Scared Yet?

Question: at what point does the dollar decline start to concern you? Like oil, what is the tipping point that will start to erode confidence?

Future are ripping higher this morning. It doesn’t matter why they are up; they just like to go up. The dollar is getting clown raped and gold/oil continue their respective melt-ups. Remember, it’s important for oil to trade up, ahead of the winter heating season, with respect to taxing people in frigid parts of the country.

The euro is fantastic and I want to keep all of my money in Irish banks, yadda, yadda, yadda.

UPDATE: I sold out of FXY, north of $120.

Despite the tech space getting obliterated today, investors stepped in and bought everything else. The current theme is: if the dollar is down, times are good. Oddly enough, treasuries are not trading in lock-step with the dollar any more, mainly because the Fed is buying them. God and clever dogs only know why the Fed is buying treasuries. Perhaps it’s the only way they can insure foreign participation? You tell me.

It’s all about liquidity and finding a place to put capital. For the moment, money is leaving tech and going into big cap industrials. Asset managers are playing whack-a-mole today.

Personally, I like my chances long FXY/TLT here. For now, VXX/TZA is just the butt of all backhanded jokes. I remember everything and have been keeping diligent notes of all transgressions. And, should the commodity rally continue, I like AKS too. However, it is a concern to see X trading at such low levels, considering we are supposed to be in a global growth renaissance. It’s all about jobs now, so keep your eye on that employment data—as if your lives depended on it.

The apocalypse for tech stocks is here. Had you cast aside reason and logic yesterday and bought shares of CRM, EQIX, RAX, FFIV, VMW, AKAM, MELI and BIDU, you are regretting the day you were born, and more. It’s just the tip of the iceberg, really. Those stocks are still trading at absurd p/s, FPE ratios. Fundamentals really do matter, despite what the quislings say on CNBC.

Affectionately, I embrace the coming drop in the indices, as they will cleanse the market of all the people I hate most. All of you low quality men shall be washed out, amidst a sea of red. And it will not be a surprise to anyone but you.

I realize the overall markets are still holding up; but not for long. This is the opening salvo into a series of future shocks to the system. Once the dollar firms up, elevator down, gentlemen. As an aside, I bought some AKS, in an effort to bet against myself. Do not take that purchase too seriously. I still think we trade down 10% from current levels.

I bought 50,000 AKS at around $14.17.

Disclaimer: Costanza trade.

I want you to observe what happens to a stock when expectations are too high and that respective company fails to deliver:

(see FFIV, RAX, CRM, VMW for similar pain)

Like it or not, expectations are very, very high, for nearly every sector. Ask yourself a question: how lucky am I feeling?

According to management at several high profile steel companies, things are not too rosy. Same goes for tech, even though people seem to have forgotten that AKAM, INTC, AMZN and several other high profile names warned last quarter. Again, how lucky are you feeling right now?

This is what we do know to be fact.

The yen is knifing higher daily, much to my delight, despite the opposition of the Bank of Japan. Bonds are going up, again to my delight, as investors funnel into what they deem to be safe. And, finally, equities are grotesquely overvalued, based upon the laws of reason and mathematics.

Like I said, buying a basket of puts on the current dot-com-esque high fliers (CMG, FFIV, NFLX, CRM, VMW, CAVM, RAX, AKAM, AMZN) is indeud better than lotto.

Here is The PPT oscillator chart, as of yesterday (marked overbought as of yesterday for the 4th time this cycle)

The top 25 companies listed in the U.S. now trade with an average forward PE of just under 14. Typically, PE’s contract to 8-10 during recessions and expand to 17-18 during booms. Naturally, during a most confounding period of perpetual melt-ups, the FPE’s are now mid-range, essentially threatening doom to both long and shorts.

Should the economy improve, multiple expansion will be demanded. However, if we stagnate, expect contraction. It doesn’t matter what happens to NFLX or FFIV. Those are merely side dishes in the big scheme of things. The market is dictated by the whims of large cap stocks. Stocks like AAPL, XOM, MSFT, CHL, BHP and WMT demand your attention and force obedience upon those who attempt to fight the trend.

Just to rehash what has me “confused,” to put it mildly: The Fed is telling us things are not good, by their insistence to pursue reckless monetary policy. Everyone is assuming they will succeed. However, what exactly will they accomplish? $100 tomato, $400 gas?

Personally, it doesn’t make a difference if 30 yr mtg rates are 4.25% or 5.75%. The expense is negligible. Plus anyway, it’s not like the banks will, all of a sudden, open the spigots to the unwashed, allowing unbridled real estate speculation to re-emerge. What you view as nirvana, I see as a future disaster.

If the Fed is in the business of monetizing the debt, what will happen to their balance sheet when rates go up?

Answer: 100’s of billions in losses.

Which leads me to my next assumption: rates will never go up again, ever. If you are in the camp that puts the Fed on a pedestal, you have to accept the notion that the Fed will never allow rates to climb, due to their ridiculous exposure to the bond market, at historically high prices.

If that’s the case, well then, we are Japan. The Fed is preparing for 20 years of sideways to down economic activity. Or, this QE II idea is one big bluff, in an effort to push oil to $400, which will serve as an excellent and most efficient tax hike on the proletariat. So you know, I view commodity price increases as tax hikes.

If I am right about the sinister plans of the Fed, bonds will continue to outperform and commodities will serve as a safe haven of sorts for investors. Equities could trend high, most regrettably. However, should economic activity continue to bounce along the bottom, PE’s will contract, sending the markets lower.

The only reasonable argument for higher multiples is higher rates, due to robust economic activity. If that’s the case, then QE II will never happen.

There is no need for me to discuss the yen and how it will destroy the Japanese export market. There is no reason to discuss the potential downside to QE II or even the reasons to initiate such a program. There are no reasons to be cautious, since the dollar goes down. Therefore, stocks must go up. There are no reasons to discuss the downside ramifications of European and America austerity, providing the GOP takes control in a month. We do not need to worry about tedious currency or trade wars or malignant unemployment. All we need to worry about it right now.

Living in the right now economy, everything is based upon expectations. It’s a contradictory thesis, but true. Everything is fast. The market is quickly and expediently pricing in a full recovery and rapid inflation, all at the same time. Why else would gold be north of $1,300? Can both co-exist?

Over the years, I’ve come to realize the market is a terrible pricing mechanism. It’s a rarity to see the markets behave in a manner that coincides with actual economic data. More often than not, the market is simply guessing, like most of you. Case in point: dot com bubble, credit crisis and subsequent recoveries.

Like it or not, right now the economy is pricing in an extension of the Bush tax cuts, a GOP landslide, a major uptick in employment. While it’s true, the banking system is completely impaired. It’s also true we are pricing that in too.

As the final hour of trade commences, “The Fly” is being “Stunt man Mike’d” due to a belief system gone wrong. Sometimes it’s better to know nothing and live free; than to over-think the little digits and letters and live in hell. The new America is enjoying a period of “decadent poverty,” where free lunches are served with fine silver and everyone wins.

Off to drink a glass of water, filled with live waterbugs.

The futures started ripping to the upside as soon as the floor fell out of dollar support. Yes, quantitative easing, apparently, has already worked, even though it has yet to begin. The Fed is playing a game of high stakes psychology on its zombified test subjects, who believe everything they are told.

It’s obvious, the rally isn’t over yet, as performance chases performance, which in turn chases more performance. Japan’s interest rates are at 0-0.1%, yet their stock market is down 75% from the highs. On the path the Fed is putting us on, it’s only a matter of time before the dollar loses reserve status. Then what? Well, then commodity prices won’t be jarred by the manipulation of the dollar and America really feels the brunt of their economic missteps. But you and I know that will never happen, right? Before we lose reserve status, foreign capitals will be “set free” by several thousand of our finely tuned bombers.

In summary, today I feel as wrong as wrong can be, sitting out and enduring the pins and needles of a 2% lift off. It’s like watching your girlfriend dance with some tool, as you watch from the luxury of a full body cast.

Perpetual melt-ups into the election, in order to set the mood for reelection.

As much as I would like to see 99% unemployment and the Dow at 32 by tomorrow, it will not happen. Today was nothing more than a pit-stop, in the great scheme of things. While it’s true, AXP caught an ax to the face today. It’s also true, people with clown-like large wallets will be buying it tomorrow.

Do not make a mountain out of a molehill, else end up living inside of one.

HORATIO CLAWHAMMER is not interested in what makes you laugh, cry, only the end result. I’ve been storing my positions for over a month now. They’ve been fermenting, all the while you faggots danced in the streets, dressed in pink blouses and purple pants, made from latex.

I am very tempted to take a basket of stocks, specifically NFLX, FFIV, CRM, AKAM, CMG, VMW, WYNN and FCX and buy long dated puts on them. Go a year out, 25% less the current price strike. It’s better than playing lotto.

All in all, today was a good day for me, making that two in a row. It’s only a matter of time until the prophecies of “The Fly” come to fruition.