Author: TheAcsMan

I love extrapolations and projections, so based on this past week, I’m getting ready for a great 2012.

Even though this was a holiday shortened trading week, I definitely got my fill of thrills.

I’m not exactly certain how I should categorize the kidney stone that helped to welcome in the New Year. I guess that not all thrills are positive ones, but at the very least it didn’t cause me to miss anything other than some pain free stretches of time. It also seemed odd sitting in my usual perch on the La-Z-Boy without being able to extend the leg rests.

At that point, it’s just a chair, so what’s the point of a La-Z-Boy?

The unexpected probing was also an unwanted thrill, but this time the prober did not at all look like Woody Allen and had no sense of humor about him.

Slam, bam, than you man and that was it. No dinner, no drinks and certainly no conversation.

What I found somewhat unusual was not paying in cash to have my asets handled so unemotionally.

Sort of like the relationship with your stockbroker.

I suppose that the kidney stone is something that I’d prefer not to extrapolate. The thought of giving birth to a 7 pound bundle of crystal by years’ end isn’t as appealing as it may sound.

But how could you not love a week when inserted between every verbal comma was mention of the Hungarian currency, the Forint? With all of the discussion of how trivial the Greek economy is in the big picture, imagine where Hungary sits.

Actually it represents about 0.8% of the EU’s annual gross domestic product while representing 2% of its population. In contrast, its one time partner in two wars, Germany, has about 20% of the GDP and 16% of the population.

The Greeks, who have been maligned for their sloth and lack of industriousness, actually have a per capita GDP that’s 40% greater than that of my hometown, Hungary.

But maybe that metric is as meaningless as the retail shopping metric that I proposed to Telsey and Associates.

In hindsight, no pun intended, the use of aerial views of mall bathrooms and the quantittaive analysis of the number of toilet paper plies utilized, giving a Shoppers Hygiene Instore Tracker, was not adequately validated. Who knew that people would be offended to learn that the personal posterior hygiene of a Walmart shopper was less than that of a Nordstrom shopper.

Although closely related to the Forint in my lexicon, my next thrill came from a mention received in a Forbes magazine article by Eric Jackson. The article “Crowd Sourcing the Top 2012 Market and Stock Tips’” was a snapshot comparison of 2012 predictions solicited on Twitter. Apparantly, some of the Twitter users have a version that allows for 2000 space messages, but I was still thrilled to have the opportunity to put my 140 spaces in and to be included among a list of pretty well known people, who may be wondering why security let me through.

And the hors d’oeurves? Excellent. Worth crashing the party.

With all thrills, there has to be the eventual period of descent. That’s the roller coaster ride we are on all of last year.

For me, that descending part of the roller coaster ride was Netflix. After the speculation that a newly led Yahoo! might be a buyer of Netflix, its shares went soaring more than 29% over 3 days, never even beginning to question the insanity.

Of course, I had sold $72.50 call options and seeing shares go from $71 to $86 took a little bit out of my otherwise unbridled joy. Hence, the rant earlier this week.

The particular lot that was assigned was bought at $72.03 on December 27th. That lot, had actually replaced a previous one that was assigned at $72.50 the previous Friday, which had been purchased for $66.16 on December 5th.

So in addition to the $6.81 per share capital gains on that inital lot, the options premiums received during the 5 weekly cycles contributed an extra $5.14 per share.

Still a long way away from $86 though, but the reason it’s easy to say “never have regrets” is that these kind of opportunities always come back. It’s not likely that Netflix is headed back to its original heights.

The laws of physics just won’t allow that to happen.

Now, I do understand some of the physics behind roller coasters, drops, velocity and acceleration, although I choose to not even attempt to understand the application of differential calculus to the process of options trading. But from a pure respecting the laws of physics point of view, following the fall with the Netflix experience, there should have been no way to get to a point that was higher than where I had originally soared, but if the mind obeyed the laws of physics there would never be any fantasies.

There’s a reason the saying “it’s all downhill from here'” exists.

All during the week, the hosts of “Street Signs” on CNBC had been asking viewers to send in their recommendations for the 2012 “Word of the Year'” as it was time to replace “Hopium” the 2011 word.

I spent a good part of 2011 watching Street Signs in 2011 and especially liked the decision to pair Brian Sullivan, Mandy Drury and Herb Greenberg, but to tell the truth, I don’t recall how “Hopium” crept in to become the rage of the 2 PM hour.

I don’t know if there were many other entries besides my own. Among my losing submissions were “shopandippity” and Eusaster.” 

I won’t even bother giving definitions for those losers.

But at the end of Friday’s show, with requisite drumroll, they announced their word of the year, “Eurosis.”

My word.

Whoever said after the competition results were in “there are really no losers” was a loser. And since Eurosis is sort of lame, you can only imagine what the rest must have been like.

Since it was the winner, I’ll give the official definition. 

Eurosis. The fear of European Union monetary policy and its effects on American interests. It’s a less severe form of “Sarkozis,” which is a fear of monetary policy decisions promulgated by the President of France.

I like “Hopium” better.

Still, as they say, a win is a win, regardless of how sloppy.

The tradng week ended with the kidney stone still in place but without the intense pain. From my perspective, it’s as if the roller coaster’s end of the ride was at a different and higher station.

I know that the kind of extrapolating that I’d like to do isn’t possible. Not that the laws of physics control the markets, but greed and fear have every bit as much to do with market movements, as real data do.

This week starts quarterly earnings reporting.

What I have extrapolated, based on the past quarter is that I will no longer try to play a stock right before earnings.

Again, no physical laws involved, just a simple case of “fool me once.”

What a week.

As Sunday is the traditional start of the week, at least for my purposes, this new week has gotten off to another nice start.

Today, I drove my son to New York and dropped him off at JFK airport, as he goes on a trip to Israel, as part of a great program called “Birthright.”

A few days ago I didn’t think that I’d be able to make that 9 hour round-trip drive, due to the kidney stone. Hard to believe that an errant finger could have jostled it free, especially from the other end, but whatever, I was grateful for the opportunity.

Part of the reason that I’d wanted to drive him was to stop at a Kosher-style restaurant, Harold’s Deli, that was featured on the Food Channel show “Man Against Food.”

A big part.

We had a great time trying to stuff ourselves and barely being able to make a dent in the plated offerings.

I got back home just in time to eat some of the doggie bag remainders, still leaving plenty for tomorrow.

Happiness was one last fat filled meal before tomorrow’s procedure and more jostling of personal assets.

Luckily, the procedures aren’t scheduled until the early afternoon.

I say luckily, because Monday starts with me needing to find a home for about 25% of my portfolio, so there’ll be some more jostling of assets going on.

Yes there’ll be cash involved, but at least there will also be that missing emotional attachment.

Ah, it feels so good to have those assets moved around.

 

Check out Recent PortfolioTransactions

 

 

Today’s Trades	Security	Type	Action	Type
January 6, 2012	FCX	Option	Expired	Weekly
January 6, 2012	MOS	Option	BTC	Weekly
January 6, 2012	MOS	Option	Assigned	Weekly
January 6, 2012	AXP	Option	Assigned	Weekly
January 6, 2012	CAT	Option	Weekly	Assigned
January 6, 2012	AA	Option	Assigned	Weekly
January 6, 2012	GMCR	Option	Expired	Weekly
January 6, 2012	NFLX	Option	Assigned	Weekly
January 6, 2012	AMZN	Option	Expired	Weekly
January 6, 2012	BP	Option	Expired	Weekly
January 6, 2012	CAT	Option	Assigned	Weekly

  

There’s an expression that combines “clarity of mind” with “clarity of passion.”

“Clarity of mind means clarity of passion.”

Having watched enough episodes of Dateline over the years, I’m not certain that clarity of mind is a necessary pre-requisite for clarity of passion.

Given my current state of pharmaco-reality, I’m not certain that I can negotiate the thought process necessary for the whole “necessary and sufficient” exercise. Certainly, you can possess clarity of mind, yet find yourself without the ability to recognize the passionate nature of anything.

Anhedonism.

People, even smart people, seem to know exactly what they want, and often it is passion for passion’s sake and they then concoct incredibly stupid plans in order to requite that passion.

If you have to look up the word “hubris” today’s Daily Dilbert won’t make too much sense, even if you look up its definition. Otherwise, it’s very funny, as usual in its simplicity.

Clarity of mind is certainly not pre-requisite for clarity of purpose, either.

Take the past few days for example when a kidney stone was making its unwelcome re-appearance.

My mind, which is usually quite clear and reasonably analytical, refused to recognize the symptoms, even though I’d gone through the lovely experience before.

The mind muddled the purpose, though. My purpose should have been to take steps to avoid exquisite pain, rather than to ignore the obvious and expect the irrational.

I spent last night and this early morning in the emergency room of our local hospital. Sugar Momma happens to work in the emergency department of that hospital and it was she that convinced me, as I was writhing on the floor, that I should bite the bullet and make the journey.

Now, given that she works in the psychiatric section of the emergency room, deep down, I suspected that this was some sort of scheme for having me involuntarily commited.

I was ready to rally the rest of my family around me in my defense, but despite the pain induced delerium, I had enough reason left to realize that they wouldn’t have a lot of credibility.

At least I think this is my family.

Maybe Sugar Momma was right. She was especially questioning of my sanity, when while laying on the gurney, I was able to let the FourSquare world know that I was awaiting the joy of giving birth to a 7 pound delight.

But you may not be able to fault her for otherwise questioning the screws.

After all, why would a perfectly capable person sit on his behind all day long and sell calls on stocks that are rising for no apparent reason?

What kind of clarity of thought was behind writing calls on Visa or Green Mountain Coffee, right before each really hit their meteoric rises?

My purpose and passion were clear at the time and were one and the same. It’s just that occasionally the reality or signs leading one in the appropriate direction are either ignored or mis-read.

In hindsight, I can’t necessarily say that the decision to purchase shares in Amazon, Green Mountain Coffee Roasters and Netflix, in quick succession just prior to the previous earnings reports were reflective of clarity of mind.

Hubris?

Probably.

Certainly, if you exclude the call options premiums, the performance of all three haven’t met my defined purpose.

“Making profits out of nothing at all” was the refrain always going through my mind. That’s a well defined purpose, just not always met.

While waiting for some final word on what was to come next, my concern was whether I’d be able to make it home in order to assume my La-Z-Boy position and trade, as the opportunities warranted.

Instead, laying in the emergency room I just kept hearing the physician say, over and over again, “Everybody must get stoned.”

Funny stuff.

In the past, I’ve not done well with physicians who thought they were stand up comedians, having received my first rectal examination from someone who had great reason for looking like Woody Allen.

No, it wasn’t an even more perversely behaving Woody Allen impersonating a physician. It was his cousin, impersonating a comedian while doing the exam, which was made much more unformfortable by the literal and figurative punchlines.

I was unable to find pleasure in neither the examination, nor the jokes. Again, anhedonism or the working title for “Annie Hall.” I don’t think that Dr. Gnarlfinger would have appreciated the reference.

I don’t know if this morning’s emergency room physician was making a joke about how kidney stones are inevitable or whether he was referring to the prescription for Percocet that he was pinning to my sweatshirt.

Or, it’s very possible that it was all an illusion, as the actual suggestion for that tie-in came from Lee Grindinger and I just felt a need to somehow work that in to the theme.

We’ll never know.

But I do know that Lee is a Forex trader, happily retired in the Virgin Islands. If he’s to be believed, he also enjoys running around in the nude during the winter solstice.

I would do the same, but I’m tired of getting those black and blues around my cankles due to excessive dangle.

Among the nice things about Twitter is that you can actually “meet” nice people, or in this case, we were “introduced” by TradeFast, another one of those nice people, but who does the investing thing for a living. He has to deal with people and their money. That’s not easy. I’ve saved a Percocet for him.

Ultimately, there was reason to believe that my physican was referring to pharmacological management for pain, as a prescription for the narcotic came with the usual advice regarding driving and the operation of heavy farm equipment.

What he didn’t tell me was whether I’d be in a proper frame of mind to responsibly trade stocks today.

It was bad enough that I’d already tried to barter the entirety of the prescription to E*Trade to offset trading costs, but I should have given up before asking whether I could margin the pills.

The one thing that I can say about the Percocet is that it made it much easier to discern Twitter sarcasm.

Maybe it was just coincidental, but a Tweet from Reformed Broker “What’s great about this ADP report today is how perfectly it always confirms BLS numbers” was so much easier to recognize as having been sarcastic as the screen fonts seemed to take on severe skew.

And when did Twitter start talking Tweets back to you?

So trading didn’t seem like a good idea.

Mosty of the time, I take a very short term approach, especially now that the weekly options are so readily available.

This Friday, I expect to have holdings of just a few days assigned, such as Freeport McMoRan and American Express, in addition to others.

But one of the longterm plays, the Sirius Satellite Radio puts that I purchased in July, will expire in 2 weeks.

Lo and behold, it was up 10% today, putting it above the $2 strike price.

Now, Momma (not Sugar Momma) always told me never sell puts on a stock you wouldn’t otherwise mind owning. She actually told me that in Hungarian and was probably thinking in terms of the local Forint currency.

But still, that lesson didn’t go wasted on me.

Back in July, I thought that Sirius was a stock that I wouldn’t mind owning at $2 at the end of January 2012.

But now, as I look at the call premium for February’s Sirius $2 call, I’m not certain that I could justify owning the shares. WIth 6 weeks to go until the February options would expire, the $0.12 premium for the $0.04 in the money stock just doesn’t seem worth it.

But my drug clouded my just couldn’t make the logical decsion.

“Making profits out of nothing at all” was obvious, but buying and selling is pretty much like heavy farm machinery.

But who gets hurt if I make a bad decision behind the mouse?

Only my heirs, as I have no plans to spend the money other than perhaps for new racing shoes and an athletic supporter.

Hmm. Only for my heirs. Have you seen that motley bunch?

With my head spinning, yet the pain somewhat better, I realized that I neither filled the prescription nor had I taken the 1 tablet that I was sent home with, that the conspiracy theorists posit was given to get me hooked.

Hmmm.

With that realization, clarity replaced delusion and I closed out the Sirius position.

Netflix? Yesterday’s rant, when it seemed the world lost clarity and instead focused on unfounded rumor? Eh, not so much, as it only gave back a small bit of yesterday’s unwarranted, not short selling fueled run-up.

Clarity is fleeting, as are strategies and profits.

Hopefully, the stone will follow the same path.

 

 

Check out Recent PortfolioTransactions

 

 

Today’s Trades	Security	Type	Action	Type
January 5, 2012	SLM	Option	STO	Monthly
January 5, 2012	SLM	Stock	Added
January 5, 2012	SIRI	Option	BTC	LEAP

  

I must be fixated on “oxymorons,” just having written about them a few days ago.

Had it not been for a Tweet from Marek Fuchs of TheStreet.com regarding his attendance at a Fordham versus Harvard college basketball game in the Bronx, I’d never have known about the event, despite the fact that I’m an alumnus of both.

On the other hand, I did know that CNBC was broadcasting live interviews from within Goldman Sachs and was wondering whether a high school classmate, CFO David Viniar, would appear.

To his great credit, absolutely nothing untoward was ever said about him throughout the slew of slings and arrows directed at Goldman’s higher offices. Sometimes, keeping a very low profile is a good thing, so it’s not overly surprising that he didn’t make an appearance.

Fuchs, who somehow finds the time between filming his entertaining and educational series “They Just don’t Get….” for TheStreet.com and his parental responsibilities, Tweets with regularity. At last night’s game his Tweets ranged from wanting his money back, despite the fact that his ticket was free and it being one of the most exciting games he’d ever seen.

He also was the halftime entertainment and penned an article for a local newspaper, while simultaneously putting out a fire in the Village of Tuckahoe.

Really. That’s the name. Tuckahoe.

Oh, and did I mention that he was an author?

My guess is that somewhere along the line either the ecstasy kicked in or the game got competitive. I doubt that the halftime sermon alone would have moved him to hyperbole.

When I went to Fordham, there was a general understanding that Fordham alumni went, in disproportionate numbers into the service of the FBI and CIA and in turn, spent an inordinate amount of time investigating Harvard graduates.

Competition. Think G. Gordon Liddy and then think dirty competition.

Great mustache, just nasty competitor who believed that in order to protect our nation from its enemies you had to use the U.S. Constitution for personal rectal hygiene.

Friendly competition is more like the sort Inspector Clouseau engaged in with any of the adversaries that he faced, yet nonetheless, respected.

The adversaries, in turn, received amusement for their troubles.

I really don’t know who won last night’s competition, but I doubt that it was friendly.

There’s a big schism between “The Bronx” and Cambridge. “Jenny from the Block” and William F. Buckley are reasonable poster children of their respective homes, just add some needle tracks to the former and ample elbow patches to the latter’s images.

Whereas the stereotype of the Harvard man would have him asking “may I top you off, my good fellow?” the Fordham man was just as likely to ask “Yo, you gonna finish that least slice, or what, Mofo?”

With the  conclusion of the Iowa Caucus, whatever that is, it’s clear that the competition for the hearts of living room ballot casters, was anything but friendly.

Newt Gingrich, given plenty of opportunity to soft peddle his assertion that Mitt Romney was “a liar,” acted in a very unpolitical way. He repeated that Romney was a liar and that he lied everytime someone asked him what he had meant.

I’m not certain that the latter was necessary, as being a liar requires the actual lie, but the emphasis was there for good measure.

That’s very different from the Newt Gingrich of the early debates, when he castigated moderator Brian Williams for seeking to foment dissent among the candidates.

Imagine that? Trying to elicit differences from among the debaters. How un-American is that? At the time, Newt embraced a “Kumbaya” approach to competition, just like in T-Ball.

Everyone is a winner. We’re all Charlie Sheen, at least until the caucus results are in.

A few weeks ago, as Newt was just beginning to show some slippage from the suprising rising poll numbers, he implored his followers to show the world that negative ads don’t work.

For a guy who takes every opportunity to let the world know that he’s an “historian,” he certainly got the history of political ad campaigning wrong, in addition to the historical facts regarding his own past.

So the competition just turned a bit less friendly.

Not able to stand the heat, or perhaps realizing that God really didn’t support her candidacy, Michelle Bachman dropped out of the GOP race.

In a related statement, God, when asked for a comment simply said that “It was him, not her.”

I’ve never been an overtly competitive sort, although my Sugar Momma tells me that I’m fiercely competitive.

Not wishing to fight that assertion, I’ll go along with her assessment of things and instead count on some level of passive aggressiveness to get back at her.

But forget that. These days, the competition in trying to beat the market is all I need.

What makes it especially appealing is that the opponent is nameless and faceless.

Unless I’m in a state of total fiction, I seem to remember that a few years ago there was a website that the user, for a fee, was able to control a gun and then aim and shoot at something. Maybe even a human target, who can remember these sort of fictional memories? I think it was a deer or a feral cow, actually.

The point is, what kind of guilt would you have shooting an individual in total anonymity?

Isn’t that what drives most criminals? At least their expectation that their anonymity will be maintained until the very second that they’re caught.

Each and everyday there’s an objective way to measure how you did in the market, in what really is a friendly competition if done properly.

As opposed to real life, in the market, there’s no reason to really think that there’s a Zero Sum game involved. There’s no reason to think that your fortune is matched in quantity elsewhere, only in an opposite direction.

There’s a commercial that I see on CNBC with some regularity, yet I have no clue what company is behind the ads. But in a nutshell, it’s some sort of hand holding trading academy where you can learn the trade of the trade.

Near the end of the commercial, where the student completes a profitable trade, the instructor says “now imagine how the guy on the other side of that trade must feel.”

All of a sudden, its become less friendly or at least a face has been put on the loser. For me, that would kill it.

Would you really eat veal if you could see the face of that cute calf right in front of you? Okay, maybe that’s not a good example, because veal is so delicious.

But in most everyhting else, anonymity is great. How else do you explain the popularity of the “glory hole?”

But there’s a problem for everyone else that comes along with anonymity.

If an unwarranted rumor causes a crash in the forest and you’re not there to hear it, did it really happen?

Misinformation, disinformation and unverified information are all tools of unfriendly competition that can hide behind the cloak of anonymity or disengaged responsibility.

Today, for example, one of the Najarian brothers, and I will never be able to tell them apart, was referring to the sudden uptick in Netflix, based on the purchase of a large number of forward month call contracts. He then commented how Netflix shares were working their way back from their disatrous fall into the $40’s.

That comment, may or may not have gotten anyone to make a trade, in one direction or another. More likely, the comment by Gene Munster of Piper Jaffry & Co., just a short time earlier that suggested Yahoo!, which also announced just earlier that it will be under the new leadership of Scott Thompson in just a couple of days, was a potential buyer of Netflix.

Problem is, that Netflix never made that drop into the $40’s, although at its nadir following the subscription pricing fiasco, it did get down to $62. Further complicated by some pretty out there speculation.

Now, I’m not saying that there was any vested interest or any personal gain from streaming bad information, but who gets hurt?

Certainly not like the case a couple of weeks ago when Dennis Gartman frontran his clients and announced that he was out of gold, whereas their accounts could only be traded at the end of the month.

Equity go poof.

As far as the promulagtor knows, the victim is usually no one that he’ll ever know, because he’s allergic to pine trees and knows better than to enter into the forest. He’ll never know, that is, unless some aggrieved lunatic confronts him. However, if that person traded merely on the basis of the bad information, he was a lunatic to begin with.

In trading, everyone is your competition and yet no one is your competition.

Why in the world would anyone give away their proprietary secrets, insights or knowledge other than to help push outcomes in the direction of their hopes?

Okay, so that guy is your competition and his clone is on some other station, so escaping them is not that simple.

Whereas in a basketball game ignoring the point guard may carry perilous cost, I increasingly believe that ignoring the Talking Head is necessary for avoiding the same.

It’s not the competitor you know, it’s the one you don’t.

 

 

Check out Recent PortfolioTransactions

 

Today’s Trades	Security	Type	Action	Type
January 4, 2012	ZSL	Option	STO	Monthly

  

 

Maybe I wasn’t listening very carefully today, but this year in the stock market seems to be getting off on the right foot.

For me, that has nothing to do with a 200 point gain, but it has everything to do with platitudes and what is frequently assumed to be the “conventional wisdom” not making their annual appearances.

Okay, maybe the 200 point gain has something to do with it, but I like to think that I’m bigger than that, even though I know that my superficiality won’t take me there.

Specifically, getting off on the right foot means that there was a noticeable absence of anyone getting on the typical first trading day of the year talking points.

In the years that I’ve been fairly addicted to business television the beginning of the year stories are always the same.

Dogs of the Dow, January stock rally, retail sales revisions come in better than expected, Super Bowl Indicator theory and so on.

There’s usually also some human interest story, like the twins born in different years.

Great stuff.

I guess I’m so sensitized to these kinds of stories that the recent nightmare I had made so much sense.

Listening to Dana Telsey describe how this year, once again Chinese restaurants and movie theaters in major metropolitan areas saw 30% of their annual profits maerialize during the week between Christmas and New Years.

So far, there hasn’t even been a summary of best and worst performers, although that has to be related to my inattention.

Although, still, its absence may be plausible. I guess when you can go an entire year and not see anything change in the S&P 500 level, it’s almost as if the year had never happened, other than memories of the vomiting during the up and down segments of the ride.

That’s exactly why you need to sit in the front row of the roller coaster. Staying ahead of the curve works. Sitting behind someone who vomits doesn’t.

Now to be totally fair, I did hear someone refer to the “Dogs of the Dow” theory on Friday, but did so only in the context of pointing out that the list for 2012 looks pretty much like the list for 2011.

That’s not the way it’s supposed to work, so maybe that explains today’s silence. Of course, that silence may make adhering to the theory a good idea, were it not for the stocks involved.

After the past week, which was so utterly boring, it really was nice to see a definitive move, especially in a higher direction, but I pretty much traded myself out for the day after the first 60 minutes.

I’m not usually prone to making New Year’s resolutions, but I did so this year.

The first, has already been satisfied.

I resolved not to send out a single Tweet on New Year’s Day and I kept that resolution, despite the fact that my quality of life was demonstrably  lessened as a result.

I made no other resolutions, so I’m pretty clear for the rest of the year.

There are, however, a few investing mistakes that I’ll try not to repeat in 2012.

The fact that writing calls so religiously has sometimes caused me to miss out on some unexpected stock gains, such as Visa, on two separate occasions, is not one of those mistakes.One of my investing resolutions, year in and year out, is to not have regrets.

Probably the biggest mistake I made was to think that I could time stocks and decide what direction momentum stocks would move prior to announcing earnings.

Since I’ve already made it abundantly clear that I’m a lousy stock picker, why not compound the misery by adding timing to the equation?

Although I’ve very much cushioned the disappointment of Green Mountain Coffee Roasters, Netflix and Amazon with aggressively going after call option premiums and cost averaging down, the investment dollars could have been better spent elsewhere.

It’s not likely that my hope that all three would stay in the current ranges for about 40 weeks would have a chance of occuring. But if it did, selling weekly calls would bring you share cost basis down to about zero.

As much as I tell myself that I like the thrill of the ride and the opportunity to make hedging corrections, life would be much easier if the roller coaster went only in one direction.

In the case of CNBC Fast Money, that direction is downward. Its probably become my least favorite show show on CNBC, although I do like Scott Wapner, who is the new host of the afternoon session. For starters, Dennis Gartman is on far more often than even my tuned out ears can take, although I tend to have the same opinion about the regular panelists.

I still pine for Jeff Macke.

Occasionally, they do have irregulars, such as Ron Insana, who provide added value, as does a semi-regular, Zach Karabell.

I hate it when people say, “in my humble opinion'” as there nothing humble about expressing an opinion, especially my own.

Today, however, there was a gem of a comment that definitely made paying attention a worthwhile pursuit.

Of course, it came from an irregular, Mark Fisher. His softly stated comment was “How can people have opinions on everything?” He further went on to say that if you do have opinions on everything, it’s as if you have no meaningful opinions on anything.

The mystery that plagues me is how Mark Fisher is associated with Dennis Gartman.

When I say “plagues me,” I’m over it already, but his comment was a very refreshing one to hear so early in the year.

As the year wore on, meaning by 1 PM on this, the first day of trading, a corollary to the January Rally story line did pop up.

This one was the observation that as goes the first day of trading for the year, so goes the entire year.

Well, that would certainly be the kind of uni-directional roller coaster that most of us would want to climb upon. I’d whip out the calculator to see how 250 trading days of action like today would extrapolate out, but I don’t think my trusty Texas Instruments circa 1974 calculator can carry through on that many digits.

Although there was a reportedly 60% concordance betwen a positive open to the year and the S&P 500 close, to their credit, the two experts downplayed the correlation, in all likelihood, because there is none, if you use the strict definition.

Or real statistical analysis.

However, one did go on to say that in the very few times that a year has ended perfectly flat, the following years, on average, had a 35% gain.

Since that’s based on only 4 instances, it’s not likely that you’d want to invest the ranch.

But still, with the year getting off to an auspicious start, I’m looking for a year end S&P at 1450.

That would represent a 15+% increase, or as I like to look at it, a rate that would take less than 5 years to double your money.

That leaves me in an even bigger quandary.

For me, the call writing philosophy that Barrons had so warmly embraced, is based on my long term optimisitc outlook that is in turn attenuated by short term pessimism.

That turned out to be a good way to go in 2011, as long as you define optimism as meaning neither up nor down.

But given an outlook for a 15% rise, where does the buy-write strategy fit in, especially if fear of missing out (FOMO) on any rallies is a concern?

That gets me to yesterday’s blog.

I guess that could also count as a New Year’s resolution, in that I did vow to not overthink. Since buy-write got me here, it’s buy-write that I’m going home with.

That was easy.

Today that included selling calls on Green Mountain, Freeport McMoRan, ProShares UltraShort Silver ETF, Alcoa, Mosaic, British Petroleum and Riverbed Technology in addition to buying more shares of the UltraShort Silver ETF, which plummeted in price as silver and gold both rallied, continuing last week’s stunning reversal.

Although I know and understand that you really can’t predict that this will be a great year on the basis of a single day, my optimism was set in concrete as Mandy Drury compared the price breakouts seen today to “zits on a teenager’s face.”

How can you argue with those sort of signs?

That one alone makes it worth paying attention. 

Check out Recent PortfolioTransactions

 

Everyone has probably met someone who suffers from the tendency to overthink everything in life.

You know, these are the people that are obviously very bright, but often get paralyzed at the prospect of making a decision. These are the very same people that do poorly in school and especially on standardized exams because they begin to read so much into the question at hand and begin to see so many rational explanations for the questions that they are unable to choose from among he options.

These are not the people that you want to be air traffic controllers.

That’s very different from someone wo is just too stupid to correctly choose from among the options. You know, the kind that have their name stenciled in at the parking lot of the COPS studio, often have tattooed knuckles and don’t do terribly well when there’s alcohol on board.

These are also the people that you do not want to be air traffic controllers.

For the former group, options especially limit their ability to act. When faced with a multiple choice question with four of 5 options, they always see two or three that are very reasonable choices and they just can’t pull the trigger to commit to a single answer.

Interestingly, they tend to do well on the kind of standardized exams that include such choices as; a,b and c are correct; b and d only are correct, such as found in medical, dental and law standardized examinations. They also do well on essay format exams because they can map out their thought processes, despite frequently never answering the actual question.

By the way, in none of the above scenarios was I referring to myself, although I like being at a stage in life that I don’t really have to think anymore.

For the most part it’s now auto-pilot. It’s either “all of the above” or “none of the above” for me.

I challenge myself each morning by choosing which tee shirt and coffee mug combination will help me to start the day. Together with Dilbert, The Altucher Confidential and The New Tork Times Obituary pages, I have my rituals highly defined.

Rituals are important. They offer a chance to go through the motions and make it look as if you’re actually an active participant in life.

At the end of each year I go through a couple of additional rituals.

Although Sugar Momma and I donate to charity all year long, there’s something extra enticing about December 31st, as the clock is ticking away and conspiring to delay for a year the chance to get personal gain from doing something good.

So it was off to Goodwill to make one last donation for the year. As an added bonus, closets were cleaned out, a semblance of organization made a temporary appearance in the house and that also made us feel good.

On the way home, I decided to do yet another ritual and that was to purchase my annual tax preparation software.

A one time addicted Best Buy patron, I rarely go into the store anymore, other than to pick up something that I may have ordered on-line. But since I was in the neighborhood, I thought “why not.”

The reason “why not” became clear when it had only one copy each of TurboTax Basic and Deluxe available. Although I didn’t need more than a single copy, neither of those versions would do it for me. I checked the aisles, but the usual display stands stacked with the tax software were missing.

“I guess they’re not in yet,” was the sales associate’s disinterested response.

Odd, since this was my yearly Best Buy ritual, just trying to squeeze in yet another tax deduction.

Against better judgment, I went next door to Office Depot, usually a place entered only out of desperation.

Not exactly a dynamic retailer, but they were stacked with every version of TurboTax that was available in the known universe in the aisle display that I was always accustomed to finding.

Of course, then came the Amazon check and sure enough, I was able to get it for 25% less, or the same price that both Best Buy and Office Depot were asking for the Deluxe version. And so out the door I went and just placed the order with Amazon before even firing up the car engine.

Although a bit of software doesn’t mean very much, I can’t help but feel that on this one, the pessimistic chatter may be right. Best Buy may be a retailing dinosaur, just seeking to find its final resting place.

The last minute rituals were now out of the way, but just a day earlier, I went through the other ritual.

That’s the ritual that I enjoy practicing, although the opportunity doesn’t present itself every year.

If you are a reader of Barrons, and I am not, you may have seen the article this Saturday that referred to the winning strategy of selling call options:

“The simple strategy known as the “buy-write” or “covered call” was proven in 2011 to make a silk purse from a sow’s ear.”

If you read this blog, you know that I readily admit that I’m not very good with idiomatic expressions and adages, but I think I know what that one means after having read the article.

I have to thank one of my Twitter followers, Michael Scally for sending me the link. How can you not like a Twitter person who lists his geo-locations as Houston, Texas and Padua, Italy?

What I especially agreed with is the Barrons characterization that the strategy was “simple”, as in no thought process really involved.

How can you not like that?

How ironic. Whereas those that over-think get bogged down when there are too many options, an investment strategy that focuses on options is actually very straight forward and simple, according to the fine headline writers at Barrons.

If I think back about 25 years, I actually did subscribe to Barrons. In fact, other than reading Alan Abelson’s column each week, if I recall, there was only one other section that ever held any interest for me and that was buried deep into the paper.

In barely a column’s worth of type each week there would be some sort of summary of call and put writing statistics. I think that I actually first learned about the covered call strategy from Barrons, although I’m not certain. Whatever it was, it did take about 20 years to ever do anything about the fascination with renting your shares out to some unknown greedy stranger.

Maybe even a stranger with a pony-tail and a doppleganger

But that philosophy has been very good to me. Not only has it helped to protect the value of my portfolio from me, but it also engendered the Option to Profit book, the blog and the ability to park my scrawny ass on the La-Z-Boy.

With all of that extra time now available to me, since there is no work commute, nor work, I can agonize over my tee shirt and coffee mug selections, instead.

But back to the ritual.

Despite an absolutely unchanged S&P 500 for 2011, it was time to do some end of the year selling to take some strategic tax losses.

How great is that?

As much as I hate taking losses and recognize that I typically only throw in the towel on poorly thought out decisions to purchase technology stocks, I don’t mind the end of the year variety losses. This time it seemed that it was opportune to shed some Goldman Sachs and Alcoa shares, but I wouldn’t be shocked if I found myself buying them back in a month.

For me, it’s akin to my overall philosophy on taxes. I don’t mind being in the highest bracket, as long as it means that I made enough to be in that bracket. That’s a fairly small trade-off.

Paying alot in taxes can only be reflective of good fortune or not understanding the tax code.

And so, I like being in a position to have the option to sell shares at a loss to help offset the years’ capital gains, which, coincidentally have greater value if you do happen to be in the highest tax brackets.

What a great system.

By the same token, though, I’ve never really understood why charitable contributions provide greater benefit to those in the highest tax brackets. A $100 donation when in the highest federal and state brackets may end up only costing $55 or so, whereas for someone in the lowest brackets, that same $100, which also represents a much larger portion of overall annual earnings, may cost $90.

Off topic?

I suppose, but that incongruity does make charitable donation a no-brainer if you’re fortunate enough to be in that so-called 1%.

Although, I do have to admit that in going through the clothing items for donation, I did uncover a few tee-shirt gems that I rescued for myself. They had been in Sugar Momma’s collection. I justified de-selecting them by thinking of it as being similar to the tax benefit derived from their donation. I just took my cut from the top, rather than waiting for it to trickle down in the form of a lower tax bill.

With end of the year rituals resolved, it was time for the beginning of the new year rituals.

Setting goals and objectives.

My goals this year are all related to expansion. I’ll keep the objectives to myself.

I believe that as I expand my tee shirt and coffee mug collections I’ll have to put less and less thought into what the days’ choice should be. Less thinking.

Happy with 2011’s results, I have a good feeling about 2012, and expect to do some portfolio expansion, but resolve to not overthink the trades.

Again, less thinking

I’ll try to remember that profits are good and losses are bad and act accordingly.

Increasingly, I’ve come to believe that by reflexive call writing near the stock’s purchase price, particularly with weekly options, there is relatively little risk and a reasonably defined income stream.

Thinking? Not so much.

I’ll stick with my list of Old Reliables. They’re pretty boring, but I’ve never been a fan of momentum, anyway, as my La-Z-Boy is cruising along at just the right acceleration.

Here’s to wishing that everyone has a year devoid of active thought processes, yet culminating in joy and happiness.

In the meantime, I’m already making plans for end of the year donations to Best Buy. It looks as if they made be in need.unless they rediscover their lost rituals of price, selection and servce.

 

 

Check out Recent PortfolioTransactions

 

Happy and Healthy New Year

 

Sugar Momma and I began our lives together 28 years ago, having driven cross country together and arriving on the east coast on New Years’ Eve.

That first night, we got a pizza from a small place called “Andy’s Thrid Generation Pizza” on Long Island. If it’s still there, it may be up to the fifth generation by now, just one step ahead of the iPhone.

In that time, I think we’ve made it to midnight just twice, including that very first New Years’ eve. After a truly horrible “Welcome in the New Millenium” party, it’s not likely that we’ll ever be venturing out again in celebration. We get all we need watching the fireworks display in Australia or Hong Kong.

Tonight will be no different, although through the modern miracle of “On Demand” we will be watching “Bridesmaids” and guessing that it will be every bit as funny as when we saw it in the theater.

As you prepare for what will hopefully be a safe and enjoyable celebration tonight, getting ready for what will absolutely be a wonderful year, I wanted to thank Sugar Momma for having the faith and patience to allow me to sit on my La-Z-Boy and by all appearances, do nothing at all during the course of the day.

That’s priceless, as is she.

She never reads this blog, so I can say that with impunity, without fear of losing bravado.

If she were reading this, she would likely want to know why you were reading this, as well.

But despite her incredulity that you would be wasting your time and encouraging me to do the same, she would join me in wishing you all what we wish for ourselves

Happy New Year and a wish that the coming year brings happiness, health and prosperity.

 

My favorite Sugar Momma reference was  How My WIfe’s Bra Saves us Money (she liked it, too)

More Sugar Momma references

 

I’ve never made any secret of the fact that I don’t read very much.

My daily ritual of reading DIlbert and The New York Times Obituaries was recently complemented with James Altucher’s blog. I actually thought long and hard about whether to refer to it as being in “complement” to or in “supplement” of my daily activities and realized that there really wasn’t a word to convey both impacts.

I’ve linked to it a couple of times and bored readers of this blog have clicked on that link, which has also activated a small hidden webcam near their laptops, in addition to any resident webcams you they already have.

I like my fuzzy clandestine streaming to be in 3-D.

For those who read this blog on a regular basis it doesn’t come as a surprise that I don’t read much. In fact, there’s really not a strong body of evidence that I even read my own blog, much less proof-read it.

And forget about reading for the sake of getting my information right.

When I was younger, I was horrified to find some ham in our refrigerator since it’s not Kosher, as you may be aware.

My mother, in response to my pointing this out to her, said “if it tastes good, it’s Kosher.”

What a great philosophy.

I use that philosophy with my supportive facts. If I believe them to be true and accurate, then they’re true and accurate.

A “Kosher pig” is an example of an “oxymoron” until some moron ruined it about a decade ago with the discovery of a species of pig in some god-foresaken rainforest that might just satisfy all of the criteria necessary to be considered Kosher.

I wrote about Oxymorons a few months ago, but with an emphasis on the “moron.” The thought was rekindled a few days ago reading one of Altucher’s blog entries.

He was asking whether there could really be anything such as an amicable divorce.

In a world of delusion there probably exists such an entity, but then again delusion and the real world are themselves mutually exclusive.

In the real world you end up in “divorce court,” which, wouldn’t you know it, is itself an oxymoron. Just for fun, see if you can find all of the highlighted and hidden oxymorons in today’s blog’

Today, I watched what was called by many a “stunning reversal” in the price of silver.

In fact, they were correct as silver one upped gold and not only cut its earlier steep losses, but ultimately had a nice gain at the end of the day.

One of the things that I’ve come to like are “tag clouds.”

For someone who doesn’t like to read, tag clouds are just great, unless you get bogged down by the concrete concept of tagging a cloud. Or having physical contact with an etheral concept.

Thinking too much isn’t an oxymoron, it’s just an impediment sometimes.

Through the tag cloud by simple virtue of font size, boldness or color, you can immediately know what’s important to the author. You may not know whether it’s love or hate, but at least you know about the intensity of the apathy.

In my case, the tag cloud lets you know that I have some recent passion about silver, more specifically in the prospects of silver prices doing poorly, as I own the leveraged silver ETF that appreciates in value as silver prices drop.

Before I owned the shares my interest in silver was neglible, other than as an historically important treatment for gonorrhea and vampires, as well as syphilitic vampires. You would have known that as the words silver, gonorrhea, syphilitic and vampires never appeared in the blog’s tag cloud.

During the course of the day as the Dow closed up 135, at its high for the day, the ProShares UltraShort Silver ETF closed down $2 from its intra-day high. That drop represented about a 12% move, which was of course exaggerated compared to the actual movement of the underlying metal, due to the leverage.

Think of leverage as being a financial tag cloud, only in reverse. The less you put on the line, the bigger the potential risk or reward.

In that way, think of Jon Corzine as being about 13 times larger than the most leveraged ETF currently approved for trading. The difference being that the leveraged ETF is typically highly sector focused and doesn’t require much in the way of thought process.

Math? Yes.

Thought?

Well as Dennis Gartman might say. Thought on and thought off.

Moron.

On the other hand, under Corzine the focus was placed on an aspect of finance for which resident expertise at MF Global Financial was missing. Yes, that’s right. Your local MF Global Financial knew nothing of international currencies and swaps.

Moron.

Actually, to be totally fair, both are exceptionally intelligent morons, based on my archival research.

“Stunning reversal” doesn’t really qualify as an oxymoron in the classic sense, although there are many variety of “Oxymora,” but just like doing a treatise on what makes something funny is immediately not funny, so too is an encyclopedic look at Oxymora less than intellectually amusing.

No one should ever be surprised by “stunning reversals.”

Have you ever been to a 25 year high school reunion? Just look at the gut of the guy that was on an athletic scholarship.

Have you ever looked at every stock chart ever?

Unlike last month and the one before that, so far during this entirely unsatisfying January options cycle, I haven’t had the opportunity to benefit from the recurrent big spikes in silver prices.

In those months, just as today, the stunning reversals were predictable. What was certainly unpredictable was the inability of thr talking heads to portend the past.

And so here we are, about to enter the last trading day of 2011 and very possibly having survived the single most roller coaster year ever in trading.

True, we didn’t have a “flash crash” nor did we have any memorable declines or rises, but that’s only because there were so many.

And just like a roller coaster you end up exactly where you started, just feeling a bit more queasy for having been intimately involved in the sausage making process.

But man, is that sausage “damned good” or what?

 

 

 

Check out Recent PortfolioTransactions

 

This is yet another in a series of unsolicited blog submissions from George Pick, who is currently serving as an advisor to the Herman Cain Adultery Campaign.

During lapses in medication dosing he finds the time to write and peer through neighborhood windows. Today’s blog was clearly written during a period of delusion.

Thank the Lord for laptops….what we do without them?

What a great world we live in. Offices, who the heck needs them?

Why do they call it traveling when you are immersed in the morning rush hour and standing perfectly still? The last time I remember being that still was when my 5th grade teacher Mrs. Chivis yelled at us “clasp your hands and sit still” and it scared the crap out of this 10 year old.

As her bifocals were keenly balanced on the perch of her nose and, of course, that long chain anchored those bifocals, I remember thinking “if only they had laptops in these glory days.”

I could have wrapped up my 5th grade education with an on-line course and sent the ole battle axe a packin. I never did find out what her first name was. She will always be Mrs. Chivis who scared the crap out of me.

I guess you could have labled me CRAPPY STOCK. I think she did……

Time out for an Egg Cream break with 2 pretzel rods…..O.K. I’m back….

I am sitting in my antique style chair at my desk with my trusty laptop

Wat a buy the chair was $649. and the desk was $1200. I got them both at a tent sale for $170.  Floor samples. I just love a great buy. It’s thriling to know that you didn’t screw up, you actually got a well thought out bargain, sorta like a crappy stock.

It’s thrilling when you buy a crappy stock and it soars. Ya know the kind of crappy stock that Cramer would not give a mention to, nor would it ever make the 8 o’clock hour on CNBC.

Who buys that crap anyhow?

So I bought this stock called ZOOM. Admitedly I am not a long term investor. Just do not trust the economic volatility in today’s world, but I do trust a penny stock?

What am I thinking? Mrs. Chivis should have had me wrapped a little tighter. What a crappy stock.ZOOM is. but who cares if it makes a whole bunch of coin,.or in this case a whole lot of Benjamins…

” Wanna be ballers, shot-callers It’s all about the Benjamins baby Brawlers — who be dippin in the Benz wit the spoilers It’s all about the Benjamins baby”

O.K. I’m back…..

I wrote an in-depth post on a forum that I frequent and clearly explained my logic. Funny, though how child molesters aren’t that interested in stock picks.

One response yearned for a clear explanation of my sanity. “Do you realize the crap this company distributes” asked one poster?

Yes I realize, .the kind that just paid me a huge return. Who cares what they make? I am not touting their product, I am not getting into a long term relationship. Heck we are not even dating. This is just dinner and a movie and hopefully a happy ending.

I am not an options guy. Not good at it. I leave that for brilliant minds like my friend the TheAcsMan.

What I like is a great buy…PERIOD.

A great buy is a great buy, no matter how you twist it.

What constitutes a great buy? When the value of the item you are buying outweighs the dollar amount spent on the item.

Pretty simple…

I look for reversals that are forming. Chart patterns that show signs of breakouts. I.love to find 50 Moving Averages’s crossing 200 day Moving Averages to the up side.

Cup and handles.

52 week lows reached because of some analyst downgrade.

You get the picture.

So I proceeded to buy my bargain on Monday at $0.93 and by Wednesday it hit $1.60.

That’s what we technicians would refer to as a “lucky call.”

I need to check with Chase to see if they have a money market that pays that type of interest on my money, or that minds that there’s white powder coatiing my deposits.

What a crappy stock

I think it is a great stock and it is reaching that 90 cents level again as I write this useless information.

Alex I will take useless information for $1000 please..

And by the way dinner and the movie was a perfect date and YES, a happy ending was in order….

“Enormous cream, forest green — Benz jeep for my team so while you sleep I’ma scheme (that’s right)”

O.K. I’m back.

I love not having to drive my car to an office. I owe that to people named Gates, Jobs.and too many more to mention. The great innovators of this generation. Because of their brain power and consistent commitment to create,  I can take my laptop to the crapper and purchase a crapy stock

All while I am taking a crap.on the crapper.

Somebody save me.

Did I just pay homeage to those brilliant minds or scar their memories forever?.

Who gives a crap?

And talking about crap, how about esearch in Motion? .I lost some Benjamins on that one. I got out quick and shaved my losses. Could the analysts have madee up their freakin’ minds? Is it a buy or a sell?

Break up the company and sell the parts. Change management. Make a WHITEBERRY so it looks like an iPhone.

Hey RIMM, wake the F**k up. It’s 2012 you fell asleep and the world has changed.

Sorry, I know NO emotions when it comes to stocks. No personal involvement. Just dinner and a movie and hopefully a happy ending. I couldn’t help myself.. I dated RIMM and.I usually do not date that type but I had to stay and see if I could eventually receive that happy ending.

Well I didn’t .

NO happy ending.  Paid for three dinner dates and still no happy ending so decided to cut her loose and date within my limited capabilities.

So the question is which stock is a CRAPPY STOCK?

ZOOM with a happy ending or RIMM with no happy ending.

“You …You got what I need…but you say he’s just a friend yeah you say he’s just a friend….You..You got what I need….”

O.K. I’m back….

Kimberly Clark.

Can you say that again?

Kimberly Clark. Sounds so wholesome. The type of girl you take home to meet your parents.No happy ending, but she will put a smile on your face.

Sncere, wants the best for you and is always consistent. Looks like she just fell out of a J.CREW catalogue.

Certainly not a CRAPPY STOCK, but I have to look deep inside my soul.

OK. not so deep.

I am not that deep of a soul and by my standards of weighing values I guess I am what I am.

I just want a happy ending when paying for dinner and a movie. A bit chauvanistic,  but stress release is imperative to my stability which in turn has a profound effect on my sanity.

Not RIMM type of crappy, but ZOOM type of crappy-happy..

Although if I purchased RIMM @$13. and it went back into the 20’s, 30’s.and then all the way back to the $70’s, I could eliminate the “CR” and replace it with an “H” and RIMM could be a crappy-happy…happy ending kind of a date.

But you know how it goes.

You start dating again and all is well and then you get blind sided. But it is hard to fathom that the stronghold it had on the corporate world has slipped through their sleepy minds. Perhaps management needs happy endings to stimulate their thought process. Kimberly Clark is a great date and even a better long term relationship. Perhaps marriage would be a good dividend, but I like my crappy-happy stocks….

Back in May I believe it was Cramer who touted Motricity at $30 or so and then admitted that he had made a mistake.

Does Cramer get …..?

Never mind.

Then a Motley Fool article said “sell and stay far away.” I think it was a December article.

So who’s right ?

In my view neither was right, but hey that’s just me. Instead of “buy” and “don’t buy” when is somebody going to look at any item and say “O.K. I did my research so how do I play this to my advantage?”

I purchased MOTR at close to its 52 week low. Then December 23 it gained 22% …..CRAPPY STOCK.

28% of the 33 million share float is short., but Carl Icahn has supported MOTR with a $20 million investment and owns 15% of the company, and yes there is another person with the same last name that is an insider.

It is going through some executive changes and probably a short squeeze. It has been in a tight channel since August and the broke out of the channel to the short side and reversed in the past few days with increased volume.

Is the short squeeze on? We shall see. Just watch the volume as it tells the story…..

CRAPPY STOCK?

My thinking is there are no crappy stocks. Only people that enter and exit a stock at the wrong time. Bit if crappy stocks keep giving me high returns with no marital obligations and all the baggage that is attached, I will keep dating with some dinner and a movie.

And that movie better COME with a HAPPY ENDING….

” But this ain’t a joke, I want you to know that Tech ninna is never pretending.. Alone in my bed, a gun to my head, asking WHERE IS MY HAPPY ENDING? “

“Clasp your hands together.” I wonder if Mrs. Chivis is out there reading tonight?

YEAH……YEAH….

 

If for some bizarre reason you feel a need to read George Pick’s previous guest blogs

● Quiero Taco Bell

● Who Needs Friggin’ Options?

　

　

Check out Recent PortfolioTransactions

 

Let’s climb into the “Wayback Machine” and travel to a place that I like to call February 2007.

Back then, I was just getting started with managing some of my own investments.  I had decided to finally start putting my money where my theories were and focused on putting some 401(k) rollover funds to work.

Since the rest of my investments were sitting with my trusty broker, with whom I’d had a 25 year history, I thought that regardless of my personal mis-steps, I’d still be in reasonably good shape.

But barely 6 months later I was looking to rework my entire portfolio by putting my own stamp on all of its holdings.

To remind past readers, or just to inform new ones, the decision to do so came only after the unexpected death of my broker. The happy  25 year run that took us from E.F. Hutton to Paine Weber and stops in-between suddenly ended

Back in early 2007 I was far more discerning when I made my stock purchases, only because the portfolio that I was managing was relatively small. Since I was selling call options on all of the holdings and needed to do so in a sufficiently large quantity to offset bid and ask discrepancies, my self managed portfolio wasn’t entirely diversified and could easily suffer from the kind of hiccoughs that can be so common.

At that point, I already owned shares in those triple digit darlings Google and MasterCard, and Apple was soon to join them. Back then, there was no shortage of triple digit stocks.

That changed.

With some money in hand following the sales of Intel and Dell Computer (see why I hate Tech stocks), I was trying to decide between purchasing from between two more triple digit darlings:

Sears Holdings or Goldman Sachs.

Goldman was at about $215 and Sears was nearly $190 at the time.

It was never really a fair fight. Goldman always had the inside track.

No, not because Eddie Lampert, the Chairman of Sears Holdings and allegedly the next incarnation of Warren Buffett, was a Goldman alumnus, but because the Goldman CFO was a high school classmate of mine.

Easily the smartest guys in any room.

You may know some of the story as it all infolded between February 2007 and December 2011. If you don’t know the story, take a moment to check your brokerage statements.

You know, the ones that you were afraid to open.

The smartest guys in the room have seen their ups and downs over the past few years.

Today came news that 120 Sears and K-Mart stores were going to be closed.

People still marching on Wall Street would like to do the same with Goldman Sachs.

For me, the sure sign that something was amiss at Sears was when I noticed that Dick Bove was sporting a Sears necktie. To those more analytically inclined, the message was already clear when the aerial photographs of the Sears’ parking lots during the holiday season were indistinguishable from the parking lots of an Orthodox Jewish synagogue on Yom Kippur.

Don’t get that?

Alright, how about it was indistinguishable from the New York Mets’ parking lot in October.

But anyway, back to 2007 and with a decision to be made, I bought shares of Goldman Sachs and have held shares nearly continuously since that time, albeit in varying amounts as the term “dollar cost averaging” took on great meaning with Goldman, as did the expression “Value trap?”

Just to put things into perspective, Goldman is now trading below $95, although to its credit, no one has yet had their names qualified as being a “convicted felon.”

Without giving too much information away, over the years, I’ve generated about $35,000 in options premiums from my shares and have also had some capital gains as shares were assigned. Remember, I like to practice sacrifice of young children to protect the older ones and I rarely practice what Baruch preached, so while I currently have losses on existing shares, they’ll be on paper unless someone can take them out of my cold grasp.

If there really was a reason behind the decision to choose Goldman over Sears, it’s been lost to me, but I know that there really never was a reason, so I’ll go with the high school thing.

Maybe it was just cultural. Goldman, Sachs or Sears.

Mind you though, the argument for going with Sears was compelling and as they say at politically correct competitions “there really are no losers here.”

Other than investors.

It seemed as if hardly a day went by that we didn’t hear how Eddie Lampert was this generation’s Warren Buffett, despite the fact that Warren Buffett is still this generation’s Warren Buffett.

The strategy also sounded great. Look, he’d spent no money at K-Mart and made everyone that had faith gazillions of dollars.

Blue light specials? Gone. Why pay extra for the blue tinted light bulbs?

Then, he got Sears Roebuck to overpay for K-Mart, demonstrating what morons the Sears Board of Directors really was, making it all that much easier for Lampert to complete his swoop and pick up Sears on the cheap and transform it into Sears Holdings.

Besides, everyone knew that it was all about the real estate, anyway.

Genius. Pure inspired genius.

Yeah, that was yet another example of “crowd think.” Everyone piled on to the genius behind cornering the valuable real estate.

If you ever stepped foot into a Lampert era Sears, you realize that they were ghost towns, but that was clearly part of the brilliant Lampert strategy.

After all, why get bogged down with pesky things like inventory and customers when you want that “valuable” real estate to sell. Those things only get in the way.And surely, as loathe as I am to look at, much less use charts, see how well that strategy paid off? After all, everyone knows that an empty house sells much more readily and at a better price than a lived in and furnished house.

Sorry about not flipping the chart right side up.

I know even less about real estate than I do about stocks, but closing 120 stores probably isn’t going to do much good for business real estate values.

What did I tell you? The guy’s a genius.

The fact that a few weeks ago every analyst was blasting Best Buy for having retail outlets that were too large probably wasn’t terribly good news for the world of business real estate either.

I don’t know what my personal outcome would have been had I purchased those Sears shares back when they still had some appeal.

I never look back and play the “what if” game. That can be particularly psycholgically destructive of you’ve ever suffered assignment of shares, such as Visa or even Green Mountain after unexpected and significant price rises.

Although Sears is down about 83% from that day back in 2007, Goldman is down about 56%.

I suppose either way you could make it up on volume, but it seems ironic to introduce a retail concept to a guy who has been lambasted for not being a retailer, yet having the “cajones” to think he could run Sears.

By the same token, Goldman was about as far from the retail brokerage business as you can get, so maybe volume isn’t the way to go.

That’s why I’m not sitting in the room with those smart guys.

But I least I have the inventory to furnish the room.

Check out Recent PortfolioTransactions

 

I know that am destined to burn in the after-life, but there’s probably a special place in heaven saved for those that fuel the eternal flames so needed by the underworld.

Without evil, there would be no good, so you’re welcome.

27 years to the day of the attempted subway robbery heard around the world, one of the 4 assailants took his own life in the squalor of a Bronx motel.

The fact that he didn’t bring his own towels either told you that he wasn’t staying long or that he wasn’t leaving.

I’m from The Bronx, so I know of what I write.

It seems odd not to qualify an earlier paragraph with the word “alleged.” No one was fooled by the claim that the 4 young men were just trying to panhandle from the meek “electronics” expert that day on a New York City subway car.

Everyone knew that they meant to rob the defensless guy just minding his own business on an isolated subway car.

On the day before Christmas, these guys clearly didn’t believe that the meek were going to inherit the earth. And if they were, they were just going to take it away from them.

You may remember 1984. It wasn’t a very good year as far as crime statistics went in New York City. Assaults and violent crime were commonplace and the city was truly at a low point. Even during its fiscal crisis in the 1970’s there was never that feeling of fear to simply go about routine activities.

Like going to work, or going for a walk.Or just riding on the subway.

There’s absolutely no excuse for drawing an analogy between those events 27 years ago, culminating in this weekend’s suicide death of an inveterate criminal and a stock market investing strategy.

The road to hell is paved with people using such analogies for their own personal gain.

Like many others, I was greeted with the news that one of the 4 assailants of Bernhard Goetz, later known as the “Subway Vigilante” had died and had a quick journey back a generation.

As real evidence of a generational gap, neither of my two kids, who have 46 years between them, had ever heard of Bernhard Goetz, but there was a time when he was both reviled and revered.

In fact, you could easily go back and forth yourself with those two opinions on any given day and then do precisley the opposite the next day.

Racist, citizen standing up for his rights, vigilanate?

When confronted by 4 men on a New York City subway, with intent to rob him, Goetz did the completely unexpected. Not only did he pull out an underpowered gun, but he shot and wounded each and every one of the four.

Shades of “grabbed from the headlnes” only in reverse. Goetz recreated the fictional “Death Wish” role played by Charles Bronson a decade earlier and transformed it into real life, only he didn’t disappear into the ether seeking out more evil-doers.

Another decade later and Rudy Giuliani was elected mayor of New York CIty.

Racist, citizen standing up for your rights or vigilante?

Giuliani is widely credited with turning New York City around. His first act was to eliminate what he referred to as “quality of life” crimes, like banishing the homeless guys that would make your windshield even dirtier with their squeegies, in the hopes of getting some spare change.

Truth be told, it was Bernhard Goetz who turned the city around and got its citizens to leave the fear behind and retake the greatest city on earth.

Without Goetz, there would be no Giuliani.

You see, I’m a big fan of “Game Theory“.

You may also know it as  “The Prisoner’s Dilemma”.

I believe in it because I’m cycnical. Most people will only do the right thing if there are consequences to mis-reading the boundaries. It took an irrational act by Bernhard Goetz to get rational behavior to return to its rightful place in society.

The essence of the theory is that the unknown leads you to act prudently and to minimize risk. If you believe that in some way your fate may be determined by the actions of another, who has the same self-interests as you, but doesn’t have your interests at heart. It causes you to think like you’re going to potentially be a victim to a criminal, because he’s equally likely to become a vicitom of a criminal.

You.

Criminologists talk about how the certainty of punishment is the best deterrance. The death penalty, for example is never going to be a deterrent if never carried out.

Empty threats? Worthless.

Threats? Worthless, unless occasionally carried out.

Behavioral psycholgists will also tell you that the best way to effect change is to have a variable reinforcer. Keep the subject on their toes. Never let them figure out a pattern.

With Goetz’s action the rules of the road were changed.

No longer was it a sure thing that a seemingly meek guy riding the subway was going to be a sitting duck. Now there was a channce, maybe small, but still, a bit of uncertainty, that the next guy was going to be packing as well.

All of a sudden, the risk-benefit ratio had changed.

In investiing, it’s all about modifying that risk benefit so that you don’t carry all of the burden.

Invest like Goetz.

To one extreme you may have someone like Raj Rajaratnam. He didn’t want to carry any burden and in that regard, he’s just like how we all should be thinking.

Risk is bad, reward is good.

Again, we can do away with the word “alleged” when discussing Rajaratnam, although I continue to believe that insider trading is a victimless crime.

On the other extreme is the kind of person that does nothing to protect himself and just gives in to the whims of the market as it bounces wildly from subway car to subway car taking whatever it needs to fuel its movement.

But let’s face it. You may be honest and well intentioned, but the next guy, maybe Raj Rajaratnam may not have your interests at heart.

I know. Hard to believe. But even if what he’s doing may or not be criminal and may or not leave victims in its wake, you can become a victim by your own apathy.

To get the best deal, you have to think like a criminal confronted by other criminals also seeking to get the best deal.

But just imagine that while you’re talking to the police officers your doing it submerged in a tank of water. Your sound waves travel at only 550 feet per second in your tank, while your compadre in the other adjoining holding cell has unfettered access to sound travelling at a full 1100 feet per second.

He gets to cut his deal first and you lose, because you were a flounder. Don’t blame high frequency trading for your problems, just do something about it, like not worrying about being whip-sawed.

The point is, don’t trust the next guy and don’t come unarmed to the party, even if it is only a snub-nose. The one on the other side of any stock transaction is a faceless and nameless soul, although more than likely “he’s” a fund.

Although the Supreme Court has ruled that corporations are people, it hasn’t extended that largesse to investment funds, they don’t really have souls.

Instead, take the deal. Use hedges to better define your reward and potential punishment. But, you still can’t screw the other guy, because that’s what greed is all about and it gets in the way of rational thought.

Prisoner’s Dilemma shows that a reasonable person realizes that if his counter-part tries to screw him over, he would be met with the same response.

By virtue of the game, that would result in the worst outcome for both, a lose-lose situation

So instead, the aim is to escape only slightly tarnished, knowing that the chances of escaping unharmed is tiny, while the chances of getting hit with a ton of bricks is great if you try to outsmart the system.

Where the analogy falls short is that in Game Theory you assume that your opponent is a rational thinking entity, with a drive for self-preservation.

That’s why the U.S. and Soviet Union never fired those nuclear warheads at one another.

Enemies or not, they weren’t crazy and were too smart to take a risk that had little assurance of reward.

Nuclear arms in the hands of a terrorist, especially one that believes that a better world awaits if the ultimate sacrifice is made puts us in the realm of the irrational, at least by most rational people’s perspective.

The market is supposed to be rational, but lately it hasn’t necessarily been behaving that way.

When faced with an irrational or unpredictable opponent, you have to abandon the Goetz Princple, and instead have to be proactive. Just assume the worst and you’ll be right.

When faced with the dilemma and you will be, just ask yourself, WWGD?

 

Check out Recent PortfolioTransactions