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.