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  • Here's What Stinks About The Steve Jobs Resignation Aftermath [View article]
    Tongue-in-cheek. But all the same, although I don't own any Apple products, when I am in the stores I note that there are all kinds of accoutrements with Apple logos, like cell phone or laptop cases, and amplifier/speaker combos to use with your i-Pod, so it isn't a huge stretch from there to the Apple carry-on bag and designer luggage set, Apple accessories so that pets can share the Apple lifestyle, and so on.

    Of course the counter argument to that is that Apple is popular precisely because it makes no-nonsense products that combine form and function without gimmicks and deceptive marketing and that it does what it says on the box.

    However the history of successful brands is that in the long run they get degraded. Being rather old, I remember that a pair of Levi's jeans actually cost more in 1967, the Summer of Love, than they do now. They were regarded as the best of the best, and Russians would pay $100 for a pair of genuine American jeans.

    Now Levis are just another brand of cheap clothing made by computers in Thailand or some place.

    If Apple runs out of new product ideas some time down the road, we may see them trying to maintain growth by leveraging the brand. Probably not just yet, though.
    Aug 26, 2011. 03:27 PM | Likes Like |Link to Comment
  • Why You Should Sell Gold And Buy Apple [View article]
    You can print all the money in the world, but it's not like you can just dig gold out of the ground... oh, wait a minute.
    Aug 25, 2011. 12:20 PM | Likes Like |Link to Comment
  • Hurricane Irene And The Stocks It Could Affect [View article]
    If the hurricane hits and does extensive damage, actually this is very good financial news for Lowes and for Home Depot.

    When Hurricane Charley hit Port Charlotte, Florida a few years ago, the Port Charlotte branch of Home Depot was stripped bare of supplies for months and had the highest sales of any Home Depot in the nation for that year.

    After extensive damage from a hurricane, huge numbers of workers flood into the area for the cleanup, which is very helpful to local businesses such as motels, restaurants, liquor stores, and builders' merchant like Home Depot, but bad news for insurance companies who are paying for the party. It may also be good news for railroads that are bringing building supplies into the area.

    It may be bad news for electricity utilities, especially if they have a lot of overhead lines, because there is considerable cost in repairing supply lines, plus if customers are without power for any length of time, sales are lost at a time when air conditioning may be using a lot of power. It is, however, excellent news for manufacturers of portable gasoline powered generators.
    Aug 25, 2011. 08:55 AM | Likes Like |Link to Comment
  • The Reception On Sirius XM Is Clear If Investors Tune Out The Noise [View article]
    I am kind of agnostic on SIRI, but I decided to make a small play just for fun. Was also influenced by reading that the next generation of iPhones may have a satellite radio decoder built in.

    Buy 10 Jan 13 $1.50/$3.00 bull spreads for 40 cents
    Sell 10 Jan 13 $1.50 naked puts for 40 cents.
    Net cost $0

    Worst case scenario SIRI goes to zero and you have to buy 1000 shares at $1.50, 10% below current price, for a loss of $1500. Of course you can enter a stop loss order to buy back the puts if SIRI falls below a certain level.

    Best case scenario SIRI goes to $3 or above and you make a profit of $1500 per thousand shares.

    Since it requires that $1500 be frozen in an IRA account to cover the naked puts, you might well ask whether there is really any difference between this trade and just going long SIRI.

    Actually the only difference is that you get in for $1.50 per share instead of $1.69, which is 10% less than today's price. This trade will work better in a margin account.
    Aug 24, 2011. 10:38 AM | Likes Like |Link to Comment
  • The Gold Trade: Prepare for the Plunge [View article]
    Good for you!

    Gold is not money, but it attracts many people in a quasi mystical way, and so the trade in gold is not really rational.

    Some people buy it because they confuse the incorruptible nature of gold with permanent financial value. For others it is just a trading vehicle.

    I have a hedged position in gold and expect to make money regardless of whether it goes up or down. The best quality of gold, in my view, is that its value can swing unpredictably by large amounts, and any trading strategy should take that into account.
    Aug 23, 2011. 07:01 PM | Likes Like |Link to Comment
  • High Dividend Stocks Generally Facing Massive Liquidation and Collapse [View article]
    I think one should be wary of the super high dividend stocks, but also bear in mind that stocks like the agency mortgage REITS look to be fairly safe for now with interest rates promised low for the next couple of years, and the position can be further protected on the downside and leveraged by selling long term ITM LEAPS against the holding, while collecting the dividends.

    It seems to me, and I stand to be corrected that if a stock like NLY is held in a retirement account with the intention of holding it eternally for the dividend income, then even if the dividend falls from 14% to 7% return on initial capital, it is not really a bad investment.

    However, what interests me more is that with the downturn in stock prices some companies like BP, Royal Dutch Shell, VOD and INTC are now offering very decent dividend returns at current prices with the prospect of some long term capital gains as well. The first three offer some protection against declines in the fortunes of the dollar and INTC also has worldwide revenues.

    Positions in these stocks can be further protected by selling calls against the position and by selling naked puts or buying bear put spreads to protect against a fall in the stock by either increasing the position at a lower cost average, or by cashing out on ITM puts when the stock is down.

    By selling ITM LEAP calls against the stock, one can often obtain insurance against a decline together with a guaranteed return on capital at the expiry of the LEAP and still collect dividends until the stock is called away.

    By this means in is highly possible to insure against a 20% fall in the stock AND get a 15% annualized return on capital.
    Aug 22, 2011. 10:25 AM | Likes Like |Link to Comment
  • TGIF - Are We There Yet? [View article]
    I like the XOM play and would be interested if anyone has any ideas on identifying the characteristics of stocks suitable for this kind of play in terms of stock price, beta, dividend rate, volatility, etc., because clearly some stocks must be more suitable than others for this type of play and there must be indentifiable characteristics.

    For example, it looks to me that the same play with BP might return even more.
    Aug 20, 2011. 02:49 PM | Likes Like |Link to Comment
  • The claim that conservative policies of new presidential candidate Gov. Rick Perry caused an economic miracle in Texas is a myth based on a fallacy, Paul Krugman writes. "A state offering cheap labor and... weak regulation can attract jobs from other states," but any logic applying those policies to the entire U.S. is impossible since "every state can’t lure jobs away from every other state."  [View news story]
    ¨¨Who made child labor laws? Why do we need child labor laws? Why not just have parents instead?¨¨

    The movement towards child labor laws was inspired by the works of such as Charles Dickens, who was himself sent to work in a factory at the age of 12 while the rest of his family was confined in debtor´s prison.

    While I personally have no objection to children being set to work in factories instead of watching TV or playing video games, Dickens didn´t care for it and made his fortune by inventing the whole child abuse industry and writing about it.

    But you are certainly right that if children could be made economically self sufficient, this would be a great help to families. They could probably even pay for their own schooling, thus relieving the taxpayer.
    Aug 18, 2011. 01:15 PM | Likes Like |Link to Comment
  • 5 Stocks to Buy Regardless of Economic Status: Part 1 [View article]
    Of course, and in fact the Coca Cola company is also responsible for Dasani bottled water, which is an expensive way to obtain tap water in which you are essentially paying only for the bottle. This is really the ultimate achievement in business--to get people to pay for something that used to be free.

    Here in the Dominican Republic I can pay 30 pesos, which is less than a dollar for a 5-gallon refill of purified drinking water, or pay the same price for a glass of Dasani water.

    From an investment point of view, this makes Coca Cola an incredible company, because its products cost almost nothing to make, yet sell at a premium price. Even in the event of a severe recession, tap water will always be available virtually free, so the profit margins will remain close to infinity.
    Aug 17, 2011. 09:13 PM | Likes Like |Link to Comment
  • Swensen Too Broad in His Condemnation of 'All' Mutual Funds [View article]
    If you buy DIA or SPY or EWA you can be sure not to be outperformed by the market. If you choose an actively managed mutual fund, you MIGHT beat the market, but if you do it is purely a matter of luck.

    Another problem is that if a market tanks, then you tank with it, because mutual funds, unlike hedge funds, cannot go to cash or buy puts to insure their positions, protect profits etc.

    It makes no sense to buy mutual funds, but often if you are in a 401(k) or government pension plan you may not have a choice.

    This article is WRONG, WRONG, WRONG. One SHOULD completely dismiss a portion of the market that is nothing but a ripoff.
    Aug 17, 2011. 08:27 PM | Likes Like |Link to Comment
  • Most Mutual Funds May Be for Fish: DFA's Funds Aren't [View article]
    Mutual funds are just a ripoff. You might just as well buy DIA or SPY, because that way you will never be beaten by the market like half the mutual funds.

    Many state pension funds funnel funds into mutual funds provided by companies that have presumably bribed their way into this position of privilege by paying campaign expenses for politicians. It is shameful, but it is the American Way. You get what you pay for!
    Aug 17, 2011. 08:21 PM | Likes Like |Link to Comment
  • 5 Stocks to Buy Regardless of Economic Status: Part 1 [View article]
    Good picks.

    Although I do not drink soda myself, it is my observation that 95% of the US population is addicted to straight Coca Cola, and in many work places dispensing machines are provided so that consumers can get a fix of this expensive designer flavored sugar solution without leaving their desks.

    Here in the Dominican Republic it forms the base for an even more potent form of drink known as Cuba Libre in which it is combined with an ethyl alcohol distillate of sugar cane to provide a fuel that powers a large section of the human population and gives people a sense of optimism.

    Even in the event of human civilization being totally exterminated, it is likely that Coca Cola sales will remain unaffected.

    The stock has also been blessed by the great god Buffett.
    Aug 17, 2011. 08:15 AM | Likes Like |Link to Comment
  • Corrections Corp. of America (CXW +1.9%) advances after announcing a $150M expansion of its share buyback program, and a newspaper article updates Florida's plans to privatize some of its prisons. The state says it plans to hire only one firm to run the prisons; both CXW and Geo Group GEO already operate prisons in Florida.  [View news story]
    GEO corp is based in Boca Raton Florida and many of its executives are previous employees of the Florida Department of Corrections and Department of Children and Families, and have maintained close contacts with top people in Tallahassee . GEO Corporation donated the maximum $25000 to Governor Rick Scotts inaugural ball which was organized by GEO´s chief lobbyist. GEO Corporation is a major contributor to the Republican Party.

    It would not be a great shock if GEO got the Florida prison contracts.
    Aug 16, 2011. 12:07 PM | Likes Like |Link to Comment
  • New Reflections in Understanding Options [View instapost]
    Yes, the interesting thing is that my father regarded his broker as a kind of authority figure because he lived in a big house, drove a Jaguar, and played off a single figure handicap.

    Fortunately my father´s bed and breakfast is now reporting good business due to economic refugees from Ireland arriving late at night on the ferry in search of a bed for the night. Having wisely married a hardworking young woman twenty years his junior, he now operates in more of a consultancy role, though he maintains executive responsibility for omelettes, cash management, and double book keeping.
    Aug 15, 2011. 04:13 PM | Likes Like |Link to Comment
  • New Reflections in Understanding Options [View instapost]
    In real life most people don´t know or understand what the real risks are.

    The prevailing wisdom is that if you stay in the market long enough, you will always come out ahead.

    Of course they used to say that you couldn´t go wrong in real estate either, until it was revealed that it is all the fault of greedy borrowers.

    We all know about Warren Buffett, but where are the great short side investors?

    In 1986 my father had stocks in the UK stock market and that market crashed badly one day. He sought advice from his broker, with whom he sometimes played golf, as to whether the market would go up or down from that point.

    The broker told him they MAY go up, but on the other hand they MIGHT go down more. Being a prudent fellow, and having taken professional advice, my father cashed out all his stocks. Within a few weeks the stock market was right back where it started. The broker retired soon after, my father is still working at 86.

    Moral of the story: Be like a broker. Make money when the market goes up and make even more when it goes down.
    Aug 15, 2011. 02:34 PM | Likes Like |Link to Comment