Monthly Archives: November 2011

 

I must have missed something in life. I grew up at a time when The Beatles were just beginning their “US Invasion” and can still remember their first appearance on The Ed Sullivan Show.

It was a time of free love and drugs, although the option to pay was always available.

Do you remember the song “Daytripper”?

If you really grew up at that time and took in all of what was going on, you likely can’t remember that song, but you can still probably take a guess and be right.

I took a guess and was totally wrong. I just assumed that it referred to LSD trips. The actual lyrics said otherwise, although McCartney said otherwise to the otherwise. According to him, Daytripper” was an example of playful wordplay in an attempt to mask the true meaning and escape the wrath of more prudish critics.

Whatever.

It’s sad as I sit in the Nashville Airport, ready to return home, after having just arrived this morning, that for me, at least, today “Daytripper” just refers to a nameless and faceless traveler, blending into the scenery with the ubiquitous blue blazer and laptop.

Fortunately, the Nashville Airport seems to have the highest concentration of guitar toting passangers of anywhere in the world and served to break the sea of faceless daytrippers..

I never was much of a “daytripper” of any sort, but I am of the nameless and faceless variety right now, along with what appear to be travel weary salespeople.

You know the kind. The ones with the crisply pressed shirts and corporate logos. The ones that are told to always smile, lest their sorrows be a bad reflection upon the home office.

A life of that kind of daytripping doesn’t have as much appeal as the kind that The Beatles had characterized. I don’t even think that there are sad country and western sings paying tribute to those traveling cowboys.

But then, there’s also that other variety of daytripper.

Lord knows that the trading variation of “daytripper” seems like a good idea these days. But unlike a few years ago, when a large population of those day traders was wiped out, who needs to play for pennies here or there anymore?

Instead, think big. Sort of like why think a joint when it could be THC, to borrow from The Beatles post-Yogi phase of mind, if you buy into that interpretation of the song.

I usually spend Thursdays going after different kind of pennies. I usually am looking to sell some call options of 1-2 days duration, just to pick up a few of those errant pennies.

And do on Thursdays I scour my old maid holdings, those that aren’t already paired with a short call option, looking specifically fpr those that are below their cost basis and have shown some price recovery, but aren’t expected to get back to their cost by the time of option expiration.

I know. I had to read the paragraph over a few times, as well.

But lately, even those price moves that seemed unlikely to occur in such a short time frame have been occurring on a regular basis. When that happens, I lose my shares.

On top of that, the old conventional wisdom that smart traders wouldn’t stay long into the weekend, especially when there were economic overhangs, seems to have died a quick death. So instead of being able to count on a nice Friday plunge, thereby bringing my shares below their strike prices, lately they’ve just moved further away.

Luckily, just like in this past week, I can often count on “down Mondays. Those are the natural consequence of too many unwarranted moves up. They help bring share prices back to a more reasonable level so that I can re-purchase thoise shares.

Hopefully, at a lower price that they had been assigned for.

 Today, once again, I was totally shut off from all human contact. By that I mean that I was with people and that prevented me from being glued to anything electronic.

Although I was fully equipped with my trusty little travel modem, batteries and chargers to spare, all tucked into the blue blazer, since I didn’t need baggage, I was still unable to do anything other than get an occasional glimpse on the puny screen of a smartphone.

That’ not terribly satisfying. Size matters.

Leaving home this morning before the market opened, I did at least hear about the surprise move to lower EU interest rates.

This one was no rumor. Only made sense for the market to react in an appropriate way and accept that news with fully open arms.

Maybe even a hug.

On top of that the world learned that when Greek Prime Minister Papandreou was calling for a referendum, he really meant “concensus,”

When will we ever learn that whenver we try to translate from thr original Greek to Grrk, something important is always lost in the translation.

Since there is no video proof in English of the Prime Minister ever suggesting a referendum, the market just assumed that it was all a misunderstanding and proceeded to squeeze the shorts just a bit more.

Despite the fact that a former deputy finance minister from the opposition party referred to Papandreou as basically an emotional wreck who was unable to deal with the stress of the situation, talk has now turned to the idea that Papandreou simply outmaneuvered his opponents.

Who cares?

Simply add another 200 points to the Dow, go right past S&P 1250 and all’s good in the world.

What’s fascinating is that these days facts seem to be daytripping, too, although it’s sometimes difficult to distinguish between facts and rumors.

The way our mindset is working these days, if something is rumored to be factual, that’s good enough. If the previous rumor is contraindicated by a new rumor, that’s good enough, as well.

Think of it as playful wordplay.

In fact, the daytripping of rumors is considered in and of itself to be a new age manifestation of fact,

As a Harold Ramis inspired character would say, “That’s the fact, Jack,” and you’d be very hardpressed to counter that unless someone else saluted you and shouted out “That’s not the fact, Jack.”

How likely is that to happen?

Very likely, if recent events are any measure.

The words may be different, but the outcome would be the same.

So even though I was fully isolated from the world, I know that today’s market response will surely lead us to Friday and recently, there’s been no negative rumors coming out of the EU on Fridays. That can only lead to more unwarranted buying, because it’s already too late to sell on the news.

Or not.

So that then brings us to Italy and the sense of deja vous will hit yet again.

The characters will be different, the politics are a bit different, but regardless of what side of the Atlantic you’re on, it’s clear that there’s lots of dysfunction going on.

We’ll probably never truly know what Lennon and McCartney had in mind when they colloborated on that song, just as well never know what was really going through Papandreou’s mind.

Either way, enjoy the outcome, because sometimes it’s just best not to know.

 

　

I rarely get bored.

That explains why I can sit all day and stay glued to the TV screen watching and listening to various “experts” spread their wisdom.

Today, though, as good as it was, turned out to be very boring.

For a change, not only was there no news to move the markets, but there weren’t even any rumors.

To make matters worse, even though I am a big fan of Ben Benanke, Federal Reserve Chairman, his press conference, which now can no longer be referred to as “unprecedented”, came to pre-empt CNBC’s “Street Signs,” which for me has been a reincarnation of the old NBC concept of “Must See TV.”

To put that into perspective, I felt the same way today as when episodes of COPS and America’s Most Wanted are pre-empted by NASCAR, except I don’t like NASCAR.

Instead of dealing with the boredom, I did something that I really dislike. I went to the Mall to pick up some more stylish accessories to complement my typical daily outfit, as I was making a business related day trip to Nashville on Thursday.

While driving there it was either pay attention to the road or think about anything else. So I chose anything else, but focused on the earlier thought this week regarding “expertise”, but now I was focused on “at what cost” should we bow to expertise?

Each day I seem to wonder why we don’t hear more people speaking out on the clear and constant assault on our intelligence.

Listening to the barrage of statements whose contradictory nature is masked by the passage of time, it would be nice to see the occasional use of that modern miracle to objectively measure expertise.

Video, or at least its digital counterpart.

These days nothing happens without someone having captured it on video of some sort.

Since I do nothing else in life these days than sit and watch, I maintain my intelligence by trying to recall everything I’ve heard and seen in the process. That includes the local cable advertisements for computer repair and pest control.

A rodent prancing on your motherboard will cause great damage, but at least I think I can remember where I put the piece of paper with the shop’s phone number on it.

But when memory is lagging, video is great.

 A number of years ago, Joe Kernen offered to drag out the video that he inferred would contradict the statements that an esteemed guest was making, regarding his personal exemplarly prediction track record. That individual was giving the strong impression that he had called for market caution just prior to the collapse of the markets. He was equally clearly upset with the suggestion that he was massaging the past.

So much so that he passed away not too long after.

Kernen will do that to people.

In that sense, I guess Kernen got the last laugh, although that was a bit extreme. The official party line is that the two events were unrelated, but the mysterious disappearance of the DNA evidence certainly leaves room to wonder.

There’s no question that there’s some very high priced talent out there willing to manage your assets and provide your portfolio tending loving guidance, while playing a revisionist version of history.

I don’t totally understand the “2 and 20” nor the concepts of “high water mark,” but I certainly understand the proven concept of closing a fund when losses make it improbable that the “2 and 20” will ever kick in. Doing that also erases all memory, other than for those that get left holding the bag with losses from the old fund.

Yet, amazingly, high priced losers always seem to live yet another day. There’s a whole other world of investors out there who likely are unaware of the real performance they are buying into.

Now that’s a nice concept. Walk away from your failures and start anew.

The unsaid, or more likely loudly stated concept is that “you get what you pay for.” That’s somewhere along the lines of “it takes money to make money”.

That appeals to lots of people. So much so that many mega-church pastors are able to convince their not terribly worthy parishioners that God will like them more if they donate more lavishly to the church.

Only then will they become more worthy, while in the process becoming less wealthy, which is a stopping point for becoming more wealthy.

Inferences being what they are, if you should lower your self-respect by paying less, you will get less. Like say, a lesser Hindu God.

Since there’s no equivalent measurement to Price – earnings ratio in the world of portfolio or hedge fund managers it’s really difficult to critically assess if you really do get what you pay for when your portfolio is managed.

 No doubt that there is truth to almost everything that’s said or left unsaid. After all, how many absolutes are there in life? Even the Ten Commandments have some wiggle room. Even those absolutes have back door escapes.

Don’t want to commit adultery? Fine, bigamy for you.

But I think I’m beginning to understand why we’re so accepting of such clear and blatant contradictions. In fact, they really don’t insult our intelligence, they help hone and maintain it. Besides, we’re surrounded by contradictions and never think twice about tehir co-existence in what should be a mutually exclusive relationship.

Beyond that, axiomatic sayings, the ones that we simply accept as being true, often have their own axiomatic, yet polar oposite counterparts.

“The best things in life are free.”

How does that even begin to square, especially when you get what you pay for?

With time, I’ve come to very strongly believe that the science of stock picking is neither art nor science.

It’s either blind luck or access to very special and timely information.

Given the ferocity of market moves and the rapidity with which they occur or change direction, it’s not terribly likely that anyone can really fare well by simply picking stocks. Obviously managing positions through the use of derivatives is increasingly important to manage risk, but that just further confirms that even the best and brightest have no clue what will happen to their favorite stock fromr one moment to the next.

So, do you really have to pay for the expertise that is every bit a hostage to external forces as you, a lonely individual investor is?

Clearly, when there are massive moves, it’s not legions of little guys who are creating or perpetuating the waves.

The little guys, though, are still to often led to believe that the deck is stacked against them. As such, the only way to have a fighting chance is to pay for it without regard to performance. There’s also much more prestige to having a managed account at Morgan Stanley than one at E*Trade.

That’s the suburban equivalent of class warfare and snobbery

Obviously, when all of the chips are ready to be cashed in, prestige has lots more cache than bottom line.

I bring all of this up because among the reasons I maintain this blog is to sell books. For that purpose, I have a publicist.

He is paid nothing and worth every cent.

Alright, I paid for his college education and may have fed him on occasion, but otherwise, he gets nothing.

Best of all, he has nothing to work with.

I’m anti-social, lazy, content to be sitting in my La-Z-Boy and watching TV.

In the meantime, I do find some time to make some trades. Today they were simple ones and not terribly rewarding as there’s only two days left until this week’s options expire. When you subtract what I pay my publicist for his services from the premiums I received today, I still have all of the premiums.

He has the memory of meals past.

After about 500 points of loss, today was a gift that allowed me to sell calls on Riverbed Technology, Netflix and Amazon.

I didn’t get much for the effort, but it was something that I could throw into the box that holds all of those other meaningless trades.

My publicist, in the meantime, was doing some real work. He’s informed me that I’ll be appearing on “Bloomberg Rewind” next week.

I was watching Bloomberg Rewind tonight and the guest, John Ryding, Chief Economist of RDQ Economics disparaged Twitter when asked if he participated in that social medium phenomenon. His position was that his clients expected more than what could be delivered in 140 spaces.

Newsflash: Clients don’t want verbosity. They want performance. They’re not paying premium fees because they want your wisdom in doses of greater than 140 spaces.

But still, all of a sudden, my publicist is earning his way. I hope he’s not expecting a little extra in his envelope.

But here’s the problem.

When you start getting more than what you paid for you can go one of two ways.

Either you congratulate yourself on the great fortune of faring so well, or you wonder “what if?”

For me, there’s no “what if?”

There’s nothing better than not needing to have your hand held and then topping it off with the hand you held for so long giving it back.

There’s no price on that. And I still have about 120 spaces left. Now that’s economical.

I can still think back to those days when my kids would be put to bed each night with a story.

“Moo. Baa. La La La.”

That phrase will be stuck in my mind until the day I die, as like most parents, I found myself reading the same story over and over, night after night, because that was the story that wanted to be heard.

Whatever it took to get the little darlings to sleep. Whatever it took. Even Moo. Baa. La La La.

I was only talked off the ledge because the nice policeman promised me I’d never have to hear those sounds again.

Instead, it was a book devoid of silly sounds, but sadly chronicling the deaths of brave, hungry, thirsty, polite, sleepy and explorers, leaving only a single smart explorer to survive.

“Six brave explorers came to Egypt alive, one discovered a rare bird and then there were five.”

Different kids, different tastes. Different stories, but with the same need for the comfort that comes with repetition.

It was always so nice when one was ready to move onto a new book. I don’t really recall, but I may have occasionally hastened that process by telling the kids that their mother threw out their favorite book in a moment of unrestrained rage.

Not trusting a parent is part of healthy childhood development. You can look it up.

Even “Atlas Shrugged” would have been a welcome change from some of the Berenstain Bears adventures, especially the dentist one. The Berenstain Bear loving kid of mine didn’t have the same love for my attempts to read to him from more legitimate dentistry textbooks to try and offset the inaccuracies of the Berenstain version of teeth.

Fast forward some 15+ years and that brings us to today.

And here it is. The same old story. Instead of reading the book, all I hear is the constant repeat of the musical refrain, “Greece is the word, Greece is the word, is the word that you heard…”

Greece, the nation that gave the gift of democracy to the world also showed that it could lead the way in abandoning electoral responsibility, as Prime Minister Papandreou called for a national referendum to get approval for the austerity measures necessary to prevent a “hard default.”

I’ve already forgotten what the root cause of the market’s Monday downturn was ascribed to, but today everyone was on the same page.

“Greece is the word, Greece is the word, is the word that you heard….”

I’ve never really gotten to the point of being apoplectic, but I can imagine that Angela Merkel is at that stage.

Have you ever seen what happens when a German head of state gets upset?

What was really a sight was watching the former Greek deputy Prime Minister of Finance, who by the way was part of the more conservative opposition party, refer to the current Prime Minister as being emotionally and psychologically a basket case.

My words, not his, only because he didn’t have the same fluency with American idiomatic expressions as I have.

So today’s market was a reflection of all of the pent up anxieties of the past few weeks that were falsely put to rest late last week.

I’m not certain that InTrade is making book on the likelihood of the Greek populace voting to take the austerity measures that are part of the now infamous “Greek Haircut”, that apparently requires shaving 50% of the head.

I’m guessing that if the vote can ever get pulled off before the Greek government falls, there not much of a chance that people are going to vote themselves into a life that they’d rather not live.

The good news is that each person can decide for themselves whether they want heads shaved in sagittal or transverse planes. If they play their cards right and perhaps use some entrepreneurial spirit, the “Grecian” may yet come to replace the “Brazilian.”

See, you never got that kind of detail out of those stupid Berenstain Bears stories.

The Greek story was so dominant that even Jon Corzine was moved to the back burner. Any other day and news that MF Global may have violated some very basic elements of trust by using some $700 million of their client’s funds for their own in-house and ill fated pursuits.

Sometimes it’s a good thing when some other story pops up.

To this day, ex-Congressman Gary Condit is no doubt grateful for the timing of 9/11. His role in the disappearance of young intern and romantic liaison was all but forgotten as he quietly stepped away from the spotlight.

Of course, the opposite can just as easily occur. Just ask Farrah Fawcett.

Figuratively, of course.

He fame long ago faded was rekindled with the effort to document the ravages of her anal cancer and subsequent death.

Unfortunately for her, her producer didn’t clear her passing with Michael Jackson’s itinerary for that day.

So Corzine got a pass and may still be on the short list to replace Timothy Geithner as our next Treasury Secretary, unless of course someone on the search committee has an “aha moment” and remembers that Corzine was the guy in charge when MF Global went bankrupt and stole their clients’ money.

That may be a bit harsh and things still remain to be sorted out.

What is clear is that Corzine bet and he bet big and he bet wrong.

Corzine used to be one of the big boys at Goldman Sachs, co-CEO with Hanry Paulson. There’s a reason that the Goldman people are called “the smartest guys in the room.”

What Corzine failed to take into consideration was that he had left the room and apparently the other kids took all the smarts with them. People marching up and down Wall Street may disparage Goldman Scahs and may blame them for the financial meltdown, but last I looked, no one was accusing them of stealing money or dipping inappropriately into anyone else’s pockets, as your old weird uncle used to urge you to do with him.

While Corzine was being trivialized, news from Greece threw the market into spasms of optimism interrupted by spasms of pessimism.

Word that the idea of a referendum would never occur helped the market recoup about 100 points from its low.

Further word that Papandreou might be psychotic or having some kind of a breakdown was comforting to the markets.

When it was all said and done it looked as if only some form of chaos was in the near term crystal ball, so the market just gave up.

Not capitulated, just gave up and called it a day. A bad day.

I picked up some more shares of Riverbed Technology and marveled at how the ProShares UltraShort Silver ETF that I owned, some of which is hedged, has been serving as the perfect antidote to both the fleeting feelings of elation and depression.

Those feelings come and go because it’s just a reflection of the same old story that is the big picture. The book, as it were. The book that encompasses Greece, Corzine, the Yen Carry Trade, High Frequency Trading and so much more.

That story of that book is that what goes up must come down and must then go up again, only to come down in time to do it all over again.

Strangely, I never tire of that book, only the stories in it.

To me, the details of each breaking business or economic story now all sound the same.

Moo. Bah La La La.

All I care about is that at the end of each day I’m not one of those investor explorers who doesn’t live to see another day.

I’ll do like that smart explorer who just stayed in bed and avoided the predictable traps. Who needs excitement?

Just make mine a La-Z-Boy and make certain the Moo Lah, Moo La La stays safe with me.

  

  

The past week was all about superlatives. Best of all, the superlatives were all headed in the right direction.

It really didn’t matter that so much of that direction was dictated by rumor after rumor. People who were smart enough to do the stupid thing and not take profits when common sense dictated otherwise were well rewarded on paper.

With the close of trading on Friday we were hearing all kinds of statistics centering around the market’s performance this October.

By all accounts we had seen the single best performing month since 1618, or in meteorological terms “ever since records have been kept”

It was that good. You actually had to go back to when Native Americans were occupying Wall Street to have had as good a month as we’d just experienced.

Even the old adage “buy on the rumor and sell on the news” couldn’t bring the market down after the rumor of breaking an impasse over the Greek financial crisis came into being.

At least to a degree, as today the Greek Prime Minister announced that the final details of the debt agreement will be put to a referendum. So, that certainly makes it a done deal.

What could possibly go wrong?

But in October jut about everything went right, as long as your standard is that you need at least a 17% gain.

Shorts were reportedly being squeezed, talk of IPO’s was beginning to burn up the airwaves and people were clicking on the ads on this site.

That final indicator seems to be a very accurate one. People click on financial related ads when they’re feeling good about multiplying the wealth. When the market is going down no one in their right mind clicks on an “Open an E*trade Account” ad.

Even Groupon was looking rehabilitated and in some corners was being compared to LinkedIn, with regard to the reception its IPO would be expected to receive.

 

 By some measure, those all may be sufficient to mark a near term market top. And so, today, perhaps befitting the fact that it’s Halloween, the market just gave a middle finger to those superlatives and proceeded to lose almost 2.3%.

The diagnoses for the drastic response today came quickly.

“Risk aversion is once again taking hold in markets,” said Brown Brothers Harriman & Co. strategists in a market commentary following this anti-climatic end of the month day.

That’s why those guys get the big bucks. They are able to instantly recognize once they’ve been run over by a truck.

There must have been a really sharp curve in the road, because clearly none of us ever saw that truck coming. Otherwise we would have stopped buying and buying and stopped driving stock prices higher and higher.

The really good analysts can even identify the source of the tire tracks on their back.

I assume that some of those wild horses now roaming the floors of the NYSE are left over from the original occupants who only remembered to close the gate after the horses had escaped.

But beyond that, they get the big bucks because they can also see well into the future, discounting all unforeseen obstacles.

You and I need a straight road ahead of us.

The really good ones see it coming and take decisive action before the apocalypse.

“Although encouraged by what we consider to be a good start, we suspect Europe will require other measures going forward to effectively deal with its sovereign debt problems,” said USAA Investment Management Company in another note.

The rest of us totally forgot that there’s more to the EU than just a faltering and puny Greek economy

To be so talented is such a gift and needs to be shared with the world.

That was the kind of talent that just oversaw the bankruptcy announcement on Monday of MF Global Financial.

Before overseeing the bankrupting of a one time proud company, the guy who got the big bucks oversaw its evolution from an important cog in the wheel to the wheel.

But not any kind of wheel. More of a freestyle wheel. You know the kind. The one unrestrained by shape and form and without knowledge of the road.

Besides losing billions in European bond speculation, an area where reportedly MF Global had little experience or expertise, it now also seems that some $&00 million of client money is missing.

No matter. Just another opportunity for Jon Corzine to reinvent himself, although it’s not too likely anymore that he’ll be heading to become Treasury Secretary anytime soon.

I suppose that was an anti-climactic end to that much envisioned and predicted journey.

The news of MF Global’s descent didn’t seem to hit the markets terribly hard. For the most part the market just stayed in a tight range until the final hour when it just added another 100 points to its losses.

Why did the market do that? Why did it suddenly reverse direction?

Didn’t you read the earlier paragraphs? Investors suddenly became risk adverse and learned that other countries in the EU were basket cases, as well.

The fact that Halloween also marked Jean Claude Trichet’s last day on the job may have led to some sympathy selling.

For me, I just love “down Mondays”.

Those are the days when the market heads downward sharply right after I’ve had lots of options exercised.

In this case, I had the opportunity to repurchase shares of Caterpillar, Home Depot, Mosaic and Netflix below where they had been assigned and British Petroleum and JP Morgan at prices slightly above the assigment level.

That’s like getting things you really wanted on sale.

The fact that the market didn’t reverse course mid-day, as I so smugly believed was also anti-climactic. Even worse, it led to the feeling you get when you buy something and then as soon as you walk out the door, the going out of business sign goes up.

At least for a number of the share repurchases I did get to sell call options as they were on a short lived climb upward. Caterpillar and Mosaic behaved nicely, but for the most part, the other opportunities didn’t materialize.

Sometimes it’s amazing what opportunities do materialize. Sometimes, though it’s hard to understand why they existed in the first place.

Let’s go back to the case of MF Global again.

No one hates bankruptcy more than common stock holders.

Right?

Well, generally that’s true, but there’s another class of investor that may not fare too well, either.

Those are the holders of unsecured loans.

Reportedly, JP Morgan Chase held about $1 Billion of those notes and its shares got hit very hard. All the better time to repurchase shares.

Then, word came out that all but $900 million had been packaged up and sold to investor syndicates.

You know the kind. The kind that bought CDO’s. The kind owned by people in that evil 1%, mindful of the fact that even the original occupiers of Wall Street had their own 1% folk.

That JP Morgan was involved was no surprise. That fact that it repackaged its assets and palmed off the liabilities on others whose own investing greed was exploited, isn’t too much of a surprise.

So, does any of this sound familiar yet?

But what did come as a surprise was that among the unsecured MF Global creditors was CNBC.

Say again?

CNBC is on the line for about $850,000. Peanuts by any measure, but why exactly is CNBC in that kind of position?

Shades of Jon Stewart.

Did that in any way influence or steer its coverage of MF Global prior to this crisis? Once you’re in that kind of position are you any longer an independent arbiter or free to report wherever the facts take you?

I’m not certain I really need to know those answers. Whatever they are, compared to my imagination, the reality would probably end up being the most anti-climactic of all.

My guess is that it represents some payments owed to CNBC for ad time, although that seems like a relatively large accounts receivable for basic cable advertising, but then again, onMonday I was the lone voice defending Sallie Mae, as it, coincidentally enough was one of only a handful of gainers in a 270 point down day.

As far as MF Global’s tentacles go, back in the ancient Lehman bankruptcy days it was the contagion that killed us.

Now the contagion watch is on Europe with little to no concern about what other blocks may fall here in the US.

As nice as it would be to have MF Globals woes end with MF Global, the Schadenfreude that will all suffer from has to believe that lack of contagion is equally anticlimactic.

We all love a good collapse, but “been there and done that” describes the prevailing attitude.

It’s time to return to those great first 30 days of October, get some risk on and ignore reality.

That’s a climax we could all enjoy.