ARE YOU READY FOR TAPERMANIA?

Over the past month, pandemonium has broken loose on Wall Street, tanking the values of munis, treasuries and high yield corporate debt. Moreover, REITs and utilities have been hammered into panned cakes.

Since 2008, I’ve kept a Risk Appetite Index inside of The PPT to track potential dislocations in credit. It was supposed to warn members of impending doom. But it was a different world  back then. Now Detroit can filed for bankruptcy and the Dow trades up on the news. Truly bizarre.

1 mo view of RAI

Pretty bad, eh?

Now have a look at the chart over a longer time frame.

POW! That chart screams “punch me in the face with a bag of wooden nickels.” Yet, markets have yawned it off, while eating a plate filled with boiled yams.

The Fed is either going to confirm “TAPERMANIA” or deny it, thereby causing a few things to happen.

Under a confirmation of TAPERMANIA, the following should occur.

1. TLT will get smashed.

2. REITs and Utilities will drop 3%.

3. Commodities and the overall markets will undergo significant selling pressure.

If TAPERMANIA is denied, the following should occur.

1. TLT will edge higher. It will not rip, because stocks will do that.

2. REITs and utilities will sharply rebound.

3. Beaten down commodity plays, like Iron Ore, Gold and Coal, will outperform the markets.

4. Market soars.

I do not believe there is a middle ground. I know every single Fed meeting is the most important meeting of all time. The media has a way of over-dramatizing these events. Nonetheless, you shouldn’t enter tomorrow without a game plan. Failure to deny TAPERMANIA will most likely lead to the cancellation of the summer rally, in exchange for 5 weeks of misery.

Rub some VXX on your chests, eat hearty, for tomorrow you will trade from hell.

http://www.youtube.com/watch?v=wXLRgDUtuqg

I’m done for the day, having raised enough cash to buy core positions on dips.  Everything you see now is phantom. This can all be washed away with Bernanke’s taper gun tomorrow. Or, perhaps the rally continues, once people find out that Ben prefers the company of transvestite hookers when deciding upon policy.

I intend to double my position sizes in WETF and AMBA. In other words, I am circling the wagons around a few stocks, but cannot justify buying them now ahead of a market moving event.

GTAT looks like it wants higher again. Hell, many stocks look real good. I just don’t feel like jumping in front of trucks yet.

Maybe tomorrow.

I sold out of YELP and ANFI for profits and tossed the proceeds into a money market. I want to double the size of my AMBA and WETF positions and now I have the money to do it.

The prudent thing to do is wait until after the Fed news to take action, so that’s exactly what I intend to do.

I am long the very best of stocks. My timely exit from part of my FRO position was worthwhile, seeing today’s action.  I am very bullish on a few names: AMBA, YGE and IMMR. I have lots of stocks, some are good, others are great. IMMR is great.

Come get your haptic smack, five fingers striking your face like an african drum.

It pains to say it, but AAPL is dead. The company is being destroyed by Tim Cook. Samsung is doing it. IMMR is your play on the Samsung juggernaut.  If you’re not familiar with IMMR’s technology, become acquainted. There are very few IP companies that actually bank coin. VHC wishes they could be doing what IMMR is doing, with regards to signed royalty agreements.

All that aside, I’ve been trying to find another stock to buy, but nothing strikes me as good. I do like FXCM, especially since currencies have gone wild.

For now, I am in a holding pattern. My gut tells me we sell off post Fed.

Oh by the way, the pinless hand grenade action in  gold and silver will place some junior miners into receivership. NAV’s are dropping rapidly and credit downgrades are imminent.

Forget about futures or where your stupid stocks open this morning. The real action will come after the Fed has their say, tomorrow afternoon. Will the Fed “taper” as many suggest? Or, will Ben and Co. continue the path of God, liquifying the markets so that we might enjoy splendour, live leisurely while the poor suck on pieces of black coal and mutton?

All of these questions, AND MORE, will be answered tomorrow.

For now, sit back and relax like a man on deathrow just one day before he is to visit ol sparky.

This could go down as one of those posts that mark the exact top in the markets, at least for awhile. But there is something that’s been gnawing at me and no one seems to be talking about it: INPUT COSTS!

The above table is my raw commodity index inside of The PPT. As you can see, over the past two years most commodities have collapsed. No wonder SBUX, SJM, DNKN and GMCR are doing so well. Coffee is down 60%!

Curious as to how HSY got to $90 p/s? Look no further than the price of cocoa and sugar down 30%.

My guess, companies had some hedges against the rise in commodity prices. But they’re probably going to lighten up on them now, since there isn’t any pressure on raw materials. If this trend continues, miners and farmers enter the fag box and never leave. Manufacturers will see their margins explode, even grocery stores stand to benefit. Look at NGVC as of late.

If timber comes in, residential construction will benefit, as well as makers of furniture. The fact that cotton is down 25% helps retailers and clothing manufacturers, just like a lower price of oil and distillates helps truckers and shippers.

Make no mistake, lower natty and coal is by design, a great tax cut for the unwashed American pleb shopping for broccoli at Walmart.

Wheat and corn have been weak, helping chicken companies like PPC and SAFM. There are so many benefits to lower input prices it’s hard to isolate a single idea. I think it’s fair to say it’s a gigantic boon for the entire country. We’ve been blessed with cheap coal and natural gas, now everything else is getting cheap.

Thoughts?

I just got back from a celebratory lunch, tasting menu with wine pairs, at once of Princeton’s finest eateries. I hope you can appreciate the good fortune that I’ve experienced today with FRO. Being able to sell 500,000 shares into an upswing, fully liquid, is a gift, one that I couldn’t look in the face and ignore.

With part of the proceeds, I went long YGE; the rest  is in cash.

My largest positions are IMMR, YELP and AMBA. I know the market will trade up, so I am not too worried about booking profits.

The market looked dicey for awhile, but roared back like the lion that is is. I am almost fully invested and will be looking for another fresh idea this evening. I like NILE, but the shares are too thinly traded. BX and APO are good, but offer limited upside returns. The reason why I went heavy into YGE is for the upside potential. Since I am up so much, I can afford to take risk.

I was up 5% for the day, plastic manning my way to +32% for the year. Despite all of the tests, Le Fly is pissing on his competition from atop a summit, defecating on those who try to sneak up from behind (no homo).

And that’s exactly what I intend to do, friendo.

I am up more than 5% today, setting new records, new annual highs in the process– up 32% for the year.  I sold more than 500,000 shares of FRO today because I needed to divest a little. I will hold another 700,000 shares until my prophecies come to fruition.

With the market soaring ahead of the Fed, I think it’s fair to assume “tapering” isn’t part of the Bernanke playbook. We should continue to make new highs, unless of course earnings, or lack thereof, derail us. I did not like the news out of TEX today.

With today’s gains in the SPY, we are about flat for the month of June. There isn’t anything wrong with selling to take profits. But just know, better men than you are 100% long, strong, unafraid of the horrors that may or may not hang in the balance.

Your gender is suspect.

Solar is where it’s at because of fundamentals. These companies are smashing earnings expectations and guiding higher. Plus, it has the attention of the degenerate momentum crowd. I love YGE up to $4.

“The Fly’ is all about winning and has decided to continue to do so for the duration of 2013.

Off to go buy 20 diamond encrusted gold chains and 200 pairs of Air Jordan’s with my FRO winnings.

I started a good sized position in YGE.

It looks like my FRO is getting a serious blow out today. Apparently, the other Frontline, the one that trades in Oslo, was up more than 20% today. I can only surmise good news was released.

Still checking.

UPDATE: I sold 300,000 shares of FRO. I am still holding another 900,000.