Ahh, I feel much better now. I apologize to you for my coarse behavior over the past 9 months. You see, I was rather agitated. Such is not usually my vocation, but, well…everything last year went so wrong.

I should not have to point out that, in my first year counted amongst the ranks of iBC Contributors, I had high hopes of grand slams. And I got them, early on. But in the stock market, your grand slam is never safe. It can always be called out.

Watching my claim to victory get wrenched from me like that last year was almost more than I could bear. The shame!

But now, all is forgiven.

I sold TVIX this morning up 20% on the net position. That added about .5% to my annual performance this year; not bad for such a small stake. But the product is rotten. Stay away from it.

I wish I might have held onto SCO another two days, sure, but given the size of my net energy shorts, something had to go. And I even got out of the oil half of the trade with small profits – so 2011 was not a complete waste, I suppose.

(No, it really was a complete waste…)

So all that remains is to hold ERY. And here I am torn – ERY is quite a large position, so I may have to scale it back today. I don’t want to go into the weekend overly exposed, because I believe that “something must be done.”

But I also don’t want to hit Monday and have a meltdown materialize with no ponies in the race.

My cash position stands around 20-25%.

Now, let there be no more hostility between us, friends. Enjoy your weekend.

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I don’t believe it was even five minutes after suggesting that the number of euro shorts could be tinder for a dollar dropping, risk-on rally that the euro collapsed under its own weight, like a sprinter with a broken ankle.

But maybe that’s a warning unto itself. The only reason to be betting on this market so far is the old adage of the madness of crowds. Contrarianism runs strong in markets, and why shouldn’t it? The unwanted bet is the cheap bet. And the cheap bet frequently carries the best odds.

But there is no law that the majority cannot be in the right.

Sometimes, it doesn’t matter that everyone knows something to be true; not when that truth is something terrible enough.

Who says these massive euro short positions have to be scaled back before the euro can drop more? We don’t know who’s short the euro. For all we know, these shorts are hedges by European companies, and are now a standard part of doing business. They may not be going anywhere.

As far as I’m concerned, the euro going to par against the dollar is a forgone conclusion. It is a matter of when, not if. I would not be surprised if the euro shorts get set on fire between then and now, leading to “risk on”. But I’m not going to bet on it either.

Instead, after watching this afternoon’s action, I’m going to wait patiently for my targets to get hit, so that I can scale out of ERY, SCO, and TVIX – for profits.

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As melodramatic panic hits the waves, Facebook and all social media stocks topple into total despair. The indices crumble. Morose manic depression forces men to wallow in their boots, while widows and orphans cry from an unforeseen location. The entire world is ending, and everybody hates you.

It was not supposed to be this way.

$FB was the single greatest effort of investment banking in the last 5 years. It was to be a shining beacon of financial splendor, complete with all the trimmings. FB IPO DAY WAS SUPPOSED TO BE SOMETHING BEAUTIFUL.

Instead, we have this disgusting “Woodstock” before us; as dirty vagrants dance on their graves, and mourners go about the streets.

Where art thou! Cocaine lines and mustard seeds? WHY DID YOU FORSAKE US!?

“I just wanted hookers and blow…,” cries the vicenarian trader. He was but hired to his new job only two weeks ago. So sad. So sad. Now, he will be fired, and forced to eat his dog. And Christmas will be cancelled.

California has always sucked dick. But now they will have to own up to it.

Now, with all of Europe and Asia being swallowed by the deepest circles of Hell, there is no more hope.

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Perhaps the most rampant folly I have heard throughout the start of 2012 is that somehow we are now immune from selloffs relating to Europe, because we are now somehow total experts on ALL possible outcomes from the EU.

Never mind that this weekend, most pundits were taken completely off guard as extremist movements sprung up like dandelions in opposition to austerity and, yes, the euro.

Never mind the surprise when Norway of all places almost had their government collapse, without warning.

But what I find so ironic about this line of thought is that it is exactly identical to what I heard last year around mid-June, when the same people were arguing that we could not experience a selloff because the market was now candidly aware of all risks from the previous selloff of 2010 – which was in response to Greek debt woes.

And oh how we didn’t get one…

What disturbs me is twofold; firstly, that decadent traders are presupposing that the collective efforts of markets are even capable of comprehending the ever evolving developments from these sensitive issues (judging from the now cliché shock every time something new and unexpected happens, I’m going to guess not), and second, that the discounting always seems to give the most improbable outcome benefit of the doubt (financiers who are universally hated will manage to simultaneously devalue their currencies, restructure their debt without aid from private investment, and avoid price shocks, while not sparking revolutions from the people they are toying with) when any error in the least – error such as we’ve been seeing mispriced – should result in calamity.

When we look past what “the market” – which at this stage in the game seems to be mostly traders staring at their own transactions in a mirror – thinks it knows, and instead focus on all the things that we’ve gotten wrong…well, my own confidence in our ability to appropriately price in “risk” is more or less nonexistent.

However, while you may disagree with me, the distinction is that if everything works out perfectly, markets are at best adequately priced where they are. Whereas, should you discover that I am correct and there is nothing more omniscient about a half million junkies placing bets on opaque outcomes than any one of these men and women on their own, the result will be a proverbial bloodbath since there seems to be no amount of caution left.

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If we keep cratering into weakness, the much anticipated 2012 Facebook IPO, and Zuckerberg’s status as a billionaire, will be in jeopardy. This is the last thing I think any of the banks wanted, as a soft market makes for a horrible public offering.

How many groups were counting on the FB IPO to set their revenues for 2012? Well, I’d guess we’re about to find out.

Zuckerberg has already said he won’t be attending a roadshow today. More to follow soon.

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The problem with markets – all markets – right now is an issue of benchmarking.

Thanks to Central Bank shindiggery™ all basic risk measures have been and will continue to be thrown off. Case in point; US treasuries.

Now, on an annualized “blah blah” return compared to stock “dewdiggory”, well stocks are looking pretty cheap right now, I will tell you what!

And those commodities; why gold’s “shimsham” ratio is set to send that metal running at least four and fish fathoms past their 2001 “cerflunket”.

…

I understand, you think I’m crazy. And I am, sincerely. But please know the fact that such metrics are absolutely meaningless, because the things that define them are being distorted.

Now, sure, stocks are real cheap compared to bonds, particularly that golden standard the US Treasury. But don’t confuse that with thinking stocks are cheap. I expect having your hand lopped off beats having wolverines devouring your entire arm, but fuck me if you would choose either of those willfully.

That’s the market right now; you can pick to have your eyes eaten out by rabid badgers, or your intestines perforated by javelins. How is that a choice?

Globally, we continue to see demand getting crushed, from everything from energy to raw goods, with inventory and basic replacement stepping in now and again to force demand. Sales by and large have continued to fall, and people are getting all hyped up on “better than expected” earnings.

Great. Awesome. Except that the contraction hasn’t finished yet. Demand is still falling, so your forward guidance is still dropping. Dropping less than expected, whatever that means, is still dropping. Corporate balance sheets are largely offsetting this by deep cuts in employment, and you can’t do that forever.

And meanwhile, you’re adding in to equity near all-time highs. Why?

Well because the other option is to add into bonds of sovereign entities run by deranged idiots that are levered 100% to their annual gross domestic product. And that means either subjecting yourself to near imminent defaults of less than 2 years away, or risking slightly less imminent defaults of 2-5 years away.

Oh, or you can load up on commodities – like oil; which has experienced a 20+ million inventory build in less than a month, largely from plummeting demand…the same demand that is affecting corporate forward guidance.

So, your investment options seem to consist of buying shrinking businesses, unneeded commodities, or investing in over levered, incompetently run governments, all for record high risk premiums naturally.

Oh, or you could keep in cash. Which will all but definitely be devalued from here on as the aforementioned problems continue to manifest themselves.

Now, some of us are choosing to chase returns in very specialized cases. We are destined to see bipolar mood swings from cash, commodities, equities, bonds,…each will be temporarily crowned as the “golden safety play” OVER AND OVER AGAIN. And if you’re patient, there will continue to be the means to make boat loads of soon-to-be-worthless cotton slips over the next two to three years.

But honestly, all of these investment options kind of suck. The real opportunity will reside with private money and start up companies, because all publicly available investment options continue to see such rough competition and overbidding.

So if you’re unsure of yourself, or don’t have the skill/patience/risk tolerance to try and play the volatility while knowingly betting your fingers, let me offer you a better choice. Just spend your fucking money. Diversify what you need across all the above allocations. And otherwise, enjoy yourself. Because we’re all about to take a taste of peas, here.

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