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Mark Bruns

 
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  • For options/volatility traders, the best time to trade volatile events may be the week or two before and after their occurrences, writes Bill Lubby. FOMC meetings are a good example, the VIX rising 2.4% on average in the 6 days prior, and then rising again in the 2-9 days following.  [View news story]
    I dunno ... my opinion [basically a wild intuitive guess, in this case] ... is that the market is pricing in a Bernanke put ... in essence, it views the extra QE from the Fed as putting heavy downward pressure on volatility ... that doesn't seem adequate ... perhaps someone can add some insight.

    I'll admit that I'm not entirely sold on that view ... for all of the reason hx88 mentions [and maybe more] ... the underlying weakness prompting the Fed's is SEVERE ... not just the Fed, but all central banks‬ driving rates toward zero pushes the yield curve‬ toward becoming the yield-less flat line [and who is really sure about what locks up as parts of it go negative] ... there's also still the potential for a minor seismic event associated with the surprises/re-adjustments that might come out of the LIBOR [and other rates] being manipulated.

    I do NOT mean to imply that someone should be in "sky is falling mode" and backing up the truck to load up on vol ... all I'm saying is that I think we are in brand new territory.
    Jul 12 03:04 PM | Likes Like |Link to Comment
  • Chart Of The Week: As Goes Spain... [View article]
    Absolutely spot on! Great article!

    Spain absolutely should be our primary focus.


    I think it's worth spending a few moments thinking about why the news in Greece has been so important to the Liberal fascists like Paul Krugman and George Soros who are such staunch anti-austerity Big Government advocates. The Liberal anti-austerity fascists continue to take every opportunity they can to pound on Germany to do more; at the same time, they refuse to make reasonable requests of the debtor nations to take the appropriate steps to move forward on the path to responsible fiscal policy. Fortunately, there are people like Bill Gross [of PIMCO] who get this right: "Elections which ratify more and more debt cannot cure a debt crisis." http://bit.ly/LMNnQm

    If we want to understand Greece's newsworthiness, we can use a historical metaphor from the 1930s ... Greece in 2010 - 2012 is similar to fascists proxi-wars in the Spanish revolution or the Second Italo-Abyssinian War in Ethiopia ... Hitler and Mussolini brought out and tested their best firepower to evaluate its battle readiness for the bigger WAR that they knew they'd start ... in Greece, Liberals from all over the world are making their strongest arguments in favor radical left wing parties that favor of anti-austerity measures. The moderates and independents in Greece have been lumped in with profligate spenders, the radicals who claim entitlements to early retirement, generous vacation and unlimited education benefits. The Liberal involvement in the Greece elections is a proxy fight for the much bigger WAR that is coming.

    The reality is that the REAL war begins in Spain, just as WWII really began with appeasement of Hitler in Munich with respect to Czechoslovakia's Sudetenland. In 1938, the world believed that it could afford to let Hitler have the Sudetenland ... Ambassador Joe Kennedy and FDR even thought it was a good move and pressured the English behind the scenes to do it. Right now, most of the world does not really seem to care about Spain ... but Spain IS where the line in the sand absolutely must be drawn.

    I believe that bond markets provide terribly important information about the state of the world; if you want to understand the where the world is going ...it's great to focus on America and what happens in America, but you need to spend some time focusing on Spain, in particular ... and, in general, keeping your eye on the European sovereign debt crisis.
    Jul 10 04:36 PM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    My main point is that Put premiums have gotten more and more expensive relative to calls ... the Put/Call price disparity is flashing a WARNING SIGN to stay away, to avoid Tesla, to give the company to either prove itself and prove the short-sellers wrong OR ...

    Tesla, very well, could prove the naysayers wrong ... it's an extremely steep uphill climb, but it could do it ... for people who think that, calls would be a better way to "play" that upside, but it's a gamble ... a "sport trade" ... not really an investment.

    There are Tesla zealots 110% committed to Tesla ... including institutions that must hold companies like Tesla for to match their fund objective of investing in "green" companies ... but, under the current option price environment, it wouldn't make sense for these dedicated long-term believers to have a pure long position in Tesla, a synthetic long is a cheaper way to get the same thing.
    Jul 6 08:29 AM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    You can talk smack if you like ... Tesla is for sport traders ... and people who can't or won't take the effort to figure out synthetic positions with options.

    The FACT remains is that you can establish a synthetic long position by buying a call and selling a put in TSLA for price that puts you well under the market price for holding the stock ... a DEC synthetic long at a $31 strike could be put on today for net $1.50 credit ... that 29.50, a full $1.73 under the current stock price.

    If you hold the stock now and you are committed to hold indefinitely -- it's ok with me if you want to be a TSLA believer, but if you are allowed to own options in your account, you really should be making your TSLA bet with a synthetic long position ... unless you want to throw money away OR unless you want to trade TSLA for sport.

    Do NOT buy the stock and then write calls ... you're better off to just have no stock and write TSLA Puts and pocket the premium.

    This is WARNING FLAG territory for new investors ... it's also WARNING FLAG territory for anyone that owns a fund that owns a significant Tesla position. You can buy into the high risk "Rule Breaker" theory if you want, but generally, when you see that kind of premium for Put prices vs Call prices ... it's a sign of something flaky ... in TSLA there's an ENORMOUS short position, so if you want to bet against shorts [even though that's never a great idea], write puts ... but it's just plain foolishness if you're hanging on to the stock if you can trade options.
    Jul 5 07:38 PM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    Safety items have a negligible impact on economy/performance -- the weight is not that great; design have been developed over the last several decades to dissipate energy from a crash and protect the occupant.

    There is significant drag on economy/performance is from boosting customer comfort/convenience. It is NOT the weight of seats or interiors as much as it is matter as much as the drag of having the A/C clutch engaged to [continually and excessively] optimize operator comfort. EPA testing does not test in actual road conditions so EPA mileage does not reflect ACTUAL mileage that corresponds to driver A/C usage.

    If you're seriously interested in evaluating performance of passenger automobiles, you need to take Al Kargilis's course on Design and Development of Automotive HVAC systems ... without this kind of background in a very practical aspect of how automobiles are actually used, you simply cannot understand the performance, power, thermodynamics and efficiencies of passenger automobiles. http://bit.ly/Ls7jbb
    Jul 2 10:02 AM | 2 Likes Like |Link to Comment
  • Rising U.S. corn prices in the face of a Midwest drought have forced Valero Energy (VLO) to shut two of its 10 ethanol plants, each with the capacity to produce 120M gallons of ethanol per year. Rabobank analysts predict corn prices could rise another 25% by year's end on lower yields due to the weather, pushing prices near the all-time high of $7.99/bushel.  [View news story]
    It USED TO BE that prices for grains were more inelastic than they are nowadays -- a large proportion of corn was consumed for food or livestock breeding populations that needed to be maintained -- but grains are still relatively price inelastic ... after a certain point, a decreases in supply leaded to certain amount of panic buying. The fund ownership in grains is not especially large yet -- it would be safe to say that investment funds are monitoring the situation closely and will jump in quickly if a price spike looks likely, i.e. the PUBLIC tends to be "notified" with news headlines of huge profits to be made in commodities after that spike has happened. Right now, WEATHER still drives this market ... if plentiful rains started falling right now across the corn belt the market would, in all likelihood, drop like a rock.

    Nowadays, at certain price points [depending upon demand for gasoline], we see demand drop out ... that's what we are starting to see with the idling of some ethanol plants -- it's not a permanent for those plants, of course, but as corn gets harder to find in sufficient quantities to keep the plant running [and spot prices rise], it makes sense for plants to go offline for longer periods to do maintenance tasks for awhile and wait for lower prices [and new crop harvest].

    The predicted price increases are largely dependent on expected yields. Most of the fluctuation is weather-driven, but it would be reasonable to expect that USDA crop reports will err on the side of painting the rosiest scenario possible until AFTER harvest is complete in December. Incumbency does have it's advantages in things such as control of Cabinet Departments that report economically-sensitive data.
    Jun 28 07:23 PM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    Those are excellent rules for Tesla!


    Tesla is a stock for "sport-traders" -- I don't fish/hunt/snowmobile or ever watch any kind of sport that's on ESPN -- I "sport-trade" for entertainment ... at any time, the maximum trading loss was bracketed below the level of loss that I could "walk away from" with no regrets -- I have friends who spend a lot more hunting / fishing / tailgating / taking the bikes to Sturgis than I could have lost. I like to "sport-trade" IPOs stocks because I like to watch how the stock price manipulation plays out ... the action in these issues tends to be downward, but there are reactions to [temporary] oversold conditions and short-squeeze plays by the manipulators.

    People talk smack about "sport-trading" stocks ... like these Tesla comments ... it's not different that the bravado and cheering by sports fans ... or accountants/lawyers wearing their "tough man" motocycle leathers when they walk into biker bars ... I enjoy laughing at stuff like that.

    I do not consider Tesla to be a stock for long-term investors ... anyone who disagrees with me should use a synthetic long (write puts+sell calls at same strike price) ... a synthetic long in TSLA is significantly cheaper than than buying the stock. If the big holders of Tesla were holding the stock because they see it as good long term investment, I would expect them to convert their stock positions to synthetic long positions ... the reality is that Tesla is not held by smart long-term investors; it is a "crony capitalist" stock held and manipulated by cronies.
    Jun 24 12:49 PM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    You won't see my tax return [for a variety of real reasons OTHER than TSLA] ... we are not talking about that much money ... this is trade that I've done for the sport of it ... it's very small time trade!


    I do owe you an explanation what I did; it's basically a trade that depends upon the price fluctuating ... I bought Puts and Calls to open the trade ... as TSLA rose, I followed with a spread trade -- selling Calls to close a position and buying [more] Puts as a [larger] open position ... as the TSLA fell, I did the other side -- selling Puts to close a position and buying Calls to re-build my Call position ... I have tended to have more Puts, but there are times when Puts were overvalued and I believed that TSLA was relatively oversold for this point in time. It's not a very fancy trade ... it's just picking up dimes in front of the dozer as it moves back and forth ... it's a trade that is probably more work and risk than what it's worth, but I find Tesla and the ultra-naive Tesla partisans to be highly entertaining.


    As for the risk free arb ... look for yourself at the selling prices for Put Options right NOW ... 33 strike Sep Put with the 33 strike Sep Call ... write the put, buy the call, you pocket about $0.25 and you are required to buy in Sep at $33.00 which is about $0.75 less than mkt price ... IF it were possible to find shares to short -- you could add a SHORT position to the short put/long call synth long ... you'd lock in the $1.00 profit with basically no risk.


    When this kind put-call disparity is out there in the options markets -- and it just flat out shouldn't be there -- the market is telling you to stay away ... something might be rotten in California.
    Jun 23 06:11 PM | Likes Like |Link to Comment
  • OK, You Sold In May... Now What? [View article]
    Believing in simplistic calendar-based market timing is just ... unbelievable, on so many different levels... the allure of too much emphasis on market timing is that it all seems reasonable ... except that EVERYBODY IS ALREADY IN ON THE CON.


    Market's do have personalities and "rhythms" that reflect calendar events ... volume [and market liquidity] falls off or increases seasonally; the four quarterly earnings seasons can be a time of greater price fluctuation and an opportunity to liquidate or add to a position. All of this kind of information enters into an investor's larger strategy for the allocation of both time and capital ... obviously, awareness of market opportunities cannot be discounted entirely -- but wealth is created by OWNING businesses and regarding investments an "owner" rather than a "timer."


    There have been NO really significant fortunes made through calendar-based timing alone ... large fortunes have been converted to small fortunes with market-timing and, for some reason, people like to brag about their timing on stock purchases and the great run of luck they have been having at the casino...


    Market awareness does matter ... but the claims associated with market timing are the same as the claims of the penile enlargement industry, I really do get a chuckle out of the claims and the notion that someone would believe them, even if the product is ridiculous. Let's just say when I hear a claim of acquaintance with multi-multi-millionaires, I just think ... well ... yaah ... keep using that ... that works for you!
    Jun 23 12:20 PM | Likes Like |Link to Comment
  • The first reviews for the Tesla (TSLA) Model S start to pour in, largely on the positive side. The electric vehicle boasts impressive acceleration, a smooth ride, and a massive infotainment system chock full of delights, according to the writers. With demand for the model uncertain, and its success seen as an all-or-nothing watershed moment for the company, early buzz on the car is viewed as critical. (Reviews: Engadget, Motor Trend, Wired, CNET[View news story]
    As a stock to trade, Tesla (TSLA) has been very kind to me ... I think it is a monumentally terrible stock to own and invest in UNTIL it produces a solid record robust and durable profitability ... rather than more and more promises of what it will do in the future. It's an absolutely fascinating case study in IPO stock price manipulation.

    The cheapest way to acquire a long-term position continues to be a synthetic position, i.e. to write (sell) Puts and buy Calls. In theory, it would be possible to do a risk-free trade (i.e. the epitome of "Seeking Alpha") with a synthetic long position married with a Short position. The problem is that Tesla is so heavily shorted that it is impossible to find shares to short ... the put-call price disparity with the short situation should tell you something. Basically the "take home lesson" from that situation is the market is providing information to investors who want to heed it. In case, anyone has any doubt the big neon flashing is a "STAY AWAY FROM TSLA" warning.

    Tesla (TSLA) stock price basically reflects the short situation and the movements are driven by squeezes that insiders/traders have attempted to use to separate people from their money. I do enjoy seeing all kinds of hype surrounding Tesla (TSLA) -- it just makes the case study more entertaining. I'm even hopeful the hype leads to short squeezes and price run-ups ... I will use price run-ups to liquidate my call positions and buy puts and wait for the inevitable to happen again ... hopefully, I'll be able to do this like before when the stock price ran up just before "rats jumped ship" and a key insider dumped its 7% stake in Tesla this spring ... but realistically, I am thinking that the whole Tesla house-of-cards story is becoming so obvious that this can't possibly work any more.
    Jun 23 11:02 AM | 7 Likes Like |Link to Comment
  • OK, You Sold In May... Now What? [View article]
    Is there ONE example of durable success in the world of competent investment professionals of anyone who has built wealth by market timing? I'm not talking about just one or two lucky trades where somebody happened to guess right ... like buying the right lottery ticket ... but a sustained record of outperformance? I am not aware of even ONE example of durable, sustained market-timing success ... it strains credulity that anyone, even the newest investment noob on the planet would actually believe that you could discover the secret to market timing on a website like Seeking Alpha.

    There just ain't no such thing as a free lunch!

    The MOST IMPORTANT investing principle for the beginning investor is to find ways that allow you to increase the enjoyment that you find from life without spending money -- you MUST reduce your living expenses so that you never need to raise [much] cash in order to just finance your living expenses. When the ratio of your wealth to your living expenses gets to be around 1000, you don't have to worry any more about raising cash ... you should not sell on given day or month or according to alignment of the planets ... but frugality matters -- if the ratio of your wealth to your living expense is less than 25 (e.g. $2.5M wealth and $100K annual living expense), you always have to be a little bit concerned about having enough cash to ride out a lengthy tough spot. It is much easier to get your out-of-pocket cash living expenses below $10,000 or $5,000 or even less than it is to stock pick or market-time your way to a multi-million dollar nest egg. Investing in your own frugality means developing your skills and creative ability to be able to ENJOY life without spending so damn much.

    I tend to favor a investing and owning assets that's somewhat in-line with a value discipline ... analyzing investments as an enterprising investor from a "Margin of Safety" perspective a la Seth Klarman and others in the Graham-Buffett world ... attempting to improve assets through continued analysis and disciplined ownership (i.e. not with public stocks, but other investments) ... and patiently holding assets until the price offered by the market is too good to refuse. Lots of people involved on the Seeking Alpha website might be smarter than I am ... but I'm not stupid enough to believe in market timing or to believe much in the magic of stock or sector picking ... in other words, it never ceases to amaze me that people spend so much time debating investing theories that are too good to be true, that just don't add up ...

    There just ain't no such thing as a free lunch!
    Jun 6 04:44 PM | Likes Like |Link to Comment
  • Counting Nokia Out Of The Smartphone Race Is Dangerous [View article]
    Danger? In what sense? There are REAL dangers in the world ... a lit cigarette next to gasoline pump is dangerous ... if NOK is really going to recover, there will be opportunities to get in after the price has stabilized and begun to move upward. Right now, the danger is buying before the bottom has been firmly established. Most investors can safely ignore NOK without any kind of "danger" until after the price has stabilized and the fundamentals supporting a solid upward upward trend are proven.

    The DANGER that most naive turnaround investors succumb to is buying too early and trying to buy at the bottom -- before the dead cat falls again ... and again ... and again ... and again ...
    May 28 06:31 PM | 2 Likes Like |Link to Comment
  • Interview With Marc Faber: Gold Still Best Portfolio Antidote For Excessive Debt [View article]
    It's sort of like the old line about how a broken clock being right twice a day ... of course, the problem is that we MIGHT be coming up on a time when this "stuck clock" is right again -- actually Faber seems to advocate investing and WAITING until events come around to favor an investment thesis ... Faber does make a few extremely valid points, e.g. gold's price relative to money supply argues that there is no bubble on gold, but that won't stop the market from being temporarily dominated by people who [erroneously] believing that there is a bubble.

    Faber's investment thesis is fundamentally not pro-gold as much as it is pro-diversification -- it's a diversification of different investment theses -- not just a simplistic diversification of assets with negatively correlated returns that we find in portfolio theory. Faber diversifies in an attempt to always have something that is in favor -- he's always re-balancing by selling what is in favor to buy what is out of favor ... regardless of what kind of set of events happen; in some ways, it's really not all that radical -- it's almost a mix of cliches that have worked in the past ... gold as a hedge against hyperinflation of the early 1970s, equites with growth and appreciation potential for the early 1980s, real estate in booming emerging-growth economies of the early 1990s, conservative solid income-producing assets for the early 2000s.

    The biggest asset in Faber's portfolio is his reputation and act for shows like CNBC ... he has been accepted by the Big Journo as the comfortable, soothing voice of contrary thinking ... the gold bugginess, the accent, the ability to discuss flaws in economic theories and the funny little pony tail are all part of what makes him genuinely entertaining. And like the stuck clock, occasionally he's right ... unlike like stuck clock, he is stuck on several different periods of time.
    May 3 01:11 AM | Likes Like |Link to Comment
  • Nokia's Turnaround Story [View article]
    I believe that Nokia is one of those companies that you watch and wait for the turnaround to actually materialize ... too many people try to get in at the bottom -- there's actually a better return from betting on a company with a proven record (i.e. at least three significant data points) of success.

    In other words, the AAPL example illustrates this perfectly. Yes, it might be great to buy at the bottom and ride the stock to the top -- actually, it might be better to buy AFTER the turnaround has happened -- although it still takes courage to bet on a company that is up by 200%, 400% or 800%. Betting on AAPL in late 2003 or early 2004 [after the AAPL stalwarts and bottom feeders had hung in there and maybe even doubled their money] was still plenty early, even 2005 was still early enough.

    AAPL return from 1/1/1998 until 1/1/2005 = 861% (a pretty good outcome with a pretty decent amount of risk or volatility in returns).

    AAPL return from 1/1/2005 until present = 1772% (twice the return with maybe half the risk or at least less volatility in returns).

    It is not unusual for bottom feeders to buy 20 stocks like AAPL looking for a great turnaround story -- a handful will break even, most will go to zero and one will become the next Apple -- the bottom feeders will still be left with half the assets they started out with ... but they will have the bragging rights for being in at the bottom. Is that really worth anything?
    Apr 29 11:02 PM | 2 Likes Like |Link to Comment
  • PCEF: How Marginal CEF Investors Can Avoid Being 'Gamed' [View article]
    1.56% is the expense ratio quoted on the fact sheet supplied by the company responsible for PCEF, Investco Poweshares.

    http://bit.ly/IE1TIY
    Apr 25 01:09 AM | 1 Like Like |Link to Comment
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