Excuse the lapse of writing, particularly during such an eventful day as yesterday. A family member realized some damage to their house from the wind storms that struck Wednesday; missing shingles, broken trees, some little things like that…and I said I’d help them out.

Today, I’m rather tired and, since I forgot to apply sunscreen, baked like a manicotti.

My outlook on equities remains cautionary. I have a large cash position and ample shorts with SCO and EUO that give me, I feel, a 50/50 cash/invested stance. My longs are AEC, CLP, CCJ, BAS, RGR and silver.

AEC was hammered yesterday, one of the top losers in the market. They announced another secondary, which they’re using to get their debt lower. AEC executives I believe are very concerned about the ability of interest rates to hold. They have been for over a year now. And not just for interest rates from treasury yields, but also there have been subtle drops of fear about what would happen if a push to reform Freddie and Fannie upended the new loan origination process. So possibly expect more dilution. But, earnings are set to improve from the move, FFO remains strong, and as long as they keep pushing the business towards expanding operations (California is their big push at the moment), I will be willing to stomach some stock sales.

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There wasn’t much need to, but I took profits in the RGR and BAS shares I most recently purchased on the last “selloff”. The RGR shares were bought on 4/4 for $48.03 and the BAS shares were bought on 4/26 for $13.03.

I unloaded them for $50.78 and $13.98, respectively.

I also added to my SCO hedge for $37.30.

Even if I wasn’t expecting the annual recession scare(s), energy demand is clearly falling, and since most of my book is in CCJ and BAS, that leaves me exposed. As I believe this is the start of the next washout, it just makes sense to bunker myself.

Net equivalent cash position now stands north of 50% again, counting on EUO and SCO hedging.

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I took a small dip into BAS today for $13.03. The earnings report came out and after glancing over the transcript of the call, I’m pleased with the management. They’re vigilant about maintaining cash flow positive operations. They’re controlling costs and margins. More importantly, they took advantage of the bloodbath that soaked through the industry last year, and dropped tens of billions on acquisitions.

Even after the acquisitions, they’re still easily the most cash rich company in the drilling and fluids space that I’ve come across so far. Feel free to chime in with other companies that are similar or better.

The company is steering carefully around their customers, and I think they’re doing a great job. Honestly, I believe the company could sell off again, especially if we get the market correction I’m looking for. But, I sold off some shares at $14, so adding a couple percent here won’t hurt me and locks in that opportunity.

I still have 30%+ in cash and hedging in SCO and EUO. If we get a deeper selloff, I can still take advantage of it. BAS is firmly on my radar.

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I am becoming increasingly cautious as this rally is now sustained on the backs of defunct maritime shippers, the airline industry, and pharmaceuticals. Most of this trash would never be permitted to find its way into my holdings.

As summer sets in, the theme will settle on a single discord: disappointment.

The other day, I had a family gathering about 100 miles away. Along the trip, I counted almost 300 acres of land for sale at “NEW LOWER PRICES”. This is what I saw along my way; I didn’t go out looking.

There is a shadow inventory overhanging this market, and the chord that is holding it up is made of the ability of an aging Baby Boomer generation to tolerate pain and discomfort – two things which that group of whining malcontents has never been particularly prone to enduring.

And Europe continues to circle the drain in a slow bleed. You can stop looking for the inflection point, where suddenly everything starts to become increasingly easier and growth picks up. Thanks to binging on positive carry trades for two decades the system has been made recalcitrant and calcified. The arteries are hardened and strain for blood flow.

Thanks to my maneuvers in the Fall, I’m up 21% since November. Yet, more than half of this is contained in just two positions forcing higher by large margins – CCJ and BAS. It could all vanish in a hurry.

This is why I pushed to raise 30% cash recently, although my exposure to CCJ and BAS remains extreme. I have faith in these two positions; they will continue to benefit and outperform remarkably over the next few years. But the swings will be gut churning and disruptive.

Factoring in EUO, my net artificial cash position is closer to 40%. If we crater, EUO is going to spike (more than it has been). I’m also treating BXG like a cash position, as there is an all cash offer (even though I’m hoping/expecting the deal to fall through). That puts me at ~45% cash.

I’m almost ready for the fireworks to get started.

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Sitting by the wayside while men of action seize the day is not an appropriate response to opportunity.

As such, I depleted my cash position to a meager 5%, adding heavily to BAS, CLP and RGR.

This is a trade on a belief that we are making a quick bottom and have higher yet to go. I’ll take expedient profits or losses on this, as I am serious about maintaining at least 20% cash (before hedges) at most times; from now until Summer, be my judge.

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Alright, so the instant I switched over from “merely rapaciously expectant” to “full blown, mind numbingly jubilant”, the market turned on a dime and started punching participants in the face. That should have been clear before I did it. It always happens like that.

So on behalf of everyone whose kids can’t attend college now, I’d like to say, “I’m sorry.”

In times like this, it can always be difficult to answer that most important of questions. No not, “am I properly managing risk.” I’m talking about the even more important inquiry…”Whose fault is this?”

Now, there are several ways you could play this. Personally, I’ve decided to blame it on people using trailing stops. Dicks…littering their homes with half eaten burgers strewn around in McDonald’s bags all over the floor…all while smoking and ashing right on top of them…just begging to burn their house down…

There, you see how I did that? Make sure you ramble a little and trial off at intervals, to really get the “I’m-slightly-unhinged-talking-almost-to-myself” effect.

At any rate, the markets are getting lit up, and all is despair. If you’ve been living the Pisani lifestyle, I’m afraid you’ll be made to eat your hat by a short seller, who will watch you doing it while flinging small handfuls of sand in your eyes. It hurts, I understand. You have my sympathy.

Thankfully, I had the foresight to sell into the strength as opposed to throwing weight on the downdraft and cutting myself down by 5%+ all in one go.

My anticipation, for the moment, is that we will finish this selloff quickly and then surge higher.

I made a (now obviously) misguided purchase of AGQ a few days ago, but other than that I’ve been very good about holding that cash and keeping my hands off it. EUO, my hedge, is running, as this selloff seems to be driven as much by dollar strength as anything else.

The REITs are holding up decently well; AEC and CLP having nothing but cash and sterling operations.

BAS is not so fortunate.

If you owned BAS and didn’t know this quarter was going to be hard: please dispatch yourself in a grueling fashion. That was the most obvious loss in the history of loss-taking. Still BAS is way up from last year and I will consider adding on dips.

CCJ got hit yesterday as well, and RGR seems to be collapsing predominantly on profit taking. Both are buys; both will see much higher prices.

Finally, silver. Silver is the butt of jokes being told on Twitter; that place where everybody sees everything coming and makes 500% annually. Well, the jokes going to be on all of you. Silver is going to explode higher when you least expect it. I remember the circus at $15 /ounce. How it was going single digits. Then it lit you up.

I remember when it went from $50 to $25, and the same people were guffawing how it was going back to $15. Then it lit you up again.

Now it’s off to below $30 (meanwhile the Fed is dropping money like it’s worthless), and the same folks are howling that it’s all done for.

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