Fade The Fader Fading (China’s Bullshit Too)

Oh, so now JUST EVERYBODY is betting against Europe? News to my ears, that is.

There I was, minding my own business, leisurely sitting around the 9th floor, when one “Joe” of a certain “interior corporation” magazine flashes across my screen with a piece spelling out how “you just know everyone is betting against Europe here; time to fade them.”

Yeah, where were these people Monday? Or Friday??

Where were these people when the DOW was undergoing a 1,000+ point rally over the last three weeks???

But now after a one day selloff, we’re just a bunch of euro-bashing bearshitters, huh?

Everybody’s been just “dreadful” to those poor EU politicians. Nobody’s given them the benefit of the doubt at all. Never mind all the traders pumping the long side on the expectation a real solution would be reached this week.

And in addition to that, now people are spouting some garbage about “Chinese stimulus,” which is apparently to fill the skeptic void that’s building over any American stimulus here at home.

Yeah, that kickass Chinese stimulus, whereby they keep their currency nice and cheap while building empty cities and rails to nowhere. I’m sure that’ll help out the American stock market. Hey, weren’t a bunch of you betting on renminbi appreciation about this time last year?

How’s that working out for you?

Here’ the real deal; China is not letting its citizens sell their homes for less than what they bought them for…ever.

Nice move China, except if you’re a real estate laden Chinese business with no money left, this is the devil’s horn blowing in the wind. Hear the sound, drop dead.

I’m sure that, just like all the other awesome decisions of the infallible People’s Republic, this will be just dandy for the Chinese people.

If you’re a young and coming Chinese man, you have all the luxuries of modern society, including the ability to board a “state-of-the-art” missile which will then fire you down a track at 300 mph with zero safety mechanisms. On your trip, you can enjoy the great many sceneries of the Chinese nation, such as – empty cities – rice fields – and of course, – slave worker factories, on your way to the capital. Once arriving at Beijing, you can walk through polluted, crowded streets of people (feel free to step over dying infants, should you encounter any) while looking for an elusive job. Should you desire to settle down and have a family, while trying to make ends meet, you can be blessed by the beautiful and plentiful numbers of women in China – almost one for every six men. But wait, like most young men, you probably want a home for that young bride (who you’ll definitely meet if you just wait another month or so). So now you should go by yourself a first time house – which cannot be sold to you for any less than the inflated home prices that exist today, under penalty of law.

Ahh, spring time in Beijing…

Why, with policies like these, there’s just no way they don’t have 9.1% all-natural-definitely-not-fraudulent growth next quarter.

I told you the God damned Europeans would disappoint. They’re disappointments. What else did you expect?

As Italy tells the world to fuck itself, while Germany, Norway, and Finland insist no new euros will be printed, and France being desperate not to lose its credit rating, any hope of a real solution being offered tomorrow withers away.

Not that it would have made a difference anyway. The EU was bringing $600 billion to a $1.4 trillion + problem. That’s like a porn star with erectile dysfunction; not going to cut it in the film business.

Let’s say they agreed to backstop Italy’s debt, as opposed to actually bailing Italy out directly. Well, great, you know where that leaves Italy? Still needing to raise $1 trillion…fat fucking chance any bond trader in the private sector would be looking to pile into that situation.

“Hey asshole, how would you like to invest with me so you can lose 60% when I default in three months?”

In Europe, you’ve got four major countries and every single banking operation competing for limited financing. Yet I’m hearing people chant “well this is just like 1998.” HOW THE FUCK IS THIS LIKE 1998?

In 1998, we had some shit ass countries default on peanuts. That triggered massive problems with one major institution which was then bailed out by banks who otherwise had plenty of cash.

Here, we have four central countries defaulting on more money than they have in circulation combined, while their entire financial sector gets lynched by runs on their reserves.

But hey, keep buying stocks because you think the Fed is about to unleash QE3. It won’t change Europe and you’ll still lose.

When the European countries fail to finance the more than $1.4 trillion of debt they have coming due, QE3 will come.

When European citizens are plagued with mass austerity and their local economies shrivel, like Greece’s has, QE3 will come.

When U.S. imports become more scarce and international trade slows, QE3 will come.

When the dollar rallies 30% from these levels against most major currencies, and our exports get priced out of world markets, then QE3 will come.

When oil has dropped to $60 a barrel on massive demand destruction and dollar strength, and the commodity markets are not a risk to the country’s productivity, then you can bet QE3 is coming.

And when you’ve secured a 50% loss because you bet QE3 would get here sooner than it did…well QE3 will be coming for sure then.

Dear God, there is no reason for this. Crude oil should not be trading at $93 a barrel. Why? Because of CAT and better than expected performance?

You want to see that performance get clobbered? Send crude back to $100.

This is a delicate balance, yet jackass pit traders are handling it like a grizzly bear in a room of fine china.

I have sworn on my honor not to cover UCO for another day. I’m now hearing that Spain’s deficit reduction targets will be missed by a long shot.

There is not enough liquidity to sustain Europe. It doesn’t make sense to be long oil at $93 when four massive European countries are on the brink.

I have two things working for me here, where the market is concerned, which leave me to believe that despite the most heinous activity of my portfolio over the last two to three weeks, redemption lies just around the corner…whichever corner it is we turn.

The first is the fixed income markets, which continue to signal disruption and turmoil. Today, as the market rallied as strongly as it did, and with oil pushing up just under 5%, Italian 10 year bond yields still pushed about 1% higher from Friday, to 5.95%. Spain and Portugal also saw significantly lower bond prices.

Remember that Italy needs $1 trillion over the next 24 months. That alone pretty much eats up the entire bailout fund the Europeans are debating. Their only hope is to get market participation to restructure the $1 trillion, plus the debts of the other countries. Shy of that, they are in serious trouble.

And the bond market, unlike stocks and commodities, is not currently giving them the benefit of the doubt.

The second salvation is the quantities under my jurisdiction. My raw volumes of shares have increased incrementally over the last few months, starting with my monstrous wins shorting crude oil and energy back at the start of summer. And I locked in a good portion of those wins when I covered ERX, shifting the proceeds into my existing holdings.

I have since received serious blows against many of those positions, such as CCJ. However, UCO was a useful hedge, whatever carnage it reaps on me now. My legacy position, which is about 33% of my net holdings of shorted UCO, still has a cost average of somewhere around $36. The net position is a loser, but much less so than looking at my last entry points would indicate.

If I take off my UCO short, and cover MGM also, and all my other longs return to where they were trading before the sell out, then I calculate that would put me back around my all time highs, and if it happens fast enough, I might even close out the year with gains.

It’s a tall order, and over the next few days, the decisions I make will decide whether or not it will come to pass.

This is the second year in a row where I’ve been brutalized in the Fall. Last year it was a near-fraudulent buy out of STU shareholders by SLM. That morning, I awoke to a 10% one day massacre of my net worth.

Today, crude oil is gutting me alive while fleshing out the prime cuts, saving them for some fillet it will be having with its friends.

Believe me, I am not calm about this. It’s all I can do to avoid pushing all the sell buttons and sending my portfolio into total lockdown. And if changes don’t take hold in the near future, that is exactly what I will be doing.

I will totally cover my oil short, and MGM short, leaving only my small short in TLT and the rest of my longs on.

But despite this gut wrenching feeling I’m having, I’m going to wait it out just a little bit longer.