My Number One Hedge

Before I get into my number one hedge, let’s recap this mornings events. Apparently a German bund auction failed. Germany is saying it was a “technical difficulty.” However, the market is saying “fuck a panzer tank” by punishing german bunds. Here’s a summary of this mornings European bond blow ups.

Belgium +8.6% to 5.51%
Germany +7.5% to 2.06%
Denmark +2.4% to 1.98%
Austria +4.2% to 3.65%
Czech +5.2% to 4.21%
France +4.3% to 3.68%
Italy +2.3% to 6.98%
Spain +1.1% to 6.67%
Finland +3.1% to 2.76%
Hungary +2.6% to 8.54%
Ireland +6.1% to 8.27%

Okay, can you even begin to fathom the situation in Europe now? The cost of capital is soaring, pan Europe, and the money seems to be evaporating into thin air. Equities are trending lower, alongside precious metals. The only beneficiaries are dollar/treasuries/yen. Taking into consideration the current trends, bond vigilantes will likely make a run on German bunds now, crush Europe, then spread worldwide. The question is, how long until European banks sell US treasuries to fill capital short-falls? Eventually they will need to repatriate funds, no?

Things look grim.

It’s clear to me that the Turkey Gods have been brined and cooked. It was a high probability trade, based on recent history, that failed. What else is new? 2011 has been marked with one high probability trade after another going bust.

Regarding my #1 hedge: it’s income/non risk assets. The mistake I see a lot of investors make is allocating too much of their liquid net worth into equities. This is a huge mistake. The market hasn’t been a very reliable place to grow your money. Frankly, you are better off buying art at a Sotheby’s auction, than fucking around with TNA vs TZA. Losses endured during 2011 should not change your lifestyle, because your total market exposure should not total more than 50% of liquid assets. Some men take their pay checks and dump it into stocks. That’s not investing, but gambling. When you gamble, you make irrational decisions–a sure-fire way to lose money. Take your time and keep your exposure down to a level you can afford to lose.

I rarely take on new accounts for a reason. First, I have never and would never accept money derived from the internet. It’s a dirty place and I do not wish to commingle my internet life with my real life. But in my real life, I only accept 1-3 new accounts per year, all strictly screened for minimum net worth requirements. I do not want to invest money on behalf of someone who cannot afford to lose money. People who have a lot to lose tend to act like fucking retards when the going gets tough. It’s important to ex out emotions, as much as possible, when placing bets. That’s what they are. Let’s face it.

In summary, the world is fucked for Thanksgiving and you’re better off buying crates of high quality wine, than fucking around with stocks. They’re for asshats.

I had gains today thanks to my oversized EXK, AG and RGLD positions. But, I shouldn’t get too confident about retaking any lost coin, on the long side, anytime soon. When I take my head out of the sand, I see torched buildings and body parts strewn across the landscape. My original short thesis revolved around a strong dollar, strong US treasuries and high volatility. You can witness all of the things I predicted in the charts of UUP, TLT and TVIX.

With Italian, Spanish and French yields elevated, as well as Belgian, you’d have to be out of your fucking minds to be long here, unless your name happens to be Lord Fly, Master and Commander of all things to do with Fantasy and Wondrous Turkey Galas.

I have no business being long shit like LULU and RBCN. I’ve hemorrhaged millions over the past week, stubbornly ignoring my own gameplan. Germany has said, repeatedly, they are not interested in Euro bonds. Now the Fed is mandating US stress tests for some big banks, under a 13% unemployment scenario. Can they see the future?

If you just stumbled onto this site and have an interest in an objective market view, from someone who has successfully navigated down markets like this, you’ve come to the right place. All positions aside, the market is in danger of a serious dump out. Crashes do not occur from elevated levels. They are a result of mass panic, caused by macro capitulation. I just took on a new account today and I bought him NGD. Gold and silver are the only assets worth acquiring, in my estimation. Having said that, if the deflation demon really takes hold, both gold and silver will be decimated.

In my personal/aggressive account, I opted against going “all in” on an egregious option trade, in exchange for some AG common. I was thinking irrationally yesterday and needed to smack myself to get my brain back on track.

Bottom line: the market is OVERSOLD, but nothing extraordinary. I like my chances long, only from a unrealistic, crazy policy marker bonanza point of view. If judging purely on logic, something that has been an outlier in this market for 3 years, we should trade down hard over the next two weeks, led by commodity related stocks.

I bought NGD and added to AG.

I’m just going along for the ride here, albeit my “seat” is strapped to the bottom of a pick up truck–face down. Let’s hope to avoid any road bumps, shall we?

Germany is rather adamant about not giving a fuck about Spain and Italy. I am only hating on Germany now because it suits my book. If I was net short, I’d be praising them. I’m fucked up like that.

This is all you need to monitor from now until death:

Italian 10 yr

Spanish 10 yr

France 10 yr

As an aside, keep your eyes on this shit too:

Hungary

Czech

Poland

Belgium (BLOWING THE FUCK OUT)

Austria

Did you know Saudi Arabia was 87% debt/GDP back in 2000? Since 9/11, they got uber rich off the greatest transfer of wealth in the history of mankind, allowing them to pay it down to just 10%. On the other hand, western nations are all bloated pigs, even Germany, even Canada. Countries like Nigeria are thriving, as we suck dick. Our President seems to believe we need more solar panels and wind farms. As he lies to you, America continues to transfer wealth to the camel fuckers in the middle east.

Looking over potential buys, I can only come to grips with gold and silver, once again. The policy makers are adamant about extending the lunacy. Right now the play is deflation. However, if we ever get a bounce, ever, I sense gold and silver miners will be the best plays in the market.

Moving on to NFLX. This company can file for bankruptcy if the ship doesn’t turn around soon. The $400 million raised today is dilutive and the terms are onerous. Their cost to run the business is ridiculous and they no longer have access to the bond markets. I would steer clear of this one–scary.

Bottom line: I am Bill Miller, purposely ignoring reality in exchange for fantasy land.

After the European banking system undergoes a comical $10 trillion write-down, all deposits will be wiped out. The contagion will spread to the United Steaks, effectively cutting off the municipal bond markets, bankrupting retarded ghetto cities, like Detroit and Cleveland.

All of Europe’s big banks will fold like cheap tents, carrying their markets down another 75% from current levels. Financing will be eliminated, which in turn will result in the bankruptcy of any company who depends on short term lending to finance day to day operations. Due to pension fund liabilities, small outfits like Lucent and General Electric will be wiped the fuck out.

Wait, it gets better.

We’re gonna finish where we left off in 2008, with shipping rates plunging by 99%. Counter party risk will be too tenuous to deliver goods. As a result, your local grocery stores and shopping mall will be wiped clean. You will have to resort to the ancient practice of cannibalism, in order to survive the barren winter months.

No matter how rich you are, your mortgage will default, unless you have cash tucked away in a vault. See after the great $10 trillion write down in Europe, $100 trillion in US derivative risk will be triggered, wiping out all of the money ever known to mankind. Every bank and brokerage firm in the Northern Hemisphere will be shuttered.

Banks will try to evict you just to procure the raw materials inside of your home. You will literally need to shoot the marshall from seizing your property, else end up homeless in the streets, where the police serve as warlords for local tribes– enslaving people to farm the streets of Manhattan.

The United Steaks government will collapse, set off by a tidal wave of secessions from southern psychopaths.

In the meantime, German inflation will be firmly under control.

I lost so much money today I can’t feel my fucking face and my eyes are bleeding. All day I had to deal with the absurdity of being right about the market going down, yet long stocks. Not only am I long stocks, I am heavily weighted toward precious metals, the very bane of this cocksucking market.

Don’t go there. Don’t step onto the stage claiming you saw this coming and timed your shorts perfectly. You same clowns got Ape-Raped three weeks ago and you will be violated again, and soon.

Let’s cut to the chase. I sold out of my aggressive-personal account because I’m about to throw a Hail Mary. Into this sell off extravaganza, I intend to take a long bet through options–all or none. For managed accounts, I sold out of that bitch of a whore OMX and USG. I might start buying WNR again down here, especially if crack spreads stabilize. Remember, WNR is 35% hedged @27. Cracks are now under $15. They stand to make a great deal of money on their hedges.

My wife handed me some crystal today. It’s supposed to make me feel better and make me lucky. I took that shit and turned it into dust. I will now snort that dust and see how lucky it makes me.

The rest of you financial bloggers out there talking shit can burn in hell, or 0hio, for all I care. Very few of you have skin in the game, managing bullshit “virtual funds”, making cow-eyed proclamations on CNBC. Speaking of cow eyes, Cramer is looking for every single bank in Europe to collapse, wiping out both equity and bondholders to the tune of (get this!) 10 fucking trillion. Yet, at the same time the dust bowls materialize in Brussels, THE SHARES OF MORGAN STANLEY ARE JUST FINE!

Let me warn you: there is no coming back from a 10 Trilly loss. That’s the sort of shit that wipes out ALL bank accounts, globally. Civilization as we know it would end. Your homosexual FAZ positions will be worthless when you have an ax wedged into the exact center of your skull.

http://www.youtube.com/watch?v=REQ5V2BNjz8

Dear Sir,

I regrettably inform you that  your dinner invitation to Le Casa del Fly has been revoked.  There will be no turkey legs served at the great manor on Thursday. Instead, we shall dine on hotdogs and sauerkraut, preparing for the troubling days and weeks ahead.

I hope you understand this to be a slight against your personhood. True enough, I never liked you much anyway. You drink too much wine and your breath smells of a sheep ass.

Good Day,

Fly

I have no one to blame but myself, for being so naive as to believe Europe would fix their problems. I’ve always contended this was a problem that couldn’t be fixed. It’s too big and there is no political will. Now you have psychopath lunatics, like Cramer, sounding alarms, exclaiming total losses in EZ will total $10 fucking trillion.

Pardon the melancholy tone. Regrettably, I wasn’t all in VRUS calls like many of you. However, instead, I am long all of the shit that is going lower. I am long this shit with great certitude that it will kill me. I could very easily assuage my pain by liquidating down here and join the circus to become a fucking “cannon clown.” Or, I can extend my torture by waiting for the ultimate bag of shit to drop on my head. Right now only small bags of shit are dropping on me.

Shares of GS, MS and JEF are the only tells for this market. The CNBC folks are relishing in this “debt bomb” situation we find ourselves in. They chuckle and laugh at the plights of investors while declaring “net short positions.” They are rather comfortable in their smugness, clamoring for the EU to fall apart–drinking from the mugs of angst.

Our President is one giant dick-sucker, more concerned with taking trips to pineapple country than dealing with the fucktards inside of the super committee. In summary, I hate all of you, as well as inanimate objects, such as silver coins, computers and televisions.

Taking into consideration how tenuous markets have been thanks to the European crisis, it is even more unbelievable that our elected officials could not come to a consensus to cut spending over a decade. None of them deserve to be re-elected. I am making it a stated goal of mine to vote against all incumbents–republican and democrat. These bastards aren’t responsible stewards of this country. They are nothing more than whores, begging people for money to fund their re-elections.

With regards to this mornings tape: I cannot believe GILD paid so much for VRUS. They are out of their fucking minds.  Everything else is getting the broken elevator treatment. However, let me be emphatic about something right now: you bears are well deserving of a giant cock-smack to the face. I’ve perused the comments section of iBankCoin this morning and nearly vomited on my $4,000 laptop.  Shame on you people for not learning from history. You should know by now, when the DEVILDOGS of the world are out and about declaring winship, mobile de-cocking guillotines aren’t too far behind. How many times does Ben Bernanke have to circumcise you to get a little humility out of you?

Back to reality. TLT is north of $120. The deflation trade is back in vogue, as people “Do the Hugh” into Thanksgiving. This is not what I expected to happen. Then again, betting on inflation versus deflation is pretty much a coin toss these days. People don’t know what the fuck is going on. But I can tell you one damned thing for sure: governments don’t give a fuck about your paper currencies. The whole flight out of gold and silver, as harrowing as it is, will be a temporary phenomenon.

Botton line: your luck is soon to expire. Go drink a hot cup of Early Grey, come back to iBankCoin, and apologize for your behavior. Failure to do so will result in the removal of your mustaches, via my mustache removing drones.

On Monday our congressional “super committee” will announce they are fucking idiots and cannot operate a government. Their task was to cut spending over a 10 year period in order to avoid being “the next Greece.” We aren’t in danger of becoming “the next Greece” until we have Japanese style debt/GDP numbers, in my opinion. Nonetheless, their failure to cut waste in government spending is just one more reason for you to stockpile guns and dry food.

Raising taxes in order to finance more government corruption is nonsensical. The people who tell you “rich people are getting a free ride” should fuck themselves. Last I checked, my quarterly estimated tax payments are more than most of those assholes annual salaries.

Moving on.

Europe is the joke that keeps delivering punchlines, accentuated by whimsical rim-shots. It befuddles me how this topic keeps dragging on. A few weeks ago it seemed the EFSF was the saving grace for all of the malcontents in Europe. Then Italian and Spanish yields blew out, causing alarm amongst those with short fuses. Remember, the ECB is interested in making money, not just saving their asses. It makes a lot of sense to allow Italian and Spanish bonds trade lower, in order to buy them up on the cheap. The problem with this strategy is the notion of contagion. People think this is getting out of control and have begun taking aim at France, due to French exposure to Italy. As a matter of fact, bonds yields across Europe, sans Germany, have been rising.

The ECB needs to decide on a definitive course of action. Either they unify under one banner and issue EU bonds or dissolve the partnership. The German leader, Merkel, seems only interested in her political viability and might just tell everyone to fuck themselves. Should this happen, the stock market will fall by more than 10% in a single session. If you were around for the “Asian Contagion” back in 1997, this will make that look like a calm tape.

The worst case scenario is so frightening, I try to avoid thinking about it. I have a bad feeling something terrible is about to happen and I am ill prepared to deal with it. I was very much prepared for this eventuality 3-4 weeks ago, but was shaken out of my bear trade with that unfuckingbelievable 1,200 point rally. With my recent luck, I will throw that trade on again and the Germans will decide to comply and fuck me again.

This truly is an untenable situation and I wish this shit would conclude already.