On a day like today, you can’t really do anything but check your ammo, clean your guns, and get a good night’s sleep. If you are a conviction trader, then you have to stick with that conviction, or risk going crazy. This kind of “spring is busting out all over” rally has happened before, and I knew it would happen again. Somehow, I’m a little more peaceful about it this time.
Make no mistake, there are still dents in my wall, as my beloved [[SKF]] visits its recent lows, and all that shiny money I’d made in [[FXP]] and [[EEV]] melts away. Still worse are my many bank shorts, which are knee-capping me like an IRA Provisional in a Belfast alleyway.
As well, my Chesapeake Energy Corporation [[CHK]] fib gamble (remember $45 being the 61.8% retrace?) treads water. Even my alleged “hedges” weren’t much help today, with bio-babies Auxilium Pharmaceuticals, Inc. [[AUXL]] , Valeant Pharmaceuticals International [[VRX]] and Amgen, Inc. [[AMGN]] doing “meh” at best.
Why I held off grabbing some Humana Inc. [[HUM]] I don’t know why. I also like Rage’s Almost Family, Inc. [[AFAM]] idea as well, as it follows the “Collect the Old Fugger/Soylent Green” revenue model like Humana.
In the “Firefly’s Ass Bright Spot” Department, thanks goodness for my The Mosaic Company [[MOS]] short, which I thought was a disaster as it soared past $130 the other day, only to see it tumble to below $104 today (out at $106).
But overall, the trend is still down, and the only option I see is continue to focus on what’s falling off, here. My thesis continues to be that this is a commodity pullback rally, resulting from a combination of weak economy and “nothing left to sell.” There may be some dollar fuckery in there as well, but I don’t believe it’s going to last with the way we are exchanging “good money for bad” at the Fed window, and our trading partners being forced to raise rates due to incipient inflation they cannot afford to ignore. No, we’ll probably see this commodity cycle turn as soon as Ben has enough excuse in his pocket to lower rates once again — in an emergency bank saving gesture.
I don’t see things getting better for retail, banks and capital manufacturing here. What we may see is opportunistic acquisitions, as cash rich companies pick off competitors rather than invest in new plant and capital. “No-drill” Nancy may come back in September with another “Congressional bag o’ sweetmeats” in hand in the form of yet more helicopter checks, but I think we’ll be farting into the hurricane at that point.
Unlike in the “old days” (read: mid-nineties) all that excess printing press cash doesn’t go to fight Chinese/Indian deflation anymore, but rather pushes prices up worldwide as inflation is declared the winner in the end. The result — “Here’s your shitty $600 check, that’ll be $428.49 for that loaf of Wonder bread, please.”
Even the most hapless fuckwit knows there’s only so many 28% cash advances he can take off his credit cards before his shiny new appliances start disappearing. That means the retail trains is losing it’s wheels, even as it thinks it’s winning. I will have my vengeance on Abercrombie & Fitch Co. Abercrombie & Fitch Co. [[ANF]] once again.
Your thoughts are appreciated, either on the above, or the “Mournful Song of the Night,” one of my faves. Off to football practice.
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I totally agree that the economy is headed for the shitter. Unfortunately we could all take a lot of kicks to the nuts trying to stay positioned for it to happen.
Jake your a natural. Great post *****
I look forward to hearing what you think and if we are really are in a paradigm shift. Aren’t there some cheap as fuck stocks right now.
The market thinks and works more like Tony Soprano then some sort of logical make sense textbook. This is a big 2 weeks coming up. Fly has talked about it for the last year. This will be a World Lovefest thru the Oly’s…
Good job on the MOS short. It had to break sometime.
I sold 1/3 of my SKF yesterday, and the rest this morning. I got plenty of FCX (for a trade) and any profits I will probably reinvest into GLD later this month. I can reenter SKF anyday I want, there’s no upside to watching it flounder during this rally.
It’s August, it’s hot, and there’s very few stocks I like right now. DGX is one. I have to admit eying USO and ACI on this pullback, but I already have a nice chunk allocated to metals and mining and adding USO or ACI would be overdoing it the whole materials and commodities thing.
I agree the economy is crappy but… but… the market wants to rally right now, so it’s going to whether it makes sense or not. The piper will probably not be paid this month, maybe in October or after the election.
To sum up, IMHO look for a few longs that don’t totally turn your stomach and ride the rally until it’s done.
i do remember this >>> Chesapeake Energy Corporation (CHK: 44.92 -0.73%) fib gamble (remember $45 being the 61.8% retrace?) treads water.and i was pumped for some sort of gain even a little would help me since i got in @ 49.99 and the bleeding hasnt stopped <<<<this wasnt because of something you said ….was just hoping i could get in near the bottom ..but the more i watch and listen i find out I AM A DUMBASS… i know nothing … BUT NICE CALL ON YOUR PART
so could you tell me if i own a commodity or something else?? i have ” CHK ”
do you think with all thats going on in the market this stock in going down more ???
this was the first stock i bought and was getting ready to buy another 1 or 2 stocks but couldnt get to my wallet because of the boot up my ass
Nice post JakeGint.
Nothing to add, just giving you an easy trade and something for the bears to hold on to. This really should have popped $34 today, it even had decent volume. As always, pick your own side.
http://img378.imageshack.us/img378/5374/bacaug08copytu8.jpg
Jake,
consider the following. global r/e prices have been coming down for the most part. the world is in the process of deleveraging making for smaller balance sheets.
wage pressures here are almost non-existant and they are only picking up a tad in eu. japan almost zero inflation rate. productivity has held up a rare occurrance during economic slowdowns. i believe that the worldwide inflation we’re seeing has been induced by a commodities bubble. if that bubble has busted, poof, so is inflation.
add to that the possibility that the dollar will start going up or at least has stopped going down. also a positive for inflation. remember our trading partners, that hold close to 2 trillion of our bonds will play ball with us. that worlwide economic growth will slow, thats a given. but slower growth combined with lower inflation can actually increase profit margins and produce multiple expansion. as an aside greenspan made a statement that i actually agree with, and that is higher stock prices facilitate financial institutions raising of capital. for the conspiracy theorist out there, the way to prolong the game with some hope of resolution is to bust the commodity bubble and to have a robust stock market. sorry for having no paragraphs. more to follow.
Nice chart Cubs. I love it!
Jake:
watching fast money tonight and it came up that FRE is levered something in the area of 220 to 1, obviously to get healthy FRE must raise cash, restrict new loans, take losses, sell parts of its investment portfolio, and let some of its loans portfolio run out – bottom line – how is this going to help housing prices stabilize – in other words, SKF is still a good trade – I started nibbling on it today
Thanks for the comments, all!
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@ KC
I look forward to hearing what you think and if we are really are in a paradigm shift. Aren’t there some cheap as fuck stocks right now.
Last I looked the P/E of the S&P was still in the high teens, and we also have earnings predictions being chopped almost daily. If we expected rising earnings, like in a normal bull, then I think we could say stuff is cheap. When earnings are coming down, we don’t even know what cheap is, no?
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@ Boca.
I actually do have quite a few longs right now, in Bios, commodities (gold, oil, gas) and even one wacky “financial” (WU). I think what you are telling me is I need to do is cut my short exposure here a bit. I may do that tomorrow if we get a bit of a pullback.
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@ Arch —
I’m not really sure what your time frame is here, Arch, but if you bought CHK for the medium to long term, I think you will be fine. It’s literally a blue chipper in the natural gas arena.
Yes, you bought “a commodity” in essence, you have hooked your wagon to natural gas in the middle of hurricane season and bought a great company that is almost 62% off it’s highs, and whose CEO can’t buy enough of his own stock. I’d never tell you to “rest easy” in this environment, but I don’t think you need to panic just yet, either.
(to be cont.)
Cubs,
Thanks for the chart. I was afraid I might have to shield the kids eyes, as I brought it up on the home comp. Luckily, it wasn’t live video. (ggg)
You know where my thinking is on BAC. Countrywide? What is that, lemonade?
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Chivas, my permabull friend. How, exactly, does the worldwide commodity bubble get popped when we are increasing M3 by 18% a year, ovah heah?
It may get temporarily jawboned, but all that silky green paper has to go somewhere, and the men who ride camels may not seem very bright, but they are “bright enough.”
Besides, what happens when Ben rides to the bank rescue with a special emergency cut now that “inflation is just a phantom?”
I think I know how this ends. Buy a wheelbarrow with your next cash transfer, er, I mean “stimulus check.”
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Bob “Vernon Ghoulston” Buckeye,
You are huge, my friend. Go Jets, too!
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Jake, my dear friend. i want you to know that i have been bearish at times and the time will come when i will be again, just not now.
the rate of change in m2 and mzm has been collapsing and i mean collapsing for the last 3 months along with bank credit, that not inflationary. in addition since we now have a global economy it is more important to look at global money supply growth, and the rate of change is anemic. also, todays world is more complex and interconnected than when milton proposed his theory of inflation as monetary phenomimim. to many dollars chasing to few goods. thats not the world we live in today.
the process of writing down debt and deleveraging is always deflationary, no exceptions.
your inflation scenario will come to pass, just not now. it will happen when things appear to be fine, when the financial system is back on its feet and when the r/e market is recuperating. all this is academic my friend. gold and the dollar will tell the story. to me it appears that gold has broken, that it will test 800 and break it.
tell me whats the your line in the sand for gold.
chivas, my fondest desire is to be able to buy gold between $750 to $800. Jake will probably use fancy fib lines to calculate his answer, I know by comparison I’m using crayons on a kindergartner’s tablet to figure my buy range.
This push and pull between deflationary and inflationary forces has been on my mind for a while. I agree with you in the end inflation will win, but have no intuitive grasp of the overall current trend. Translation: thinking about the economy can make me a little crazy right now.
Chivas, it’s one or the other. We’re either going down the shitter because of bank collapse, or we’re inflating as a result of a stupid attempt to save them.
What’s your poison?
As for gold, I’ll have to look at my charts tomorrow, as I don’t have anything up at the moment, but for some reason $835 sticks in my head as the 38% retrace. I really don’t think we break that, but I could be wrong.
It’s a race to the next rate cut, I guess.
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Jake, get some sleep. cya tomorrow.
Arch — heads up on the CHK at the 61.8% retrace!
Money!
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Chivas — checked my fin levels on gold.
Two year chart, 38% retrace is $83.50
Ten year chart (monthly), 38% retrae is $77.90. This is also the two year 50% retrace, so a “double strong” line, from my observation.
If we were lucky enough to get it there, it would be “back up the truck” time, I think.
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Jake,
You need to post shit on the Giants and stop all this financial fuckery/prognostication.