18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
18,453 Blog Posts

iBC 10th Anniversary Special: The Flash Crash, Samsonite Hamburgalar, and Mr. Devil Dog

NOTE: we’re doing Exodus free trials until tomorrow. Inbox me for access: flybroker at gmail

A little background on my epic VXX trade in May of 2010. At the time, I was 34 years old and for the first time in my life began to get self conscious of my health. I had recently been afflicted with heart palpitations after taking a single pill of Allegra, and I seriously thought something was wrong with my stomach. My grandfather died of stomach cancer and my aunt got it too — so I had become paranoid as fuck and I started to believe I had cancer too.

When I had an appendectomy in 2008, the doctor who did the surgery said he saw irritation on my stomach and asked if I ever had an issue. All of these things, coupled with the fact that I was watching the show House every weekend, caused me to schedule an endoscopy on May 6th, 2008 — just to see what the hell was going on in my stomach.

A day prior to my appointment, I penned a blog and told readers not to buy stocks and how I was 13% weighted in VXX.

Here it is.

I want to address the rookie/punk trader, who is fully margined out in stupid commodity stocks, waiting for the market to resume its uptrend. Mind you, this is the same guy who chided “The Fly” for being defensive, with stupid comments and inane financial advice. Yet, here I am attempting to help him out now. My kindness does not have boundaries.

Okay, so here goes.

Don’t get excited about the riots in Greece. They are Greek and have nothing better to do. However, watch for the sovereign debt crisis to snowball through Europe, effectively stealing the hearts and minds of investors. In my estimation, until this is put to the back burner, this is a DO NOT BUY market. While it’s true, I’ve been adding to my Goldman Sachs Group, Inc. [[GS]] position. It’s also true that I have like a gagillion dollars to allocate to such investments. For the average loser, such as yourself, you cannot afford to make mistakes, since it will wipe you the fuck out and send you to the homeless shelter for soup and shit.

If you are 100% long, sell immediately to lower the boom. Effective downside hedges are [[VXX]] , [[SKF]] , [[TZA]] and [[FXP]] . Normally, I do not condone purchase of 2-3x ETF fuckery. However, in a rising volatility environment, levered ETF’s do very well, especially if you can catch a nice crash or two.

With my money, I intend to add to my [[VXX]] position and suspend any buy orders I had in mind, due to my belief that this crisis is still in its early stages. When the bounce comes, use it to lighten up.

My target cash position is 50%. Right now, I am about 25% cash, 13% [[VXX]].

The next day, the markets ‘flash crashed’ and I was unable to sell my multi-million dollar VXX position — because I had been under general anesthesia. By the time I woke up, markets were in rebound mode and I was so groggy, I really couldn’t grasp what just happened. Here was my blog.

The thing that scares me the most is the fact that gold is up. People are running to safety. This is not over. If you bought the bottom, entertain me and take profits. Right now, my [[VXX]] position is 20%+ weighted in my portfolios, coupled with my 40% cash, I am actually up on the day. I do not mean to brag on a day like this, because I’ve been on the receiving end of the shit stick. But, you really need to come to grips with the fact that you have no fucking idea what you are doing.

Take heed, else feel the brunt of a full blown sovereign debt crisis.

Okay, the burden of responsibility is now on the shoulders of men wearing fancy pants. The ECB is not the Fed. In my estimation, they are too fractured to come up with a cohesive plan over the weekend. This whole little crisis is likely to snowball out of control, turning it into a giant snow man, armed with rocket launchers and shit. I underestimate the Europeans, based upon history. However, there is an outside chance they will concoct some sort of scheme to placate markets— leading to a Monday melt up.

As a result of this sovereign debt crisis, the credit markets are tightening, ipo markets have seized and sentiment has turned decidedly negative. You need to understand these things and throw away your investment thesis of two weeks ago. Things change and so should you.

Here is my game plan:

Because of my large [[VXX]] position (28% of assets), I am up another 2% for the day, bringing my year to date gains up to 17%. With my cash reserves (38%), as discussed in earlier posts, I intend to buy your margin liquidations, with great vigor. Thanks in advance for that.

I am circling the wagons around three names (that’s right, just three):


Goldman Sachs Group, Inc. [[GS]]

Eastman Chemical Company [[EMN]]

All three are market leaders and represent good value, based upon current estimates. Furthermore, should the market get flogged some more, they will not receive homo-hammers to the scrotum, just small meat tenderizers to the face.

In short, “The Fly” wins again, much to your chagrin.

In other news, my friend, equity partner, and fellow blogger Chart Addict will no longer blog here at iBankCoin. He has moved over to Stocktwits aka The House of Lindzon. Knowing CA for more than a year and meeting him in person, I can say, without hesitation, he is a real pro and an honest/trustworthy person. Access John’s farewell here.

NOTE: Elections for the next tabbed blogger will commence Sunday night. Mr. Caine Thaler versus ChessnWine. Be there! Oh, one last thing: because of the elections, The Fly’s weekly cartoon will air tomorrow.

After foisting Chart Addict onto Phil Pearlman at Stocktwits, I continued to build my VXX position. I am fairly certain that had I been awake during the Flash Crash, I would’ve sold it and gone long. But because I missed out, I dug in my heals and convinced myself that we were going to retest the flash crash lows.

In this blog, I shrouded the true size of my position, but made reference to it being very large. When I ended up selling it, thanks to my continued accumulation and market appreciated, it was more than 35% of my assets. Remember, the financial crisis was still fresh on everyone’s minds and I had survived and thrived on buying triple inverse ETFs.

With over 4% intra-day gains, I have been paring down my monstrous [[VXX]] position. And, I sold out of my [[FAZ]] . IF I went to cash on the entirety of my [[VXX]] position, I would be more than 55% cash, right now. Although that seems like a lot, I would still be subject to daily drubbings on the remainder of my assets (45%) that are long.

To be blunt, I am strongly considering taking my huge gains (millions) here and blowing out of some longs, even if it means taking big losses. For the record, I will not consider selling out of Flotek Industries, Inc. [[FTK]] , since it’s too thin to absorb my tickets.

More later.

Then on May 21st, 2010, just 4 days before my birthday, I booked the win. It was millions in profits and it led to a hubris that later on caused me to lose at least 3x what I made in May of 2010. I felt like a gladiator and I would go on trying to repeat these glory, all to no avail. It was a timeless moment, one that was designed for me, and I truly believed in what I was doing. The trade netted upwards of 60% returns in a little more than 2 weeks. Because of the concentrated nature of the position, it had a profound effect on my assets under management and helped me generate a considerable amount of production for that year.

I am lightening up every hour on my [[VXX]] position; but I will NOT be adding to any longs, NO MATTER WHAT. At this point, I am booking 50-90% gains on [[VXX]] , while incurring blows to the scrotum in a variety of longs. By lightening up here, I run the risk of losing 1.5-3% (my estimate) tomorrow, via my 45% long positions. However, I am willing to accept that risk, AND MORE, considering my year to date gains are now north of 25%.

On a personal level, in order to abate conflicts of issues, I will hold the entirety of my long VXX position into tomorrow’s fuckery. I will have you know, my position is quite large, but so are my balls.

I know many of you are tempted to go long here. However, if we are going to double dip, thanks to Europe/China melt down, 10,100 will look rich as fuck, 6 months from now. Should we double dip, the Dow is going to 8,000 minimum.

Real quick:

I blew out of the entirety of my [[VXX]] position, booking millions of dollars in profits in the process. With a small percentage of cash, I doubled down in both Eastman Chemical Company [[EMN]] and POSCO (ADR) [[PKX]] , positioning myself to sell both names into strength. It’s a bold move, but worth it, in my opinion.

And, to get broad big cap tech exposure, I bought some [[TYH]] .

However, longer term, I am very bearish on the markets and will look to re enter [[VXX]] lower. In addition, I will begin a short selling campaign, on individual names, who are deserving of a good lashing or 5. My plan, which may fail, is to ride this oversold bounce to the tune of another 5% gain, then reverse positions to the downside.

Based upon the sublime laws of The PPT, all to do with mathematical harmony, we will bounce today, AND MORE.

Finally, my current allocation is about 50% cash, 50% equities.

BONUS: part 3, 4 of 11, Fly has a sit down with SAMSONITE HAMBURGALAR and he meets with Mr. DEVIL DOG.

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  1. momsen92

    I recall telling Fly 9-10 years ago that Keurig was shit and GMCR wouldn’t do squat (I was incorrect). I should have known that convenience trumps everything in this country. How else can you explain people eating at MCD.

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  2. doji

    Been around here so long I know this shit.

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  3. soupbone

    Peter Rotesque, whatever happened?

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  4. dae42

    Way back when Fly had a clue about equity markets…sort of…ahhhh the memories.

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    • ironturd

      Wait UVXY, FIZZ, HMNY and short NVDA isn’t the portfolio of a space aliens magician?? Fly is at the absolute top of his game right now

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