You’re Not Smart for Being Hedged

First off, I want you to know that I don’t get mad at any of you, really. All of my pent up, homicidal anger is directed towards people in my profession. Why? Sorry, I really don’t know. I guess it’s the same reason why lions want to eat zebra. I just don’t like people in my industry and I make every effort to direct my children away from it. It is filled with the greediest, most dishonest, reprehensible people on the planet, save the law profession.

I hear a lot of people bragging about not losing money in this downturn. That’s great. However, even more, these same people are boasting a bearish outlook, yet find themselves long stocks to “hedge” their shorts. Sorry pal, the only thing you are hedging is your low IQ. Look, only pussies hedge themselves out of big trades. If you are as doom and gloom as you say, take 50% of your assets and get short, with conviction. You can keep the other 50% in cash and use it to get long options for scalp trades.

The reality is, these people are not good managers, but scared money. They’ll never hit the grand slam because they are singles hitters and have warning track power. For some people, that’s okay. For me, I am all about the fences.

Having said that, I am still almost 50% cash due to my belief that “weekends are scary”. God, who knows what will happen?!?! At least my DECK is moving higher, following an absolute drubbing.

Should the market regain its footing, the refiners are the best place to put your money, due to margin expansion. Fucking crack spreads are north of $37 now and the WTI-Brent spread is 31%! If WNR isn’t your thing, look at HFC, DK or CVI, all solid companies in a kickass space.

Best case scenario for the longs, today’s lows stick and we run up into the bell. Worst case, this little rally runs out of steam and we cascade into le belle.

A lot of you small plebs are young and bearish. You hate the world, mainly because of your lack of personal success. As you know, success comes in many different forms. Some of you are upset because you can’t land a hot chick/wife, make some kids, and/or get rich. Without poking fun at you, as I burn $100 dollar bills by the fireside (yes, Le Fly sits fireside in the summer, even in the fucking Caribbean), I am going to teach you what you need to be told.

First of all, there is no long term strategy with the 3x asshole ETF’s. There is too much decay and they will blow your faces off in a NY minute. Trade the 3x ETF’s, holding them no longer than a week. I prefer to trade the options. Buy some TZA calls, at the money or slightly out of the money, current month, and throw some fucking dice. Yesterday, I bought the TZA Sept 47 calls and sold them today for an 80% rip. Did I sell because I thought the market is going higher tomorrow?

Fuck no.

I sold because I never look a gift horse in the face without kissing it on its big stupid nose.

If you believe we are entering a long protracted sell off, short the insurance firms. Fuckers like HIG, MET, AFL, LFC, and others, have massive exposure to the equities markets. You can also target custodians like TROW or BK. The obvious choices are industrial related names, like CLF, JOYG, TEX and CAT. I’d be careful with retail because they are crafty fuckers who find ways to steal your money.

Should credit markets seize up, then we have a whole new ballgame. In The PPT, I created a ratio using net cash per share/price. If a stock is trading with a 0.5 ratio, that means half of its market cap is cash, a sign of financial stability. On the other hand, there are scores of companies that have horrendous balance sheets that will literally go bankrupt if the equity and credit markets seize up. Back in ’08, both FTK and WNR were on the verge of bankruptcy due to this exact scenario.

After you find a company with negative cash flow and loads of debt, find out how it is structured. If the debt is coming due soon, you know they have issues that need to be addressed. You can trade ahead of dilutive offerings and bank easy coin.

As far as multiple contraction is concerned, it’s a moving target. If we delve into economic collapse, none of the current numbers are worth anything. To effectively price the market, you need to consider the worst case scenario numbers, then reduce them again by 25%. So, if you believe we are cheap here at 13X, consider the possibility that the “E” on “PE” is false. Discount it.

Finally, the whole purpose of being a bear is to eventually buy cheap stock. There is no such thing as long term bear, for mankind is always advancing. To bet against mankind is sheer stupidity. Hell, I guarantee you people living in Germany or Japan, circa 1945, thought things would never get better, considering the carnage around them. Everything you see here is fixable because everything is bendable. The snap back rallies will be fierce and they will make a spectacle out of you for staying short. The rallies will materialize out of nowhere, based on rumors and intra-day leaks. Don’t be a jackass and trade with your heart. Always take the high probability trade.

As investors, that’s all we’re supposed to do.

What you are witnessing in the markets is a massive Exodus from equities, in an effort to price in depression. Since we never recovered from the Great recession, any economic downtick will surely result in a good olde fashioned depression. Unemployment rates will soar upwards of 15%, led by prolonged shutdowns in industrial manufacturing companies. If you think the fucktards in Brazil and China will dodge this unscathed, think again. Any and all export nations will see GDP decline far greater than western GDP’s. We are already at a standstill, while they are levitating at unsustainable levels.

When stocks like DECK get sold off for no apparent reason, other than “pricing in potential multiple compression,” you know there is a problem. So, everyone is pricing in multiple compression and everyone is long the same fucking stocks. The end result: FCX circa 2009. Remember when FCX dove lower in early 2009, due to hedge fund liquidations? Well, the same shit is about to happen now, unless the tide is turned.

The major difference between 2008 and today, believe it or not, Bush and Paulson were on top of this shit, albeit a little late. What we have now is a power vacuum, with that fucktard Obama on siesta. As for Geithner, who the fuck knows where he is camping? This is the main problem. The Fed cannot do it all and it seems to me Bernanke is sick and tired of being ridiculed by BOTH SIDES OF THE AISLE, when he is the only one enacting policy in a feeble attempt to save this country. The reality is, the Fed should not be our last savior, but they are due to congressional incompetency.

If left unchecked, we will dive into a depression, equity prices will drop 40% from current levels and trillions of dollars in economic stimulus and Federal Reserve printing will be wasted, left for the sands of time to figure out.

We attempted to avert a calamity, but due to massive malfeasance, we’ve created a fucking monster that is going to eat this country whole.

Nevertheless, as crazy as it sounds, the high probability trade is to be long. Heck, if I know the outcome, so do the asshats who are printing the money. The name of the game is reflate, not sit here and fucking die like little bitches from Carthage.

At the close of trade, my cash position stood at 47%.

I increased my DECK position by 30%, averaging down sub $76.

Well, I told you I wouldn’t get caught flat footed again. But this time around, it wasn’t instinct that saved me, but the stock Gods. I am completely out of the loop now, here on an undisclosed island in the caribbean. Due to the implosion of DECK yesterday, I opted to go to 50% cash and throw on a TZA hedge, by way of stock and Sept 47 calls, +75% today. However, I am not unscathed here, but the damage is contained.

Why are we crashing again? European banks? PFFFFFFFFFFFFFFF. I think Scott said it best, a whole pastiche of things is contributing to a crisis of confidence. As far as Italian and Spanish debt is concerned, yields jumped less than 0.75% today. However, for the love of hypodermic needles, they are both yielding less than 5%, hardly a crisis there.

This is what I am doing. I am going to sell my TZA and scout longs. I might not buy them today, due to the possibility we close at the lows. But this panic is oversubscribed and my robots say it’s time to get in.

For the record, The PPT flagged OVERBOUGHT on 8/15. How’s that for timing?

Indeud.

UPDATE: I sold out of TZA and calls, +80% one day gain.

I just wanted to point out the obvious to some of you who visit iBC and leave inane messages. “The Fly” is not a fucking trader. He doesn’t fiddle around with bullshit Zeeco or ThinkandSink accounts, managing 5 figs, acting all bold and shit. The vast majority of you little trollops are irrelevant when it comes to Wall Street. You are never privy, just choking on dicks and charts. You feel as if you have an edge because you read candlesticks. However, in reality, you are playing with dynamite sticks, fixing to blow up your accounts.

Your financial advice is never required or coveted on iBankcoin, because we are better than you. I don’t just mean that in the colloquial way, but literally.

I am a manager of assets. I make people rich and rich people richer. I’ve been doing this shit since the late 90’s, a student of the market since I was 11. Anything that you know, I’ve already studied.

To this point, even while on vacation, the bannings on iBC will be distributed liberally, sending you goat fuckers to see the distinguished Greg Solomon for reeducation.

If you’re interested in my pedigree, look no further than my archives. I’ve fucking annihilated this market, publicly, for over 5 years now and, generally, spit on you little faggot bloggers who dare step into my realm.

iBC will nuclear bomb your barracks and enslave your women to bake us banana bread. Do not fuck with me, especially when on vacation, else I will rip your face off and punch your fucking skull clean off your scrawny shoulders.

As an aside, I am expecting further downside tomorrow. Hence, I am 50% cash with a TZA hedge, by way of stock and Sept calls.

NOTE: From now on, unban requests will be denied, unless the request comes in the form of essay, minimum of 200 words. Proper punctuation is a must.

If DECK didn’t get obliterated today, I might not have opted for cash today. But it did knife lower, on no news other than CTRN and ANF sucking balls, much to my chagrin. DECK is one of my largest positions and I only have a few positions, so I must reduce risk in other positions in order to determine whether I want to double down or cut my losses on DECK.

There is no way anyone has an edge on DECK here. They do not accelerate sales volume until late September and inventories are big due to the belief that they are poised to ramp, later on this year. If you recall, they reported a great quarterly number and I sold near $105. I bought back in around $90-92.5 due to my belief the stock was being tossed aside due to market panic. However, over the past two days, DECK has shed nearly $10 on no news. Which leads me to surmise, FMR or Blackrock may be reducing risk, across the spectrum, regardless of the name.

Let me remind you, the people who manage your money are not too bright and tend to not give a fuck about executions. They are steering a big fucking boat, much bigger than my flotilla, and couldn’t care less about chicks digging on furry boots. Once the selling subsides, DECK will be a sick buy. Watch it spring the fuck higher, to the amazement of all who are short.

For the day, I shed another 1%, mostly due to DECK.

Off to eat some fish tacos.

In light of today’s intra-day “fuck you, you’re dead” trading, I took time out of my vacation to sell out half of my equity holdings. I sold my largest position, EMN, as well as CLF and KBH. With DECK spiraling lower here, on no fucking news, my appetite for equity is little to none. Earlier on I was tempted to go long Sept calls in DECK and maybe a bit more WNR. However, I am going to respect The PPT here and opt out of any shopping sprees, in exchange for cash.

My cash position is now 50%.

UPDATE: I bought a TZA stock/call position as a hedge.

After an early melt-up, it appears to me the market is flat footed here, about to get kicked down a flight of spiked stairs, lined with mustard. My DECK position is getting poleaxed and WNR has given up most of its early gains.

The fundies for the refiners continue to strengthen, as crack spreads widen even further this morning, off of reported gasoline shortages throughout the country. Don’t forget, we’re entering the wonderful and magical season of hurricanes, where cities get torn to shit by “angry” thunderstorms on steroids and crack-cocaine.

Up in the civilized part of the United States, NYC, we do not “enjoy” such weather. Instead, we get to “enjoy” homeless men spraying urine and feces onto open food buffets.

Bottom line: the market isn’t healthy just yet. We need to meander around a bit and get rid of weak hands. I suspect after a little basing out around these levels, we will be able to launch higher again, just in time for September—identical to last year.

This post is about absolutely nothing. The goal here is to clear the uprising that took place, in the previous post, and feature some fantastic music.

Enjoy!