A Look into the Future

Amidst the whistling winter winds, quislings will be shot dead for stealing bread from the local bakery. Local schools will be converted into prisons and church’s into homeless shelters.

High above, rogue military bombers will drop napalm ordnance on upscale shopping malls and low end street fairs.

Local banks will be used as recruiting stations to lure unsuspecting teenagers into American kamikaze missions. And, at the local grocery store, mustard gas will replace the old tangy condiment, much to the delight of middle aged military historians.

Back on Wall Street, the Dry Bulk Shipping sector will be on fire, due to elaborate strength in Asian economies. Oil and gas stocks will soar, due to the fact that people will be using armed vehicles and tanks as their primary source of transportation. Retail and tech stocks will soar, thanks to government stimulus packages that includes “buy one rpg, get a second one for free.”

Short sellers will have their balls baked, literally, by roaming squads of “truth seekers.” Western civilization, as we know it, will be a bit different, but business will continue, thanks to American innovation.

The problem with buying commodity stocks is that the fundamentals are going to be horrendous, going forward. They are the biggest beneficiaries of “bounce trading,” due to people being emotionally attached to them; but like dot coms in 2000, they are dead.

If the market is to begin a new bull market, it must do so with new leadership.

Construction firms are ripping again, much to my delight, long KBR. My watch list includes: PCR, SGR, FLR, FWLT, ABB and MDR.

Today’s tape is the exact reason why I am not willing to commit 100% to being a bear. Although I know stocks are expensive and will trade lower, that does not mean people are going to forget about Santa Claus and give up all hope. Instead, investors are taking the optimistic viewpoint, betting that the economy picks up within 6 months. After all, how can it get any worse?

Well, the answer to that question, and more, is easy. Wait until states and municipalities run out of money, and start to grovel for Federal dollars.

Hey, at least treasuries are down today, which means people are not tossing money into the Federal barn fire.

As crazy as it sounds, long ERX, TNA, FAZ, SRS and JPM is working today, which happens to be a portion of my holdings. Essentially, the banks are not participating in today’s melt up, which means we will trade lower sometime later today—unless of course commodity stocks can hold onto these big intraday gains.

As for FXP:

That etf is so criminal, the makers of it should be tossed into an alligator infested swamp.

Top picks: KBR, FAZ, SRS TNA

UPDATE: I sold out of my entire JPM position, above $34. And, I bought some more SRS, sub $84.

We are about to enter a pretty odd time of year for the indices, where junior traders and trade at home Dads run rampant, moving stocks on thin volume. I do not expect the market to make any bold statements, for the remainder of 2008.

There will be many false breakouts, accompanied by incessant rumors of insolvency. But, nothing will be resolved until early 2009.

In my estimation, the best way to protect assets and make some money in a thin December tape is via intra-day trades and/or long/short strategies. As bad as today looked, tomorrow can look glorious, with robust gains in banks, oil and tech. However, don’t expect much follow through.

We’re in a fucking meat grinder tape. This is the sort of market that will destroy year to date gains, inside a short week. My approach is simple: keep the short positions static and trade around them with longs. In other words, I will build up positions in SRS, SKF, FAZ, REW and maybe even a little FXP, down in the $30’s (why the fuck not?), while making advantageous trades in individual stocks/ etf’s, like KBR, JPM, TNA or FAS.

You get the point.

Like last year, I expect the “homo hammer of certain death” to reign down equities, as if Dennis Kneale’s face represented the market, or some shit, and some binged out, over-caffeinated maniac was just hammering it— until its ugly mug turned to dust.

NOTE: The PPT is pretty much neutral right now. Technically, the market is a sell. But, there are numerous sectors that are still in bull mode.

[youtube:http://www.youtube.com/watch?v=uPHzu3oc-2E 450 300]

Poof. Your bullshit Santa Claus Rally is over.

-Merlin

At the present, I am content being both long and short, with an egregious bias toward short banks/commercial retail. My longs include: ERX, TNA, BDK, JPM and ROM. My shorts include ERY, FAZ, SRS, SKF, DUG and REW.

However, the overall exposure is net short. Granted, should the market crap out today, I won’t make a fortune. But, at this point in the year, I’m more interested in being right, than making money.

I rather see people lose limbs, on Wall Street, falling victim to psychotic margin clerks, than make enough money to buy another set of diamond encrusted rims.

The way I figure, if there is another 40% downside in the market, which is my belief, then missing out on a 2-5% day is acceptable. There will be plenty of time to take off the upside hedges and embrace the bear. I plan on doing so, when most of you bulltards are crammed together, in the fucking selling funnel, stomping on each other, dying to get out.

The guy who plays the CIA boss, in Borne Ultimatum, is such a fucking tool. I mean, how stupid was he to believe Jason would go to Tudor City? Everyone knows there are no exit points in Tudor city.

Geez.

This morning, I was flipping stocks, as if I worked at The Pancake House. First I was bearish, then bullish, then bearish. Quite honestly, if i have to deal with this shit for much longer, I am going to fucking smash shit in my office. I’m gonna throw televisions out the window, old school style.

Big money is flooding back into treasuries. Be very careful with your long exposure here. The fact that people are still extremely risk adverse, as evidenced by the TLT, should stifle your exuberance, at least a bit.

For the love of currency and small babies, 99% of you fuckers were scared of the apocalypse, just two weeks ago.

Take a deep breath and put things into perspective. Is it enough to own stocks, based upon the fact that they do not go lower, over a 1 week time frame? If this bear market has taught you anything it is to not trust anything or anyone, sans “The Fly”; because he’s looking out for you.

The bullish points are price action and “baked in” Armageddon at the retailers. Any upside in holiday sales will really have an impact on the underlying share prices. However, as far as the fundamentals are concerned, I have a serious issue getting long oil stocks, with crude in the low $40’s. Nonetheless, I am long ERX for a trade. Although it’s worth noting, I sold some out for a quick .25 loss.

Bottom line: For once, I suggest being very careful here, both long or short.

For the record, I do not think we will start nosediving here. That’s too easy. Emotional rallies are hard to stomp out. As evidenced by the action in the semis this morning, there comes a point when people are sick of bad news and want to believe everything is priced in.

Early this morning I sold some longs. However, just in case, once again, I am throwing some long trades on again. I have a funny feeling they will try to gun this market later on today. I bought ROM and TNA.

Despite oil being cheap as hell, oil stocks are responding positively. For now, it makes no sense to get in front of the train. Bet against those names when the train has stopped, not when it’s charging ahead.

With that in mind, I stopped buying SRS, which I initiated this morning.

Look, just because I think the market is vastly overpriced does not mean it will collapse today. There is room for everyone to be right, considering what time frame you are looking at. Most people that I know, who are bullish, are long rentals, not long term positions.

With my money, instead of guessing when the market will drop, I rather keep both long and short positions, then use idle cash to scalp short term trades, in either direction.

For now, my bias is to be short, with a careful eye on the idiot jumping around in his green leotards.

UPDATE: Buying ERX, sub $40.

Back to the real world:

Everyday this week and next, your favorite corporations will send a spokesman to the proverbial roof top, in order to scream: “we’re fucked.”

This morning, FDX, NVLS, NUE, NSM, TXN, BRCM warned, just to name a few. Tomorrow it will be a whole new set of names.

See, aside from charts, and internet musings from former bears telling you the downward shift in equities is over, in the real world, where people actually live, things are grim.

For example: 58% of modified mortgage losers are back in trouble again. That’s right, Joey Bag O’ McMansion can’t afford his 6,000 foot idiot home. Despite the government forcing his local bank to keep him in the idiot house, he can’t fucking afford it.

Are you listening to me?

He can’t fucking afford it.

As a result, all of those modified mortgages are going to be classified as in “redefault.” How fucking queer is that?

Across the pond, in the U.K., their housing debacle is just getting started. Analysts predict U.K. homes to decline by at least 20%, slumping into 2011. In Hong Kong, property sales are reeling. Don’t even get me started on Japan.

In short, all signs point to an extended period of worldwide contraction, well into 2010. If that’s the case, what the fuck are you doing buying bullshit?

UPDATE: I sold out of my UYM, FAS and BGU positions. Raising cash.

UPDATE II: I am initiating a position in SRS, nibbling at 200 share blocks from $82.

Long time readers of this site know, not too deep down, this whole battle of popular consensus versus “The Fly” will end badly for you bird brained fuckers. Many of you pikers are felling good about yourselves now, with “The Fly” on a 1 week losing streak, while you scalp some coin off the bottom of my shoe.

Let me remind you and make a prediction: This time is no different than the countless times when I’ve proved you wrong; and, soon enough, I am going to put you fuckers to sleep, like old dogs, for trading against me.

Sure, you’re entitled to your own opinion and the right to make an accurate market call, every once in awhile. But don’t forget, “The Fly” wins all the time, even when he appears to be getting poleaxed badly.

New readers may put that claim into question and ponder to herself: “is this man serious”?

Yes fucktard, I am as serious as a cocaine induced heart attack. Moreover, let me tell you little shit faces, the Dow Jones is going to be deep water diving sometime very soon. The ongoing collapse of American capitalism (remember that) will not end with a few scrapes and bruises. It will end when your torso has been removed from your limbs. It will end when FDX says “oil is cheap, but we don’t got shit to deliver.”

Rates are low; but standards are super high. Homes may be down in value, but still expensive, compared to wages.

Please, let this rally be the opiate to lull you into a deep comfortable sleep.

“The Fly” has nothing but disdain for most of you and will gladly “wake you up,” with news of pending insolvency and personal liquidation, via a very bad negative equity situation.

Okay, shhh, go back to sleep now.