Look, I know you don’t want to hear it, but the test results are coming in and it seems that we might all have herpes. It’s not like we hoped, you know, that Greece gave us a harmless bout of the clap and now we’re selling off needlessly when we’ll be perfectly fine in six to eight days. It’s unfortunately not just that we’re overreacting about a few free-spending european economies. Greece is quite probably the first herpes sore on the dick of the global economy and now that we’re looking more closely we can see a lot more red spots. Sure, they could all be in-grown hairs, jock itch, chafing marks, and so on but at this point it’s looking suspiciously structural and connected.
Even though this outbreak may go away in a few weeks, the global economy is gonna have herpes for awhile. You can expect it to break out periodically when there’s enough stress, and also occasionally just for seemingly no reason.
We’ve got a kind of perfect storm where the political situation in each european country doesn’t give them any room to maneuver and certainly the US is holding on better but doesn’t have any money or assurances to spare the europeans. Hollande wants stimulus but can’t pay for it, Merkel will go along if others chip in, the British are cunts and don’t think the economic health of the rest of europe matters, the Italians are still a joke, and Spain is serious but it’s probably too little too late, and the Greeks are going to have a leftist government that’s smart enough to understand that they’ve already fallen over the cliff and their very economic nihilism can give them negotiating leverage. That leaves uh….Poland? Poland’s held up pretty well but asking them to carry the world economy may prove to be just a little bit too much pressure for them–but with the help of Lithuania, Latvia, and Estonia they may just be able to swing it. Right? Right?
The Chinese growth slowdown might not sound bad to us you’ve got to keep in mind social stability is priority one since they’re still a country with about 600 million peasants and a mobile reserve army of labor numbering at least 90 million, anything less than 7-8% growth can produce major social upheaval, so strong is their need to continually increase the capital goods investment rate. They could soften up their currency and let it float more, but anything that reduces the rate of foreign investment could literally be political suicide for the Communist Party.
South America is doing surprisingly ok but they’re also pretty bad about running up public debt and all their currencies either have too much or too little inflation. and unlike in Europe they quite often don’t pay it back. Finally, if the price of oil goes down Venezuela is fucked, and they’ll produce regional instability whether or not Chavez goes.
Russia and its satellite states could be a safe place to hide out but while a weaker eurozone economy helps Russia politically, it doesn’t follow that they’ll see any real growth or that the mafia-state will become more efficient and responsive to the market. Middle East: still fucked, exactly the same as it’s been for the last 300 years. Sub-Saharan Africa: Hahahahaha. Seriously? Hahhahahaha, oh god, it hurts but I can’t stop laughing. Yeah, Africa’s going great–invest in beautiful South Africa which is in no way going down the same path as Zimbabwe. Of course, they said Zimbabwe was in no way going down the same path as Mozambique 30 years, and that Mozambique was in no way going down the same path as Guinea, etc. etc.
My dark thoughts on this sunday have gone so far as to already pre-place pessimistic orders for monday, which will all be canceled should the G8 or Greece or China or anyone produce more than a single drop of genuinely good news. It’s not a matter of “seller exhaustion” or technicals or anything like that now, it’s a question of people fundamentally doubting future production is going to be met with adequate demand on a global scale. There’s no such thing as oversold when even the P/E ratio is in doubt: if someone tried to sell me radioshack tomorrow, I wouldn’t even pay the exact price of assets on hand because there are unstoppable daily losses and the need to liquidate immediately would take another 5-10% off.
Now imagine I’m not just talking about one hapless shitty company that’s been run into the ground due to poor management, but companies that are simply not in a position to participate in the economy successfully anymore. Take a coal company, an IT company, crocks, internet startups that are not a bad idea but have trouble monetizing, a chain of restaurants, and do the same valuation of assets on hand -5% because it’s now clear that the entire business model can’t operate at a profit.
At the very least this means capital goods producers are toast, luxury techs like…almost the entire solar industry, overpriced clothes, etc. are toast, shipping is toast but more slowly than the others, and not just solar but the entire energy sector is in trouble, with natural gas being the MVP of failing to engage in monopolistic behavior that hurts consumers in order to defend the price and capital goods investments. Oil companies are much better at this and have real political clout/are actual countries so they’re relatively safer but I don’t think anyone’s going to escape unscathed.
I don’t think this will effect luxuries like high-end jewelry and liquor, thanks to conspicuous consumption–don’t expect discount Johnny Walker Blue, ever. I don’t know where such white-girl favorites as organic cupcake stores, arts and crafts supply centers and yoga studios fall along this continuum but I suspect that demand for them is inelastic so even if there was a way to practically bet against them I wouldn’t advise it.
I’m not sure how to feel about gold and silver at this point: it seems like everything but a full-blown economic recovery is a win condition for them but gold is still such a massive bubble I’d rather do it as a weekly trade depending on news and sentiment than buy some bars and keep them in a shoebox.
All puts, all the time, fuck spreads, fuck stops, fuck hedging, this is a time for hedgehogs not foxes.
I’m going to wait a few hours (possibly the whole sessions) to see if there’s a bounce on monday and then get these almost at any price and sell at least 90% of each position by Friday. I’m going to do a lot more research on shipping, basic materials, and industrial metals but for now shorting the SPY and attacking a few companies I see with big gaps should be sufficient.
LNKD 85 july puts
BKS 16 June puts
SPY 127 weeklies if/when there is any bounce or bull trap AND the absence of something of the magnitude of QE3 or similar. Don’t tell me I’m an idiot if it’s at 135 on Friday because they agreed to drop a trillion dollars into the markets.
CHK 15 June puts, because no man can turn around the macro-trend
SCHN 30 July puts should they be audacious enough to attempt a bounce
Continuing to hold, may lighten some on monday to get liquid if the bounce looks strong:
GME 20 July puts
RPRX June strangle with 7 puts and 10 calls
YELP June 17 puts
BKS 16 June puts
