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  • Housing Conundrum: A Poor Supply Of Fresh Inventory Or An Oversupply Of Poor Pricing? [View article]
    Well, I made enough money to buy a tiny house, and probably a nice tree house, by shorting ITB recently. I also suggested that one might consider following my example. But, some folks are afraid to make a contrarian profit.
    Anyway-I very much like the author's logical perspective in attempting to unravel what seems to be a bit of a paradox. It's not quite so paradoxical, if we study the work of Daniel Kahneman and Amos Tversky. I think that decisional biases abound at every turn.
    Let me relate a personal story-which I find to be extraordinarily interesting. The author mentioned that buyers are more 'astute' in terms of looking at data. But, buyers look at more than just number of bedrooms, etc. I know a gentleman that bought a home in foreclosure about 2 years ago. I gather he bought said home near the bottom. He currently has the property for sale at twice what he paid for it. What he related to me is rather fascinating. His agent informs him that virtually all folks that look at the home are aware of the potential profit this guy stands to make. This seems to be a real psychological 'sore' spot with potential buyers. And, it gets communicated by the other agent via this comment: "Well, your seller stands to make a big profit on the house, but has done nothing to it."

    Now, what's LOGICALLY relevant is the current fair market value, as determined by a qualified appraiser-not what, if anything, has been 'done' to said property. So, what's the difference between someone buying AAPL at 50-and it's now near 130? It would seem that the information content is so pervasive, compared to just a few years ago, and it coincides with a time in which people still carry, and perhaps personalize, resentment in rather curious ways. One hypothesis may be that one armed with such information, doesn't want to be the one enriching another. Would it matter if the seller happened to be, say, a local government?

    It may be that the relative price range has something to do with the substance of the article. I think we can accept that fewer first time homes are being built-at least to the extent prior to 2007-due to simple economics. These homes are low margin. One would need to depend upon selling an enormous quantity to make the effort worthwhile.
    Also, why would the passage of 5 years or so greatly reduce the burden of those 'underwater'? What's wrong with that assumption? Well, it's quite simple. If you look at the amortization schedule of a fixed rate 30 year mortgage, it's not until near the end of the term that any significant reduction is made to principal! And, what about the folks that piled on the interest -only second mortgages, where NO PRINCIPAL REDUCTION HAS BEEN MADE! And, what about those with negative amortization mortgages, or other exotic structures?
    So, the mere assumption that fewer mortgages should be underwater simply because 5 or so years have elapsed is wrong. But, if 'underwater' is defined as the difference between one's payoff and the assumed FMV-then that too is an untenable assumption. What is the 'real cost' to sell, pay off the mortgage, commissions, and generate a 20% downpayment for the new house, and move all your stuff?

    I know I've wandered all over the landscape, but essentially I think there is an enormous psychological factor that could well be unprecedented. If I were still in college, it might be an interesting topic to pursue.
    Apr 25, 2015. 01:46 PM | 2 Likes Like |Link to Comment
  • Market Manipulation Takes Center Stage [View article]
    The spread on UCO is reasonable-but you need to catch the midpoint.
    Apr 24, 2015. 01:11 PM | Likes Like |Link to Comment
  • 15 Years Of Stimulus: Nothing To Show [View article]
    Think about a random sample of IPO's over the past 5 years. Hint: TWTR, FB, SHAK, BABA-anything remotely similar to CAT, X, F?
    To what extent do the new glamorous companies match wages and benefits of a railroad or manufacturing company?
    For sure, some of the new companies offer high paying jobs- but certainly not at the level of a GM at its peak. This transition was well underway before the mortgage collapse. And, in fact, why did so many folks jump into the real estate investment circus?
    Small business, or Mainstreet, was already rendered obsolete by WMT, HD, TGT,etc. Even now your family doctor is confronted with whether to 'throw in the towel' and sign on with the big hospital. And don't be surprised if your dentist has a cubicle at WMT very soon.
    So, the real problem is an algorithm which seeks global efficiency with established services, and a market intrigued by battery operated cars and exploiting a gigantic wave of narcissistic propensity.
    So, there is no going back to 1968-despite the fact that The Rolling Stones' plan yet another tour this summer. We may be in the early stages of disrupting the way we were for most of the 20th century. And, for most of us, we seek to interpret the 'now' by reference to Federal Reserve policies- but this might be a societal subterfuge which masks nothing more sinister than a transitional epoch.
    It may be that the central planners are as clueless as a jackass, for if they had some real 'solution'' to the economic plight of Joe Average, surely it would have been forthcoming by now.
    Apr 23, 2015. 10:57 PM | Likes Like |Link to Comment
  • South leads big decline in new home sales [View news story]
    I previously published that I had 'tripled down' on shorting ITB a few weeks ago. I just set closing instructions-don't want to be piggish.
    But, folks, here's the thing. This will happen over and over again.
    Like a broken record, just as surely as night follows the day-so, if you missed this one, don't despair. It's one of life's little merry-go-rounds.
    Apr 23, 2015. 10:23 AM | 1 Like Like |Link to Comment
  • Facebook beats by $0.02, misses on revenue [View news story]
    I take it you bought a boatload of those 87 calls.
    Apr 22, 2015. 04:32 PM | 3 Likes Like |Link to Comment
  • Energy ETFs: Best Positioned 10 Of 30+ Now, As Seen By Market-Makers [View article]
    Very interesting info on UCO Peter. My adjusted basis is near 5 (adjusted by selling USO calls when oil was declining). I think UCO is my largest stock position at this time.
    What I've been doing is simply selling calls on up moves, and averaging in as needed. Thus basis is decreasing even more. The big question relates to whether we have a sustained break-out for the summer driving season, or just spin around. Frankly, I don't really care. This is the beauty of owning many shares, and thus being able to sell numerous call options-depending on what the oil market does.
    But, yes, it's an 'irregular coastline', or fractal as you suggest-thankfully!
    Apr 22, 2015. 04:28 PM | Likes Like |Link to Comment
  • The Naked Truth [View article]
    From the crash in 1929, it took a full generation (and then some), for the market to 'recover.' Along the way, central planners undertook, what was for the time, the most extraordinary actions in history. Even the political shenanigans (attempting to pack the Supreme Court) were without equal.
    I remember my grandparents telling me about the Great Depression-they lived through it-as did my parents (although they were fairly young). To this day, my 89 year old mother vividly recalls those years, and the years leading up to World War ll. Indeed, many historians are convinced that it took the war to end the depression.
    We are roughly 7 years removed from 2008. But, what's interesting is to read the various newspapers through the 1930's and into the 1940's (right up until Pearl Harbor)-the burning economic issue is eerily similar-where is the recovery for the common man? Where do we go from here?
    In graduate school, I researched and prepared a paper entitled "Maldistribution of Income As A Factor in the Great Depression," and also read "Grapes of Wrath" to get an understanding of the times. We still face many of the same issues, despite our advances in medicine and technology. The one enormous difference is the safety net available to those down on their luck. My mother can vividly recount homeless people passing through. Her father owned a cotton gin, and managed to hold his own. But, many nights people stayed with them, or slept outside. He loved to cook for a lot of people, so they always had a big pot of stew available.
    What I conclude is that we live in a world of central planning, yet there is an incredible void of leadership. Sort of a paradox, I suppose.
    Apr 22, 2015. 03:59 PM | 7 Likes Like |Link to Comment
  • Upbeat Forecasts For U.S. Housing Sales In March [View article]
    But, the admissible evidence (if you're an attorney), or the acid test (if you're a bean counter) is to the contrary. I offer, as Exhibit A, the recent drop in ITB.
    Of course, one can argue that there is no correlation between housing stocks and government data-but then one would need to be consistent in that approach.
    If you sold a few calls on ITB when I suggested same recently, you did well. The more rational approach with housing, and one I've had for over 30 years, is to look for zones of ergodicity within share prices.
    In other words, how many times within the past year has ITB touched 27.41? How often has it approached 29 and quickly retreated?
    At what point, then, can I sell calls with the highest degree of profitability (or, how can I utilize historical volatility and probability of mean reversion to make the most money, within the shortest timeframe, and with the least risk?).
    So, pardon me if I'm a bit skeptical that housing has 'taken off.'
    Apr 22, 2015. 10:58 AM | 1 Like Like |Link to Comment
  • John Hussman: Profit Margins - Is The Ladder Starting To Snap? [View article]
    Puck, I added family add-ons based on info from some doctors I know. My understanding is that kids generally create $500/mo/per kid for things like attention deficit, school lunches, phones. And, I'm told, but I haven't researched the data, is that there are various rent subsidies (called Sec.8, and other low income housing subsidies), and vouchers for certain appliances, such as refrigerators.
    Doctors have also indicated that there's been an 'explosion' in disability benefits, and supposedly some town in Alabama is the poster child for same, with about 75% of the population on disability.
    I didn't make a stab at unemployment because that's not stable over time.
    But, even if the number comes in at 37,214.52 exactly, it still represents an extraordinary lifetime return, when compared to CD rates. If rates remain low for many years, which many predict, a stable and protected return can be compared with an amount of money required to be invested to yield an annual amount of even 25k. These dollars get spent almost immediately, and clearly impact the economy. I'm sure that anyone in the above category wouldn't think of themselves as 'millionaires'-but could anyone live off the interest on a mere 1m at .05%? In other words, if I'm offered a million dollars with the caveat that it has to be held in trust, and I have to live off the interest, or I could opt for various government programs-I think I have to pick the latter.
    We have a strange paradox.
    Apr 21, 2015. 01:38 PM | 1 Like Like |Link to Comment
  • John Hussman: Profit Margins - Is The Ladder Starting To Snap? [View article]
    I've read that the total number of people on food stamps and other forms of government assistance-such as disability-exceeds 50,000,000.
    Are these households in the hole? I suppose that's a matter of perspective. But, if the average government recipient manages 50k/year-which is reasonably stable-what level of savings in a CD is required to match said benefit stream. Well, what are current CD rates? Ok, and your answer is ?
    So, do we not have another 50,000,000 millionaires supporting the economy? And, these folks are totally judgment proof as well! And, they don't subscribe to the WSJ-or watch CNBC-nor do they utilize financial planners.
    Ok-so the government is in the hole. Well, not exactly. They can spin electrons into perpetuity-provided the nuclear silos remain functional. So, we have those dimensions, and we have the millions of bankers, generic Wall Street types, politicians and experts of all sorts. Then we have the 'blood and sweat' economy where folks operate big machinery, fix leaky pipes and pave roads. (These folks are the remnants of the butcher, baker and candle-stick maker). Mixed in with this assortment, we have the young and the elderly-the future and the past.
    So, households yet to be and households that were-which of them will join the 50million category? Odds?
    It is the relevant culture that allows the market to exist-in all of history we learn that the reason for a societal phenomenon flows ultimately from the common denominator. Thus when we inquire as to the market, we must first ascertain the tectonic forces that move imperceptibly, yet resolutely.
    Apr 20, 2015. 11:14 PM | 1 Like Like |Link to Comment
  • An Extended Period Of Contango Has Left Volatility Down In The Dumps [View article]
    In addition to the tactics mentioned, one might use the short call premium to buy UVXY puts-or bull put spreads, spaced by the amount of the call premium.
    Or, to avoid being called away in the event of a market tantrum, just buy the bull put spreads. You might think that this is just throwing away more cash, but if the puts expire worthless, it's likely that you've witnessed a market downturn.
    I don't know if simply selling calls can control UVXY. In general, call selling is for a stable, or even bull market. Call selling is just an add-on for income-unless you take the risk of ratio writing. That is, selling something like 3:1 for each 100 shares owned. That's what's needed to mitigate the contango problem. But, this creates a margin and risk problem. So, I circle back to buying puts.
    What strike? Well if you buy otm puts, they might depreciate faster than the contango. I think one strike otm, with selling a near term otm, several strikes lower-might work best.
    Even at that, adjustments might be needed along the way.
    Another possibility is to sell puts on SVXY, using the long shares of UVXY as a hedge (or just trade SVXY)-all of this is an attempt to lower your UVXY basis. Or, you can short VXX, leaving UVXY unencumbered to work as a hedge. In theory, this tactic shouldn't create a margin issue, but existing margin software is not sophisticated enough to make the adjustment.
    Apr 20, 2015. 04:40 PM | 1 Like Like |Link to Comment
  • You Probably Hate Comcast [View article]
    I dunno. It came in a box when I 'upgraded', and my wife went thru process with the same person Chris referenced above.
    Does Arris mean anything? I'm of the old school where I used to be able to summon my secretary for help-but, now that I'm retired, I'm left to confront these challenges. I don't understand why the TV seems to work ok-but the internet defies all reasonable expectations.
    Apr 20, 2015. 02:18 PM | Likes Like |Link to Comment
  • You Probably Hate Comcast [View article]
    Well, the word 'hate' is too pedestrian to do justice. Most of us 'hate' traffic, 'hate' going to the dentist, 'hate' cold soup, etc. No, in this case, another level of emotion is stirred. Perhaps this level of emotion can only be suitably conveyed by analogy or metaphor. Suppose, for example, some stranger slipped up behind you and kicked your dog. Or, let's say, your doctor performed knee surgery-on the wrong knee!
    My observation is that most people harbor a continuous loathing; a nagging, nauseous sort of disgust, as if one is constantly confronted with some putrid smell.
    I pay over $135/month for two TV connections, and 'super fast' internet service. As all know, the internet service is terrible. But, it is 'superior' to U-verse-which is the biggest rip off in history. But, I also pay them for internet service. Unfortunately, that's not all. I pay a monthly ransom to DISH as well. The reason is that I have this recurring nightmare that I'll be in the middle of the biggest trade in my life, and comcast will fail me. In fact, I know they will.
    Several times a day, I get this little note on my trading platform: "connection to server failed-reconnecting."
    Let's talk about something else-I just start shaking uncontrollably when I see or hear the dreaded word- (I can't repeat it).
    Apr 19, 2015. 09:11 PM | 1 Like Like |Link to Comment
  • Why Individual Investors Do So Poorly In The Market [View article]
    The vast majority of people know as much about brain surgery or nuclear physics as they do the stock market.
    We have to LEARN to play chess, LEARN to play golf-there is no shortcut.
    I trounce the averages, but the 'averages' mean nothing to me. I set my own objectives with each strategy. And, I've been at this since the late 70's (and started learning years before).
    So, it's not at all surprising, and if one keeps doing the same thing, they can expect the same results.
    Apr 17, 2015. 11:32 AM | 8 Likes Like |Link to Comment
  • Party City up 21% in opening IPO trades [View news story]
    A new, future short has been born into the world. Let us all rejoice, and hope for an energetic, first little baby step.
    I seem to recall something about a fool and his money, or perhaps it was that old, but astute observation: "Fools rush in where angels dare not tread."
    Apr 16, 2015. 02:12 PM | Likes Like |Link to Comment