Author: TheAcsMan

 

The original Szelhamos Rules ran for precisely 1 year, from February 2007 – February 2008. This article originally appeared March 29, 2007. For Michael Dell update, read “How Much Bad News Can we Handle? (August 19, 2011)

Recent data seems to refute this old adage. After spending 5 or 6 years in college, many newly minted, diploma holding graduates are returning home. “Failure to Launch” was a reflection of a growing phenomenon around the country. For me however, the sight of Terry Bradshaw’s butt, has made that both a memorable and disturbing film. But the reality is that you can go back home. It’s cozy, it’s safe and it’s cheap. And everyone is doing it.

But in the world of business it’s not quite so clear that you can go back home. Steve Jobs and Charles Schwab did, and their company’s shareholders were elated to welcome them back. Apple Computer may just have well been named Jobs Computer, because there was only a rotten Apple during his absence. Even the threat of his departure, whether due to personal health or options related scandal, had depressed the stock price, and his returns to grace and health saw upward moves in Apple’s price.

In Charles Schwab’s case, the company was already called Charles Schwab. No need for renaming. But when he left, it lost focus. When he came back, Schwab, the company came back, better than ever. Among the discounters it is still able to command a premium for its services.

So they could go home. And everyone lived happily after after, that is, until they leave again. And someday Steve Jobs and Charles Schwab will pack up and go. Planned succession? Who could fill their shoes? John Scully?

But it’s not always that way. Remember Gateway Computer? It’s still around. It’s a $2 stock that every now and then gets speculative play because people think that it will return to its former glory. And why not? A couple of years ago it’s iconoclastic founder, the pony-tailed Ted Waites returned, to help rescue the company, that littered the landscape with its ubiquitous cow boxes in the mid-90’s. Gateway once had cachet, now it has some shelf space at Best Buy.

Well, you know what happened. I already told you it was a $2 stock. Buying out low quality maker eMachines didn’t do much for Gateway. Bringing the cow boxes out of pasture didn’t help much either. And so Ted Waites left again. He couldn’t go home. He never did learn to avoid the pastures while in sandals. That was his real downfall.

Why bring this up? Who really cares about Gateway? Although I still have my first PC, a Gateway P70, with a kicking 1 Gig hard drive, I really don’t think about Gateway. In fact, the only reason I still have the unit is that it is too heavy to take to the dump. There is nothing compelling about their machines, other than to bring back memories of the early post-IBM days when Gateway and Dell slugged it out for the hearts of the computer newbies.

But I do care about Dell. A few days ago I wrote that I was planning to make a sale of my Dell stock if it reached 25, which I was expecting, since the bad news was certainly behind us.

In my own mind, I may think that I’m pretty important, but I’m pretty sure that my disclosing my intentions didn’t send panic waves through the market for Dell stock. O, as it turned out, it was more bad news.

A couple of months ago, the famous founder, Michael Dell himself, stepped back up to the plate. Out was his hand picked CEO successor, whom he had wholeheartedly endorsed just weeks before. That’s always the kiss of death. The stock rallied on that news. The prodigal father was returning to rescue his child. Dell would go up, would go down, would show some brief upside trends on news. But Michael was back. He came back.

Now it’s never good news when you start the morning with an announcement that trading in Dell stock is halted. That was this morning’s news. It followed yesterday’s announcement that there may be a need to restate prior year’s’ earnings. Irregularities. How I hate that word, at least if it refers to a stock that I own. At my age, it’s very important to be regular.

Dell is a good example of how not to buy a stock. A while ago, after quarter after quarter of great earnings and guidance, Dell announced a disappointing quarter. The stock fell about 10% on that news. I though that was a great opportunity to buy into a great company, at a great price. Not !

Who knew that the house of cards was beginning to crumble. Those disappointing results may have been the first indication that you can’t hide irregularities forever. Manipulate as much as you want, but sooner or later the truth comes out. And so for the past 18 months or so, its been one delayed filing after another. That’s never good news. Yet Michael Dell stood by his man. After all, they did share an office.

In hindsight, with the continued delays, and the continued support of Michael Dell, there should have been alarms going off for me. But I kept confident. Secure in the fact that even while no longer running the company, Michael Dell would get this thing back on track.

He didn’t and he hasn’t. It’s hard too imagine that he didn’t know the depths of the problems at Dell. They still make a great product, albeit not price competitive, but a great product. In a household full of computers and laptops, our Dell is our top dog. But as a company, it’s broken, and Michael Dell should never have gone back home. Only time will tell what whether there was criminal activity or securities violations and now Michael Dell is back. If he knew the depths of the problems, his arrogance is mind boggling. The market wants results, not camouflage and not a soft shoe shuffle.

Maybe more disturbing is that if he didn’t know what was going on, what is he doing coming back? Stay away. How could he have been so removed? That’s very different from the departure of Jobs from Apple. If he was so removed and distanced from operations at Dell, how in the world could he be prepared to rescue them from this morass?

I hate selling on bad news. That’s why I didn’t panic last month. The difference is that ultimately, with a broad enough time frame, the market always recovers. Remember 1929?

You can’t say the same for companies. Remember Enron? Maybe Dell makes up a few cents, but it’s hard to see a return to its glory days. There’s lots of competition. Computers are commodities and are priced as such. Dell products are no bargains and you have to wait a few days to get yours. Americans want instant gratification, not a visit from the UPS guy.

Oh, and the SEC problems don’t help, either.

I have two solutions. Think private equity, if you can’t comply with the SEC.

So, Michael. Come. Visit. Have a nosh. But seriously, what were you thinking?

And my other solution?

It’s time to go before you end up on Best Buy’s shelves, next to your old friend, Ted.

 

NOTE:  The graphic appearing in this blog article did not appear in the original version

 

 

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Today started off with terrible news, so it should have come as now surprise that the markets would react negatively, drastically and with unbridled violence.

The news that the beloved screen actor and martial arts expert, Jackie Chan, had died of a heart attack swept numerous social media sites, spreading across the globe, saddening fans and traders alike.

On the heels of Thursday’s U.S. market close, Friday should witness a bloodbath in the Asian markets once those markets open, as Chan was held to near diety status. Very fortuitously, the Arab markets are closed on Fridays, in respect of their Sabbath day. Chan is so revered there, in recognition of his early role in a little known Saudi backed film where he decapitated a young Moses, thereby causing the Exodus to never occur.

He is, in fact, held to such high regard within that demographic, that his image is not allowed to be shown in his movies.

Today’s report came several months after the most recent unsubstantiated rumor of Chan’s death, but the market, in its wisdom is never backward looking and ignored the news that the silver screen star was very much alive.

It’s not about accuracy. It’s about the moment. Revisions are routine and routinely ignored.

You could tell that there was obvious tension in the air as CNBC security was called in to separate Jim Cramer and Simon Hobbs from one another. It appeared as if Hobbs was trying to establish mutual consent on the adoption of Queensbury Rules, but the kid from Philadelphia was having none of that.

Although calmer heads eventually prevailed, it wasn’t so for the markets. They needed to vent.

Following the early sell-off came more bad news from Europe. Finland, a economic powerhouse of a country best known for having been usurped by the Soviet Union, joining Hungary as one of only two members of a dead language family and the home of the ubiquitous Nokia telephone, threw a wrench into the Greek bailout.

I would have also mentioned walrus blubber, but the previous sentence was already well past run-on status.

Just as they were getting ready to cross their T’s and dot their umlauts, Finland decided that they wanted collateral on the loans to Greece. On the surface, that wasn’t a problem. but then the FInnish Finance Minister was concerned that the Feta Greece was putting up had a expiration date that was unacceptable to the olfactory enhanced and sensitive Finns.

So our markets reacted accordingly as there was fear that the stink would spread across the European continent.

Oh yeah, and then there was that abysmal report from the Philadelphia Fed. The report showed contraction of factory activity to its lowest level since 2009. Anyone who has waited in line for a Philly Cheesesteak can attest to how long it now takes to shred the Cheese Whiz

But wait, isn’t that when we hit our last stock market bottom?

How great of a sign is that? Good enough to take the Dow from down 200 to down 500.

That good.

For those that remember The Haines Bottom, RIck Santelli reportedly called the bottom today. Somehow I missed that, but I did hear him call for $2200 gold, albeit, he warned of a precipitous correction. That would be bad news to come, but probably good news for others.

Today, all of the talk was about “risk-off” and the shift of money into gold. Given gold’s meteoric rise these past few hundred dollars, I still have a hard time seeing how that qualifies as a “risk-off” investment. I still can’t get James Altucher’s remark out of my mind. “It’s only a rock. It’s a rock”.

Real value resided in tulip bulbs. We all know that.

Those may be the most sane words I’ve ever heard uttered. The former. Not the latter.

Later in the day, with about an hour to go until the closing bell, trading was halted in Hewlett Packard.

More bad news.

HP had been another rumor source all day, as word leaked out that it was looking to spin off its PC business and then acquire an Enterprise company named “Autonomy”

Seriously, Autonomy is going to be acquired. Anything incongruous about that?

Well, HP pre-announced its earnings and the stock nose-dived. The fact that they pre-announced should not have come as a surprise to anyone, as HP has a habit of doing that regardless of the CEO du Jour.

What struck me as funny was a comment by Michael Dell.

Yes, that Michael Dell, who suggested that the name of the new HP PC spin-off might be “Compaq”.

Yeah, pretty funny, but Michael Dell is probably not in much of a position to fling stones. In fact, during the first iteration of Szelhamos Rules, he was the subject of “You Can Never Go Back Home“. Read it, especially in light of the warning in the very last line of that blog article.

Of course, if you owned Dell shares yesterday, you weren’t very happy, as Dell just reinvents their own personal bear market. Although after 16 quarters of earnings’ disappointments since Dell’s return, they must surely be approaching  Michael Dell’s objectives.

Truth be told, cutting off the “Dude, you’re getting a Dell” guy was like cutting Samson’s hair.

As I watch more erosion of my portfolio at least I was able to come up with a new strategy to make my funds last me through retirement.

Out of necessity comes invention. So I’ve decided to stop taking my hypertension medication. Not only does it soilve the primary problem, but it’s also a very cost-effective way to solve it.

The last bit of bad news still has me puzzled.

For some reason, much ado was made today about the President taking vacation. In fact Yesterday Donald Trump said that he “was told” that President Obama has now taken more vacation than any other President.

How convenient that he could spread that “news” but not take the blame, when its proven to be false. My guess is that he was probably the one who started the Jackie Chan rumor as a way of taking heat off of himself for publicly announcing his beautifully timed purchases of Citibank and Bank America.

Forget that President Obama has taken one third of the vacation time that his predecessor did during the same time period.

It was no accident that Will Ferrel, in a Saturday Night Live spoof, had George W. Bush referring to himself as “your President, 24/7. That’s 24 weeks a year. 7 hours a day.” Where’s there’s smoke, there’s fire.

But, you would think that the President’s opponents would greet his vacation as good news.

After all, if he is to be blamed for the economy and the rapid degradation of Feta cheese, it should be of great benefit to have him take his hands off that steering wheel.

As a fitting end to the trading day and as a unintentional salute to the new norm,  Maria Bartiromo said “The Dow Jones Index is off by over 500 points. Its worst loss in a week”.

In a week. Not 2 years, or whatever the previous standard was for time between disasters. Now 5 days seems like an eternity.

Using that new norm, my retirement funds should last at least another 2 weeks.

Now, finally, some good news.

 

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For most of my professional life I worked fairly hard, never taking the typical route nor career plan, based on my education and training. Had I taken the typical route I could have retired long ago as I’ve always believed that there is a limit to how much anyone needs.

If my kids were younger and they would pose me with the question “Daddy, what do you do?”, I have no idea what I would say to them.

“Daddy sits on the La-Z-Boy. Sometimes Daddy presses the “ENTER” key on the keyboard. Then sometimes Daddy transfers money from Mr. E*Trade to Daddy’s bank so that I can buy cigarettes for you little cute boys to play with,” is how I envision my response would have been 15-20 years ago.

Although my kids knew what I did for a living when they were younger, there was really no reason for them to understand what I really did, especially since I also traveled quite a bit for work. Luckily, they didn’t ask many questions, oterwise I’d have to kill them.

That may seem harsh, but there’s a lot at stake.

Having a second family will do that. Since my Sugar Momma doesn’t read this blog, I can say that with reasonable impunity. Unfortunately, that second family didn’t come with many benefits, as all they did was pre-warm my rental car and make certain that I always got the same hotel suite each week, although at the time, that seemed pretty risque.

The best thing my other family ever did for me was making certain that when I arrived back home to pick uyp my car from the airport lot, it was always cleared of snow and ice. 

How sweet was that? I tell you the guys at the Key West International Airport Park and Fly were the best.

As many hours as I put in, they were still nowhere near the number of hours that Szelhamos toiled away. Although he was proud of the income that I was making I always felt somewhat guilty that I could make more in about  2 weeks than he could make in a full year. No one shovelled out his car, either, although in later years, it was actually his car that I left in the airport lot.

To use the 1964 TV barometer mentioned in previous blog posts, in a great year, Szelhamos could buy a new TV every week. 

During the 7 year phase that I flew twice a week and would see the same faces lined up in the Southwest queue I often wondered whether I should get one of those wrinkle free logo shirts. I often thought about creating the most bizarre little shirt pocket level logo and some oddball corporate slogan and web address. In hindsight, I can’t really understand why I never did so, other than the fact that it would have required some minimal effort.

I eschewed conversation so I never burst into spontaneous word exchange, but I was often on the receiving end. I guess I just have that kind of face or perhaps salesman have either a need to talk or just like to talk. EIther way the familiar faces would always ask me what I did and who I worked for.

I would just make careers up on the spot and at that time, my memory was pretty good, so that I would remember to whom I said what. Regardless of the story, I was always a lone wolf, never working for “The Man”.

On those occasional memory lapses, I clearly had just moved on to a new area of consulting expertise. Whenever someone asked me for a business card, I would tell them that I accepted new clients only by referral from exisiting clients that were on the approved list.

The inference was pretty clear. “You’re not on the list”.

There was no need for business cards. I almost felt like I was running my own personal Studio 54, except for a lot less drugs, sex and music. But I did get tiny bags of honey roasted peanuts and a complimentary soft drink.

Some of those guys even believed that my Southwest Airlines seat was designated First Class.

Which gets me to today.

My kids are grown. One is doing his own stock investing and, if the IPO market stays strong, will be well ahead of where I was at his age. In fact, I’d have to get a new indicator to replace the Color TV measure, as the Y axis couldn’t extend far enough to do service to my own earnings.

The other is in college and has both an entrepreneurial streak and a need to serve, as he just finished Army Basic Training and will be heading back for specialty training following the upcoming academic year. In itself, service is not a road to riches, but he will have many other interests to support his choices.

These days, I set a bad example for each of them, as I sit at home on most days my head askance staring at the monitor and my eyeballs awkwardly pivoted to also glimpse the TV. I’m afraid to look, but I think I’m getting La-Z-Boy sores on my backside.

What do you do, Daddy?

It’s almost embarrassing to say that I simply sit and wait for an opportunity.

On days that opportunity doesn’t come, we don’t eat, said the lion to his cubs. Of course, my cubs are moved out so that’s really not too much of a concern.

But before the shame and guilt gets too far along, there comes a day like yesterday, when driving my oldest son to his home, he asked me about this months’ options trading.

Unlike Sugar Momma, he reads the blog and knows that I’m in the hunt for a monthly options premium record, which I didn’t reach on Wednesday, either.

He’s stunned at how much is generated out of this La-Z-Boy, regardless of whether the market is up or down.

That also led him to  observe that he’d never met anyone at the stage and satus in life that I currently enjoy, who is driving around such a loud piece of shit car.

I smiled.

Mostly because I couldn’t hear him over the noise.

So Wednesday just turned out to be another in a series of big swings, all occuring in the absence of any kind of noise. Since I had sold in the money calls recently on Deere, I was happy to see it take an early price hit. Maybe it did so in sympathy will Dell’s disappointing earnings. Dell, Deere? DELL or DE, seriously, how much different could they be?

For me, not very, as I tend to stay reasonably agnostic as to industry or sector. SUre, I know what they both do, but don’t really care. I have experience with both and that’s all that counts. In Dell’s case, it is one of the few stocks that I’ve bought that didn’t make money for me, either through capital gains or options premiums.

I bought Dell about 4 years ago after its first ever disappointing earnings releae. Back then it was about $35 and I thought I had gotten a great price. After three months I got my first lesson in the meaning of  the expression “value trap”.

I swore that I would never but Dell again. I’m not a very forgiving fellow.

Deere on the other hand has rewarded me over and over, both on the stock and on the options premiums.

I know Deere will go back up. Dell? Maybe they should merge with Yahoo!. Then I’d only need to stay away from the single entity Ya-hell! instead of both of those dogs.

During the course of a typical month I find myself a;\lternating between hoping for up days and hoping for down days, all in the name of managing the covered calls and minimizing opportunity costs. With two days left in this options cycle I now am hoping for a sustained rise across the board. Most of my covered options are going to expire, so I’d love to see capital gains, at least on paper, complimenting the realized gains on the options premiums.

Next time, if my kids ask me what I do for a living, it’s probably reasonable to say that I sit around hoping for things to happen.

If only there was a Viagra-like solution, although looking at a screen filled with green just might have the same effect., except that I won’t need to seel medical attention after 8 hours.

If I’m lucky enough toi be around, I’d love to see the day that my own granchildren would ask their fathers the same question.

I hope that their answers are simple and to the point.

“I don’t really do much. I just watch stocks go up and down and cash in on other people’s greed, fera and envy”.

Now how sweet would that be?

 

 

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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.

See a sneak preview of Chapter 1. 

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

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Life is filled with difficult decisions. Fortunately it is also filled with “no-brainers”.

I don’t live in one of those open primary states, so I won’t get a chance to vote against Rick Perry.

That’s probably a good thing for the nation, as my track record for voting in Presidential elections is pretty abysmal. Not the voting itself, I always exercise that civic duty, but rather the outcomes. SInce 1972, I’ve only correctly selected a winning candidate 3 times. Based on that kind of history, a vote against Perry, would likley indicate a Perry victory.

If you’re an astute reader, you would have known that’s not voting for Perry would have been one of life’s “no-brainer” decisions. Given that a scant two years ago he was spouting the merits of Texas secession from the Union, it’s a little difficult to fathom how he could be running for the Republican nomination for the Presidency of all 50 states.

The fascinating thing about that is if he had been successful in his original endeavor, we would now be making fun of Haley Barbour, Republican Governor of Mississippi, for basing his international expertise on being able to see the Independent States of Texas from his bedroom window.

Perry’s very recent rant on the Chairman of the Federal Reserve, Ben Bernanke, and suggestion that his “printing money” would likely be dealt with harshly back in Texas, indicates that Texas might have been a hostile neighbor under a Texas President Perry.

Amazing that Perry would call the “printing of money” treasonous, but not talk of secession. Although he did have a Sarah Palin moment and briefly referred to the action as “treacherous”.

Given how Perry appears to handle himself, I would think that he remains mired in “concrete operations”, probably thinking, incorrectly that Bernanke is usurping the authority of the Treasury to print money. Surely, you’ve noticed Geithner’s ink-stained thumbs. Presidential hopefuls need to have those kind of observational skills.

One has to wonder just how cowboy-like Perry would be behaving if he had not been Governor of Texas during the energy boom. My guess is that he should be kissing the feet of the Saudis, Iranian mullahs and Chavez. He should probably also give a wink and a nod to the money printers who showered Texas with the economic stimulus dollars that he was against, but happily accepted credit for when job creating projects got underway.

So, that’s not a difficult decision.

What I’m mulling now is my next step.

On the investing end, I am literally a single trade away from having my best options premium income month ever. I still have shares in ProShares UltraShort Silver, which I picked up yesterday, as well as some Goldman Sachs and PowerShares QQQ that do not have calls written upon them. At this point, I’m 0.4% away from that all time high, so There’s still a chance that in the remaining 3 days I can catch just the right premium.

That would be a good feeling, especially during this tumultuous option cycle.

Deciding whether to accept any price just for the sake of besting the previous “record month” is also a no-brainer.

Absolutely. How many records do you have?

But the real difficult decision revolves around my everyday life and how to deal with the volatility.

For example, during a 2 minute stretch in Tuesday’s trading, after the market had erased a triple digit loss, and was then down just 2 points, it proceeded to drop 75 points.

Root cause? What else. I was away from my La-Z-Boy perch.

They can see you through that TV monitor, you know.

So the big decision, and a difficult one it is, is whether to change my diet by significantly decreasing fiber, or getting a TV and computer monitor installed in the bathroom. So what if they can see through that monitor. I have no pride when it comes to protecting the portfolio.

If I were the kind that enjoyed puns, I could make a comment like “There’s nothing like placing a bid from the bidet”, but that would be as sophomoric as it would be heavenly.

On the flip side, you could be “getting your ask while wiping your ass”, but then that’s really stretching the bounds of civility.

Obviously, there are other alternatives. I’m certainly old and lazy enough for “Depends” or I could customize the La-Z-Boy.

Once again, I have no pride. After all, I write this blog.

I suppose it would be much easier if I had some algorithms to make the decisions for me.

What’s truly amazing is that now it looks as if we’re in an environment that one algorithm is likely to trip someone else’s algorithm into action. While some tripped algorithms maybe complimentary, others may act in contrast. In essence a single tripped algorithm is a simple yes or no decision, but the cascading algorithms may represent some rudimentary form of artificial intelligence, that kind that seems confused and results in bouncing around aimlessly.

As these software generated decisions are being made, I increasingly take comfort in the fact that I no longer need to make my own decisions. I can reasonably be assured that whatever unseen force caused the random “movement du jour” will be counter-balanced by some other unseen force at some point.

The need to depend less and less on brain activity appeals to me. All decisions would be devoid of thought in a perfect world. In fact, in a perfect world, there would be no need for decisions of any kind.

Based on my inability to negotiate a close in the bid-ask gap on some earlier trade attempts to break that all important monthly record, I know that such a perfect world doesn’t exist in the market place.

So today will be like any other day.

I’ve once again decided not to campaign fund raise for Rick Perry.

 

Option to Profit – Make your Portfolio Work for You.

Now available at Amazon and other retailers

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.

See a sneak preview of Chapter 1. 

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

Now you can Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

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My Sugar Momma keeps complaining that I tell the same stories over and over again.

My Sugar Momma keeps complaining that I tell the same stories over and over again.

Get the idea?

There are a lot of things that change after more than a quarter a century of marriage. Reflexive laughter at a spouse’s stories and jokes is but one of them. The others will be discussed in my adults only webpage section exclusively for annual plan paid subscribers. I don’t play blue for non-paying audiences.

So it should come as no surprise that the most difficult thing to do with a blog is to find inspiration and new material day in and day out. That’s especially true since I’ve made a habit of recycling stocks as I do stories. I rarely add a new one, maybe one new stock each month.

Thankfully, my short term memory is shot, so it’s always new and fresh, as are the stories and anecdotes. That also explains how I can watch Comedy Central. The only things that seem familiar are the nightly news stories and the market’s volatility.

Seen all of those before.

After all, why should I traipse into new territory? It’s not like I’ve been married to everyone for 25+ years. And why stray from the stocks that got you to the party? Do you really think I’m going to watch that new Paul Reiser sit-com? I didn’t even watch the one that ran for 10 years.

Today, my inspiration, for what it’s worth, came from Paul Kedrosky. I don’t really know if he has any discernible skills, but based on his Tweets, he is intellectually far flung, yet there seems to be a coherent and unifying thesis behind it all.

By the way, the annual plan subscribers will see the previous paragraph as : “Paul Kedrosky…..he is intellectually well hung…”, so there’s still time to sign up.

Borrowing from Rodney Dangerfield’s classic “Back to School” movie, as Sam Kinison is yelling the day’s lesson at him “Yeah, Kedrosky really has a unifying thesis. What that is, I have no clue”.

Even though I’ve now repeated the following phrase about a dozen times to myself and it still sounds derogatory, it’s not meant to be so. To me, “Kedrosky is like a Renaissance Man’s savant”. He may or may not have a readily identifiable and focused skill, but he is skilled across a broad canvases’ broad canvas..

Anyway, in a brief Twitter dialogue he used the phrase of today’s blog title. I asked for his permission and he said he had hundreds more. Actually, he said that he had hundreds more from where that came from, perhaps implying that they may have been purloined.

Look, have you ever seen the images that I use to illustrate the daily blog’s theme? Do you think I really care if it was purloined, borrowed or rendered?

“Wasted Optimism”. What a perfect expression.

I suppose that as an investor, or trader, everytime you purchase a stock and it fails to perform to your expectations, that becomes an instance of wasted optimism. Entrepreneurs and venture capitalists probably have boundless optimism and rarely look backward.

But I’d like to think that in his depth of thought, Kedrosky intended more.

Just 10 days ago you certainly would not have wasted your optimism by hoping that after an S&P downgrade of US debt the S&P 500 would be right back to its baseline.

That wouldn’t be optimism. That would be stupidity, or perhaps well placed contarianism. Regardless, you would have been considered certifiable and would have had a great deal of difficulty getting anyone to buy into your optimism. Imagine trying to transfer your enthusiasm to get retail customers to buy stocks at such a time.

A few days ago I characterized myself as a cynic and short term pessimist, but long term optimist.

I don’t really know what that means, but I’ve believed that for years, despite the lack of internal consistency.

When I was younger, after my first investing experience, I was convinced that I would be retired by age 30. That kind of short term optimism was unwarranted and didn’t really work out as I’d envisioned.

Now, my long term horizon and short term outlook are beginning to converge. Not because I’ve undergone some intrinsic change in outlook, but because the clock keeps ticking.

Now, I’d like to think that I can retire sometime before death. Even though I don’t work anymore, I look at the trading thing as my job. It would be great to hand that to my kids, once their parole officer finds them.

So in the meantime, I take my long term optimism and short term pessimism and just throw money at stocks and hope something makes sense. Long stocks, short calls. Long ultrashort ETF’s, short on their calls, Long volatility index, short the call. What was that unifying hypothesis?

Today, I had the luxury of some cash as my shares of Caterpillar and Freeport McMoran were assigned. On my wish list were Deere, Chesapeake Energy, Microsoft, Rio Tinto and something else that I can’t recall.

See the problem?

I am utterly convinced that by the time I meet my maker the market will have carried me to great riches. That’s the optimist in me, even though the outcome is predicated somewhat on my death. That part is a bit of a downer.

This week? Eh, not so much.Not entirely convinced we’re getting there without a stop, despite Monday’s glorious market.

Despite the nice sustained climb in the markets from mid-week last week and on, I purchased Deere, Chesepeake Energy and more Freeport McMoran in the morning with the expectation that they would go down by week’s end.

So with the optimistic sense that I was right about the pessimistic trend for the week, I sold a $75 option of Deere, purchased at $76 for $2.50 in the hope that it would be called away from me after trades close on Friday.

I did the same with Freeport, buying shares at $45.75 and selling the August $45 call option for $1.63. I did the same with Freeport last week. Same idea, maybe even the same shares in some sort of market recycling phenomenon, hopefully with the same outcome.

But in a show of short term optimism, I sold by Chesapeake calls at the $32 level, having picked up shares at $31.75 and receiving $0.60 for the contracts.

Go crazy.

I often think back to Alan Greenspan’s famous and oft repeated comment about “unbridled enthusiasm”.

No wait, that was Seinfeld. I think Greenspan said “irrational exuberance”. I always get the two confused. I think Greenspan was the guy with big ears and glasses. Seinfeld was the one married to Andrea Mitchell.

Both though make a statement about optimism. Llike calling someone a “savant” those statements may be disparaging, even if that’s not the intention.

My guess is that Greenspan meant to be disparaging. Seinfeld? Definitely disparaging.

Me? Again, not so much.

Optimism and pessimism are just parts of the sine curve that we keep cycling through in the markets. Lately, I hear many more people talking about “rho” or the correlation between events. Whether my optimism is well correlated with a rising market is irrelevant to me, as I am only optimistic that stocks will churn in one neighborhood, then move on to another neighborhood and just churn some more before moving on again and again.

Once you start getting so many people focusing on something, like correlation statistics, its bound to be passe. With everyone having their hands on the same data and interpreting it similarly that can only mean a decidedly opposite outcome.

Of that I’m certainly optimisitc. Long term. Short term.

And if I’m wrong, I won’t be next time around.

 

Option to Profit – Make your Portfolio Work for You.

Now available at Amazon and other retailers

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.

See a sneak preview of Chapter 1.  noco

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

Now you can Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

 

  

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Every 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 due to disuse, 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 gray. 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 real 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? How about grandchildren?

 

Option to Profit – Make your Portfolio Work for You.

Now available at Amazon and other retailers

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.

See a sneak preview of Chapter 1.  noco

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

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Study after reputable study indicates and continually confirms just one thing. An absolute and universal truth that ultimately forms the foundation of so many things that we do.

Size does matter.

Additionally studies also validate the concept that “Stupid is as stupid does”, sometimes referred to as “The Gump Principle” in academic circles.

Despite the denial that we all go through, size is everything. Bigger, better and more. It’s all about size. Don’t be swayed by the girth argument. You want girth? Find yourself a steroid juiced linebacker and then get back to me.

As an aside, before you try to point out what appears to be an exception to that rule, the short ugly guy in sweat pants with the babes hanging off each arm? It’s the size of the bankroll. That usually trumps everything else or every figurative shortcoming.

Depending on your perspective, you can have a sliding scale on what constitutes appropriate size, however.

Take yesterday afternoon. After a big drop it looked as if the Jamie Dimon effect was being to take hold. He spoke in calm, reassuring and upbeat tones about what the American economy has going for it.

In the interview background, in otherwise scenic Monterey, California was a Chase Bank ATM. High magnification video indicated that 40% of customers attempting to withdraw cash were greeted with insufficient funds notices. The sight of them kicking the machine really didn’t require high power magnification.

Luckily CNBC has that 7 second audio delay that MSNBC forgot to use.

As Dimon spoke, the market picked up about 200 points. Granted it was still down 150, but by comparison, with a new persepctive on size, down 150 seemed minscule.

Down 150 is the new up 25. What used to elicit a shriek of disbelief of orgasmic frenzy levels now barely even gets a “meh”.

We are still talking about stocks, right?

As I awoke Wednesday morning I discovered that I had some unexpected cash sitting in my account. Someone had exercised some of the now deep in the money ProShares Ultrashort VIX ETF that I owned.

That’s where the Gump Principle comes in and did so from both sides.

For starters, in hindsight, I shouldn’t have sold those calls. I left lots of money on the table as the volatility index has been on a tear as the market has been plumbing new depths. Even more so, as the ETF was levereged.

So idiot that I can be, I made my 10% return on shares and options for the 3 weeks of holding, but it could have been much more.

Based on the past 2 weeks, even much, much more wouldn’t have been nearly enough to be enough.

But I wondered about the guy that actually exercised the option. Why? Why do it, especially with more than a week remaining and no divdend to be captured? If you want to lock in profit, why not sell the option instead of shelling out the cash and then presumabaly selling the shares?

My guess is that there was a breakdown in the perfection of options pricing so that purchasing the shares resulted in perhaps a lower yield, but greater gains.

That would mean either an idiot on the ask side or the bid side of that proposed transaction. Maybe both, so good luck getting them together to make a market. Greed is a form of stupidity.

In an exercise of my own greed, I quickly used the proceeds and snapped up some more shares of down-beaten DuPont, which goes ex-dividend on Thursday.

The numbers were small, but right now anything looks good. Purchased at $54.45, then a $0.41 dividend and a $1.12 options premium for 7 trading days. That’s the best I could do right now, but from my perspective it’s a big deal. It’s especially a big deal if this most recent plunge follows the same playbook as that in 2009. At that time I loaded up on high yielding quality companies and kept my fingers crossed, while selling 5% and 10% out of the money calls. In that way, I accepted less income in anticipation and hopes of greater capital gains.

So let’s review.

Monday we were down 600, Tueday up 450 and Wednesday down 520.

To put it into a personal standardized perspective, while pointing out the disequilibrium, on Monday I Iost 220 Color TV’s, while on Tueday I was given 146 and Wednesday I returned 100. (Don’t understand? See Some Things Don’t Get Old)

To me, that’s actually a very positive trend. How’s that for a warped perspective? And one that’s pretty stupid, too.

But the reason that I see it as a good trend is that the simple math always dictates that it requires more effort to recover from a drop than it does to actually drop.

Think of that concept as being no different from gravitational forces. As I get older that analogy is much more apropos as I gaze into a full length mirror. You know, they really should make bras for those things.

For example, let’s take numbers ripped from the headlines. When the Dow falls 2000 points from the 12,719 level to 10,719 in one month , that’s a 15.7% drop. However, from that level it takes an 18.7% gain to get back to the summit.

But in my case despite seeing the market give back Tuesday’s gain and then nearly another 20% on top of that, I was still left with 46 Color TV’s.

Wow. See what I mean. Down 150 is the new up 25.

It’s all in the perspective and being stupid enough to accept that perspective. That’s a winning combination, or as we know in the aftermath of the Charlie Sheen debacle, “Winning is the new losing”. It’s the kind of denial and re-definition of standards that still makes it so profitable to deluge the world with penis extender e-mails. Want and believe enough and you can convince yourself of anything.

Now, if only I could figure out a way to re-monetize those TV’s and buy some gold, or at least those gold clad Buffalo nickels, that are priced at a gold equivalent of $20,000 per ounce.

That’ll show the world who’s stupid.

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What’s in the Szelhamos Portfolio?

 

Based on a one day move it’s probably a bad idea to suggest that a pattern or trend is developing.

That should be painfully obviouse for anyone that’s been following the markets and the daily intra-day moves the past couple of weeks.

Giddiness quickly dissolves into disbelief, and not the good kind of disbelief.

As usual, there was lots of discussion over the possible root causes for Thursday’s typical 400 point move.

There are those who believe that the European decision to limit short selling on the financials was the impetus. My memory is increasingly fuzzy these days, but didn’t we try that as well? Don’t think that it had quite the longterm impact that the decision architects had hoped.

Others pointed to the early return of French ministers from their month long August vacations to attack the French banking issues that are now emerging. The first photos from those finance meetings are a stark reminder that no one should wear European style bathing suits, even if there’s a conference table to obscure the details. 

For my money, I’d rather suspect that someone might have a similar background to mine by looking north of their waistline.

Today, however, I think I spotted the ultimate market indicator that very strongly suggests that the market is heading up with sustained gusto.

During a brief period of time, that seemed all too long, Herb Greenberg disappeared from the CNBC picture. He was always one of my favorites. A calm, analytical approach to macro and more importantly for the individual investor, micro-economic analyses.

Just as an aside, but a follow-up to yesterday’s basic math lesson, people like Greenberg are very valuable to the health of your portfolio.

I’ve never been a fan of mutual funds, but when I was gainfully employed and had to choose from among bad fund choices, I would always opt for funds that performed best during down markets. I certainly can’t take credit for that strategy, but I just don’t recall its source. For purposes of consistency, let’s just say it was from Herb Greenberg.

And it is a good strategy, as it really is more difficult to overcome a single large loss than it is to make up for a multiple missed opportunities.

When Greenspan would talk about “frothy exuberance” and paint on a broad canvas, Greenberg would pragmatically focus down on the specific issues that mattered, your false hopes about inappropriately moving stocks. He consistently highlighted situations where the investor may have been at unexpected and highly significant risk.

Valuable stuff.

Well, thankfully for viewers, he’s back and I hope, enjoying east coast weather. The fact that Sugar Momma and I plan to pack it up and return to her sunny California roots when the kids aren’t looking is in no way meant to be interpreted as a statement regarding the hideous nature of weather in the Mid-Atlantic.

Ever since I re-started the Szelhamos Rules blog in an effort to boost sales of Option to Profit and started Tweeting, Greenberg, no surprise, has been another favorite among the small number that I follow. In fact, after my son, he was the first account that I followed and along with Paul Kedrosky they remain the only three that I have consistently followed.

My son doesn’t necessarily help me with investment ideas, but at least I know what’s going on with his life thanks to Twitter. And if FourSquare is to be believed, he sure does party a lot. I don’t know whether Greenberg and Kedrosky have similar lifestyles.

But to be totally fair, however, I must give my son credit for early detection of VMWare and Iron Mountain, among others.

So here’s the good news.

As any Twitter user knows, it’s all about the Followers. Yesterday’s blog, “Depends on your Perspective” re-affirmed the importance of size in every aspect of life.

For me, Twitter has become life, but based on my number of followers, my life expectancy is somewhat guarded or at least the value of my life is highly suspect, perhaps due to accounting irregularities.

In the 4 months that I’ve been on Twitter I’ve looked forward to the Tweets from Greenberg as they’ve complemented his now increasing on-air presence.

As usual, on Twitter he dispassionately and objectively reports and dissects “data” in his alloted 140 spaces.

Somehow, I once got included in a Tweet sent to Greenberg that included quite a bit of venom packed into its 140 spaces, but as they say, that’s what it takes to make a market. I can only imagine how Jim Cramer’s inbox must look as it’s very easy to sling from behind a firewall of anonymity. (See “Why I No Longer Watch Jim Cramer“)

Maybe it’s the TV, maybe it’s the wide range of fashionably colorful dress shirts, but Herb Greenberg’s Twitter follower base has grown by about 60%, or an additional 4,000+ in short order.

That can mean only one thing.

As viewers and the Twitter universe are being ever more mindful and respectful of a circumspect and wary approach to stocks and the markets, the contrarian in me just knows that we are now poised for a major upward correction.

Forget all of those technical analyses and all of the charts and statistics. Face it, every math and physics PhD. out there has access to the same data and analytical tools and algorithms, yet they arrive at wildly distant conclusions. The fact that I’ve used a second derivative of the velocity of Greenberg’s growth in Followers to create a market strategy is largely irrelevant.

Forget the “science” and go with the “Greenberg Follower Contra-indicator Tool”.

As the number of his followers increases and becomes likewise increasingly engaged, it is a sure sign of investor capitulation. The water’s both too cold and deep and besides, your mother told you to wait an hour after eating before you go back in for a dip.

In the meantime, Greenberg will continue to present sage-like and cautious observations.

I tend to be a cynic and even though I’m a short term pessimist, I am a long term optimist on most everything.

But as individual investors are getting more cautious, I think of the opportunities that are akin to short squeezes. It’s related to something that’s called “FOMO” or “Fear of missing out“. FOMO itself is a first order derivative of greed.

Caution is absolutely the way to go. That’s why I hedge everything, although I don’t think I can use that strategy as an excuse to explain the girlfriend on the side. But when everyone is getting on the caution bandwagon instead of  judiciously exercising caution where appropriate, there is opportunity.

When the fear of missing out dawns on the individual investor prices go up. Demand trumps value.

So I, for one, am very happy to see Herb Greenberg’s growing popularity. By the same token, I fully expect this indicator to break down at some point as those who have blindly followed caution would be fools to unfollow Greenberg once their FOMO takes hold. If anything, they’ll need him even more to better protect what they’ve gained.

At that point I’ll just come up with something else to replace the Color TV indicator and the Greenberg contra-indicator.

It’s even easier than keeping everything contained in this bathing suit.

  

Addendum: Since this blog entry appeared in August 2011, Herb Greenberg has added on another 12,000 Twitter users, reaching 20,000 on December 1, 2011. Since then, the S&P 500 has gone up 6.8%. Unfortunately, 7.6% of that gain came this week (Nov 28 – Dec 1, 2011). Stay long, my friends.

Additionally, the following was not linked at the time the article originally appeared: “Fear of Missing Out“

  

 

 

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It’s been a long week. I probably don’t have to tell you that.

For me, the highs and lows of the past few days were more than just quantitative matters, they were matters of the heart.

As Lou Grant would have said, “I hate matters of the heart”.

The week in question started on a real high note, as I watched my son graduate from Army Basic Training last Wednesday and escalated as we were able to bring him home with us to start his junior year of college. So, while stocks were just beginning to really shed some real market cap, I didn’t mind too much. Joy can make you forget such mundane things like skyrocketing paper losses.

In fact, despite being armed to the teeth with my traveling trading desk, after a few hours in the car on the first part of the trip down to South Carolina, I decided to spare my lap the deep thermal burns, shut down the streaming CNBC feed and give it a rest.

Of course, at the time, the market was up reasonably nicely and I had a feeling of calm and peace. So much so, I didn’t even care that much when I learned that the market eventually turned for the worse.

The next two days I was essentially cut off from any timely market related news. Although I did prove to my Sugar Momma that I wan’t addicted to the electronic market tether, I did find myself breaking into lots of cold sweats and sucking the residual sugar off of discarded gum wrappers.

For some bizarre reason, when my oldest son, who now follows the markets tracking his undiversified portfolio of one stock informed me that the market was down 500 points last Thursday, I took it in stride, after all, I had my whole family in tow, reminiscent of long car rides together 15 or more years earlier.

Not only did I take the news in stride, but I actually got a kick out of that news, even though I’m not a short seller. Despite the fact that I exercise a covered call strategy on nearly every holding and despite the fact that the bids on most of those call options were close to zero, I still felt a rush.

For me, the exaggerated bounces in the market never get old. They’re always exciting, even if I can’t find a way to take advantage of them.

Imagine then how excited I must have been on Monday. Can you believe losing even more than on the previous Thursday? If Dow down 500 points is good for the perverse part of my being, how great is 600 points?

When I was younger, I used to measure money in terms of how many color TV’s you could buy with that money. Our family got its first color TV back in 1964, just in time to watch the Yankees – Cardinals World Series. I remember spending most of my time trying to get the colors just right and trying to find the perfect antenna position. I usually ended up being the antenna and the grass usually ended up being blue.

After all, for $500 were you expecting perfection?

At Szelhamos’ highest earnings year, I calculated that he could have bought 50 color TV’s or one each week. Back then I was too unsophisticated to factor in taxes and things like present day value, or concepts like “constant dollars”.

Now that I’m older I don’t think in such childish and simplistic terms. Instead, I now calculate a days’ gain or loss on the basis of how many Szelhamos years worth of earnings it constituted. For example, instead of saying that Monday resulted in a paper loss of 200 color TV’s at 1964 prices, I would be much more inclined to say that the losses covered 4 years worth of peak earnings.

What a rush, albeit a downward spiralling rush to poverty.

While the market was going down, despite an occasional tease upward, the joy still overcame all.

Today, the story was quite different. This time, instead of having headed down south for a bit of happiness, I had to trek North back home to New York for a bit of sadness, as word had come of the death of a woman very dear to me. Not an actual relative, but very much a second mother to myself and sister.

A Holocaust survivor, a refugee from communism, she started a new life with her family and friends in America.Always giving, always smiling and door always open. As much as joy can help you to forget, sadness can help you remember.

But in her case all of the memories were wonderful, but unfortunately they had grown old and increasingly dim, until a touching eulogy reminded us that in everyday actions by her children, grandchildren and great grandchildren those memories live on. Sometimes that memory will take the form of a strudel.

And that’s alright, too.

As the days’ drive to New York began, I was in the passenger seat, once again with full electronic gear at the ready. Pleased to see the market hold its 200 point gain once again those feelings of calm and peace returned, this time though looking at how many TV’s I could buy with those paper gains.

At about 3 PM, heading from the funeral home to the cemetery, my oldest son who was in New York on a business and had joined with us, turned to me and calmly let me know that the market had given up all of its gains.

Serenity. Serenity now. Remember. It never gets old. I keep telling myself I love the violent and unexpected moves.

Now, I also love Ben Bernanke as much as the next guy, but I couldn’t imagine in my wildest dreams what he could have said to have shaken the markets so much. Normally I’d have been home rapt on every word and nuance, but today I was left to my wonderings. Did he call Tim Geither a “pussy”? I think I’d put up 1o color TV’s at 1964 prices to have a front row seat for that cat fight.

And I like both of them.

Finally arriving at the cemetery the rain was pouring upon us. Briefly it stopped and someone remarked “What a miracle, God is smiling on us”. Minutes later the rain came back with a vengeance and that same person took the opportunity to say “What a miracle, God is crying with us”.

That reminded me of something that does get old. The various talking heads that believe the viewer has no sense of history or at least no functioning memory. I like my analysts and miracles to be consistent.

But at least here the intention was good. Sun was good. Rain was good. We were celebrating a good life.

As I looked around the assembled crowd, it was no longer the elderly crowd that I remembered from my younger days. With very few exceptions, they are now gone, being replaced by newer versions of themselves.

Oy.

Once back in the car, my personal market reporter, whose personal wealth may dwarf mine if the IPO market can survive the downdraft ,once again turned to me and said “Wow, the market turned it around and closed up over 420 points”.

That’s a lot of color TV’s.

Hearing that kind of news never gets old. It may not be strudel, but hearing my son deliver that news is a sign that I will never get old, rain or shine .

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In my book, Option to Profit, I have a chapter entitled “What are My Credentials?” I thought that if someone was going to buy the book, or perhaps browse through it, they should know who this person is making investing strategy recommendations that might have a very tangible effect on their lives, if followed.

I don’t try very hard to hide the fact that I don’t have any formal credentials such as being an economist, a certified financial planner or anything resembling a career in finance. I do know, however, how to use such phrase as “at the margins; opportunity costs; sunk costs and others. In addition, I’m well versed in all of the consulting buzz phrases of the 90’s and early part of the 21st century.

My credentials? I happen to have spent 30 years as a Pediatric Dentist and the majority of those years, in academics.

There you go. Those are the qualifications. I’m really not qualified for anything. I can’t even figure out how to mulch around a tree.

So that brings us to the only story of the day. The first trading day after the historic Standard and Poors downgrade of United States debt instruments. No small matter, but who exactly is charged with that incredible responsibility? Well, it was actually a decision that was finalized by a three person Sovereign Ratings Committee. The public face of that committee on Friday and Saturday had the unfortunate luck to share the same name as the embattled CEO of Cisco.

If you’re reading this blog you probably know that would be John Chambers.

Neither of the two John Chambers is terribly popular right now. But them both into the same room right now and all of the air and life would be sucked out. The joy, too.

Imagine the unbelievable burden of making the decision that would undoubtedly have both riptide and trickle down impact on the United States and the entire civilized world.

Imagine the education, training and experience necessary to weigh all of the information and to make a decision based on sound economic and mathematical forecasting principles. Balance that with a need to understand business cycles, political systems and social contracts.

Where do you find such people? Harvard, MIT, Princeton, Standford? What kind of multiple advanced degrees would such people need? Obviously doctorates, probably in economics, finance, analytical mathematics, even Physics all sound like reasonable entry points.

I suppose an MBA would be very helpful and might substiute for at least one doctoral degree.

So it would probably come as a surprise that the Chairman of the Sovereign Ratings Committee has an bachelors degree in English literature and philosophy from Grinnell College.

I’m not even going to bother to find out where Grinnell College is, but I do know that there’s no ivy on their walls. In this age of distance learning for all I know, Grinnell may not even have walls, although on a purely intellectual basis, there’s no reason that ivy can’t climb up your computer LCD screen.

He does however, also have a Masters degree in English Literature from Columbia University, so that puts him only one shy in the number of Ivy League degrees compared, to say, a one-time Pediatric Dentist, who isn’t even remotely qualified to be posting on Twitter.

Speaking of which, last week another of my favorite Tweeters and I only follow a small number, started a bit of a controversy when he made his case for the advantages in hiring MBA graduates from the top schools for analyst positions.

Like the chicken and egg argument, nurture versus nature and other exercises in sophistry, you can always make some kind of a case for for the role that experience may play in work ouput and quality.

The basic thrust was that by hiring a graduate of a top notch MBA program, at the very least you can be assured of intellect. True, the person may still be a loser in life and professionally, but to paraphrase @Tradefast, a corporate Chief Investment Officer, “at least they’re not dumb”.

In the limited universe designated by 140 spaces @Tradefast makes some of the most cogent observations and does so in a humble fashion. A rare breed. Although I am still a New York Mets fan and he tweets lovingly of the Yankees, he still maintains a very high degree of credibility with me.

Despite the earlier mentioned correlation between education and intellect, you can’t necessarily make a similar statement about experience and intellect. Having experience makes you neither a sure hing for smarts nor talent.

The longer you are in the workforce, the more you realize that there are plenty of people with experience that seem to be entirely mediocre, but somehow move up the ladder or move onto another organization just before his mediocrity becomes apparent..

No disrespect to Mitt Romney, but I don’t believe he is as distinguished or accomplished as he is portrayed. The great smile and hair do help, however. As did having a father with “Governor” on his resume.

Sometimes, that’s all it takes.

So what are John Chambers’ qualifications to lead the august S&P committee?

No doubt that the downgrade statement was beautifully crafted, making wonderful use of some great techniques developed over the centuries.

When he said “ask not for who the rating falls” in response to a question by a CNN anchor, there should have been some clue that deep analytical thoughts were not a priority.

What really caught my attention was “Out, out, damn debt”.

As the trading day proved to be far worse than the futures indicated there wasn’t much solace. I closed out some options but not much else. I’m still amazed that I can tolerate these paper losses far better than I can stomach throwing a dollar into a slot machine.

Glued to CNBC all day, I re-watched John Harwood’s interview with Tim Geithner. What appealed to me was hearing a cabinet secretary not use the typically nuanced words to describe the S&P decision. He was pretty candid. It was very refreshing. I wish that he would do that when appearing before House and Senate finance committees as well, when he really has to suffer fools.

Much was said today about the President’s late appearance for his 1 PM statement on the downgrade. When President Obama finally did begin, nearly an hour after the scheduled time, as if I had anything better to do, the market at first responded positively.

In just a few seconds about 75 Dow points were restored. Amazingly, at the very instant that he mentioned that our problems went back to the day he took office, the downward trend returned with new fervor.

Clearly the President didn’t read my blog entry yesterday, “A Call to National Action.” Had he done so, he would have known that this was a rare generational opportunity to exhort Americans to return to the personal and political behaviors that guaranteed our financial supremacy.

From the point early in the morning when Jim Cramer said that he liked the direction of the tape, to the closing bell, an additional 500 points was lost. I must admit, I thought that the script would play itself out with only a small change at the close, myself.

As the day came to an end, those additional 500 Dow points, in terms of market wealth, exceeded the cumulative value of every single copy of every work of literature ever sold, including e-books.

Certainly, that’s the sort of analysis that John Chambers should be able to comprehend.

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