Despite much fear of a Detroit bankruptcy, last night the city seemed pretty quiet. I suppose there’s not much more in the way of hardship that can be imposed on this place; it’s pretty much at rock bottom.

This failure is a stinging rebook to a philosophy that still very much haunts our country, not unlike the Nain Rouge haunts Detroit and brings suffering on its residents.

My portfolio is rather quiet today, with exception being made for BAS, which is now up more than 2% on the day. Everything else I have is lower or flat.

I would urge caution, as I have for the better part of three months. A correction is taking longer to form than I suspected, but that does not mean a correction will not form. We are going into a very tumultuous year, from the stand point of prospective growth and complex changes.

It’s better to be guarded and maybe have sub-optimal returns (by have a large cash position to the long side), than arrogant with losses.

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Let’s remark, for a minute, that today was a solid green day for us. I personally made 1.5% invested halfheartedly. These sorts of things are just not allowed by the laws of the universe.

I will get a drubbing. It’s ordained; once a year I need to get my clock cleaned. It was supposed to come from the SCO short, but I cut it loose after 15% downside, which took barely ~1.5% off my account. I won’t be let off the hook that easy.

The only other way to crush me now is lower equity prices.

Now, we’re pushing back to level with the old highs, pretending like nothing matters. Meanwhile, European sovereigns are being downgraded left and right, Greece is a laughing stock, Italy, Spain and Portugal can’t get into a growing stride, former star-child Ireland is being swept under the rug, the Middle East is literally on fire, and China is going into a hard stall.

US housing is good and we seem to be keeping head above water – that buys you a little leeway. Does it counter Planet Earth reverting to tribalism?

Take a look at the euro; just awful.

Here are some fun bullets from the European Trade Commission:

Total US investment in the EU is three times higher than in all of Asia.

EU investment in the US is around eight times the amount of EU investment in India and China together.

EU and US investments are the real driver of the transatlantic relationship, contributing to growth and jobs on both sides of the Atlantic. It is estimated that a third of the trade across the Atlantic actually consists of intra-company transfers.

The transatlantic relationship also defines the shape of the global economy as a whole. Either the EU or the US is the largest trade and investment partner for almost all other countries in the global economy.

The EU and the US economies account together for about half the entire world GDP and for nearly a third of world trade flows.

I know the good Forex Kong disagrees with me, having glanced over his work. However, we have different angles, as he is clearly a trader whereas I am looking for big distortions and moves that quake an ANOVA test.

The long term moves in the euro are a malediction on trade and investment between Europe and foreign nations. If the currency pushes into the mid 1.2 range, when coupled with persistent announcements coming from the Eurozone that remind us their leadership has no handle on the problem, and fear of a push to record lows will ripple across our markets.

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Welcome, and I hope I find you well.

I’m coming into the afternoon with strong rallying across my portfolio. AEC and CLP are both up over 100 points. CCJ, RGR, and BAS are all pushing 200. The euro cracked this morning, and EUO is now up 150. Silver is enjoying a relief rally, but it’s down so much inside of this year, it seems stupid to talk about.

The only place I’m losing money today are the TSLA puts. And since they’re puts at 2-3% of the account, I really don’t care.

I’m actually looking to add to the Tesla put position, this time targeting the 2015 expiries. A $70 strike price should do nice – maybe as low as $50.

I believe TSLA is the new NFLX; sans the recovery.

All in all, I’m still up over a percent so far, with a 30% cash position to boot. But if I were to be honest, I would say I still expect the summer to end dreadfully.

Have a great day.

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Q1 GDP estimates were complete hocus, spurred by inappropriate inferences from seasonal adjustments and over-optimism that housing prices can ignite a positive feedback loop, at this point in time.

If it seems like there’s no way you could have known that…you’re wrong.

I told you explicitly that this would happen in January, while also reminding you to be stupid long in the teeth with equities. The entirety of this positioning was predicated on selling out into the spring strength and preparing for reality to set it during the summer; that same time reality always sets in.

How many of you listened?

I’m guessing not many, because in the spring, all of a sudden site traffic plummeted and I literally couldn’t give my posts away.

Incidentally, I also told you you’d be back.

Crawling…

We’re enjoying a relief rally at the moment from oversold conditions. Behind that, there’s at least one more leg lower waiting. We will retrace most of the last four months; first look comes at 1,540 SP for me.

At that point, I’ll make the judgement if we go lower still, or set up for a bottom.

In the meantime, please stop talking about the accelerating growth lines.

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Have a quick look at the graph on this site. I haven’t audited any of the numbers, but if the author has done his homework, it fortells fairly clearly what oil longs have to expect.

For the moment, all of my short exposure is being pesteringly resilient; most probably because I am counting on those positions to even out my account. So of course, oil is holding up here, the euro is trying to push higher, and TSLA recovered a $3 move.

There’s no reason for any of those things other than that they hurt Cain Hammond Thaler. The market is trying to harm me, because that is the only consolation anyone in these positions will ultimately have…if they can shake me out.

But I have the patience of sheet rock. You will not win.

Current positions by size (greatest to least)

Cash – 27%
CCJ – 18%
CLP – 8%
AEC – 8%
SCO – 8%
EUO – 8%
Silver – 8%
BAS – 7%
RGR – 7%
January 2014 TSLA 35 Puts – 1-2%

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China pushed tonight to throw 50 billion yuan into their markets. 50 billion yuan is $8 billion. Does SHIBOR look like an $8 billion problem to you?

Looks like a little bit bigger of an issue than that.

Reports that China had credit issues have been disseminating for years. The background here is that China stemmed credit to get costs under control, but in doing so many of their corporations were going under, unable to obtain financing. That’s the funny thing about statists – when credit dries up, only the well connected and morally popular can get loans for anything. The black market for credit was pushing rates that would make a loan shark blush.

To tap into those double digit interest rates, the rumor was that China’s finance markets were running money out the back door and into the black markets.

If this is the tipping point for China, my calls just as recently as yesterday for 1,540 SP will be fond memories, because we’ll pass through them like a hot blade through butter.

Do yourself a favor and throw out everything you were working on yesterday. It’s worthless now. Start over from a point without preconceived notions. You’ll save yourself money in the long haul.

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