Fly Buy: ACI

I bought 10,000 shares of Arch Coal, Inc. [[ACI]] @ $25.65.

Disclaimer: If you buy ACI because of this post, your only son will take a job mining coal. And, you may lose money.

This is what 9% Chinese GDP growth means:

Dry Bulk shipping rates are way too cheap.

Commodity stocks need to reflate by another 25%, minimum.

The world as we know it is not ending.

See, if you were just looking at the stock market, over the last 3 weeks, you’d think China were “enjoying” negative GDP growth, when in fact they are still ripping higher. With inflation in check, and $2 trillion in reserves, the Chinese can offer real stimulus to their economy, via infrastructure projects, if needed.

Essentially, the rumors of impending doom are gravely overstated.

With my money, you know I like The Mosaic Company [[MOS]] and National-Oilwell Varco, Inc. [[NOV]] . However, on that Chinese GDP number, the whole sector can be bought, from Alcoa Inc. [[AA]] to Olympic Steel, Inc. [[ZEUS]] .

My favorites include:

Freeport-McMoRan Copper & Gold Inc. [[FCX]] , Southern Copper Corporation (USA) [[PCU]] , Agrium Inc. (USA) [[AGU]] , CF Industries Holdings, Inc. [[CF]] , Monsanto Company [[MON]] , Arch Coal, Inc. [[ACI]] , United States Steel Corporation [[X]] and Suncor Energy Inc. (USA) [[SU]] , just to name a few.

In addition, domestic retailers are too cheap, despite the credit crisis. Into the thaw, I want to be long [[M]] and Polo Ralph Lauren Corporation [[RL]] .

Naturally, the consumer staples will rebound for two reasons: one due to valuation, two because they are defensive. My favorite staples are The Clorox Company [[CLX]] , The Procter & Gamble Company The Procter & Gamble Company The Procter & Gamble Company The Procter & Gamble Company [[PG]] and Unilever N.V. (ADR) [[UN]].

While it’s true, this rally may not last very long; it is here now. Moreover, while it’s here, “The Fly” intends to sap every last bit of coin from it and transfer it into his checking account.

NOTE: [[SEA]] is a great way to play the rebound in the shippers.

LIBOR rates are collapsing, soon to break 4%. Stocks are set to explode to the upside, because all of you jelly donut eaters are negative. This is, if I may be so bold, the perfect environment for an epic rally. One that tosses the deformed carcasses of grotesque short sellers into idle sewers and eliminates fair play amongst traders.

Yes, the rules have been changed and in order to survive such “Costanza like” environments, one needs to adapt. Otherwise, while “The Fly” hams it up over a nice grilled sword fish, you fuckers will be eating a roasted cigarette in a red wine reduction.

As you can see, National-Oilwell Varco, Inc. [[NOV]] and The Mosaic Company [[MOS]] are “spastically” higher this morning, as people with intelligence quotients higher than 50 step in and gobble up shares, like a turkey pecking away at loose pieces of corn.

For the most part, banks are higher, but nothing too exciting.

The real coin is being banked in the commodity space today. On that news, I am stepping in, buying shares of Southern Copper Corporation (USA) [[PCU]] here, sub $12.30—as the shares are without a doubt “ghetto cheap.”

As you can see, I am banking profuse amounts of coin here. Do not dare bother me.

Please ignore the previous post about riots and toy makers and shit. Our panda friends to the east are still busy manipulating their economy higher. They just reported a weaker than expected, but still kickass, 9% quarter of GDP growth.

Some analysts feared Chinese GDP could come in as low as 7%. Even though 9 is less than 12, it’s still bigger than 7. Therefore, we’re going higher, at least for now.

Xinhua news is reporting that small riots have broken out in parts of China, due to factory closings. As a point in fact, more than 50% of Chinese toy makers have gone bankrupt in 2008.

Without a doubt, this will lead to much higher prices here in the states. I must be out of my fucking mind being long equities.

“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.

The company, which has struggled as global growth has slowed in recent months, employed 7,000 people in mainland China and Hong Kong. It wasn’t immediately clear how many have lost their jobs.

DONGGUAN, China (AP) — Unemployed worker Wang Wenming was angry at his boss for shutting down a massive Chinese factory this week that made toys for Mattel Inc., Hasbro Inc. and other American companies.

But the assembly line worker was also furious at the United States.

“This financial crisis in America is going to kill us. It’s already taking food out of our mouths,” the 42-year-old laborer said Friday as he stood outside the shuttered Smart Union Group (Holdings) Ltd. factory in the southern city of Dongguan.

The company, which has struggled as global growth has slowed in recent months, employed 7,000 people in mainland China and Hong Kong. It wasn’t immediately clear how many have lost their jobs.

Economic upheaval in the U.S. is already changing and shrinking China’s vast manufacturing hub in the southern province of Guangdong, long regarded as the world’s factory floor. However, factory closures won’t just be a China problem — shoppers will feel the effect in malls and stores in the U.S. and Europe.

“When these companies go bust, the outcome is higher prices,” said Andy Xie, an independent economist in Shanghai. “Labor costs have gone up 70 to 100 percent in the last three or four years. But these guys have not been able to raise their prices because Toys “R” Us, Home Depot and Wal-Mart are saying no price increase. How is that possible?”

For years, there were too many factories competing to win bids from foreign buyers demanding prices that were often unrealistically low. The winners were American and European consumers, who enjoyed rock-bottom prices.

But many factories were scrimping on materials and stiffing their suppliers just to survive, Xie said. The financial crisis will be the final culling factor that forces many wobbly factories to go belly up and end an unsustainable situation, he added.

Already, China’s toy industry is hurting. The official Xinhua News Agency reported this week that 3,631 toy exporters — 52.7 percent of the industry’s enterprises — went out of business in 2008. The causes: higher production costs, wage increases for workers and the rising value of the yuan, the report said.

Nor is Christmas likely to make much difference. Big toy giants generally put in their Christmas orders months in advance so toys can be shipped to them in time.

Even before the financial crisis, China’s exports were dropping because of the slowdown in America and Europe. For the first time in three years, the growth rate for Chinese exports in the first quarter of 2008 declined, according to customs figures.

Chan Cheung-yau, chairman of toy and games subcommittee under the Chinese Manufacturers’ Association of Hong Kong, agreed that the outlook was gloomy for toy makers. He predicted that thousands more factories would close in China next year.

“The tightening credit market has made it more difficult for manufacturers to raise funds,” he said. “It has created a huge cash flow problem.”

Workers at the Smart Union toy factory said that for several months the plant was less busy and paychecks were arriving late.

“The management said the problem was that our American customers weren’t paying for the goods they ordered so the company couldn’t pay us,” said worker Shao Xiaoping, who was still wearing his blue company shirt with a red patch above the pocket that said “Smart.”

He was among 100 workers who on Friday gathered outside the gates of the factory, a sprawling five-story complex covered in white and blue tiles discolored by dust and smog. About 2,000 other laborers protested outside the local government’s offices, demanding that the Hong Kong-based company pay their wages, severance and other benefits. The building was guarded by a line of 50 riot police with shields and clubs.

The workers said the Hong Kong-based owner of the factory didn’t warn them before the plant closed Wednesday.

“I’ve been working here for eight years. I have no idea whether I’ll ever get paid. The government says we will, but I’m not optimistic,” said a man in a white sleeveless undershirt who would only give his surname, Zhang. Most workers wouldn’t completely identify themselves for fear speaking to the press would cost them their wages.

A sign posted by the local government on the factory gates said workers could be detained for 10 to 15 days for stirring up unrest, unlawful gathering, protesting and ignoring orders from security officials.

Calls to Smart Union’s offices in Hong Kong went unanswered. On Friday, the company said in a filing to the Hong Kong Stock Exchange that it informed Hong Kong’s High Court that is has stopped operating and was seeking buyers.

Last year, the company, listed on Hong Kong’s stock market, said in a financial report its core customers included Mattel, Hasbro and Spin Master Ltd. The company’s stock was suspended from trading Wednesday.

In another report this year, the company reported a pretax loss of US$25.9 million (HK$201 million) in the first six months.

Higher manufacturing costs — including a 20-percent rise in the cost of plastic — took a big bite out of profits, along with the 7 percent appreciation of the yuan, it said. The company was also hammered when Mattel and other toy giants recalled millions of Chinese-made toys last year because of safety concerns, the company said.

Although Smart Union wasn’t directly involved in those recalls, “the product recall incident badly affected the toy industry,” it said.

Most of China’s toy factories are in Guangdong province — the main laboratory for the bold economic forms China began 30 years ago when it began shifting away from communism. The province was a good place to start dabbling with capitalism because it shares a border with Hong Kong, the main gateway into China for foreign investors.

Companies from Hong Kong, Taiwan, America and Europe flooded into the province to set up low-cost factories that made everything from sneakers and bras to laptops and iPods. The booming region close to Hong Kong became known as the Pearl River Delta.

Most of the factory closures are happening in the Pearl River Delta, and the changes didn’t seem to bother one of the province’s highest-ranking economic officials, Vice Governor Wan Qingliang.

In a briefing with foreign reporters this month, Wan said the global economic crisis wouldn’t deter the provincial government from pressing on with a sweeping plan to restructure the Pearl River Delta’s manufacturing base. He said the government wanted low-end factories to move farther into China’s interior so that they could be replaced with more high-tech, advanced industries.

“We have a policy to empty the cage for the new birds,” he said. “The ultimate target is to build the Pearl River Delta into the core region of modern manufacturing.”

If the strategy works, China might eventually come out of the toy crisis stronger.

Brought to you by the Godly folks at iBankcoin. Coming soon.

[youtube:http://www.youtube.com/watch?v=exPbOejUenk&feature=related 450 300]

I am posting my closing comments 30 minutes before the close, mainly because the market is a lying whore. The late day price action is absolutely asinine, all thanks to margin clerks. I know these people and they are ruthless bastards.

However, as the market firms up, with time, the margin call selling will stop and volatility will decrease.

You know my game plan, which is to buy egregious amounts of The Mosaic Company [[MOS]] , National-Oilwell Varco, Inc. [[NOV]] , [[TBT]] and [[UYG]] , while holding ample supplies of cash.

While it’s true, I own a variety of stocks, but none as important as the ones above.

The credit markets are easing and that is definitely good. However, at the same time, global growth is collapsing, as demonstrated by the dot com-ish drop in the dry bulk shipping index.

Next week, in my opinion, the most important data is Chinese GDP (Monday). Should those red fuckers come in with a 7%+ numbers, saddle up, we’re going higher. However, anything less than 7% will scare the markets into panic.

Any gamblers?

On a strong Chinese number, get long Joy Global Inc. [[JOYG]] , Peabody Energy Corporation [[BTU]] , Bucyrus International, Inc. [[BUCY]] and other coal players. As you know, coal is the filthy fossil that keeps the Chinese engine running.

On the short side, any disappointments should be met with massive [[FXP]] and [[EEV]] buys.

Expect the market to whipsaw all around, due to the imbeciles who call themselves “option traders.” These people are not traders; they’re fucking gamblers.

With the Dow giving back here, I have halted any new buys. Who knows what this stupid market will do?

In normal markets, when the breadth is this good, we should not reverse lower. No fucking way.

There are solid gains amongst most Dow and Nasdaq 100 components. Typically, when stocks are 3%+ green on the day, they do not go negative, barring some sort of new release.

In short, I am not selling, regardless of how we close. Should we “enjoy” an ugly close, I will buy the Monday dip. Should we close strong, I might sell a little on the Monday rip. Either way, sometimes it’s important to think big picture and ignore the 15 minute fluctuations of the stock market.

Think big and you will destroy all of your enemies.

You fuckers are besides yourselves due to my egregious winning percentage, aren’t you?

While I’m over here rejoicing in the blood of deformed bearshitters, you sit there pussified about the end of the world.

Fuck that. My senses are on a much higher level than most, if you haven’t figured it out by now: I am a pimp smacking “space alien magician.”

Currently, my cash position is 30%. As I said before, I will hold 25%, no matter what, mainly because I am up nearly 60%, year to date, mind you.

For you rookie idiots, keep note of my legging into positions, as opposed to your nonsensical all in approach. You lose money in the market for two reasons: 1. you are a bad stock picker. 2. you do not know how to build positions.

For example: had you gone long Apple Inc. [[AAPL]] earlier this week, you’d be down more than 10% already. However, if you were patient, and kept cash aside for an average down, you would have the firing power to lower your cost basis here.

As for hedging: I find no reason to hedge, down at these depressed levels. Should the market goose step to 10,000 or higher, I might consider a little [[FXP]] or [[SRS]] . Basically, if there was ever a time to have balls, via egregious stock buys, it is now.

Luckily for me, I am already up big; so I don’t need to go all out here. Instead, I will just roam around my office dumping cigar ashes on Tim Knight’s bullshit blog.

UPDATE: “The Fly” gets his revenge.

UPDATE II: I bought 10,000 [[M]] @ $10.15