~Jim “Jimmy” Cramer

It was obviously a great trade to sell industrials and oils. I did not participate in that. I just felt that the other sectors were very vulnerable and that oil could go down to the mid-$80s if the margin buying — not demand destruction but margin buying — got crushed.

Investors who think it is demand destruction do not understand that unless the world stands still, you can’t have oil go down from $96 to $75 in a couple of days, especially when Chinese inflation is heating up, as we learned last night, perhaps the worst new bit of data out there.

Doesn’t matter. Some moron will espouse it Tuesday. We will have to listen.

So be it; my response will be swift and brutal.

Remind me, again, who is the world’s largest economy? Oh right, the United States. And we’re slowing down a bit.

And what’s bigger? China, or all of Europe? And yeah, it looks like Europe is slowing down a bit too. Hell, the U.K, not to be out down, is straight up burning its economy. Mothballing is apparently not in style in London nowadays. They will torch their fucking idle factories and businesses, and even some of the non-idle ones.

And finally, isn’t China’s most recent inflation statistics coming in around 6.5%, well inside the 10% clusterfuck they were experiencing earlier this year, and a mere and rather insignificant .1% higher than expectations? I wouldn’t call that, “heating up.” I’d call that, “slowing down.”

So it looks increasingly like:

a) The world is standing still. Very small growth, which was one of the key premises to higher oil prices to begin with.
b) Less oil consumption from slowing industry. That means plenty of unused oil running through the system.
c) Little room for decreased production of oil suppliers. You cannot tell me that Saudi Arabia can afford to cut back on production. They are giving each of their citizens cash deposits to calm down and stop rioting. Iran and Venezuela have absurd spending plans, which can only be made up for with volume, should the price of oil continue to slide. Russia has never been keen on slowing their own production; they just insight others to do so.

It does not take massive oil gluts to crush prices. It only takes a decent unused margin and few prospects for increased consumption going forward. That’s where we are.

Without cheap Fed money spurring the market on another coke run, oil goes lower. And Jim Cramer will eat his words.

Now pray with me for peace in Libya.

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ERX was obviously the trade to be in. I was short it from the high $60’s mixed into the low $80’s. I held it for literally months, despite having massive pressure being applied in the way of potential losses.

So I grab a quick (and huge) 26% gain, and I decide “surely, the Europeans will do something about this this weekend, and I’ll watch as all my effort goes bye bye.”

Yet here we are, with the damn thing down another 25%.

I mean, I’m still having a grand time. UCO is down 15% itself and is keeping my long positions pretty well in check. I’m still outperforming the market.

But I can’t help but think that if I had been more patient and less concerned about a Euro championed short squeeze, I could very well be looking at 0% losses for this walk through Hell.

Just regrets that need to be voiced…

And also despite being cash’s biggest cheerleader for months, I find myself too short on it. That’s mostly because I repurchased ERX and have been dip buying. Up until now, I had just bundles of the stuff; now I’ve got barely a position’s worth.

So today I sold out of all MGM shares; that had about 4% remaining of my 5% allocation (nasty, I know, thank God I cut out the rest when I did).

Really though, where’s a good Fed pump when you need one? Maybe they want to see commodities get crushed a little more before they act?

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I added to AEC for $16, heavily by about 4% of my total portfolio. That stock, like CLP, is going to absolutely rocket once the world gets its head back on its shoulders.

My cash position and short in UCO together remain above net 20% of my core holdings. If I cover UCO though, I would be inside a 10% cash position. I have been grabbing greedily, snatching up names I feel are being liquidated in spite of value, because moronic fund managers don’t know how to show restraint with borrowed money.

You could say I regret covering ERX last Friday, seeing it’s down another 10% today. I really figured an EU deal was imminent. It seems I overestimated the willingness of Euro jackasses to save their own skin.

Honestly, those people beckon death upon themselves regularly as if by culture or habit.

Yet, ERX’s lows from last Friday’s capitulation have not been matched (Pre-Release Edit: They have been matched). The indices are showing an aptness to spring. And despite the graveness of what has happened in the last week, I think the move is a little overdone.

There are two great paths we as a country might ultimately take. We either get nailed by the losses and everyone grinds to zero, or the Fed opens the flood gates and we still lose out, only much slower and without old ladies starving in the street.

Only a few weeks ago, I thought more stimulus was out of the question. But, more than that, I knew that Bernanke would want to observe what happened in the economy.

The recent observations trump my preference of no intervention. Ben Bernanke & Co. will continue the path of currency destruction, and soon. Perhaps before their August 27 meeting, if this continues.

They will most likely announce cooperation with bailing out Europe, by committing bonds or reserves to the ECB. This will enable the EU to assist Italy and Spain without the Euro going to par with the dollar and crushing our own economy.

Asia will have to assist the intervention as well. But it will happen; it must, if the establishment is to survive.

Don’t bet on them just giving up and throwing in the towel. The losses to the system cannot be erased. But they can be selectively distributed. The people who rely on money circulating will ensure that it does, and that means devaluation.

Until then, keep your hedges on and some cash reserves or a buying game plan.

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So it looks like now there is no emergency bailout of Italy or Spain. So be it, it’s not like they could have come up with the money in one lump sum anyway.

However, I hope that this does not interfere with the ECB purchasing Italian and Spanish debt on the open markets. It is that sort of action which is critical to the survival of the EU.

Of course, if I were Germany I’d be contemplating leaving the EU; what have they received from this deal?

Lots of other countries received access to Germany’s AAA credit rating while Germany got to provide those countries with cheap goods and has simultaneously been “blessed” with their liabilities and paper promises.

If I were German, I’d be contemplating WWIII, from the anger that must be building.

This isn’t an ideal venue to take out their frustrations though. If Italian and Spanish debt freeze up, then there could be some large problems. Everyone is going to suffer for this.

I may regret gambling on a European debt deal. It seems Europe is as heterogeneous as ever.

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As I mentioned in my last post, Twitter, and The PPT, I covered my ERX short for a 26% gain. As a 3X product, it is far too volatile, should we bounce here.

In its stead, I have increased my UCO short.

I also nibbled, ever so slightly, on BG. Analyst Bomber, inside The PPT (Robert), seems to feel that they will have a bad quarter because of trading. He is probably right.

But I’m a long term investor in the name, and so $62 is tempting. I was going to pass, until I got a whiff of rebound (you know the smell, I’m sure; like old family cooking).

It’s tough to say, but if I had to guess, then my artificial net position is probably 85% long. However, ERX and UCO can be so volatile, in all reality it could be much more or less than that.

More importantly, after everything, I have not dipped into margin at all, except of course to finance the shorting. I will have cash remaining should we continue lower, and there is nothing, shy of my being a dolt and buying in heavily, that can change that.

I fully expect a plan out of Europe this weekend. If French clowns like Trichet possess survival instincts at all, then they will get their asses in gear, starting right now.

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Ironically, I’ve lost more this morning than I lost all of yesterday. My positions are starting to blow out, likely because some of them were mostly spared the carnage yesterday.

This morning, on the bounce, I took the opportunity to pad an extra 50% to my UCO short. Unfortunately, ERX was off limits, and soon thereafter I discovered my connection to my broker slowed to a crawl as less fortunate bastards took to their accounts trying to sort out the mess from yesterday.

So I am counting my blessings, and holding the helm steady. That’s about all you can do in a time like this.

Here my warning: leverage is to be avoided at all cost. If you are caught levered long, even a little, the potential for trade imbalance causing margin calls and sowing the seeds of destruction in your life savings are present.

Believe you me; I am the black knight of margin.

The time will come when I borrow against everything I have, and max out a GEMoney card to boot. It may come soon too, if things get too bleak and I start to see the Fed run train on the currency.

But today is not that day.

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