Lysol Kills 99% of ……

Malcolm Acs served as today’s guest blogger. The views in this blog entry are his alone and do not represent the Disinfectant Industry, No molds or bacteria were harmed in the writing of this blog

Despite spending the last eight years of my life living in Washington, DC, I’ve managed to stay clear of any and all political involvement.

I voluntarily went into work during the Obama Inauguration. I avoided every form of public transportation during the Glenn Beck “Restore America” rallies. I was in the bathroom for most of the Larry Craig scandal.

Recently when I was asked by a complete stranger on the bus if I thought Obama stood any real challenges in re-election, I immediately retorted that I had voted for George W. Bush in each of the last three elections. Based on the abrupt end to our conversation, I think it’s safe to say that Bush will have my support once again next year.

LysolAlthough I’ve been known as a bit of a hell raiser and a constant contrarian, I’ve always had very little tolerance for protestors in any form. My sophomore year of college the school hosted the “National Conference on Organized Resistance”, bringing over a thousand radical progressives from around the country for a week of discussing everything from authoritative veganism, homemade bomb making, and the evil of tampons. After being tired of the stench of over a thousand unbathed squatters spending a week inside of our building, I attempted to freshen the space with two dozen cans of Lysol. While I did not face any disciplinary action for assaulting the eyes of a few hundred occupiers, my actions were strongly condemned by the student newspaper as an act of ozone terrorism.

Now six years later, I tend to look at things a little bit more rationally. I’ve watched hundreds of inane causes bring people to my backyard, but after the weekend they always move on, leaving some trash on the ground but some dollars with local businesses. When the first tents started popping up next to my office as the Occupy Wall Street movement moved south to Washington, I assumed it would be as fleeting as every other movement and be over before it even really began. Each morning as I passed through McPherson Square (home of the larger of the two occupier camps, immediately north of the White House), I watched the infrastructure get more complex as their population grew. I couldn’t help but wonder if they knew how much Wall Street funding went to the manufacturers of the Eddie Bauer and Columbia brand tents that were popping up.

I became more and more uneasy with the entire situation and it showed increasing signs of permanence. This time however, I left the Lysol at home and took much more combative measures.

I invested every penny I had in Microsoft.

While occupiers have damned Wall Street for destroying wealth through mismanagement of assets and creating a “rich-get-richer” economy based on derivatives, Capitol Hill has struggled with companies like Microsoft bloating their balance sheets with cash that could otherwise be reinvested in job-creating activities.

At the recent shareholders meeting, Gates defended the $57B of cash on hand by claiming, “You want to retain enough (cash) so the company has the strength to be able to take big risks even in the face of some economic uncertainty”.

Microsoft? Risk? Big Risks? Unimaginable. Google Apps is quickly starting to eat into the MS Office suite. Apple’s OSX is growing in home computing and becoming the clear choice for executives, sales teams, and engineers. I’m far more likely to use a payphone and own a rotary phone than a Windows 7 phone.

Amazon Web Services owns the cloud and Google and Apple’s investments will be dominant long before Azure is even relevant. The difference between Amazon, Apple, Facebook, and Google is they respond to consumer demand and iterate daily. Microsoft updates its Office suite every four years.  The companies that actually take the risk to reiterate and reinvent have created enormous gains for shareholders.  Microsoft has traded between $20-30 for the last decade.

My father and I have a number of things in common, but the biggest one is our constant quest to make “easy money”. Since the day I started working, I’ve spent a ton of time scheming up different ways to stop working. When PNC Bank introduced ATM fee reimbursements I spent hours researching the logistics of owning my own ATM machines, charging myself exorbitant fees, and spending my days making $20 withdrawals and living off reimbursed fees. Several years ago as a borderline-suicidal Baltimore Orioles fan, I convinced my father to lend me $1,000 to screen print 200 “DUMP ANGELOS” t-shirts. After showing him that the profit from the first production run would be enough to buy six 1964 color televisions, he promptly funded the venture. We have a lot of shirts left. Four years later I have not repaid the loan, however in my defense I didn’t have time to research the definition of “negatively amortizing” when I signed the document. Why should I possibly repay a loan that is greater than the value of the shirts?

Despite the many past easy money failures (and likely even more in the future), Microsoft has been the closest consistent source. Two trading days before my first ever options-expiration-Friday, I’m sitting on the right side of $27 calls that I wrote less than three weeks ago with a 41 cent premium. Couple that with a 20 cent dividend payment from the $56B never-to-be-used rainy day fund and that’s a 2.3% return in less than three weeks.
Come Monday I’ll take my likely unassigned shares, rewrite a new set of contracts, collect my premiums, and start my work week. I’ll be confident that Microsoft won’t be able to innovate themselves above $30 or squash themselves below $20. Two months later I’ll enjoy the fact that Steve Ballmer truly believes that “We are in the Windows era. We were, we are, and we always will be,” by collecting my dividend payment in lieu of ever taking that big risk that they save every penny for.

One day the Windows era will be over, but at that point I’ll likely be far better for it, 2.3% at a time, every month, every time. Hopefully at that point PNC still reimburses ATM fees and Angelos still owns the Orioles.

Maybe I’ll stop tomorrow morning in McPherson Square and explain to the occupiers how they too can use derivatives and a dividend-capture strategy to safely increase their own personal worth at the expense of market-crashing speculators. I’ll probably just play it safe and stick with the Lysol.

@malcolmacs is a former technology headhunter currently working within the e-commerce and social media industry in Washington, DC. He is a dual graduate drop-out in Quantitative Finance and Information Systems Management . His fund currently manages over $8,000 in assets. Do not follow him on Twitter.

Check out Recent PortfolioTransactions