The Refiners are Buys

321 crack spreads are sustaining mid $30’s, +450% year to date. Brent-WTI spreads are upward of 28% or $24 per barrel and the price of gasoline has declined, substantially, in recent months. Make no bones about it, this is the golden age for the refiners. It’s too bad the fucking stock prices aren’t reflecting it yet.

The best plays are the ones close to Cushing, OK or Eagleford shale, due to the price divergence between WTI and Brent. Recently, EPD announced they were scrapping plans to build a pipeline from Cushing to Houston, something that went unnoticed by the dicksuckers who manage money. What that means, essentially, is sustainable discounts for WTI, compared to Brent, for at least 2 years.

Thanks to the recent decline in gasoline and widening crack spreads, the refiners should be bought in size, in my opinion. The top mid-continental plays, in my opinion, are WNR, CVI, HFC and DK. As you know, WNR is undergoing some deleveraging here and has disappointed with earnings, thanks to aggressive hedging strategies. However, long term, they are doing the right thing for the company. Plus, they still have an East coast refinery up for sale that may boost share price, upon consummation of a deal.

The bottom line: there is no better industry than fleecing the average Joe of his coin at the pump. Margins are wide and times are good. I will be a buyer of WNR on all dips and will look to start new positions, in other refiners, when the opportunity presents itself.

If we are to continue higher, we must not give up yesterday’s gains. The banks need to hold, led by BAC and GS. And, Italian and Spanish 10 yr yields must hold under 5%. That’s the obvious. If those things happen, and the economy doesn’t drop off a cliff, commodity and technology related stocks will lead the way higher.

High beta names like DECK, LULU, AMZN, NFLX, BIDU and AAPL should outperform. There are many other high beta names worth buying; however, those are just a few that come to mind.

In the banking sector, I like SBNY here. They do not have the toxic assets that plague the other banks because it’s a new bank. They are taking market share in NY and is a prime takeover candidate. In the semis, I like IPGP, in retail DECK and in oil and gas I prefer CXO and WNR, just to name a few.

But all of this shit will be worth nothing if we can’t crawl out of this faggot box we find ourselves in, no offense to gay guys of course. The up and down nature of this market has people sick to their stomachs. Retail investors have fled from the landscape and now the fucking robots are ruling the roost. Larger than life firms like Blackrock, Fidelity and Pimco dominate this market and can literally make or break your favorite stock.

Why was DECK knifing lower, or any other high quality name, over the past 3 weeks?

Answer: survival.

Hedge funds and money management firms needed to sell non-core names in order to “outperform” the S&P. I know it sounds retarded; but these idiots are THRILLED to be down 10%, providing the SPY is down 12%. The whole name of the game is to beat the pace rabbit, which is the S&P 500. If you really want to fuck with these funds, you take down AAPL. Then you will see panic and despair.

In summary, in true retarded form, the names that clubbed you to death on the way down will be the names that resurrect you on the way back up. These same managers will buy in, when “the coast is clear,” whilst snorting a table full of cocaine off their bloomberg terminals.

There is a hidden monster off corporate balance sheets that is not being discussed yet, even by the most disgusting bears.

Unfunded pension liabilities.

Due to the recent market drop, healthcare and unfunded pensions now stand at around $500 billion, significantly higher than even the 2008 lows. That equates to $1.50 in earnings, for the S&P, next year. Should the market continue lower, there will be serious consequences that will fuck up and destroy a plethora of organizations. Remember, insurance firms are not the only companies that invest in stocks. The big pension plans at GM, F or GE invest billions and have been raped, due to the absence of risk free yield. Since rates are at 0%, pension funds were forced to take on more risk. As a result, they are now albatrosses around the necks of dozens of corporations.

So, that $2 trilly in sideline cash isn’t exactly a net net number, if you know what I mean.

I will highlight some real risk names for potential short sale, whenever the fuck I get in the mood to short.

For now, I spit in the face of S&P and welcome any and all to “GET IN THE HOLE,” ahead the gentleman Ben. Thanks to today’s 5.5% gain, I am now up north of 7% for the year.

NOTE: iBC’s web redesign is pending.

Related: The State of California admits to a $1 trillion pension liability.

Fuck it, I am getting aggressive ahead of “The Hole”, having allocated another 20% of my cash to IPGP, VHC, DECK, WNR and CXO today. For my personal, I am all DECK calls, WNR common and CXO calls. To date, my personal/aggressive account is down 35% to mid 600’s. It was, as noted here for over a year, seeded with just 100k 1.5 years ago. At the highs, that account was north of 1.25 mill. Easy come, easy go.

Today’s rally has legs and should extend into tomorrow. In my estimation, the only thing that derails us is a BAC offering of some sort. So you know, The PPT has registered OVERSOLD signals since 8/18. That means it has, yet again, nailed the top and bottom of the ranges, over the past volatile two weeks. Very impressive, if you ask me. For those that got in, prior to today’s melt up, “The Fly” tips his top hat to you.

Everyone else can go fuck themselves.

Let’s be clear (no Obama): there was an Earthquake on the east coast today because that fucking planet, niburu (sp?) is going to smash into Earth, sending us into a fucking permanent ice age. So you know, “The Fly” has made arrangements at Puma Punku to live out the rest of his days in barbaric comfort, should celestial fuckery take hold of Earth. From there, I will conduct my daily space experiments on the humans I capture, via my space capsule BEAM-RAY gun. In case you were wondering, YES, I am the only space alien magician blogging on the internets, telling you small brained dogs how it really is. Be my guest, bet again S.A.M., with your 0% equity allocation, see where it gets you.

NOTE: Greater men than you have bet against me before. Now those men are dead.

I started a small position in CXO.

In both analog and consumer semiconductors, revenues and inventories versus average days sales are now BELOW 2008 levels. The semiconductor space is prepared for a slowdown and offer significant value here, especially if the economy isn’t diving into a fucking vortex. I like the semis here and started off by buying IPGP here. I will add to additional names, as the market improves. But my general thoughts on the sector here is exceedingly bullish.

Chips and refiners. That’s where I will put my dice, with a little side order of DECK.

I still own GSVC and BEE and will not abandon the former. I love the longer term story for GSVC; but BEE needs to get going soon, else it’s gone.

The market is firming here and most of you fuckers are pussies. How could you just sit there, watching this market tick higher and do nothing? It amazes me how people chase performance. If you miss out on the coming rally you deserve everything you get, AND MORE.

As for gold: FUCK GOLD.

I added new positions, buying both VHC and IPGP.

And, I added to DECK and WNR.

Cash is now 30%.

I am trying my best to allocate some cash here. But every time I scan the market, I don’t like what I see. Today’s warning signal is coming from none other than BAC. Apparently, Countrywide financial is sinking America’s biggest bank and there is nothing being done to give the market confidence. It’s as if “they” are doing this shit on purpose.

I do the math in my head, over and over and over again. I cannot think of a scenario where the stock market breaks out for a prolonged run higher. If the economy is really in trouble, there will be no assistance from the Federal government. It’s important to recognize the political environment, led by the Tea Party, is aggressively opposed to Fed stimulus. Mostly everyone in Congress is hating on the Federal Reserve, which leaves us with what?

NOTHING.

The free market people will have their way; and I guarantee, they’re not gonna like it. I still find it amazing that our government, in lieu of crazy unemployment, is opting for a balanced budget approach to fixing our problems. This is fucking lunacy. However, there is no point lamenting over fiscal policy.

Having said all that, a sharp reflex rally is right around the corner. Since I am already long WNR and DECK, I am looking for some exposure to tech. I have a long list and will likely take a stab at one today, despite the bad bank tape. So you know, I am not optimistic on the long term prospects for this market. But, I believe we have a 5-8% rally from these levels, going into September. On the next rally, I will reevaluate my position to conform with my longer term forecast.

What a fucking day. I woke up in Turks and Caicos, anxious to get back to NYC. Believe me, I love Turks; but it’s a fucking backward beach, where toilet paper costs $10 per roll. I am more than happy to be back, just in time for the fucking market to melt-the-fuck-down.

I leaked out another 1.3% today, despite being in a 50% cash position—thanks to WNR. People sold the refiners, en masse, because Libya was liberated?! What the fuck? Assholes, the Brent-WTI spread is still $24 or 28%. Fuck you homos who are selling down here. Fuck you.

Today’s action in the market was dreadful. Banks are going to zero. Goldman is going to jail. And commodities, sans gold/silver, is worth shit.

What’s the downside?

The median EPS drawdown during recessions is about 15%. At the current, the S&P will earn $93 this year. Okay? The average trough PE since WW2 is 13. Let’s shave 15% off $93. That gives us $79. At 13x eps, the S&P trades to 1031. However, over the past 3 recessions (1990, 2000, 2008), average eps fell by a much larger degree— falling 24%, 32% and 57% respectively. Should the average eps drop by 30% this go around, that puts the S&P at 845 at 13 times earnings, a 23% discount to current levels.

What am I going to do about it?

For the love of dirty dogs, I want to successfully trade out of my existing longs. I am underwater in all of them and feel fortunate to have limited exposure. But it’s fucking hard to watch these stocks underperform, without benefiting from the market drops. Nevertheless, I have chosen the path of long and will “stay the course” (no Bush) and trade out of these positions, through timely adds.

On a side note, I found it funny that Mrs. Fly booked first class going and ASS CLASS coming home, via Jetblue. She spent inordinate amounts of money on all sorts of Carribean shit and managed to stick me next to the fuck toilet, in last class, on the way home as a “reward” for my hard work. How quaint.

As I make final preparations for my first class flight back to America, I am pleased to see S&P futures +22. More so, I am elated to know, if only for a brief period of time, the dicksuckers who profess 0% US-European exposure and a multitude of short sales, will be catapulted into a swarm of bees today. Again, the problem with people, in general, is gluttony. If you were balls deep short, going into the weekend, you got greedy and will now pay the price.

The lessons of managing money, on a high level, continues to repeat themselves, and often. You simply need to pay attention and stop being such a fucking pig.

Finally, Ben Bernanke cordially invites you to enter “the hole” asap. He will bring his finest blunts and 40oz bottles of malt liquor to Jackson Hole this year, begging you to fuck with him.

Are you brave/man enough to get in “The Hole”? Or will you simply fade away, like a one hit wonder, vanquished yet again by THE BEARDED CLAM?