The Clam Cometh

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.

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.

$34.62 a share. Seeing massive problems in my portfolio; looks like settlement issues.

We’re going lower.

I’m not changing a thing.

While it is extremely tempting, crashing into the close as we are, to try and be a boss and nail a bottom by covering my ERX and UCO shorts, at the end of the day I need to remind myself of this;

I’m not up at all. I’m even.

We have no idea what’s going to happen over the next 24-96 hours. Personally, I’m thinking there’s going to have to be a massive bailout and major cross-continental agreement worked out over the weekend. Short of that, things are going to get very, very ugly.

But I’m not willing to bet money on that either. I’m slightly down for the year so far; that beats being really down for the year so far.

I’ll see you all tomorrow. Sleep well, and don’t hurt yourselves.

Update:

Christ this is tempting. ERX down more than 20% now, capitulating.

I don’t think we see an agreement tomorrow. The EU needs to convene for this level of conference. We are at least one day away from them even being in a position to do that. More chaos tomorrow, I think.

Update 2:

My free run got blown at the close. Depending on how you value it, I was off somewhere between .8-2% for the day (silver makes this challenging).

AEC and CLP collapsed into the close, as did BG, CCJ, MGM, and pretty much everything else underneath this God green Earth.

Remember, this is panic selling and wild liquidation. Don’t read into the numbers too much, with certain sectors or stocks. If you’re a $20 billion fund manager getting hit with margin calls at the end of the day, you aren’t too interested in what it is you’re selling.

At that point, you’re just selling.

Crude to $60.

Even as we speak, Federal Reserve officials are likely coordinating with their EU counterparts so that they can begin the process of sorting through the mess and finding a workable solution.

I do not think anyone suspected that Italy would fall so quickly; that particular domino was off in a corner by itself. Yet, it now appears that the domino is ten feet high, six feet across, and weighs roughly two thousand pounds; basically it is going to crush the entire game to hell.

This cannot be permitted. And in the interest of global trade, the EU cannot go on a euro printing jamboree. That would skewer the balance and send the rest of the planet tipping as exports dried up while Europe faced unprecedented inflation.

Any solution will require lots of dollars by the Fed.

Until a few minutes ago, I was set that the Fed would hold back from easing. However, they will most definitely be forced to commit bonds and dollar denominated debt if they are to bail out the EU without crushing our own economy at home through unprecedented dollar appreciation.

I don’t think they can get anything accomplished today, and they certainly won’t have it worked out tomorrow. But they cannot permit this to continue into next week.

I am considering removing the hedges lightly so that, when an inevitable deal is announced this weekend, I won’t feel the wrath of commodities. I may cut them in half early or late tomorrow.

Be cautious friends. The 9th floor bids you good health, and watch out for murder holes.