If You Can’t Beat Them…

CAT is firing 20,000 people because growth in China is non-existent. Despite a zero interest rate policy by the Fed, mortgage rates have been soaring over the past 10 days; and t-bills have been getting mud stomped.

And, despite all of the bullshit, the market is ripping to the upside.

Whether you like it or not, the market is going higher because it is tired of going down. Instead of sacrificing your bullshit portfolio for your beliefs, play the upside.

As you know, as of Friday, I had a slight bias to the downside. However, after seeing the market respond to this mornings horrific news, I added to my FAS position. Without doing the math, I am probably equally balanced long and short.

I see oil/gas stocks are running with their socks off. However, there is no way I am buying them, ahead of their numbers. XOM is overvalued on so many levels, now constituting more than 30% of the DUG. I must hold down my short oil bias, even if it’s a short term painful one, for the sake of all that is good and reasonable about mankind.

I am really digging the action in the banks, particularly the European ones: BCS, DB and IRE. But, I question the sustainability of this move. I’d rather hold onto, and possibly add more to, my Godly FAS position. And, let’s not forget, PFG, another position of mine, has $20 written all over it.

In short, the bulls are playing with their imaginary friend, Mr. Reflation. They believe he is real and will save them from the angry, fire breathing, dragon in the cave down the road. For now, I will play along and see if it can make me some money, as opposed to digging in my heels. However, at the end of the day, understand, that dragon will come and scorch the faces off of those who are against it.

UPDATE: I sold out of my UYM position, around $13.22

You fucking people, getting all happy, with the jazz hands waving in the sky, over a pending U.S. collapse make me sick. The internet is a funny place, where all sorts of strange men share the intellectual equivalent of spoiled mashed potatoes and old duck pate.

I throw my shrimp tails in your general direction, while guzzling a glass of single malt Scotch.

Most of you are simply besides yourselves, over some sort of near term economic apocalypse— that is supposed to force fuckers like me into the open fields, farming for beans and shit. I got news for you Alfred Hitchcock, double chinned motherfuckers, I ain’t farming no beans. More importantly, hey guess what, I’m gonna live my bourgeois life in the most egregious fashion, during this decline. After all, economic duress means good times for “big men.”

Here’s the thing: before I take my family to the mountains to escape the “poor” and famished “regular folk,” I will employ a small army, a militia of sorts, of unemployed malcontents to secure the food provisions at my local Costco, then proceed to the mountains to take your guns and rice.

More importantly, many of you third rate bloggers, and youtube box heads, think Asia will, all of a sudden—by the grace of God—live happily ever after, all the while America burns to the ground, amidst civil unrest and eventual revolution. Ha!

Wrong again, friend.

Before that happens, our big mighty tanks and motherfucking cluster bomb carrying bombers of elysium, will secure the coal/copper mines of China and the national treasuries of any middle eastern country of choice.

A 14 trillion dollar economy is not something to piss off, especially when it employs goons with big guns and technology that can eliminate your cities population, without damaging any valuable infrastructure.

What I am saying is: you need to chill the fuck out with your “America is gonna fall” rhetoric. Things may be fucked up and times are likely going to get worse. However, if we go down, so do you.

Therefore, keep buying our fucking treasury bills.

[youtube:http://www.youtube.com/watch?v=0p215rO0B34 450 300]

Exclusive CNBC interview.

[youtube:http://www.youtube.com/watch?v=Li2PVKMZCo4 450 300]

Barring a huge move, I am done for the day. I took advantage of weakness in SRS and DUG, in order to add to my positions.  At the same time, I am very tentative to sell out of any longs.

As an aside, it is amazing to see commercial Re stock draw investor interest. For example: FRT has very little cash and $375 million in debt due in 2009. As of now, it would be impossible to roll that debt over. Moreover, if they were to raise money via secondary offering, it would be dilutive as a mother fucker.

Within CRE, dozens of firms face similar, if not greater, risks. In no way would I be a buyer of commercial RE stocks, especially while the credit markets are closed to them.

The text book says the market should be down 300-400 points, based upon GE getting the “homo hammer of certain death.”

However, for whatever reason, investors are optimistic over a pending GE crisis.

Fucking idiots.

I refuse to sell FAS, UYM or even PFG, for fear of late day shenanigans. My best guess on the future direction of the market: next week, we dive lower, based upon worse than expected numbers coming out of big oil.

As of 3:00pm, I am 40% long, 50% short and 10% cash.

As an aside Update: California has 2 months of cash left and a 9.3% unemployment rate. Can you say “higher sales taxes”?

I’m down slightly on the day, mainly thanks to sharply higher oil stocks, effectively raping my DUG/ERY positions. Truth be told, I am buying DUG, down at these levels, based upon the belief that the major oil/gas companies will not deliver on numbers next week.

As a reminder: Along with my SRS, DUG, ERY, EEV and REW positions, I am long FAS, UYM, PFG, amongst others.

However, you fuckers need to pay attention to something: GE.

Chatter on the street says GE will need government assistance, in order to firm up their balance sheet. Although it’s fun to buy stocks, based upon some bullshit number out of GOOG, many of you foam mouthed bullish type will be brutally dispatched and clown raped, if the GE story gets worse.

Don’t look now, but GE is hitting the lows of the day, while the market melts up—stuck on stupid.

As always, the prophecies of “The Fly”, as it pertains to the future single digit share price of GE, will come to fruition. The question you need to ask yourself: can the market deal with a distressed GE?

NOTE: GE paying a 9.5% dividend, during such bad times, is ridiculous.

UPDATE: I bought 2,000 SRS @ $61.51.

A good friend of mine has been screaming from the roof tops to sell short treasuries, via TBT, and roll into gold, via DGP or GLD, on the belief that gold will become the new safe haven.

Although I not believe gold is a good place to park funds, I am open to the idea that it can become the “new safe haven,” for big money.

The writing is all over the wall today. T-bills are getting nailed to the floor boards and the dollar is up! And, at the same time, both gold and silver are through the fucking roof.

That makes no sense.

Also, oil/gas and other commodities are down, with exception to gold and silver of course.

So, we have money fleeing t-bills, en masse, and that selling is NOT promoting risk in commodities or stocks. Odd, no?

The bulls case, for a long time now, has been to get long stocks and commodities, in anticipation of the “safe money” in t-bills getting put back to work in riskier asset classes.

Well, we have severe selling pressure in t-bills, but no dice for equity holders.

Look, at this point, stocks are like warrants attached to the overall health of the economy. It is the sideshow, compared to the action in currencies and bonds.

Bottom line: I’m not a fan of gold/silver; however, today’s run should not be ignored. It is clear, the “safe haven” money is being transferred from t-bills to gold. Should this trend continue, gold/silver can move much, much higher from current levels.

Top gold/silver picks: ABX, EGO, AUY. PAAS and SLW.

UPDATE: Everything just changed. Oil is out of control to the upside.

UPDATE II: I bought 5,000 DUG @ $24.44.

First, I’d like to say, there is nothing more poetic that a sharp reversal to the upside, while a “Fuck You Bulls, You’re Dead” title saddles the front page.

Aside from that, XOM refuses to go away and die. In the short term, the market is going to do whatever it wants to. However, I wanted to highlight a disconnect between how investors are valuing XOM compared to its peers.

At current prices, XOM‘s market cap is approximately 388 billion, which is equal to the market caps of CVX, BP and TOT combined.

So, since XOM‘s cap is equal to the combined value of CVX, BP and TOT, let’s compare the two entities on a valuation basis.

Price to Sales Ratio
XOM: 1.10
CVX/BP/TOT: .57

Revenue
XOM: $464 billion
CVX/BP/TOT: $826 billion

Price to Book Ratio
XOM: 3.15
CVX/BP/TOT: 1.47

Gross Profits (last qt.)
XOM: $37.5 billion
CVX/BP/TOT: $54.8 billion

Price Earnings Ratio
XOM: 8.4
CVX/BP/TOT: 5.24

So, either CVX/BP and TOT are egregiously undervalued or XOM is idiotically priced. I choose the latter.

In order for XOM to trade in parity with CVX/BP and TOT, its share price needs to trade in the $40-$50 range.

Bottom line: If XOM got cut in half from current levels, it would represent the best value in the oil space, but just by a little. With a market cap of nearly $400 billion, it represent more than 5.5% of the entire S&P 500.

Developing…

Dear Mr. Lewis,

I require fancy things, because I am accustomed to such niceties. Prior to receiving my services, I request several things from your embattled firm, which are, as a point in fact, non-negotiable.

The interior of my office is to be laced with pearls and my desk must be of the antique variety, preferably colonial era zebrawood. My wife says I look good tanned next to zebrawood.

Once inside my office, I must feel captivated by the decadence of 17th century Persian rugs, which can be acquired from the Newport Restoration Foundation. And, let’s not forget, I must have several chrystal chandeliers, made from Strass, all within 14.5 feet of each other, in order to capture the perfect lighting and establish proper ambiance.

My chairs must be from Africa, made from 100% pure ivory elephant tusks; and my bathroom is to be constructed with the rarest black Moroccan marble available, preferably from the Pietra Naturale quarries.

Last but not least, because I am an awfully busy, busy man, of great importance and consequence, I must be in possession of a regal commode—as I am too busy to walk to the rest room during work hours. See, I am in the business of creating wealth for the world and find it extraordinarily cumbersome to gallivant to the local bathroom, which is 20 feet from my desk.

When I have to go, I must go.

Oh, one more thing, I will also need all of the crown moldings and lamp shades replaced, with something of a French, 16th century flavor.

Be sure to spend no less than $1,220,000 on these small, minor luxuries. Remember, your company is in great need of my expertise and services.

After these demands are met, I shall endeavor to increase the quoted share price of your beleaguered firm, in exchange for a small stipend of only 300 million dollars in stock and cash bonuses.

All agreements and conditions of my employment shall be agreed upon under strict contract, which shall be forwarded to you from our legal department, by the end of today’s trading. Failure to live up to such said demands shall lead to my automatic resignation, by which your firm will be obligated to offer severance of 550 million dollars.

Good Day,

Mr. J. Alexander Thain