Monthly Archives: August 2011

Today may have marked the best day to have been in complete and utter isolation. If only I could have hidden my portfolio away in one of those salt mines that the government reportedly has available for its own uses.

Like the past two days I was otherwise occupied with the very happy occasion of my son’s graduation from Army Basic Training.

I spent very little time watching the news or paying attention to the markets.

That was probably a good thing as I forgot to pack my blood pressure medication for the trip.

On the drive back home, which took almost 10 hours with stops, there was a lot of napping and lots of questions asked regarding details of basic training. Sugar Momma was especially interested in every aspect of Army life but had a hard time comprehending that there didn’t necessarily need to be a reason behind anything.

What we didn’t realize was that during the 10 weeks away from home he and his fellow trainees had been completely cut off from the world around them. They had not heard of any news since May 25th. Imagine not knowing of any world events or changes for such a long time.

Sounds great, doesn’t it? If only there was a way to be spared the news of the world without having to do an obscene number of push-ups.

My son had said that they heard that Ryan Dunn and Hugh Hefner had died.

Granted they got the Hefner rumor wrong, although to the rumor mill’s credit, Hefner was in the news.

What amazed me is that Ryan Dunn, know only for some antics regarding a Matchbox racecar up his ass, as part of the “Jackass” crew made the news embargo cut.

But those represented not a sampling of the news they had heard, but the sum total of the news.

As my oldest son tapped me on the shoulder while I was driving, he just casually mentioned that the Dow Jones was down about 350 points at mid-day.

Once again, the thought of being buried deep in those salt mines seemed so appealing. Even push-ups with South Carolina fire ants marching on my back in the South Carolina sweltering sun seemed preferable to dealing with a wilting portfolio.

The thought that things can change so quickly and sometimes without any real stimulus at all became very real. Surprisingly, the market seems to be surprised or maybe it hasn’t had access to the news recently.

For his part, our son informed us that in the Army women are females, guns are weapons and bathrooms are latrines. Although those may seem like minor changes, they are apparantly very serious ones and trainees receive reinforcement in numerous ways to ensure that appropriate terminology is used.

For my youngest son, as I looked at him, a lot had changed in just 10 weeks of time, but now it was our turn to fill in the gaps in his knowledge of world events.

Amazingly, he didn’t seem surprised to find out that plaid had replaced yellow on all traffic lights. Nor was he surprised to find out that Amy Winehouse had passed away.

“Again?”

Being a football fan, he asked about the player’s strike and was happy to learn that tragedy had been averted. I was amazed at the level of detail my other son had regarding the settlement. I don’t think that I had ever had that level of understanding on any topic, but then I’ve never been as passionate about any topic.

I had been fairly passionate about stocks, but that was before yesterday.

One thing that did get my interest was the remark that “now that I have some money, I may be interested in buying some stocks”.

Even after the pain of the last couple of weeks, those words had curative powers.

The very first thing he had wanted to do after setting foot off base for the first time in 10 weeks was to go to Chipotle Mexican Grill. Of course, we had told him earlier that Chipotle had completely revamped its menu using goat and nutria as replacements for steak and pork, respectively.

That was change that you could believe in.

Unfazed, as long as they were free range, by 11:30 AM we had gone through the line, ordered and were sitting at our table. I got quite a kick watching him take that first bite, as it reminded me of some of the unadulterated joy little kids can have. He clearly enjoyed that first bite and quite a few thereafter.

I don’t even think he noticed the fluffy tail still wagging out of that burrito.

My father-in-law used to use the phrase “eating memories” to describe the disappointment in once again eating an old favorite food. “You’re just eating memories. It’s never as good as your memories”.

Maybe 10 weeks isn’t that long a period of time, but clearly nothing had changed here.

By 11:45 the line was out the door and very heavily populated by soldiers that had off-base privileges.

Chipotle is certainly no “cheap” stock, but might be a perfect first stock for the young investor who understands dining value.

As the market takes a sharp nosedive value is something that will never change.

Hopefully, some brave people will now step forward in recognition of the values that abound and quickly change the direction in which we’ve headed.

Sounds like a job for the U.S. Army.

 

 

Like most people of my age, I was a fan of Monty Python. I once worked with someone who thought that Monty Python was a real person and for some inexplicable reason kept calling him “Marty”.

Parenthetically, he was also the only person that I ever knew who would watch Monty Python and not be under the influence of anything.

At the time, being a door to door vacuum cleaner sales man it helped to have some other influences in life.

Yesterday, Sugar Momma and I started our drive to South Carolina to attended our youngest son’s graduation from Army Basic Training. She chose my wardrobe for the trip because she didn’t want anyone to be offended by my various tee shirts.

Normally, she tells people that I have some early stage neurolgical disease, not Allzeimer’s, she tells people, and then just makes up a name for something to act as an excuse for my behavior.

Even though I had spent about 95% of my life on a 500 mile stretch of Interstate 95, I clearly wasn’t prepared for the new world below, despite having lived below the Mason-Dixon line for 15 years.

There was a world of Cracker Barrels, Shoneys, Hardees, Bojangles and more. I kept hoping to see a Piggly WIggly but was satisfied with the endless stream of barbecue related billboards that all had some kind of chef hatted hog.

Although I don’t normally eat lunch, Sugar Momma does. She also uses public restrooms. So a few hours into the trip we stopped and ate at a Cracker Barrel.

My first time ever, but how could you not love a place where the waitress asks you “would you like some gratuitous fat with that, sir?” I even snapped a picture of the sign that said “New Fried Bologna Biscuits”.

When it comes to food, I’m fairly conservative. I still can’t understand how someone would destroy fried chicken with gravy. And besides, what gravy? What kind of chicken has gravy?

Grits? I don’t want to know from grits.

Since Sugar Momma likes to drive I just settled in with my laptop plugged into the inverter and fired the modem up and began the day like any other day, while streaming CNBC.

And like most days recently there wasn’t really much to write home about. Just another sea of red, this paricular flow worse than most.

Knowing that I didn’t really have any trades on the horizon my thoughts turned to new strategies. Even though the old strategies have at least cushioned the fall, you can never close your eyes to new and better.

I’m not much for speculation or risk taking, but I also get bored pretty easily doing the same thing day in and day out.

But I’d rather be bored than have kept the portfolio strategy that was in place for the first 25 years of its existence. There’s something very appealing about actually taking profits as opposed to watching paper profits disappear.

In the past few months I’ve slowly devoted a bit more to selling puts and buying various ETF’s and selling calls on those positions.

A few years ago I actually successfully played the ProShares Ultra Dow against the ProShares Ultrashort Dow. I say “successfully” because I didn’t lose money, but I didn’t make much, either.

Back then, I used movements in Goldman Sachs as an indicator of market movement. That actualy worked very well. A change in Goldman’s shares would seemed to very quickly be reflected in the ProShares, but not so quick that a nimble trader couldn’t get in, and more imprtantly, out.

But that was yesterday. And yesterday was a long time ago, as Goldman is anything but a market indicator these days.

One of the other reasons that I abandoned that strategy was due to the relatively thin options market and the wide spread between bid and ask prices. It does you no good to not have a trading market.

But lately I’ve been following the Direxion 3x Dow (FAS) and short Dow (FAZ) and assessing them as part of a variation of that old strategy, sans Goldman. When one goes up the other has to go down and the options move in tangent, but again in opposite directions.

So why nit hold both and sell call options on both?

Since what goes up does go down and eventually back up again, the strategy is based upon accepting losses, taking gains and closing out contracts and then rolling them over, but in the opposite direction.

So for example in this string of down days, while FAZ would climb in value, FAS would drop. That would give the opportunity to close the short call contracts on FAZ, which have quite nice weekly options premiums and then sell call options on the existing position.

In the meantime, there is an options premium gain on the FAZ and perhaps a capital gain on the underlying ETF, as one of the positions ultimately gets assigned.

And when it does, the assumption is that for the next cyxcle, weekly or otherwise, the direction of movement will be opposite of the preceding cycle.

Will it work? Don’t know, but it has looked good on paper. In practice may be a different issue as the challenges presented by greed, fear and envy will exert themselves regardless of how aware I am of their presence.

Although as with every investment there’s a chance for losing your investment, it can’t be any worse than the risk you take with that gravy they seem to pour on everything down here.

I do like the idea of trying something new, especially in bits and pieces. I typically hold about 20 “big boy” positions at any one time and try to evenly proportion them.

The others are my more child-like holdings, like the occasional short put position or the speculative play. Those are always small positions, since I like to balance not being overly greedy with not being overly stupid.

Although I’m equally fond of not having to think very much and this play does involve a little bit of decision making, maybe that will strengthen my weakening cortical matter and allow me to finally pick out minimally offensive tee-shirts on my own.

After these past few days it may not be a bad idea to try something new and different, which brings me to one other road side sign that I saw today:

Osaka Spa – Truck Parking in Back Lot

Based on the clientele that we spotted in the Cracker Barrel I’d be hard pressed to think that there would be anything very authentic in the Osaka Bar in that part of North Carolina.

As part of my decision to exercise good judgment for the foreseeable future, I didn’t investigate that opportunity any further.

If however, that exercise gets too tiring, I may just be in the market for some FAZ and FAS and a nice double helping of fried bologna biscuits.

Pass the gravy, please.

 

 

 

 

 

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I used to think about how good and how bad it would be to live the life of a simple fruit fly.

The good? Not a care in the world, just hopping from rotting peach to rotting peach sucking in all of life’s sweet nectar.

The bad? Splat. You’re dead.

Actually, from what we now know, the simple fruit fly is not so simple at all. In fact, it now appears that nearly 75% of human disease genes have a homolog in the lowly fruit fly, while 50% of a fly’s genes have homologs in mammalian lines.

We are not so different after all, in that fruit flies and most humans are equally unlikely to know the meaning of the word “homolog”.

The fruit fly genome was entirely sequenced over a decade ago. I can’t begin to fathom how many fruiit fly years that is equivalent to, but for starters, 1 day in the life of a fruit fly is about 70 years for you or I.

Just imagine how many Armegeddons the Harold Camping of the Drosophila universe could have called for during that span. Haley’s Comet would have to come about every 20 hours or so, and so on.

What fascinated me was the life sequence. In the blink of an eye a female fruit fly transitions from “birth” to beginning the process of re-populating the species. With that kind of accelerated sequence, it’s not very likely that the show “To Catch a Predator” would have a meaningful species equivalent. Basically, after a couple of minutes you’re not a pupae anymore. Pedoflyia? I suppose that the equivalent would be flies ganging up en mass to hunt down a human predator with a swatter.

And then just as quickly, the lowly fruit fly dies.

Imagine having your entire life cycle crammed into just hours.

That’s exactly what yesterday morning’s market turned out to be.

In the blink of an eye the 130 point gain evaporated as just 3 letters, I-S-M took center stage.

I’d been watching the futures from about 6:30 AM and saw a slow erosion prior to the opening bell, but certainly nothing in the fruit fly realm of things.

The script, at least to my interpretation had a nice bounce and then a retreat, but nothing as rapid as turned out to be the case.

Luckily, I made all of my options sales within the first 15 minutes of trading. During that time, the market was already coming off of its opening highs. I was lucky enough to sell call contracts for JP Morgan, Freeport McMoran, Caterpillar and QQQ.

I had absolutely no inkling that the opportunity to buy them back and close the loop would come just an hour later.

Again, here comes the fruit fly. As it turns out, the female fruit fly, probably aware that her cycle is short, captures as many sex partners as she can during her brief stay on earth. Interestingly, it is the sperm of the final partner that appears most likely to father the offspring as the male fruitfly has an enzyme that actually displaces and destroys the sperm of its competitors.

You may call it slutty, but from my perspective the female fruit fly is hedging her species’ bets. The male fruit flies are like the universe of investors out there. They all want to drop their money, sometimes without due diligence being performed.

It’s all about timing. Anyone can trade, but not everyone can bring home the bacon or the insect analogous salted body part.

And as the market decided to erase its subsequent 140 point drop, it was time to start the cycle all over again.

What a day. I felt so dirty, just like a highly accomplished fruit fly lounging in a rotting peach on top of the world.

Luckily for me, the paroxysms of movement were just that. Thanks to the spasmodic activity I was able to roam around today taking care of errands before our trip, without really missing much. All of the action was at the tail ends of the day.

This morning my Sugar Momma and I are heading down to South Carolina for our youngest son’s graduation from Army Basic Training. In the 10 weeks that he’s been away from home, between his second and third years of college, he has no doubt experienced an incredibly accelerated series of events. If anything, he is just coming to life and will be a completely different person from the one we last saw before Memorial Day.

In the big picture these past 10 weeks were just a blip in time, but in terms of impact, I’m certain we’ll be seeing a new and improved version of a son who was already pretty good, but as good as he was, he couldn’t lob a grenade with reliable accuracy.

I’m cerain that the fruit fly metaphor is not terribly complimentary, but for me the message is clear.

Life moves fast, but we don’t have to go the fruit fly route. We have plenty of chances to enjoy, experience, self-correct and evolve.

Tomorrow is always new day, a day whent he market will completely ignore the antecedent events and trade in a vacuum. No historical memory and no ability to really be forward looking, despite the widely held axiom that the market, in its efficiency, discounts future events.

For the poor fruit fly it’s much more simple, but not all that different.

There is no tomorrow, there was no yesterday. It’s all about the present and the need to be the last one standing or piledriving to pass on life to the next generation.

For me, yesterday was good. I still lost a little, about 0.1% compared to 0.5% for the S&P, but today, with modem ready to go, DC inverter plugged in, I’ll be looking for more opportunity as we head to South Carolina., as Sugar Momma chauffeurs me around. Although there won’t be any procreating opportunity at least I’ve already outlived yesterday’s Drososophila brood and plan to see a few hundred more generations come and go.

As good as yesterday was for those wildly copulating flies, today will be no different for the next batch. For me, today and tomorrow will be even better than yesterday, regardless of what the market can bring.