I’m busy logging off everything and filing the last few pieces of work, before turning down the lights in my 9th floor office, and setting foot out the door.

This weekend, some friends and I are going deep into Canada, for some downhill skiing and proclivities. In another hour, I will head to a meeting with a client, and from there you can be guaranteed I’m not coming back to work.

Enjoy your long weekend, but take warning before it comes: you cannot expect the events unfolding today to not have ramifications. I understand S&P has a poor track record, and that also most of you are chronic followers. But price inevitably comes from developments in the real world.

The market may rally through bad news on any given day. But if will not rally through bad news on every given day. Eventually, this shit will catch up with people.

Much of the end of 2011 was based on the perceived “cheapness” of stocks in terms of their recent earnings. But are those earnings going to hold up to the test of time?

If you disagree with me when I say we are going much lower, well then that is your prerogative. But you could at least have a cash cushion set aside for when you are wrong.

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For the moment my funds are tied up in chasing the same ends as they have been since June/July. I’m holding my same longs (AEC, CLP, BG, CCJ, and physical silver), shorting oil, and the only real change has been my cash position which went from an ample 15-20%, to being compressed at near zero, thanks to rolling and exorbitant losses from an oil market gone wild.

But if this isn’t your first time stopping in, you already know that.

I’ll stay married to this for a little longer, mostly because there are a lot of bad signs out. Consider today’s yield results for German 6 month bonds – does it not remind you of the Swiss auction last summer? I mean, the fat middle of my losses have been realized; hanging out short oil is not likely to cause me the severe pain again like it did through October. If it starts to, I’ll jump ship.

But if I’m right, 2011 never happened. It’s that easy of a choice, right now.

However, I do need to lay out a game plan, provided I’m on the receiving end of a 20mm cannon and don’t realize it.

So here goes. These are the strategies that are on looming in the future, but I don’t feel like undergoing yet:

a) Short long dated U.S. treasuries (I started this small and then let off)
b) Increase my physical silver holdings (preferably by feeding off hedge fund carcasses; it’s worth noting that silver’s spot price is lower than where I trimmed my holdings in December 2010)
c) Begin to roll over some profits from my multifamily REITs into hated retail REITs (provided I get a good exit on the multifamily stuff)
d) Gobble up some natural gas exposure (this winter is not global warming; it’s a rare occurrence of wind patterns. Future winters will be cold as hell, once more…)

I am also intrigued by the prospects for buying up newly issued currencies of distressed nations, provided the exchange rate is tantalizing and I feel most of the devaluations are behind them. For instance, I hate Greece, but they are in a key posture for shipping, and if they re-issue the drachma, I guarantee it will be universally hated. However, at some price, Greek labor becomes competitive, the Greek economy will come back to life, and then the drachma will find a floor and appreciate.

We’re obviously nowhere near there, but if the EU starts to come apart at the seams, there will be many losses and much hatred for the worst of class, creating ample buying opportunities.

So for now, I just need to make sure I have access to enough funding, in such a development, to take advantage of these opportunities as they come along.

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What is the real problem here? Is it that people have lost faith and confidence? Is it that Europe owes trillions more than they have? Is it that the ECB isn’t a lender of last resort?

No.

Those are all simply focal points; locations where we start to see the real problem’s impact.

The real problem is far more rudimentary than these exact issues. The system is very big, but the sum of all claims on it are much, much bigger.

We can’t possibly produce enough goods or services to make up for what everyone feels they’re owed; we can’t possibly grow from here to overcompensate from those claims, off of our own resources or those borrowed, to give a fair return to everybody for their time and effort. The system needs free “donations” to get by.

Those donations can come from suckers lending money to these governments, only to see inflation devour all their returns, and more. They can come willfully or un-willfully. They can come as defaults or as devaluations or even delays…but we’ve hit that point where the impact is so big, someone somewhere is going to feel it firsthand.

The imagery I would invoke is a balloon overfilled with air. You begin to see weak points develop in the rubber; thin spots where the elasticity of the material finally was not sufficient to create more volume for the matter within.

You can say that the problem is with that point in the material; to some extent that is true. But if you take your hands and force the air pocket back into the balloon, you don’t fix the balloon.

You get another weak point that pops up somewhere else.

At this point, the volume in the balloon exceeds the ability of the material to contain it by at least 3:2. Maybe it’s even 2:1 more obligations than suitable goods and services. We need to let some air out of this thing, and it’s either going to be intentionally done, or forces that are greater than us will play out of their own nature.

Either way, be careful you’re not the sucker.

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Ah, another day, another 30 points of persistent elevation on my systolic and diastolic readings. Thank you, stage 1 hypertension.

Waiting is bad enough even if you have the patience of a rock. But when you have your reputation and wealth sitting on a development that is partially tied to the ability of some jackoff whom you’ve never directly met, who has little discernible talent or skill, and whom you have no respect for, to recognize what you’ve noticed all along…

Well, then waiting becomes torture. Particularly when some of the people you disdain and are waiting on decide to show up and throw mud on your shoes.

It’s like watching a toddler trying to stuff a square block into a round hole with a diameter smaller than the square’s square. It’s sort of cute at first…the little tyke just keeps shoving and pushing, occasionally picking up the block to put it in their mouth and chew on it for a while.

But when the block is being held by some of these thirty year olds in publicly interacting firms trying to push the crap they are as news to the public, well… it’s not that endearing.

So I sit and I wait in the 9th floor, staring down on these reprobates, hoping beyond hope that they hurry up and find the God-damned-square-shaped-hole in the game so that they can stuff their silly block into it, show the world how smart they think they are, and create the price movement I need to unwind these fucking positions and carry on with my life.

On a positive note, it is looking increasingly like our beloved analysts-turned-2-year-olds have discovered renting, and are beginning to trumpet its powers. They are only going on 12 months behind the world here, when the space started to heat up, which is a cause for rejoice. That is almost timely, really, considering what we have to work with.

I have now noticed a steady stream of pro-renting news pieces making headlines. Perhaps, within 2012, the multifamily REITs will begin to really spread their wings.

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I get that in the small circles of your subconscious, saying that the Iranian embargo will naturally lead to higher prices is about as instinctive as when you bite your nails when you’re nervous.

Trying to be suave and enlightened, it’s similarly impulsive that you explain your tic with elaborate and embellished words, to try to cover your weakness of mind.

“Why, the Iranian oil embargo, in my estimation, is going to cause a constraint, vis-à-vis lower supply to Europe,” you say with great self-worth and self-confidence. Never one to underplay your own “knowledge” you add unreserved little snippets for those who would think otherwise. “Certainly, this is as basic as economics comes, you drab simpleton. It’s quite alright if you don’t understand it. And so Brent must go to $125.”

Save your spur of the moment comments, and save me from listening to you. I’ve had more than enough of this rot for three months now. I already was so rewarded as to be one of the few to bet against oil on its huge move lower in August; and for that I watched in amazement as within two weeks, “everyone” was betting against oil. I saw with sickening disdain those of you who were pumping oil all but seamlessly, shamelessly up until then, pivot to a new catchall: that oil was somehow a contrarian trade rather than a failing thesis.

And now you’re doing it again. Oil managed to almost recover its highs from last year. That is all that has happened. Yet listening to the perpetual “logic” coming out of such (as it were coincidentally, broke) establishments like SocGen, I want to start throwing empty drum barrels into their headquarter’s main entrance so that these self-described-analysts can dodge them as if they were my literal criticisms of their piss-poor work quality.

How does this embargo constrict supply? The oils still out there, unless you think Iran is going to stop pumping it. Last I checked, complicated supply and demand relationships alone don’t spur price. What is to stop a place like China from capitalizing on Iran’s precarious predicament by buying their oil at a steep discount from market price? China isn’t exactly in a huge rut of oil right now; they’ve reduced their consumption from Iran itself steeply this past year. And if they were to do this, then they would also likely require less oil from the rest of the world.

Bam! I’ve just dreamed up a situation where oil trades down on the Iranian oil embargo, as then the no-longer needed Chinese oil, displaced by exclusive and cheaper Iranian oil, would start finding its way to the rest of the world, creating a localized glut elsewhere. China and Europe are separated from bidding against each other and individually have more sway over their local, controlled markets.

Is it going to happen? Not necessarily. But we’re not oh-most-definitely-without-question going to get this supply constraint everyone has been hammering on about today either. It could easily swing either way, or nowhere, because this doesn’t change supply at all.

This act does nothing to fundamentally alter the amount of oil being produced in the world. Unless you believe the Iranians are going to lay down and die, why would you also assume they won’t manage to find buyers for their oil? If oil is in such high demand right now (unless its $100+ price is greatly undeserved…), what makes you think the Iranians couldn’t possibly find someone to pick it up at some price?

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Continuing with last year’s theme of being defecated on by blue collar retirees willing to buy at any price, oil is continuing its march higher, spurred on by Iran being the asshole of civilization and some better than expected manufacturing data from the ISM.

What is being tactfully omitted from this discussion is the manufacturing data that came out of Europe, sometimes referred to by its more proper name of THE BIGGEST COMBINED ECONOMY IN THE WORLD. That data, actually, was better than expected also. And by better than expected I mean that the Eurozone manufacturing only contracted by more than 3%, across all countries.

Austerity is doing its damage in Europe, and there is little to no hope that those countries avoid a recession. Yet the U.S. gets to pay (what is it now?) $102 for a barrel of oil?

Some countries in Europe have seen anywhere for 10-20% of their manufacturing go offline. The U.S. manufacturing has hummed along, barely, and the GREAT CHINA GROWTH STORY is getting nailed every day. Yet, still, you insist on buying crude oil.

I admit I’m about at the end of my rope with this trade. For the day, although SCO and ERY are each drowning by more than 7%, I am actually barely down at all. I have very large 3-4% rallies in AEC, CLP, CCJ, BG and a massive rally in silver that are overcompensating.

But if you continue to buy oil, eventually I will acquiesce and close out the oil and energy shorts. But when that happens, I’m also going to cash and shutting down the account.

Because nothing good can happen from a continent going into recession. No good can come from 50% devaluations of one of the world’s major currencies either.

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