One Stock to Circle the Wagons Around

Because of the drop in the NIKKEI last night, the wildly successful ETF, ticker DXJ, is getting hit. Funds are divesting from Japan because of the severity of the drawdown. I expect to see outflows from Wisdom Tree by next week because of the drop. However, does anyone out there really think the NIKKEI is heading much lower? If you are like me and believe the dip will be bought, WETF is a must own down here, getting smashed because of the 7.3% drop in the NIKKEI.

Nothing has changed at Wisdom Tree. I still believe someone will buy them, either BLK or IVZ or anyone looking to get exposure to the rapidly growing ETF market.

Year to date, NO ONE has operated more efficiently than WETF, in the asset management space.

I do not have money to allocate at the moment, as it’s currently tied up in a wide array of names. But if I did, I’d start a half position in WETF now and average down on the next dip.

Everyone is mesmerized by the NIKKEI’s 7.3% drop last night, wishcasting a similar fate to western markets, particularly ours. According to the stock market handbook, the market is supposed to trade lower now, for an extended period of time–coinciding with memorial day and the summer plans of hedge fund managers. The only people who will be left at the trading turrets, in about three weeks time, are 2nd tier analysts and 3rd rate money managers, and of course yours truly.

The natural drawdown scenarios dictate the market will drop by about 10% from current levels, in order to clawback from the stupid money. You must understand, the money made by stupid people over the past 3 month, especially over the past month, is supposed to be destroyed by Mother Market. Stupid money is always designated to self-destruct.

Knowing that, coupled with the fact that you’ve made good money over the past 3 months, are you selling into weakness today? Or, will you buy the dip, believing that we can never trade lower again.

I don’t have the answers for you just yet. Timing tops is the hardest thing to do, aside from climbing Mt. Everest. I am heavily exposed to the long side, but crazy in the head too. I have no problems with drawdowns. I wish I could say the same about clients. They tend to loathe them. But that’s why I am the professional and they’re just market fans, cheering from the sidelines, like small school girls rooting for their favorite quarterback.

The solars have been leading the market higher, now they’re leading us to a viking burial.

I’m now down over 3% for the day, even my haptic play, IMMR, which was soaring earlier, has reversed and turned to red. I am enjoying outsized losses because my appetite for risk was outsized. In the event the market continues lower, I will endure more losses, up to 10% from the highs. Being that I was up 1% this morning, today’s reversal is -4% for me. I will see this market out, giving it the benefit of the doubt. However, I am not prepared to bet my life on it and will cut losses at the -10% mark.

Everyone is so dramatic when it comes to Fed statements. We’ve been here before. Why does everyone forget the answers?

Even if the Fed ended QE, do you really think they’d allow the market to tank for an extended period of time? Eventually, we all have to behave like adults, without the assistance of the Fed. However, the very fact that there is a bid under this market, via an activist Fed, should be enough to quell any Fed withdrawal symptoms that might emerge in the future.

All in all, today was a horrible day. I hate reversals. They always spill over into the net day. But this is the price of admission for the gamblers parlour. Losses should never come as a surprise.

The market has given up a 150 point rally. Under normal circumstances, I’d say “be careful, the market might go lower now.” But this market is anything but normal. At the sight of any dip, you will bear witness to financial perversion, as fund of funds allocate all of their money into long only funds. I don’t even want to talk about pullbacks anymore and how horrible they will be, once they arrive.

What’s the point?

I’ve been waiting for a significant, earth shattering, correction since 2009. Yes, I’ve been long and always bullish. But deep down I’ve been scared of a 2008 redux. Like many others, I was shell shocked by the crash, even though I was 100% short.

If you’re worried about market pullbacks, you obviously can’t “hold your butter.” How do you expect to make money if you’re not willing to lose some too?

For the day I am down 1.5% and loving it.

Someone put relaxer in my FRO. I’ll blow it out like Black Dynamite tomorrow, jive turkeys.

If you are unfamiliar with IMMR, watch this video below.

Haptic technology is a money maker. Immersion technology will be in the new Sony playstation and most likely the new X-Box, which was announced yesterday.

Sporting gross margins of an astounding 99%, embedded in all of the cool non-Apple devices, like Samsung, this name will continue to gain traction as Tim Cook destroys AAPL from within.

Bernanke is pimp smacking the flavor out of the mouths of bears. I bought USG off the TOL numbers, knowing it’s going higher. You hear me? I don’t think it is; I know it is.

Other than that, “The Fly” has STOPPED TRADING, opting to sit back with his holdings, blowing cigar smoke into the vaulted ceilings. Don’t think for a second we are geniuses for making money here. It takes balls to be a successful investor/trader/ball player. The meek will never inherit the earth, when there are people like Rumsfeld out there.

Out of all my positions, I like the look of IMMR, MT and FRO best.

Just know, it takes balls to make babies. If you find yourself baby less and without coin, pal friendo, you have no balls.

Toll Brother just smashed earnings:

Toll Brothers beats by $0.06, reports revs in-line (36.01 )

Let’s have a look at residential construction, on an apples to apples basis, to see if there are any disconnects.

Fastest growing by earnings:

RYL, TOL, MTH, MDC

Fastest growing by revenue:

TPH, CHCI, MDC, RYL

Most levered, based on debt/equity:

BZH, HOV, KBH, SPF

Lowest PEGs:

TOL, MTH, RYL, MDC

Least owned by Institutions:

CHCI, HOV, SPF, AVHI

Lowest FPEs:

HOV, RYL, MTH, NVR

Lowest by P/B:

SKY, AVHI, SPF, TPH

Lowest by P/S:

SKY, BZH, HOV, CVCO

Smallest by market cap:

SKY, CHCI, AVHI, CVCO

I happen to be a very methodical planner, but impulsive trader. It’s an odd combination, sort of like watching and old professor go nuts inside of a laboratory trying to create Frankenstein for no god damned reason. I start off my days, as most gentlemen should.

Breakfast is austere, nothing more than a cup of earl grey tea and a piece of toast or maybe a greek yogurt, with the sounds of classical music being played, gently in the background.  I turn on the CNBC and chuckle as the comedians tell funny jokes to the cameras. I pen a blog, email important people, text Jeremy (our IT guy/my partner on the site) threatening messages regarding the servers and then sit down to give the market a look over.

I have a list of stocks that I am willing to buy, procured, diligently, the night before. I look it over and think about a few of the names, request research on the ones that interest me, then watch the market open for trade.

As soon as the market opens, I turn into Dr. Jekyll, screaming at people and punching plants in the face. All of my watchlists are immediately shredded to pieces, then burned. Frantically, I search through the most active list and most up list, looking for trends. I want to see a common theme. I am looking for correlations and reasons to buy into a given sector. If the sector isn’t hot, I’m not interested. This is trading after all, not investing.

From about 10am to 11, I speak to some friends about the markets, pick their brains for ideas.

I do another blog.

Over the past few weeks I’ve been spending my trading days inside 12631. I love it so much, I don’t think Chess and RC will be able to kick me out. Jeremy tells me over the past week 12631 broke all activity records in its 2+year history. The room has never been so lively. All day long I am posting thoughts about stocks that pop up on my radar inside 12631, before I buy them or even think about buying them. It’s just a great place to hang with people who are serious about making money. Hat tip to Chess and RC for that.

I switch back to The PPT and post comments in there regarding stocks that look good, maybe create another screen to find some trades for members, or post some research.

I find a stock worth buying.

For the next 10 minutes, I am entranced with getting orders filled. Typically my trades are anywhere from $50k to $200k per, with normal positions sized up to about $2-3 million. I know to some that sounds like a lot, but for people in my industry, it’s chicken scratch.

When I am buying stock, I do not micro-manage the fills. I want in the stock, so I buy it. If I am afraid of moving the stock higher, I buy small, with plans to buy more later.

I blog again.

By the end of the day, I have probably blogged 5-10 times, spoken to 15 people, left 10-20 PPT messages and 50 12631 comments, filled 10-20 orders and sucked down 4 oversized mugs filled with the blackest earl grey tea (milk and honey) the earth has ever produced.

Then in the after hours I build a watchlist of stocks to buy for the next day. You know the routine: rinse and repeat.

NOTE: Someone just reminded me that I tend to chat it up a bit on Twitter too, yelling at the internet in grossly sardonic manner.

Why bother giving you a market summary?

I’m long 1.2 million shares of FRO into the bell. Let’s see how I fair tomorrow.

I was +3% for the day

I’ve been in and out names so fast, I am sure it’s hard for many of you to keep track of what the hell I am doing.

In summary, I am at new highs, +32% for the year, up more than 3% today.

My largest positions are JIVE, FRO, YZC and MT, in no particular order.

I’m also long and liking ANFI, IMMR and MCP.

Things have been very fluid and I am still liquid for 10% of assets, which are in cash. I’m also not limiting myself to cash on hand, open to the idea of using leverage for trades.

Eventually the market is going to stop going higher. Until then, I’ll keep trading whatever the people crave.