The House of Cards is Collapsing

I’ve always felt as if I was on borrowed time, long this market. Often times, I’d tell people this. If you know me, I have probably mentioned it to you once or twice. The idea that we could manufacture new money, instead of good and services, in order to escape the wrath of depression is a last ditch attempt, sort of like Japan using firehoses and seawater to solve a nuclear meltdown (I suppose the aliens didn’t tell us how to shut it off). Even if you look back on my 2011 market predictions, I said volatility, via VXX, would be the best trade of 2011.

Reasoning: I was expecting a surprise event that would fuck the markets sideways.

The house that Ben built is collapsing and there is little that can be done. There was no way for his nerds to forecast this disaster; but it happened. It’s very likely that the market will rally significantly, within a week or so, based upon some sort of minor victory over nuclear power plants. But the wheels are in motion. The amount of money that Japan will need to borrow will be the straw that broke the camels back. If their rates uptick, it is game over for them. They will default and flush everyone down with them, including the FUCKING BASTARDS FROM CHINA. You know, that shithole where FAKE AND FRAUDULENT COMPANIES DERIVE FROM, LISTING HERE IN THE STATES, LYING TO OUR AUDITORS.

The recovery here in the U.S. has been tenuous at best. We cannot afford the world’s third largest economy to go offline. Don’t forget, more than 30% of the global NAND (flash memory) supply is made in Japan. That will affect everything from ipads to laptops.

Here’s the trade:

Sell everything.

As of yesterday’s close, I was 30% cash, heavily long stocks like WNR and OPEN. I will keep WNR; but everything else is subject to immediate liquidation. I am not interested in playing chicken with a fucking nuclear power plant. At this stage, the value of your account is not relevant. Your strategy should revolve around preservation, live to fight another day.

I will not buy any inverse ETF’s or short stocks at this point, because there is a chance for a sharp rally off the carnage. However, I am very much interested in getting a whole lot smaller, especially before everyone else starts bugging the fuck out. If this downside has legs, this is merely the opening salvo, into a series of market drops that will make you wish you had listened to me today.

Until the nuclear situation is resolved in Japan, expect the markets to remain weak. Thus far, everything is down in Japan tonight, which is spreading to all markets trading in Asia. In addition to the declines, prices of gasoline, heating oil and NAND/DRAM chips are ripping higher, based upon supply disruption. This sort of adds salt to the wounds. However, as market participants, it’s our job to exploit these disconnects.

From what I have gathered, Micron’s fabs are unscathed and stand to benefit the most from the subsequent price spikes. As for the heating oil/gasoline, let’s hope that crude continues lower, effectively jacking up the crack spreads for the refiners. Keep in mind, my little refiner WNR reported “record spreads” last quarter at $16.50 per barrel. Guess where they are now?

$24!

That is pure profit. Fuck, spreads are the highest in recent history and the stocks are still 50% lower from where they were trading in 2007. Look for dog brained money managers to swap out of their exploration oil/gas stocks in exchange for the refiners. This will be my best trade, year to date.

I warned you fuck-bags to get long WNR and other refiners. You chose to ignore my teachings in exchange for sheer stupidity. So you know, I am long 150,000 WNR in my personal accounts, betting on margin expansion. Crack spreads will widen, as the crisis in Japan extends. Their refineries will not be able to handle demand once reconstruction is underway. Opt to ignore my teachings again and I will be eating your livers in no time at all.

I sold out of a plethora of idiot stocks, in order to slow shit down and focus on the new thesis. I felt it was time for a change. Therefore, I changed.

With millions in cash and millions more invested accurately, I am sure my story will end as expected: winship. While I would like all of you to win alongside with, the reality is that many of you are built for the explicit purpose of losing. For the remainder of the night, I will redouble my efforts, scouring The PPT, using profile keyword searches and volume screens, to find my next winner.

Adapt or get crushed.

I am opting out of this market, to an extent, for now. I sold out of some big positions, including APC, PSUN and BZ. I did so, even though I had nice profits in them a short while ago. It’s important to understand yesterday’s profit is gone. You cannot base your decisions based upon the past. That’s like going to the store and offering to buy a can of soda of .65, because that was the price when you were 8.

For now, I kept BORN, OPEN, FORM, FLWS, MAS, ADBE, WFC, TEVA and C. However, the bulk of my energy is building up my WNR position, especially with crack spreads at $25. And, I took a gamble on this PESI. Other than that, I am 30% cash and watching this shit with a bowl of popcorn on my lap, throwing crumbs at the teevee, where all those faggots talk shit.

NOTE: If you haven’t noticed, iBC is Johnny on the Spot with the news these days. Be sure to follow us on Twitter, as our feed automatically updates there.

Repositioning here, I sold out of the above stocks, raising my cash position to 30%.

I added to my WNR position.

I bought 10,000 PESI, speculative personal account buy.

Description of the company:

Perma-Fix Environmental Services, Inc., through its subsidiaries, operates as an environmental and technology know-how company in the United States. It operates through three segments: Nuclear Waste Management Services (Nuclear Segment), Consulting Engineering Services (Engineering Segment), and Industrial Waste Management Services (Industrial Segment). The Nuclear Segment provides nuclear waste management services, such as treatment, storage, processing, and disposal of low-level radioactive and hazardous waste; on and off-site waste remediation and processing; nuclear, low-level radioactive, and mixed waste treatment, as well as processing and disposal; and research and development of ways to process low-level radioactive and mixed waste. The Engineering Segment offers consulting engineering services, which include consulting services regarding air, water, and hazardous waste permitting; air, soil, and water sampling; compliance reporting, emission reduction strategies, compliance auditing, and various compliance and training activities, as well as provides engineering and compliance support services. The Industrial Segment provides industrial waste management services, including treatment, storage, processing, and disposal of hazardous and non-hazardous waste; wastewater management services, including the collection, treatment, processing and disposal of hazardous and non-hazardous wastewater; and treatment, processing, recycling, and sale of used oil and other off-specification petroleum-based products. It services research institutions, commercial companies, public utilities, and governmental agencies, including the Department of Energy and Department of Defense. The company offers its services directly to customers or via intermediaries. Perma-Fix Environmental Services, Inc. was founded in 1990 and is based in Atlanta, Georgia. [From Yahoo! Finance]

The tragedy in Japan will eventually lead to a massive rebuilding effort, whereby demand for timber, steel and machinery will go through the roof. As of now, economic output is at a standstill. However, soon enough, the Japanese government will be borrowing shitloads of money, and repatriating money from overseas, in order to rebuild. This, without a doubt, will be bullish for steel stocks, like CLF, X, AKS and especially PKX (proximity), as well as CUT. Thanks to a booming pac-rim, basic material are already in short supply. This will make matters worse.

Furthermore, with Japan busy at home, QE3 is all but guaranteed now. Look for THE BEARDED CLAM to smoke short sellers inside of his philly blunts, while laying the hammer down on some of you talking monkeys. Without a doubt, Senator Gint will enjoy even bigger gains in his portfolio of crap that is gold/silver. Inflation will get ridiculous, once the Japanese rebuilding process begins.

In the short term, stocks might suffer because investors have dog brains and cannot look more than 15 minutes into the future. However, once these things that I am teaching you come to fruition, there will be a fucking race to the finish. So you know, “The Fly” has already completed said race and has taken the luxuries of littering said racetrack with “bouncing Betty” landmines.

In the immediate term, I like the refiners, as their crack spread margins expand. Due to loss of refining capacity in Japan, expect refining margins to rise, worldwide. My favorite refiners are WNR, TSO and VLO. I’d avoid the auto-parts companies and most certainly Japanese industry.

Oh, with Buffet buying LZ, look for NEU to get a sympathy pop.

‘Tis the season to be long refiners anyway, ahead of the fucking driving season. Over the weekend, the war mongers (Libyan no fly zone suggesters) out of Europe agreed to expand their own version of QE, by way of allocating $600 billion in imaginary money towards the explicit manipulation of their bond markets.

This may lend, mind you, to dollar strength. An oddball trade is setting up, where stocks might actually trade down. The Japanese situation isn’t making things better. It’s worth noting, oil may drop as Japan’s economy dumps out. But, you might see the crack spread explode higher, due to 1/3rd of Japan’s refineries going offline. Furthermore, with their nuke plants melting down the fucking country, it’s plausible that they might adopt a fossil fuel energy policy.

Bottom line: look for bullish to fanatical pin action in the refiners.

Aside from that, I really need to see how Asian and European markets react to the news before formulating a strategy. One thing to keep in mind, whatever plans you had before this Japanese disaster, with regards to the market, is gone. Everything has changed. This is one of those game changing, black swan events, that needs to be watched very closely.

In an effort to avoid meltdown, they are now flooding the reactor at Fukushima with sea water. Although officials are downplaying the seriousness of the recent events at Fukushima, they have ordered an evacuation of all people within a 12 mile radius.

In addition to sea water, the people at Tokyo Electron are adding boric acid to the concoction, in order to disrupt the nuclear chain reaction.

NOTE: Over 200,000 people have been ordered to evacuate. Despite the plethora of reports that predict some sort of an apocalypse, Japanese officials insist they have things under control.
Japanese Chief Cabinet Secretary Yukio Edano said they were venting out air, which contained radiation, but very low levels.
UPDATE: Japanese officials are streaming a conference right now.