Fly Buys: IPGP, VHC

I added new positions, buying both VHC and IPGP.

And, I added to DECK and WNR.

Cash is now 30%.

I am trying my best to allocate some cash here. But every time I scan the market, I don’t like what I see. Today’s warning signal is coming from none other than BAC. Apparently, Countrywide financial is sinking America’s biggest bank and there is nothing being done to give the market confidence. It’s as if “they” are doing this shit on purpose.

I do the math in my head, over and over and over again. I cannot think of a scenario where the stock market breaks out for a prolonged run higher. If the economy is really in trouble, there will be no assistance from the Federal government. It’s important to recognize the political environment, led by the Tea Party, is aggressively opposed to Fed stimulus. Mostly everyone in Congress is hating on the Federal Reserve, which leaves us with what?

NOTHING.

The free market people will have their way; and I guarantee, they’re not gonna like it. I still find it amazing that our government, in lieu of crazy unemployment, is opting for a balanced budget approach to fixing our problems. This is fucking lunacy. However, there is no point lamenting over fiscal policy.

Having said all that, a sharp reflex rally is right around the corner. Since I am already long WNR and DECK, I am looking for some exposure to tech. I have a long list and will likely take a stab at one today, despite the bad bank tape. So you know, I am not optimistic on the long term prospects for this market. But, I believe we have a 5-8% rally from these levels, going into September. On the next rally, I will reevaluate my position to conform with my longer term forecast.

What a fucking day. I woke up in Turks and Caicos, anxious to get back to NYC. Believe me, I love Turks; but it’s a fucking backward beach, where toilet paper costs $10 per roll. I am more than happy to be back, just in time for the fucking market to melt-the-fuck-down.

I leaked out another 1.3% today, despite being in a 50% cash position—thanks to WNR. People sold the refiners, en masse, because Libya was liberated?! What the fuck? Assholes, the Brent-WTI spread is still $24 or 28%. Fuck you homos who are selling down here. Fuck you.

Today’s action in the market was dreadful. Banks are going to zero. Goldman is going to jail. And commodities, sans gold/silver, is worth shit.

What’s the downside?

The median EPS drawdown during recessions is about 15%. At the current, the S&P will earn $93 this year. Okay? The average trough PE since WW2 is 13. Let’s shave 15% off $93. That gives us $79. At 13x eps, the S&P trades to 1031. However, over the past 3 recessions (1990, 2000, 2008), average eps fell by a much larger degree— falling 24%, 32% and 57% respectively. Should the average eps drop by 30% this go around, that puts the S&P at 845 at 13 times earnings, a 23% discount to current levels.

What am I going to do about it?

For the love of dirty dogs, I want to successfully trade out of my existing longs. I am underwater in all of them and feel fortunate to have limited exposure. But it’s fucking hard to watch these stocks underperform, without benefiting from the market drops. Nevertheless, I have chosen the path of long and will “stay the course” (no Bush) and trade out of these positions, through timely adds.

On a side note, I found it funny that Mrs. Fly booked first class going and ASS CLASS coming home, via Jetblue. She spent inordinate amounts of money on all sorts of Carribean shit and managed to stick me next to the fuck toilet, in last class, on the way home as a “reward” for my hard work. How quaint.

As I make final preparations for my first class flight back to America, I am pleased to see S&P futures +22. More so, I am elated to know, if only for a brief period of time, the dicksuckers who profess 0% US-European exposure and a multitude of short sales, will be catapulted into a swarm of bees today. Again, the problem with people, in general, is gluttony. If you were balls deep short, going into the weekend, you got greedy and will now pay the price.

The lessons of managing money, on a high level, continues to repeat themselves, and often. You simply need to pay attention and stop being such a fucking pig.

Finally, Ben Bernanke cordially invites you to enter “the hole” asap. He will bring his finest blunts and 40oz bottles of malt liquor to Jackson Hole this year, begging you to fuck with him.

Are you brave/man enough to get in “The Hole”? Or will you simply fade away, like a one hit wonder, vanquished yet again by THE BEARDED CLAM?

Do you want to know why I am so emphatic about NOT being a bear? Look at the people who are professing the doom and the gloom and the fucking lightening to the face trading action. They are small turtles, scared of foot steps, creeping around like zombies eating flesh. I cannot and will not keep company with your ilk. Understand something, many of these people were screaming on roof tops about inflation 2 months ago. I’ve always asserted, The Hugh Hendry, long treasuries, would be back in style one day, much to your chagrin.

How many of these little burlap’d bears were telling you to buy TBT because, for the love of haunted houses, rates just had to go up?

WHAT HAPPENED?

I will tell you what happened, AND MORE.

The Frakenstein Economy (h/t BP) lost its 10,000 gigawatts and sunk back into oblivion. We never really crawled out from the shithole of 2008. The Fed and the Treasury gave corporations time to mend their balance sheets and they did so with great vigor. At the present, corporations hold nearly $2 trillion in cash, buttressing any bullshit dip in the dollar. All of you dollar homos needs to take a look, in earnest, at the dollar and quit calling for its demise. It is the standard.

Over the past month, commodity related stocks have signaled a sharp drop in economic output. It is my belief this avalanche of negative sentiment started with the debt ceiling snowball. As a result, sentiment plummeted and corporations stopped investing.

Take a look at some of these Basic Material losers, over the past month, absolutely staggering.

No. Ticker 1-month Return Industry Market Cap Sector
1 PCX -49.71 Industrial Metals & Minerals 1,120,000,000 BASIC MATERIALS
2 HUN -41.77 Chemicals – Major Diversified 2,810,000,000 BASIC MATERIALS
3 CIE -41.46 Oil & Gas Drilling & Exploration 3,360,000,000 BASIC MATERIALS
4 WLT -40.67 Industrial Metals & Minerals 4,630,000,000 BASIC MATERIALS
5 MT -40.45 Steel & Iron 30,300,000,000 BASIC MATERIALS
6 CHMT -40.33 Specialty Chemicals 1,070,000,000 BASIC MATERIALS
7 SD -40.28 Oil & Gas Drilling & Exploration 2,680,000,000 BASIC MATERIALS
8 NBR -39.62 Oil & Gas Drilling & Exploration 4,720,000,000 BASIC MATERIALS
9 ACI -38.87 Industrial Metals & Minerals 3,710,000,000 BASIC MATERIALS
10 ANR -37.61 Industrial Metals & Minerals 6,550,000,000 BASIC MATERIALS
11 KEG -36.83 Oil & Gas Drilling & Exploration 1,790,000,000 BASIC MATERIALS
12 KRO -36.03 Specialty Chemicals 2,320,000,000 BASIC MATERIALS
13 MMR -36.00 Independent Oil & Gas 1,810,000,000 BASIC MATERIALS
14 NFX -35.83 Independent Oil & Gas 6,180,000,000 BASIC MATERIALS
15 HSC -35.66 Steel & Iron 1,630,000,000 BASIC MATERIALS
16 ATI -35.31 Industrial Metals & Minerals 4,550,000,000 BASIC MATERIALS
17 CPX -35.11 Oil & Gas Equipment & Services 1,950,000,000 BASIC MATERIALS
18 WOR -34.24 Steel & Iron 1,150,000,000 BASIC MATERIALS
19 WTI -34.12 Oil & Gas Drilling & Exploration 1,360,000,000 BASIC MATERIALS
20 SOA -33.76 Specialty Chemicals 1,830,000,000 BASIC MATERIALS
21 ALB -33.76 Synthetics 4,250,000,000 BASIC MATERIALS
22 SGY -33.69 Independent Oil & Gas 1,090,000,000 BASIC MATERIALS
23 TS -33.67 Steel & Iron 18,260,000,000 BASIC MATERIALS
24 CRZO -33.49 Independent Oil & Gas 1,070,000,000 BASIC MATERIALS

Now, this is telling us one of two things. Either we are entering some sort of fucked up vortex, where only Hugh Hendry gets to dance, while the rest of us get beaten to death with sugar canes. Or, this is nothing more than fear begetting more fear, due to negative sentiment. I’ve seen this type of carnage before and it doesn’t always precede recession. Sometimes investors just sell shit for the sake of selling it.

Of course, there is more evidence pointing to recession than boom time. And, as always, one should be diligent in picking stocks and price points. However, at some point, this all gets priced in, like it or not. When stocks start going up again, even on bad news, you will know we hit bottom. Until then, survive.

My vacation is winding down. I had a great time with my wife and kids. Life is different here. No one gives a shit about stocks or bonds. However, little do they know how much their tourism revenues depends on a healthy western economy. On my seven day hiatus from the real world, I must have spent upwards of 12k on a wide array of accouterments. Naturally, Mrs. Fly had to shop for souvenirs, like a mad woman. And I had to eat at every high end eatery within 50 miles, like a fucking glutton, because that’s what I do.

Come Monday, I hop on a plane and fly back to civilization, where fucktards are literally trying to destroy the world on a real time basis. Will the stock market crash or not? Better yet, will Ben Bernanke save the motherfucking day, or not? Will gold keep going higher? And, moreover, is John Paulson’s asshat fund closing the fuck down, taking every stock he owns with it? All of these questions, and much much more, need to be answered, and soon.

This life of a stock operator is asinine, when I think about it. It’s speculation on speculation, with a twist of gambling. There are methods to game this market; but it’s never easy. Each and every time I make a bold move, I get the distinct feeling that “this time might be different.” When it all pans out, short term memory lapses kick in and I go back to square one.

I never hate on fellow managers who lose their mojo. I can see how people can easily lose their way, cutting through all the bullshit, all the stress and the lies and the backstabbers. Take a guy like Bill Miller, asshat money manager at Legg Mason. Sure, Bill sucks moose balls now and people love to give him shit about it, myself included. However, he was a fucking stud for decades. The same with John Paulson. All of you little bastards are ripping into John, for being retarded. However, the man accomplished greatness. He lost his way and will be recycled. That’s life.

Personally, I’d rather take a stab at accomplishing greatness, even if it’s only for a short time, than live out my days like an average Joe. Anyone remember Randy Stone? Of course not. But I bet you fuckers remember Macho Man Randy Savage.

You see these people on Twitter talking shit? Several of them are documented hedge fund failures. Now they want to train you how to run money? That’s fucking hilarious. Look, I’ve been managing vast sums of money for 14 years. There is a huge difference between telling someone on a blog, or via a newsletter, to buy XYZ because it’s “awesome and amazing” than putting millions of dollars into said ideas and having to deal with real life consequences. That’s my unique, double edged sword dilemma. When you little skittles talk shit about WNR or DECK or whatever stock I am buying, there is real money at stake, not just my reputation. When people fuck with my money, I eat them whole, like a pelican at a beach. I will attach c-4 to your brains and catapult you into active helicopter blades.

Hence, I liberally ban people at will.

Coming soon, iBC is in the final stages of a complete web redesign, very drastic and groundbreaking. It will make all of the other 3rd tier blogs melt away like a snowman in Turks and Caicos.

Sometimes it’s easy to get caught up in the emotion. Geez, if you were to just spend a day on Twitter, viewing the outright panic mongering by would be gurus, you’d never buy a stock again. What we are seeing here has happened before. You just don’t remember it too well, due to all of the marijuana intake.

At the moment, the S&P is down about 12%, month to date. The last time the market melted down in August was back in 1998 when those commy pricks (Russians) had an economic collapse. As a matter of fact, it started on 8/17/98 and it spread throughout Asia. Hence the phrase was born, “The Asian Contagion.” Due to Russia’s overwhelming debt, they decided to devalue the Ruble and fuck creditors. The immediate result was a market in crisis. Commodity prices plunged and equities crashed. I remember the exact moment because I was so dead in the water, I was out interviewing for low end discount house gigs. As I was on one of these hideous interviews, the “boss” brought in his “top producer”, who boasted an annual income of 98k. Just one year prior, I made about 80k, my first year in the business. It was at the very moment, seeing these fucking pikers in front of me that I knew it was my duty to make it in the business.

I borrowed money from credit cards, skipped lunch 3 out of 5 days, worked Saturdays, and got lucky.

I put all of my money under management, and all new money, in one stock, BYND, and scored big. The market meltdown, the end of the world as we knew it, back in August of 1998, never materialized. Following a 14% drubbing, the S&P rebounded in September by 6.3% and some more in October by 8.1% and never looked back.

Aside from 1998, we dove lower in February of 2009 by 10.75%, only to rebound by 8.3% in March. In October of 2008, the market crashed by 16.5% and dipped some more by 6.9% in November. The only other occurrence of a double digit decline in a single month was September of 2002, when the S&P dropped by 10.4%. Shortly after, the market roared back in October by 8.2%.

The trillion dollar question: is this time different? Is this “the end”?

The world has been ending for as long as I can remember. However, somehow, someway, this bitch of a market always seems to come ripping back.

Aside from the fundamental thesis behind the refiners, I am having a very difficult time finding stocks to buy here. The trends are fucking woeful and have the distinct look of being “on the other side of the mountain.”

I’ve looked through all of my screens and all I find is silver/gold. However, the problem with silver is the outside chance a rip your face off and skull-fuck you rally derails the metals, at least temporarily. I like both AG and EXK. But the last thing I want to do is hedge myself out of a good rally.

NVDA is tempting, as well as TZOO, VHC, ARMH and LNG. At the moment, I am much more interested in procuring conch ceviche, than gambling on a somber Friday afternoon.

In summary, I am likely to make do with what I have. Although my upside will be less than before, should we rally, my downside is somewhat contained. Going out a month or so, should the economy remain in flux, I see no reason to be long equities, aside from the temporary hyper-cocaine rallies.

As always, things can change materially. I am not about sticking to an ideology, but raping the trading ranges. At the moment, like it or not, the rubberband is tightly coiled back, readying to spring forward.

NOTE: My year to date gains are around +6%

Aside from the fundamental thesis behind the refiners, I am having a very difficult time finding stocks to buy here. The trends are fucking woeful and have the distinct look of being “on the other side of the mountain.”

I’ve looked through all of my screens and all I find is silver/gold. However, the problem with silver is the outside chance a rip your face off and skull-fuck you rally derails the metals, at least temporarily. I like both AG and EXK. But the last thing I want to do is hedge myself out of a good rally.

NVDA is tempting, as well as TZOO, VHC and LNG. At the moment, I am much more interested in producing conch ceviche, than gambling on a somber Friday afternoon.

In summary, I am likely to make do with what I have. Although my upside will be less than before, should we rally, my downside contained. Going out a month or so, should the economy remain in flux, I see no reason to be long equities, aside from the temporary hyper-cocaine rallies.

First off, I want you to know that I don’t get mad at any of you, really. All of my pent up, homicidal anger is directed towards people in my profession. Why? Sorry, I really don’t know. I guess it’s the same reason why lions want to eat zebra. I just don’t like people in my industry and I make every effort to direct my children away from it. It is filled with the greediest, most dishonest, reprehensible people on the planet, save the law profession.

I hear a lot of people bragging about not losing money in this downturn. That’s great. However, even more, these same people are boasting a bearish outlook, yet find themselves long stocks to “hedge” their shorts. Sorry pal, the only thing you are hedging is your low IQ. Look, only pussies hedge themselves out of big trades. If you are as doom and gloom as you say, take 50% of your assets and get short, with conviction. You can keep the other 50% in cash and use it to get long options for scalp trades.

The reality is, these people are not good managers, but scared money. They’ll never hit the grand slam because they are singles hitters and have warning track power. For some people, that’s okay. For me, I am all about the fences.

Having said that, I am still almost 50% cash due to my belief that “weekends are scary”. God, who knows what will happen?!?! At least my DECK is moving higher, following an absolute drubbing.

Should the market regain its footing, the refiners are the best place to put your money, due to margin expansion. Fucking crack spreads are north of $37 now and the WTI-Brent spread is 31%! If WNR isn’t your thing, look at HFC, DK or CVI, all solid companies in a kickass space.

Best case scenario for the longs, today’s lows stick and we run up into the bell. Worst case, this little rally runs out of steam and we cascade into le belle.