Surprise Vacation Keeps Me Away

Excuse me, as I was at the beach today, strolling as a lolligagger up and down white sand, pressed against by bright sun and an endless sea; two forces in a forever-struggle waving back and forth.

Perchance had it that I came upon Mr. R W Pelican, to whom well wishes were given.

I see today that the market melted higher. My positions did to, with exception to the new EUO position, and CLP for some (lack of) reason.

In another few weeks, if we haven’t corrected, then more EUO will be bought, and more stock will be sold. This is a leisurely process, as the atmosphere is one of triumph, with no pressing concerns, much like my day.

I opened a position in EUO for $18.25. This is a starter position, which I will add to every few weeks/months.

Remember, every time thus far that European authorities have put claim on “the end of the crisis being just in sight”, it has come back to haunt them.

They are playing a confidence game. The realities of the situation are different. Just below the surface, trouble is brewing.

Remember that.

You think this makes sense do you? US markets are ramping to levels not seen since the last, great bull market. The debt of countries like Italy (where ex-president and child rapist Berlusconi is threatening to splinter the votes to ungovernable ends) and Spain (where a quarter of the youth are disaffected, unable to start their lives and about one tenth of the land mass is preparing for secession) are trading for yields that are really, reasonable. Oil is spiking towards the $100 mark – meanwhile Europe remains marred in recession and Germany just joined them. Oil stockpiles are increasing.

Precious metals are collapsing in price and the Fed is printing $80 billion a month.

In short, my dear reader, you are out of your minds.

But that is all right. You see, I foresaw your absurdity – your complete mental breakdown – months ago. I prepared for this. I realized, “this makes no sense”, and because it made no sense, I knew you would act this way. How else would the crazy behave in a crazy world?

So I did the opposite of what makes sense. And I did it first, before you.

Now, let’s chat about the euro. The $EURUSD is completely deranged. If it were a person, it would be a homeless man who found a tattered tuxedo, and is presently running around, hiding in steam vents in the middle of the street in Detroit. But, by some divine joke, this homeless man has been mistaken for a titan of industry, and is currently invited to all the high social class dinners.

“Aaaaahahghgh”, he gurgles in reply to requests for his opinion on gun control.

“EEEEAAAA”, he says when asked for advice on pre-tax 401K versus Roth.

And then he proceeds to eat his napkin with an olive fork.

Now let’s chat about oil. Oil is going way lower. The US economic numbers and forecasts are, again, way off, again. This is really not very funny anymore. How ten thousand economists can blow this year after year, never bothering to even pretend to learn from their mistakes the year prior…they should all be fired and stripped of their degrees. Pathetic…

Plus, Europe remains in a spiral. Germany, the heart of the EU, has finally entered recession this year. Question: knowing German culture, do you think that will make them more or less willing to work with their fellow member states?

Wait, don’t answer that. I’ll answer it for you. “It will make them less likely to work with their peers.”

Very good me, have a reward.

Why thank you.

German’s are going to increasingly view the rest of Europe as a useless bundle. If German wellbeing takes a hit, they’re culturally predisposed to blaming Italy or Spain or France for dragging them down with their wild schemes and self-centered demands. If Germany was reluctant to sit by and watch Draghi open the ECB doors to distressed banks before, wait until their worst prejudices are confirmed. Free money was supposed to help Europe, remember? Germany goes into recession and they’ll make sure the Bundesbank does everything within its power to hamper the rest of the EU at every turn.

Now let’s chat about housing. Housing prices are going higher, but that’s not going to help you sell that third, four bedroom house you’ve been desperately clinging to, praying for a buyer. Your retirement plans are shot, pal. Prices are going higher, but sales volumes are staying depressed. The housing recovery, like most luxuries, is reserved for the rich.

Now let’s chat about bonds. Safe haven bonds have got one major push left in them. I don’t expect the US 10 year to clear 2%. Meanwhile, bonds of Italy, Spain, Greece, etc are WAY too high. They are going to be taken out back to the woodshed before summer.

After that, I’m going to reinvestigate building a short position in American treasuries. We’re one major push in commodity prices from the Fed being strung up without any options for recourse. Because they’ve decided to load up on assets yielding 2%, they really don’t have much in the way of choices for controlling the money supply, unless they want to jack up the discount rate and watch the banks crash screaming back into bankruptcy. The economy is going to become increasingly wild, like a Stallion that got away from the Spanish.

For the moment, bet on the Fed and bet on higher prices. But always remember, in the back of your mind, that trouble cannot be vanished with the wave of a wand. Problems will always materialize in some way, and if not addressed, the consequences of those deviations can build to tremendous proportions.

Alright, there’s no sense to go crazy. The markets are busy making levels that haven’t been seen in years. My accounts are topping out, now brushing up against their old highs. There’s no sense being dumb.

I went through the positions (except AEC and RGR), easing each one up, until I got the cash amount I needed; dispersed equally across the lot.

CLP announced numbers, and the earnings were very good. However, funds from operations were down, which disturbs me. It could be a simple timing issue, as they just sold a few apartments, and haven’t managed to reinvest the proceeds yet.

Management claims FFO will be almost 40% higher from where it is today by the end of 2013. I’ll give them the benefit of the doubt for now.

Occupancy remains elevated in the multifamily space.

AEC reports February 5, I believe. I expect good things.

Michigan is making up for the unusually warm weather we’ve received this winter by dousing us into zero degree temperatures. Detroit was on emergency patrol yesterday, trying to shepherd as many of the homeless as possible into shelters, to avoid them freezing to death.

The markets are churning a little here. But I am loath to give lip service to the sort of unfounded pessimism that is gripping the cowards of Twitter. Believe the rumors of broken-ness and impending reversal to your own grave misfortune. Because we have higher yet to go.

I am pressing my luck and bets. RGR is selling off, but the stock was up 33% in a month. My other down position is CCJ, which is experiencing the typical terror-burdens that grip its share price at least once per 3-6 month run.

Precious metals continue to rebound, and are setting up for the next grand phase, in my opinion. This much currency manipulation will inevitably lead to long strides in the metals, particularly if things don’t break down. The recent “Gold Bug Bashing” we paid spectacle to in December is an annual tradition of sorts – not unlike a classic European festival. It happens every year, led by clowns and street performers. Not the kind of people you ever bother to consult with outside. Precious metal investors have been well vindicated in their thesis over the last 20 years – it’s not like that will be stopping now that the printing presses are stepping into high gear.

The short sellers, far too early to the water, have received a surprise blast to the chest today as the melt up defiantly continued from an early reversal. Many of you had been expecting that inauguration day would be the mark, in hindsight, of the top.

Then this pony kicked you in the throat.

We are not done going higher. Diligent reports delivered to the 9th floor, contained in secret manila envelopes on my desk, detail that we will be making new highs by mid-February.

Short seller capitulation is demanded by the longs. Profits must be extracted by pain. Scott Bleier’s theory of retail market allocation is in full effect here – anyone leaning against equities here is eligible to have their spine broken in twain.

Only real numbers being reported will stop this freight train. Nobody cares about disappointing economic numbers because CEO guidance remains high. Thus, CEO’s have a few more months to deflect trouble and keep their heads down. And there is nothing that can get in the bull’s way.