Bargains or Value Traps?

I can’t sleep. My “calculator brain” is working overtime tonight, thinking of strategies to fix my situation. The great thing about the market: as long as you have capital, you can always make a comeback.

Looking over my screens, based upon the numbers in front of my face, a wide array of stocks are absurdly cheap. Or, maybe, just maybe, those numbers are lying to me. Like in 2008, had you stepped into names based upon value, you got the Grandfather Clock kicked the fuck out of you, as EPS for the S&P were slashed by 57%.

Let’s get bearish, shall we?

IF we slash EPS by 57% this time around, fair value for the S&P, based upon trough FPE of 13, is 530. That’s more than 50% lower from here, LULZ. So, before you declare the market to be “soooooo homosexually cheap” consider what I just told you. I find my lecturing especially humorous coming from a guy (me) 70% long into this mess. However, I promise you, on a stack of really cool King James bibles, I will repent for my sins against the stock Gods and get my shit together soon. See, if we have 50% lower to go, there is lots of time to get it right. In the big scheme of things, we’re barely down over the past 3 months, like 7%. I piss on 7%.

I hope you realize this market is EXTREMELY OVERSOLD at these levels. I mean, we haven’t been this oversold all year long. So, despite the gloom and the doom, like a fucking idiot, I am expecting a sharp rally and soon.

However, rallies should be sold into, until further notice. These are the things you need to look at, in no particular order.

Italian 10yr yields
Spanish 10yr yields
Earnings guidance at big industrial companies
TLT
UUP
FXY
GLD

If you can figure the shit out above and how they correlate with the market, you will figure this tape out. As of now, they are all showing signs of extreme panic. Incidentally, extreme panic leads to jubilation, as bottom feeders eat the carcasses of those being liquidated via margin calls. Oh, by the way, I know A LOT of people readying for margin liquidation. This is no garden variety sell off. The carnage in the basic materials, a sector heavily weighted by hedge funds, is destroying funds across America–like democrats on capitalism.

One other thing, beware of rumors that will start leaking out, regarding LM, MS and other asset management firms, maybe even custodians like BK and TROW. The credit markets are seizing up and things are about to get real sporty and fast.