Here we go again!
Did everybody fasten their seat belts?
Last week I said the Fed euphoria would last 2 weeks at most but today the market dropped so easily that I'm starting to think I may have been too optimistic. I'm not going all doom and gloom just yet, let's see if this is a just a dip or a real downturn but it's certainly time to think about stuffing the old mattress plays if you didn't take my advice last week and put 30% of your profits into contrary positions.
I'm not going to dwell on the situation, we went over all this on Thursday morning when I said we weren't quite ready to flip to the dark side but we certainly saw it coming! When you think your rally is build like a house of cards you have to keep an eye open for things that may topple it and this morning I was right on saying "GM may lead the Dow to a downside surprise if they can’t make their 11 am strike deadline." That's exactly how it went down in today's trading.
Our first trade of the day was to protect the Happy 100 virtual portfolio with FXI puts in the STP. We ended up with the $170s at $17, a roll from a previous position, as I felt it would give us more bang for the downside buck than the DIA puts would if the global rally starts to fizzle (also you can sell very expensive puts against it but we are risking it naked for now).
At 9:52 I said: "This is not a strong morning so far, I’m wondering if energy is going to take us down but it’s hard to believe that can actually happen anymore." Despite my jitters I kept to my promise to go with the Flow and we grabbed the CROX Jan $60s for $7.40 at 10:07, those did pretty well but we covered them a tad early (perhaps). We got our HBC $90 puts for just $1.05 at 10:43, maybe I'm missing something but I'm pretty happy about that!
At 11:03 GM went on strike for the reason I predicted – job losses. The union can make a lot of concessions but one thing they can't take is another round of cuts since the last time they agreed to cuts (2003) they lost over 1/3 of their membership. GM is in no position to promise to keep jobs in America, even if the union is willing to work for Asian wages. "Globalization is killing us," said Jerry Gillespie, president of a UAW local in Warren, Mich., whose members work on engineering and design of future products. "They want to build engineering centers in the rest of the world and take that work away from us. That's our fight."
Since labor relations in this country, since the disparity between the rich and the poor hasn't been this bad since 1970 (the last time there was a UAW national contract strike), it is important to understand that this is 73,000 workers walking off the job in 80 towns across America. A prolonged strike can cripple the economy of 50 or 60 small plant towns and, every day this strike continues, it costs GM $100,000,000 but, if the strike goes more than 10 days, other costs will kick in that could run into the Billions for GM. Are they that crazy or that desperate?
I predicted this on Friday when I said to members: "I don’t really think they can come to an agreement. It was bad timing for GM, they just made money and they will probably have another “good” quarter (the same way we have a “good” budget) and the UAW isn’t giving anything up without getting something (like ownership). I said yesterday, Kirkorian, who is a deal genius and works with exceptional guys, went into that thing with no prejudices and no pre-conceptions and didn’t give a damn about other shareholders or the board or hurting anyone’s feelings and HE COULD NOT FIND AN ANGLE SO HE DUMPED GM. Now we are going to assume GM management had the Ruby slippers and could have clicked their heels whenever they wanted to go home???"
Also this morning I had a timely radio interview with Bruno Behrend on WKRS in Chicago where we discussed the NYMEX scam and how easy it was to take them down by simply accepting delivery of a few million barrels last Thursday. The oil roaches are already racing to abandon ship as 47M barrels head to Cushing next month as last minute buying left them with 67% more barrels than they accepted at the end of August, which fostered the September "shortage" in the weekly inventory reports.
This was a good application of my plan of last Wednesday, where I said: "The good news is we figured out how to break the scam at the NYMEX. Since they tend to leave as much as 100M barrels on order just days before settlement (that’s today, by the way) and since 40M barrels is "a lot" for actual settlement. All we need to do is buy 50M barrels AND ACTUALLY ACCEPT DELIVERY and we lock in a glut of oil for the following month." So thank you mysterious buyer, whoever you are!
The next act in the grand oil scam will have the oil crooks scrambling to explain away the inventory build in some way that avoids the very obvious fact that all it takes to alleviate a "shortage" is to actually accept a very small portion of the 650M barrels that are still on order between now and the end of the year. My guess is they will do a 180 degree turn and suddenly claim demand dropped off (something I predicted earlier this month anyway). This PR spin will, of course, be assuming you are a total moron who can't remember that just last week oil rose to all-time highs on "record demand forecasts."
Please send this to Congresspeople, etc. now because the oil companies are simply insulting their intelligence and I am concerned that if we don't forewarn them of this tactic that these insults may go right over their heads and make them look silly on CSPAN when they get up and say that there is no price manipulation in the energy industry!
We had a lot of stop outs as I pulled back on the bull side at 1:35 saying: "Stopping out of winners here, Oil stocks heading back down, lots of stuff falling including retail and solar plays." so we'll see tomorrow if I'm just being a Nervous Nelly or if the Emperer is indeed, slightly underdressed…
