Reader Beware

I have a unique perspective on markets and offering financial commentary. Unlike most of your internet hot-shots, guys trading in and out of stocks for nickels, never allowing a loser to marinate for more than a few hours, I do this for real, with real money. When you’re managing real portfolios, for real people, one doesn’t spin in and out of trades like a fucking idiot, especially in 3x ETFs. As a matter of fact, the industry that I work in hates 3x ETFs and makes it a point to stop you from buying or selling them.

Many of you are young, cow eyed, punks, with little to no money to your names. That’s fine, since we’ve all been there. Hopefully in a few decades you’ll have enough money to consider yourself a person of interest. The problem that I have with most commentary, especially on StockTwits/Twitter and an array of low brow sites, is the allure of fast money and riches. Listen to me now, the stalwart part of your revenue stream will derive from industry, not speculation. While it’s true, some have made mind-boggling fortunes in venture capital over the past 10 years or so; that’s not sustainable. Eventually, everything comes back to the mean and those buying late get diced like pineapples (extra Boss Ross).

I come across as combative, sometimes unstable, and somewhat of a carnivale clown with a murderous streak in him most of the time. But I do have a reservoir of experience and wisdom worth sharing when it comes to this line of work.

It’s important to dream; but don’t be delusional. Setting unrealistic expectations for yourself, such as duplicating ridiculous 10k to $1million portfolio success stories, is next to impossible. You have a better chance at getting struck by lightening than doing that. Also, the idea that you should quit your jobs and only trade, despite not having a high net worth, is dangerous. Some can do it; most cannot.

Trading is almost like gambling, except for the part that if you wait long enough and buy good companies, you’re most likely to have success, whereas the exact opposite applies to gambling. Anything worthwhile is worth waiting for. If you approach your portfolios in that manner, instead of this ego driven, manically bastardized version of instant-gratification or die, you will do just fine.

First, let me reiterate my approach to my $HABT position. When they came public I said this was going to be a long term position of mine, that I’d buy it once per month for 12 months. Having said that, I have about 8 months left of buying to fill the position. Despite my enthusiasm for the stock, it is in my best interest for the stock to be flat to down, especially as the company executes on numbers.

Both earnings and guidance exceeded expectations, helped by an additional day in the quarter. Wall Street’s response has been negative, sending the stock lower in after-hour’s because the numbers weren’t break out.

That’s okay.

There are two things keeping margins down.

1. Price of beef.

2. Rise in minimum wage in California.

Given the collapse in commodities, it’s only a matter of time before beef costs sink lower, helping the company with inputs. The minimum wage issue will abate, as the company diversifies outside of Cali. They have plans to open more than 25 stores in 2015, many in NJ, DC, Nevada and Florida. Numbers were tempered as the quarter dragged on because they were recently featured in a Food magazine for having “the best tasting burger in America.” Naturally, this free endorsement helped boost sales, which will of course wane as time passes. Nevertheless, the core to the Habit/Shake Shack thesis remains intact, which is to destroy the MCD-Burger King hegemony on fast food hamburger consumption.

Playing casual dining has been a very lucrative place to make money over the past decade. This trend will continue, especially with lower fuel and commodity costs.

Making money in proven themes, like the sale of hamburgers, is fairly straight forward. As store openings accelerate, so will the share price. We’ve seen this play out over and over again in CMG, PNRA, BWLD, SONC and even YUM.

HABT intends to double its footprint over the next 4 years. Based off current guidance, the company is trading 4.5x 2015 sales, a discount to CMG’s 5x sales and way under SHAK’s 20x sales. I don’t like my chances at making money in HABT over the next 4 years; I love it.

Terrible day in stockville. Breadth is abysmal and losses are mounting, except for players in the world of medicine.

Up on takeover rumors after canceling an event, shares of ACAD are through the roof. This name has a lot of important biotech investors in it, like Baker Brothers–who owns more than 20% of the stock. If you’ve been following along, Baker Bros just made a killing in PCYC. Their other two large positions are GEVA and SGEN. I am long the latter. Aside from that glimmer of respite, everything else is acting rather medieval, with marked exception to REITs–up thanks to rates going lower.

So, let’s summarize.

Economy good: rates rise, banks go up thanks to yield curve, REITs, Utes suffer. If rates go too high, market throws tantrum and tosses everything into the sewer pipe.

Economy milquetoast: QE is a possibility, yields are down, REITS, Utes thrive. Stock market rips to new highs.

Economy bad: QE is all but assured, yields plunge, then maybe rise off sovereign debt fears. Stocks initially rise off QE prospects, then plunge after idiots gather around a fire and declare “The Fed has lost control” and we’re all fucking doomed to depression.

If you can fit your trades into those themes and where we are now, with respect to these idiots cycles, you will make a mint.

In summary, Wall Street is like a story of three little bears playing out. They hate hot and cold porridge and love the “just right” medium type. Without question, Wall Street is filled with a bunch of drama queen drug addicts, who don’t know their ass from elbows when it comes to knowing what’s best for America. To denigrate positive employment numbers because the proverbial punch-bowl might be taken away is reprehensible. Then again, humans are a disgusting breed of life-form.

We will reach a place of equilibrium soon, an oversold condition in these markets. The PPT will tell you when it happens and we will act upon it. Anything more than that, at this point, would be idle guessing on my part.

Yes, I am selling into the hole here. The very last thing on the fucking planet that I intend to do is repeat last year’s fuckery. As such, I am merely taking precautions, cutting some losses, booking gains.

I sold out of FMSA, EMES, FL and some SLCA.

I have sell orders in for a few other names, with an intent to raise enough cash to allow me to eat yams all day long and talk shit on the computers.

We can talk about the reasons why stocks are plunging to hell this morning; none of it matters. All you should know and care about is there are more sellers than buyers today and the tone of the tape has changed.

Once per month, we get these sell offs. People get all worked up in a frenzy and fuck themselves inside of idiot stocks. Bear in mind, we are in the midst of an epic bull run, one that has lasted for six years. Each and every sell off has been transient, temporary phenomenons that are met with unchecked, wild-eyed, buy programs–fueled by cheap money and strong liquor.

The very idea that the Fed might hike rates is hateful to most Americans. We want cheap money, strong booze, and fast cars. Austerity is for conquered countries, like Germany and Greece.

Bottom line: Don’t laugh off the sell off just yet. Examine it closely and do what you need to do to protect your assets. Being emotional about money is always a good way to lose it.

With the Dow Jones +170, one would think everyone who was long was banking coin, no?

The truth is, not everyone can be as cool as me, gallivanting (no homo) about town, almost gliding, making tremendous progress in the capital markets. I am what some might call “an expert” in the arts of proper money management.

Now some of you are still living in the past, relishing in an era when Le Fly got tossed into an idle alligator pit with his Four horsemen of financial ruin. I’m gonna need you to get in the now, son.

See, on Friday, the market was down 300 and I was barely down. Today, the market is up 150 and I am up 0.5%. Do you know where that puts me year to date?

I’m nearing +15%, son. I have little time to play games with the likes of you, as I have bottles of wine to devour and a certain Mrs. Fly LOOMING in the background trying to control me. “The Fly” cannot and will not be controlled. He is like an atom bomb over Moscow, in the winter. Was it the fall out or the winter that made it snow? No one knows. But it’s snowing, nevertheless.

Yes, it’s true, my largest position is HABT and I’ve been reticent about revealing the size of my positions for sometime. Anyone inside of The PPT knows that I’ve been concerned that a certain vindictive billionaire was targeting my positions for rapid deployment, down the sewer pipe. Remember kids, it’s not paranoia when someone is really out to get you.

Alas, I am out in the clear now, with gargantuan gains and a chest filled with animalistic vengeance. FL, my second largest position, continues to press forward and my scheme for “motherfucking redemption” is coming together, thus far, in 2015.

Do you like to eat food? Good. Keep on stuffing your fat, fucking, faces–because you’re gonna line my pockets with pure gold over the next decade or two.

Do you know what is the longest running trend, unabated, for the past 150,000 years?

Answer: Human population.

As our society matures and becomes more gay, women are permitted to work outside of their home, away from the children, leaving men with nothing to eat. This, as you know, is a problem. To remedy this issue, men of industry have begun opening casual dining fast food chains, to serve men quality food, without having to make them feel uneasy about eating alone. Granted, women eat at these places too, and on occasion, so do entire families. But let’s get one thing straight here, right now, casual dining is a man’s genre, sans the frozen yogurt joints.

Here in America, the land of the savage human beast, we enjoy a good burger, frenched fry, and even a little milked shake–every so often. Just like the people in London have malted vinegar running through their veins, from all of the fish and chips they consume, Americans have ketchup in theirs.

Over the past 5 years, DPZ has appreciated over 700%. I bet you didn’t know that. Naturally, this can be attributed to men coming home from a long days work to find zero dinner on the table, thanks to his wife working too. In order to alleviate short term starvation, these men dialed their local Domino’s and ordered a few pies to hold them over until their wives came home and cooked a proper meal.

If I was to select three themes over the next decade, I’d choose food, energy and medicine. Technology has been in a deflationary vortex for decades. I have zero interest in long term tech plays. On the other hand, food services and healthcare, those industries are enjoying rapid inflation, and growth. Companies like JAZZ, CELG, HABT, SHAK are the future.

With regard to today’s tape: so far, so good. I told you the auto-shorts were gonna get their clocks cleaned. I don’t like energy, however, despite the WLL action. The price of crude needs to jump higher, in order to get the sector going. We need $65 WTI by April to get another leg higher, otherwise energy shares will be under pressure.

Diversify lads.

A new Habit Grill opened in New Jersey two weeks ago, so I decided to mosey on down to give it a try. The restaurant is very inviting, clean, and conducive to serving dozens of people comfortably. I ordered just about everything on the menu, having the advantage of being accompanied by my family.

First, let me just say, their grilled tuna sandwich is outrageous and is the best thing on the menu. This will appeal to people, like women, who opt out of eating red meat. Their bacon chicken club with avocado was good too, along with the fries and shake.

The hamburger, specifically their double char burger was excellent, in a Burger King sort of way. If The Habit Grill is the new Burger King, then Shake Shack is the new Mcdonald’s, taste wise. It’d be funny if both mega-burger chains were behind this great burger conspiracy, no?

All in all, Shake Shack is a better restaurant. For my palate, In and Out and Bobby’s Burger Palace both have better burgers than The Habit Grill too. However, there is plenty of room for growth here. And even though HABT doesn’t have the best burger, that doesn’t mean their business won’t prosper the most. The best product in any category rarely wins. It’s all about execution and management. We’ve yet to see how good the managers are at HABT; but will get a glimpse this Tuesday, after they report earnings.

NOTE: I know some of you are obsessed with the news out of Greece. It is a non-event.

Citizen Kane is the best movie ever made. I realize it’s the favorite of critiques and the lot of you like to fade ‘experts’. But in this instance, they are absolutely right.

There once was a time when I hated old movies. I felt they were a waste of time, stupid dead people on black and white screens. But then I calmed down and started to pay attention to what was being said on the screen, instead of what was happening. Orson Welles, who would’ve been the best director to ever live had it not been for being blacklisted for making Citizen Kane, preferred to make black and white movies over color. Well into the color teevee days, he still made black and white films because he felt it added a certain glamor to the movie, making viewers focus on the content and not the pageantry (extra Ashley Schaeffer).

Citizen Kane represents a lot of things to me.

When I was young and successful, growing up in the business, truth be told, I was ashamed at how young I looked. I always looked 5 years younger than I actually was and meeting clients was always a point of stress for me, since I looked like a kid out of high school. Now that I am older I realize that youth was never anything to be ashamed of, but to embrace.

Orson Welles was the youngest director at the time. At 25, he made the greatest movie of all-time. This success was never to be repeated and marked the apex of his long career. What a terrible thing to live with, topping out and never being able to repeat the glory you once had.

Welles, famous at the time for one of the best pranks of all-time (Interestingly enough, many years later, a lad in Ecuador tried to repeat this prank, which resulted in his audience to go bat-shit crazy. Riots ensued and they burnt the fucking radio station down to a cinder, killing 7 in the process.), the War of the World’s radio broadcast, which tricked all of the idiots listening into believing a martian invasion was at hand, was a firebrand and because of this was given a blank check to make Kane. Commercially, it was not a success and behind the scenes it was a fucking nightmare for movies execs, since the movie is actually about the life of the most powerful media man of the time: William Randolph Hearst.

At any rate, if you’ve never seen Citizen Kane–do it today. It is a timeless classic.

NOTE: As a result of Citizen Kane, I researched and viewed all of Welles’ work, even the stuff never published. For the next few weeks, I will be reviewing his films, opting for thematic reviews over random.

The market is going to fry the eyes out from your sockets on Monday. For the day, I was barely down, buttressed by gains in HABT, FL, ICPT and SBNY.

We’ll get it all back, and more, on Monday.

NOTE: Be sure to check in tomorrow for “Saturday Cinema with Le Fly”, where I intend to reveal my favorite movie of all time.

https://www.youtube.com/watch?v=FZkSmshyalI