A Reversal of Winship

I am not posting this for your pity or to teach you any lessons, but to document my mistakes during this collapse.

Just two weeks ago, I was sitting on 16% year to date gains in an 80% cash position. I felt the market was a sell until September or until Bernanke announced another form of quantitative easing. I intended to put 25% of my cash into TLT, due to the seasonal trends in the month of August for bonds, which are flawless. So, what happened?

First, I got distracted by the Congressional debt ceiling debate. They pulled an old Kaiser Soze on me, a regular sleight of hand if I might be so bold as to say so. The reason why I was in cash was because of the European debt crisis. I felt, and still do, Italy and Spain are too big to save. However, the Congressional clown show made me forget the answers to the questions that plagued me. I bought into the market on the premise I would sell into a debt ceiling deal. It was all a ruse, a ploy that helped some get out while schmucks like me bought in.

I fell for it.

The deal was announced and futures were ripping in pre-market trade. Shortly after the market opened, everything was sold and with great vigor.

I held my ground, believing the sell off was reactionary and without merit.

Then, I overweighted in WNR, due to my belief that the company would smash earnings because of industry wide fundamentals. On the day they reported an eps shortfall, the market dropped 500+, exacerbating the selling in WNR, sending shares down more than 20% in a day. At the time, I was 20% cash and looking for longs. Remember, I just finished booking sick profits on a number of stocks, like DECK.

The very day before the 500 point decline, seeing the market weak, I put 30% of my cash to work in a number of names. At this point, the Italian and Spanish news flow was beginning to thicken and tensions were high. However, like a jackass who had the answer key but didn’t bother to look at it, I chased stocks down the rabbit hole.

The market cratered and I lost 10% in one day, all but wiping out my year to date gains. Then on Friday, stocks continued to sell off, following a very good opening. I didn’t like the patterns, so I sold most of my positions, raising cash levels to 70% again. While doing this, I booked millions in losses. However, shortly after I sold, a news story broke that the ECB was going to buy Spanish and Italian debt. To me, that meant QE1 for Europe. What I failed to acknowledge is how retarded the Europeans are when it comes to taking action. I got hooked, allocating cash to the markets, leaving my reserves at a respectable 30%.

Then came today. I didn’t buy anything or sell; but my positions plunged lower, sending me down more than 5% for the day. The only reason I wasn’t down more is because of my 30% cash position, which is now 35% all on its own.

Where does that leave me?

65% long, 35% cash, down 8% for the year aka “new lows.” Aside from the losses, my psyche is badly damaged. It’s one thing to miss a trade, it’s a whole different story ignoring my own advice and getting blown up as a result. The game plan going forward entails lots of finger crossing. I am fairly scared to death that this market can plunge 10%+ in a day. I am putting all of my emotional capital in The Fed, which is a future mistake yet to be revealed. I can see myself making mistakes in real time and it shocks me.

We’re all waiting for respite, some semblance of normalcy in order to reduce risk. However, when markets are this oversold and sentiment is at the point of panic, markets crash. Granted, we’ve crashed over the past 12 days, down more than 17%. But if confidence isn’t buoyed ASAP, we’re gonna crash some more.

Sadly, this time around, I don’t see our leaders doing anything. I mean, these fuckers aren’t even trying. In the midst of a global meltdown, our fucking President is hosting $15,000 per plate fundraisers. Something is wrong. It’s as if they’ve resigned themselves to let this thing just play out. The consequences of their inaction will be devastating for this country, and more specifically me.

Filed under “Chart Art”

You’ve been clamoring for this day for years. Over the past week, we’ve undergone a major sell off on extraordinary volume, while the elite were caught offguard on vacation. You could not have planned it better. CDS spreads for the banks are blowing out and BAC is off by 20% today. Whole countries are having issues financing themselves, as yields soar to new highs.

By the time the ruling elite come up with a plan to stem this crisis, the market will be in shambles. As the dicksuckers on CNBC declare “this sell off has been orderly,” nothing orderly is taking place in my portfolios. I’ve never underperformed so bad, in my entire life, than the past week. Just Friday I kicked out positions, raising cash to 70%, only to buy back in later, hoping for a reversal in fortune.

This is the nail in the coffin of the retail investor. He is done.

Having said that, the smartest managers in the world have been tricked by this tape. Do not throw yourself into a lit fireplace for losing money. While it sucks to be on the receiving end of sheer fuckery, it can be recovered. This is a panic. Put your charts away, for they will do you no good. The selling will stop when the last bull (Ned Riley) buys up lots of FAZ.

Taking a look at TVIX, it looks like Carl “fuck you, give me 3 seats on your board” Icahn initiated a hostile bid for the entity. This is fucking madness and I do not appreciate my twitter stream filled with fuckfaces who are elated over perpetual market crashes. If you managed to call this tape correctly, this is not the time to brag or drag people through the mud. Most people are invested in stocks and are enduring massive losses. Some people take losses badly and it can affect their health. All jokes aside, I will try my best to provide as much news and commentary as I can, while trying to maintain my book of business here, in the real world.

Fuck S&P and to hell with this administration’s futile attempts to buoy the economy. We do not need platitudes, but action.

We are seeing a fucking replay of 2008, aren’t we? All of the trillions of dollars spent on stimulus, bailouts and QE down the drain. Due to the bailouts of 2008-2009, sovereign nations took on too much debt, trying to transfer risk from banks to us. They figured if the economy came back and taxes were raised, they could stave off collapse. Let’s be clear, without the bailouts of 2008, for better or for worse, the entire system was going to collapse.

Over the past 3 years, we’ve been sustained on free money and lots of eloquent speeches. The reality, we haven’t grown fast enough to dig out of the massive debt hole. While everyone feared the inflationary side effects of quantitative easing, the real threat was deflation, which is the reason why Bernanke continues to print at a rapid pace. Asset price destruction occurs quickly and it is absolute. The only real threat of inflation, in the eyes of the Fed, is wage inflation. Due to our stupid economy, wage inflation hasn’t been a problem in 30 years.

As we sink into the vortex of asset price destruction, it is clear to me there is only one way out: print more. The problem with printing more is the unfortunate side effects of artificial, manufactured inflation. The alternative is debt restructuring and failure on a monumental scale. That simply isn’t going to happen, especially after seeing how policy makers managed the crisis of 2008.

This is the primary reason why I have been long. It was never based around the idea that the economy was terrific. Sadly, like many other investors, I was long because while the printing presses were running, the prices of equities were gunning. There is no debating that fact.

People are fleeing for the exits now based upon the premise that “it’s all over.” Can the ECB bailout everyone? Is BAC going to bite the dust this time around? Moreover, is there political capital left for future bailouts, if needed?

It’s 2008 all over again and policy makers, once again, seem stupefied to stem the contagion.

German markets plunged 5%, alongside all other exchanges. We’re knifing lower so fast, so egregiously, people cannot fathom the losses just yet. Long volatility has been the trade of the year thus far (hmm, I wonder where I heard that before?). And, I’ve managed to dig myself a murderhole, filled with WNR, DECK, GSVC and EMN, then swim in it.

As S&P downgrades anything related to the U.S., I ponder to myself: how do we get rid of these people?

You don’t need me to tell you how oversold we are. It would be easy for me to step in here today and go long a bunch of shit, but that would be reactionary. You know how I’ve been spending my day? I haven’t looked at CNBC or stocks for more than 10 minutes. I am watching the old teevee, laughing it up, waiting it out. I am not leveraged, so I am able to ride it out. Typically, riding out stocks is reserved for idiots. However, I refuse to sell into capitulation. Blame it on a character trait defect.

This is a crash through panic. We’ve seen this before and the end result always is the same: we come back.

I want to go on the record to express my heartfelt wishes and prayers to magical, mystical beings to sap all of the coin from the the purses of my fellow bearshitters wrapped in burlap (DEVILDOG). They’ve certainly earned a place in my dark heart over the years, seeing them make one massively bad call after the next. All of the stuff that you read online, regarding doom and bloody gloom, is not original content. It’s simply the same story, regurgitated, topped with a new headline, and published anew. If my dog had a SEP IRA plan, I wouldn’t let the clam shuckers from Zeroedge, or any other perma bear sites, manage it for him.

NOTE: I do not have a dog.

Israeli and Saudi markets are down sharply. I don’t care about that. There are rumors floating that the ECB will begin massive buying of Spanish and Italian bonds. Should that come to fruition, this market is going to explode to the upside, skull-fucking every single short within a 50 mile radius of me, as well as worldwide,  then lighting their craniums on fire. On the contrary, if nothing is done, so are we.

I am not being melodramatic by stating the obvious, am I? Naturally, the S&P downgrade is irrelevant, as it will not affect our borrowing costs. The main issue is Europe. Having said that, we all know how cheap stocks are and how oversold the markets are at this point in time. But we’re not trading on the fundies here. Let’s wait and see what comes out of Europe. And, don’t forget, THE BEARDED CLAM wishes to have a word or two this Tuesday, at the infamous JACKSON HOLE. All sorts of fabulously gay shit might happen this week.

Making money is “awesome and amazing”, as Mrs. Fly likes to say. But it’s not the game plan now. Right now we stay alive, tuck a few guns in our side pockets, and prepare to shoot people in the face.

So let me get this straight, they made a FUCKINGTWOTRILLIONDOLLAR error in their calculations, yet said “fuck it, we’re going in anyway” with a credit downgrade of the United States? Their main reasoning is political instability? Well, fuck you very much S&P. Would you prefer we have a dictatorship or authoritarian regime like China or Venezuela?

While it’s true our Congressmen acted like fucking morons, they still got the job done by the deadline. This is the same company who rubber stamped all of the CDO’s AAA, leading up to and causing the credit crisis. An argument can be made that the ratings agencies were key actors in bringing down the U.S. economy. Don’t tell me they didn’t know what they were doing. Now, after they helped cause joblessness, fuckery and pain, they downgrade US.

Excuse me for sounding cynical, but they should be held accountable for their errors and for stripping us of our AAA rating.

While you might say “well, Fly, we’re spending too much and we borrow too much. We don’t deserve AAA.” We do, AND MORE.

Look you, we print our own money and owe nothing in other currencies. Theoretically, we could print a few trilly tomorrow, buy China’s treasury holdings from them, then tell them to fuck off. As long as we are the reserve currency of the world and have the ability to create more dollars, our credit rating cannot be negotiated. It is AAA, or whatever the fuck you want to label it. How about A1, like the steak sauce?

The ripple effects might spook people a little, as the cock-gobblers from S&P start downgrading U.S. munis and agencies who rely on the government.

All in all, in my opinion, it is a NON-EVENT.

The real story is still in Europe. Don’t let this downgrade shit distract you. The ECB needs to start monetizing their debt now, else world markets will continue to slide. Providing a deal is announced by Sunday, I expect a patriotic “fuck you S&P” rally on Monday.

It’s the American way.

The rally has been stymied and the volume is bone shattering. I am glad the week is over, as it marked nothing but brutality and carnage for me. If the ECB is going to start monetizing their debt, well, that’s bullish for gold. Silver is too fucking retarded.

The market crash we were all hoping to avoid may be off the table, if a deal is done. If not, we’re fucked.

The action in the Nasdaq is flat out dreadful, with horrifying declines in anything tech. At the moment, fundamentals do not matter. Best case scenario, ECB does a deal and QE3 is announced, leading to a “skull-fucking rally”, erasing the faces of the bears who pressed their luck. Worst case scenario, S&P downgrades America, ECB does nothing and Bernanke gives a speech about beards. Under that scenario, we drop 1,000 points next week.

I could not be more disappointed with my performance this week. I had the answers to the exam and forget to bring them when the test was given. I failed and feel terrible for those of you who bought stocks due to my commentary. My apologies.

Over the weekend, I am going for dinner and drinks and will be keeping a close eye on the news.

Top picks: EMN, WNR and DECK

I have no idea if this is “the” bottom, but it has all the hallmarks. Big volume, whoosh lower, even I got scared out of the market. Luckily, right after the Obama meeting, the market rallied for a good 10 minutes. I used that spike to sell. My losses were still horrendous, so I have nothing to brag about just yet. Shortly after, the ECB deal was announced. Now, I could be wrong, but this sounds like QE1 for Europe. In other words, there is a better than average chance we DO NOT collapse on Monday. That’s what we are all scared about, right?

Having said that, our economy is still rocky. Maybe we get a little QE3 next week?

Who knows?

I went from 20% cash to 70%, back down to 30%. I will stay at these levels for at least another day. How absurd!

My core positions are EMN, WNR and DECK. I still own CLF and GSVC, but feel strongly about the other three.

How am I holding up, you ponder?

BAD. I fucking gave back 16% over the past two weeks, most lost over the past two days. Luckily, I was at all-time highs right before this shit storm hit. Nevertheless, the carrousel must continue to turn and the game needs to be played.

Upside to relief rally is +500 points.

Downside to collapse is -5,000 points.

Trade accordingly.

I sold a plethora of stocks and will not look back. I’ve decided it’s too risky to wait and see if the Europeans can get their shit together over the weekend. Therefore, I went to a 70% cash position. The losses are in the millions, wiping out all of my gains year to date. But that’s okay.

With a clean slate and safe bank account, I intend to rally around three names: WNR, DECK and EMN. The story for WNR is alive and well and it makes no sense seeing the stock trade at such low valuations. I loved it at $19, I am fucking possessed with it at $14.

I am buying more and in size.

UPDATE: I bought size in EMN and WNR. Cash down to 40%.

UPDATE: I bought a shitload of DECK. Cash down to 30%.