iBankCoin
18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
23,533 Blog Posts

Who Are We Kidding?

Seriously, I’ve been a hardcore cheerleader for this rally. I’ve made every excuse, provided the internets with a plethora of reasons why stocks should trade higher; but this is just getting ridiculous.

Originally, I aimed for 10,500, then set my goals higher for 11,000. During the sharp sell off in January, I changed my mind on 11,000 and vowed to get the fuck out of stocks, once I was made whole again. Well, as you know, for the most part, that is exactly what I have done. While it may bore many of you to read my daily diatribes of “how to do the Hugh Hendry and why,” via [[TLT]] , you must remember, I conduct myself like a gentleman at all times and have perfected my trade of proper asset management, throughout the years, unlike many of you dart throwing coked out gorillas, running a hedge. I simply spit on you, from a range of 40-500 yards out.

Back to my point.

I look at stocks, trading with absurd valuations, like Baidu.com, Inc. (ADR) [[BIDU]] , Wynn Resorts, Limited [[WYNN]] , Starwood Hotels & Resorts Worldwide, Inc [[HOT]] , The Macerich Company [[MAC]] , Las Vegas Sands Corp. [[LVS]] , Amazon.com, Inc. [[AMZN]] and salesforce.com, inc. [[CRM]] and say to myself “this is going to be ugly when it ends.” I cannot say for certain when this Fed induced rally will end. However, rest assured, when it does end you will be swimming, mind you, in large capital losses, unless of course you are wise enough to plan ahead. The valuations that are now being applied to stocks, one year removed from the greatest economic collapse in generations, is simply unsustainable.

There are people who believe that equities can keep trading up, providing the dollar is debased. Over the short term, sure, that makes sense. But is that a logical trade long term? I mean, really, are you fucking nuts?

These days, everything is interconnected. A Japanese bank getting fucked in California mortgages can throw mashed potatoes on this rally and precipitate a global crisis, in one week flat. You cannot have a poor economy, weak dollar, and expect higher stocks indefinitely, based upon the idea that “since it’s priced in dollars it must go up.” WRONG. The chickens must come home to roost.

Take a look at what occurred during the credit crisis. Asset managers were stuck in funnels, dying to get out of stocks, as margin calls exasperated their cash calls. The only true flight to safety was in U.S. Treasuries, since it is backed by the full faith and credit of the United States. After all, when the shit hits the fan, where would you rather have your $200 million, in Treasuries or Freeport-McMoRan Copper & Gold Inc. [[FCX]] ?

Look, there is so much money invested in the U.S. markets, it would take some sort of parabolic shift to jar the dollar to startling lows. Money will simply follow the path it has always traveled, in and out of stocks and bonds. There will be no Exodus from the dollar into euros. If anything, euros will flood into the United States, in an attempt to escape their hopeless mess.

In recent years, gold has been plugged into nearly all asset management models. And, as a result, there is decent support for the yellow metal. However, once again, during the crisis of 2008, gold proved it was not a safe haven.

In short, enjoy the rally while it lasts; because when it ends, you are going to be shining my shoes.

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75 comments

  1. Cash Is King

    What a great post!

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  2. Le Fly

    Jake

    Eventually, real assets will decline in value leading to a cash call on investments, sending your theory yonder

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    • Teahouse On The Tracks
      Teahouse On The Tracks

      Isn’t it a Zero-Sum Game with euros coming here pumping up the $ while giving Bernanke the ability to keep the presses running without debasing it ….

      Clack, Clack, Clack ….

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      • JakeGint

        Why would “real assets” decline in value if they are only reflecting a devaluation in the metric that measures their worth?

        Soon everyone will be “rich” — Barack Obama style. Welcome to the $15 Royale w. Cheeze.

        My! That’s a mighty TASTY burger, Brad!

        ______________

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  3. Le Fly

    Dayman

    Not really. I just think some of the high beta stocks need a good 30% correction

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  4. Rand

    The devil has come to breakfast, granny.

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  5. SlayingDragons

    One of your best posts yet. Thanks fly

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  6. Le Fly

    Jake

    There is no data that supports your view: higher inflation equals lower stock prices. Period

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    • Sebaco

      curious, where you see inflation or just anticipate it?

      Home prices still correcting, credit still disappearing, wages under pressure and money stagnating in banks.

      Yes, gas has gone higher and food prices will probably correlate up too, but not enough to derail a zero-interest rally.

      Brazil, China or India…Brazil seems to have learned their lesson and have things in control. China and India are trying to negotiate a soft landing…perhaps it starts there.

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  7. Le Fly

    They would decline due to supply and demand, which would more than negate currency devaluation

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  8. Boulevard

    When 90% are bullish, i will sell, whilst evryone here seems bearish enough… I will hold.

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    • Teahouse On The Tracks
      Teahouse On The Tracks

      eggsactly!

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    • Yogi & Boo Boo

      The real question is: who was bullish 1 year ago (at the bottom) and held the whole way up and who was bearish then? You certainly don’t have a random sample of traders/investors here. I am only betting on or against my own performance and market positioning, nothing else.

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  9. Le Fly

    Climbing out while taxes rise and trade barriers emerge, a reenactment of the great depression by our policy makers

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    • Teahouse On The Tracks
      Teahouse On The Tracks

      So how’s that gunna create a supply/demand issue … less demand from fewer discretionary $’s to spend and rates still near zero unlike the Great One?

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  10. Treepart

    Harumph!

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  11. HuggieBear

    HuggieBear is calling for the bloodbath to begin 1st week of April.

    These sick bastards are likely going to run this market up right into the end of the quarter.

    And then — BAM — a convenient good friday jobs report that won’t “meet expectations”, next thing you know we’ve got a good old fashioned April sell-off (see 2004).

    Get yourself a post-note and jot this shit down, because this is exactly what is going to happen, unless’n Greece blows up before then. If that happens, the apocalypse will arrive a bit earlier.

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  12. Tradingfrog

    If this market continues to move as it has recently, in the not too distant future, you, my dear Mr. Fly, will be shining MY shoes with the remnants of your pathetic VXX. The decay of this ridiculous ETF is too magnificent for even someone as brilliant as you to overcome. I find it unbelievable that you cannot see this.

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    • The Fly

      Shut up you imbecile. Never question my moves, for they are ahead of yours. Go back to your pond and fuck some of those lilly pads while you are at it. You are not qualified to offer me financial advice.

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  13. Woodshedder

    Good post Horatio.

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  14. TheArtist

    right on…..

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  15. AlphaDawg's Left Nut
    AlphaDawg's Left Nut

    Second Cash is King’s statement.

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  16. TA

    It may seem silly for things to continue but it’s been 3 weeks of that and we’re still moving up.

    There’s no point in arguing with it, just ride along but keep an eye on the leaders for signs it’s time to get off the train. Today was very bullish, no reason to run yet.

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    • TA

      BTW I plowed 10% back into some low risk plays this morning

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      • Hawaii Five0

        You clearly got it right for now. I backed off strict trend following and went to 50% cash about 3 or 4 week ago. and while I still made some coin, many of my strict trend following friends are way ahead of me, i.e., the ones that are either balls to the walls or out ( make it big..loose it big).
        I love the idea trend following because it so damn simple, but hate the whip saws that can knock you out of the game. In Covel’s book, one guy lost 50% after several whip saws and gave up by going to cash, while others took some antacids and stayed with the program to gain 500% in the next couple of months.

        Just wondering how you are thinking about these Macro ideas.

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  17. Tradeperson

    You are right, but throughout history, the Rothschilds financed the wars. Money is a vehicle going down a street designed by “city planning manipulator government things”. To join a conversation on the Hampton’s porches and sip wine, a couple of $Bil in the Bank (wink) are necessary. Traders are but small gnats in the insect world of real information and power. The structure has been there for centuries and protesters are usualy handed their body parts in a slurpy. The big boys are trading with algorithms that they paid hundreds of $Mils that are worth $Bils and more because they have the power of change. Faith in any thesis is just that. Good Luck, might as well stay in Vegas. Charts don’t postulate, don’t prophesize, have zero feel and can be interpreted on one’s own time scale. But they know that, too.

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  18. softbatch26

    You must talk to the robots.

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  19. JakeGint

    You cannot have a poor economy, weak dollar, and expect higher stocks indefinitely, based upon the idea that “since it’s priced in dollars it must go up.

    If you debase dollars, the assets priced in dollars will — seemingly, at least — increase in “price.”

    That is all.

    _________

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  20. Dayman

    Fly,

    I believe you said earlier that you see a decline to approx. 10k on the DOW and that would be the time to buy for the rest of the year. Sounds like you have changed your tune?

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  21. omfgitsjd

    If the S&P trots along the 82 – 84 path, the S&P 500 will steadily climb during 2nd quarter 2010 and then do a 14% correction ending late 3rd qtr or early 4th quarter. That scenario would line up with the four year cycle low.

    Since I’ve been long since the crash, I’ll continue accumulating throughout the year and absorb the 14% correction later this year.

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  22. Danified

    Life is cyclical, a simple if debatable truism. Live long enough, you will begin to see the patterns. Stand still long enough and you might get trampled by your past.

    Perhaps we are trading in a black hole or perhaps in an everlasting nirvana? Black holes are formed from massive stars at the end of their life times. The gravitational pull in a black hole is so great that nothing can escape from it, not even light. Black holes distort the space around them, and can often suck neighboring matter into them including stars.

    Black hole or nirvana? I have no clue…. I do know traders are banking coin in the process of elimination. And that is always a good thing.

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  23. Outlaw_Josey_Wales
    Outlaw_Josey_Wales

    The bears have almost all been gunned down in this fed induced free crack rally. Watch this clip and instead of the words Bounty hunter replace with bearshitter and remember “Dying aint much of a livin boy”

    http://www.youtube.com/watch?v=ZEClGMJ2r3g

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  24. omfgitsjd

    I’m just not seeing enough euphoria and reckless abandon to sell. Maybe I’ll take some off the table later before the correction.

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  25. The Fly

    Do a quick study on stock prices and inflation. Aside from gold, stocks do very poorly when inflation upticks.

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    • JakeGint

      Right.

      Next question. Has inflation upticked, yet?

      ______

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      • Teahouse On The Tracks
        Teahouse On The Tracks

        We’re still climbing out of the funnel …. and when it does pop it’s head out of the funnel the PPI/CPI won’t show it for some time.

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    • omfgitsjd

      Yes, I’ve baked that into my allocations. Probably not enough though.

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  26. Tradeperson

    Timing the trade or trend following should lead to success of the trade. I have found that knowing how to trade is much more profitable. Stops, entries, targets, time horizons, unforseens, options and hedges, are necessary tools that I study and use on a daily basis. Predictions and macros are good tools when one is in-the-zone and fortunes are made by being on the right side of the thesis. Good fortune to all

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    • Danified

      That sums up how I envision myself trading. Ha ha…. good stuff…. I have “tradersperson” envy.

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  27. AlphaDawg's Left Nut
    AlphaDawg's Left Nut

    Schiff says…

    “Your kids aren’t going to pay these taxes, they are going to FLEE to avoid taxes.”

    http://www.youtube.com/watch?v=LjMZ1Dh4qLc

    I say WHATEVER. I don’t think that generation has the balls to do much except stay here and collect checks. It takes a pretty strong willed person to pack and leave. Kids today, can’t change a tire, can’t make change. They are hardly motivated enough to pack up in droves, move to a foreign country and hide out.

    I do like Schiff’s tie. Good color on him.

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    • Po Pimp

      I packed up and moved out in 2003. No desire whatsoever to go back.

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  28. The_Real_Hmmm

    Surprised you haven’t mentioned natty. It’s getting Suge Knight’d, like all of 2010.

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  29. Yogi & Boo Boo

    Fly, Great post. Thanks.

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  30. Hootenanny

    When 90 % off all the A-holes out there are Bullish you know the end is near! It’s tough being patient but I believe a major correction is inevitable!

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  31. Coked up Money Manager
    Coked up Money Manager

    Whoa! Hold on now with that crazy talk Fly! We haven’t even gotten to the “XYZ up 20% after stock split announced” phase yet…Yeah, maybe we are buying stocks at $20.00 that we could have gotten for $1.00 last year,but hey man, we think it has a good chance to get to $22.00…THAT’S ANOTHER 10%!…Ok I gotta take a “bathroom break”…sniff-sniff

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  32. JakeGint

    Kudos to my weurthy (sic) opponent Kreppa Nu, whose eggsellent pick — SNDK — began to take it’s inevitable rebound today. A PPT batsman and a weurthy opponent, indeuuuuud…..!

    __________

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  33. Damon

    The Fly is right.

    I’m sorry, but I precipitated this with my own “Man-On-Main-Street” reports from the heartland of the Pacific Northwest, many, many months ago.

    This turd don’t float.

    Time to get off the boat.

    Glub, glub, glub.

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  34. Hawaii Five0

    Fly,

    A great post…showing a great deal of how you are thinking about the market. Very helpful!

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  35. BuffaloUdders

    Am I the only one to think that if China demands what it wants, and gets it, that they are not only controlling the fastest growing economy, that they also have their thumb pressed against the rubber band of the entire world? How can we ignore this? Isn’t Google ultimately going to show that, by the numbers, China is stronger than any single corporation? And if you want in to China you have to KNOW (Warren Buffetesque) that China will be a partner?

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  36. Teahouse On The Tracks
    Teahouse On The Tracks

    Nope but they may not always get what they want ….

    >> Ecuador broke off negotiations with the Export-Import Bank of China for the financing of a $2 billion hydroelectric plant, known as Coco Coda Sinclair, because of “mistreatment” and demands for financial guarantees Ecuador couldn’t meet, President Rafael Correa said on March 20. Correa also said in his speech that he asked his ministers to present resignations as part of “normal annual evaluation,” adding concern among investors. <<

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  37. TraderMark

    Sorry, I thought I was on zerohedge for a moment there.

    I almost think Le Fly is secretly shining the hub caps of his French FAZmobile.

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  38. Trading Rookie

    Thanls for the update

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  39. Scavenger

    One theory: Folks still have until 4/15/2010 to make 2009 contributions to their IRA mutual funds or brokerage accounts.

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  40. adam

    anyone make much of this happening today?

    http://pragcap.com/the-death-cross-in-china

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    • Alvari40

      You have hit the nail on the head. This is the news for the next few weeks. We kinda drift with our focus every now and then, but the rate increase/impending trade deficit/housing bubble news coming out of China could be a slap in the face of this bullish market over the next couple of weeks. Another technical to watch that could be a sign that is consistent with the chart you posted is the transports. They formed a bearish engulfing (on high volume) on Friday and failed to push to new highs yesterday while the rest of the market proceeded higher.

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  41. Dead Home Builder/Developer
    Dead Home Builder/Developer

    Inflation is creeping in, all materials; Crushed rock to shingles, all commercial Insurance.

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  42. Skeptical

    What is this, the Doug Kass fan club site?

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  43. jg

    amen.

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  44. kidstock

    This site has sucked goat balls ever since Le Fly got Pussified…you USED to be a great trader in bull markets. Not sure what happened.

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    • The Fly

      Let this be a reminder: I am not here for you. I am managing real money here, for real people. If you want someone who is interested in talking to you, go visit one of the many/great blogs here on iBC.

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      • kidstock

        Help me remind you…in bull markets leading stocks like INTC, GE, etc take the lead. Maybe you need to tweek the PPT since it appears to ignore many basic bull market tenets (ie Dow Theory Confirmation, volume confirmation on breakouts, etc).

        While I recognize what your mission, I am less than impressed with your recent performance given your trading acumen. You should be up considerably more this year and wonder if you’re relying too much on the PPT.

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        • The Fly

          Mind you pees and q’s. That is as soft and nice as I get. You need to concern yourself with your book, nevermind what I am doing. If I am prepared to miss out on idiot money, so be it. It should not effect your life whatsoever.

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    • GFY

      Hey Kid Cock! If it wasn’t for this site you would never have been able to come up with the expression “Goat Balls” on your own! So go Fuck yourself stupid!

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  45. checklist_now_35
    checklist_now_35

    agreed on WYNN and LVS. just a few thousand shares of each still waiting to hit the year-mark for capital gains…. I may buy puts…

    ok, sold some calls on those past the 1-year mark. Thanks for the reminder.

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  46. checklist_now_35
    checklist_now_35

    i still have alot of longs. alot of hedged up (long put or short ITM call) longs.

    somebody knock me out and arrange for another atomic market crash, then wake me up mid-crash. That was alot more entertaining and exciting than sitting around waiting to sell things.

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  47. Ben Graham

    Mr. Market gave birth to Mr. Derrivative and they’re both involved in an incestuous relationship.

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