Believe the Lie

Stop obsessing over uncovering some Earth shattering news that everyone else is not keen of and get to work. Ignore the notion that you will call the next great bubble and make a fortune buying puts, CDS  and shorting equities. You need to stop betting against the status quo, for they have tanks and missiles and you are armed with pea shooters.

Having said that, pay attention to what is happening, ever so quietly. Banks are going up. SHHHHHH, don’t tell anyone.

Just yesterday, ChessnWine made an epic call inside 12631, recommending the top rated stock in The PPT: NCT. The net result was dozens of 12631 subs making more than 13%. Albeit, NCT is not a bank; but they are financial related.

I am long large amounts of BPFH and find myself up 10% over three days. Annualize that pal; then get back to me.

Mergers are happening. Both LEGC and WTNY got bought out yesterday for 40-50% premiums. MI was acquired last week. It has begun.

I will be all over this trade, for the next 2-3 months. I flagged this sector two weeks ago and it is en fuego right now. Look to names with solid price to book ratios. Typically, anything under 1 is dirt cheap. However, when analyzing banks, it’s important to know what their tier 1 capital ratios are, as well as normalized earnings potential. And, you need to look at the peer group. Southwest banks and valued different from Midwest banks, all due to socioeconomic backgrounds, locale etc.

Your average mutual fund manager WILL NOT call into question the accounting practices of his bank holdings. I repeat, mutual fund managers will not scrutinize the reported numbers. Instead, they will plug the numbers into his model and buy accordingly. For the most part, money managers are big dumb guys with idiot amounts of cash to invest.  These stocks will rip higher, in the first half of 2011; because people are under-invested in the sector. Let’s face it, banks sucked dick in 2010.

Get with the program, else get left behind shining my balls.

Aside from positioning into takeover plays, the first half of 2011 should be about “Growth at a Reasonable Price” (GARP). To accomplish this task, you can sift through thousands of ticker symbols, like a babboon’s ass on a needle, or you can set up screens, like a gentleman. Either way, you’re going to want to look for stocks with the following criteria:

Avg. volume over 500k. Trading is hard enough as it is. You do not need the headache of fucked up liquidity traps.

ROE over 10%

Quarterly Revenue Growth over 20%. Most websites use yoy comparisons. I think that’s flawed.  Inside The PPT, I use the last two quarters versus the same period one year ago.

Market Cap over 250 mill. Anything less is simply gambling.

And, finally, I use rudimentary fundamental analysis by grading PEG, Debt/Eq, p/b, p/s and profit margin metrics, all done using my fucking toolbox. If you do these things correctly, you will find a lot of bullshit Chinese names. Scratch those fuckers out, for they are mostly fraudulent. After that, you will have a solid list of companies, all worth buying based on fundamentals. Now comes the hard part.

When to buy?

Well, you have two options:

1. You can dollar cost average into focus names, sort of like I did with FTK.

2. Or, you can keep them on watchlists and buy them when the fucking trading robots throw cocaine on them and snort them into their chambers.

As for me, I will be putting a portfolio together for 2011. Aside from the trading that I do, day in and day out, I need a little bit of normalcy, especially since my pie is getting bigger. I can’t keep sloshing in and out of equities like this, else I will die of a panic induced stroke by the age of 35.

What sort of names will this screen produce?

Naturally, the list is constantly changing, as fundamentals improve and/or deteriorate. But, just to get an idea, had you went about your business using this screen, in 2010, you would be long names like PCLN, OPEN, APKT, AAPL and a slew of fucked up education stocks (COCO, ESI, CECO). Be careful not to get sucked into “value traps.” The education stocks were classic value traps in 2010. Typically, smart money foresees danger before the unwashed. If a stock or sector is trading at ridiculously cheap valuations, there is a reason. In this case, Congress ass-raped the criminal enterprises who offer fucked up education for exorbitant fees, rightfully so.

I bought 25,000 ATPG, under $16.

Disclaimer: If you buy ATPG because of this post, your dog will shit on your pillow. And, you may lose money.

Commodity related stocks with large short interests are on the front burner, especially names that have underperformed. Names like GMXR, CRK and SD are sprinting because shorts want no part of this trading action, going into 2011. Because of this inalienable fact, I am long large quantities of ATPG. There is not a better set-up, out of the 4,000+ stocks that I follow, than ATPG, right here, right now.

Providing I can secure more risk capital, I will buy this stock, with reckless abandon. I will need to sell something in order to buy more, due to the strictest of asset allocation models—procured by yours truly.

Additionally, I really like REXX right now. So you know, my top three positions are EXK, REXX and CCJ.

I nibbled on some PWER and EXK down here and look forward to MOTR-boating, providing the stock dips another .50.

Remember, investing with precision requires that you exhibit a modicum of patience. Stocks trade up and down. Do not give up on names, just because they are trading down. There are a million reasons why stocks trade down, ranging from real fundamental concerns to a fund manager forced to liquidate to stupid rumors. It’s the disconnect between price and fundamentals that needs to be arbitraged. Know your shit, establish a course of action and don’t bitch if shit goes wrong.

I’ve been able to take advantage of under performing hedge/mutual funds, who need to chase stocks into year end. I expressly outlined this strategy over a month ago, especially since most fund managers missed out on the recent run. Coming down the stretch, I intend to unwind many of my positions, booking profits along the way. If the market is set to sell off, it will come in earnest during the first week of January. Do you notice how giddy everyone is, banking coin like it was the dot com era, part II (anyone who says “deux” is a fucking putz)? Well, the better it feels now means the worse it will feel later. For the most part, speculation is not for the faint of heart. During the dot com era, I recall many brokers losing millions, long during brief periods of correction.

Looking past the next correction, it’s important to understand where we are in the cycle. Emphatically, I believe we will see record mergers and acquisitions in 2011. If you want to get in the game and do not know where to start, follow corporate raiders like Carl Icahn or LBO firms Blackstone or Fortress—names like MOTR, HAIN, TTWO or LORL.

At the present, my cash position is just 10%. For my personal aggressive account, I am fully leveraged, with distinction and style. My target cash level is 50-60% by early 2011.

You burlap fuckers are now nothing more than roadkill, the proverbial bitch of this market. Fuck you and your stories; I got the market shining my shoes and balls. How’s that, pal?

Once again, I encountered “market gurus” in my comments section today, offering advice to Senor Tropicana. Let it be known and heard, anyone offers me advice and you will catch a swift ban. Off to see Greg Solomon you go.

For the day, I was up another 1.2%, pushing my gains near 55%. My personal aggressive account broke a million today, starting off from a mere 100k at the beginning of the year. I did not think it was possible; but believe you me, it fucking is. I sold out of CX and AKS today, replacing them with large amounts of ATPG and MOTR. I’m MOTR boating up in this bitch, like an old sailor.

The market cannot trade down, prior to Santa. Also, look for mergers and acquisitions to really start heating up. Blackstone just raised $15 billion, for that very thing (buyouts). Before the party ends, we’re all gonna get drunk and shit, throwing cocaine in the trading robots, while eating caviar and guzzling champagne like bourgeois gluttons.

I bought 10,000 ATPG.

Disclaimer: out of my way.

An end of an era. I sold 100,000 FTK, closing out my position.

NOTE: I just did “the million dollar roll” on my personal aggressive account.

I get alarmed when things are going too well. Unfortunately, I am a bit paranoid in this regard and find it hard to restrain myself from thinking about worst case scenarios. I am well aware of how the Earth and water coexist with one another and how one person’s sin is another person’s sacrifice. Making money like this, well, it’s too easy. My comfort zone is one that is far more tedious and arduous for the soul to bear. Perhaps it was the way I was raised, dodging bullets, fending off knife attacks; but I prefer to face the abyss, just prior to dining at a three star Michelin eatery.

Having said that, I made myself oatmeal this morning. It’s been many months since my last bowl. After I poured the water into the ancient wooden bowl, I just sort of watched it getting cold. I found myself unable to enjoy the fruits of my labour [sic], even as little as eating a warm bowl of horse food. Instead, I ate it cold. I suffered through the cold horse food, in order to make a few hundred thousand dollars in personal gains this week. The world is off-balance and someone needs to set it straight.

As an aside, my monstrous sized mug of coffee is empty now, so I need to scurry along. I’m buying MOTR and SOL with vigor.

NEVER BET AGAINST THE GUY WHO WILL EAT COLD HORSE FOOD ON PURPOSE TO WIN IN THE STOCK MARKET. EVER.

I bought another 20,000 MOTR and started a new position in SOL.

Good day to you.