Smashed ‘em Bro!

There is a late night sports show in Australia and New Zealand which I’ve watched only once or twice. It’s called “Crowd Goes Wild.”

They have this segment they run where they usually show a rather spectacular rugby collision or tackle. It’s very aptly termed, “smashed em bro.”

Getty images
Getty images

The equities markets selloff this week amounts to a “smashed em bro” moment for many, myself included. I had a few (too few) shorts as hedges, which alone flashed green amongst a sea of red. It was brutal.

Just as a rising tide lifts all boats, so too a receding tide takes the good out along with the bad. This is an environment that is rare and offers us some spectacular opportunities.

As my friend Harris Kupperman mentioned to me last night, “I’m just looking at the large cap mining stocks trying to figure out why 5-6x cash flow is the right number if most are set to see production growth. I’m in awe.” Now, Harris is a very smart guy, and I’m comforted to know that he sees the same opportunities in this as I do.

I dislike buying mining stocks in general simply because they’re un-investable – period. They are however fantastic trading vehicles.

Mark wrote an article recently titled “Gold Stocks-Are You Kidding Me?” he mentioned the pessimism in the gold community and the fact that even the gold newsletter writer guys have been throwing in the towel. Sentiment for mining shares is near rock bottom. Net spec longs in this market are well down. In short, the structure of the market is heavily loaded on the bearish side.

Are we at exhaustion yet? I don’t know, but the way to hit home runs in any market is to buy when things are cheap and sell when they’re expensive.

Lets revisit some macro questions, shall we.

On the 29th February the “Bernank” mentioned that the Fed was done with quantitative easing. No more money printing folks. There it is from the horse’s mouth. I think that statement, after the last few days action, together with what’s coming, will go down in history along with other such statements such as, “I did not have sexual relations with that woman…”

The Europeans have just voted in the village idiots with a very clear, distinct message to the market. We don’t want austerity pain. Print us rich please.

All of these actions tell us one thing. I spoke about this very phenomenon previously when discussing Davos-Profiting from the Asanine.

The fed has been purchasing in excess of 60% of all issued treasury debt this year; this is with a backdrop of waning demand from foreigners. Pray tell how they are going to keep this up without the printing press?

All indications at this point tell me this market is cheap. Is it going higher? … Undoubtedly so. Is it going higher tomorrow? I don’t know, nor do I care.

Make your own mind up, but when I can buy long-dated calls on GDX for next to nothing, or sell Jan 2013 $44 puts for $5 .50 I’m willing to put down my coffee and take a good hard look.

– Chris

“You’re either a contrarian or a victim, the choice is yours.” – Rick Rule