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Howard_Roake

Howard_Roake
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  • A Look at 8 Big Sells by George Soros [View article]
    Soros sells when his back is bothering him according to his son. In other words, he's a great intuitive investor who acts on his intuition. Read his "alchemy of finance" if you want to understand his psychology, trading approach and reflexcivity ideas. His greatest asset is he always questions his own ideas acting like a devils advocate constantly. A great approach for any trader. His favorite intro is to say "I'm a speculator but sometimes I end up being an investor when I'm wrong". But like all good traders he doesn't hesitate to act when his hypothesis weakens.
    Apr 8 01:43 PM | 6 Likes Like |Link to Comment
  • 30 Days Later: Cramer's March 8 Picks [View article]
    Yes, PDLI does have a nice current 9-10% dividend yield. But an even more reliable trade would be to put in a limit buy around $5 and then immediately put in a sell at $6 as its traded within these bounds for almost 1.5 years! Would give you a gain of around 16% every 3-4 months. Of course, past behavior does not predict the future, but its a fairly interesting prospect. Its now about where one would want to sell. Drop in price isn't directly correlated to the ex-div date as it is with high dividends equities like AGNC. (next ex-div is 6/6/2011) Or just buy and accumulate around $5 and collect the dividend (which should increase when the price decreases). Don't know anything about the dividend history-any comments on this issue?
    Apr 8 01:27 PM | 1 Like Like |Link to Comment
  • The Risk of the Buy-Write Strategy [View article]
    You might argue that if you like a stock enough to buy it why limit its upside potential when you have unlimited downside losses as a possibility? And, if you know when to write a call (at a key resistance, say) then you could do as well just selling it and waiting for a pullback to buy it back. This sort of "market timing" is nearly impossible to do consistently so this strategy is very hard in the long run. A better risk/reward can be had with a synthetic buy/write. Buy a slightly ITM (in-the-money or at-the-money call and then sell an OTM (out-of-the-money) call against it. The loss is limited to the price premium difference and the gain to the difference in the strike prices. You still need to decide if an uptrend or downtrend is likely between now and expiry but a lot of the timing and time premium associated with buying naked calls or puts is eliminated. And the returns are about 50-100%/month on risk capital. As an example you can buy the AAPL May 340 call for $1410 and sell the May 350 call for $960 for a total cost of $450 which would be your maximum loss of AAPL is below $340 by May 21. If its at or above $350 (its resistance) you get $550 profit for a gain on risk capital %122 in about 5 weeks. On the other hand suppose you think AAPL will be below $340 by May 21. Just sell this same spread for $450 will a maximum loss of $550. This is the most conservative strategy possible. Now you just need an opinion and some risk capital you can afford to lose! How conservative? If you think AAPL will be right where it is now in price in a month, just buy the call 320/330 for around $660 net debit and just wait. As long as AAPL is above $330 you will get $340 profit just for waiting for a "yield" of 51%/month. Here, you're only assuming AAPL can stay above $330 to collect your profit (its currently at $339 so even if it drops $9 you still make $340. (By contrast if you buy 100 shares of AAPL at its current price and it drops to $330 you lose $900) Think about it the stock drops but you not only don't lose anything, you make a profit. And if it crashes to below $300, you lose $660 maximum. Its works only the long run because selling premium and relying on time decay always works, while buying premium relies on good "luck".
    Apr 5 10:00 PM | 3 Likes Like |Link to Comment
  • Are Chipotle Investors Headed for Indigestion? [View article]
    You know it would help both bulls and bears to actually look at the price action before stating silly opinions as in many of the comments above. I'm looking at CMG right now and its stuck in a range from 220 (support) and 260 (resistence) for the last 5 months. For those who are math challenged that's a range of plus or minus of 7.5% around the mean of 250. So buy only if it drops to 220 and then sell (or short) again at 260 and wait. (It was at 260 in Dec 2010 right where it is right now) The big gains on this one have been made so don't be silly and buy at current resistence levels. If you want to get some easy money on this sell both OTM calls above 260 and OTM puts below 220 and just collect the premium.

    I agree with the author's contention that the downside risk is much greater than the upside gain and the price action shows this one is going nowhere on the last 5 months (don't get fooled by random fluctuations).
    Mar 28 06:44 PM | 1 Like Like |Link to Comment
  • 8 Takeover Rumors Smart Money Is Betting On [View article]
    The latest rumor is that microsoft would like to "take over" apple. Unfortunately, Steve Balmer discovered their market cap is smaller-presenting some financing difficulties unless they can use AAPLs some 50B$ in cash as a down payment. Gates was rumored to exclaim, "how'd that happen I thought the zune was doing so well"? Jobs was rumored to exclaim-I'd do it if we could just shut down that bug filled "windows" crap once and for all.
    Mar 24 02:10 PM | Likes Like |Link to Comment
  • What 'Buying the Dips' and Demographics Mean for Stock Market [View article]
    Yep, everything will be O.K. until large numbers need to liquify their equities and there's no bid (like last May 6). Not much different then if everyone decided to liquidate their "fake" digital deposits for $s. There's over a 10:1 ratio of digital accounts to actual cash in circulation, so only about 10% can actually liquidate. Its the problem with all ponzis, only the first out do well. So, demographics suggests you want to start converting paper into real finite real assets starting, say, now! Medicines, precious metals, storage foods, drinks, ammo, guns, etc.
    Mar 24 02:18 AM | Likes Like |Link to Comment
  • 9 Stocks George Soros Is Buying [View article]
    Yeah, car companies and airlines should do great with crude prices above $100. A chart of any of these, especially, DAL, GM and F show them to be in a strong downtrend all below their 50 day moving averages. F is about to break below its 200 day MA! Would have all made great shorts about 2 months ago. And F gapped down $3 on huge volumn. These are all signs to stay in cash or short cautiously, not buy.
    Mar 24 01:57 AM | 1 Like Like |Link to Comment
  • Are We Headed for a Global Meltdown? [View article]
    And while we're going down memory lane: let's not forget since the foundation of the FED in 1913 the $ has lost 97% (that's not a error, 97%) of its purchasing power (value). You need to price your so-called 6.5% "returns" in gold food or oil. (For example, over the last decade the SPX priced in gold is down 300%).
    Mar 22 09:55 PM | Likes Like |Link to Comment
  • Why Market Aftershocks Will Continue [View article]
    In the US its easy to cite nuclear plants away major fault zones and the coasts-just where our major coal fired plants are currently located. If not for the tsunami none of the nuclear plants in Japan would have lost power to the cooling pumps and no meltdown of the fuel rods. Primary cooling loops based upon water as the heat exchanger is unfortunately an explosion hazard as both superheated steam and hydrogen are created in the older reaction designs when the water stops circulating (in the new pressurized designs such as used by the French, water continues circulating and cooling via convection). Also, newer plants use a closed loop liquid metal (sodium) primary heat exchange removing any explosion hazard in the core (water is only used in the secondary, non-core cooling and to drive the steam generators. As stated above the somewhat hidden health and environmental effects of fossils fuels are masked by our irrational concern about "invisible" radiation and radioactivity (and yet few seem concerned about the massive medical overuse of x-ray based CAT scans). The coal industry would love to have the safety record of the nuclear power industry. But humans are notorious at underestimating real harm probabilities. The biggest health effect in Japan due to this disaster will come from lack of electricity and food and the resulting respiratory illnesses. The biggest health hazard in America is, of course, obesity followed closely by unnecessary medical procedures such as surgeries driven by profit considerations (and obesity).
    Mar 16 08:33 PM | 1 Like Like |Link to Comment
  • You're Retiring: Where Is Your Income Going to Come From? [View article]
    In flat or declining markets sell calls against your holdings. But, how do you know if we're in flat or declining markets? That's the rub. But, as an example you can collect $283 upfront for each 100 shares of PG by selling the Jan 2012 62.5 call. That's a 4.6% "yield" on your $6150 worth of PG. You get to keep the $283 if PG is at or below $62.5/share in Jan. (Current price is $61.5) If it is above $62.5/share you sell PG for $6250 and still keep the $283 for a total yield of $363/$6150 = 5.9% over the next 9 months. Plus you still get the dividends over that period. Now buy it back if you like and sell the 2013 calls against it. Do this once a year. Unless you think PG will explode in price and you want the capital appreciation, this is a good way to generate steady income. (The average price for PG is about $62 over the last 40 weeks moving average) Of course, of PG went from $62 to $42 like in did in late 2008 2009 you would rather be in cash!
    Mar 11 09:59 PM | 1 Like Like |Link to Comment
  • You're Retiring: Where Is Your Income Going to Come From? [View article]
    All psychological tests indicate humans hate losing a lot more than they enjoy winning or staying even. (I know this in myself-if I had 8 winning equities and 2 losing ones I know perfectly well which ones on which I'd be worrying) Thus, this mitigates against this strategy for the average investor/human. That number in the portfolio matters more pyschologically. No one can honestly claim that when the next financial crisis occurs (and it will in a very short <2 year period since our entire financial system is one gigantic ponzi scheme) that they will be sanguine when they see their $1M portfolio go to half its nominal value in a couple of months or less (or maybe a few hours or less if you consider the flash crash). If, however, you take the more rational viewpoint that as long as you have enough income to handle your expenses, then this dividend growth approach is a very good one. But this isn't a whole lot different than knowing that ones work skills and abilities are so good they will never fail to have an income-thus requiring a much smaller portfolio to fall back on.
    Mar 11 08:08 PM | 3 Likes Like |Link to Comment
  • Which Way Wednesday - Happy Crashiversary! [View article]
    How about an article complaining about the inequalities in IQ? Did you realize that the Gaussian distribution of IQs centered on the mean of 100 means that 50% of the entire population has too little mental capacity (i.e. <100) to function in a modern society. How can we "redistribute" this unfair intelligence distribution so that more may be able to solve complex problems? The only "fair" or even workable approach would seem to employ shock therapy and/or powerful drugs on those with IQs above, say 120.

    Here's a brain puzzler: In what form do the wealthiest 400 individuals hold their wealth? (No its not in chests of diamonds and gold, or safes full of cash, O bleeding hearts) Answer: Stocks, bonds and RE-and the stocks are mostly in companies they or their families founded. All illiquid if you attempt to "redistribute" them via sales-and who would buy? And how are we to determine how to redistribute these assets fairly? Who will decide? Who can decide prices better than markets? Are professional athletics overpaid? Musicians? Doctors? Scientists? Teachers? Lawyers?

    I'd love to know what fraction of the 42M on food stamps are clinically obese?
    Mar 10 03:16 AM | 7 Likes Like |Link to Comment
  • End of the Secular Commodities Bull Market? [View article]
    As several commenters have noted what happens in the immediate future (i.e. this year) depends on what happens after QE2 and thus interest rates. Any interest rate increase to historical norms of 5-6% means an end to both the equities markets and likely commodities (and the debt fueled federal and state governments?). However, every government and central bank in the world is fighting this possibility tooth and nail. Despite the vigorous protests to the contrary the FED cannot stop monitarizing our debt by buying treasuries because then its truly game over and we will go into that deflationary debt destruction spiral we almost got to experience in 2008. Unfortunately, that's just the reset we need if the real economy, not the extend and pretend one, is ever to recover. My bet is the FED and the government will continue the QE and thus the bull in commodities will continue (long SLW, NOG, BEXP, POT, CF etc). But such input price increases are inconsistent with profit expansion for most companies so equities are likely to be range bound or stagnate. Yes, its stagnation USA style all over again.

    The commodities bull will end when China implodes as Japan did due to RE speculation-are the conditions for this to happen are in place. However, China is even better at extend and pretend than we are, so this might take awhile.
    Mar 8 03:22 PM | 2 Likes Like |Link to Comment
  • 4 Stocks I Wouldn't Mind Picking Up Near 52-Week Highs [View article]
    As in all things, no risk no reward. The only thing that matters is human psychology. Will someone want to pay even more than I did in the future-that's for the stock-not the company. And people like to buy things that are going up (so its bad news for RE in the future) All the 1 years trends on these stocks are up-up-up. As other commenters said, for true leveraged growth I'd prefer and am long SLW and RVBD via naked calls. On the other I'd take a calculated risk via bull call spreads (own AAPL and CRM), limiting both my risk and my reward. AAPL has been range bound between 340 and 360 for a little over a month folllowing earnings, mostly due to Jobs health issue. So, taking a chance on the April 350/360 bull call spread is hardly much of a gamble. Everytime, AAPL comes close to or hits its 50 day moving average at 340 it bounces off (those Algos again) like it hit a brick wall. CRM has been range bound between 130 and 150 for over three months. A good iron condor candidate I'd say.
    Mar 7 07:26 PM | Likes Like |Link to Comment
  • Friday's Market Blow - Jobs or No Jobs? [View article]
    The dept of education was established in 1979 by Jimmy Carter, so its "budget" prior to that was rigorously zero! For 2006, the ED discretionary budget was US$56 billion and the mandatory budget contained $23.4 billion. Currently, the budget is $69.9 billion, according to the Dept. of Education website.

    So, everything else (i.e. education) gets cut eh?

    As those who know math like to write following a proof.
    QED

    What do the five states with the highest SAT test scores have in common? (Iowa, Minnesota, North and South Dakota, Missouri)

    The lowest per student expenditures.

    Per capita spending on education in 1961-1962: $2770
    Per capita spending on education in 2006-2007: $10,000
    (in constant 2008 dollars- i.e. inflation adjusted)
    SAT scores:
    1962-1963 Verbal 478 Mathematical 502
    2006-2007 Verbal 480 Mathematical 520

    So, we more than tripled our nationwide expenditure without any statistically significant change in achievement.

    Conclusion: There is no correlation between spending on education and student achievement. I'm guessing the important factor is the environment and genetic contribution of parents.

    At the risk of redundancy: QED
    Mar 5 12:57 AM | 10 Likes Like |Link to Comment
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