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Szelhamos Rules

ProShares UltraShort Silver

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It's all About Appearances

As time goes on I've come to realize that what I once thought was my absolute grasp on the secrets of the Universe were just a prelude to the growing realization that I understand nothing.

Nothing at all.

What I'm also realizing is that during that period of your life when you are on the path of professional ascendancy or at least hoping to be on that path it's not about substance at all.

It's All ABout AppearancesIt's always about appearances.

Hello Volatility my Old Friend

I don't know why, but so many things in life seem to be able to be expressed in someone else's song.

For lots of people, the feeling is that the song is speaking directly to them and captures exactly what they've felt.

For me, if that were the case, I'd be a die hard fan of instrumentals.

As much as I love Bruce Spriingsteen, there's no doubt that he's not singing to me or about anything that I know or can identify with. I'm just a big fan of unbridled sweat stains.

"I see you walking down the street, pushing that baby carriage at your feet'" is a line that I can play back in my head for hours at a time, yet it means nothing to me.

"My father said right before he died that true true love was just a lie."

Again. Nothing.

Hello Volatility my Old FriendSimon and Garfunkel come as close as anyone that I could identify with other than the fact that I can't sing and I never had any friends to disharmonize with on the streets of the city.

Garfunkel on the other hand did have a couple of solo hits that seemed to speak to me, but more than likely it was the hair that I idenitfied with.

Now that he's old and has male pattern baldness, I won't look nor listen in his direction.

For me, volatility is far from the "darkness" that the original duo known as "Tom and Jerry" sang about, except that I do think of it as my friend.

Friendship is a strange thing, because even arch nemeses somehow perversely become friends, if only because of the years upon years of battling with one another, and the mutual understanding and respect that ensues. At least that's the image that's painted in "The Fugitive," and "The Pink Panther."

Personally, I think that years of battling would only deepen the anger and hatred.

The recent friend, Green Mountain Coffee Roasters and Starbucks just had a falling out and then just as quickly had a reconciliation, just yesterday.

Friendship is great and quantifiable, as Green Mountain went up about 13% after Starbucks announced yet another initiative with their insipid coffee making friends.

But then, Starbucks CEO Howard Schultz was on air after the annual meeting and despite saying nothing but good and warm things about his friends in Vermont, discounted it all as he quickly changed his tone and cadence with the perfect use of the word "however," as he transitioned to a more bubbly discussion of Starbuck's upcoming venture into coffee hardware.

Whatever happened to Simon and Garfunkel, anyway?

Everything in my world changed on January 9th, 2012. That was the first day of the new trading year that I started a trend of under-performing the market.

The first week of January was basically like all of the previous 4 years.

Those were the years that volatility  was here. Those were the years when markets would as easily go up 100 points one day as go down 100 points the very next, or sometimes two or three times in a single day.

Those were the days that I might sell and then buy back call contracts on Freeport McMoRan two or three times in a day.

For many, volatility represented "darkness" as it introduced uncertainty and fear.

The past few days saw early morning returns to volatility only to use those gains to tease me, as they disappeared as the days wore on.

This morning was different, at least through noontime when I began pounding away.

And then I started writing today's blog.

Sorry, couldn't resist.

What I also couldn't resist was selling some more call contracts on a portion of my ProShares UltraShort Silver ETF holdings. Still, after one trade earlier in the week, the position is still woefully under-hedged, with about 70% of the shares sitting out there on their own, but the very same shares that casued me to under-perform, have in the past two weeks started leading me back.

Like everything else that I own, I really don't care whether it goes up or down in price, as long as it moves somewhere and then back to where it started, over and over again.

Imagine being perennially drunk or having some organic destruction of your brain.

Sort of like, "these are your stocks. These are your stocks with Alzheimers."

All of the opportunity to create income from selling call options or from selling puts comes from the volatility.

As volatility has fallen I've found myself not only under-performing, but also venturing into more risky positions.

In the past, I might play around with 5% of my holdings and maybe get into something a bit more speculative than what I considered as my "Old Reliables," but these days, in search of premiums I see a portfolio with the likes of MolyCorp and Green Mountain.

Money makers, yes, but at a price. They're not really my friends.

That price is that at any moment their bottoms could fall out and even with all of the weekly option premiums in the world, climbing back to ground zero would be a difficult task.

In the time that I've held Green Mountain, it's taken quite a few hits, but the period that its done so has been long enough that the premiums have added up.

As much as volatlity is my friend, I've also come to realize that my nemesis, the assignment of shares, is also my friend.

As much disdain as I have for people that seek to make a quick killing through the leverage that option purchases offer, I realize that neither of us could exist without the other.

Where would Wile E. Coyote be without the Roadrunner? What would ever happen to him if he caught his prey? Would life even be worth living?

So as bad as those days of great volatility may have seemed on the surface, all of the uncertainty and all of the gut wrenching losses (and gains), where would we be without it?

If anything, volatility brings us out of the darkness.

Without the volatility, in fact, there's even more uncertainty. As stocks seem to take a slow climb in a single direction, at some point everyone has to start believing that the bottom will fall out.

In that situation, those that continue buying in the market consider themselves to be contrarians and those that sell the market, in the face of the continuing climb, consider themselves to be contrarians.

Obviously a set of circmstances that would throw the universe off of its equilibrium, just like when both Dr. Richard Kimble and Detective Gerard believe that they are the good guy.

For one, I don't mind looking at paper losses. How else could I explain holding those UltraShort leveraged silver ETF shares for the past couple of months.

Well, yes, there is stupidity, but I have a reasoned approach to ignoring the traditional tenets of Bernard Baruch.

So welcome the volatility. He is your friend.




Check out Recent PortfolioTransactions and Transaction Performance 


Recent Trades Security Type Action Type
March 22, 2012 ZSL Call STO Weekly
March 21, 2012 GMCR Call STO Weekly
March 20, 2012 MS Put STO Weekly
March 20, 2012 ZSL Call STO Monthly
March 20, 2012 MCP Put STO Weekly
March 20, 2012 BP Put STO Weekly
March 20, 2012 SLV Put STO Weekly
March 19, 2012 VXX Call BTC Weekly
March 19, 2012 CVC Call STO Monthly
March 19, 2012 MOS Call STO Weekly
March 19, 2012 MOS Stock Added
March 19, 2012 MS Call STO Weekly
March 19, 2012 KSS Call STO Monthly
March 19, 2012 KSS Stock Buy
March 19, 2012 KSS Put STO Monthly
March 19, 2012 VXX Put STO Weekly
March 19, 2012 VXX Call STO Weekly
March 19, 2012 VXX Stock Buy
March 19, 2012 MCP Call STO Weekly
March 19, 2012 CHK Call STO Weekly
March 19, 2012 ZSL Put STO Monthly
March 19, 2012 AFL Call STO Monthly




Apple Embraces Chinese Communism


We all know that corporations are people. The United States Supreme Court made that abundantly clear and the equally abundant political ads, courtesy of the Super-PACS are testament to the privilege of being a person.

Best of all, the beneficiaries of corporate largesse can wash their hands of all responsibility, as they must have an arm's length relationship with their friend, the Super-PAC.

It's so nice to be able to keep a straight face while totally disowning some egregious allegation or claim.

It may not seem as if its a privilege to be a viewer, but someone has to pay the price for someone else to have rights.

Apple is a person among persons. WIth a market capitilization is large as it is, it definitely warrants attention when it does anything.

Today it shook the ground enough to even get the attention of its co-founder, Steve Jobs.

The singular issue of the day was the Apple decision to offer a meaningful dividend and purchase back some $10 Billion in shares, which at its current rate of climb would be about 12 shares.

Apple Embraces Chinese CommunismThe certainly not something that Mao Tse Tung or his successor Mao Zedong, would have done in his lifetime.

In fact, the announced dividend, if paid in $1 bills that were laid end to end would circle the globe six times. If paid in Chinese Yuan it would also circle the globe sx times, but only because the size of their note is artificially pegged to our dollar's dimensions.

The truly amazing thing is that if you followed that trail of singles around the globe again and again, you'd likely never run into a single Research in Motion Playbook owner.

That fantasized fact may be somehow related to Apple's incredible recent success.

But how do you deal with such success, especially when the underlings get restless?

Just thrown a curveball, Apple has emerged unscathed as it turns out that the Chinese FOXConn controversy may have also been a fantasy. Apple has never been accustomed to being scrutinized or criticized.

In size, impact and imperiality, Apple is China.

When talk comes of a Chinese hard or soft landing the world economy quakes. When China needs oil, copper or rare earth minerals, the rest of the world literally pays a price. Their suppliers pay as price as well, mortgaging their humanity and resources for the immediate gift of money and jobs.

When Apple needs components they need them in great volume and effectively control the availability of those components to their competitors.

But that's just the price of doing business When they abruptly change component suppliers they leave a spoiled landscape, making large swaths of Africa resemble West Virginia.

But that's the price paid for the right to engage in competition. If not Apple, certainly someone else with a vision and 5 year plan.

What China has learned is that prosperity pushes the longing for personal rights, freedom and democracy off of the radar screen of its own citizens.

That makes it a win-win situation.

How does China keep its more than one billion citizens happy and not clamoring for change at the top, or more importantly changing the system completely?

Certainly not by keeping them on the farm.

Money makes people happy, despite what the old adage says. You can buy happiness. And happiness diverts attention.

Steve Cook has learned just that, but he's dealing with a citizenship that left the farm long, long ago. Simply seeing stock gains on the order of magnitudes in insufficient to keep the peons sated.

Increasingly there has been noise calling for change. The kind of change that Mao and Steve Jobs may very well have considered as sacrilegious and an affront to the vision.

Granted that Mao didn't believe in ownership and consumerism, and sure, Steve Jobs made consumerism "cool," but how would each have responded to the call for dividends, stock buybacks and splits?

No doubt  that Mao would have wanted to see the dismantling of the corporate giant and return of its assets to the people, but that was so yesterday. Besides, Mao's concept of returning assets to the people was purely for show.The government was the people and they lept everything.

Today, Chinese corporations are global and despite the appearance that they may be independent, nothing can be allowed to function without the central government's tacit approval. Sure, the people may hold shares, but those shares can all become worthless at a whim of the government or at the discovery of its accounting practices.

Except that great wealth is tied up in those shares and companies and great wealth keeps the citizens pacified.

With noise coming for change in Apple's stewardship of its cash hordes, the memory of Steve Jobs had to be discredited, just as Mao has become an anachronism that stands in the way of progress and coould no longer be counted upon to control the masses.

And so change came to both.

Today it came to Apple, fortunately, bypassing the need for a Cultural Revolution.

By really, did they bypass the cultutral revolution?

Although there are no bodies scattered over the landscape, the ideas that were at the core of the "business" of being Apple were discredited.

In China, the first sign of discredit to the memory of the founder were such things as refrigerators.

Dividends are Apple's answer to refrigerators.

In China, a refrigerator was wonderful, but then you neede to have the means to put something into it, so the people were not satisfied for long.

Unlike giving a peasant the opportunity to buy their first refrigerator and then creating new demand for the items necessary to fill that refrigerator, dividends are the test of trickle down economic theory. Since the likelihood is that current owners of Apple shares are probably of greater means than those that could not avail themselves of ownership, it would be reasonable to expect that the dividends would work their way back into the economy.

I'm not of that belief. Of course, I also don't own shares of Apple, having lost them to assignment more than $100 ago.

Without a doubt, the real winners are the federal and state governments.How can they lose with dividend increases?

In that regard, the dividend declaration is realism put into play in an effort to safeguard the enterprise.

After Tiananmen Square something had to give.

After the tragically early passing of Steve Jobs something also had to give. Sacrificing the culture in order to save it from itself.

Now, everyone is happy.

I was especially happy today, as long as I didn't think about the shares of Apple that I could have been owning, had I not let my pessimistic self take root.

Part of the happiness derived from not only making lots of trades today, but still having anough cash on hand to pick up any bargains if they should materialize.

Even better, for some inexplicable reason, more than half of my shares in Mosaic and Chesapeake Energy were not assigned and for some shares, such as Kohls and Mosaic, I was ablt to repurchase assigned shares at lower prices.

As far as following through with this past Weekend Update game plan, I did purchase shares of the Barclays SHort Term VIX ETN, sold calls and sold puts. I probably should have waited another day to do that, as the VIX took another hit today, as did the ProShares UltraShort Silver. I did, however, buy back the VXX calls that were sold earlier in the morning to lock in profit.

Small consolation. Like getting a dividend and saying goodbye to growth.

Of course, despite my happiness that I was off the hook for the previous month's puts on those shares, I couldn't look the other way when I saw the premiums on the $10 April puts and will sweat it out again this month.

Szelhamos didn't like Communism and fled Hungary during its revolution and never looked back.

I know with a great deal of certainty that he never owned, no ever used an Apple product, but he certainly knew who Mao Tse Tung was and who Steve Jobs was. I also have no doubt that he would have admired Steve Jobs for his creativity and entrepreneurial spirit in the same way that he had disdain for Mao.

Convergence theory, which was popular at one time would have predicted that Mao and Jobs would have gravitated toward one another, despite their differences. Actually, because of their differences.

As much of a capitalist as Steve Jobs was, it's not likely that he would have cjhosen a redistribution of wealth to appease the masses, even if he was a believer in trickle down.

Sometimes a capitalist has to go Mao






Check out Recent PortfolioTransactions and Transaction Performance 


Recent Trades Security Type Action Type
March 19, 2012 VXX Call BTC Weekly
March 19, 2012 CVC Call STO Monthly
March 19, 2012 MOS Call STO Weekly
March 19, 2012 MOS Stock Added
March 19, 2012 MS Call STO Weekly
March 19, 2012 KSS Call STO Monthly
March 19, 2012 KSS Stock Buy
March 19, 2012 KSS Put STO Monthly
March 19, 2012 VXX Put STO Weekly
March 19, 2012 VXX Call STO Weekly
March 19, 2012 VXX Stock Buy
March 19, 2012 MCP Call STO Weekly
March 19, 2012 CHK Call STO Weekly
March 19, 2012 ZSL Put STO Monthly
March 19, 2012 AFL Call STO Monthly
March 17, 2012 AFL Call Expired Monthly
March 17, 2012 CHK Call Assigned Weekly
March 17, 2012 CVC Call Expired Crumbs
March 17, 2012 FMCN Puts Expired Monthly
March 17, 2012 KSS Call Assigned Monthly
March 17, 2012 MCP Call Expired Weekly
March 17, 2012 MCP Put Expired Weekly
March 17, 2012 RIO Call Expired Monthly
March 17, 2012 RIMM Call Assigned Crumbs
March 17, 2012 S Call Assigned Monthly
March 17, 2012 XLE Call Assigned Weekly
March 17, 2012 ZSL Put Expired Monthly
March 17, 2012 GMCR Call Expired Crumbs
March 17, 2012 GMCR Put Expired Weekly
March 17, 2012 MS Call Assigned Weekly
March 17, 2012 ZSL Call Assigned Monthly
March 17, 2012 ZSL Call Assigned Monthly




Is 2012 is the New 2011?

I've never been one to follow fads. I probably wouldn't even recognize the most outrageous of  fads even when at its full height.

The New Kids on the Block will be collecting social security before it dawns on me that they have come and gone.

I do recall occassionally having wondered why women weren't wearing lime green jump suits as much as they used to, but would never have noticed in real time that orange had become the new lime green.

Or maybe it was the other way around and lately, as it is, I haven't been seeing quite as many of those orange jumpsuits, either.

2012 is the New 2011For the most part social trends escape me from a cognitive perspective as well as from an application perspective. My inability to fathom the basic tenets that belie chart analyses are consistent with the fact that I'm "trend challenged."

But I am looking pretty sharp in my new Nehru jacket and that has to be worth something, especially in 1968 dollars.

I did notice, however, that on Monday we were poised for a triple digit loss, which would have been a first for 2012. As it would turn out, all bout 15 points of that loss were erased and 2012 just kept right on being 2012.

I had also noticed that the smartest of the smart had been calling for a return of the 2012 gains for the past 3 weeks. They did so based on the well known statistical model based on the spins of a roulette wheel, that demonstrably indicate a string of reds are highly likely to be followed by a black.

You can bet the house on that one.

But it was hard not to notice that Tuesday's open was going to be something new and harken back to something old.


That was a time, long ago, when markets would move in  large swings from one moment to the next, without readily apparent coercion.

Nostalgia is such a great thing. Even the insipid and tasteless can see wonderful in hindsight.

With the market turnaround yesterday, most reasonable people would have turned off their computer feeling quite good about the days' action and what it seemed to portend for the near future, especially since only Israel and Iran were on the "unwanted events" radar screen.

I had a reasonably sound sleep last night and noticed no unusual activity. There were no siren blasts nor unexpected bright flashes of light over the horizon. But just to make certain, I did check through my usual and reliable sources and was able to confirm that there was no over night nuclear holocaust or other worldwide natural disaster, before I went down the stairs.

The canary, however, was dead, but I didn't see the connection.

So of course, the expectation would be that today would just be another faceless day of trading. Just another in a long string of benign 2012 days.

They may have been boring days, but there is something nice when no one really gets hurt between the hours of 9:30 AM and 4 PM.

Bad enough that the market ignored that expectation as I saw the morning's futures indicating a triple digit loss, but based on the performance of my Aflac shares, down nearly triple the loss of the overall market, I would have been justified in believing some other horrible nature disaster occured in Asia.

Maybe the duck died. Maybe origami causes cancer, but I was already prepared to contribute to the relief effort.

But no, all was quiet and disaster free, even though it appeared that no one bothered giving the "all clear" to the precious metals markets.

So what happened? Why were we suddenly transported back to those wildly gyrating days back in 2011? Why were our markets hurled all the way back to levels last seen a couple of weeks ago, if our tribe elders' recounting of ancient history is to be believed?

Having listened attentively to the various experts, I'm of the belief that my own theory for the sell off has validity equal to theirs.

In fact, talk about trend and talk about correlation. Even I could see this one a mile away.

It seems pretty clear to me that every time Rush Limbaugh makes a public apology the market tumbles. What better example than today, fresh off the heels of yesterday's apology to the slut from Georgetown, who apparently wants the government to pay for her satin sheets and Alize.

His words. Not mine.

What else could it be? What else has changed so drastically in the past day to warrant a return to 2011? What were the smartest among us saying?

Worries about Greece? How is that new?

Not only is that old news, but the worry that the latest plan will meet some unpredicted obstacle has been entirely predictable throughout the lengthy process. Before you know it, the Europeans will be ready to intrerrupt yet another summer beach vacation to deal with the same Greek fiscal crisis.

Decreasing GDP growth in Brazil? Why is that a surprise? It's not as if a broken Conga Line can't be readily repaired.

Just as anectodal evidence of an improving economy in the US precedes the official numbers, last I heard, Brazil was the democracy that China isn't. Information on the streets doesn't have to be smuggled out. People are allowed to talk.

Sure, China stating yesterday that it's GDP may be as low as 7.5% came as a surprise, but that was yesterday.

One expert suggested that we needed 24 hours to digest that news and that it was only now weighing heavily on our markets.

Of course, yesterday, another expert commented that the market's late day recovery came as a result of having time to digest the Chinese GDP news and the realization that it wasn't really very bad.

That digestion excuse was later used by Limbaugh, as well. He claimed that he hadn't realized the extent and nature of his comments, particularly as they came as a spur of the moment stream of consciousness over the course of three days.

But I suppose his girth requires more time to digest three days worth of non-stop verbal assault.

Even with today's continued drop in the precious metals, my ProShares UltraShort Silver, although disproportionately too large a portion of my portfolio, was nowhere near large enough to offset everything else, most of which, unfortunately is not hedged.


Looking back at things, it seems that both lime green and orange were really pretty hideous seasonal choices, but there's no doubt that someday, maybe even in my lifetime, those colors will be the "new black."

But why return to 2011?

Even though it was marginally in the black and even though the buy-write strategy was a winning one for 2011, according to Barrons, 2012 has been so much kinder to the psyche.

That comes from me despite the fact that I continue to trail the overall market in 2012, after beating it nicely in 2011.

I'm happy looking forward, so there's not much reason to look back.

On the other hand, I did come in second place in a hula hoop contest at my then future mother-in-law's 60th birthday party, taking full advantage of that bit of nostalgia to garner some needed brownie points.

Had it not gotten entangled in that Nehru jacket, I may have placed first.

Somehow, it still all worked out.

So whatever becomes of today and whatever pattern may be created beginning today, I'll remain oblivious, as long as the sirens stay silent and the glow stays low.

There's always tomorrow or 2013. Whichever comes first.




Check out Recent PortfolioTransactions and Transaction Performance 


Recent Trades Security Type Action Type
March 5, 2012 FCX Stock Added
March 5, 2012 CVC Stock Buy
March 5, 2012 MOS Stock Buy
March 5, 2012 MS Stock Added
March 5, 2012 XLE Stock Added
March 3, 2012 BP Puts Expired Weekly
March 3, 2012 FCX Calls Expired Weekly
March 3, 2012 FCX Calls Expired Weekly
March 3, 2012 GMCR Puts Expired Weekly
March 3, 2012 HAL Calls Expired Weekly
March 3, 2012 MS Calls Expired Weekly
March 3, 2012 RIG Puts Expired Crumbs
March 3, 2012 RIMM Call Expired Weekly
March 3, 2012 CHK Puts Assigned Weekly
March 3, 2012 GS Calls Assigned Weekly
March 3, 2012 HAL Puts Assigned Crumbs
March 3, 2012 FCX Puts Assigned Weekly
March 2, 2012 MCP Call STO Weekly
March 2, 2012 MS Call STO Weekly
March 2, 2012 GMCR Call STO Weekly
March 1, 2012 RIG Put STO Crumbs
March 1, 2012 HAL Put STO Crumbs
March 1, 2012 FMCN Put STO Monthly
March 1, 2012 KSS * Call STO Monthly
March 1, 2012 KSS Stock Buy




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