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I’ll Have Another, Please September 28, 2007
Today marked the last day of the 3rd quarter and the market finished down for the day.
More importantly, today marked the final day of non-adulthood status for my oldest son. Tomorrow will truly be a new day.
This was a quarter that most people will remember for the down markets and the volatility. For many, no doubt, the 50 basis point drop by the Fed came too late.
It was a quarter to remember, but thank you, I’ll have another. Please, may I have another?
For starters, despite the axiom that September is a bad month for the markets, this September was the best in 10 years, with a Dow increase in excess of 4%. How would you like to have a year of Septembers?
After it was all said and done, the Dow still finished up 3.6% for the quarter, although the S&P 500 only made it up by 1.6%.
Ah, but the Szelhamos Portfolios went up by 5.3%, and that was even with a big losing hedge waiting for another dive in the markets.
On the negative side, my professionally managed portfolios rose by only 3.0%, while the retirement account mutual funds actually lost 0.5%. In all, it was still an overall 3.2% return for the quarter.
Although I suppose that I could gloat about beating the indices and my other professionally managed accounts, I would rather be humbled and be left with even bigger portfolios. With all of the extra time necessary to count the money, I wouldn’t have time to be overly upset about not beating the professional guys.
As I think back to the days immediately after the big market drops, there was always a unanimity in opinion. As always, anything resembling consensus is bad. But back then, and also back in February, there were the calls to move into the defensive stocks and the consumer cyclicals. Being a male, I don’t listen to what I don’t hear.
Funny thing. They really didn’t do terribly well, though. For example, I own Altria and Kellogs, both highly touted during market dives. How did they do?
After adjusting for dividends, Altria was up by about 0.5% and Kellogs was up by about 3%.
Oh, I hear you. You say that’s not really fair to look at their quarterly performance. You say I should look at how they performed from the time of the two day 500 point drop. After all, that’s when all of the buy recommendations really started pouring in.
Well in that case, once again adjusting for dividends, Altria was up by about 5% and Kellogs was up nearly 7%. Not bad.
What was especially interesting, though was that the one consumer cyclical that was routinely left off of the recommended list was Procter and Gamble. It was too big and stodgy.
That is until it started propelling forward, then everyone got onto the P&G bandwagon, but by the time they did, P&G became an underperformer. Is anyone surprised?
I happened to already own P&G, as well, and after adjusting for dividends, it was up by about 14%. So I’m feeling better about being old and stodgy, myself.
In the meantime, during that same period, from the close of trading on July 27th until this afternoon’s closing bell, the Dow was up by more than 5% and the S&P 500 was up by 4.7%.
So, now I’m sure you’re wondering how the Szelhamos Portfolios performed in that time, utilizing an aggressive options hedging strategy, because as we all know, it’s all about me.
It was up by 8.5%. And it did that without selling anything at a loss and without following the herd into the consumer cyclicals, which, admittedly, did perform better than the overall market. But not by very much.
But that strategy only worked for me because the market was so volatile with 3 weeks of 200 point swings on a daily, sometimes twice daily basis. Halliburton, for example, repeatedly went up and down around a $35 - $37.50 range, never staying in any one place very long. For me, the timing was perfect, as I traded in and out of Halliburton $37.50 and $40 options, repeatedly, usually with a holding period of less than 3 days. The same with Apple, Ameritrade and some others.
Although I’m currently sitting on a paper loss with the ProShares Ultrashort Dow ETF’s, I did pocket profits on numerous short term trades both on the short and long sides and will continue holding the ProShares Ultrashorts as a hedge, especially as the Dow nears the 14,000 mark, which previously wasn’t considered to be a resistance point.
As it turned out, I made nearly 75 trades in this quarter. Not bad for only 64 trading days. I tried my best to contribute to the economy without really working.
My professionally managed accounts made a total of 34 trades, evenly split between buys and sells. However, the trading pattern before the big losses in the markets, which accounted for 10 trades, was identical, also being evenly split between buys and sells. So as far a strategy goes, I’m not certain there was any exhibited by the underperforming professionals, at least not for this most recent quarter. They do what they do.
But I don’t want to take away anything form my advisor at UBS, Bob Shapiro. He is consistently great, having turned in more than a 20% gain for the past fiscal year ending June 30th. And best of all, during down markets, his portfolios don’t melt away.
I would happily take that quarterly 3.2% gain again and again, for the foreseeable future. As long as inflation stays low, there’s little to complain about with a 13% annualized rate of return, especially since my conservative projections are based on an annualized 7% return.
Since I’m now emotionally committed to another 47 years before retirement, I really won’t need much to help support me in my retired years, given that the life expectancy of a 100 year old is limited, so the extra few percent a year on the rate of return isn’t as meaningful as it once would have been.
In the old days, meaning before yesterday, I would have pointed out that a 13% rate of return will get you to double your money in about half the time of a 7% rate of return. 5 ½ years instead of 11 years.
Over the past year, I’ve considered moving funds away from one of the professional managers because of under-performance, especially during down markets. I think I’ll still give it another year. The one thing that I do know is that I don’t want to add any to the Szelhamos Portfolios, because as it is, I spend way too much time trying to manage the funds that are already there, although I suppose that all that would really be necessary is adjusted the number of shares and not necessarily the number of holdings. Or I could just send it over to Bob Shapiro and sit back.
Back when I first started directing the Szelhamos Portfolios I traded in and out of securities at a fairly rapid rate. Now, I’ve come to realize that you can profit from your holdings even when they go down in value. If an underlying security is good, there’s no real reason to part with it during the inevitable drop in price. Just let someone else pay you will you park the securities with them for a specified period of time. As long as I still have first right of refusal on continued ownership there’s a way to have your cake and eat it, too.
And yes, I’ll have another, please.
No News is Bad News September 27, 2007
Every now and then it’s just a great day. Go figure.
There were lots of reasons why today should have been a miserable day for the market. A miserable day for the market often translates into a miserable day for me, although the day started out with some really great news.
That news was that mother and surprisingly early delivered child were both doing well. Anxiety filled thoughts could now be put to rest. In general, it’s best for those to be stowed deeply.
As far as today’s bad news goes, let’s actually start with yesterday. The Durable Goods report was a stinker. We’re not producing the stuff required for long term capital investment. That’s always bad news.
In a one man effort to effect future durable goods numbers, my good friend committed to a business expansion that will add short term and long term jobs to the economy, as well as placing orders for not only more durable goods, but also for consumer goods. He is what the economy is about. In order to make certain the costs of the expansion will be offset, I committed to stay with the organization for another 47 years.
But as bad as the official Durable Goods numbers were, the market shrugged that one off yesterday. Sometimes you get a freebie.
But today, the bad news just kept coming. The dollar is again at an all time low. By all that’s right, stuff should just keep getting more and more expensive, at least if it wasn’t for the Chinese. Fortunately, they’ve steadfastly refused to stop pegging their currency to the U.S. dollar. Otherwise, we’d really be feeling it.
But that news was also a non-news event. The market did nothing. I’d call that another freebie. That’s 2, if you’re keeping track.
Then today, oil decides to go up about 3%. Last that I recall, that can’t be very good, either. And so the market did what one would expect.
Oh no, that’s right. It did just the opposite. Sorry. Yet another freebie.
And the housing numbers? You really don’t want to know. They were horrible, and yet, that’s right. We were given a pass. Another freebie.
Since the conventional wisdom is that the market looks forward 6 months, you would think that these pieces of bad news, all of which would seem to have negative long term consequences, would have sent the market for a tumble.
And to top it off, for some reason people expected an announcement on Bear Stearns today, but it never came. That was considered to be bad news for the financials. Imagine. 24 hours after the story broke and they couldn’t pull a deal together. Unbelievable. Could the news be any worse?
At this point I’ve lost track of how many freebies we received today.
But wait, we weren’t done with today’s numbers, because then came along the unemployment numbers.
Remember last month when the Jobs numbers came out. I think of jobs as synonymous with employment. Well those numbers were really bad and the market dived.
So just as the employment numbers were really bad, one would think that the corresponding unemployment numbers would be bad as well.
That’s why I don’t get the big bucks. As it turns out, the unemployment numbers were great. Low unemployment claims. Don’t ask how that was possible, but those were the numbers. Of course, next month we’ll have to deal with the inevitable revisions. Those can be killers, as we found out with last month’s Job’s Report and the revisions that came along with the report.
But today’s unemployment statistics seemed to be just the bit of good news that the market needed to latch onto today as everything just went up.
As it turned out, today was one of those very rare days when nothing was really considered to be bad news.
Maybe it was because the recently revealed Committee to Save the World’s premier member, Ben Bernanke, decided to match last month’s flood of liquidity into the market. It worked so well last time to bolster confidence that, what the heck, let’s do it again.
And it seems to have worked, because First Data was able to secure its $9 billion in funding necessary for the buyout. Just 24 hours ago, everyone was still wondering where the money was going to come from, but no longer.
I didn’t do very much today other than watch in wonder as the green kept overtaking the red numbers on my screen. Consistent with my past pattern of bad calls on the options hedging strategy, I sold some MasterCard October $155 calls. I did so at a time that MasterCard was up by about $0.70.
I felt to be quite the genius when about 30 minutes later MasterCard was down about $2.
That feeling didn’t last very long, as for some reason, and I haven’t seen the news on it yet, MasterCard decided to turn it around and ending closing up by over $5. It’s still below my strike price, but really, don’t you think I would have had the sense to have waited just a bit longer before selling those call options.
For those who are reading this at work, you’ll understand that all of the kicks to the jimmies must have caused the premature action. I should have waited. I could have gotten twice the premium.
For the rest of the readers, there is no explanation for the previous paragraph. You just had to be there. I’d like to deny that I was there, but unfortunately, there were witnesses.
Just as MasterCard was rising, so too were Apple, Goldman, Google, Kraft and Halliburton. Just more examples of poor market timing on my part. Yet, the overall numbers are looking great, now more than 1% ahead of where they were right before the most recent plunges, and those hedging premiums have had something to do with the rebound in portfolio value. Best of all, the market still hasn’t reached its July highs, still being about 0.7% short.
So despite the fact that my flight tonight is delayed by about 90 minutes and I am more anxious than usual to get home, I am comforted by the fact that I failed to follow through on my conviction that the market was going into a tailspin. To remind me of my lack of faith, I’m still holding onto some of those ProShares Ultrashorts, watching those hedges just keep right on falling.
But who cares. They’re falling for a good reason. It’s almost akin to complaining about paying too much in taxes. I’d rather be making a lot and paying a lot in return.
But as I sit here, beginning to feel a numbing sensation near the jimmies, sober thoughts enter to defuse the feeling of elation over all of today’s freebies and further remind me why I haven’t gotten rid of those ProShares Ultrashorts.
As all of these freebies started to add up today, a very strong rule of thumb came to mind.
Payback is a bitch.
Why the Rich Keep Getting Richer September 26, 2007
There are some everyday expressions that you know just can’t be true.
Not every cloud has a silver lining and lemonade doesn’t even remotely make up for being handed a life of lemons. It is true, however, that the best things in life are free. Take diamonds, for instance.
I’m sure that there are other, probably even better examples, but I’m tired and not able to comb my massive memory banks as well as I would like.
But the rich do keep getting richer. Believe it.
That one is as close to modern gospel as you will ever find. That’s why it’s really not newsworthy if Bill Gates’ personal wealth increases by $10 billion. But it’s really newsworthy, probably page one newsworthy, if Donald Trump was to lose $1 billion in net worth.
When the Texas Hunt brothers, who tried to corner the silver market in the ‘80’s lost it all, that was really big news. If they were to get it all back, eh, not so much.
But It just doesn’t really happen that way. When it does, it’s really memorable.
Sure, there’s always the errant Mike Tyson type, but that doesn’t really count. Had he branched out beyond boxing, like Oscar de la Hoya, then he wouldn’t have the category all to himself. Tyson just had a short term lease on his money.
Today was a good example of how the rich just keep getting richer and how the volatility of the stock market is the vehicle that allows the incredible accumulation of wealth to just keep going unchecked.
Essentially, the stock market is a zero sum gain. Someone’s loss is someone else’s gain. That is the hallmark argument against the equitable distribution of wealth in the socialist state. People were not intended to be equal. At least not in an economic sense. Even if everyone were to get an equal share of the wealth, within seconds the distribution would become unequal again. It wouldn’t take long for someone to figure out how to get more than his share. All it takes is opportunity. And money.
Unless you’ve been hiding under a rock you know that Bear Stearns has been deeply involved in the most recent market drop. We still have no real clue as to how much Bear Stearns lost in the sub-prime debacle, but we know that at least 2 of its hedge funds were closed due to insolvency.
If you were a holder of Bear Stearns stock, you also know that it took a huge hit in that month or so, as the sub-rime news kept trickling out. It wasn’t a good time. Lots of people lost lots of money in Bear Stearns.
As inevitably seems to happen, recent market meltdowns have been nothing more than great fire sales. Although I generally don’t follow this practice, people really in the know always seem to have some cash on the sidelines and at times like this you really understand why that’s such a great idea.
When everybody else is selling in an attempt to cut their losses, there comes a time when someone else will more than happily pick up those very same stocks at bargain prices. That’s exactly what that cash idling in the account is meant for.
That’s exactly what I wasn’t able to do as I watched a great stock, Goldman Sachs, just get lumped in with all of the other losers in the financials sector. As Goldman sank below $170 it seemed like a no-brainer. Pick up more shares. But funny thing. You need to have money to buy shares. Your good name won’t be enough. Goldman Sahs has a good name, but it didn’t keep it from getting dragged down with the rest.
So to start you have to have cash to take advantage of the bargains. The more you have on the sidelines waiting for the right moment to pounce, the more you’ll end up with after the panic is done.
And that’s where the rich come in and get richer.
You must have seen Bear Stearns’ rise today. Now first of all, it was a great day all around and best of all, it was consistent from start to finish. From the pre-open to the closing bell and beyond, the market stayed up and finally closed at its high, just short of a 100 point gain.
Mostly, the good news today was the GM – UAW contract agreement. It actually sounds a if they may have come to an innovative solution to GM’s healthcare liability, similar to a social security trust fund. Hopefully, it won’t be too similar to the social security trust fund, because we really don’t need to have that become insolvent as well.
But in GM’s case, the end is in sight. Their big burden is paying for the healthcare of their retirees. But as that generation disappears, they will be replaced by union workers that had lesser levels of benefits than they had, so at some point, unlike the social security trust fund, the amount of expenditures will start decreasing. Innovative. Very innovative.
But today, it was really the action in Bear Stearns that really stood out. And why not. Guess who had started accumulating stock when Bear was being driven all the way down. There’s a reason they call Warren Buffett the world’s greatest value investor.
Whereas in the past Bear Stearns had set a 40% premium for any buyout, they were no longer in the driver’s seat. Their loss is Buffett’s gain.
And Buffett clearly needs whatever he can get. Although it’s not big news when a billionaire accumulates another $10 billion, it is big news when a billionaire’s rank on the wealthiest list falls a notch or two.
And that’s exactly what happened to Buffett a couple of years ago. He gave up his number 1 position to his supposed bridge playing buddy, Bill Gates. I’m not certain what kind of stakes they play for, but whatever it is, it hasn’t been enoug to return Warren to his rightful place atop the hill.
Now it’s time for the Oracle of Omaha to return to his rightful perch and he’ll do it the way he does it best.
Even though he may seem to be a kindly elderly gentleman, this is not a game for Warren Buffett and it certainly isn’t a gentleman’s game. Just as sure as the rich just keep getting richer, the rich aren’t going to get left behind. So in this opportunity at Bear Stearns, Buffett sees his chance to leapfrog past Bill Gates. Sometimes, you’re only one investment away.
Sure, the rich keep getting richer because they take advantage of opportunities that other’s just can’t, but also because the rich have to take advantage of those opportunities. They can’t resist. That redistribution of wealth was intended to come their way, so they have to do whatever it takes to make prophesy come true.
I got a little richer today, but I did nothing to warrant it and I don’t believe that it was prophesized. Sometimes it’s not a question of taking advantage of opportunities as you bottom fish. Sometimes it’s just a case of going along for the ride. Today, I went along for the ride and most everything was up, at least a little.
I did some quick calculations and figured out that just by going along for the ride, at this rate on an annual compounding basis, I could equal Buffett’s wealth in the year Twenty never.
It’s nice to have goals.
Maybe I should tell Buffett and Gates to order that bigger bridge table now.
Staring into the Mirror September 25, 2007
I’ve set 2 personal records this past week. I must be on some kind of a roll, since just the week earlier I set records for my personal best time in a 5K race. Once you’ve started reaching new heights, it’s hard to accept anything less in any phase of your life. We Americans are a competitive sort and we always climb the mountain that’s placed in front of us.
Me? I’m naturalized, so I can take it or leave it.
This week, however, the records were not good ones. I suppose that even personal lows are records, but I don’t have a good feeling about these most recent events. That’s where the mirror comes in.
Just a few days ago, I think I had the worst day of my life. Not the death of a loved one, not a great personal tragedy, not a 500 point market downturn, I’ve withstood all of those. But still, the worst day of my life. And now, directly related to the events of that day, I find myself staring into a hotel room mirror.
My son used to work the front desk in a couple of hotels and I’ve heard stories about the unspeakable things that happen during those moments of lonely despair, that all seem to start with a sustained period of staring vacantly into the mirror. The anonymity of the hotel room makes a perfect setting for these depths of human emotion, from which there is often no return. How horrible the moment of discovery must be for the hotel staff.
There I stood, in the aftermath of my worst day ever, now all alone, staring into the hotel room’s full length mirror. Who knew what lay ahead? May God have mercy on my soul.
And then it started.
I started to practice the steps to the Rumba. The Rumba!
You see, last week was the first of eight dance classes that my wife and I are signed up for. Weeks 1 through 4 are Rumba-centric. Weeks 4 through 8 are Cha Cha.
After about 30 seconds of demonstration of the steps we were expected to dance. Funny thing, though. I don’t dance. That neuromuscular coordination thing? Never my strong suit. And rhythm? Don’t even ask.
I am not Rumba-centric and never will be.
If Szelhamos had been there to witness the gyrations of the instructor, he definitely would have said his usual: “He must be good in the bed”. Szelhamos always inserted the word “the” into every sentence, and as often as he could. In a sign that there is no need for DNA testing, I found myself thinking the same thing.
Of course, had he seen my attempts at dancing, he probably would have said something polarly opposite and would have demanded a paternity test. He would have been right to pursue the truth.
After about 45 minutes of pure agony at the class, I knew that one of 2 things was going to happen. Either I was never going back, or I was going to be the best Rumba dancer this side of Rooms 104 to 108.
Then I realized that I set my goals sufficiently low, as Room 108 is the Handicapped Access room and Room 106 is closed for renovation.
Nonetheless, I was going to take this thing seriously. On my plane flight this weekend, the plane was pretty empty, so I thought that it would be a good opportunity to practice some of the Rumba leg extensions. I was going to take every opportunity to be ready for this week’s class.
For no apparent reason, someone sat in my aisle, despite the fact that the plane was 80% empty. But that didn’t stop me from practicing my modified form of Restless Leg Syndrome. There was no hotel room mirror, but there were quite a few vacant stares in my direction.
And now it continues, here in the hotel room.
Funny thing, though. I don’t know why that plane passenger is still here with me. Sooner or later, I’ll probably ask, before it gets really awkward.
Speaking of really awkward, the greatest likelihood is that my wife will not be able to be at the next class, because she had to unexpectedly fly to California this morning for a family crisis. Since this is a couples dance class, I suppose that at first my presence without a partner would be awkward, but I’m certain that I could hook up with the Amish appearing couple in the class. With swiveling hips like his, I’m certain that he is open to the challenge and perhaps even a bit intrigued.
Why do I write about the embarrassment of this past week?
Because today was another in a string of boring days in the market. No news, no great events, no scandals. Nothing. Even Ahmadinejad was reasonably low key in his U.N. speech. The best part of today’s news was that prior to his speech and question and answer session at Columbia University, President Ahmadinejad was introduced by the university president as being a petty and tyrannical dictator.
That’s a pretty nice introduction. I can only imagine that the official Iranian interpreter considered his options before interpreting that for the Iranian President. Something about “killing the messenger” probably went through his mind.
Strictly speaking, President Ahmadinejad was correct in denying the existence of Halo 3, as it was not officially released until approximately 8 hours after his speech. Technicality? Sure. But denying the existence of Microsoft’s latest hot release will further ingratiate Ahmadinejad in the eyes of those that seek to destroy the perceived stranglehold that Microsoft has on the gaming world.
Nonetheless, nothing will bring Microsoft down and it’s no surprise that Bill Gates continues to top that list of billionaires.
And so, ultimately, the market did what it has been very good at doing since it gave up this volatility thing. It just wandered around aimlessly.
In the meantime I continued to marvel at how poorly my recent options sales have been. I felt so proud about rolling my September Apple $145 contracts into October $150’s on Friday.
So here we are 2 days later and Apple has gone up to $153.
At the same time I’m behind the 8 ball on most of my open options, but there’s plenty of time to go until the expiration of the October contracts.
No matter what, even though I know that selling these contracts is a pretty good way to enhance returns, it still feels so bizarre to wish for a stock’s price to go down. But so far, the strategy has been working for me.
So far, this year, it looks as if I’ve squeezed out a bit more than an extra 2% in profits by doing all of the options trading. At the rate that I’m going, I’ll finish the year having made more than 200 trades.
Seems hard to imagine that would really give me any time to practice the Rumba.
Now, with the market closed, and the blog almost written for the night, I’m ready to face that mirror again, this time with more confidence, but unfortunately no additional rhythm.
Here’s to a better day tomorrow. A bit higher in the markets and better shifting of weights and swiveling of hips in the mirror.
I’ll take either one of those.
Never Bow to Pressure September 24, 2007
Great words to live by.
The most obvious example of bowing to pressure is the response to the herd. It’s so easy to do the wrong thing at the wrong time. In fact, at the wrong time, even the right thing will be wrong. Sometimes, regardless of how long you wait, the right time never returns. Even the moths won’t bother with my closet full of Nehru jackets. But I still haven’t given up all hope.
Each time the Dow has plummeted in the past half year, the herd, on very large volume had seen its masses grow and took the newcomers down with it. In a word, stay away when big price moves happen on big volume, or better yet, go in the opposite direction.
Have you seen one of the new Wendy’s commercials? The horde of people just jumping into the cavernous hole in the middle of a field is precisely what the market is about during one of those downdrafts. After all, who in their right mind could resist jumping into a bottomless pit? You don’t need a herd to tell you that’s absolutely the right thing to do.
The people with the red pigtails ignored the herd and lived to benefit from another rally. Unlike the Nehru jacket, the right time for the market has returned on both occasions of the large price drops. You would have thought that the Nehru would make a comeback after Hammer Pants faded away. Another losing bet.
Generally, I’m able to withstand the pressure of the crowd. I’ve never really had a problem walking the other way. The Hammer Pants, incidentally? Very comfortable to walk in.
This time is different. And we all know what happens when the pressure is too great.
I’m about to bow to the pressure, despite my best editorial judgment, giving in to the worst in Yellow Journalism.
So, in response to all of those that requested it, in fact, pretty much demanded it, I give in.
My recounting of the “Sirloin” experience received more response than anything I have ever spoken or written about. Ever.
So here it is. Just one click away, the pictorial evidence of Sirloin’s deed.
Now I feel like I can move on.
So now let’s get back to what pays the bills around here. That is, musings about the day in the market. If I don’t deliver the goods, my overlords aren’t afraid to hold back their wrath.
The big news today was the invited address than Iran’s President Ahmadinejad gave at Columbia University. Historically, despite our preconceived notions, raving psychopaths rarely foam at the mouth. Those that do, rarely are elevated to positions of leadership.
With that twinkle in his eyes, 20 years from now, you could almost envision President Ahmadinejad as a gleaming grandfather, upon the news of the birth of a grandchild. Unfortunately, you could also envision him ordering his daughter to be put to death for indecently exposing a portion of her body during the birth process.
What was she thinking? Obviously a tool of the American infidels.
But because of Ahmadinejad’s special relationship to his deity, he would be able to get his daughter posthumously reclassified as a virgin, thereby allowing her to atone for her birthing indiscretion, as she joins the other 71 in rewarding another raving psychopath in the afterlife.
See? There’s no such thing as a bad deed.
But that news did little today. After a few hours of gains, the market just turned mildly lower.
Despite a plunge in MsterCard, for no known reasons, the nice advances in Google, Goldman, Apple and NYSE more than made up for the mildly negative tone of the market, and MasterCard in particular. But as usual, as went Goldman, so went the Dow. Goldman eventualy gave up almost all of its gain and the market closed near its lows for the day.
MasterCard had been down about $1.50, at which point I bought back the options that I had just sold. As MasterCard approached the breakeven line, I was feeling pretty smart about the timing of my decision, having made a small profit on the transaction.
But before I could count those pennies, MasterCard just jumped right into that big hole, pushing the stocks with the red pomny tails right out of the way. Had I held on to the options and bought them back later in the session, that profit would have been counted in nickels instead of pennies. There would have been enough additional profit to purchase condiments.
Since I’ve been negative on the prospects of the markets, it’s no surprise that the options that I’ve recently sold, all at a time that I thought we were at a near term top, are all in the red right now. Halliburton, Google, Apple and Goldman have all had surges in their prices. I still have until October 19th to execute a strategy, but if I lose any of these positions, they will be at good prices. So I won’t feel too bad, at least not as bad as the guy who thought it would be a good idea to invite President Ahmadinejad to speak at Columbia.
Now that it’s warming up near the Arctic Circle, his new assignment shouldn’t be overly onerous.
Interestingly, speaking of bowing to pressure, you would have thought that Ahmadinejad would have let the rhetoric fly already with regard to his inability to get permission to visit Ground Zero.
Maybe he is just being responsive to the sensitivities of those that have suffered horrible personal losses.
Nah.
I don’t know if “the other cheek” is a concept that he is acquainted with. I doubt it, so the rhetoric will probably fly tomorrow when he addresses the U.N.
Personally, I think that Mayor Bloomberg should issue an executive order furloughing any ex-New York City policemen convicted of brutality and assign them to the U.N. security detail. Rehabilitation has to start someplace..
But with that Hungarian now the President of France, maybe the world tide is turning a bit. What good are screws if you can’t tighten them? How else are you going to generate the kind of pressure that can’t resist a bow or two?
Other than more of an impetus to increase oil prices, how much downside could there be to tightening those screws? Especially since the entire world seems resilient to oil prices. What was predicted when oil hit $50 never came true, nor did it at $60 and $70.
Everyone just keeps humming along on their growth train. Taking wise advice, the economies of the world haven’t bowed to the pressure of high oil prices, and who knows, maybe everyone, including Russia and China have had enough of the one country that seems to want to rain on everyone else’s parade.
If the world, with the U.N. as its proxy acts the right way on this one, get ready for a rally like we've never seen before.
And if that happens, I’ll get whatever spray paint Sirloin left over and really make my feelings clear where it does shine.
And Hours to Go Before I Sleep September 21, 2007
I may be shallow, and not just on a self-proclaimed basis, but even I know that those weren’t the exact words of Robert Frost.
But they’re close enough.
No, I’m not referring to the time left to go until the end of triple witching, or actually, more correctly, quadruple witching, thanks to the advent of derivatives upon derivatives. Before you know it, derivatives will become grandparents. Quintuple witching? One can only hope.
No, what I’m counting down is the time it will take to finally return home after today’s inaugural dance class. Cha Cha Cha.
I’m certain that tomorrow, as I prepare for my Day of Atonement prayers, I will have to ask for forgiveness for my flagrant disrepect of the performing arts.
Unfortunately, I’m no longer immobilized from the 5K debacle, so I can’t use that as an excuse. My grandmother isn’t ailing, either and as hard as I tried, I couldn’t find any other races scheduled for today.
I don’t usually eat lunch, but I thought perhaps I could count on that trusty stomach to get me out of the commitment. Its never failed me before. Old reliable, I call it.
And so I went to the local gas station and loaded up on self serve hot dogs. I put on lots of mustard and raw onions. But that was a couple of hours ago already, and still nothing. Not even the slightest cramp. That’s just unacceptable. Damn that Nexium. Why can’t the little blue pill work as well as the little purple pill?
Even with the market looking quite good through the first few hours of trading, my mind really can’t focus on the market. Although I’ve made two trades, including getting out of the Apple September $145 options and into the Apple October $160 options, I’m just not feeling it.
With Goldman finally surging back to its July levels, I sold some October $230 options. The last time I sold Goldman options they were for $240, so I’m willing to settle for less, but by the same token, I lowered my overall cost basis by picking up some more shares during the recent drop, so less could end up being more.
Sure, it’s always nice to make a profit by letting someone else take part of the risk on your stock and then rolling it over and doing it again, I’m still too fixated on the cha cha and whatever else we’re supposed to be learning.
Tonight may be a good night to break in those new Mickey Mouse Crocs. Cha Cha Cha.
A few months go I watched an episode of 30 Rock. It’s really a pretty funny show, but I rarely got an opportunity to watch the show. For some reason, I refuse to use the DVR, probably because the last thing I need to do is to watch more television.
But in this one episode, the Alec Baldwin character makes a comment about the quixotic NBC page, that no one can quite figure out, hence “quixotic”.
“Someday, my friends, we will either all be working for him, or we will die by his hand”.
Words to remember.
What reminded me of these words?
China. Cha Cha Cha.
For some bizarre reason, Mattel apologized to China for its most recent series of toy recalls. Yes, that’s right. Mattel apologized to China. I suppose from Mattel’s way of thinking, had they not made the toys, China never would have been put into the awkward position of having to paint them with a child friendly substance.
I believe that the exact words of the Mattel CEO were “we sincerely apologize to the People’s Republic of China for engaging in the business of manufacturing and distributing toys to children in order to bring joy into their lives. Our heartless pursuit of this mission resulted in the need to apply pigments to the products in order to add color to the otherwise drab lives of children, thereby endangering their lives and their cognitive growth and development. In the future, if we are permitted to continue to contract with deceitful and sub-standard Chinese contractors in order to continue to engage in the manufacture and distribution of products, all products will only bear the colors of the Chinese People’s Army and will bring great honor to the blessed memory of Chairman Mao.” Cha Cha Cha.
The Mattel CEO says one thing to Congress and then quite another to China. T the very least, if this CEO gig doesn’t work out for him, he could certainly have a future as an elected official.
As we look at rising commodity prices, the falling dollar, astronomic trade deficits on our end and double digit growth, dubious trading partners and an aggressive expansion of military, nuclear, missile and space programs on their side, China may be that quixotic page.
Neither scenario is good for us.
As we enter into the last hour of trading, the Short Interest Report has been released. It confirmed what I thought yesterday. That being that there has been a large drop in short interest this past week, meaning that at least one impetus for continued stock price increases is lessened.
Yet, on record first hour volume we are still maintaining a 75 point advance with only 45 minutes remaining. Not bad, but things can change quickly these days, especially during an Octuplet Witching Hour. Apparently, derivatives have the gestational period of a hamster.
At this point, I think it’s time for a nap. Maybe when I wake up I will realize that this has all been a dream.
Cha Cha Cha.
The Three Tenors September 20, 2007
Now that Luciano Pavoratti is gone, it’s time to assemble a new group of Three Tenors. Sorry Placido, your time has passed. It’s time to pass it to a new generation. As for the other guy, I don’t even remember his name, so I couldn’t send him his termination notice. But he’ll get the word. It really needed to be a clean sweep of the old talent.
Too bad Cheney’s not a tenor.
Little did anyone know that the baton would be passed so quickly and the handoff would be enacted so perfectly. But we were ready for a change and there really wasn’t much reason to put it off any longer.
But there on Capitol Hill, answering questions for the recently assembled “Sub-prime Crisis and Solution” committee sat the heirs to the throne. There were Ben Bernanke, Henry Paulson and Alphonso Jackson. As Secretary of HUD, you’ve probably never heard of Alphonso Jackson, but in the late sixties and early seventies, after having being kicked out by his own singing family for inappropriate behavior, he landed with and sang backup for the Cowsills. You couldn’t miss him. He was Andy Williams’ favorite.
And, yes, you’re right. If that family threw him out for “inappropriate behavior”, you just know that it had to be something more than a mere wardrobe malfunction. Oh, those Jacksons. I suppose that even they have behavioral standards.
Tito, I know you read this blog. I’m talking to you. Call me.
By the way, in case you also don’t know what HUD is, it is an acronym for Ghetto Development. And is pronounced “Hood”.
To be honest, the new trio of tenors was probably an octave or two below where I remember the vaunted Three Tenors being, but they captured my attention better than the original guys ever did. There is something special about financial testimony being given in Italian and in full operatic regalia.
Everyone knows who Bernanke and Paulson are, but Jackson carries the group through the strength of his instrument, a voice that sings directly to the beings in heaven. Unfortunately, he seems as dumb as a rock, unaware of the subtleties of politics. Someday he’ll learn never to give out actual numbers, they tend to erode the feel good atmosphere associated with meaningless generalities. It’s all about the “feel good” perception in this massive head game.
For example, when the statement is made that reductions in the fed rate will reduce the number of foreclosures, everyone feels good about that. But when the Secretary of HUD chimes in that only a small number of foreclosures will be averted, all of a sudden that good feeling is evaporated and angry stares are directed, well, you know where. You would almost think that this Jackson was a child molester, too. Not so.
Fortunately, in his true diplomatic way, Bernanke was able to point out just how difficult it is to actually put a number on that kind of thing. Although Jackson seemed to have no difficulty coming up with 225,000.
Whew, just in the nick of time, before anyone actually came to the realization that it was all just smoke and mirrors, came Bernanke to the rescue.
Unlike those times when Ben Bernanke is giving congressional testimony, there were no great reverberations in the market as he answered the committee’s questions. We’ve either tired of the process or the committee doesn’t know how to ask those great self-serving and probing questions that get to the answers that make markets move.
Throughout the early morning and through the committee’s meeting, the Dow just meandered in a small range, maintaining the pre-open losses in the futures, reflecting the boring committee hearings.
The only real excitement came after an inane question by a congressman who more than insinuated that Paulson was harboring some animosity toward the committee and its oversight function. He came right out and said so.
It seemed to me that the reason for that allegation was that the previous congressman asked a question that had a 7 minute preamble. That question was directed to Ben Bernanke, who answered it in about 8 words.
The congressman then asked Paulson to answer the question, and Paulson sat up and said what any normal human being would have said, given the situation.
“What was the question?”
The congressman passed on repeating it, knowing that it was such a worthless question. He just needed something to put at the very end of his preamble, or what I like to call, his pre-ramble. Knowing that he couldn’t repeat his rant, it would have made him look even more ridiculous to just put the question out there with no adornment.
It was nice to see that Paulson had tuned out and zoned out.
As Paulson tried to respond to the inane insinuation about harboring animosity, the congressman interrupted him and said that was not his question, and then he proceeded to ask a truly worthless question. As usual, there was no shortage of those this afternoon.
You could see Paulson arch his back and bite his lower lip.
What he should have done was to take a page out of his old Dartmouth football team playbook and just clipped the guy. Maybe stomped on his face, as well. Why not? At most it would be a 15 yard penalty. I think there would have been bipartisan support, too.
Anyway, in a show of solidarity, when Bernanke and Jackson were posed the same question, they started by stating that they harbored no animosity toward the committee.
By the time Jackson made that statement, committee chairman Barney Frank interrupted and said “we’re past that, let’s just focus on the question”, as if anyone cared.
If there wasn’t animosity before, there was now.
And so, that being the last question, the committee closed its session with lots accomplished. Basically, they did no harm to the markets, and that in itself can be quite an accomplishment.
As it turned out, the market just took a breather the rest of the day.
Despite the fact that Goldman reported spectacular earnings, their third highest ever, the stock couldn’t maintain its earlier $3 gain, on top of the $25 or so gain the past couple of days.
And guess what kind of investments helped propel Goldman to such great numbers.
You got it.
They were short on sub-prime mortgages.
That’s why they’re Goldman and Bear Stearns isn’t.
Likewise, Ameritrade gave up its gains and most of yesterday’s, as well, as the brokerages took some off the table after a great week that started on Tuesday afternoon, thanks to Uncle Ben.
Tomorrow, as the proverbial “triple witching” day would usually be filled with the prospect of fireworks, but these days, there’s definitely very little that’s going by the playbook. Since it looks as if the shorts have finished covering their positions there’s not much reason to suspect that there would be any big upside push, especially since we’ve digested the big earnings news.
After the bell, both Nike and Oracle came out with their earnings reports and they were a bit better than expected, but I don’t think that they will be enough to propel the market. If Goldman’s numbers couldn’t do it today, I think it means that we need a little respite. It’s been a very tense week, albeit, a really good week.
I will look forward to tomorrow. I hope that Apple makes a run at $145. I can’t wait to sell an October $145 call. As far as everything else goes, I’ll be too busy worrying about tomorrow night to concentrate on the market.
What will I be worried about? Is it because tomorrow evening is the eve of the Day of Atonement, when we must take stock of our actions in the past year and ask for forgiveness, while we begin our fast?
No, it will be the first night of the dancing class my wife signed us up for.
Anyone who mistakes Bernanke, Paulson and Jackson for the Three Tenors certainly won’t be able to translate music into movement.
Count on that.
There’s Got to be a Morning After September 19, 2007
As long as I’m using old song titles as themes, this one seemed perfect.
As far as I know, however, there is no college campus resurgence for Maureen McGovern, unless it’s simmering under the surface. I don’t think so, but I could be wrong. I still think that Meatloaf has that audience to himself. Someday, I’m sure that Maureen McGovern will be either on one of those PBS concerts or hosting one of the Time-Life infomercials.
If Meatloaf ever does either of those, it truly will be the end of time.
Judging by the pre-open futures, the morning after may not be one filled with regret. So far, despite poor earnings numbers from Morgan Stanley, it doesn’t appear as if the usual morning after question will be asked.
“Oh my God, what have I done”?
Neither does it appear that yesterday’s run up in stock prices was a result of systematic drunken frenzy, with subsequent remorse. Not that I have first hand knowledge, but I have friends. It looked as if there might be some follow through from yesterday’s 330 point gain. And as it ultimately turned out, there was conviction to today’s gains. The morning after was looking pretty good. That in itself is a surprise.
I had real trepidation about what today would bring, but I’ve been expecting the other shoe to drop for the last few weeks, and I’ve been wrong. Luckily, I’ve also been frozen in my actions, unable to find the conviction to act on those negative feelings.
But events last night put me on notice that only the unexpected should be expected. As far as I’m concerned, yesterday’s 50 basis point drop itself was unexpected. To me, it seems that the Fed Chairman caved in and may not be as independent as the Fed is supposed to be. I know that’s unnecessarily cynical, but I think a really great message would have been shown if the FOMC said that there was no need for a rate drop because the economy was doing just fine and will continue doing well once we get those greedy sub-prime mortgage vultures out of the system.
It didn’t stop with the rate drop, there were more surprises to come.
No sooner had we discovered that former Fed Chairman, Alan Greenspan did most of his thinking and writing in the bathtub, than we saw him popping up on The Daily Show last night.
The pensive pose on the cover of Time magazine was understandable, but The Daily Show? Did anyone in his right mind ever expect that Alan Greenspan would show up on The Daily Show? I suppose you do what you have to do to sell books. You should see what I have to do to get sponsors onto this blog. Talk about prostituting yourself.
As unexpected as the appearance may have been, it was impressive. For an 81 year old, Greenspan had quite a bit of jump in his walk as he entered the stage. He was also quite good at reining in Jon Stewart. Rarely will you see Jon Stewart unable to steer the interview in the direction that he knows will bring laughs. Greenspan, in his deadpan reaction to Stewart’s attempts, got the laughs, basically by ignoring the attempts to be led.
As unexpected as this appearance was it prepared us for more of the unexpected today, as today was another up day after yesterday’s record rise. By any definition this was certainly unexpected, given our recent history of being unable to sustain upward momentum.
And what a day it was. Even though the Dow was only up by 75 points, the rest of the market just thought that it was still yesterday. The Russell 2000, for example, was up more than twice the Dow’s relative rise. This past year the Russell 2000 has really underperformed the Dow and S&P 500. If it decides to catch-up, the Szelhamos portfolios will really soar. As it is, the portfolios are now ahead of where they were at the market top in July. A little rise in the Russell would put it way ahead.
When there are such nice upward moves I look for opportunities to sell out of the money options, trying to capitalize on overinflated options premiums. With that kind of strategy, the underlying sentiment is that the market won’t sustain the short term gains. Usually that works out pretty well, but sometimes you run the risk of selling those options right when a stock is beginning its real upward move. That may be the case of MasterCard. After its $10 gain yesterday, I sold options. I really didn’t expect another $3 gain today, as it is drawing closer to $160.
Today, with Google up about $12, to $547, I sold some October $600 calls. The premium wasn’t overly inflated, but it was still worth risking the loss of my Google shares.
I also sold some November $22.50 Ameritrade options, as Ameritrade had a good morning gain to about $19. In this case, the premium was inflated and I would be ecstatic to lose Ameritrade at $22.50.
I also tried selling some January $75 Altria, but couldn’t get the price I wanted, but I’ll keep trying tomorrow. I wouldn’t mind having any options on Altria exercised, because in addition to the profit, it would rid me of my guilt over owning the merchant of death.
If I make enough profit from these trades, I’ll be able to buy enough paint to give Sirloin’s works two coats of cover-up. Otherwise, I may just have to let his work remain for awhile.
That’s actually what my sons want me to do. They like Sirloin’s work, they think that it classes up the place. When you live in the burbs, I suppose a little ghetto atmosphere can pass for class.
As it turns out, tomorrow will be yet another morning after. I suppose that could go on ad infinitum.
But you really have to wonder whether the market will start factoring in other things, than just the need for a rate cut. Before you know it, there will be calls for more rate cuts and it doesn’t seem like those would be so readily forthcoming, unless something out there is really much worse than we know.
The thing that probably should be factored in is this little thing called “reality”. As we’ve been so focused on interest rates, oil is just climbing like crazy. Interestingly, despite the rise of about $10 a barrel over the past couple of weeks, the price at the pump really hasn’t risen. Continuing along that same paradox, today’s oil and gas reserves data was released. While oil reserves were unexpectedly down, gas reserves were up.
And while all of this is going on, gold is skyrocketing and the dollar is plummeting. What part of this equation is good?
We certainly can’t count on Ben Bernanke to singlehandedly continue to rescue the economy.
If he did, how would he respect himself when the morning eventually comes?
What’s it Gonna be Boy, Yes or No? September 18, 2007
Everyone who was alive in the ‘70’s knows that question.
“What’s it gonna be boy? Yes or No?”
It was “the question” and it summed up a generation of angst.
As it turns out, Meatloaf is having a resurgence among college students. Who would have guessed? Who across the multi-generations doesn’t know that refrain from “Paradise by the Dashboard Light”?
Just as equally, everyone who was alive in the ‘70’s knows the answer to “the question”.
“Let me sleep on it and I’ll give you an answer in the morning”.
We all know how that situation turned out. Well, at least it turned Meatloaf toward prayer. That’s a good thing.
Well that’s precisely the situation that Ben Bernanke found himself in yesterday evening. Absolutely everyone wanted to know what his interest rate decision would be, but we had to wait for the answer until today. I, for one, could not get a good night’s sleep knowing that I had to wait not until the next morning, but until the next afternoon.
Unfortunately, there was no Phil Rizzuto like interlude to inject a little bit of humor into the situation. Just a lot of talking heads, all trying to read between the lines.
The best you could do was the image that Alan Greenspan evoked yesterday with his revelation that he did all of his best thinking and writing while in the bathtub. Meanwhile, I just thought his skin was wrinkled and saggy from age. So much so, that I never noticed the immaculate hygiene.
I guess you just take a high level of hygiene for granted in a Fed Chairman, but given the scope of his book, he obviously spent a lot of time engaged in personal hygiene. We should all be so clean. I’m thinking of upgrading to an 80 gallon hot water heater and blogging while soaking, myself.
For the last 3 weeks or so I’ve been fully convinced that the market was going to nosedive after today’s announcement. I had been watching the behavior of puts on the S&P 500 in the event that that dive looked like a reasonably sure thing.
My intention was to buy these September puts at the very last minute based on the market behavior the 2 or 3 days prior to the announcement. On Thursday, I laid out the scenario whereby I would pull the trigger. And I was fully expecting to pull that trigger.
The last couple of days, however, just muddled the picture. Instead of a trend up or down in those days prior to the Fed’s announcement, the market went up a little on Friday, went down a little yesterday and had a moderate gain in today’s early trading. The herd just wasn’t going in any direction, at all, so there was no contrarian direction to be taken.
Based on last Thursday’s strong close and the mildly upward trend the past couple of days, I would still have predicted that the market would go down in response to Bernanke’s announcement.
Even in the unlikely chance that he was going to announce a 50 basis point decrease in the Fed rate, it seemed that had already been discounted in stock prices.
Wrong, wrong, wrong.
As it turned out, the Chairman, who is now everyone’s financial darling, announced that the committee was unanimous in recommending the 50 basis point cut. And so the market went on a wild buying binge.
And where was I during this?
I had my day very strategically mapped out. I wasn’t going to lose my chance to capitalize big on this sure thing.
The rate announcement was scheduled for 2:17 PM. I know that sounds sort of odd and random, but who are you going to complain to? Really? 2:17?
I had planned to decide whether to pick up the S&P 500 puts just a few minutes prior to the announcement. I was especially prepared to pull the trigger, because the market had held its 90 point gains all morning and early afternoon. I saw that as the contrarian sign that I had been looking for. I was convinced that I would be picking up some shares of a just in the money September S&P 500 put. The risk – reward ratio looked great.
At that point it was about 1:30 PM.
But then a funny thing happen.
Work got in the way. Who knew that work could be such a great thing? As it turned out, that diversion, that I like to call “work” may have saved me quite a bit.
I never got near a computer screen again until nearly 3:30 PM. I never got the chance to buy those puts. Yet another good reason to keep my day job. It keeps me from make a mess of things.
At that point, as everyone knows by now, the market was up by about 330 points, having added about 250 points after the announcement. The details of which I didn’t get until shortly after 5 P.M.
So I didn’t get to make the money losing trades that I was so convinced would have been the right thing to do.
I was stunned to see the numbers, but I still had to time to read the details of the announcement. I did have time to make one trade, though. With MasterCard up by 10 points, and I believe with more upside potential, I sold some October $160 options.
I wanted to make more options trades, but I had neither the time nor the good price points.
In the meantime, even with a $12 gain in Goldman Sachs, I’m still not even close to a breakeven, unless you factor in previous options premiums. And Google? Another $10. A lovely sight. Going to $600.
I realize that I rarely write about other stocks that I’ve held onto for a long time, because to me, they seem sort of boring. But today was a great day for the likes of Freeport-McMoran, Rio Tinto and Deere. Boring, but even better than everything else did today. Just as work is sometimes a good thing, so is boring.
But now comes the morning after.
We’ll see whether the next part comes true. Will those who believed that a 50 basis point drop would be a sign that things are even worse than thought get into gear? If so, then the good news of the 50 basis point drop becomes perverted and leads us downward on a wave of worry.
At this point, we’re only about 2.5% below our mid-July highs, but I’m only 1% below, thanks to some recent hedging that gave some downside protection.
I suppose that the only thing to do after such a big one day gain is to sit back and watch. Obviously, you hate to think of the potential of missing out on the beginning of a nice ride up, but recent history shows that there isn’t very much short term follow through after these days. Maybe now would be the right time to buy those puts? I don’t think that I have what it takes to make that trade tomorrow, but it’s tempting.
But I’m still not ready to close out positions, because I can’t really think of many good replacements, at least not at these high levels.
That’s why I don’t get paid to write this blog. I don’t need to have ideas.
What I need right now, actually is just some paint.
Now that we know Uncle Ben’s answer, it’s time to get into the next level.
Unlike Meatloaf who immediately starting praying for the end of time, once he gave his answer to that infamous question, I’ll direct my prayer in other directions.
Such as being able to match the obscure shade of the exterior of our house.
I’ve got my priorities straight.
Why Mondays Matter September 17, 2007
We all know the gruesome statistics.
More people die from heart attacks on Monday than on any other day of the week. And as far as time of the day goes, nothing is more risky than those first couple of seconds after you’ve woken up and are ready to touch your feet to the ground.
So why do I look forward to Monday mornings? It can’t possibly be for the infarct. Even if sudden and fatal, I don’t think that would be terribly enjoyable, despite what people seem to reflexively say after hearing of someone’s sudden demise.
Most weeks, the answer to that question would be really simple. With the exception of those pesky federal holidays, Mondays marks the return to trading and I don’t work on Mondays. Nice. Doubly nice. That’s the kind of excitement that I’m talking about.
The house is empty on Mondays, everyone else is either back at school, or at work. Nice.
So why did I especially look forward to this Monday?
This week, that’s an easy one to answer. Sometimes you need Monday to help you escape from the weekend, and this was a busy and tiring weekend for me.
After a couple of lackluster trading days and the expectation that today wouldn’t be terribly different, you would think that a weekend filled with some kind of excitement would be welcome. But I live for tedium.
On the world front the weekend was also quiet and that certainly helped to continue to set the stage for a buildup to 2:17 PM on Tuesday.
Alright, so what made me doubly wish for Monday to come?
Alright, let’s start with the good news.
I set a personal best record for the 5K run, a time that nearly beat the times of the past 3 winners of the Boston Marathon. And they were Kenyans!
For some inexplicable reason, my younger son and wife convinced me to run in a charity 5K race. Considering that I had never done anything like that before, other than once running to catch a city bus, it seemed inexplicable that I would say yes. I overused the word “inexplicable” to describe this decision, because it really was. Almost as inexplicable as my agreeing to take the couples dancing class that begins either this or next Friday evening.
Needless to say, once the race started, I soon realized that my sole goal would be to finish before the morbidly obese women with the walker and oxygen tank. In the heat of the race and grueling competition, I realized that the wheeled walker and tank may have given her an unfair advantage. As such, it’s difficult to criticize me for what I did. Hindsight has its purpose.
I knew that someday, that lucky clothespin that I always carry, would come in handy. Who knew that the steady flow of oxygen was so vitally important, especially when going uphill? But I’m sure that most everyone would agree that those wheels were tantamount to cheating, and after all, there was a $1,000 first prize at stake.
Anyway, I did pay the price, even beyond the tax deductible entry fee. Basically, every muscle from ankles up to the neck were aching in unimaginable synchrony, and continue to do so, as I type away.
The aching was compounded at yesterday’s Stevie Wonder concert, as I endured endless “bo dunk a dunk” bumping and grinding. Excruciating, but I probably deserved it. Unfortunately, my ability to use that as an excuse probably won’t carry through until the dance classes begin.
But since this blog is supposed to be about the world of finance and money, let’s get right down to it. Let’s forget about all of this trivial, meaningless stuff. The stuff that is my life.
The real issue this weekend, however, was the plummeting value of my home. Without a doubt, its value has probably slowly drifted downward these past few months as everyone across the country has begun to experience. The charity that my son and I ran for, ironically enough, happened to be Habitat for Humanity. Home prices in our community would have to fall nearly 100% for Habitat for Humanity to get anything done in our county.
But what then caused this sudden and unexpected drop in the value of our home? Was it fallout from the run on the British bank? Was it the inevitable result of our liquidity and sub-prime crises? Did someone leak the Fed’s upcoming interest rate decision?
No. It wasn’t any of those.
It was all due to “freedom of expression” and a need to unleash pent up creativity.
Yes, I know, these are the most common causes for decreasing home values, but let me tell you my story. Hopefully Bernanke will read this and act accordingly in formulating the Fed’s interest rate position.
You see, we had a weekend guest. A 12 year old who visited us a few weeks ago with his mother, who is a co-worker with my wife. He was enamoured of the neighborhood, our house, dog and most of all, the backyard trampoline. That trampoline was viewed as a good way to shed some unwanted pounds and make one’s self more attractive to 12 year old females.
He asked if he could one day spend the weekend and my wife agreed that would be a nice idea, particularly since this 12 year old is an extraordinarily polite and agreeable child. Additionally, he likes to eat, which is something that brings joy to any mother, even if its not her own child. Of course, when my wife discovered that the newly purchased box of Rice Krispy Treats was entirely devoid of the 14 remaining treats, all of a sudden, she wasn’t quite as joyful. Don’t mess with that woman’s Rice Krispy Treats.
You’ve been warned.
So this was the weekend for “Sirloin”, as we’ll call him, to protect his identity, to stay with us.
Saturday was uneventful, mostly because I am unaware of anything that went on around me, as I was in bed, unable to move or even twitch, in the aftermath of the 5K.
At about 11:30 PM, my wife awoke me and said, “don’t worry. Everything is OK. It’s not that bad”.
Normally, such words, when delivered in a vacuum, such as these were, would not pique my curiosity. Somehow, I managed to ignore these words, even as she described the late night actions, which involved my son’s clubhouse.
My son had made a very elaborate 2 room clubhouse underneath our deck. When I say elaborate, I may be understating the situation. There is a pull out couch, carpeting, hammocks, a desk and electricity. It is very neatly maintained, as opposed to his room, which is like any other healthy male adolescent’s room, typically dirty and smelly.
Not so for the clubhouse.
As it turns out, “Sirloin” found a can of spray paint in the clubhouse mailbox. Yes, the clubhouse has its own mailbox post and mailbox. It also has a faux security camera that moves in a 30 degree arc and makes a “whirring” noise. I told you that it was elaborate.
For some bizarre reason, Sirloin decided that it was permissible to take the can of spray paint and write a composition on the side of our home. He was, however, quite neat about it, as no paint drippings were noted on the wall, nor on the couch. As I was always told in school, neatness counts.
Apparently, Sirloin is well versed in the ancient art of Japanese edifice expression, because his writings followed a vertical pattern, as opposed to our more acceptable, horizontal left to right variety of literary graffiti. However, regardless of the orientation I couldn’t find any meaning. But isn’t that sometimes the true expression of art?
So, as I look at the other homes in our community, I immediately sense a drop in our home value. Now, I’m not an expert in this area, but if spelling counts as well, the drop may be even larger that I have calculated.
To his credit, when I came down to the kitchen on Sunday morning, still not having seen the “art work”, Sirloin confessed it all to me. He did so after he asked me if I had a plunger.
More on that some other tangential story line some other time.
As I was taking my blood pressure, fumbling around trying to find a cuff that would go around my neck, I tried to explain to Sirloin, who was very sincerely apologetic, that it is the sin and not the sinner that had my disfavor.
Of course, that’s not really what I believed, but it sounded so pious when I said it. No one could possibly have believed it. But Sirloin did and he was now ready for a breakfast of Raman Noodles, with cheese, and Old Bay seasoning. Although the recipe apparently also called for hot sauce, I couldn’t locate any.
I’m still not over the initial stunned sensation. No, not about the breakfast selection, about the spray painting, I do, however, feel sorry for my wife, who at some point, will probably have to bring up the topic with her friend from work.
As badly as I feel about that, I would love to be a fly on the wall, although based on the behavior exhibited by real life flies, they prefer to congregate in areas in need of plunging.
But more on that tangential story line at some other time.
Maybe next Monday.
It’s a Tug of War September 14, 2007
Tug of War and metaphor seem to rhyme.
But that’s exactly what today is turning out to be and that is exactly what it is portending for Monday. Stalemate, stagnation, you name it. Nada, nothing, say “when” if you get the idea.
Yesterday I concluded that next Tuesday’s post-announcement trading would be determined by the direction taken with trading today and on Monday, with the idea being that whatever direction trading took over those 2 days, Tuesday would trade in the opposite direction after the Fed announcement.
After a quick 90 point drop, which I initially interpreted as a bullish sign, the market erased that loss and then just meandered around a tight unchanged band.
The one scenario that I never thought of is that perhaps so many people are involved in the Tuesday guessing game that the market will neither go up nor down. Unless Bernanke comes out with a real shocker, there may just end up being equal numbers of people on both sides of the expectations aisle.
It could end up being a stand-off.
And now that I think about it, that’s what makes the most sense. That’s especially so when you consider that absolutely everybody is predicting that Tuesday will be the “single most important trading day” in memory.
With so many people staking their professional seer careers on that kind of outcome, you just know that it won’t turn out that way. Instead of being the single most important trading day in memory, it may end up being a yawner.
What happens afterward may end up being a return to basics. Maybe, just maybe, instead of bouncing around because of one “crisis” after another and reacting wildly to every isolated bit of data, we will focus on what really matters. Things like earnings, economic growth and jobs creation.
Or not.
I think that the “or not” is much more likely.
Now, despite my ability to rationally explain why Tuesday may end up being a yawner, deep down, and maybe even very superficially, I still think that we can only go in one direction. I just don’t know if I have the inner strength to act on that feeling.
Interestingly, despite the potentially bad news today, the market was incredibly tame for a second day in a row. That must be a reflection of the ongoing holiday spirit, that left the trading floor more quiet than usual and left us with a trading volume of about half of a typical Friday.
The bad news today came in 2 forms. One was the retail sales numbers. Once again, they were down. Sales down, profits down. That’s simple enough, but at a time that we aren’t really interested in things like the basics, who cares?
The other news came from England. Remember yesterday’s blog? After saying that it wouldn’t increase liquidity as a response to bail out speculators, the Bank of England did just that.
It prevented a possible run on its 4th largest bank, one that was roughly akin to Countrywide Financial, with regard to its sub-prime exposure.
That news could probably be taken either way. If you’re looking for a sign that a central bank will step in, then the Bank of England just showed that it isn’t unthinkable. If they can do it, so can our Fed.
On the other hand, is this a case of our sub-prime problem doing more than a trickle over the pond? Is there a downside to globalization? If we’re all connected in one great big economy, could we all go falling down like dominoes?
But today, nobody really cared. The markets were open, but it just went through the motions, and who can blame it for doing otherwise? Even if this is going to end up being a stalemate, you can’t take that chance and commit your positions one way or the other. Although, this may be the perfect time to take out insurance, such as puts on the S&P 500, if you are currently fully invested. The problem is that with all of the past volatility and the prospect of more to come, the premiums are high. That means you stand to lose more if the market moves against you and you stand not to make as much if you are right. That just goes back to that risk – reward concept. Or you can do just as in the past. Ride it through the storm. And if by chance the market should shoot up, hey, there’s nothing wrong with being wrong.
At the very least wait until the last possible minute to buy those options, at least you’ll pay less of a time premium, considering that options contracts expire next Friday. The announcement comes at 2:17 PM. I’m still completely up in the air, although I have no doubt that if the market has a big up day on Monday, it will definitely be time to sell. The chances of a big up day on Monday or prior to 2:17 PM on Tuesday, is pretty small, though.
This evening Jim Cramer did a review of the 3 possible Fed decisions and came to the obvious conclusion. No cut, 25 basis points and 50 basis points. Nothing good can happen in the short term. As I pat myself on the back, he used the same reasoning as I have for each of these scenarios, including the irrational reverse psychology herd action in the event of the 50 basis point cut.
Uh duh. Now I know that Cramer is a fan of Szelhamos Blogs. He must be the guy in New Jersey that shows up almost everyday when I look at the Google click reports. Now if only I could figure out who the reader from Viet Nam is.
But what Cramer did really well, and without any assistance from me, was to lay out a plan of action following the announcement. If I do commit to selling positions, his recommendation in the face of a 50 basis point cut is to wait 2 days before getting back in.
In the meantime, nothing can get me down.
That’s because I received something glorious in the mail this afternoon.
Yes, I had been waiting for it and could almost taste it, I wanted it so badly. And today it came.
Ah, that refund check from Comcast.
So sweet.
About 6 weeks after Comcast Liberation Day, but that’s a reasonable period of time. So sweet. So savored.
So really. Who cares whether its no drop, 25 or 50 basis points. My servitude to Comcast is now officially over. Free at last.
What a great way to start a new year.
In a tug of war between Verizon and Comcast, there’s no contest. I can’t even begin to drag Comcast through the mud enough to adequately portray its putrescence.
Unfortunately, those words may come back to haunt me through the wonder of Google archiving, particularly if I slam Verizon 2 years from now in favor of (ugh) Comcast.
It could happen. You never know. That’s what tug of wars are all about. It could go either way in an instant.
Hopefully, come Tuesday afternoon we won’t get dragged through the mud in the final hour and 43 minutes of trading. But as always, just wash up and get in it agai | 
