18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,250 Blog Posts

Commodities Are on Fire

Much to my chagrin, Vale pulled out of the Xstrata deal, which would have fetched 90 billion. As a result, a bunch of asshole basic resource names are jumping off my screen, in anticipation that Vale will direct their guns at someone new.

From [[AA]] to [[FCX]] to [[CENX]], the sector is on fire.

Also, it appears the downtrend for the wheelbarrow dollar has resumed, following a small consolidation. With that, “ag plays” are on fire, led by oil.

Basically, today’s gains are due to takeover speculation and the “inflation story” being placed back on the front burner.

Although I am being flame broiled on my [[SMN]] position, I do have minor hedges, via [[DGP]].

Both [[MON]] and [[POT]] continue to steam ahead, thanks to the crap mentioned above.

In short, the bulls are making lemonade out of today’s poor tape, by running up the commodity plays. This is very good for their case and it may spill over into the general market, by 4:00.


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Fly Sell: RIMM

I sold 1,500 [[RIMM]] @ $117.

NOTE: This is my last piece of RIMM, after holding it for years. All done.

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Elevator Down

The durable goods numbers were plain awful, particularly for machine tools. Businesses are not spending like the do-gooders think they are.

Keep your eye on dollar weakness versus the yen, via [[FXY]]. So far, the move to the downside is significant. Should it continue, I will be buying more gold, via [[DGP]].

One thing to keep in mind: municipalities who plan for construction projects, by raising money via bonds, are in for a giant surprise. In their infinite wisdom, they peg expenses to the CPI index, which, as you know, is utter bullshit. Inflation in construction, which includes steel, concrete, copper etc, is running at a 9% clip per annum— up 50% since 2003.

What does this mean?

For one, it means municipalities will be forced to raise more money to finance construction of infrastructure projects (bridges, tunnels, roads) or be forced to cancel them.

Possible short plays off this dilemma include:

[[TEX]], [[VMC]] and [[GVA]].

As for today’s trading:

Look out for the asshole dip buyer. He’s back in town, with his stupid mustache and bag of depreciating dollars.

I really like [[SMN]] here, which is down due to gold strength. Again, long both DGP and SMN is a good pair trade.

Finally, it appears [[C]] is in the middle of all sorts of problems. Today, they settled an ancient Enron claim, for close to 2 billion dollars.

You have to be kidding me.

And, they own a truckload of [[CCU]] debt.

Top pick: [[SKF]]

UPDATE: Paulson says Bear Stearns ‘found itself facing bankruptcy

Yeah, instead they ended up getting 10 bucks per share, which in my book, is a fucking bailout. The deal was NEVER structured for $2. They used that $2 shit for public relations, in order to say: “see it’s not a bailout.”

Fast forward one week, they upped the buyout to $10. Plus, [[JPM]] is paying out the nose to retain Bear brokers, all with Fed money aka tax payers dollars.

Keep in mind, in bankruptcy, [[BSC]] goes to zero.

29 billion @ 2.5% for 10 years.

Not a bad deal for Dimon and Co.

Federal Reserve equals U.S. Sovereign Wealth Fund.

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Bear Brokers Milking JP Morgan

[[JPM]] is busting the bank to retain top producers at [[BSC]], while telling the pikers to go fuck themselves and run, not walk, to Merrill.

For brokers generating over $500,000 in revenue, Dimon and Co. will pay them a 100% up front bonus, which includes 25% of JP Morgan stock. And, those lucky fuckers will get additional bonuses of 50% cash and 50% stock, based upon production numbers, over the next three years.

For lesser producers, in the $250k-500k bracket, they will receive a 50% bonus, split evenly between cash and stock.

For losers making less than $250k, they get nothing. Moreover, they probably get to hand in their books, to bigger producing brokers, and look for a new job.

Essentially, a broker making $1 million in gross commissions stands to make over $4 million in bonuses, over the next three years. Anyone in the industry knows that is an incredible deal, for basically doing nothing but go to work.

For JP Morgan: I believe it is a terrible deal, as they try to fend off shark-like recruiters from taking Bear Stearns’ best brokers.

Basically, JPM is taking on one fuck of a money loser.

NOTE: One of my recruiter friends said other firms are willing to payout more than 200% in upfront bonuses, for top producing Bear brokers. This should be interesting.


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Late Night Stupidity

China Life [[LFC]] takes the wonderful premiums from their core business and invests them in the stock market. Can you say “moral hazard”?

With the Shanghai down more than 30%, year to date, something tells me the fuckers from LFC have some rough sledding ahead.

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You’re All Cowards

It’s amusing to know most of my readers are bears. Every time the market gaps higher, you fuckers vanish, like cockroaches in light, taking your ignorant comments with you.

I’ll have you know, “The Fly” is a veteran at this game. I don’t shake and I do not waiver.

I will also have you know, [[LEH]] is a short sellers ATM machine. Please do not tell the fuckers from Lehman the market has bottomed.

All day, “The Fly” was getting his face punched in by Mr. Monsanto, bloodying up my [[MON]] short and [[SMN]] long. For the day, I was down more than 2.5%—effectively deballing my bountiful month to date returns.

Right now, everyone is declaring inflation dead, due to “tight monetary policy.” Ha!

This is most amusing. It is even more amusing to see the market price in another 50 bps cut.

Hey asshole, quit being a pussy and get long gold, via [[DGP]], short the dollar, via [[UDN]] and short the banks, via [[SKF]].

Learn at your own pace.

UPDATE: Mish on Lehman.

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Don’t Forget to Dress Your Window

Market psychology is very fragile right now.

On one hand, my “intelligent” bearish friends are scared shitless of a “technical breakout,” which can send the Dow up another 200-300 points. On the other, my bullish friends are booking profits here, afraid to ride long into earnings season.

One reasonable explanation for the recent rally is end of quarter window dressing. Fund managers are drinking the bottom kool-aid, putting cash to work at a frantic pace, in order to polish up their marketing material.

Expect the winners to keep winning, while the losers do nothing.

Additionally, it seems everyone has anointed the demise of [[BSC]] as the seminal moment which will mark the bottom for all eternity, similar to the Long Term Capital collapse.

This, as you know, is absurd. The problems we face today are far more systemic and will be spearheaded by a recession.

My bets are on Joey Bag-o-Donuts’ inability to buy a 3rd plasma tv, not a total collapse of the banking system—resulting in a market crash. That’s stupid.

I accept the fact that the government will backstop the banks and keep them afloat. However, they cannot make people shop at [[BBY]] or buy houses from [[HOV]].

To hedge against my short selling stupidity, I’ve been buying [[DGP]] and [[EWH]].

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By the Way

Consumer confidence fell the most since Nixon. According to Case-Shiller, home prices plunged by 10.7%. A new record. Congrats Mr. Hovnanian.

And, to top the shitsicle off, the dollar has fallen the most in two weeks, versus the euro.

Cognizant that money managers will paint the tape this week, for brochure purposes, I will buy more gold, via [[DGP]], in order to hedge against my [[SMN]] position.

Remember, SMN has several gold stocks in its holdings. If commodity related names melt up into Friday, DGP will offset my SMN losses quite efficiently.

Also, keep your eye on [[FXY]]. Should the dollar continue to weaken versus the yen, this rally will end quicker than a gay parade in the middle of Tehran.

Top pick: DGP

UPDATE: Due to my high tolerance for pain, I will not cover my [[MON]] short. Instead, I will let the dust settle, then short more. The nerve I have!

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