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Did you ever have one of those days where you weren’t quite certain what they did with the real you?
Why would unknowns just barge in and take you away? Even worse, what if they put an evil doppleganger in your place, sent to undo all of what you had done?
Sometimes that can be a good thing, but lately I’ve been pretty good.
As we started a new option cycle I had a chance to reflect on the past month.
Based on the by-laws, I have to reflect, even though I am by every stretch of the imagination a very shallow individual.
The stockade on the front lawn is a visual reminder of what happens when performance isn’t up to standards, so sometimes I’m forced to do some “window dressing” before the end of each options cycle.
But not this time.
Before presenting the findings to the Board, I had a moment of solitude and surveyed the process and how the previous month faithfully reflected the strategies that I had cobbled together over the years.
It’s always a good feeling when you beat the averages, especially when the numbers aren’t very good. Certainly the last cycle was a Jeckyl and Hyde kind of month.
As I finally began the presentation, Sugar Momma, who is a Board member, asked if I had done anything illegal. I suppose that was her way lof expressing how impressed she was with the guidance that I was offering.
I always insist on holding the monthly Board meetings with lights turned off so that she can’t read my facial expressions that might in some way belie the truth.
I looked at her, or at least in the direction that I knew she would be, wondering where in the world she would ever think to have asked that question.
So I asked.
Apparently she does pay some attention to the business news and knew about the Rajaratnam insider trading case, but she clearly never read my opinion on that travesty of justice. Why in the world she would think that those circles would travel down to me, to be in the presence of my La-Z-Boy escapes me, but I think she was being serious.
I reassured her that no insiders were harmed in the generation of the previous month’s profits and submitted to my nightly polygraph with more confidence than is typically the case.
But still, just because I believe that insider trading shouldn’t be a crime, doesn’t mean that I would choose to ignore the fact that imprisonment or such things is very real.
So the nice performance of the past month, complemented by very nice options premiums was all above board.
The only problem was that thanks to the unexpected and unwarranted rally this past Friday, I was now faced with replacing about 60% of my portfolio.
Looking at the Asian market performance before calling it a night on Sunday, I was expecting the possibility of a strong open on Monday.
On those Mondays that I’m in a position to refurbish the portfolio I don’t like up Mondays. I prefer manic selling Mondays and the likelihood of repurchasing some of my beloved babies that were taken from me in that nasty assignment process..
So I was pretty happy when I saw the US pre-open numbers, but that happiness didn’t last, because the market just focused on yet another promise of a promise overseas and capitalized on the lack of news.
Another triple digit gain.
When the real me was taken away and who was behind my abduction are still mysteries to me.
As I looked at the newly reconfigured portfolio after the close of Monday’s trading, I’m not certain who was calling the shots. It clearly couldn’t have been me
First of all, there’s still much left to be spent.
That’s just not like me.
Despite the fact that I know it’s a great idea to keep cash at hand to capitalize on an unexpected bargain, I rarely have the discipline to do that.
Put the money in my virtual pocket and its like every day is hookers and blow.
But somehow, by the end of the day, I still had about 40% of what I started with still staring at me.
So maybe some sense of rationality overwhelmed me and I did the right thing.
But then there’s that other thing.
Looking over the list of shares, the long time holdings had some new neighbors.
I tend to stay within a tight universe of stocks, not bringing new ones in very often. These days, I’ve become even more restrictive, trying to limit new purchases on;y to those stocks that hav eweekly options available for trading.
As far as the news one went, I’d actually owned two of them before, but three really stood out, as they were all reporting earnings this week.
I don’t usually play with earnings. Stocks will go in any direction you can imagine after earnings announcement.
Granted, that doesn’t take much of an imagination, as up, down and sideways are basically the only possibilities.
But even worse, I was looking at new neighbors that have a bit of controversy surrounding their names.
I hate controversy.
Remember that very first episode of “The Mary Tyler Moore Show” when Lou Grant tells Mary “You have spunk….I hate spunk.”
But whoever it was that took my place today could care less about the rules of the road.
I understood why I repurchased shares of the ProShares UltraShort Silver ETF. I was able to get them below where they had been exercised. a 1)% monthly pemium for the near the money strike has been a good strategy with those shares over the past few months.
I even understood why I bought back my Mosaic shares at prices higher than where assigned.
What I don’t understand is how Green Mountain Coffee Roasters. Amazon and Netflix made it in and through the gates.
As Netflix reported after the bell and lost about $30, the $8 weekly options premium didn’t seem like such a great deal in hindsight.
Listening to the universal blasting of the company just strengthens my resolve to find out whatever happened to me.
Having the next day’s expected action around your stock holding described as ugly and messy is a bit un-nerving
Years ago, when I was on the precipice of making a career change, I had to ask someone who certainly knew what a mid-life crisis was all about, whether he thought that I was going through one.
Sometimes you do things and are not quite certain of the reaons behind your actions.
He had a simple set of two questions.
“DId you, or are you thinking of getting a new car; and did you are are you thinking of cheating on your wife?”
In hindsight, the answer to at least one of those questions turned out to be “Yes”, but I can’t really recall which one.
But I cqan’t look to such a simple excuse as “mid-life crisis” to explain today’s actions.
Once the market opens, I’ll be regretting the Netflix purchase, but unless Apple pulls some amazing streaming delivery system out of its corporate butt as we await the specter of an Apple TV, Netflix may have had a strategic mis-step, but it’s not dead.
Yet.
In the meantime, I still have quite a bit more that needs to be put to work and am hoping that the real me shows up the next few days, although we’ll see how Sugar Momma responds to the new me.
I just love it when she uses some of those advanced interrogational techniques.
What the hell?
 
 
 
 

I know enough to know that when someone starts a sentence with the words “In all due respect…,” there’s no great love coming forward. You know the tone. The same one that’s used right before you hear something like “in my humble opinion.”

I tend not to use profanity, except when paying for sex, but when I hear either of those sets of words, my first response is “F**k you, will all due respect.”

Sometimes, I may instead say “In my humble opinion, you can go and F**k yourself.”

And then I stop listening to whatever it is that’s about to be uttered, but I amuse myself with an internal giggle at their expense.

Many years ago, when I was first getting started in life and the greater world of investments, I was very fortunate to have received a cold call from a young man named Bob Shapiro.

To make a long story short, Bob was just starting out with E.F. Hutton, of E.F. Hutton fame and became my stock broker for the next 25 years.

How often have you known a cold call to work out?

I followed him to Smith Barney and then to UBS and to all of the corporate in-betweens and iterations after E.F. Hutton gave up its soul and life.

Sadly, Bob passed away about 4 years ago.

Although I told him that I had, I never did read any of the writings of Bernard Baruch. Bob had recommended that I do so.

If you read my blog on a regular basis, you’ll know by the persistent presence of typos, I don’t even read my own blog, much less the writings of a long dead legendary investor, whose mere mention of his name causes phlegm filled sputum to be hurled outward.

It’s bad enough that there’s an entire summer’s worth of swatted flies on my computer monitor, I don’t need any Baruch related detritus.

I’ll never know whether Baruch had the same penchant for run-on sentences as I seem to have.

Anyway, Bob was a fan and being a man of structure and integrity, he ascribed to at least one one of Baruch’s investing principles. That was to cut your losses once you’ve reached the 10% mark.

Bob practiced what he preached. He was consistent in his application of the rules and he was a good shepherd of my portfolio, using his discretion to trade.

Sometimes performance disappointed, but Bob never did.

In the intervening years, I still haven’t read Baruch’s works, but I’ve adopted Bob’s belief in rules.

The only thing is that I don’t buy into Baruch’s “10% Rule.”

For starters, I hate to take a loss, unless its being done for tax purposes.

Sometimes, though, I’ll admit that I used “taxes” as an excuse to just get rid of a loser or what I think to be “dead money.”  Invariably, those have been technology stocks. Other than Google, VMWare, Riverbed Technology, Apple and Microsoft, I’ve not had good luck with technology.

Actually, when I lay it out like that, the technology winners outnumber the losers. Dell, Hewlett-Packard and Research in Motion are my losers, but I hold grudges for a long time and human nature makes it easier to remember the dregs.

Part of the reason that I hate to take losses is that during my years with Bob, I saw many stocks recover from that 10% drop and often quite quickly. Beyond that, there were certainly many holdings that might have had paper losses approaching 10%, yet went on to recover and profit. Rio Tinto, a holding that I’ve had since 1994 was one such example.

In the meantime, though, I’ve had plenty of stocks that have had losses in excess of 10% but I’ve nursed them back to health.

Riverbed Technology is one example, but the most recent is Transocean, one of the bad boys of last year’s Gulf Oil spill.

I own shares of British Petroleum, Halliburton and Transocean and I refer to them as my Evil Troika, yet I welcome them to my portfoklio.

My current batch of Transocean has a cost basis of about $58.50 and I’ve owned it since mid-July. After a late day surge, shares closed at $53.

Using that simple rule, I should have banished the shares, even after that promising surge in the final hour of trading.

I suppose that if I included the $0.79/share dividend, we’d be borderline.

Yet there they are. Still sitting there, with a nasty shade of red clearly indicating that its been a loser.

Before today’s surge, I actually sold $52.50 calls expiring on Friday, for about $0.44 cents.

That seems like a pretty bad risk – reward, but as I looked at my history with Transocean going back to the most recent purchase in July, with the premium received today added to all of the other premiums, if assigned, I’ll net a 0.7% profit.

Paltry, sure. But still a profit. Annualized, that’s 2.8%, which is a lot better than the 1.6% S&P 500 deficit thus far this year.

Better yet, to compare apples to apples, during the period of ownership the S&P 500 has dropped from 1316 to Thursday’s close of 1215, which happens to be a 7.6% loss.

I’ll take 0.7% and forget about the annualization. Better yet, those particular shares are in a tax deferred account, so I have no concern about buying them back when they inevitably fall again, since the wash sales rule is moot.

In the past 6 weeks I’ve been up to New York twice to attend funerals and have had a chance to reflect a bit on the lives and memories of friends and family.

I also think about Bob fairly often, despite the fact that we only met a single time.

Strangely, I also end up thinking about Bernard Baruch, a man I’d never met and it’s very unlikely that I ever will. I doubt that he believed in reincarnation and I’m not certain that he and I will end up in the same place when it’s my time.

Thinking about what a different investing world it has become, with immediate access to information, bid-ask differences of a penny and significantly reduced transaction costs, I wonder what Bernard Baruch would teach us today?

In all likelihood, he would be going by the name “Barry Barch” and would be pushing whatever the intangible asset of the day happened to be.

In all likelihood, he’d be recommending sales of options on the VIX futures, which themselves are a measure of the implied neurotic tendancies of investors who are uncertain of what to do in the face of earning’s season reports.

Bob, on the other hand, would probably not follow him in that direction.

In my humble opinion

 

 

 

 

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

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In recent years, “fundamentalism” has gotten a bad rap.

Remember the old days? Back when we had TV dials, rotary phones and believed in the fundamentals in every aspect of our lives.

Eh, not so much anymore.

Maybe it’s the perception that fundamentalism is associated with terrorist bombings or perhaps related to abortion clinic shootings, but whatever, fundamentals are not what they used to be. Neither are the funadamentaists.

Fundamentalists, those that purportedly live a life style based on fundamental principles, are very egalitarian, though. Not only do they come in all colors, religions, nationalities and walks of life, but they hate all (other) colors, religions, nationalities and walks of life. To me, that exemplifies a blanket lack of bias.

It used to be that fundamentals were simply the basic building blocks upon which more complex behaviors, decisions and actions were based.

How can I put this?

Eh, not so much anymore.

It’s almost as if they took the “fun” out of fundamental and instead focused on the “mental.”

I have to credit Dennis Kneale for inspiring today’s theme. Before your mind runs away with you, he did so, not because of the “mental” part.

I can’t say with any certainty that I’ve ever gotten any tangible added value from following Dennis Kneale on Twitter or watching his segments on FOX Business or FOX News, but I’ve definitely received the intangible value of thinking, when I’d ordinarily be drooling.

So, while I may not be grateful, those around me probably will pick up my slack and thank Dennis Kneale for removing the topic of fairness in our tax system from our dinner table.

Enough about Dennis Kneale. Read his tweets and watch his segments.

Rhetorical question: What’s so fundamentally changed that a 4% move in Intel’s stock price following release of earnings move doesn’t propel the rest of the market upward?

Unnecessary answer to the rhetorical question? Fundamentals are irrelevant.

Now the fundamentalists pictured above would know just how to light a fire under the market, but that’s a pretty ugly allegory so I’ll avoid drawing it to spare sensitivities.

Clearly, the focus on fundamentals in the stock markets has gone the way of the Yeti, except that fundamentals once did actually exist, although there’s not much of an archeological record of them having survived into this decade.

I did some carbon dating of some old brokerage house statements from the 90’s and there clearly was an over-riding theme of investing on fundamentals.

There was a time when every stock market and investing primer started with concepts like Price – Earnings ratios. Trading volume, new highs and lows. Even such arcane concepts as profits.

These days?

Eh, not so much anymore.

I’m not really certain what’s focused on these days, besides the closing level of the Finnish stock market. This afternoon, I noticed the new top banner on CNBC, at about 2 PM that now gives the closing prices of the many European markets.

I don’t even think that information is fundamental to Finland.

Now, I probably shouldn’t be the one to harp on and bemoan the loss of fundamentals.

After Wednesday’s bell, Riverbed Technolgy reported earnings.

I don’t know what they were, but in the after hours Riverbed went up about 9%.

I’ve owned Riverbed numerous times over the past 3 years and have made lots of money just selling options on those shares.

Lots of money.

In yesteday’s blog “Put a Condom on your Portfolio” I mentioned that sometimes the protection is worth more than the assets. Riverbed is one such example, thankfully.

Occasionally, I’ve also made some capital gains on the shares as they were assigned. That may end up being the case this Friday, as about 30% of those shares may be assigned at $25.

The fact is that I don’t even know what Riverbed Technology does or makes.

That would be pretty fundamental.

But I do know that its price moves alot in both directions. I also know that the premium people are willing to pay to leverage their investment through the purchase of options is fairly rich.

I don’t need to know any more. As long as there’s no white powder obscuring the flashing geen numbers on my screen, I’m good. And truth be known, even if there was a faint hint of said powder, I’m still good.

A big topic of discussion today was on the unsettling effect of ETF’s on the markets and commodities, especially the leveraged ETF’s.

One of my past favorites, which I don’t currently own, is the ProShares VIX Short-Term Futures.

To put it simply, this vehicle represents purchasing a derivative of a derivative, which itself is based on the implied volatility of the markets over 30 days.

Then you can compound it a bit more by selling call options, as I did.

Once you get to that point, it’s actually hard to even remember what it is that you want to occur.

The Volatility Index, or VIX tends to go up when the market goes down. Now once you start selling calls on that, you’re actually hoping that….

Never mind. It’s bad enough that I go through that mental exercise with the ProShares UltraShort Silver ETF.

I don’t exactly know what I want to happen, all I know is that whatever has been happening has been good for me.

Why would you want to regulate that? I like being happy. Before you know it, people other than Ron Paul will be clamoring to regulate sex and drugs.

That may explain why only a single Senator showed up for the ETF hearings scheduled on Wednesday.

No, not because it was “Sex and Drugs Hump Day” on The Hill.

Well, it may also be related to the fact that the other committee members thought that this was just another episode of “To Catch a Predator”.

Say what you will about their sincerity and interests in protecting the investing public, but at least our elected officials are capable of learning from their past mistakes. That, and big posters with a bright red “X” over the face of Chris Hansen are plastered everywhere in the Senate corridors.

I still giggle at the close of each committee session when the disclaimer comes on C-SPAN informing the viewers that “no Pages were abused in the hearings of this committee.”

There was some talk about requiring the same kind of documents as are necessary to open margin accounts or trade options.

But as long as the leveraged ETF’s stay in the 3x range, why do so? Since investing is really a zero sum game, where are the profits of the 1% going to come from if the uninformed and incapable hordes are prevented from losing their way?

I certainly understand why it’s necessary for margin accounts. People do stupid things when they invest money that’s not really their own and it’s amazing how quickly equity erodes. I learned that from Bernie Madoff.

Not directly.

Leverage? You want to talk leverage. Just look at the November 2011 premiums for in the money and near the money options. There’s a 40 to 1 ratio.

2 to 1 and 3 to 1 for ETF’s?

So, I don’t really have a problem with uninformed people purchasing ETF’s. I’m informed, or at least have the potential to be so, and I still don’t know what I’m always purchasing, but I do know enough to change course if things aren’t going according to plan.

Sometimes the fact that an investment opportunity just looks good is good enough as far as full disclosure goes.

But what does rankle me a bit is the behind the scenes rebalancing that takes place, particularly in the leveraged ETF’s that in the long run result in an outcome completely counter-intuitive to rational thought processes.

When you have to explain to someone why their leveraged short Oil ETF fell in value, even while the price of oil did just the opposite over the same haul, there’s a fundamental problem.

Although having the right to make a fool of yourself is fundamental, being made a fool of, is not.

 

Full Disclaimer: Some Pages (and two illegal immigrant interns) were harmed in the writing of this blog. Details may be found on a future episode of DateLine.

Spoiler Alert: Kneale’s alibi is filled with holes.

 

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

I’m not a really big fan of chart analysis.

I’m really humbled when I see some of the analyses that are performed by chart technicians as they crunch and manipulate data and then lay it out in simple graphic forms for the rest of us to ogle and admire.

I won’t say that I’m amazed by what they do, but I will say that I’m amazed that 2 different people can see the same exact graphs and draw the same lines and come up with different conclusions.

Using the kind of analysis that is better suited to a Rorschach Test, somehow people see incredible details and images from the saw-toothed lines. Best of all, they even give names to the images that they think they see.

I’ve often wondered why the “p” in “psychotic” was psilent.

With that in mind, you might understand why charts don’t show up very often in this blog site and why I pay very little attention to charting and technical analysis in the Option to Profit book.

The fact that I know nothing about the tenets of technical analysis are just incidental to their absence.

I still think of myself as analytical, but most of the time quantitative analysis is best suited for events that are predictable.

Human emotions and the reactions to external events aren’t very predictable. That’s why it’s easy to have a “fair and balanced” discussion on any economic issue.

Until the least 2 hours of trading on Tuesday, when word came out that there would be a permanent oversight “troika” in Greece and that the EU was prepared to assemble a $2 Trillion bail out fund, the day’s big story was Green Mountain Coffee Roasters.

David Einhorn, who is legend for his early and dismissed warnings about Lehman Brothers, has some concerns about the K-Cup Kings. (See his 110 slide PowerPoint presentation, GAAP-uccino)

He was fairly universally atacked.by the 99% and at least some of the remaining 1%.

GMCR has been one of those “mo-mo” stocks. Not only did it have “mo”, but it had a double dose of momentum.

After a 3 for 1 split, it’s current $80 per share price would have been $240. Not bad, but just a 2 months ago GMCR was at about $110.

There have been lots of questions swirling around GMCR. Accounting issues, patent issues and whether their alliance with Starbucks is really a good deal.

But look at the above graph. Just look at the performance of the Coffee Kings compared to SPDR Gold Trust Shares.

As a disclaimer. I’ve owned both GMCR and Starbucks in the past year and we drink lots of Peets at home, as it reminds Sugar Momma of her care free days in Berkeley.

By comparison, Gold has been a piker. It doesn’t come close to even the laggard performance of Starbucks.

Gold, the basis of all that we hold valuable, the cornerstone of Ron Paul’s economic theory has been, at best, an also-ran, three times removed.

Here’s the thing. It’s repeatedly been ;pointed out that gold is just a rock. James Altucher was the first person that I heard to come right out and say so, at the very peak of gold’s price run higher. But he has also predicted that Apple will be the first $2 Trillion company, making its liquidation a possible solution to the money needed for the EU banking bailout. Although in his blogs he talks abouty a $1 Trillion level, during a CNBC interview he hiked it to double that amount. Either way. enough to buy a few months of banking calm overseas.

The rock part makes it hard to eat.

Without doing the research, I’m certain that point has been made prior to Altucher pithy “It’s just a rock” comments.

I don’t know if Ron Paul has considered that shortcoming. It’s no surprise that you don’t find Godfather’s Pizza offering a gold topping. It may have as much to do with the fact that would be a price buster for the 9-9-9 special, as much as it has to do with its inedible state.

If the eventual GOP nominated team turns out to be Paul-Cain, they’ll have to work that out.

In the meantime, not only can coffee be ingested and help to sustain life, but it also helps to nourish and give life to another useful currency.

Tulips.

Just spread those coffee grounds around the tulip bed and you’ll have an energized bounty of flowering fools.

The next step is Ron Paul’s. I don’t see how he can keep his ground, especially after mentioning that children’s health care wouldn’t be on the chopping block in a Paul administration.

At least not until other areas were eliminated first, since he explained, “we wouldn’t be able to do everything all at once”.

If Green Mountain continues its fast fade, Paul may be spared the painful decision of switching from Gold to Grounds

In the meantime, once the EU news was reported, the market took a decent 90 point gain and quickly turned it in 250, before giving up a little.

Simon Hobbs, of CNBC, who if you didn’t know, was British, has been a consistent voice of reaonable interpretation of European actions during their banking crisis.

His skepticism has, thus far, been consistently appropriate.

His critique of the report in the U.K’s Guardian newspaper seems to have been well placed, as the market began to recognize that the reports were more paper tiger-like than a real full frontal assault.

For the most part, I was a bystander during the day’s trading.

I did sell some JP Morgan Chase calls, but did so prematurely, as the shares went quite higher later in the day as the EU news came out.

No matter. There are still 3 days for more earth-shattering news to hit.

Once the EU news was digested and GMCR was ancient history, all ears and eyes turned to the after hours earnings reports of Intel, Yahoo and Apple.

The big news was that Apple, which always “underpromises and over-delivers”, had its first EPS miss since 2004.

The inital reaction was pretty brutal, with Apple taking a quick $30 hit, which represented a 7% hit.

Cooler heads prevailed and those losses were quickly pared back to about 4%.Certainly those cooler heads prevailed in Goldman Sach’s case, as it reported  poor earnins, but saw its inital 5% drop turn into a 5% gain.

Based on “technicals” one talking head on CNBC posited that Apple was exhibiting “bubble” behavior and that it’s price momentum was indicating that the bubble was about to burst.

He might be right, but we’ll probably never know if he was wrong.

Yahoo and Intel had nice numbers, so hopefully there will be some follow through in Wednesday’s market.

The problem with that line of thought is that it puts too much emphasis on rational market action. Events driven by events and data, rather than tangentially related rumors.

Based on where we seeem to be going, the likelihood of the market responding to real economic news is as likely as Ron Paul burying his gold around Ben Bernanke’s tulip beds.

More likely is that in a Ron Paul administration he would just plant a big kiss on Bernanke’s two lips in preparation for a literal fitting of cement shoes, and then peacefully sip away on some fine Green Mountain espresso brew

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

 

Nobody ever got giddy over practicing caution.

The other day I was looking through a “new feature” being offered by E*Trade, their “Online Advisor”. It”s not terribly different from the myriad of other such tools in that essentially the same questions are asked, particularly with regard to your tolerance for risk, the number of years until retirement and other seemingly important questions.

Single ply or two ply, I believe is a proxy assessing your spending habits.

When it’s all said and done, there’s nothing more exciting than having “Fixed Income” recommended for your stage in life.

You know the stage. Respirators, catheters and orderlies that don’t know how to use any of them.

Caution is pretty boring and I really don’t want to be reminded that I’m at that stage of life.

I may be ready for Depends, but  I’ll fight until the end to avoid those Fixed Income investments.

I had a friend in college who always thought that he was the desire of every woman’s dreams. He used to proudly show me the condom that he kept in his wallet, as he always needed to carry “protection.”

After a while, I recognized the crease in the foil of that condom and realized that for years he was showing off the very same one. he was taking the exercise of caution to an extreme that really wasn’t terribly appealing, but he was behaving otherwise.

He had a business card that read something to this effect:

“My name is Harold. I want to sleep with you. If you want to do the same, please call my number. If not, please return the card, as I’m running low”.

In this instance no names were changed to protect anyone.

He also used to talk about how he was going to go to the “free clinic to get “tested.” It seemed that he needed to be tested everyweek. Whenever I would hint that I might want to go with him to get tested, he would always come up with a reason why he wasn’t able to go at that particular time.

Somehow, I don’t think he was quite as accomplished as he had been inferring. I don’t think he really needed much protection, except perhaps from reality.

I made no such pretense and was never a big fan of “protection”.

To be clear, I’m still talking about FIxed Income investments. I like protection in most other aspects of life.

Although I’ve never been a big fan of reckless behavior, especially when it comes to investments, I’m not a big believer in living a life of over-caution, either.

The problem is that when giddiness does set in, caution is thrown to the wind.

Certainly there has to be a graph somewhere that shows the association between alcohol and unwanted pregnancy, just as their has to be a graph someplace showing the association between a rapid rise in the stock market and stupid decisions. Greed will do that, as will the fear of missing out.

Unless you were in FIxed Incomes or in cash, which are essentially the same, you’ve been very happy the past couple of weeks. Surprisingly, that feeling would have alternated with having been very sad the previous few weeks.

So happy, that you probably think that everything is just going to keep going unchecked in the same direction. One of these days, the “this time it’s going to be different” feeling is going to come true, but that’s not likely to happen this time or the next.

And then, along come days like today.

After a couple of weeks when grasping at rumors of good news was all that it took to drive the market higher, today was the day that Germany’s pessimism on an EU solution came back to haunt.

Pissing in the wind, punching a whole in a condom and buying high are all reckless behaviors. Pinning your hopes on a promise to resolve a crisis is probably not a good strategy.

But from my perspective, not having downside protection is every bit as reckless, especially when the market goes up and down in completely unexpected spasms.

Sure, I was saddened to see Halliburton drop $3 after announcing earnings before Monday’s opening, but the $38 call options that I sold on Friday for $1.02, that happen to expire this coming Friday soften the pain.

Of course, the downside is pointed out by those that believe that stocks are all poised to make spectacular climbs at any given moment in time.

There’s no shortage of examples where that’s happened.

This year, I can look back at shares of Green Mountain Coffee Roasters and VIsa among others, that I’d lost to assignment after unexpected run-ups.

Those are easy to remember and hard to forget.

But I’ll also remember that last week I didn’t bank any option income on my downbeaten shares of Mosaic because there were rumors of a buy-out and I didn’t want to get caught flat-footed.

I’ve thought of alternatives to selling covered calls, but that would require picking better stocks and making their purchase and sale at just the right time.

That solution would require effort and skill, so that makes it a “no go”. Although I’d be willing to use insider information to help arrive at the same end point, I don’t appear to yet have those kind of connections.

The reality is that there are very few surprise break-outs of a stock’s price. For every Visa that gaps from $80 to $90, or very Green Mountain that goes form $45 to $60, there are a couple of thousand each day that don’t.

Today, El Paso did, but space doesn’t allow me the opportunity to list those that didn’t.

The fear of missing out on one of those great moves is unfounded. They just don’t happen that often.

What does happen often is that stocks go up, they go down and they go up again, right before going down and then up again.

After that has all happened, you can reliably predict that cycle will repeat itself.

On Monday, I started the day with cash coming from the assignment of British Petroleum, Freeport McMoRan and Alcoa and was looking for a quick bang for my investment buck. For the day, at least, I got it by picking up additional shares of Riverbed Technology, DuPont, Sallie Mae and ProShares UltraShort Silver ETF.

I immediately sold in the money calls on all three of those purchases. After all, when do you put protection on? After the proverbial horse has left the barn?

For my trouble of selling near the money and in the money calls expiring on this Friday, if assigned, I’ll net a 3.4% return on the options income alone

Sometimes the protection is worth more than the asset it’s protecting.

I’m not exactly certain how that same analogy can be applied to condoms, but at least in my world of investing, it seems to be true.

For the shares that I picked up today, I don’t have very many high hopes of an El Paso like surge.

Whatever surge there may be will be restrained by the protection, but enjoyable nonetheless.

As the markets have been evolving I’m looking forward to even more variety in the protection available.

As we begin selling derivatives on derivatives, such as options on the VIX or short options on the VIX, I’m looking forward to the inevitable appearance of some of those UltraSheer options to help make the experience that much more enjoyable.

And what investor wouldn’t want to be long in UltraSheers? 

 

Invest like TheAcsMan

 Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.   hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

 

Groundhog Day, the Bill Murray movie, is reportedly the most played movie on television and basic cable. I know that I’ve done my fair share of viewing that movie over the years, first starting with it’s original theatrical release and then seeing it ad nauseum during that bizarre commuting phase of my life, spent in many a hotel room.

Given the movie’s storyline, it’s only appropriate that the movie keeps getting repeated.

If you’re one of those very few people that hasn’t seen the movie, or just doesn’t know the story, you’ve likely spent the greater part of your life in Slovakia, focusing on far more important things than light romantic comedies taking place in obscure Pennsylvania towns, starring a now obscure actress.

You certainly wouldn’t understand the connection between Groundhog Day and unending repeating, or as I like to call it; “Life”.

Personally, I don’t understand thow I could have two consecutive days when a Pennsylvania city is mentioned in my blog.

Some things just are out of your control.

I can’t really tell you how the Groundhog Day movie ends. It’s not that I don’t wanty to spoil it for you, it’s just that I don’t remember, but I do remember all of the intervening details.

In the movie the predictabilty of reliving each day first proves to be maddening, almost driving the Bill Murray character to the brink of suicide, until he realizes that he can step out of the pre-deteremined actions of his character.

Ah, now it’s coming back to me.

Only when he realizes that he can capitalize on the mundane and predictable, does he realize the key to his happiness. To top it off, he brings out the best in those around him, as well. As soon as he starts behaving in a manner that conflicts with the expected reality, he changes everyone’s reality.

For some people, in the market’s after hours, today was as if the movie featured Google.

Talk about a replay.

Google came out with great earnings after the closing bell and shot up about 9%. That’s not much of a surprise. They always come out with great earnings and then fall prey to the spin.

Google has a habit of making big moves on its earnings reports that in absolute dollars are magnified by its $500 per share price. It did precisely the same last quarter, making its move to $600, before heading down back below $500 just a short 2 weeks ago.

Unfortunately, you just can’t predict in which directions those moves are going to be. Although I don’t currently hold any shares, I have in the past and have been blown away by some of the downdrafts in price, even after great earnings reports. Hedges helped soften the falls, but dampened the rises.

It goes both ways.

On the other hand, even though you can’t predict direction, you sure can predict that there will be movement.

Today I felt as if I were in my own personal Groundhog Day scene.

It was just another day that happened to have JP Morgan report its earnings as part of the ordinary landscape.

I’ve owned JP Morgan on and off for about 2 years and have especially been going through my own personal Groundhog Day with the shares ever since the weekly options became available.

On Monday I added onto my position and sold $32 calls, for nearly a 3% premium.

As it just seems to do on a predictable basis it went up and then down. They don’t need to report earnings to make significant price movements. The only difference was that today at least there was something going on that could be called a reason for the move.

Everyone was expecting disappointing numbers, which of course is why share price went up admirably from Monday through Wednesday.

Of course?

As luck would have it, it went down sharply today and is now below the strike price, with expiration on Friday. Why ot went down when everyone was expecting bad news and why it first went up in advance of the expected bad news earnings?

Yeah, as if that scene’s never been played out before.

You just have to get used to it and go with it.

I could do these kind of weekly trades every week.

In fact, I do.

On the other hand, the ProShares UltraShort Silver doesn’t come with a weekly ETF, but it really doesn’t matter. Silver goes up big on one day and goes down big the next.

I sell the call options, buy them back, sell them again, buy them back again.

You get the idea.

The share price of the ETF is virtually unchanged from where I bought it, but that volatility brings a great premium. Actually, whereas I usually sell near the money options, the volatility and resultant premiums for this ETF were so nice, that I’ve been selling well out of the money options, balanced with some at the money options, so that I could benefit from the stock’s capital gains, receive options premiums with less risk of being assigned and also receive heightened premiums that are very responsive to the stocks moves.

Huh?

Today, for example, with silver falling and the ETF share price rising, when it hit $14, I sold $16 calls expiring next Friday for $0.34 per share net. That’s on top of the $0.62 and $0.57 per share netted the past 2 weeks on those same shares.

But I also sold some $14 calls on Monday, when the share price was $14 for a $1.19 premium.

The last month’s options cycle was the same.

And the one before that?

The same.

I guess that’s why some people like annuities. They’re so predictable, just like groundhogs.

As an investment, I’d rather not have an annuity, but I don’t mind if my shares throw off predictable options income and start annuitizing themselves.

Now if life really was like portrayed in Groundhog Day, I would certainly banish my lack of nerve that popped up yesterday and I would have sold calls on Sallie Mae and Mosaic.

As it turned out, Sallie Mae gave up most of the gain that it made on Wednesday.

Mosaic on the othre hand went up a bit more, but each day that no new rumors pop up is just another day of lost opportunities to bank some premiums.

But, the one thing I know is that the opportunity will return and I’ll never tire of doing the same thing over and over.

As opposed to the personal hell that Bill Murray found himself in until he found the key to navigating through hell, I feel as if I’m in heaven.

What may be going on is that the market represents the inverse of the Groundhog Day experience.

While everything changes around you, the best way to thrive is to keep doing the same thing.

Inertia is a terrible thing to waste.

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

Here’s something that we don’t see very often.

A U.S. city, state capitol, no less, declaring bankruptcy.

That’s almost as unheard of, as say, Athens declaring bankruptcy, except that the buildings in Harrisburg are in a greater date of disrepair.

That decision to do the unthinkable can’t inspire too much confidence in municipal bonds, even though the city comptroller has indicated that they are still current on the General Obligation notes.

The cynic in me believes that the decision to declare bankruptcy isn’t entirely coincidental.

With all of the world’s attention focused on Greece and the EU, we’re starting to feel a bit left out on this side of the pond, and if there’s anything that we need, almost as much as oxygen itself, it’s the spotlight.

I think that Harrisburg is looking toward Florida for its inspiration and wants that Andy Warhol moment in the sun.

Florida, as well as some other states, is challenging New Hampshire’s hold on being the nation’s first Presidential Primary state.

For some reason, it seems important for a state to be the first, probably because that’s where the big campaign money goes, as serious candidates need to get their toehold early or fall into the abyss.

And that spending blitz isn’t just restricted to media campaigns.

Take for example the tremendous boost just given to the New Hampshire hospitality industry as Mitt Romney, in return for an early endorsement, agreed to provide Governor Chrisite with an unlimited supply of McRIb sandwiches when it is re-introduced onto New Hampshire’s McDonalds’ menus.

FIrst out of the box has its benefits in most every competitive arena.

No doubt that Harrisburg didn’t want Greece or Italy going first. You just know that when that first one goes, the rest will just domino.

Harrisburg simply didn’t want to get left in the dust or ash heap that their $300 million trash incinerator bond had them headed.

Sure, those are quasi-nations within the framework of the European Union, but in an “America FIrst” sense of indignation, Harrisburg did what so many other municipalities around the countyr just didn’t have the nerve to do.

No one strives to be #4.

Besides, how else does a relatively sleepy backwater state capitol get its share of attention and maybe eco-tourism, which is not to be confused with eco-tourism. Instead, think “Keynes to the City” as being an eco-tourists most favorite guided tour through bankrupt Harrisburg.

There’s no special formula or way to predict who will demonstrate the nerve to take on the unknown. It obviously takes a crisp understanding of risk and reward ratios.

I’m sure that every X-Games participant goes through an extensively elaborate algorithm to determine the appropriateness of their next humanly implausible action.

Sometimes “nerve” can be a funny thing.

There was a time that I had the kind of nerve that didn’t mind letting it all ride on a single horse race or spin of the roulette wheel. But during that same period of time, I would break out in tremors at the idea of executing a stock trade on my own, much less look at the paper losses.

But then something happened. I don’t have any clue just what it was, but it all changed.

The entire risk-reward perspective had become turned on its head.

These days, I can’t stomach the idea of losing even a quarter in a slot machine, but am not really moved by a six figure paper loss in a single day.

I’ve been functioning like that for quite a while, but today I seemed to take a step backward.

With the market continuing to climb for no real reason, here it was, mid-week, the time that I usually like to grab some remaining pennies on the table. I was still delighting in the fortuitous timing of Alcoa announcing another set of disappointing numbers only to have the disappointment well cushioned by a continuing euphoric market.

Well done, Klaus.

This time, despite the fact that there were a number of opportunities that I would have normally taken, I found myself selling only Goldman Sachs and Time-Warner calls.

I struggled with the decision to sell calls on Sallie Mae and Mosaic.

I mentioned Mosaic yesterday as it was the target of a potential takeover rumor.

Sallie Mae, on the other hand, has just showed some nice strength going into earnings next week.

Yet, I couldn’t find it within me to make the sales..

I’m rarely undecided, but the “FOMO” hit again.

Fear of missing out. I was worried that I might miss a quick upside move in either and leave a lot on the table.

The other day I read a nice piece by Phil Pearlman, the resident staff psychologist at StockTwits.

His blog title, NetFlix is on Tilt, examined the tendency to overcompensate for stock losses, using a poker players’ analogy.

Admittedly, I know knothing about poker, but I liked his take on “Tilt”.

For me, avoiding fear, greed and envy were always primary requirements for keeping your head above water. I always looked at those as raw human emotions, but “Tilt” didn’t quite fit that category, but it was also worth avoiding. When asked, Pearlman confirmed for me that “Tilt” was not an emotion.

Still, I was left with the feeling that some kind of emotion has to be responsible for causing one to enter “tilt mode”

The tendency to do stupid things in order to erase other stupid actions isn’t an emotion, it’s just part of human DNA.

In my case, I had nothing stupid in my near past that needed to be compensated for, but I felt that if I went on with my usual modus operandi and sold the calls, I was going to be left out of the game. There’s nothing worse than watching that big shiny ball roll down the playing surface and not being able to do anything to get back into play.

I understand that kind of “tilt”, but I also get Pearlman’s kind, as well.

Neither is good for long term survival.

By the time the market closed on Wednesday, half of the index gains were gone, and in hindsight, I should have made the sales.

Is “regret” an emotion? It’s also just another one of our traits, but it is related to envy. Envious of what could have been or just regretful for what never was.

In the meantime, word came across that Slovakia pulled it together and its Parliament endorsed its role in the expansion of the rescue fund.

For another few days, Greece is spared from what everyone believes is the inevitable.

But it doesn’t matter.

Thanks to Harrisburg, American pride is restored.

From a grateful nation, thank you for taking on an unnecessary municipal project, passing the blame onto a previous city administration’s cronyism and faulting pressure applied from the State House for making the ill-fated decision.

Can you say “tilt”?

A real leader would have blamed it on the Greeks.

But at times like this, a grateful nation will take any winner as it own.

Here’s to Harrisburg.

First in our defaults and first in our hearts.

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

 

About 5 years ago Sugar Momma and I, together with our kids were travelling on a sleeper train from Venice to Budapest.

What seemed like every 20 minutes through the night, there was a loud knock on the door of our berth.

Border patrol guards.

The one nice thing that you could say about Marshall Tito, the now long dead ruler of Yugoslavia, is that while he was a live, there really wasn’t need for all of these border guards that came into being after Yugoslavia got split up into its forced component pieces.

I’ll always remember one specific guard who responded to Sugar Momma’s dreary eyed question, “Where are we?”, with the answer, “Slovakia. You’re in Slovakia. Have you ever heard of Slovakia?’.

He didn’t look pleased when she told him that she’d never heard of his country. He then said something in Slovak to his compatriot.

Then he laughed and returned our passports. At least he didn’t point his rifle in our faces.

My wife and I returned to our sleeping car room and she said, “You know, that soldier boy was sort of cute”.

Now before you start getting on my back, I know that Slovakia was never part of Yugoslavia, but for purposes of the above illustration, let’s just assume that it was.

Fast forward those same 5 years and all of a sudden Slovakia is as big a deal as Malta had been last week.

On Tuesday, all the remained for the Euro rescue to go forward was final approval from the Slovakian Parliament of the plan to expand the Euro Rescue Fund.

Whereas the likes of Malta and others didn’t take the opportunity to flex its muscles, Slovakia jumped at the chance, befitting its role as home to Zdena Nazarejova, winner of numerous Women’s European Bodybuilding and Fitness Championships.

Only in a world defined by the oddities routinely found in the “Twilight Zone” would you have seen a Reuters headline that read “Latin American stocks little changed before Slovak vote”.

As it turned out, today was a very eventful day.

For starters, after the market’s close, word came out that the Slovakian Parliament failed to approve their nation’s participation in the EU fund expansion. As the poorest of all the EU nations, they probably felt they had less to give and besides, they had already gone through years of fiscal resposnibility and austerity just to gain EU entrance.

So while we await formation of a new Slovakian government in the aftermath of this rebuke to its leadership, there was opportunity to see what else was going on in the world.

The fact that there seems to be significant movement on the release of Gilad Shalit, the Israeli soldier held for more than 5 years by Hamas was noteworthy.

Myanmar releasing 3000 political dissidents? Wow.

The arrest of an Iranian-American for conspiring to asasinate the Saudi Ambassador to the US and then bomb the Saudi and Israeli embassies? Get me the screenplay.

Ukraine sentencing its previous Prime Minister to 7 years of prison after having been found guilty of negotiating with Russia over natural gas prices? Same old. Same old.

Herb Greenberg making a triumphant appearance on Jim Cramer’s MadMoney after a much too long absence.

Now that’s newsworthy.

But with all of this going on, all the market was thinking about was the start of earning’s season, as Alcoa was poised to announce after the closing bell.

It was so bizarre to have essentially no trading range through the day.

I did purchase shares of Alcoa on Monday and promptly sold calls. I don’t usually buy shares right before earnings are announced, especially if there’s already been a 20% run-up in price.

But given the fact that Alcoa had been serially projecting earnings downward, my thought was that we should have been prepared for bad news.

Which in fact came after the close.

Did I forget to mention that I also sold some Alcoa weekly puts right before the close?

In the after hours, Alcoa slid to $9.79 after having closed at $10.30.

I also purchased some more shares of Mosaic, using some of the options premium proceeds from the past couple of days.

By the time I logged the purchase into the Portfolio Holdings and Recent Transactions page of the site, Mosaic had jumped up about $2, apparently over some buyout rumors.

I like capital gains as much as the next guy, but I hope the rumors aren’t true. Mosaic has been one of my most reliable stocks in terms of generating great options premiums. At first it was month after month and now, life is even better as its week after week.

I look at Mosaic as my annuity plan. I’d hate to see it disappear from my screen.

But for me, the big news continued to be Greenberg’s return to Mad Money.

At one time as an addicted viewer to Mad Money, my favorite segment was the East vs. West, when Cramer would take on Greenberg via satellite from San Diego. They would discuss their differing opinions on the merits of stocks in the news.

Probably by coincidence, Greenberg’s audio feed would always seem to get abruptly cut off, giving him the next to last word. The look on his face upon realizing that he was silenced was priceless.

What are you going to do?

But what really made this event so special was that my Sugar Momma gave me a special dispensation to watch Cramer’s Mad Money in our family room.

Cramer had been banned many years ago, because she complained that he gave her a headache.

Sigh. The things you’ll give up for love.

But this time she allowed it.

She came back downstairs near the end of the segment and asked who the “other person” was.

“He’s kinda cute. But is he always that hyper?”

After having seen the movie “Contagion” a few weeks ago, I would have thought she would have realized that this was more a case of environment exerting its predominance

For some reason her question reminded me again of the Slovak border guard incident, but at least Greenberg was neither there to hear the comments, and as far as I know, he doesn’t carry a rifle.

But in the event that he does, I won’t comment about what appeared to be matching shirts.

Muted Plum, I think.

That’s a color that never would have existed in Tito’s Yugoslavia or in any of the former Soviet satellites, but it’s an entirely new world.

To welcome in that world, I’m going to see if I can get away with catching tomorrow’s Mad Money episode.

If I get a rifle pointed to my face, I’ll know that my Parliamentary body has chosen to flex her muscles.

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

What’s in the Szelhamos Portfolio?

Reality and reality don’t always coincide

The official word came out that the recesssion was over.

Unfortunately, as incomes were also reported to still be falling and the unemployment picture is only as good as the next revision, it’s hard to rejoice at that reality.

Especially when wages are now lower than when the recession began.

I’m certainly not one to argue with the proclamation, but since the recession was reported to have ended in June 2009, you’d think that enough time would have passed for some tangible obvious improvements.

Although I’m, not one to argue, by far those that posted comments on the New York Times report, took exception to the reality as reported. Although aomw of the recommendations may have shown an equally questionable understanding of reality.

Of course, talk of a “triple dip in housing” can’t be what recoveries are made of, but that’s the latest fear, which should be taken seriously if you believe in the reality that housing drives the economy.

Reality does sometimes have a way of catching up to the real reality.

Take the Occupy Wall Street situation.

No doubt that its been spreading, growing and gaining steam. It’s even being exported to other cities and college campuses, despite the fact that no one has actually reported on the aims and objectives of the original Occupy Wall Street group, much less the spin-offs.

But that’s changing. Today, camera crews were actually beginning to show up, demonstrating that media outlets are perceiving the reality of the situation, although maybe it’s just a slow news day, what with the Kardashians keeping a low profile, as they prepare for the upcoming Jewish harvest holiday of Sukkoth.

As if Jews didn’t have enough problems.

Fortunately, those problems don’t include the Kardashians.

Since I only watch CNBC and don’t have a Daily Show kind of staff to scour all the networks and cable stations, I can only comment on CNBC coverage.

And today, there was some. They were right there.

Despite the perceived reality that the Occupy Wall Street protestors were a collection of society’s professional laggards, John Carney reported otherwise.

In fact, they seem to be pretty mundane, having even organized into committees to establish standards of protest behavior. Doctors, lawyers and college graduates will generally do those things that reek of structure.

They even are reported to have a drug usage policy, and rather than being “use as much as you can, dude”, the policy is that there should be no drug use.

Advil is reportedly acceptable and there may be other exclusions for certain extraordinary circumstances, like needing a buzz.

That doesn’t really support the dirty hippy characterization, neither reeking in a literal nor figurative sense.

While there’s probably enough detestable behavior to go around, maybe much of it even emanating from Wall Street, pointing out the obvious may not bring us closer to a meaingful soluion, especially if the obvious is not the root problem at hand.

The reality is that the Federal Reserve’s mandate to keep interest rates low can only continue as long as wages stay low and discretionary spending is curtailed. Since their dual mandate also includes keeping employment high, at the moment that can only be accomplished by keeping the cost of employment low.

Remember “supply and demand”? What better way to bring unemployment down than by being able to pay the same total dolars but for more employees?

There’s lots of political pressure to go to a single mandate, although others would just as soon get rid of the Federal Reserve altogether and have you eat your gold reserves in the event of residing for extrended periods in your nuclear fallout shelter.

That solution probably isn’t very realistic.

The European Central Bank, on the other hand, has only the single mandate, that of maintaining price stability. But there too pressure is mounting to ease up on that mandate in order to get an employment surge.

Obviously, despite what the protestors believe, it’s not easy being a banker.

European bankers must especially be wondering “what’s next?”. The market was buoyed today by some rumor of a secret plan concocted by Merkel and Sarkozy that will make everything alright.

Actually, there’s not yet a plan. Instead, there’s a commitment by them to come up with a plan. This comes on the heels of the market moving news last week that the EU fiscal crisis was going to be taken seriously.

Small steps, but over-sized responses.

Sarkozy, being the chief proponent of politicizing the ECB in order to bring more full employment is the reality. But so too is Merkel, since she’s got the money, but maybe not the political will nor backing of her fellow Germans, much less the Slovaks and Maltese, who really have little at stake.

The fact that they have little at stake is reality, as well as the reality that they can throw a wrench into the works every bit as easily as Germany or France.

Greece could as well, but that would require some effort.

So that’s not going to become a reality because of the reality.

Whether today’s market move was a reality borne of a dream or not didn’t really matter to me. Although I watched my assigned shares of Halliburton, Freeport McMoRan and QQQ head even higher today, I didn’t mind, especially since I still owned more Halliburton and Freeport McMoRan shares.

As usual, despite knowing that entering the market to pick up shares whenthe market is already up 200 points isn’t a long term winning strategy, I was flush with cash and had to do something.

So I added to positions in Mosaic, ProShares UltraShort Silver ETF, Morgan Stanley and JP Morgan. I also picked up shares of Alcoa, despite the fact that it’s just moved up about 25% and reports earnings after Tuesday’s close, kicking off yet another earning’s season.

While the market stayed up, I sold calls on all of those, as well as Halliburton and British Petroleum, while I looked for more upside on the likes of DuPont, Rio Tinto, Transocean and some others, that I don’t yet have hedged.

The reality is that despite a nice week, the past few weeks had been brutal. Despite what looks like good news at the end of the day and despite the very nice month’s worth of options premiums, the bottom line hasn’t been terribly good.

Sort of like what most of the nation seems to be going through, as long as you believe that 99% represents a majority of the nation.

So is the recession actually over?

As a famous past President once said, “it depends on what your meaning of the word ‘is’ is”.

The term “jobless revcovery” is time worn, but that’s what it looks like we’re seeing.

The people that those occupying Wall Street are presumably protesting against try to paint a different reality.

They claim that they can’t find people to fill their jobs. They claim that people would rather collect unemployment for an extended period of time than go to work.

That reality may apply to some people, since just about every situation applies to someone. Who knows, Chaz Bono may win this season’s Dancing with the Stars.

Hard to imagine that could be reality, but it could.

For all I know, today’s reality was second guessed by those citing the semi-holiday feeling to the day, since there was no bond trading, in commemoration of Columbus Day.

You remember Columbus Day, don’t you? That’s a day that we commemorate something other than the reality of Columbus.

Suspending belief is sometimes a useful tool. It’s worked pretty well for Columbus and it can work for us, as well.

So, yes, the recession is over. There are jobs galore and throngs are gathering on Wall Street to demonstrate the overwhelming gratitude of 99% of the nation to those who actively seek a greater tax burden.

Reality is awesome.

 

 

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

What’s in the TheAcsMan Portfolio?

 

Other than  my family the two things that I love most are numbers and comedy.

I like fried food, too, but now I’m not allowed to eat them, because my numbers are too high.

Sort of ironic. Those numbers I hate.

With so much debate going on about the concentration of wealth in our nation and the unfairness of the tax code, I’m somewhat perplexed that the beautiful objectivity of numbers could be so bastardized.

Living near Washington, DC, I truly understand the beauty of “spin”, but how do you spin a number itself?

Whereas many accept the Bible as the ultimate truth, believing the same about numbers doesn’t violate the first commandment and isn’t really counter to our western belief in monotheism.

In fact, the concept of monotheism couldn’t exist without numbers.

Well, at least one number.

There’s probably no valid reason for me, however, to have such faith in the sanctity of numbers. I should be cynical based on an old Abbott and Costello routine from a few generations ago.

Costello clearly demonstrated that 13 times 7 equalled 28. He also proved that 28 divided by 7 equalled 13.

And for the perfect trifecta (or Troika, as that’s become a popular word in the world of European Finance) 13+13+13+13+13+13+13 = 28

The Gospel of Comedy may trump all other truths.

These days, the numbers are sliced and diced by all sides to demonstrate points about inequities.

Amazing how one side feels that the disenfranchised are being unduly carrying a tax burden, while the other side believes that the disenfranchised are represented by those people that would be effected by the “Buffett Rule”.

“50% of Americans don’t pay taxes”

“The top 1% of earners carry a greater tax burden than ever before”

Both of those sound patently unfair. And there’s no shortage of other factoids being tossed around. Refute one and you’ll be answered with another factoid. Refute that, and so on.

It was 1982 and I was very fortunate when I first started investing, in that the market was beginning to wake uo from a long slumber. Although after what had been referred to as this generation’s “lost decade” in investing, I guess the best investment would have been a 30 year Treasury at 17% back in the late 70’s, or those great MAC bonds that helped rescue New York CIty after Gerald Ford seemed disinclined to help.

See, that’s the beauty of words.

Ford was portrayed as having told New York to “Go to Hell” in the city’s newspapers. That’s spin.

To borrow and butcher Tom Hanks’ line from a Leagiue of their Own”, “There’s no spinning in numbers.”

By the way, there is one other thing that I love, although it’s more of an addiction.

I love anagrams.

Back in 1982 the concept of trickle down economics was widely introduced by Ronald Reagan. You know him, he’s the guy that both sides embrace with a big, wet hug.

The concept sounded great. After all, the wealthy were the benefactors of society. Of course they would take their increased wealth and shower it down upon the masses.

Well, my love of anagrams always led me to the words “age, rage and anger”, whenever I looked at the word “Reagan”.

Of course that just reflects a person who at the time was still young enough to not fall under an earlier generation’s warning to not trust anyone over 30.

There I was in Public Health School, learning all about maldistribution iand inequities, yet I was also a investment class wannabe with a growing fascination with the stock market.

What amazes me is that no one has decided to look at the supposed inequity in a systematic way, by looking at changes at the margins, let’s say, compared to 1980, which ended by ushering in the Reagan era.

My guess is that it actually has already been done, but that without a sexy sound bite, good luck getting popular traction.

Funny thing, but it has already been done by the Congressional Business Office. The non-partisan CBO.

Back in 1980, the top 1% of the population received 9.8% of all income. By 2005, it was up to 18.1% or an 85% increase.

But when it comes to tax paid, the top 1%, and that included me, rose from 15.4 to 27.6%, or a rise of 79%.

In other words, the same tax code that allows most senior citizens on social security to not pay federal income taxes has also significantly trickled up benefits to that top 1%. They made much more money, yet paid much less taxes.

Of course, then the next debate falls to the source of those earnings, specifically capital gains versus earned income.

I also love charity.

But in my case, it’s donating to charity. In that regard, I really have a hard time understanding why the $100 that I donate only really costs me about $60 after considering tax deductions, while Warren Buffet’s secretary ends up being charged $85 for that same contribution.

But that’s another blog. Maybe in that blog I’ll look at the same comparative numbers since 2000. In which case the differences aren’t quite as pronounced. I guess that’s one way of getting the numbers to do what you want.

In the meantime, the numbers treated me well last week, as it hopefully did for most others.

In addition to the nice paper gains, again I sold a number of call options during the last 48 hours.

In fact, I sold such weekly options on 22% of my portfolio and received an additional 0.68% return in premiums on that portion of the portfolio. Those numbers felt good and Ill be happily paying my captal gains taxes on those.

I’ll be losing some of my Halliburton and Freeport McMoRan shares, but may find myself buying them right back, if the price is right.

In that case, the numbers are truly subject to interpretation. Some of those Freeport shares were assigned, resulting in a capital loss on shares.

So it’s off to Quicken to see whether there’s any value in taking a tax loss on those shares or just buying them back within that 30 day period and forgoing the loss in an effort to create new options income and maybe capital gains.

Wash rule be damned. You don’t own me. Sometimes it’s just worth giving up the advantage of the loss that the tax code gives. The code giveth and the code taketh.

Sigh. Rich people’s problems.

A Europe exercises increasing dysfunction, on this side of the pond we look better and better by comparison, but their dysfunction just compounds our Rich People’s Problems.

At the Finance Minister’s recent meeting in Poland, that weren’t very hospitable to TIm Geithner and weren’t very receptive to the advice that he was willing to share, that was borne out of experience.

If they’re not willing to listen to Geithner, I think that I have a suggestion that should be acceptable to all parties, even Malta and Slovakia

Maybe those European Finance Ministers should all just take a math lesson from Abbott and Costello.

 

  

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

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