A Special Message From Merlin

Poof. This late day rally shit is over.

-Merlin

The tone for the markets will be set in early 2009. There are two train of thoughts now.

1. Everything is priced in. Large pools of cash are dying to buy equities.

2. This is just the beginning of the economic slide. Large pools of cash are on the sidelines because stocks are for asshats.

Personally, I feel, as always, stocks are for asshats. Going into 2009, I have a short/sweet list of potential short sale set ups worth perusing.

Here they are:

AIV, AXP, LM, BAM, KIM, VNO, CMA, HK, XOM, RIG and PACW.

In the event the market shows early strength, quickly, I will buy the following for trades:

GG, AMZN, NFLX, TEF, CNI, ENR, ACLI, BG, ABB, SY, INT, AET, NUE and GTY.

Without a doubt, there are a lot of good values, if looking at stocks from a traditional point of view. However, we are not in traditional times.

While you sit there, in your bullsiht pleather chair from Staples, the government is stealing from you. They are taking your money and giving it away, in order to “save the economy.” Moreover, on a local level, they will be raising your taxes and reducing services. Quality of life is on the decline—no doubt.

Like I said before, commercial real estate is doomed to be fucked every which way but loose. If you are in the camp of thought that commercial Re will undergo a mere “shallow pullback,” like “The Field Clown Doug Kass,” you are in for a very, very rude awakening.

Sit there and wait for the vacancies and dividend cuts to happen; then get back to me and say “KIM is a great fucking buy.”

Finally, at the present, I am long SMN, REW, FAZ, SRS and DUG. In an effort to reduce my inverse etf positions, I will swap out of them, in exchange for direct short positions against select names.

Here are some swap ideas:

SMN for short MON or MOS.

REW for short AAPL or MSFT.

FAZ for short WFC or BAC.

SRS for short KIM or VNO.

DUG for short XOM or RIG.

[youtube:http://www.youtube.com/watch?v=jQs49tGoK_4 450 300]

Late year pick me up.

Before you read this post, go read Mr. Mortgage’s take on the great big refinance hoax. He nailed it.

Now that rates are low, everyone with a series 7 thinks we will undergo some massive refinance boom, similar to 2002-2004. The only problem: no one is going to get approved.

Hear me out. Anyone who bought a house, in a high interest rate environment, refinanced between 2002-2004—when Greenie dropped rates to 1%. Anyone who needed to lock in low rates did so back then.

Now if you were unlucky enough to buy a house from 2005-2007, odds are you are deeply underwater. What exactly are you refinancing? Your fucking house is a worthless piece of shit.

Naturally, refi applications are going to sky rocket over the coming months. However, the only people who will make money off of this development are the appraisers. Most people have no idea how fucked they are in their Mcmansion, circa 2006. Once the appraisers are dispatched by the refi broker, people will find out, in a very egregious way.

You fuckers will get declined in a very “upside down” way. In my opinion, this will lead to a whole new round of underwater mortgage owners turning in their keys to banks. And, it will result in home values getting marked the fuck down, across the board, as the appraisers run around, delivering bad news.

Let’s not even talk about the condition of credit scores.

Bottom line: the talk of a “refinance boom” is a fucking fraud. Anyone promoting this fairy tale should be shot and burned at a stake.

With regards to the market:

It’s time to consider the fact that there is no oil in Israel. Just an idea: you may want to sell your fucking oil/gas stocks here. As a matter of fact, do it twice.

With my money, I shorted more KIM and will work diligently to build my cash position up to 60%, so that I may get drunk on New Year’s eve, with peace of mind.

NOTE: DT has a cool round up of idiot bloggers (excluded your truly) and their favorite posts for 2008.

UPDATE: With some of my cash reserves, I shorted a little more LFC @ $44.80 and VNO @ $55.90.

The euro will continue to collapse, calling into question its viability.

The dollar will remain a safe harbor, crushing many dollar bears along the way.

Oil prices will decrease in volatility, settling in around $30 per barrel.

Gold will collapse in the second half of 2009, under $500 per ounce.

Natural gas prices will trade in a range of $3.50-$6 for the entire year.

The price of corn, wheat and other agricultural products will collapse, making life very difficult for farmers.

Residential home prices will fall by another 15%.

Commercial real estate will feel the full brunt of the credit crisis, with vacancies sky rocketing to record levels.

AAPL will trade down to $50, before recovering.

GOOG will trade down to $250.

Rumors of a CHK bankruptcy will run rampant.

Most oil/gas stocks will fall by as much as 50%.

Hynix Semiconductor will file for bankruptcy protection.

AMD will file for bankruptcy protection.

MU will file for bankruptcy protection.

GE will fall into the single digits.

Several high profile homebuilders will fold.

The bubble in t-bills will continue until late 2009, sending yields to ridiculously low levels.

Obama’s stimulus program will disappoint.

50% of solar stocks will go away or melt into oblivion.

Taxes will rise, drastically.

Numerous states will request emergency funding from the Federal Government.

The unemployment rate will climb to 12%.

Bank stocks will fall by another 50% before recovering.

Water Utilities will outperform in 2009.

Russia will continue to devalue its currency.

Emerging markets will outperform Western stock markets.

The Dow will fall by 15%.

The Nasdaq will fall by 25%.

The S&P 500 will fall by 10%.

However, mid year, all indexes will drop by half, setting up a 2nd half rally.

Cash rich Japanese stocks will outperform.

China’s economy will continue to weaken, hurt by the U.S. consumer.

3 big name retailers will file for bankruptcy protection.

Chrysler will be liquidated.

F and GM will merge.

iBankCoin’s popularity will grow much faster than anyone could have predicted.

iBankCoin will makes its first acquisition in 2009.

Finally, The PPT will be a huge success, much to the chagrin of all “The Fly’s” enemies.

NOTE: Here were my ’08 predictions.

NOTE II: Here are Danny’s predictions.

NOTE III: Here are Alpha’s predictions.

[youtube:http://www.youtube.com/watch?v=U5WvQrfDPQY 450 300]

Fuck this market and everything it represents. I have decided to make no big moves, for the rest of 2008 (unreal discipline, I know). As I discussed before, end of year tapes are riddled with assclowns who enjoy whipsawing each other out of field cannons. At the present, my cash position is about 50%. I will make a sincere effort to up it to 60%, early next week.

My top holdings are shorts in oil and banks. However, I respect the power of men in idiot boxes and will deploy capital to the long side, if needed.

One way or another, the market gets raped in January. The question is: will it happen right out of the gates or after Obama’s inauguration?

In the event that I am wrong and we go straight up, I am prepared to eat a healthy serving of humble pie and join the Fucktard Festival, dressed up as a CNBC anchor.

Bottom line: this shit is for the birds; I’m out of here.

Go ahead, you should buy oil, banks, retailers and other “early cycle plays.” You fuckers, with your low IQ’s and burlap pants, know more than the man in the fucking time machine. After all, you’ve proven me wrong throughout 2008—with your stellar stock picking skills. The market did great this year and POT is $300 per share, isn’t it?

Your lowly manners, coupled with non-existent Wall Street connections, make for a great day trader. Go get your fucking charts, grab that pencil and ruler, and get to drawing straight lines on that graph paper you received for Christmas.

While you’re busy predicting the future through technical analysis, “The Fly” will be reading his vast collection of Depression Era newspapers, for leisure of course. Oh, he’ll also be betting against the fucking snakes at XOM, RIG, LFC, KIM and VNO.

Finally, I will be selling all of my inverse etf’s by the 2nd week of January. They do not represent the underlying components effectively and should be banned by the SEC. They are assholish plays on swaps. I’ve had enough. As I said before, in 2009, “The Fly” will be going old school again, via taking direct bets against losers like KIM or RIG and most 3rd tier bloggers and less than worthwhile internet leeches, if I might be so bold as to say so.

Oil projects are at a standstill. Oil/Gas producers are now capping their wells, in order to cut costs, as demand dries up. And, despite your asshattish desire to have things the way they were yesterday, oil companies are in very dire straights.

The underlying commodity price has fallen off a cliff, down about 75% in 5 short months. Yet here you are, like a fucking imbecile, trying to pick a bottom in oil stocks.

Hello, asshole, many of them will go all the way to zero.

This cycle is especially brutal for oil companies for several reasons. Most important is the condition of the sectors balance sheet, which happens to be dreadful in many cases. Most companies levered up into the faux inflation run. They borrowed a shit load of money, thinking $100 oil was here to stay.

Guess again.

Much to the chagrin of our asshat bankers, oil companies will be defaulting on their loans, as soon as cash runs dry. Based upon recent price action in crude, that shit (see ya later fuckfaces) will begin to happen soon.

Aside from the obvious plays (short oil stocks), one might want to inquire about the dumb lenders in the oil/gas space. Just when you thought there were no more shoes, BAM, another one drops.

Realistically, oil/gas companies will have a very difficult time raising capital in the future, with the underlying commodities in the dumpster and widespread insolvency amongst our coolest banks.

The following companies have a negative net cash per share ratio, which basically means they have more debt than cash on their balance sheets aka “fucked.”

(stocks above $10 per share)

Screen #1

FST, DVN, CHK, LINE, SFY, EAC, PVA, CRZO, EPD, CWEI, NFX, CNQ, XTO, APC, HK, SNP, ATLS, EVEP, NBR, RIG, WLL, CXO, BBG, HP, EXH, BAS, GLF, CGV, SII, SPN, OIS, CLB, OII, EPE, PETD, TSO, MRO, VLO, SUN, PBR, ETE, EPE, E, REP and IOC.

Just in case you were wondering, the amount of debt taken on in this industry is in the 100’s of billions, fucking absurd. It is a ticking time bomb, ready to rip off the remaining leg of your local banker. CHK alone has more than $14 billion in long term debt. SNP, an example of pure Chinese fuckery, has close to $25 billion in long term and short term debt. In an effort to narrow down the list to a few names, the following stocks kept flashing warning signs in my numerous, and quite thorough, screens:

Screen #2

CHK, SNP, APC, CNQ, DVN, PBR, RIG, SII, NBR, ETE, VLO, EXH, WLL, E, REP, HK

And, finally, here are The PPT Hybrid Scores for the stocks in screen #2:

CHK: 2.57 Sell
SNP: 1.91 Strong Sell
APC: 2.61 Sell
CNQ:1.94 Strong Sell
DVN: 2.69 Sell
PBR: 2.7 Sell
RIG: 2.59 Sell
SII: 2.58 Sell
NBR: 2.03 Sell
ETE: 2.1 Sell
VLO: 2.53 Sell
EXH: 1.93 Strong Sell
WLL: 2.66 Sell
E: N/A
REP: 2.66 Sell
HK: 2.42 Sell

Now, before you go out and short all of the above names, remember that oil/gas stocks are the go to sector for asshole dip buyers, running around in florescent orange leotards. If you have a long term objective, without a doubt, many, if not most, of the above names will be significantly lower, due to sector deterioration.

NOTE: At the moment of this post, “The Fly” was short an egregious amount of RIG.

[youtube:http://www.youtube.com/watch?v=P4fFYaiigKI 450 300]

Show some class you heathens. Santa Fly will leave some presents for you internet leeches, sometime tonight.