Swimming Downstream


In the real world, we marvel at how salmon swim upstream, back to their own birthplace, in order to perpetuate their species’ life cycle

Then they die.

As opposed to a long ago blog article about Michael Dell, but just as easily could have been about Jerry Yang, Ted Waite and some others, it’s really hard to go back home, unless you’re Howard Schultz or Steve Jobs.

In general, it’s always easiest to go with the flow and become one of the crowd, unless you’re a lemming.

Lemmings on ParadeThey take exactly the opposite approach of the salmon. They go with gravity and are disciples of Thomas Malthus, thinking that their species would have its best chance of survival without them taxing the limited resources available to the next generation.

I saw Meatloaf in concert a couple of years ago, in a relatively small venue. Bat out of Hell, arguably one of the greatest rock albums ever, dared to ask the querstion “What’s it going to be boy? Yes or No? Yes or No?”

And that was the question for me on Thursday. Be a lemming or be a salmon.

The problem with that analogy is that either way you die and they both depend on some strange fascination with herd mentality.

The real question then becomes: “Go with the flow or fight the tape.”

In general, those are the two basic categories in society. Are you a Goth or a preppy?

There’s no question that the tape has been decidedly up the past few days, even if a few of those were limited to only the closing hour. But ever since that boring 300 point Dow down day on the day that the NYSE commemorated the 10th anniversary of 9-11, there have been only good feelings.

Market Kumbaya with everything being carried upstream as there’s an expectation for less than horrific news coming out of the European Union has been the rule. That was definitely the case with Thursday’s trading as the market nicely bounced back from an early day retreat of gains and went on to close at highs.

In general, I tend to be an optimist as far as the longterm direction of the market goes, but right now my longterm horizon is limited to the end of the options cycle, which happens to be today.

Based on what I’ve done the past couple of days, including the sales of call options on Dow Chemical, Textron, Home Depot, Transocean and more Freeport McMoran during the first phase of Thursday’s rise, it says that I don’t expect follow through for the last day of the cycle.

Now that’s a pretty stupid position to take, trying to predict market movement for a specific day in the absense of any real news and in the face of an obvious trend.

I base that on one thing and one thing only.

Watching Chrisitne Lagarde, the new head of the International Monetary Fund, I realized that she looked just like comedian David Brenner’s older brother.

There’s was just no way I was going to be soothed by economic forecasting from her once I couldn’t get David Brenner’s vision out of my head.

Any of you of my generation understand the difficulty of balancing thought and action when something displeasing is part of the equation. That’s precisley why sex counselors used to advise men suffering from premature ejaculation to think of Willie Mays at critical moments.

With that in mind, I decided to keep swimming downstream into the face of a gusher. At least when it came to stocks.

When it comes to those UltraShort Silver ETF’s, I decided to go with the flow and exercised judgement based on greed. No matter what our stock market does in response to the EU crisis, I expect gold and silver to give up much more of their entirely unwarranted gains. So there was no way I would sell call options on those holdings. The reward of picking up a few more crumbs wouldn’t even remotely cover the costs of missing out on the plunge, thanks to the gift of ETF levereging.

Today may turn out to be the day that might Austria gives its thumbs up to the EU plan to bail out Greece, so there may be even more of an upward bias to come and then the obligatory letdown.

The plan, if approved, gives Greece a few more months before defaulting, by freeing up some $8 Billion Euros to help its banking rescue.

Sounds like a great idea, mostly because I missed hearing the word “traunches” repeated every fifth word.

The problem will become obvious though when the rest of Europe sees that Greece ends up using that first traunch to buy cigarettes and book vacations to Thailand to make up for the vacation time missed while striking.

In the markets the only real news was from Netflix which lost nearly 20% of its value. They showed just how easy it was to swim downstream today. But they had good company in gold and silver, although their density alone made it much easier to work against the upward stream.

Although I neither hold shares, nor use Netflix’s service, I’m beginning to understand the madness behind their model change and increasing dependence on, coincidentally enough, “streaming” media.

Just imagine if you were a Netflix user. You could have been streamed the bad news well ahead of when basic cable investors would have gotten it. Talk about a great advantage.

Obviously JP Morgan gets its news the old fashioned way, as it decreased its price targets after the 20% drop.

You’d think that for whatever advisory fees they’re paid by their clients, they’d at least be streaming Netflix.

After the close, Research in Motion joined Netflix with a 20% drop in the after hours trading once their disappointing earnings were released.

I’m not really certain that you can call anything RIM does these days “disappointing”.

A few short years ago bad news from RIM would have cast a pall over the market. It’s not too likely that will be the case as the market opens on Friday. But at least RIM has been consistent regardless of short term market direction. Since its last earningss report, its been all uni-directional.

On a positive note, the RIM executive officers were certainly able to much more easily and quickly e-mail news of the disappointment, owing to the great Blackberry keyboard. Imagine how much more time it would have taken to disseminate the bad news on, say an iPhone. 

Say what you will, but there’s something refreshing about a technology company basing its fortunes on a mini-keyboard.

The way I see it, RIM has gotten the best of all worlds, as long as those worlds place a heavy emphasis on oblivion.

It’s definitely in a lemming march, yet it’s also trying to swim upstream. No matter how you look at it, that’s a losing combination.

Sort of like the European Union.






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