Szelhamos Rules

You often hear stories about deathbed conversions or returns to faith near the moment when there's not much left to lose by professing one's faith.

So what if an unexpected profession of faith leaves your followers and fans behind in a world of even greater uncertainty?

Screw them. When you see the white light, it's every man for himself and the adoption of the Captain Schettino rules applies, whereby woman and children have to fend for themselves while the captain of the ship trips his way past those pearly gates ahead of the rest.

Who knows, there may be limited seating.

Many famous and infamous people have purportedly had deathbed conversions, including Darwin and Stalin, but the reports of other such conversions may just be wishful thinking or generated for proganda purposes alone.

Based on the appearance of the term "ProShares UltraShort Silver ETF" in the word cloud that accompanies this blog you might be lead to believe that I worship at the feet of some silver idol.

Not really, but you would be right to have that suspicion, as it does seem to appear with great frequency.

By the same token, the constant "God Damn" refrain doesn't necessarily reflect belief in a diety.

I'm not particularly religious, although I don't know if I'll be one of those undergoing the end of life "seeing of the light" experience.

At the moment, there is a 24 hour "Yahrtzeit" candle burning in our household, as is the Jewish tradition to mark the anniversary of a close relative's passing. Still, nothing really religious, just adherence to tradition and maybe trying to keep my options open in case "The Big Man" chooses to exercise an option over whether those last minute attempts to enter the Kingdom will be honored.

Szelhamos, who wasn't particularly religious would probably be pleased that he's remembered. In the slight chance that such a possibility exists, then "why not?"

My sister started a Facebook page for our elementary school, a Yeshivah in The Bronx.

If you're not familiar with the term "Yeshivah," apparently based upon the remembrances of those sharing on Facebook, it is alternatively a wonderful place of learning and a wonderful place for the expression of sadistic and irrational behavior by Rabbis.

I went to grade school when corporal punishment was still permitted and even encouraged by parents.

Other than one particular Rabbi in the third grade, whom I credit for teaching me to behave myself in class, I don't really have the same kind of memories. I learned to behave because I valued not having my knuckles pounded by the edge of a wooden ruler.

My sister recently asked the group of about 100 alumni of the now defunct school a question regarding faith. She asked how they would currently describe themselves in that regard.

The response covered the gamut from atheist, to converted to orthodox.

Faith undulates, as well. Look at Bob Dylan. It can run hot or cold as the moment sees fit.

Look at me.

Even among the Amish, there's an expectation that thre will be a time to explore and to question the path set out for their lives. The ultimate expectation is that they flock will return home and forever stay on the righteous path.

Which gets me back to silver, the lesser of the precious metals.

Remember, no one of any repute staked his life and reputation on trying to turn lead into silver. The Golden Calf was gold, wasn't it?

Right now, despite the relatively small position that silver has in my portfolio, in the form of an inversely leveraged ETF. it's taken an unduly prominent position in my writing and fretting.

Silver has been like the devil or the snake in the Garden of Eden.

One of my very basic tenets has always been to avoid speculation. Nothing defines speculation like precious metals and leveraging on top of that.

Yet, Silver has also tested my other core tenet.

Avoid greed.

All throughout history the precious metals have done that to mankind.

In the case of the ProShares UltraShort Silver ETF, the rich call option premiums are snake-like enticing and have been part of a core strategy for me the past 6 months.

Just grab those premiums and sit back in the faith that silver will undulate.

But over the past two weeks my faith has been tested as silver keeps going up and up and the ETF, as result, keeps going down and down. That's in real distinction to its pattern over those previous six months when it was up and down and then up and down againa nad again.

That's a pattern that I could live with.

So while the market has been doing very well in 2012, I'm finding myself in an uncharacteristic position ever since I adopted the aggressive call option writing stratgey so beautifully described in wannabe Award winning book, Option to Profit.

That position is one that's trailing the S&P 500's performance for the past three weeks.

That will cause a crisis in faith.Scratch that. Ha caused. Make that "has caused."

As anyone who follows trends and popular opinion, you will know that once something appears on the radar screen, that tends to be the kiss of death.

In the case of precious metals, everytime a gold bar has found its way onto the front cover of TIME magazine, that spelled the end of the bull market.

Crocs? Same.

Last years' winning mutual fund sector is pretty much always this years' dog, and not in a good way.

In the case of the covered call writing strategy, the proclamation by Barrons Magazine that it was the only winning strategy may have just been the kiss of death.

The problem with getting older is that it's a bad time to lose faith, especially if you are by nature one who sees a role for faith in all aspects of life.

The difficulty comes in the fact that it's hard to put faith into something new, unless you happen to be a at death's door, in which case there's not that much time to mull over the options.

So it's very distressing to think that an aggressive covered call strategy has run its course, or is just not the right strategy for the moment.I've always understood "I want a new drug," but not "I want a new faith."

Mind you, questioning faith is not a very good thing to do while enrolled in Yeshivah or any other religious organization.

Faith requires faith.

Not questions and certainly not doubt.

As far as the covered call strategy goes, the potential for underperformance during an unbridled bull market isn't surprising. That's just the trade off that you make for accepting the options premiums. You have to give up something, especially if you;'re selling near the money options.

I get that and that can't shake my faith. Despite the fact that the premiums may be the Devil, a dalliance doesn't undermine faith. It may actually enhance it.

But still....

It is about the money and the bottom line.

In the case of the ProShares UltraShort Silver ETF the problem really hasn't been its sustained drop. Sure, its been distressing, but it hasn't been the root cause, because there have been plenty of sustained drops over the past few years and those have been weathered pretty well.

The problem has been that since the new option cycle began this past Monday its done nothing but go down and I haven't found the opportunity to hedge the positions.

The last time I owned a naked stock for more than a day or two was during circumcision and maybe during college streaking days.

How convenient. I can blame timing and circumstance for the failing and concurrently help to sustain my faith.

But in reality, it was greed that came into play.

Yesterday, before the Ben Bernanke press conference, both gold and silver were giving back some of their gains and I was getting ready to sell call options on a portion of my shares, which were all purchased at varying price points.

But greed convinced me to wait for an even greater drop in silver prices before making the hedges come to life.

Greed is the Devil. The time never came.

Greed is what destroys faith, if allowed.

The only way to fight evil is with faith and in this case, avoiding the use of margin by usury loving bastards.

Check and check.

Crisis averted.

Check out Recent PortfolioTransactions and Transaction Performance 

Most people go through two stages of life that they really like certainty and predictable patterns.

Really young kids and really old people. Both tend to get very cranky when their schedules are thrown off or they don't get what they were expecting when they were expecting.

I'm neither of those demographics, being uncomfortably in-between, but I do need the predictability in life to keep my balance intact.

I, too, can get cranky.

For as long as I can remember, ever since I've been interested in the release of the  "Federal Open Market Committee" (FOMC) statement on those Wednesdays, they have one of their eight annually scheduled meetings, the statement has been released at 2:17 PM.

The regularity of the timing led me to scoff at the reports that would cite the release as being anticipated at 2:15 PM.

Amateurs.

I never particularly cared why they chose an odd time, perhaps because it is a prime number and, after all these are economists and numbers wonks, but that was the routine.

By contrast, I do care why Comedy Central starts many of their shows at bizarre times, yet I've never been able to uncover an answer. I doubt that the prime number theory applies. Math is frequently not a strong suit for those in the entertainment end of the entertainment business.

In fact, I've always been so attuned to the FOMC announcement that it became a reason for regular party giving with a countdown to 2:17 PM among me and my many friends and admirers, although most of the time it was just me.

And by most of the time, I mean "always."

Comfortably seated at 12:28 PM, the characteristic voice of CNBC's Hampton Pearson cut in with a reading of the statement.

My first thought was that Pearson had gone rogue and decided to flip the middle finger to the embargo on the statement and  decided that he alone would control the markets.

I thought we'd hear doppler like screams coming from Hampton Pearson as he was being hauled away by SEC security people further away from the microphones.

But no.

How did I not get this message? The Cheetos aren't going to eat themselves now that the sense of party had been replaced by the sense of outrage and feeling of betrayal.

The announcement came with no unusual fanfare, just the usual post-release commentary, which hasn't been especially insightful for the past year or so, as nothing changes.

With today's report, the expectation is that there will be continued "no change" until 2014.

What did change were the prices of gold and silver which had opened the day with a long overdue drop, albeit small. That mad me happy, as I have a significant position in the ProShares UltraShort Silver ETF and that's been getting brutalized recently. Even worse, I'v had only very limited success in writing the richly priced call options on portions of those positions.

Sadly, that early afternoon reversal was really stunning.

But still, the academic question is "what the hell?"

My personal belief is that the FOMC got spooked by the recent CNBC series on CNBC where Steve Liesman so capably concurrently portrays the Federal Reserve chairman, a dovish and a hawkish member of the committee.

Probably wanting to undercut Liesman's growing influence and popularity with the spot on portrayals, right down to the obligatory hawkish bow tie, they took pre-emptive actions. Although, the purely fictional basis of the meeting as portrayed by Liesman was made clear by the lack of a well trimmed beard on his Federal Reserve Chairman figure.

So we'll never know if the character was based on anyone of importance. My guess is that it could have been Ben Bernanke, especially since Liesman didn't don a toupe.

With lots of hopeful eyes, including my own, focused on the market this morning in anticipation of a strong open following Apple's great after hours price pop, there was just a prevailing yawn.

That changed after the FOMC announcement.

What didn't change was the Google drop. For some inexplicable reason it was very weak today. The only news out was that it was planning to add more emphasis on Google+ in its search results. Apparently, that uncovered some critics who believe that will clutter the results with less relevant information that may have come from, say, Twitter, instead.

That and some Privacy Policy stuff. If that leads you to switch to Bing or Yahoo!, then Google probably didn't really need your business, anyway.

With Google recently deciding to not pay for the Twitter API feed necessary to populate its results, they must have some reason to believe that Google+, even in its cranky infancy may be a reasonable proxy to the Tweet, at least enough so so satisfy the needs of people requiring 5 minute old information.

You know, the ind that has been tested, verified and validated.

Does anyone really believe that if there was an apparent adverse effect on the quality of search that Google wouldn't toss out Google+ in a heartbeat or at least ante up the money to access the Twitter data? It hasn't exactly shown allegiance to its own "forever in beta" offerings over the years, so it wouldn't be unheard of to see them do an about face if it jeopardized the profitability of search.

It's all about the search.

Now what I've spent the day doing is searching for "mea culpas" from any of the "talking heads" that yesterday warned about Apple's typical large price drop after earnings were reported.

To distill their comments to its most basic essence, you would have to have been an unmitigated idiot to consider picking up shares in advance of earnings.

As I mentioned yesterday, the unanimity of those reports helped to scare me straight. They also helped me realize that I'm not quite the bad boy rebel contrarian that I thought I was, since that should have been a clear signal to buy more shares.

So it came as no surprise that my search turned up no results.

What the hell?

No one scratched their heads to offer up anything in response. "Yeah, I missed that one. My bad," would have been sort of nice and refreshing.

Certainly an apology isn't needed, because clearly, two well versed people can look at precisely the same information and come up with competely different conclusions.

The emphasis on the history of Apple's share price plunging immediately after earnings release is more support for the blog from earlier this week that "Experience is Meaningless."

Basing an opinion, however on the fact that over the past year Apple shares had plummeted each time after release of earnings, is akin to basing your betting strategy on the fact that the last four spins of the roulette wheel turned out to have been "black."

The only lesson learned is that no one has really figured out a better way to put pants on, so until that time, don't get scared straight from someone whose fly is down at least half the time.

What did make sense, although I didn't do so, was a $420 straddle, with the contract expiring this Friday. Either way, as long as the movement was big, there's a winner to be had, but I doubt that I would ever do that, since it's not in my core DNA to buy calls or puts.

I may need to re-think that intransigence, especially when it comes to those companies that have a history of big moves in response to earnings.

But then again, why wait for quarterly earnings when I can go to a casino seven days a week?

At least there, I can be served a free drink to help soothe my crankiness and might even find some mistakenly tossed out voucher.

The odds of that happening is much better than picking up a gem from the "heads."

Told you I get cranky.

Check out Recent PortfolioTransactions and Transaction Performance 

Given the fact that we've never even been able to teach any of our puppies any trick at all, the saying "you can't teach an old dog new tricks'" while perhaps not true in every situation, is definity true in my household.

Maybe I can blame that on "Low T," as it seems that just about everything else is being piled on its shoulders. Besides, that would make sense, especially if both trainer and trainee suffered from that malady.

In Laszlo's case, his descent into "Low T" came fairly suddenly, so I do  wonder whether his reluctance to learn any tricks is just a manifestation of his passive-aggreesive behavior.

Although I'm at the point that I'm not likely to learn much new anymore, I'm getting increasingly proud of my ability to adapt, if not learn.

I've certainly recognized my advancing limitations as I've completely given up on the idea of learning even the most simple of technical analyses.

I don't even do cost averaging anymore, but I continue to be able to count by "fives."

But over the past few years, I've noticed the ability to make some behavioral changes as push would come to shove.

Monday was a good example.

Armed with lots of cash due to the assignment of about 60% of my portfolio, in the past, I would have felt compelled to burn through all of the funds, regardless of where prices were headed on that day.

If they were heading down, that often was fine, as given the market's behavior, there would be a predictable bounce upward sooner rather than later and then why not buy at a presumed bargain price?.

On the other hand, there really was no rationale reason to rifle through the money chasing rising share prices.

But I did, over and over again.

Not yesterday, though.

Restraint and judgment helped to start this morning with a decent amount to still play with, looking for what appeared to be bargains that weren't there yesterday..

Had retraint not been there, I would have picked up shares of Deere at about $2 more than where they were purchased today.

I felt good about that, although that's just a small step resuting in a small advantage. Mostly, I'm proud of that small step because I did it all on my own.

Learning how to exercise restraint to prevent premature speculation is a big achievement.

But sometimes you need others to help you and sometimes they have to take drastic actions to scare you straight.

In my case, I needed to be scared straight into inaction.

Do you remember that series of specials describing the seemingly drastic and harsh measures taken to deal with hardened bad boys. Lots of yelling, lots of crying and then success.

Okay, maybe a suicide or two, as well, but by the end of the episode, all we saw wa success.

There was probably a lot of bad breath, too. That would get even the most hardened to go straight.

Another "dead ender" rescued from a life or misery, crime and dependence on society, at least until the cameras were on.

By the way, I do feel a need to remind readers that the version of "Scared Straight" that I'm referring to is not the same as practiced by Marcus Bachmann.

But yeah. That's me. Bad boy to the core. I needed the drastic kind of medicine.

In the past, I've written about how investors need to avoid the emotions of greed and fear. I've also thrown in "envy" and its derivative "fear of missing out." Not really emotions, but they're something.

But now I think it may be alright to be afraid.

All it took was being scared straight by what could have been disastrous results following some reckless behaviors taken during the last earning's cycle in October 2011.

I've chronicled it before, but in quick succession I bought shares of three momentum stocks: Amazon, Netflix and Green Mountain Coffee Roasters.

By itself, that's probably not a terrible thing to do, although doing it all at once is a little harder to justify.

In hindsight, looking at the charts, which I rarely do, they were hitting their peak levels, with the exception of Netflix, which had already come down by 50% or so.

I could probably rationalize those purchases as wanting to satisfy that small portion of me that still likes to speculate, as my remaining expression of living dangerously.

But the really stupid thing to have done was to have purchased those shares right before earnings were released. To be fair, they did seem like "screaming buys" at the time.

And people to respond to screams, sometimes even exiting their own behavioral DNA.

But you know how it is. The people that need to be scared straight are the ones that think they can take an easy ride to a good life, without paying the consequences.

Although the call options were great immediately before earnings, the reulting screaming free fall in the share's prices made it a real uphill climb in using successive week's option sales to try and cushion the drops.

Lesson learned.

So here I was this morning, with no one around to scream at me, no one to watch over me so that I don't become one of those recidivist statistics.

The cash that remained wasn't red hot, as I've learned that a level of restraint cools it off, bit it was still smoldering.

I looked at share prices of Apple and Amazon and so much wanted to add to the former position and re-establish the latter.

"Money, money, money." That was the chant that I heard being screamed right at me.

That is until I realized that Apple was reporting its earnings after today's close and Amazon just a few days later.

I hemmed, I hawed and then circled around the coffee table a few times, especially after salivating over the weeklycall premiums.

Then, to complicate things even more, every single commentator and analyst pointed out that over the past four quarters, at least, Apple has plummeted after announcing earnings.

Being the contrarian, to me that only mant that Apple would go up after announcing the latest numbers.

There they were. The proverbial angel and devil, one on each shoulder.

I wanted it so much, but I didn't want to go back into the dark place.

Instead, I went for the "bargain" priced Deere and picked up more shares of Morgan Stanley, which also goes ex-dividend in a couple of days.

I don't know what gave me the strength to resist the temptation this time around and only time will tell how long I can keep behaving in a judicious way.

Maybe it was a testosterone surge or maybe it was the fear.

Maybe I should try screaming at our dog and give him a shot ot testosterone

Check out Recent PortfolioTransactions and Transaction Performance