You probably think I’m in a terrible mood today, being short oil and energy as I am. And you’d be right.
I despise being wrong…ever. It infuriates me, secretly lurking beneath my otherwise uniform composure.
Watching UCO and ERX rise up 4% as they are is aggravating and makes me want to throw furniture out of my windowsill onto people innocently passing nine floors below me. In that respect, I am very ill-suited to hedging, the act essentially being wrong somewhere on purpose, so you’re always a little right. However, in my mind, I also can overcome these emotions because I understand it’s the right positioning.
The reason being that, despite the poorly thought through conclusion reached by money managers the world over right now, a default by the U.S. government would not weaken the U.S. dollar.
Full faith and credit of the United States be damned! No one has had any faith or credit in this government for thirty years, yet the dollar continues to dominate trade. There is no suitable substitute at this point. How many of you, may I ask, have some form of money to barter with, like gold or silver or foreign notes? How many of you have a readily available substitute?
The dollar is only a metric. No one expects value from it. It is used to measure and place hold, not preserve. No one sits around thinking, hmm, I’ll hold onto these dollars today so I can use them to buy stuff when I retire. They think, hmm, I’ll buy some equity or bonds today, so God willing I don’t starve when I retire.
But therein lays opportunity. If the events unwinding in Congress lead to long term stability or default, in both cases the dollar will rally because the ability of officials to continue to damage the dollar by devaluing it will be much harder.
The metric would be secured.
Only the Fed, at that point, would be capable of destroying the USD. And I do not believe Bernanke would be complicit with such a thing. They would need to replace him before they could destroy the currency further.
And in both cases, stability or default, the price of oil could very well shit itself. Only if things continue as they have without reform does oil go higher. Combine the deficit issue with the damage high costs for energy does to business and consumerism and I’ll hold these short to 20% losses, if need be.
Meanwhile, I have no need to be as upset as I am. Thanks to MGM (+6.69%), AEC (+2.25%), CLP (+1.81%), BG (+1.53%), and silver, I’m up 1.5% today, despite my shitty hedges and cash.
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For what its worth, I am not selling UCO until it hits $48
Good day.
I increase my short at $47.
I increased my short in ERX for $79.84. Just diluting the cost average here, there’s a big spread from where I slapped on the coverage at $68.
i think the ben is a lot smarter than people believe.its pretty easy for a lot of folks to armchair quarter back his moves. i wouldnt want his job. even if i could. what disturbs me most though,is why did’nt he let a tbtf bank go under,no matter how big they are. or like gs,turning themselves into a bank,so they wouldnt go under,so they can get bailed out,by us. i think the market would survive,as well as our country, if gs bit the dust.
Just wanted to say I really enjoy your macro commentary. It’s refreshing when you spend most of your day watching people try to perform surgical strikes, getting in and out for small profits that may be nothing more than market noise. I have a great deal of respect for people that develop a valid longer term view point and have the balls to put money on it. I certainly don’t have the cojones to stand in front of all the people assuming a debt ceiling raise will be the green light that signals a return to business as usual, so we can get back to more fun things, like QE3. But, I only ever put my macro hat on for fun, not for profit. I have full faith that you will be right at some point in the future, if only for my staunch opinion that leveraged products are only decent shorting vehicles.
I’m glad you like it.
I agree, Ben is not the one trick pony people are making him out to be. He knows not to push the easing here.
I hated the man in 09, but that was when he was trying to steal my pocket book. I have more faith in him now that things are level and I made out.
thats why i don’t see a “qe3”. and i seem to think that the market just might be digesting the notion that we really dont need one. it will be a long time till japans’ out put is back to where it was,thus “almost” making the buck look good, along with the piigs and that situation,seems like the buck may win that one to. china, same to,they are getting over heated. the only one left now is us. and if we cant start churning out meaning full work and jobs, then we will be using all those printed bucks that ben produced.