Few Pockets of Strength

I’m not going to jump to conclusions and declare a top. The fact of the matter is, oil is correcting after a monster leg up and Alcoa is fucking up the metals, like always. Plus, the market like to ebb and flow between 12,000-12,500. Before I start liquidating my holdings, I need to see more carnage.

You know what is down, which is pretty much everything. But there are some outliers, like the airlines—called out yesterday by ChessnWine (AMR) inside 12631. For those of you not subscribed to Chess and RC for a mere $20 something per month, you are missing out huge. They are money.

Additionally, WMT, PG, HD, KKR, MON, MAC, NFLX, AKAM, FDX, UNP, TM, ZUMZ, ARO and TGT all stand out to me due to unusual strength in a bad tape. It is a pastiche of stocks, with a common denominator of benefiting from lower input prices, namely cotton and oil. I cannot tell you why KKR and NFLX are up, other than the fact that fund managers are desperate to park cash.

Bonds are up today; but the dollar is down. I must say, as bad as this tape looks, I am not scared. Perhaps I have too much money in the safe; but this tape is screaming “short squeeze” and is one press release away from punting the bears into outer space. Sure, you can listen to the zerohedgers, who only paint a story with a black brush, while sipping on a mug filled with black smoke. However, last I checked, this motherfucker of a market has been fucking mothers now for 3 years. I declare, there is a statute of limitations on your double dip calls of lunacy. The news cannot be worse, yet here we are within striking distance of recent highs.

Well, the earnings season has kicked off and I expect better than estimated results, across the board. There will be some pitfalls, as always. But the general consensus, whether you like it or not, is up.

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On trying days like this, it’s important to remember what got us to this point. Do not forget the reason why corn, sugar and oil are “expensive as fuck” and why gold/silver jargon is all the rage at NYC cocktail parties. As you look at AA ticking lower and the perspiration in your palms increases, remember what the clam is and how his hydraulic, pimp’d out, car “swaggers” into oncoming traffic, effectively “mushroom clouding” all those who get in his way.

Ben Bernanke is a great American and an even greater citizen of the world.

Having said that, I’d rather gorge my eyes out with a spork and stir fry my retina, than buy more stocks down here. All I have is 10% cash. I will not use said cash on such a minor dip. I reserve such cash for catastrophic one off events, or computer driven anomalies. However, I realize some of you are cash rich and very much interested in buying dips, like every asshole should.

With cash, I’d seriously look towards the refiners down here. I am a broken record; that’s okay. Crack spreads are another 5% this morning, to $26.44. Are you fucking kidding me? Do you realize how insane that is? The refiners are RAPING America and getting away with it, sort of. In my opinion, the time is NOW to bulk the fuck up on these bad boys, into May earnings, with VLO first slated to report on 4/26. Should they disappoint with Q2 guidance, as God and Santa Claus are my witnesses, “The Fly” will get in his hot air balloon and take that fucker into outer space, never to be seen or heard from again.

[youtube:http://www.youtube.com/watch?v=_obdlF_0WnQ 616 500]

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Ladies and Gentlemen of free America,

You need to take out your blue blazers and put them on, for this market is about to get the Thanksgiving kicked out of it. As we speak, Senator Jakegint is cutting back on household expenses, in anticipation of demonstrative losses. From what I have gathered through iBC’s Security Apparatus, Jakegint has stockpiled three months supply of tv dinners and Woodshedder has secured one year’s worth of pork belly rations.

This distresses me a great deal.

Asia is getting put in its place tonight and Godzilla has emerged from the Sea of Japan and is now stomping out buildings and eating people like candy. The middle east is “going Hitler” on its citizens and NATO is busy sending emails to one another in Libya.

Rumours of a “double dip” of sorts has appeared in all of the popular trade journals and Chinese CEO’s are closet homosexual/terrorists, operating here in the US to pilfer our dumbest investors for the benefit of The Communist Red Fuckers from CHINA (TCRFC).

I’ve done the very best I can with the tools available to me. I’ve all but put the entirety of my sanity and chips into refinery stocks; yet they still trade lower because when the Earth is vacated of human life, gasoline sales will plummet.

Having said that, I tend to act against my better judgement. I’m heading off to Japan now, where I intend to slay Godzilla with a gravity hammer. After I am done, I will return to the states for a snack, then proceed to catapult diseased corpses into enemy cities.

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Carnage is taking place in the oil markets today, as men with exceptionally small brains fail to see the forest through the dense trees. More specifically, midgets in space outfits are selling refiners, ad hoc, despite the profit margins for said refiners going through the roof over the past two days.

Get this: crack spreads were up 5.5% on Friday and another 3% today. For the first time in months, there is a divergence between the price of refinery stocks and spreads. More importantly, you fuckers seem to believe a drop in crude equates bad times for refiners: WRONG. It’s all about the spread. Look at WTI vs Brent today. WTI is dropping harder and faster, which widens an already profitable situation for a company like WNR. In short, this short term pain will be rewarded with a “fuck you, you’re dead” short squeeze. We’re coiling back here and when the catapults are released, diseased bodies of bearshitters will be launched into the cities of those who bet again us.

WNR vs Crack Spread

Aside from that, the market looks like shit. The Cramer pump of MWW has worn off and OXY is getting punched in the cock. All laughing aside, I am getting boiled here, down 2% for the day.

However, for those of you mocking men of my stature and standing for buying dips: need I remind you of recent history? Ben Bernanke will smoke you inside of his tightly woven philly blunt. As we speak, Ben is watching CNBC and dropping his blunt ashes into an ashtray made from $1,000 bills, saying “I’m gonna get those bitches soon.”

You’ve been warned.

[youtube:http://www.youtube.com/watch?v=Ul5KYuNvqWI 616 500]

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I am still watching shit melt down to a cinder in slow motion, in case you were wondering. Right about now I have a date with a certain Starbucks, interested in their dopio offerings. I will have you know, I visit Starbucks, in favor of Dunkin’ Donuts, so that I can walk around with that awesome cup. It’s a great status symbol you know.

Developing…

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So I am driving my kids to school this morning and at the light I take an “illegal” look at my streaming quotes on my iPhone. Much to my horror, WNR was trading down $5.53 to $12. My initial reaction was pure, unadulterated, fear. Instantly, I did the math in my head, calculating my losses. They were fucking “clown rape on a Sunday afternoon” heinous. My heralded personal aggressive account, that was up 875% last year, would have “enjoyed” total loss, due to my highly leveraged state.

I turned as pale as my white 10,000 thread Egyptian cotton sheets, then started to think of reasons how this could happen. I raced back to my house, doing about 500mph hour, shooting heat seeking missiles at the fuckers in front of me. I parked the car, ran upstairs, despite my wife giving me shit about “acting all barbarian like.” Then I read it was all a big fucking joke, a sick mistake of sorts. The stock wasn’t down huge, but up a smidge.

Essentially, “The Fly” wins again, despite early concerns of a total and complete wipe out. That’s how I roll.

NOTE: This shit doesn’t stop me from investing like a space alien magician. I’m not the type of person that puts credence into bullshit experiences like this, saying “OMG, that could have happened, let me be more careful.” Quite the contrary. I view it was nothing more or less than a bone headed error, not worthy of my time, but most definitely yours.

Back to my rocket ship, doing light speed past your bullshit house.

[youtube:http://www.youtube.com/watch?v=nhjRmhP2f-8 616 500]

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Because I am long the refiners, my ear is to the ground, regarding investor sentiment in the refining space. A lot of people seem to believe the trade is to be long refiners, ahead of the driving season, then sell as gasoline rips the faces off consumers.

The gagillion dollar question is, has this trade proven to be successful in the past? Let’s take a gander, shall we? Follow me into the dark corridors of The PPT.

I will pick three refiners for this study: TSO, HOC and VLO, due to their institutional favorite status.

TSO

April
Stats for the month:

Avg Return 2.46
# months TOTAL 28.00
# months UP 17.00
# months DOWN 11.00
months UP (%) 60.71
months DOWN (%) 39.29

May
Stats for the month:

Avg Return -0.50
# months TOTAL 28.00
# months UP 15.00
# months DOWN 13.00
months UP (%) 53.57
months DOWN (%) 46.43

June
Stats for the month:

Avg Return -0.94
# months TOTAL 28.00
# months UP 14.00
# months DOWN 14.00
months UP (%) 50.00
months DOWN (%) 50.00

——————————————-

VLO

April
Stats for the month:

Avg Return 3.55
# months TOTAL 30.00
# months UP 17.00
# months DOWN 13.00
months UP (%) 56.67
months DOWN (%) 43.33

May
Stats for the month:

Avg Return 1.69
# months TOTAL 26.00
# months UP 17.00
# months DOWN 9.00
months UP (%) 65.38
months DOWN (%) 34.62

June
Stats for the month:

Avg Return -4.15
# months TOTAL 29.00
# months UP 11.00
# months DOWN 18.00
months UP (%) 37.93
months DOWN (%) 62.07

———————————————–

HOC

April
Stats for the month:

Avg Return 3.93
# months TOTAL 19.00
# months UP 11.00
# months DOWN 8.00
months UP (%) 57.89
months DOWN (%) 42.11

May
Stats for the month:

Avg Return 2.32
# months TOTAL 18.00
# months UP 12.00
# months DOWN 6.00
months UP (%) 66.67
months DOWN (%) 33.33

June
Stats for the month:

Avg Return 0.40
# months TOTAL 19.00
# months UP 8.00
# months DOWN 11.00
months UP (%) 42.11
months DOWN (%) 57.89

The results say sell in June, if you are interested in taking profits. What’s important to note is how did refiners do in 2006-2007? After all, the last time crack spreads were this wide was 2006-2007. It would make sense to try to learn from the trading patterns of this industry when the fundamentals were almost identical, sans the extra bonus we have now with Brent-WTI spread.

TSO

2006
April: +2.36%
May: -2.43%
June: +9.2%

2007
April: +21%
May: +2.1%
June: -7.5%

VLO

2006
April: +8.3%
May: -5.1%
June: +8.4%

2007
April: +8.9%
May: +6.4%
June: -1%

HOC

2006
April: +4.1%
May: +8.1%
June: +15.6%

2007
April: +7.25%
May: +10.2%
June: +6%

The verdict: refiners did exceptionally well throughout the Spring months and into the Summer. If anything, sell in June, then come back for the ever exciting hurricane season aka “say goodbye to your GOM oil rigs, fuckface.”

In closing, here is how WNR performed month by month, in 2007, compared to the present.

WNR
2007
Jan: +7.4% Feb: +5.7%, March: +35%, April: +1.5%, May: +24.1%, June: +17.8%, July: -3.98%, August: -6.6%, Sept: -21.6% (Bear Sterns), Oct: -9.6%, Nov: -21.2%, Dec: -16%
2011
Jan: +15%, Feb: +33.6%, March: +4.2%, April: +3.4% (so far)

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Believe me, I tried to think of another title for this post. I lamented over the fact that this title may be viewed as a personal assault upon Cramer’s reputation. However, after intense analysis, this is the only title that would suffice.

On yesterday’s Mad Money show, Cramer threw refiners into his “sell block.” Why you ponder?

Well, he discussed how the crack spread is “super high” and how the spread between WTI and Brent crude could not sustain current levels. He furthered his assault, claiming the group was set to report “outstanding results” and that the stocks would gap higher on that news. WTF?!? Now a normal person would discount his opinions regarding Brent-WTI spread tightening as mere conjecture. After all, there is a reason why Brent is trading at a big premium, all to do with the middle east on fire, literally. WTI crude is stored in Oklahoma, a place where tomahawk missiles and bands of RPG wielding “freedom fighters” are not found in great abundance. Frankly, I agree with everything else he said.

Yes, the refiners will report outrageous earnings, effectively roasting the stomachs of those betting against them. Going into the peak driving season, gasoline demand will soar, sending spreads even higher. Current spreads are at $25 and climbing, yet Cramer is telling his flock to take profits. I cannot agree with such thinking, especially at a time when the refiners are just ramping, from an EPS perspective.

How egregious can share prices get, best case scenario?

Let me show you something. Inside The PPT, I launched new tools that will automatically scour analyst estimates, both high and low ranges, then recalculate PEG and FPE scores based on the data. Let’s take a look at the average estimates for the refiners, then compare that to the high end estimates (I believe refiners will exceed the very highest of estimates).

No.	Ticker	Earnings – Avg. Est. (next yr)	Earnings – Avg. High Est. (next yr)	Forward PE	Forward PE (high est.)	Industry
1	VLO	3.48	4.80	8.33	6.07	Oil & Gas Refining & Marketing
2	MRO	5.69	7.63	9.20	6.94	Oil & Gas Refining & Marketing
3	WNR	1.89	2.41	9.74	7.63	Oil & Gas Refining & Marketing
4	HES	7.88	10.42	10.11	8.11	Oil & Gas Refining & Marketing
5	MUR	6.99	8.94	10.17	8.40	Oil & Gas Refining & Marketing
6	TSO	2.53	4.04	10.55	6.61	Oil & Gas Refining & Marketing
7	CVI	2.10	2.20	11.15	10.65	Oil & Gas Refining & Marketing
8	HOC	5.26	7.49	11.61	8.15	Oil & Gas Refining & Marketing
9	FTO	2.44	3.55	12.12	8.33	Oil & Gas Refining & Marketing
10	CLMT	1.60	1.70	13.18	12.42	Oil & Gas Refining & Marketing
11	INT	2.86	3.00	13.91	13.27	Oil & Gas Refining & Marketing
12	SUN	2.74	3.90	16.93	11.89	Oil & Gas Refining & Marketing
13	UGP	0.94	0.95	18.62	17.87	Oil & Gas Refining & Marketing
14	DK	0.71	1.06	19.04	12.75	Oil & Gas Refining & Marketing
15	EROC	0.36	0.50	28.97	20.84	Oil & Gas Refining & Marketing
16	SYNM	0.07	0.07	29.71	30.00	Oil & Gas Refining & Marketing
17	ALJ	0.40	1.87	35.50	7.60	Oil & Gas Refining & Marketing

Based upon high end estimates, VLO is trading 6x and WNR 7.5x 2012 estimates. That’s absolutely ludicrous for an industry that is enjoying extreme revenue and EPS growth. An argument could be made, due to the current WTI-Brent spread, the refiners have never been this attractive. Period. WNR trades to $25, or 10x 2012 estimates. Write.it.down.

In summary, I could never do what Cramer does, day in and day out. However, mark my words, I will eat his liver with my long bias versus his sell block bullshit, in the refiners.

[youtube:http://www.youtube.com/watch?v=E5GHn4EAR-g&playnext=1&list=PL9C849302F07CFF4E 616 500]

UPDATE: This guy gets it.

[docstoc docId=”75721668″ mId=”-10″ width=”595″ height=”550″ slideMode=”false” showRelatedDocs=”false” showOtherDocs=”false” allowdownload=”true” url=”http://www.docstoc.com/docs/75721668/WNR”]WNR[/docstoc]

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I bought 10,000 WNR for personal.

See crack spreads?

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Based upon nothing at all, the market will melt up today. You will see the dollar trade lower, commodities gap higher, and stocks eviscerate anyone who shorts them. There are a thousand reasons to sell stocks, but just one to make you go long— to make money.

Ladies and gentlemen, people want to be “rich as fuck” again. They will leverage their future in order to own something, irrespective of where that company is located. The beauty of this business we are in is its immunity to domestic retardation. Go ahead and shut the fucking factories. Send those jobs to Ibiza for all I care; I will go long foreign stocks, fueled by foreign cocaine—for domestic consumption.

As Congress flops around like fish out of water, the American investor, mind you, is having a renaissance. I know Jakegint will cry foul and lament the great many grotesqueries of a Mr. Barry O’bama. However, keep in mind, Senator CH is making more money than God now, long to death gold/silver. Bravo! Well done Senator Cement Head.

As for me, I will be the recipient of a good old fashioned “Cramer pump” this morning, long lots of MWW. Aside from that, I intend to make up yesterday’s losses and plan for the future– one that demands you shut the fuck up and listen to me, ever so quietly.

We’re cutting cocks off today. Get in line for a bowl of “ball soup.” I will be waiting in the rafters chuckling at the men in diapers.

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