OxyMorons









Most days it’s relatively easy to get inspiration from some ridiculous event that inappropriately effects our lives, or more importantly, my life.


On days that the market has a slow, steady and sustained rise, it’s a little harder to get incensed about anything, I suppose, however, that on those days, I could outsource the blog to the kind of person that leaves the movie theater after having seen Bambi and complains about how inappropriate and psychologically damaging it was for their child to be exposed to Bambi’s mother’s death.


There’s always a black lining if you’re willing to look for it or create it.


But I wasn’t about to outsource anything, it’s not like this blog is paying the bills.


By the time the market came to its close, despite the quietude, I ended up having made another 11 trades, again most of them being call options sales. But when I looked back I realized that there was a unifying theme throughout the day.


Some things just don’t go together. Oxymoron


Everyone knows about the standard oxymorons, like jumbo shrimp and superette. Please don’t take the image to the left as giving insight into my political leanings. It’s just there to illustrate the point that 50.1% of the 2000 electorate believed to be true. Even more in 2004.


Go figure.


Just in case you don’t get it, the operative word is not “left”.


Some other things are just a matter of taste and aren’t necessarily obvious.


To this day my Sugar Momma is revulsed by the thought of the vegetable quiche I made during our “courtship. At the time I didn’t know that she wasn’t a big fan of mushrooms, but there were plenty of onions, peppers and cucumbers to offset the funghi.


At the time, cucumbers seemed like a good idea to me, but now, in hindsight, her explanations of how they just don’t belong make a lot of sense.


She, on the other hand has thought nothing of adding broccoli to Chicken paprikas, a venerable Hungarian dish. Trust me, no Hungarian uses broccoli for anything, not even broccoli.


Then news came that the European Central Bank had decided that it would accept Greek collateral for the loans necessary to rescue the nation’s economy.


That was the initial stimulus for the initial market climb on top of an already good opening. For the likes of Bechtel and other international builders, like the bin Laden family, the prospects of erecting giant silos all across the European zone to store all of that feta was welcome news, as such large projects had dried up.


Then came news that threw cold water on the plan, as certain silo owners demurred on storing both feta cheese and lamb, as that was a clear violation of the Kosher laws. Meat and dairy do not go together. 


What kind of an uncivilized animal drinks a tall cool glass of milk with a hamburger?


I’ll tell you what kind. The kind that would eat a cheeseburger.


But it didn’t end there.


There was more talk of Carl Icahn and his bid for Clorox. He now seemed to be bidding against himself to take control of the company. If anything, the last 25 years indicates that Carl Icahn doesn’tt belong in ownership of any publicly traded company.


Of course, there’s also Buy and Hold, although I do have some new found respect for the concept. Mostly because a well know proponent, Eddy Elfenbein of Crossing Wall Street, who in addition to having a great investment record, may be alternatively the funniest and most insightful financial Tweeter I’ve found.


As long as I’m the tangential subject of favorite Tweeters, for pure cynicism and brutally honest self-deprecation mixed with stock and market insights, I go to someone named “Dasan


Okay, back to topic at hand.


Then there are those things that shouldn’t go together, but really should.


Although I currently own neither of these, how appropriate and complete would a portfolio be if it had shares in Altria and Aetna? Talk about a natural hedge.


But what really caught my attention yesterday morning was listening to Senator Kent Conrad (D – North Dakota).


As a member of the “Gang of Six” which was recently rejoined by Senator Tom Coburn (R – Oklahoma). He was giving a rare optimistic report of potential bipartisan compromise on the deficit ceiling.


What struck me was a common theme. It seems that the only voices of reason in Washington D.C. come from lame ducks or retired elected officials. Conrad has let it be known that he’s done. Have you heard Allan Simpson recently? All of a sudden, his barbed wit is a tool for mocking both sides.


Amazing, once re-election is out of the picture, these guys actually think in terms of what’s right, not just what’s right for re-election.


For me, it just confirms that the most useless thing is a machine whose only function is to create copies of itself, with those copies also just having that singular skill. That’s precisely what nationally elected officials are, particularly members of the House of Representatives.


Seems that elected officials don’t belong in elective office.


I know how to get the broccoli out of paprikas, but I’m not sure how to tget the elected guy out of elective office.


Term limits? Coup d’etat?


Both so un-American.


Being an American, I did find the time to trade, since I really didn’t ponder these issues too long.


My faith in Riverbed Technologies would have been rewarded had I been quick enough. After being up to about $32.50, the shares turned on a dime and closed down another $0.75, so I didn’t get to sell options.


I did however buy back the Bank of America puts that were expiring today at a nice 3 day profit of 3%.


I had thought about selling July 29, 2011 $10 puts instead, but wouldn’t you know it,, the bid and ask prices weren’t going together. As Bank of America kept rising in price, the ask of the $10 out of the money put kept rising, while the bid, more appropriately kept falling. The spread was huge.


The market doesn’t always price to perfection, nor apply the mathematical relationships that should determine the premium price.


One Twitter follower, actually a favorite of mine, suggested that instead of buying stocks and selling calls, I should just sell puts, as the end result was the same and incurred less trading commissions


To my sense of thinking I discounted the commissions, since in blocks of 1000+ shares and 10+ options contracts per trade, the cost was less tha $0.02/share. Additionally, I could double dip and get dividends, as well.


His resposne was that the dividend is factored into the premium price


I agree, at least on a theoretical basis. But theory, common sense and application of theory don’t always go hand in hand.  It’s in the imperfection of the individual and the greed factor, that there are non-scripted opportunities.


Its own brand of oxymoronism.


Instead, I used the money to pick up shares of the ProShares VIX, which is really volatile and, therefore carries a nice options premium.


I also bought more of the ProShares Ultra Silver and sold those calls, as well.


The same with DuPont, Dow Chemical, Mosaic, Hasbro and Williams-Sonoma. Buy shares, then sell calls. Sometimes you buy them back and just sell them again.


Seems so natural doing things that do go together and living happily ever after in the forest.


 


 


 


 


 


 





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Blind Faith





So much of our lives are based on blind faith. Many years ago, someone told me that if we followed a purely rationale thought process, we would never make the key and truly important decisions in our lives. We would always find logical reasons to not follow through.


Despite what should have been a logical decision, our first child was conceived in his home. And you see, that worked out pretty well.


After trading hours on Tuesday word came out that RIverbed Technology’s earnings, despite record numbers, were disappointing. I watched it go down by about $9, but didn’t have the kind of severe gut wrenching reaction as others may have had.


The last time I owned it was about 2 months ago and subsequently lost it to assignment.


What else is new?


But as I mentioned in yesterday’s blog, RIverbed Technology has been one of my all time very favorite stocks, as it consistently has offered a 4-6% options premium for its near the money options strikes.


I’ve held and lost my shares over and over the past few years and never moaned about the loss when shares went higher, even beyond the option premium that I received. Knowing that I, like most people, tend not to sell their shares at the top, those “lost” profits would have been unrealized anyway.


I wanted to pick up shares again last month or the month before on the first day of trading for the new options cycle but as I recall, shares popped by $2 or so. It just wasn’t in the cards.There wasn’t too much reason to chase after it. I may have loved the shares. but I had some dignity.


As I waited for RIverbed to return to a more reasonable $34 range, it just kept going higher and higher.


Faith and ReasonBut I had faith it would return to the neighborhood in which we both felt comfortable.


Blind Faith, actually. The phrase itself suddenly seems repetitive.


I suppose that I could have checked the charts to reinforce the belief, but I didn’t have to. My faith was reinforced with memories and the knowledge that Newton got it right 400 years ago.


I suppose that I also had faith that the Laws of Physics are inviolable.


So the prospects of a bargain share price come the morning, I was ready to pounce on new shares. Despite not bothering to get too much detail about the earnings and guidance, I had faith that Riverbed would lead me back again to The Promised Land.


For starters, I also had faith that I would still be of sound mind and body, come the morning. Based upon my current status, that would be an increase of one.


What I had in faith though,  I lacked in funds.


I eagerly awaited the opening bell, but there was just one additional problem.


I had to take my visiting niece from California to the airport for the next leg of her trip. She was off to Florida and was excited about going to Disney World, despite the fact that she lives within 30 minutes of Disney Land.


It’s like getting excited about seeing a Dominos Pizza place when you cross the border into West Virginia.


Anyway, we were on the road at the opening bell.


I took my Droid phone, rationalized that I wasn’t really texting while driving and instead attempted to trade on the E*Trade Droid platform.


To get the funds, I broke cardinal rules in addition to driving laws,  I suppose. I sold my shares of McKesson that I had only recently purchased. The dividend that I captured offset the capital loss, but otherwise it was a wasted two weeks of holding.


But I couldn’t keep my eyes on the road and get my too fat fingers to negotiate the keyboard well enough to put in a limit order, so I just succumbed to my need to trade and placed a market order. Not only did I take a loss, but there went the other cardinal rule.


Market order. Ugh!


But I had faith that it would work out well, and it did. I actually sold shares at the high for the day. How that happened I have no idea, but the shares may have gone to the same guy who put in a market order for Zillow upon its IPO and paid $60, shortly before the $20 issue price roared to $43.


Or depending on your perspective, plunged to $43.


Still, it didn’t turn out badly for me.


Then I did the same with my Riverbed purchase, although I did so from another lane, not really having the memory of moving over.


But I had faith that I wouldn’t drive into the guard rail.


I told my niece not to do as I do.


I wasn’t referring to the texting or trading while driving, though.


I was referring to placing market orders. Really, faith can only take you so far.


By the time we got to the airport, I placed an additional Buy order for Riverbed, this time at a limit price and the resulting average price of $32.02 made me happy.


I like my purchase prices to be very close to strike prices for reasons that seem obvious to me.


Once she was safely through security I got my quick market summary and saw that Textron was up big. I mentioned Textron in Tuesday’s blog as well. Together with Riverbed, Textron and a few others have been great to me with the options premiums spun off.


This time I decided to have faith that when I returned home 30 minutes later, the price would still be there for a good options sale.


I did sell options on a piece of my Textron holdings the day before, which made up about 7% of my combined portfolios. I often do that if I have different priced lots and in the case of Textron, I did, as I averaged down my cost last month.


Faith was rewarded, because Textron went even higher and I changed my plans, instead selling the August $25 options, rather than the $24’s.


Even better, my faith that Bank America would cling to its $10 level seemed to have been rewarded. I sold $10 in the money puts expiring this Friday. The strange thing is that I often sweat the small things way out of proportion. I get more nervous thinking about a quarter in a slot machine than the prospects of looking at a single day’s paper loss of $100,000.


Both have happened. The difference being that I never was able to recover the quarter.


If my Bank of America puts were assigned, they would represent just a very small fraction of the overall portfolio, yet I found myself checking Bank of America’s share price even more than that of Riverhead, which now represented about 3% of my assets.


Clearly, however, I didn’t have that much faith in RIverbed, since my typical holding is about 7%. I’m not trying to draw any parallels to Moses here, but his faith was sometimes lukewarm and look what happened to him.


Could you imagine being left to dig your own grave in suburban Egypt? Coincidentally, I have a plot picked out adjacent to a Dominos in West Virginia.


It’s my sincere hope that my lack of complete faith will see a triumphant rise in shares of Riverbed, making me wish that I had full and unquestioning faith in the purchase of its shares.


That’ll teach me.


Here’s to a vengeful God.


 









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Personal Hygiene








I’m a big believer in personal hygiene.


I know that it takes some courage to come right out and say that, but it needed to be said.


ShowerUnfortunately, sometimes time seems to fly and it’s only when I see the flies circling about me do I realize what’s been neglected.


In the winter, when no flies are to be had, I usually get the message when Laszlo refuses to lick me.


If you’re not a regular reader of this blog, Laszlo is my personal assistant.


Most mornings I’m usually up and esconced in my La-Z-Boy sometime between 6 and 7 AM after having checked into FourSquare. Coffee made, sipping slowly and studying the pre-open mood and scouring the New York Times.


Of course, given my professional education and training, I do brush my teeth before heading to my “office”. I felt that needed to be said, as well.


Both yesterday and today it was a simple matter to break away from trading in order to exercise personal hygiene.


I love big moves, up or down, especially once they show signs of stability. That’s when it’s safe to move away from the monitor and TV screen.


Yesterday, however, I could have taken a very extended shower and perhaps had a kidney removed as well, as CNBC coverage of the Murdoch’s appearance before the British Parliament committee hearing just went on for an insufferable amount of time.


But CNBC wasn’t alone. Bloomberg, MSNBC FOX News, FOX Biz, CNN, Home Shopping Network, Comedy Central, The Sci-Fi Channel and even a C-SPAN channel all devoted themselves to the Britsh equivalent of gavel to gavel coverage.


Well, at least Nancy Grace went on unencumbered. For a while, I thought maybe one of the Murdochs had perhaps vanished and she was trying to find the truth. As it turned out,  just a pie went missing off the HLN sill.


After a major flurry of trades in the first 30 minutes of the morning’s session, I was able to sell calls on lots of my positions as the market opened high and just went even higher.


At that point and then faced when the droning sound of various United Kingdom accents, it was safe to shower.


Back in the days that I travelled quite a bit, I always thought that I did my best thinking while en-route.When driving, I’d often lose track of where I was. When flying, I’d forget to disembark if there some relly good ideas percolating.


These days I rarely travel, so instead I try to get my best thinking in while in the shower.


For some reason I was reminded of a friend from long ago who used to refer to his morning routine as “Shit, shower, shampoo and shave.” I did try convincing him that the “it’s all the same drain, dude” theory didn’t really apply, but to no avail, I believe.


For some reason, I continue to believe that there was one more act in that group and for the life of me, I just can’t recall. That has made me think that I’ve been omitting some inportant act of personal hygiene for the past 30 years.


Did I mention that I have no friends?


What I didn’t expect after returning to my perch was how dirty I would feel listening to the Murdochs try and  relieve themselves of responsibility or advanced knowledge of the cellphone hacking charges


When Rupert Murdoch ascribed responsibility to his subordinates or their subordinates, I was fully expecting him to continue down the line until he finally arrived at the people whose cell phone accounts had been hacked. It doesn’t take too much of a stretch to blame them for not using something other than the default password.


I mean, after all, for how many centuries did the plea that the rape victim was dressed seductively help to exonerate the accused?


How I would have love to have heard the word “mis-remembered”, but I guess that’s a  uniquely steroid induced American word.


PiedWhat really amazed me was the initial reaction of the huckster that tried to “pie” the elder Murdoch. For the first few moments neither the small portion of the Twittersphere that I follow, nor the media seemed to understand exactly what a “foam filled plate” signified.


In fact, as late as 4:15 PM, Maria Bartiromo still referred to it in that manner.


Maria, darling. He was “pied”.


The pie in the face used to be a universally recognized comedy staple and statement of political beliefs. In the early part of this century it was the symbol of the Teddy Roosevelt’s Bull Moose Party, except they were real whipped cream pies and Roosevelt devoured them..


Apparently, with our lives taken over by electronics and social media, where human contact is ever diminishing, the old pie in the face has lost its rightfful place in our coollective experience.


With wife Wendi coming to Murdoch’s defense, the hearings went on after a brief delay, with Murdoch only needing to shed his suit jacket.


Although most every native born Brit is expected to carry a Shepard’s Pie at all times, it’s hard to believe how a shaving cream pie could have escaped detection by security personnel in Parliament.


So of course after listening to all of the tripe, it was time for yet another shower.


What was really fascinating was that after listening to Murdoch the flies came back, but this time they circled counter-clockwise.


When I came back, I was rewarded for the decision earlier in the day to purchase more shares of the ProShares Ultrashort Silver ETF’s.


Apparently, after President Obama’s statement that the “Gang of Six” seemed to be coming to some agreement, precious metals decided to reverse course and give up those last few days worth of gains.


I also purchased more shares of Lowe’s and just as quickly sold those calls, in addition to selling calls on the ETF’s.


After the close, all eyes were on Apple’s earnings report. As usual, they blew away their perennially under-reported guidance numbers and eclipsed the $400 level for a short time.


My eyes though were on Riverbed Technolgy, one of my favorites, that I last held 2 months ago. I have made more money selling calls on Riverbed than on any stock, other than Sallie Mae, Goldman Sachs, Textron, Rio Tinto and JP Morgan.


Okay, there may have been a few others, as well, but I got tired of checking it out.


Regardless, over the past 4 years or so, Riverbed Technology has spun off about $25,000 in premiums.


Given that it is earnings season, it was now their turn. Despite a 72% surge in earnings and record margins, Riverbed lost 25% in the after hours because it “missed on top line growth analyst expectations.”


I have no idea what that even means, but as  “Chico Escuela” used to say “Ribberbed been berry berry good to me”, so after it’s stink wears off, I plan to purchase more shares with proceeds from any assigned weekly contracts.


Then, we can get rid of our stink together.


If it means getting good companies at good prices, I will exercise personal hygiene on a predictable and regular basis. But its funny how it takes a stinker of a price drop to make something attractive again.


Maybe I need to rethink my own personal hygiene schedule and take a lead from Riverbed.


Noseclips anyone?


 


 


 









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Mixed Emotions





Listening to Treasury Secretary Tim Geithner during his interview yesterday left me wondering what kind of emotions to have.


Perhaps in a similar vein, my dog Laszlo may be going through an identical dilemma, but he’s probably dealing with it in a more mature fashion, because in his case, there was no money involved.


Nathan's Hot DogsOnly casings.


While Sugar Momma was in New York City this weekend with our visiting California niece, I threw all cholesterol caution to the wind and purchased some Nathan’s Hot Dogs and their frozen french fry counterpart from the supermarket. Without a doubt, had I succumbed to a cholesterol chunk lodging in a coronary artery, that market would be held as an accomplice to my death.


Casey Anthony made not have been so clear cut, but no jury would let Harris Teeter get away with the role they played.


Amazingly, the fries tasted Coney Island authentic, although I don’t know if that could also be said had I baked them. Listen, I said “ALL” caution to the wind, although I did use canola oil in the spirit of compromise.


Unfortunately, that spirit can’t seem to migrate 20 miles or so down the road as we approach that August 2nd debt ceiling deadline.


I probably should have invited Eric Cenator over for dinner. I would have also broken out a new box of wine for the occasion.


But I wasn’t the only one reveling this weekend.


Laszlo, our long haired miniature dachshund got to enjoy cannibalism as he had his first ever wiener. That’s right. The wiener dog ate a wiener.


Usually a picky eater, he went wild, devouring what seemed to be his body weight in hot dogs on two successive nights.


He clearly enjoyed his repast, but his digestive system didn’t and it looks as if we may have to burn some carpets.


My guess is that if faced with the hot dog temptation again, Laszlo would choose to forget the distress and remember the joy. I don’t think he would spend too much time dealing with the emotional extremes or the consequences of his actions.


It’s like the time I had unprotected sex with the Angolan prostitute after we finished passing the needle.


So when Tim Geithner very clearly stated that the aims of the US banks were counter to the well being of our economic system at first I was ecstatic to hear that level of forthright thought. No one could accuse him of class warfare or pitting Main Street versus Wall Street on this one. After all, he was Chairman of the New York Federal Reserve. It’s not like he didn’t know what banks were all about.


I’m not one of those people who believes that bankers are evil. I’ve been very happy to own JP Morgan, Goldman Sachs and others. Alright, not so happy with Goldman at the moment.


I don’t even think credit card issuers are evil, also having been very happy to own Visa and MasterCard.


I have also owned Altria and Philip Morris, even though I think lung cancer is evil.


But you do have to believe that there were some excesses that got us to the abyss and you also have to believe that despite the infusion of liquidity through TARP, QE1 and QE2, the mainstream financial systems may not have done very much to help us climb out of that crater, although with just 6,000 more ThankYou points I can get a door placed on our guest bathroom.


I was also pleased to see that the market was opening down, perhaps in reaction to the Secretary’s opinions. Happy, because I did have to replenish about 35% my portfolio after assignments and it appeared that there were some good prices to be had.


In fact, I was able to repurchase shares of Sallie Mae, Williams Sonoma, ProShares Mid-Cap 400, Rio Tinto and Transocean at prices lower than I had to release them to assignment


I also thought that I got good prices on my purchases of British Petroleum, Mosaic, JP Morgan, Hasbro, ProShares Ultra Silver, ProShares SPDR S&P 500.


But then it seem that the market started to do what Laszlo did. It started to try and digest Geithner’s words.


That process wasn’t very pretty, as the Dow slumped another 80 points from where I had made the majority of my purchases.


I didn’t see what the floor of the NYSE looked like, but I doubt that it is carpeted.


Good thing.


Normally, I like to sell my call options soon after my share purchase, although I try to wait for a down pattern to shift gears before making those sales. That’s probably greed coming into the equation, but I prefer to think of it as optimism.


That wasn’t going to be the case yesterday. Although by the close the market had cut its loss by almost 50% from the days’ low I still didn’t find the opportunity to cash in, possibly due to the fact that I also fell to sleep during the extended period of boredom that gripped the market at about noon.


As I went to the New York Times to see their take on the day, they ascribed the market’s fall to the European debt crisis. Not a single mention of Geithner.


The lack of credit for his market moving words was consistent with the theme earlier in the day on CNBC when Geithner’s influence on Congressional members relating to the debt ceiling issue was being downplayed.


All while lauding his skills and deft.


That’s probably one way of dealing with mixed emotions. On the one hand he’s situationally impotent to effect change of opinion, but on the other hand, he’s the best of all impotent Treasury Secretaries.


I hope that he’s not overly distressed.


I do know one thing that will make him feel better.


A Nathan’s Hot Dog.


At least for a while, until the next crisis hits.


 









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What Buddy Holly Teaches Us





 


Special thanks to Josh Brown (Reformed Broker) for reminding us that February 3rd was the anniversary of when the music died.


 


Sometimes I think I’m like that kid in “The Sixth Sense”.


“I see connections”. That’s not quite as spooky as seeing dead people, but just the same, some of the connections can be pretty tenuous and call reason into question.


Buddy Holly, not me in High School


In this case, though, the connection happens to be to a dead person who now appears very much alive, as Natalie King Cole has released paternal DNA testing indicating that Buddy Holly was her biological father and will soon be releasing a music video duet of “Oh Boy”.


But what in the world does Buddy Holly have to do with stocks, investing or the markets? So little, that if I didn’t bang out this blog right now, the moment the idea popped into my head, there is no reasonable way that I would remember the concept or connection 3 minutes from now.


It all started with a simple Tweet from Josh Brown, author of The Reformed Broker website.


I have no connection with him, in fact, I think he may have even blocked me from posting to his Twitter account, due to our onetime irreconciliable differences over Darfur.


But he pointed out a great Buddy Holly tribute album with lots of very impressive contributing artists. How could you not want a Buddy Holly song covered by Cee Lo Green?


Being who I am, I scanned the list of artists with one filter in mind, but the search turned up nothing. Maybe he was still with the rest of us sitting a very extending Shiva for Clarence Clemons.


That prompted me to dust off a couple of 35 year old concert venue renditions of Buddy Holly songs by Bruce Springsteen and then caused me to allegedely post links to them on this site.


I say “allegedly” because it may be against the law to have done something like that. Despite great admiration for both Springsteen and Holly, an equally prestigeous named law firm might pursue me for something.


Allegedly. Good luck finding them.


Anyway, Buddy Holly was truly an amazing guy. A walking and talking cultural contra-indication, he was a Texas Boy in the 50’s, playing to racially mixed audiences and performing with musicians who couldn’t get in the front door in many parts of the country. Interestingly, The Big Bopper also couldn’t get in because of his girth.


The fact that his wife’s name and that of my Sugar Momma are the same played no role in the strength of the connection.


Another of my favorites, Don McLean paid Buddy Holly homage, at the expense of Elvis. Entirely coincidentally, the blog “The First Time” from just a few days ago featured Roberta Flack, whose own song “Killing Him Softly” was a tribute to Don McLean.


As Kurt Vonnegut used to write, “And so it goes”.


Had I not seen Don McLean in concert the night before the SAT’s, maybe I would have had three Harvard degrees.That undergraduate degree would have taught me to never begin sentences with either the word “But” or “And”.


No regrets, though, as that is a recurring investing theme of mine.


I say that after having just lost Google to assignment, far below its Friday close. And then there was Visa and before that Green Mountain Coffee Roasters.


Okay, maybe some small regrets. Unfortunately, my vanishing memory banks can’t seem to erase those memories.


Buddy Holly showed that there were lots of different ways to break out of the stereotypical mold and create a new far-sighted and visionary path.


He also helped re-invent an entire musical genre, much like I will need to recreate my portfolio today, as nearly 40% has to be replaced due to assignment.


I didn’t need a plane crash to realize that there were alternatives to buy and hold, although, sometime this week, I will pay some tribute to a Buy and Hold guy (if I can remember).


It did, however, take the untimely death of my financial advisor, who when we first started our relationship, was still known as a “stock broker”. I discuss him at length in the Option to Profit book, which I obviously plug at every opportunity.


Today, I will be figuring out how to redeploy about 40% of my portfolio, following assignments of Freeport McMoran, Google, Halliburton, Sallie Mae, Rio Tinto, Transocean and maybe a few others.


I will likely buy back Sallie Mae, Transocean and Rio Tinto and follow through with the recommendations that I Tweeted on Friday afternoon regarding Sunoco and Time Warner, in addition to whatever else remains in or is added to the portfolio.


Of course, I’ll look to sell call options, always being satisfied in the 2-4% monthly gain per stock. Dividends, small capital gains and options premiums, whatever it takes to scratch out a respectable living.


In a way, it’s like the small venues that Buddy Holly played, because in his barely year of fame, he hadn’t yet gotten to the big times, which for Rock and Roll, hadn’t really come of age yet anyway.


Or as I like to look at opportunity costs, “You didn’t miss them anyway”.


He was obviously a risk taker and I am slowly getting into that frame of mind, at a time when the financial guys are saying that those of my age should “slow down”.


Anyway, I just read a short article that seemed to say that approaching retirement only 25% of holdings should be in equities and the rest in annuities.


Can you say “WTF” on the internet?


Would Buddy Holly put his money into annuities? Elvis maybe. The Jester? Never.


Screw annuities. Just to slow down that aging process and as a thumb in the eye of those thinking that I should be slowing down, I’ve started selling more and more put contracts. Even though I’ve done that for a few years now, as part of my less than 5% speculative piece, it was always with very low cost issues, like Citibank, Sirius and YRCW. Now I’m branching out, slowly working may way up the price chain with Harbin Energy, Yahoo and Spreadtrum Communications recently. Maybe Google next?


I don’t think so. I may see connections, but I’m not a lunatic.


But it is fun. It’s not what I’m supposed to be doing at this age, but it is all a frame of mind. And besides, that frame of mind is both figurative and literal. I love wearing the big glasses and checkered jacket. Probably the only person who will see me in my lucky trading garb will be Sugar Momma and the UPS guy.


Sugar Momma has been looking askance at me lately anyway as the last 3 or 4 texts I’ve sent her have mistakenly included the word “tit”, instead of “it”. Proof reading was never one of my strong suits, but coming on the heels of the blog entry, “How my WIfe’s Bra Saved us Money“, now she’s not so certain that those were simple auto-spell mistakes.


Although the UPS guy has learned not to ask me questions, I’m sure he’ll be able to hear the Buddy Holly tunes that will be streaming today and he’ll probably say something to the effect of “Man that’s so loud, I can barely even hear your annoying wiener dog barking”.


That was the whole point.


Today, as we start another options cycle, I’ll be replaying “That’ll be the day the Bear Market Died” all day long and thinking of all the connections that are so obviously there.


Don’t you see them?


 


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Being the Best





Szelhamos used to have a saying whenever he assessed a project that he had undertaken:


“It’s good enough” was the typical comment as he surveyed the fruits of his labor.


Of course, if you were paying for those fruits you probably wouldn’t want to hear that sort of statement.


He had a friend who was a house painter who used to tell the story of when he told his workmen in Hungarian that they were just going to do a quick sloppy job on one particular project, when the owner, apparently understanding Hungarian promptly showed the work crew the front door.


I remember when Szelhamos and I were trying to finish a small storage space in the basement. For some reason that I can’t recall, we didn’t include that in the rest of the professionally contracted basement project, which was a significant undertaking. That basement was actually larger than the entirety of our two story home in the Westchester suburb of New York City.


Of course, our end result was good enough. I doubt that it will be good enough for the next owners of this home.


Today I started thinking about just how important it actually is to be the very best in your area of expertise or business. You hear the phrase “best of breed” so often as the one one company in a sector that merits your investment consideration.


When news came out late yesterday afternoon that Borders, arguably the best in the business of book peddling was now likely to liquidate, it occured to me that being the best in a dying business offers no solace.


The fact that both Borders and Blockbuster used the same gimmick of a free Buggy Whip with every purchase or rental probably should have sent that message earlier.


I’m just not certain how Merril Lynch is going to work those into a meaningful promotion for its dying business.


G.E.D.In a way, this thought is a little bit in keeping with yesterday’s blog “Remember Report Cards”.


What I didn’t mention in that blog article was something that I learned from my oldest son, who at one point of his early college career had a GPA that if multiplied by 100 would give you an  IQ that might qualify you to wear a protective helmet 24/7.


I’ll give you a moment to digest that one.


What he taught me was that unless you were planning on going to graduate or professional school, grades really didn’t matter.


I’ll never know how true that really is, as he completely turned it around in the latter half of his college years and now only has to wear the helmet during waking and sleeping hours.


As a side note, he has done quite well for himself in his first few post-college years. Working hard, having fun, making money and joining the investor class.


So good enough?


As I look at today’s upcoming  end to the July options cycle, on the heels of Google’s blow out earnings numbers yesterday, I’ll be missing out on what may be a $50 climb in Google, as my call options will see shares taken away from me at $520.


Should I have tried to be the very best and get the most out of that and all investments?


Uh duh. Of course.


There’s no question that there’s an audience for a Home Run Hitting Contest, but there’s not much audience for a Scratch Singles Show.


If you owned unhedged shares of Google, you just hit a home run.


Otherwise, if you’re like me, the third base coach just tackled you as you rounded first base.


But I don’t have much in the way of regrets.


Tomorrow will end and once again I’ll do the final “is it good enough” calculation.


That’s the angst filled calculation that I do to see what my bottom line would have been had I not sold call options on my holdings.


I’m not sure why it continues to be angst filled, especially since most every month I come oit ahead. Not only do I come out ahead, but the money represents realized profits, as opposed to theoretical profits that assume that I would have been smart enough to take profits on the stocks, as opposed to the typical “let it ride” mentality of most investors.


Listen, I know who I am. Otherwise, I would have sold Google back in 2007 when it had reached $700.


One of the nice things about selling call options is that it creates a discipline of selling and forcing yourself to take profits.


It’s akin to admitting that lesser profits are “good enough”.


And they really are, especially if those lesser profits come on a  really frequent basis.


The New York Mets used to have a powerful home run hitter, Dave Kingman. Back in the 70’s or 80’s, he towered above other players. When he hit a home run it was really a marvel, but really accounted for nothing. One dubious record Kingman had, among others, was his home runs to runs scored ratio.


Worst ratio ever!


In fact, Kingman, purely for purpose of exaggeration, was possibly the best homerun hitter of the era and had some of the longest clouts ever recorded, ultimately became the first player ever with more than 400 home runs to fall off the Hall of Fame ballot on after his very first year of eligibility.


Given those highlights, I’d rather take it down a notch or two and be Lee Mazzzilli. Broad repertoire, nothing terribly flashy and ended up with a World Series ring.


Kingman ended dressing a rat up and placing it into a shoebox he gave to a women reporter. He was trying to send some kind of a message, but unfortunately severed horse heads were out of season.


I’m resigned to the fact that I’ll never be the best. But I’ve also come to understand that “good enough” can be good enough if you can just keep doing it year after year.


Mediocrity isn’t really bad as long as it’s consistent. Hitting a home run is great, but not at the cost of striking out in a 3 to 1 ratio. Just look at the high flier funds and see where they stand in the subsequent years


Remember when Fidelity Magellen was the very best? How about when it was the very worst? I’m not much of a mutual fund person, but over the long term, it was the Equity Incomes funds of the world that lived to see another day.


When today is over, I’ll look at all of my shares that are assigned and do the calulation. In Google’s case I’ll bid them farewell until the next time that we meet. Probably in the neighborhood of $510


As it will turn out I purchased this current lot of shares on June 13 at $507.39. I will give it up for adoption to a new owner for just $520.  I also received another $11.01 in options premiums. So for the one month of ownership or rental of those shares, my return was 5%


I’m really happy with that.


It’s good enough.


 


 









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Remember Report Cards?









When Szelhamos and my mother were still very new to this country, they really didn’t speak much English.


That proved to be of great advantage when I was in the second grade.


Back then, I spent a lot of time in the corner, as I continually acted out a my infantile way of demonstrating my crush on Miss Spillinger, the teacher. The fact that Miss Spillinger would probably be about 70 years old now would make her a cougar by most anyone’s operating definition.


Report CardsWhen I received my report card, I was not eagerly awaiting the parental unit’s disappointment over my “Conduct” grade . I had received a “U” for “Unsatisfactory”. Even at age 7 or 8 I knew that there would be some kind of price to be paid.


What I hadn’t counted on was Szelhamos relapsing to German or Yiddish for his interpretation of the “U”. To he and my mother. it meant “Uber”, the very highest of grades. I don’t really know what they thought the only other grade “S” for “satisfactory” stood for. They probably thought that was Hungarian for “szar”, which by all reports would have been consistent with Szelhamos’ school performance.


In cae you’re not fluent in Hungarian, just go to Google Translate.


But they were both quite proud. Clearly, as parents that had done everything right.


Whew, spared whatever the consequences would have been. All I had to do was to promise that I would work harder to get “Ubers” in all of the other subjects and not “Szars”


All was forgotten by the third grade as we moved on to a different grading stysem, the old A through F. with  A and E alternatively used as the highest grades. And lets not forget all of those in-between grades that pluses and minuses were all about.


Through high school our report cards were numerically graded in units of ones. Very precise. Every exam had consequence, as every exam would change your final grade.


For my own children, by the time they reached high school, there was a maddening grading system. Although it was still an abbreviated A through E, with E now replacing F as a failing grade, but all performance motivation was extinguished. That was because the system had no contingency for plus or minus grades. A student with a “B” knew that no matter how well he would have done on the final exam it would have no impact on the final grade. Whether you had an 80 or an 89 it didn’t matter. It was all the same.


Students are very good at gaming the system and there was really no consequence for poor performance or inconsistent performance, as long as you stayed within a broad grade range.


Forget about the concept of doing well just for the sake of knowing that you did well.


Personal Pride? You may as well use a Google Translate tool to figure out what that means as well. You could have done szar on an exam and it would not have mattered one bit.


For me as a parent, report cards became worthless quarterly pieces of paper, knowing full well that the system promoted under-achievement. If that’s too harsh, then let’s just say that the system didn’t promote optimizing efforts.


In hindsight, I give my kids credit, though, for not wasting their time on an equally worthless system.


I often used to think that teachers should have some kind of report card, but I know how subjective those grades might be, especially if parents had a say in the process. Although there must be some kind of evaluation system, the consumer student or family is not privy to that information, even if the teacher has been charged in some kind of sex crime.


But at least the nice thing about the educational system was that most of the time your exposure to a teacher was a once in a lifetime experience. Unless that exposure was part of a sex crime, in which case either the video or the nightmares could make those images recurrent.


I never had Miss Spillinger, or another like her again. That probably turned out to be a good thing. I was able to turn my attention toward academic achievement as opposed to lusting for an academic.


If she were around today, I would probably worship the denture adhesive that she would now be sticking onto her forehead.


But those days are over. Even though my youngest son still has two more years of college to go, they are really over.


Back in the days when I actually worked for a living I would have to do quarterly and annual evaluations on my professional and non-professional staff. Sometimes the criteria were prescribed for me, while other times I formulated the performance criteria to suit the individual’s strengths and job requirements.


People certainly had incentive to do well because bonuses were at stake.


Nice incentive.


In a world where bonuses are most often much more meaningful than actual salary, I often wonder what kind of real report card is used on Wall Street. I’m certain that its entirely related to how much income is bought in, with perhaps some inverse consideration being given for the number of current SEC or criminal investigations. But no doubt, those report cards are internal documents and not shared with the investing public.


Afterall, if public servants don’t have their report cards disclosed, why should employees of publicly traded companies?


A few years ago, Joe Kernen of CNBC did the unthinkable. He called an “expert” to task, when that well known individual, who has since passed away, said something that was clearly not true and in complete contrast to his previous positions prior to the financial meltdown. No one likes a guy who tells you “I told you so”, when in fact he was part of the cheering chorus. It’s one thing to be a  bear and have your followers miss the boat. It’s quite another to be a raging bull and then see your followers fall off the cliff.


The difference is that the bear followers live to see another day. But then again, so does the rampaging bull advisor. Too bad his followers may not get that luxury. Did you ever notice that cult leaders tend not to take the Kool-Aid?


Kernen threatened to bring out the videotape.


Indignant is one way of describing the response and the atmosphere remained tense.No one likes to be graded on performance at any stage of life, especially if you know that you’ve not even qualified for a “Gentleman’s C”.


I blame Kernen for the gentleman’s subsequent death.


Obviously, any kind of financial performance report card is fraught with problems. The mutual fund industry has been great at portraying their performance in the best light by slicing and dicing the numbers and reporting periods in question.


Just look at all of the controversy surrounding Jim Cramer’s performance as a public tout. The numbers generated by “objective” observers are all over the place.


As I sit and listen to analysts and experts all day long it is equally obvious that no one really keeps track of all of the statements, recommendations and pronouncements. Given that these guys are always looking for a way to distinguish themselves from the pack, it should be relatively easy in these days of computers and data collection to actually track someone.


The way to really distinguish yourself is to be lucky with at leat one big call, be attractive and personable. Then you make bold statements while counting on  memory self-destruct processes to kick in.


Of course sending a buy signal is only one part of the equation. The next part, that we rarely get released for public consumption is when to sell. No one wants to publicly come out and say “sell” or more genteely say “take profits”.


There are some brave souls who will say as much, but that comes with personal peril.


As I watch yet another TV sequence with Dennis Gartman of commodities fame, I wonder what his real and current batting average is right now. based on his reception on various shows and the frequency with which he appears, you would think that he was “Uber”.


Amazingly, it always seems as if the talking heads always sell just before the unexpected plunge and always buy right before the climb.


That would be 100%, at least of the acknowledged and unaudited trades.


I do watch CNBC’s “Fast Money” most nights and analysts are marched through all of the time. I know that as people we tend to be biased toward attractive and tall people. That’s borne out by study after study.


When they parade out the technician with the patrician name on casual Fridays, how can you not immediately believe that he was ordained to be infallible?


Especially if a gnome like ogre comes to a different conclusion looking at the same chart?


Even if the guy with three names turned the chart upside down and said precisely the same thing you would believe him, while rolling your eyes if the Kucinich like analyst did the same thing.


Of course, the Kucinich-like analyst never would have made it onto TV, although there is one incredibly ugly guy who appears on CNBC. Given his outward appearance, I’d say that he was probably very, very good at what he does, unless he’s sleeping with the producer.


These are the things that markets are made of, but these are a few of my least favorite things.


For all I know, that ogre may speak the Gospel, but no one calls anyone to task.


Today, with the options cycle coming to an end this Friday, I sold near the money call options in Williams Sonoma, one of my perennial favorites, as well as in Spreadtrum Communications.


A also bought more shares of the ProShares Ultra Silver which was down big today, as silver and gold prices soared again. Although I initially thought that I would hold onto those shares as a speculative play, I eventually sold July call options on those, as well.


Why am I telling you this?


Just as I did last week, when I sold some last minute call options hoping to scrounge out a few pennies, a last minute rally in the markets got my shares assigned. My ultimate trade was pennies for dollars and I was on the short end.


There’s no obligation to tell you, since I’m not an advisor, nor do I sell my expertise in real time.


But report cards are important. When it comes to protecting my money, I don’t mind looking at an ogre. At least with an ogre, it’s all out there for everyone to see, warts and all.


The late Mark Haines would very often question  guests with a cynical tone.With the new iteration of Squawk Box and Squawk on the Street, the remaining members of the trio of the last decade, Joe Kernen and David Faber are back together, albeit in picture frames.


It would be a great tribute if they returned to those days of holding analysts and experts to the fire. It’s time to sharpen up those pencils and let the grades fall where they may.


 


 


 





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Crisis du Jour





 


KidsEvery time my kids, niece and nephew get together at our house, I have a deeply rooted need to snap a picture.


Always in the same location, always the same pose. My nephew and niece have learned how to position themselves so as to make it difficult for me to PhotoShop them out of the picture.


Seriously, why would I want to look at them everyday?


But they’re very bright and have long ago figured me out. They know that I’m not likely to do it if it takes too much energy, so they choose their positions carefully. They no longer sit next to one another at the ends. As a result, my PhotoShop skills have really waned, whereas had I had the motivation I could have actually expanded those skills significantly.


One of their favorite sayings, always following some lack of common sense action of mine is “Uncle George, you went to Harvard?”


Jokes on them. I’m not really their uncle.


Although the dogs come and go, the kids stay the same, other than the fact that they’re not kids anymore, with the youngest soon to leave her teenage years behind. Sort of like an option’s expiration, only with a much better future.


What made me very happy yesterday, in adddition to the fact that it was the best picture ever in the series and only required a single take, was that my niece requested the photo opportunity. I didn’t have to beg, nor did I need to cajole and I was able to stop payment on the checks.


WIn – win, especially since my bank doesn’t assess me a stop payment fee.


It’s funny how, as you get older, you find yourself spouting the same aphorisms that your parents regaled you with when you were too young to appreciate any one else’s experience. In this case it’s how quickly time passes by.


Someday, I’ll probably assemble the shots taken over the years just to depress myself about the passage of time, but that would take motivation and effort, both in short supply. Instead, I’ll just stare at the gray hairs lining the floor after haircuts.


As quickly as those years seem to have gone, some other things tranpsire so painfully slowly.


Take August, for example. Although nearly each and everyday has been a rollercoaster ride, the kind that I never tire of, as long as the ups and downs are in equal measure, it has just crawled along.


Although the month was filled with happy and sad moments, a graduation and a funeral (I probably dont need to add, “respectively” here), the month still dragged entirely because it happened to be one of those 5 week options cycles.


Man I hate those.


I don’t mind the over-emphasis on the market’s down movements, but what I do mind is that extra week. I mind that even more than the grocery store “special” offering an extra 20% product  in the shampoo bottle, but having to pay 30% more.


Although we have just that one final week to go, I wish it would have ended already. Not to ease the pain, because that really hasn’t been too bad, but to get my hands on more options premiums. I can’t wait for the August contracts to expire. That’s still true even though since this past August still has a chance to be the best options premium month I’ve ever had.


Isn’t volatility wonderful?


With an additional week to sell some options, I’m within reach of my personal monthly best, without worry that an asterisk will need to be placed in my spreedsheet. Having shrivelled genitalia is a small price to pay for all of that income and since I use only generic steriods, my expenses are low.


It all goes to the bottom line.


Once the weekly contracts became more common, I really gravitated to them, now looking increasingly for those opportunities. Unfortunately, some of my favorite stocks, although highly liquid, such as Dow Chemical and DuPont, don’t yet have weekly options, whereas “drek” like Harbin Energy does.


So my trading still comes at a flurry on the first Monday and Tuesday of each cycle and then markedly slows down, other than for the few weeklies. Shares like Freeport McMoran, JP Morgan, Goldman Sachs and others keep the income rolling in through the month, but it’s still heavily concentrated to the cycle’s beginning,


On Monday, I’ll need to replace Caterpillar and Freeport McMoran. At the moment, I’m leaning toward Deere, Chesapeake Energy, Rio Tinto and maybe even Microsoft, which goes ex-dividend on Tuesday. If I’m able to get any of those at just the right prices, meaning right near a strike price, the near the money or in the money options premiums will take the month to new highs.


As I type away, the early reports are of positive opens in Australia and Singapore, but that doesn’t translate very well here, unless there’s something cataclysmic happening. Since most of my remaining August options are still out of the money I’d like to see a nice higher opening, even if it means paying a higher price for the items on my wish list.


As the September cycle approaches, I’m carefully looking at the more favorable premiums as the volatility has risen and wondering whether it’s time to adopt an earlier strategy.


Back during the market bottom in 2008 and 2009, I was actually selling out of the money calls, hoping to capture greater stock capital gains. I could do that since the options premiums, even for the out of the money positions were really very good, owing to that volatility. That strategy was right for the times, but was replaced by an in the money strategy as the market started on its sustained upward climb in 2009.


Given the options, and by that I mean choices, I think that I would rather not go back in time. Even though the grey hairs and the aging kids are making me increasingly forlorn, I think I’d rather stay grey. I’ve learned alot over the years and don’t think I’d want to tarade any of that back.


I think I’d also like to stay with the current in the money strategy. I like it at these higher levels.


The air is actually much better at 12,000 than it was at Dow 11,000 even though the premiums are much sweeter closer and closer to hell.


As the kids are getting older, I know that the photo opportunities are going to get less and less likely. Although I’m sure that if properly motivated I could computer age them appropriately on the exisitng photo collection, that’s probably not as likely to give me the same satisfaction as the reral thing has over the years.


In the meantime, I’ll just have to get my satisfaction from knowing that with each month comes along a new option cycle and some great memories of cycles past


I just wish that time would go by much faster.


Did anyone say Daily Options?


 


 










 


I ended yesterday’s blog with the phrase “metaphor du Jour”


And here we are today and it’s “Crisis du Jour”.


The only thing that I can think of is that I’ve become a Franco-phile ever since the Dominique Strauss-Kahn incident. I won’t tell you if that began as the allegations flew or when the allegations sank.


And I have a soft spot for Szarkozy, too. He’s so far from the US stereotype of a French leader and, of course, he has that Hungarian lineage that has helped to somewhat dampen the bad taste still left over from Esterhazy, more than a century ago.


I only started paying attention to the world economy about 25 years ago or so and unfortunately, my memory has started deteriorating since then, so the recollections may be a bit spotty.


DefauktBut for whatever memory that remains there seems to be a pattern of ever developing world crises and threats of default.


I vaguely remember Brazil and Latin America of the ’80’s. I recall all of the talk about the kind of horrible exposure Citibank had in Brazil’s economic woes. And then there was the IMF, as well, but that’s not real money. I have no clue where their funds come from, but no doubt, now as then, it’s probably disproportionately from the US. I could be wrong about that, but I don’t really care about accuracy. In that way, I’m just like the elected officials discussed a couple of paragraphs below.


Man, but look at Brazil now.


All that had to be done was to simply press the “Default Button” and all was well again.


Then in the late ’90’s it was Russia. Once they started locking up the “oligarchs” and squashing political freedom in the name of democracy things improved substantially, although you do also have to give some credit to $150 oil. They also save a lot of money by rotating the Presidency between just two people.


At this point, my short term memory really gets fuzzy, because the crises started coming more fast and furious over the past decade. In fact, sometimes it’s hard to keep track of which came first, the boom or the bust.


When was it that Ireland was the economic wonder of Europe? Wasn’t Iceland just another way to say paradise? Come on, you really didn’t expect that much from Portugal, did you?


It is getting hard to keep track of all of the players these days. Germany is once again all powerful. I know that much, but we have a succession of Greece, Spain and now Italy to capture our attention.


Oh yeah, and then there’s the United States. Remember just a couple of months ago when S&P scared the b’jeezus out of the markets? Not to mention the fact that there’s all of this talk of US debt default if the ceiling isn’t raised.


For purpose of this blog, I’ll just conveniently forget about our own financial meltdown of 2008.


Years ago there was a movie, “Don’t Raise the Bridge, Lower the River”. Interestingly, the parties in the Jerry Lewis shennagins were Arab and Portugese.


How prescient. But probably reasonable advice, although it probably wouldn’t be a bad idea to do a little of both with this new invention, that I believe is called “compromise”.


As I was watching CNBC over the past couple of days and listening to our elected officials from both sides of the aisle playing loosely with the facts, it occured to me trhat we would be so much better off if the perjury rules that Roger Clemens is facing over his congressional testimony were applied to members of congress.


They should always be under oath. After all, with every public pronouncement, aren’t they just electioneering for votes? These days being a congressman is akin to being a robot whose only skill is to create new identical robots sharing the same skill.


Since it’s all about the re-election, everytime they, shall we say, stretch the truth to fit their needs, they are lying to the electorate.


Perhaps the only one telling the truth, or at least he thinks he is, is Rep. Ron Paul and he’s a lunatic. Now that he’s announced that he won’t be seeking re-election, we’ll see what sort of increasingly unfiltered things spout from his brain.


I think the best way to play all of these crises is to stay in bed or at the very least mute the TV and wonder why there’s so much red rolling by on the ticker.


Another approach is to do what I do when I get very frustrated with a misbehaving software product, app, code or hardware. Just press the “reset” button or go back to “Default” settings.


Sometimes it’s really that easy and spares you from wasting lots of time.


Sure, there’s not that much gratification from giving up rather than struggling through to try and come up with a solution, but after a while, enough is enough and you have to let those costs sink away.


Not that long ago, perhaps two years or so, the “experts” told us that Italian debt was very different from that of must other countries. The distinguishing factor we were told, which made the Italian situation non-explosive was that its debt was predominantly owed to Italian nationals. Very different even from the United States situation, where we are mortagaged to the Chinese, who assumed the landlord position from the Japanese of the ’80’s.


Remember them?


With each day, comes a new crisis and then a new slew of analysts and talking heads who alternate between telling us that it’s either “risk on” or “risk off” trading.


These things really mean nothing to me. Sure I understand the concept, but I could just as easily stand there and make this stuff up and then just as easily change my take on things the next day.


I don’t know if these pundits receive report cards, but if they do, they are probably curved similar to the way weather forecasters are assessed.


On a positive note, yesterday morning the Dow Futures would have had the market opening down 150 points. In the absence of any really tangible news, it all turned around and the market just stayed flat all day.


I started going for pennies again and sold some JP Morgan $41 calls expiring this Friday for $0.25.Not much, but if I get exercised, I’ve already gotten the quarterly dividend and a couple of weekly options premiums on this one. As pointed out in the recent blog, those pennies do add up.


I certainly don’t mind the scratch singles. I don’t have any pride. I don’t even mind getting on base by error.


Unfortunately, I saw no other opportunities today. In the absence of any news known to the greater investing world I marvelled at how Dow Chemical, a sizeable holding, got smacked down 3.5%. Not that I pretend to be a technician, but there certainly wasn’t any technical reason and I doubt it was related to the Italian banking crisis.


No matter. That crisis will be like yesterday’s fish and Dow will bounce back


I think tomorrow, I may try the Spanish economy or maybe even one of the daily specials.


As Groupon and LivingSocial try to distinguish themselves, this may be their next area of opportunity. The Daily Default Deal might be very attractive  to investors. A 24 hour window to buy bonds at great discounts. Unfortunately, the discounts are likely to get even higher after the offer expires on some of these.


But still, the very thought of being able to get laser hair removal and discounted bonds all at the same time is just too great to pass up. The thrill of the Deal du Jour itself may just be the opiate that we need to forget about the Crisis du Jour.


Can’t wait for tomorrow.


 


CORRECTION: A previous version of this blog post inappropriately referred to Brazil as having defaulted on it’s loans. In fact, during the 1980’s it was Argentina that defaulted, while Brazil approved new lax sodomy laws. Thank you to @Wolfrum for bringing a portion of the correction to my attention.


 





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Is Tweeting Worth It?









Like pretty much everything that I write about, there’s a metaphor out there somewhere. Sometimes though, it’s so obscure that even I can’t quite get the correlation without holding my breath for five minutes or more.


Amsterdam BrowniesI can’t wait for my state to enact the Medical Breath Holding Act, as I’m somewhat embarrassed about having to do so illegally. It’s not like breath holding is a gateway tantrum behavior at my age.


I always used to think that Szelhamos would have loved to try a little bit of that medicinal stuff. Funny how it’s not considered medicinal in Amsterdam and Szelhamos did love his assorted baked goods.


Too bad, but at least my kids and I have Amsterdam and you know what they say:


“Wat gebeurt er in Amsterdam verblijf in Amsterdam”

I reached a Tweeting milestone the other day, yet it was greeted with nowhere near the fanfare that Derek Jeter received.


Can you imagine? 3,000 Tweets in barely two months. Yeah, and how many hits did Jeter have during his most productive two months?


Exactly. No one coddled me through the dry spells.


And if it weren’t for some time on the Disabled List, due to a typing index finger injury, I’d be approaching Pete Rose territory. But like Pete Rose, I doubt that I’m headed for the Twitter Hall of Fame. There’s a price to be paid for betting on what Ashton Kutcher will be Tweeting next.


Although the lucky recipient of that 3,000th Tweet didn’t get as much as he was hoping for at the Sotheby’s auction last week, he was still pleased. Imagine the sheer joy of being among those to have an opportunity to read a 4th of July gem like this one, my 3000th:


 


Spell-check, auto-spell, calculators, e-mail, IM’s, texting, sexting, Twitter.


Slow degradation of the 3 R’s and professional pornography


 


TweetingIt’s amazing what kind of wisdom you can cram into 140 spaces.


My son convinced me to start Tweeting. Why he did so is still unclear. Although he says that it would help me to promote the Option to Profit book and stir sales, I think that he wanted me to do something that might stave off rampaging senility.


Why you couldn’t have both is beyond me, but clearly he didn’t think things out very well.


As far as the first objective goes, I’ve been pleasantly surprised by sales, especially since I really have no friends and an exraordinarily limited and interested family to buy enough books to make me feel fulfilled.


So what has 3,000 Tweets accomplished?


Besides destroying the ability to use prepositions and introducing the concept of substituting numbers for words?


For one thing, it has bought Szelhamos Rules a readership. But what is making me very happy is that increasingly those readers are coming to the site directly, rather than through those obscurely shortened links that originate somewhere in a Libyan domain. The proportion of Twitter referred clicks to direct hits has been steadily changing.


If you know just a little about the various website analytics, you know that site hits are usually categorized on the basis of their origin, being either direct, referred or through search.


Interestingly, the two most searched terms that bring people to the site are “Boston Chicken logo” and “Big Bra sizes”. That just shows you what a wide range of subject matter is covered in the blog.


Being a little more analytical, I can also tell you that the Bra searches predominantly originate in Saudi Arabia, Qatar and Mississippi.


I won’t get into details like bounce rate, average time spent on site and average number of actions.


That’s geeky stuff, just like technical analysis.


See. Did you see the segue? OK, ready for it? The metaphor has to do with trading strategy. My facial color is now sufficiently blue for me to see the connection.


Is it really worth all of the call writing activity. Wouldn’t I be much better off with either a buy and hold or an actively traded portfolio.


Following StockTwits as I now do, as well as the trading crowd on Twitter, I’ve learned a little about momentum trading, but when I say “little”, I actually mean “nothing”.


What was once a fairly analytical mind has no patience for learning, understanding and applying all of the charting nuances that these guys seem to enjoy, or at least tolerate for the sake of making some money.


I still have no clue what phrases like “Swing Trader” and “Position Trader” actually mean, even though I’ve done the obligatory Google search.


But there’s absolutely no way that I could revert to “Buy and Hold”. For one, I really enjoy the options income stream, but more importantly, I really enjoy the trading. (See “Feeding the Beast“)


If you did read my book, you’d know that I have admitted to being a terrible stock picker. I may have used the adjective “lousy” to describe those abilities. Instead, I’ve come to rely on a list of about 50 or so stocks that I routinely trade in and out of, not so much on my own accord, but instead based upon whether the shares are assigned.


Occasionally, I do add a new stock or two to that mix each month or so, but it seems to take a while for those to prove themselves.


Why? Because I’m a lousy stock picker. That means not only do I not know a good stock from a bad one, but I also don’t know the right time to buy a good stock.


So the prospect of actively trading stocks alone just probably would work for me. Besides killing the 2% monthly income stream, I have a feeling I’d be seeing lots of capital losses.


Granted, the joy of trading might not be diminished, but somehow I think that the joy is more in the profit than in the act.


It’s not sex, you know.


I do keep a relatively crude spreadsheet that compares my holdings to the S&P 500 and adjusts for withdrawals and deposits, but doesn’t account for different trading strategies.


Compared to the S&P, so far for the past four years, I’ll gladly take those extra few percentage points.


Even though that kind of assessment is abstract, it does calm my frayed “wish I woulda” kind of nerves everytime I think of the ones like Green Mountain Coffee Roasters that got away from me. Oh yeah, and Visa, a couple of weeks ago. 


So is the incessant call writing really worth it?



  1. Sure, it got me a book and even book sales.

  2. It got people reading the blog and even commenting and sending non-threatening e-mails.

  3. It helped me to stop plying my formal trade.

But the real question was is “Tweeting worth it?”


See all of the above.


And so ends the loop that is the metaphor du jour.


 


 





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Which Way is Up?









Over the years I’ve gotten a little more sophisticated in the kinds of trades that I make and obviously, the stakes have gotten higher, as well.


Like an addict, there’s a need to trade, a need to get a greater thrill and to wonder what’s coming next.


And then you die an inglorious death in the streets, with your feet ensheathed in Baggies, lucky only in the fact that you had enough plastic ties to secure your booties so that your trusted pet goldfish wouldn’t float away.


Maybe that’s a bit of an exaggeration, but you get the idea of what excess can do and just how worthless the more expensive Zip-Loc is when it comes to securing the bag to your foot.


Do you remember that song “Want a New Drug”?


The problem is that when the drug does quit, you may not really be sure which way is up.


Not to cherry pick lines from songs, as there are billions available for any situation, but “You may ask yourself, how did I get here?”


It used to be very simple. There was a time when there was just wine. But even then, by the time the room stopped spinning, you rarely knew which way was up.


As I was writing the Option to Profit book, I received a call from a friend in California wanting to know if I had any stock recommendations. It was about 11 AM on the East Coast. She told me that her broker was drunk and she needed to get out of cash.


Being drunk is probably not a good way to make investing decisions, unless it’s for someone else’s money.


Seriously? Who cares if it’s other people’s money?


GAAs time went on, beer and wine begat hard liquor. For purposes of this piece, marijuana was the gateway to LSD, heroin and cocaine. I’m so hopelessly out of it, that I can’t really write with any level of expertise on more modern mind benders. Sure, Crack, crystal meth, PCP, ecstasy. Heard of ’em, but it ends there.


I never even had a Four Loko


Regardless of the drug, they all threw your balance off and altered the perception of reality.


Welcome to my world.


When beer and wine were all there was, so too were individual investors limited in the recreational and investing choices. For me, those are one and the same.


Back then, all you had to know was up and down. Your stock went up or you stock went down. End of story,


As I was getting ready this morning for another week of trading, I looked at my holdings and potential holdings and had to make an increasing and varied series of mental notes.


At least this Friday is the end of a monthly options cycle, so I don’thave to think about which one is a weekly and which is a monthly.


I don’t own many Freeport McMoRan shares at the moment as I’d like, having just lost some to assignment. I want those shares back. I’ve had them on and off, mostly on for the past 3 years, going from a pre-spli $22 to a post-split $52.50, but I don’t want to pay $55.


So I want that share price to go down. Simple enough.


But now, take Google, as another example. It was hit hard on Friday, down about $15 or so on the heals of a $30 run up.


But I still want it to go down because I sold $520 calls expiring this Friday. Granted I got good premiums last month and this month, but it would make me happy to be able to keep my shares and “…..go back Jack, do it again.”


That seems simple enough to keep track of, Google down. Down good.


Certainly, it’s also simple to keep track of the fact that I want Mosaic to go up, but knowing that its just gone up about $10 in the past week makes me less than optimistic for a rerun. But, if it gets near $72.50, I’ll be selling a call contract expiring this Friday and then hoping it stays right around there.


Again, simple enough, just a little bit woozy on that one.


Then there’s the Spreadtrum Communications deal. I had some puts expire this past Friday and I still have others due to expire this Friday. But, I also was just assigned some shares, so now I own shares, as well.


Now it’s getting a bit complicated, but as the room is slowing down, I think I want my shares to move up.


Yeah, that sounds right. I think I’ll try to sell $17 call options for this Friday and hope that Spreadtrum closes above $17, since I really don’t want to be holding a Chinese company of any kind for any amount of time.


But since I don’t like taking losses, I’ll see if I can’t make a go of it for a week.


On the other hand, the Sirius $2 puts I sold are expiring January 2012. I suppose that it would be good to see a nice price rise and then buy back the puts to close the position. But if it goes up too much, too fast, I’d feel like a fool for not having purchased the shares outright, even though I know that I would never buy a $2 stock.


Why not? I don’t know. Don’t make me think, I’m getting a headache.


Alright, what’s this I see. I also have shares in the Proshares Ultrashort Silver and have sold calls on it, as well.


Let me try to get this one straight. Man my head hurts. The price of silver goes down, and then the price of the ETF goes up. Oh, and its 2:1 leveraged as well.


My cost basis is $17.02 and received a $1.02 premium for the most recent $17 call sale. Friday’s close was at $16.86.


I have no idea of what I want.


Do I want silver to go up or down? Too much thinking involved. Way too complicated.. I may need something to bring me down off this bad trip.


I need some Rocky Road ice cream, maybe a little Chocolate Marshmellow.


But here’s the thing.


After the headache goes away, after the room stops spinning and once I know up from down, I just want to do it again.


Anytime the opportunity presents itself, it’s just time to do it again.


I’m sure before it’s time to cash in my literal and figurative chips the investing choices readily available to an individual investor like myself will increase even further.


Sooner or later it won’t matter. In a world where up is down and down is up, the Mad Hatter reigns.


I wonder if a yarmulke counts?


 


 








 


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