Hedge Fund Relief Rally Stalled

The “Hail Mary” pass that has been tossed over three weeks ago, for the benefit of hedge funds, might end up getting intercepted by FUCKTARDED earnings shortfalls. Let’s face it, this whole rally was concocted for the benefit of asset managers and pension funds deep in the red. The reality is, the news isn’t good.

AMZN just missed by 100 yards and NFLX is dead and buried. Coupled that with an AAPL, CMI and MMM miss, alongside the GMCR-FSLR debacles, one could make the case momentum is in danger of slowing, and fast.

The PPT flagged OB yesterday, after coming within .01 of OVERSOLD on 10/17. I will not tell you the current score, out of respect for members. However, I will say, betting against The PPT is not a high probability trade.

My timing to take 40% profits on WNR was sublime and my average down on VXX this morning was near perfect. Mind you, I am in the drivers seat again, up over 1.5% for the day, putting my year to date gains near 17%.

If the EZ bails out everyone, gold goes up. If they don’t and panic ensues, gold goes up. Let me be frank, I do not like gold bugs. As a point in fact, they irritate me. Nevertheless, during the month of November, gold and silver outperform. There are certain seasonality trends that are worth paying attention to, such as long FFIV in October.

I warned you to avoid gold and silver during the month of October, due to binding magic that forces those stocks to trade lower in October. But the hex is lifted in November and it is time to revisit the parlour in which JAKEGINT drinks himself to sleep every night, through the explicit purchase of gold and silver.

Already, I’ve deployed 10% of my assets to EXK. I intend to buy or consider buying AG and EGO.

As for EXK, it’s been up in 4 of the past 5 Novembers for an average return of 23.65%. The GDX has been up 4 of the past 5 years for an average return of 10.7%.

Look, I’m having a hard time getting long or short. I am long TLT, VXX, TZA, GSVC, EXK, WNR (sold 75% of my position yesterday) and short EXH. I am studying a number of interesting food and beverage names, hoping to buy them on dips. But gold and silver is unique, in that it is favored by both longs and shorts.

In my estimation, gold and silver stocks are the only longs worth pursuing, at this point in time.

Consumer confidence numbers were so bad (39), it’s almost comedic. People in this country would rather punch one another in the face than buy another pair of jeans. Coupled with the fact that things are starting to look dicey again in Europe, there are numerous reasons to sell stocks. Keep in mind, CMI and MMM missed, as well as AKS. Letter X had bullshit numbers; but people with goat brains are buying stocks, nevertheless.

You do understand that buying here means you are Eddy Barzoon, don’t you? The people who are telling you to buy now, after a 16% rally, are idiots. Plain and simple, Cramer doesn’t manage money for a living anymore and is out of touch with reality. Might I suggest he bulk up on some psychotropics?

It’s very possible the Europeans concoct some plan that looks good on the surface. However, you cannot insure your way out of insurmountable debt. You either default or print money. Having said that, the news should be sold, several times over.

Gold is sprinting and refiners are getting crushed. The problem with the refiners here is collapsing 321 crack spreads. This is occurring due to run away speculation in WTI, which, incidentally, is compressing the spread between Brent and WTI as well. This is a lose lose for WNR. However, the moves that pissed you off last quarter with WNR may end up saving them. I am talking about their aggressive hedging strategies that stunted profits. With 35%+ of production hedged at $27, WNR is in a great position to unwind those hedges, smartly, into weakness.

321 cracks are down 15% today to $22.5.

Finally, what more can I add to the NFLX story? This is an unbelievable collapse. I am sure there will be a trading opportunity. But the downward momentum in both the stock price and business is too fast. It’s best to spectate, while poking fun at the trials and tribulations of a certain REED HASTINGS.

UPDATE: I bought EXK to get my silver on.

Typically, I ignore Cramer’s nonsensical rants. Not today.

Let’s not even mention his long term love for NFLX, even at $300. On the CMI earnings miss, Cramer told viewers of CNBC to “buy the stock down 9” and how the CEO is just “so self deprecating.” Cramer envisioned the CEO whipping himself during the conference call. Later on, Cramer had the balls to say CMI “would not have warned if the stock was trading at $78.” WTF?! He furthered, because the company’s stock price was in the 90’s, they had room to warn.

With regards to MMM, Cramer called them “serial underperformers” and how they were simply “outliers.”

To summarize: macro-trends do not exist for stocks. When they report good news it’s because they things are terrific. When they report bad news it’s because the CEO sucks and/or they are just trying to beat next quarters estimates.

Bob Pisani called Cramer out saying “MMM is not an outlier,” pointing to weak sales amongst a variety of industries.

Ho-hum

Believe it or not, I blog from a dark room, clad entirely in burlap garments. My beard is “Santa Claus” thick and my rambo knife has blood stains on it. As I sip on a mug filled with black smoke, visions of glorious calamity and appalling stock market collapse crowd my oversized brain (IQ clocked at 155).This rally you’ve enjoyed all but guaranteed an egregiously large decline, and soon. The sands of time shall mark the occasion, when man, in the face of obvious destruction, chose to buy high multiple shit in favor of getting his affairs in order.

I insist, you should get your affairs in order immediately, if you haven’t done so already.

The entirety of the market is on the verge of getting “NFLX’d”, as the European debt crisis hits brand new levels of absurdity. Consider the fact that Italian 10 year yields are saddling the 6% mark with ECB intervention. Without it, Italy would be gone, washed away like a cannoli in a white water river.

As you know, I sold much of my WNR today, executed at the finest prices of the day. I sold 50% when it was up, and another tranche when it was down a bit. All in all, I’ve reduced my WNR position down to 5% of assets, allowing my short exposure to live. This is the first time my short exposure is net more than 10% of assets since the inception of this rally of life. Humans want to live. It’s too bad everyone must die.

The market is a circus, populated with base creatures, who respond only to pain or pleasure. Such beings are on the low end of the totem pole. I intend to teach these iniquitous ham and eggers a thing or two about moderation. You will bear witness to this, AND MORE, in the days and weeks to come.

Typically, I titled a post before I start the article. But I can’t think of a title to describe what is taking place in this market, so I will try to think of one as I type this.

I sold 50% of my WNR position. The refiners look tired and I only have a few longs, one of them being TLT aka treasuries. We are now up more than 10% for the month of October. What a difference one month makes, eh? It’s real easy to be bullish here. After all, Europe has it all figured out and CAT beat earnings. You can sense the cynicism in everyone who talks about Europe, no? And yet the market continues to steam roll higher.

Let me just say, this move higher is not natural. There must be some covert Fed buying spree, aka QE3, taking place. I will need to add one or two names to the long side, at some point, to offset my hedges. I am hesitant to do so up here. But then again, this market is on automatic higher, so why not take the free money off the floor? The Fed is throwing money on the floor at us Wall Street strippers. All we have to do is dance to get some. As you know, “The Fly” doesn’t dance for the Federal Reserve. I will leave that sort of behavior for you.

NFLX is posting earnings tonight. Anyone of you punks feeling lucky?

More broadly, 40% of the S&P 500 members will be posting numbers this week. Coupled with the European crisis fix, scheduled for this Wednesday, you homos stand to make a great deal of money this week, eh? Keep in mind, when I say “homo” or “faggot”, I mean it in the most docile way possible. “The Fly” is an equal opportunity hater. Do not think for a second because your lifestyle is a political hand grenade that I will give you a pass. Fucking wrong. I will call you out for your homo ways, whenever the opportunity presents itself.

Into the rally, I FUCKING HATE STOCKS. I want to spit on them and throw them out of the window. It pains me to know I will have to buy something to offset shorts. But then again, I am my own fucking man and do not have to do anything.

So what have we learned reading this article? What shall I title it? HOMO RALLY LIVES? Or, how about I FUCKING HATE STOCKS! That would garner a great deal of click throughs. Fuck it, I am going with…. Well this is stupid, since you already know the fucking title. Boy I am smoking some bullshit today.

UPDATE: I fucking defeated you, by refusing to title this post. Take that, fuckface.

I sold 50% of my WNR positioning, putting me net short by about 10%.

Buying stocks up here is no different than spraying one another with high octane gasoline, while smoking cigarettes. What will happen when Greek debt holders take a “voluntary” 50% haircut? See, I am not so much concerned about the losses, which will be horrific. I am interested in hearing the Euro leaders tell CDS buyers of sovereign debt their insurance is no good.

If you own Italian debt and have insured it via CDS, how worried are you about that “insurance” right now?

If Greece defaults, but doesn’t let the CDS trigger, I sense there will be a run for the exits on any sovereign debt in question. It’s like buying puts to hedge your long bets. What would you do if the market crashed and your longs got smashed by 60% and some authority declared your puts to be invalid? I’d never buy stocks again.

There is no easy out, in other words.

In other news, CAT posted good earnings, which bodes well for basic material stocks. And, ORCL bought RNOW (nice trade Howard Lindzon), which should buoy the tech sector. There is definitely a sense of complacency out there. You’ve been conditioned to believe nothing can go wrong, because you’re accustomed to sucking government tit.

Finally, going into November, I will be allocating funds towards gold and silver stocks. Traditionally October is a bad month for gold. Conversely, November is a fantastic month for precious metals. Keep your eyes on Italian 10 yr yields. I don’t care how cheap stocks look. If Italian yields keep edging higher, we will collapse under a flaming vat of refined light sweet crude.

Here are the facts: the SPY is up 9.56% month to date.

The last time we enjoyed similar gains was in April of 2009 (+9.94%), September of 2010 (+8.96%), April of 2001 (+8.54%) and March of 2000 (+9.69%).

So what happens after such huge runs? Stick around and I will tell you.

In May of 2009, the market soared by another 5.84%. In October of 2010, the market moved up by another 3.82%. In May of 2001, the market declined by 0.56%. And, finally, in April of 2000, the market dropped by 3.52%.

It’s important to note, since 1993, the market has increased in October by 5% or more four times. Without failure, each October surge spilled into November.

Of course, percentages are meant to be evened out, eventually. And, past performance can only serve as a guideline to future events. But it’s important to respect momentum. When the market gets going, especially into Thanksgiving, it does not relent.

Obviously, if things do not reverse quickly, I will have no choice but to close out my hedges and get long. Even though I missed out on the last few percentage points, I remain at annual and all time highs. It does not look good for the bears, frankly. The news is horrific, but prices continue to move higher. This is classic bull market behavior, whether I like the reasons or not.

My big task is to find stocks that conform to my new risk tolerance level. Into the final months of the year, I will avoid high beta tech and basic material stocks, aside from the ones I already own, in favor of predictable free cash flow food and beverage companies. Naturally, this will evolve or devolve into early 2012 river boat gambling. However, for now, this is where my focus will be concentrated.

The Peanut Gallery was nuked so that we could replace it with something better. All of this depends on your contributions being coherent and somewhat useful. While the majority of you offer worthwhile information, far too many serve as intellectual chum. In part, this is my fault, as my jovial, foul mouthed rants attract the lowest form of internet web surfer.

Perhaps it’s time for a change?

Going with that theme, I will begin “curating” the viewership here on iBC. Remember, there are two levels of banship on iBC. The nice ban is prohibition against commenting on the site. The onerous version is full “get the fuck out of here, ban your iP address” type that disallows access to the site–sent to the Greg Solomon reeducation camp (GSRC).

To date, we’ve banned over 1,100 from reading the site. While some bloggers would love 1,100 more people to read their shit stained diaries, I curate. I treat this website, as if it were my own home. If you revolt me, you’re gone. If your jokes wear thin, you’re gone.

If the site itself doesn’t work as it should, I lose my temper and make sure it gets fixed.

We all have a place in this world. Some of you are meant to take up space, while others are destined for greatness.

All kidding aside, the bannings will continue until morale improves.

As for the market: futures look okay, ahead of bad European negotiations. It’s ridiculous, plainly. I dare you to bet against me. Better people than you have tried and now find themselves in 200 sq ft apartments in Queens.