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.
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