A Special Message From Merlin

Poof. Your bullshit Santa Claus Rally is over.

-Merlin

At the present, I am content being both long and short, with an egregious bias toward short banks/commercial retail. My longs include: ERX, TNA, BDK, JPM and ROM. My shorts include ERY, FAZ, SRS, SKF, DUG and REW.

However, the overall exposure is net short. Granted, should the market crap out today, I won’t make a fortune. But, at this point in the year, I’m more interested in being right, than making money.

I rather see people lose limbs, on Wall Street, falling victim to psychotic margin clerks, than make enough money to buy another set of diamond encrusted rims.

The way I figure, if there is another 40% downside in the market, which is my belief, then missing out on a 2-5% day is acceptable. There will be plenty of time to take off the upside hedges and embrace the bear. I plan on doing so, when most of you bulltards are crammed together, in the fucking selling funnel, stomping on each other, dying to get out.

The guy who plays the CIA boss, in Borne Ultimatum, is such a fucking tool. I mean, how stupid was he to believe Jason would go to Tudor City? Everyone knows there are no exit points in Tudor city.

Geez.

This morning, I was flipping stocks, as if I worked at The Pancake House. First I was bearish, then bullish, then bearish. Quite honestly, if i have to deal with this shit for much longer, I am going to fucking smash shit in my office. I’m gonna throw televisions out the window, old school style.

Big money is flooding back into treasuries. Be very careful with your long exposure here. The fact that people are still extremely risk adverse, as evidenced by the TLT, should stifle your exuberance, at least a bit.

For the love of currency and small babies, 99% of you fuckers were scared of the apocalypse, just two weeks ago.

Take a deep breath and put things into perspective. Is it enough to own stocks, based upon the fact that they do not go lower, over a 1 week time frame? If this bear market has taught you anything it is to not trust anything or anyone, sans “The Fly”; because he’s looking out for you.

The bullish points are price action and “baked in” Armageddon at the retailers. Any upside in holiday sales will really have an impact on the underlying share prices. However, as far as the fundamentals are concerned, I have a serious issue getting long oil stocks, with crude in the low $40’s. Nonetheless, I am long ERX for a trade. Although it’s worth noting, I sold some out for a quick .25 loss.

Bottom line: For once, I suggest being very careful here, both long or short.

For the record, I do not think we will start nosediving here. That’s too easy. Emotional rallies are hard to stomp out. As evidenced by the action in the semis this morning, there comes a point when people are sick of bad news and want to believe everything is priced in.

Early this morning I sold some longs. However, just in case, once again, I am throwing some long trades on again. I have a funny feeling they will try to gun this market later on today. I bought ROM and TNA.

Despite oil being cheap as hell, oil stocks are responding positively. For now, it makes no sense to get in front of the train. Bet against those names when the train has stopped, not when it’s charging ahead.

With that in mind, I stopped buying SRS, which I initiated this morning.

Look, just because I think the market is vastly overpriced does not mean it will collapse today. There is room for everyone to be right, considering what time frame you are looking at. Most people that I know, who are bullish, are long rentals, not long term positions.

With my money, instead of guessing when the market will drop, I rather keep both long and short positions, then use idle cash to scalp short term trades, in either direction.

For now, my bias is to be short, with a careful eye on the idiot jumping around in his green leotards.

UPDATE: Buying ERX, sub $40.

Back to the real world:

Everyday this week and next, your favorite corporations will send a spokesman to the proverbial roof top, in order to scream: “we’re fucked.”

This morning, FDX, NVLS, NUE, NSM, TXN, BRCM warned, just to name a few. Tomorrow it will be a whole new set of names.

See, aside from charts, and internet musings from former bears telling you the downward shift in equities is over, in the real world, where people actually live, things are grim.

For example: 58% of modified mortgage losers are back in trouble again. That’s right, Joey Bag O’ McMansion can’t afford his 6,000 foot idiot home. Despite the government forcing his local bank to keep him in the idiot house, he can’t fucking afford it.

Are you listening to me?

He can’t fucking afford it.

As a result, all of those modified mortgages are going to be classified as in “redefault.” How fucking queer is that?

Across the pond, in the U.K., their housing debacle is just getting started. Analysts predict U.K. homes to decline by at least 20%, slumping into 2011. In Hong Kong, property sales are reeling. Don’t even get me started on Japan.

In short, all signs point to an extended period of worldwide contraction, well into 2010. If that’s the case, what the fuck are you doing buying bullshit?

UPDATE: I sold out of my UYM, FAS and BGU positions. Raising cash.

UPDATE II: I am initiating a position in SRS, nibbling at 200 share blocks from $82.

Long time readers of this site know, not too deep down, this whole battle of popular consensus versus “The Fly” will end badly for you bird brained fuckers. Many of you pikers are felling good about yourselves now, with “The Fly” on a 1 week losing streak, while you scalp some coin off the bottom of my shoe.

Let me remind you and make a prediction: This time is no different than the countless times when I’ve proved you wrong; and, soon enough, I am going to put you fuckers to sleep, like old dogs, for trading against me.

Sure, you’re entitled to your own opinion and the right to make an accurate market call, every once in awhile. But don’t forget, “The Fly” wins all the time, even when he appears to be getting poleaxed badly.

New readers may put that claim into question and ponder to herself: “is this man serious”?

Yes fucktard, I am as serious as a cocaine induced heart attack. Moreover, let me tell you little shit faces, the Dow Jones is going to be deep water diving sometime very soon. The ongoing collapse of American capitalism (remember that) will not end with a few scrapes and bruises. It will end when your torso has been removed from your limbs. It will end when FDX says “oil is cheap, but we don’t got shit to deliver.”

Rates are low; but standards are super high. Homes may be down in value, but still expensive, compared to wages.

Please, let this rally be the opiate to lull you into a deep comfortable sleep.

“The Fly” has nothing but disdain for most of you and will gladly “wake you up,” with news of pending insolvency and personal liquidation, via a very bad negative equity situation.

Okay, shhh, go back to sleep now.

[youtube:http://www.youtube.com/watch?v=XUGAmDTLPY0 450 300]

So we are running higher, based upon a stimulus program, that is being funded by more debt? The banks are running because the Gov’t will not allow C go out of business?

None of this makes any sense.

The economy is not going to recover in 6 months. Therefore, buying into this rally is equal to playing with a book of matches, in the middle of a pool filled with gasoline.

I could understand the run up in basic material/construction names. But, I cannot support the view that commercial real estate has bottomed, or that banks are cheap here.

Banks are not cheap. They might have been cheap last week, but not after a 50%+ run.

I should be buying SKF and SRS here, down at these levels. However, with Santa Claus around the corner, and men with small brains on the loose, it makes sense to be careful and make my next move in a very deliberate/careful sort of manner.

Sometime soon, I will sell FAS, BGU, UYM and other longs, while the market chokes on black dust and crushes the hopes of people snorting mustard seeds.

There comes a point when an investor loses his desire to make the hard trade. Instead of going with his gut, he will go with the herd, buying or selling, because it’s easy. Deep down, he knows the herd is always wrong, but follows them anyway, in an effort to outsource investment decisions.

If this is happening to you right now, pay attention, else find your account in a very egregious negative equity position.

The herd is stupid, full of gay bovine, who rather play Jenga at night, than study the history of the stock market. These people wear green leotards and frequent Broadway plays, on a regular basis, in order to conform. They visit third world nations, in order to “take in the atmosphere,” and donate money to criminal charities. If you are sick of losing money, instead of following them, go to cash.

Let’s say you made a few bad trades, and your account went from 100k to 70k. At 70k, you may begin to panic and switch positions to better suit the current trends. The only problem with doing that is you are late. You already missed the meat and potatoes of the rally. More often than not, switching teams, after a good kaning, will send your bullshit account down to 50k.

Let’s get more specific:

Say you are long 1,000 FAZ, 500 FXP and your head is on fire. First, dunk your head into a toilet bowl and flush, in order to douse the flames. Then, instead of selling all of your losers (FAZ, FXP), why not hedge it via a FAS or UYM long?

That’s exactly what I did on Friday. I sold 1/2 of my inverse shorts, regardless of the losses and went long UYM, FAS and KBR. As a result, I’m on the fucking hamster wheel to nowhere, FAST, today, up no more than .00001%.

But, my next move will be Godly. I will attempt to time my sells to coordinate with a near term top, always a dicey endeavor. However, at the same time, leave enough cash aside to correct mistakes, via going long/short for scalp trades.

Bottom line: Don’t give up, just because you’re a loser without a brain. Think about the market as a battlefield, where every decision you make gets you closer to killing that fucking homo in the green leotards.

You know, I can’t give a valid reason for the market rally, aside from a pending stimulus plan and/or the market is sick of going down? Knowing full well how stupid people are, I bought up blocks of UYM, as if my head was on fire. The rational thing to do, in my opinion, is to fade the rally. I might start doing that, sometime very, very soon.

Until then, when in Rome, you might as well do as the Romans do and snatch the purses of slow minded tourists. And, you might want to buy what has been tossed aside, such as oil and other commodities.

But, in the long run, it is a mistake to believe the economy will inflate, at least right away.

Enough of the annoying voice of reason. Let’s talk about what’s running:

Infrastructure plays: ACM, PCR, FWLT and FLR.

Oil: RIG, NOV, OXY, HP

Tech: RIMM, AAPL, HPQ, IBM

However, at the end of the day, you must smoke ample doses of crack cocaine to think the market will go much higher, with SKF, SRS down at these levels. I don’t even want to talk about FXP.

My recovery plan was put into place on Friday. I ate a lot of losses in shorts and hedged with going long UYM/KBR. And, I built up a cash position of more than 30%, which will help me make quick/scalp trades.

As of 12pm, the only moves I made was to cover my GVA short and buy more UYM.