Some of you may say this carnage is contained in the energy sector. It is not. The selling is across all fronts of commodities, currencies, and being sustained by a rally in bonds. It’s time to stop dicking around and call it like it is.

The market is pricing in another recession.

The past week has been the most painful I have ever experienced. The idea that just a week ago, I was flat for the year is preposterous to me. But it is true. In one week, the market has gone completely insane. Or perhaps it sees everything clearly and I have the blinders on.

Let’s create a hypothetical recession and talk about it. What would it look like? I think it’s safe to say that it would be much less severe than 2009. Every recession cannot be the worst recession ever, that would defy the statistics. I would also say that the central banks would step in much faster and more forcefully. We are watching the total dismantling of business right now. If you aren’t winning, you are losing…badly.

If we catch a recession, I am guessing it would last no more than 8 months and set us back just a few percentage points in growth. A mild trough, setting up for a quick recovery. This is the best guess I can offer, looking at the historical distribution of other recessions, as no data has yet presented itself that the US is in a recession.

As for cash, I have decided not to raise any. But…and this is a big “but”…I do not trade for a living. I have a job. The money I manage on this site is my own money and I can afford to watch it go through 50% swings. My demise is spared simply by not having any margin and picking positions that don’t fold.

My greatest fear is that BAS gets dragged into bankruptcy. That would be tragic. Understand that I am betting against this, knowing full well it could happen. I do not want to marginalize the risks here; this is GKK all over again (a company I once rode from $32 to $3). If you are mindlessly following me, you are in severe danger.

I’m probably right 60/40. That means I’m still wrong 40.

CAPEX budgets have started to reflect realities, for oil and gas development. That makes sense. If 20% reduction is to be extrapolated, no question we are about to watch many many names fold. The question is, are any of mine amongst them?

If the CAPEX cuts are handled skillfully, then producers will rally around a few favorite services firms, passing tough love judgment on the others, ushering about their ends. This is a normal occurrence, which we see in many industries that rely on suppliers/services firms.

If the CAPEX cuts are handled daftly, the entire E&G sector gets plunged into a black hole, and they don’t recover for a decade.

Let the game of chicken commence.

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For me, the most pressing of matters is the fate that awaits BAS. This may seems odd, but even after cutting its position sizing from almost 25% of my portfolio down to 10% in August, this singular company has had almost comic effect on my positions. The 5% or so in purchases I made throughout its decline can hardly be called the tipping point, as the source of my fate has been without a doubt the move BAS made from $29 to $6.

It is almost idiotic to speak of. Am I blind to something the rest of the market clearly spots? I am human, after all. Barely. But I am human.

So I decided to go take a walk down memory lane, to the dark days of 2010. It was a horrible time, following the worst recession the US had witnessed in almost 100 years. Oil prices had fallen from $140 to (for a few short months) the $30’s.

I believed that looking at these two companies, the BAS of 2010 and the BAS of today, I might learn something. Can BAS survive this oil price rout? Am I even now venturing down the path of my own demise?

I will let you decide.

Here is BAS’ balance sheet in June of 2010 (when oil was trading comparably to where it is today).

And this is BAS’ balance sheet as of their most recent filing.

Go then, Slavs. Pass your judgment, if you dare. Argue that these are somehow different companies.

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Nah, I’m just screwing with you. It was unchanged.

FORT WORTH, Texas, Nov. 11, 2014 /PRNewswire/ — Basic Energy Services, Inc. (BAS) (“Basic”) today reported selected operating data for the month of October 2014. Basic’s well servicing rig count remained unchanged at 421. Well servicing rig hours for the month were 77,800 producing a rig utilization rate of 73%, compared to 71% in both September 2014 and October 2013.

Fluid service truck utilization was up substantially. There was a tick down in drilling rig days, but those remain well above where they were the last time BAS was trading at $11.

Roe Patterson had this to say:

“October activity was strong across all of our business segments rebounding from the Labor Day and weather impacts during September. Our stimulation horsepower operated at near full utilization in October and we maintained price increases to offset higher operating costs.”

Sounds like doom and gloom there. Black smoke everywhere…

“We saw a significant increase in truck utilization in October, particularly in our Permian Basin and Rocky Mountain operating areas, as we continue to benefit from our longstanding strategy of centering our fluid service assets around our advanced disposal well network. Utilization levels in our well servicing and contract drilling segments were steady and remained in line with our expectations.

“While we are pleased with our customers’ current levels of activity, we are closely monitoring them as well as their expected 2015 spending plans. We have positioned ourselves to quickly make appropriate changes to our operating strategy as may be required.”

So far, there remains no proof that the sector is even slowing down. I’m sure there are some high speculation bets out there which will be destroyed. So stop buying husk.

Rumors of the demise of the energy and gas sector are way ahead of themselves.

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You would think I’d be in a good mood, presently up more than 1% with seven out of eight stocks green. But my mood is sullen and sulky and dark.

BAS has me in a silent furry, washing over the walls of the room. The cat finally could not stand my presence, which seemed to put her on edge; her tail swishing her way to light side steps about me while she dared whether or not to approach. Finally, caution got the better of her and she briskly toed out the door.

I want to hurt the people hurting BAS. I want them to suffer a long, drawn out demise. I want it to be humiliating.

It’s not enough for me to win, anymore. This selloff was so spectacularly stupid, I want those across the table from me to lose. We’re past the grounds for accepting victory. I want to salt the earth of the conquered, burn the heritage landmarks to ashes, then shoot the first born.

I don’t just want a massive victory. Now I also want it to be brutal.

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I deployed 2.5% of my account to buy BAS at $12.61.

I put another 2% of my account into HCLP for $47.18.

I put another 3% of my account into VOC for $9.83.

Small margin balance. I am not just commenting when I say I am betting on oil. What we are experience in the oil market is not at all unusual. What is unusual is the sheer lengths that people have taken to sell oil stocks, with almost no evidence, other than a little correction in oil prices, that they are right.

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Okay, I’ve read the report from BAS and can comfortably say that those who are pressing BAS shares lower are mentally unhinged.

Today – October 24, 2014 – a prospective investor could purchase shares of BAS for about $13.60. BAS just reported earnings of $0.24 a share, up from $0.06 last quarter. At a current book value of just under $7; and even playing coy and considering BAS earnings of $0.15 a quarter from here forward; BAS is priced with a risk threshold of just 11 years.

At the most recent earnings of $0.24, that threshold drops to a theoretical breakeven point of just under 7 years.

BAS is priced perfectly reasonably, and that gets you exposure to a company that grew revenues an additional 10% in the last three months. Year over year, BAS is growing at a more than 20% clip.

BAS hit these numbers without even factoring in additional operation capacity that is being brought online later this year. Consider for example completion and remedial services, where as of September 30, 2014, Basic had roughly 413,000 HHP up from approximately 351,000 HHP at the end of the previous quarter and 292,000 HHP as of September 30, 2013 – that’s a 42% increase in capacity.

But oil prices are going to render that excess capacity worthless, right? Actually I defer to the CEO on this subject:

“We have not seen a reduction of activity by our customers due to the recent decline in oil prices, and none have indicated reductions in their 2015 growth plans. Early indications of these capital spending programs look to be slightly higher than 2014 levels. We will monitor utilization rates closely and should we see any meaningful pullback, we will react quickly as we have historically.”

So to recap; BAS is a company growing at a rate that makes it the envy of the party, which even excluding any additional growth is moderately priced, down 9% today because people are concerned, mind you, that maybe the industry might slow down (of which there is no indication whatsoever that BAS would be hurt disproportionately or even that that is happening).

Let me put this all into perspective for you. You could go out today and buy shares of BAS for the same price that you could get them last year when the company was losing $0.17 per share per quarter. The market is giving BAS no premium whatsoever for going from an unprofitable company, to a profitable one.

Jesus! – (punches a brick wall in his office) I hate it when the market does dumb shit like this!

I have just mentally budgeted an additional 10% of my asset allocation solely for the purchase of BAS shares until such time as I shall be either satisfied, or badly wounded.

Today, my account stands about 95% long. I am willing to take it to 105% on margin exclusively for the acquisition of BAS shares, not counting on any other purchases I might elect to make or future sales.

First buy order comes at $12.

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