The old rules of thumb about the oil markets have been turned on their heads. If it escaped your attention, for the last few years, wisdom that summer carries with it higher prices from more demand have been great…if your goal is to lose money.

Because what has actually been happening is each year, the summer brings with it renewed fears about the sustainability of the recovery, and as the winter optimism from holiday activity slumps, something – maybe speculative buyers in the oil markets, maybe something more complicated than that – slackens and all of a sudden, we get this big rush of inventory that floods our storage centers.

And anyone caught calling plays from their grandfathers old book goes long oil at exactly the worst possible time.

The thing is, for whatever reason, it always seems to get bought towards the end of summer, right when the rule of thumb dictates that oil demand should be falling. Maybe it’s all part of a game. Maybe there’s some reason for it I just don’t understand – I guess having selloffs in the winter months are always more dangerous; what happens if something important, like heating, gets disrupted?

I may not know why this is happening, but I don’t need to be an oil industry expert to know what my eyes are telling me.

SCO is spiking up 5% today, and oil inventories are building quickly. For the moment, everything is just peachy in the markets – actually, in the same day I’m up 5% shorting oil, the rest of my holdings are all largely green.

But it won’t last. We are on the cusp of a nasty selloff that will bring some humanity back to investing and some shame back to the arrogant.

And it will be treated as the end of the world. Or at least until the fall, when buyers likely step back in, claiming “no way that happens ever again…”

Comments »

Would someone care to explain how a guy who’s sitting on 35% cash, short oil and the euro, can possibly be getting torched to the tune of 3% in one day?

I’ll tell you how. Silver. That’s how.

“EEEUUUGHGHH-BBBBLEEEEBLLUUUGH”

That’s the sound I just made; I encourage you to tap into its phonetic discourse and let it reverberate throughout your physical space.

How the hell is physical silver off 10%?? Good God, I mean, I understand why gold could bust a move like that, but silver? How many speculators were in the silver market? Clearly more than I thought.

The basic theme here is: own stuff, get beaten.

My salvation is that silver cannot possibly have 10% implosions for months on end (crosses self). It just has to find a bottom – even if that bottom is at $20, the pain will stop.

A very disappointing Spring is upon us folks, just like I warned you all it would be. That being said, I certainly didn’t expect I’d be a casualty.

Comments »

I have to hand it to the EU countries. We are now years into this crisis, and still they manage to keep their bonds funded. Spanish bonds are easing back down from the 5% mark that had me on my toes. It would appear that the flare up has been contained…for now.

But that’s not the name of this game. They can save themselves as many times as they like. It would be better to ask, “what are the odds they save themselves every time one of these crises kicks up.” Much like a kid juggling eggs in his mom’s kitchen, the prudent bet is that he drops them. The moments leading up to the inevitable wrath bearing down on him are of entertainment value only.

Gasoline prices are imploding. That is merely a factual statement. I can’t decide what to think about it yet. Lower gasoline prices are inherently good for the consumer, it is true. But following the economic reports we’ve been receiving, and right out of Christmas and the optimistic projection parties that come with that time of year, and I’m not entirely sure of the thing being good.

My preference remains withdrawn defensiveness. Lots of cash, hand picked hedges. And only names of quality that I don’t mind being left holding without a bid.

Comments »

I added a position in SCO for $40.19.

This takes my artificial cash position north of 50%. We are at the “edge of disappointment”, where things are neither good nor bad, but merely “meh”.

“Meh” gets you killed.

Europe will flare up again. Cyprus doesn’t matter particularly. The underlying reason we keep hearing about the EU is because the EU is fundamentally fucked on a spindle. The cost of holding the euro together, not just in terms of money, but in terms of man hours, resources, lost opportunities, bitter resentment, livelihood,…is just immense.

It’s never just about the money. When the economics and numbers don’t work, it should usually be a warning sign that you’re screwing something up largely. Money is a metric for measurement; hence why when obnoxious social justiciers whine about people only caring about the money – refusing to just go along with their latest “great idea” – I have a resounding urge to punch them in the throat.

I really don’t understand why European citizens are subjecting themselves to this. It’s not like they’re avoiding the losses…the pain is coming either way, so it’s a choice of accepting that, making changes to improve their underlying format, and moving on, or…not accepting that, getting the beat down anyway and setting themselves up for more failure later.

Anyways…Italian/Spanish/French debt is docile now, but it’s just a matter of time before the next explosion. Europe continues to miss deficit reduction targets by a quarter mile, and they’re all in recessions.

Dangers to the SCO position would include if the ECB and Fed were ever permitted to team up like Batman and Robin; doesn’t seem in the cards at the moment (or ever), but it’s worth stipulating that I really believe Bernanke & Co would view $150 oil as a “successful policy outcome.”

For the meantime, however, I’ve got decreasing industrial production overseas, an oil production bonanza here at home, and a hundred-years demographic movement towards smaller commutes all playing to my hand.

Comments »

Okay, I had to step in to the silver market today, taking a leveraged ETF play with AGQ.

I’ve owned silver, more or less continuously, since 2009 – in the physical form.

But every now and again I also leverage up the play with moves in the financial products. Now is just one such time.

Silver is a component of my 9th floor. I’ve used it in the limestone stucca that adorns my walls. I used it in the mortar to build the very foundation of the room itself. It’s a staple, because it is so undervalued, I can off the back of my hand say “silver is undervalued” at any time of the day, and probably be right.

I got into AGQ for $41.77. This is just for a trade.

The Fed is printing another trillion dollars, and the debt crises of the world are nowhere near the halfway mark yet.

Mull that over, why don’t you…

Comments »

Sticking with the larger theme over the past two weeks, my portfolio is melting higher into the close. AEC, CLP, CCJ, BAS, and RGR are all rushing up, either for profits or, in the case of Ruger, to close the day flat. Which, given Ruger’s last month, is really not a problem at all.

Physical silver has largely recovered from the Fed scare. The euro has also rebounded after Junker tried to talk it down.

My expectation is for higher prices. We are running, and only confirmation that the recovery is not happening will stop us. If you are betting against the indices, or are out of the market, I have bad news for you – that is months away.

You are stuck exactly where I was last year; having the right answers, but getting whipped anyway. It will come through for you in the end. But unlike 2011 and early 2012, this time I will be mocking you, sipping straight whiskey, and the pain will only end after I’ve locked in profits and position myself against the market.

So I am afraid you will be on the receiving end of jokes until at least March…

Expect treasuries to sell off as short sellers start trying to edge into that trade. The rising yield will only add to confirmation bias, bouying the stock markets higher. Both trades will fail in the Spring with bad prints going into summer.

The treasury bears will be killed at least this one last time. The markets will sell off again. I personally will be interested in building a short euro and short oil position sometime in the next two months.

Comments »