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  • Consider This ETF To Balance Some Of The Pullback Risks  [View article]
    Small cap put options have also been excellent proxy hedges.
    Jan 26, 2016. 08:29 PM | 1 Like Like |Link to Comment
  • Retirees: Are You Seeing The Face Of Jesus In A Piece Of Toast?  [View article]
    Mental accounting, anchoring and loss aversion are primary problems that preclude optimal decision making. Confirmation bias most likely assists the afore-referenced characters in deception of judgment.
    We give all of these biases a 'name' so that we can establish tests and write papers, but at the primal level of the brain, it all comes down to bio-chemistry. Even before language, our ancestors exhibited such traits, often without a more modern cultural filter. Reason or System ll thinking ( Kahneman) requires effort-we prefer to take heuristic shortcuts-hence the ease with which fast talkers sell their snake oil to the gullible.
    If you condense the history of man into a year, the concept of a market has a life of a nano-second-essentially a new phenomenon. It wasn't so long ago that we advocated trial by combat, dunking witches and treating some humans as property. How is it that we acquire the requisite sophistication to understand the gifts of John Nash (and others) and relate same to what is a 'game'? Why are some chess players better than others? What can we learn from Livermore, Paul Tudor Jones, George Soros and many others that seem to have achieved enormous success in a game poorly played by the vast majority of participant?
    I submit that the anthropologic subconscious mind gives a primordial recognition to our concept of something very simple-and that is the concept of time. Jagger says that 'time is on our side' but we don't believe him. Rather we find T.S. Eliot's words "I'll show you fear in a handful of dust" to hasten our sense that we are quickly running out of time. And so we often let System l make suboptimal decisions, and hope for the best. .
    Jan 21, 2016. 09:53 PM | 7 Likes Like |Link to Comment
  • Massive cash injection from the PBOC  [View news story]
    Li just admitted that China would keep intervening in the equity markets. Years ago I suggested that governments buy cheap put insurance to protect retirement plans, and let speculators play on the margins.
    But why bother with any pretense when you can manipulate the game. But, if you want an illusion, how do you set targets? Traditional valuation has no meaning. I suppose you could decide that the 'market' should grow x% annually, and maybe inject a small amount of volatility to keep people 'excited.'

    Brave New World indeed.
    Jan 21, 2016. 10:58 AM | Likes Like |Link to Comment
  • If The Oil Crash Continues, Buy These 5 ETFs To Outperform  [View article]
    SCO has been a great play-but any spike in oil can drop it like an anvil. Actually, the structure of this creature makes buying some puts a great bet.
    Buying the contra play, UCO on dips, and holding will likely be a great play. Since UCO is already so low, you get a coefficient drag which numbs a continued drop in oil. Or you can sell LEAP puts on UCO, and own oil really cheap. Yes it goes lower, but I don't think it drops below zilch.
    Jan 19, 2016. 11:05 PM | 2 Likes Like |Link to Comment
  • You Can Either Surf, Or You Can Fight  [View article]
    I think the 3 Trillion is now 2.7.
    Good point by Moon.
    And, my goodness, what did the USA do before China borrowed a few ideas from Alexander Hamilton - to blend with Lenin and Orwell?
    You would think the US central planners would game plan the mother of all devaluations. I've been on record for YEARS now to short China equities-and have given numerous examples previously (DANG, RENN,etc). A good strategy anticipates-at this point, one thinks about slowly buying into the bloodbath.
    An easy strategy now is to use call ratio back spreads to buy indexes or specific instruments. To make it easy, let's use AAPL. I can sell an itm call and use the cash to buy two or more otm calls. If the stock goes down, the short call makes money. If the stock moves back up, the long calls offset the short call, and then put the position in the green. I would provide a specific way to do this, but it requires some small amount of management. Better to spend the time required to use this technique so one acquires their own confidence and knowledge.
    Jan 15, 2016. 02:11 PM | 5 Likes Like |Link to Comment
  • Major averages open in red  [View news story]
    Not so much a plunge as a reflective discount to Bullards comments. And, the China fairy tale becomes a nightmare. Then there is the liquidity issue and the debt issue. But there is no fairy tale-or nightmare-just shades and permutations of reality. China has front loaded today, at the expense of the tomorrow's doorstep. Not a big deal unless tomorrow and tomorrow and tomorrow merely replicate an indeterminate function.
    Jan 15, 2016. 09:59 AM | Likes Like |Link to Comment
  • Maybe You Should Panic  [View article]
    Excellent points David. We have variousness biases that inhibit rational thought. The comments from the majority of people are so infected with confirmation bias that it's little wonder that decision-making will be sub-optimal.
    I suspect that the vast majority of people cringe at the notion of hedging, or insuring their financial wherewithal. Yet, any farmer would build a fence to protect his cattle, or treat the soil to prevent disease.
    As the great Scottish poet said: "The best laid plans of mice and men oft go astray." The most bewildering observation is that it's cheaper to protect a million dollar portfolio than to insure a million dollar house. But why, pray tell, do so many people prefer to get an ass-whipping?
    Jan 15, 2016. 09:43 AM | 6 Likes Like |Link to Comment
  • China Takes The Road To Serfdom  [View article]
    What do we mean by "free markets" and "capitalism"?
    Perhaps a complete discussion would necessitate historical and philosophical differences. In Western countries, we find a long history that mixed a more enlightened jurisprudence with concepts of individual liberty. The Puritan Ethic, the "invisible hand" and the Industrial Revolution (as well as the American Revolution)- all shared a unique spirit. This spirit and attitude were shaped by the Enlightenment, the Renaissance and early technology.
    China has an interesting history and culture as well- but different. The end result is a sort of synthetic capitalism. It is a designed system; a more contrived replication. There was very little "evolution"- more of a central decree to incorporate certain concepts of a "capitalistic" system in order to survive and prosper. So, from "Red China" to a paler shade of red, took just a few decades.
    Western capitalists have been all too eager to profit from China- and all too quick to believe in the Asian miracle. After all, a ravenous appetite for coal, cement, iron ore and countless other commodities certainly translated into capitalistic dollars. Of course, China really couldn't be expected to understand the entire playbook- they just wanted the pieces that made the poem rhyme. So, killing a few short sellers and fronting their nascent market seemed expedient. Surely Adam Smith must have allowed for exigent circumstances.
    The greater concern is that central planning now seems a bit too expedient for the nations that embraced capitalism centuries ago. Is it likely that western democracies take a page or two from China's synthetic creation?
    Jan 13, 2016. 10:34 PM | 2 Likes Like |Link to Comment
  • On the hour  [View news story]
    If you hedged with put ratio strategies, as I suggested many moons ago, you're in good shape. But alas, who wants to think about such things when the vast majority are drinking the Kool-Aid?
    It's obvious that panic and poor decision-making remains an undying human trait. Thank you my fellow humans. The wildebeest on the African plains would be most proud of you today-except they don't have a pre-frontal cortex.
    If you insist on being a one-dimensional bovine, use this as an opportunity. Don't let the other animals stampede away your critical rationality.
    Jan 13, 2016. 02:56 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    Agree- all ye need to know is this: "money is as money does."
    A store of value/a medium of exchange-if I had an infinite amount of money, I could move the market infinitely higher instantly. Without liquidity, value has no existence. In fact, I could move the market to the stratosphere and then cause it to come crashing down-I could do this as often as I desired. This simple concept is ignored-in practice-as I don't have an infinite amount of money. Yet, it's useful in understanding flash crashes, as well as an assortment of event driven behaviors.
    Jan 12, 2016. 02:49 PM | Likes Like |Link to Comment
  • Oil Bears Are Missing The Forest For The Trees  [View article]
    Some of the ETFs referenced are actually SHORT oil-such as SCO.
    If you've made money shorting oil, a very inexpensive cover is to buy calls. But, no doubt the bottom is closer. I would take some profits on shorts, as the odds of a sharp rebound will increase as oil drops. I'm using short oil gains to buy oil on dips-I cant go wrong other than forego time value on holding timeframe.
    Jan 12, 2016. 02:31 PM | Likes Like |Link to Comment
  • Weighing The Week Ahead: Time To Buy The Dip?  [View article]
    For some time, I have suggested deploying put ratio back spreads to catch both flash crashes and sell-offs. Why bother chasing elusive butterflies and listening to arm-chair quarterbacks? Simple put spreads have also been extremely profitable.
    The market is inherently unstable, with deceptive periods of relative tranquility. All of nature manifests a certain entropy, or a chaotic propensity. All the angst about the 'market' which is nothing but a game devised by humans, is but a waste of one's hour upon the stage. If you want this game to tilt in your favor, you must first learn to deal the cards accordingly.
    Jan 10, 2016. 12:53 PM | 2 Likes Like |Link to Comment
  • Is This Another 2008? George Soros Just Raised That Prospect  [View article]
    A casino has a mathematical edge irrespective of all other factors. So, whether 2000 is like 2008, or some public figure makes a prediction is totally meaningless. The key for any individual is to figure out their own unique edge and play the game accordingly. Yes, new wrinkles in the game matrix (futures manipulation, high frequency trading patterns, etc)-must be recognized for maximum efficacy, but the idea is to eliminate mere assumption, and strive for conceptual precision.
    Jan 9, 2016. 09:58 PM | 1 Like Like |Link to Comment
  • The S&P 500 Drops 6% This Week - 'Irrationality' Isn't Always Associated With 'Exuberance' And 'Euphoria'  [View article]
    Yes-but the strategy was to short devaluation. Consider the QE already unleashed, and contemplate whether there is a point of no return a la' trillions of debt that is increasingly questionable. And, even though the stock market is a new creation, ad hoc heavy-handed centralized intervention speaks volumes as to core competency.
    But, China will have an opportunity to continue the game-it will be interesting to watch how history unfolds early in this 21st century.
    Jan 9, 2016. 09:32 PM | Likes Like |Link to Comment
  • The S&P 500 Drops 6% This Week - 'Irrationality' Isn't Always Associated With 'Exuberance' And 'Euphoria'  [View article]
    Lenny-if you are a one-dimensional player (long only), there is nothing wrong with lowering your basis. Just don't bet the farm at x price point. Always assume an even lower price. I sold LEAP puts on TNA at 52 (such that TNA will have to drop significantly lower for assignment).
    If TNA drops lower, fine. I can keep playing. With actual shares, the "paper" carnage can look ugly-but it is transient. I sold TZA puts when TNA was at 95, and have made enormous profits. But, like Livermore, I am not wedded to either a bull or bear mentality. However, I understand that most prefer to cheer for the snorting bovines, not the growling marauders. And, for that predilection, be prepared to keep lowering your basis. Take advantage of the downdraft. And realize that precise timing is for suckers.
    Jan 9, 2016. 09:09 PM | 4 Likes Like |Link to Comment