Buckle Up; We’re Gonna Crash

I have sirens and red flashing lights going on in my office today, like some sort of nuclear submarine battle station.

Listen up and good: credit default swaps are scaring the shit out of everyone. Whether it should happen or not, people really do think the market will crash. From General Electric Company [[GE]] to Goldman Sachs Group, Inc. [[GS]] to Morgan Stanley [[MS]] , the market is thinking about putting them out of business. Without question, this is the most interesting market I have ever traded in.

Anyway, I sold all of my [[DIG]] and [[IEO]] , exercising some overdue discipline. I know I had a fucking thesis, as to why I was right going long oil: but I changed my mind.

In my opinion, there is no longer a reason to keep hedges or any long positions for that matter, with exception to being long 200% inverse etf’s.

With much of the proceeds, I loaded up on [[SRS]] , as previously outlined.

So, at the present, my position sheet looks something like this:

[[SKF]]

[[SRS]]

[[REW]]

[[SSG]]

[[TWM]]

[[FXP]]

[[EEV]]

Short Fifth Third Bancorp [[FITB]]

Short Marshall & Ilsley Corporation Marshall & Ilsley Corporation [[Mi]]

Short Vulcan Materials Company [[VMC]]

Short Legg Mason, Inc. [[LM]]

Short Pzena Investment Management, Inc. [[PZN]]

Short PacWest Bancorp [[PACW]]

Short [[FED]]

Short East West Bancorp, Inc. [[EWBC]]

Short AXA (ADR) [[AXA]]

Short Janus Capital Group Inc. [[JNS]]

Short Goldman Sachs Group, Inc. [[GS]]

Short General Electric Company [[GE]]

long Western Refining, Inc. [[WNR]]

long National-Oilwell Varco, Inc. [[NOV]]

long Freeport-McMoRan Copper & Gold Inc. Freeport-McMoRan Copper & Gold Inc. [[FCX]]

long Clean Energy Fuels Corp. [[CLNE]]

long other bullshit names that are losing me money today.

All in all, I am up a staggering 10.5% as I write this.

Hence the phrase: “it was the best of times, it was the worst of times.” applies.

Flashback UPDATE: Ron Paul

I bought 10,000 [[SRS]] @ $86.82. And, I bought 1,000 [[SKF]] @ $131.25.

UPDATE: I bought another 10,000 SRS at $90.

Disclaimer: If you buy the above stocks because of this post, Doug Kass will actually make an accurate market call. And, you may lose money.

And I am not talking about the garden variety type. How can so many people get the market wrong, so consistently?

Answer: You’re all idiots.

You people should be shining my shoes for what I bring to table. Lo and behold, the market is coming around to my way of thinking—oil up, banks down. Fucking shocker.

Hey, I got an idea. How about some of you charting analysts go chart the credit default swaps on Morgan Stanley [[MS]] and Goldman Sachs Group, Inc. [[GS]] ? Tell me what they say and then give me your market diagnosis. While you’re at it, go check the cds’s for General Electric Company [[GE]] . I wonder how the market would do on a GE bankruptcy? Shall we try to find out?

Both Goldman and Morgan are in trouble here. I know the assholes from SEC are reinstating that ridiculous short sale restriction rule tomorrow; however, that will not solve the underlying problem, which is confidence. There isn’t any.

From what I understand, following the Lehman Brothers Holdings Inc. [[LEH]] bankruptcy, auditors were shocked at what they saw on the Lehman books, with regards to transparency. Actually, there wasn’t any. CDO’s were marked far too high and their commercial backed paper was priced for dot com boom times. Can you say “jail”?

So, where should a lowly investor, such as yourself, put his money now?

For starters, get long some commodity stocks, as the Federal Reserve and Treasury actively deplete and loot the country for all of its IOU’s. There is a long term price to pay for all of this spending and it doesn’t equate to a stronger dollar or fun and gleeful times.

With my money, I am shorting more GS. It’s going to book value ($99). And, I am buying more [[DIG]] and Freeport-McMoRan Copper & Gold Inc. [[FCX]] . Just in case you were wondering, I am holding my WNR for higher prices (I had to say that).

Oh, I almost forgot: Bill Miller from Legg Mason, Inc. [[LM]] still sucks.

UPDATE: I changed my mind. I am selling all of my DIG and IEO, but leaving FCX. I will now lever myself for a downside move, without hedges.

UPDATE: As per Gov. Patterson aka degenerate blind guy. On all this fun talk of depression, let’s go buy some fucking stocks—boo-fucking-ya. Shall we start with some insolvent banks? How about a fresh look at the homies or retail names? They’re all the rage.

Off to do a few lines of baking soda with small pieces of ham.

Inside of two weeks, the U.S. Government has nationalized the country’s largest mortgage participant and insurance company. I don’t give two fucks and a gay fiddle what the market says, this is HORRENDOUS news.

Take this opportunity to undermine the financial integrity of America.

Down low UPDATE: Money market fund in trouble.

The announcement was made by the Primary Fund, which had almost $65 billion in assets at the end of May. It is part of the Reserve Fund, a group whose founder helped invent the money market fund more than 30 years ago.

The fund said that because the value of some investments had fallen, customers now have only 97 cents for each dollar they had invested.

Poof. Your bullshit host, “Fly,” is gone—off to have his staples removed.

-Merlin

As soon as the Fed announced that they were going to clown rape you [[UYG]] dip buying motherfuckers, my television went offline.  I find that to be fishy.

Anyway, the Fed is not here to help, gentleman. I suppose the republicans have finally remembered their laissez faire ways, and is making wall street pay for its sins.

Fair enough. I can live with that.

I just bought a small truckload of [[SKF]] , [[SRS]] and shorted 3,000 Legg Mason, Inc. [[LM]] .

NOTE: Stop dip buying, assholes. Credit default swaps are through the roof. Down we go.

For you banking lovers, you must go pray that American International Group, Inc. [[AIG]] gets a nice big government block of cheese. For bears, it’s time to sit back and watch events unfold, while lining up some good shorts.

Either way, this mess will not end nicely.

On the top of my list is AXA (ADR) [[AXA]] . They have so much exposure, in so many different asset classes; I cannot envision their shares going on any substantial rally.

Also, for some reason California based banks are running. I guess the theory is FIFO (first in, first out). But, that is assuming the housing market has bottomed in California and banks are flush with cash.

I’ll take the opposite side of that trade. I will look to sell short [[FED]] , PacWest Bancorp [[PACW]] , East West Bancorp, Inc. [[EWBC]] and Wells Fargo & Company [[WFC]] .

God willing, Vulcan Materials Company [[VMC]] will continue its dive lower. I think it is a good short, right here, or anything over $65.

And, if the market rallies, asset management stocks should go higher. My favorite death spiral shorts are Legg Mason, Inc. [[LM]] and Pzena Investment Management, Inc. [[PZN]] , with a little Janus Capital Group Inc. [[JNS]] for good measure.

Finally, expect to see the market rally today. Line up your shorts, while placing your hedging longs.

As you know, personally, I like the energy complex as a hedge against the banks. In that space, I like National-Oilwell Varco, Inc. [[NOV]] , Western Refining, Inc. [[WNR]] , [[DIG]] and ConocoPhillips [[COP]] .

I bought 10,000 Western Refining, Inc. [[WNR]] @ $10.55.

Disclaimer: If you buy WNR because of this post, you will come down with an egregious case of appendicitis. And, you may lose money.

Here we go again. Charlie “meatball” Gasparino is at it again, spreading incredibly egregious rumors of a possible government bailout of American International Group, Inc. [[AIG]] .

More often than not, Charlie is not only wrong: he’s exactly wrong.

Of course it sucks to have the market steam roll you, based upon a rumor. However, the market was down 500 points yesterday, for fucks sake. You didn’t think it would go down forever, did you?

My approach is simple:

Do not cover any shorts, while this great unwinding takes place. Instead, use capital to hedge or scalp trades.

With that being said, into a meaningful bounce (300 points or more), I will look to short more AXA (ADR) [[AXA]] , Legg Mason, Inc. [[LM]] , Goldman Sachs Group, Inc. [[GS]] , Fifth Third Bancorp [[FITB]] , Marshall & Ilsley Corporation [[Mi]] , Vulcan Materials Company [[VMC]] and PacWest Bancorp [[PACW]] .

There is always the chance that the market can go on an extended run, with assholes thinking the worst is behind us. However, just remember, in the real world the economy is fucked up. It’s not isolated in the banks anymore. The lack of liquidity is incredibly deflationary, which by the way is far worse than inflation.

Revisit some of your Great Depression text books for reference.

Should Gasparino’s bullshit rumors come true, get long energy stocks, via [[DIG]] , for the dollar will get boot stomped from here to Japan.

NOTE: The decline in Morgan Stanley [[MS]] is starting to become “alarming.”

My Goldman Sachs Group, Inc. [[GS]] short is working like a fucking slave right now. Well, not like a real slave. Instead, GS is like some sort of person or thing that makes you a lot of money, without having to actually compensate that entity, similar to how the workers from Wal-Mart Stores, Inc. [[WMT]] get treated.

Book value for GS is now down to $99. That’s precisely where it is going. Giddy-up—fuckfaces.

Which reminds me, what happened to all of the dicks who were hardcore Goldman ball lovers? I mean, all the guys who said “Goldman is a premier franchise.” I HATE when people say that. There is no such thing.

The way I see it, everyone gets their 15 minutes of fame or glory, but it never lasts. Look at American International Group, Inc. [[AIG]] . That company had the 2nd biggest market cap in the country a few years back, now they’re sleeping with the sardines.

Seriously, never listen to people who go on television to voice their opinions. First of all, men who need to whore themselves on TV are insecure and big time bloviators. They just want to hear themselves talk and say all sorts of gay shit.

Instead, listen to anonymous malcontents on the internet. As you know, the internet NEVER lies.

Back to business:

I am having my face punched in, via my long oil positions. It’s starting to make a dent. How much lower canFreeport-McMoRan Copper & Gold Inc. [[FCX]] go? I don’t know. How much lower can AIG go?

Answer: not much more.

Keep your eyes on Citigroup Inc. [[C]] and Morgan Stanley [[MS]] . Both of those names look “graveyard sick.” I would not be surprised to see C go all the way.

Finally, assholes are buying Wells Fargo & Company Wells Fargo & Company [[WFC]] again. Understanding the severity of an AIG bankruptcy, I cannot cover my numerous short positions. However, I will add to my longs—just in case the Fed tried to pump up equities.

NOTE: I stopped out of my Wachovia Corporation [[WB]] .