Monthly Archives: June 2011

“That’s why you get the big bucks” was always the statement made when someone was ready to pass the buck on decision making. Maybe funny the first or second time that phrase was ever used. it no longer seems to elicit even a forced chuckle.

Most people recognize that behind those words are the human sins of jealousy and wrath.

Cynics always say that behind every joke is the truth.

Whereas I used to believe that there were only two kinds of people, the ones with tattoos on their knuckles and those without, I now have a very different outlook on society.

We’re essentially comprised of decision makers and those who would be quick to jump on the guy making the big bucks for a chance to make big bucks of their own.

For about 20 years I made decisions, but I never was faced with the aspect of someone waiting for a decision to go the wrong way for their own chance to become “the decider”.

I was lucky in that way.

For the past 10 years I really haven’t had to make much in the way of workplace decisions and I’ve come to like that kind of slothenly existence, even though that also qualifies as a human sin.

Actually, I haven’t even had to be in any kind of workplace other than my own La-Z-Boy for most of the past couple of years, thanks to Sugar Momma and her faith that I could be more than just a love machine.

Today was a bit different, as I was uncharacteristically faced with a number of looming important decisions.

It all started with the realization that I’d be cut off from information today, yet again. For the second time this week I was going to be working, but at least I wouldn’t have to make any workplace decisions.

What I had to decide was whether to bring my own laptop and modem to work today to complement the PC available to me. I thought that perhaps I would just stream CNBC and in someway recreate my at-home trading lair. I felt so lost on Monday without those literal and figurative tools of the trade.I just had to have more than one screen and just had to have the background noise, occasional gem of a segment and the screen crawl.

For a moment, I even thought about bringing the La-Z-Boy with me.

I stood over one of the laptops this morning, faced with the realization that in order to stream CNBC I would have to use the premium E*Trade platform, rather than the middle of the range one that I much preferred.

MarketTrader, the platform that I like has all of the views pre-arranged. Not much in the way of customizing necessary or possible. By contrast, the premium platform is fully customizable and can have as many pages as you like with their uniquely positioned and chosen tools and fields. Charts galore, research tools, pretty colors. You name it. Even the whistles have whistles.

It’s just E*Trade’s way of saying that frequent traders need and are more likely to appreciate a more advanced approach to trading. I suppose that’s true,  but to do so requires lots of decisions.

So, easy decision.

I wanted no part of having to accustom myself to a different interface, even if it meant that I would miss out on what was going on in the world.

But that’s why I get the big bucks, because I can make those kind of difficult decisions without agonizing myself into inaction.

With that problem solved it was time to lay out the day’s trading strategy. My illness requires that I make trades even if there is no rational reason for doing so.

I was fully expecting some kind of retracement today. If this was a dead cat bouncing it didn’t know the meaning of gravity. I actually had an image of Wile E. Coyote running past the edge of a cliff and somehow staying airborne until he realized there was nothing below him to stop the plummet.

But that’s not what happened. It was just more of that unbridled enthusiasm that Greenspan had warned us about and that we hadn’t seen for a while.

With the end of the trading week, I decided to follow yesterday’s theme of exalting the lowly penny.

Today, the bet being made was that the prices for British Petroleum, General Electric and QQQ would retreat from their current levels by the close of trading today.

For some reason I decided that would be a good idea, even in the face of advancing prices. After all, at some point, Wile E. has to drop.

Coupled with the fact that the premiums for barely a days worth of time were really low, it seemed that the correct decision would have been to just keep riding the horse that’s pulled us this high over the past few days.

Maybe making the difficult decision means making the wrong decision in the face of over-whelming facts, so obviously I was the perfect person to be making those decisions to sell call options on those shares.

My only connection to reality today was the Twitter feed that I was getting, but for some bizarre reason I seemed to be getting alot of re-tweets about horses today.

Horses?

So Twitter wasn’t of that much help today.

I also noted two recurring rumors. One about Steve Jobs being hospitalized and the other about Tim Geithner stepping down as Treasury Secretary.

Since neither Apple nor the broad markets seemed to react to either of those rumors I decided to ignore them, even thought they kept coming fast and furious. At least the previous day’s rumor of Steve Ballmer stepping down from Microsfot had come to an end.

Then I went to StockTwits. Amazingly, then couldn’t find anyone similar to me to suggest that I follow.

Twitter always has plenty of suggestions, most of which fall into the lunatic range and so I don’t take their advice, but at least that counts as another decision on my part. 

In all, despite the 152 point Dow gain, I was underwhelmed, maybe because my earlier decision to sell call options for Freeport McMoran left me wishing that I hadn’t. I started questioning the decision to bearishly sell those call options and bemoaned the great likelihood that I wouldn’t be enjoying the full benefit of their substantial price rise these past few days.

Until it hit me.

 I came to the understanding that I was living the best of all worlds. Not only was I getting paid today to go through the motions of working, but I was also helping those pennies pile up in the background by making these non-sensical and uninformed trades.

But best of all came the ultimate realization.

What better position is there to be in than to not only be the decision maker but to also be the one passing the buck and then questioning the wisdom of the decision.

Now comfortably perched back in my La-Z-Boy I can appreciate that no one is going to pounce on me for having made a bad decision, if that’s the way it turns out by the time of today’s closing bell.

There’ll be plenty more bad decisions to come, but I’ve decided I can take that kind of responsibility.

And that’s my final decision. 

 

 

Yesterday was an all around good feeling day.

First, more book sales showed up in the daily reports. Secondly, I didn’t show up in this morning’s New York Times obituary pages.

So that’s already a pretty good day.

But what I really mean is that time specifically between 9:30 AM and 4 PM. Those times both ended by the ringing of bells. For a change, it wasn’t an opening or closing gong representing some kind of Chinese reverse merger company, either. Just real authentic opening and closing bells at The New York Stock Exchange, with lots of green in between.

You know that kind of good feeling. The kind where you just want to roll over and go to sleep, with a big contented smile plastered on your face.

Maybe a generation ago you would have lit up a cigarette.

I snuggled a bit with my LCD monitor as I took in the numbers. I watched “40 Year Old Virgin” once again the other night and decided that I would limit it to snuggling until we have 20 straight advancing sessions.

If that day comes, I’ll probably unplug the monitor just to be on the safe side.

By the time I looked at the closing numbers and entered the day’s data into one of my spreadsheets I wondered when was the last time I had such a good day. With the S&P 500 up about 1.4% today, my holdings were up a full 3%.

Before you get overly impressed, don’t be.

Fortunately, there’s no requirement that I tell you how much they were down over the past two weeks, but to give you some idea, my big movers were the likes of Mosaic, Williams Sonoma, British Petroleum and Rio TInto. And that doesn’t take into consideration some of the losers I shed in the last couple of days like Research in Motion and Hewlett Packard.

I think you get the idea. They were pretty hard hit over the past couple of weeks. And they definitely had a lot of energy stored up in them for a bounce or two. I could care less about dead cats, as long as the bounce is in one direction only. Had Newtown bothered to hang around long enough, he would have seen some of those apples rise.

Curiousity did get the best of me and I saw that the last time I had a day quite this good was May 27th, 2010. On that particular day, the Dow Jones was up 284 points (3%) and the S&P was up 3.1%. Interestingly, yesterday was yet another of those index disconnects, as the Dow was up by only 0.9%.

Just like Monday’s market.

I have no idea what the significance of that kind of pattern is, not that two days makes for a pattern, but it must mean something, like maybe Hewlett Packard continuing to underperform.

The problem during the course of this feel good day was that I really didn’t know what to do.

You know, do you stay the night? Do you leave a $20 on the night table and discretely slip out? Do you go through gut wrenching pangs of guilt because you made some money while Sally Struthers is still trying to raise some for Biafra?

But when you predominantly sell calls on your holdings you’re never quite sure what to do or how to feel.. Normally, whenever possible, I try to sell calls into a rally. There’s no better way to get an optimum premium and thereby provide a better cushion for the inevitable price retracement.

That’s the intellect part of me.

But some of the prices had fallen so much, instead of thinking about generating options premium and perhaps also getting some small stock capital gains and maybe a dividend or two, I really wanted to hit those home runs.

That’s the emotional part.

The call writing strategy is one of singles. Just lots of them. But we were so far behind after the last couple of weeks, I really wanted to get back into the game quickly.

It’s tough when your intellect and emotion start doing battle. You know which one usually wins. That actually explains why there are ugly babies in this world. Well, that and alcohol.

Did you love her or did you love the sex? That sort of conflict. And you can’t answer “Both”.

But that’s exactly what I did. I hedged my hedges. Okay, there may have been sex involved as well.

I started by methodically looking at my purchase prices, especially for those that had multiple entry points. Having holdings like that isn’t unusual for me during a down market if I think my shares are being unnecessarily beaten down. So I just chase them to a degree and average down.

For example, instead of writing 40 Textron contracrts, I only sold 13 at a $23 strike. I won’t mind losing those if that means I’ll be able to get a decent premium on $24 or above Textron contracts.

I also sold a split amount of contracts on JP Morgan. But as the afternoon progressed, word came out that there would be an announcement about JP Morgan and the SEC. Soo I watched the shares fall in response and just bought back the call contracts making a decent profit for a couplel fo hours.

After it became pretty clear that the $154 million fine was a meaningless slap on the wrists, I re-sold the contracts.

The emotional side resisted doing the same for Mosaic and William Sonoma, but the intellectual side totally overwhelmed everything else and sold contracts on all of my Freeport McMoran and Rio Tinto shares.

There were some General Electrics thrown in, as well.

Unfortunately, I wan’t able to take my own advice about picking up shares of Riverbed Technology, as I opted for Halliburton instead, as  brothers from different mothers. Halliburton has done well, but Riverbed busted out today with a 6% gain.

But still, I felt good. Imagine that, compromised on my beliefs and I felt pretty good.

Today was unmitigated joy, tempered with a little pessimism and topped with a sea of green.

Nothing brings joy more than green. Of course, if that dead cat continues its one way bounce, that will really be one for the books.

Here’s to erasing May 27th, 2010 from my history books and for defeating the laws of gravity.

Sorry Isaac, but if it will make you feel any better, tomorrow we debunk the laws of conservation of matter and energy.

I probably shouldn’t say anything terribly negative about some of the popular on-line investment sites for consumer investors.

It would be like biting the hand that feeds you or maybe defecating where you eat, depending on your level of adolescence. Given the fact that I used the word “defecating” instead of some readily available alternatives, I’ve demonstrated my maturity to my own satisfaction.

I’m a little reluctant to saber rattle  because as I’ve been trying to raise awareness of the Szelhamos Rules blog and the Option to Profit book, I’ve been posting comments pretty much everywhere that I can, as you’ve come to realize if you’re on Twitter. It’s the current day version of subway grafitti, except without any artisitc merit.

So instead, I’ll rant, because I don’t really understand the imagery behind saber rattling.

Many of the postings are in response to articles that appear on such consumer investor sites. Interestingly, I don’t have the same opinion about broadcast investment stories. That may be the case because so much of it is just background noise and there’s really no great way to respond in a timely fashion.

The real reason that I should consider treading lightly is that a disproportionate number of clicks on this blog site and resultant book sales have come from readers of those sites.

Thank you readers. Laszlo the Dog feasts again tonight owing to your largesse.

As I wrote that, the adolescent in me thinks “Large Ass”.

I know that’s not really funny, but it really is.

I’m at a midway point in the investor spectrum. Compared to the individuals that I follow on Twitter, I’m woefully inept, at least in terms of jargon, understanding of technical analysis and depth of social media following. Most of my Twitter followers are there because I strategically used hashtags on such words as “prostitute”, “Charles Manson”, “Filipino Mail Order Brides” and “TeaBagger”.

Lord knows it’s not content related.

On the other hand, I’m very satisifed with my trading results, so I’m not terribly concerned about being a rube in a sea of city boys. I know that there’s nothing terribly sexy about going to the bank with unrolled nickles and dimes, while wearing my Crocs. I suppose that I’d have greater self-esteem if I had a bunch of Benjamins and wore Bruno Magli’s, but I’m okay with my ghetto investor status.

But compared to the cross section that I’ve seen on such sites as SmartMoney.com, I have a highly fissured brain, at least when it comes to investing, or at least as it comes to the perception that the editors and writers have of their audience.

By the way, I’m not referring to the audience.

Oh, and I have two pair of Crocs, one being faux-fur lined.

What particularly bothers me is the quality of advice that appears on these sites. So much appears to be counter to what reality says is real.

If you read this, please don’t expect much in the way of documentation. I save the arguments that I can back up on my “Premium Content” site.

Today was the day that really broke the proverbial camel’s back. I didn’t really bother keeping a log of all of the articles over the past few weeks, but they’ve given me many opportunities to respond and trumpet my own philosophy in a “What you talkin’ bout, Willis” kind of tone.

If you were to glance at some of the articles appearing in the past week you would have walked away with the belief that the individual investor should look to time the market, insofar as to know which sector to invest in and when.

Good luck with that timing strategy.

You would also be lead to believe that some stocks with high P/E ratios had little downside risk. Really? Green Mountain Coffee Roasters? The next drop in that one should be reasonably vertical. One disappointing word from Starbucks and GMCR late climbers on are going to jump ship and there’s really not a lot of support between $45 and $80.

Today there was an article on a new retirement caluclator, as if there was a shortage of those. The message in the article was that the new retirement calculator would lead you toward a path based on irrefutable knowledge.

After all, numbers don’t lie. Unless you picked the wrong numbers.

That path is based on the same kind of warrantless assumptions that every other calculator is based upon. You really may as well load your thought processes down with “your number”, either being placed into a false sense of security or a state of steady panic, leaving you paralyzed to act either proactively or otherwise.

Instead, the article completely ignored the fact that the assumptions may turn out to be wholly inaccurate, and to my thinking, they completely ignored the steps to take to accumulate the funds necessary to have a fighting chance of making it to retirement.

What really galls me is that there is a consistent bias that the average investor class individual doesn’t have the ability to take responsibility for their portfolio and by so doing, they consistently steer people toward those paths that are littered with return reducing obstacles.

Roll over retirement plans are consistently treated as vehicles that should be maintained in the same  sub-standard performing accounts offered by the employer du jour. Brokerage house recommendations ignore the existence of discount brokers. Independent thought and reliance on developing personal investment skills is ignored.

The reality is that if the professionals were so good, there wouldn’t be the wide range of price movements seen, particularly over short periods of time. It’s not the little guy or the uninformed investor that’s been disrupting markets with ill timed and ill advised investments.

It’s the professionals. The very same that cloak themselves with the sophisticated tools, algorithms and investing instruments.

The very same professionals who just came out today with downgrades of Research in Motion.

They’re the smart ones, though. Besides being a weatherman, what other job can you be so woefully bad at, yet still be considered a shining star?

Yet, the general investing public is too often considered to be unable to behave in a discerning fashion. As if they don’t know what crap is (crap just being another synonym used by one of a certain level of maturity).

If I were conspiracy-centric, I would say that this is just another example of “The Man” trying to keep the little guy down. It is almost like the concept of the company store. You become so indentured to your overlords that you never even think about venturing out on your own, or you just can’t.

Fortunately, I don’t harbor that kind of mentality.

Today I practiced what I preached. I used proceeds from some of my assigned shares to pick up downbeaten shares in some other companies. I also dumped shares of dead money stocks to take advantage of the tax losses.

If warranted, I may buy them back within a tax deferred account and then avoid the wash sales rule.

Every single position that I picked up today, I had previously owned within the past few months. Visa, Halliburton, Sallie Mae and some more shares of Freeport McMoRan. These were now all down to prices that I had originally purchased them at over the past year.

All of life is a big cycle and stock prices are no different.

I quickly sold call options on Sallie Mae, Visa and Halliburton and used proceeds to pick up even more shares.

One of the articles that I saw today raised the question of whether individual investors should use on-line brokerage accounts. The emphasis, obviously was on the lack of hand holding. What they didn’t discuss was how that hand holding is so restrictive. Where in the world would you ever find a broker to pull off the kind of trades you need to protect your portfolio from the wild gyrations induced by the smart city boys with the Bruno Magli’s?

Even though none of the above may sound like a real rant, I should let readers know that 3 LCD monitors were harmed in the writing of this piece.

 

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What’s in the Szelhamos Portfolio?

 

My least favorite subjects in high school were English and what used to be called Social Studies. Given that I attended a high school that was internationally known for its emphasis on science and math, I’m not even certain why the non-science classes were taught. There’s really not that much in life that can be achieved with the written word.

Fast forward a generation and both of my kids are fascinated with history and have relatively little use for math and science. Fortunately though. they still have some use for me. The youngest one was able to make his first real phone call from basic training yesterday and it was a special Father’s Day treat.

My oldest son came over for a Father’s Day visit and did the barbecueing, which is something that I really dislike doing. It was great.

We also independently paid our visits to Selhamos. Father’s Day and Mother’s Day are sad days to visit cemetaries, especially when you see so many young kids there.

And there were.

Death is also not one of my favorite topics, even though I do love the obituary pages. I do, however, like the concept of resurrection, just not necessarily in a religious context, despite the fact that I spent 4 years in a Jesuit college.

If I could choose a resurrection for anyone that’s died in the past 24 hours, no doubt that I would choose Clarence Clemons. I last saw him and the E Street Band 2 years ago. I still wear a T-Shirt from that concert tour at least once a week.

Even though “The Big Man” had to be lifted onto stage back then, man could he wail.

But resurrection was not the sort of thing they taught at my public high school anyway, which back in those days was predominantly Jewish. What they did sometimes teach, however, really taxed the imagination and my patience for learning.

Within my least favorite classes was a subset of least favorite topics.

That was Greek mythology. That stuff was about as believable as the concept of the Greeks readily accepting the fact that their economy may no longer support the right to retire by age 35. But when you think about it, the EU could just as easily been in a position to bail out the Phoenicians, but for some simple twists of fate.

Hated it. Just couldn’t identify with any of the characters or gods, although that Oedipus fellow….Interesting.

So no one is more surprised that I am for the title of today’s blog, ripped right from the mythological headlines.

What’s somewhat fascinating is that I also once owned a Pontiac Phoenix.

It was one of the then new GM series X-Cars that was supposed to revolutionize the American automobile industry. Even then, I don’t think I knew what exactly about that series of car was so spectacular, but Consumer Reports gave it glowing reviews in its inaugural year, only to do a complete about face by the next year.

My Pontiac Phoenix caught fire while I was driving it on I-95 in Rhode Island at about 4:30 AM enroute from Boston to New York. I recall driving on a pretty deserted and dark road when I saw someone flashing their brights in my rearview mirror.

That car then pulled alongside me and started honking wildly.

When I didn’t respond as that driver thought I should, he turned his courtesy lights on so that I could see him and frantically made sweeping hand and arm gestures which I really can’t recreate on paper.

Since I wasn’t expecting to be playing Charades and was never very good at mime interpretation, I just kept on driving, ignoring the lunatic to my side as best I could.

As it turned out, the under-carriage of my car was on fire. At some point a combination of flames from the hood and smoke, on an otherwise smokless and flameless early morning, finally drove the point home.

Although I never did finish that drive home.

I’ll spare you the details, because I’ll probably end up using them for another blog, but in the days before cell phones, it took quite a while for help to arrive.

Ashes. Phoenix. There was no resurrection

And so we begin another new options cycle this morning in the aftermath of another miserable week and another miserable month. The June cycle may as well have all gone up in flames.

Oh wait. It did.

Sure, I know that the S&P 500 actually finished the week with a 0.1% gain, but most people still think of last week as having been the seventh losing week in a row.

I know that I do.

As much as I’d like to see Clarence Clemons resurrected for at least one more show, I’ve got no such hopes for June 2011.

The only thing that helped to make it less of a total loss of a month were some of those last minute options sales that were made in some pathetic combination of desperation and addiction. Those pulled in nearly as much as the previous three weeks.

Interestingly, it actually made me realize that there was an opportunity to return to the past. Back in the days when I ran a monthly service offering 4 or 5 trades in the 2 days before monthy options expiration. But I gave that up. Once a month was entirely too infrequent. But all of a sudden its become clear that the weekly options offered the opportunity to actually make those recommendations much more frequently.

So with that ever worsening ADHD I suppose that’s the next venture. Re-establishing that newsletter and the market for it. Yet another pile of ashes, albeit self-imposed, ready for resurrection.

But first, it’s July. Making something of the ashes left behind after 7 weeks of losses. Although those losses were mitigated a bit by the options sales, as I noted a few weeks ago, I was under-hedged, since I kept thinking that the market would reverse course.

It probably will come as a surprise to no one that was not the case.

Of those last minute call options that I sold in Mosaic, Microsoft, Hewlett Packard, Textron, DuPont and Dow, only the Microsoft and some of the H&P shares were assigned. I had been expecting and hoping for more and had planned on possibly picking up shares in Visa, Sallie Mae, Riverbed Technogy and Home Depot.

I actually bought Home Depot last Monday, just to pick up Tuesday’s dividend and then sold a call option. That was a good series of trades and I still think Home Depot may be a good holding, even at a slightly higher price. So I will likely pick up replacements for my assigned shares.

Beyond using the phrase “From ashes rose the Phoenix” I really didn’t do much research to see what the mythological context was or what lessons can be learned from the ancient tale. It just seemed like an apt thought.

That point was actually driven home as the new Szelhamos Rules blog just reached its 20.000th hit this Saturday.

I say “new” because the original version ran for precisely one year. After the first year, regular readers were redirected to a new site called “Csokoljmegasegem.com

You’ll have to use Google Translate to figure out what that means. It was one of Szelhamos’s favorite Hungarian expressions.

But from those ashes arose the new Szelhamos Rules, and as a Father’s Day gift, my son has said that he will oversee an entire re-design of the site.

Told you. A great Father’s Day.

I hope that you all had the same.

 

 

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