Jimbo

THE GOVERNMENT SHUT DOWN QE When you thing about it the Government Shut down is a form of QE Instead of increasing demand for bonds you reduce the supply. Rates go down and money flows into stocks. But when the shutdown ends the QE ends. I am sure traders are positioning themselves for a short sharp fall in prices.

CREATURES FROM THE QE SWAMP When you think about it Heinz Kaft and Inbev are sort of creatures from the QE swamp Corporate vehicles - publicly listed LBO's - with lots of debt- structurally designed to benefit from QE. BUT: Drain the debt swamp and their stock prices wilt. Both have gone over the coyote cliff and lost half of their market cap. Both need to eliminate their dividends and spend every dollar of FCF on debt reduction. This should stabilize their stock prices and lead to reasonably quick debt reduction. Indeed they are both prime candidates .......along with GE For a "Coyote Recovery ETF" This would invest in companies that have gone over the cliff and are now in recovery mode.

DIWORSIFICATION Peter Lynch talked well about DIWORSIFICATION Altria is a prime case right now. Overpaying massively for Juul and Chronos. Altria would have been far better off using those funds to creep up the INBEV share register. Taking advantage of the fact that INBEV's share price has cratered due to its excessive debt. Sectors currently in a bubble: 1/ Pot Stocks 2/ Fintech 3/ Bonds

THOUGHTS ON THE FED PUT The Fed put used to trade like a US treasury. Now it trades like a junk bond.

WHAT WE LEARNED IN 2018 Trade wars and tariffs are actually bad for stocks. Rising interest rates are bad for stocks. Overvalued markets finally correct. Tarrifs are a classic case of Bastiat's seen and unseen Yes the protected industry expands. But the increased cost of the protected industries goods causes an overall decrease in total demand for that good and overall economic activity.

MORE THOUGHTS ON APPLE given 1/ The iPhone has flatlined technologically - lengthening the replacement cycle. 2/ Apple can only increase sales and profits by raising prices I cannot see the actual real reality price of this stock increasing. I can only see it going down and taking the market reality price with it.

2018 - THE YEAR THE PUMP WAS REPLACED BY THE DUMP Despite the last end of year rally 2018 was the year the pump was replaced by the dump. I don't think the dump in 2019 will be that bad. Normalisation has to occur to save the pension funds from insolvency. Sill numerous stocks where their market reality price (MRP) has to adjust to their actual reality price (ARP) in 2019 Apple is now selling near its ARP.

THE TAX CUT PUMP AND DUMP When you think about it the corporate tax cut operated in a similar manner to a pump and dump scheme. First the tax cut and repatriation of funds to pump the stocks. Then the bond market realises that they have to fund the tax cut - leading to treasuries falling taking corporate bonds with them - rates rising. Stock market suddenly realises that corporate bond rates will rise forcing corporates to cut back on borrowing and stock purchases - the dump part.

THOUGHTS ON THE BEAR Why there was no Christmas rally? Too much Bear....in such a market all news (including good news) is bad news Thats why Mnuchin's attempt at a good news story about calling the PPT. Turned into a bad news story. The Trump bump and corporate tax cut was the final overvaluation push that set the market up for the bear market. The tax cut while short term bullish was actually long term bearish as it added to the deficit and pushed up interest rates which pushed down stocks!!!!!!!!!! All the Synthetic QE from Trump or Mnuchin will not be effective. Synthetic QE is only effective in BULL markets not BEAR ones. The thing they really need to do is cut the budget deficit to take the pressure off interest rates. But they wont do that. So its back to more printing.

THE POWELL PUT Not a real put.....only worth 10-20 cents in the dollar tops. It seems that the markets cant handle "normalization"

THE HONEST HEDGE FUND CLOSURE LETTER A lot of smart hedge fund mangers are closing up shop. However their closure letters to their investors I think leave something to be desired. In the spirit of Christmas giving and the truth, I have decided to produce a generic hedge fund closure letter that hedge funds that are closing can use as a template to craft their own letters: Dear Investors The game is finally over. It was wonderful while it lasted, but massive Central bank bond buying has sadly come to an end. Ever since they panicked big time in 2009 and introduced massive quantitative easing its been a wonderful ride for stocks and bonds. We have not had to do anything, no stock picking skills required, just every year collect our massive 2 and 20, take very expensive holidays and buy ourselves lots of very expensive presents for Christmas. THANKS FED. Its been a wonderful welfare scheme for investors and hedge funds, but the writing has been on the wall ever since that Trump fellow got elected President and those little riots in Paris just seem to confirm everything. We looked like geniuses by just sitting tight and doing nothing. But the very action of this inaction is now making us look like fools. Time to shut up shop and open that private office in order to take advantage of all the wonderful shorting opportunities, and then pick up all the cheap assets after the crash for cents in the dollar. Just remember: all good Ponzi's eventually come to an end. Sorry got to go, the private jet to my holiday destination is waiting on the tarmac.

FRENCH GOVERNMENT BONDS ANYONE????? I think not. I think a theme in 2019 will be a sell off in European bonds.

OVERVALUED STOCK OF THE DAY Coca Cola - why hasn't it broken yet??? $200 Billion in market cap and going nowhere fast No to negative growth in sales and FCF. Only has $6 billion in FCF Sells for 35 times free cash flow Has added debt over past few years to help pay for dividend. Needs to lose $100 Billion in market cap to be worth investing in.

PUMP AND DUMP FOR ADULTS REDUX A lot of big cap stocks have a large "Ponzi value" included in their stock price due to all the stock buy backs financed by all the cheap QE debt (BBB rated debt). This Ponzi value will continue to bleed out in 2019.

APPLE REDUX I bagged Apple on this Board a while ago. Apple subsequently loses $200 Billion in market cap. Which is rather annoying. Because I can no longer bag the stock. As at 800 billion in market cap it is within a reasonable value market parameter With 50 billion in FCF its worth about 750 Billion (15 times FCF) If you think of the stock as a bond (and that's a good way to think about a stock) its yielding 6-7% (FCF/Market Cap). Reasonably priced. Particularly in comparison with so many overpriced big caps out here.