You Pick a Topic

It’s a slow summer day, with most of the important people out on vacation. It’s just you and I here, playing about the stock market, wasting time on the internets. Feel free to ask me questions, provide me with topics to discuss, or inspire me to write something blasphemous. There are so many interesting topics to discuss. I look forward to your suggestions.

As an aside, I still haven’t purchased anything.

See, we’re bouncing here. Not all stocks are up today, but a solid 50% are moving in the right direction. Notice how I had the gaul to say “right direction”, referring to stocks moving higher? Like time, the natural order of the stock market is for it to appreciate. I never quite understood the mindset of a bear, betting against commerce in a world whose population has done nothing but increase for the last 100,000 years plus. While there might be periods of ‘adjustment’ and panic, it’s just ridiculous and silly, almost juvenile, to be a long term short seller.

That being said, I should have put money to work before yesterday’s close and certainly this morning–but I’ve been busy. After this post, I will look to make a few purchases.

The market might bounce, but the bubble stocks might struggle as earnings season progresses. That was the situation back in April and May and it might repeat now. Look at shares of GIMO in the after-hours, down more than 30% on a guide down. If your company is growing more than 20% per annum and trading more than 4x sales, look out below during earnings season. Most of the ‘bubble stocks’ are losing money, so earnings might not even matter. Last quarter, stocks like WDAY, CSOD and NOW got manhandled after big earnings beats. No one cared because they weren’t making money.

In order to mitigate the risk of this dip being different, you might be better served with a broad based ETF, like TNA or even QQQ. Play the bounce, make 5%, then jettison. It’s summertime, after all. Who needs this shit?

At any rate, here are some interesting names that have gotten hammered over the past few days.

DATA
XON
SALE
ANGI
NOW
FUEL
DWRE
KS
GLOG
GTAT
TSL
AEGR
ACHN
TEDU

On the other end of the spectrum, the following stocks have outperformed this abysmal tape.

SCCO
PPC
NOR
AKS
GES
AXL
X
TSN
BAX
PG
WHR
ELY
GNC
BBBY
GME
AU
LL
CODE
OAS
LRCX
ACC
CXO

This decline is anything but docile. It is the third rail of a subway tract meeting your foot. It is a sucker punch to the nose. It is a grape rape. For two days now, we are relieving the horrible carnage of April and May, whereby high beta, high valuation, tech and biotech stocks are getting their faces kicking in. We are talking 5-10% moves lower, no bids, into a spiral of death.

This is the other side of the blade, when trying to play illiquid small cappers into a frothy tape.

I am 30% cash, yet I feel like I am 130% long. Most of my long term holdings are holding up. But the trades, the speculative stuff: ouch.

I am fortunate to have sold yesterday. I would have sold more, had I read today’s newspaper yesterday. I can only tell you that I believe this sell off will be shallow. Instead of licking your wounds, afraid to venture off outside, you should be thinking greedily now, preparing to position into the carnage.

This is the July lull I warned you about. Go back and read your history. Back in 2000, we followed the same path we’re heading now. There was a lull in July and new highs were achieved in August. I do not believe the bubble stocks burst for no good reason back in April. I cannot accept the fact that I was simply fooled and we are going to reboot and head back to new highs, without any test or correction to follow. “The Fly” doesn’t get fooled like that, unless it’s for a reason–a harbinger of doom of sorts. Which is why I believe, with all of my black heart, that this isn’t the top–not yet at least.

This is the fake out. The part of the story when some of you get tricked into shorting stocks, getting long volatility, ignoring the lessons of yesterday. The top will not be as predictable as this. It will come at a time when you least expect it, stuck in a brothel or some decadent harem, smoking crack cocaine with hookers.

This is not the top. But that doesn’t mean you should be all in. I am now more than 30% cash, yet I am still getting lit on fire this morning. Naturally, whatever losses I am enduring now will need to be made back later, utilizing the cash I’ve set aside. I will need to execute excellent trades, timed perfectly.

I will use The PPT as my guide, as it has never let me down.

I’ve found that the difference between successful people and the mediocre is attitude. On one hand, you have a person who optimistically goes about his day, only interested in generating revenue, improving his business. On the other, there’s the guy who spends inordinate amounts of time spying on others, trying to destroy one thing or another. He’s a negative Nancy, a cancer that must be stricken out from the human gene pool.

I’ve also found that many of these people are victims to the natural order. They find themselves alone, unable to procreate because no one wants to bother with a misanthrope.

Here on the internet, everyone is an expert. There isn’t any need for corporate etiquette, respect for one another, or common decency. The lot of you are vial cretins, only interested in making a mockery of the human race through humiliating displays of self absorbed behavior. For the most part, I turn a blind eye to your discretions. I merely ban you from the site, block you on Twitter, and carry on, productively, trying to generate revenues in the businesses that I am associated with. I also offer my advice, free of charge, for good or for worse, always in the most entertaining manner that I know possible. After all, if one cannot cry, or should not cry, one might as well laugh.

But this wholesale display of inimical behavior has got to stop and I am going to start dropping anvils onto your skulls, crushing you into dust.

Futures are weak again. It looks like a Debby downer open. Rumor has it that the iPhone 6 will in fact have a sapphire display, effectively defecating on the analyst who downgraded GTAT and forced me out of my RBCN yesterday. If this is true, I’d like said analyst to be destroyed, his house auctioned off for charity, and for his wife and children to divorce him–leaving him broke and penniless, without a pot to piss in.

Back to doing productive things, like plotting your demise.

I know the market was down just a bit today and we’ve been hitting new highs almost every single day. However, big runs always find resting points and big gainers undergo periods of consolidation before making fresh legs higher. We can very well be heading towards a lull in small cap action, sending many of you to the ‘fag box‘ for an expeditious rout from the battlefield.

For now, I am about 30% cash and I might up that level to 50% if the weakness persists. There have been lots of monster winners and logic dictates one shouldn’t get greedy up here. I have pre-set screens up in The PPT scouring for stocks that are up over 20% over the past 3 months, yet down more than 10% over the past week. I am biased towards profitable, very liquid, reputable names into a decline. The low volume, chinese burrito, moonshots are often purchased towards the end of a run up, since all of the good stocks have been bid up already.

I’ll let you suckers know what looks buyable tomorrow.

When the bubble stocks burst a few months ago I created a ‘bubble basket’ designed after the criteria that David Einhorn talked about in his cryptic warning to investors, regarding ‘high valuation’ stocks. The index is made up of about 100 stocks and it slid from par (100) down to about 80, when the market bottomed. Since then, the ‘bubble stocks’ have been leading the market higher, as that index surged from 80 to over 106 last week–making up all of its losses.

Well, today it is getting hammered, down nearly 3%. If your portfolio is getting racked today, you’re probably overweight too many ‘bubble stocks’ and stand at risk for a repeat of April of 2014.

Risk is off. I sold out of LEJU and booked a 16.5% gain in the process. Thus far, for today, I sold out of BALT, RBCN and LEJU.

Technicals have deteriorated to the point where I think there’s a chance for a flushout, another PPT oversold signal. I could be wrong, which is why I am not selling more. But, I am cautious enough to want to sit on my cash and wait for the market to show me a clear direction, instead of trying to anticipate one.

Now is a good time to refresh watch lists with quality stocks and forget about the low brow stuff.

I sold out of BALT for an 8% one week loss. I also sold out of RBCN, for a 1.5% loss. I sold RBCN because of the pin action in GTAT, after an analyst downgrade. Naturally I disagree with him, but the price action rules the roost. With regards to BALT, lines in the sand will be adhered to, no matter how I feel about the stock.

In the past I’d average down in BALT and possibly end up banking coin on this trade. But things are different now and I cannot afford major draw downs. With the proceeds, I will be looking to buy dips. But I will be patient.

On the other end of the spectrum, my LEJU position is now up more than 15%.