Wednesday, October 29, 2014

Hedge funds and XIV


So what reason did you guys have for that massive glob of short $VIX selling at 2PM?

Was there something in the Fed minutes that you didn't know was going to be there? Or do you just kneejerk sell at 2PM because reasons?


GDXJ weekly:

Ask your local goldbug TA what the downside target is for a break of the horizontal support line.

Go ahead, ask him.

No really, ask him.

Was that the bottom in gold?


Wednesday news

Not much news, buy the damn S&P.

Ritholtz - OMG the market crashed in 1929! Heavy sigh.

Liz Ann Sonders - market perspective. She tells the market to quit piddling its frilly pink panties.

Mineweb - Russia buying more gold. This is bullish, you say? What about the fact that Russia is now eating through their currency reserves, of which they have less than a year's worth left? I suspect that at some point they're going to have to dump their gold too.

The Guardian - The Jesus & Mary Chain on Psychocandy, 25 years on. They got ahead on their motorbike, they felt so quick in their leather boots.

Pharmasave Dave's prescient Pinetree post from previous

PS Dave - Pinetree we have a problem. Let's just quote the first half of this, then you can click through to Vancouver Venture for the rest:

Back in the spring of 2011 when gold was trading at $1500 and on it's merry way to $1900 and the talk of $3000 gold was all the rage, Pinetree Capital opted to leverage their seed generator model via a $75 million 8% debenture offering.

Part of the covenant of the offering was that the debt to net asset value ratio will not exceed 33%, which was not a problem at the time of the offering. In May 2011 Pinetree had approximately 136,389,000 shares outstanding with a net asset value of $4.30, the assets were worth $586,472,000 so $75 million was just a mere 13% debt to equity. Well within the covenant.

How things have changed in the summer of 2013. Pinetree is now under pressure as CEO Sheldon Inwentash is now finding out that the bank is his new boss.

Pinetree Capital Ltd., as at June 30, 2013, was not in compliance with one of the debt covenants contained in the convertible debenture indenture dated May 17, 2011, as supplemented by the first supplemental indenture dated Dec. 11, 2012, in each case, between the company and Equity Financial Trust Company, as trustee, which govern Pinetree's 8 per cent convertible unsecured subordinated debentures due May 31, 2016. The debt covenant at issue prohibits the company's debt from exceeding 33 per cent of the total value of its assets, as reflected on its (unaudited) consolidated balance sheet as at the last day of each month. As at June 30, 2013, Pinetree's debt-to-assets ratio was 36 per cent. Pinetree has attempted to manage its debt-to-assets ratio throughout the year, primarily by retiring in excess of $14-million principal amount of debentures under normal course issuer bids (representing approximately 19 per cent of the debentures originally issued), however, the downturn in both commodity prices and the junior resource space generally has eroded the value of the company's investment portfolio.

Pinetree will continue to monitor its debt ratio, which it estimates to currently remain at a similar level to the June figure.

Pinetree has pared the original $75 million debentures back down to $60,864,000 as of June 25 2013 through a series of buybacks. Unfortunately Pinetree's main source of income is based on capital gains and with interest payments of approximately $4.9 million a year, a declining portfolio value and the need to buy back debentures to stay within the covenant guidelines the pressure is on the portfolio.

As of June 30th Pinetree declared a NAV of $0.76/share and with 143,819,000 shares outstanding giving Pinetree's portfolio value of $109,302,440 net of debt. So Pinetree is faced with a double edge sword, as the margin calls come in from Equity Financial and the interest payments rack up Pinetree would have to sell its portfolio into a very illiquid market further depressing their portfolio and putting more pressure on their covenant.

Here is a list I compiled from Pinetree's website, Pinetree's disclosure policy is to disclose the public positions over $1,000,000, this is as of March 31, 2013. I have adjusted for reverse splits, takeovers and spinoffs to the best of my knowledge. The prices where as of August 2nd for valuation with the original cost provided.

This is a pretty large portfolio and anyone of these companies could be under further price pressure given Pinetree's circumstances, although the most liquid companies could be sold first.

FWIW I grabbed some of Sheldon's Coro shares at 3.5 cents. Smokes money, nothing major, I'd still rather own the S&P 500.

On the one hand, it's been beaten down by a seller who is far too large for the market in this stock, and who seems to be selling at gunpoint. That seems to be a good time to buy, not sell.

On the other hand, just because a drive gets forced with a heavy torque doesn't mean it'll be able to bounce back one the torque leaves. Sometimes the torque is enough to break the drive entirely. Does Coro get broken just because it's now at 3.5 cents? We've seen that before with other juniors. Hopefully Coro doesn't need to do a dilution, for example.

Anyway, PS Dave's post has a list of the companies that Sheldon owned as of last year. So go read that if you're shopping for bargoons the way Dave's hero Rick Rule does.

A humourous story about junior mining stocks

A guy is driving around the back woods of Montana and he sees a sign in front of a broken down shanty-style house: 'Talking Dog For Sale'. He rings the bell and the owner appears and tells him the dog is in the backyard.

The guy goes into the backyard and sees a nice looking Labrador retriever sitting there.

'You talk?' he asks.

'Yep,' the Lab replies.

After the guy recovers from the shock of hearing a dog talk, he says 'So, what's your story?'

The Lab looks up and says, 'Well, I discovered that I could talk when I was pretty young. I wanted to help the government, so... I told the CIA. In no time at all they had me jetting from country to country, sitting in rooms with spies and world leaders, because no one figured a dog would be eavesdropping.'

'I was one of their most valuable spies for eight years running. But the jetting around really tired me out, and I knew I wasn't getting any younger so I decided to settle down. I signed up for a job at the airport to do some undercover security, wandering near suspicious characters and listening in. I uncovered some incredible dealings and was awarded a batch of medals.'

'I got married, had a mess of puppies, and now I've just retired.'

The guy is amazed. He goes back in and asks the owner what he wants for the dog.

'Ten dollars,' the guy says.

'Ten dollars? This dog is amazing! He worked for the CIA and won medals! Why on earth are you selling him so cheap?'

'Because he's such a bullshitter. He's never been out of the yard.'

Tuesday, October 28, 2014

Tuesday morning news

The argument that the Federal Reserve has "faked a recovery by printing money and handing it over to investment bankers to buy stocks to artificially float the stock market" has one big problem:

Hard economic data.

Here's two examples for today:

Calculated Risk - ATA trucking index up 3.7%. Forget the "unchanged from August" bit, it's a noisy data set. Trucking is up 3.7% yoy and that means growth. Unless, of course, you're some low-grade fucking moron who insists that the US Federal Reserve is renting out trucks to fool mom & pop investors into believing in a non-existent economic recovery.

Calculated Risk - SAAR predicted to be up 5% yoy. Unless of course you think the Federal Reserve has expanded its balance sheet by buying a few dozen million cars over the past 5 years in order to trick Wall Street into buying shares of Ford.

Transports breakout


Please copy the link for this post, and forward it to every single clown you know who was suggesting just a couple weeks ago to puke equities. Send it to every blogger and every market "professional" and every stupid "journalist".

Because what this chart is showing right now is an upward breakout in transports.

An upward breakout in transports doesn't lie: it is confirmation that the bull market is continuing and the US economy is still growing.

Congrats to all of you who increased exposure 2 weeks ago, and all of you who simply stayed fully invested because you saw the stupidity of the selloff.

Union Pacific and how every hedge fund is run by morons

A recap.

Back in mid-October, Union Pacific was a piece of garbage stock that needed to be sold because:

1. deflation
2. collapse in world trade
3. Ebola
4. poor future for shale oil because oil prices went down
5. wharrgarbl.

All perfectly intelligible reasons to puke UNP, right?

So splain this to me:

That's not just a recovery, but an accelerating upward breakout.

So here's an interesting idea for all of those financial professionals reading my blog:

If you were to track down every person in your office who was in favour of dumping UNP at $100, and then you beat each of them to death with a hammer, it would be illegal. In some states, you might get the death sentence. No good and sane person would ever do such a thing.

And that is why your stupid firm will never outperform SPY. Give up.

Gold is gettin' it good

Gold certainly is getting smacked down hard in the US this morning, eh? I guess someone needs the price back down for options expiry, eh?

Monday, October 27, 2014

Hey Nolan!

Hey! Nolan!

Have you figured out what the problem with Sandstorm is yet? Cuz I'm thinking this chart would inspire an ambitious lad like you to seize the reins and take control, y'know?

This chart here says that the value of Sandstorm has shrunk by two-thirds, relative to Franco Nevada, in just two years.

Wow, that sucks.

Is Pierre Lassonde really that much smarter than you, Nolan? Maybe you should quit your Sandstorm job and go work for Pierre for 5-10 years and get an education in how a streamer is supposed to be run.

Interesting gold price chart

Check this out, it's really not a bad chart at all:

Hey, all this talk about $1230 gold, and yet it's actually worth $1388 right now? What gives, man?

It's worth that much to me because I'm not an American.

Actually there's about 6.809 billion people out there who aren't American, but who's counting?

Keep selling, Whitey!

Monday news and socialist agitation


BI - Hussman thinks the stock market is crashing. Well of course this clown thinks the market is crashing, he's always thought it's crashing. Blodget, you douchenozzle, I'm deleting the BI link off my cellphone: since your website continues to feature ignorant fruitcakes like Hussman, you've now become a waste of my fucking time.

FT Alphaville - Goldman's new take on the oil selloff. $70 oil would be good for the US economy, no? Maybe for Europe, China and Japan too! Not so good for the Middle East or Russia though - hey, that's even better! What's not to like? Even Alberta gets fucked. That's awesome.

Chronicles of Brodrick - winners and losers from low oil prices. Hey Sean, you forgot to put "oil and gas newsletter writers" in your list. How's the junior oil and gas stock market been looking recently?

Gavyn Davies - is worldwide economic growth permanently lower? When are these pundits going to realize that Krugman and Piketty have it right? The economy needs a balance between rentiers and the proletariat: if you confiscate all the income of the poor and hand it to the rich, the rich will suddenly have a whole pile of excess savings and nobody to lend it to.

And that's what's been happening for the past 50 years, and that's why the worldwide economy is now confronted with deflation: the rich now have all the money, and nobody left who they can lend it to.

That's the endgame of the war against the proletariat. All that's left for the rich is to dissolve all democratic institutions and rebuild the feudal system.