Unmitigated Disaster

I left the office this morning to think about the market. I am conflicted between two schools of thought. On one hand, the market is clearly oversold. On the other, how in the world does Italy and Spain wiggle their way out of this mess? Moreover, it is clear to me, it looks like we are heading back into recession, the old double dip.

I can take the hits now, book the losses and walk away with a 13% gain. But if I do that, I risk missing out on what is sure to be one of the most “awesome and amazing” snap back rallies of all time. Truth be told, my current roster of stocks are sucking “severe dick” (whatever the fuck that means). My recent spate of option purchases have gone to hell in a hand basket and my buy of TNA yesterday is laughable today.

The question is, are we in the midst of a 2008 style melt down or is this something that will pass?

Part of me wants to just bury my head in the sand, especially since I only have 50% exposure. The only way to guarantee snap back rally participation is by holding onto positions, even if it feels like hell on a hot day. Then again, only fucktards like Bill Miller trade like that, taking hits for no apparent reason other than to stay “long and strong.”

They are trying to destroy the market, by taking yields down and running up CDS. As you can see, they are quite efficient at causing panic. The only safe havens are gold, silver and treasuries. Incidentally, it has been in my game plan to get long TLT for August since the beginning of the year. I am fucking pissed at myself for missing the trade, when it was in the low $90’s.

What am I going to do?

I’m going to throw fucking spears through the faces of people soon, African mask style.

321 crack spreads are at record highs, above $34. The Brent/WTI spread is at record highs at $22 or 24%. Take a company like WNR, who gets their crude from the Eagle ford shale, which sells at a discount to WTI, and you have a company that is seemingly immune to the barbarity taking place in this market.

A company like Western Refining is to the stock market what Rome was to Britain, circa 75AD. Like the British, all other stocks aside from WNR and a handful of others, are neanderthals, unjust and outright uncivilized.

WNR is your evening cup of Early Gray with a dash of milk and honey, while your average Nasdaq tech stock is a 40oz of Crazy Horse, with a peppermint stuck inside.

As investors/traders, it is our responsibility to position our money ahead of the herd. I am putting my best foot forward with WNR and would like to see rapid appreciation, in the midst of Italian failure (no meatball).

Earnings are coming due Thursday and it’s always a gamble. However, if these numbers do not impress the small minded people employed at money management firms, then the planet is a sphere, Babe Ruth never hit an infield homerun and DB Copper died in 1972.

Fuck you CNBC for putting that fat fuck Phil Lebow on teevee today, talking up the auto sector. That’s the last fucking sector, in the whole entire world, I’d want to own here, save some bullshit Chinese burritos fraud stocks. We’re down 8 straight days and now many of you asshats are going short? Good luck. I suppose, to a large extent, it’s all a crapshot.

The only redeeming thing about this whole mess, for me, is witnessing Obama and Congress fail, on an epic level, in trying to turn this economy around. They are sitting ducks, dead in the water, future ghosts.

If I was 100% long today, I’d visit my friends office and punch the shit out of his sheetrock, in an uncontrollable exhibition of rage, then calmly walk out as if nothing happened. It’s days like this that makes me want to throw firecrackers at people or slap pedestrians in the face with hot slices of pizza.

If this market trades down tomorrow, that will make 9 straight days down. This is a KARL DENNINGER, ZEROHEDGE, DOUBLE BLUE BLAZER, APOCALYPTIC dive lower, no safety net. If you are a bear, this is your chance to kill everyone and eat their brains. You must pray for state failures and civil wars, famine and pestilence. Throw in a little epidemic, and I believe this market can go lower.

In the meantime, like a fucking idiot taking an MCAT exam, I sit here waiting for someone to give me the answers. The mood is outright morbid and we need Uncle Ben to get his “press on” so we can feel a little bit better about ourselves.

I could not help myself.

I bought TNA sub $67.5

TLT is gapping higher, as predicted by history. Over the past 9 years, TLT has gained in the month of August every single time, with an average return north of 3.5%. The market is getting killed today because investors have had enough with the excuses and ineptitude of our government. When you throw in the Italian and Spanish sovereign debt crisis, you have a recipe of sheer panic.

I was wrong when I said we’d rally on the debt ceiling deal. We had the initial reaction yesterday, but gave up the ghost quickly due to the meatball throwers in Italy. To be honest, given the news, I don’t know why I am long stocks. As a point in fact, I have every reason to be 100% cash or short. When buying into the blood, it never feels right and the headline risk is always against you. It’s the very definition of contrarian investing.

Despite being 50% cash and selling out of my DECK position near the high of the day, I am down 1% today, led by losses in TEX, FLS, WNR and my intra-day purchase gone south TDC.

For the sake of retaining my sanity, I will be adhering to strict stop losses, in order to protect my gains.

I started a new position in EMN.

With the sale of my largest position, DECK, and smaller purchase of TDC, I am now 50% cash/50% long. The market looks like shit, but I haven’t been hurt during this decline. As a matter of fact, I missed the majority of the decline, while in cash. And, I was able to cherry pick some good stocks that bucked the trend, going up in a down tape.

So, I can afford to risk a little here, waiting for a rally. Truth be told, I am tempted to go long some gold and silver stocks here. However, I am refraining from doing so, just for the sake of keeping it light.

Although I’ve been successful at managing risk during this period, I’ve been a little antsy over the headline news and would prefer, simply for the sake of quality of life, to not have too much equity exposure at this time.

Some of my new positions, FLS and TEX, are down since I bought them. My line in the sand for all new positions is -5% to -10%, with exception to GSVC because of the nature of their business and small float.

WNR is trading off, following MPC’s earnings. Again, in my opinion, there is no comparison between the two companies. WNR has run up a lot in recent weeks, so I would not be shocked to see it sell off on good news. However, I am fairly confident they will report solid results, so—for me—it’s worth holding.

Finally, VXX is going up, hitting my put position and XIV. I am giving the VXX time to soil itself, as it always does. Right now the market is for shit, so don’t expect miracles. My current thesis is “wait for the bounce,” so holding VXX puts a little longer meshes with that frame of thought.

I started a new position in TDC.

Disclaimer: If you buy TDC because of this post, the President, for no apparent reason, will veto the debt ceiling bill. And, you may lose money.

I sold out of DECK.

I am officially up 120% on my DECK 92.5 calls. Believe me, trading options is not as easy as I make it look. Throughout the years, I’ve definitely lost more than I’ve made. Nevertheless, I am making up lost ground rather quickly these days.

The market is weak due to Italian and Spanish bond spreads blowing out versus German. I don’t see how this will be resolved amicably. I was discussing these important matters with my wife last night, who knows nothing about finance. Her strong recommendation was for Europe and the U.S. to “take their medicine” and restructure their debt. I tried to explain to her how that would mess up the status quo and how I would prefer the old can kick. Then she retorted, “why, so our children will have to deal with these issues later?”

I find it funny that someone, who knows nothing about finance or how the debt crisis is proceeding, could be so confident about what needs to be done, yet global policy makers are juggling balls while their respective countries get burned.

As much as I want things to continue “as is” because it’s convenient for me, I suppose it cannot. Eventually, hard decisions, by brave people, are going to have to be made. Everyone will take a hit, no matter what. However, we will be better for it later, after the losses are taken and things are “reset.”

For now, we will continue the charade, making believe the banks are solvent, until the tipping point. For Europe, that tipping point is a lot closer than people think. No algorithm will be able to predict failure, so you’re gonna have to use intuition and common sense going forward.

In the meantime, I am banking stupid coin on DECK here, as it is my largest position. A sharp rally is coming. We just need a spark to get this car, made from dynamite sticks, going again.