Another Transfer of Wealth is Well Underway

I just heard Rick Santelli whine about our government not using natural gas to fuel our cars. Let’s not be naive, ok? The government is owned by large corporations. Companies like XOM, CVX and COP want to own the natural gas space, but were caught off guard by a slew of start up companies. Over the past 5 years, partly due to inaction by our government to use natural gas for cars, partly due to the advancement of horizontal drilling, the price of natural gas has plummeted, bankrupting hundreds of companies, as a result.

As we speak, there are many over-leveraged natural gas companies with the very best properties in America. Because they are now being controlled by debt holders, those assets will be sold or they will go bankrupt. When liquidated, the big oil companies will buy up the property.

Only after this process is complete will the quintessential American politician take action, promoting natural gas as a primary fuel for the US automobile market. Within 10 years, the price of natural gas will be north of $10 and the natural gas companies who survived this transfer of wealth would’ve enjoyed parabolic moves to the upside.

I started a position in BV.

This is a real bottom, not one of the head fake’s we’ve witnessed over the past 5 years.

We are seeing significant drawdowns in supply (the most in 20 years) and more importantly, the rig count is down 58% from 2010. In other words, supply is being dried out at a time when wells are shut in. Should we get a few supply disruptions this summer, the price of natty can spike higher.

The direct beneficiaries are companies who desperately need higher prices, like CHK, GMXR, KWK, UPL, ECA, SFY and CWEI. There are others and the sector is ripe for speculation.

In other news, Blackstone borrowed another $2.1 billion to buy more residential real estate. I’m telling you now, as I’ve told you for months, housing has bottomed and prices are going up–big time.

Human waste everywhere. This company is full of feces.

“We are not allowed off of the boat despite the fact that we have no way to use the restrooms on board,” Jonathan Evans of Reidsville, North Carolina, said in an e-mail early Thursday. “The cruise director is giving passengers very limited information and tons of empty promises. What was supposed to take a hour has turned into 7-plus hours.”
Carnival, in a statement, said the ship never lost power, “but there were periodic interruptions to elevators and toilets for a few hours last night. However, at this time all hotel systems are functioning normally and have been functional since approximately 12:30 a.m.”

Gregg Stark, who is traveling with his wife and two young children, told CNN, “There’s human waste all over the floor in some of the bathrooms and they’re overflowing — and in the state rooms. The elevators have not been working. They’ve been turning them on and off, on and off.”

Source

I am short CCL.

After selling BX and HLF, I need to plug a hole or two with larger cap names. Right now I am invested in an array of smaller caps, which is perfectly fine in an upswinging, penis chopping market. But if the blade swings the other way, I’m gonna get hurt.

I’ve spent all day and night looking for names, searching the darkest corners of the world for something of value. I’ve come up with a handful of names, none of which inspire boldness.

Here they are

CRUS (small cap at 1.5b)
GS
RF
RLGY
SWKS
SWK
WDAY
WFM
LM

On the other hand, I’ve got small cap ideas coming out of my nose (not really, because that would be gross). But there are chockfull of micros spinning higher. A new trend that I noticed today was to buy up beaten down names, just because they are more than 15% off their 52 week highs. You have no idea how hard it is to find stocks more than 5% of their 52 week highs. If that’s the case, SWKS, FIO and WFM are poised to rip tits, breasts and ball sacks to the upside.

There is one little internet name that is interesting, ticker DMD. They own Livestrong.com, Ehow.com, Cracked.com and are the #2 registra of websites in America, second to Godaddy, which is owned by none other– KKR.

Speaking of which, asset managers look great. I can assure you that my business is thriving now. I am in a growth industry, the very best industry in America, bar none. So, there isn’t any doubt in my mind that EVR, BX, APO, FIG and KKR aren’t knocking the cover off the ball too. One name worth noting is LM, old school asset management firm with big exposure to banks.

I like LM here, very much so.

Finally, there has been a secret society out there who’ve been buying up regional bank stocks like Ronald Reagan’s jelly bean budget. The trick to finding the winners is to look for banks with price to book ratios under 1.25 and debt/equity ratios under 3, with decent growth. The lower the debt/equity ratio, the higher the stock. Add in a little dividend and you have a winner.

I would reveal this list to you, but it’s for closers only. Plus you have plenty to chew on now, so hop to it.

I’m not here to amuse you, jackass. I never have been, nor will be. Whether you read the site or not is immaterial to me, not so much for the other top hatted folks who shovel coal into the iBC furnaces. I want to be very specific when I say, 2013 is the most important year of my career. I’ve been building up to this point for a long, long time. I was supposed to launch a fund several years ago, but procrastinated, then delayed some more.

Following 2011 and 2012, with returns in the mid single digits, I find myself less than enthused with my market approach and have subsequently put my big plans on hold. Well here I am, off to another gangbuster year, up 20% so far, trying to hold it together. Pardon me if I place my clown hat, gloves and scarf on the side, as I attempt to restore a sense of normalcy into The House of Fly. If you happened to be anywhere within 100 yards of me, I’d break your jaw bones into 10,000 pieces with a clawhammer. If, however, you were at 101 yards, I’d simply snark at you and warn you to “steer clear” with my faux southern accent.

I sold HLF because Ackman convinced the NCL to take a negative position on HLF, requesting the FTC open an investigation. While I did enjoy the specter of causing him pain, then anguish, via a “barbell’d” approach long HLF, short JCP, I cannot remain long a stock that might undergo a very negative news event. I wish Icahn the best and I am sure he will win in the end.

With the sale and the bulking up on my AG short, I am now in a net 95% long position, down from a record 140%. I am, however, looking at a series of banks trading below 1x book for possible purchase and might allocate funds there soon. My other big positions are all subject to sale, irrespective of what my core thesis might be.

2013 has to stick. If I cannot pull off 30-50% gains in 2013, I am underserving of the title of Blogfather and will resign from the post, vacating it until a new Blogfather is chosen, just like the new Pope.

I sold out of my HLF position for a 4% loss. I have no interest in sticking around for a possible FTC investigation. You’re going it alone Carl.

10,000 apologies.

Okay, I can’t quite put my finger on why the market goes up every single day. But I do know a few things that can help you immensely.

1. Don’t buy laggards. Only donut holes makers buy stocks that no one else wants.

2. Short stocks that are laggards, because betting against donut hole makers is a high probability bet.

I just know the market will top out when I least expect it. Typically, the market tops out when I am at my bravest, leveraged into low quality offal securities. The reason for that is simple: near tops, quality stocks are richly valued, leaving only the piker stocks, value traps, left to be bargained for. In the past, I’d eat them up whole, laughing all the way to the bank like a deranged idiot.

When the market tops, those stocks will fall 10% in a day, leaving you exposed to destruction. This is not likely to happen, it will happen. I can guarantee that.

Your question must be: “Dear Fly, so then what should a small pleb, such as myself, partake in if the markets go up everyday?”

Very good question.

You should practice discretion and asset allocation.

Here is what my holdings looks like, from a skeletal standpoint.

Position A: 20%
Position B: 20%
Position C: 15%
Position D: 15%
Position E: 10%
Position F: 10%
Position G: 5%
Position H: 5%

That is 8 positions totaling 100% of assets. You don’t need to follow this allocation to the tee. But I’ve found having fewer positions, smartly placed, is better than having 20 5% positions. Most large companies trade in a convoy, all up, all down. It’s your job to exploit valuations and outperform the peer group through smart picks. Most of the time, I edge into a 20% position 5% at a time, giving me a margin of error to average in.

When it comes time to go to cash, you will find an allocation like this to be extremely accommodative to your needs.

I don’t know how long this rally is going to last. My guess it ends in mid- April, trades around violently until September, then resumes upward into the new year. Right now I’m a giant elephant stomping out tigers and lions, but afraid of the mice running about.

I added to my AG short.

STOP TRADING!

I’d like to take this intermission in market activity to offer some incredible marriage tips. As some of you know, I’ve passed along excellent jewels in the past, helping those of you with retarded marriages enjoy longevity. Today’s subject pertains to discourse and how to allow your wife to “feel appreciated” for her labor.

Borrowing a phrase from a gentleman of the cinema, all of you should address your wives as “friendo.” It has a rather nice ring to it, expressing congeniality, in a whimsically playful way. More often than not, your mate will offer sexual advances for using this word properly.

Let me offer a few examples.

(puffs from cigar) “Why don’t you get me another glass of scotch (puffs cigar three times and exhales donuts into the air) friendo.”

(excited) “Good news, friendo, I am going out golfing with the boys.”

(tosses a steak onto the counter) Cook that for me, would you, (pause) friendo.”

“Please, refrain from talking to me during market hours (takes sip of wine from glass) friendo.”

“Shall we meet each other say around noon for a little afternoon sex, friendo?”

(pointing to the television) Do you see this, friendo? Don’t change the channel, as I need to relive myself in the lavatory this instant.”

“Please iron my shirt (extra pause) friendo.”

You’re welcome.