Fly Buy: $HOV

The after party has begun. It might last all day.

I’m in for a few blocks under $6.

Please go home and be sure to take your stuff with you.

The higher rates go (TLT), the higher the anxiety. Therefore, rallies are sold.

I am sure the whipsaw will continue.

Bring your own $100 bills.

Markets have decided to stop going lower. Bernanke was seen extinguishing his blunt on someone’s face this morning.

Prepare for hedonism.

And, finally, let’s hope it lasts.

There has been a major dislocation in the FX markets in recent weeks. Ask our currency expert, Forex Kong.

The result of these disruptions have led to lower stocks in Asia, flat in the US, however. There is a lot of fear, stemming from Thailand to Turkey. Yet, US markets have been blowing marijuana smoke in the faces of prognosticators.

A very interesting trend, that has be in place for more than 2 years now, is the brutal bear in commodities. Jim “the bowed tie” Rogers is completely without penis now, lollygagging like an idiot in the orient–teaching his spoiled brats mandarin.

There isn’t money to be made in corn, even though central banks are printing money ad nauseum. Why is that? Everyone has so much money, shouldn’t they be buying farms?

I don’t know how we got hoodwinked into believing the inflation myth. There isn’t wage inflation, just the asset variety. The money that is being made available by the fed is being used to purchase stocks and real estate, evidenced by the facts.

Coffee is down 60% over the past two years.

Natural gas is down almost 60%.

Coal and uranium are off by more than 45%.

Silver, lithium, nickel, sugar, cotton, copper and cocoa are all down more than 25%.

These aren’t corrections, but annihilations.

The above chart is of the yen. It is the cog that keeps the risk train  rolling. Banks borrow yen to buy assets. When the yen goes lower and the asset they’ve purchased rises, they make money. However, if the yen starts to go up while assets are flat to down, forced sales happen. This is a very simple explanation of how the yen carry trade might hurt global markets. It’s real. Be scared of it.

Overall, currencies have been all over the place, with most of the strength found in two risk off currencies: Swiss Francs and Japanese Yen.

In my opinion, the commodity trade isn’t coming back. It can be traded; but forget about CLF hitting all time highs again. US markets will continue to rise, if housing keeps its upward trajectory and the Fed and Bank of Japan keep reflating. We can survive without the Fed and BOJ, but there will be a period of adjustment, which means stocks will trade lower. Eventually, we’ll get off the Fed’s crackpipe, but only after employment has improved.

They told you 6.5% is their mark. Why don’t you believe them?

Buy the dips, unless the yen carry trade unravels. If that happens, buy VXX in size.

Serious volatility is scaring the plebs out from their positions. I, on the other hand, am up 0.4% thanks to IMMR and AMBA. But there are dislocations in the credit markets, municipal and sovereign. Also, the REITs continue to get blasted and commodities are death.

Below is a chart of the yen, which looks to be breaking out–not a good sign for global liquidity, a source of funds for just about everyone.

Here are the REITs.

My risk appetite index is at new lows.

The dollar is getting slaughtered, all the while TLT is going lower. That makes no sense at all.

Italian and Spanish bonds are creeping higher again.

If I wasn’t inclined to talk my book, I’d suggest being cautious here. With mysteries abound and the market good and fat, one is bound to get killed. On the other hand, volatility has been dead for some time now and whenever the market looks like it’s ready to rollover, Ben Bernanke rolls the bears into his philly blunt and smokes them.

For now, I am 100% invested.

His gold fund is down 54% for the year.

Here are his gold holdings year to date, minus his monster GLD position.

I threw in the ANR position for good measure.

Is any high profile hedge fund manager worse than him?

These stocks will continue to go lower until he sells them, just like the banks circa 2011.

I added to my AMBA position.

I literally left the turret after posting a blog this morning in favour of a nap. I felt strongly about the need to relax and thought to myself “when I awake, things will be much better.”

LO AND BEHOLD:

MY STOCKS ARE RIPPING TITS CLEAN OFF THE HAIRY CHESTS OF BEARS.

The constant and persistent march higher in yields is taking a toll this morning. I do not believe the sell off is due to lack of stimulus out of Japan. Instead, I think this is all about the Japanese carry trade–managers worried about a possible unwind.

These are unfounded concerns and the market will understand this soon enough.

TLT is setting up for a sweet buy soon, most likely in August. Fun fact, TLT has never traded lower in August. I can envision myself (extra Mrs. Fly) positioning into TLT in mid July. As for today, you shouldn’t panic over every single drawdown. This isn’t the end of the world and you know there is a permanent bid in equities.

Granted, we don’t want to see European yields blowing out again. Both Italian and Spanish yields have been creeping up in recent weeks, most likely due to the rise in the yen.

In short, TLT needs to stabilize and the yen needs to continue to depreciate. That’s the recipe for higher prices in this market.