Another Oil Buy

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.

Most of my dealings with persons of disinterest online have to do with people who’ve been wrong on the markets since 2009, bankrupt 3 times over shorting the markets, with extreme bones to pick with anyone and everyone who are long equities. This, of course, is nothing new in the world of speculation. It’s just that the shit throwers have a larger microphone to spew their rhetoric.

Chartists like to default on the lines on a graph as a reason to buy or sell stocks. Those lines are usually based on something fundamental. The chartists are either too busy or lazy to figure out why, so they chalk it up to “volume explosions” and “price explosions”– for breaching the holy and sanctimonious moving averages.

The fundamentalists are the brains on Wall Street. They do the numbers and sometimes get harangued by momentum moves, which defy most of the tenets of value investing. Their investments are often methodical, slow, but highly efficient.

The last part of Wall Street are the short sellers, which are broken into two distinct parties. The first are the value guys turned dark side, like Jim Chanos and at times David Einhorn. Although they are looking to destroy companies, there is usually a reason for their disdain, e.g. fraud, bubble, fad, etc.

The other part of the short seller cabal are the shit throwers. They cling to religious ideas behind their selling. They sell because a stock is up, or because insiders sold a little, or because a lock up expiration looms, or because a certain stock is popular, so they simply hate on it and short it. A perfect example of these people are the ones who insisted on selling short AAPL, right before the iPhone 6 release.

Clearly, there were better names to short, ones without $150 billion in cash, trading at extreme value levels. But they had to sell it because others liked it–peacocking all the way towards a tax loss. These people are trolls, vagrants, perverts, alcoholics, and gluttonous pigs!

After the apes lost their banana trees to arson, foreign apes visited their jungle to offer them some of their bananas. These apes wore elaborate head-dresses and spoke with exotic accents. Normally bananas would sell for $30 per bushel. But give the situation at hand, lack of bananas and excess supply of crazy eyed monkeys, the new imported bananas were to be sold for $60.

At first, the exchange went fucking apeshit. Everyone sold their banana stocks and panic ensued. The Grand Wizard ape stepped in to calm the bloody waters. He lowered the cost of borrowing from the Bank of Ape by an unprecedented 100 basis points. The little apes on the exchange were delighted, throwing shit back and forth between one another, bashing skulls in for fun–the works. Stocks recovered, and not before long, expensive bananas were to be enjoyed.

After a period of 5 years, the apes grew accustomed to fancy imported bananas. Slowly but surely, the price rose from $60 to $100. With the price north of $100, industrious apes began exploring new places to find bananas. Shortly thereafter, they found a bunch of banana trees way up in the mountains. You’d have to be fucking insane to climb up there to get them, so they hired the dumbest apes and paid them a fortune to do the work.

Within a few years time, the jungle was booming with rich apes who worked in the new mountain ranges. The stock market roared, led by mountain range banana stocks. The president of the jungle promoted his new mountain range banana economy like crazy, all the while talking shit about the jungle’s addiction to foreign bananas. He told the citizen apes that the jungle didn’t need those fancy fuckhead apes with funny hats. Soon enough, the jungle would be producing their own bananas and could easily tell those foreign apes to fuck off and to burn in hell.

The citizens enjoyed this rhetoric and re-elected their president for another term.

When the fancy apes heard this shit, they got pissed off. But they didn’t react right away. They continued to sell the jungle apes their overpriced bananas, all the while encouraging them to expand their jungle economy based off the premise of ‘banana independence’. After the jungle apes built it up nice and strong, the foreign apes flooded the jungle with excess bananas, crushing the price and the stocks associated with it. The little apes on the exchange floor went nuts, selling banana stocks left and right until they passed out from exhaustion.

The mountain range banana business went bust and the jungle apes went hungry again.

The end.

Part 1

You must admit, this market has a certain, shall I say, je ne sais quoi about it. The death knell has stricken equities. In accordance with the inverse of their mandate, the Federal Reserve is strongly considering a surprise rate hike, in order to expedite the 2nd coming of the great depression.

Jim ‘bow tie’ Rogers, long term commodity champion, died today of stupidity of the brain. Everything is drek, except HABT. As Americans, we do enjoy a hearty burger, or three.

As I gaze into my monitor and bear witness to my own demise, I had a vision, one that had to be relayed to you, the ordinary pleb from the housing tenements.

I envisioned a world without people, a vast sea of silence sweeping the landscape. The apes were running the show and banana stocks were all the rage. These new lads swung from vines and defecated in the jungle, whilst eating plants and worms. But they loved to eat bananas, atop all. At night they’d fornicate with one another and then attempt to bash in the skulls of their enemies. They eventually set up exchanges and started wearing suits. They appointed a “Grand Wizard” ape to run their monetary system, who in turn provided the jungle with the liquidity needed to function as a dysfunctional cabal of shit eating apes.

This Grand Wizard made elaborate speeches. He was a King of garb and liked to see the price of bananas swing around wildly, almost uncontrollably wild, whenever he decided to make a change in his monetary policy. The little apes on the exchange would throw shit at him, whenever he appeared, as he always seemed to fuck them, one way or another. The price of bananas were cratering and although it was good for them as consumers of bananas, their fucking banana stocks were going lower.

Until one day a terrorist ape set fire to all the banana trees, sending the price of bananas through the fucking roof. The little apes were jerking off in public, elated, drinking fermented piss and getting drunk about the jungle. When all of the apes went home that night for supper, there was nothing on the dinner table but worms and plants. All of the fucking bananas had been destroyed.

The end.

Part 2

Oil has gone down every month since July. The last time we had a slide like this was in 2008. Oddly enough, the decline in crude started in July as well. As you well know, back then, it went down, every single fucking month, until March of 2009. Using the same model, while looking at my abacus, I’ve deduced that oil shall drop until March of 2015, around $36 or so–just so that we can conclude the mirror image strategy that seems to be unfolding.

There has to be something MOAR to this story. Dry bulk shipping rates are down 60% over the past month, during a busy time of year. For the love of God, Capesize day rates are now less than Panamax. That’s like a yatch being cheaper than a row boat.

Couple that with the hazardous drop in iron ore and one can make the case we are heading towards GLOBAL RECESSION. None of our data is suggesting this, just market dislocations. However, how else can you explain what is transpiring, from commodities to interest rates to the hair on my chinny-chin-chin? I didn’t think so.

This being the month of December, a glamorous month for investors, historically, we are setting up for a very anti-climatic end to 2014 and it arrests me–seizes me by the nose and kicks me down the stairs. Nonetheless, every single time the market dropped in December (2002, 2005, 2006, 2011, 2012), sans 2008, the market forklifted in January.

As an investor, here ‘s what you need to be asking yourself right now:

Is it worth it? What if there is a giant global recession on the horizon?

Will this lull in stock prices cessate and will the Santa Claus rally commence?

Finally, will the market bounce back in January, providing you with ideal exit points for the shares you are buying today?

Yesterday I alluded to three things that needed to happen in order to get the market going, for the sake of Santa Claus. The exact opposite has occurred and we are now descending into pure anarchy.

Although some of my positions are resisting the temptation to trade down, it’s inevitable, at this point, that all of them will. The downward action in oil has scared the life out of people. It’s not only that, frankly, but the price of iron ore, dry bulk shipping rates, and copper too. I am painting a very dire scenario for you because that’s what’s being presented. If I wasn’t so stubborn, I’d bulk up on utilities and REITs here, discard the high beta crap and be done with it.

Unless oil reverses off the lows, I am not optimistic about this market and fear it can start unraveling rather quickly.

I am reading a lot of conflicting stuff, regarding hedges at some of your favorite oil companies. My favorite story is the lack of hedges at CLR, who fully covered their hedges last month–just before the gargantuan move lower. Most of the reports I’ve read had a worst case scenario crude price of $70. As we approach, $60, it’s worth noting, the industry is in serious trouble. With over $200 billion in junk related debt, or 16% of all US junk debt, the drop in crude is bound to have a ripple effect that will be deleterious to investors.

Before I get into the hedges, just know the price of iron ore has crashed too, now at 5 yr lows. Couple that with oil, the dry bulk index, and copper, it truly paints a negative picture for China bulls.

At any rate, here is what I’ve managed to cobble together, thus far.

Apparently, you should beware of oil companies who have three way collars on production, as it doesn’t put a floor into the price of crude. The poster child for three way collars is PXD. Again, it’s a little murky out there, regarding who has the best hedges. But it appears PDCE did it right, hedged at $89, through 2016. It looks like HK and FANG did it right too. As the price of crude continues to slide, I am sure we’ll be hearing a lot more about this very important tidbit of information.

Quit busting my balls over GPRO. If I didn’t panic out following a 20 point rout, do you think I am going to panic today after a $3 upside reversal? Do yourselves a favor, pal, and shut the fuck up and go have a beer at the end of the bar.

This is text book gangster close, whereby the market reverses an early morning gap down and then proceeds to urinate on short sellers throughout the entire day. See, if you happened to be short today, you felt like a champion mandingo in the morning. But now, great scott, you’re feeling a little light in the loafers if you know what I mean. Things can start getting real dicey, real fast, for the uninitiated.

How does one know if he is initiated or not?

It’s very simple. Are you a member of the million dollar club? And, no, I do not mean net worth. I am talking about speculation, son. Listen up here. If you’ve never lost and made a million dollars in the market, you are nothing more than, or less than, a car-jacking, ski-mask wearing, motherfucking novice.

I will have you know, King Fly has lost many millions of dollars during his illustrious career, and has made them all back and millions more.

For the rally to continue, we need three things to occur.

1. Oil MUST trade up.
2. The dollar must sit the fuck down and shut up.
3. Asian and European markets must rally.

If we get those three things, we will have ourselves a pleasant Santa Claus rally. If not, I bid you farewell.

NOTE: The PPT nailed the OVERSOLD signal, intra-day, at today’s open. SHOMP.

For tax purposes, I did a bunch of reshuffling today. After these sales, I am done locking in losses.

Some partial sales include YELP, TRIP, SLCA.

Full sales COP, CHK, T and OZM.

I replaced those stocks with BABA, OXY, MS, FMSA, ACAT and ETR.