It’s Not Over

0bama wants to raise taxes so that we can spend it on bridges and tunnels. Unfortunately, said bridges will likely be MADE IN CHINA. That’s right. This country is so fucked we’re actually outsourcing the production of our bridges to China, because of their slave labor. So what exactly are we doing?

Answer: importing slave labor.

I sold out of the majority of my stocks this afternoon because I genuinely feel we are at the precipice of a crash. The upside moves in TLT and UUP, coupled with the outright liquidations in commodity, tech and financial related names, has me thinking something very ominous is looming. Having said that, I left 30% of my assets long in the event we knee-jerk higher on policy announcements. Make no mistake, policy makers will announce something and soon. They cannot just let the ship sail into the sunset without trying to sink it first.

The reasons for selling was very simple and concise. I was down 4% intra-day and up 4% for the year. I cannot ignore such mathematical coincidences. I took it as a sign from the Gods and left the table a winner. When we do rally, I will be prepared to toss cash into the market like brokers throwing themselves into lit fireplaces tonight.

Everything is collapsing because cash calls reign supreme.

Coming soon: major EPS cuts, French bank rumors, Euro-Libor concerns, Italian 10yr bond concerns, US spending bill impasse, Rumors swirling around US investment banks and custodians, major hedge funds liquidating, and significant downside revisions in US GDP forecasts. The upside? Possible inflationary policy response aka “nothing new or special.”

For me, the choice was simple. My only regret is not selling yesterday.

I sold out of everything but a little WNR, GSVC, AG and LCC, raising cash levels to 70%.

More on this later.

As you read this drivel, I am down a little more than 3% for the day, OUTPERFORMING most sectors thanks to my 30% cash horde. Truth be told, it is very tantalizing to buy stocks down here. After all, we are absurdly oversold, based upon normal metrics. But things aren’t exactly “normal” are they?

I am pulling a decent amount of money out of my banks today and tomorrow. Not because I believe there will be a bank run, but because it’s entirely possible. They’re all fucking liars and there is no way I can guarantee liquidity, if BAC-C-MS seizes up. Siemens is pulling money out of Socgen and the COO of Blackstone said he can’t get financing for more than $1billion in Europe.

$1 fucking billion.

I will not buy stocks, unless I sell something else. The 30% cash level is now permanent, due to looming catastrophe. If stocks bounce here and run, so be it. The penalty for being wrong here will be finality. We are talking about a major move to the downside, without curbs or government help. The Tea Party will have their dish served on hot platters of surplus coals.

On the other hand, there is no way I can short stocks here either. We are too oversold to short now. While some of you are addled with ADD and find a need to trade something every 10 minutes, “The Fly” is interested in big moves. Therefore, my only concern now is preservation of capital, not capital gains.

As the day progresses, look forward to margin liquidations on an industrial scale. There are so many fucktards long commodities, short dollars, it’s almost funny. Granted, it’s been a popular trade to be long GLD, short UUP. However, the pain trade has now been applied to the necks of gold bugs and they shall join the margin liquidation party soon.

It’s Hugh Hendry TLT all day every day because nothing is safe. Think about that for a second. Nothing is safe.

Food for thought: Public companies like SCMR are now trading near net cash. What is their cash invested in? You got it: treasuries.

For today’s market session, I hired three violinists to play the shit that was playing in the Titanic movie, in order to set the mood. I am drinking brandy, ignoring EVERYTHING Mrs. Fly says to me. It’s as if she isn’t there, a ghost of sorts.

Early going, my losses stand at just 4% intra-day. I said “only” because I expect a great deal to come. However, the problem with selling anything right now is it goes against what my urinal shadows are telling me. So you know, the urinal shadow in the butlers uniform is a NET BUYER of stocks here.

Let’s put something on the table, shall we? Ben Bernanke is a fucktard. As such, I removed his iBC cocaine theme. He does not deserve it.

Hey, as the price of crude collapses, fucking hedge fund managers with vigor, jet fuel prices will drop. With that, airlines make money money. As logic dictates, profits will rise and the stocks will soar. HOWEVER, I am assuming people will still fly inside of airplanes. That’s the rub!

The market is singing beautiful tunes today. It is the songs of horror and desperation, designed by the devil himself. “The Fly” welcomes the end of the global banking system, so that he may begin his life of crime.

Oooooh, as my violinists go into diminuendo, the market is rallying. I need some fucking opera singers in here.

Developing…

Wow, I cannot believe my eyes. I am not just talking about the whoosh lower in futures. I am looking at T-bills trading at a negative yield and TLT north of $122. Euro Libor is at the 2009 highs and European markets are crashing. Moreover, the safe havens have been bombed, namely GLD. In this environment, everything trades lower.

If we are using the 2008 model, this is just the beginning. This crisis will be absorbed without TARP or bailouts. The political will is gone and we’re on our own.

Inflation was never real. I know Peter Schiff and others made millions off scaring people into believing that lie. But the truth is, the Fed can’t print money fast enough to offset the destruction of capital. Don’t take my word for it, go take a look at copper, oil and coal.

Regrettably, I missed this move to the downside. Hindsight is 20/20 and there is no point lamenting over losses. They just happen. As tempting as it is to deploy my 30% cash into this market, I will likely do the opposite. Despite being technically oversold, there are many other factors that take precedent.

This is it. This is the collapse that everyone said would happen. At this very moment in time, while our leaders twiddle their thumbs, the global banking system is collapsing. The only thing that has me scratching my brain this morning is Italian 10yr bonds, actually easing a bit here to 5.75%.

Aside from that, the European banks are way over-leveraged and our economy is in the grips of a deflationary vortex.

Good morning to you too!

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.

Look at these year to date losses in some large cap stocks. Absolutely staggering.

No. Ticker YTD Return Market Cap
1 CX -63.49 5,480,000,000
2 ANR -62.95 7,320,000,000
3 RIMM -62.91 16,010,000,000
4 MT -55.97 32,710,000,000
5 MTL -54.24 7,380,000,000
6 AIG -52.46 42,310,000,000
7 BAC -51.95 70,840,000,000
8 CCJ -50.25 8,770,000,000
9 LPL -49.80 7,210,000,000
10 MS -48.95 33,390,000,000
11 RF -48.28 5,600,000,000
12 WLT -48.01 5,200,000,000
13 RCL -47.95 5,600,000,000
14 LYG -47.93 43,320,000,000
15 VE -47.06 8,350,000,000
16 JNPR -46.48 11,670,000,000
17 NBG -46.43 5,490,000,000
18 SNE -46.23 21,710,000,000
19 C -45.94 83,020,000,000
20 TCK -44.87 25,160,000,000
21 ACH -44.35 9,360,000,000
22 SID -44.14 14,290,000,000
23 GGB -43.67 14,580,000,000
24 TTM -43.54 10,410,000,000
25 FSLR -43.51 8,830,000,000
26 FBR -43.29 7,160,000,000
27 BCS -43.14 29,960,000,000
28 GM -42.76 34,940,000,000
29 NOK -42.75 22,930,000,000
30 TS -42.66 18,940,000,000
31 HPQ -42.52 53,650,000,000
32 NMR -41.85 14,920,000,000
33 LFC -41.49 69,160,000,000
34 GS -41.42 58,710,000,000
35 FFIV -41.06 6,350,000,000
36 PHG -40.89 19,940,000,000
37 F -40.62 41,530,000,000
38 SPLS -40.25 10,540,000,000
39 FCX -40.23 43,420,000,000
40 STI -40.21 10,540,000,000
41 AFL -40.00 17,020,000,000
42 LNC -39.93 6,480,000,000
43 BSBR -39.49 34,890,000,000
44 HST -39.23 7,990,000,000
45 SCCO -39.23 27,160,000,000
46 DB -38.80 36,050,000,000
47 NFX -38.54 6,540,000,000
48 STM -38.54 5,830,000,000
49 TLM -38.00 16,790,000,000
50 CS -37.86 33,190,000,000

Everything is falling apart. The world is burning and the Fed is buying 30 year bonds to lower mortgage rates, yet banks do not lend money to people. So what’s the point?

Bernanke stepped in with a meek $400 billion. Not enough.

The result: massive sell off in equities, crushing everything in its path. The GOP should be pleased now, as this economy is sure to devolve into a devastating depression.

As for me, I did everything wrong. I had over 10% of my holdings in TLT yesterday, but sold to finance a purchase in AG. I am now down 4% in my AG position. My tech shares are going lower, albeit not as much as commodities. Speaking of commodities: they are in a NO BUY ZONE, ever. Expect dramatic eps cuts and wholesale liquidations by hedge funds going bust. The sector is over-invested and the great unwind is going to continue. See ANR, WLT and FCX to see what the great unwind looks like.

I am far from out of the game, still up around 9% for the year. However, this move to the downside is especially worrisome because it is occurring at oversold levels. In other words, we could get a real fucked up sell off soon, firmly placing us in the 4 digit range for the Dow.

Just to recap what I’ve been telling you: pricing in a recession, in my estimation, puts the S&P at 850 to 900. Any rallies should be sold and cash should always be heavy.

Holy shit bonds are soaring now. Be patient, prospective home buyers. You will be able to get a 30 yr mortgage for less than 3% in no time at all.

The initial market reaction is ALWAYS wrong on Fed days. I’ve warned you about this countless times. The news by the Fed was as expected and frankly not enough, in my opinion. However, it’s important to note that Ben Bernanke just outed his cigar on the faces of the GOP.

Fuck you GOP. Ben’s pimp hand is indestructible.

The outlook is bad and you should take heed to the Fed’s warnings. At a minimum, this means no margin accounts or large directional longs bets through derivatives. Eventually, this market is going much, much lower.

However, I am not against a little cocaine induced relief rally either.

For now, I am in a holding pattern, still with 30% cash. Earlier today I added to my AG position. But precious metals are now under pressure, as TLT goes fucking gangbusters to the upside.

Fuck. I should have held it.

Forget about the silly european debt crisis and downgrades of US banks by Moody’s. Do you want to know where the real dangers lie? In case you didn’t know, China.

Look at WLT’s earnings warning today. That is unassailable proof that China is slowing down, drastically. As a matter of fact, do not be surprised to hear about a full fledged collapse in their cardboard economy, and soon. Make no mistake, the materials, led by copper, have been warning you of this reality for months now. Admittedly, I was a bit skeptical. However, after today’s evidence through WLT, I am convinced: we are heading for a most heinous economic downturn.

Clam this, clam that.

The Fed can create inflate. Before QE, monthly CPI was at the lowest in recorded history, at 0.6%. One year later, it was north of 2% But if the buyer of last resort (China), goes offline, we’re fucked.

My minimum cash level is 30%, which is exceedingly high. I intend to bank a little coin in my longs, believe it or not, just prior to selling them for mounds of cash.

Gentlemen, I hope you are dressed to the nines, as instructed (tux, white gloves, cane with ivory tip and top hat). The fate of your country, as well as your bullshit portfolios lies in the balance.

Top picks: AG, LCC, VMW