 per contract gain – a good way to stay warm!  

The cold has already descended upon Western Europe and China, sending prices for gas in Spain, and liquefied natural gas in Asia, to record highs.  Beijing temperatures fell to a record low of minus 9 Thursday.  An icy blast from Jan. 16 will mean the third highest number of heating degree days in 40 years.  The vortex of seven years ago kept shoppers indoors, grounded flights and made it harder for shippers to fill product orders.    

It's an interesting way to start the year and we'll see how things play out but we're still shorting those index lines at Dow (/YM) 31,00, S&P (/ES) 3,800, Nasdaq (/NQ) 13,000 and Russell (/RTY) 2,100 and we'd love to see Oil (/CL) closer to $55 so we can short that into tomorrow's inventory report as further OPEC cutbacks aren't going to make a dent in the surplus we have going on.  For now, we can use the $52.50 line as our shorting zone with very tight stops above. 

I put that last one up as it's good to know what kind of insanity the other half are reading.  Like this:



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  1. Good Morning.

  2. Phil/KHC-are you bullish on this one now?  Not sure I am totally comfortable with the turnaround plan, but they do have a viable plan and it seems like there's value at this level especially with the div yield.  Thanks. 

  3. TRIL    gets $25M investment from Pfizer

  4. Biodiesel   look into this SPAC :       VIH    looks interesting 

  5. That PFE investment arm has another interesting company…FIXX. Sold a few Feb21 10P for 30c.  Just need to keep them on the radar.

  6. Comment content omitted because it is too long.

  7. Good morning!  

    KHC/Seer – Well I did love them below $25 as that was silly but $32.65 is $40Bn and while they PLAN to make $3Bn this year, that plan has rarely worked out for them historically.  

    Year End 28th Dec 2014 2015 2016 2017 2018 2019 TTM 2020E 2021E CAGR / Avg
    Total Revenue

    10,922 18,338 26,300 26,076 26,268 24,977 25,782 26,049 24,866 18.0%
    Operating Profit

    1,568 2,639 5,581 6,206 -10,368 3,064 1,164     14.3%
    Net Profit

    657 634 3,596 10,941 -10,192 1,935 -494 3,435 3,093 24.1%
    EPS Reported

    -0.053 -0.221 2.79 3.21 -8.28 1.58 -0.407      
    EPS Normalised

    -0.053 -0.221 3.42 3.49 0.479 2.78 1.75 2.80 2.52  
    EPS Growth

          +2.21 -86.3 +481 -37.1 +0.709 -9.99  
    PE Ratio

              11.8 18.8 11.7 13.0  

              16.6 26.5   4.27  

    They are actually at net -$700M for the year so far so I'm not sure what the enthusiasm's about.  At $25, I'd like them again as a long-term blue chip – as my attitude is eventually they'll find someone to run it who knows how to make a profit on $25Bn in sales – it's just not the current team.

    • The broader market is looking for some leadership, with the S&P 500 (SP500) +0.1% and the Nasdaq (COMP) +0.3% slightly higher.
    • The Dow (DJI) -0.2% is trailing on weakness in Visa and UnitedHealth. The Russell 2000 (NYSEARCA:IWM) +0.6% is the outperformer again.
    • In Washington, the House is set to vote on a resolution for Vice President Mike Pence to invoke the 25th amendment to remove President Donald Trump. Pence, who recently met with Trump for the first time since last week, is expected to decline, leading to focus on the article of impeachment by House Democrats.
    • The reflation trade is seeing the most buying interest, with rates on the march again. The 10-year Treasury yield is up 3 basis points to 1.17%. It just needs to hit 1.18% to match the post pandemic plunge high seen last March.
    • Cyclical sectors like Energy (NYSEARCA:XLE) and Financials (NYSEARCA:XLF) lead the S&P, but their limited impact compared with Big Tech is leaving the major indexes looking for some traction.
    • Seven of 11 sectors are higher.
    • The megacaps are mixed, but Tesla is bouncing back from yesterday's plunge, when it snapped an 11-session win streak.
    • Apple is edging up after reportedly topping expectations for iPhone 12 sales in China.
    • Apple (NASDAQ:AAPL) sold 18M iPhone 12 units in the China market in Q4, exceeding expectations and achieving over 20% market share, DigiTimes reports.
    • The impressive Q4 sales dented the market share numbers for Huawei, Kiaomi, Oppo, and Vivo, which accounted for more than 90% of China's smartphone market before the iPhone series launch. In Q4, their combined share fell to ~78%, according to the DigiTimes report.
    • Momentum is seen continuing through the Lunar New Year holiday, bringing Q1 2021 volumes level with Q4 2022 shipments, MacRumors reports.
    • Shares are higher by 0.5% premarket after yesterday's 2.3% decline.

    • For December 2020, Brookdale Senior Living (NYSE:BKD) reported weighted average occupancy of 71.5% vs. 72.8% for November.

    • The sequential rate of occupancy declined moderately in Q4 at 72.7% vs. 75.3% in Q3.
    • For Q4, the company expects to recognize ~$78M from government grant programs and ~$30M of COVID-related expenses.
    • Team "FUD" had a day yesterday, with Bitcoin (BTC-USD) plunging from nearly $42K to about $30K at its lowest level. Alongside, Ethereum (ETH-USD) sunk to nearly $900 from above $1,300.
    • "An asset that drops 28% over a weekend is not a safe-haven, a store of value, or a viable hedge against inflation," tweeted team FUD's spiritual leader Peter Schiff at what turned out to be nearly the exact low of the day.
    • Still feeling his oats a couple of hours later, Schiff claimed "very few" institutional players are actually buying bitcoin, it's just folks like Michael Saylor (NASDAQ:MSTR) are making so much noise about it. That was quickly refuted by Tyler Winklevoss, who as the owner of Gemini exchange might be in a better position to know.
    • Observing yesterday's wreckage, some point to yet another outage at Coinbase (COINB) on the way down at around the $38K level as generating a flurry of panicky selling action.
    • More likely behind the selloff is what came before – and that was about a doubling in price over the previous few weeks. Trees … sky … you know, the thing.
    • Bitcoin has been bouncing since late yesterday, currently trading at $35K. Ether has retraced to $1,075. The Grayscale Bitcoin Trust (GBTC) fell 15.8% yesterday and is up 4.3% premarket.
    • Blockchain players on watch: Riot (NASDAQ:RIOT), Marathon Patent (NASDAQ:MARA), Grayscale Ethereum Trust (OTCQX:ETHE), Canaan (NASDAQ:CAN), and Galaxy Digital (OTCPK:BRPHF).
    • Gilead Sciences (NASDAQ:GILD) and Vir Biotechnology (NASDAQ:VIR) announces that the companies have entered into a clinical collaboration to evaluate novel therapeutic combination strategies aimed at developing a functional cure for chronic hepatitis B virus (HBV).
    • The companies plan to initiate a Phase 2 trial evaluating combination therapy for both treatment-experienced and treatment-naïve people living with HBV.
    • The multi-arm trial will evaluate different combinations of selgantolimod, Gilead’s investigational TLR-8 agonist, VIR-2218, Vir’s investigational small interfering ribonucleic acid (siRNA) and a commercially-sourced, marketed PD-1 antagonist.
    • The primary outcome of the study will be the proportion of patients achieving a functional cure, defined as an off-therapy loss of hepatitis B surface antigen (HBsAg) and HBV DNA from the serum.

    • Both companies retain full rights to their individual product candidates and will discuss the potential path forward for any future combination studies based on the outcome of the Phase 2 trial.

  8. It's a shame sheldon 'shelly' adelson has passed. I wonder how steve wynn is doing…..

  9. Any comments on REYN reasonable low on the ladder positive cash flow.

  10. Phil / Seeking Alpha –  I've notice I'm not able to read anything on seeking alpha without a membership….  did they change something…  I used to be able to read news there and earnings etc…. now it seems everything needs a membership?

  11. Renewable Energy Will See Major Growth in 2021: Here Are 3 Stocks to Buy

  12. Whenever I read about "nuclear spacecraft", Dyson's Orion drive comes to mind. ( There's an amazing description of such a drive in an old sci-fi novel, "Footfall", by Larry Niven and Jerry Pournelle.

  13. I've noticed it too Batman.  It's super annoying as I use Flipboard and all their articles now, when you click on them require subscription.  SA, Forbes, CNBC, MarketWatch ..etc.  It's only been the last few months it's started.

    Sounds like a great opportunity for a platform to front-end all your subscriptions payments with a single vendor and let them take care of paying the individual subscription.  The platform takes a minor scrape for the convenience.  Sucks having to manage all these subscriptions now.

  14. Phil / INTC,

    I took 5yr avg P/E 13.45 x 4.75 EPS = $64.  Do you consider this a realistic target price?  2021 may be a good year with a slew of new cores being announced and possibly MobileEye catching some interest in the auto sector. 

  15. batman/SA – same here with Seeking Alpha – everything is behind paywall now.

  16. Batman/SA-you can register for free and still see some things, but need a subscription to see everything.

  17. Seeking Alpha/Batman – Yes, the free ride is over.  Happening on much of the Internet these days.  If you remember – you didn't get magazines or newspapers for free yet we all expect all the content providers to work for free.  This is why we have an information crisis in this country – what used to be a thriving, competitive news-gathering system is now just a few monopolies feeding you various flavors of consumerist propaganda.  But at least it's free….

    Nuclear/Snow – I used to love those old science fiction books.  Read them non-stop when I was a kid.

    Platform/Jeddah – My idea is to have a micro-payment system so you can pay 0.1 or 1.0 pennies per article that you decide to read instantly.  I guess it could be accomplished with some kind of alt coin system but something you pay real money for and you have a token account that lets you click on any published article and gain access to it for a fee.  The advantage of the publishing monopoly is we'd only have to get 3 of the 5 major publishers on board and we'd own the micro-payment market.

    INTC/Jeddah – Very realistic.  I could not understand how they got sold off so much with all the things coming down the pipe.  

  18. INTC thx Phil.

    Platform / Excellent idea on uPayments!  Pay for what you use.  Wonder if the publishers would opt for this concept or prefer locking subscribers in for a fixed amount that they get up front.  I'm not a marketer, but imagine if you had a platform like this in place, they could slice-n-dice however they want to collect.  The platform is basically the underlying account core + secure API's for processing/managing subscriptions and payments.