Jimbo

APPLE......THE OIL WELL ANALOGY Apple is like and oil well. The share price appreciation has been almost all multiple expansion since 2013. The business operational metrics have not improved much. The price has moved up powered by the wells natural pressure - natural lift. Natural lift is provided by the operational metrics of the business. Its been a real gusher. But as we get above a price to free cash flow ratio of 15 for the stock. The wellhead pressure for the price appreciation is dropping. The management of APPLE wants to keep the share price appreciation game going. By adding a lot of artificial lift (share buy backs) to replace the loss of natural lift. Coyote lift.

MANTRA OF THE DAY Real assets yes financial assets no.

NEW ETF SUGGESTION Where is the Imploding IPO lockup period expiration short ETF when you need it. Of course it needs a catchy name for marketing purposes of course How about the Lost Dreams ETF??????

THE DEFECIT AND THE REPO MAN The simple fact is that the FED is now the REPO man. Reposessing all those loose treasuries (an extra trillion a year) through open ended intervention and funding in the REPO market. It has no choice. Otherwise the treasury market will go south pretty quickly. And take the stock market with it!!!!!!!! Shades of 2008.

TOBACCO IS SMOKING HOT Tobacco stocks cheap But the Tobacco space needs to be restructured: 1/ BAT needs to break up into a US and a non US company like Altria and PMI did. 2/ PMI needs to takeover Imperial Brands. 3/ The US BAT company should then merge with Altria. 4/ The non US BAT company should then merge with PMI. All this probably wont happen but would create massive increases in market caps if it did.

WEWORK AND THE FAKE $47 BILLION VALUATION What was Wework It was and is fundamentally an experiment in financial engineering Two experiments to be exact Experiment One: Can fake belief (valuation) be created in the private market and that valuation transfer over into real belief (valuation) in the public market (via an IPO) The answer is no!!!! Experiment 2: Can the founder still become a billioniare by selling out in the private rounds without selling out in the public listed space. The answer is yes.

BEYOND MEAT It appear that Beyond Meats stock price is now beyond the shark.

BONDAGE FOR BONDS So the Fed has to keep the repo market rate repressed. So it can keep the treasury yield curve repressed. So all the other bond rates can be kept repressed. That sounds like a lot of bond bondage to me !!!!!!!!!!!!!!!! Fed has to guarantee the profitability of all the bond leveraged carry trades.

ORGANIC QUANTITATIVE EASING So the Fed Chair says the balance sheet growth will be "organic" And we cant call it QE4 How about we call it: "Free range organic quantative easing"

THE QUANTITATIVE EASING YOU HAVE WHEN YOU DONT HAVE QUANTITATIVE EASING So we have QE4 we just we cant call it QE4 QE 4 (NOT)

FROM WEWOKE TO WEBROKE You cant short Wework unfortunately. But you can short Softbank. And you can short Wework debt.

THE GODS OF THE MARKET IN THE END RULE And there was a great wind in the REPO market, and lo a great crying was heard and the clash of cymbols, drums and mysterious thunder.....etc....etc In 2007/08 wall street tried to "maintain" the mortgage security market by sacrificing their balance sheets. Didnt work out too well If i remember correctly. Resulted in quite a few sacrificial victims to the gods of the market. Fast forward to 2019. They are again sacrificing their balance sheets to maintain the treasury market. Won't work out too well this time either. There is a reason a lot of banks wont lend at the higher rates. They know that the money is being used for a losing purpose!!!!!!!!!! The fact is that cheap repo money maintained the hedge funds in their leveraged treasury plays. The cheap repo money is gone and these trades are now money losing and need to be unwound. Its not going to be pretty.....not pretty at all.

ALTRIA AND PMI....EXISTING IN DIFFERENT FRAMES It seems that my advice has been followed and the merger cancelled. The problem with merging there companies is that they exist in different frames. The international regulatory framework is so much more benign for tobacco than the US framework. They were trying to merge incompatable frames. Altria needs to get a better grip on the negative frame in which it exists. The only reason it is tolerated is because the states and federal government need them as a tax cow. And making cigaretes illegal will merely create a vast black market. (These simple facts need to be constantly pointed out to the regulators to lessen the pressure) The great flaw in the agreement they reached with the States and the Fed is that there was no standstill agreement on tax increases. As the States get more desperate for money expect more taxes and declining sales.

QE4 HAS ALREADY STARTED Why!!!!! Because the FED will have to implement QE4 to take all the treasury buying stress off the Banks. Because right now the Banks are holding up the Treasury market!!!!!! And its showing up as stress in the REPO market. There's just not enough REPO money to fill the growing hole in the treasury dyke. Full monetization of treasury debt coming to a market near you!!!!!!!!!

AND THERE WILL BE SIGNS!!!!!!!!!!!!!! So the repo market has coniptions because it cant fund the $1 trillion Government deficit anymore. Because Banks dont want to dump their treasury postions all at the same time and crash the treasury market. So the Fed has to ride to the rescue and take on the burden of monetizing the defecit. So QE4 starts now!!!!!!!!!!!!! We must remember that the REPO market was a great PONZI engine providing almost costless funds to be used in leveraged carry trades to buy longer dated and higher yielding debt. That engine no longer works........no longer drives asset price appreciation. The rise in REPO rates has basically made most carry trades using repo funds no longer profitable.