Hedged A Bit More, But Looking For Sunshine

I started a new, half-sized, short position in ERX today for $48.14. This is all about catching the market fluctuation and hedging down so I can secure the recent gains.

I thought about selling some of my additional CLP, AWK, or AEC positioning. They have taken stride and made almost full recoveries from the start of the selloff, as I figured they would.

But I love the stocks, so I have decided instead to use a bit of hedging to preserve capital, as opposed to drawing down these names outright.

Watch closely you; the REITs and utility company I possess will be trading at new highs just in time for Thanksgiving. BG and CCJ will have also returned to their pre-selloff days, at a minimum.

This is not the end of the world. I had a conversion with two gentlemen the other day, who were trying to convince me that this is all part of the “new normal.”

Poppycock, I’ve heard that trash before. Mankind will not take its lumps sitting down. America will persevere and rise from the ashes to something beyond what any of you ever imagined.

God, I would pit even our most lazy union member against any man in Europe. To hell with China, we will continue to innovate beyond them and their zero-safety-system-high-speed-trains.

We’ve hit a bump in the road, but even if our markets dip into an official recession, our country’s greatest days are ahead of her. In the next two years, the housing market will continue to work through the buildup of supply and bad mortgages. Once property values stabilize and the American citizen is no longer dropping half of their disposable income on interest payments, it will all be uphill from there.

Quit betting on the end of humanity. A few select markets and sectors need to sell off, but in general business is still the only reliable faculty of man.

I demand cheap and abundant crude oil, like it were my birth right.

I demand it because it means the revitalization of this country.

I demand it because it means the broken dreams of our enemies.

I demand it because it will make me lots of money.

But what I demand won’t necessarily come to fruition here. While our economy has obviously slowed, that may already be accounted for, in the hearts and minds of oil traders.

This may be the last chance for the commodity markets to break down further; if crude can’t cave back below $80 again, I would be foolish to ignore the presence of a forming level in the pricing.

And maybe that’s where oil should be. Cramer may have been correct; shy of total destruction, crude can trade down into the $80’s after you flush out the speculators.

But I want, very much, to believe it’s good for more than that. I want to believe that oil can go at least into the $70’s.

This is the last good chance for that. Next week will tell whether or not it can be done.

I don’t quite know what’s going to happen after tomorrow. What concerns me is the bipolar nature of the two main outcomes I see.

We need to deleverage this beast. But how we do it makes a world of difference.

If we devalue the currency, everything goes much higher. If we let mother market sort things out through failures, we could go much lower. Or maybe we let the consumer sort it out and we just float along as the working man deleverages us all.

Ideally, I would have more cash right now, but as I’ve opted to position myself in assets I feel will be able to continue making money and grow despite the second option of deleverage-by-failure, I don’t want to sell out of anything.

And even though I’d rather not be short something like oil with the chance that the Fed announce they intend to eat the dollar’s value – well because I’m so long my other positions I can’t really afford to not have a hedge on, in case the world should burn, if you catch my drift?

So I’ve decided to just hold strong with what I have. I still hold AEC, CLP, AWK, BG, CCJ and physical silver, with a now scant <10% cash position (after associated short funds) and an ample UCO short stake.

Depending on how we go up or down, that may not be enough. If we absolutely collapse, I will take it to the teeth along with everyone else; but God willing so will oil, so maybe I increase my cash level as a percentage of my portfolio anyhow.

And if we should go way up well, I can only pray oil doesn’t graze $200 before BG does.

Going into this summer I had one basic set of mind. I thought the Fed was done easing and I figured commodities were overbought, the dollar was oversold, and we needed a good pullback before the economy could strengthen up, with us recovering into Christmas.

That was before Europe. That was before China. That was before the manufacturing slowdown in the U.S. Is this all part of people overreacting to the selloff in commodities and such? Maybe that’s all it is.

The real point here is that I don’t know enough to negate my initial judgment, so I have no reason not to assume that I’ll still end up right. As information comes along, I might see that I was wrong, but that alone isn’t enough to switch up.

I’ve lost plenty of money before now second guessing myself.

Personally, I am a much stronger investor when I find situations where I recognize things are against a wall. My back to the wall, I tend to march into the room guns blazing. But once in the center of the room, like we are now, well, I need to find my corner again.

My next adjustments will be reactionary. I will extend the duration of my oil short into next week.

Let’s see what Jackson Hole has to offer.

The guy usually gets a call from financial institutions when they desperately need a) lots of capital and b) credibility.

Here’s a quick list of notable institutions that have contacted Buffet looking for a pump, when they needed help, off the top of my head.

Lehman Brothers
Goldman Sachs
Long Term Capital Management
Solomon Brothers

Now maybe I’m jumping to conclusions here. This list is not particularly long and there could be plenty of times when perfectly sound financial institutions have requested he make an investment.

But usually when I hear of Buffet making ventures into the financial sphere, it’s to gobble up obscene deals put together by completely desperate corporate managers who really need a hail mary.

So what does this say about where Bank of America was/is?

Come on, seriously. Someone needs to go to jail or we need to drop this pretense that trading inside knowledge is wrong.

This double standard is some serious garbage. Looking at you Washington (you’re both capable to give direction on this and probably guilty as shit of it).

I’m glad I have a full time job. I would be ripping my eyelashes out from boredom if I didn’t have a separate outlet to distract me from today’s low news feed and disjoint market action.

The most interesting thing I’ve come across today is France’s recent announcement of austerity (embrace slower growth). I would have typically counted the 5% slide in housing, but I saw that coming, so it wasn’t really a surprise, or interesting.

And the market itself is just not doing it for me right now. Too boring; I’m waiting for confirmation or error to point me in the right direction and there’s none of it happening here. Everyone is coasting into Friday, it seems.

Now, in my portfolio, there is one notable exception to today’s weak handed, disinteresting activity.

AWK is on a streak, up 2%.

This is interesting to me. If you’re looking for a place to allocate capital, the utility space still likely holds some good purchases. American Water is a quality name and I’m very much a fan of them, holding a good chunk of my net worth in their stock. They pay a decent dividend as well.

Good resistive position, should we start to break down lower. And also a good name that will continue to profit if we should start to punch higher. It’s worth considering, along with select other utility companies, just for their ability to turn a profit without being highly influenced by other economic activity.

Now I think I’m going to sneak off for an afternoon snack; maybe some bruschetta.