It’s a bit white knuckle, but I’m not buying this rally at all: They’re gonna need to show more strength by the afternoon or else everyone but the permabulls will get out, and certainly nobody’s going to want to hold over memorial day weekend…

Very simply we’re seeing more resilience from the bulls than they should be showing due to the reality of the situation, which means we’re nicely set up for a pretty serious flush this week.

I have to say there are big risks on either side for LULU, LNKD, and YELP because they’re stubbornly holding up/holding out and anything could set them off to a big move in either direction. I’m short on all of them because a black dog talks to me at night and tells me to kill, but a less rash investor (Ie, me after lunch) might consider placing some strangles here. AAPL is also holding, but really, who fucking knows anything at this point.

ATVI finally got some love with 6.5 million copies sold at 50 bucks a pop minus 1.5 million for WoW subscribers who got it free plus item trading for real money with a 15% cut plus Blizzard’s legendary legacy support services mean nothing but good things, though obviously the overall trend is still down massively and I can’t really think of a stock trading above book value that doesn’t deserve a 10% haircut. No matter how many times it’s explained, it’s really simple: bad news is never priced in adequately because humans systematically underestimate the likelihood and severity of rare events.

I put in my orders and I’m holding some troops in reserve, but the only sane strategy at this point is to step back for an hour or two then return. I also pulled out all stops because I believe blowing up builds character. If the S&P goes below 1300 today expect me to be the most annoying man who has ever lived.

At this point there’s just no way the Germans feel bad enough about WW2 to even pretend to go along with anyone at the eurozone meeting today. The  summit is looking more and more irrelevant in a “no news is bad news” environment. As for myself, I’m hoping for a public relations disaster because it’s now clear that Germany and France have totally different definitions of the word “bond” as in  “common bonds” which is a pretty fundamental difference.

As I understand it, the Germans have no problem with money held by various national banks collectively in a certain account being used by a specific country at some sort of preferred rate  without being mutually backed should they spend it all on hookers and blow.  This is a technical consideration and not, in principle, a bad idea. Meanwhile, the French and Italians want the Germans to underwrite all of the risk for the entire Eurozone. The problem is that this is not a bad idea either if you’re not German so it’s not surprising to see the rest of the Eurozone really push for it.  What’s surprising  is surprising that they’re surprised Germany doesn’t want to do it, and they may even spark a mini-crisis by trying to persuade another country to agree to something that’s clearly against its interests without having any coercive leverage.

People in europe who are (already) starting to congratulate me for my bearishness based on the fundamentals  no longer being fundamental have no idea how poor my sense of daily timing is. My portfolio would be much better off  if I just talked to a trader once a week and he just took my advice and track record into consideration. Any takers?

I was about 80% committed to puts on Monday before face ripping began, and the remaining 20% were timed almost perfectly with the HoD yesterday but that’s still not a good ratio at all.

My SPY 129 weekly puts are still so fucking far underwater I’m discovering new species of fish, and while I’m probably going to see some return of their value, not being liquid enough to get more of the succulent SPY June 131 puts at 1.90 was heartbreaking.

The general idea for the non-me investor (I secretly want to know what blowing up feels like) would be 5% gold (I hate gold, but…) 20% cash, 25% puts, 10% calls, and the rest in stocks either short or long. I tell myself each month that it’s time to balance the portfolio, hedge and set up less risk, but then something always comes up and I find myself white-knuckling another week. Now it may be the turn of the bulls to develop an involuntary twitch and have mysterious stomach problems.

Barring really massive positive news,  I don’t think the market has come anywhere close to pricing in the “news” about debt and slowdown in fundamentals that’s not really news but we’ve managed to ignore.  Keep in mind that the walls of Jericho are not falling and this isn’t the end of the world unless AAPL breaks 515 at which point there becomes a risk that news and fundamentals become a feedback loop that drives stocks lower and wipes out this year’s gains entirely until something intervenes.

I’m not so sure about this “something” now: governments like to run up debt because it lets them look better in the present, and financial sectors like to take on extreme risk and commit suicide for the same reason.

So, fortresses that I am currently sieging  and would like to see fall, but if they show no signs of cracking this week I’ll give up and move on to easier targets: LNKD, LULU YHOO, SSW, YELP

Villages where the terrified defenders have tried to parley but I’ve butchered their messengers each time: GME, BKS.

Where all my money should be:  SPY puts

Where half my money should be: conservative call spreads on safe stocks like WMT and ABT and YUM when it drops back to 60.

Possible hedge against a money drop:  Try to always have around 5% in gold but trade it on a weekly/monthly basis as needed,  grab some AAPL 600 august calls picked up at anything below  530 with a downward trend*

*Note: I will not even attempt to do this until/unless it drops to 470-450 because I am dumb.

Flipping through this morning’s news in Europe indicates that essentially nothing has happened to change the fundamentals of the situation. Every time the SPY or the Dow goes up I ask people “Why? What sentiment is causing this other than that we’re tired of it being down?”  That’s essentially what all the technical analysis is saying, since it’s ignoring the daily flood of bad news and bad fundamentals. We may be reaching a short-term workable bottom here but then there’s going to be another forced sell-off as the next wave of bad data/news comes.

It’s not like it’s the end of the world and we should get guns and canned goods, but it might be worth studying the 1929 crash, which actually is a misnomer–there were a few days of dramatic drops, but then the market recovered almost up to 90% at points and sort of bounced up and down while still slowly and steadily losing value until it bottomed out in 1931. A stock market crash isn’t a one day event but a couple of linked large downward moves with no fundamental reason for future optimism in the medium-term.

Thus, my earlier plan will likely go into effect today or tomorrow, but I’ll be adding Yahoo puts on the way up as I would expect them to get a pop based on news that there’s a meaningless stock buyback that allows their institutional holders to sell off.  That said, I also lost a lot of money betting against AOL time and time again: the tech dinosaurs have a lot more staying power than a young whippersnapper like myself can see. I’m also going to hold off on my LNKD put: unless they’re cooking their books (which I not suggesting) their growth and overall model looks really strong so while a low tide lowers all the ships I think they could hold up fairly well.

Shipping is going to get murdered in its bed because it’s already been suffering structural problems of overcapacity for the last 4-5 years or so and I’ve decided that it’s best to hit them while they’re down: GLNG, NAT, SSW and TNK all look like great shorts to me (as a basket, one could randomly pop, if I only go with one it would have to be SSW) with possible downside of 20-30% in the next 3 months.  GASS is a possible short later. They seem to be a well-run company at this point but if they can’t buck the macro trends the downside is pretty much bankruptcy.

Attacking natural gas is a little bit more risky and diversified and there are actually some newer micro/medium-cap companies that understand the new paradigm and may do better than expected, plus everyone gets all serious about energy independence and not falling behind in the technology race so there’s a huge chance of favorable government intervention.

 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

I have a split personality–in addition to managing my own rapidly shrinking portfolio, I also manage a handful of IRAs for friends and relatives and a large account that is not mine. The IRAs are all doing great, thanks to the miracle of Radio Shack puts I bought in January: I think every stock I’ve bought for the IRAs has tanked and they’re still up 20% thanks to those RSH January 2013 7.5 puts.

So I have one account in which I don’t have to answer to anyone, and another one which is checked by someone who has a fondness for former best of breed stocks in dying/contracting industries, which means the portfolio is shot through with BHP, RIMM, and a few others which I am not able to touch due to a belief in the divinity of  “dividends” or some other ancient religion such as “buyouts.” Not that they’re always wrong, just that this is a hell of a time to be holding copper and blackberries.

I didn’t realize until today that I had developed a split personality between the two accounts.

I went into today holding YELP and GRPN puts in the watched account and YNDX and RENN calls in the unwatched account, and I have no explanation as to why I did this. I got a congratulatory phone call today as the watched account tore through barrier after barrier and finished up a significant amount.

“But how did you know the facebook IPO wouldn’t cause a pop in social media and they would all collapse?” They asked, voice full of adminiration and wonder, and I was modest and deferential. Meanwhile some of the long YNDX calls sit in  my account are an angry, angry red that I can’t even take off the books because there is no buying interest whatsoever, and obviously my weekly RENN six calls were so universally bought on stocktwits that it was clear in retrospect that it wouldn’t work.

Just earlier this week, I dumped all my FIO calls in my risk account at a small loss reasoning that they were doomed, but decided that nearly identical competitor OCZ was onto something big and held it in the safe account, where it died like everything else.  Wait, what?

So I’ve effectively been playing a shell game against myself, and I have no idea why. This ended today, and now I awake as if from some fevered dream. The two halves are joined and from this point on they will work like one well oiled machine that’s been losing an average of 1% a day for the last two weeks because I decided to switch from stocks to more  call options on May 2nd, the exact worst day in history to do this. I’ve lost untold riches to my own stupidity, margin calls, and AOL in the last month and I will recover and restore my sanity starting on Monday. For real, this time.

My only lingering problem is that I believe with all of my soul that ATVI will be at 13 again and stay there very soon, tape be damned. Accordingly, I have an obscene amount of ATVI calls for June and August and as the price goes down, I keep buying more. My hoard of ATVI 13 and 14 calls is now approaching the thousands and if I’m right I’ll sell all the motherfuckers at the first hint of green and build a golden statue of myself patting myself on the back.  Right now I feel like a very stupid dragon who keeps bringing pogs and beanie babies and collectible mcdonald’s 40 ounce cups back to his lair while the other dragons are out gettting actual gold.