Monthly Archives: April 2011

Don’t get me wrong. I love Sallie Mae.

Obviously, no one really loves Sallie Mae if they are their student loan processor, but I’m well beyond that stage of my life and fortunately my kids didn’t need to go that route.

But you have to love Sallie Mae if you’re a trader. Even investors have to admire Sallie Mae, although the ride from $6 to $10 was bumpy, as it was from $12 to $14.

 

I have to credit Jim Cramer for first putting Sallie on my radar screen a few years ago. That was when Sallie was at about $6, recently up from about $3. Even with that kind of move, Cramer was convinced that Sallie was going higher.

You could have made your career on that gutsy call alone.

 

At that time, there was widespread belief that the Obama administration was going to dismantle Sallie Mae, so a trade in it was fraught with risk. Since I don’t like risk and don’t like to speculate, I’m still amazed that this one caught my interest.

Remember cousins Freddie Mac and Fannie Mae?

The upside, though, especially if you were a covered call trader, was considerable. In those days, Sallie’s volatility was high, but the share price always seemed to revert to a slowly increasing mean.

On top of that, the options premiums were in the 6-10% range for the near term strike and money price.

I had not owned shares for about 2 months, but then repurchased for the March 2011 options cycle, as Sallie kept testing the $15 mark, I was always happy when the cycle ended below $15.

Even though the options premium in the lower volatility environment was now in the 3-4% range, still not a bad monthly return.

On Monday I sold May $15 options and then bought them back on Wednesday, as Sallie fell prior to its earnings announcement.

So what happens?

Sallie announces earnings 25% less than it’s comparison quarter.

Bad news, right?

Oh, it also announced a pitifully small $300 million stock buyback.

And you guessed it. The stock surges by about 17%

Now I’m not complaining, because that gave the opportunity to sell new call options. even though Sallie now went well beyond $16, I still sold the $15 options, as I expect the price to fall down somewhat. Since my purchase price was about $14.50 and the cost basis now even less by a few months of options premiums, the in the money call option will give penny for penny profits if the stock price falls.

Now all of this happens on a day that GE, which is not the parent corporation of this blog, announces great earnings and another, albeit small, dividend increase.

Again, you guessed it. GE moves down, after a very nice pre-market move, testing $21. Not just down, but below $20.

In the first iteration of this blog, a few years ago, I thought that I had learned not to apply rational thinking to the market’s moves.

Clearly, I haven’t learned that lesson, as I’m still amazed at the irrational reactions.

It can’t be reading between the lines. There has to be something else at work here.

While I can’t complain about Sallie Mae, I can about GE, as I still haven’t had an opportunity to sell call options. As it is, the GE shares are becoming the dreaded “dead money.” Even Microsoft is performing better. At least I can get a decent options premium on those shares, which barely move outside of their tight range.

In the end, does it matter that nothing really makes sense?

Not really, but it’s still very difficult to get a rational mind to think irrationally on a consistent basis.

Fortunately, as I’m getting older, the rational part of my mind seems to be diminishing in its relative strength, being replaced by the need to grow hair out of areas that never had hair before.

When you think of the divine nature theory of the creation of the universe and all creatures, you really have to wonder what was in the grand plan that called for hair to grow from your ears as you got older.

That really doesn’t make sense.

Why couldn’t the creator of the universe rest after creating the need for a rising waistline and a complimentary white belt?

I guess rational thought has never really had a place in the universe.

Sadly, tomorrow is a stock market holiday. I hate those days, with all due respect to dead Presidents, religious celebrants and laborers. It means that I’ll have to actually do something less constructive, but it will give me the opportunity to ponder how I might implement irrational thought processes so that they operate in the background.

But if I did that, they I could never become a talking head or “contributor'”  because that would mean that I would correctly be predicting and analyzing the markets.

I wonder what I would say about the price of silver?

Maybe not making sense is really the way of the universe.

Go figure, but do so irrationally.

Today was actually one of those rare days that I worked.

Although I think that I work just by sitting at home, watching TV and trading stocks and options. In addition to all of those responsibilities, I also screen telephone calls from tele-marketers, as we still have a landline or two.

My wife doesn’t use the same lexicon as I do and considers work to be something more honest in nature whereby money is exchanged for services. 

I don’t know where she gets these kind of ideas, but I do know better than to disagree.

So today I worked, which was compounded by the fact that I worked on Monday, as well.

The problem, though became apparent as early as Monday, and something really does have to give.

I’m not one of those people who feel that they really need to have it all. I’m not a Cosmo woman. I’m perfectly willing to sacrifice.

But now that my son has convinced me that I need to get with “The Twitter” and revive the blog, all in the name of generating buzz for the OTP book, I barely have time to watch TV or trade stocks.

And now there’s this work thing.

Guess which one I’m perfectly happy to give up?

Today was especially difficult to juggle all of these demands, and I’m afraid that my tweeting suffered.

This came as an especially cruel blow, as I was so proud to receive a direct private Tweet from Herb Greenberg, now back at CNBC, and was looking forward to even more recognition from one of the greats.

His one word Tweet to me was “Funny.”.

That was good enough for me. I didn’t even care if he didn’t call me in the morning. His scent on my Droid screen still remained.

Today was one of those days that really deserved lots of attention toward watching the tape and trading on it. After all, how often does the market move up about 200 points from the open and then just stay there?

Not many. But what made it a really good day was that I still had plenty of positions that I had not yet been able to call cover.

That happens even less often.

What was so nice about selling so many contracts today was that it generated enough options premiums that I could use the proceeds to buy even more shares in some of the holdings that weren’t moving today.

I was able to pick up more shares in Mosaic, Riverbed Technology and Textron.

And it was that same Textron whose call options I bought back after just having sold them yesterday.

Now, all we need is for Textron to move up a bit more, since it did recover much of its earlier days’ loss and then sell new call options.

As my son would probably say after seeing Charlie Sheen on his Violent Torpedo of Truth Tour, “Winning.”

But I didn’t have much opportunity to Gleet.

That’s gloating while you Tweet.

What I did realize is that my wife, who is increasingly more accurately portrayed as my Sugar Momma, needs to step up her game just a bit.

Perhaps a second job.

That would be a very nice good faith move on her part, and one that would certainly be appreciated by me.

I can write these kind of things in this blog, because she has the good sense not to read it, although on certain days I’ve been known to suggest that she read the days’ entry.

Today won’t be one of those days.

Since I’m not “working” tomorrow, I plan to juggle all important aspects of my life in their proper proportions.

At the rate that I’m going, I’l have Ashton Kutcher like Twitter numbers in no time and I promise to do it without a backside view of my sugar momma in her granny panties.

I won’t pander for numbers.

Tomorrow, I’m hoping for a negative image of today. I’d love to see a market drop in pretty much everything, except for those of my holdings that didn’t participate today.

You’ve got the idea.

Textron, Mosaic, and Riverbed. But add to that list JP Morgan.

And then there are those that didn’t participate enough.

Goldman Sachs, British Petroleum and Hewlett Packard.

There may be some others, as well, I just can’t remember. My mind has been too drained by working for the man.

Something has to give.

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It seems as if Standard and Poors has been waiting a few years to try and figure out how to atone for its major lapses in the past.

While it was dutifully handing out Triple A ratings to the likes of Washington Mutual, CountryWide and Wachovia, Rome burned. Some of the flames may have permanently singed Angelo Mozilo’s face. 

Certainly it would be wrong to ascribe all of the financial woes that we’ve experienced to S&P’s lack of actually doing what they have been renowned for, by I’m not bound by any sense of fairness.

Let’s just say that they were probably more than just an idle bystander. In the world of grades, they would have received considerably less than a “Gentleman’s C” for their ratings of the players that likely belonged to the same clubs as the S&P big boys.

Allegedly.

So how do you make up for the incredible oversights that allowed the financial giants to play games of leverage that overwhelmed its basic support structures?

Simple.

You just attack the basic financial structures of the United States.

Their pronouncements couldn’t really come as any great news to anyone. No one feels particularly good about the national debt and the vast amounts that are held by the Chinese.

As my parents would say whenever faced with any challenged that posed potentially distasteful outcomes, “What good can come of it?”

Imagine a doctor informing a patient that they have cancer. “Oh, and by the way, your hideously ugly as well”.

Well that may be true, but it didn’t really have to be said.

Being in Washington, the name of the game is spin. Often, policy activists and community organizers share a common strategy, and that is to use shame as a weapon.

So the spin is that S&P’s comment was to shame the leading political opponents to come to the table and work things out.

Not likely. The Supreme Court may recognize corporations to be individuals, but they still haven’t proven that they are capable of rational thought or caring and that goes for the elected officials, as well.

If they did, S&P wouldn’t have told us that are debt is ugly.

I especially liked the new Presidential Press Secretary’s response, saying that the political process will surprise S&P.

First of all, when did the President get a 12 year old press secretary? When did Jody Powell leave? But perhaps more importantly, whatever the dysfunctional political process must evolve into, it should have nothing to do with playing to S&P.

It should be fairly obvious what needs to be done, and that is for both sides to drop their ideology and learn that both sides have legitimate ideas.

In a word? Compromise, or as that one time Country King of Comedy used to say, “Get er done”.

Using rosy colored glasses, people talk of how well Tip O’Neill and Ronald Reagan were able to work together and wonder why it can’t happen that way now.

My guess is that in 30 years people will be looking back at today’s era and fondly remembering how well John Boehner and Barack Obama collaborated when it was in the nation’s best interests.

It’s all about lowering the bar. Who needs Triple A ratings, anyway?

We do, obviously, but S&P’s warning is for the possibility of a downgrade in a couple of years. To put that into perspective, it’s like worrying about whether your unborn great-great-great grandchild will have acne.

Besides, there still must be some trust fund that can be raided.

If you’re an unrequited bull you got past the S&P debacle and looked at today’s plunge as a gift to pick up some shares on a relatively cheap basis.

Yesterday being the first day of the new options cycle, I had cash resulting from the assignments of Visa, American Tower, Rio Tinto and American Express.

I especially liked the American Towers money.

I didn’t hold shares very long, as it was never a company that was on my radar screen, although Jim Cramer used to mention it with frequency during his early Mad Money days.

But with the announcement of the planned AT&T buyout of Deutsche Telecom’s T-Mobile unit all of the “Talking Heads” were in unison spouting about how bad that would be for American Towers as there would be no need for AT&T to lease as much space on those ubiquitous towers.

So of course, AMT did a drastic plunge on the news.

What a great time to buy, but just in case, I hedged and got a nice premium of $1.25 and a capital gain of $0.83 on the underlying shares that had a basis of $47.17.

Had I been greedy, I would have sold something higher than the $48 calls, because the over-riding AMT thesis wa wrong and quickly demonstrated as such.

Anyway, I felt like a little kid in a candy store. Everything looked so good yesterday and best of all, I had money in my hand.

By the time it was done, I picked up additional shares of Sallie Mae, Freeport McMoRan and British Petroleum. I bought new shares in Textron and Williams Sonoma, two of my past favorites and replaced my Rio Tinto Shares.

Best of all, with the market coming back from down 220 to down 140, all of the newly purchased shares were already in the black.

Barely, but in the black, although nowhere near enough to offset the other shares that I owned. But still….

I came close to buying Google shares again, but just couldn’t pull the trigger, even though Google always seems to recover from its post-earnings blues fairly quickly. I just thought that there were some better opportunities over the next month, as that is always my time frame. What can these shares do for me during the current options cycle?

Plain and simple.

I suppose that I should be thanking Standard and Poors for creating the opportunity, but I’m still having difficulty with that concept.

If someone calls your sister a “whore” it’s hard to forget that fact, even if there’s some truth behind the comment.

If S&P had been a really good friend, I’m certain that a couple of really nice up days in the market could help to ease some of the bad feelings. Maybe if it took my sister out to dinner, showed her a nice time, I’d be willing to let bygones be bygones.

But let’s face it, S&P hasn’t been good to anyone lately.

By the way, apologies to my sister. She’s not anywhere near the whore that Standard and Poors can be.

 

 

What’s in the Szelhamos Portfolio?

Not as catchy as Abraham, Martin and John, but much more alliterative.

Unfortunately, Dion had to throw in the name “Bobby” after the title was already a done deal.

So, throw General Motors in there too, but pronounce in the way they do south of the border or, if you.re a fan of the obscure, the Balkans..

I don’t currently own GM, but I agreed with the $50 B bailout.

 

What I don.t agree with is the announcement that the federal government will be selling their remaining stake, at what will amount to a large loss, all in the name of political expediency.

Szelhamos used to believe that you should never talk about sex, politics, religion or money, when in proper company. So he did so on a regular basis, as do his offspring, since he also taught us to never keep proper company.

Although I voted for this administration, and only the third time that I correctly chose the winner in a presidential election since 1972, I’m having a harder and harder time supporting some of their economic and fiscal policies.

But, the other side isn’t very good. In fact, I think they.re even worse on the economic side of things. Compassionate conservatives, my ass.

Nonetheless, to divest because they want to wash their hands of the auto business before the election, as has been the reason attributed to the announcement, once again puts politics ahead of rational thought.

Not to mention the public good.

Of course, if I were a shareholder, I would also be pretty upset that they are once again tipping their hand on a market moving and disruptive kind of transaction.

I suppose you could make the case that divestiture would raise money to put toward deficit reduction. Additionally, potential capital gains by those purchasing shares in a secondary offering would increase tax revenues, but still, treat it like an investment.

I think that if Timothy Geithner, who along with Ben Bernanke, have been very good at funneling money back to the federal government was left to his own resources, he wouldn’t be giving up the shares so quickly.

Although Geithner is never at ease on camera, he appeared even more so during this mornings’ CNBC interview, as he tried to calm the international markets on the quality of US debt.

Unfortunately, politics gets in the way and the Treasury, too, will be held hostage by the children that we have elected to serve our interests.

While Geithner was speaking, Goldman Sachs was basking in its earnings report. The stock was up more than $4 during the pre-open. By noon, and one downgrade later, it was down more than $2.

Of course, that downgrade was from Dick Bove, who after bouncing around is at a firm that everyone seems to mispronounce. Rochdale, as in Rockdale.

Remember, Bove is the guy who appeared on a near daily basis on CNBC as he steadfastlt defended Chuck Prince’s CitiGroup as it kept falling and falling.

“The dividend is absolutely safe”.

Remember that?

What happened? They’re still the smartest guys and now they’ve unloaded those expensive preferred shares held by Warren Buffett.

That can only be good for Goldman, but now comes the worry that with the retirement of those shares, so too are the principals of Goldman relieved of some of their obligations, such as not to sell their shares and not to retire.

Would it really be that bad if the likes of Blankfein faded away?

Certainly, Senator Levin (D-Michigan) would be able to find a new whipping boy, but some of the considerable heat would be off.

The Goldman bench is deep enough, even 2 levels down, that they could seemlessly continue operations, yet claim that those newly in charge had nothing to do with the questionable practices that fueled the financial crisis.

Win- win.

Since I own quite a few shares of Goldman, I would like to see a win-win outcome.

David Viniar, the CFO, was a past high school classmate of mine. I didn’t really know him, but do remember his 70’s hairstyle, which is very different from what he now sports.

Unfortunately, he didn’t get good grades at today’s conference call and was thought to be evasive.

People like answers.

Now that leaves me with Google, to complete the alliterative theme.

Actually, I have nothing new on Google. Still weak today, but finding a floor at $520. What frightened me from picking shares yesterday during the bargain hours, was that it looked as if Google still had downside potential to $500, when I looked at its chart. Based on its previous action following large earnings related drops, I don’t expect that to happen.

But still.

I did have the chance to sell call options on Dow Chemical, Riverbed Technology, Textron, Freeport McMoran, Sallie Mae and Mosaic today and am still hoping to close a trade on Rio Tinto, while awaiting decent opportunities on all of the rest.

Freeport reports earnings tomorrow. I think they’ll be good, but I’m concerned that guidance will drive stock down. In return for that fear, I got $1.91 on a $52 call, when the stock was at $51.20

Sallie Mae also reports tomorrow. The stock price started inching up in the last hour today. I took that opportunity to sell 79 call contracts. Why not 80?

3 PM, I think the day’s outcome is already sealed and the trend is trickling upward. Now sit back and wait for IBM, Intel and some other company that I can’t recall, but don’t own, to report earnings after the closing bell.

Oh yeah. Our benefactor, Yahoo!

At least that’ll give me time to come up with lyrics to Geithner, Goldman and Google

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I don’t watch The Celebrity Apprentice, but you can’t escape Donald Trump.

Now, I did used to watch that cult Comedy Central favorite I’m with Busey. That was a show worth watching. Why they don’t air the re-runs is unfathomable to me. Shouldn’t they be amortizing their production costs by keying in on a whole new generation of people that missed the show during its first and only run?

Borrowing from Stephen Colbert’s take on Jon Kyl’s Planned Parenthood mis-statement, it is not an actual fact that Donald Trump fell off a motorcycle and suffered irreparable brain damage, helped along in his recovery by his dedicated wet-nurse, Gary Busey.

But it is highly likely.

No doubt that the injury would have been far worse had The Donald’s bouffant not cushioned the impact.

Although I don’t watch the show, it’s also hard to escape the commercials, especially since I’m tuned to CNBC all day long. The Meatloaf tirade and violent outburst toward Busey was frightening.

My quandary is that I used to really like Meatloaf. I actually met him years ago, at of all things, the circus in New York. This big hulk of a man was holding a helium balloon outside the restroom area, waiting for his kid.

Although I don’t use public restrooms, I haven’t saddled my own children with that neurosis, so it is possible that Meatloaf’s kid and my own had adjacent urinals.

I had the chance to say to him “Mr. Loaf, greatest album ever”

I even saw him at a  concert just about 3 years ago and barely noticed the mistakes and forgotten lyrics in his set.

The point is, that the sooner Trump announces for President, the sooner they can yank Celebrity Apprentice from the airwaves. Isn’t that likely to be reason enough for the guy to run? Let’s get this out of our system, along with the whole “birther” issue and get onto the real issues, like is Obama a secret Muslim?

There’s no shortage that things that could stand to be yanked from the air.

Let’s assume for a blissful moment, that Trump has disappeared from the airwaves, what else needs to go?

As always, I would start with the talking heads. Why I continue to keep them on is another mystery. Clearly, it’s a manifestation of my jealousy for not being able to get paid to spew credibly sounding nonsense.

That is, unless you count the incredible blog related revenue.

There’s no question that the nonsense in this is in long supply, it’s just that the revenue isn’t pouring in, although Google does it’s share, thanks to their ad placement. Speaking of which, as I sit and watch the pre-open, Google took a nosedive along its historical levels in the $30-40 range in the afterhours.

I was absolutely convinced, because of its price action in the preceding week that it would go up, especially since everyone had already been talking about their increased expenses for the quarter.

As always, their ad revenue was stellar and their CPC (cost per click) income was up 8%. I love Google’s ads. They make me money when strangers just click on them for me.

How great is America? No wonder Sergey came here.

In a blatantly anti-semitic move, Larry Page has become CEO (Not a factual statement, thank you Colbert staff writers)

He was loudly derided for contributing a statement at last night’s conference call that was barely longer than The Emancipation Proclamation.

Look, he’s only been on the job for a week. Lincoln, who died on this date 145 years ago (coincidentally the 44th anniversary of my Bar Mitzvah), had 2 years to work on his statement.

If Google follows its typical pattern in the aftermath of its earnings announcement plunge, it will languish today and then recover its loss over the next 2 weeks.

If you bought shares yesterday prior to the announcement and sold call options, you did receive a $12/share cushion. Roll that over into a May contract and unless Google goes into historically uncharted territory, you will be back in black.

That’s probably not very comforting, but read Chapter 12 in the OTP Book, enjoy the fine cartoon by my resident illustrator, Dr. Bob,  and learn to embrace a different perspective. You’ll be much happier.

As will I if you buy the book.

Between Google and the book, I can fade away and never intrude on your internet waves again.

If only Donald Trump would do the same?