As an American, it is alluring to fathom that all local happening determine the fashioning of the world. To some extent, that is a true statement.

Our country has arguably had the most front and center position in global policy, military dominance and peace keeping, technological advancements in all fields, and has been most efficacious in grooming a culture of leadership and advancement.

For these achievements, we deserve respect and approbation. The latest antics of the “worst of class” aside, I have great pride in the people of this nation.

However, part of being mature is knowing when it isn’t about you.

This sell off has nothing to do with America. Our economy is steadily advancing and we are healing from our wounds; both those found physically and those located in the holes of our pride. This progress is encouraging, sure.

But our neighbors are not doing so well; and you need to recognize that we count on them far more than you give them credit for. You must understand that trade with foreign entities makes up around 30% of all sales and purchases in the U.S. GDP.

How much of that is Europe, which is forcing itself into austerity, destroying their demand base? How much of that is China, which is experiencing a mini-blow up on its hands?

It is fanciful and calming to imagine ourselves inside a bubble, impervious to the craziness of the outside world. But we are not. America is at the top, but the hill is shallow; its zenith does not scrape the clouds, only the tops of the trees.

In the well chosen words of Lloyd Blankfein, I do think we’re a little better. But I only think it’s a little better.

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Today’s announcement that the WTI crude would be pumped out of Cushing, OK was the missing piece to a puzzle that has confounded me since early October.

Since all WTI oil is priced at Cushing, the price of WTI is much less affected by the global cause for oil and much more by the localized supply glut that has been a condition of the region for years.

The failure to secure the pipeline out of Cushing was not to limit ConocoPhillips, who has now assured us that they intend to reverse the flow from Cushing and send it further south.

Here, I presume, they will be able to fetch a price much closer to that of Brent crude oil.

Sadly, had I known of this development I would have fled my oil short in quite a hurry. However, not knowing what was afoot I made decisions that are in hindsight obviously deleterious to my wellbeing.

This development is creating a pricing phenomenon; whereas before a localized glut of oil in Cushing was creating an artificially low price, now an anticipated localized drought is driving WTI much higher.

So unfortunately, the price of $102 a barrel for WTI is probably more similar, in conjunction with demand, to what $90 a barrel was. I’d assume some fashion of this approach is being used to get the $110 price target that JPM just set.

This also means it will be much harder for me to make back lost ground.

However, as demand still sucks, the higher price is sure to hit industry, and we have this massive problem ongoing in Europe, I will remain where I am. My losses will not get too much worse than they are now.

I look for crude to break down on further contraction in demand, now that this one off event has been priced in.

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There is one segment of this economy that is absolutely killing it. And interestingly enough, it is completely off almost everybody’s radar.

I’m talking about multifamily apartment units.

I first made the case for them back in February, when I completely restructured my portfolio away from the commodity plays that had made up my investments until then.

Since then, things have not gone sour in the least.

Rent rates have skyrocketed; I read that in Seattle and San Jose, for instance, they’re up 13% so far. On average, rents have risen at an annualized 4.8% so far this year. Localized “hot spots” make up most of the gains, which like Seattle or San Jose, can be double digits. These are mostly the major urban areas, like New York, or Austin. Rents have risen in the U.S. for seven straight quarters now.

Similarly, occupancy rates have been pushed up to stratospheric points, sometimes with as little as 3-4% of units standing vacant.

What we are starting to see is the beginning of a major recovery in the multifamily rental space. Talk of big development projects is being heard, and you could see a huge surge in construction of these complexes in as little as two quarters, when ground is broken in the spring of next year.

There are different dimensions to this; you could play the construction side who have billions in projects in the pipelines.

Management companies, which some properties owners employee to actually oversee their day to day operations, are also seeing steady and increasing demand.

Then there’re the actual community owners, who are the ones to see the direct benefit of higher rents/lower unoccupied units. But here you have to choose what angle you want to come at it from. Do you have a mixture of styles of apartments and aim for a nice “average rental business?” Or do you specialize?

You could go and try to corner the lower quality, as these are the cheapest cost and are probably experiencing the most intense benefit from the surge in occupancy and rates. Class C or Class B apartments are your target purchase. They might be older or just poorer quality, but because of that they also go for a premium, and new construction will be cheap and immediately gratifying.

Or you can go with the Class A apartments. These are very new, aimed at attracting high incomes, and typically have a big premium baked into their purchase. Or are just expensive to construct.

I’m taking the last route, with minimal exposure to the construction side also. AEC and CLP both aim at holding the cream of the crop either through acquisitions or construction. Acquisition has been the favorite lately, since construction is time consuming and properties are selling for record low prices.

The key to Class A apartments is to treat it like an investment in a new “renting class” of wealthy Americans. With the lower Class B and Class C investments, a sudden resurge in housing prices could easily coax new, middle class renters, back out of the market and into home ownership.

With Class A, I’m hoping that the more expensive costs associated with the units will be offset by occupants of Class A units deciding to make living in these apartment units a permanent lifestyle choice. I think that the allure of homeownership for the country’s elite has been at least temporarily obstructed; it’s much easier to live carefree in a luxury apartment where all costs are fixed and you’re surrounded by the finest of amenities and service personel, than to own a home and have to unclog your own shower drain of your wife’s hair. If it pays off, the next 20 or even 30 years could be one of the most lucrative periods for Class A units in general.

But whatever one chooses, the space is starting to heat up. Especially if we see a rush of development intended for sale (as opposed to construction being done by companies for their own operations) you could see some appreciation for apartment units to advance.

As of right now, the multifamily owners and operators have mostly been booking losses. But these losses are almost entirely related to the continuously diminishing prices associated with their properties. If the value of rental properties goes higher, these businesses will come to the attention of every fund manager in corporate America.

I’ve been building my own stake well in advance of that.

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Nice move, oil market. I’d not call it checkmate. But I salute your conviction.

I’ve already held this long; and thanks to my untimely added purchases of my jackass UCO position, my losses year to date stand around 25%. I had myself a miniature blow up, more than twice as vicious as last year.

But as I sit here gazing out my window, taking evenly spaced, deep breaths, the mature and non-panicked conclusion that I’m reaching is that it doesn’t make sense to cover here.

In terms of crude oil, I’m right back where I started save for a lower net value.

I still have the gains booked from my ERX short, and the shares I added to the rest of my positions. I also have lots of booked losses from ducking in and out of UCO, which can be used to escape some positions.

I will be patient; there’s no good reason for these huge morning gaps, except that traders are chasing momentum trying to save their year, and aren’t thinking about the fundamentals at all. So crude oil goes higher; maybe to $110, maybe more.

Production numbers out of Europe have been consistently bad, production in the U.S. has been okay but not offsetting, and emerging markets are chained to Europe. Meanwhile, $100 crude oil comes with its own consequences to economic output and forces the Fed to think long and hard before acting. That’ll leave the dollar intact as the euro collapses, adding to the other downward pressure as global supply continues to ramp up and demand softens.

If I was forced to guess when the oil market will finally reverse, I could only give a range; sometime in the next 3 months or bust. This reminds me exactly of July when I first started betting against crude oil, save I already have this position. It would be two whole months before I saw my expected outcome materialize then. It could be just as long now.

In the meantime, I will control risk through the rest of my portfolio. I will also look to see if it isn’t advantageous to sell something to take advantage of these losses.

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Woo Hoo! How about them bond auctions in Europe, huh? I hear Spain was only $300 million short of what they needed to raise.

On a positive note, it appears that manufacturing in the NY district rebounded marginally after plunging since May. However, if you look closely, future orders are way down and inventories are falling; not good signs if you’re trying to keep a sanguine stance ahead.

But even if American manufacturing did modestly expand, it does not fix what is coming. Europe is going into a full recession. Their shortfalls are not going to be covered by borrowing; two options remain to them.

They can enforce austerity (demand destruction, recession) or they can print (euro falls).

One of those two trades I will win on. I’m long EUO, ERY and short UCO.

Even now, as the European economy contracts, the excess gasoline and crude oil not being traded over there is desperately looking for a home.

And hey, look over here! America is expanding. I bet we could use the oil.

As the European crisis deepens, it will necessarily lower the prices we pay at the pump and for raw materials. It’s just a matter of how long before the tankers start arriving.

Worse, Europe is the biggest trade partner of developing economies, like China. How can you count on emerging market growth to keep demand elevated, when the men and women who have been buying the most goods out of these places are about to experience a recession?

It’s nonsensical.

In an odd sort of way, I’m comfortable with oil at $98, as there is little that could possible push it back towards the $110 mark. My losses are uncomfortable, but there’s nothing but the potential for catalysts to send it screaming back lower.

Watch for crude to move back below $90, and the euro to move below 1.3, soon.

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It is now 2:38pm in Michigan, and the market is yet to bounce. Could today be the day that the market finally refuses to erase an entire day’s worth of losses?

I’m not holding my breath. People want to rally to Christmas, so short of impending catastrophe, I guess we’ll rally to Christmas. Although I will add that breaking necks for the third time this year, going into the holidays, is exactly the sort of dick move that this year would pull before closing out.

I still hold my oil short, energy short exposure through ERY, euro short exposure through EUO, and will add SCO when the levy finally breaks.

I’m also not changing up my longs, still holding AEC, CLP, AWK, BG, CCJ, and physical silver.

Today, CLP sold off some office buildings and acquired even more Class A multifamily apartment units. I’m ecstatic.

Also, check out AWK. It recently broke out to new highs. Trading above $31, and still paying out 3% annum, the stock remains an attractive utility play. It’s been very resilient to the news flow.

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