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.

The Barometric Pressure is Rising        February 26, 2010

I’m a reasonably smart person, but after 50 or so years of watching weather forecasts, I still have no idea what significance the barometric pressure holds.

What I do know is that my wife is an inverse barometer of what is hot and what is cool.

Just to establish a frame of reference, her birth coincided with the death of the Hula Hoop, Silly Putty and the comic strip Nancy and Sluggo.

When she finally adopted the mp3 player standard, she bought the Apple iPod Mini.

As soon as she did, the Mini was no longer cool and Apple, which has its fingertips on the coolness barometer recognized that immediately.

Their response was to introduce the iPod Nano and to forever disavow the very existence of the Mini and to retire the Mini color choices.

When she added Sirius Satellite Radio to her Volvo, Ford decided to sell Volvo and Sirius began its rapid descent into penny stock hell, from which it is struggling to escape.

And now, as a blow to Amazon, she has purchased a Kindle e-book reader.

As a holder of Amazon shares, I took this as a powerful indicator that the stock price will be heading south.

A couple of weeks ago when Apple introduced its unfortunately named iPad, I had no such fears. I thought the universe was big enough for both Bezos and Jobs.

Now I think that Apple will control the universe.

The problem that I have is what to do about that.

It’s been more than a year since I owned Apple shares. For a couple of years I had very successfully ridden the Apple wave and continually sold options, bought options, bought shares and sold shares.

Then came the Jobs’ health scare and I closed my positions, avoiding a big drop down to the $70 range.

Granted, Apple shares did very well without Jobs and now is back to $200 and I’ve missed the entire ride back up.

As rosy as the future looks at Apple, is there another Jobs related scare in the works?

A week or two ago it was announced that the highly private and secretive Jobs has agreed to collaborate with an author for an upcoming biography.

An authorized biography. That can’t be a good sign.

To me, it portends poorly both as a predictor of Jobs’ own assessment of his health and for Amazon’s fortunes.

The need to get that biography rolling could be a sad recognition that the clock is really beginning to tick away.

And even from his deathbed, the ever combative and competitive Jobs will figure out a way to wrestle market share.

I admire Jobs’ unspoken credo:

“The enemy of my enemy is my enemy”.

What are the chances that Jobs would allow his assuredly best seller biography be available on the Kindle platform? I’m sure that this will be the paradigm that he is setting up with publishers to give his iPad dominance in the e-book publishing arena.

What better way to show that sales would not suffer by limiting its distribution to a single platform and perhaps at a better deal than Amazon had been giving publishers.

It’s also somewhat ironic that Jobs’, who had built Apple and the early iteration of the iPod on the basis of proprietary technology and file formats, would bring out a product, the iPad, in direct response to the proprietary file format of the Kindle.

Genius. An opportunity is an opportunity.

I suppose that Bill Gates must feel somewhat sad that Jobs is diluting some of his enmity and now directing it toward Bezos, who has the best laugh in the entire Fortune 500, putting both Gates and Jobs to shame.

He should find comfort in the fact that there is enough hatred for everyone.

Having also owned Microsoft until recently, I would also love a chance to buy shares again, once it gets down to $28. It’s slowly getting there, having broken the $30 barrier, but unable to do much more. I like it when Microsoft stays in the $28-30 range. It’s a great stock on which to sell call options.

I never did understand the near universal dislike of Microsoft. I suppose it’s harder to dislike what it stands for these days, given the philanthropy of Bill Gates.

It’s amazing that the person who is probably the single most important person for the technology boom is probably also the single most important person in helping to wipe out malaria, using the highly technologically advanced mosquito net.

But as great as all of these are, the common wisdom is that technology will lead the markets in the early stages of a bull market.

To date, no one has identified the advance from Dow 6500 to 10500 as a bull market. Certainly, along with every other sector, technology has appreciated quite a bit in the past year.

But is there any more near term upside in the tech sector?

To me, it doesn’t really matter whether technology is a barometer of the markets or not.

That’s what’s so reassuring about covered call strategies. It doesn’t really matter what direction stocks move. Just as long as they do move.

Up, down. Just move, damn it.

So, I will probably hold onto my Amazon shares, especially since I just sold some covered calls. But, at the very first sign that my wife is actually adopting the technology, it will be time to cut loose.

Not her, but Amazon.

And so, I will probably go through the rest of my life watching weather reports and still not understand any of the barometric pressure nonsense.

But I’m comforted by the fact that I don’t really care to learn.

All I need to know is that I must do the opposite of what my wife embraces.

I Never Liked Jim Bunning              February 25, 2010

I’ve been waiting almost 40 years to get this off my chest.

Jim Bunning pitched a perfect game against my beloved New York Mets on Father’s Day in 1964.

Like Steve Carleton, he was a great pitcher.

And like Steve Carleton he is an incredibly opinionated guy, with a streak of meanness that pervades his entire existence.

Although to be totally fair, there is no strong evidnce, that like Carleton, Bunning is a raving racist and anti-semite.

But he probably is.

Despite what the internet says, Bunning does not have Alzheimers Disease. There’s no shortage of postings that attribute his strange behavior, comments and anger to that horrible condition.

No. He is just mean, rude, obnoxious and angry by nature.

Did I mention that he was stupid?

Even the Kentucky Republican Party is embarrassed by his behavior, and they’ve made no secret of their desire to just see him fade away.

Think Jesse Helms.

It always amazes me that the guys who are the most vocal are the ones that have never introduced any meaningful kind of legislation.

Think Jim Bunning.

Today, he continued his lambasting of Ben Bernanke. I didn’t get to hear his line of questioning, which is usually devoid of fact and filled with invective.

Today, I just heard an interview, in which he stated that Bernanke didn’t have the guts to preside over a rise in interest rates.

Guts? Not my words.

In fact, if Bernanke wasn’t in possession of lots of intestinal fortitude, he doubtlessly would have soiled many fine business suits over the past 2 years, as the world stood on a precipice, awaiting his guiding hand.

I’ve also watched Bernanke perform at many congressional hearings and have carefully watched his facial expressions and movements.

There is absolutely no evidence that he had ever had a voluntary or involuntary bowel movement during any of those highly stressful moments.

He always had the guts to stand down his harshest critics and every crisis thrown his way.

What really amazes me is that if you really want to see Jim Bunning get angry, just ask him anything about baseball.

Given that he has had no legislative achievements, but his illustrious baseball career led to his induction into the Hall of Fame, you would think that he might occasionally want to discuss those glory days.

As a member of the infamous 1964 Philadelphia Phillies, who blew a huge lead in the waning days of the season, failing to get into the World Series, one may say that Bunning didn’t have the guts to withstand the pressure of those final days.

In fact, real baseball fans will know that as the “go to guy” in that final week of the season, Bunning fell flat each and every time he was asked to perform.

Granted, he and Chris Short were each asked to pitch every other day for the last 10 days. That was probably too much to ask, but isn’t that when the tough get going?.

Oh. So now I know why he doesn’t want to talk baseball.

But what else does he have?

On a positive note, like another great pitcher, Sandy Koufax, Bunning never pitched on Yom Kippur.

Now, in a show of genteel anger, the president and congressional leaders sat down for a televised discussion of health care. What was supposed to show the nation the common ground that existed on both sides of the political aisle, instead demonstrated how arrows could be slung without emotion or visible anger.

Or facts.

Well done. Everyone looked like a jerk.

It may finally be time to scrap our system of checks and balances and appoint a beneficent dictator.

And not Jim Bunning.

I was thinking more like Dean Kamen.

Who? You know, the guy that invented the Segway and lots of other things. He’s quirky, he’s brilliant and he loves mankind. And best of all, he knows how to make money.

Kamen. Kamen. Kamen.

He would also be our first curly haired leader.

What’s not to like?

Not to beat a dead horse (see yesterday’s blog), it also seems to me that every time Bunning is prominently featured on CNBC, the market plummets.

Sure you can blame it on the bad jobs numbers, but I choose to blame it on Bunning.

I did take the opportunity to buy back some options contracts on DuPont and Sallie Mae, locking in quick profits and sold even more Sirius puts.

In the meantime, there is nothing good on the horizon, but the horizon is as close as tomorrow.

For now, I am getting ready for our little trip that starts tomorrow.

My wife and I are going to the Hershey Spa in Pennsylvania.

I’ve never been to a spa, nor have ever gotten a massage.

She loves those things. I’m somewhat squeamish.

About an hour ago she informed me that she signed me up for a “chocolate hydrotherapy” session, bathing suit optional..

I looked at her in a look of amazement and asked myself, WWJBD?

What would Jim Bunning do?

What do you do with a Dead Horse?       February 24, 2010

This is America,

We all know the correct answer to that question.

The answer is: “C. You beat it.”

If you chose “D. You beat it.”, we would accept that as well.

Additionally, full credit would also be given for “A. You beat it” and “B. You beat it.”

I think that anyone who hasn’t spent a decade in some cave in Tora Bora knows the answer to that one.

That’s why today was so confusing.

Two of America’s favorite whipping boys were testifying in front of Congressional hearings.

You don’t even have to be a bad boy to be berated by the morons asking the questions, but sometimes the targets are easier than at other times.

So here were these dead horses, Ben Bernanke and Akio Toyoda.

They had “beating” written all over them.

Bernanke is an old-timer. He gets beaten up all the time, but still manages to keep his cool and is able to ignore the grandstanding and stupidity.

I’d love to be a fly on the wall when he tells a trusted someone his true feelings about the elected idiots who care only about their personal image and their re-election at the expense of the issues.

Toyoda on the other hand, is a newcomer.

It’s so much fun to see newbies sweat.

I was all set for the fireworks. You just knew that there were going to be some good beatings. The kind that would make you wish that you were a rented mule. At least that way, you’d get off easy.

In fact, giving testimony before Toyoda was Ray LaHood, Secretary of Transportation.

What a name, LaHood. It must be the anglicized version of La Costra Nostra

In case you’ve never seen or heard Secretary LaHood, he both dresses, looks and sounds like a hood. Whereas, all of the other cabinet members wear the required dark business suits, he’s routinely wearing some bright sport jacket, has his hair combed back with just the right amount of extra mousse and talks as if he has a wad of tobacco and a couple of toothpicks in his mouth.

Martin Scorcese could have ended his search with LaHood and would have been home free for 30 years or so. And he’s aged better than DeNiro.

So Lahood, the transportation hood, was getting those testy congressman ready for their feast upon the carcass of Toyoda.

But a funny thing happened.

First of all, Toyota’s stock was up 3% in the trading before the testimony.

That seemed a little surprising, but at least you could easily predict a swan dive later in the afternoon, as the hearings unfolded.

But what was really surprising were the softballs that were served up to Toyoda and his henchman Inabi, who despite having been with Toyota for 40 years, claimed that he had only recently joined the company.

Inabi and Toyoda were horrible in their responses. It was inconceivable that the president of Toyota, the gransdson of the founder, and himself a qualified test driver, knew nothing about any of the alleged safety related problems. Especially since NHTSA sent a team to Japan in December to discuss these very safety issues.

“Oh. December. So long time ago. Americans have so very large penis”

But they both kept getting free passes.

Roger Clemens even did a better job on The Hill. At least his disremembering was cute.

And so, the great expectation that Toyota shares would drop, never materialized. In fact, shares ended up the day by more than 4%.

No beating on Wall Street and no beating in The Capitol.

The real duplicity happened earlier in the day, as Chairman of the Federal Reserve, Ben Bernanke appeared before the congressional committee for his routine skewering.

Another dead horse? Another beating?

Not in this bizarro version of America.

In fact, the best moment of the day came when Bernanke responded to a rambling question from the congressional Libertarian Obstetrician, Ron Paul.

Fresh off the great straw poll victory in this past weeks’ C-PAC meeting, Ron Paul was strutting his usual conspiracy stuff.

What these hearings really need is Alex Trebeck.

“Congressman Paul, could you put that in the form of a question?”

When it was finally his time to respond, Bernanke referred to the question and its suppositions as “bizarre”.

But what was really bizarre was the incredible disingenous about faces that we should be so accustomed to.

The very people who were Bernanke’s biggest detractors during the period preceding the vote on his re-appointment, and were among the unheard of 30 votes against Bernanke, all prefaced their initial questions with the following statement:

“Congratulations on your re-appointment, Mr. Chairman”.

I don’t think you can say “A**hole” on the internet, but some version of that word must have made an appearance in Bernanke’s mind, albeit briefly.

So as it turned out, the day was a snoozer.

I didn’t do much trading today, just some sales of call options on DuPont, Dow Chemical and the Financial Spider (XLF). I also picked up more shares in El Paso and tried selling some more Sirius Jan 2011 puts and Yellow Roadway puts, but couldn’t get my price.

Tomorrow, I’m going to check out the situation with Freddie Mac. They just reported earnings and for the 3rd quarter in a row, they have not had to take any money from the Treasury.

I think that they are also safely above $1 and may consider selling long term puts on their shares, as well, if the premium is right (2% per month).

In the meantime, with no beatings to be had today and the clock ticking away so seducingly, I’m going to have to take things into my own hands.

Is Nothing Sacred?                     February 23, 2010

You already know the answer to that one.

Over the years, everything that we’ve been taught and thought to be good for us, turns out to be anything but.

Whereas most people measure their being by knowing where they were when Kennedy was assassinated, or when OJ was in the Bronco, I use a different standard.

It was a Saturday and I was going to the movies to see a Bowery Boys double feature and some Looney Tunes.

But first, I was getting my hair cut, when the announcement came over the radio.

The Surgeon General had announced that smoking was hazardous to health.

There was an audible gasp, as well as lots of hacking coughs, whose sound transmission was delayed by the thick cloud of smoke in that small Bronx barbershop.

Then came the tsunami.

Soon, Ralph Nader was a household name and would eventually go on to become our 49th President.

The Corvair, movie popcorn butter, red meat, heroin, unprotected sex, freon, metal fillings, alcohol during pregnancy, race related humor and more every single day.

It’s all bad for you.

Who knew? Who suspected?

As our world was getting less and less safe, for more than 20 years, at least I’ve been able to find comfort in the absolute safety of one thing.

Of this I was always certain.

My Toyota will never let me down. Never.

So here we are today, and the US head of Toyota is testifying before a congressional committee. Aside from his shedding a tear or two, he didn’t fare too well.

As the Talking Heads once sang “Well, how did I get here?”

Tomorrow should be even better, as Akio Toyoda, the grandson of the founder, will give his testimony.

I will say what many others won’t.

Deep down, I know that many are hoping for a C-SPAN televised “hari kari”. That would certainly boost ratings and effectively challenge network reality fare.

It seems that with all of this shame, that would be the only honorable thing to do.

Am I wrong here? Am I the only one who sees the obvious solution to this crisis?

But through all the tumult, especially of the last couple of weeks, Toyota stock has stood fairly stable, after its initial fall. Of course, if you were on the short end of that initial 20% drop, that’s not much of a consolation.

Toyota is not one of the stocks that I habitually follow, but I am getting intrigued, especially since the nearest out of the money call option has a 2% premium.

I think I’ll wait until I hear it straight from Akio or his interpreter.

What also intrigues me though, is that I’m not certain that the market has factored in the lost revenues from plant closures. The big fall in Toyota’s share price all came before the proverbial “other shoe” dropped, and Toyota basically suspended all US sales.

Toyota puts, anyone?

I almost never buy naked calls or puts. Just a tad bit speculative for me, but this one seems right, especially as I now watch testimony from Toyota drivers and their gruesome experiences with their runaway cars.

But since I can see both sides of this argument related to the prospects of Toyota’s share price, I’d stay away. I don’t like the odds of a coin toss.

On a less speculative note, the only trade that I did finally make, on this downer of a day, was selling $1 January 2011 Sirius puts. I took my own advice to Option to Profit subscribers and sold 80 contracts, putting me on the line for 8,000 shares. But the $0.25 premium was worth it.

I hope.

Getting back to the market, it wasn’t Toyota’s woes that caused stocks to head south this morning.

The rest of the market took a tumble this morning when the monthly consumer confidence numbers were released. They had the biggest monthly decline that anyone could recall.

It seemed odd that consumer confidence would go down so much, when all of the talking heads are saying that the economy is turning the corner.

Maybe they only interviewed Toyota owners.

Now, all of these same talking heads are saying that we’re due for an even greater fall. It’s a good thing that I didn’t listen to them yesterday, otherwise, I’d be on the wrong corner.

At least Toyotas still know how to turn a corner and there’s no evidence that they fall down, either.

Yet.

Now if only they could get consumer confidence to accelerate. Toyotas seem to be good at that.

Maybe the economic stimulus package should include the distribution of floor mats to all Americans.

Clean feet and unbridled acceleration. Both Japanese customs, although one is more grounded in tradition than the other.

What is truly amazing, though, is that Toyota has single handedly bought the American political system back from its past decade of dysfunction.

On what other topic could Jason Chafetz (R-Utah) and Dennis Kucinich (D-Ohio) repeatedly find common ground during an interview this afternoon?

Kucinich doesn’t even agree with other Democrats on anything.

So is this all the modern day version of Armeggedon?

I don’t think so, but we do have an immense need for a whipping boy, and if illegal Mexican immigrants are no longer in vogue, why not Toyota.

Forget the fact that our Toyotas are all made in the US. They still have that foreign sounding name. It’s not like they’re Chevrolet.

Now that’s American, through and through. I’ve always wondered why they don’t pronounce the “t”.

At least that’s still sacred.

On a Sad Note                         February 22, 2010

My mother and I didn’t have that much in common.

She was very serious and responsible. She certainly was the glue and moral compass for our family. I, on the other hand am apart at the seams and don’t know what direction “up” is in.

The rest of our family were jokesters, irresponsible and rarely practiced personal hygiene.

As far as I know, no one ever had a serious conversation with Szelhamos, or if they were fool enough to try it, they soon realized that it was not going to be very fruitful.

One thing that I did share in common with my mother was a fascination with the days’ obituaries. We both found it amazing that there were so many unsung heroes, who lived amazing lives and contributed so much to us all.

Like her, I still start off every morning scouring the New York Times Obituary page. She would have loved the 24/7 availability of on-line obituaries. She especially would have liked the obituary archives of The New York Times.

Where else would you have the opportunity to see Geronimo’s obituary?

I happen to specialize in sports related obituaries. She was much more of a renaissance person, more or less a liberal arts major in Obituaries.

The other day I learned of the death of Jim Bibby, a baseball player. He once pitched a no hitter and was a key pitcher for the Pittsburgh Pirates in their 1979 World Series win.

I always thought of him as a New York Met, because I still remember when he was signed as a prospect more than 40 years ago. As it turns out, my memory was a bit faulty, because he actually never pitched for the Mets, as they traded him away in 1971, still only a “prospect”.

Certainly, his death is sad, to his family and friends and maybe even his former team mates, who are also dropping like flies.

But what saddened me upon reading the news is that I had no one to share that news with.

I once had a friend, who, like me, was sort of a baseball savant, and we used to out-trivia one another, especially with real minutae. He was better than me, but occasionally I would best him. He was especially well versed in Pittsburgh related sports news.

In a way, it was quite comical that we would often start out the morning asking each other “Hey, did you see who just died?”, and then play the impromptu trivia games.

Although we never admitted to it, I’m sure that we would quietly also measure our own mortality based upon the passing of our boyhood heroes and memories.

Now, he’s gone too.

So I have only the blog to talk to and see if I can out trivia it about Jim Bibby.

Somehow, it’s not as satisfying, even though I always win.

Actually, I suppose it’s very satisfying. Winning is good.

At least it’s a good thing that it’s Monday, especially the first Monday of the current options contract. That usually keeps me busy enough to keep my mind off of other things.

Like death and trying to understand why the Mets ever traded Jim Bibby in the first place.

I guess those are both equally imponderable topics.

Oh yeah, and taxes, too. Lots of capital gains. I suppose that’s good news, but sooner or later, you have to pay for it, and there’s no estimated tax payments to offset the bolus of a blow from all of those gains last year.

“Bolus of a blow”. I like that.

On mornings like this, I often find myself considering the repurchase of stocks that were assigned away from me. I like the comfort of familiarity. But even then, the tax man is involved.

Stupid “Wash Rule”.

I thought I had already made it clear that personal hygiene was not my strongest suit.

So I often repurchase shares of the same stocks, but not in the same accounts. That’s where the tax deferred accounts really come in handy.

Thank you Senator Ira Roth.

But once again, today was a boring day. Although, in hindsight, I liked it better that way, than in the past few months, when the first Monday of options trading saw stock prices significantly climb, only to plunge, just as I was getting ready to sell options.

There’s nothing so satisfying as “buy high and then forever hold”.

Last night, I thought that we were in for exactly the same scenario, as the Asian markets opened with a major rally that fortunately didn’t spill over to today’s trading.

For the first time in a few months I was able to get some decent prices on new purchases. Mostly, I bought back shares in stocks that were just barely in the money and will likely sell “in the money” call options on them, in the expectation that the shares will go down in value over the next few weeks.

I know that it doesn’t seem to make too much sense to buy shares with the expectation that their value will drop, but somehow it seems to work.

All it takes is a lot of attention.

In general, that’s not something that I have in deep supply, but for some reason I can stay very focused on these once a month kind of Mondays.

As I think about it, my mother also had a very hard time focusing on things, but neither one of us was born recently enough to have Ritalin come into our lives.

How did people survive before the days of Ritalin, iPods and Viagra?

As I read Geronimo’s obituary, there was a humorous anecdote about how he had died shortly after taking an overdose of Viagra and they were unable to fully close the lid on his coffin.

I’m not certain that his grieving nation, followers and relatives thought it to be amusing, but 101 years later, it’s probably no longer “too soon”.

The brief discussion about Geronimo did not come by coincidence.

His passing saddened us, and for many, was the end of an era.

For others, though, like Ben Cartwright, the passing of his old nemesis gave him the opportunity to follow a different path and to start life anew.

And that’s what I did this Monday.

Jim Bibby is gone, as are many others. Predictably, there will be even more to come.

But just as predictably, each Monday following the third Friday of the month, there is a certain kind of re-birth, one that brings hope and joy.

Today was that day.

To Jim Bibby and those who would have remembered him.

Things I Don’t Understand       February 19, 2010

The internet is probably not big enough for me to list all of the things that I don’t understand.

For starters, I don’t understand the concept of an expanding universe. It’s sort of self-explanatory as to why it’s hard to understand the concept.

Don’t make me explain it.

I also don’t understand how the repository of information on the internet can continue to burgeon is such an unabated fashion that it will soon exceed the outermost reaches of an expanding universe.

Whoa. That blows my mind, dude.

No more for me. I’m done.

Now, what I really don’t understand is how Szelhamos Rules has received about 300 hits in the last couple of days. Unfortunately, my one time daily reader from North Vietnam is not yet among the most recent group.

Here’s my guess.

It’s because of the flow of great new contributions to “Szelhamos Laughs”.

Yeah. That’s it.

Fortunately, in addition to all of the things that I don’t understand, I have to add the definition of the word “arcane”.

What I also don’t understand is why I don’t have even more subscribers to Option to Profit. I posted recommendations for this month on Wednesday evening for subscribers and with the closing bell this afternoon the results were in.

And I looked upon what I had fashioned and it was good.

All 4 ultra-short term recommendations were winners. Best of all, each of the recommendations had their options exercised, so subscribers are free and clear at the end of the day with a nearly 2% return for a couple of days.

You can view the recommendations for the past 10 months in our archives page.

Now, here’s a freebie.

I almost never make speculative recommendations, but I think this one is a real beauty and can give a 25-30% return for an 11 month holding period.

Everyone knows about Sirius Satellite Radio. Maybe a great product, maybe not, but assuredly, a lousy stock.

And that’s true whether you held it in its lofty heyday or bought it as a speculative play, as so many have done.

If you first bought Sirius six months ago, you think it’s a great stock.

But as Sirius has finally broken a $1 share price, now is the time to sell $1 puts on it.

What that means is that you are obligating yourself to purchase Sirius shares from someone at $1 per share, exercised if Sirius shares go below $1 before January 21, 2011.

In return for that obligation that you carry for 11 months, you will get a “contract premium” of $0.25-0.30 per share, based on Sirius’ current stock price.

If you think Sirius is going to continue going up and have a speculative streak, you can just buy the stock.

But if your more conservative, as I am, let someone else take the speculative risk and let them pay you for the right to lose money.

Is Sirius going to go up?

I don’t know, but I think it’s more likely to go up than to go back below $1, 11 months from now.

As you’ve already figured out, because you, the astute reader who knows the meaning of the word “arcane”, Szelhamos Rules is just a shill for Option to Profit.

How embarrassed I must be to have been discovered for who I really am.

A shilling addict.

But not as embarrassed as Tiger Woods, who, in his own way and addiction, has been every bit as much of a shill. The difference is that his respite from shilling has cost him about $150 million. My shilling has netted me an estimated nothing and not many happy endings.

Not even a Shilling, mates.

On a positive note, I guess that my ultimate fall into disgrace will be a lot less steep and a lot less noticed.

As I sit here watching his “press conference”, I still can’t understand why he needs to hold a press conference.

But I do understand that this will make for another great SNL skit.

I’m guessing that Betty White will play Elin Woods, the long suffering wife of the adulterous Tiger, who should be portrayed by Fred Armisen, you already does an unbelievable Barack Obama.

If only I was as good at picking stocks as I am at central casting.

As a man, and an objective American consumer and sometimes investor in some of the companies that Tiger has represented, all I can say is:

“Way to go, Tiger”. (Add a couple of winks, nods and a high five or two. Maybe even a running and jumping chest bump).

I know, this is supposed to be about stocks, but you get what you pay for (note to self: increase subscription rate for Option to Profit, because there is no extraneous drivel).

So here it is, anyway.

Nothing much happened today. The markets closed up, but just barely, to end the options contract month. The real news was that it was up for the fourth day in a row.

The even bigger news was that for a few short moments, the market was finally in the black for 2010.

That didn’t last long.

Not one to gloat, but while the S&P 500 is still down 0.5% for the year, the Szelhamos Portfolio is up 1.2%

And it’s basically done just a nickel at a time.

Today, for example, I sold JP Morgan Chase February $40 call options. Sure, it was for only $0.10 per share, but so what? The options expired a few hours later, and as far as I know, there’s no white powder on the profits.

And if there was white powder on the cash?

Exactly.

So this weekend will be much like the War Room in the White House.

The only difference between my War Room and that of the White House is that I actually listen to Colin Powell’s recommendations.

It will be time to map out strategies to replace some of my favorite stocks that were assigned. Dow Chemical, Sallie Mae, Berkshire Hathaway, Chesapeake Energy, Riverbed Technology and VMWare. There are probably a few others, as well.

Some, I’ll undoubtedly buy back on Monday or Tuesday and just sell more options. Otherwise, I may look at some stocks that were exercised from me last month and whose prices have gone done enough to warrant a repurchase.

The pattern for the past few months has been that stocks have gone up the few days before options expiration and continued their climb for the next day or two of the new options contract.

Unless you locked in options premiums on the first day or so, you would have seen the opportunities vanish for the next couple of weeks, thereby limiting total return.

So if the market is up again on Monday, I won’t be greedy. I’m going to assume that will be a short term peak and will sell contracts as quickly and profitably as I can.

At least there’s one thing that I do understand.

Rage Against Everything?        February 18, 2010

Sometimes it’s hard to know what to write about.

That’s especially true on those days that I’m working and seem to be shut off from the world outside of the stock market.

On those days I always have my stock ticker running, especially the first few and last few days of every options cycle, but I don’t necessarily follow the important day’s events, as much as I love The New York Times website.

But let me start by asking readers a very simple question:

“Have you ever been so mad at the IRS that you set fire to your house, flew a single engine plane into a federal building and then killed yourself?”

Please contact me at iamaravinglunaticofamaniac@szelhamos.com if that describes you.

That’s the sort of story that I missed today. That and Bernanke raising the interest rates charged to banks for their federal funds borrowing.

Now I understand how rational people can have irrational thoughts if their entire portfolio was invested in Enron or WorldCom, but I’m still having a hard time understanding how the IRS, George Bush and Capitalism fell under the same umbrella of rage.

I also understand the rage against banks that have been getting funds from the Federal Bank at essentially 0% and then catapaulting their own profit, while not re-investing those funds in the form of reasonable interest rate business loans.

I also understand why many were and still are enraged at the universe of Bernanke’s actions over the past few years.

But fly into a wall?

Oh rage. Sometimes you can be so irrational. Just like the market irrationally moving up on the announcement of increased interest rates.

Long ago readers remember that only the irrational is truly rational in the marketplace.

In retrospect, maybe I’m better off living as a hermit. And actually, while hindsight holds court, it wouldn’t really be that tragic if some of Bernanke’s detractors on the polar extremes of the political spectrum considered their own in-flight implosions.

Perchance to dream.

But being a hermit does have its advantages. That way I can revel all by myself when everything seems to be going just as planned.

Share? I share my joy with no one. Jim Carrey’s Ebenezer Scrooge was talking right to me.

Take today, for instance.

During the day, I was very pleased with the way the market was behaving.

As hoped, I made about 10 very short term trades, selling options for contracts that are set to expire tomorrow afternoon. Textron, Chesapeake Energy, Dow Chemical, EnCana, Halliburton, Google and Freeport-McMoran come to immediate mind.

I call this “milking stocks”. None of these trades were for big bucks, but put altogether, it makes for a really nice return, especially for only a day or so, until the February contract expires tomorrow. Basically, I was just squeezing a few extra dollars out of these stocks, by letting speculators give me the money they’re willing to throw away.

That is precisely the strategy used in Option to Profit and it has worked well. Unless there is a drastic reversal tomorrow, Wednesday evenings 4 recommendations should all work out really well, netting a 2% or so return for 2 days.

That’s nothing to rage about.

In fact, I had absolutely nothing to rage about today.

I wonder if that sort of realization would make Lewis Black upset.

Although I do like to have things to rant and rage about, today was not one of those days. On those days, it’s very easy to find something to write about.

But really, what I had intended to write about was what made this a truly special day.

Mostly, what made this a special day was that I was able to successfully knock another item off of my spouse’s rage list.

I shaved my beard off this evening, thus correcting the situation that she referred to as that “ridiculous beard”.

I still have a number of items to go, but this was a big one.

After all, it was her birthday today.

The electronic birthday card, flowers and dinner at the town’s chique new wine bar were pretty much expected.

But the big beard shave off?

That will buy me enough credits for a few weeks.

She doesn’t really rage or rant, but this way I can take credit for the lack of rage on her part.

Luckily, she doesn’t do our taxes, can’t fly and is reasonably ambivalent about George Bush.

But effective immediately, I’ve begun to grow my beard back.

That’ll give her something to rage about.

Soros, Lampert and Paulson  February 17, 2010

40 years ago, the one-time scion of early Rock and Roll emerged from oblivion to sing a soulful homage to yesterday’s heroes who met their deaths much too early.

“Abraham, Martin and John”

When Dion sang those words, you felt a tear come to your eye as you envisioned the lives of great men ended far too soon.

This mournful and soulful song was crooned by Bronx’s Little Italy favorite son and captured the mood of a generation.

And when he added the reference to “Bobby” near the end of the song, you were reminded that terrible events are just part of our daily existence, robbing us of our idealism and youth.

The salty tears almost ruined the cannoli, but sometimes the burning desire to ingest is greater than the sorrow.

So, it was with a sense of mournful deja vous when I heard that 3 great financiers have recently invested heavily in Citigroup, the one-time scion of worldwide finance.

As a bank, I love Citibank. I’ve been with them for more than 20 years, even though the nearest branch is now about 30 minutes away. I don’t even have to lick their deposit envelopes. They’re self-adhesive.

What a bank.

As an investment, the only way that I’ve made money with them is by selling put contracts and by taking a capital loss on my taxes for my stock sales

Not my favorite stock.

At those times, you actually wish that you were in the 125% tax bracket.

Fortunately, Citigroup tax losses will at the very least offset some gains.

You can rationalize anything.

I hate Citigroup stock.

Well, here’s the thing. Soros, Paulson and Lampert are all well renowned investor billionaires. Obviously they know what they’re doing and they’ve been at it for a while.

I’m sure that for their ideals, they would sacrifice their lives, much like the heroes of yesterday.

Soros happens to be Hungarian and stands apart from most others in his small group due to his liberal political positions and his philanthropy. He was also in trouble with French authorities on charges of currency manipulation.

You did say convicted? Uh, no. Never convicted

I think that he an Roman Polanski share a chalet in Luxembourg.

Like the others, he has also been on the wrong side of some contrarian bets, especially in the currency markets.

Paulson made a killing in sub-prime, as a contrarian, and recently dumped a ton of money into gold (at its high point). So far, its been reported that he hasn’t been able to recruit quite as many investors as he had envisioned.

Parenthetically, or maybe not so much, I sold some gold coins right after Paulson made his announcement a few months ago.

Eddie Lampert, who has been touted as the next Warren Buffet, now owns Sears. He reportedly bought the pathetic scion of retailers for their commercial real estate assets.

Did I mention that he purchased Sears at the peak of the commercial real estate boom?

So maybe that’s why no one really sheds a tear when you hear the chorus of Soros, Paulson and Lampert. My cannolis are certainly much sweeter for the munching.

But yet, all 3 now make a big stand on Citigroup.

Maybe not a big stand for them, but still, a significant statement.

What gives?

Although Citigroup is up 2% in the early trading, the options markets don’t seem to agree. Given that options buyers are usually a greedy bunch, looking for a quick strike, it’s telling that even they aren’t biting.

As opposed to Abraham, Martin and John, who had legions of fervid followers among the common populace, I don’t think the same can be said for our modern trio.

Yet.

One thing I will be keeping an eye on is the January 2011 $4 call on Citigroup, with Citi at $3.40 right now. If that premium goes up, and it is only $0.36 cents, I might consider picking up some shares, selling options and forgetting about it until next January.

The scenarios? In the worst case, Citi goes bankrupt and you lose everything, other than the options premium. Best case? You net $0.60 per share and the options premium, resulting in about a 30% or more return for 11 months of holding.

Or, if you think that price shares are going to rise, sell in the money March 2010 Citigroup $4 puts, with a great $0.62 premium. In the worst case, if shares do not go above $4 by March 19th, you’ll be obligated to buy shares at $4.

I don’t typically like “speculative” plays, put there may be a place for this one.

The fact that the herd isn’t following makes me feel positively about today’s heroes’ contrarian investment.

Anyway, here it is 11 AM. The first anniversary of the 2009 Stimulus Package. Which is quite different from the Stimulus Package I found underneath the bed. I think the ear marks are actually explained by its aural use.

But that’s an unnecessary digression.

I don’t usually start blogging so early in the trading session, but so far, despite the Dow being up 30 points, it’s pretty boring.

What does have me excited, though, is that by the close yesterday, my portfolios were back in the black for 2010, being up by 0.4%.

Doesn’t sound like much, but the S&P, for the same period was down 1.8%.

I always look at the differences in rates of return as how that difference effects the amount of time necessary to double your portfolio’s value.

Assuming an annual 7% rate of return, that 2.2% difference reduces that time from a bit more than 10 years to just 8 years.

Given that my life expectancy is 17 minutes, that’s quite a difference.

Due to the “tremendous” success of Option to Profit, which by the way is making its monthly recommendations tonight for subscribers, I am able to retain a full time actuary, who continually updates and handicaps my condition.

He tells me that canollis are good for the circulation.

What would I do without him?

A generation later, it almost makes me want to cry.

My Backyard             February 16, 2010

My backyard is filled with snow. Lots of snow.

Thanks to Presidents past, I used yesterday’s much needed day off from the rigors of blogging to shovel a path to my mail box so that I wouldn’t be delayed in opening up publisher’s rejection letters.

Even Ed McMahon, of blessed memory, said “No!”

In hindsight, I now regret having bad-mouthed James Polk during that drunken brawl at the Charles Schwab Investment Seminar. It probably wasn’t his fault that they gave my Lemon Chicken to the neanderthal to my right.

Anyway, this morning having just finished watching President Obama’s energy conference, I learned that the first nuclear power plant in 30 years will also be in my backyard. I thought that those were the sort of things that weren’t allowed south of the Mason-Dixon Line.

My realtor, Jim Crow and Sons, has let me down, once again. Next time, I’m sticking with Knowles, King, Kennedy and Kin.

But, if that’s what it takes to get rid of all of this snow, then I’m all for it.

Fortunately, today’s projected snow never did materialize and I suppose that there is something appealing about brightly glowing green ash and those cute 3+ eyed fish (so prominently displayed on The Simpsons), but I can’t help but think that today’s projections are tomorrow’s disappointments.

To be totally honest, that last line represented a minor modification of the ad campaign I had designed for Planned Parenthood, so many Supreme Court Justices ago:

“Today’s conceptions are tomorrow’s disappointments”.

Even though I don’t retain the rights, I’m certain they won’t mind.

I can only guess that every analyst on the planet will be now talking about nuclear power investment plays, but before anyone gets too excited, I think that most people would still prefer snow in their backyard.

Before deciding on my own personal preference, I attempted to contact Matt Groening regarding the “cuddle factor” of those irradiated fish, but he was unavailable for comment, as he was continuing to struggle with slipping into his luge outfit for today’s all important second run.

Honestly? I had him more pegged as a curling kind of guy.

Fortunately, his being otherwise entertained allowed me to devote my full attention to today’s market action.

At the end of a 170 point gain for the day, the net result was that I did nothing, other than to continue wearing down my couch.

What was I hoping to accomplish? After having made 125 trades since the beginning of the year, I was still hoping to make a few more options contract sales before this Friday’s expiration. After all, I do have some recommendations to make by tomorrow evening for those foolhardy subscribers to Option to Profit.

Normally, I wouldn’t have many positions still available for trades so late in the options month, but since last month’s expiration, stocks first headed steeply downward, only so show some recovery in the past week. What that has meant has been reduced opportunity for good price points as the month wore on.

Huh?

Just go with it. But instead of a monthly 4% or so income from premiums, so far the February contracts have only returned about 2.5%

As expected, despite today’s climb, Berkshire Hathaway did decline 1.1%, but not as much as I had been hoping. After today’s market close, Berkshire Hathaway’s quarterly holdings were disclosed and I think that their shares are likely to increase tomorrow.

In the meantime, everyone was still focused on Greece and how the EU seems to be unnecessarily drawing out a resolution to their financial crisis. Mostly, what they were focused on was how the markets had decided not to focus on the EU dysfunction.

Perversely, when news of a bombing of a JP Morgan Chase office in Greece was announced, shares of JP Morgan, which had been badly lagging today’s market, did an about face and ended up gaining more than 2%.

As an owner of those shares, I suppose I should endorse those kind of actions, but I have a very slight uneasiness about tying my prosperity to wanton acts of violence.

Did I mention that it was only a very slight sense of unease?

For a enduring 3% gain, I’d be the first to raise a glass, but at 2%, I still see some ethical issues.

Clearly, it’s the ability to see nuance that distinguishes us from the animals.

So, as I was watching just about all of my positions advance throughout the day, it was frustrating not being able to pull the trigger on a single trade. With the recent upward momentum the risk-reward benefit with just a few days left in this contract month is getting better, especially if stocks can maintain that upward move tomorrow.

All I want to do squeeze out an additional 0.5% over the next 3 days. Since each half percent represents more than 2 days of actual work, I would be able to even further wear down the couch.

I’m still up in the air regarding strategies to employ over the next couple of days, but I’m leaving no stone unturned.

I’ve even checked with leading religious authorities and they are divided as to whether praying for additional stock holdings related strategic bombings would merit any number of virgins in the hereafter.

Since I’m not one to waste prayer without some sort of eternal guarantee, I’ll probably just continue to glue my eyes to the computer screen and the ticker crawl.

It must be all of that eye fatigue that explains that lime green haze I see in my backyard.

Lovely.

Administrative Details      February 12, 2010

I really hadn’t planned on getting bogged down in administrative details so quickly during the victory tour, but these items really couldn’t wait.

As it turns out, my spouse, who is an otherwise an avid reader of all things written, but only reluctantly and under great protest would read this blog in its initial incarnation, informed me that I had omitted a grievous sin in recounting her list detailing my shortcomings.

So, for completeness sake, here’s what I omitted:

• always tucks shirt in - looks nerdy

Alright, now it’s out there.

The other item, though, really took me quite by surprise.

In the nearly 300 previous blogs, no one responded to the call for submission of humorous cartoons or other items to Szelhamos Laughs.

That is, until today.

I’ve posted it for your review, but I do need to stress that they are supposed to be funny. Maybe I hadn’t made that particularly clear.

Szelhamos liked to laugh, not to ponder.

But thank you to “Lonesome Bob from Toledo”, home of some great (and humorous) Hungarian hotdogs.

But today’s real administrative issues had to do with the closing minutes of today’s session.

Mind you, this was not just any day. This was a day to actually venture outside, see what mounds of snow looked like and attempt to find the mailbox.

It was even a day that many returned to work. Even I, succumbed to the need to occasionally give the couch a rest. (Please refer to yesterday’s blog)

But the day was reserved for the baby Berkshire Hathaway shares.

You see, a few months ago, Warren Buffet, the Oracle himself, decided to buy the remaining shares of Burlington Northern, that great railroad that goes somewhere.

Maybe up north. I don’t really know.

That pleased me to no end, because I had recently bought back some options on Burlington Northern a couple of days earlier, pocketing the premium. A day or so later, I tried selling the call options again, but just couldn’t get the right price for the options.

Admittedly, I sulked a bit, having missed out on the opportunity to get some more premium.

That is, until I awoke the next morning to the news that Buffett made a $100 tender offer for Burlington Northern.

I immediately sold those shares, gave thanks to God for not allowing me to sell the $80 call options and went on my merry way, performing an occasional and impromptu dance, when the spirit beckoned.

That, I thought, was the end of this saga. But, as it turns out, Buffett gave holders of Burlington Northern the option to accept cash for their shares or exchange them for “baby” Berkshire Hathaway shares.

I never gave that detail a thought, since I quickly cashed out my position.

That is, until about 3 weeks ago, when I heard the rumor that the baby Berkshire Hathaway shares were going to split 50 to 1.

So I picked up shares at the ungodly price of $3150. That’s per share! Yet only a mere fraction of the real Berkshire Hathaway shares, that were going for well above $100,000. That’s why the “B” shares are called “baby” shares.

As it turned out, those shares went up to $3350 that day, and indeed, did split the very next day. Before you knew it, those $67 split shares were up to $72, when it was also announced that they were going to become part of the vaunted S&P 500.

So I did what I do?

I sold $72 call options, watched the shares fall to $69, bought back my options at a nice profit and then watched the shares move to $74.

At that point, I sold some $74 call options.

All this in a 3 week period.

Well, today was the day that the baby Berkshire shares entered into the S&P.

At the close of trading, all of the index funds and the large mutual funds had to pick up shares of baby Berkshire.

When it all shook out, over 150 million additional shares shares traded in the last 5 minutes, in an incredible administrative competition to get the best price for as many shares as possible. In those last few minutes, there was a $2 range in price, with shares finally closing at their low for the day.

Not exactly what you would have predicted.

Berkshire now is at about $75.50 and the options expire this Friday.

I expect that it will fall a little further, but that my shares will be assigned come Friday.

But given its premium, I plan to buy these back, or even add to my position on the following Monday.

As if you can really plan those things.

Otherwise, today, as it turned out, was just another one of those see-saw days. Market up. Market down. In the morning it looked as if the bottom was getting ready to tank, as the Chinese government increased their bank’s reserve requirements.

And that effects us, how?

Supposedly, that means there’ll be less expansion and construction in China and less demand for all goods.

And that effects me, how?

After all, I’m only an administrator and watchdog for all things humorous.

I don’t really understand the underlying mechanisms that make the markets move, particularly since the people who do understand these things are always wrong.

With that clear, after working so hard for the past 2 days, Monday marks a well needed rest and respite from this literary drudgery. Since the market is closed in celebration of President’s Day, I really have nothing to write about. Even my drivel needs some context.

To “Lonesome Bob in Toledo”, don’t give up on yourself, just because the outside world has already written you off.

That’s what’s so great about the internet. It’s the one place where the hoi-palloi and the riff-raff can rub elbows.

I’ll be riff.

Popular Demand?   February 11, 2010

In case you hadn’t noticed, “Szelhamos Rules” has been dormant for 2 years.

As much as I’d like to say that we’re back due to incredible outpouring of popular demand, it’s probably not a good idea to rekindle old relationships or start new ones with a lie.

Oh, there were a few errant remarks and even some e-mails wondering why we stopped or wondering when we were coming back, but as those elderly relatives started dying off, the queries came to a halt.

So why come back? Why now?

Maybe it’s the 50 inches of snow on the ground. Maybe it’s the empty nest.

Maybe its an attempt to resolve some of the issues that my wife recently identified as being problematic with me.

• Bad hair
• ridiculous beard
• cognitive rigidity
• always wears the same stupid jacket
• bad humor
• wearing out the couch

I suppose that by re-starting this blog, maybe I could help resolve some of those issues.

As I look back at that list, I think the blog could bring resolution to all of those issues.

And more.

I probably don’t need to remind anyone that the last 2 years have been on the tumultuous side.

One of my favorite one time CNBC analysts was Ron Insana. He chose the wrong time to start his own firm. No matter how good his insights were, they were no match for the debacle(s) that were to come.

He now sells hot dogs near the Apple Store. Don’t ask him for extra sauerkraut. It just makes him cry into the already dirty water in which your hot dogs are floating.

As I looked back over the archives and some of the rants I went on, I realized that hindsight can be a really bad thing. Mostly, it just proves how wrong you can be, on a regular basis.

Take Ben Bernanke for instance. I even beat Cramer on that rant. Unfortunately, I posted my rant on YouTubesteak.com in error. Not quite as many hits come from that site.

Speaking of Ben, I think how bad hindsight is every time I see Ben Stein doing a commercial for some rip-off free credit score report company. Mostly, what I remember is his op-ed in The New York Times when he insisted that the sub-prime issue was much smaller than everyone believed.

It made me miss the old days of the Japanese Yen carry trade.

I still don’t know what that means, but apparently it’s not as big a deal as it was purported to be 4 years ago. At least no one got a foreclosure notice due to their Yen position.

How quickly things change. At least i can understand the concept of Greek insolvency. It’s just a case of the EU taking it up the.... (can I say that?)

Speaking of change (not asses), one thing that really changed was my approach to investing.

Luckily, that change came more than 2 years ago, and helped to significantly shield me from the pain of the markets.

Longtime readers may remember an evolution in my investing practices, with more emphasis being placed on covered calls. In general, as a point of reference, when I refer to “longtime readers”, I’m talking about myself.

Fortunately, a couple of years ago, I almost exclusively switched to a covered call strategy. Focusing on 75-100 core stocks, I now move in and out of those stocks only if my positions are exercised. You can see those stock positions and those stocks being followed.

I look at it as a form of survival of the fittest.

Not that you should think that I’m referring to myself as being fit. Rather, it’s a recognition that the hardest thing to do is to know when to sell a stock. Instead, by selling covered calls, you allow the process of natural selection to decide when to sell your stock and take profits.

Huh?

Let me backtrack for a few moments.

Remember Bob Shapiro? I wrote about him a few times. He was my longtime stock broker. He had complete discretionary trading over one of my accounts. I moved with him from EF Hutton, to Shearson Lehman, to Paine-Weber and to UBS.

Bob was great in every way. Great portfolio management, great interpersonal skills and just a good person.

Bob used a buy and hold strategy for the most part, although he was quick to shed losers.

Over the years, the one thing that I noticed is just how much fluctuation there was in the prices of my holdings. One such holding, that I’ve had for nearly 16 years is Rio Tinto.

Up, down, up, down, up down.

You get the idea.

I used to fantasize about how great it would have been if we sold, bought, sold, bought, sold, bought.

Once again, you probably get the idea.

But, I always had complete faith in Bob and he had the results to warrant that faith.

Unfortunately, in June 2008 a letter from UBS informed me that Bob, very unexpectedly and sadly, passed away.

More than 3 weeks later, a call from UBS convinced me that it was time to manage all of my own securities.

The timing of that move was interesting and stressful. During the 2 weeks that it took to transfer securities to E*Trade, my family and I were vacationing in Italy. While there, and a large part of our portfolio in transfer limbo, we watched the market begin the early part of its plunge, that would start in earnest just a few months later.

By the time we arrived home and the stocks were fully transferred, there was already lots of lost ground to make up

Working with Bob’s portfolio, I began to rebalance it within the existing framework of portfolio securities. Then, I began what would prove to be a timely strategy, in that I started aggressively selling call options on everything in site.

Not only selling call options, but aggressively buying them back and re-selling them, sometimes at lower strike prices, just to milk every bit of premium that I could get.

I went from about 30 transactions per month to about 150 in the same time period.

E*Trade likes me.

A lot.

I also went to full time trading and publishing (and selling) a newsletter, Option to Profit. Beyond that, there’s also a special service offered to individuals in my professional affinity group. You can read about it, but you can’t join. So why bother linking to it?

Exactly.

These keep me busy in ways that I never would have imagined.

However, in order to satisfy one of the items in my wife’s list, I do find myself working outside of the house a few days each month, as she would not accept my offer to buy as new couch as an appropriate remedy to an identified problem.

So, back to “survival of the fittest”. My truly fit stocks, those that are behaving well, are assigned away from me. I keep the premiums and whatever price appreciation occurred. Sure, I lose out on the possibility of unbridled stock gains.

But, you know what? That doesn’t happen that often.

“Why?”, you ask.

That’s where survival of the fittest really comes in.

Those who purchase the covered call options from me are speculators. Pure and simple. Anyone buying calls or puts, is just hoping to leverage their investment and hope that their timing is impeccable.

It’s a form of greed.

Luckily, most purchasers of options contracts are wrong.

Now don’t get me wrong, I’m greedy, too, but I’m not looking to hit a home run, just lots of singles.

I don’t mind taking advantage of someone else’s greed.

I don’t mind a 2-4% monthly stream of income.

So it really is survival of the fittest, even though, on occasion, the greedy may get it right, their long term survival is impossible.

Fortunately, I made that investment strategy shift at the time that the market was ready for its free fall.

What I really learned was that volatility was my friend and that there was nothing wrong with hitting lots of singles.

Evolution. Survival of the Fittest.

Someday, I’ll even tell you about our “almost” trip to The Galapogos Islands.

After reading the itinerary, we realized we still had a lot more fitness to go.

Maybe next year.

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