Score One For The Gun Crowd (And RGR)

Long tendrils of smoke curl around the knuckles of my left hand, wafting as they stretch into the air. The wisps tangle in my goatee, until the force of my arm moving causes them to disperse with abruptness, bringing the cigar to clasp between my lips.

Leaning back in my chair, with one leg draped over the other, my right arm is stretched off to the side; my hand resting on a keyboard, the index finger of which occasionally, thoughtlessly strokes the Enter key, refreshing the screen I’m not really looking at, out of the corner of my eye. I draw deeply from the cigar, sending rose color spattering across the walls.

It’s over and I’ve won.

Another buck o’ five, and I will be up 20% on my Sturm, Ruger & Co position in one month. The stock is digesting now, but soon, it will run even higher.

Illinois’ latest effort to infringe on the rights of gun owners was checked late last night. Not even in Illinois, the heart of gun hating, paternalistic, authoritarian pansies, can they successfully check the gun lobbies. That’s probably because no matter how frequently or frantically the network heads deny it, the gun lobbies are about as grassroots and motivated as you can get.

Today is the first day of Congress, and so far Diane Feinstein is nowhere to be found. Go on, introduce your little bill, wretch. For it goes to its long slumber in the halls of the House.

I bet you must feel stupid. You gave in to the panic, checking your mind at the door. You let emotional arguments overpower you, and now, you’ll see the world hasn’t changed in the slightest from November, before that incident.

Guns are not going anywhere. And now I have your money too.

Petty mortals – what did thou believe otherwise?

Did thee not know the Bernanke of Benjamin had come?

Whas’t thou – o’ pariah – of little faythe?

Suffer now, immeasurably, by the hands of our benevolent dictators.

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I lucked out. Like a crazed masochist, I entered today fully long, parading around in public, for all the world to see. Last week, I lamented at having ever believed the fiscal cliff could be resolved.

For most of this year, I cast aspersions on the fiscal cliff, and publicly ridiculed anyone who talked about it. I mocked the believers; and last week, I fell to my knees and crawled towards them, begging for forgiveness. We were going over that fucking cliff, and I was a vile wretch.

But, for some reason, I just couldn’t bring myself to raise cash. Instead, I begged for the beating, just asking for it.

Only faith saved me from passing up these illustrious gains. Faith in the destructive power of $1 trillion free dollars. And faith that real problems can’t actually be voted away.

So here we are. I’ve picked myself up and will begin pretending like I never doubted. With these early gains (average positioning seems up 2% or more), I’d like to see you try and prove otherwise.

Let the taunting of the unfortunate commence.

Hahahaha you have to be kidding me.

The magnanimous US Senate managed to find a whopping $15 billion in budget cuts for 2013? Are you out of your minds?

That’s about .4% of the US’ $4 trillion discretionary budget. Except, it’s not, because the Department of Defense budget is all hush hush and super secret. You throw in the entitlement spending in there. and the great Senators of the United States of America have proposed ~0% spending cuts in exchange for more blank checks.

Just knowing how Washington works, you have to assume you could slash 2% of discretionary spending without any consequences to services whatsoever, merely because DC is a gigantic slush fund for the well connected.

If any of you retained any hope that the system could reform itself, please consider this the force of reason bashing against the side of your head.

Every year, I get suckered into making New Year resolutions for myself. The truth is, before I began writing for all of you, I never bothered with these quaint idiosyncrasies.

But I let myself get drawn into the habit, mostly because it’s a ritual everyone else seems to enjoy.

Enough!

No more of your melancholy guilt tripping. I hereby resolve to never resolve myself to any “New Year Betterment” ever again. You can take your quest for personal and global improvement and shove it.

I have since realized that New Year resolutions are actually the cause of all the world’s problems.

It begins when one of you cretin tries to fix your own flaws. And, after failing miserably, it ends with you trying to fix everyone elses – through legislation. You know, as a warm up to fixing your own…

It seems like most of you actively trying to make the world a better place are managing quite beside yourselves to make it a worse one.

Well I for one will not stand for this any longer. THAT, friends, is called being part of the solution…by not trying to be a part of the solution.

Well, this isn’t fun. Seems like going to cash was the right course of action. Seems like it…

Sadly, if you’ve been following, I did not go to cash.

But still, I wait. I wait because $1 trillion free dollars can’t be wrong. Our markets can collapse after that. Or maybe they don’t collapse at all? Maybe they just stay where they are while the real economy fumbles and craters? That’s an option, after all. Ben pulls a fast one and leaves you all befuddled.

Mind you, most of my own positioning is tied up in POS stocks like CCJ, BAS, and RGR. Sure, I love a good distressed buy. They’re my absolute favorite. I love getting socked in the teeth to the tune of 30% in between 40% rallies. And having psycopaths at the HuffPost, Brady Campaign, anti-nuclear proliferation activists, and Matt Damon slobbering over themselves in a quest to destroy perfectly reasonable and productive activity for wild-eyed, long shot chances at actually improving the world.

It. Is. So. Awesome.

As 2013 runs to a close, I wish suffering on all of you. This world is increasingly not big enough for all of us, and so I say, may the next one of you to suggest it would be better for Cain Hammond Thaler to live in Detroit without a gun be gang raped by knife wielding maniacs.

Dicks…

I hope you all had a Merry Christmas, or at least enjoyed the free break for those who do not celebrate.

The unprecedented actions of the Federal Reserve have changed my mind. My fears of the demise of the world economy need to be adjusted for these new facts on the ground. This is not childish interest rate games they are playing. The rules are being changed, and anyone caught looking at their old playbook risks being swept aside.

The initial reaction of the Fed to the Great Recession was interest rate adjustments around the time of Lehman. These had no real impact on the crisis.

The second reaction was to directly purchase the distressed assets. This act led to the bottom of 2009, in my opinion. It was this direct devaluation of the currency that led to the rapid price reflation.

Then, QE2 was announced. However, the purchases were sterilized with sales of offsetting treasuries. In this regard, QE2 was vastly different from QE1.

Which brings us to QE3 and the hastily announced (and almost ignored, it feels like) QE4. These two actions are monumental in scale. And they look almost exactly like QE1. We are about to have immense, unsterilized purchases of treasuries and, likely, other assets by the Fed.

Ben does not seem to be playing around here. I understand the dangers of the US budget all too well. I also remain convinced Europe will continue to sink all economies into a global recession.

But I am floored by the numbers being tossed around. And now Japan is jumping onboard also?

My belief for the next year is this; currency destruction is the name of the game, and it’s being kicked into high gear. It’s still football, but not like your grandparents used to play. The players are professionals, on steroids, and they’re going to start setting new records.

The damage of the economic realities that are being fought will shift where they materialize. Deflation threats and exploding bond markets will be replaced with money primer that will eventually run away from the officials who are unleashing it, leading to inflation. The bond markets will not be allowed to sell off; but nor can they be used to control the outstanding money supply anymore either.

It was always a cruel, false choice between these two outcomes, but knowing which one would ultimately happen was a matter of what choices those sitting at the head of the table decided to make.

There’s only one way to position yourself – full long, but NO MARGIN.

Precious metals are a must here. However, I view industrial commodities like oil to be a trap. My expectation is that economies will continue to contract even while the numbers involved grow. Real unemployment remains elevated, GDP and tax receipts increase, and people become furious at the $100 tomato.

Commodities like oil or copper will be subject to immense volatility, as they have been. Since I envision economic activity to continue slowing, demand for oil will weaken and stockpiles will grow substantially. This will create an environment of “reflation” where these commodities rise in price trying to pace the precious metals, only to hit the “flush out” moments where they crater 30% inside of a few weeks. Then repeat the process.

Taxes are about to rise on everyone. Consumption will likely slow.

I’m inclined to believe that the US consumer will fair better than expected. I’m also of the mind that, with recent price decreases, such as gasoline, the country can absorb a good swath of a broad price rally before it starts to stall out again.

Stay away from companies with soft balance sheets. Large cash positions are a must. It’s time to start picking out the long term survivors; the guys with 20% of their books in cash, waiting for a chance to seize market share.

Then sit back and hope business productivity is enough to offset the currency destruction and slowdown.