Kevin McElroy's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.com/user/677552/comments http://seekingalpha.com/article/540551/comments?source=feed#comment-5030411 5030411 Wed, 02 May 2012 16:38:03 -0400 http://seekingalpha.com/article/540551/comments?source=feed#comment-5026771 5026771
And we're not anticipating anything really. Really, we're just taking advantage of the statistical likelihood (as measured by delta) that the stock will remain ABOVE the $39 strike by expiration. The implied volatility makes this credit strategy attractive now thanks to the perceived expectation of a potential big move for GMCR following earnings - as has been the case in the past.
We're selling high volatility and creating a trade that limits our downside. As for why we went bull put instead of some other credit spread, that's just a general belief that GMCR will move higher rather than lower.
But we know due to high volatility that we have a significant margin of error wherein we'll still be in the black. ]]> Wed, 02 May 2012 15:13:58 -0400
And we're not anticipating anything really. Really, we're just taking advantage of the statistical likelihood (as measured by delta) that the stock will remain ABOVE the $39 strike by expiration. The implied volatility makes this credit strategy attractive now thanks to the perceived expectation of a potential big move for GMCR following earnings - as has been the case in the past.
We're selling high volatility and creating a trade that limits our downside. As for why we went bull put instead of some other credit spread, that's just a general belief that GMCR will move higher rather than lower.
But we know due to high volatility that we have a significant margin of error wherein we'll still be in the black. ]]> http://seekingalpha.com/article/540551/comments?source=feed#comment-4971111 4971111
Your max loss for the second question, would be $157 per contract. That seems high, but think of it this way: you're risking $1.57 to make a profit of 43 cents. That's a 27% gain in about a week with over an 85% likelihood of success. Pretty good risk-reward.

The problem is, these kinds of trades (by pure statistical likelihood) fail 15% of the time. So if you're NOT managing your position sizing, and you're NOT trading with some regularity, you're likely to get blown up. It's a long term strategy, and it's easy to get shaken out when things go against you. ]]> Tue, 01 May 2012 10:26:04 -0400
Your max loss for the second question, would be $157 per contract. That seems high, but think of it this way: you're risking $1.57 to make a profit of 43 cents. That's a 27% gain in about a week with over an 85% likelihood of success. Pretty good risk-reward.

The problem is, these kinds of trades (by pure statistical likelihood) fail 15% of the time. So if you're NOT managing your position sizing, and you're NOT trading with some regularity, you're likely to get blown up. It's a long term strategy, and it's easy to get shaken out when things go against you. ]]> http://seekingalpha.com/article/540551/comments?source=feed#comment-4970371 4970371 Tue, 01 May 2012 10:14:09 -0400 http://seekingalpha.com/article/484141/comments?source=feed#comment-4287811 4287811
As for the continued implication that I was short this stock, I really hope that my accusers (who I will not name) will think long and hard about what they're saying. In this business, it only takes one phone call to the SEC to make things unpleasant for any journalist or analyst. People have gone to jail for front-running - so I do not take these accusations lightly - nor should anyone.

There's a real witch-hunt going on for any kind of malfeasance in the aftermath of the Madoff debacle, so don't make the mistake of thinking that your snide accusations are cute or funny. The SEC doesn't find them funny, nor do I.

Regardless of my guilt or innocence, being investigated by the SEC is unpleasant. So either knock off the jokes, or by all means drop a dime and waste taxpayer's money and my time. These kinds of accusations have no place in this discussion in either event. ]]> Tue, 10 Apr 2012 11:42:26 -0400
As for the continued implication that I was short this stock, I really hope that my accusers (who I will not name) will think long and hard about what they're saying. In this business, it only takes one phone call to the SEC to make things unpleasant for any journalist or analyst. People have gone to jail for front-running - so I do not take these accusations lightly - nor should anyone.

There's a real witch-hunt going on for any kind of malfeasance in the aftermath of the Madoff debacle, so don't make the mistake of thinking that your snide accusations are cute or funny. The SEC doesn't find them funny, nor do I.

Regardless of my guilt or innocence, being investigated by the SEC is unpleasant. So either knock off the jokes, or by all means drop a dime and waste taxpayer's money and my time. These kinds of accusations have no place in this discussion in either event. ]]> http://seekingalpha.com/article/479911/comments?source=feed#comment-4181711 4181711 Thu, 05 Apr 2012 14:11:10 -0400 http://seekingalpha.com/article/479911/comments?source=feed#comment-4174171 4174171 Thu, 05 Apr 2012 11:32:58 -0400 http://seekingalpha.com/article/450881/comments?source=feed#comment-4171191 4171191
You can read it here: http://bit.ly/Hp6yPR

I doubt it will satisfy the SERIOUS accusations that I'm secretly pounding this stock down so I can buy it in my own account. Or that I'm shorting the stock. That would be illegal, and punishable by prison time.

If anyone seriously suspects me or any other author of breaking securities law, I strongly encourage you to cease the saber rattling here in the comments and to immediately contact the SEC.

For the record I have no ownership in Seadrill, nor am I shorting it. Nor do I plan on owning it anytime soon. ]]> Thu, 05 Apr 2012 10:37:38 -0400
You can read it here: http://bit.ly/Hp6yPR

I doubt it will satisfy the SERIOUS accusations that I'm secretly pounding this stock down so I can buy it in my own account. Or that I'm shorting the stock. That would be illegal, and punishable by prison time.

If anyone seriously suspects me or any other author of breaking securities law, I strongly encourage you to cease the saber rattling here in the comments and to immediately contact the SEC.

For the record I have no ownership in Seadrill, nor am I shorting it. Nor do I plan on owning it anytime soon. ]]> http://seekingalpha.com/article/419021/comments?source=feed#comment-3477721 3477721
The other thing with companies like Labrador is that they're on schedule to double their production. Unless we see a huge slaughter in iron ore prices, this company should have great upside. But do your own homework, of course. ]]> Wed, 14 Mar 2012 15:10:05 -0400
The other thing with companies like Labrador is that they're on schedule to double their production. Unless we see a huge slaughter in iron ore prices, this company should have great upside. But do your own homework, of course. ]]> http://seekingalpha.com/article/419021/comments?source=feed#comment-3477491 3477491 Wed, 14 Mar 2012 15:03:32 -0400 http://seekingalpha.com/article/322592/comments?source=feed#comment-2761861 2761861 Sun, 19 Feb 2012 09:53:56 -0500 http://seekingalpha.com/article/353841/comments?source=feed#comment-2578381 2578381
So for me, it's not an either or. It's the difference between deciding how much cash I want in the bank, and how much of my capital I'm willing to bring to the casino. ]]> Sun, 12 Feb 2012 09:24:09 -0500
So for me, it's not an either or. It's the difference between deciding how much cash I want in the bank, and how much of my capital I'm willing to bring to the casino. ]]> http://seekingalpha.com/article/329772/comments?source=feed#comment-2351051 2351051
Honestly though, you should always the assume the worst. The disclosure policy anywhere on the internet, and indeed, just about anywhere is not exactly rigorous. Never believe anything you read unless you can verify it independently.

The SEC can't stop you from being fleeced. They can only prosecute someone after the fact, and that's certainly not a guarantee, nor is it a solace.

If you don't do your homework, then you should look in the mirror for someone to blame. ]]> Fri, 03 Feb 2012 02:36:18 -0500
Honestly though, you should always the assume the worst. The disclosure policy anywhere on the internet, and indeed, just about anywhere is not exactly rigorous. Never believe anything you read unless you can verify it independently.

The SEC can't stop you from being fleeced. They can only prosecute someone after the fact, and that's certainly not a guarantee, nor is it a solace.

If you don't do your homework, then you should look in the mirror for someone to blame. ]]> http://seekingalpha.com/article/329772/comments?source=feed#comment-2350981 2350981 Fri, 03 Feb 2012 02:30:20 -0500 http://seekingalpha.com/article/329772/comments?source=feed#comment-2350961 2350961
But we know the bond train can't last forever. When interest rates take the smallest steps back to revert to mean, it will be a massacre in bonds. Until you're wrong, you'll be right though.

I managed to buy some of that $45 silver - but I bought most of my silver under $20 - so my cost basis is still attractive. In silver, as with bonds, or any asset class, it doesn't make sense to try to time the bull market. ]]> Fri, 03 Feb 2012 02:28:11 -0500
But we know the bond train can't last forever. When interest rates take the smallest steps back to revert to mean, it will be a massacre in bonds. Until you're wrong, you'll be right though.

I managed to buy some of that $45 silver - but I bought most of my silver under $20 - so my cost basis is still attractive. In silver, as with bonds, or any asset class, it doesn't make sense to try to time the bull market. ]]> http://seekingalpha.com/article/317220/comments?source=feed#comment-2158980 2158980 Mon, 09 Jan 2012 10:05:41 -0500 http://seekingalpha.com/article/317220/comments?source=feed#comment-2148081 2148081 Wed, 04 Jan 2012 15:38:37 -0500 http://seekingalpha.com/article/317220/comments?source=feed#comment-2147095 2147095 Wed, 04 Jan 2012 09:40:13 -0500 http://seekingalpha.com/article/316545/comments?source=feed#comment-2144842 2144842 Tue, 03 Jan 2012 09:47:11 -0500 http://seekingalpha.com/article/310657/comments?source=feed#comment-2072836 2072836 Wed, 30 Nov 2011 12:32:43 -0500 http://seekingalpha.com/article/309120/comments?source=feed#comment-2059039 2059039 Wed, 23 Nov 2011 12:53:07 -0500 http://seekingalpha.com/article/309120/comments?source=feed#comment-2056845 2056845
I buy or sell because I think an asset is fairly priced or overpriced. If I'm right, I make money. If not, I don't. Buyers aren't cheerleaders. Short sellers aren't devils. It's a useless way to look at the market, because the very act of entering the market is not a phenomena self-reinforcing enough to make it a part of any investment strategy.

A butterfly flaps its wings and all that, yes, but it's irrelevant to the discussion. Italy is broke, selling their bonds didn't make them broke. Buying them won't make Italy solvent. ]]> Tue, 22 Nov 2011 16:34:13 -0500
I buy or sell because I think an asset is fairly priced or overpriced. If I'm right, I make money. If not, I don't. Buyers aren't cheerleaders. Short sellers aren't devils. It's a useless way to look at the market, because the very act of entering the market is not a phenomena self-reinforcing enough to make it a part of any investment strategy.

A butterfly flaps its wings and all that, yes, but it's irrelevant to the discussion. Italy is broke, selling their bonds didn't make them broke. Buying them won't make Italy solvent. ]]> http://seekingalpha.com/article/309120/comments?source=feed#comment-2055612 2055612
Moreover, there's plenty of research suggesting the opposite: short sellers provide liquidity when it's needed most. And when shorts get hit with a margin call, their buying to cover is EXTREMELY bullish, usually setting off a wave of big gains for the underlying.

I recommend reading this now widely publicized paper by Lou and Karpoff: http://bit.ly/upNUH6

It's probably a grad level paper, so maybe go through a 400 level Econ course before tackling it. ]]> Tue, 22 Nov 2011 09:33:03 -0500
Moreover, there's plenty of research suggesting the opposite: short sellers provide liquidity when it's needed most. And when shorts get hit with a margin call, their buying to cover is EXTREMELY bullish, usually setting off a wave of big gains for the underlying.

I recommend reading this now widely publicized paper by Lou and Karpoff: http://bit.ly/upNUH6

It's probably a grad level paper, so maybe go through a 400 level Econ course before tackling it. ]]> http://seekingalpha.com/article/307936/comments?source=feed#comment-2041057 2041057
If you shorted Ireland at 7%, you'd still be in the black.

Thanks for commenting. ]]> Tue, 15 Nov 2011 16:24:56 -0500
If you shorted Ireland at 7%, you'd still be in the black.

Thanks for commenting. ]]> http://seekingalpha.com/article/307042/comments?source=feed#comment-2032720 2032720
Your average mutual fund manager will tell you that diversification means owning a blue chip fund, a growth fund and an income fund. They'll tell you to own bonds if you're old, and high beta stocks if you're young - with almost no intelligent regard to whether it's a good time to buy bonds or stocks.

I do like asset class diversification, most fashionably of late seen in the Ivy League portfolio. But that type of diversification typically means avoiding the entire stock market for months if not years at a time...]]> Fri, 11 Nov 2011 11:44:52 -0500
Your average mutual fund manager will tell you that diversification means owning a blue chip fund, a growth fund and an income fund. They'll tell you to own bonds if you're old, and high beta stocks if you're young - with almost no intelligent regard to whether it's a good time to buy bonds or stocks.

I do like asset class diversification, most fashionably of late seen in the Ivy League portfolio. But that type of diversification typically means avoiding the entire stock market for months if not years at a time...]]> http://seekingalpha.com/article/307042/comments?source=feed#comment-2032704 2032704
I refer to these stock indexes because that's what most regular investors own through mutual funds. And most investors' portfolios have exceedingly high correlation to the movements in these broad market indexes.

I like MCD as well. ]]> Fri, 11 Nov 2011 11:39:46 -0500
I refer to these stock indexes because that's what most regular investors own through mutual funds. And most investors' portfolios have exceedingly high correlation to the movements in these broad market indexes.

I like MCD as well. ]]> http://seekingalpha.com/article/305467/comments?source=feed#comment-2027352 2027352
I mean, what would you do with a swimming pool full of cash? What would you do with a swimming pool filled with Mona Lisas?

So, first you need to understand that owning physical gold is not an investment. It's a form of cash-savings. Buffett I'm sure advocates for cash-savings. He holds cash. You wouldn't make a ridiculous analogy about holding dollars in a savings account. So really, your argument against gold comes down to your belief that the dollar in a savings account will outperform gold. You've been wrong for 12 years. Why are you correct now?]]> Wed, 09 Nov 2011 10:42:43 -0500
I mean, what would you do with a swimming pool full of cash? What would you do with a swimming pool filled with Mona Lisas?

So, first you need to understand that owning physical gold is not an investment. It's a form of cash-savings. Buffett I'm sure advocates for cash-savings. He holds cash. You wouldn't make a ridiculous analogy about holding dollars in a savings account. So really, your argument against gold comes down to your belief that the dollar in a savings account will outperform gold. You've been wrong for 12 years. Why are you correct now?]]> http://seekingalpha.com/article/305467/comments?source=feed#comment-2025850 2025850
My ultimate thesis for the dollar is, as you say, for it to become worthless. That thesis may take several decades or more to truly play out. But in my eyes, a currency doesn't have to become worth zero in order to be a failure. For the U.S. it would be a major failure for the dollar to lose its reserve currency status. That might be enough to make it highly undesirable to hold the dollar.

Moreover, I guess I see the dollar failing currently. It's failed as a store of value for any significant period of time. It's failed Americans who save in dollars, and own assets tied closely to the dollar. The whole idea of a politicized fiat currency is failing as we speak. More people wake up to this idea every day.

Paper currencies fail. They all do. They all will. I guess I see the dollar failing sooner than everyone else. That's a difference of perspective, and the very fact that everyone seems to think I'm crazy is evidence enough to me that there are still plenty of folks who have yet to buy a single ounce of physical gold. That's bullish for gold from my perspective...]]> Tue, 08 Nov 2011 15:56:08 -0500
My ultimate thesis for the dollar is, as you say, for it to become worthless. That thesis may take several decades or more to truly play out. But in my eyes, a currency doesn't have to become worth zero in order to be a failure. For the U.S. it would be a major failure for the dollar to lose its reserve currency status. That might be enough to make it highly undesirable to hold the dollar.

Moreover, I guess I see the dollar failing currently. It's failed as a store of value for any significant period of time. It's failed Americans who save in dollars, and own assets tied closely to the dollar. The whole idea of a politicized fiat currency is failing as we speak. More people wake up to this idea every day.

Paper currencies fail. They all do. They all will. I guess I see the dollar failing sooner than everyone else. That's a difference of perspective, and the very fact that everyone seems to think I'm crazy is evidence enough to me that there are still plenty of folks who have yet to buy a single ounce of physical gold. That's bullish for gold from my perspective...]]> http://seekingalpha.com/article/305467/comments?source=feed#comment-2023325 2023325
Instead of coming to the conclusion that there's "not enough gold," I guess I come to the conclusion that there are too many dollars chasing too few goods. Hence, I think we'll see continued appreciation in gold prices denominated in dollars. I guess that makes me a crazy end-game gold bug who believes we should mine the moon for gold and line our houses with tin foil, etc.

You can label me crazy if that helps you gloss over the obvious and major problems affecting the dollar. My crazy ideas have made me some nice gains...]]> Mon, 07 Nov 2011 16:07:22 -0500
Instead of coming to the conclusion that there's "not enough gold," I guess I come to the conclusion that there are too many dollars chasing too few goods. Hence, I think we'll see continued appreciation in gold prices denominated in dollars. I guess that makes me a crazy end-game gold bug who believes we should mine the moon for gold and line our houses with tin foil, etc.

You can label me crazy if that helps you gloss over the obvious and major problems affecting the dollar. My crazy ideas have made me some nice gains...]]> http://seekingalpha.com/article/304334/comments?source=feed#comment-2022036 2022036
My rule of thumb for a minimum amount of physical gold and silver to own is at least 6 months of living expenses. Tally up your grocery bill, your heating/cooling bill, your fuel, electricity, and other living expenses for a 6 month period, and buy that much gold and silver.

That's a really quick and dirty calculation that will probably give you the bare minimum of PM holdings that you might need during the absolutely worst case scenario of a currency crisis.

I don't own any paper gold or silver, though I will occasionally trade options on the bigger gold and silver ETFs.

I know some gold-minded advisors will recommend 50% of your holdings in gold and silver. That's a lot of eggs in one basket, especially if that basket is all in one place - either at your home or in an ETF or bank. So if you're inclined to own that kind of a significant chunk of your portfolio in gold, think about diversification within the asset class. Diversification of locations where you store your physical. Diversification of the different types of paper gold holdings. Diversification among PM miners, etc.]]> Mon, 07 Nov 2011 08:18:46 -0500
My rule of thumb for a minimum amount of physical gold and silver to own is at least 6 months of living expenses. Tally up your grocery bill, your heating/cooling bill, your fuel, electricity, and other living expenses for a 6 month period, and buy that much gold and silver.

That's a really quick and dirty calculation that will probably give you the bare minimum of PM holdings that you might need during the absolutely worst case scenario of a currency crisis.

I don't own any paper gold or silver, though I will occasionally trade options on the bigger gold and silver ETFs.

I know some gold-minded advisors will recommend 50% of your holdings in gold and silver. That's a lot of eggs in one basket, especially if that basket is all in one place - either at your home or in an ETF or bank. So if you're inclined to own that kind of a significant chunk of your portfolio in gold, think about diversification within the asset class. Diversification of locations where you store your physical. Diversification of the different types of paper gold holdings. Diversification among PM miners, etc.]]>