Bear vs. Bull

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Hey, let’s raise rates (remember that?). I believe it was the Fast Money gang (Guy Adami) who was suggesting we might enjoy a massive 3rd quarter rally, spearheaded by CDO markups. Buy the banks, no?

Where are the Warren Buffett rumors? Every time the market dumps out, they pull Buffett out of a potato sack and spread scurrilous rumors about his pending “white knight” investment. It never pans out. Buffett is old and cranky. He hates bailing people out, let alone buy himself a decent suit.

Shall we ignore AIG‘s trillion dollar meltdown?

I swear, men with charts should be sent to military work camps. As soon as the vix hit 30, buyers started stepping in. If you really think about it, men with charts are pretty much the dumbest people on the face of the earth, right below spastic retards, who buy Wells Fargo & Company [[WFC]] and U.S. Bancorp [[USB]] , in florescent orange jumpsuits.

The Fed will not cut rates tomorrow. However, in the event that they do, my oil stocks will surge. Either way, I win, at least half way.

At the present, I find it acceptable to lose money in my oils, providing my bank shorts eat pavement.

The next boot to drop has to be in commerical real estate. I have contacts in the field and almost all of them think they are immune. They have a certain smugness about their business and it irritates “The Fly.” These people are mentally impaired—I’ll have you know. On this display of hubris, I want to sell short Vornado Realty Trust [[VNO]] , Boston Properties, Inc. [[BXP]] , Simon Property Group, Inc [[SPG]] and SL Green Realty Corp. [[SLG]] or just get lazy and go long [[SRS]] .

Finally, I think it’s important to note the bag holders of American International Group, Inc. [[AIG]] equity. Here are a few publicly traded companies, who have massive AIG common stock on their books:

AXA (ADR) [[AXA]] : 161 million shares

State Street Corporation [[STT]] : 96 million shares

Barclays PLC (ADR) [[BCS]] : 94 million shares

The Bank of New York Mellon Corporation [[BK]] : 31 million shares

Legg Mason, Inc. [[LM]] : 29 million shares

Northern Trust Corporation [[NTRS]] : 29 million shares

T. Rowe Price Group, Inc. [[TROW]] : 23 million shares

Janus Capital Group Inc. [[JNS]] : 19 million shares

Goldman Sachs Group, Inc. [[GS]] : 17 million shares

Morgan Stanley [[MS]] : 16 million shares

Bank of America Corporation [[BAC]] : 16 million shares.

Look at everyone trying to describe this 150mph head on collision as some sort of final capitulation, a buying opportunity. Watch them talk garbagio about how insignificant Lehman Brothers Holdings Inc. [[LEH]] was and how if we just close our eyes, we will not see American International Group, Inc. [[AIG]] melt away.

Bank of America Corporation [[BAC]] just threw an oversized anvil on their shareholders, via buying Merrill Lynch & Co., Inc. [[MER]] —at way too high of a price. We all know they could have bought them for like 10 billion. Instead, I guess they thought it made “sense” to take the life savings of coal miners and school teachers in order to buy them for 44 billion.

Right, that makes sense.

Enough of the news; let’s talk turkey.

On this little tiny dip, I will buy more [[SKF]] . There is no way in hell those bastards from Wells Fargo & Company [[WFC]] ] should be green, yet they are. Look for Citigroup Inc. [[C]] and Bank of America Corporation [[BAC]] to continue to drive SKF higher, especially with all the arbs on BAC now.

Also, Legg Mason, Inc. [[LM]] is wrong, as usual. I will try to short more.

And, I will begin to short AXA (ADR) [[AXA]] . These European noodles have investment risk everywhere. They are as stupid as Pzena Investment Management, Inc. [[PZN]] , only 1,000 times bigger. Just know, AXA is long 132 million shares of American International Group, Inc. [[AIG]] .

Wonderful.

Finally, my head is being “Talibanned” off via egregiously weak oil stocks. From [[DIG]] to Western Refining, Inc. [[WNR]] , pain is abundant. At the moment, I am closing my eyes to the weakness, sort of like how Cramer only likes to accentuate his green stocks, while his “charitable portfolio” is down 25%, year to date.

Luckily for me, my “uncharitable portfolio” is up more than 40%.

Top pick: SKF

UPDATE IV: Sorry for the damn site going offline (I really wish I could curse right now). I have no idea what happened. My guess, Lehman Brothers got all pissed about my “fortune cookie curse” on them and ordered a web assault on iBC. Apparently, our fate is intertwined with Lehman.

Mini Update within a bigger Update: The site was hacked down by egregious iBankers. We are fighting them on the internets. Developing…

Odd, no?

Anyway, BAC just made a massive error, through buying MER. Essentially, the Fed is forcing them to do this deal. Everyone knows, they can get MER for $15 or less. Instead, they are trying to paint the pig gold and tell us it’s a golden bowling ball. It’s not. It’s a stupid pig with gold pain on it.

With that in mind, expect to see BAC at new lows, within weeks. And, on a big spike, I might short some MER, based upon the insane theory that BAC shareholders may say “hmmm, this deal blows, cancel it now.”

Basically, BAC is the biggest bagholder known to modern finance. I am sure Cramer will find the silver lining inside the nuclear bomb crater and suggest we go out and buy banks, again.

Then we have AIG. KKR and JC Flowers just walked away from a tentative deal with them. Basically, they need to raise $40 billion, in order to avoid a credit downgrade. Because of this, they want the Fed to give them a bridge loan of $40 billion: ROFL.

Are they nuts?

Finally, the hapless banks are concocting some new liquidity pool, in order to create liquidity. Shocker. Ignore their efforts and buy SRS, SKF and short LM, with great vigor.

The market should get stomped out tomorrow, led by free falling banks and massive drop in the dollar.

UPDATE III: Merrill’s board is voting on a $29 per share offer (all stock) from BofA. If this dilutive deal goes through, expect the shares of BAC to get mudstomped. This is a highly irresponsible move, on behalf of BofA. I am sure their shareholders would appreciate it if they could wait until Tuesday to negotiate a buy out price. My guess, they could bag MER for $10 or less, if they keep their cool.

UPDATE II: In light of the probable unwinding that will occur, here is a short list of Lehman Brothers’ top holdings:

General Electric Company [[GE]]

Pfizer Inc. [[PFE]]

Target Corporation [[TGT]]

UBS AG (USA) [[UBS]]

Linn Energy, LLC [[LINE]]

GLG Partners, Inc. [[GLG]]

Merck & Co., Inc. [[MRK]]

Microsoft Corporation [[MSFT]]

[[CME]]

Bank of America Corporation [[BAC]]

Apple Inc. [[AAPL]]

Flagstone Reinsurance Holdings Limited [[FSR]]

WellPoint, Inc. [[WLP]]

Wal-Mart Stores, Inc. [[WMT]]

Exxon Mobil Corporation [[XOM]]

UnitedHealth Group Inc. [[UNH]]

Google Inc. [[GOOG]]

Johnson & Johnson [[JNJ]]

Baidu.com, Inc. (ADR) [[BIDU]]

UPDATE: Should AIG catch a credit downgrade, they will face a 46 billion dollar cash call: ROFL. That’s like Dr. Evil type money. God help us.

S&P futures indicate a 36 point drop (3%), thus far. CDS spreads have widened by 30 basis points.

NOTE: As soon as I can start cursing again, Dick Bove is getting a “lifetime achievement” As*hat Award.

Developing…

UPDATE III: AIG is desperately seeking to raise 30-40 billion, in order to avert a credit downgrade. Also, with a few hours left until Asian trading begins, I believe it is fair to say Lehman will be liquidated. We are living in interesting times.

Should BofA go ahead and take out MER, expect the wagons to circle MS.

Whatever the outcome, just know, you will remember the last trading year for the duration of your lives, with great clarity. History books will reference this era and label it and the people in the forefront as “stupid,” “gay” and everything in between.

UPDATE II: Apparently, all buyers have walked away from LEH. And, to muddy the waters a little further, [[BAC]] may buy MER for $25-30 per share. How will the street digest the collapse of LEH, while another major investment bank catches a 100% premium bid? I have no idea.

One thing is certain, a BofA buyout of MER is a defensive one. They (banking fools) are trying to eliminate future headline risk.

UPDATE: Just to recap this weekends developments:

Paulson and Co. refused to bailout the buyer of Lehman Brothers Holdings Inc. [[LEH]] , whomever it may be. As a result, Barclays PLC (ADR) [[BCS]] has walked away from talks. And, rumor has it, so will Bank of America Corporation [[BAC]] .

The closer we get to Asian trading, the greater the likelihood Lehman may fortune cookie its way into a bankruptcy filing.

Video UPDATE: Cramer’s real position on housing, a few years back. I am sure he would like this video pulled.

Poof. Your stupid gasoline supplies are gone.

-Merlin

NOTE: Crack spreads are now north of $70!!!

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Great Depression music. We will all listen to this crap, when poor.

Enjoy.

I’m out of here. I have no desire to watch this unorganized mush of a tape today. Everybody is trying to out position/out smart one another, with vacuous bets. There is no need for me to watch the minute by minute ticks, when I know what the eventual outcome will be.

Which reminds me, I need to start shorting TheStreet.com, Inc. [[TSCM]] again. A friend of mine, who is a HUGE Cramer fan, has lost 100’s of thousands by listening to the old bald one this year, following his egregious financial advice. Don’t ask me stupid questions, like “hey, why do you let your friend do that?”

The short answer is: “The Fly” does not try to alter other peoples opinions, unless properly motivated.

Frankly, thestreet.com and realmoney.com are broken business models, that have become the laughing stock of the blogger community and a curse to their followers/subscribers. Only a handful of people, like Rev Shark, make any sense, on a day to day basis. I would expect TSCM to go substantially lower, as his (Cramer) habitual reflexive CNBC moments further tarnish his clownish reputation.

As for today’s trade:

Utter garbage. There are people out there who do not care about pending disaster at American International Group, Inc. [[AIG]] , Merrill Lynch & Co., Inc. [[MER]] , Lehman Brothers Holdings Inc. [[LEH]] or Washington Mutual, Inc. [[WM]] . All they know: U.S. Bancorp [[USB]] , Bank of America Corporation [[BAC]] and Wells Fargo & Company [[WFC]] are great buys. Boo-yah.

This is ridiculous. Go take a look at their earnings. They are not immune.

If there is one thing that I would like to see, more than anything else, I’d like the stock Gods to bestow death to the axis of evil: USB-BAC-WFC. It’s the trinity of bovine thinking.

In closing, my top picks include: [[SKF]] , Western Refining, Inc. [[WNR]] , Freeport-McMoRan Copper & Gold Inc. [[FCX]] , [[DIG]] and short Legg Mason, Inc. [[LM]] .

I bought 10,000 Western Refining, Inc. [[WNR]] @ $11.17.

Disclaimer: If you buy WNR because of this post, your only son will come home sporting a hitler mustache. And, you may lose money.

I sold short 5,000 PacWest Bancorp [[PACW]] @ $29.72.

Disclaimer: If you sell short PACW because of this post, your friends will label you an albatross. And, you may lose money.