Infrastructure Bust Confirmed

“The Fly” warned you, countless times, regarding the pending bust in global growth aka “infrastructure plays.” Today, Terex Corporation [[TEX]] confirmed my thesis. Next up: Vulcan Materials Company [[VMC]] .

No need to toot my own horn, since I am in a perpetual state of victory. However, I must admit, my call on the end of global growth, coupled with big trouble within U.S. municipalities, was a Godly one.

Much to my chagrin, I find myself here long Freeport-McMoRan Copper & Gold Inc. [[FCX]] and a variety of oil stocks. I know how my subconscious works— and it’s those damn hurricanes that motivated me to get long.

In hindsight, it was a mistake. But, I am sure I can weasel a way out, via large average downs. Don’t try this at home.

To a large extent, I have been cushioned because of the rise in Western Refining, Inc. [[WNR]] . As you know, I have a nice sized position there.

Going forward, I can’t help but think the banks are in a free fire zone, especially since Cramer said to go buy ’em all, yesterday.

Make no mistake, the bust up in commodities is having a trickle effect. You can’t say I didn’t warn you.

Bottom line: short Cathay General Bancorp [[CATY]] , short PacWest Bancorp [[PACW]] , short Morgan Stanley [[MS]] , short Goldman Sachs Group, Inc. [[GS]] , short East West Bancorp, Inc. [[EWBC]] , short TCF Financial Corporation [[TCB]] , short [[FED]] and short Legg Mason, Inc. [[LM]] is the way to go. And, don’t forget to bet against the retards at Jacobs Engineering Group Inc. [[JEC]] , Foster Wheeler Ltd. [[FWLT]] , Fluor Corporation (NEW) [[FLR]] , ABB Ltd (ADR) [[ABB]] and URS Corporation [[URS]] .

Or, you can just buy [[SKF]] and go for a swim in the pool.

This commodity is driving me batty. It’s scrambling my brains, with the constant “homo hammering.”

Where are all the powerful oil men, the oligarchs, when you need them?

Thank heavens, my recent forays into [[SKF]] , [[SRS]] and [[FXP]] has hedged my disastrous commodity bets. Just so you know, as a result of this madness, I sold out of my Southern Copper Corporation (USA) [[PCU]] position, exercising a little discipline. The way I figure, I’ll be chasing Freeport-McMoRan Copper & Gold Inc. [[FCX]] down anyway. Why hold a second tier name?

On the bright side, it looks as if I’ll be able to curse, literally any day. As you know, I vowed to refrain from using foul language on the site, until the Dow hit 11,000. My confidence is unwaivering. My IQ is much higher.

In other news, Cramer was 1,000,000% wrong on his crazy targets for crude, natty and gold. I believe he said natty to $16, gold to $1,600 and oil to $160, or something stupid like that.

Does anyone care about that? I mean, how long until somehow holds his feet to the fire?

Here, on this stupid blog, you pie eaters jump all over me if I am off by 1 or 2 points. However, more often than not, I prove my detractors to be of the lowest quality, not worthy of dinner with proper silverware.

With my money, I am going insane. I want to punch a few holes in T. Boone Pickens’ car. But, I will go with the flow, like a summer breeze gusting down on a garbage dump or coal mine.

Top picks: SKF, Western Refining, Inc. [[WNR]]

I bought 3,000 [[SKF]] @ $111.12 and 3,000 Freeport-McMoRan Copper & Gold Inc. [[FCX]] @ $78.59.

UPDATE: I bought 1,000 SKF @ $112.

Disclaimer: If you buy the above stocks because of this post, you will get head lice. And, you may lose money.

When China Mobile Ltd. (ADR) [[CHL]] was in the 70’s and I told you it would have a 5 handle soon, you all laughed at me, while eating greasy smoked ribs. When I said China Life Insurance Company Ltd. (ADR) [[LFC]] is a “whore of an equity,” you all chomped corn cobs, like freakin’ beavers eating through wood.

Much to my naysayers chagrin, [[FXP]] is going to print $100 soon, thanks to overwhelming weakness in Chinese H shares. With the Chinese stock market in the dumps, I love the prospects for [[EEV]] and FXP.

Also, remember, FXP gets you short PetroChina Company Limited (ADR) [[PTR]] , China Petroleum & Chemical Corp. (ADR) [[SNP]] and CNOOC Limited (ADR) [[CEO]] too. It has something for everyone.

Look for crude to bounce here. Right away, start plugging away at the refiners. Again, I like Western Refining, Inc. [[WNR]] , Valero Energy Corporation [[VLO]] , Frontier Oil Corporation [[FTO]] and Tesoro Corporation [[TSO]] .

As for the basic material space, it is going to bounce with great fury soon. However, for a hedge, I like VeraSun Energy Corporation [[VSE]] and Clean Energy Fuels Corp. [[CLNE]] here. I am long both.

Courtesy of “The PPT,” here is a small list of basic material names, sorted by large percentage of shares sold short:

Encore Wire Corporation [[WIRE]] : 30.7%

Western Refining, Inc. [[WNR]] : 29.9%

Hecla Mining Company [[HL]] : 27.5%

Trico Marine Services Inc [[TRMA]] : 27.4%

USEC Inc. [[USU]] : 25.4%

RTI International Metals, Inc. [[RTI]] : 24.5%

[[GGC]] : 24.1%

McMoRan Exploration Co. [[MMR]] : 22.9%

Apex Silver Mines Limited [[SIL]] : 22.1%

Flotek Industries, Inc. [[FTK]] : 21.4%

Allis-Chalmers Energy Inc. [[ALY]] : 21%

Insteel Industries, Inc. [[IIIN]] : 20.7%

Metalico, Inc. [[MEA]] : 20%

Goodrich Petroleum Corporation [[GDP]] : 19.8%

Tesoro Corporation [[TSO]] : 19.8%

CARBO Ceramics Inc. [[CRR]] : 19.2%

Dynamic Materials Corporation [[BOOM]] : 18.9%

VeraSun Energy Corporation [[VSE]] : 18.7%

As you know, I am not a big fan of technical analysis. However, I am a huge believer in monitoring price action. The way a stock behaves tells a story. I don’t believe in all of the mumbo-jumbo formations that may or mat not indicate a “break out.” However, I do believe there is something to be said about a stock hitting a 52 week high on a daily basis or a stock up big, on monster volume.

That is why I have put iBC’s IT department to work, in slave-like fashion, to develop The PPT.

I will explain what it can do, in detail, the closer we get to launch (October 28th). Just know, it will monitor the price action of every stock publicly traded, using the parameters I deem important. And, as an aside, we will give the user the power to set his own parameters too.

NOTE: Legg Mason, Inc. [[LM]] caught a downgrade this morning by Credit Suisse, mainly because Bill Miller sucks.

Yesterday Lehman was selling a part of their bank to the Koreans, today it’s Merrill.

I guess there aren’t anymore Chinese, European and Middle Eastern men to con. Also, in an odd twist of fate, the Korean won is getting bludgeoned on a daily basis.

“We have yet to reach an agreement because of differences in assessing the value of assets,” Lee Chol Hwi said yesterday in an interview in Seoul. “We have been seeking to buy a significant amount, but a deal may be difficult at this rate.”

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All very odd, no?

I can see the sales pitch now: “Take your filthy Korean wons see. Take them, see, and buy part of our bank see. We’ll sell it to you real cheap, see. Hey, Johnny, how cheap can we sell it?

Johnny: “We can sell it for 5 billion bux [sic].”

“See, 5 billion bucks for a piece of America, see. Do it and I’ll throw in a commodity fund too, see. They’re cheap too, right.”

[youtube:http://www.youtube.com/watch?v=iaEYYNM9nN8 450 300]

You thought today’s tape was benign, with a slightly bullish bias for the banks?

Look again.

The commodity/infrastructure plays were manhandled, yet again.

Look at the losses in Joy Global Inc. [[JOYG]] , Bucyrus International, Inc. [[BUCY]] , Foster Wheeler Ltd. [[FWLT]] , Fluor Corporation (NEW) [[FLR]] , Caterpillar Inc. [[CAT]] , Terex Corporation [[TEX]] , McDermott International [[MDR]] , amongst others. And how about the dry bulk shippers? Boy, they were great, right.

Look again.

Shares of DryShips Inc. [[DRYS]] , TBS International Limited [[TBSI]] and Genco Shipping & Trading Limited Genco Shipping & Trading Limited [[GNK]] have been oven stuffed and eaten.

The ongoing theme is destruction. One sector at a time—everything is burning. Albeit, from time to time, you will get an oasis sector, like ag, oils and banks; but for the most part this market has been the greatest destroyer of wealth EVER.

I have never seen anything like it, yet the vix is still in the low 20’s and ‘tards on the tube keep talking like everything is honkey dory.

Hello, anyone home?

Aside from the great commodity crash, today is D-Day for tech. Ooh, everyone said money would roll out of oil into Research In Motion Limited (USA) [[RIMM]] , Apple Inc. [[AAPL]] and Intel Corporation [[INTC]] .

How’s that working for you?

The semi’s, led by Lam Research Corporation [[LRCX]] , Intel Corporation Cypress Semiconductor Corporation [[CY]] , Marvell Technology Group Ltd. [[MRVL]] , [[WRF]] and Altera Corporation [[ALTR]] , are dead and buried too. Don’t even get me started on the solars.

Basically, pick a strong sector and short it. You like how healthcare or biotech is trading?

Short them.

You know they will be taken to the woodshed, eventually, by some “unforeseen event.”

With my money, I am prepared to buy more [[SKF]] at $105. And, I will continue to buy the dips in [[DIG]] , [[IEO]] , Freeport-McMoRan Copper & Gold Inc. [[FCX]] , Southern Copper Corporation (USA) [[PCU]] and National-Oilwell Varco, Inc. [[NOV]] .

Also, I still like the refiners, particularly Western Refining, Inc. [[WNR]] , for a trade. Don’t even get me started on Legg Mason, Inc. [[LM]] . Bill Miller is making a comeback. Hurry up, get long.

Get back to me in two months and tell me how that worked for you.

Just a quick note, since I have work to do.

Thirteen gulf refineries are still offline, causing gasoline to spike, while oil eats dirt—mainly for liquidation reasons.

In short, the profit margins for the refiners are rocking and rolling (sorry for the corny broker phrase), as the “crack spread” widens. Moreover, with Hurricane Ike on his way to slap around a few rigs named Tina, I bet the refiners will continue to run here.

Here is a list, courtesy of “The PPT,” of publicly traded refiners with a large percentage of shares sold short:

Western Refining, Inc. [[WNR]]: 29%

Tesoro Corporation [[TSO]]: 19.8%

Sunoco, Inc. [[SUN]]: 16.1%

Frontier Oil Corporation [[FTO]]: 11%

Alon USA Energy, Inc. [[ALJ]]: 7%

Valero Energy Corporation [[VLO]]: 2.6%

Delek US Holdings, Inc. [[DK]]: 2.6%

Commodity stocks are being unraveled here. They are gapping lower, as bids dry up and losers head for the exits.

Stocks like Freeport-McMoRan Copper & Gold Inc. [[FCX]] , United States Steel Corporation [[X]] , Southern Copper Corporation (USA) [[PCU]] , Century Aluminum Company [[CENX]] and all of the oils are dropping in fantastical fashion.

At the same time, banks are up.

This makes no sense and cannot/will not continue.

I must say, it’s very tempting to jump in here, on the material names. However, it’s hard to pin down a good cost basis, when the bottom drops out. Just yesterday, I initiated a position in FCX. Look where that got me.

The market is hardly down. Yet, if you are long commodities, you feel like it’s down 500.

To hedge the commodity debacle, take a look at ethanol plays, like VeraSun Energy Corporation [[VSE]] and Aventine Renewable Energy Holdings, Inc. [[AVR]] . Also, take a closer look at the refiners—like Western Refining, Inc. [[WNR]] , Valero Energy Corporation [[VLO]] and Tesoro Corporation [[TSO]] .

Or, take down an oil down etf, [[DTO]] .

In short, if you are looking to buy the blood, do it in small increments.

For example: if you want to own 1,000 FCX—buy 200 share increments, every 3 points.

I cannot stress this point enough. Dollar cost averaging into stocks is the most important aspect to swing trading or investing, especially in volatile markets. Never deploy all of your capital at once. Instead, stagger your buys over days and weeks, until your target position is reached.

Try to trade without hubris. Trading with your balls will make you a very poor person. Your wife will leave you and your health will go downhill; then you will die.

How’s that sound?

UPDATE: I bought 2,000 FCX @ $79.60. My next buy will be in the $75 range.

My Clean Energy Fuels Corp. [[CLNE]] is rolling downhill now. With Proposition 10 looming, I think it makes perfect sense to be long CLNE—at least until Congress is set to vote on it. If President Obama is really intent on “greening up,” he will go with the “Pickens plan” and give incentives to our trucking fleets to switch over to natural gas. Plus, it will save many of the land based trannies lots of money on fuel. At the present, with the low prices of natty, it will cost $1.55 a gallon to fill up. Compared to the insane prices of diesel, it’s a no brainer.

Oil just can’t catch a bid here, effectively annihilating those who are unlucky enough to be short Vulcan Materials Company [[VMC]] . Also, all of the banks are starting spring higher, due to the nonsensical notion that they benefit off of cheap oil, or something. At the end of the day, the banks trade lower. Write it down.

Nonetheless, the energy sector is bouncing today, as investors realize how gay it was to sell them “fire sale style,” yesterday.

With my money, I like [[DIG]] , [[IEO]] , but love the refiners, especially Western Refining, Inc. [[WNR]] .

The short position is monstrous (29%). With all of the storms (4) in the Atlantic now, you have to be mentally ill to be short refiners.

Finally, on the long side, I like Barnes & Noble, Inc. [[BKS]] , VeraSun Energy Corporation [[VSE]] , Southern Copper Corporation (USA) [[PCU]] and Freeport-McMoRan Copper & Gold Inc. [[FCX]] , while loathing Legg Mason, Inc. [[LM]] and Pzena Investment Management, Inc. [[PZN]] . Oh, and I also like to bet against Chinese stocks, via [[FXP]] , with impunity, based upon egregious valuations.