Get in “The Hole”

As I make final preparations for my first class flight back to America, I am pleased to see S&P futures +22. More so, I am elated to know, if only for a brief period of time, the dicksuckers who profess 0% US-European exposure and a multitude of short sales, will be catapulted into a swarm of bees today. Again, the problem with people, in general, is gluttony. If you were balls deep short, going into the weekend, you got greedy and will now pay the price.

The lessons of managing money, on a high level, continues to repeat themselves, and often. You simply need to pay attention and stop being such a fucking pig.

Finally, Ben Bernanke cordially invites you to enter “the hole” asap. He will bring his finest blunts and 40oz bottles of malt liquor to Jackson Hole this year, begging you to fuck with him.

Are you brave/man enough to get in “The Hole”? Or will you simply fade away, like a one hit wonder, vanquished yet again by THE BEARDED CLAM?

Do you want to know why I am so emphatic about NOT being a bear? Look at the people who are professing the doom and the gloom and the fucking lightening to the face trading action. They are small turtles, scared of foot steps, creeping around like zombies eating flesh. I cannot and will not keep company with your ilk. Understand something, many of these people were screaming on roof tops about inflation 2 months ago. I’ve always asserted, The Hugh Hendry, long treasuries, would be back in style one day, much to your chagrin.

How many of these little burlap’d bears were telling you to buy TBT because, for the love of haunted houses, rates just had to go up?

WHAT HAPPENED?

I will tell you what happened, AND MORE.

The Frakenstein Economy (h/t BP) lost its 10,000 gigawatts and sunk back into oblivion. We never really crawled out from the shithole of 2008. The Fed and the Treasury gave corporations time to mend their balance sheets and they did so with great vigor. At the present, corporations hold nearly $2 trillion in cash, buttressing any bullshit dip in the dollar. All of you dollar homos needs to take a look, in earnest, at the dollar and quit calling for its demise. It is the standard.

Over the past month, commodity related stocks have signaled a sharp drop in economic output. It is my belief this avalanche of negative sentiment started with the debt ceiling snowball. As a result, sentiment plummeted and corporations stopped investing.

Take a look at some of these Basic Material losers, over the past month, absolutely staggering.

No. Ticker 1-month Return Industry Market Cap Sector
1 PCX -49.71 Industrial Metals & Minerals 1,120,000,000 BASIC MATERIALS
2 HUN -41.77 Chemicals – Major Diversified 2,810,000,000 BASIC MATERIALS
3 CIE -41.46 Oil & Gas Drilling & Exploration 3,360,000,000 BASIC MATERIALS
4 WLT -40.67 Industrial Metals & Minerals 4,630,000,000 BASIC MATERIALS
5 MT -40.45 Steel & Iron 30,300,000,000 BASIC MATERIALS
6 CHMT -40.33 Specialty Chemicals 1,070,000,000 BASIC MATERIALS
7 SD -40.28 Oil & Gas Drilling & Exploration 2,680,000,000 BASIC MATERIALS
8 NBR -39.62 Oil & Gas Drilling & Exploration 4,720,000,000 BASIC MATERIALS
9 ACI -38.87 Industrial Metals & Minerals 3,710,000,000 BASIC MATERIALS
10 ANR -37.61 Industrial Metals & Minerals 6,550,000,000 BASIC MATERIALS
11 KEG -36.83 Oil & Gas Drilling & Exploration 1,790,000,000 BASIC MATERIALS
12 KRO -36.03 Specialty Chemicals 2,320,000,000 BASIC MATERIALS
13 MMR -36.00 Independent Oil & Gas 1,810,000,000 BASIC MATERIALS
14 NFX -35.83 Independent Oil & Gas 6,180,000,000 BASIC MATERIALS
15 HSC -35.66 Steel & Iron 1,630,000,000 BASIC MATERIALS
16 ATI -35.31 Industrial Metals & Minerals 4,550,000,000 BASIC MATERIALS
17 CPX -35.11 Oil & Gas Equipment & Services 1,950,000,000 BASIC MATERIALS
18 WOR -34.24 Steel & Iron 1,150,000,000 BASIC MATERIALS
19 WTI -34.12 Oil & Gas Drilling & Exploration 1,360,000,000 BASIC MATERIALS
20 SOA -33.76 Specialty Chemicals 1,830,000,000 BASIC MATERIALS
21 ALB -33.76 Synthetics 4,250,000,000 BASIC MATERIALS
22 SGY -33.69 Independent Oil & Gas 1,090,000,000 BASIC MATERIALS
23 TS -33.67 Steel & Iron 18,260,000,000 BASIC MATERIALS
24 CRZO -33.49 Independent Oil & Gas 1,070,000,000 BASIC MATERIALS

Now, this is telling us one of two things. Either we are entering some sort of fucked up vortex, where only Hugh Hendry gets to dance, while the rest of us get beaten to death with sugar canes. Or, this is nothing more than fear begetting more fear, due to negative sentiment. I’ve seen this type of carnage before and it doesn’t always precede recession. Sometimes investors just sell shit for the sake of selling it.

Of course, there is more evidence pointing to recession than boom time. And, as always, one should be diligent in picking stocks and price points. However, at some point, this all gets priced in, like it or not. When stocks start going up again, even on bad news, you will know we hit bottom. Until then, survive.

My vacation is winding down. I had a great time with my wife and kids. Life is different here. No one gives a shit about stocks or bonds. However, little do they know how much their tourism revenues depends on a healthy western economy. On my seven day hiatus from the real world, I must have spent upwards of 12k on a wide array of accouterments. Naturally, Mrs. Fly had to shop for souvenirs, like a mad woman. And I had to eat at every high end eatery within 50 miles, like a fucking glutton, because that’s what I do.

Come Monday, I hop on a plane and fly back to civilization, where fucktards are literally trying to destroy the world on a real time basis. Will the stock market crash or not? Better yet, will Ben Bernanke save the motherfucking day, or not? Will gold keep going higher? And, moreover, is John Paulson’s asshat fund closing the fuck down, taking every stock he owns with it? All of these questions, and much much more, need to be answered, and soon.

This life of a stock operator is asinine, when I think about it. It’s speculation on speculation, with a twist of gambling. There are methods to game this market; but it’s never easy. Each and every time I make a bold move, I get the distinct feeling that “this time might be different.” When it all pans out, short term memory lapses kick in and I go back to square one.

I never hate on fellow managers who lose their mojo. I can see how people can easily lose their way, cutting through all the bullshit, all the stress and the lies and the backstabbers. Take a guy like Bill Miller, asshat money manager at Legg Mason. Sure, Bill sucks moose balls now and people love to give him shit about it, myself included. However, he was a fucking stud for decades. The same with John Paulson. All of you little bastards are ripping into John, for being retarded. However, the man accomplished greatness. He lost his way and will be recycled. That’s life.

Personally, I’d rather take a stab at accomplishing greatness, even if it’s only for a short time, than live out my days like an average Joe. Anyone remember Randy Stone? Of course not. But I bet you fuckers remember Macho Man Randy Savage.

You see these people on Twitter talking shit? Several of them are documented hedge fund failures. Now they want to train you how to run money? That’s fucking hilarious. Look, I’ve been managing vast sums of money for 14 years. There is a huge difference between telling someone on a blog, or via a newsletter, to buy XYZ because it’s “awesome and amazing” than putting millions of dollars into said ideas and having to deal with real life consequences. That’s my unique, double edged sword dilemma. When you little skittles talk shit about WNR or DECK or whatever stock I am buying, there is real money at stake, not just my reputation. When people fuck with my money, I eat them whole, like a pelican at a beach. I will attach c-4 to your brains and catapult you into active helicopter blades.

Hence, I liberally ban people at will.

Coming soon, iBC is in the final stages of a complete web redesign, very drastic and groundbreaking. It will make all of the other 3rd tier blogs melt away like a snowman in Turks and Caicos.

Sometimes it’s easy to get caught up in the emotion. Geez, if you were to just spend a day on Twitter, viewing the outright panic mongering by would be gurus, you’d never buy a stock again. What we are seeing here has happened before. You just don’t remember it too well, due to all of the marijuana intake.

At the moment, the S&P is down about 12%, month to date. The last time the market melted down in August was back in 1998 when those commy pricks (Russians) had an economic collapse. As a matter of fact, it started on 8/17/98 and it spread throughout Asia. Hence the phrase was born, “The Asian Contagion.” Due to Russia’s overwhelming debt, they decided to devalue the Ruble and fuck creditors. The immediate result was a market in crisis. Commodity prices plunged and equities crashed. I remember the exact moment because I was so dead in the water, I was out interviewing for low end discount house gigs. As I was on one of these hideous interviews, the “boss” brought in his “top producer”, who boasted an annual income of 98k. Just one year prior, I made about 80k, my first year in the business. It was at the very moment, seeing these fucking pikers in front of me that I knew it was my duty to make it in the business.

I borrowed money from credit cards, skipped lunch 3 out of 5 days, worked Saturdays, and got lucky.

I put all of my money under management, and all new money, in one stock, BYND, and scored big. The market meltdown, the end of the world as we knew it, back in August of 1998, never materialized. Following a 14% drubbing, the S&P rebounded in September by 6.3% and some more in October by 8.1% and never looked back.

Aside from 1998, we dove lower in February of 2009 by 10.75%, only to rebound by 8.3% in March. In October of 2008, the market crashed by 16.5% and dipped some more by 6.9% in November. The only other occurrence of a double digit decline in a single month was September of 2002, when the S&P dropped by 10.4%. Shortly after, the market roared back in October by 8.2%.

The trillion dollar question: is this time different? Is this “the end”?

The world has been ending for as long as I can remember. However, somehow, someway, this bitch of a market always seems to come ripping back.

Aside from the fundamental thesis behind the refiners, I am having a very difficult time finding stocks to buy here. The trends are fucking woeful and have the distinct look of being “on the other side of the mountain.”

I’ve looked through all of my screens and all I find is silver/gold. However, the problem with silver is the outside chance a rip your face off and skull-fuck you rally derails the metals, at least temporarily. I like both AG and EXK. But the last thing I want to do is hedge myself out of a good rally.

NVDA is tempting, as well as TZOO, VHC, ARMH and LNG. At the moment, I am much more interested in procuring conch ceviche, than gambling on a somber Friday afternoon.

In summary, I am likely to make do with what I have. Although my upside will be less than before, should we rally, my downside is somewhat contained. Going out a month or so, should the economy remain in flux, I see no reason to be long equities, aside from the temporary hyper-cocaine rallies.

As always, things can change materially. I am not about sticking to an ideology, but raping the trading ranges. At the moment, like it or not, the rubberband is tightly coiled back, readying to spring forward.

NOTE: My year to date gains are around +6%

Aside from the fundamental thesis behind the refiners, I am having a very difficult time finding stocks to buy here. The trends are fucking woeful and have the distinct look of being “on the other side of the mountain.”

I’ve looked through all of my screens and all I find is silver/gold. However, the problem with silver is the outside chance a rip your face off and skull-fuck you rally derails the metals, at least temporarily. I like both AG and EXK. But the last thing I want to do is hedge myself out of a good rally.

NVDA is tempting, as well as TZOO, VHC and LNG. At the moment, I am much more interested in producing conch ceviche, than gambling on a somber Friday afternoon.

In summary, I am likely to make do with what I have. Although my upside will be less than before, should we rally, my downside contained. Going out a month or so, should the economy remain in flux, I see no reason to be long equities, aside from the temporary hyper-cocaine rallies.

First off, I want you to know that I don’t get mad at any of you, really. All of my pent up, homicidal anger is directed towards people in my profession. Why? Sorry, I really don’t know. I guess it’s the same reason why lions want to eat zebra. I just don’t like people in my industry and I make every effort to direct my children away from it. It is filled with the greediest, most dishonest, reprehensible people on the planet, save the law profession.

I hear a lot of people bragging about not losing money in this downturn. That’s great. However, even more, these same people are boasting a bearish outlook, yet find themselves long stocks to “hedge” their shorts. Sorry pal, the only thing you are hedging is your low IQ. Look, only pussies hedge themselves out of big trades. If you are as doom and gloom as you say, take 50% of your assets and get short, with conviction. You can keep the other 50% in cash and use it to get long options for scalp trades.

The reality is, these people are not good managers, but scared money. They’ll never hit the grand slam because they are singles hitters and have warning track power. For some people, that’s okay. For me, I am all about the fences.

Having said that, I am still almost 50% cash due to my belief that “weekends are scary”. God, who knows what will happen?!?! At least my DECK is moving higher, following an absolute drubbing.

Should the market regain its footing, the refiners are the best place to put your money, due to margin expansion. Fucking crack spreads are north of $37 now and the WTI-Brent spread is 31%! If WNR isn’t your thing, look at HFC, DK or CVI, all solid companies in a kickass space.

Best case scenario for the longs, today’s lows stick and we run up into the bell. Worst case, this little rally runs out of steam and we cascade into le belle.

A lot of you small plebs are young and bearish. You hate the world, mainly because of your lack of personal success. As you know, success comes in many different forms. Some of you are upset because you can’t land a hot chick/wife, make some kids, and/or get rich. Without poking fun at you, as I burn $100 dollar bills by the fireside (yes, Le Fly sits fireside in the summer, even in the fucking Caribbean), I am going to teach you what you need to be told.

First of all, there is no long term strategy with the 3x asshole ETF’s. There is too much decay and they will blow your faces off in a NY minute. Trade the 3x ETF’s, holding them no longer than a week. I prefer to trade the options. Buy some TZA calls, at the money or slightly out of the money, current month, and throw some fucking dice. Yesterday, I bought the TZA Sept 47 calls and sold them today for an 80% rip. Did I sell because I thought the market is going higher tomorrow?

Fuck no.

I sold because I never look a gift horse in the face without kissing it on its big stupid nose.

If you believe we are entering a long protracted sell off, short the insurance firms. Fuckers like HIG, MET, AFL, LFC, and others, have massive exposure to the equities markets. You can also target custodians like TROW or BK. The obvious choices are industrial related names, like CLF, JOYG, TEX and CAT. I’d be careful with retail because they are crafty fuckers who find ways to steal your money.

Should credit markets seize up, then we have a whole new ballgame. In The PPT, I created a ratio using net cash per share/price. If a stock is trading with a 0.5 ratio, that means half of its market cap is cash, a sign of financial stability. On the other hand, there are scores of companies that have horrendous balance sheets that will literally go bankrupt if the equity and credit markets seize up. Back in ’08, both FTK and WNR were on the verge of bankruptcy due to this exact scenario.

After you find a company with negative cash flow and loads of debt, find out how it is structured. If the debt is coming due soon, you know they have issues that need to be addressed. You can trade ahead of dilutive offerings and bank easy coin.

As far as multiple contraction is concerned, it’s a moving target. If we delve into economic collapse, none of the current numbers are worth anything. To effectively price the market, you need to consider the worst case scenario numbers, then reduce them again by 25%. So, if you believe we are cheap here at 13X, consider the possibility that the “E” on “PE” is false. Discount it.

Finally, the whole purpose of being a bear is to eventually buy cheap stock. There is no such thing as long term bear, for mankind is always advancing. To bet against mankind is sheer stupidity. Hell, I guarantee you people living in Germany or Japan, circa 1945, thought things would never get better, considering the carnage around them. Everything you see here is fixable because everything is bendable. The snap back rallies will be fierce and they will make a spectacle out of you for staying short. The rallies will materialize out of nowhere, based on rumors and intra-day leaks. Don’t be a jackass and trade with your heart. Always take the high probability trade.

As investors, that’s all we’re supposed to do.

What you are witnessing in the markets is a massive Exodus from equities, in an effort to price in depression. Since we never recovered from the Great recession, any economic downtick will surely result in a good olde fashioned depression. Unemployment rates will soar upwards of 15%, led by prolonged shutdowns in industrial manufacturing companies. If you think the fucktards in Brazil and China will dodge this unscathed, think again. Any and all export nations will see GDP decline far greater than western GDP’s. We are already at a standstill, while they are levitating at unsustainable levels.

When stocks like DECK get sold off for no apparent reason, other than “pricing in potential multiple compression,” you know there is a problem. So, everyone is pricing in multiple compression and everyone is long the same fucking stocks. The end result: FCX circa 2009. Remember when FCX dove lower in early 2009, due to hedge fund liquidations? Well, the same shit is about to happen now, unless the tide is turned.

The major difference between 2008 and today, believe it or not, Bush and Paulson were on top of this shit, albeit a little late. What we have now is a power vacuum, with that fucktard Obama on siesta. As for Geithner, who the fuck knows where he is camping? This is the main problem. The Fed cannot do it all and it seems to me Bernanke is sick and tired of being ridiculed by BOTH SIDES OF THE AISLE, when he is the only one enacting policy in a feeble attempt to save this country. The reality is, the Fed should not be our last savior, but they are due to congressional incompetency.

If left unchecked, we will dive into a depression, equity prices will drop 40% from current levels and trillions of dollars in economic stimulus and Federal Reserve printing will be wasted, left for the sands of time to figure out.

We attempted to avert a calamity, but due to massive malfeasance, we’ve created a fucking monster that is going to eat this country whole.

Nevertheless, as crazy as it sounds, the high probability trade is to be long. Heck, if I know the outcome, so do the asshats who are printing the money. The name of the game is reflate, not sit here and fucking die like little bitches from Carthage.

At the close of trade, my cash position stood at 47%.

I increased my DECK position by 30%, averaging down sub $76.