I Live For These Moments

Let’s be honest here: the market is boring when it goes up everyday. There is nothing like tuning into bbg radio, while driving in the car, hearing stories of panic and calamity. The end of the world scenarios  playing out make for top shelf drama. We all know how the story ends, though, right? All of you malcontent beer swillers, salivating over SPY futures down 13, eventually, will be bankrupted and discarded along the side of the road, for the garbage men to scoop up.

Thanks to President Obama and President Obama only, ebola is in America. There is no one else to blame but him, frankly. Flights should have been shut down and Liberia quarantined. Instead, we have a national panic and this is lending to the negative sentiment.

ISIS is now within 15 miles of the Iraqi airport. We are quickly approaching the last helicopter leaving the american embassy in Vietnam moment there. When it happens, and assuredly it will, there is no doubt it will be a national disgrace.

The oil trade is broken to pieces and deflation is back (extra Hugh Hendry).

In my experience, markets can remain irrational longer than you can remain solvent. Just because we have tanked, that doesn’t mean we should rally. I invite you to manage your affairs and account for another 20% lower in your holdings to properly stress test your accounts.

This is the way I see it: I have about 40% of my assets in a defensive posture. I am willing to lose money on the other 60% because, eventually, I will take that staid money and toss it into the sweet fires of risk, when “that moment” arrives. I will make all of the money back, and more. But before that happens, there will be small rallies and rumors of bigger ones. Ultimately, this is a seasonal thing, the side effect of a corrupt and utterly inept Federal Reserve Chief. Janet Yellen, seltzer drinking moron from Brooklyn, is in far over her head and I am afraid we might need to endure a substantial pullback before she comes to grips with the indelible fact that QE is for life.

https://www.youtube.com/watch?v=ZvclxOKoAug

This is going to be a serious post–because money is serious. Two thousand and fourteen has been dreadful for me. The reason for it was the massive draw down that I took in March-April. Digging myself out from a -35% hole is nearly impossible. Aside from that, this market has been filled with ominous surprises.

I got March-April wrong, from an investment standpoint. But you can’t say that I didn’t warn of this October surprise, eluding to “the path of 2000” a few dozen times since May.

We’re Not Out of the Woods Yet– May 28th

A Late Night Message– July 1st

My Bearish Scenario– July 27th

The Only Reason Why I’m Not Buying Right Now– July 31st

Now is the time to sell– Aug 25th

Fall Back Son– Sept 7th

DEATH IS COMING -Sept 15th

It’s April All Over Again– Sept 15th

Ignore Everything But This- Oct 7th

I post 4 to 5 times during the day and I really like to get fired up on reversals. I have many stocks that are earmarked as long term investments, my personal cash. I also have trading accounts that are more short term. Over the past month, I went from 50% in TLT and utilities to a series of energy and tech stocks, only to stop out of them right before this last leg lower. Believe me, I took losses, but nothing like it could’ve been.

With the proceeds, I held about 50% cash and then bought into the Fed day spike. But, as you know, I didn’t chase beta. Instead, I bought ETR, WRE, HE, TRN and CLR. With oil collapsing, I instantly took hits in CLR and TRN; but the rest of the money, which represents about 35% of my assets, is secure. I also have about 5% cash left.

As luck would have it, one of my other large positions, CYBR, is up this week.

In summary, I lost money this week; but I am still standing and ready to buy these liquidations–when the time is right.

However, my thesis for most of the year was that this would mirror 2000 and the market would careen lower into the New Year. To be clear, I still believe this can happen. Nevertheless, nothing goes down in a straight line, nor up. And let’s be honest with each other, saying “this time is different”, pertaining to the sell off, has been a really bad strategy since 2009.

I know, this time ‘really’ is different.

TLT is the safe haven because there is a flight for safety. This is a classic bear market trade.

Commodities are in the penalty box and have been for sometime. This speaks to global growth slowing (extra Keith).

Utilities and REITs should perform, as investors flee high beta in search for yield. The higher TLT goes, the more attractive ETR gets.

One last point: why aren’t I short?

Because I’ve studied bear markets and have concluded that I could make double digit returns in utilities, without having to risk my face being ripped off on an upside surprise, especially during wholesale market selloffs, like we had today.

Bottom line: I know a bounce is coming and I tend to get excited when I see one; but my overall opinion is one of extreme caution heading into the holiday season.

The viciousness of the sell off is something that I hate to bear witness to. I’d love to get all dramatic and say “I haven’t seen this since the panic of 1907.” But the truth is, I’ve see this sort of bid less drek countless times.

It appears we will close at the lows, after sucking in people mid-day, during a brief respite. It was a false rally and now those who got sucked in will dutifully pay for their sins.

Since you’re here to ponder about me and how I am fairing, let me lend a bit of transparency to my holdings. I am a power man, with ETR being my largest holding. After that, I am a rail man, long TRN. My next three positions are CYBR, CLR and WRE. After that is SLCA, HE, LITB, AAPL and GILD. The rest of my holdings are spread across a number of small positions, all resembling Hiroshima, post WW2. As of now, on this day, I am down 1.3%. My losses are accelerating with the crash-like flavor of the tape.

We are all hoping for a bounce. Therefore, we get nothing. I suppose we get to enjoy robots gone wild, hitting bids with reckless abandon. Anyone who is long chips or oils are completely without money now. Today, a new sector joined the ranks of losers: social media stocks.

Regrettably, there aren’t many safe havens, aside from high yield plays and PEP. I implore you to explore utilities and REITs, for we are in a low rate world. For the love of fashionable Hazmat suits, Kazakistan govt bonds are yielding just 4%.

I wish I could be more optimistic, in the face of overwhelming and dire disaster. But everything is rubble now and the run of uninterrupted hedonism, spearheaded by QE, is over.

One can only pray now for a bounce and a little bit of sweet Jesus mercy for next week.

Amen.

I added to SLCA, TRN and CLR.

Oil reversed higher. Stocks reversed an early deficit, going from -70 NASDAQ to up. Now we are spiraling lower again, for reasons unbeknownst to me. At the same time, the very worst of the human race is jerking off to the redness of the tape, coming to this here blog and making bold, exclamatory comments. Just know, without a shadow of a doubt, there will come a day when I decide to become a vigilant, leave this gentrified life of money management/blogging, and kill you. I am not this stable persona you make me out to be. All of your comments and stupid remarks are being archived, for review at a later date. Just like in April and May, when you approached these halls with hands full of shit, you will walk away from this market action smelling like a horses ass.

The algos are firmly in control of the NASDAQ. It wants to do what it wants to do.

That bottom call that I made 45 minutes ago, it’s gonna have to be put on hold for a minute, possibly a day.

I bought SLCA.

This is the sort of tape where bottoms are made. Every time the market gets like this, all sorts of odd people appear on the site. So you know, inception to date, we’ve banned over 3,000 readers from viewing the site and countless others from commenting. Once you’ve been flagged, your comments will never appear and you shall be banished for eternity. While you may have strong objections to the manner in which I approach the market, none of what you say is actually valuable, in any shape or form. Therefore, ergo, you are banned.

Iran cut the price of oil today, leading people to believe there is a serious glut on the world market, catering to Asia. This is the primary concern behind the price drop.

MCHP warned and is spooking people out of MU and other high caliber names. This is wrong.

My fucking train stock, TRN, is acting as if the railroads have been seized by ISIS. This is all wrong.

I am calling for an intra-day rally and subsequent rally, right here, right now.

There will also be blood.

I see the market is reversing off the lows, sending shares higher. If you’re like me, you already have longs. Albeit, my level of degeneracy pales in comparison to yours. My top holding is ETR, a utility that pays more than a 4.5% dividend. My second largest is TRN, followed by CYBR, WRE and CLR. That being said, I track the NASDAQ 100 pretty tightly, a design that I created in order to avoid being blown out.

Let me remind you of the suggestive nature of this tape and to be careful of chicanery. Just because we are rallying now doesn’t mean all is well. This market is infected by a cancer, an ailment that can only be cured with soaring WTI-Brent crude prices. We need to know global growth is ok. After seeing the MCHP warning, tech investors are feeling uneasy. Look at MU.

I am hoping for the best, but certainly will not be surprised to see a late day collapse.

On the positive side, this is day 14 of The PPT missed oversold signal. In other words, the last time it was wrong, it took 14 days of market mayhem to finally rip higher.

Hopefully history will repeat itself.

NOTE: Today is the last trading day of The PPT free trial.

Throughout our recent history, every single decline of this magnitude has resulted in a face ripping rally. Even during the darkest days of May of 2014, the high beta tech and biotech rout, that represented extreme opportunity, as many of those shares rose by 50% in the months to come. I believe a similar fate awaits the oil men in the Bakken–the young gents waking up at 4am to inject fracking fluids into the earth for the explicit purposes of becoming rich. And, as a side bonus, convert the local drinking water into a toxic incendiary cocktail of win.

I realize that you are very frightened now, scared of shadows and mugs overfilling with black smoke. But, I promise you, this will pass. As an investor, it is your responsibility to remain in the game. That means you need to measure yourself. This is not the time to be greedy, but to stay alive. There will be plenty of coin to make once the market turns. You should not be buying anything on margin or dumping large portions of your portfolios into short dated option contracts.

I have a mind for this sort of tape. I’ve been through the very worst markets the world has to offer and do not get nervous anymore. Your emotional response to loss should be equal to that of gain. One outcome is equal to the next and it must remain that way, otherwise you’ll panic out of good positions.

Let’s see how she opens and then I’ll offer some quick analysis.

Let’s all agree that CLR represents the oil trade, as it pertains to both quality and risk, as they have operations domiciled in the reviled region of the Bakken shale. The question we have to ask ourselves is “how long with this correction in crude last and how low can these stocks go?” Our only guide is history, gentlemen. It’s all a guess. But at least with history, we can get an idea of where that rubber band of human emotion breaks.

Here are some of the more frightful one month drops in CLR, since 2008, and the returns in following two months afterwards.

Jan 2010: -11.4%, Feb: +3.95%, March: +7.75%
Feb 2009: -23%, March: +33.3%, April: +10.2%
April 2013: -8%, May: +1.5%, June: +6.1%
May 2012: -18%, June: -8.5%, July: -3.9%
July 2008: -17.6%, August: -12.2%, Sept: -22%
August 2010: -10.9%, Sept: +14.4%, Oct: +2.5%
August 2011: -18.5%, Sept: -13.4%, Oct: +25.3%
Sept 2014: -17.5%, Oct: -7.5%?, Nov: ?
Nov 2008: -39%, Dec: +5.9%, Jan 2009: -0.1%

As you can see, these sort of declines are not unique, but rather par for the course. I am going out on a limb here and saying 2008 type losses are out of the question. But that does’t mean we are done going lower. Every time we slid more than 15% in a given month, the following month was horrendous, sans Feb of 2009.

During May of 2012, we slid about 30% from May through July.

During August of 2011, we slid 31% before spring boarding 25% higher.

Right now, CLR is down 25% over the past two months. If I was a betting man, I’d say there is 5% down, 25% up in the name–good odds from my vantage point.

I will be averaging down if we leg down again.