Rainbows and Unicorns for the Bulls

Look at everyone trying to describe this 150mph head on collision as some sort of final capitulation, a buying opportunity. Watch them talk garbagio about how insignificant Lehman Brothers Holdings Inc. [[LEH]] was and how if we just close our eyes, we will not see American International Group, Inc. [[AIG]] melt away.

Bank of America Corporation [[BAC]] just threw an oversized anvil on their shareholders, via buying Merrill Lynch & Co., Inc. [[MER]] —at way too high of a price. We all know they could have bought them for like 10 billion. Instead, I guess they thought it made “sense” to take the life savings of coal miners and school teachers in order to buy them for 44 billion.

Right, that makes sense.

Enough of the news; let’s talk turkey.

On this little tiny dip, I will buy more [[SKF]] . There is no way in hell those bastards from Wells Fargo & Company [[WFC]] ] should be green, yet they are. Look for Citigroup Inc. [[C]] and Bank of America Corporation [[BAC]] to continue to drive SKF higher, especially with all the arbs on BAC now.

Also, Legg Mason, Inc. [[LM]] is wrong, as usual. I will try to short more.

And, I will begin to short AXA (ADR) [[AXA]] . These European noodles have investment risk everywhere. They are as stupid as Pzena Investment Management, Inc. [[PZN]] , only 1,000 times bigger. Just know, AXA is long 132 million shares of American International Group, Inc. [[AIG]] .

Wonderful.

Finally, my head is being “Talibanned” off via egregiously weak oil stocks. From [[DIG]] to Western Refining, Inc. [[WNR]] , pain is abundant. At the moment, I am closing my eyes to the weakness, sort of like how Cramer only likes to accentuate his green stocks, while his “charitable portfolio” is down 25%, year to date.

Luckily for me, my “uncharitable portfolio” is up more than 40%.

Top pick: SKF

UPDATE IV: Sorry for the damn site going offline (I really wish I could curse right now). I have no idea what happened. My guess, Lehman Brothers got all pissed about my “fortune cookie curse” on them and ordered a web assault on iBC. Apparently, our fate is intertwined with Lehman.

Mini Update within a bigger Update: The site was hacked down by egregious iBankers. We are fighting them on the internets. Developing…

Odd, no?

Anyway, BAC just made a massive error, through buying MER. Essentially, the Fed is forcing them to do this deal. Everyone knows, they can get MER for $15 or less. Instead, they are trying to paint the pig gold and tell us it’s a golden bowling ball. It’s not. It’s a stupid pig with gold pain on it.

With that in mind, expect to see BAC at new lows, within weeks. And, on a big spike, I might short some MER, based upon the insane theory that BAC shareholders may say “hmmm, this deal blows, cancel it now.”

Basically, BAC is the biggest bagholder known to modern finance. I am sure Cramer will find the silver lining inside the nuclear bomb crater and suggest we go out and buy banks, again.

Then we have AIG. KKR and JC Flowers just walked away from a tentative deal with them. Basically, they need to raise $40 billion, in order to avoid a credit downgrade. Because of this, they want the Fed to give them a bridge loan of $40 billion: ROFL.

Are they nuts?

Finally, the hapless banks are concocting some new liquidity pool, in order to create liquidity. Shocker. Ignore their efforts and buy SRS, SKF and short LM, with great vigor.

The market should get stomped out tomorrow, led by free falling banks and massive drop in the dollar.

UPDATE III: Merrill’s board is voting on a $29 per share offer (all stock) from BofA. If this dilutive deal goes through, expect the shares of BAC to get mudstomped. This is a highly irresponsible move, on behalf of BofA. I am sure their shareholders would appreciate it if they could wait until Tuesday to negotiate a buy out price. My guess, they could bag MER for $10 or less, if they keep their cool.

UPDATE II: In light of the probable unwinding that will occur, here is a short list of Lehman Brothers’ top holdings:

General Electric Company [[GE]]

Pfizer Inc. [[PFE]]

Target Corporation [[TGT]]

UBS AG (USA) [[UBS]]

Linn Energy, LLC [[LINE]]

GLG Partners, Inc. [[GLG]]

Merck & Co., Inc. [[MRK]]

Microsoft Corporation [[MSFT]]

[[CME]]

Bank of America Corporation [[BAC]]

Apple Inc. [[AAPL]]

Flagstone Reinsurance Holdings Limited [[FSR]]

WellPoint, Inc. [[WLP]]

Wal-Mart Stores, Inc. [[WMT]]

Exxon Mobil Corporation [[XOM]]

UnitedHealth Group Inc. [[UNH]]

Google Inc. [[GOOG]]

Johnson & Johnson [[JNJ]]

Baidu.com, Inc. (ADR) [[BIDU]]

UPDATE: Should AIG catch a credit downgrade, they will face a 46 billion dollar cash call: ROFL. That’s like Dr. Evil type money. God help us.

S&P futures indicate a 36 point drop (3%), thus far. CDS spreads have widened by 30 basis points.

NOTE: As soon as I can start cursing again, Dick Bove is getting a “lifetime achievement” As*hat Award.

Developing…

UPDATE III: AIG is desperately seeking to raise 30-40 billion, in order to avert a credit downgrade. Also, with a few hours left until Asian trading begins, I believe it is fair to say Lehman will be liquidated. We are living in interesting times.

Should BofA go ahead and take out MER, expect the wagons to circle MS.

Whatever the outcome, just know, you will remember the last trading year for the duration of your lives, with great clarity. History books will reference this era and label it and the people in the forefront as “stupid,” “gay” and everything in between.

UPDATE II: Apparently, all buyers have walked away from LEH. And, to muddy the waters a little further, [[BAC]] may buy MER for $25-30 per share. How will the street digest the collapse of LEH, while another major investment bank catches a 100% premium bid? I have no idea.

One thing is certain, a BofA buyout of MER is a defensive one. They (banking fools) are trying to eliminate future headline risk.

UPDATE: Just to recap this weekends developments:

Paulson and Co. refused to bailout the buyer of Lehman Brothers Holdings Inc. [[LEH]] , whomever it may be. As a result, Barclays PLC (ADR) [[BCS]] has walked away from talks. And, rumor has it, so will Bank of America Corporation [[BAC]] .

The closer we get to Asian trading, the greater the likelihood Lehman may fortune cookie its way into a bankruptcy filing.

Video UPDATE: Cramer’s real position on housing, a few years back. I am sure he would like this video pulled.

Poof. Your stupid gasoline supplies are gone.

-Merlin

NOTE: Crack spreads are now north of $70!!!

[youtube:http://www.youtube.com/watch?v=nPaLuzmhxTk]

Great Depression music. We will all listen to this crap, when poor.

Enjoy.

I’m out of here. I have no desire to watch this unorganized mush of a tape today. Everybody is trying to out position/out smart one another, with vacuous bets. There is no need for me to watch the minute by minute ticks, when I know what the eventual outcome will be.

Which reminds me, I need to start shorting TheStreet.com, Inc. [[TSCM]] again. A friend of mine, who is a HUGE Cramer fan, has lost 100’s of thousands by listening to the old bald one this year, following his egregious financial advice. Don’t ask me stupid questions, like “hey, why do you let your friend do that?”

The short answer is: “The Fly” does not try to alter other peoples opinions, unless properly motivated.

Frankly, thestreet.com and realmoney.com are broken business models, that have become the laughing stock of the blogger community and a curse to their followers/subscribers. Only a handful of people, like Rev Shark, make any sense, on a day to day basis. I would expect TSCM to go substantially lower, as his (Cramer) habitual reflexive CNBC moments further tarnish his clownish reputation.

As for today’s trade:

Utter garbage. There are people out there who do not care about pending disaster at American International Group, Inc. [[AIG]] , Merrill Lynch & Co., Inc. [[MER]] , Lehman Brothers Holdings Inc. [[LEH]] or Washington Mutual, Inc. [[WM]] . All they know: U.S. Bancorp [[USB]] , Bank of America Corporation [[BAC]] and Wells Fargo & Company [[WFC]] are great buys. Boo-yah.

This is ridiculous. Go take a look at their earnings. They are not immune.

If there is one thing that I would like to see, more than anything else, I’d like the stock Gods to bestow death to the axis of evil: USB-BAC-WFC. It’s the trinity of bovine thinking.

In closing, my top picks include: [[SKF]] , Western Refining, Inc. [[WNR]] , Freeport-McMoRan Copper & Gold Inc. [[FCX]] , [[DIG]] and short Legg Mason, Inc. [[LM]] .

I bought 10,000 Western Refining, Inc. [[WNR]] @ $11.17.

Disclaimer: If you buy WNR because of this post, your only son will come home sporting a hitler mustache. And, you may lose money.

I sold short 5,000 PacWest Bancorp [[PACW]] @ $29.72.

Disclaimer: If you sell short PACW because of this post, your friends will label you an albatross. And, you may lose money.

I know that term applies to many of you drug addict types. However, I am talking about the spread between gasoline and crude. At the present, the crack spread is above $15. Keep in mind, when Valero Energy Corporation [[VLO]] , Tesoro Corporation [[TSO]] and co. were hitting all time highs, the spreads were not much more than $20.

Needless to say, the refiners must be bought.

Once again, courtesy of “The PPT,” here is a list of refiners, sorted by percentage of shares sold short:

In other news, I now hate people who incessantly buy Wells Fargo & Company [[WFC]] and U.S. Bancorp [[USB]] . I am telling you now: I will track them down and have their mustaches punched off.

By the way, natural gas may spike hard here too, due the fury of Ike. My weather reports say Ike will bring a bigger storm surge than Katrina. If you think that can happen, get long [[UNG]] , Natural Gas Services Group, Inc. [[NGS]] , Arena Resources, Inc. [[ARD]] , GMX Resources Inc. [[GMXR]] , TXCO Resources Inc. [[TXCO]] , NGAS Resources, Inc. [[NGAS]] and Ultra Petroleum Corp. [[UPL]] .

Also, considering the amount of damage that may be done, take a look at BlueLinx Holdings Inc. [[BXC]] , Builders FirstSource, Inc. [[BLDR]] , Pike Electric Corporation [[PEC]] and The Shaw Group Inc. [[SGR]] —just to name a few.

Top pick: Western Refining, Inc. [[WNR]]

What’s wrong with these people? I mean, they seem to be living in a drug induced world of euphoria, where everything is priced in. Are you imbeciles even looking at American International Group, Inc. [[AIG]] and Merrill Lynch & Co., Inc. [[MER]] ? Forget about Lehman Brothers Holdings Inc. [[LEH]] and Washington Mutual, Inc. [[WM]] ; they’re already dead.

Do you think those stupid charts of yours, pointing to a “breakout” in Wells Fargo & Company [[WFC]] , will stand the test of financial Armageddon?

Just in case you didn’t know, the market is not smart. It’s as dumb as a bag of shoes. I live for these type of tapes, when people with zero market knowledge step into dung, trying to play Gordon Gekko.

Listen to me: the market is NOT going up.

Instead of looking for “possible reversals,” you should be structuring your bank accounts to fall within FDIC protection. It’s not a joke or just a theory anymore. The banks have soiled themselves and they will not be getting up.

Hey, what do I know? I’m just a guy with a 155 IQ, who drives around in a diamond encrusted time machines (spinning rims), while drinking monster energy soda from his chalice.

The dollar is getting pounded today, which helps commodities. As you know, I am heavily long [[DIG]] , [[IEO]] and Western Refining, Inc. [[WNR]] .

I like the refiners best, as a play on Hurricane Ike.

Also, Freeport-McMoRan Copper & Gold Inc. [[FCX]] is lifting off. It may be time to revisit Southern Copper Corporation (USA) [[PCU]] too.

Finally, Bill Miller is just a goat herder. That man is unqualified to manage money, regardless of his track record. If anyone from Legg Mason, Inc. [[LM]] is reading, feel free to contact “The Fly.” He will be more than happy to take over Bill Miller’s fund and help save the company!

Until then, I will be shorting LM with great vigor, and tenacity.

NOTE: The solar burritos are, officially, dead: Chipotle Mexican Grill, Inc. [[CMG]]