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Something Missing?    June 30, 2010

Has anyone noticed anything missing lately?

And I’m not talking about the fact that I haven’t made a posting in about 6 weeks.

But here we are, the end of the second quarter of 2010.

What started out so promisingly in April turned incredibly nasty in May and June.

As options were nearing their expiration in May, I was furiously making trades, buying back options contracts and chasing the prices down, by selling new contracts on the depressed prices.

I felt proud of myself. Pretty much like making lemonade out of lemons. Even though stock prices were going down, I squeezed even more out of options premiums.

It was almost like a fairy tale, except for one thing:

The ending.

The ending that i had envisioned was a return to the upward momentum. That would have allowed me to get right back and sell those options.

You know the mantra.

Sell, baby sell.

As it turns out, that’s been the mantra for stocks, instead.

So the prices that I thought would recover, never have. as a result, not only did my portfolios lose money, but I couldn’t generate anywhere near as much options income with the June contracts.

And here we are in the second week of the July contracts and after having already closed 2 of them out, I don’t have any open contracts. All I’ve been doing is making strategic sales to take tax losses.

Not really a strategy that you want to be doing. I’d rather pay the taxes.

Although the final numbers aren’t in yet, I think that I made more money by searching under the cushions of every couch that I’ve sat on in the past 2 months, than from my trading.

That’s probably not a very sustainable business, unless I get a lot of new friends with big sectionals.

I never really understood the concept of “burying the lead”, as so often is disparagingly stated of newspaper articles, but now I get it.

What’s been missing is buying.

There’s been plenty of selling, but as the bad news just keeps on coming, who in their right mind wants to be buying?

I just saw a funny video on YouTube of a guy who redid Billy Joel’s “We Didn’t Start the Fire”. The big difference was that he was able to find enough minor tragedies, events and fads in just the past year, as opposed to the 45 years or so that Joel needed to drive home his point.

But the latest version really summarized the rapidity with which major events are occurring. There seems to be an avalanche just about every day, but we still haven’t gotten numbed to the constant barrage.

Sure, by now the BP spill seems normal. In fact, I just picked up shares, so maybe a little bit of numbness is setting in.

But as the markets have fallen, I watched my old favorites get slammed, just like every other stock in the universe.

Google, Goldman, Dow, DuPont.

Loser, loser, loser and, need I say it? Loser.

Oh, there’s more, but it’s just too painful. I can’t wait for the numbing sensation to hit.

But even today’s feeble early attempt at a rally is fizzling, I remain optimistic.

Why?

Because I’m delusional and also because every single talking head has turned negative.

Head and Shoulders? Double Dip? L Shaped Recovery?

As long as their all negative, I don’t care which wrong answer they’ve chosen.

What I do know, is that I’ve been equally wrong.

It seems that every new stock purchase that I’ve made has been poorly timed. Even when I thought the stock had reached a near term bottom, I’ve been wrong.

Alcoa, Textron, Walgreens, Chesapeake Energy, eBay, Seagate Technology and more.

Wrong, wrong, wrong, wrong, wrong, wrong and more wrong.

And even worse, I haven’t capitalized by selling options contracts; my raison d’etre.

But maybe the new quarter will bring something better.

For the past few years, the old adage “Sell in May and go away” hasn’t been good advice.

This year, though, selling in May would have given you a great opportunity to free up cash to buy stocks on the cheap.

I didn’t do that, but in my continuing delusional state, I can convince myself that I did, until I try to execute some trades and receive an error message saying that there isn’t enough in my account to cover the trade.

Just another bubble being burst.

But fortunately, the delusion prevents depression.

I suppose that’s also missing, in this case.

And that seems to be a good place to end.

Spain to the Rescue    May 12, 2010

Looking through its history, Spain hasn’t always been good to my people.

And I’m not talking about the “investor class”.

Today I found out that Fidel Castro has claimed to be descended from Spain’s Marranos, those who secretly continued to practice Judaism, while openly proclaiming their new post-conversion faith.

As if the Jews didn’t have enough problems. Do we really need to count Castro as one of our own? He certainly wasn’t very good for the investor class, and with his ascent, the Jewish population of Cuba, including pious notables such as Meyer Lansky, fled.

And the beard.

Whether it’s expulsion, being burned at the stake, or forced conversion, Spain holds enough bad memories to make you forget that it was once a place where everyone actually got along.

In fact, the Hookah bars of 14th century Spain were filled with intellectuals and artists of all faiths comparing notes and renditions of their favorite prophets, with nary a drop of blood to be seen, other than resulting from the blood brother rituals practiced in the back rooms.

And then there was Franco.

So the re was this 500 year period when things were not so good.

But it all changed today.

Because today, Spain stepped up and announced austerity measures.

No, not against the Jews. I don’t know if they’ve ever officially rescinded those, so as far is known, they’re still in effect.

No, these austerity measures are related to their economy and way of life.

Depending on who you listen to, either the United States, Spain or Portugal is in line to follow Greece into financial hell.

Exactly what “austerity” will come to mean is not yet known.

Maybe one less dagger thrown into the charging bull. Or maybe they’ll shorten the path in Pamplona.

Either way, significant moves and cultural hardships in the name of fiscal responsibility.

Today’s sustained upward move was credited to Spain’s preemptory announcement that austerity was the call of the day.

That on the same day as Greece announced that it was ready for its first EU - IMF infusion.

Yeah, that’s likely to be money well spent.

And while we’re wondering what the new definition of “austerity” will come to be, word just came in that their is an entirely new definition for “bi-partisan support”

Now that Senators Kerry and Lieberman have come out with a new version of the Climate Control Bill, Lindsay Graham, the original co-sponsor (and Republican) is no longer necessary. He can now turn his full attention to battling the claims that he is gay.

Instead, Lieberman clearly qualifies as Republican(ish) and will make the bill all enfranchising.

I love the mutable nature of language.

What I don’t always love is the mutable nature of the markets, even though that is what is the very basis for my good friend, volatility.

You see, just a week ago, after a truly miserable week, I felt somewhat comforted knowing that unless there was a very significant turnaround, I would likely be able to keep all of my equity positions.

But now, as that march upwards seems to be continuing, I’m re-approaching assignment levels of most of my holdings.

I’m sure that the news could be much worse, so I really have no right to complain.

Besides, if no one actually reads this blog, is it really a complaint, at all?

You may have noticed, that there are now some annoying attempts to monetize thgis site, more than just the static banner ads that can be easily ignored.

But as the readership continues to rise and is approaching the levels of the first incarnation of Szelhamos Rules, I thought, “Why not”.

So if you’re curious enough to see what Simpsons character you are, go right ahead.

Or if you really want to download that Yahoo! Toolbar, by all means, go for it.

And why am I really doing this? Why do I really want to cheapen this site.

Sure, the money part is important, but it’s not everything.

Hopefully, if we can generate enough revenue, I will hire a translator to put this blog out in Spanish, and maybe Portuguese, too.

And who knows, if the pundits are right about who’s next, we may need an English version, too.

So click away, your country is depending on your support.

A Trillion Here, a Trillion There    May 10, 2010

That’s right.

As the old saying has evolved, “..pretty soon you’ll be talking about some real money”.

It wasn’t that long ago when we would be aghast over the concept of $100 million being spent on some government project, like space exploration or a “bridge to no where”.

Do you have any idea how many Hoover Dams you could have built for that kind of money?

Then came baseball free agency and all of a sudden $100 million didn’t really buy you that much. For every Vince Coleman there were some real stinkers.

Seemingly even faster than “Moore’s Law” regarding the association between time and the doubling of computer processing speed, a $100 million became $1 Billion and then $100 Billion.

So it shouldn’t come as too much of a surprise that $1 Trillion is the new black.

Where the analogy falls really flat is is in comparative value.

As computer chips and other components get exponentially faster and more powerful, their prices have declined.

In contrast, as our house of cards gets bigger and more unruly, the price to rescue dysfunctional systems and even governments climbs higher and higher.

As opposed to the United States’ bailout of our financial institutions, that Trillion or so seems to have been reasonably well invested. Besides its preventive actions, part of the government’s portfolio is actually getting a decent rate of return.

Eliminate the bankruptcy of CIT and the bottomless pit at GM, and maybe $100 Billion or so at AIG, and the money was well spent.

Now it was the EU’s turn, along with some help from the IMF, and its biggest principal, the United States, to help bail out Greece.

And what exactly do you now get for $1 Trillion? What is the value proposition?

Well, where it counts, you got a lot.

At least today, as the market went up 405 points, solely on news of the EU bailout. No one has really thought this totally through yet, so we’ll see what kind of of staying power today’s rally will have.

It’s not really clear what the Greeks will be giving up and how in the world they will be able to repay the loan

Even with today’s run-up, there’s still a long way to go to get back to where we were just 2 short weeks ago. For example, with Google up over $25 today, it still has another $50 to go to reach it its late April levels.

You can add Goldman Sachs to that list.

And while you’re at it, add Dow Chemical, Dupont, Deere.

And those are just the “D’s”

I’ve always liked “D’s”, but the past couple of weeks have been ridiculous. A flat market would have been much more appealing.

I didn’t really have any available cash to pick up any bargains the past couple of days. Today, though, I had the opportunity to re-sell options on Seagate Technology, trying to milk a few more dollars in premium before expiration.

I have had to resort to the milking strategy since my request for an EU or IMF bailout isn’t being received as favorably as I had expected.

But if we have a dozen or so days like today, I may not really need a bailout.

Then we’d be talking some real money.

No Commentary is Really Necessary   May 7, 2010

I’m not as young as I used to be, so there are a lot of things that I can’t do on a daily basis anymore.

So far, I haven’t seen a single pharmaceutical company run an ad for the inability to come up with a fresh blog everyday. They certainly have lots of ads for other things that can’t seem to come up as readily as they once did.

Actually, I still have at least one of those abilities, I just don’t have the desire to come up with a new blog everyday.

When did it all change?

Not that there was any shortage of news. There was lots of good material out there, just waiting to be picked, but this was just one of those weeks when no commentary was really necessary.

A few days ago I was going to write a column about how much I was looking forward to the return of volatility, since volatility means higher options premiums.

As it turns out, after a week of “uber” volatility, I may be ready for the days of ennui.

This was one miserable week. I never wrote that column.

On the positive note, unless we have an incredible rally the next couple of weeks I won’t be losing any of my shares at options expiration.

When I say that’s small consolation, I mean that it’s no consolation at all.

Nearly all of 2010’s gains were wiped out this week. Had Goldman Sachs not somehow managed to stabilize itself, it would have been even worse.

On Thursday, the day of the 10 minute meltdown, I actually made 3 trades, closing out some options positions in Dow Chemical, Seagate Technologies and Halliburton.

Those trades actually happened as I was en route to meet my wife at the garden center, where we make an annual pilgrammage to choose vegetables for the garden plot.

On a truly positive notes, no beet plants were found, despite searching through 5 different garden centers.

Anyway, at that point the market was down (only) about 250 points and my closing transaction orders had not yet been fulfilled, as the options premiums were increasing, even though the stock prices were falling.

Ah, volatility.

By the time I got to the garden center about 10 minutes later, well, you know the story.

And of course, you know what happened by the time I got back in the car after loading up the trunk and back seat.

At least my options contract order made it.

Greek Crisis?

No, I still prefer women, but for some reason that seems to be the “culprit du jour”.

That or the Citigroup trader that has fingers too big for his keyboard.

Could you imagine the thrill and ecstasy if you were able to pick up shares of Accenture at $0.01 and then watch it meteorically rise back to $40?

Then try to imagine yourself ranting like a lunatic a few hours later when it’s announced that the trades made during the anomalous 10 minute period would be reversed.

That’s why there’s really no need for commentary.

A few years ago, when the Szelhamos Rules blog was just a few days old, the market fell 416 points, in the midst of an upward climb.

That was exhilirating.

That one was blamed on the “Yen Carry Trade”, a crisis long before sub-prime was bought to our attention.

But this week wasn’t anywhere nearly as exhilirating.

And for just a few moments it looked as if Friday would restore some sanity to the week.

That delusion lasted for about 6 minutes.

The next delusion is that the next couple of weeks will erase this weeks’ plunge.

But I’ll deal with that delusion after I continue to try to convince myself that this years’ Simpsons episodes will recapture the edginess.

I’ve been telling myself that for the past 4 years. Even my kids don’t watch The Simpsons anymore.

But I keep telling myself....

And that’s the point.

Without delusion we wouldn’t take risks.

Granted, during delusional moments it’s hard to recognize that there’s actually risk. at large.

But that’s not the point.

The volatility is really what we need.

It’s what makes salsa the “#1 condiment”.

Even though I really don’t believe that, it helps make the point.

No commentary is necessary for the obvious.

From Ashes Arose the Phoenix     April 30, 2010

Metaphor? Simile?

I have no idea. Literature was never my strong suit.

I was more of a math and science guy, as was nearly everyone in my high school, including Goldman Sachs’ CFO, David Viniar, a classmate of mine.

But I’m not talking about Goldman successfully testing the $150 resistance point.

Granted, I was relieved to see the yesterday’s big drop came not as a result of yesterday’s grueling grilling of Viniar and others, but rather as a result of European market’s reaction to the Greek fiscal crisis.

Goldman is being blamed for enough things, it doesn’t need to also take blame for yesterday’s much needed stock price shakeout.

Back in the first iteration of “Szelhamos Rules” I was a big Goldman fan. Back then, I believed that it should have been in the Dow 30, because no stock better presaged the market’s movement than Goldman.

When Goldman moved, regardless of direction, within a few minutes so would the markets. Back then, I successfully traded in and out of leveraged S&P 500 ETF’s, long and short positions, purely on Goldman’s moves.

The was grueling, too, but then Goldman lost its special mojo, and I stopped that trading strategy.

Instead, I focused more on Goldman, the stock, and increased its relative standing in my portfolios. With volatility at its peak, the Goldman call options were very inviting, so I sold them again and again.

To a large degree, I owe a debt to Goldman. Its performance in the past year has done a lot to return my portfolios to health.

For the last 6 months or so I haven’t seen anything resembling an association, neither positive or negative, but I’ve still stayed positive on Goldman, knowing that cool headed Viniar was there to see that the numbers added up.

And so Viniar, not typically one to seek the limelight, performed well and put a very human face on an investment banking diety, Goldman Sachs.

And yes, both the market and Goldman arose from the ashes today, but that’s still not what I’m referring to.

You see, about 2 1/2 years ago I finally bought a big screen HDTV.

62 inches, because it is all about size, no matter what you may otherwise hear..

I bought it just so that I could watch my beloved New York Mets triumphantly compete in the World Series.

Unfortunately, the TV was delivered the day after the Philadelphia Phillies eliminated the Mets.

Other than a day or two in first place last April, the Mets have been pretty hideous.

But now they have risen from the ashes and just completed a 9-1 home stand, including a doubleheader win over the Dodgers.

The difference? In the Mets case, the likely final result will be akin to the biblical refrain, “ashes to ashes”.

I’m not holding my breath on that one.

As far as Goldman goes, I’m sure there will be lots of ups and downs over the next year or so, but that’s what selling covered call options is all about.

The 5 week May contract is only a week and a half old, but I’ve already sold and closed 2sets of contracts and am waiting for another drop in stock price so that I can close out a third series of contracts with strike prices of $165 and $170.

Speaking of ashes, I’m not a big fan of Green Mountain Coffee.

The product, not the stock.

I like the stock. I just picked up some shares last week and predictably enough, immediately sold some near the money call options that gave a 6% premium.

All was going well, until Green Mountain gave improved guidance and announced a 3 for 1 stock split at the close of today’s trading session.

For some reason, Green Mountain dropped 12% in the after hours market.

Ahes?

Maybe, but I hope to be able to buy back the call options for a song and pocket nearly all of the premium.

Then it’s just a question of rising from the ashes and selling more options contracts.

If only they would all read the script.

I did re-purchase Flextronics share with the intent of selling call contracts on them, as well, but right before the closing bell, I decided to just take my 4% profits, as Flextronics erased most of its early losses.

I then quickly puirchased more Seagate Technology shares and sold in the money $19 options, that would give me a 3% return, if exercised.

Both Flextronics and Seagate are a bit more speculative than I generally like, but their volatility offers a nice premium and I believe they are better positioned now, as the economy seems as if the worst is behind us.

Also at the close, it was announced that Palm was rescued from the ash heap.

A month ago, a couple of analysts put a $0 price target on it.

That doesn’t happen very often.

But as good as their technology has been, they just haven’t been able to execute for a couple of years.

But apparently Hewlett-Packard covets the Palm OS and paid about a $250 million premium over today’s market close.

Without HP, there would be no Phoenix in this case.

So look for HP to join Google and Apple in the Smart Phone and tablet markets.

As far as I’m concerned, I’m just pleased that my cartoonist collaborator has has risen from the ashes and has started spinning his magic again.

De-tox is tough. You can see his un-retouched photo

Make sure you check out the last 2 cartoons. The Captain’s Log Floats and Joe Camel Buys the Box.

Thank God that sometimes metaphors, or similes can come true.

Outdoing South Park    April 27, 2010

I hope that my readership demographic is heavily invested in South Park trivia.

If so, you will remember the classic episode in which the word “shit” was used, as a sort of exercise of free speech on basic cable. After that first utterance, the same word and its various permutations were used over and over again, until it lost its shock value.

Of course, in the meantime, as the entire world was losing its inhibition over the use of a vulgar world, fiery sulpher and brimstone began to rain down on the earth, as the Gods viewed human behavior as an abomination.

As with most episodes of South park, there was some kind of take home message and deeper meaning to the enjoyable nonsense.

Today’s Senate hearings grilling current and former members of Goldman Sachs’ Mortgage Backed Securities Division was pretty much a display of how little those elected officials really understand the nature of free markets and market making.

More on that later.

The real thrill of today’s hearing was the repeated utterance of the word “shitty” in describing the performance of a deal, although one of the witnesses thought that it was his performance that was being labeled as such.

But we have to thank the committee’s chairperson, Carl Levin, for getting the ball rolling, with his repeated reference to a “shitty” deal. And Claire MacCaskill of Missouri was not shy about chiming in, as well.

Notably, none of the witnesses joined in on the verbal fun, referring to the characterization as “that word”.

This was even better than Roger Clemens’ frequent reference to “misremembering”.

Following up on yesterday’s lament, I still don’t understand what all of the fuss is about.

Claire MacCaskill was pretty much on target when she likened the entire process of market making and hedging as a form of betting, although the reluctant witnesses weeren’t quick to accept that apt analogy.

Last I recall, no one puts a gun to your head to make a bet, although one may be raised if you don’t make good on your losses.

Goldman is being accused on successfully hedging its bets on the housing markets and mortgages, as well as so-called synthetic Collaterized Debt Obligations (CDO’)s.

Everyone seems to be outraged that Goldman knew that its package securities were adverse to the buyer.

A few years ago, all major fast food franchises were required to post and make easily available information regarding nutritional content of its products.

As it turns out, not every consumer of a McDonalds product is sophisticated enough to know that a diet that exclusively consists of McDonalds products can lead to obesity and perhaps some other health related issues.

However, no one will argue that the CEO of McDonalds, if he is a vegetarian, or only sparingly eats at his own restaurants due to health considerations, is guilty of misleading the public into buying a bad product.

That’s what Goldman Sachs is being accused of.

The difference is that Goldman only sold its products to very sophisticated consumers who were looking to make a financial killing at someone else’s expense.

Again, no gun was used in the making of a killing.

That’s what a market is all about.

The casual McDonald’s diner may not do his due diligence or may have done so, but based on the risk-benefit assessment, makes a decision that is deemed to be appropriate for their situation.

In Goldman’s case, there really is no such thing as a win-win situation.

For every product, there must be a buyer and there must be a seller.

Someone wins and someone loses.

Maybe the loss is only an opportunity cost, but still someone has to lose.

Who doesn’t understand that?

Apparently, what’s really not understood is that there are mechanisms to mollify risk, and being short on a position is not only one of those mechanisms, but also a critical means of introducing liquidity into the market.

I hate this hearings. They pre-empt more entertaining chatter on CNBC. I may soon find myself searching for whatever channel carries Oprah or Judge Judy.

Why am I on Goldman’s side?

Uh duh. I own shares.

But on a purely philosophical basis, I have to agree with the very basic concept of moderating risk.

That’s why I continue to sell options, in effect, being short on a position position.

In return, someone has to buy the contract from me, at a price that we both agree is fair.

The person buying the contract, like most options buyers, is probably hoping to leverage up his profits.

We are both greedy, buyer and seller.

The difference is that the buyer of the long position is more greedy, hoping to make a multiple on his investment.

Me? I’m just trying to take advantage of someone else’s greed.

What’s more American than that?

Referencing another great South Park episode in which Cartman travels back in time to Philadelphia during the founding of our nation, he discovers that you “can have your cake and eat it, too”.

Not very funny, but very true.

You want funny? Just tune in to Capitol Hill hearings.

Because it’s the only place that you could find Senator John Ensign question anyone on ethical behavior.

Now that’s even funnier than South Park.

Things that I Don’t Understand             April 26, 2010

At the age that I should be getting more insightful and drawing upon my increasing worldly experiences, the list of things that I just don’t understand keeps getting longer and longer.

I’m old enough to remember the Kitty Genovese murder more than 45 years ago, when neighbors peered from their upstairs apartment windows and watched her get beaten and then die on the street.

No one did anything.

But I can understand their inaction. It’s not as if anyone actually had a cellphone to call 911. In fact, there wasn’t even a 911 service back then. Since there were no portable phones either, that would have meant they would have missed something if they actually had gone to the kitchen to make the telephone call to the police.

That’s a lot of effort and who would want to take their eyes off the scene of a women dying on the streets? It’s not as if that happens everyday. Not even in the pre-Rudy Giuliani days was it that common of an occurrence.

This weekend, the scene was replayed in New York as a Good Samaritan lay dying from his stab wound, as countless people walked by and did nothing.

Well, that’s not exactly accurate.

One passerby did make use of his cellphone to take a picture that he likely thought would amuse his friends.

Pretty funny, huh?

Another person who has decided to do nothing is Lindsey Graham, Republican Senator from South Carolina.

He didn’t pass a dying person on the street, he may not even know how to use a cellphone, for all I know.

All he did was to turn his back on all of the human race.

Okay, that’s an exaggeration, because as far as Republican Senators go, I actually liked Lindsey Graham. He’d had a pretty distinguished military career and although quite conservative, is not a dyed in the wool ideologue. He has had spasms of reasonable bipartisan like behavior. I admired his early support for John McCain, when it wasn’t the popular thing to do, but wondered why he didn’t try to throttle him back to his senses when he chose Sarah Palin as his running mate.

But those aren’t characteristics you see coming out of South Carolina’s elected officials, either.

Dying person on the street, reasonably open-minded politician. Both rare.

Seeing actual civil behavior and dialogue by elected officials would probably result in the same motionless gawking as watching someone getting murdered.

We are hard wired to respond to shocks, regardless of their nature, in the same manner.

But in a show of political hissy fit, Lindsey Graham, the chief Republican protagonist of climate control legislation, the co-sponsor, for God’s sake, withdrew his support.

Why? Was there some underhanded political trick at work, some behind the scenes horse trading? Did the Democrats toss in abortion funding into the climate control bill?

No, Lindsey Graham took his ball home because Majority Leader Harry Reid decided to first push Financial Regulation legislation ahead of the queue, and now immigration legislation, moving Climate Control back on the legislative agenda.

Now I understand that Graham has his own problems these days that may have otherwise occupied his thought processes.

Never married, perhaps a bit too fastidious for some of his sleeveless tee shirted voters, you know, the ones with the actual red necks, he’s fighting Tea Party allegations that he’s a “closeted homosexual”.

Forget that he’s voted against all legislation that would have promoted equality for gay and lesbian citizens and that no one really cares about anyone’s orientation, least of all Lindsey Graham. But the issue has received national attention, so maybe Lindsey wants to retreat just a bit. and get out of the headlines for a while.

Making a big stink about the order of the legislative agenda is probably not a good way of getting attention diverted from yourself, though.

Although it’s often said that there’s no such thing as bad publicity sometimes it really does make sense to lay low.

Look at Transocean.

It’s rig goes down off the coast of Louisiana, eleven die and oil is contaminating the Gulf of Mexico.

Is anyone screaming at Transocean?

No, and that’s because its CEO takes a decidedly different approach than the CEO of Massey Energy, whose company had hundreds of citations in the mine that swallowed the lives of a score of miners a few weeks ago.

No one particularly likes Don Blankenship, the “in your face” CEO of Massey. But nobody has even ever heard of Transocean’s CEO, Steven Newman.

Low profile, that’s the key.

That’s something that Goldman Sachs executives will be learning sometime soon, perhaps as soon as today, as Lloyd Blankfein released a statement that many viewed as contrite and conciliatory.

How times have changed.

I do understand that nearly everything must change, but I don’t understand why we don’t even bat an eye when those who have changed try to convince us that nothing has changed.

Remember “I was against the war when I was for the war”?

Alright, but what does any of this have to do with today’s market action?

Clearly not much, other than to add to my increasing list of things that I don’t understand.

It was another boring kind of day, with the overall market down. The continued big drops in Google and Goldman Sachs hit me disproportionately hard today, so that it was a rare under-performance day for my portfolios.

Why did Google get hit so hard?

You guessed it, I don’t understand.

Why did Goldman continue its retreat?

I actually don’t understand that either, but I’m getting concerned about its resistance level and how much lower it can go.

What I do understand is that tomorrow is yet another day and offers a whole new opportunity to become perplexed again.

It’s a good thing that my trading results are good, particularly since I have no idea how I got there.

Populism is Alive and Well                  April 23, 2010

-I’m not one of those that believes that Barack Obama is a closet Muslim, not that there’s anything wrong with that, Praise be to the name of the Prophet, nor do I believe that he is not a native born citizen.

But as the nation continues its search for bad guys, why not focus on those at the top of the heap? And while we’re collectively at it, let’s not forget those at the bottom of the heap.

You do have to admit, though, that the President does look cute in a Hitler like mustache.

Lately, I’ve been even more riveted to the news than usual, mostly because I enjoy re-inforcing the fact that I’m not one of those people that I see on television.

That’s probably the same reason that I have religiously watched COPS every weekend for the past 20 years.

This week, the populist uprising was against Goldman Sachs, one of my favorite stocks for the past 5 years,and certainly at the top of the heap.

It was probably a mistake for its CEO, Lloyd Blankfein, to refer to Goldman as doing “God’s work”. Now, had Goldman not been already reviled by some as being an “evil Jew brokerage”, and had Blankfein had a less semitic sounding name, all would have been well.

By the way, for a very funny and insightful website, check out Jew or Not Jew.

Goldman Sachs would have been applauded for its generous charitable contributions.

While the SEC auditors and accountants were reportedly spending up to 100% of their time surfing porn web sites, Goldman Sachs was just continuing to do what it always did best. Nothing illegal about being smarter than the next guy and hedging your bets. No one does it better.

Even though I own shares, I have fewer than I did a month ago, but recently picked up another 200 shares after Goldman took a big hit earlier this week.

I suppose that its alright to be the subject of populist attack, but it’s a little disconcerting to see that attack being led by someone who himself is the target of populist attack.

Granted, when President Obama addressed the audience at Cooper Union on Thursday, he wasn’t as shrill as he had been in other venues. Maybe it’s because he realized that Blankfein didn’t look that good in a Hitler mustache.

It’s my general belief that bald men should not be adorned with Hitler mustaches.

But that’s just one man’s opinion.

On a local note, my family is benefitting from populism.

My sons runs a website called Free the Birds. It’s a very simple site and sells only a single product. They are seeking to capitalize on Baltimore Orioles’ baseball fans dislike of its owner, Peter Angelos.

“Dislike”, is actually a very tame word.

Based on the guttural reactions of support that are received when we sport one of the shirts, dislike of Angelos is a unifying force in the mid-Atlantic.

As the team has floundered, more Tee shirts have been sold in the past week than all of last year, all as the result of organic searches on Google, Yahoo or Bing.

People are just angry and they are looking for like minded hotheads.

Populism.

Everyone wants to bring down the big guy.

In the markets, this week they were gunning for eBay and Amazon. Despite good earnings, they got pounded. I actually picked up more eBay shares before the earnings report, but luckily, I had them hedged with call options that I bought back at a nice profit after eBay’s plunge.

RIMM? Smacked down.

Microsoft? Smack.

Google? Don’t ask.

Luckily, I don’t currently own Amazon, RIMM or Microsoft, but have recently and have been waiting for good re-entry points.

That leaves Apple.

The last time I owned Apple was a couple of years ago. At that time, I sold my shares at about $200 and then felt like a genius when Apple went down to about $70 on Steve Jobs’ health scare.

On the flip side, I’ve felt like an idiot for not getting back in, but I’m waiting for a shoe to drop.

Why no populist uprising against Apple? Despite an episode of “The Simpsons” that attempted to begin that process, Apple just keeps riding against our national love for populistic hatred.

I just hate that.

But you don’t have to be on top to be the target of populism.

Just look at the legislation signed into law in Arizona yesterday, giving law enforcement the right to request identification papers of anyone suspected of being an illegal immigrant.

You Canadians are in for it now.

South Park has ridden the anti-Canadian populist wave for years, but now its time for all of us to get on board.

Hating to end on such a negative note, I was pleased to see some light at the end of the tunnel.

Does that mean that the economic outlook is improving? Are jobless numbers going down?

Do I look like an economics forecaster?

I have no clue whether there’s any light at the end of that tunnel, but I do know that one populist target is losing steam.

“Archie Comics” has announced that it will be introducing an openly gay character.

I don’t know if Archie is as influential now as he was 50 years ago, but at least it’s something.

Maybe it’s just another example of the Ying and Yang of the universe.

Maybe if Lloyd Blankfein was gay, he wouldn’t have all of these arrows slung his way, as our cultural tide is turning.

For the sake of my shares, Lloyd, come out of the closet.

And erase that silly little mustache. No self-respecting and fashion conscious gay man would be seen with that monstrosity.

I had a Happy Ending                      April 16, 2010

Last week, I had my first ever professional massage. I should probably further qualify that point by also adding the word “legal”.

It wasn’t my idea. I never would have initiated a massage for money, but my wife, who loves massage, gave me a birthday gift.

I think that I paid for it, though.

She clearly knew me well enough to know that I would also never go on my own, even with gift certificate in hand, so my first massage was a “couples massage”.

So she gave “us” a birthday gift.

And because she does know me so well, she also warned me to avoid the use of certain words, such as “lower, job, happy, blow, even lower, ooohh and ending”.

In fact, she told me not to speak at all.

Good advice.

But what really made everything special was the totally unexpected “happy ending”.

Yeah, the massage was surprisingly good, but the “happy ending” was great. I just wish that I could do it again.

Fortunately, options expirations occur only every 30 days or so, so I’ll be up for another happy ending soon.

Just in case your mind was wandering off into some area of unprofessional massage conduct, let me assure you that with my wife in the room and table next to me, I doubt that kind of “happy ending” would have been a possibility.

The “happy ending” that I’m talking about came 6 days after the massage on today’s options expiration Friday.

Going into the final day of the options month, most of my positions were well in the money and I was fully expecting to see them all assigned.

My sorrow in the prospects of seeing them leave my portfolio was still offset by the nice premiums I’d received for the month, but not by much.

In fact, on Wednesday and Thursday I boosted those premiums a bit when I bought shares in YUM Brands, just prior to earnings announcements and Citigroup. Of course, I then sold options, set to expire just 2 days later, just trying to milk some more income out of the portfolio. I even used margin to make those purchases, something that I almost never would do, unless I thought the rate of return warranted it big time.

So despite being disappointed as I’d hoped for a stock retreat on Wednesday and Friday, I was planning Monday’s strategy on replenishing my depleted portfolio.

But go figure.

Google, did as it always seems to do.

Their earnings are always announced on the Thursday preceding options expiration and no matter how great their numbers are, its stock price always plummets after the numbers come out.

And this month was no different.

This time, I had re-purchased Google shares at $545, earlier this month, replacing shares that I had assigned 2 months earlier at $580.

You may recall that I accidentally bought a call option on my shares instead of selling a $560 option.

Fortunately, by the time I realized my mistake a few days later, Google was above $560 and so I took profits on my mistake.

I then went and sold $570 options, getting almost a $14 per share premium, so I wasn’t overly upset when Google made it to $590 and change prior to Thursday’s close.

I was resigned to losing Google, but pocketing a $25 per share profit and another $20 per share in options. Not bad for 20 trading days.

Long story short, I still will have my Google shares on Monday, as I will also retain my Goldman Sachs shares.

I expected Google to go down on good news. I didn’t expect Goldman to go down on charges.

There’s probably no reason to speculate about what the near term will be for Goldman’s share price, but I plan to pick up more shares.

For the last year or so, everyone has loved to hate Goldman and they’ve been the poster child for the evil excesses of Wall Street.

Maybe they’ll just turn their new headquarters building into a federal prison.

I’ve been riding Goldman Sachs since about $94, occasionally losing shares to assignment. For example, I held 800 fewer shares of Goldman this month than last, but depending on how shares open on Monday, I may return to earlier levels.

But getting back to that “happy ending”, all of the shares of stocks that I held that had gone well above their strike prices either fell below, or fell sufficiently to make a re-purchase on Monday and Tuesday a reasonable action.

I couldn’t have scripted it any better.

But I certainly didn’t expect it to work out that way.

Had I known, I would have had a better and more logical reason for not offering any stock and option picks for this month’s Option to Profit newsletter.

My reason for not making any selections this month was that I couldn’t find any buy-write combinations that offered enough reward for the risk, especially with the unchecked climb upward in April.

So I made the right decision, but for the wrong reason.

That was the second time in the past week that things went that way.

I clearly made the right decisioI politely declined the masseuse’s offer for a professional “happy ending”.

Although, as it turns out, she was just a slightly masculine looking woman.

Maybe next time I’ll think of a better reason, but for now, I’m still enjoying this month’s very happy ending.

Dow 11,000 !!!                            April 12, 2010

A few short days ago, the Blog title was “Dow 11,000 ???”

Notice the subtle difference?

BFD used to be a pretty popular expression when I was younger.

Buggy whips were also once popular.

The first time the Dow hit 11,000 was about 11 years ago. The last time it was there was about 19 months ago.

Want better proof that “buy and hold” is dead?

This is not your grandfather’s stock market. At some point, even your grandfather hopefully sold his shares of Amalgammated Buggy Whips.

Even if he did, I can guarantee you that his broker insisted that he hold onto his shares, until it finally became obvious to even him that Model T’s didn’t need to be whipped.

As the early 20th century James Bond would have said, “cranked, not whipped”.

By then it was probably too late to sell and too late to buy something better at an attractive price.

So you missed out on inheriting shares of Tabulating Machine Company, but at least you’ve got those cool Amalgammated Buggy Whip stock certificates to line your parakeet’s cage.

BFD, you say?

Would you have traded Amalgammated Buggy Whips for the corporate precursor to IBM?

BFD?

I think not.

And that is precisely why the windows on high rises can’t be opened.

You can blame it on the Buggy Whip Bubble.

Think of the generations of buy and hold traders that were never born because their prospective grandfathers took the painless route out of their of their financial undoing.

Coincidentally, “Think” was the early motto for IBM.

I never meant for this blog to be deep, but “whoa, you’re blowing my mind”.

And as a good mind gets blown, it was interesting to note that several independent studies have recently shown some beneficial uses for the hallucinogens of my youth.

Magic mushrooms, even LSD may become as respectable as medicinal pot and surely there will be future trades to capitalize on those pharmaceuticals and the companies that bring them to market.

Remember Pfizer’s stock rally when Viagra was released? Only a small portion of the population fit the Viagra demographic and look at what it did for Pfizer’s bottom line, not to mention how it singlehandedly re-energized the ad industry and opened up the door for an ever increasing slew of pharmaceutical ads for ailments we never knew we had.

Are you suffering from the embarrasment of webbed taint?

Is there anyone that you know that wouldn’t benefit from medicinal pot or ‘shrooms?

It’s probably still too late to trade out your shares of Blockbuster for the future purveyors of good times, but there must be something else that you’re holding that is just wasting your time and money.

For me, it’s Elan and Ameritrade.

I have expectations that those shares will be assigned from me and I’ve got no plans to buy them back.

I’m not quite ready to plow money into Altria and Pfizer, since medicinal euphoria is still a long time off, only the big boys will have enough capital to corner the market in those areas.

And what better combination than a Viagra/LSD pill? It worked for cholesterol/high blood pressure. Actually, as it turns out, that combination really didn’t work clinically, but that’s irrelevant. From a marketing and sales perspective that combination was pure gold.

So it’s only natural to think of about of those poor folks suffering from erectile dysfunction and lackluster imagination or creativity?

I can’t wait to see the commercials, testimonials and drug warnings.

Imagine, treating cock block and writer’s block with a single pill.

Without a doubt, the Holland Tunnel would become an object of sexual fantasy.

“Please seek immediate medical attention if you have an erection lasting more than 4 hours and you are unable to extricate yourself from Orca’s blowhole.”

Somehow, I feel that I’ve digressed.

Oh yeah, Dow 11,000.

BFD ???

BFD !!!

Ho and Hum                              April 9, 2010

That pretty well summarizes this year.

Even though the S&P 500 is up about 6.0% and my portfolios are up an a bit more than 8%, it just continues to be a real yawner.

I know that it’s a little unseemly to be complaining about the lack of excitement, especially in light of nice profits, but if this keeps going I may have to actually spend more days actually working, just to keep from getting bored.

First, though, the good news.

By the time April 2010 options expire this Friday, I will have had my second best month ever in terms of accumulating options premiums. When the dust settles, it will be about $37,000. Considering the the best month of about $45,000 was a 5 week options period, as opposed to the 4 weeks in April’s contract, it was a really good month.

But for the third month in a row, I expect t see a fair number of my options assigned away from me and I’ll once again be in the position of trying to figure out what to replace them with.

I’m not quite certain why this month was so good. I squeezed out less than $1,000 in extra options premiums through buying back and then reselling contracts.

In past months, what I like calling “milking stocks”, was a much more significant portion of the monthly income line.

But as everyone knows, the volatility has been woesome.

Last year, nearly every trading day had an intraday range in excess of 100 points on the Dow. This year, there have only been 5 days like that.

Did I mention that its been boring?

So as we entered the last week of this months’ contract, I made a few half-hearted trades, just to help me stay awake.

They were all in positions that hadn’t moved much this month, or lagged the market.

Textron, EnCana and Elan have been pretty flat all month. In fact, I sold options in EnCana and Elan, that if exercised, would result in capital losses on the stock, but I wanted to get something out of holding them for the month.

And unless they skyrocket in price over the next 4 days, I can always buy them back next Monday.

Wash sales or not.

I do annually toy with the idea of changing my trader designation and taking a “mark to market” price at the end of the year, so as not to be subject to the “wash sales rule”, but I don’t feel like doing the extra paper work and accounting.

“I don’t feel like it”, that’s a mature approach.

But things have gotten so boring that I’ve decided that I really have nothing to say that would warrant a daily blog.

Consider it an early Christmas gift to those readers that are contractually obligated to log in every day and read my drivel.

On another positive note, my oldest son, who is gainfully employed and doing quite well and occasionally throws some good stock picks in my direction, has recently decided that he is getting a Master’s degree.

That makes me happier than capitalizing on a month of volatility.

As if those 2 things weren’t enough, look for his business enterprise soon at Frydayz.com.

Neither the site or the business are ready yet, but when the best french fries in town are ready to come to your community, expect to see me at the fryolator.

I’ll be the one with the laptop, combining my 2 favorite things, fried food and stocks, into one daily adventure.

In fact, if prices come down just a bit more, I would even consider battering up my laptop and flash frying it in trans-fat free oil.

I’ve even considered dunking my head into one of those hot vats of oil just to wake me up from these trading doldrums, but common sense took over and I realized that was a bit extreme.

Now here’s the bad news.

Earnings season begins tonight, as Alcoa, the traditional kick-off company reports.

Alcoa always disappoints, and I own Alcoa.

Google reports on Thursday, and even when it blows the numbers away, it tends to drop price by 4-6%. Why Google always reports the day before options expiration continues to be a mystery to me.

But the real bad news is that volatility tends to rise right before earnings reports and then drop after the report.

Unfortunately, that means that as we begin the new options month next Monday, what little volatility there is will likely be diminished even further.

Even though May will be one of those 5 week contracts, I’m not very hopeful about getting nice premiums.

More ho and more hum.

A Month of Mistakes                       April 6, 2010

I made a big mistake today, but given the number of smaller mistakes earlier this month, I shouldn’t have been too surprised.

I’m not sure how it all started, but somehow I got into a “guess my age” kind of challenge with someone I didn’t even know. Without a doubt, I initiated the exchange, even though an earlier such challenge a few months ago, ended disastrously.

I don’t learn lessons very well, so I’m doomed to repeat them.

There’s rarely a good outcome when trying to guess the age of an adult women. Choose too low, and it’s disingenuous. Choose too high and you’re on your own to find a way out of that worm hole.

Or just forget about trying to find your way out, maybe you’d be better off climbing into a cave. Tora Bora, anyone?

Maybe that’s why Osama is still in hiding.

Come out, Osama, all is forgiven.

Yeah right. Guess wrong in that game and you will forever be cast away.

So instead, the best strategy is to actually try to make an educated guess and then subtract a few years.

And maybe a few more.

I once tried that strategy, subtracted 10 years from my educated guess, and I was still 10 years too high.

Ouch. But it’s still the best strategy.

Today, I underestimated and I got it right, even though no direct confirmation was ever made.

“You’re right. That’s how old I look”, was the response.

I actually liked that answer. Fortunately, I didn’t divulge my real guess. I suspect that the measured response would have been quite different had I put forth the real guess.

Maybe I am capable of learning my lesson, after all.

As it turned out, this mistake was just one of judgment. I just should not have gotten into this situation. It was entirely preventible and I only had myself to blame, especially for escalating the stakes.

But today’s mistake really had no cost associated with it. My other mistakes this month have been costly and could have been even worse.

First, let me say that I love E*Trade.

Not the stock, but the company. I make more than 1000 trades each year and their execution is perfect.

But here’s the problem.

About a month ago, they introduced another upgrade to the trading platform.

 With the previous platform, you could save your default trading preferences.

For example, my default options trade was “Sell to Open” for 10 contracts.

Click, click. Trade done.

Now, there are still preferences to be set and I’ve set them to execute a “Sell to Open” trade as my default.

Even though E*Trade gives you a chance to review your order before submitting it to the floor, I never bothered to check. It’s somewhat akin to all of those annoying “Are you sure you want to delete this file” messages from Window Explorer.

Yes, I want to delete, stop asking me already.

Thousands of trade orders, never a problem.

But this month, 12 different times I submitted “Buy to open” orders by accident.

WTF?

You see, despite the default setting, the new trading platform uses a fuzzy logic algorithm and uses its best judgment to figure out what you really wanted to do.

Since most traders don’t sell options to open a trade, E*trade’s algorithm basically sends a middle finger in your direction.

I caught 8 of the mistakes very quickly and reversed the trades, losing only the trading costs.

Luckily, two of my mistakes worked out pretty well, as both Google and Dow moved up and my long options positions appreciated. I’m glad it took me a while to actually realize that I had made the mistake, otherwise I would have quickly reversed the trades and missed out on the profits.

On the other hand, my Textron and Mosaic mistakes were discovered nearly 2 weeks after the trades. Instead of feeling pretty happy about the drop in Textron and Mosaic’s share prices and the resultant profits in the short options positions, I realized that I was holding the wrong end of the stick.

Not only did I lose out on the options premium, but I paid a premium to buy the options and its value was evaporating.

Mistakes in judgment?

No, just a lack of attention on my part.

As opposed to the age guessing game, I’m convinced that I won’t be doomed to repeat these trading mistakes, although 12 mistakes seems to mean 11 repeats.

That’s not very good.

But I’ve come to realize that trading is a lot like being married.

Maybe paying attention is an early casualty in both marriage and trading.

I haven’t tried marriage counseling, but am perfectly willing to give trading counseling a chance.

After all, you can always get remarried, but once an option expires, it’s forever.

 Here’s to no more mistakes.

And you don’t look a day over 50.

Dow 11,000?                              April 5, 2010

A couple of years ago the thought of Dow 11,000 would have gotten you tossed out of even a rundown Long John Silvers restaurant, not to mention more reputable establishments.

No one hanging out and having lunch at The Four Seasons would ever have entertained such a thought. After all, once we breached the 14,000 mark how could we possibly even conceive of Dow 11,000?

To do so, what undoubtedly result in losing their favorite lunchtime table and from being seen by all of the truly important movers and shakers in the financial and political worlds.

Even the Eliot Wave Theorist people weren’t publicly predicting that type of gloom, lest they be involuntarily committed to some penny stock pushing halfway house.

Openly questioning an active bull market can exact a significant price on your reputation, so only the perennially sour and most frequently wrong pundits dared to make such dour predictions.

So here we are, down about 7500 points and then up another 4500 points later and we’re almost back to 11,000.

Weird ride, huh?

Sort of like a roller coaster without seat belts and harnesses. Whipping up and down and carcasses strewn all over the ground.

That pretty much describes the last couple of years.

Once you’re a carcass it doesn’t really matter how good things end up getting later on.

You’re a carcass. Do you understand? A carcass.

I’ve been called an “ass” on many occasions, but I least I wasn’t one of the carcasses.

But I can’t get too excited about 11,000. We’re still so far away from the market top of 30 months ago, even after this incredible climb of the last 12 months.

What I do like, though, is the idea that if we do get another 30% rise and match the market top, I will be way over my personal top way back in October 2007.

Options have become my best friend and in a way, the more slow and the more indirect the climb back to 14,000 the happier I will be.

As the Dow moved a little closer to 11,000 I re-sold some Seagate and Chesapeake options, trying to milk every last bit of options premiums from them before next Friday.

Based on the number of trades that I’ve made since Dow 6500, I estimate that it will take another 2000 or so by the time we get back to 14,000.

Actually, given the zig and zags over the last couple of years, it may actually take a couple of thousand more trades just to get back top 11,000.

Either way, I’m belted in and always enjoy the ride, even though I always hold onto my glasses, just in case.

Will we see 11,000 tomorrow?

Meh. (I love that word. Thank you Urban Dictionary).

It doesn’t really matter. You just need to be able to walk away from the ride.

Taking Time Off                           March 31, 2010

I must be getting old.

There was a time when I would look forward to April Fools Day. There was also a time that I liked snow and would never get tired of making jokes about those people that retired to Florida.

Times have changed.

Now, I actually enjoy those early bird dinners and I now, too, wear my white pants belt slightly below my nipple line.

Despite the fact that I just saw some really good practical jokes aimed at computer monitors and their users, I couldn’t get myself excited enough to try and execute the tricks on anyone.

I did try the “smashed” computer screen on myself and it was quite good.

Maybe next year.

Today was the first of 3 consecutive work days. That’s a bit too much for me at this point. I can easily work that much, but as you know, I don’t like or need the distractions that keep me away from constantly monitoring the monitor.

As upset as I am that the market is closed on Good Friday, and hence, no blog that day, I suppose that if I had to work, I shouldn’t mind the closure all that much.

But I still do.

Having gone to and graduated from a Jesuit college, I fully understand and appreciate the holiness of Good Friday and the rationale for closing the stock markets.

What I don’t understand is why the bond markets will be open for half the day.

I never understood bonds, anyway.

Sure, I understand the inverse relationship between yield and price, but I don’t understand why those apostates are working on a sacred day.

In today’s news, the world of the sacred actually got a bit more scary, as Pope Benedict’s personal preacher compared the attacks on the Vatican hierarchy to the persecution of the Jews.

A couple of points here, please.

While the rest of the world is focusing on the ludicrous nature of that comparison, after all, how many priests have been gassed or burned at the stake in the wake of the pedophile controversy? Oh, and exactly what crimes did the Jewish people commit?

Killing the Saviour doesn’t count.

But I choose not to focus on such petty details.

What we all really want to know is why exactly does the Pope need a personal preacher? The mainstream media has not posed that question. You would think that the Pope didn’t really need to get fired up or reminded of right and wrong.

Wrong? Hitler Youth

Right? Looks good in white and frequently wears yarmulke.

Interestingly, the Pope’s popularity among Americans has fallen the same 20% that President Obama’s ratings have slided.

Apparently, the passive response to pedophilia is equal in magnitude to embracing communism.

At least one gives us health care. That’s much better than cold sweats, nightmares and STD’s.

So as the really meaningful news comes slowly and with no action in sight, there’s a high probability that I will be taking tomorrow off from my blogging responsibilities.

Of course, with Good Friday and the weekend, that would make it a full 4 days. Forget the fact that the employment numbers are coming out on Friday and that expectations are for very good news.

Forget that all of the iPad TV program product placements are getting us ready for a huge release on Saturday and a likely stock price retreat this coming week.

Forget those things because there’s nothing you can do about it.

Thank you Jesus.

In the meantime, that will give me plenty of time to ponder my current dilemma.

Having just received a bountiful gift of many days’ worth of authentic corned beef (who knew you could get such a thing from Cleveland), and all of the appropriate accessories (ice packs, rye bread, half-sours, mustard and horseradish), I must decide whether to break the Passover prohibition against leavened bread.

It’s bad enough that I will spend my time off the next few days having a matzoh related colon cleansing, but to consider having that corned beef between two shingles of matzoh is in itself painful.

Oh yeah, for you diehard market junkies, today’s performance?

“Meh”.

I Never Get Bored                          March 30, 2010

I’ve been living a lie.

I imagine that lots of people come to that realization as they are laying on their deathbed and come to finally accept a higher supreme authority.

Maybe that’s what goes through the minds of the thousands of Chinese “criminals” that are facing execution, particularly now that religion isn’t completely prohibited in the People’s Republic, unless you’re a Tibetan monk.

 I wonder if the Rio Tinto employees just convicted of engaging in the accepted practice of official bribery are considering a turn to faith.

It couldn’t hurt, but they shouldn’t choose Tibetan Buddhism.

As an aside, a hearty congratulations to the Chinese government for overtaking Iran in the competition. It just shows what focused commitment can bring.

Texas used to have that kind of commitment, but it seems to have lost its mojo.

I’ve never lost my mojo. Never had it to lose. I’ve lived my life in a constant search for no stimuli. I’ve always been very happy in a state of barely animated vegetation.

Looking back over the years, I can’t honestly say that I can recall ever initiating a social contact. To do so would likely disrupt the moss growing on all of my sides.

Somehow, I did manage to get married and have a couple of children, but I don’t really recall any active participation on my part. I doubt that there’s anyone out there that could attest to any meaningful efforts on my part.

Sometimes you just roll over in bed, at just the right time.

And that’s why sitting around, day after day, watching the stock ticker go by is so perfectly suited for me. Ever since the invention of Caller ID, I no longer have any doubts when I decide to not answer the telephone.

Somedays, it’s not unusual for me to utter a single word until my wife comes home from work.

I just don’t get bored.

Or at least so I thought.

But these past two days, and in fact, the last couple of weeks have been really boring.

They’ve been profitable, and I’ve made lots of trades; another 8 trades this day, but they’ve been incredibly boring.

With the exception of that 100 point reversal last week, which ended that day up just 5 points, we’ve been in a very tight range and almost no volatility.

I hated these past trading days.

And then I realized that I may have been experiencing boredom.

In a sense, I may have trouble recognizing what boredom really is. I may be exactly like my new puppy, Laszlo, who instinctively knows that he must bark, but still can’t figure out how to do it.

If this has been boredom, I really don’t like it.

Today I took profits in Seagate Technology options, Google options and in Goldman Sachs options. I also sold or re-sold options in Google, Dow Chemical and increased my holdings in Seagate Technology.

But still, it was boring.

I was even bored by the news that Karl Rove left his book signing event without even granting a single signature, due to the protests of a lone woman who was against the war in Iraq.

I guess her protests could be described as having been successful.

Even though his claim that this was an example of the “totalitarianism of the left”, I was still bored.

Amused, but bored.

Even the news that Ricky Martin has admitted that he is gay didn’t do much to wake me up.

To make matters worse, the market is closed on Good Friday.

I certainly understand the religious significance of the day and how deference is due, but 3 days of no market activity just compounds the ennui.

No self-respecting Savior would condone shutting capitalism down for 3 straight days, for without “evil”, there could be no “good”.

In fact, finding a synonym for boredom was the highlight of this week, until news came out that I had been named as having had affairs with both Tiger Woods and Jesse James.

Hard to believe, but no sense in issuing denials.

Instead, I’ve been issuing autographs.

So while still in this horrific holding pattern I still fully expect the market to make a dramatic climb relatively soon, since the market continues to ignore negative news and the IPO’s just keep coming.

Maybe it’s all just wishful thinking, but at this point I would even welcome a nice sustained drop.

But first things first.

I have to deal with the realization that I do get bored. Accepting that fact is the first step toward rehabilitation and breaking away from an existence based upon a lie.

I work outside of the house for the next 3 days, although my computer will never be too far away. Work itself, without the external stimulus, is not very exciting.

But I plan to attack each day with renewed vigor and enthusiasm.

At least until the day that I can finally retire.

That’s when the real excitement starts.

Remembering your Very First Time            March 29, 2010

I suppose that it’s only natural at a certain stage of your life to think back fondly on the first time.

Let’s not pretend, we all know what I’m talking about.

Think about how nervous you were. Think about what gave you the courage to move forward. And think about all of the things that made it the right time for the first time.

And now, think about where your “first” might be right now.

I’ve thought about all of those things and I’m ready to start my search. It’s time to get back to my youth

You may have even noticed the search box to the right of the blog. Lots of people are searching for their distant memories, trying to recapture the “good old days”. I actually generate a referral fee for everyone that signs up for the free search.

But those really were the good old days.

When everything seemed so much more simple and so much less complicated.

And so, I started my search.

And almost instantaneously there were the results. I didn’t use Facebook, I didn’t use the search box on this page, I didn’t even use Classmates.com or MyLife.com

I just used Google.

It helped that there wasn’t a name change after all of the years.

And there it was, just waiting to be re-discovered.

My very first stock purchase.

Raytheon.

RTN. How I loved those 3 simple letters.

Thank you Google Finance.

I bought and sold Raytheon over a period of 3 days and made a $1,200 profit.

That was nearly 30 years ago, and I hadn’t had any contact with Raytheon since. In fact, shortly after I made that purchase and sale, I hooked up with someone who would turn out to be my long term stock broker, Bob Shapiro, until his unexpected passing a few years ago.

Bob was great and we had many wonderful trades together.

But none were as exciting as the very first. Yet I chose the path of a full service broker and never again saw Raytheon enter into my portfolio.

Was it because of my upbringing. Would my pacifist parents not accept a long term relationship with a defense contractor? Or did they just believe that a young man should not be doing his own trading and instead should do like every self-respecting person and join with a broker?

I don’t know what it was, but that was the end of our relationship. Just that one series of trades. Oh, but what a trade.

Over the years, I’ve been very happy with other defense contractors. They’ve always left me smiling. But no matter how happy and how committed I have been to the likes of General Dynamic, I can’t help but continue to think about that youthful dalliance with Raytheon.

But what to do? Bob’s been gone for a few years now and I’ve chosen to stay on my own, but the thought of Raytheon was always foremost in my mind.

Maybe we’ve moved in different directions. Maybe Raytheon wants no part of me, but I needed to know.

Would following this desire to see how my life would have turned out had I continued to own and trade Raytheon disrupt the stability of my portfolio?

I’ve been faithful to my rule based trading program. Nothing good could come out of straying and leaving the path.

But now is not the time. My portfolio is almost completely optioned until that third Friday in April.

Should I sell something and close the contract out? Could I wait another 3 weeks?

It’s all so confusing.

This must be the very definition of a mid-life crisis. I can feel the angst.

Even though I know that only disappointment can come out of this, I’ve decided to pick up some Raytheon shares.

I’m not sure when, but soon. It’s only a matter of time. I just need to know if the magic is still there.

That’s asking a lot. It would take more than $1,200 to recapture the thrill of it all.

Maybe the real thrill is in just remembering your first time and then realizing that your self-imposed rules are for the best.

As Szelhamos used to tell me, there are lots of Raytheons out there. Why don’t you find yourself a less militaristic company to invest with and never look back. Find a good broker and enter your investing life together.

And so, I remember thinking that maybe someday I’d be lucky enough to find a Gulf and Western, a company that I could spend a lifetime with, like Szelhamos did.

Here’s to you Raytheon.

The capital gain is long gone, but the memories will always be there.

Let’s not spoil it.

Risk Management                         March 26, 2010

When I initially signed up, I had no idea just how risky my chosen profession would turn out to be.

There really wasn’t much threat of physical danger, nor the threat of economic slowdown. It was a much more insidious kind of threat and it hit me pretty hard yesterday.

Not n a real tangible way, but more in an emotional sense, and I’m a pretty fragile guy.

Back in business school classes, they always spoke about “opportunity costs”. I still use that measure as an assessment of my trading activities. Not only do I compare different portfolios that I manage to their appropriate index, but I also track the “what if” scenario. That being a buy and hold approach, without selling call options.

The results continue to warrant very active management and hedging of my positions.

These days, I don’t work very much, about 2-3 days each week. That’s just how I like it. That gives me a lot more time to sit in front of my computer monitor and TV and pay attention to what really matters. By being able to spend so much time, the other opportunities aren’t opportunities, at all.

And when I am doing what I enjoy doing, most of the time I’m trying to execute trades to limit my portfolio risk, albeit, while also limiting its upside potential.

But that’s a trade-off that I’m very willing to accept and it has worked out very well over the past few years, especially during the downslide.

What I’m having a hard time accepting is that fact that I can’t manage risk, as well, when working gets in the way.

Granted, I do have the kind of employment that typically doesn’t take me away from the monitor for much more than 20 or 30 minutes, but on rare occasions, it is more.

And that was the case on Friday.

As opposed to those at work who surreptitiously stream the NCAA playoff games to their work computers, I do my scouring in the open. Every one knows. No one cares. And that’s because there’s no loss in productivity. I still work while I play.

It’s sort of like how a family accepts the antics of an “eccentric” uncle, especially if that uncle has clauses in his will endowing everyone left behind with wealth.

For some unknown reason, I wasn’t able to spend much discretionary time watching price movements on Friday, and there were some big ones.

Net-net, they didn’t account for much, but the intra-day moves in some of the stocks that I hold would have made me drool, had I been around to witness them in real time.

Since I like to milk stocks with multiple roundtrip of options, I missed out on a number of those opportunities because work really became work and not just work-like.

That’s not what I had signed up for.

To be completely fair, I did have enough time to execute a couple of trades. I bought more shares in Dow Chemical and Textron and immediately sold call options.

So what else is new?

The Dow Chemical share purchase was part of a dividend capture strategy. Shares are ex-dividend on Monday. I sold in the money options with the hope that they exercised, so that I could re-purchase shares on Monday and simply sell the options again.

But Dow closed at only $0.06 above the strike price, with a dividend of $0.15, so I doubt that the shares will wind up getting exercised.

No matter, I continue to like Dow Chemical anyway, and have owned it from its $5 low, occasionally buying back assigned shares.

But the Dow Chemical and Textron opportunities were there to be had all through the trading session and didn’t require any real time commitment or concentration.

Now I know that some readers will just wonder why I don’t enter orders to cover the times that I’m away from the computer, so as not to miss those short lived opportunities to trade.

And they would be right, but I love the intimate involvement and the sense of excitement as I watch and wait to see if my order got executed.

That’s a pretty lame excuse, but it’s not all about the money, even though that’s the only way to keep score.

So while we’re keeping score, I’ve decided to make this a 7 inning game.

As a gift to myself, I’ve moved my retirement date up by 6 months, so that there will be that many less chances for work to get in the way of my real job.

Because that’s what I really signed up for.

Even the GPS has no Clue Sometimes         March 25, 2010

My first experience with a GPS system was a few years ago when our family traveled to Italy.

It was a great trip, other than the dreadful decision to rent a car and then to try and stuff the hooker’s body into the trunk.

More on the later if I’m ever indicted.

As far as the car went, I didn’t think my driving was all that bad, but apparently I had a lot of white knuckled passengers as I would take the tight curves on some of the winding hills.

Did I mention that there were only some flimsy barriers that separated us from flying off the road and into the ravines?

Oh, and there were a couple of scrapes and bumps. Maybe a broken side view mirror, as well.

And the hooker. That’s an interesting story. Who knew that cherry gelato could set off such an incredible rage?

Anyway, I won’t even bore you with the details of all of the tickets we received once we got back home, after being flagged by some camera system for violating local ordinances, over and over again.

Red light running? No.

Speeding? No.

We’re not really sure what the tickets were for, but there were lots of them and a Google search will tell you that I wasn’t alone in receiving the pleasant surprise in the mail long after the trip had been concluded.

But it was the GPS that came with the car rental that was really memorable.

For some strange reason, every time I tried to get to the airport in Florence, it kept directing us to the loading dock of the local Ikea.

Now I love Ikea as much as the next guy that has no regard for standard sizes and pronouncible names, but it’s not the airport.

Considering that the road signage was pretty horrible, even if you could read Italian, we thought that the GPS might just come in handy. And to be fair, by and large, it was really helpful in getting to some obscure villages.

It would have been especially handy if it could have gotten us to some of the less obscure sites, like airports. or if your objective was getting to a good place to buy a bureau for your son’s dorm room.

Regardless, I finally got over the mild trauma of the earlier GPS interactions and bought one a few months ago.

I love playing with it. Listening to other languages and voices giving me directions to all of the places that I already knew how to get to. Now, I want to get the system that has Snoop Dogg’s voice. He probably could less less if you kept making the wrong turns. He’d probably be pretty mellow about my driving ineptitude.

I even take great joy in violating the oath not to try and program it while driving. It’s similar to tearing off those furniture labels under penalty of law.

But today, the GPS system did something strange.

As usual, I used it to get me to a place that needed no introduction. I could have done it with my eyes closed, but I used it anyway.

For some bizarre reason, only strange street names were showing up. Sure they were in my neighborhood, but they were no where near the predictable path the GPS would usually lay out for me.

And beyond that, it just kept re-calculating the path every few seconds.

The parts I loved the best was when it placed my car in the middle of the harbor, or in the middle of open fields.

Then, after emerging from a tunnel, it started functioning properly, just like the GPS I actually had no use for.

For some unknown reason the GPS went off course, but sooner or later it got back onto the right track.

Today’s market did just the opposite.

Now I know that the GPS allegory was a bit long winded, but I needed filler today, because there really wasn’t much interesting going on.

Until early afternoon the market was up over 100 points, moving exactly the way Walgreens performance the other day told me that it would. This was the precise path that I was expecting.

But I couldn’t find any explanation for why it gave up all but 5 points of that gain. Why the market decided to lose all bearings was a mystery. There was no Greece related news, nothing from Bernanke and no bad unemployment data.

Luckily, while the market was still up I was able to sell call contracts on Goldman Sachs and El Paso, before they ended up turning downward like everything else in today’s market.

By the time the day was ending, Freeport-McMoran and Mosaic had taken big drops, so I decided to buy those call contracts back and lock in the profits.

If my stock market GPS starts working again, both Freeport-McMoran and Mosaic will start heading back up again and it will be time to sell options contracts again.

I think I’ll use the profits from today’s turnaround to buy a more reliable GPS.

There’s Something Happening Here      March 24, 2010

Do you remember that song?

If you do, you’re probably at the age that your drool short circuits your keyboard, if you can still remember where you put the keyboard

Damn these wireless things.

They need to invent a “clapper” kind of device for all things wireless, or at least something like the “panic” button on my car keys.

Annoying, isn’t it?

But where else, besides America, could you put the names of two dreary cities together and come out with a classic rock song?

The next line of that song was “What it is ain’t exactly clear”.

I hate the expression “With all due respect”, but with all due respect, I do beg to differ with Buffalo and Springfield.

What is happening is exactly clear and yesterday bought clarity and proof.

When I left my comfort zone the other day, I bought some Walgreens the day before it announced quarterly earnings.

That’s typically a risky thing to do, because earnings announcement can drive stocks in every direction possible. Forget about trying to apply rational thought processes to understanding the direction and magnitude of the moves.

I was fully expecting Walgreens to dip after earnings and was anticipating buying back my call options, awaiting another opportunity to milk some income out of the shares as Walgreens would, according to the script, recover its stock price.

When Walgreens’ earnings report came out, they missed estimates by a penny.

Just as scripted, but these days, everyone thinks they can do improv. That’s why I stay away from Open Mike Night.

Back in the old days, like a week ago, that would have meant the the stock would be punished. Even good news often led to a paradoxical drop in stock price, with the talking heads consistently intoning that the “earnings were already baked into the share price”.

But Walgreens took a very healthy move upward.

WTF? Where in the script was that supposed to happen?

Ever since we all overheard Joe Biden’s open mike comment to the President at yesterday’s victory press conference, I’ve decided that’s it’s acceptable to use some expletives in my commentary.

Maybe Joe should avoid Open Mike Night, too.

So, WTF? It still feels good to be so verbally free.

Thank you, Joe. Sorry about the settlements announcements. Bad timing, eh?

Mazel Tov on the health care thing.

But now I have all the proof that I need to know that the market is truly heading higher. That’s WTF.

As Joe Biden would say, “this is a big f**king deal”.

You got that right.

When bad news is shrugged off, more IPO’s are coming to the market and pricing higher than anticipated and new or higher dividends are being announced, that can only mean “froth” awaits us.

Today Starbucks initiated a divided and MaxLinear came public, with a wildly successful offering. Even a bank issue came public today, and that went up, too.

WTF?

I went even further out of my comfort zone and picked up shares of a real dog, Alcoa. A perennial earnings disappointer, Alcoa releases its earnings a week before April’s options expiration. Between the options premium and the profit when the stock will be exercised, I’m expecting a net 7% return for the 3 weeks of holding.

Usually, I tend not to be so optimistic. I like to see the chickens hatch, but until the new raging bull market to come is featured on Time or Newsweek, it’s time to be optimistic.

In this post healthcare reform era, where everything feels good, even the Financial Reform Bill may get real bipartisan support.

In the past, bipartisan had the same meaning as “International” in the name of an airport. A single flight each week to Canada gives lots of airports the right to call themselves “international”. That and having a “Sunglasses Hut” concession.

Previous “bipartisan votes” meant that a Senator from Maine begrudgingly went along for the ride, if only to make a point.

By the way, Maine has lots of international airports, but not enough sunny days to warrant the Sunglasses Hut storefront in the concourse.

Now at noon, the market is just taking a breather, with no real news to digest.

As happens many times each month, Mosaic has made a sudden move up and I sold options for the April $60 and $65 strikes.

So what else is new? I love Mosaic. It makes up nearly 7% of my portfolio.

I usually don’t do separate strike prices unless I have lots at different prices. In this case, I have Mosaic shares purchased below and then above $60.

I still am waiting for Goldman Sachs, Google, Ameritrade, Elan, El Paso, Chesapeake Energy, EnCana, Textron and Halliburton to reach favorable price points so that I can sell their options.

Even without those sales, my options premiums are already at about 2.5% for the April options cycle. That doesn’t include the potential for realized capital gains if the options are exercised. Or dividends.

Do I really know what’s happening here? Is it exactly clear?

No, not really.

But I like the beat and I don’t mind playing it over and over again.

Google Says “No”                    March 23, 2010

There’s a series of very obnoxious television commercials in my area with the catch phrase “Jack says Yes”.

These commercials are on every basic cable station. Sadly enough, even CNBC. I’m listening to one such ad at this moment.

Ugh.

The owner of the car dealerships in the ads portrays himself. Based on our experiences in his dealerships, and he has many, the obnoxious commercials are based on some really obnoxious people. There are no characters portrayed in these commercials. Only reality.

I hate “Jack says Yes”, but I loved “Google says No”.

If there are any oldtime readers still out there, they may remember that in te first incarnation of Szelhamos Rules, I use to find occasion to rant a bit about Google.

Even while their stock price was going up, as it always was in those days, they kept going off on bizarre tangents that seemed to reflect a lack of focus on the core business.

Offering a $25 million dollar prize for some kind of moon launch or space exploration was just one example of the far flung initiatives that they had.

Of course, everything else always stayed in “beta” and never had any opportunity to act actually add to the bottom line.

It also didn’t help that the stock itself never made me much money on an “ROI” basis.

But despite those peeves, I was grateful to Google for one thing.

With all of its volatility, Google was the very first stock that I sold options contracts on.

My first purchase of Google was for just 50 shares. Even then, I was nervous about the purchase because of the high cost per share. But as I started looking at the options, I saw that the premiums were really a nice way to offset some of the risk.

The only problem was a very basic one. You need at least 100 shares sell a call option contract.

50 shares of Google is some serious change.

So I made the plunge and picked up another 50 shares. Although throughout my ownership of those original 100 shares, I never made that much in return on the shares, the options premiums were great. My total return on premiums over the years was much in excess of the capital gains on the shares themselves.

So it was with a little sadness that I had my original Google shares assigned from me last week. I had decided not to replace the shares and to not look back.

Then, a funny thing happened.

Google said “No” to the Chinese government.

Google had originally caught a lot of flack for seemingly turning its back on its credo of “Do no Evil”, by agreeing to a Chinese government demand for censored and filtered search results. In fact, it seemed that Sergey and Larry were really capitalists, after all, instead of just idealistic tech geeks.

But we all should have known better, because in the past few years, despite seemingly still unfocused, Google is figuring out how to monetize ventures other than paid search.

Google phones, Google apps. It’s becoming a Google world, and it’s not all for free.

Okay, maybe its not all about the idealism, maybe there were other reason to pull out of China, but this will be big. Maybethe boys had this planned all along.

A generation or two ago, it was a toothless plumber in Poland.

Most recently it was a velvet revolution in the former Czechslovakia and some anvil swingers atop the Berlin wall.

About the same time, the image of a lone protester standing in front of a Chinese army tank is etched in all of our minds, but achieved nothing as tangible as in Eastern Europe.

This is different.

Google is publicly standing up to evil.

Images of Chinese citizens holding a candlelight vigil, laying flowers and candles by Google’s Chinese headquarters speak volumes. This will be harder to sweep under the carpet than anything faced by the Chinese government since Mao began his long journey.

A single tank could easily have run over a single protester, but not an entire nation.

The Chinese now have more than just two classes of citizens. Back in the old days, there were only party members and peasants, in addition to lots of repressed unrest.

Now there are intellectuals, entrepreneurs, world travelers and rock stars. As well as increasingly emboldened religious and ethnic minorities.

Uighurs are cool.

What do they have in common?

They like material goods. They like to have more than one child. They like their taste of freedom.

And they like Google.

This is no longer your Mao’s China. They don’t respect their elders the way they used to.

And so, as Google was down about 2.5%, I picked up another 100 share lot.

It was more emotional than well thought out and I plan to be greedy, going against my rules based approach.

My fingers are crossed that it will approach $560 and then I will sell a $560 call option.

Otherwise, I will end up muttering under my breath and cursing the day Google decided to really do no evil.

“Just say no” was a popular expression in the ‘80’s, especially by satirists.

Google took a big step toward making the world a much better place for more than a billion people.

Google walked and China blinked.

One of Szelhamos’ favorite expressions was “It’s a free country”. For him, it wasn’t always that way, but there could never be any going back.

Maybe a word as simple as “no” could bring that expression to China.

The Comfort Zone                    March 22, 2010

I rarely wander outside of my very small and ever diminishing comfort zone. These days, even a neighborhood walk consists of nothing more than circling the cul-de-sac.

Once.

When I do leave the zone, it’s usually at the behest of someone else who is able to control and manipulate my actions, without my even being aware.

That description could be applied to most anyone I have contact with.

Frightening.

But, I usually end up enjoying myself, despite my voluble and voluminous protests to the contrary.

Yesterday was one such example, as I traveled into the big city to meet with my sister, one of my children and an out of town cousin.

Traffic aside, it was a beautiful day and a gorgeous venue. I’m glad I did it, but I was equally glad to get it over and arrive back home.

The big city does strange things to a “fella” Luckily, I was able to get home quickly enough and washed all of the big city airs off, before settling down with a nice jug of shine.

My distaste for wandering outside of my personal comfort zone also extends to my investing comfort zone.

But, when the new options cycle begins, I usually do venture just a bit outside of that tight zone and purchase one or two new stocks to replace those that were assigned from me.

That’s the extent of my need for excitement and variation.

Today was that day and I was going to be adventurous.

I purchased Walgreen’s for the very first time. Decent company, still growing and a good options premium. It even has a small dividend, but if all goes as planned, I won’t be holding shares 2 months from now.

Forget about the dividend.

Hopefully, by the time April 16th arrives I will look back and not regret straying outside the zone.

Over the years I had discovered that I was absolutely terrible at the timing of my stock purchases and sales. Inevitably, immediately after a purchase, my shares would decline. These days, when I buy a new stock, such as Walgreen’s, I just sell the near the money options concurrent with the stock purchase. I don’t mind making 2-4% for the first month of ownership of a new stock, until I get a battle tried feeling for the way its price behaves.

Otherwise, I just did what I usually do. I replace shares that were assigned away. Stocks that I decided not to replace included Amazon, Flextronics, Google, JP Morgan and the XLF (Financial Spiders).

I also chose not to replace my AIG shares. They have been a really good speculative play with a 7-8% near the money options premium, but I think it’s played out. Besides, with news that Hank Greenberg has sold his shares to MetLife, who am I to say that anyone should hold shares.

In addition to that, the AIG good news cycle may now have also come to an end, as the CBO reports that the final AIG bailout cost will only be $8 billion, compared to the original $180 billion figure.

All in all, not a bad investment all around. Hats off to the Treasury.

I did try to get back shares in DuPont, but as I was entering my limit order price, DuPont just started a steady rise and went outside of another comfort zone. I’ll just wait to see if it drops back down to a price that I’m willing to pay.

As long as the overall market is not behaving in a hideous fashion, what I tend to do with all of the resultant money from the assignments is to average down the cost of my stocks that weren’t assigned. Those shares typically didn’t perform as well in the prior month as the ones that were exercised.

My over-riding theory is that they will catch up in their performance in the current month.

Thus far, that theory hasn’t let me down.

I also consider buying shares in stocks that were exercised in the previous cycle, as well as occasionally buying back shares of stocks that were just exercised.

So this month, I’ve added shares in Chesapeake Energy, Halliburton, Dow Chemical, Freeport-McMoran and Mosaic.

I also re-purchased shares lost this cycle in Goldman Sachs, eBay, El Paso and Sallie Mae, as well as General Electric and John Deere from previous cycles.

For my occasional speculative streak, I added to my E*Trade holdings. My per share cost had been $1.22, but I bought additional shares at $1.52. Today’s news that E*Trade has appointed a new CEO and will be instituting a 10:1 reverse stock pick convinced me.

Typically, the benefit of a reverse stock split is more illusory than anything else, so I don’t really expect any meaningful capital appreciation. That’s why I immediately sold April $1.50 call options, with a net 6% premium.

This was a busier trading day than I had expected, because it played out to perfection.

First, the market opened down by about 50 points, allowing me to pick up shares at lower prices. Luckily, I was able to be at full speed mentally at the open and executed a large number of trades while prices were low, because about 10 minutes into the session it turned positive. At that point, most of my purchases had lready been made and then I switched attention to the options sales. The then climbing stock prices only helped the options premiums.

Ah, perfection.

By the time the dust had settled, 40 trades were made and I still had a number of optionable positions remaining for future trades and more income.

There really wasn’t much market shaking news today. In the aftermath of the House’s health care reform vote everything else was anti-climactic.

And so, the biggest news came near the end of the trading day.

Word came out that Google had decided to be true to its credo and announced that it was leaving China, rerouting traffic to its Hong Kong servers, thereby allowing non-censored search information to be available on the mainland.

It was good to see Google returning to its comfort zone. The world would be a much better place if we all adopted the “Do no evil” mantra as our own.

That’s What I’m Talking About          March 19, 2010

Yesterday was a day of mixed messages.

The optimists pointed to the fact that the Dow Transportation Index reached a new high. By itself, that would be nice, but when it occurs at the same time that the Dow Jones is hitting its own highs, that’s supposed to confirm the movement in the Dow.

Personally, I could care less about confirmation, just as long as it keeps going up.

You confirm, you don’t confirm. I don’t care. Just show up.

The optimists also noted that the Consumer Price Index held steady this month, indicating that inflation is still not an issue. Not too much of a surprise, since the Producer Price Index came out a few days earlier and actually showed a drop. Now maybe, just maybe, by extension, since the CPI didn’t drop as much as the PPI, maybe there’ll be better corporate profits ahead?

But the pessimists looked at yesterday’s 40+ point move up, yet another in a string of consecutive positive days and saw that the number of losing issues was far greater than the number of advancers.

That can’t be good, from a technical point of view, unless you choose to ignore that particular data point.

And so, we entered the quadruple witching day without real conviction one way or another, even though the talking heads continued to look for sizable advances.

If you’ve been paying attention, you know that I’ve been hoping to see the market go down as we neared the completion of this options cycle. It was just a question of being able to hold on to shares and not have their outstanding call options exercised.

Today I got my wish. Not on everything, but I still got my wish. Even those shares that I will lose will be much more appealing for a buyback on Monday morning.

Among other things, I got another gift, just as I did yesterday. More premature assignments freed up some funds to pick up more shares and then to sell more options contracts.

In the early moments the market was rising, I bought some more Freeport-McMoran, which I’ve been riding up since a $22 price, occasionally having shares assigned and then just picking up more.

Today, Freeport-McMoran did what it seems to always do. It reversed courses in a heartbeat. Before it did, I sold in the money April $80 options and then an hour later bought them back for a $0.72 share profit.

I’m sure Freeport isn’t done with its roller coaster ride.

Considering the news that was hitting the markets and the fact that it was a quadruple witching, you would have thought that the Dow would have plunged.

Palm reported terrible numbers and its outlook was bleak. A couple of analysts pegged its downline share price at $0! On a positive note, you’re not likely to be disappointed if the predictions aren’t entirely accurate.

Then came the news that Germany then backed away from its support of a Greek bailout. It now wants the entire European Union to participate.

Maybe it’s just me, but I do enjoy seeing the Euro get pummeled and the “union” fraying a bit. If only for the arrogance that’s exhibited every time the cycle favors the Euro versus the Dollar. It amazes me that the European central bankers and politicians believe that every such cycle spells the doom of the dollar.

And then there are domestic issues. The healthcare vote is scheduled for this weekend and is a wild card. Interestingly, the health insurance stocks, Aetna and Cigna were way up today, on a day that ended up seeing very few real winners.

It was as if people actually realized the obvious.

No matter what the outcome on the healthcare vote, the health care insurance companies will make out like bandits. In the worst case scenario, they’ll have 50 million more subscribers.

And this would be bad for them, how?

Finally, India announced a rise in its interest rates and the fears are that China will be next, very likely driving commodity prices down, as demand falls.

Bad news, eh?

As we were approaching the final hour of trading, the declines were beginning to mount. As we reached an 80 point deficit, I was beginning to salivate, wondering what kind of wonderful devastation might await us in the final hour of witching.

I really wanted a nice 200 point drop. I thought that with that kind of a decline I’d be able to hold on to most of my shares and just begin selling options on Monday.

But as I watched, a funny thing happened.

Actually, nothing happened. The market recovered about 50 points and my dreams of a perfectly played out sequence of events just vanished.

Upset? Not at all.

I get to do this all over again on Monday.

I have to buy lots of replacement shares, pick just the right time to sell my options and then kick myself no no apparent reason.

And then I get to watch the ticker for the next 20 or so trading days.

Sort of like paradise.

That’s what I’m talking about.

Waldo Greenspan                      March 18, 2010

There they were.

In front of yet another inane congressional committee hearing.

I know. Democracy demands transparency and accountability, but does anyone actually believe that anything constructive can ever come out of these hearings.

Besides, if Jim Bunning isn’t involved, there won’t even be any worthy theatrics. Or knuckleballs.

So Ben Bernanke and Paul Volcker, with nary a crown hair between the two of them, patiently sat and listened to the sound of hot air.

But where was Greenspan? At least he still has enough to pull of a decent comb-over.

Now I know that Alan Greenspan isn’t part of the Obama administration, not even indirectly, as Paul Volcker is, but he was missed. Maybe he was there, but I didn’t really notice. Perhaps he should wear one of those striped red and white shirts. But even then, amidst all of the luminaries, he still might be hard to spot.

The class of the alive Chairman of the Federal Reserve is even smaller than that of Presidents of the United States, so it would have been quite a sight to see all three sitting in front of their inquisitors.

Fascinatingly, the two most recently deceased Fed Chairman were also the two least equipped for the position and served under the President who was equally poorly equipped. But they had good hair. Especially Arthur Burns.

Here’s a hint or two, besides the reference to the well pated Burns.

He’s still alive and in a Playboy interview prior to his election, admitted to “lusting in my heart”.

So without Greenspan around to obtusely pontificate, nothing interesting came out of the hearings yesterday. Nothing earth shattering and nothing market moving.

So after yesterday’s non-event we were ready to enter the last two days of the options month.

I received an unexpected gift. I had fully expected a number of my stocks to be assigned following the close of trading on Friday.

But I woke up this morning to see that a couple of stocks were inexplicably exercised last night. There was no dividend capture strategy and the options were still eminently tradable with a decent premium.

So why were they exercised?

I have no idea.

But whatever, a gift is a gift and there’s no better gift than the one that is completely unexpected. And now there was extra cash in my account just waiting to be invested.

Remember. Jesus saves and Moses invests.

So I used the unexpected proceeds to just purchase more shares of AIG and Seagate Technology and immediately sold in the money options, set to expire tomorrow.

By the way, if you are an Option to Profit subscriber, you would have known that those were among my recommendations for this month. I always keep enough around to follow my own recommendations. This time, I was able to double up on some of the positions.

Lucky me.

They options were comfortably enough in the money that, barring some tremendous moves during tomorrow’s quadruple witching, they will be exercised.

For the 2 day holding period, following all expenses, my net return will be just less than 2%.

Even though I lost my shares, I was still able to milk some more options related income out of them thanks to the unexpected gifts from some anonymous investors.

Thanks to you, anonymous speculator and investor.

I’m expecting tomorrow to be a major non-event, much like the hearing.

Quadruple witching doesn’t carry the same menacing threats as in the old days. Additionally, there’s been absolutely no volatility this month, as opposed to February. There hasn’t been a single session this month in which we’ve had a 100 point turnaround.

So I’m assigned to the realization that the downdraft that I had been hoping for as not very likely to happen tomorrow.

That is, unless we can find Greenspan.

No one had the ability to move markets more wildly than Greenspan. Just the mere hint of a negative sentiment would send stocks reeling, even though most people would admit that they didn’t really understand what Greenspan had said, or meant.

If only he could come out of the woodwork and say anything.

Anything at all.

But if we can’t find Greenspan, there’s always next month.

There will still be plenty of opportunities to appear before congressional committees. After all, both Greenspan and Volcker are relatively young, by Chinese government standards.

One Man, One Vote                    March 17, 2010

By every sense of the word, Saddam Hussein’s Iraq was a democracy.

Every few years there would be an election to choose Iraq’s leader.

Here’s a spoiler alert.

The results were always the same.

Saddam Hussein would typically receive 99.99% of the vote and the executed opponent would receive the remainder, along with the knowledge that votes cast for him may have been tantamount to a death sentence for supporters, as well.

Strictly speaking, the Federal Reserve functions as a democracy.

During the Greenspan era, however, there were neither any executions, nor dissenting votes.

Coincidence? You decide.

But how the world has changed. Saddam is gone, Iraqis dip their thumbs in indelible purple paint and we talked about the prospect of two dissenting votes at an FOMC meeting.

Two dissenting votes?

Prior to yesterday’s meeting, they were still buzzing about Hoening’s dissenting vote at the last meeting. He felt that we could raise interest rates up to 1% and still be accommodative to American business. Surely they would continue not lending, even if the rate rose as high as 1%.

I never really understood macroeconomics. In hindsight, Greenspan was widely assailed for keeping interest rates too low, thus leading to lax lending standards and the subsequent avalanche of loan defaults.

Now interest rates are even lower and no one is lending, but it’s still considered to be the tonic for what is ailing us.

So maybe Greenspan was a genius, just ahead of his time. At the very least he had big ears and glasses to match. As an octogenarian, I also assume that his belt was immediately below his nipple line.

These are all the characteristics that we should seek for the Chairman of the Federal Reserve. Call them stereotypes, I just prefer “characteristics”.

In time, Ben Bernake may grow into the job. I’ll bet he already has a pair of white shoes and matching belt. He is from South Carolina, after all.

Perhaps as a sign of weakness, Bernanke did not have Hoening abducted and executed. He also spared his extended family. Very un-Saddam like. He has a lot to learn about being a real leader.

Prior to yesterday’s FOMC meeting, there was actually lots of speculation that there might have been a second dissenting vote on the very same issue, which is really the only issue at these meetings.

That sort of thing would probably have lead to the use of chemical weapons in a bygone era.

Ah, the good old days.

But without a second dissenting vote to be had, the market rallied yesterday afternoon.

Maybe no one wanted to test the Wrath of Bernanke, or maybe no one else agreed that the time was right to throw any potential obstacle in the way of a nascent recovery.

Cynics would say that raising interest rates before mid-tem elections would not fare well for the ruling party, but the Fed is supposed to be free and clear of politics.

Much like the Supreme Court.

But times really have changed.

And then the news came this morning that February’s Producer Price Index was down 0.6%, after a 1.4% rise in January. That was a big and unexpected drop. The core index was up 0.1%, versus 0.3% in January.

So maybe Bernanke was right. Maybe there is no short term threat of inflation and no need to raise interest rates.

I’ve been scouring the online news services and so far I haven’t seen a single story about the abduction of Thomas Hoening.

The pre-open markets just yawned at the PPI news, but had it shown an increase in PPI there would have been a major sell-off, as panic would have set in about inflation coming sooner rather than later.

Market traders are very much like infants and puppies. They have no object permanence. Only as long as the news is in front of them do they respond. Although unlike infants and puppies, the response is usually not very cute. But, in their defense, they are usually potty trained. Althogh, I would bet on a few of those 500+ down days from a couple of years ago, there was more than one pair of soiled Armanis.

Once a new bit of information or data comes their way, they completely forget about all of the previous data points. The big picture is rarely considered. It is always the single data point, sans context.

It’s fun watching an alarmist Pollyanna.

This morning, with the few uncommitted dollars that I still have before options expiration, I plan to exercise my rarely used speculative side and sell more Sirius XM January 2011 $1 put contracts. With a $0.35 premium, I can sit on that for 10 months. I don’t see bankruptcy looming.

In the meantime, it’s that time of the month and I have to come up with 4 or 5 trades for the Option to Profit subscribers, bless their souls.

Subscribers will get recommendations pushed to their desktop through the OTP Toolbar sometime in the last hour of trading this afternoon. Non-subscribers (or as I refer to them “cheap bastards”, can see the month’s picks by the close of trading on Thursday on the OTP Archives Page.

As a cynic, I tend to believe that even though it is St. Patrick’s Day and we should be seeing seas of green, as the market has opened on the upside, I still think that making OTP recommendations today will be difficult. I generally look for stocks that I think can go up over the successive couple of days. But with this string of up days, there’s bound to be a let down somewhere.

On top of that, volatility is so low that the options premiums aren’t that enticing.

I don’t like the prospect of sending subscribers down the wrong path, even though the track record has been great.

As opposed to the roulette wheel, not to be confused with “Chat Roulette”, each day is not an independent event in the stock market, so it is entirely appropriate to think that the hot air in the balloon may be cooling down.

Based on the votes of the talking heads, though, it seems to be 99.99% for a big move upward.

Short sellers, beware. The talking heads don’t take kindly to dissidents.

This is not your father’s democracy.

They’re Back                          March 16, 2010

Today was an exciting day.

Not so much in the markets, even though we were up for yet another day. And despite the fact that the recent upward move during this period has now gone from 12 points per day all the way to 18 points, it was still pretty boring.

Not even a new short term high in the S&P 500 really provided any excitement for me. Not even a 50% increase in the average daily rise. Sometimes a number is just a number. But try telling that to the technicians and the chartists who make a big deal about these sort of things.

I don’t know how many charts I’ve seen that demonstrate head and shoulders formation or reverse head and shoulders formation.

But the one thing they have in common is that they all look the same to me.

So the markets didn’t really do it for me today. The real excitement came in today’s entertainment news.

Even though I’m not much of a golf fan and would never have become a customer of anyone’s based on a celebrity endorsement, I greeted the news of Tiger Woods’ return to golf with great joy.

First and foremost, I’ve loved the various Tiger jokes. There’s been no shortage of really good jokes, Photoshopped pictures, PowerPoint shows and cartoons. Most of these, however, I can’t include in Szelhamos Laughs, because of our high moral standards for this blog. Although I don’t hold the same standards in my own life, the blog is sacred and I don’t want to be a blot on the integrity of the internet.

Tiagra. That was inspired and perhaps an exception to my general rule of not falling for celebrity endorsements.

I’m sure that his return will spawn an entirely new generation of humor at his expense.

I have nothing against Tiger Woods, but like most people, there is a certain satisfaction when you see the hypocrisy of well known people exposed for all to see. That’s why I love politicians. They’re an unending source of joy.

But getting back to Tiger what better way to greet his return than a new season of South Park, which itself begins tomorrow with an episode that seemingly will further skewer Tiger and perhaps those so engrossed with the entire spectacle of the past 4 months.

I guess that if we weren’t there to laugh at all of this stuff, the supply would have dried up a long time ago, so I will accept my share of the blame.

Now although I wasn’t particularly excited by the new S&P 500 level, I was excited that every talking head that made it on the air was excited about it.

I consider them to be part of the entertainment world.

For the first time in quite a while almost everyone was willing to take a real stance on the next move in the markets, without incredible hedging and hemming and hawing .

Nearly every talking head seems convinced that we are moving higher.

Not just higher, but much higher.

They all seem to think that it will start unfolding in the next couple of days as we approach a quadruple witching day, this coming Friday.

That’s where the chartists and the technicians come in. Long gone are the days when stock analysts went on a combination of gut and inside information. Now the most sought after people have degrees in math and physics and are pros at computer modeling.

To me, that only means one thing.

Armegeddon.

On a positive note, Armegeddon would establish a new series of points for their Bollinger bands and whatever other lines they use.

Fortunately, in the world of stock markets, even Armegeddon isn’t a terminal event, nor would it last very long. There would still be a need for moving averages in this version of Armegeddon.

In this world, there’s a second act after Armegeddon.

Today did have a nice first act, though.

I actually almost considered buying shares in a new issue this morning. Originally set to in the $9-11 range, Financial Engines (FNGN) came public at $12 and nearly 2 hours into the session finally opened at about $15.

This stock marked the first NASDAQ issue to open higher than its offering price in a long time.

The last real hot IPO was Blackstone and you remember how that worked out. I was among those that was burned on that one. I did snicker a few days ago when I heard that the original Barbarians, KK&R (Kohlberg Kravis and Roberts) were bringing their equity partners public. That itself is another sign of Armegeddon.

On a side note, Klein’s decision to change his name to Roberts was a stroke of marketing genius. I think KK&K was already taken.

But I ended up not making the purchase and ended up missing out on another $2 price appreciation. FNGN closed above $17 and it was an orderly upward climb, not a frenzied bidding war trying to pick up shares.

But that’s alright. I did sell some Textron $23 March options that will expire this Friday, so at least I did something constructive for the day.

I also took our new puppy, Laszlo, out for a walk today. It was the first sunny and warm day that he’s seen and he enjoyed the romp, although walking a 3 pound dog is a bit different from going on a stroll with an incredibly energetic golden retriever.

We were both winded after about 45 seconds and neither one of us knew the proper etiquette around the mailbox post.

In time, we’ll both learn.

On a somewhat sad note, the stocks that I was hoping would go down today failed to comply. I was expecting an end of the day fall in prices and it never materialized.

Following the expected announcement from the FOMC that interest rates were going to remain steady and without a second dissenting vote to rock the markets, it was just all up from there.

Maybe it’s too much to wish for a return of the shorts and bears.

I’ll just have to make do with Tiger and the boys from South Park.

Not Even a Baker’s Dozen               March 15, 2010

First the good news.

Today marked the sixth straight trading day that the Dow advanced. That’s something that you don’t see every six days.

Even with this stealth bull market, six straight up days is quite a feat.

There really is no bad news to deliver, but the good news is not so great. Sure, six straight days sounds great, but the average daily climb over these past six sessions has been less than 13 points.

Hence, the Baker’s Dozen.

That’s probably a dated and obscure reference, but the only other one that I could come up with had to do with Lords a Leaping.

So all we’re really talking about is 0.12% per day.

Now if the Dow went up that rate every day for a year, we’d be talking about a 30% gain.

That’s pretty good, just like the old days, except for the 250 straight up days. it would take. I don’t really remember that ever happening. Even though my memory is a little rusty, I seem to remember of stretch of about 18 days, but I might be thinking about the number of consecutive victories by the Walt Frazier - Willis Reed New York Knicks, instead.

We’ll never really know, but by any measure, a good run.

For me, things started off great today, but as the Dow began to erase its 50 point loss, my smile disappeared a bit. I was especially happy to see Google down more than $20 and Goldman Sachs down by more than $5, but that joy didn’t last.

Pretty much for every point that they went down, my short position in the in the money call options appreciated by an equal amount.

More of the Zero Sum Game.

Everything that I had hoped would drop between now and Friday actually did, but no where near as much as I had been unrealistically expecting.

Some, like Freeport-MacMoran even finished up for the day and went back above the strike price. That wasn’t how I envisioned it all unfolding.

To further wipe the smile from my face were the downward moves of the stocks that I was hoping would move up. Instead, as you may have guessed, they started moving down, just as the rest of the market recovered.

When I wanted a zig, I got a zag.

Zig. Zag. That doesn’t seem like much of a difference, but it was.

Tomorrow, I have an abiding belief that we will zag and the zig.

Once again, maybe the difference doesn’t sound so significant, but it can ne quite significant. There’s nothing like taking the wind out of the sails to help grease a downward move.

With 4 days to go until options expiration, I’m still holding out hope that the next movement will be downward and then will quickly reverse itself.

But not before Monday.

Is all of this too much to ask for?

I’ve been in this position before and I can tell you that the answer is “Yes”.

That’s not to say that it hasn’t worked out like that before, because it has, but it’s actually a little unrealistic to ever expect it to work out that way.

Too many “ifs”.

Actually, about 13.

What’s in a Name?                     March 12, 2010

I haven’t been paying very much attention to the tangled world of mergers and acquisitions that has been trying to take place in a highly specific sector lately.

I may have the details wrong, but first CF Industries made a bid to buy Terra Industries. Then Agrium made a bid to by CF, which if you need to be reminded, was already trying to buy Terra. And then Yarra announced its planned merger with Terra. Then Agrium dropped its bid for CF.

Yes, that’s right. Yarra and Terra.

This sort of confusing daisy chain of mergers started about a year ago. Where it will eventually go from here and whether other companies will fall into play still remains to be seen, but they didn’t get more convoluted than this.

What hot, sexy and desirable sector are these companies a part of? What sector is so popular that companies are all fighting one another to tie the corporate knot?

The fertilizer industry.

Who knew that fertilizer could be so incredibly exciting and apparently, profitable? There’s money to be made in them thar pellets.

Fertilizer. Another word for manure.

Manure. Another word for s**t.

My editors won’t allow any scatological terms in this blog, nor any profanity, as to not pollute the internet. Besides, DirtySanchez.com has already enjoined us from using certain protected terms on our site, unless we pay hefty royalties.

There’s not enough Tequila in Guadalajara to get me s**it-faced enough to agree to their terms.

My editors also inform me that this is not your father’s fertilizer. This is not the same stuff that Mario used to spread on the neighbor’s lawn every spring, bringing an even more pungent, foul and fetid aromas to the Bronx, in return for prize winning roses. This is even more than the highly sought after elephant droppings that people would line up for every time the circus was in town.

Never having seen a Kenyan farmer in a photo with his prize winning gargantuan tomatoes, I’m not quite so certain why elephant droppings are prized by weekend victory gardeners, but so be it.

Why do I care about fertilizer company stocks, particularly since I’ve never owned any of them and have nothing more than a peripheral interest in the entire, Yarra, Terra, CF and Agrium circus?

Simple, because I do own Mosaic, and have so for more than a year.

Same sector, but not part of all of the merger dysfunction. I’m really not certain why Mosaic and Potash, another major player in s**t, have thus far been immune to the takeover and merger mania. They may just be the biggest s**ts out there, perhaps affording them a little added protection.

Mosaic was once the darling of the fertilizer sector, before the bottom fell out, preceding even the sub-prime crisis. Mosaic was one of those “it can only go up” stocks, that only kept going up as China, India and Brazil found out that their citizens actually preferred to eat.

But when the worldwide economies began to slow down, Mosaic didn’t fare terribly well and has been in a relatively narrow rut. That’s what routinely happens when they speculators get scared “s**tless”.

Today was a perfect example of what I like about Mosaic. Lately, it just goes up and down on a regular basis and often does so in big increments.

Today, it shot up about 7% and, so, for the third time this options cycle, I sold options on my shares. So far, this month’s income from options premiums on Mosaic is a bit more than 3%, in addition to paper gains and a small dividend distribution.

Month after month you can count on Mosaic to make these kind of moves, often from one week to the next, Mosaic shares just turn on a dime.

This stock, if properly managed, is anything but s**t, even though its price hasn’t shown much net change over the past 12 months. The key is managing the stock by selling and buying back options contracts as the price fluctuates all over the place. Otherwise, if you just buy and hold, your Mosaic shares would have been lagging the market.

Over the course of ownership of Mosaic, a period of less than 2 years, I’ve booked nearly $25,000 in options premiums on an average holding of 800 shares. That equates to about 30% income per year for a stock whose net price is essentially unchanged during that period.

No s**t!

As happy as I’ve been with my ownership of Mosaic, I’ve decided to go one step further and join the entreprenuerial class and stoke my capitalistic leanings.

Today we bought home our new dog, Laszlo.

Laszlo is a long-haired mini-dacshund. I can tell from the glint in his eye that he wants to make a significant contribution to our family industry and bottom line.

In that regard, we will be putting his bottom to work.

Granted, he’s no Great Dane, but I plan to follow the Mark McGwire regimen and bulk Laszlo up so that his fertilizer production will sustain our financial growth.

Pooping, scooping, bagging, branding and marketing will all be done internally.

I fully expect to ride this fertilizer wave with “Laszlo Outgo” and will await the takeover offers.

Poop, dung, guano, s**t, manure, fertilizer, I don’t rely care what you call it, as long as it turns a profit.

Fire Them All                         March 11, 2010

I’m suddenly very conflicted.

Although I am a fervid supporter of Citigroup as far as its banking services go, I’ve been pretty critical of the corporate parent for a few years, well before its meltdown started.

Citigroup was big, bloated and poorly managed. Despite laying off tens of thousands of employees all over the world, its operations were a mess and nothing that its previous CEO, Chuck Prince, did seemed to help

Today all of the talk is about “too big to fail”. but with Citigroup is was “too big to function”.

And then came sub-prime.

But more on that later, after a brief flashback.

Do you remember 1994? That was the year that Newt Gingrich and his band of Republicans swept into legislative power in the mid-term elections. They took advantage of the electorate’s discontent and rode that wave and then flexed their muscle.

You know, in that arrogant sort of way, that they have a hard time understanding that any other party in power could possibly do the same flexing.

I don’t really remember much of their “Contract with America”, but there were 10 or so points that were to deliver us from the evil path which the Democrats and Bill Clinton had opened for us.

Never mind that their call for morality at the height of the Lewinsky Affair was somewhat undermined by the actions of such notables as Gingrich himself and (the late, but philandering) Henry Hyde.

Never mind that and all of the other misguided ideas.

But they did have one really great idea.

And that was the concept of “term limits”. What a great idea. Essentially, the Republicans were running on a platform of “throw the bums out”.

Now a funny thing happened on the way to power. Once elected, they all lost that desire to give up their power. They became the bums and they were pretty comfortable in the club car.

No one discussed term limits anymore. There is no way to throw these guys out, unless they do some serious groping, preferably male on male groping, for maximal public reaction.

Oh and they have to get caught.

Now, fast forward to 2010 Rhode Island.

A local school board has announced that all teachers were being fired due to consistently low student scores on standardized tests.

They threw the bums out and there weren’t very many protests.

Another 2 months down the road and Kansas City announces that it will be closing more than 50% of its public schools.

Ostensibly, this one is about fractured municipal budgets, but hopefully the least qualified will need to seek other means of income.

So it is possible to both “Fire them all” and “Throw the bums out”.

Now back to Citigroup.

Just a short while ago there were lots of choruses calling for the heads of all of the heads of the major banks.

You know the ones. The ones that got billions of bailout dollars and contrary to intent, just sat on those funds, continued to give out large bonuses and didn’t do much lending.

Those banks.

And while all of the major banks, other than Citigroup, paid back their TARP loans, the voices got louder.

Off with their heads. Especially Vikram Pandit’s head.

The Congressional hearings were pretty intense and very accusatory. It was the heads of the bankers that they were going after.

But unlike AIG, Fannie Mae and Freddie Mac, where the government directly ousted the CEO’s, the big money banks were treated a bit more gently.

Rather than forcing out the likes of Ken Lewis of Bank of America and Vikram Pandit of Citigroup, there was just gentle, but unrelenting pressure.

Ken Lewis folded.

But Pandit, who seemed the weakest of all, just stood his ground. He also managed to keep a pretty low profile.

All of the calls for his head have suddenly turned to accolades. Now no one wants to throw him out, as it looks as if Citigroup may be working its way toward a profit and repaying TARP.

For the past week Citigroup has been up about 25% on incredible volume.

However, so have AIG and Freddie Mac, leading people to believe that this the result of a “classic short squeeze”. Of course, the prefix “classic” would seem to indicate that it would be fairly obvious to recognize the existence of the short squeeze, but for some reason there seems to be disagreement.

So maybe it’s not so classic.

Why am I conflicted?

Is it because I rode Citigroup down to $3, before selling a large position and taking tax losses, but am now happy to see Pandit emerging victorious?

Yeah, that could be it.

Is it because I really do believe that “they” should all be fired, but maybe Vikram Pandit should be allowed to stay?

Yeah, that could be it, too.

Since I don’t really like to play with speculative stocks, I don’t really want to think about buying shares in Citigroup. For a while, I did sell put options when Citigroup was in the $1-3 range and was able to make back a small fraction of the losses from the stock itself.

But as Einstein so brilliantly noted, the definition of insanity is doing the same thing over and over again and expecting different results.

Too many people have been burned by the erroneous thought that a stock couldn’t go down much further. That in itself isn’t a great reason to buy shares.

If this really is a short squeeze, we should know pretty soon.

As for the talking heads who have opined on Citigroup for the last 40 points, it’s still not to late to throw all of those bums out.

What a Difference a Decade Makes       March 10, 2010

Here we are celebrating yet another anniversary.

No sooner had we hit yesterday’s propitious one year anniversary of the market bottom, than the realization came that today was yet another momentous day.

Yesterday it was a market bottom, and today it was a market top.

This time, it’s not that good of an anniversary. As opposed to the 60% or so increase in the Dow and S&P 500 over the past year, today marked the 10th anniversary of the NASDAQ market top.

Remember dog sock puppets? Pets.com was the epitome of over exuberance, but had plenty of company. Think of the baseball and football stadiums that had to be renamed when their naming rights sponsors entered into the world of Chapter 7.

Remember PSI.net Stadium?

And even with the incredible gains of the past year, in the 10 years since the “dot com” bubble, the NASDAQ is still down a lot more than 50%. It would be unimaginably worse had Google and RIMM not come onto the scene and had Apple not recovered its corporate mojo.

In the last 10 years, Apple has increased its market capitalization by nearly 15 times, changed its name once, been through a health scare and options price fixing debacle, but still keeps on going.

Its scary to think that your wreckless investment strategy in the “fad sector du jour” couldn’t be corrected in 10 years. Compare that to investments in more reliable sectors. We’ve come a long way in the past year, although we’re still down about 25% from the 2007 highs.

But still. I’m only saying.

I was never much of a NASDAQ person, although I do, or have recently owned shares in Google, RIMM, Apple, Microsoft, Amazon and Seagate Technology.

Granted, there is some volatility in these shares, but at least they have established markets and proven earnings capabilities.

My best performer in the NASDAQ has actually been Riverbed Technologies, which I do not currently own, but would jump at the chance to repurchase. I still have no idea what they actually sell, but occasionally rumors float that Hewlett-Packard may be interested in a buy-out. Currently, I don’t think that’s actually reflected in the stock price. Riverbed Technologies has lots of see-saw price action, which I loved, although lately its been on an uninterrupted upward climb, which never benefits me. I had my shares exercised last month, after almost 2 years of holding and trading lots of options contracts.

Lots.

I did purchase more shares of Seagate this morning, hoping to take a quick 2% on options sales, which will expire in 7 trading days. So far, as is typical for me, Seagate is now dropping in share price.

I’ve never been good at picking an entry point for a stock and like most people, I was pretty bad at picking an exit point.

But by selling call contracts, I don’t have to think about exit points too much. It gets done for me.

I wasn’t trading for my own accounts back in 1999 and 2000, but I’ll bet the options premiums on some of those NASDAQ high fliers must have been incredibly enticing. I’m glad that I wasn’t doing my thing back then, because I do have a hard time resisting a nice premium.

These days, if I’m wrong in a particular month, it’s usually only a month or so until the underlying stock recovers its price, so I don’t worry too much, particularly since the options premiums continue to offset any paper losses.

But that would not have been the case 10 years ago. There’s not much chance of a recovery after extinction.

And how did the NASDAQ celebrate on its 10th Anniversary?

Well, it did better than the S&P did yesterday.

The NASDAQ went up about 0.8%.

A muted celebration, yes. But at least a celebration.

Only 3000 more points to go.

Today also marked the first day of availability of consumer 3-D televisions. I’m sure that this day will be as memorable as the very day that the electric can opener was first introduced at the Chicago Expo.

The similarities are astounding. For both items you needed to wear an overly large pair of glasses, lest you get speared by shards of metal or suffer immeasurably hideous headaches and nausea.

As much as I like the 3-D effect in theaters, I’m not sure how much I need it to watch CNBC. However, based on the ubiquity of the blog postings that seem to be obsessed with the bra sizes of Michelle Caruso-Cabrera and others, there may just be a market out there.

I’m only saying.

It’s a Zero Sum Game                March 9, 2010

The other day I made mention of a basic mathematical property, although I couldn’t quite remember its name. Just a few years ago I could have rattled off pretty much everything I had previously learned.

Now, as further proof of the basic degeneration of my cognitive abilities, as I find it necessary to call upon one of the basic laws of physics, just as before, I can’t quite remember just which of those laws speaks to the impossibility of either creating or destroying matter.

Fortunately though, as I have forgotten much valuable information, I still remain a relatively strong repository of useless information, although there is nothing useless about the Law of Conservation of Mass.

Today was a perfect example of how nothing was created.

Despite the fact that today marked the first anniversary of the “stealth” bull market, nothing happened to mark that event. In fact, the last few days have been yawners.

Today, the market appeared to be poised for nice upward ride after battling back from a negative futures market. But as today’s “Szelhamos Laughs

” Laugh of the Day can understand, the malaise just set in and sucked all of the energy out of the explosion.

Although the answer to the question “can matter be created or destroyed” is standardly given as “no”, the answer may be nuanced, by considering changes of state as well as the consequences of a nuclear reaction, which is encapsulated within Einstein’s famous Law of Relativity.

The amount of matter destroyed when multiplied by the speed of light squared equals the amount of explosive energy created.

Every school aged child knows that equation and every uranium engineer understands the dilemma it poses, while simultaneously confirming the basic laws of physics.

But nothing the market has done in the past year has been explosive. As much as has been regained, its still all been beneath the radar. The destruction of wealth was explosive, yet its resurrection has been anything but explosive.

Fascinating.

Or yet another yawner, depending on your perspective.

But, unfortunately, neither my portfolios nor the market in general understand those nuanced perspectives on basic laws of nature and physics.

They still are buying into the standard answer to the question.

As far as my portfolios go, I am the one at blame. My actions have resulted in the current state in which it exhibits an inability to create any kind of change.

That is the natural consequence of selling all of these call options and then having the underlying stock prices exceed the exercise prices.

Basically, for each penny that one of my stocks appreciates in price, the underlying option goes down by the same amount.

A zero sum game.

Nothing created, nothing lost.

The standard answer.

And that’s why, once again, my short term hope is for a destruction of wealth, which would lead to a creation of wealth.

How’s that again?

It’s what Einstein would have called “Ying and Yang”, drawing from the rich symbolism of his native Germany.

Those aren’t the words that I would have chosen, but who am I to disagree with Einstein? Granted, I still think he was wrong to disregard my advice to trash the professorial look and grow a mullet, instead.

But that’s now ancient history.

I did take the time between yawns and pondering the immutable laws of the universe to take a small gain in Halliburton, by buying back some of the call options that I had sold just a few days ago.

Nothing explosive, no great quantity of matter destroyed and no great energy created. But still, do it enough, and then you’ve really got something.

I don’t think that I’ll ever get the tremendous explosive movement of stocks that everyone dreams about. I have too much negativism. I believe that every stock is destined to go down the instant that I purchase shares.

That’s why I sell call options. You have to be a basic bear, be willing to take smaller gains, in order not to get blown away in a downward explosive movement.

In fact, the essence of my strategy is that the Zero Sum Game is great. Let all of the price volatility cancel itself out and take advantage of that volatility by generating options premium income.

Who needs excitement? Who needs explosions? Who needs nuances?

I’ll take boring and Zero Sum any day.

 

 

I Need to Get Out More Often         March 8, 2010

Today was a very slow news day.

The day after the Oscar Awards, there was nothing to displace the Oscars off of the front page. Sure, there were the daily obligatory stories about healthcare and covert uranium enrichment in Iran, but nothing really making news.

Even the obligatory stories were more half-hearted than usual. The only story that showed some promise was that of the New York congressman who resigned amid sexual harassment allegations, claiming that the White House forced him out.

At least that story may play out quite nicely in a couple of days. Lord knows I need material. The fact that it was a male congressman and a male aide will make it all the more likely that we’ll be hearing more about this story.

Ordinarily, the day after Oscars usually brings lots of discussion about fashion hits and misses. Mr. Blackwell wasn’t even dead for five minutes before all of the pretenders to his throne snaked out of their holes seeking prominence at the expense of starlets craving attention.

Truly a win-win situation.

Today wasn’t much different in that regard, but the fashion faux pas definitely took a back seat to the real story of the day.

The biggest story all day long was how the annual award ceremony could have omitted such luminaries as Farrah Fawcett, Bea Arthur and Henry Gibson from the “In Memoriam” tribute.

For my part, I was already asleep by the time the tribute aired and it was really the only thing that I had wanted to see all evening.

Given my penchant for starting off each morning with The New York Times Obituary pages, that should come as no surprise.

So it was only this morning that I heard the news.

Over and over again. The furor regarding the grievous omissions got lots of play.

A clearly shaken Ryan O’Neal was interviewed while retrieving his mail this morning.

He didn’t understand, either. Although I’m still not certain why the reporter sought his comments about Henry Gibson.

And if Ryan O’Neal doesn’t understand, what chance do the rest of us have in trying to make sense of this travesty.

I didn’t bother going to the IMDB.com site to see what movies any of those television stars had made, but when their names come to my mind, I don’t think “movies”. Pin-ups, cutesy poems and gender mis-identification, yes.

Movies?

No.

I suppose that by most measures if this is the most pressing story of the day, all must be well in the world.

It was then that I realized that I may well have in a state of suspended animation for the past 30 years or so.

No sooner had I dismissed the movie credentials of Fawcett, Arthur and Gibson, that I realized that I really wasn’t familiar with many of this years’ nominated movies.

Throughout the evening, the titles of the 10 nominated movies were sprinkled liberally to whet the appetites of the viewers.

I was just puzzled.

I hadn’t even seen Avatar, much less the Hurt Locker.

3-D? When did we even have 2-D?

I didn’t know the difference between “Up” and “Up in the Air”, although in my defense, I had wanted to see “A Serious Man”.

I still can’t believe that “The Hangover” wasn’t nominated.

Maybe the omitted trio deserved to be in the tribute after all. Maybe all of the aggrieved were appropriately aggrieved.

And as I looked for solace in my world of stocks, I got none. For today was equally banal in the marketplace as it was in the rest of the world.

I think that about 6 shares traded hands today. Absolutely nothing happened.

The very reason that I haven’t gotten out very often gave me no reason to be pleased with my choice to cast off the outside world of film entertainment.

Given what a waste today turned out to be, It probably would have been smart to go and finally see Avatar.

On paper, that would have been a good idea, had I not been at work today.

At least on those days that I toil through the “semi” part of my semi-retirement, I can still track the stock ticker ad-infinitum.

So today I got the worst of all worlds.

No news, no movies, no stock trades and work.

Although I probably do need to get out more often, I’d be just as pleased to continue wearing out my couch, listen to the breaking news and make a trade or two.

Of course, I would still be decked out in the finest of designer cartoon character pajama pants for the benefit of the photographers and fans.

I just hope they use a good picture of me when it’s my time to make the “In Memoriam” tribute.

Please don’t leave me in The Valley of the Omitted.

 

What is the Definition of Good News?    March 5, 2010

These days, the answer to that question is pretty simple.

Good news is simply defined as the absence of bad news.

Think how much less distressing news would be if every report of news started with the phrase “Guess who didn’t die today?”

The absence of bad news can be such a relief.

Think of bad news as your children. Now think of an empty nest.

What a relief.

Now feel guilty for equating your kids as bad news, although guilt will be covered in a separate blog.

Of course, you could also think of your children as good news, but there’s nothing even remotely funny about that and I cherish the guilt.

The person who came up with the concept of how good it feels when you stop banging your head against the wall was a genius.

He knows what I’m talking about.

Take today’s February Jobs Report, for example.

Following the ADP release of their version of the Jobs Report on Wednesday, the great expectation was that today’s report would indicate a much larger increase in unemployment, due to the bad snow storms in February. That’s all anyone was talking about for the past two days.

Interestingly, the pre-market futures were pointing upward this morning. Usually, they are very tentative, with no one willing to make a sizable bet one way or the other, until the official Job numbers were released.

Somebody must of had an inkling that things would not be as bad as expected.

Or, looked at in another way, things would be good.

When the numbers finally came out this morning, sure there were another 35,000 jobs lost, but the big weather related fall that every one was expecting never materialized.

The absence of bad news became the good news, even though there really was no good news.

Still don’t understand? Let’s try it another way.

How do you feel when you stop banging your head against the wall?

So on the basis of an absence of bad news, it was off to the races.

When the day finally ended, my portfolios were up 4.5% for the year, compared to only 2.2% for the S&P 500.

Reason to gloat? Not really, because in this good news was potentially an absence of further good news.

Or, in other terms, bad news.

Despite today’s 122 point jump in the Dow, I had been hoping for a fall in prices. As of the moment, with still 2 weeks left to go on the March options contracts, nearly every one of my holdings are now in the money.

That’s the potential downside inherent in covered call writing; the possibility of limiting your share in the upward movement of your stock shares.

That’s the bad news.

All of that is tempered, though, by the realization that even had I not sold the covered calls, I probably would not have taken profits on the appreciated stock.

That’s just the nature of human nature. Greed keeps telling you that there’s always more waiting for you right around the corner. One of the tenets of Option to Profit is that you can’t be too greedy. You can be greedy, but just not too greedy.

Although I may miss out on some of those profits, I channel my greed in a different direction. I do so by making the same trades over and over and milking the most out of my stocks.

Just like the old concept of making it up in volume, most of my “milking” trades are for a small amount of profit.

Done as many times as I can possibly do them.

This week, for example, as Mosaic’s stock price has moved up and down, I’ve sold and then bought back options contracts at a profit 3 times. Each time the stock price goes down, I can repurchase my options contracts at a lower price, thereby taking profit.

And then the cycle starts again.

And in the case of Mosaic, again.

Freeport-McMoran is great for that, as well. Sometimes, with its volatility you can do it a few times each day.

Watch for it.

My hope now, is that over the next 2 weeks, markets will go down just enough for me to keep my shares, or at least buy them back at prices not too far from where they are now.

And then the cycle starts again.

Boring?

Maybe.

Profitable?

Yes.

I never get bored. I could easily sit in front of my monitor and watch CNBC all day long, as long as I can hear a chorus of “ca-chings” coming in my direction.

After all, good news is measured in units of “ca-ching”.

So next week and the week after, bad news should result in more units of “ca-ching” for me.

Bad news equals “ca-ching” and therefore, through some basic mathematical theory, maybe the distributive or transitive property, or something like that, bad news must, therefore, equal good news.

Ca-ching. equals ca-ching.

 

A Good Day in Retail         March 4, 2010

Although yesterday ended up reasonably well, despite all of the concern about the bad omens that were appearing everywhere, today was the day that I was really dreading.

There’s only one thing that I dislike more than buying retailer stocks.

And that’s going into a big-box retailer, or any retailer, for that matter.

I don’t even like going into Best Buy or Home Depot, although there have been brief periods that I’ve owned their shares.

Of course, those brief periods usually meant losses.

So I don’t have any love lost for these guys. I particularly don’t like being told every 30 seconds by the Best Buy crew that they’re not on commission.

I don’t believe them.

I don’t even like going into the local bagel place or even the Dunkin Donuts drive through. There’s just something about the face to face retail interaction that I just don’t like.

And don’t get me started on Starbucks. I’m always ill at ease when staring at the various piercings and tattoos on the baristas.

You would think that internet shopping would be perfect for me, but, at best, I’m barely breaking even on my Amazon shares and Dunkin Donuts delivered by Federal Express are just a tad bit too expensive for me.

Maybe I just don’t like shopping, but today, it just had to be done, especially since the refrigerator was now dead and the car’s flat tire didn’t spontaneously re-inflate.

I actually shuddered when my wife suggested that we go to Sears. A friend had told her that the Kenmore refrigerators had gotten great reviews in Consumer Reports.

Although it was a good idea, theoretically, since we could get the tire and refrigerator all with one stop, I looked at her disbelievingly.

Not because I didn’t think that Sears was qualified to service our appliance and tire needs, but because she was relying on Consumer Reports.

The last time I used Consumer Reports it was to buy a new car.

That car was the Pontiac Phoenix, one of the new so-called X-Cars of 1980.

Maybe this will remind you:

“The Revolutionary X-Car Series from General Motors”.

The X-cars are what put GM back on the map, but not in a good way. They were the first mass produced front wheel drive cars in the US and they were supposed to lead GM toward the next century.

Of course, you can figure out the rest.

Consumer Reports loved the X-Cars and on the strength of their conviction, I made the purchase, only to be almost burned alive when the transmission caught on fire after a few thousand miles.

You don’t see many X-Cars on the road these days. In fact, within about 5 years they had virtually disappeared from the road, much less the showroom.

That Pontiac Phoenix experience took us directly to the world of Toyota. Until that day comes that our Toyota takes on a mind of its own, we’ll stay with them. Thank you, GM.

So off to Sears it was.

Now I know that the supposed next Oracle of Omaha, Eddie Lampert, orchestrated the purchase of Sears, resurrected K-Mart and continued Sears’ beloved place in American culture.

Skeptics said that Lampert only purchased Sears to be able to get at its real estate assets. In hindsight, not a terribly good move, when you consider that he made the purchase at the height of the commercial real estate boom.

Not being able to sell those assets as the bottom fell out from the real estate market, Lampert had to go to Plan B: Retailing.

And forget about the fact that Lampert had no retailing experience.

This is Sears. This is Consumer Reports.

So after waiting about 15 minutes in the ghost town of an automotive department, I went looking for my wife, who had started the refrigerator search on her own.

“Kenmore? You want a Kenmore?”

Ever had a sales associate laugh at you?

And then I remembered that we had once had a Kenmore dish washer that self-destructed shortly after it was installed.

That recollection called for a re-evaluation of our Kenmore-centric strategy.

To collect our thoughts, we walked back to the automotive department, where a very harried employee was mumbling. As it turned out, he had just been fired by the local post-office.

But he did try to be helpful, when he sadly told me, after scouring through the computer database, that they didn’t have my tire in stock.

Not being well versed in inventory control, I pointed to an entry on the screen, which showed my size tire, from my preferred manufacturer, with 16 in stock.

Oh.

Back to the appliance center.

The sales associate that we had previously spoken with, approximately 15 minutes earlier, did not remember us.

Unless he had a twin brother with the same name, Wow!

And then, he tried steering us toward the Kenmores.

I don’t know Ashton Kutcher. I don’t ebven know if he’s doing “Punk’d” anymore, but I was convinced that there were hidden cameras. mean, besides the ones in the public restrooms.

Long story made long?

We bought a Samsung, but not the one that he tried to get us to go for. You know, the one that takes the flash card, so that you could display pictures on the LCD screen on the freezer door.

And when you think refrigerators, you think Samsung.

The point of all of this?

I won’t be buying any Sears stock in my lifetime and if my luck holds out, I won’t ever enter any store, ever again.

 

Bad Omens Galore           March 3, 2010

I had a sense that today was going to be a truly bad day.

First, was the refrigerator. It decided to stop working. My bare feet were greeted with some unknown combination of liquids that had puddled onto the floor and oozed their way through the kitchen.

My prized ice pops had become victim to a defective and failing freezer unit.

At least the baking soda didn’t go bad. That box of Arm & Hammer had been in our family for three generations. The same can be said for other products from Church and Dwight, Arm & Hammer’s parent company, a perennial also ran to Proctor and Gamble in all things in the grocery store aisle. other than Trojan condoms. Which, as you’ve probably guessed by now, have also been in our family for three generations. Obviously, had they been used, there would have been no further generations to speak of.

Then, there was the flat tire and the hour spent trying to find some WD-40 to loosen the lug nuts. By the way, WD-40, the company, has a great stock (WDFC). It is as uni-dimensional of a company as you can find, but no one does it better. Unfortunately, no options are traded on WD-40, and these days, I won’t purchase a stock unless I can hedge it with options sales. It also has a very small daily trading volume, but nonetheless, it isn’t subject to wild price swings.

And the bad news kept coming as the monthly ADP Jobs data was released. The predicted gain in jobs didn’t materialize and January’s figures were revised further downward. That doesn’t portend well for Friday’s release of jobs data by the Bureau of Labor Statistics, which also will reflect the adverse effects of February’s snow storms. For those that actually follow these sort of things, the ADP report was supposed to be revision proof, as it actually took data from the payroll reports that it administers. So much for it being a more reliable tool than the official government data collection.

Finally came word that Medivation’s acclaimed Alzheimers’ drug was worthless. The plaid packaging was nice, though.

Medivation was down 70% and its big pharma partner, Pfizer, was down just a bit.

I neither own Medivation nor Pfizer, but I’m fairly certain that I will own Alzheimers. It’s just a question of when.

For every problem, however, there must be a solution.

The flat tire is easily repaired or replaced.

The refrigerator? Still not certain, as the repairman hasn’t arrived. On a positive note, it was a freebie, as I used credit card points to get it. But still, Whirlpool, isn’t 6 years a bit too soon for a burial or major reconstructive surgery? You could take a lesson from Arm & Hammer.

Jobs? Well, speaking of Alzheimers, at least Jim Bunning relented and some people can keep on working. Maybe the rest of the stimulus money will be released someday and even more people could get back to work. Interestingly, my search to understand how a single person could hold up the allocation of funds, was answered by The Daily Show. Eventually, The New York Times had a small piece on the parliamentarian game played by Senator Bunning to block the release of federal employment funds.

And coincidentally, speaking of Jim Bunning, the Alzheimers issue is something else, altogether. My Alzheimers-to-be needs a Medivation. Sooner would be better. After all, it would be tragic to not remember why I need to take the Viagra.

Even worse would be if a health insurance utilization review employee was reading my blog and would deny me coverage for my anticipated Alzheimers as an “expected to be pre-existing condition.”

But I just know that our future President Jenna Bush will truly be the compassionate conservative that she pledged to be and will see to it that I am not left in the lurch, drooling on my brightly colored plaid shirt.

I did take the opportunity to pick up some shares of Seagate Technology. It’s a pretty volatile stock, that I previously owned at $5 and had exercised away from me at $10.

Now, it has doubled, but after a couple of days of volatility in both directions, I bought shares when it was down 6%. As a reflection of its volatility, as the stock stands at $20, the March 19th $20 option has a premium of more than 4%. Granted, it’s an in the money option, but there’s only 13 more trading days left in the option. I plan to gamble a bit and see if Seagate will recover some of its loss and then sell the in the money $20 option.

4% return, plus appreciation on the underlying stock for a less than 3 week holding period would be pretty good.

As the day wore on it looked as if we were going to hold onto the modest stock gains. In fact, at one point, the Dow was in the black for the year.

And then, the expected happened.

It seems that every time President Obama speaks, the market retreats.

And today was no different.

It’s hard to believe that there could possibly be a reason for missing “W”, but he only rarely would seek out speaking opportunities.

He lived by the belief that presidents should be seen and not heard. “W” did a lot of waving as a proxy for either prepared or impromptu remarks.

Good thing.

Fortunately for me, what looked as if it was going to be yet another bad omen, the President’s words did nothing to upset my portfolio, which managed to end the day up about 0.3%.

So the streak was broken, but still the problem must be acknowledged.

I think that given the choice, speak or wave, the solution to that problem is clear.

Wave, Mr, President. Wave.

By the way, do you know how to fix a flat tire?

 

 

Choices. So Many Choices              March 2, 2010

Leno or Letterman? Covered that one yesterday.

PC or Mac? Decades old query.

Tomato or tomato? Any Gershwin fans still out there?

Missionary or Piledriver? I’m a pet lover.

Buy or hold?

So many choices. So many questions.

Sometimes the choice is easy.

Jim Bunning or Rasputin?

Today, I heard an interesting defense of the traditional buy and hold strategy, made by a very respected portfolio manager, who had cobwebs in his facial wrinkles.

I may not have his exact quote, but it was something like this:

“In the long term, buy and hold works, other than for the past decade. By Jiminy, I’d vote for Hoover. Yeah, that’s the ticket.”

I would assume that the point that he was trying to make was that the past decade was a real outlier. That’s probably not going to be much consolation to people that invested in the last decade, especially if their investing career has only known the past decade.

In the 1990’s, everyone was talking about “paradigm shift”. That phrase was applied to every imaginable situation. You weren’t really cool unless you somehow could work “paradigm shift” into every conversation. During that decade, Baskin-Robbins started introducing its Paradigm Shift of the Month with much fanfare.

Well, that was still better than the “what’s your sign” craze that marked my generation’s decade in the sun.

So it’s somewhat ironic that all of that blabber about paradigm shifts hasn’t really opened up the eyes of many investing professionals. If you use a broker, you know that their paradigm has not shifted, unless they open themselves to accusations of churning.

But even when you have a managed portfolio and do not pay for individual trades, it’s still the same buy and hold, as you find yourself watching your paper gains become paper losses. And you still always underperformed the indices.

In all likelihood, the paradigm shift necessary to move away from the ubiquitous need to have a paradigm shift, was to not shift paradigms.

That must explain why it’s still, by and large, a buy and hold world.

Szelhamos used to tell me that choice wasn’t one of the options available when the Communists were in charge in Hungary.

You want a shirt?

White.

You want shoes?

Brown.

You need a different size?

Comrade, the one we gave you is the correct size for everyone.

Imagine the amazement upon coming to America and setting foot into a Costco?

In fact, Szelhamos had exactly that reaction nearly 50 years after he came to the United States when he first stepped into a BJ’s.

And since this is a family oriented blog, I’ll make the next choice “G” rated.

BJ or Costco?

From a stock perspective it’s Costco, although I’ve never purchased shares. If you check out the stocks that I own or follow on Option to Profit, you’ll see that there’s a real scarcity of retailers in those lists.

They’re volatility always frightens me. I’ve occasionally owned Walmart, but it’s just too boring.

Once I own a stock, I like the volatility. But just as knowing when to sell as stock is difficult, knowing when to buy is equally challenging.

Even though I routinely sell call options on my shares, it can really be difficult to do so if your recent purchase takes a price hit right after you buy it, thereby making the options sale a losing proposition.

There have been many times that I’ve wanted to buy Costco but just couldn’t do so. Deep down, I always felt the price would go down, even though there was no compelling reason to believe so.

Costco reports earnings tomorrow morning. In the past year, on two occasions that’s been the time for a spike in its price.

I won’t be buying any in the near future, but I think it’s only a matter of time before I finally get the courage to take the plunge.

Instead of showing courage, I just did my usual ticker watching and trading today.

As often happens, I sold options contracts a bit too early. Yesterday I sold contracts in Freeport-McMoran after a 2% rise in its price. I was expecting a fallback.

That never happened. Instead, today it just went further up, getting closer to the exercise price.

Today was no different. I sold options contracts on Goldman Sachs, Google, Dow Chemical, Chesapeake Energy and Mosaic, thinking that I had done so at their intra-day peaks.

Wrong.

That’s another choice.

I totally forgot about that one.

Right or wrong.

Today, I may have chosen the wrong path, but there’s still 13 more trading days for the March options.

In a strange way, this puts me in a position to hope that stock prices go down.

That’s almost evil.

Good or evil.

Easy.

Right now, I’ll go with evil, with an option to repent.

But I still won’t watch Leno.

That’s unforgivable.

 

Leno’s Back                          March 1, 2010

Jay Leno is back and his return has received much more fanfare than the return of “Szelhamos Rules”.

I think that the biggest difference between these two events is that Leno never really left.

Borrowing, once again, from the Talking Heads, “Same as it ever was”.

Szelhamos Rules, on the other hand, took a true 2 year hiatus.

Although to be totally fair, I don’t think there was a tremendous groundswell of support for either of us to return.

Somethings are better off in the sunset. But it’s just so hard to resist those bright lights, the fame and the money.

I bear Jay Leno no ill will, but the fact that my previously scheduled guest bloggers, Sarah Palin, Lindsey Vonn and the cast of The Jersey Shore have just backed out of their commitments, took me a bit by surprise.

At first, I thought it was just a bad coincidence, but I’ve just learned that they’ll be appearing on Leno’s re-premiere episode.

At least Lindsey Vonn had an excuse. With her recently broken pinkie she couldn’t type much, anyway. And as far as the cast of The Jersey Shore goes, it’s not entirely clear that they’re literate.

But can you really have a premiere episode of an old show? It’s a bit like wearing a white gown for your fifth wedding, or claiming that you’re still a virgin after your fifth child.

I’m blogging to you, Sarah Palin.

As far as it goes, I wasn’t planning on watching Leno’s return, anyway. Even though I was more on Conan’s side, I’ll still keep watching Letterman on those rare nights that I’m bored enough to watch any of them.

Tonight won’t be one of those nights.

For my money, I’d watch Craig Ferguson over all of them. He is just a funny and irreverent version of Groundskeeper Willie. He doesn’t need a sidekick, a bandleader or even an audience. Sometimes, looking at the quality of the production, you get the feeling that his show is done in John Wayne Gacey’s basement.

Except that John Wayne Gacey had better artwork.

As far as I’m concerned, the entire genre died along with Soupy Sales.

But life still has to go on.

And so it did today, as the market started a new week and a new month.

But still, it was the same as it ever was. Maybe there’s a theme here somewhere.

My old favorite, Jim Bunning, was once again in the news. This time, he reportedly was solely responsible for placing government workers on unpaid leave.

He objected (so what else is new) to the fact that the road construction workers were being funded without concomitant budgetary cuts in other programs.

Nowhere have I been able to find a explanation of how a single individual in the Senate could wield such power, but I guess that offers just one more reason why the system works so well.

It’s too bad that we really can’t often have the opportunity to understand an individual’s adult behavior based on their childhood behavior.

It’s not likely that anyone still alive was witness to a young Jim Bunning and his “normal” responses to everyday situations.

It would probably be fair to guess that there were lots of tantrums, maybe setting possums on fire and a lynching, or two. Ultimately, his behavior deteriorated further and probably even has further deterioration ahead.

So with a portion of the government on Bunning induced involuntary furlough, fresh on the heels of several days of snow related federal government closing, it seems that the turn of the 19th century anarchists were on the right track.

Based on how our elected officials seem to be doing when they are at work, we certainly would be much better off without government.

Or at least this government.

And listening to Harry Markopoulis, the guy who tried to alert the SEC to Bernie Madoff, more than a decade ago and was continually shown the door, it’s also clear that our regulatory agencies are equally expendable.

The best part of the Markopoulos interview, as he is beginning his book tour, is that he considered killing Madoff, if he thought his own life was in danger.

All of a sudden, this world of investing is getting exciting.

Mystery, intrigue and more.

Today, there was profit, as well.

March started out with a report of decreased consumer confidence, which ordinarily would drive the markets down. But earlier news that AIG was selling a part of its Asian business to Prudential was a nice spark, as well as some merger and acquisition news in the pharmaceutical sector.

None of that really effected me, except that it drove my AIG a little closer to its $30 strike price.

Small pain, relative to the tragedy in Chile this weekend.

Not one to miss an opportunity, the market sought to capitalize by driving up shares of the copper miner, Freeport-McMoran, based on fears of decreased copper production from Chilean mines.

And that seemed like a really good strategy until someone realized that all of the copper mines were way up in the north of Chile, nowhere close to the earthquake impacted areas.

For me, that oversight was good.

As Freeport shot up this morning, I sold options contracts on my existing shares.

As the realization hit that maybe those concerns about copper production were overblown, the Freeport share price retreated and I just bought back my options contracts and pocketed the profit.

Freeport is great for that. It’s one of those stocks that routinely has intra-day volatility. A few months ago I had 5 straight days in which I sold and re-purchased Freeport options contracts.

When the opportunity arises, I love “milking stocks”, trying to take advantage of the volatility in share price.

After all, I do need something to do with my days.

But I hope that tomorrow is just a repeat of today. Sometimes, “same as it ever was” can be a good thing.

Unless Jay Leno reprises his 10 PM show.

 

 

February 2010 Blogs

 

 

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