Is LinkedIn the new Boston Chicken?

Amazingly, there were no big non-business stories yesterday to divert our attention while the broad markets were gently eroding in the background, as they had done the past week.


Forget about the cosmetically insignificant increases every now and then, those were really illusory. But we’ve been so occupied with the shock and awe of the stories that have unfolded over the last two weeks that we haven’t really even noticed the slow meltdown.


At least the stories were more entertaining than substantive. I’m at the stage that I really don’t want to process the meaning of real impactful kind of news anymore.


For one, I’m happy to see this month’s option cycle come to an end today. I’m excited to start over again on Monday. I did get to sell some more British Petroleum options that expire today, but at a return of less than 0.5%. Normally, at higher volatility times, it would have been 1% for a single day right near the strike price.


Even though my options related income was about 2.8% for the month, my shares underperformed the overall market, thanks to Goldman Sachs, Hewlett Packard, Freeport McMoran, Rio Tinto and Mosaic.


Before you say in that sarcastic tone of yours, “Hey, that’s picking them, Sparky”, or something hurtful like, “You want me to buy your book on successful stock trading, why?”,  just remember that not too surprisingly, those were the very same companies that propelled the numbers forward the previous month.


But here we are. Bin Laden is out of mind, at least until he floats down the Mississippi, Strauss-Kahn is behind bars until sometime this morning and Rajaratnam is prepping for the Nathan’s Hot Dog Eating Contest.


So yesterday’s lone big story was the very successful IPO launch of LinkedIn.


Imagine that.


I have no clue what LinkedIn actually does, although I do have an account. By the same token, I’ve had a Facebook account for years, but no friends.


If you knew me, you’d understand.


By all accounts, none of the talking heads I heard yesterday on CNBC and my new friend, Fox Business, seemed to really understand what LinkedIn actually did.


But you can’t sneeze at 100 million users, although who knows how many of them are like me?


No, I don’t mean an unemployed consultant. I mean someone who has no clue what LinkedIn does and is not likely to spring for any “premium services”.


Before I even consider bad-mouthing LinkedIn, as full disclosure, I own the domain ChainedIn.com which is in its early stages, looking for angel investors. ChainedIn is a social media network for white collar criminals who someday will be seeking to re-enter the workplace.


Have you noticed that there seem to be more and more of those kind of guys each day? as a derivitive play, I suggest companies that manufacture security video equipment.


But with an original $33 IPO price, jacked up to $45 last night, LinkedIn opened at $83 and went north of $100, finally settling at $93 or so. Since I didn’t have any shares, I didn’t really feel compelled to come up with the actual price at the closing bell.


Given that more than 3 times the float exchanged hands yesterday, there’s probably a pretty strong base at $85. Not bad, and that should give it price stability for a while, or at least until it’s realized that there’s no real revenue coming from people like me.


Options on LinkedIn will start trading on May 27th, so it will be intersting to see what kind of reward opportunities there’ll be in those premiums.


As the price gapped upward the skeptics asked whether this was the sure sign that the bubble was upon us. Other asked if LinkedIn was yesterday’s Netscape, having had a similarly spectacular debut.


But how quickly the market forgets about the Netscapes of the world.


Boston ChickenMind you, if you look closely at trading patterns, the market doesn’t even remember news from 10 minutes ago, much less the IPO of Boston Chicken in 1993.


Boston Chicken, a decidedly non high tech stock climbed 143% that first day. That put LinkedIn to shame.


And then it Netscaped.


Ultimately, McDonald’s bought it, renamed it Boston Market and now their menus are too complicated for people like me to casually wander in and get something to eat.


Boston Chicken, in fact, has been so thoroughly cleansed from our existence, that not even the all powerful Google search engine could come up with an example of its logo. They may as well named it Ozymandias.


I did find a copy of an original stock certificate, though.


What did Boston Chicken, Netscape and LinkedIn all have in common?


Right. Individual investors got nothing. No allocations. Nothing.


Boston Chicken is completely eradicated, Netscape is making its way to that special burial ground as AOL’s red haired step-child, and LinkedIn is pretending like it’s going to be different?


No sock puppets in LinkedIn’s future.


But let’s look critically at the real differences.


LinkedIn takes advantage of real advances it corporate names. It uses two words, but presents them as one. But more importantly, it uses capitol letters for each of those words. It wasn’t NetScape and it wasn’t BostonChicken.


See the difference?


No? Doesn’t matter. The euphoria will be around for a while and will certainly speed up some more IPO’s in correctly named social media.


Who knows, as desperation for opportunities increases, maybe even Friendster will come public, as Facebook continues to play it coy.


But after a spate of questionable Chinese IPO’s and lots more on the docket, it’s not all rosy.


So it sent a message when I saw that E*Trade was one of the co-managers of the AIG IPO, which is neither an IPO nor a secondary offering.


It’s been redubbed a “re-IPO”.


Since I hold 0.002% of the current IPO float, yet wasn’t important enough to be pitched the re-IPO on Tuesday, when Ben Mosche addressed the big boys, I’m a little concerned that E*Trade is a co-manager of the sale.


Obviously, this won’t be quite as hot as LinkedIn or Netscape. It definitely won’t be as hot as Boston Chicken, which was equally tasty served cold.


As I wonder what to do with my AIG shares, considering that there doesn’t appear to be too much of a market for more shares, I’m somewhat comforted by the thought that so many of the experts are already using today’s LinkedIn performance to parallel the top of the market in 2000.


They all seem to believe that the bubble is about to pop.


And why shouldn’t they? Crazed trading today, crappy Chinese IPO’s and a former scion of the Dow about to be shown no love.


All we need is one more sign. A TIME Magazine cover story touting the beginning of the bubble, together with all of the other signs, speak to a continued strong bull run.


Come Monday, that means averaging down on Goldman, Freeport, Rio Tinto, Mosaic and even HP.


LinkedIn? Maybe, but only with the proceeds from ChainedIn.


Interested, my Angel?



 

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A Tale of Two Shitties





 


I’m sorry. I just couldn’t resist.


Both Dell Computer and Hewlett Packard announced earnings on Tuesday.


The morning started with an earlier than expected release and disappointment by HP and ended with Dell’s decent announcement.


A lot has been said over the last two days about what these two companies have in common. Without exception, those comments have been derisive of Hewlett Packard.


LosersBefore I weigh in, for me, Dell and Hewlett Packard are very much alike, but there is still hope for HP’s salvation.


You see, in the short 4 years or so that I have solely been responsible for managing my own account, I’ve had very few losing stocks.


Now before you say, “yeah right” or something much more offensive, let me qualify the previous statement.


Since I’ve been in the habit of selling call options on just about everything that I have ever bought, when you add the options premiums into the mix, I’ve had very few losing stock positions.


Since I have gotten much more anally compulsive since the advent of computer spreadsheets, I also throw in the opportunity costs represented by annualized S&P gain into the mix, as well.


Anally compulsive. Shitty. Get it?


Never mind, but the dearth of losers makes it easy to remember them, although sometimes I don’t hold a grudge. That’s really only true if I dump a loser specifically to take a tax related loss. Otherwise, I do hold a grudge and the long term memory is still going strong.


Man was YRCW good for that. In fact, it was good enough for both of those. Forever etched in my memory and wiping out lots of taxable capital gains. In fact, it’s almost displaced the debacle of L.F. Rothschild, which soured me on trading for my own benefit some 25 years ago.


Anyway, I digress, but you can probably guess two of the stocks on that short list.


I first bought shares in Dell about the time I started seriously managing my own stocks. I remember picking up shares after Dell announced earnings that  were disappointing. The shares took a $3 hit from their previous close of $36.


That alone will give you an idea of how long ago it was. Dell hasn’t seen $36 in a long, long time. Back in the days when 20 gigabyte hard drives were kick ass. Get it, kick ass, anal, shitty.


Never mind.


I didn’t know the definition of “value trap” back then, but at the very least, I’ve proven myself to still be capable of learning.


I also remember selling call options and clearing a few dollars. Not too many, because I was so convinced that Dell was going to recover all of its earnings related losses and then some, that I sold well out of the money $40 options.


Long, painful  story short, I sold my Dell shares. They were repugnant to me.


They are still repugnant to me, with or without Michael Dell at the helm.


Speaking of long term memory, back in the early incarnation of the Szelhamos Rules blog, I wrote an entry that was directed at Michael Dell and Jerry Yang. It was entitled “You Can’t Come Home”. If anyone is remotely interested you can look for it in the Szelhamos Archives (March 30, 2007).


But if you do so, that’s pretty sad.


Guess which other stock was one of my losers, although I currently am short puts on shares. Talk about a worn out welcome. Yang really blew it on his return. Maybe he should have taken steroids.


At the moment, I hold HP shares, but they’re nowhere near as repugnant, since I’ve been selling near the money call options on it over a few different options cycles.


With a cost basis of $41, I can sell my shares at $37 and still walk away saying that it wasn’t a loser.


But I’d be deluding myself, because it is a loser in pretty much all other regards.


It is amazing that value traps do exist. Knowing that is preventing me from buying additional shares. Fortunately, that same knowledge knew not to pick up additional shares in Dell, or more recently Ford Motors.


I remember every loser, but I don’t lose too much sleep over them, although occasonally I will rant, as I recently did about some Bove related debacles in Citigroup and Goldman Sachs. One, a long ago memory, the other a grudge in the making.


HP on the other hand, shitty as its been, may still have some life in it.


Before talk of HP becoming a commodity, remember than the same accusation was dealt to SanDisk, after it dropped from its highs a few years ago. A little talk of takeover, a little fire on all engines, a little growth in flash memory everywhere and everything and all of a sudden, SanDisk is trading like anything but a commoditized product.


It was a shitty decision not to own shares of SanDisk.


Not to step on Dickens’ rotting corpse, and all due apologies for mangling the title of such a classic, but human nature being what it is and the uncertainties in life and the stock markets, I probably should have entitled this piece “A Tale of Many More Shitties to Come”.


That’s especially true given what a downer this month has been.


But the nice thing about reliance on options premiums is that each month begins a new opportunity and if it weren’t for those spreadsheets, I’d have no meaningful memory of the previous month.


So, I’m completley ready to say goodbye to “This Tale of Two Shitties” and say hello to “A Brave New World” that starts on Monday.



 


 


 






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Baby Huey: The Yin and Yang of the Universe

Yesterday, Herb Greenberg, a CNBC hero, really confirmed his place in my heart.


I’ve always liked his well placed and deserved cynicism, enough so to give him a shout out in my acknowledgments, but yesterday he pulled a cultural coup.


Baby HueyHe singlehandedly restored the once famous Baby Huey back to his deserved place as a cultural icon.


Even I, who used to read, Baby Huey comics religiously, really couldn’t recall much about his character, other than his exceptional physical size and equally large diaper.


As I dusted off the cobwebs of the only portion of my brain that actually worked as a child, I realized that Greenberg was right. Baby Huey was an earlier generation’s Rodney Dangerfield. 


The point of the 140 or less character post made by Greenberg was that Hewlett Packard was now in danger of becoming this generation’s Baby Huey.


WIth what I would imagine a throng of people speeding to Google to discover just who Baby Huey was and a subsequent re-birth of that brand, something else has to give.


In a universe where matter can be neither created nor destroyed, a re-emerged Baby Huey can only come at the expense of something else.


As I sit on my shares of Hewlett-Packarad, I really hope that it’s not HP.


Since these days I am more concerned about generating options premium income rather than capital gains on the underlying stocks, I’m not asking or hoping for much.


And I wasn’t disappointed, because HP’s CEO Leo Apotheker’s appearance on CNBC and subsequent conference call, did nothing to raise the respect level.


So I wasn’t asking for much and I didn’t get much. Maybe even less than I asked for.


But I realized, as I looked through our electronically contemporary possessions, we actually own only a single HP product and that one is definitely not contemporary.


And that single product was an introductory level digital camera that I bought for my wife a number of years ago, as I was looking for something non-threatening to help her enter the 19th century.


As I further thought about the absence of contemporray HP products in our household, it just further reinforced that Baby Huey metaphor. Using an anything but contemporary cartoon character to illustrate a “high” tech company, with a bumbling CEO, was inspired.


Perfect, Greenberg. Just perfect.


Then I also remembered an HP laptop that we purchased for my son as he was getting ready for college. Fortunately, his 6’6″ body could lug that beast around, although he didn’t have to do so very long. A dead hard drive during finals week and battery that wouldn’t hold a charge were enough for him to move elsewhere.


All of a sudden, as more cobwebs are sequentially dusted, I realized that I’m not so happy with HP. But I also realized that I was part of the problem.


So I went to Best Buy’s weekly circular and looked for the HP product that I just had to get. Something to make me feel complete and to perhaps, in whatever small way, help out HP’s bottom line.


While doing that, I also looked through the DVD titles to see if there was a Baby Huey Anthology on sale.


No surprise. Both of my searches turned up nothing.


Apparantly, the IT guys buying servers and services get the same circular that I do and they haven’t been overly impressed lately, either.


So if HP can’t make it happen on their technology, are they really in danger of becoming another Dell Computer?


The reality is that Dell was always Dell. It never innovated, it just assembled and marketed well, until the “Dude, your getting a Dell” guy was busted on marijuana possession.


HP need to distinguish itself, otherwise, there’s not much rationale for a premium price, neither on its products nor on its stock. Although, if Apotheker got busted on dope charges there might be an entire legion of new found fans willing to buy HP just for the show.


Maybe the answer is growth through acqquisition, as Apotheker said. Maybe they’ll one up Microsoft and offer $10 billion for Skype.


Maybe they should bid for the New York Stock Exchange.


Remember, there are no bad ideas when brain-storming. Only stupid ones.


One idea that did come out today was the proclamation that HP would no longer be playing for the subsequent quarter. That might actually be very nice if another one of the big boys decided that longterm was the way to go.


We’ll see how long that philosophy can last in a fast food mentality world. Most people don’t really want to know what McDonald’s is whipping up in its research kitchens. They want to know what’s on the menu now and get it delivered in a consistent fashion.


Thank God, that at least eBay is keeping up with the times.


I’ll see if I have enough left in my PayPal account to pick up a mint copy of a Baby Huey comic. on auction


That’ll make me happy.


Thank you, Herb Greenberg.


Any ideas for Sad Sack?



 


 

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Trump Pulls a Huckabee

HuckatrumpIt seems like an eternity, but it was only a few short years ago that Mike Huckabee was the darling of the media.


He was on The Daily Show, The Colbert Report and maybe other shows, as well, but since I only watch Comedy Central and CNBC, I’ll have to leave it at those.


Just so you don’t think I’m too shallow, I do occasionally watch Access Hollywood, although I never have any clue as to who the celebrities they’re talking about actually are.


Unless they’re dead.


But back to Huckabee. Like so many others, before he became a serious contender, he was actually likeable. Smiling, affable, joking and guitar playing.


In fact, everytime I heard his name, I giggled a bit and had visions of an old favorite, Huckleberry Hound.


Why is it that everyone who’s really the antithesis of “cool” seems to play the guitar?


Maybe the real cool musical instrument is the accordian, after all.


Anyway, Huckabee then went through the classic John McCain transformation.


Then out came the other face. The creationism bit and some of the deeper seated beliefs forming the basis of his evangelistic faith.


Not that there’s anything wrong with faith, as long as it doesn’t trample my right to faith and personal freedom.Although I believe that life begins the moment the condom bursts, I don’t try to force those beliefs on others.


You’d think that would put us all on the same page.


But there’s probably a good reason to do an about face. It is just a necessarey evil to bring out the lunatics that vote in primaries, although some lunatics do stay at home and apparantly, never vote in primaries.


Well, that brings us to Donald Trump.


You see, Donald Trump just pulled a Huckabee, but not the old Huckabee. That’s still more accurately referred to as a John McCain.


No, Trump pulled the new Huckabee.


(Want to see the transformation again? Click here.)


This past Sunday night, the cynics among us saw Mike Huckabee announce what we all knew he would.


He announced that he would not be seeking the Presidency in 2012.


How could that be? How could you not seek the nomination when you came so close in 2008 and have no one of any real stature standing in fronty of you, other than the guy with the false religion that you gently backhanded a few years ago?


The reality is that even though Mike Huckabee used love of family and inner spiritual peace as his reasons for not going forward, we all knew that he wasn’t ready to give up his big, fat Fox News paycheck.


Once you’re shown the money, it’s hard to walk away. Forget about shepharding this Godless and adrift nation toward your vision of Heaven, them’s thar checks that’s needing  cashin’.


So Huckabee really wasn’t a surprise, but what about The Donald?


I envision that someday his Wall Street Journal variety caricature will be adjacent to the definition of the expression “Peaked too Early”.


Trump’s reasons for not running? Why did he decide not to throw his hair into the ring? He’s being altruistic, Comcast and NBC need him to survive. He’s doing it for them and for all of the other business interests that license his name and need his help to be pulled out of their morass.


And think of all the celebrities that are being spared the embarrassment of picking up unemployable checks.


If there’s anyone that could pull something out of his ass better than The Donald, I can’t imagine. And besides, who could not only do the pulling, but then wear it on his head?


I worry about the effects of the Trump announcement on the upcoming jobless reports. No doubt there will be many more unemployed stand-up comics.


Have you ever tried to make a living telling Tim Pawlenty jokes?


There has to be some kind of a silver lining to Trump’s decision to drop out, besides the obvious gold lining, but unless someone pulls something very unexpected out of their butt, this promises to be a very boring upcoming Presidential election season.


That itself may be a wonderful gift.


Instead, wouldn’t it be nice, if instead everyday we had a new Osama Bin Laden killing story, or a new Dominique Strauss Kahn sodomizing story?


You’d never see an unemployed comedian then.


Here’s to high profile death and sodomy, but not in that order.


That would be truly sick.



 

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Is CNBC the Great Satan of the Markets?

I like that title.


Why do I like it?


SatanIt’s very search friendly. “Satan” is one of the most often searched words. All sort of deviants and miscreants use search engines, when all they really need to do is to look into their souls.


It’s the devil within that we should all fear.


Don’t get me wrong. I love CNBC. I watch it about 10 hours each day. Although I don’t really watch it, it is more a background noise that occasionally gets me to look up while I’m doing other things.


I also included references about Joe Kernan and Herb Greenberg in the Acknowledgment section of my book, so obviously I do have a softspot for them.


But ever since I’ve been on Twitter, it’s really clear that there’s not a lot of love for CNBC, at least not by the people that I follow, and I try not to follow crackpots.


Even though I am a loyal CNBC viewer, personally, I still miss Ted David and I long for his return. But I also still pine for the return of Green Acres and as my therapist tells me, “That ain’t gonna happen”. (He’s not Ivy League)


But as much as I do pat myself on the back for being a good observer of quiet patterns, I can’t believe that I’ve missed this one.


And it was so obvious.


CNBC moves the markets. It is the six headed beast.


Now that’s not exactly an earthshaking observation. It’s on the order of Charlie Gasparino predicting that Lloyd Blankfein would depart Goldman Sachs within 2 years.


But it all crystallized for me this past Friday, the day the confusing news about Yahoo! came out.


What exactly was going on between the boards of AliBaba and Yahoo!, and Jerry Yang is still somewhat murky, but there was an obvious impact on the stock price of Yahoo!.


If you were long, that impact wasn’t very good.


At about noon, CNBC started its story on Yahoo and while the story was progressing, Yahoo! shares, which had stabilized at about $16.05 started to drop. They went down to $15.93 in the minute or so after the report.


But that’s when the observational part of my brain started kicking in. I saw what I had subconsciously seen so many times before, as I vacantly stared at the ticker.


Within about 30 minutes, Yahoo!, in the absence of any further news, started an impressive climb upward. What made it even more impressive is that it occured during the rest of the market’s decision to head south.


I took the opportunity to sell puts June 2011 Yahoo $16 puts when the underlying price was $16.


I rarely sell puts, but it clicked. This was one of those times. In the past I had sold puts on Citigroup, Sirius-XM and YRCW, all with good results. But all of those were in the $1-2 range.


What clicked was the realization that when CNBC talks, wait 30 minutes and go contrarian.


That’s not quite as catchy as the old E.F. Hutton ad campaign, but it may be much more accurate.


Years ago, when I used to watch Jim Cramer’s show, it was obvious to anyone that had bloodflow that his words would move stocks in the afterhours. This happened despite his admonishments to viewers not to make purchases in what he called the “Wild, Wild West”.


Back then, if he ever mentioned a stock that I owned in a positive sense, I always made certain to sell it in the after market, knowing that in all likelihood I would get top dollar and a chance to buy the shares back the next day at a lower price.


That’s definitely not meant to be a knock on Cramer. It’s a knock on the human traits of greed and fear, although it’s fine if other people act on those traits.


In fact, its fear that makes many people behave. Fear of ending up in Satan’s domain.


But in the markets, fear often makes people do the wrong thing.


They’re afraid of missing out when they hear good news, so they buy.


They’re afraid of being the last one left at the table when the bill comes, so they sell.


Those behaviors are good for the ones on the other side of the transaction.


Me? I have no fear, for I walk in the Valley of CNBC.

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I Never Liked Dick Bove






I usually try to be a little obscure in the daily blog titles.


The problem with getting older is that the long term memory really does stay intact and the ability to forgive and forget becomes diminished.


Now, I don’t really have anything against Dick Bove, per se, but in the past he has been as ever-present a talking head as you could ever imagine.


Shit for BrainsNow, I don’t want to you to get the wrong idea. Just because there is an image entitled “Shit for Brains”, this is in no way a representation of what I believe is present in Dick Bove’s head. After all, that wouldn’t be fair to the long and storied history of excrement.


For me, I first took notice of Dick Bove when his bald pate and perfectly trimmed beard seemed to be on CNBC every morning and afternoon giving his take on the financial institutions that he followed.


Afterall, he was a financials analyst and we were on the precipice of what would turn out to be the market cataclysm of a lifetime.


And he was the best, right?


I mean, why else would he be featured so regularly amd prominently? And you certainly would want the best to either re-assure the investment community or warn them, as appropriate.


Before I go forward, lest you think that all I plan to do is blast Bove, I would like to give him some credit for his forecasting ability. Although it was a rocky road, taking more than 2 years for the markets to recover most of the ground it lost following the 2007 meltdown, Citigroup is nearly at Bove’s price target of $45.


Granted, it’s price was significantly helped by last week’s 1:10 split, but that would be like splitting hairs.


So while Bove was continually telling the investing world that Citigroup was a solid company and that its dividend was in no jeopardy, Wall Street just burned as his talking head kept talking, oblivious to the air being sucked out of the markets.


Of course, Bove has had his credibility questioned before, in the most important of ways; the losing side of a lawsuit that was based on the accuracy of one of his calls. No reason to dredge the details of that up.


The New York Times last year characterized him as having bounced from firm to firm.


So this is the best they can come up with to assess the financial sector?


Yet for some unknown reason….


Wait, I know the reason. No one on Wall Street has anything resembling a memory.


So, they still listen to this guy. They  still invite him back.


Yesterday he did his damage again.


He used a classic terrorist strategy, perhaps pulled from Bin Laden’s recently discovered diary.


And I’m not talking about the entry when Bin Laden wrote “Fatima’s so pretty, but she doesn’t even know that I’m alive. I just want 2B friends”.


No, he focused on the strategy to go after soft targets.


And what more soft of a target is there these days than Goldman Sachs?


They can’t catch a break on anything. Imagine, they actually offered Hugh Grant the Charlie Sheen role in Two and a Half Men over Lloyd Blankfein.


As if that wouldn’t have been bad enough, Ashton Kutcher? Really?


That’s really kicking a guy when he’s down.


Bove spent the day spreading fear about Goldman and the Department of Justice.


Isn’t that the modus operandi of terorists? Fear? Soft targets?


And Charlie Gasparino was bold enough to predict that Blankfein wouldn’t last another 2 years.


Exactly how many eternities is 2 years in Wall Street years?


Anyway, you know what happened.


Goldman took another beating and you guessed it. I own Goldman shares.


What used to be about 10% of my portfolio is now about 8% and not because I sold shares.


In the aftermath of the Rajaratnam guilty verdict, Bove believes that the Department of Justice has some blood lust. He has a populist image of people wildly celebrating in front of the White House at the mere thought of Goldman convictions.


Personally, I don’t think DOJ will be going after Goldman with quite the zeal that Bove believes. The economic consequences of crippling Goldman, even in the short term has tremendous trickle down. Not good when the boss is in re-election mode.


Although the people at Goldman are deservedly called the smartest in the room, they still may need some help on this one. It isn’t easy getting out from under the grip of a terrorist


My advice? SEALS. Navy Seals.


 


 


 


 




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We are a Fickle Species

It’s sometimes very hard to understand human nature.


Without a doubt, there were still so many untapped Osama bin Laden jokes sitting out there, just waiting to be told, Tweeted and re-tweeted.


But then came the jury verdict. Even before the results became known, the Raj Rajaratnam jokes started to flow and only my own two similarly themed Bin Laden jokes could be found anywhere.


RajaratnamThey both had to do with Bin Laden’s body floating ashore someplace. I thought they were pretty funny, but no real traction because despite an admirable week’s length of attention, we’d moved onto the next and newest thing.


So at least for today, it’s going to be Rajaratnam, the butt, and apparantly I mean that both figuratively and literally of many weight related jokes.


And no, the above photo is in proper proportion.



Look, I wasn’t immune from posting a few of my own, despite my allegiance to the Bin Laden line of banter. We all want our share of the attention that is so fleeting.


And I thought of that a little while, just how fickle we really are.


Does that explain why “Buy and Hold” is a dead strategy amongst most everyone? It seems that at least when it comes to the stock market, the word “investor” may not really have much meaning.


In fact, if funds transfers would be executed and closed in the amount of time that it really should take, instead of the standard 3 business days, “Buy and Hold” would likely be re-defined in terms of minutes or hours.


I think back to the days when I used a broker and we would hold on to stocks through cycle after price cycle. Profits vanished, re-appeared, vanished again.


Since we didn’t take losses often, at the end of the day, it still felt a if the ventures were successful, but they weren’t. Really. They weren’t. All of those opportunities were squandered.


So now that I’m on my own, I’ve become very fickle, trading as often as necessary, but I’ve kept a little piece of my dignity.


I’d decided a while ago to keep the company of a finite list of stocks.


I call them my “Old Reliables”. Like a sailor’s girl in every port, although I prefer to think of them as “Sister Stocks” and I believe that God has ordained me to make them fruitful and multiply.


Each one of my favorites has a place and time. Occasionally, like Bin Laden, apparantly, I’ll bring in a new “Old Reliable” and cast another out. After all, there’s only so much male virility herbal concoction that I can ingest.


But the door is rarely irrevocably closed.


AIG is one of those Sister Stocks, an “Old Reliable”, even though it had been in the pennysphere and but for a 1:20 split, would still be at a price far below anything that I would purchase, other than to sell put contracts.


I first owned AIG back when it was American General. I didn’t own shares for a decade or so. It was noble at one time to own American General.


But now, I delight in AIG. It goes up, it goes down. I sell call contracts, I buy call contracts. I lose my shares, I get new shares.


Do I love AIG? Yes. I do. But I especially love these weekly options.


I was happy to see its decision to proceed with a much smaller “re-IPO”, as it’s been coined. I posted on Twitter yesterday that Ben Mosche was worked too hard and has too much of an ego to let AIG go so cheaply. I also believe that Geithner thinks AIG is a buy and not quite the sell that everyone was banking on.


Am I sad to see it go, if it does? No, I know it will be back.


Does that make me fickle?


Why am I asking so many questions today?


Simply because so many of our fundamental bases have been questioned in my lifetime, although each generational span probably goes through the same process.


It’s just that the process keeps speeding up, somewhat like Moore’s Law, to the point that the one time good as gold standard is like yesterday’s day old fish.


As I look at Laszlo, my dachshund, I am envious. His world and his species, are constant in their thinking and relationships.


Best of all, he’s very flexible.


But I suppose if we led the same kind of life and had the same flexibility, there might never be another generation to take us to the next unrecognizable level.


For at least today, I’ll look forward to more Rajaratnam jokes, hope AIG stays just slightly below $32 and doesn’t mind being put on the options block again next week.


 


 

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Why Speculation is Good

I don’t particularly care for speculation. But I do like speculators.


It’s somewhat akin to the expression “Hate the sin, love the sinner”, but that’s actually very hard to do, so I don’t even try.


John McCain, back when he was a decent human being, before his recent decision to try and return to that state once said about Osama bin Laden, “May God have mercy on his soul, because I won’t”.


You’ve got to like that. Too bad he went to the dark side. Come back to the light, John. Come back.


In a humorous aside, it turns out that God does not cover the seas.


Anyway, it wasn’t always that way. There was a time that I thought speculation was really the way to go. How else could you escape “The Man” holding you down?


There was a time that I thought I could outsmart the harness race track.


Then another time it was the casino and roulette.


There was even a futures period of my early life. Ironic that futures were in the past. Copper, Gold, silver, financial, wheat and corn.


Loser, loser, loser, loser, loser and loser.


Today’s blog is borne out of laziness. It’s essentially a re-hash of “Greed is your Friend”, a chapter in Option to Profit, which I will shamlelessly plug here.


So buy the book. $14.95 at respected retailers, $19.99 elsewhere.


Always go for the respected. I won’t miss the price difference.


SpeculationI now think speculation is great. Let the naysayers say that speculation has driven up the price of commodities. Gold, oil and all of those other things.


I say good for them and good for us, the end users.


Just about the only way to get us to change behaviors is to exact economic costs. What will get us to drive less? You got it. Higher gas prices.


Maybe increasing sugar prices will result in less Type 2 Diabetes.


And as used to be said on late night television “And maybe monkeys will fly out my butt”.



But I’m not a macro-economic kind of guy. I know that at some point there would have to be adverse effects on the economy, but I find that people who claim to look at the big picture, rarely do. That includes me.


All I really care about is me, and of course my readers loyal enough to buy the OTP book (another shameless plug). Mostly though, it’s about me.


And for me, speculation is great, as long as it’s others doing the speculating.


It’s on the greed of others that we prey and pray.


That’s the basis behind selling options to others. Those using leverage, seeking to hit it big with as little skin in the game, as possible are the ones that let me sleep soundly at night.


But there’s another impetus for today’s blog and that was the endless carping about Microsoft yesterday.


Just about everyone imaginable was chastising Microsoft because its stock price has been pretty range bound for the past decade. The geniuses refer to a Microsoft investment as “dead money”.


Those opinions even came from people that I respect, despite the fact that they were pretty harsh in their comments.


I tend to disagree.


But I do that as a matter of habit, anyway.


Back in the old days, my disagreement might be manifested by letting air out of tires. I always found that the diagonal combination of flat tires was most effective.


Since then, I’ve grown up. Plus, now I can just hire someone else to get their hands dirty, instead of my own.


But in this case, Microsoft has been very good to me.


It has reliably delivered a 2-4% monthly premium on its near the money options, while increasing its dividends. That 10 year chart that was shown on CNBC just made me feel that much better.


I’m a pretty analytical kind of guy, as my wife will attest as she tries to tear me away from any given spreadsheet. I continue to like Microsoft, not for its growth prospects, Uh duh, but for its prospects of my growth.


One Twitter poster, @stockguy** (identity withheld, good luck trying to figure it out), I’m talking to you, in an attempt to denigrate the call writing strategy, said something to the effect of, “well its alright for you, it may pay the rent, but for traders, it’s not enough”.


I guess my 1500+ trades a year doesn’t make me a trader and a 24-36% annual return isn’t good enough.


I don’t really think he meant it in a derogatory way, but it’s like technical analysis, you can interpret it any way you please. Besides, isn’t that what makes a market, or so they say?


Just to be clear, I’m not saying that I get 24-36% annual return. That figure looks solely at the options net income generated from trades, Microsoft being just one example.


In my responses, I got a little more detailed with numbers, as my “rent” is pretty high and using his line of thought, I may as well go and get another 5 or 6 houses, because I can, just from options premium income


Hmmm.


The problem with living in this neighborhood is that you can’t readily find someone to let the air out of someone’s tires, so you have to resort to words.


At any rate, the inference was that a “trader” is only satisfied with home runs.


A quick look at baseball statistics shows that the great homerun hitters were pretty great at at least one other thing.


Striking out.


And if you know anything about math and real life, it’s much harder to recover from a strike out in the stock market than it is to strike out.


Option to Profit teaches a way to actively manage your account, get a nice steady return and best of all, sleep at night. I guess that’s another plug, but I promise not to do so for at least a month starting tomorrow.


No homeruns. OK, maybe an occasional, but really in the stock market, homeruns are either dumb luck or insider trading. I wasn’t a genius because I held Green Mountain Coffee and had not yet written call options on it, prior to its gapping up past $65.


Dumb luck.


I certainly didn’t know anything about the Strabucks deal.


I’ve never won anything in my life so I don’t count on luck and I’m too embarrassed to evacuate my bowels in front of a prison cellmate, so I’ll stay away from any semblance of insider trading.


So to paraphrase the Dos Equis guy, “Be greedy, my friend. Be greedy”.


 


 

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What Makes Microsoft Run?



Apologies to Budd Schulberg, he probably never intended for Steve Ballmer and Sammy Glick to be mentioned in the same breath, so I won’t.


They may share some of the same lineage, but the comparison probably ends right there. On the other hand, reports of the behaviors of a young Bill Gates may have been more akin to the ruthless and one track minded Sammy, than Steve Ballmer ever could have been. But these days you would never know that, as he is busily placing fine netting over everything that moves.


Sammy GlickAs a stock, I love Microsoft, even though the investment universe looks at it as “dead money”. A look at the charts would indicate that Microsoft has been a pretty staid kind of stock, sort of like the shirts that Gates sports.


But today is a perfect example of why I love Microsoft, although its corporate name would have been far better suited for one of those e-mail spammers that has an herbal remedy to cure the Micro-soft condition that afflicts men of my generation.


Reportedly, Ballmer and company are about to part with about $8 billion to buy Skype.


Details aren’t out yet whether it was at a “Buy it Now” price or auction, as eBay still owns a piece of Skype.


There are lots of great minds out there and mine is not one of them, yet what we have in common is the asking of a simple question:


Huh?


Does Hotmail need to be jazzed up? You probably would need a Haitian Voodoo Priest to reawaken Hotmail.


The prevailing wisdom is that Microsoft would have been better off buying $8 billion in silver.


Although that’s not likely to happen, even though it could easily dip into its coffers for that type of pocket change.


But I for one, am glad that silver was not on its radar.


The problem with a ludicrously funny suggestion is that if the price of silver started to climb again, Microsoft’s stock price might actually make significant strides.


I, for one, don’t want their stock price going anywhere.


I have owned Microsoft off and on for a couple of years. It pays a dividend that keeps going up. But much more importantly, it trades in a very tight range following the March 2009 stock market rebound and pays a nice options premium on near the money call contracts.


Microsoft has become my 2.5% monthly annuity.


I love the boredom.


The nice thing about this purchase is that if it doesn’t add anything to Microsoft’s bottom line, and in fact, is written off for its full amount, it means nothing.


Conversely, if it adds to the bottom line, it means nothing.


If Microsoft spins it off, it means nothing.


Do you see the trend here?


I find great meaning in nothing.


To this day, I’m still not certain how Microsoft makes so much money.


Yeah, I understand the operating system and the little ca-ching that comes with each PC sale, but my understanding of that still comes while I pound away on Office97 and fire up my diesel powered Netscape 4.0 browser.


But I still don’t care how they make their money, as long as they just stay staid.


Was Sammy Glick boring?


BallmerHow about Ballmer?


For my portfolilo, I’ll take Ballmer any day, and besides, Hollywood is much more likely to make the Steve Ballmer story than the Sammy Glick story.


After 70 years, I think Sammy has nothing left in him to make him run.


 


Microsoft on the other hand can chug along forever under everyone’s radar all the way to my bank.





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Mother’s Day Traditions – From Blankfein to bin Laden

One good Mother’s Day tradition is that historically, the following Monday tends to be a good day in the markets. That’s certainly one type of tradition I’d like to keep going.


Mothers DayThat’s especially true if my short call options are out of the money, which most of them are right now, with the notable exception of those on the Ultra-short Silver ETF.


Another tradition, but this time one that ended, was the annual embarrassment Osama Bin Laden would be subject to, as he had difficulty distinguishing between his daughters and wives.


It’s a good thing that we found him, otherwise we’d never know when this one would have come to an end.


We’d still be at the mercy of the Al-Qaeda propaganda machines.


Thank goodness we had the help of our Pakistani friends.


I never thought that I could commiserate with Bin Laden, but I feel for him. Tough problem, but glad to see that it’s resolved, in a mutually beneficial way.


On a downside however, with the attack on the Bin Laden Compound, I’ve lost 12 loyal Twitter followers.


What I really admire, though, is the ever forward marching presence of capitalism. The latest rumor is the Al-Qaeda will be funding a remake of the classic, “Gone With the Wind”, entitled “Sunk to the Bottom”. Reportedly, Leonardo DiCaprio has already signed on as a young Osama Bin Laden and James Cameron is commited to the project.


Only natural that these two should pair up again after already celebrating the sinking of the Titanic.


Given its difficulties in the markets these days, it’s also rumored that Goldman Sachs will be bankrolling the effort in an attempt to diversify their brightest and best.


More on that later.


With 2 weeks left to go in this options cycle, I’ve been looking for weekly options opportunities now that E*Trade has finally offered weekly options to its offerings.


I did sell some more BP options this morning after making a few cents on last week’s option contracts. This week, it also goes ex-dividend on Wednesday, so I’m hoping to double dip and then do it all again on the final week of the month.


As I look for opportunities, I’m struck by how moribund Goldman Sachs has been. The brightest guys in the room must be pretty embarrassed that they can’t even seem to get caught in an upwind draft and ride on the market’s coat-tails these days. I can almost envision an elderly and bent over Lloyd Blankfein with remote control in his hand looking at videotapes of himself during the golden years.


Very sad.


I don’t think that Blankfein, the Spiritual Leader of Goldman Sachs, has the same issues with his daughters, if any, and wives, if any.


I also don’t think that he’s in fear of Navy SEALS busting into his condo, but Bin Laden probably had a high comfort level, as well.


One thing we know for certain, neither Bin Laden nor Blankfein will be celebrating next Mother’s Day as the spiritual leaders of their organizations.


And the world will be safer.

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