You Cannot Choose Your Own Reality

Most of the people I see on CNBC are “trend slaves,” easy to trick, devoid of real trading acumen. For months, I’ve been talking about buying TLT, when in the lows $90’s. As a matter of fact, I’ve done so on many occasions. Immediately, the “inflationistas,” as I like to call them, crawl from out of their corn crops to espouse ridiculous opinions about inflation, runaway yields and a dollar going to zero. While on occasion, I tend to blog about such things as $100 tomatoes; my heart has never been behind a real inflation trade. Without wage inflation, everything you see here is manufactured. As you can see by the recent turmoil, deflation is still the biggest risk to the system, not inflation.

So here we are, TLT is up from $93 to $109 in a few short weeks and I am hearing so many people suggest buying, in order to protect assets. Are you people fucking insane? If you want to protect assets, put your money in a money market or leave it in cash. Buying bonds up here is absolute madness. You can very easily “enjoy” a 10% pullback from current levels. Remember, the same people who were telling you rates were going to 10% are telling you to buy TLT now.

They conform to whatever dire scenario dejour is available on any given day. They do not manage risk. Instead, they are bearshitters, outfitted with burlap hoodies and florescent green velcro pants.

This is reality. Italian and Spanish yields have plummeted. As a matter of fact, Spanish 10 yr yields are at the lowest since November of 2010. Italian yields are at pre-crisis levels, under 5%. And, despite all of the shit talking out of the rumor mills, regarding SocGen and France, French yields are in the low 3% range.

Now tell me, aside from a slow economy, what’s your reason to panic?

That’s more like it Gents. We’re up 300 now and punching people in the faces again. I gave back about 1% yesterday and find myself up 4.4% today, putting my year to date gains north of 3%. While it’s true, I was caught offguard, long into a fucking crash, I am on my fucking game right now, ready to book monster gains again. As of yesterday, I am 80% long, focused on a few select stocks.

Look, this is how I see it. Italian and Spanish yields are going LOWER. The SocGen rumors, thus far, have been negated. All Central Banks are providing liquidity and begging you to go long stocks. The jobs market has been showing signs of improvement. It’s very, very easy to panic, sell stocks, and hide under the kitchen cabinets. Nevertheless, more often than not, people get scared for NO FUCKING REASON. Over the past two weeks, people have become hysterical. They’re calling for Great Depressions and sound downright ridiculous. You cannot cheerlead the market higher when it is hitting new highs, then profess how fucking doomed we are when it hits lows. And the bears, on the plutonium from my spaceship, have it coming to them in the worst way possible. These men are practically circle jerking on their monitors, clamoring for blood.

Fuck those guys and to hell with you unoriginal trend slaves.

Talk to my WNR.

It’s truly unbelievable to me that Europe cannot hold another gain. Do not be surprised if we go negative too. This whole SocGen crisis, even if manufactured, is infecting the minds of investors. Without confidence in the banking sector, you will get a run on the banks. When you get a run of the banks, pandemonium (no Hulk Hogan) strikes.

I’d love to celebrate my Goldman upgrade of WNR this morning. After all, it’s not everyday when an analyst makes a smart call. Gasoline is much cheaper than it was a few weeks ago, but oil is even cheaper. The prospect for demand destruction is down significantly. Hence, the refiners are more attractive.

Back to the market. Whenever the true short squeeze hits, it will be insane. This shit you see here today cannot hold. It’s too tepid, too weak, to scare any short out of the market. We need another +400 day. We need it on monster volume and Europe needs to do their part. Don’t get me wrong; we can build from here and get to +400. But, we cannot fiddle around, +100, following a fucking -500 day and expect short sellers to cover.

They need to be slayed with African spears, bones ground into dust, ashes placed inside an urn, and then tossed inside a fucking incinerator. Anything short of that simply doesn’t get the adrenaline going.

Today’s tell is BAC.

Check this out. Aside from the market, great tragedies have been occurring at La Casa del Fly. For example: just yesterday, one of my light switches broke. And, if you could believe it or not, my fucking cleaning lady destroyed my bathroom sink. I don’t know how she did it. But I have a gigantic crack in the sink that can only be remedied by replacing the whole counter top +new sink. Perhaps I might need to buy a new vanity too. Developing…as always.

Just last week my refrigerator decided to stop working. I had to replace it. Chalk up another $3k. And, my oven stopped working too. I had a repair man fix it for a modest $400. And, one of my kitchen cabinets crumbled to pieces. I had a new one custom made for only $550, sans installation. These things are not normal and “The Fly” wants to know: WHATTHEFUCKISGOINGONHERE?

I don’t have time for this extra shit, while markets are plunging and shit, zombies trying to eat my brains and all. There are lots of gangsters I am fighting on Twitter and it’s a dangerous world, as you know. If God is listening, please, respectfully, cut this shit out already.

In other news, I am cooking a mean red sauce now, fortified with low end French wine. It should be delectable and delightful (NO HOMO).

The rumors are turning into truths by self fulfilling prophecy. I know this is a controversial position, but I know for a fact companies like Lehman and Bear Stearns were forced out of business. Sure, their assets were devalued to the point of insolvency and their managers over-leveraged in a bad market. But, ask yourself, where are those same assets trading now?

Answer: significantly higher.

When markets panic, things get sold down to absurd levels. The problem we have now is leverage. We have leverage at the banks, hedge funds and for the love of second hand sneakers: ETF’s. The retail investor is long fucktarded super charged upside ETF’s, in the midst of crisis. That is a recipe for disaster. Don’t get me wrong, they can be good for a trade, but never part of a core investment plan.

So here we are, three years removed from the biggest credit crisis since the great depression, and it’s happening again. For the love of dead dogs inside 5 star hotels, we’ve been crashing since 1997, continuously, without abatement. There are great values and eventually investors will pay attention. You need to stay in the game.

Today’s decline was God awful (no Jesus). However, we are still +1.5% on the nazzy since yesterday. Small gifts.

With my money, I am not buying anything other than WNR, for the moment. My cash position is down to 20% and my core positions performed admirably today, despite the panic. As of 3:50, I was down 0.75%. Considering I was +8% yesterday, I consider myself lucky.

The recent spate of rumors needs to be squashed immediately or they will become truths. The dicksuckers over at S&P can toss this market into a 1,000 point decline with a French downgrade. There is nothing redeeming about France, not even the cheese.

With gold shooting to new highs and treasury yields at new lows, you know where the money is flocking. There are black swans everywhere and every Tom, Dick and Harry is calling for a grande collapse. It’s so predictable, it’s almost a forgone conclusion.

This is a coordinated bear raid on world indices. Do not be hoodwinked into believing there is much substance behind the fear mongering. It should come as no surprise to see most leaders on vacation now, whilst this is happening. The timing of this raid is sublime.

According to a recent Morgan Stanley report, refiners are pricing in a 2008 style recession plus sub $15 cracks. This is absurd. By no means are we heading back into a 2008 style recession. Moreover, 321 cracks are north of $35 now, new 52 week highs.

You want to know what I am doing about it?

I just doubled the size of my WNR position, in order to reduce my cost and put my money where my mouth is. Granted, the market is fucked up and people are scared shitless over these bank rumors. However, should these rumors get stomped out, all of the refiners will curry the favor of large institutional interest. Look at Tepper’s Appaloosa fund. Not only did he just take a stake in WNR, but CVI and VLO are amongst his largest holdings.

With regards to WNR: they hedged a bit to pay down debt. They’ve paid down more than $400 mill in debt since 2008 and intend on deleveraging some more by December. Furthermore, they have several hundred million dollars in assets for sale, which will help paying down debt. Bottom line: they are a cash generating machine now, having 100% exposure to super cheap WTI crude, benefitting from the Brent-WTI divergence (Brent now trades at a 29% premium to WTI).

In my opinion, one way or another, she trades up to $25, ARGGGGGG (pirate voice).

Well, that was fast, wasn’t it? I didn’t think we’d retest the lows immediately. I figured it would take a week or two. Listen, while France CDS are blowing out and SocGen is imploding, you cannot buy stocks. This is a worst case scenario, one that crushes investor sentiment, grinds it into dust and throws it into a fan pointed towards the ocean.

Having said that, I haven’t sold anything either. I am in a holding pattern, with more than 30% cash. I’ve had the same positions since last week Friday and have no plans to make adjustments.

When the dust settles and the black smoke dissipates, I will be buying refiners in size, namely HFC, DK and more WNR.

For now, I’m watching the shit storm, in amazement, and waiting for an opportunity to dollar cost average into some of my under water positions.

To restest the bottom? Sadly, I think not. Immediately following the flash crash, my short thesis revolved around the premise of retesting the lows. Well, eventually, we retested them and more. The market loves to test the mettle of investors; this will be no different.

First let me lay out the short term thesis for a bull run.

1. The recent jobs report was better than expected.

2. People will start to believe we are in a “soft patch”, like last year, instead of a prolonged drawdown.

3. Italian and Spanish yields have been dropping, alleviating funding pressures.

4. Short sellers and hedged managers are heavily exposed here, positioned for end of world trade. Well, it isn’t.

5. 14 of the 30 Dow members have FPE’s less than 10. Moreover, using low end estimates in The PPT screener, the average FPE comes in at 13.5x. That’s using LOW END numbers, not mean.

The reasons to sell stocks, include:

1. Asian growth slows.

2. The possibility that Italian and Spanish yields climb again, coupled with inaction on the part of the ECB.

3. US growth continues to slow.

4. Obama’s approval rating improves.

5. Aliens invade America and enslave all traders from the NYSE.

Look, the whole crisis was concocted by insidious bond vigilantes. We were sitting at new highs 3 weeks ago because corporate balance sheets are great, we were in the midst of an ipo boom, and more than 80% of companies were beating analyst estimates. The whole S&P downgrade story is a crock of shit. Our borrowing costs are at record lows. We piss on S&P.

Providing the ECB controls the bond vigilantes in Europe, there is no reason to believe we will not charge higher by another 500 Dow points.

Other risks to the system lie within the performances of large hedge funds. I get the feeling a few of them just blew up and will be forced to liquidate.

We are certainly not out of the hot water yet. We need follow through and fast. Should we drop 200+ tomorrow, that would mean an immediate retesting of the lows. If we keep the squeeze going, we will “V-shape” higher until fall, when I believe brand new issues will confront this market, deriving from the hideous and barbaric continent of Asia (see my 2011 predictions).

First, anyone interested in looking at the technical patterns of previous washouts, see ChessnWine’s video. Fantastic job.

My initial reaction to the Fed news was “uh, oh.” I hung up the phone, telling my friend “we might tank here.” Then after further review, I figured we had to stop sucking on the Fed’s tits eventually, so why not now? Fuck it. Then I witnessed the unbelievable, as 2yr, 10yr and 30yr treasuries skyrocketed, sending yields to historic lows. Our financing costs as a nation are so low now, we should issue $5trillion in notes tomorrow, in order to lock in these absurd yields.

Gold started to soar and the Swiss Franc went parabolic to the upside. The market was down 50 and sinking quick and all I could do was pace back and forth my television, watching the fucktards on CNBC smugly analyze the news. Truth be told, I was as nervous as could be, fearing the bottom was about to drop out of the market. Aside from my managed accounts, my personal money is at stake here and that is fully invested, with cash less than 5%. The market plunged, moving down 200 and I felt as if my heart was about to explode.

I picked up the phone and called my friend. You might know him as “Chuck Bennett.” In a very calm and cool way, he said “fuck this shit, this is the bottom. We’re going higher. Look at yields. People need to put money back into stocks; this is nuts.” He furthered, “watch, we will close at the highs of the day.”

In an odd way, he calmed me down. I needed to hear something positive, especially after watching THAT FUCKTARD, Rick Santelli, promote fear on my teevee.

No matter what, I never intended to sell or buy anything today. However, the way this tape is looking now, if I might be so bold, it appears “The Chuck Bennett Bottom” lives and we have legs into the bell. If  not today, I will be adding to my positions, WNR, GSVC, EMN, DECK and CLF. There is no reason to add diversification when I could dollar cost average into current holdings.

All in all, this is the best case scenario. We didn’t get QE3 and plunged as a result. We looked the Zerohedgers into their beady eyes and kicked them down egregiously deep water wells.

Well, the Fed isn’t playing to the market anymore. The market is going to have to deal with its problems all on its own. In an odd way, this is refreshing. Although I wanted QE3, it is unsustainable. So here we are, on our own, and the market is recovering from the original dump.

Before I make any predictions, let me just say: I am doing nothing, once again.

Let’s see what this market is made of. This is a pivotal day and the world is watching.