Shorts began a bit of covering last month, finishing with 8.86 billion shares shorted from 9.0 billion.
Shorts are notorious for going out on their shields. Never satisfied with being right when it comes to winning, shorts must see a complete destruction of companies and stocks. Conversely, when the trade starts to go against them, the idea of breaking even or taking a small loss is a badge of disgrace.
Thursday, however, shorts had to do some soul searching.
While major equity indices were up 1%, the eight stocks with 50% or more of the short positions, including Mattress Firm Holding (MFRM +2.5%), Scientific Games (SGMS +3.9%), and Conn’s (CONN +3.5%) rallied an average of 2.5%. There were other storylines, including pops in banks, and transportation stocks that had better-than-expected results from JP Morgan (JPM) and CSX Corp (CSX).
Purist will want to see the transportation stocks move higher, which means cracking the downtrend with the Dow Jones Transportation (DJT) index closing above 8,200.
Death of an Industry
So if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they are going to be charged a huge sum for all that greenhouse gas that’s being emitted.
-Barack Obama
January 17, 2008
It wasn’t an empty threat in those comments from then presidential candidate Barack Obama in an interview with the San Francisco Chronicle. After a landmark 5-4 Supreme Court decision in April 2007, Obama knew if elected that his powers to fight greenhouse gases would be unlimited.
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In 2009, his administration released its so-called “endangerment finding” to combat carbon dioxide and other gases. In effect, the Environmental Protection Agency (EPA) turned into a Frankenstein’s dream and it unleashed onto the coal industry.
From World Beater To Simply Beaten
Peabody Energy (BTU) is a great American success story that traces its roots back to 1883. In the years leading to the Obama administration, it powered a nation and even a nice chunk of the rest of the world.
BTU |
Revenue |
Tons |
Plants |
Countries |
% US Power |
% Globe |
2008 |
$6.6B |
255.5 |
329 |
21 |
10% |
2% |
The toll taken from Obama’s War on Capitalism has been devastating, resulting in Peabody taking $3.9 billion in losses over the past four years.
BTU Losses |
2012 |
2013 |
2014 |
2015 |
$1.98B |
$777M |
$512M |
$585M |
Wednesday, Peabody filed for bankruptcy protection, bringing Obama’s prophecy to fruition, a promise made by candidate Obama eight years earlier.
Ironically, in what could only be deemed too little, too late in June 2015, the Supreme Court ruled 5-4 that the administration had gone too far with an unreasonable interpretation of the Clean Air Act. The share price of key coal stocks (KEG), Arch Coal (ACI), Alpha Natural Resources (ANR), and Peabody (BTU) are down 99%.
However, those numbers don’t speak to the human toll. Estimates vary from 50,000 to more than 100,000 American coal jobs that were lost. The government says mining has lost jobs in each of the past 18 months for a grand total of 184,000. President Obama, you kept your promise.
Market Watch
Keep an eye on the NASDAQ composite, which continues to languish but has made a series of higher highs and lows and it could gather steam as it heads back to 5,000.
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