Stunning Reversals






I’ve never made any secret of the fact that I don’t read very much.


My daily ritual of reading DIlbert and The New York Times Obituaries was recently complemented with James Altucher’s blog. I actually thought long and hard about whether to refer to it as being in “complement” to or in “supplement” of my daily activities and realized that there really wasn’t a word to convey both impacts.


I’ve linked to it a couple of times and bored readers of this blog have clicked on that link, which has also activated a small hidden webcam near their laptops, in addition to any resident webcams you they already have.


I like my fuzzy clandestine streaming to be in 3-D.


For those who read this blog on a regular basis it doesn’t come as a surprise that I don’t read much. In fact, there’s really not a strong body of evidence that I even read my own blog, much less proof-read it.


And forget about reading for the sake of getting my information right.


OxymoronsWhen I was younger, I was horrified to find some ham in our refrigerator since it’s not Kosher, as you may be aware.


My mother, in response to my pointing this out to her, said “if it tastes good, it’s Kosher.”


What a great philosophy.


I use that philosophy with my supportive facts. If I believe them to be true and accurate, then they’re true and accurate.


A “Kosher pig” is an example of an “oxymoron” until some moron ruined it about a decade ago with the discovery of a species of pig in some god-foresaken rainforest that might just satisfy all of the criteria necessary to be considered Kosher.


I wrote about Oxymorons a few months ago, but with an emphasis on the “moron.” The thought was rekindled a few days ago reading one of Altucher’s blog entries.


He was asking whether there could really be anything such as an amicable divorce.


In a world of delusion there probably exists such an entity, but then again delusion and the real world are themselves mutually exclusive.


In the real world you end up in “divorce court,” which, wouldn’t you know it, is itself an oxymoron. Just for fun, see if you can find all of the highlighted and hidden oxymorons in today’s blog’


Today, I watched what was called by many a “stunning reversal” in the price of silver.


In fact, they were correct as silver one upped gold and not only cut its earlier steep losses, but ultimately had a nice gain at the end of the day.


One of the things that I’ve come to like are “tag clouds.”


For someone who doesn’t like to read, tag clouds are just great, unless you get bogged down by the concrete concept of tagging a cloud. Or having physical contact with an etheral concept.


Thinking too much isn’t an oxymoron, it’s just an impediment sometimes.


Through the tag cloud by simple virtue of font size, boldness or color, you can immediately know what’s important to the author. You may not know whether it’s love or hate, but at least you know about the intensity of the apathy.


In my case, the tag cloud lets you know that I have some recent passion about silver, more specifically in the prospects of silver prices doing poorly, as I own the leveraged silver ETF that appreciates in value as silver prices drop.


Before I owned the shares my interest in silver was neglible, other than as an historically important treatment for gonorrhea and vampires, as well as syphilitic vampires. You would have known that as the words silver, gonorrhea, syphilitic and vampires never appeared in the blog’s tag cloud.


During the course of the day as the Dow closed up 135, at its high for the day, the ProShares UltraShort Silver ETF closed down $2 from its intra-day high. That drop represented about a 12% move, which was of course exaggerated compared to the actual movement of the underlying metal, due to the leverage.


Think of leverage as being a financial tag cloud, only in reverse. The less you put on the line, the bigger the potential risk or reward.


In that way, think of Jon Corzine as being about 13 times larger than the most leveraged ETF currently approved for trading. The difference being that the leveraged ETF is typically highly sector focused and doesn’t require much in the way of thought process.


Math? Yes.


Thought?


Well as Dennis Gartman might say. Thought on and thought off.


Moron.


On the other hand, under Corzine the focus was placed on an aspect of finance for which resident expertise at MF Global Financial was missing. Yes, that’s right. Your local MF Global Financial knew nothing of international currencies and swaps.


Moron.


Actually, to be totally fair, both are exceptionally intelligent morons, based on my archival research.


“Stunning reversal” doesn’t really qualify as an oxymoron in the classic sense, although there are many variety of “Oxymora,” but just like doing a treatise on what makes something funny is immediately not funny, so too is an encyclopedic look at Oxymora less than intellectually amusing.


No one should ever be surprised by “stunning reversals.”


Have you ever been to a 25 year high school reunion? Just look at the gut of the guy that was on an athletic scholarship.


Have you ever looked at every stock chart ever?


Unlike last month and the one before that, so far during this entirely unsatisfying January options cycle, I haven’t had the opportunity to benefit from the recurrent big spikes in silver prices.


In those months, just as today, the stunning reversals were predictable. What was certainly unpredictable was the inability of thr talking heads to portend the past.


And so here we are, about to enter the last trading day of 2011 and very possibly having survived the single most roller coaster year ever in trading.


True, we didn’t have a “flash crash” nor did we have any memorable declines or rises, but that’s only because there were so many.


And just like a roller coaster you end up exactly where you started, just feeling a bit more queasy for having been intimately involved in the sausage making process.


But man, is that sausage “damned good” or what?


 


 


 


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Crappy Stocks






This is yet another in a series of unsolicited blog submissions from George Pick, who is currently serving as an advisor to the Herman Cain Adultery Campaign.


During lapses in medication dosing he finds the time to write and peer through neighborhood windows. Today’s blog was clearly written during a period of delusion.


Thank the Lord for laptops….what we do without them?


What a great world we live in. Offices, who the heck needs them?


Why do they call it traveling when you are immersed in the morning rush hour and standing perfectly still? The last time I remember being that still was when my 5th grade teacher Mrs. Chivis yelled at us “clasp your hands and sit still” and it scared the crap out of this 10 year old.


Teacher, teacherAs her bifocals were keenly balanced on the perch of her nose and, of course, that long chain anchored those bifocals, I remember thinking “if only they had laptops in these glory days.”


I could have wrapped up my 5th grade education with an on-line course and sent the ole battle axe a packin. I never did find out what her first name was. She will always be Mrs. Chivis who scared the crap out of me.


I guess you could have labled me CRAPPY STOCK. I think she did……


Time out for an Egg Cream break with 2 pretzel rods…..O.K. I’m back….


I am sitting in my antique style chair at my desk with my trusty laptop


Wat a buy the chair was $649. and the desk was $1200. I got them both at a tent sale for $170.  Floor samples. I just love a great buy. It’s thriling to know that you didn’t screw up, you actually got a well thought out bargain, sorta like a crappy stock.


It’s thrilling when you buy a crappy stock and it soars. Ya know the kind of crappy stock that Cramer would not give a mention to, nor would it ever make the 8 o’clock hour on CNBC.


Who buys that crap anyhow?


So I bought this stock called ZOOM. Admitedly I am not a long term investor. Just do not trust the economic volatility in today’s world, but I do trust a penny stock?


What am I thinking? Mrs. Chivis should have had me wrapped a little tighter. What a crappy stock.ZOOM is. but who cares if it makes a whole bunch of coin,.or in this case a whole lot of Benjamins…


” Wanna be ballers, shot-callers It’s all about the Benjamins baby Brawlers — who be dippin in the Benz wit the spoilers It’s all about the Benjamins baby”


O.K. I’m back…..


I wrote an in-depth post on a forum that I frequent and clearly explained my logic. Funny, though how child molesters aren’t that interested in stock picks.


One response yearned for a clear explanation of my sanity. “Do you realize the crap this company distributes” asked one poster?


Yes I realize, .the kind that just paid me a huge return. Who cares what they make? I am not touting their product, I am not getting into a long term relationship. Heck we are not even dating. This is just dinner and a movie and hopefully a happy ending.


I am not an options guy. Not good at it. I leave that for brilliant minds like my friend the TheAcsMan.


What I like is a great buy…PERIOD.


A great buy is a great buy, no matter how you twist it.


What constitutes a great buy? When the value of the item you are buying outweighs the dollar amount spent on the item.


Pretty simple…


I look for reversals that are forming. Chart patterns that show signs of breakouts. I.love to find 50 Moving Averages’s crossing 200 day Moving Averages to the up side.


Cup and handles.


52 week lows reached because of some analyst downgrade.


You get the picture.


So I proceeded to buy my bargain on Monday at $0.93 and by Wednesday it hit $1.60.


That’s what we technicians would refer to as a “lucky call.”


I need to check with Chase to see if they have a money market that pays that type of interest on my money, or that minds that there’s white powder coatiing my deposits.


What a crappy stock


I think it is a great stock and it is reaching that 90 cents level again as I write this useless information.


Alex I will take useless information for $1000 please..


And by the way dinner and the movie was a perfect date and YES, a happy ending was in order….


“Enormous cream, forest green — Benz jeep for my team so while you sleep I’ma scheme (that’s right)”


O.K. I’m back.


I love not having to drive my car to an office. I owe that to people named Gates, Jobs.and too many more to mention. The great innovators of this generation. Because of their brain power and consistent commitment to create,  I can take my laptop to the crapper and purchase a crapy stock


All while I am taking a crap.on the crapper.


Somebody save me.


Did I just pay homeage to those brilliant minds or scar their memories forever?.


Who gives a crap?


And talking about crap, how about esearch in Motion? .I lost some Benjamins on that one. I got out quick and shaved my losses. Could the analysts have madee up their freakin’ minds? Is it a buy or a sell?


Break up the company and sell the parts. Change management. Make a WHITEBERRY so it looks like an iPhone.


Hey RIMM, wake the F**k up. It’s 2012 you fell asleep and the world has changed.


Sorry, I know NO emotions when it comes to stocks. No personal involvement. Just dinner and a movie and hopefully a happy ending. I couldn’t help myself.. I dated RIMM and.I usually do not date that type but I had to stay and see if I could eventually receive that happy ending.


Well I didn’t .


NO happy ending.  Paid for three dinner dates and still no happy ending so decided to cut her loose and date within my limited capabilities.


So the question is which stock is a CRAPPY STOCK?


ZOOM with a happy ending or RIMM with no happy ending.


“You …You got what I need…but you say he’s just a friend yeah you say he’s just a friend….You..You got what I need….”


O.K. I’m back….


Kimberly Clark.


Can you say that again?


Kimberly Clark. Sounds so wholesome. The type of girl you take home to meet your parents.No happy ending, but she will put a smile on your face.


Sncere, wants the best for you and is always consistent. Looks like she just fell out of a J.CREW catalogue.


Certainly not a CRAPPY STOCK, but I have to look deep inside my soul.


OK. not so deep.


I am not that deep of a soul and by my standards of weighing values I guess I am what I am.


I just want a happy ending when paying for dinner and a movie. A bit chauvanistic,  but stress release is imperative to my stability which in turn has a profound effect on my sanity.


Not RIMM type of crappy, but ZOOM type of crappy-happy..


Although if I purchased RIMM @$13. and it went back into the 20’s, 30’s.and then all the way back to the $70’s, I could eliminate the “CR” and replace it with an “H” and RIMM could be a crappy-happy…happy ending kind of a date.


But you know how it goes.


You start dating again and all is well and then you get blind sided. But it is hard to fathom that the stronghold it had on the corporate world has slipped through their sleepy minds. Perhaps management needs happy endings to stimulate their thought process. Kimberly Clark is a great date and even a better long term relationship. Perhaps marriage would be a good dividend, but I like my crappy-happy stocks….


Back in May I believe it was Cramer who touted Motricity at $30 or so and then admitted that he had made a mistake.


Does Cramer get …..?


Never mind.


Then a Motley Fool article said “sell and stay far away.” I think it was a December article.


So who’s right ?


In my view neither was right, but hey that’s just me. Instead of “buy” and “don’t buy” when is somebody going to look at any item and say “O.K. I did my research so how do I play this to my advantage?”


I purchased MOTR at close to its 52 week low. Then December 23 it gained 22% …..CRAPPY STOCK.


28% of the 33 million share float is short., but Carl Icahn has supported MOTR with a $20 million investment and owns 15% of the company, and yes there is another person with the same last name that is an insider.


It is going through some executive changes and probably a short squeeze. It has been in a tight channel since August and the broke out of the channel to the short side and reversed in the past few days with increased volume.


Is the short squeeze on? We shall see. Just watch the volume as it tells the story…..


CRAPPY STOCK?


My thinking is there are no crappy stocks. Only people that enter and exit a stock at the wrong time. Bit if crappy stocks keep giving me high returns with no marital obligations and all the baggage that is attached, I will keep dating with some dinner and a movie.


And that movie better COME with a HAPPY ENDING….


” But this ain’t a joke, I want you to know that Tech ninna is never pretending.. Alone in my bed, a gun to my head, asking WHERE IS MY HAPPY ENDING? “


“Clasp your hands together.” I wonder if Mrs. Chivis is out there reading tonight?


YEAH……YEAH….


 


If for some bizarre reason you feel a need to read George Pick’s previous guest blogs


Quiero Taco Bell


Who Needs Friggin’ Options?


 


 






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The Smartest Guys in the Room?






Let’s climb into the “Wayback Machine” and travel to a place that I like to call February 2007.


Back then, I was just getting started with managing some of my own investments.  I had decided to finally start putting my money where my theories were and focused on putting some 401(k) rollover funds to work.


Since the rest of my investments were sitting with my trusty broker, with whom I’d had a 25 year history, I thought that regardless of my personal mis-steps, I’d still be in reasonably good shape.


But barely 6 months later I was looking to rework my entire portfolio by putting my own stamp on all of its holdings.


To remind past readers, or just to inform new ones, the decision to do so came only after the unexpected death of my broker. The happy  25 year run that took us from E.F. Hutton to Paine Weber and stops in-between suddenly ended


Back in early 2007 I was far more discerning when I made my stock purchases, only because the portfolio that I was managing was relatively small. Since I was selling call options on all of the holdings and needed to do so in a sufficiently large quantity to offset bid and ask discrepancies, my self managed portfolio wasn’t entirely diversified and could easily suffer from the kind of hiccoughs that can be so common.


At that point, I already owned shares in those triple digit darlings Google and MasterCard, and Apple was soon to join them. Back then, there was no shortage of triple digit stocks.


That changed.


With some money in hand following the sales of Intel and Dell Computer (see why I hate Tech stocks), I was trying to decide between purchasing from between two more triple digit darlings:


Empty Parking LotsSears Holdings or Goldman Sachs.


Goldman was at about $215 and Sears was nearly $190 at the time.


It was never really a fair fight. Goldman always had the inside track.


No, not because Eddie Lampert, the Chairman of Sears Holdings and allegedly the next incarnation of Warren Buffett, was a Goldman alumnus, but because the Goldman CFO was a high school classmate of mine.


Easily the smartest guys in any room.


You may know some of the story as it all infolded between February 2007 and December 2011. If you don’t know the story, take a moment to check your brokerage statements.


You know, the ones that you were afraid to open.


The smartest guys in the room have seen their ups and downs over the past few years.


Today came news that 120 Sears and K-Mart stores were going to be closed.


People still marching on Wall Street would like to do the same with Goldman Sachs.


For me, the sure sign that something was amiss at Sears was when I noticed that Dick Bove was sporting a Sears necktie. To those more analytically inclined, the message was already clear when the aerial photographs of the Sears’ parking lots during the holiday season were indistinguishable from the parking lots of an Orthodox Jewish synagogue on Yom Kippur.


Don’t get that?


Alright, how about it was indistinguishable from the New York Mets’ parking lot in October.


But anyway, back to 2007 and with a decision to be made, I bought shares of Goldman Sachs and have held shares nearly continuously since that time, albeit in varying amounts as the term “dollar cost averaging” took on great meaning with Goldman, as did the expression “Value trap?”


Just to put things into perspective, Goldman is now trading below $95, although to its credit, no one has yet had their names qualified as being a “convicted felon.”


Without giving too much information away, over the years, I’ve generated about $35,000 in options premiums from my shares and have also had some capital gains as shares were assigned. Remember, I like to practice sacrifice of young children to protect the older ones and I rarely practice what Baruch preached, so while I currently have losses on existing shares, they’ll be on paper unless someone can take them out of my cold grasp.


If there really was a reason behind the decision to choose Goldman over Sears, it’s been lost to me, but I know that there really never was a reason, so I’ll go with the high school thing.


Maybe it was just cultural. Goldman, Sachs or Sears.


Mind you though, the argument for going with Sears was compelling and as they say at politically correct competitions “there really are no losers here.”


Other than investors.


It seemed as if hardly a day went by that we didn’t hear how Eddie Lampert was this generation’s Warren Buffett, despite the fact that Warren Buffett is still this generation’s Warren Buffett.


The strategy also sounded great. Look, he’d spent no money at K-Mart and made everyone that had faith gazillions of dollars.


Blue light specials? Gone. Why pay extra for the blue tinted light bulbs?


Then, he got Sears Roebuck to overpay for K-Mart, demonstrating what morons the Sears Board of Directors really was, making it all that much easier for Lampert to complete his swoop and pick up Sears on the cheap and transform it into Sears Holdings.


Besides, everyone knew that it was all about the real estate, anyway.


Genius. Pure inspired genius.


Yeah, that was yet another example of “crowd think.” Everyone piled on to the genius behind cornering the valuable real estate.


If you ever stepped foot into a Lampert era Sears, you realize that they were ghost towns, but that was clearly part of the brilliant Lampert strategy.


After all, why get bogged down with pesky things like inventory and customers when you want that “valuable” real estate to sell. Those things only get in the way.And surely, as loathe as I am to look at, much less use charts, see how well that strategy paid off? After all, everyone knows that an empty house sells much more readily and at a better price than a lived in and furnished house.


Chart: GS vs SHLD and SP 500


Sorry about not flipping the chart right side up.


I know even less about real estate than I do about stocks, but closing 120 stores probably isn’t going to do much good for business real estate values.


What did I tell you? The guy’s a genius.


The fact that a few weeks ago every analyst was blasting Best Buy for having retail outlets that were too large probably wasn’t terribly good news for the world of business real estate either.


I don’t know what my personal outcome would have been had I purchased those Sears shares back when they still had some appeal.


I never look back and play the “what if” game. That can be particularly psycholgically destructive of you’ve ever suffered assignment of shares, such as Visa or even Green Mountain after unexpected and significant price rises.


Although Sears is down about 83% from that day back in 2007, Goldman is down about 56%.


I suppose either way you could make it up on volume, but it seems ironic to introduce a retail concept to a guy who has been lambasted for not being a retailer, yet having the “cajones” to think he could run Sears.


By the same token, Goldman was about as far from the retail brokerage business as you can get, so maybe volume isn’t the way to go.


That’s why I’m not sitting in the room with those smart guys.


But I least I have the inventory to furnish the room.





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Invest Like Goetz






I know that am destined to burn in the after-life, but there’s probably a special place in heaven saved for those that fuel the eternal flames so needed by the underworld.


Without evil, there would be no good, so you’re welcome.


27 years to the day of the attempted subway robbery heard around the world, one of the 4 assailants took his own life in the squalor of a Bronx motel.


The fact that he didn’t bring his own towels either told you that he wasn’t staying long or that he wasn’t leaving.


I’m from The Bronx, so I know of what I write.


It seems odd not to qualify an earlier paragraph with the word “alleged.” No one was fooled by the claim that the 4 young men were just trying to panhandle from the meek “electronics” expert that day on a New York City subway car.


Bernhard GoetzEveryone knew that they meant to rob the defensless guy just minding his own business on an isolated subway car.


On the day before Christmas, these guys clearly didn’t believe that the meek were going to inherit the earth. And if they were, they were just going to take it away from them.


You may remember 1984. It wasn’t a very good year as far as crime statistics went in New York City. Assaults and violent crime were commonplace and the city was truly at a low point. Even during its fiscal crisis in the 1970’s there was never that feeling of fear to simply go about routine activities.


Like going to work, or going for a walk.Or just riding on the subway.


There’s absolutely no excuse for drawing an analogy between those events 27 years ago, culminating in this weekend’s suicide death of an inveterate criminal and a stock market investing strategy.


The road to hell is paved with people using such analogies for their own personal gain.


Like many others, I was greeted with the news that one of the 4 assailants of Bernhard Goetz, later known as the “Subway Vigilante” had died and had a quick journey back a generation.


As real evidence of a generational gap, neither of my two kids, who have 46 years between them, had ever heard of Bernhard Goetz, but there was a time when he was both reviled and revered.


In fact, you could easily go back and forth yourself with those two opinions on any given day and then do precisley the opposite the next day.


Racist, citizen standing up for his rights, vigilanate?


When confronted by 4 men on a New York City subway, with intent to rob him, Goetz did the completely unexpected. Not only did he pull out an underpowered gun, but he shot and wounded each and every one of the four.


Shades of “grabbed from the headlnes” only in reverse. Goetz recreated the fictional “Death Wish” role played by Charles Bronson a decade earlier and transformed it into real life, only he didn’t disappear into the ether seeking out more evil-doers.


Another decade later and Rudy Giuliani was elected mayor of New York CIty.


Racist, citizen standing up for your rights or vigilante?


Giuliani is widely credited with turning New York City around. His first act was to eliminate what he referred to as “quality of life” crimes, like banishing the homeless guys that would make your windshield even dirtier with their squeegies, in the hopes of getting some spare change.


Truth be told, it was Bernhard Goetz who turned the city around and got its citizens to leave the fear behind and retake the greatest city on earth.


Without Goetz, there would be no Giuliani.


You see, I’m a big fan of “Game Theory“.


You may also know it as  “The Prisoner’s Dilemma”.


I believe in it because I’m cycnical. Most people will only do the right thing if there are consequences to mis-reading the boundaries. It took an irrational act by Bernhard Goetz to get rational behavior to return to its rightful place in society.


The essence of the theory is that the unknown leads you to act prudently and to minimize risk. If you believe that in some way your fate may be determined by the actions of another, who has the same self-interests as you, but doesn’t have your interests at heart. It causes you to think like you’re going to potentially be a victim to a criminal, because he’s equally likely to become a vicitom of a criminal.


You.


Criminologists talk about how the certainty of punishment is the best deterrance. The death penalty, for example is never going to be a deterrent if never carried out.


Empty threats? Worthless.


Threats? Worthless, unless occasionally carried out.


Behavioral psycholgists will also tell you that the best way to effect change is to have a variable reinforcer. Keep the subject on their toes. Never let them figure out a pattern.


With Goetz’s action the rules of the road were changed.


No longer was it a sure thing that a seemingly meek guy riding the subway was going to be a sitting duck. Now there was a channce, maybe small, but still, a bit of uncertainty, that the next guy was going to be packing as well.


All of a sudden, the risk-benefit ratio had changed.


In investiing, it’s all about modifying that risk benefit so that you don’t carry all of the burden.


Invest like Goetz.


To one extreme you may have someone like Raj Rajaratnam. He didn’t want to carry any burden and in that regard, he’s just like how we all should be thinking.


Risk is bad, reward is good.


Again, we can do away with the word “alleged” when discussing Rajaratnam, although I continue to believe that insider trading is a victimless crime.


On the other extreme is the kind of person that does nothing to protect himself and just gives in to the whims of the market as it bounces wildly from subway car to subway car taking whatever it needs to fuel its movement.


But let’s face it. You may be honest and well intentioned, but the next guy, maybe Raj Rajaratnam may not have your interests at heart.


I know. Hard to believe. But even if what he’s doing may or not be criminal and may or not leave victims in its wake, you can become a victim by your own apathy.


To get the best deal, you have to think like a criminal confronted by other criminals also seeking to get the best deal.


But just imagine that while you’re talking to the police officers your doing it submerged in a tank of water. Your sound waves travel at only 550 feet per second in your tank, while your compadre in the other adjoining holding cell has unfettered access to sound travelling at a full 1100 feet per second.


He gets to cut his deal first and you lose, because you were a flounder. Don’t blame high frequency trading for your problems, just do something about it, like not worrying about being whip-sawed.


The point is, don’t trust the next guy and don’t come unarmed to the party, even if it is only a snub-nose. The one on the other side of any stock transaction is a faceless and nameless soul, although more than likely “he’s” a fund.


Although the Supreme Court has ruled that corporations are people, it hasn’t extended that largesse to investment funds, they don’t really have souls.


Instead, take the deal. Use hedges to better define your reward and potential punishment. But, you still can’t screw the other guy, because that’s what greed is all about and it gets in the way of rational thought.


Prisoner’s Dilemma shows that a reasonable person realizes that if his counter-part tries to screw him over, he would be met with the same response.


By virtue of the game, that would result in the worst outcome for both, a lose-lose situation


So instead, the aim is to escape only slightly tarnished, knowing that the chances of escaping unharmed is tiny, while the chances of getting hit with a ton of bricks is great if you try to outsmart the system.


Where the analogy falls short is that in Game Theory you assume that your opponent is a rational thinking entity, with a drive for self-preservation.


That’s why the U.S. and Soviet Union never fired those nuclear warheads at one another.


Enemies or not, they weren’t crazy and were too smart to take a risk that had little assurance of reward.


Nuclear arms in the hands of a terrorist, especially one that believes that a better world awaits if the ultimate sacrifice is made puts us in the realm of the irrational, at least by most rational people’s perspective.


The market is supposed to be rational, but lately it hasn’t necessarily been behaving that way.


When faced with an irrational or unpredictable opponent, you have to abandon the Goetz Princple, and instead have to be proactive. Just assume the worst and you’ll be right.


When faced with the dilemma and you will be, just ask yourself, WWGD?


 



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Oracle as an Oracle






 


I’ve never done well investing in the technology sector, with a couple of notable exceptions


Let me list my failures: Intel, Dell, Hewlett Packard and Yahoo. There may be some others, but there are times when I buy stocks in companies without even knowing what it is that they actually do.


Probably not a good idea.


Nearly 30 years later, I still recall a close call in the technology sector.


I received an allocation in the IPO for  hot company called Eagle Computer. It was perceived as a real competitor to the IBM PC back in the very early days when a PC cost about $5,000 or more, if you wanted a second floppy drive for storage.


Funny story.


Its charismatic CEO was killed in a car crash on the day of the IPO.


OracleOnly an oracle could have foreseen that.


The underwriters actually refunded money to IPO investors and ran their next IPO a few months later without me. Eventually, the proprietary Eagle Computer, bereft of its guiding light, morphed into an IBM clone and then was sued out of existence by IBM along with some other early players.


In hindsight, maybe that’s not such a funny story.


I was spooked by the reliance on a single individual and continue to be so.


Technology seems to be highly linked to charismatic individuals.


Okay, sometimes, like Bill Gates, they’re not really charismatic, but in his own way, he was. Who else could turn mosquito netting into a sexy way of saving lives?


Ballmer?


Yeah, I’ve had Google, Apple and even Research in Motion but I seem to remember the failures more vividly.


The investing successes in technology include a company that I really don’t have any idea of what they do and have happily been in the dark for years.


Riverbed Technology.


The “Technology” part of their name gives me some idea of their sector, but that’s all I really need to know.


When it comes to technology, there really is a powerhouse and it’s Oracle Corporation.


As a powerhouse, Oracle is the baby of another powerhouse, Larry Elllson.


Oracle is involved in absolutely everything and they compete furiously with absolutely everybody. Ellison never pulls punches and isn’t really known as a diplomatic sort.


He qualifies as charismatic and he certainly lives that manner and portrays himself as such. He lives hard, plays hard and competes like there is no tomorrow.


I used to have an Uncle, that whenever I introduced him to a friend of mine, would reach into his pocket and pull out one of those free little calendar books that he would get each year from the Jewish Funeral home, to whom he had pledged his business.


He would go to the back of the book and look up where that friend was from and would announce something to the effect of: “Calcutta? 10,000 Jews.” or “Pittsburgh? 60,000 Jews.”


He wasn’t much into popular cilture, but would have loved the game “Dead or Alive, Jew or Not?”


People don’t like Larry Ellison, but he probably foresaw that as he continued to fine tune his personna.to make himself even less likable.


My uncle would probably have liked Larry Ellison purely on the basis of heritage and business success.


Investors may have liked Ellison’s results, but some of the more recent ones may take exception to that.


Despite his known penchant for cars, add to his credit not sharing the same fate as Eagle Computer’s Dennis Barnhart.


In fact, I found it surprising that he would partially share the stage with another high profile technology person Mark Hurd, fresh off the controversy at Hewlett Packard, even though it was clearly a finger in the eye of HP.


But Ellison was an Oracle. The Oracle of Redwood Shores.


He clearly knew that the wall was approaching and there had to be someone else to pin the blame upon.


In fact, at an earlier earnings report, even though Mark Hurd had only joined Oracle a very short while earlier, Ellison credited Hurd with the great quarter.


Magnanimous, no?


No. Set up, yes.


Easier to share the credit than to take all of the blame. But still, it’s unlikely that Ellison would turn too quickly on Hurd, becasue memories are still too fresh and remember the circumstances with which Ellison bought Hurd to Oracle.


Too much personal aura at stake to put him out to dry.


Instead, today, Oracle spread the pain by predicting that technology spending was suffering from delayed business spending.


In other words, macro-economic issues rather than company specific.


Well, that’s one way of deflecting responsibility and perhaps shielding the executive offices from criticism.


Oracle’s prediction spread gasoline on the sector and I got a burn along the way.


A past trading success of mine was VMWare.


Actually, I should correct that, and as Larry Ellison so graciously gave credit to Mark Hurd, I should give credit to my son for turning me back onto VMWare a few years ago when it was hovering at about $18.


I saw “back onto” because I recall when VMWare was spun off and was never able to find an entry point to buy shares. Then, I remember watching it do the 2007 plunge along with everything else.


But one Thanksgiving Friday I picked up those shares and eventually parted ways at about $45 plus a fair amount of option premiums.


Today VMWare, my beloved RIverbed Technology, of which about 70% of my shares are hedged, and another of my son’s favorites, albeit unrequited, CommVault got felled in the quake of The Oracle’s prediction. In fact, my son picked up some shares of VMWare this afternoon, hoping to ride it back to $90.


Not me.


Today wasn’t a good day for “The Cloud,” which has to also include Amazon, just as this hasn’t been a good year for oracles.


The world famous Oracle of Omaha, Warren Buffett has had a few mis-steps.


Bank of America comes to mind, but Buffett takes much larger steps and has a much broader time frame. I don’t think the Oracle of Redwood Shores shares the same perspective.


A loss isn’t a loss if it’s only on paper, so I doubt that Buffett is fretting too much. Even I know that paper doesn’t matter, especially if the printing presses are heating up.


Oh, actually another technology investment decision now comes to mind after checking through my archives. Seems that in my managed investment days, about 5 years ago, I owned some Oracle and racked up a 5% gain over two years, well underperforming the market during that time period.


Bleh.


And thent here was the decision to buy calls ahead of earnings almost years ago, just as I was getting started on my own.


Double bleh, but at least I learned something from that, which was that it takes an idiot to try and guess which way the market will react to earnings.


Especially when you know nothing about the stock. Although knowing retailing, movie rental and coffee, didn’t seem to shield me from the effects of purchases of Amazon, Netflix and Green Mountain Coffee Roasters, respectively, a few months ago.


Did I mention that those were bought right before earnings? But at least I had the call option sales to cushion the body nlows


So I guess I can put Oracle into the historical failure camp.


As far as oracles go, my hope would be that when giving guidance they could have foreseen the technology spending slowdown, but just as my own crystal ball is fuzzy, I suppose that even oracles have bad days.


The difference though is that my bad days don’t cause about $20 billion dollars of lost market capitalization.


My ability to see into the future is as good as anyone else’s, but on this one issue, I am by far in a position of superiority.


I can predict that I won’t be fooled into acting upon the thought that Oracle is now value priced.


Even though it may very well be, my Chevy Vega doesn’t let me take those kind of chances.


 



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