What Buddy Holly Teaches Us

Special thanks to Josh Brown (Reformed Broker) for reminding us that February 3rd was the anniversary of when the music died.

Sometimes I think I’m like that kid in “The Sixth Sense”.

“I see connections”. That’s not quite as spooky as seeing dead people, but just the same, some of the connections can be pretty tenuous and call reason into question.

Buddy Holly, not me in High School

In this case, though, the connection happens to be to a dead person who now appears very much alive, as Natalie King Cole has released paternal DNA testing indicating that Buddy Holly was her biological father and will soon be releasing a music video duet of “Oh Boy”.

But what in the world does Buddy Holly have to do with stocks, investing or the markets? So little, that if I didn’t bang out this blog right now, the moment the idea popped into my head, there is no reasonable way that I would remember the concept or connection 3 minutes from now.

It all started with a simple Tweet from Josh Brown, author of The Reformed Broker website.

I have no connection with him, in fact, I think he may have even blocked me from posting to his Twitter account, due to our onetime irreconciliable differences over Darfur.

But he pointed out a great Buddy Holly tribute album with lots of very impressive contributing artists. How could you not want a Buddy Holly song covered by Cee Lo Green?

Being who I am, I scanned the list of artists with one filter in mind, but the search turned up nothing. Maybe he was still with the rest of us sitting a very extending Shiva for Clarence Clemons.

That prompted me to dust off a couple of 35 year old concert venue renditions of Buddy Holly songs by Bruce Springsteen and then caused me to allegedely post links to them on this site.

I say “allegedly” because it may be against the law to have done something like that. Despite great admiration for both Springsteen and Holly, an equally prestigeous named law firm might pursue me for something.

Allegedly. Good luck finding them.

Anyway, Buddy Holly was truly an amazing guy. A walking and talking cultural contra-indication, he was a Texas Boy in the 50’s, playing to racially mixed audiences and performing with musicians who couldn’t get in the front door in many parts of the country. Interestingly, The Big Bopper also couldn’t get in because of his girth.

The fact that his wife’s name and that of my Sugar Momma are the same played no role in the strength of the connection.

Another of my favorites, Don McLean paid Buddy Holly homage, at the expense of Elvis. Entirely coincidentally, the blog “The First Time” from just a few days ago featured Roberta Flack, whose own song “Killing Him Softly” was a tribute to Don McLean.

As Kurt Vonnegut used to write, “And so it goes”.

Had I not seen Don McLean in concert the night before the SAT’s, maybe I would have had three Harvard degrees.That undergraduate degree would have taught me to never begin sentences with either the word “But” or “And”.

No regrets, though, as that is a recurring investing theme of mine.

I say that after having just lost Google to assignment, far below its Friday close. And then there was Visa and before that Green Mountain Coffee Roasters.

Okay, maybe some small regrets. Unfortunately, my vanishing memory banks can’t seem to erase those memories.

Buddy Holly showed that there were lots of different ways to break out of the stereotypical mold and create a new far-sighted and visionary path.

He also helped re-invent an entire musical genre, much like I will need to recreate my portfolio today, as nearly 40% has to be replaced due to assignment.

I didn’t need a plane crash to realize that there were alternatives to buy and hold, although, sometime this week, I will pay some tribute to a Buy and Hold guy (if I can remember).

It did, however, take the untimely death of my financial advisor, who when we first started our relationship, was still known as a “stock broker”. I discuss him at length in the Option to Profit book, which I obviously plug at every opportunity.

Today, I will be figuring out how to redeploy about 40% of my portfolio, following assignments of Freeport McMoran, Google, Halliburton, Sallie Mae, Rio Tinto, Transocean and maybe a few others.

I will likely buy back Sallie Mae, Transocean and Rio Tinto and follow through with the recommendations that I Tweeted on Friday afternoon regarding Sunoco and Time Warner, in addition to whatever else remains in or is added to the portfolio.

Of course, I’ll look to sell call options, always being satisfied in the 2-4% monthly gain per stock. Dividends, small capital gains and options premiums, whatever it takes to scratch out a respectable living.

In a way, it’s like the small venues that Buddy Holly played, because in his barely year of fame, he hadn’t yet gotten to the big times, which for Rock and Roll, hadn’t really come of age yet anyway.

Or as I like to look at opportunity costs, “You didn’t miss them anyway”.

He was obviously a risk taker and I am slowly getting into that frame of mind, at a time when the financial guys are saying that those of my age should “slow down”.

Anyway, I just read a short article that seemed to say that approaching retirement only 25% of holdings should be in equities and the rest in annuities.

Can you say “WTF” on the internet?

Would Buddy Holly put his money into annuities? Elvis maybe. The Jester? Never.

Screw annuities. Just to slow down that aging process and as a thumb in the eye of those thinking that I should be slowing down, I’ve started selling more and more put contracts. Even though I’ve done that for a few years now, as part of my less than 5% speculative piece, it was always with very low cost issues, like Citibank, Sirius and YRCW. Now I’m branching out, slowly working may way up the price chain with Harbin Energy, Yahoo and Spreadtrum Communications recently. Maybe Google next?

I don’t think so. I may see connections, but I’m not a lunatic.

But it is fun. It’s not what I’m supposed to be doing at this age, but it is all a frame of mind. And besides, that frame of mind is both figurative and literal. I love wearing the big glasses and checkered jacket. Probably the only person who will see me in my lucky trading garb will be Sugar Momma and the UPS guy.

Sugar Momma has been looking askance at me lately anyway as the last 3 or 4 texts I’ve sent her have mistakenly included the word “tit”, instead of “it”. Proof reading was never one of my strong suits, but coming on the heels of the blog entry, “How my WIfe’s Bra Saved us Money“, now she’s not so certain that those were simple auto-spell mistakes.

Although the UPS guy has learned not to ask me questions, I’m sure he’ll be able to hear the Buddy Holly tunes that will be streaming today and he’ll probably say something to the effect of “Man that’s so loud, I can barely even hear your annoying wiener dog barking”.

That was the whole point.

Today, as we start another options cycle, I’ll be replaying “That’ll be the day the Bear Market Died” all day long and thinking of all the connections that are so obviously there.

Don’t you see them?

 

 

 

Being the Best





Szelhamos used to have a saying whenever he assessed a project that he had undertaken:


“It’s good enough” was the typical comment as he surveyed the fruits of his labor.


Of course, if you were paying for those fruits you probably wouldn’t want to hear that sort of statement.


He had a friend who was a house painter who used to tell the story of when he told his workmen in Hungarian that they were just going to do a quick sloppy job on one particular project, when the owner, apparently understanding Hungarian promptly showed the work crew the front door.


I remember when Szelhamos and I were trying to finish a small storage space in the basement. For some reason that I can’t recall, we didn’t include that in the rest of the professionally contracted basement project, which was a significant undertaking. That basement was actually larger than the entirety of our two story home in the Westchester suburb of New York City.


Of course, our end result was good enough. I doubt that it will be good enough for the next owners of this home.


Today I started thinking about just how important it actually is to be the very best in your area of expertise or business. You hear the phrase “best of breed” so often as the one one company in a sector that merits your investment consideration.


When news came out late yesterday afternoon that Borders, arguably the best in the business of book peddling was now likely to liquidate, it occured to me that being the best in a dying business offers no solace.


The fact that both Borders and Blockbuster used the same gimmick of a free Buggy Whip with every purchase or rental probably should have sent that message earlier.


I’m just not certain how Merril Lynch is going to work those into a meaningful promotion for its dying business.


G.E.D.In a way, this thought is a little bit in keeping with yesterday’s blog “Remember Report Cards”.


What I didn’t mention in that blog article was something that I learned from my oldest son, who at one point of his early college career had a GPA that if multiplied by 100 would give you an  IQ that might qualify you to wear a protective helmet 24/7.


I’ll give you a moment to digest that one.


What he taught me was that unless you were planning on going to graduate or professional school, grades really didn’t matter.


I’ll never know how true that really is, as he completely turned it around in the latter half of his college years and now only has to wear the helmet during waking and sleeping hours.


As a side note, he has done quite well for himself in his first few post-college years. Working hard, having fun, making money and joining the investor class.


So good enough?


As I look at today’s upcoming  end to the July options cycle, on the heels of Google’s blow out earnings numbers yesterday, I’ll be missing out on what may be a $50 climb in Google, as my call options will see shares taken away from me at $520.


Should I have tried to be the very best and get the most out of that and all investments?


Uh duh. Of course.


There’s no question that there’s an audience for a Home Run Hitting Contest, but there’s not much audience for a Scratch Singles Show.


If you owned unhedged shares of Google, you just hit a home run.


Otherwise, if you’re like me, the third base coach just tackled you as you rounded first base.


But I don’t have much in the way of regrets.


Tomorrow will end and once again I’ll do the final “is it good enough” calculation.


That’s the angst filled calculation that I do to see what my bottom line would have been had I not sold call options on my holdings.


I’m not sure why it continues to be angst filled, especially since most every month I come oit ahead. Not only do I come out ahead, but the money represents realized profits, as opposed to theoretical profits that assume that I would have been smart enough to take profits on the stocks, as opposed to the typical “let it ride” mentality of most investors.


Listen, I know who I am. Otherwise, I would have sold Google back in 2007 when it had reached $700.


One of the nice things about selling call options is that it creates a discipline of selling and forcing yourself to take profits.


It’s akin to admitting that lesser profits are “good enough”.


And they really are, especially if those lesser profits come on a  really frequent basis.


The New York Mets used to have a powerful home run hitter, Dave Kingman. Back in the 70’s or 80’s, he towered above other players. When he hit a home run it was really a marvel, but really accounted for nothing. One dubious record Kingman had, among others, was his home runs to runs scored ratio.


Worst ratio ever!


In fact, Kingman, purely for purpose of exaggeration, was possibly the best homerun hitter of the era and had some of the longest clouts ever recorded, ultimately became the first player ever with more than 400 home runs to fall off the Hall of Fame ballot on after his very first year of eligibility.


Given those highlights, I’d rather take it down a notch or two and be Lee Mazzzilli. Broad repertoire, nothing terribly flashy and ended up with a World Series ring.


Kingman ended dressing a rat up and placing it into a shoebox he gave to a women reporter. He was trying to send some kind of a message, but unfortunately severed horse heads were out of season.


I’m resigned to the fact that I’ll never be the best. But I’ve also come to understand that “good enough” can be good enough if you can just keep doing it year after year.


Mediocrity isn’t really bad as long as it’s consistent. Hitting a home run is great, but not at the cost of striking out in a 3 to 1 ratio. Just look at the high flier funds and see where they stand in the subsequent years


Remember when Fidelity Magellen was the very best? How about when it was the very worst? I’m not much of a mutual fund person, but over the long term, it was the Equity Incomes funds of the world that lived to see another day.


When today is over, I’ll look at all of my shares that are assigned and do the calulation. In Google’s case I’ll bid them farewell until the next time that we meet. Probably in the neighborhood of $510


As it will turn out I purchased this current lot of shares on June 13 at $507.39. I will give it up for adoption to a new owner for just $520.  I also received another $11.01 in options premiums. So for the one month of ownership or rental of those shares, my return was 5%


I’m really happy with that.


It’s good enough.


 


 









Remember Report Cards?









When Szelhamos and my mother were still very new to this country, they really didn’t speak much English.


That proved to be of great advantage when I was in the second grade.


Back then, I spent a lot of time in the corner, as I continually acted out a my infantile way of demonstrating my crush on Miss Spillinger, the teacher. The fact that Miss Spillinger would probably be about 70 years old now would make her a cougar by most anyone’s operating definition.


Report CardsWhen I received my report card, I was not eagerly awaiting the parental unit’s disappointment over my “Conduct” grade . I had received a “U” for “Unsatisfactory”. Even at age 7 or 8 I knew that there would be some kind of price to be paid.


What I hadn’t counted on was Szelhamos relapsing to German or Yiddish for his interpretation of the “U”. To he and my mother. it meant “Uber”, the very highest of grades. I don’t really know what they thought the only other grade “S” for “satisfactory” stood for. They probably thought that was Hungarian for “szar”, which by all reports would have been consistent with Szelhamos’ school performance.


In cae you’re not fluent in Hungarian, just go to Google Translate.


But they were both quite proud. Clearly, as parents that had done everything right.


Whew, spared whatever the consequences would have been. All I had to do was to promise that I would work harder to get “Ubers” in all of the other subjects and not “Szars”


All was forgotten by the third grade as we moved on to a different grading stysem, the old A through F. with  A and E alternatively used as the highest grades. And lets not forget all of those in-between grades that pluses and minuses were all about.


Through high school our report cards were numerically graded in units of ones. Very precise. Every exam had consequence, as every exam would change your final grade.


For my own children, by the time they reached high school, there was a maddening grading system. Although it was still an abbreviated A through E, with E now replacing F as a failing grade, but all performance motivation was extinguished. That was because the system had no contingency for plus or minus grades. A student with a “B” knew that no matter how well he would have done on the final exam it would have no impact on the final grade. Whether you had an 80 or an 89 it didn’t matter. It was all the same.


Students are very good at gaming the system and there was really no consequence for poor performance or inconsistent performance, as long as you stayed within a broad grade range.


Forget about the concept of doing well just for the sake of knowing that you did well.


Personal Pride? You may as well use a Google Translate tool to figure out what that means as well. You could have done szar on an exam and it would not have mattered one bit.


For me as a parent, report cards became worthless quarterly pieces of paper, knowing full well that the system promoted under-achievement. If that’s too harsh, then let’s just say that the system didn’t promote optimizing efforts.


In hindsight, I give my kids credit, though, for not wasting their time on an equally worthless system.


I often used to think that teachers should have some kind of report card, but I know how subjective those grades might be, especially if parents had a say in the process. Although there must be some kind of evaluation system, the consumer student or family is not privy to that information, even if the teacher has been charged in some kind of sex crime.


But at least the nice thing about the educational system was that most of the time your exposure to a teacher was a once in a lifetime experience. Unless that exposure was part of a sex crime, in which case either the video or the nightmares could make those images recurrent.


I never had Miss Spillinger, or another like her again. That probably turned out to be a good thing. I was able to turn my attention toward academic achievement as opposed to lusting for an academic.


If she were around today, I would probably worship the denture adhesive that she would now be sticking onto her forehead.


But those days are over. Even though my youngest son still has two more years of college to go, they are really over.


Back in the days when I actually worked for a living I would have to do quarterly and annual evaluations on my professional and non-professional staff. Sometimes the criteria were prescribed for me, while other times I formulated the performance criteria to suit the individual’s strengths and job requirements.


People certainly had incentive to do well because bonuses were at stake.


Nice incentive.


In a world where bonuses are most often much more meaningful than actual salary, I often wonder what kind of real report card is used on Wall Street. I’m certain that its entirely related to how much income is bought in, with perhaps some inverse consideration being given for the number of current SEC or criminal investigations. But no doubt, those report cards are internal documents and not shared with the investing public.


Afterall, if public servants don’t have their report cards disclosed, why should employees of publicly traded companies?


A few years ago, Joe Kernen of CNBC did the unthinkable. He called an “expert” to task, when that well known individual, who has since passed away, said something that was clearly not true and in complete contrast to his previous positions prior to the financial meltdown. No one likes a guy who tells you “I told you so”, when in fact he was part of the cheering chorus. It’s one thing to be a  bear and have your followers miss the boat. It’s quite another to be a raging bull and then see your followers fall off the cliff.


The difference is that the bear followers live to see another day. But then again, so does the rampaging bull advisor. Too bad his followers may not get that luxury. Did you ever notice that cult leaders tend not to take the Kool-Aid?


Kernen threatened to bring out the videotape.


Indignant is one way of describing the response and the atmosphere remained tense.No one likes to be graded on performance at any stage of life, especially if you know that you’ve not even qualified for a “Gentleman’s C”.


I blame Kernen for the gentleman’s subsequent death.


Obviously, any kind of financial performance report card is fraught with problems. The mutual fund industry has been great at portraying their performance in the best light by slicing and dicing the numbers and reporting periods in question.


Just look at all of the controversy surrounding Jim Cramer’s performance as a public tout. The numbers generated by “objective” observers are all over the place.


As I sit and listen to analysts and experts all day long it is equally obvious that no one really keeps track of all of the statements, recommendations and pronouncements. Given that these guys are always looking for a way to distinguish themselves from the pack, it should be relatively easy in these days of computers and data collection to actually track someone.


The way to really distinguish yourself is to be lucky with at leat one big call, be attractive and personable. Then you make bold statements while counting on  memory self-destruct processes to kick in.


Of course sending a buy signal is only one part of the equation. The next part, that we rarely get released for public consumption is when to sell. No one wants to publicly come out and say “sell” or more genteely say “take profits”.


There are some brave souls who will say as much, but that comes with personal peril.


As I watch yet another TV sequence with Dennis Gartman of commodities fame, I wonder what his real and current batting average is right now. based on his reception on various shows and the frequency with which he appears, you would think that he was “Uber”.


Amazingly, it always seems as if the talking heads always sell just before the unexpected plunge and always buy right before the climb.


That would be 100%, at least of the acknowledged and unaudited trades.


I do watch CNBC’s “Fast Money” most nights and analysts are marched through all of the time. I know that as people we tend to be biased toward attractive and tall people. That’s borne out by study after study.


When they parade out the technician with the patrician name on casual Fridays, how can you not immediately believe that he was ordained to be infallible?


Especially if a gnome like ogre comes to a different conclusion looking at the same chart?


Even if the guy with three names turned the chart upside down and said precisely the same thing you would believe him, while rolling your eyes if the Kucinich like analyst did the same thing.


Of course, the Kucinich-like analyst never would have made it onto TV, although there is one incredibly ugly guy who appears on CNBC. Given his outward appearance, I’d say that he was probably very, very good at what he does, unless he’s sleeping with the producer.


These are the things that markets are made of, but these are a few of my least favorite things.


For all I know, that ogre may speak the Gospel, but no one calls anyone to task.


Today, with the options cycle coming to an end this Friday, I sold near the money call options in Williams Sonoma, one of my perennial favorites, as well as in Spreadtrum Communications.


A also bought more shares of the ProShares Ultra Silver which was down big today, as silver and gold prices soared again. Although I initially thought that I would hold onto those shares as a speculative play, I eventually sold July call options on those, as well.


Why am I telling you this?


Just as I did last week, when I sold some last minute call options hoping to scrounge out a few pennies, a last minute rally in the markets got my shares assigned. My ultimate trade was pennies for dollars and I was on the short end.


There’s no obligation to tell you, since I’m not an advisor, nor do I sell my expertise in real time.


But report cards are important. When it comes to protecting my money, I don’t mind looking at an ogre. At least with an ogre, it’s all out there for everyone to see, warts and all.


The late Mark Haines would very often question  guests with a cynical tone.With the new iteration of Squawk Box and Squawk on the Street, the remaining members of the trio of the last decade, Joe Kernen and David Faber are back together, albeit in picture frames.


It would be a great tribute if they returned to those days of holding analysts and experts to the fire. It’s time to sharpen up those pencils and let the grades fall where they may.


 


 


 





Crisis du Jour





 


KidsEvery time my kids, niece and nephew get together at our house, I have a deeply rooted need to snap a picture.


Always in the same location, always the same pose. My nephew and niece have learned how to position themselves so as to make it difficult for me to PhotoShop them out of the picture.


Seriously, why would I want to look at them everyday?


But they’re very bright and have long ago figured me out. They know that I’m not likely to do it if it takes too much energy, so they choose their positions carefully. They no longer sit next to one another at the ends. As a result, my PhotoShop skills have really waned, whereas had I had the motivation I could have actually expanded those skills significantly.


One of their favorite sayings, always following some lack of common sense action of mine is “Uncle George, you went to Harvard?”


Jokes on them. I’m not really their uncle.


Although the dogs come and go, the kids stay the same, other than the fact that they’re not kids anymore, with the youngest soon to leave her teenage years behind. Sort of like an option’s expiration, only with a much better future.


What made me very happy yesterday, in adddition to the fact that it was the best picture ever in the series and only required a single take, was that my niece requested the photo opportunity. I didn’t have to beg, nor did I need to cajole and I was able to stop payment on the checks.


WIn – win, especially since my bank doesn’t assess me a stop payment fee.


It’s funny how, as you get older, you find yourself spouting the same aphorisms that your parents regaled you with when you were too young to appreciate any one else’s experience. In this case it’s how quickly time passes by.


Someday, I’ll probably assemble the shots taken over the years just to depress myself about the passage of time, but that would take motivation and effort, both in short supply. Instead, I’ll just stare at the gray hairs lining the floor after haircuts.


As quickly as those years seem to have gone, some other things tranpsire so painfully slowly.


Take August, for example. Although nearly each and everyday has been a rollercoaster ride, the kind that I never tire of, as long as the ups and downs are in equal measure, it has just crawled along.


Although the month was filled with happy and sad moments, a graduation and a funeral (I probably dont need to add, “respectively” here), the month still dragged entirely because it happened to be one of those 5 week options cycles.


Man I hate those.


I don’t mind the over-emphasis on the market’s down movements, but what I do mind is that extra week. I mind that even more than the grocery store “special” offering an extra 20% product  in the shampoo bottle, but having to pay 30% more.


Although we have just that one final week to go, I wish it would have ended already. Not to ease the pain, because that really hasn’t been too bad, but to get my hands on more options premiums. I can’t wait for the August contracts to expire. That’s still true even though since this past August still has a chance to be the best options premium month I’ve ever had.


Isn’t volatility wonderful?


With an additional week to sell some options, I’m within reach of my personal monthly best, without worry that an asterisk will need to be placed in my spreedsheet. Having shrivelled genitalia is a small price to pay for all of that income and since I use only generic steriods, my expenses are low.


It all goes to the bottom line.


Once the weekly contracts became more common, I really gravitated to them, now looking increasingly for those opportunities. Unfortunately, some of my favorite stocks, although highly liquid, such as Dow Chemical and DuPont, don’t yet have weekly options, whereas “drek” like Harbin Energy does.


So my trading still comes at a flurry on the first Monday and Tuesday of each cycle and then markedly slows down, other than for the few weeklies. Shares like Freeport McMoran, JP Morgan, Goldman Sachs and others keep the income rolling in through the month, but it’s still heavily concentrated to the cycle’s beginning,


On Monday, I’ll need to replace Caterpillar and Freeport McMoran. At the moment, I’m leaning toward Deere, Chesapeake Energy, Rio Tinto and maybe even Microsoft, which goes ex-dividend on Tuesday. If I’m able to get any of those at just the right prices, meaning right near a strike price, the near the money or in the money options premiums will take the month to new highs.


As I type away, the early reports are of positive opens in Australia and Singapore, but that doesn’t translate very well here, unless there’s something cataclysmic happening. Since most of my remaining August options are still out of the money I’d like to see a nice higher opening, even if it means paying a higher price for the items on my wish list.


As the September cycle approaches, I’m carefully looking at the more favorable premiums as the volatility has risen and wondering whether it’s time to adopt an earlier strategy.


Back during the market bottom in 2008 and 2009, I was actually selling out of the money calls, hoping to capture greater stock capital gains. I could do that since the options premiums, even for the out of the money positions were really very good, owing to that volatility. That strategy was right for the times, but was replaced by an in the money strategy as the market started on its sustained upward climb in 2009.


Given the options, and by that I mean choices, I think that I would rather not go back in time. Even though the grey hairs and the aging kids are making me increasingly forlorn, I think I’d rather stay grey. I’ve learned alot over the years and don’t think I’d want to tarade any of that back.


I think I’d also like to stay with the current in the money strategy. I like it at these higher levels.


The air is actually much better at 12,000 than it was at Dow 11,000 even though the premiums are much sweeter closer and closer to hell.


As the kids are getting older, I know that the photo opportunities are going to get less and less likely. Although I’m sure that if properly motivated I could computer age them appropriately on the exisitng photo collection, that’s probably not as likely to give me the same satisfaction as the reral thing has over the years.


In the meantime, I’ll just have to get my satisfaction from knowing that with each month comes along a new option cycle and some great memories of cycles past


I just wish that time would go by much faster.


Did anyone say Daily Options?


 


 










 


I ended yesterday’s blog with the phrase “metaphor du Jour”


And here we are today and it’s “Crisis du Jour”.


The only thing that I can think of is that I’ve become a Franco-phile ever since the Dominique Strauss-Kahn incident. I won’t tell you if that began as the allegations flew or when the allegations sank.


And I have a soft spot for Szarkozy, too. He’s so far from the US stereotype of a French leader and, of course, he has that Hungarian lineage that has helped to somewhat dampen the bad taste still left over from Esterhazy, more than a century ago.


I only started paying attention to the world economy about 25 years ago or so and unfortunately, my memory has started deteriorating since then, so the recollections may be a bit spotty.


DefauktBut for whatever memory that remains there seems to be a pattern of ever developing world crises and threats of default.


I vaguely remember Brazil and Latin America of the ’80’s. I recall all of the talk about the kind of horrible exposure Citibank had in Brazil’s economic woes. And then there was the IMF, as well, but that’s not real money. I have no clue where their funds come from, but no doubt, now as then, it’s probably disproportionately from the US. I could be wrong about that, but I don’t really care about accuracy. In that way, I’m just like the elected officials discussed a couple of paragraphs below.


Man, but look at Brazil now.


All that had to be done was to simply press the “Default Button” and all was well again.


Then in the late ’90’s it was Russia. Once they started locking up the “oligarchs” and squashing political freedom in the name of democracy things improved substantially, although you do also have to give some credit to $150 oil. They also save a lot of money by rotating the Presidency between just two people.


At this point, my short term memory really gets fuzzy, because the crises started coming more fast and furious over the past decade. In fact, sometimes it’s hard to keep track of which came first, the boom or the bust.


When was it that Ireland was the economic wonder of Europe? Wasn’t Iceland just another way to say paradise? Come on, you really didn’t expect that much from Portugal, did you?


It is getting hard to keep track of all of the players these days. Germany is once again all powerful. I know that much, but we have a succession of Greece, Spain and now Italy to capture our attention.


Oh yeah, and then there’s the United States. Remember just a couple of months ago when S&P scared the b’jeezus out of the markets? Not to mention the fact that there’s all of this talk of US debt default if the ceiling isn’t raised.


For purpose of this blog, I’ll just conveniently forget about our own financial meltdown of 2008.


Years ago there was a movie, “Don’t Raise the Bridge, Lower the River”. Interestingly, the parties in the Jerry Lewis shennagins were Arab and Portugese.


How prescient. But probably reasonable advice, although it probably wouldn’t be a bad idea to do a little of both with this new invention, that I believe is called “compromise”.


As I was watching CNBC over the past couple of days and listening to our elected officials from both sides of the aisle playing loosely with the facts, it occured to me trhat we would be so much better off if the perjury rules that Roger Clemens is facing over his congressional testimony were applied to members of congress.


They should always be under oath. After all, with every public pronouncement, aren’t they just electioneering for votes? These days being a congressman is akin to being a robot whose only skill is to create new identical robots sharing the same skill.


Since it’s all about the re-election, everytime they, shall we say, stretch the truth to fit their needs, they are lying to the electorate.


Perhaps the only one telling the truth, or at least he thinks he is, is Rep. Ron Paul and he’s a lunatic. Now that he’s announced that he won’t be seeking re-election, we’ll see what sort of increasingly unfiltered things spout from his brain.


I think the best way to play all of these crises is to stay in bed or at the very least mute the TV and wonder why there’s so much red rolling by on the ticker.


Another approach is to do what I do when I get very frustrated with a misbehaving software product, app, code or hardware. Just press the “reset” button or go back to “Default” settings.


Sometimes it’s really that easy and spares you from wasting lots of time.


Sure, there’s not that much gratification from giving up rather than struggling through to try and come up with a solution, but after a while, enough is enough and you have to let those costs sink away.


Not that long ago, perhaps two years or so, the “experts” told us that Italian debt was very different from that of must other countries. The distinguishing factor we were told, which made the Italian situation non-explosive was that its debt was predominantly owed to Italian nationals. Very different even from the United States situation, where we are mortagaged to the Chinese, who assumed the landlord position from the Japanese of the ’80’s.


Remember them?


With each day, comes a new crisis and then a new slew of analysts and talking heads who alternate between telling us that it’s either “risk on” or “risk off” trading.


These things really mean nothing to me. Sure I understand the concept, but I could just as easily stand there and make this stuff up and then just as easily change my take on things the next day.


I don’t know if these pundits receive report cards, but if they do, they are probably curved similar to the way weather forecasters are assessed.


On a positive note, yesterday morning the Dow Futures would have had the market opening down 150 points. In the absence of any really tangible news, it all turned around and the market just stayed flat all day.


I started going for pennies again and sold some JP Morgan $41 calls expiring this Friday for $0.25.Not much, but if I get exercised, I’ve already gotten the quarterly dividend and a couple of weekly options premiums on this one. As pointed out in the recent blog, those pennies do add up.


I certainly don’t mind the scratch singles. I don’t have any pride. I don’t even mind getting on base by error.


Unfortunately, I saw no other opportunities today. In the absence of any news known to the greater investing world I marvelled at how Dow Chemical, a sizeable holding, got smacked down 3.5%. Not that I pretend to be a technician, but there certainly wasn’t any technical reason and I doubt it was related to the Italian banking crisis.


No matter. That crisis will be like yesterday’s fish and Dow will bounce back


I think tomorrow, I may try the Spanish economy or maybe even one of the daily specials.


As Groupon and LivingSocial try to distinguish themselves, this may be their next area of opportunity. The Daily Default Deal might be very attractive  to investors. A 24 hour window to buy bonds at great discounts. Unfortunately, the discounts are likely to get even higher after the offer expires on some of these.


But still, the very thought of being able to get laser hair removal and discounted bonds all at the same time is just too great to pass up. The thrill of the Deal du Jour itself may just be the opiate that we need to forget about the Crisis du Jour.


Can’t wait for tomorrow.


 


CORRECTION: A previous version of this blog post inappropriately referred to Brazil as having defaulted on it’s loans. In fact, during the 1980’s it was Argentina that defaulted, while Brazil approved new lax sodomy laws. Thank you to @Wolfrum for bringing a portion of the correction to my attention.


 





Is Tweeting Worth It?









Like pretty much everything that I write about, there’s a metaphor out there somewhere. Sometimes though, it’s so obscure that even I can’t quite get the correlation without holding my breath for five minutes or more.


Amsterdam BrowniesI can’t wait for my state to enact the Medical Breath Holding Act, as I’m somewhat embarrassed about having to do so illegally. It’s not like breath holding is a gateway tantrum behavior at my age.


I always used to think that Szelhamos would have loved to try a little bit of that medicinal stuff. Funny how it’s not considered medicinal in Amsterdam and Szelhamos did love his assorted baked goods.


Too bad, but at least my kids and I have Amsterdam and you know what they say:


“Wat gebeurt er in Amsterdam verblijf in Amsterdam”

I reached a Tweeting milestone the other day, yet it was greeted with nowhere near the fanfare that Derek Jeter received.


Can you imagine? 3,000 Tweets in barely two months. Yeah, and how many hits did Jeter have during his most productive two months?


Exactly. No one coddled me through the dry spells.


And if it weren’t for some time on the Disabled List, due to a typing index finger injury, I’d be approaching Pete Rose territory. But like Pete Rose, I doubt that I’m headed for the Twitter Hall of Fame. There’s a price to be paid for betting on what Ashton Kutcher will be Tweeting next.


Although the lucky recipient of that 3,000th Tweet didn’t get as much as he was hoping for at the Sotheby’s auction last week, he was still pleased. Imagine the sheer joy of being among those to have an opportunity to read a 4th of July gem like this one, my 3000th:


 


Spell-check, auto-spell, calculators, e-mail, IM’s, texting, sexting, Twitter.


Slow degradation of the 3 R’s and professional pornography


 


TweetingIt’s amazing what kind of wisdom you can cram into 140 spaces.


My son convinced me to start Tweeting. Why he did so is still unclear. Although he says that it would help me to promote the Option to Profit book and stir sales, I think that he wanted me to do something that might stave off rampaging senility.


Why you couldn’t have both is beyond me, but clearly he didn’t think things out very well.


As far as the first objective goes, I’ve been pleasantly surprised by sales, especially since I really have no friends and an exraordinarily limited and interested family to buy enough books to make me feel fulfilled.


So what has 3,000 Tweets accomplished?


Besides destroying the ability to use prepositions and introducing the concept of substituting numbers for words?


For one thing, it has bought Szelhamos Rules a readership. But what is making me very happy is that increasingly those readers are coming to the site directly, rather than through those obscurely shortened links that originate somewhere in a Libyan domain. The proportion of Twitter referred clicks to direct hits has been steadily changing.


If you know just a little about the various website analytics, you know that site hits are usually categorized on the basis of their origin, being either direct, referred or through search.


Interestingly, the two most searched terms that bring people to the site are “Boston Chicken logo” and “Big Bra sizes”. That just shows you what a wide range of subject matter is covered in the blog.


Being a little more analytical, I can also tell you that the Bra searches predominantly originate in Saudi Arabia, Qatar and Mississippi.


I won’t get into details like bounce rate, average time spent on site and average number of actions.


That’s geeky stuff, just like technical analysis.


See. Did you see the segue? OK, ready for it? The metaphor has to do with trading strategy. My facial color is now sufficiently blue for me to see the connection.


Is it really worth all of the call writing activity. Wouldn’t I be much better off with either a buy and hold or an actively traded portfolio.


Following StockTwits as I now do, as well as the trading crowd on Twitter, I’ve learned a little about momentum trading, but when I say “little”, I actually mean “nothing”.


What was once a fairly analytical mind has no patience for learning, understanding and applying all of the charting nuances that these guys seem to enjoy, or at least tolerate for the sake of making some money.


I still have no clue what phrases like “Swing Trader” and “Position Trader” actually mean, even though I’ve done the obligatory Google search.


But there’s absolutely no way that I could revert to “Buy and Hold”. For one, I really enjoy the options income stream, but more importantly, I really enjoy the trading. (See “Feeding the Beast“)


If you did read my book, you’d know that I have admitted to being a terrible stock picker. I may have used the adjective “lousy” to describe those abilities. Instead, I’ve come to rely on a list of about 50 or so stocks that I routinely trade in and out of, not so much on my own accord, but instead based upon whether the shares are assigned.


Occasionally, I do add a new stock or two to that mix each month or so, but it seems to take a while for those to prove themselves.


Why? Because I’m a lousy stock picker. That means not only do I not know a good stock from a bad one, but I also don’t know the right time to buy a good stock.


So the prospect of actively trading stocks alone just probably would work for me. Besides killing the 2% monthly income stream, I have a feeling I’d be seeing lots of capital losses.


Granted, the joy of trading might not be diminished, but somehow I think that the joy is more in the profit than in the act.


It’s not sex, you know.


I do keep a relatively crude spreadsheet that compares my holdings to the S&P 500 and adjusts for withdrawals and deposits, but doesn’t account for different trading strategies.


Compared to the S&P, so far for the past four years, I’ll gladly take those extra few percentage points.


Even though that kind of assessment is abstract, it does calm my frayed “wish I woulda” kind of nerves everytime I think of the ones like Green Mountain Coffee Roasters that got away from me. Oh yeah, and Visa, a couple of weeks ago. 


So is the incessant call writing really worth it?



  1. Sure, it got me a book and even book sales.

  2. It got people reading the blog and even commenting and sending non-threatening e-mails.

  3. It helped me to stop plying my formal trade.

But the real question was is “Tweeting worth it?”


See all of the above.


And so ends the loop that is the metaphor du jour.


 


 





Which Way is Up?









Over the years I’ve gotten a little more sophisticated in the kinds of trades that I make and obviously, the stakes have gotten higher, as well.


Like an addict, there’s a need to trade, a need to get a greater thrill and to wonder what’s coming next.


And then you die an inglorious death in the streets, with your feet ensheathed in Baggies, lucky only in the fact that you had enough plastic ties to secure your booties so that your trusted pet goldfish wouldn’t float away.


Maybe that’s a bit of an exaggeration, but you get the idea of what excess can do and just how worthless the more expensive Zip-Loc is when it comes to securing the bag to your foot.


Do you remember that song “Want a New Drug”?


The problem is that when the drug does quit, you may not really be sure which way is up.


Not to cherry pick lines from songs, as there are billions available for any situation, but “You may ask yourself, how did I get here?”


It used to be very simple. There was a time when there was just wine. But even then, by the time the room stopped spinning, you rarely knew which way was up.


As I was writing the Option to Profit book, I received a call from a friend in California wanting to know if I had any stock recommendations. It was about 11 AM on the East Coast. She told me that her broker was drunk and she needed to get out of cash.


Being drunk is probably not a good way to make investing decisions, unless it’s for someone else’s money.


Seriously? Who cares if it’s other people’s money?


GAAs time went on, beer and wine begat hard liquor. For purposes of this piece, marijuana was the gateway to LSD, heroin and cocaine. I’m so hopelessly out of it, that I can’t really write with any level of expertise on more modern mind benders. Sure, Crack, crystal meth, PCP, ecstasy. Heard of ’em, but it ends there.


I never even had a Four Loko


Regardless of the drug, they all threw your balance off and altered the perception of reality.


Welcome to my world.


When beer and wine were all there was, so too were individual investors limited in the recreational and investing choices. For me, those are one and the same.


Back then, all you had to know was up and down. Your stock went up or you stock went down. End of story,


As I was getting ready this morning for another week of trading, I looked at my holdings and potential holdings and had to make an increasing and varied series of mental notes.


At least this Friday is the end of a monthly options cycle, so I don’thave to think about which one is a weekly and which is a monthly.


I don’t own many Freeport McMoRan shares at the moment as I’d like, having just lost some to assignment. I want those shares back. I’ve had them on and off, mostly on for the past 3 years, going from a pre-spli $22 to a post-split $52.50, but I don’t want to pay $55.


So I want that share price to go down. Simple enough.


But now, take Google, as another example. It was hit hard on Friday, down about $15 or so on the heals of a $30 run up.


But I still want it to go down because I sold $520 calls expiring this Friday. Granted I got good premiums last month and this month, but it would make me happy to be able to keep my shares and “…..go back Jack, do it again.”


That seems simple enough to keep track of, Google down. Down good.


Certainly, it’s also simple to keep track of the fact that I want Mosaic to go up, but knowing that its just gone up about $10 in the past week makes me less than optimistic for a rerun. But, if it gets near $72.50, I’ll be selling a call contract expiring this Friday and then hoping it stays right around there.


Again, simple enough, just a little bit woozy on that one.


Then there’s the Spreadtrum Communications deal. I had some puts expire this past Friday and I still have others due to expire this Friday. But, I also was just assigned some shares, so now I own shares, as well.


Now it’s getting a bit complicated, but as the room is slowing down, I think I want my shares to move up.


Yeah, that sounds right. I think I’ll try to sell $17 call options for this Friday and hope that Spreadtrum closes above $17, since I really don’t want to be holding a Chinese company of any kind for any amount of time.


But since I don’t like taking losses, I’ll see if I can’t make a go of it for a week.


On the other hand, the Sirius $2 puts I sold are expiring January 2012. I suppose that it would be good to see a nice price rise and then buy back the puts to close the position. But if it goes up too much, too fast, I’d feel like a fool for not having purchased the shares outright, even though I know that I would never buy a $2 stock.


Why not? I don’t know. Don’t make me think, I’m getting a headache.


Alright, what’s this I see. I also have shares in the Proshares Ultrashort Silver and have sold calls on it, as well.


Let me try to get this one straight. Man my head hurts. The price of silver goes down, and then the price of the ETF goes up. Oh, and its 2:1 leveraged as well.


My cost basis is $17.02 and received a $1.02 premium for the most recent $17 call sale. Friday’s close was at $16.86.


I have no idea of what I want.


Do I want silver to go up or down? Too much thinking involved. Way too complicated.. I may need something to bring me down off this bad trip.


I need some Rocky Road ice cream, maybe a little Chocolate Marshmellow.


But here’s the thing.


After the headache goes away, after the room stops spinning and once I know up from down, I just want to do it again.


Anytime the opportunity presents itself, it’s just time to do it again.


I’m sure before it’s time to cash in my literal and figurative chips the investing choices readily available to an individual investor like myself will increase even further.


Sooner or later it won’t matter. In a world where up is down and down is up, the Mad Hatter reigns.


I wonder if a yarmulke counts?


 


 








 


The First Time





Yesterday I saw a TV commercial featuring Roberta Flack.


The last time I had heard her name was about a 6 months ago and was in regard to a dispute over her residence in the famed Dakota building in New York. Allegations of racism, inconsistent application of the rules and a use of an un-approved shade of off-white in the main foyer were all factors in the flack.


No pun intended, but a quick Google search indicates that others are not apologetic for the use of that obvious disambiguation. I feel somewhat ashamed in sinking to that level, but I hate editing.


Like most commercials, either I wasn’t listening terribly well or the product’s message was incredibly well concealed, so I have no idea what she was pushing.


Maybe renter’s insurance, but that would just be a guess. I’m really not certain what it would be about Roberta Flack that would compell me to buy anything, but then I’m not an advertising genius, just a discerning consumer.


But I certainly remembered the background music of her hit song “The First Time Ever I Saw your Face”.


So many things flashed back to me as I focused on the song rather than the product.


John Wayne GacyThe other day after watching an episode of COPS, Sugar Momma and I discussed that often used remark “this certainly wasn’t his first time”, when referring to someone caught commiting a crime.


In reality, even career criminals must have had a first time crime. Even John Wayne Gacy, Michelle Bachmann’s home town hero must have had a first make-up session and a first ritual murder experience.


Just as someday Rep. Bachmann will correctly make her first historical reference.


But obviously we all have to start somewhere and then take it from there. Sometimes it’s the start of a lifelong love affair, other times it takes you nowhere and even the memories won’t bring you back.


First record album? Herman’s Hermits


First baseball game? Mets versus Cubs in the Polo Grounds


First broom job? Consuela.


First stock purchase? Raytheon


Some of those firsts you take on with great joy and elation. I played that Herman’s Hermit album until it was just a non-grooved flattened piece of vinyl. But now the wall poster is long gone and there’s not too much longing on my part for tickets to any Herman’s Hermits reunion that might be in the offing


Still a lifelong Mets fan though. There’s not much rational reason for being so, but so often your first isn’t based on logic or rational thought. It’s based on opportunity or the need to fill a void.


And the Broom? Bronzed and enshrined, even though Consuela was deported long ago.


The other day we found a video of my son’s first birthday celebration. He was sitting in a high chair and Szelhamos was allowed to give his first grandson a real birthday treat.


His first tastes of birthday cake and Coca Cola.


The looks on his face were really those of pure and unadulterated joy, as opposed to the broom job’s adulterated joy.


Other first time occasions you may enter with trepidation.


Who knew you could do such things with a broom?


Trepidation was definitely a mild way of putting my feelings on the prospects of entering that first stock trade. What made it even more difficult was that in the days before online brokerages and complete anonymity, you actually had to speak with someone to take and execute your order.


It was embarrassing being a stock virgin and now everyone at Fidelity knew.


While my first stock was Raytheon and I only held it for a few days, yet long enough to make about $1200, back in 1982 or so, I’ve never gone back to the Raytheon well.


After that first trade I felt like I was ready for anything, but not for Raytheon again.


Despite some moments back when the Patriot Missle System was getting rave and then not so rave reviews during Dessert Storm, I’ve always resisted the temptation of purchasing new Raytheon shares.


I guess I just want to preserve the memory of the Summer of ’82.


I don’t want to sully those great images by buying again and ending up with a loser.


P.S. Note to self. No reunions. Ever


I still remember the first time I sold a call option. It only took me about 20 years of convincing myself that it was a sound strategy. Trepidation turned into elation and more trades than I care to admit to.


I also remember the first time I sold a put option. Lots of trepidation, but I’ve been slowly adding that to my bag of tricks. At the moment, I’m on the hook to purchase many shares of Spreadtrum Communication, but the risk-reward seemed so good.


Too good to ignore.


At this point I don’t look for many firsts. In fact, I tend to keep my investments limited to a list of about 50 stocks or so, constantly repurchasing shares when proices return to more rational levels. In Option to Profit, I prefer to those  stocks as my Old Reliables.


Every now and then I introduce a new holding and even though I generally take baby steps, I still do so with trepidation.


I recently purchased shares of McCormick and Co. and the ProShares VIX and more nervously track those than much larger holdings. Even though that seems illogical, that kind of irrational behavior is just a part of human nature.


Today the market seemed to be propelled by the ADP jobs reports which caught everyone by surprise with 150,000 new private sector jobs having just been added. Although the official government tally is released tomorrow, ADP ruled the day with their report of many more jobs coming on line.


But it wasn’t too long ago that ADP released its report for public consumption for the very first time. Even though its concordance or correlation with the official numbers isn’t always as strong as you would like, it’s taken its rightful place among the continually released economic reports that drive the markets crazy.


While government reports are well established and the flaws in their methodologies well know, they still bring fear into the hearts of investors. A simple report can drive the markets in wild directions. If you’re on the losing end of that movement you rarely take solace at the subsequent month’s adjustments. The fact that those adjustments may completely nullify the very report that drove your stock holdings into the crapper is no comfort..


Somehow that doesn’t seem right.


But not everything that’s done for the first time has to seem right. It just has seem right at the time.


After all, why else would you consent to a broom job?


 


  


 


 


 


 





More than I Want to Know

In the past I’ve written about just how great the world is these days when you have ready access to data and facts.


The saying “the truth shall set you free” has universal application and no doubt is understood well by the leaders of closed societies. Just try opening a North Korean Facebook account and you’ll see.


That kind of easy access to information has changed the way that I think about insider trading. I no longer look at it as a crime. Instead I look at it with envy, wondering what I had done wrong to not have had the same doors opened up for me. After all, what kind of a moron can’t get his hands on “insider information” if they actually put their mind to it?


SausageYears ago Upton Sinclair made us realize that sometimes details are really not worth finding out about. No one really wants to know how sausage is made.


But do stay away from the kind of people who do want to know and don’t want the details spared.


Definitely stay away from the one’s who make it in their basement.


The free and steady flow of information can cut that way for most of us. We’re just better off not knowing and comfortable in our relative ignorance.


I’ve never watched that cable show that highlights the world’s most dirty jobs because I just don’t want to know about the details. I just prefer to believe that all of those portable toilets clean and disinfect themselves.


On a more cleanly note, but equally applicable is my recent stream of newfound knowledge. I’ve just started using an analytical program to track viewership on this site. I’d been using Google Analytics for years, but always felt that it was too complex to get the salient information and required too many steps to focus down on the data.


What I mean to say is that I was too lazy to really understand just how powerful the application really was and just wanted it spoon fed to me in easy to digst small portions that somehow would also contain all the nourishment necessary to sustain me for a lifetime.


Now that I use “GetClicky” I see all of the information displayed in very intuitive formats. They even place the lobster bib on for you and will partially digest the information for you before placing it in your brain.


Great, isn’t that what I wanted all along?


Yeah, until I saw that I was getting regular hits from the Department of Justice. I never would have delved deeply enough into Google’s reports to get that kind of information. It was out of sight and really out of mind.


Now it’s right there for me to see with barely a click’s worth of effort.


Did they not like my jokes. Should I have not said anything about Goldman Sachs or Raj Rajaratnam? Was it the insider trading thing? There’s just no way that they’re reading for the sake of reading, although they do seem to come back at the same time each day.


Not that I’m watching them.


I don’t know, but now I’m not convinced that I really want that level of information. I’m not the sort that worries unecessarily, but it’s very similar feeling that you have when you look in the rearview mirror and see a police car behind you.


Even when you know that you’d done nothing wrong, you still get nervous.


I always used to get a kick out of watching COPS every week and seeing just how often the apprehending policeman would ask a suspect why they were nervous.


About a year ago I actually asked a policeman about that phenomenon of being nervous under those circumstances. he laughed and said that when he’d be out of uniform if he had seen a police car in his rear view mirror he would get nervous as well. Just human nature, not because you have larceny in your heart or a stolen wallet in your pocket


So what I’m saying to the DOJ guys, enjoy reading, but stop following.


Not wanting to know too much about things has extended into my overall philsophy about stocks. I long ago gave up the false idea that I actually knew anything. In Option to Profit I plainly admit that I’ve been a lousy stock picker and marched out for all to view some of my biggest stinkers over the years.


I also admitted that sometimes I don’t even know what industry or service the company whose stock I own is involved with.


But I really don’t think it’s absolutely necessary to know the business or the specifics about fall trends or consumer electronic crazes.


I just like to focus on the cyclicality exhibited in the stock proces of many solid companies. The kind that are for the most part, household names or at the very least, not likely to fall off the face of the earth in a day or two.


I’ve often said that I have no clue what Riverbed Technology does, but it’s been one of my favorite and most rewarding plays for 3 or 4 years. Do I really know what factors cause Dow Chemical to go up and down in a tight range?


My son recently clued me in and now I find myself trying to integrate technology news that I hear with what may be the impact on Riverbed’s fortunes.


I don’t like doing that, but it’s also human nature to try and out-think the world with the information that’s at hand.


Sometimes I’ve known too much about a company or have gotten emotionally attached.


There was a time when the west coast chain “Jerry’s Famous Deli” was a publicly traded company. Great corned beef, but lousy stock. I knew exactly what it did, I saw its restaurants consistently packed, but I also conveniently overlooked the terrible cation in its stock, refusing to sell until it was all gone.


What we didn’t know about Crazy Eddie, the Best Buy with attitude,  of a couple of generations ago is what kept that ship afloat. Even their auditors were in the dark. I think KPMG survived.


These days, do we really want to know what’s going on with all of those Chinese stocks?


I don’t.


But neither do I want to own them. What I do want to do is make a habit of selling puts on these companies in the after-math of the inevitable bad accounting news.


I don’t think there’ll be any shortage of those. They may as well just write a template for the stories that are going to come at us fast and furious and just fill in the company names in the blank spaces.


I just sold even more Spreadtrum Communications puts today. Last month it was Harbin Energy. Sure, “Communications” and “Energy” tell me something, but I’d never heard of these companies prior to the latest rounds of breaking bad news.


Those little puppies, which incidentally may go into the production of sausage in some countries, have made more profit for me these past 4 weeks than my standard bearers, as volatility and options premiums have gone down for the likes of DuPont, Dow Chemical and others.


The premise with at least some of these stocks is that the initial round of bad news will drive the price down in a grossly unwarranted over-reaction. After that really large first drop, sell an out of the money put. As the stock price regains some of its loss, sell even more puts, but a higher prices.


If there are weekly options available for trading, all the better.


Of course, some of these companies will become Crazy Eddies of this generation. Make your profit and then move on awaiting the next opportunity.


I will never buy Harbin Energy or sell puts on it, ever again. The same will hold true with Spreadtrum.


But its cousins will be comiong to vist soon. I just don’t know their names or how exactly they got to the point of derision.


But I don’t care, it just feels so good to not own one and not know why I don’t even care..


 







The Times They are a Changin’






It was true nearly 40 years ago when Bob Dylan wrote and then sung those words as it is today. I don’t know if Suze Rotolo, Dylan’s late muse had a role in the song, but being a muse, I suppose she was somehow involved.


Muses must be truly wonders. Picaso was said to be a bore and boorish, a bad combination. Hemingway? Just an angry drunk.


Me? An aimless wanderer.


But it’s all about the muse bringing out the best an helping to presage the changes coming to the world’s societies, cultures and institutions.


It must have been a muse that inspired some quiet genius to open up a real honest to goodness Kosher Deli in Howard County, Maryland. In an area where 20 years ago the only semblance of a Jewish Community was the cow herd that may have been destined for ritual slaughter.


And the name? Pita and Rye. Absolutely inspired. Even I get the point.


Now that’s change you can believe in.


DylanThe Times they are a Changin’  was part of Dylan’s third album, the first composed solely of his own songs. Before he was a born again Christian, before he was a born again Jew, before he was a Zulu Warrior King, before he sold out his acoustic roots and before he started wearing Cowboy hats.


Cowboy hats? That never could have happened. Not Bob Dylan.


A muse-less Bob Dylan would, though.


All of those times were a changing too. A few weeks ago TIME magazine had a great pictoral timeline of Dylan’s changes over the years. Amazingly and thankfully, some of those periods have been virtually erased from human memory. 


Fortunately, the human mind is able to erase that which it deems insufferable. I don’t remember his disco period, either.


I suppose that the longer you’re around the more change you’re likely to see, but I doubt that the equivalent of Moore’s Law applies to the world’s events, that are changing at an ever quickening pace.


Imagine this, just a few short months ago you could read the New York Times online edition for free.


Now, everyone sing along “For the Times they are a chargin'”.


I don’t blame them. Although Moore’s Law may not apply, Maslow’s does. The Times needed to survive somehow, as the print media is looking increasingly endangered. Too bad there are so many ways to circumvent the Times’ subscription service. I still think that they should have micro-charges for each article you access, but they’ve never listened to me, so I rebel against the man and the plan.


Poor Rupert Murdoch. Not only does he have to let go of his MySpace property, once the darling of social media, now he also is standing in line waiting to be accused of hacking into a young murder victims cell phone answering service, and perhaps destroying evidence.


Imagine that. The very same Rupert Murdoch who inherited broadcast rights to the Simpsons actually stooping so low just to sell some pulp.


Not possible. Newspapermen have always maintained the highest standards.


Alhough society seems to be changing at an alarmingly fast rate, those that play in the markets should be pretty used to the whipsaws. After all long period of boring stock markets ended in 1982, all we have really known is changing times. One day to the next is often a different era.


Barely a week ago doom and gloom was everywhere. The market was breaking below certain support levels, there was talk about another double dip, QE 2 was about to end and there was no good economic news on the horizon.


And then a funny thing happened.


Nothing. Absolutely nothing happened, but yet everything changed.


Michael VIck and Dominique Strauss-Kahn rehabilitated and vindicated, for now anyway.


Casey Anthony not guilty of murder.


RIck Perry, Texas Governor, going from seccession proponent to presidential challenger.


Stocks decide to defy gravity.


Bernanke doing Rogaine commercials.


Would not have predicted any of those. Although the chorus of negative opinions should have made one take wonder. My personal Google AdSense indicator was telling me that overall sentiment was negative. As clicks on financial related ads decreased the market took notice. As a contrary indicator the market could do one thing only.


My personal stock divinator didn’t do terribly well last week, as I gambled on a downturn Thursday and Friday, by virtue of having sold many in the money call options expiring this past Friday.


But yesterday, I decided to go with the flow. You know that feeling that usually ends up with up making bad decisions. This time there was no alcohol involved. The only stimulant was a bunch of cash sitting in the accounts from stock assignments.


What was I going to do, let the bull get away?


And today was just a perfect day for getting back into the market. Mild up and down moves throughout the day. Plenty of opportunity to get fair purchase prices and plenty of opportunity to sell call contracts.


So I went on a shopping spree. I even bought shares in two stocks that I’d never owned before. McCormick & Co., and the ProShares VIX Short-term futures. Whenever I purchase shares for the very first time I under-represent them in the portfolios, which is what I did today. For a guy who was in a frisky and speculative mood today, I still sure am cautious.


No doubt some of those fine local McCormick spices will make their way to the kitchen and tabletops at Pita and Rye.


Those VIX shares are interesting. Even though they’re supposed to represent a 30 day average of the volatil.ity index, they sure do bounce around alot intraday, seemingly out of proportion to a single day’s impact on a 30 day average.


But you have to love that kind of motion and change.After all, what is volatility other than a measure of the propensity to change.


But something else came over me. Something else changed.


I decided to further my speculative streak. As if buying shares in two new stocks wasn’t enough, I added significantly to my short put positions in Spreadtrum, that Chinese company that took a big temporary hit when Muddy Waters released a public letter disclosing their short position


I now have sold $9 puts for July 15, as well as $15 puts for July 8 and $15.


The premiums were just wonderful and I think that when the other shoe does fall, those expiration dates will have passed.


I picked up more shares of Mosaic, JP Morgan, Goldman Sachs, Home Depot, Sunoco and probably some other things as well, but I forget.


In all, I made 20 trades today, including options sales.


With all of the frenzy, for the first two days of this quarter I’ve already made about 12% of the number of trades last quarter.


That’s a kind of change I really welcome. The kind of change that brings us back to the good old days.


 


NEWEST FOOTER

 




Best Friends Forever

What a day Friday turned out to be.


The ISM numbers came out at 10 AM and the market never looked back. The Michigan Consumer Sentiment numbers were basically chopped liver, but the ISM was prime cut.


But I ended up not being a very happy camper. My week at the Four Seasons was instead transformed into a downpour at KOA.


Before those numbers came out I was smugly tapping myself on the back, thanks to a collagen disorder that gives me ungodly elasticity, for a job well done.


Reminds me of that old joke, “Why does a dog lick its balls?”.


Like a young Zynga employee already counting his stock options profits, I was looking at successful sales of last minute call options and the prospects of still getting to keep my shares for another weekly cycle. Best of all, they would also be right at the strike prices of the week before.


Long story short. No more shares. No licking. No tap.


Not quite tapped out, because I still had a nice gain for the week in addition to my options premiums, but I definitely left more than I would have predicted on the table for someone else.


My personal trickle down. If the Federal Reserve wasn’t going to initiate QE 3, then who better to take it on as a personal project than me?


You’re welcome.


There really wasn’t any great news for the day. Granted the ISM numbers were surprising, but I was more surprised that it sustained a fifth day of rallies until the very close of trading. More significantly, it’s as if no one had ever heard of the concept of closing long positions ahead of a holiday weekend.


The presumption is that the rest of the world will stop its tightly wound spring out of respect for our 235th birthday.


With my Jeckyl and Hyde personna, now I’m hoping for a nice opening plunge on Tuesday so that I can get back in the game at some decent prices. I already have my eyes on Williams Sonoma, Deere, British Petroleum and more shares of Mosaic.


I’m also thinking of picking up shares in McCormick & Co. for the first time. I know that its just come off of its price high, but he stock goes ex-dividend on Thursday (2.25%) and has about another 1% options premium for barely a 2 week holding period.


We’ll see. Last week I was going to do the same with Riverbed Technology, but didn’t, as I watched it go from $32 to $39. I won’t complain, since I picked up shares of Halliburton instead.


But as Friday was winding down, the only real bits of news at first semed unrelated, but proved otherwise as the day progressed.


Vick and DSKThe villified, Dominique Strauss-Kahn and Michael VIck were front and center.


Exiting from the courthouse this morning, Strauss-Kahn was all smiles as some dirt came out questioning the credibility of his accuser. The details were pretty extensive and seemed to show a pattern of less than honest behavior on her part.


Such a person could therefore never be the victim of rape.


The fact that she lied about being the victim of a gang rape in her native Guinea was probably not a factor in the decision to release Strauss Kahn from his house arrest. The fact that she was looking to cash in on the allegations and had already put out a DVD, “Raping to the Oldies” was a more central factor in the Manhattan DA’s decision.


It was fascinating to watch the accuser’s attorney stand outside the courthouse and detail the specific events that he claims proves his client’s accusations. I’m sure the people at CNBC were grimacing as the attorney very graphically detailed the genital-centric evidence. The stick figure crayon drawings with the wildly exaggerated breasts were probably poorly conceived, however.


Meanwhile, Strauss-Kahn’s attorneys, on some other courthouse steps didn’t stop short of calling those details outright lies. They were, however, much more diplomatic that Raj Rajaratnam’s attorney, John Dowd, who gave a one finger salute to the CNBC interviewer. Granted, he was on the losing side of a court decision and was still upset about Dennis Kneale’s CNBC departure.


For now, though, ankle bracelet removed, Strauss-Kahn has been somewhat rehabilitated and if he ever gets his passport back may just go back to France and be a serious presidential contender.


After this victory, when asked by the camera crew what he had planned on doing, Strauss-Kahn said “I’m going to Euro-Disney and force myself on Minnie Mouse”.


MurrayNot far away, another kind of rehabilitation was taking place.


Nike, his one-time sponsor, re-signed Michael Vick to an endorsement deal. After removing his product from stores some 5 years ago, Nike decided that in light of the dog’s recanting their original stories of abuse, it was time to get Vick back into the fold.


That and the fact that Vick appears bankable, once again.


It also didn’t help their case when it was discovered that the dog’s had lied about previously being forced into dog fights in their native Pitbullonia, as part of their political amnesty application.


Look, I don’t blame Nike. I started a website Road to Vicktory as soon as the Eagles signed Vick to a contract. A bucks a buck. Even a fallen angel should be exploited if the opportunity is there.


To slightly soothe my guilt, I also put a picture of our beloved Golden Retriever, Murray,  on the site. It’s amazing how money can soothe those sort of things.


Sometimes I wish that I had taken a wrong path, likes today’s featured BFF’s. Rehabilitation can be so sweet and rewarding. Maybe Nike will sign Strauss Kahn to an endorsement deal, as well. You know, what athletic shoe would you prefer to wear to get the best traction when standing and thrusting on the edge of a bed while on a freshly waxed hardwood floor?


Well Nike, of course. For those times that you need to maintain your hard wood.


Swoosh.


Instead, as I pound away for this blog before we set out for the fireworks show, there’s nothing market rattling coming along the way. It seems that tomorrow will just be another July 5th. The Asian markets all closed up in a big way, although the European markets were a bit more subdued.


For now, I’ll probably put my hopes for a downturn tomorrow on hold and wonder how it was that people knew not to lighten up on their holdings over the long weekend.


Maybe the bull is being rehabilitated, too.


It’s probably time to become BFF’s with it, before I miss the party.