Commodity Bust is BAD For the Market

Watching FCX , Potash Corp./Saskatchewan (USA) [[POT]] , Agrium Inc. (USA) [[AGU]] , Monsanto Company [[MON]] , Southern Copper Corporation (USA) [[PCU]] and a myriad of other commodity related names trading lower screams panic to me. Apparently, lots of funds and investors are getting punched in the scrotum, as the last place to hide (commodities) gets obliterated.

Believe me, no one hates ag more than me. I’ve had my battles being short POT/long [[SMN]] for ages, waiting for the collapse to occur. However, initially, a fierce breakdown in these names is tragically bad for the market. Understand, people have been hiding in these names. Take that away, and you have a new round of wealth destruction.

A true bear market, if I may be so bold.

Bottom line: If you are long commodities, you might as well get hedged by going long SMN or [[DUG]] . And, at the same time, be prepared to scalp a quick trade, vulture style, off the bloodletting in stocks like FCX.

Overall, this dive may prove to cast a very negative shadow over Wall Street.

The market is ripping higher thanks to the collapse of crude. The unfunny part about this commodity bust is the amount of hedge funds long the space. It’s revenge of the banking nerds and they have their water pistols pointed at the guys who have been poleaxing them for more than a year.

Keep in mind, the people who are gaining ground here are badly damaged. The funds that are long banks are far gone. Redemptions will be made and many of them will go out o’ business. However, with the commodities getting busted out, the best performers are now suffering, especially those who had short banks/long commodities pair trades on.

What does this mean?

Well, it means death for the financial industry, especially the trading desks who have been heavily long commodities, like Goldman Sachs Group, Inc. [[GS]] and Morgan Stanley [[MS]] .

Literally, there is no place to hide, unless you are a ‘space alien magician’ and possess the ability to dodge nuclear bomb hand grenades and venomous snake bites while asleep.

As you know, dollar strength is the foundation of this fuckery. Keep in mind, much of our export growth is directly attributed to the weak dollar position. If you take that away, we lose our edge.

Recognizing how the energy trade is impossible, I sold out of some of my oil longs, Ultra Petroleum Corp. [[UPL]] , Occidental Petroleum Corporation [[OXY]] , Suncor Energy Inc. (USA) [[SU]] , in order to raise cash and stop the bleeding. I will buy more Agrium Inc. (USA) [[AGU]] , under $80. Thus far, that was a stupid trade.

In addition, I will hold off on any further [[SKF]] buys. I prefer [[FXP]] instead, considering it gets you short PetroChina Company Limited (ADR) [[PTR]] and SNP .

Truly, this is a market made for an asshat.

Enjoy.

I bought 5,000 Agrium Inc. (USA) [[AGU]] @ $84.79. And, I bought 2,000 [[SRS]] @ $94.19.

Disclaimer: If you buy the above stocks because of this post, you will be attacked by a swarm of locusts. And, you may lose money.

Thus far, the market is 300+ points lower (and counting), since Cramer’s recent bottom call. Marvelous! I just wanted to put that on the table, just in case you were unaware—God forbid.

Gloriously, the bank stocks are shitting the sock drawer, partly thanks to rotten numbers out of [[HBC]] . Mainly, bank stocks are trading lower because they went up so much, over the past two weeks.

Much to my chagrin, ag stocks are being mauled. As you know, erroneously, I am long Agrium Inc. (USA) [[AGU]] . Let’s just say, my individual equity ideas are being a bit stubborn this morning. Full disclosure, I sold some Clean Energy Fuels Corp. [[CLNE]] on the opening tick, following Cramer’s pump. Did I really have a choice?

Thankfully, I am loaded to the gills in [[FXP]] , [[SKF]] and [[SRS]] .

On the matter of important hurricanes sweeping away entire sections of the U.S.:

It appears we will have to wait. Eduardo is a pussy. As a result, oil and natty stocks are trading off with fury. Go figure.

The whole commodity complex is being busted out, from gold to corn. VeraSun Energy Corporation [[VSE]] should be a buy soon.

With commodities coming down, the U.S. economy should benefit. However, keep in mind, prices are still very high. In order to get me bullish, crude needs to drop below $80 and natty below $5.

FYI: natty is a scam and never deserved to trade north of $10. They were just fleecing you.

Finally, with the FOMC ahead of us, I expect stocks to trade lower. There is nothing Bernanke can do but try to talk the dollar up. He will not raise or lower rates. At the present, he is a sitting jackass, with both thumbs up his ass. Into any strength, I want to take advantage of the smoggy skies of Beijing and get long more FXP.

NOTE: I am still chuckling, not laughing, over Cramer’s bullish bank article, written this morning— citing (of all people) Rich Pzena’s (founder of Pzena Investment Management, Inc. [[PZN]] ) bullish stance on the banks. Perhaps an ideal time to short TheStreet.com, Inc. [[TSCM]] and PZN, providing stock is available? Remember, Pzena is the same guy who is knee capping his own firm, via large bets on banks.

Eduardo to knee cap the filthy Bayou, yet again.

Click here for some up-to-the minute hurricane wish fest jargon.

Developing…

On a ‘Deacon of Death’ development, I like my chances being long GulfMark Offshore, Inc. [[GLF]] , TXCO Resources Inc. [[TXCO]] , Natural Gas Services Group, Inc. [[NGS]] , Arena Resources, Inc. [[ARD]] , Transocean Inc. [[RIG]] and Ultra Petroleum Corp. [[UPL]] .

This is the first important matter:

And, for the second:

Check out iBC’s new quotes.

Fiddle around with it and tell me what you think. We are contemplating using them or another provider. Oh, by the way, Cramer pumped my Clean Energy Fuels Corp. [[CLNE]] . Therefore, it might be a good idea to take some off the table, first thing Monday morning.

UPDATE: Mr. Mortgage details Cramers resume, with regards to “bottom calling” and the financials.

[youtube:http://www.youtube.com/watch?v=8j_TDoOPnIA 450 300]

See you Monday.

NOTE: I just could not let myself leave a “position update” of [[WB]] as the the headline story.

This is the only bank stock, aside from [[AIZ]], that I am holding. There are a slew of rumors running rampant, ranging from buyout to another big write down. My approach to WB is the following:

It’s a “what if I’m wrong” position. It goes against my market thesis; so it is a bit of a lotto play.

In short, being long WB sort of hedges against being short [[LEH]]. Providing my dire scenario turns out to be inaccurate, WB will trade north of $30, one day. If I’m right, I will be selling this sucker, under $10, while making bus loads of doe in [[SKF]].

In other news, celebrating GM’s abysmal car sales numbers (-32%), via buying stocks, is the most ridiculous thing I’ve seen since Michael Jackson kissed that chick on tv.

I’m in this big wheeled monster truck, with spikes and missiles on it, while you’re over there in your bullshit pleather chair from Ikea, looking at charts with your magnifying glass and fucking ruler.

I’m buying [[FXP]], like a drunken stock broker. And, I am selling short the shares of [[VMC]], as if the company was going out of business.

It’s Friday. Relax, drink a few shots of Patron, then short some stocks.

On a side note, [[MS]] keeps chugging higher, alongside a number of queered out banks. The fuckers who are buying bank stocks, must be wearing pink dresses and dislike sports. I can’t figure out why anyone with a modicum of intelligence would buy banks, after they have sprinted 50%.

Look you, of course the banks have bottomed, from where they were. It doesn’t take a Phd in economics to figure that out. However, you have to ask yourself, are they good buys now—after such a big run up?

With regards to [[SKF]]:

That bedeviled inverse ETF is down like 80 bucks in one month, since hitting its egregious high. What, do you think it’s going back to $90? What the fuck are you smoking?

Bottom line: the economy is not in recovery mode. As a matter of fact, it is deteriorating. Upside on SKF is 100 points, with downside of 25. I like those odds.

UPDATE: iBC’s new tabbed blogger has arrived. Welcome Gio, the Hawaii Trader.