It’s frightening how easy “investing” has become over the last five months. The yesterdays of 2012 are now far behind us, and mistakes and losses are an alien concept again. Much like early 2012 brought relief from the horrors of 2011. And 2011 in turn brought salvation from 2010. Etcetera.

The only thing more frightening than how easy playing this tape is would then be how many of you think you’re any good at this. IBankCoin traffic stats tell that story all too clearly. You’re an ace, batting 80%+ trades and you make Bill Miller look like a homeless person. You don’t need anyone anymore.

This dual function of mine makes this very frustrating. Nothing is more annoying than penning a detailed piece of a company’s management or laying out the market climate to the applause of perfect plumbing and no one reading the work. In that sense, I guess my call late last year for the most awesome rally ever was something of a nail in my own coffin (*cough* remind me how many of you bulls there were then…?). Irony can be a cruel mistress.

Whatever. You’ll come crawling back in no time.

First sign of trouble, maybe the second, and suddenly you’ll remember that you’re not so much an elite trader as a guy dabbling in a margin account (probably funded with advances from several credit cards) whose been so lucky to be on the right side of the trading over the last few months.

How many of you are locking in gains and thinking about cash? When was the last time you even bothered looking at what it is you actually own? What are the pathways to success or failure for your book?

By this time in September, site traffic will be back. Most of you are high on life right now, having chosen the most favorable conditions to try your hand at sailing. Nice clear skies, calm and steady wind and you’re on a path that never requires tacking.

But I’m watching those conditions turn. The wind is getting a little more erratic. The rain is coming out. It’s getting dark. We’re pressing into shore. And you’re not a sailor, buddy.

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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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Alright, at around noon today, I looked around and said, “You know what? I’m out”. It’s not that I’m calling a top (I’m not). In fact, I think we go higher. But what’s coming for me?

My positions have really just slothed it up this last week or two. They’ve been sucking wind and I’m not going to suffer it.

And what comes after March? The summer?

I’m not waiting around for the summer, to watch gasoline prices, European stupidity, a budget crisis, 2014 HCR implementation jitters, the press crisis of choice (it’s sort of an option play on their part), US impaired foreign exchange rates and God-knows what else I missed rob my hard won gains.

I absolutely trounced this winter; I was all over this rally back in November when everyone was boarding up their windows. And I’ve got the winnings to show it.

The largest sale came from CCJ – I love that position and the uranium market, but I’m not dumb. It was hanging out at >25% of assets…and a little closer to 30%, if you follow me…

So I cleaned it up and paired it off to 20%, even. Then I went to work on the rest of my holdings.

I sold some shares of CCJ, AEC, CLP, RGR, and BAS.

I did not sell any BXG, EUO, AGQ or physical silver

Cash stands at 30%. Average position size is 6% of assets – overweight CCJ, silver (physical and products) and BAS.

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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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Dollar up, oil up, treasury yields up, stocks slightly off, PM’s flat – sure, why try and make it consistent. It’s a non-linear world we live in folks. Get used to it.

Your market correlation models are getting blown to pieces this morning, as the movements reset. Really, yields can’t correlate with markets forever; sooner or later the transient correlations lead risk exposure by the halter to unsustainable levels. Blow ups follow.

I see no reason why markets can’t selloff even though yields are pushing up. With treasuries so inflated, they will be prone to massive directional moves that might belie the rules of thumb of “teeter-totter” purchasing patterns. I mistrust those who say otherwise.

Interference in markets from the huge players has primed the classical views of markets for disconnection. Especially at the turning ranges, things are prone to get very weird.

Personally, I’m not ready to completely abandon the market rally just yet. We haven’t confirmed the move in any direction. But I have raised a cash stake, which I will guard jealously. And when the rally is finished, I all but guarantee anyone trying to use a purely correlary approach to defining the turn will be left for dead.

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My musings on the general doom overhanging us in the form of countries bearing men who enjoy pants that fit far too tightly and women with hairy armpits should not make you forget the moment. The US is better than it’s ever been – except it isn’t – but you won’t “know” that for a good few months yet. In the meantime, there’s no reason we can’t sweep Europe back under the rug and pretend.

We were running so hot…there was no way that pace could keep up. There needed to be a rest. Today’s move brings stocks back down a notch, giving the sidelined money the option to wade into the water…where eurosharks wait with anticipation to bite off limbs and ruin days.

My positions, whatever their complications today, all remain above their 50 day moving averages. As we touch down on momentum, let’s keep an open mind here. After all, this is a bull market; right up until it isn’t any more.

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