PANIC: RUSSIA HIKES INTEREST RATES TO 17%

In order to stem the rout in the Ruble, Russia just hiked rates from 10.5% to 17%. The last time Russia responded to capital outflows like this was in 1998. I’ve told you about 1998 before and it was nothing to remember fondly. Zero bid trading action. Eleven AM margin call liquidations. Sheer panic.

“The decision was driven by the need to limit the risks of devaluation and inflation, which have recently significantly increased,” the central bank said in a statement

This move by the Russian Central Bank is sure to scare the shit out of people and might lead to a treacherous Asian trading session.

Here are your new problems to deal with and consider.

1. Russian capital outflow crisis.

2. Oil crisis.

3. Iron ore price crisis.

4. Dry Bulk Index crisis.

5. Investor sentiment is horrible.

Over at the rumor mill, lads are suggesting that Russia might be selling gold reserves to raise cash. I don’t view this as being unreasonable, which is why gold is uninvestable. Whether this pushes Russia to act harshly in the Ukraine to buoy Putin’s popularity at home remains to be seen. One thing is for certain: if I was an alien viewing the price action in these commodities and subsequent action in global markets, I’d surmise there was a looming economic crisis in the balance.

The Fed needs to respond right away, in order to help reflate markets. Their mandate is to boost inflation rates and right now we are circling down the deflationary toilet bowl. They should’ve never stopped QE.

I reduced my exposure to equities today, while sneering at my screen filled with amateurs patting each others on the cocks for making successful short sales. It truly is something to behold when you’ve been defeated in an arm wrestle by men with 5 inch biceps.

This whole GPRO trade, one in which I declared I was cursed with, turned out to be an unmitigated disaster. The funniest part of my day is reading the predictability in the stock. It always opens higher and then always punches itself in the scrotum, falling all the day long. The one thing that kept me wholly long, from $68 to $85 back down to $57 is the fact that oil has traded lower. The thesis is lower fuel expenses equals greater retails sales. Unbeknowst to me, GPRO tethered to the price of oil, denominated in rubles!

Some of these people banking coin in GPRO are complaining about its share price ‘being propped up’ by underwriters and pondered if an SEC investigation was in order because of it.

What the fuck? Fuck my life, losing to these bedraggled microbes.

I markedly reduced my GPRO, YELP, BTU and FMSA positions.

While I may one day be proven correct and these stocks lift much, much higher, it is necessary for me to reduce my beta in order to save my life.

This is going to come off more of a screed than a blog written by a reasonable man. I see this dog-faced man on my television, bragging, rather smugly, about his “70% T-bill position” and I want to kick him into an idle sewer hole. Now, following that horseshit, CNBC is interviewing the lunatic, Peter King, who wants to atom bomb Iran and Pakistan–yesterday.

The market is melting down for a variety of reasons.

1. The Russian ruble is crashing.

2. Oil is crashing.

3. Investor sentiment is plummeting.

Note: the third point is the most important. Stocks trade up and down based upon mood. The difference between a market trading 13x earnings and one at 18x is sentiment. If people have confidence, they buy. If not, you get this sort of nonsense.

Since entering the business in the late 90’s, I’ve had the pleasure of experiencing one calamity after the next. This one is a little unique, in that the crash in crude truly came out of left field. But now it’s here. What are the ramifications? Who owns the debt and instruments associated with oil wells? The wildcatters will run out of money first, then everyone else.

Sure, the drop in crude is very positive for your plumber and electrician. It’s bullish for grandma, but bearish for me.

The market demands clarity and hates unknown quantities. Until we know what the damage is, I suspect the market will continue to offer false rallies and crushing defeats. The only thing that I see positive for longs now is the predictability of this rout. When things get too easy for either bulls or bears, the trap door looms.

Futures are well off their highs, following a weaker than expected Empire Manufacturing Index reading. European markets, especially the FTSE, have been selling off for hours. Oil, which was initially lower by 3%, reversed and was up around 60 cents all night long. But now it’s flat and looking weak. I don’t care if RVBD caught a private equity bid, or a slew of analysts decided to upgrade stocks today. If oil cannot go higher after last week’s decline, we are going lower.

Frankly, this is becoming monotonous and boring, seeing the market run up in the morning, only to immediately sell off–leaving investors with garish losses.

There is nothing more to say, so I am not going to bother writing another word.

One day doesn’t make a trend. However, given the frenzied nature of the market and the quick to capitulate nature of the bears, here is a short list of oil stocks that have been beaten down to a pile of feces that might explode to the upside.

3 MO RETURNS

Micro Cap Ideas

SN -76%

CRK -74%

KEG -80%

BAS -76%

Mid Cap Ideas

EMES -65%

OAS -73%

WLL -66%

SLCA -64%

Large Cap Ideas

HAL -42%

WFT -53%

OXY -20%

CLR -56%

Naturally, the night is young and this move is very small, now up 65 cents. However, we opened down nearly $2 per barrel and have been rallying ever since. We’re overdue for a rally here, God damn it.

This just out from out middle eastern overlords, Barrons of Barrels.

“We are not going to change our minds because the prices went to $60 or to $40,” Suhail Al-Mazrouei, the United Arab Emirates’ oil minister said at the conference, according to Bloomberg. “We’re not targeting a price; the market will stabilize itself.”

I think it’s fair to say, judging from statements like that, they invite more selling. For whatever reason, OPEC is intent on walking oil lower.

Bear in mind, these are the same people who maliciously controlled the price at unnatural levels, nearly breaking the backs of all oil importers. Now that the table has turned and the west has become keen developers of crude, a war for market share has ensued.

Oh, one more thing before I go. Remember when I said the world ran on crude?

The real damage, however, is yet to come. By some estimates the wreckage, particularly for the oil-services companies, may add up to a stunning $1.6 trillion annual loss, at oil’s current $57 low, predicts Eric Lascelles, RBC Global Asset Management chief economist.

Classic heart attack close, the sordid ordeal that makes you cry in the shower–curled up like a fetus. I guess this is how I am to be destroyed, by a giant tax cut on the consumer, heavily long consumer oriented stocks. One might deduce that destruction is inevitable, with large margin balances and depreciating intelligence quotients. Nothing you see here today is based upon logic, which doesn’t make it feel better.

A loss is a loss, of course of course.

Early in the morning the tech sector was bucking the trend, even some oil stocks. After 3:00, the margin clerks walked into offices of brokers around the country, punched them in the fucking face, and then liquidated their accounts to zero.

The contagion is real. The devastation of this move, specific to energy, is equal to that of the banks in 2008-2009. OPEC doesn’t seem to care about the decline. I am sure they’re sipping on some tea, whilst the Bakken shale workers receive pink slips.

This close you see today, closing out a week of pure debauchery, is the reason why retail will never come back to the markets. The correlations and the violence of the moves are too much for most to bear, even professionals.

I will hold firm, because “The Fly” doesn’t capitulate into the hole. Feel free to save yourselves and live out the rest of your lives from the middle of a garbage can. I’d rather dive head first into a cinderblock, than sell to these motherfuckers who are covering their shorts.

Oil now has a $57 handle. I hereby fire all workers in Texas and North Dakota oil properties. Your lands will become dust bowls and your stupid little towns are going to rust. After you lose your jobs and start your new careers as WMT stock boys, taking 80% pay cuts, the large integrated oil conglomerates will buy up your properties and begin the process of jacking up the price of crude again.

Looking at previous oil busts, they usually last for a few years. However, everything else benefits. Look at today’s consumer sentiment numbers: fucking outrageously bullish.

Wade through this muck and keep tight leashes on your oil trades. I am sure they will bounce, violently, whenever the price of crude goes higher–if ever. But longer term, this economy wins, as 70% of it is based on the consumer. As much as you like oil, it only represents 12% of the economy, relegated to ultra-right winged folks in Texas and North Dakota. I am sure their prayers to the Lord will be answered and their careers saved, somehow or another. As you know, good things happen to good people.

Nonetheless, I have two main oil trades on now:  SLCA and FMSA. I did buy OXY the other day; but that’s more of a long term hold.

One thing is for certain, if and when oil does start going back up again, there is going to be 300%+ winners all over the place. Bide your time and diversify your dumbass portfolios.

It goes against everything I hold dear: logic and reason, which is why I am doing the opposite and buying it.

I added to my SLCA position. I have ear marked some money for a final purchase. God willing, our Saudi overlords will grant us respite.

There is nothing better than waking up from 2 hours night sleep to see Europe down 1.5% and US futures off by 100. It warms my heart to know that short sellers around the country will be enjoying this holiday season over large servings of human kidneys and livers.

2014 will be remembered as the year when oil crashed. Nothing else will overshadow it and that’s just how it is. The great American oil boom is essentially over. The price of crude has fallen well below ‘worst case scenarios’, so much so that triple collared hedges from the likes of PXD are now under-water.

The oddity in the oil collapse is the gross incompetence of OPEC. Sure, perhaps there is something political taking place here. And, yes, they will effectively destroy the burgeoning fracking industry. But at what cost? Not doing anything here, with oil down 45% from its highs, is equal to our Federal Reserve watching the market get cut in half and do nothing about it.

We’re all so cynical about it. Most people believe there is some underhanded deals taking place to bring down the price of oil. Can we stop with the fucking conspiracies already?

There isn’t a fundamental reason that would explain the precipitous drop in crude. Either we are being lied to about China’s growth prospects or this drop in crude is just another one of those financial fuck ups that will correct itself over the next 6 months.