Let’s be honest here, this action is not trustworthy, and I will not be caught leaning too long.

I added back on half of the UCO shares I covered yesterday, for $24.71, and also increased my MGM short by 50% for $8.30.

I’m up enough in MGM that I can afford to average down; a move to $9 would barely break me even, and I’m more than confident that that thing is headed lower. I’ll short more if we do get an epic bounce, but for now I just want to make sure that tomorrow doesn’t bring calamity down upon my head.

I still want a bounce but understand I’m liable not to get one. If we rush higher, I’ll short back up to the extra shares of UCO I shaved off yesterday, and move MGM to a full 10% of net assets. I may also trim across the board, just to get an extra 5-8% of cash.

If we bounce it will be a monstrous rally, but I really do not like the looks of things today. There’s a difference between a healthy drawdown before the next leg higher, and a market that’s undergoing a slow motion collapse.

This looks like the later; I hope it reveals itself to be the former.

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I will not be allocating capital or moving positions around to prepare for any bounce that may materialize over the next few days. As I said in my last post, I already did that yesterday, and will not see myself realize a 10% loss trying to chase this market 3% at a time.

However, it is worth noting that all the stars are aligning. We have permeating strength in the euro (even after the latest round of uncertainty concerning a Greek bailout), treasuries are crashing here, crude oil is ramping up and tech of all things is leading.

Remember to be patient and not overexert yourself with regards to picking one direction or another. The main market direction continues to be down. You should be partial to that outcome, but definitely expect a massive run higher here.

Myself, I will be looking to further short MGM and UCO. There’s no need to even think about buying my other stocks in any size, if we are to get a bounce here.

Happy hunting, followers of the 9th floor. I’ll meet you at the top.

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Well unfortunately, my portfolio has not held up as well this last week as it did in the beginning of August. While I still maintain a decent size of hedging, because I cut my UCO short in half, I am definitively losing value. It doesn’t help either that the REITs in my holdings, AEC and CLP, are not resilient at all.

This is most likely due to their small size. They are easily battered around; I had presumed this would aid them as people covet their awesome performance and refrained from selling them. This was a miscalculation on my part.

But really, what can you do in an environment such as this? Everything is being liquidated; even my AWK water utility company is grinding lower. What’s really important in days like today and yesterday is to (a) look for what will happen after the selling subsides and (b) survive long enough to see it.

In this case, I think we all know that AEC and CLP are winners, as are AWK. CCJ and BG too, frankly…but because everything is being sold to raise cash, you need to be in a position to average down and wait out the storm.

As I sit here in my office, munching on biscotti with my morning coffee, I accept that I am in no position to embrace this selloff with buy orders. I have already committed to the bounce-that-wasn’t and although my net cash position remains intact, it is not the 20% free and clear that it was. Also, by covering as much UCO as I did, I missed out on a good chunk of change which could have given me more breathing room.

So unless we proceed down another 10% from these levels, across the board, I cannot risk picking up the missed value. It would overextend me while leaving me in a virtually no-cash situation, which is not where anyone wants to be in this market.

Yesterday, I nibbled on CCJ and covered UCO. Thus, that is the closest thing to playing the developing bounce I will get, for the foreseeable future.

Now to the title of this post, take a look at MGM! That company is dying. I wish I had more than the scant 4% of my initial entry short. Someone asked me why I had bothered to short MGM at all where I did, when I could have just waited for the bounce.

I think the real developments adequately explain my reasoning. There was no bounce…

Going forward, I expect I will up my UCO short when I get a good entry, raise my MGM short to a full sized position, and perhaps nibble some more on AEC and CLP if they should bleed out another 10% from these levels. I may also nibble on my other core positions if they drop far enough.

I will also add another 2% onto my TLT short if it moves up past $127 a share.

My portfolio remains: AEC, CLP, AWK, BG, CCJ, short UCO, short MGM (small – 4%), short TLT (small – 2%), 15-20% cash, and physical silver.

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Well this hurts. I didn’t think we’d be getting this sort of system wide collapse so far after the open, especially given how deeply we sold off last week. That’ll teach me.

If I have to guess, then I’d say that currency traders and businesses with overseas exposure getting flattened by today’s euro/dollar action are causing this sell off. Other potential candidates include, but are not limited to:

Jackass Hedge Funds with Bad Commodity Bets
Banks Who Have No Depositors
Asian Garbage

What’s really important here is that my portfolio is offering me no respite. AEC and CLP are being crucified; BG and CCJ are running lower in typical style; even AWK is selling off a little. UCO is down but I covered half of it, so my guard was lowered to the blow. And gains in MGM are muted by the fact that it isn’t a full sized position yet; it’s barely more than 4% of assets and looking increasingly like I’m not going to get a great opportunity to build up the position.

Only my cash is really kicking ass today. And silver, but I’m not counting on that to do well for long.

So I’m down a pretty nasty 3% so far today. I’m not worried, but it still doesn’t look good on paper.

We need the euro to gain if there’s any hope for a reversal of fortunes. Still waiting for a relief rally, but perhaps in vain…

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While the markets continue to recover from this morning, there is one thing that bodes as ominous. The euro is getting absolutely killed against the dollar. That may explain why the market continues only to break even and seems to lack the gusto, thus far, to actually break out.

That would imply the market is presently working as hard as it can to just hold the tempo. However, if the euro continues to collapse, then I am going to look like an idiot (I covered about half of my UCO short this morning) as the indexes, commodities, and pretty much everything else plummet.

Just recollect that I still hold a sizable short of UCO, before getting too smug with me. I still like the chances for a rally, but those chances are currency-status-permitting.

As for other business; I will be shorting MGM on all available bounces. People are now reporting that Macau was being buoyed by loose lending standards to rich Chinese. I’ve heard those rumors before, and the implications are serious: if the loans dry up, so does the Macau market.

That would deal instant death to MGM. They cannot afford to lose any of their revenue.

MGM to $0.00.

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If you thought Greece would make it through this without defaulting, your hopes should have been utterly shattered this morning. Greece’s deficit problem just magnified after committing to austerity.

Think about that. Greece is already taking a hatchet to its budget, yet the crisis is getting worse for them. What does that say to you?

What it says to me is that the investors who bought Greek bonds are never getting their money back. It was a bad investment, a malinvestment, and that’s the way it ends.

There are two key possibilities at work here, and both lead down the same road.

It’s possible that Greece was just vastly understating its liabilities, and now they’re coming clean. But if they’ve been lying this whole time, what do you think the reaction of their saviors is going to be? I would expect outrage is going to meet the Greek government if they suddenly say they’ve been lying to everyone about how much they really owe.

And the second possible cause of their new deficit is just as bad. What if the potential gains from austerity are seriously inelastic? If Greece is making their economy worse by committing to austerity, then they may not actually be able to get things balanced by getting within their revenues.

I mean, think of it like this. Greece has a natural mean level of taxes, within context of growth. People invested in Greece thinking their tax structure could support X in payments. Now, however, it looks like Greece’s real mean tax level is X-Y, because most of the original X was artificially being created by Greece’s borrowings.

So suddenly, the ability of Greece to even continue meeting interest is in question. If Greece is forced to admit it’s significantly smaller than what they’ve been pretending, then it doesn’t matter how much of their budget they trim.

The real problem here isn’t that Greece won’t cut their budget enough. The problem isn’t that foreign nations aren’t bailing them out enough. Just like the real problem with the housing bubble wasn’t CDS agreements. Or that the real problems with the Tech bubble were businesses that couldn’t turn revenue.

No, altogether, the real problem here is that people invested where they shouldn’t have. Each of the underlying nuances, whether they be volatile products or low tax receipts, or even a surge of bankruptcies, is by itself not critical. We have those things every day.

The problem is that some people are still desperate to admit they didn’t throw their money into a hole. Pretty soon, they’re going to have to face the music.

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