Nice Guy on Wall Street

I’m on vacation…again.  I will not return until the Monday after next.

I’m not going to go into the politics of the situation but I would like to comment on what the impact of this conflict will be on the price of oil.  Oil will rise in the coming weeks because supply will be restricted in that region of the world.  Russia’s consumption will be up and 1% of the world’s oil supply has been cut off due to a Russian bomb.

War requires lots of fuel and Russia will be prioritizing its supplies to assist its troops.  This means smaller exports for the rest of the world.  Oil will be going up and I expect many other commodities to follow suit.

A NY Times article today has inspired me to get off my ass and get some new picks up on this site.  Here’s a paragraph from the story.

Last year, the family paid less than $250 apiece to fly nonstop from Minneapolis to Ixtapa. This year, those same tickets are $504 a person, said Ms. Frahm, raising the cost of the family’s vacation by more than $1,000.

It dawned on me that flights are the rising cost of trips which will force many people to vacation closer to home.  I’m not interested in shorting any airline company, most of the risk is already built in and with all of these extra fees, I could see them pulling off some upside surprises.

There is however the opportunity to capitalize off of people not travelling very far to go on vacation.  Resorts and casinos will be hardest hit by the reduction in airline supply since almost everyone travels by plane to get to these otherwise remote areas.  Las Vegas, Vail, Orlando, and many other places will be killed by these increased fares.

My top shorts off of this article are MTN, LVS, RCL, CCL, WYNN, MGM, UWN. Those picks are in order of my favourite to least favourite.  UWN is a special case since it is small cap, so expect a lot of volatility.

Who doesn’t fly to Las Vegas?  Driving there is for the ultra-losers of the USA and the “motor-homers” who I hope are all ancient people with nothing better to do with their time.  Fewer discount fares will hurt Las Vegas more than any other city in America I think.

Closely behind Las Vegas will be the ski resorts like MTN.  They get a few locals but the cash cows who stay in the large resorts will be flying there.  I expect them to be hurt this winter when all of a sudden the regulars from Georgia or some other state suddenly aren’t going to travel as far for their usual winter vacation.  Perhaps they will travel to the underachieving Appalachians.

Cruise lines are obvious.  Don’t disupte me, just short them.

In short, people will be travelling fewer miles this year to get to their vacation spots and I believe that these resorts will be hardest hit going forward.

When everyone thinks the market will go up, it will decline.  When everyone thinks we are going to go down, we will bounce.

It’s so easy to say this, but so hard to believe it sometimes.

Did anyone look at the tape yesterday and notice how it was acting like a Soviet defector in a grocery store?  There were so many possibilities, so many directions it could go but it just did nothing - dumbfounded by the choices.  Commodities completely collapsed to my surprise and I was lucky to escape unaffected by it.  My lack of diversification works marvels on occasion.  While I recognize the merits of diversification, I figure if you have a finite amount of money, you should use it where you know it would work.  I sensed a pullback in commodities so I divested from those various industries and got lucky.

Today, we had an up 300 day, which I will use as an opportunity to short.  I hate going into that same box of stocks again and again but they work over and over for me.  I have to recommend longs on SKF and FXP and shorts in DECK and PCLN.  Today, those holdings got plowed but I will not panic, falter or fail.

My long term view on the market has not changed, we are headed lower.  Late in August, there is bound to be some light volume which leads to greater volatility meaning larger moves to the upside and down.  I am not scared and will keep my long term goals in tact by having conviction in my previously mentioned names.

I have to wonder though how long this commodity collapse is going to go on for.  Is it time to jump on this bandwagon or is it already gone?  We will probably have some bounce in the near future since there has been such a steep and severe decline but the real question is will the commodities stay at these levels or go lower?

I believe the decline in oil is partially seasonal so I could see it headed higher once people get their heads screwed on right; however, in the short term, this is gameable.  AFTER the bounce, shorting the ag sector might be wise I daresay.  I’m not willing to make any specific recommendations since this trade would require an aggresive amount of attention and excellent timing.  For now, it is merely a thought.

I do realize this post has been all over the place but I have not been able to write as frequently due to a hectic schedule combined with holidays so my mind is a bit all over the place tonight.  To wrap things up, even though money was lost today; my long term view has not changed.  My four core holdings, mentioned previously will guide me to riches and fame…maybe.

While I was out on the western frontier, I met a guy who looked like the rich Texan from The Simpsons.  To my disappointment, he was from Arizona but luckily, he was not completely useless to me.

I went about my normal way of conversing with ancient people, acting oblivious to the real world and pretending to know less than I actually do.  It’s just easier that way because people usually people are willing to give up more information and I can analyze what they are saying but don’t have to think too hard about waht to say next.  While speaking with him I probed him on what he did and he said he owned real estate and in my head I knew that I had to keep him going on that.

In the short time that I was speaking with him, I found out a number of fun Arizona facts, which I will not share with you but understand this: Arizona banks need to go lower.

I am going to figure out how to exploit this now and perhaps pare off a little SKF in order to try out this Arizona project.  Shorting California banks is so July; it’s time for Arizona August.

Hello folks, I have returned from the wild west.

First of all, let me use my 20/20 hindsight to explain the action this past week.  At the beginning of the week, we saw huge gains in the Dow, which were almost too good to be true.  These gains artificially made many people, most noteably Cramer, to declare that the bear market was finally over.  This simply was not the case.  In those 2-3 days, the market was oversold and it was towards the end of the month.  Mutual funds markup at the end of a month which leads to higher prices that make them look good.  Unfortunately, this simply cannot hold over any long period of time.

In those 2-3 days, absolutely nothing about the market fundamentals changed.  We are still in a bear market, GDP came in lower than forecasted and I believe as I have said time and time again that we are headed much lower once the rebate cheques stop rolling in.  They will only lead to higher inflation in the long run.

Over this past week, we have witnessed a few things.  The most obvious is a breakdown in the basic materials and commodity stocks.  I don’t think this will last too long.  With more and more dismal economic numbers being reported, I expect to see a small exodus from the USD and into other “safer” currencies.  Quite frankly, I’m glad I don’t have to use that fiat money.

On that note, I’ll go over briefly what I’ve done over the past few days.  Bought more SKF.  Lots more.  It was a good buy in the $130’s but an absolute steal in the $120’s.  It is important to not consider the day to day movements in that ETF since it is a 200% inverse; it moves like crazy and it will unhinge you if you don’t have any nerve.  I could see it printing $180 again.

I took a little PCLN off the table earlier this week but I’m strongly considering shorting a little more if it goes any higher.  I believe the pin action off of the Expedia earnings will be shortlived.

I love making money in my sleep so FXP is a logical choice.  Thank you China.

My DECK short has been outperforming.  I expect that stock will go out of fashion faster than its footwear.  When you see soccer moms getting ready to buy a pair of Uggs, you know it is out of fashion and the earnings will reflect that shortly thereafter.  Case in point, CROX.

Anything that requires people to spend money that they don’t have is dead.  I love a SKS or RL short.

Always keep your eye on the big picture.  One might fall into the month-end markup trap and believe that the bear market is over, but to do so is for fools.  An experienced trader can see those things coming and use them as an opportunity.  We haven’t bottomed quite yet.  I’m playing the market as if we’re going to be in a fairly tight range for the rest of the Summer but past that, I think we will decline further.

I’m gone and will not return until next Tuesday.  In the meantime, short financials via SKF, commericial real estate via SRS, China via FXP and any stock tied to the consumer spending market.

Have fun.

Go buy some AUY.  Gold is good.