Are You Panicked, AEC Shorts?

AEC has now reversed a 1% down day, trading flat.

Quarterly earnings announcement is just minutes away…

Alright, the moment of truth is at hand. I’ve sat here silently suffering in AEC, as multiple analysts have come out with downgrades based upon what strikes me as no deep or well-researched understanding of the company, and even less reasoning provided short of “people don’t seem to like the stock.”

Well, thank you, analysts, for those life altering insights. I could not POSSIBLY have reached that conclusion without your considerable prowess of surmising. I hope you’ll be well paid when AEC finally gets big enough to force your upgrade.

Tomorrow, AEC reports earnings. I am expecting:
1) no reported earnings per share (the losses are one of the attractions, for me)
2) level/consistent occupancy rates
3) increasing rental premiums/rates
4) massive cash flow INTO the company (I do not care about depreciation in a real estate company after a housing collapse, people)

In the face of those outcomes, I will declare absolute victory, and continue to march unrelenting at any analyst who dares quote standard metrics or moving averages as excuse to downgrade such a business. Should one of my assumptions fall, I will reassess, and perhaps begin offering apologies to those who, in hindsight, I shall have unjustly injured.

However, reading some of the opinions on AEC that have come out this last week and noting their unfamiliarity, I have some suspicions:

a) paid analysts are using standardized computer algorithms / interns to offer prepackaged opinions on small companies, without ever bothering to actually check their published conclusions. I understand, there’s only about 9 minutes in between the front and back nine…
b) all analysts springboard off one another’s findings, so a single analyst offering a mass produced opinion can create a waterfall of lockstep conformity

But hey, tomorrow’s just a night away. Let’s see who’s right…

This may become a sore point, but I’m willing to risk some of my reputation with freelance gambling.

We will not be collapsing this year.

There’s still too much that the system can do to stave off judgment. Despite rampant destruction of the euro, inflation levels are still relatively subdued in the euro block. Remember, really damning inflation is measured in X, not in %.

Also, most of the problems here in the US are still “vote-able”.

Do you think a real crisis can be tallied away? Hahaha. No no – the fiscal cliff is a bumper sticker. If you can legislate away a problem, it isn’t really a problem. It’s only a real crisis when all the politicians holding hearings in the world can’t save you; just ask Greece how that works.

Real problems don’t give a fuck about consensus.

So we’ll hit the summer doldrums with sky high euro crisis pessimism expecting record low economic activity, just in time for the winter pick- me-up and another holiday spectacle of television personalities declaring “all is fixed” in spite of a total lack of evidence to back it up.

This ongoing crisis has served to introduce volatility, not direction. When every bond auction is a choice between introducing low price inflation, or crippling and immediate deflation, yes you get some wide price ranges. Each participant needs to play every day based on their own book.

My advice to you is the same as it has been for well over one year now. Have lots of cash. And only short into the highest of euphoria.

Despite believing that this winter will be a repeat of the last two, I would not call this sell off a buying opportunity. Not yet.

Wait, be patient, and prepare.

I cleared out of the other half of my APC shares today for $71.83. Two basic purchases, the first at $61.60 and the second at $64.06. I sold the first batch on 07/03 for $68.37. Both purchases were 5% of assets.

All these trades are cataloged within a reasonably short period of being made, in The PPT.

It’s not that I’ve stopped liking APC. I do still think they’re a great company. And maybe it would be better if I stop trying to overcompensate for their management; having instead just thrown back on the other 5%, and let the company do its thing.

But there’s enough going on in the world that I don’t want to own an oil company and do want to have extra cash on hand. I only bought this position to begin with because 1) APC was unreasonably distressed and 2) I was heavily short oil, so it sort of helped balance me out while deciding if I wanted to cover.

And of course, 12% profits on a trade inside of two months is nothing to sneer at.

Since the redemption of my oil trade, my account has trended sideways. I’m up 18% for the year, but still well off my old highs.

AEC, CLP, and CCJ are my only stocks. I sold my 5% ERY position for a 10% loss the other day. I expect each of them to double. No, more, I resolutely demand it.

Cash stands north of 36%.

That’s all from the 9th floor for this week, friends. God bless.

The Euro is in absolute free fall. It wasn’t even three months ago that the EURUSD was trading at 1.32. Now, it’s inside 1.22 (1.216, as I’m writing). That’s an 8% drop in 3 months, folks.

I don’t care about market statistics, or elections, or Chinese stimulus. If the euro keeps falling against the dollar like this, it will be absolute carnage.

Even as we speak, US imports are taking it to the chest. Moreover, we have seen that this is not the sort of currency move that aids the home country, in the here and now. Perhaps, after they start to pick up the pieces, having a weak currency will be useful for the Spaniards.

But at the moment, price spikes from this wildness have the propensity to send half of Europe into cardiac arrest.

At this rate, the EU won’t be around by Christmas, and all US growth will be dead and gone.

I’m going out on a limb here, to say that this market is being heavily influenced by the power of raw probabilities being taken sharply out of context.

There’s no other reason I can think of to explain this rally.

All the qualitative analytics, and all the numbers on the ground, are very bad. Safe haven treasuries are going ape shit to the upside. The Germans are slowly abandoning the EU to death. China is as gay as ever.

But for the last two years in a row, we’ve rallied into the waning months of the year. And I can’t enjoy a drink poolside without overhearing clowns talking about presidential year market statistics.

So, I’m laying my guess out there. We’re rallying because in their very souls, most men will not hesitate to lay down on train tracks if you offer them some money. They’ll do so without even bothering to check if there’s a train coming.

Now, this works just fine for me, as I’ve sort of skedaddled off to the side. I guessed something like this would happen – although if you’d asked me earlier in the year, I would have pinned October.

But make absolutely no mistake, if we don’t get some major event facilitating all this good will in the markets, there will be hell to pay. I’m scared to be on scene, when the guy lays across the tracks just in time for the locomotive to carry him to the 6 o’clock news…