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  • Dan Ariely: Why The Next Market Downturn May Quickly Become A Full-Blown Panic [View article]
    "Logical Song"


    When I was young, it seemed that life was so wonderful,
    A miracle, oh it was beautiful, magical.
    And all the birds in the trees, well they'd be singing so happily,
    Joyfully, playfully watching me.
    But then they sent me away to teach me how to be sensible,
    Logical, responsible, practical.
    And they showed me a world where I could be so dependable,
    Clinical, intellectual, cynical.

    There are times when all the world's asleep,
    The questions run too deep
    For such a simple man.
    Won't you please, please tell me what we've learned
    I know it sounds absurd
    But please tell me who I am.

    Now watch what you say or they'll be calling you a radical,
    Liberal, fanatical, criminal.
    Won't you sign up your name, we'd like to feel you're
    Acceptable, respectable, presentable, a vegetable!

    At night, when all the world's asleep,
    The questions run so deep
    For such a simple man.
    Won't you please, please tell me what we've learned
    I know it sounds absurd
    But please tell me who I am.

    Supertramp
    May 18, 2015. 11:00 AM | 11 Likes Like |Link to Comment
  • What If Mortgage Rates Go Up? [View article]
    Thanks, cboatner.
    May 18, 2015. 10:08 AM | Likes Like |Link to Comment
  • Charts Of The Day: The Great Convergence Of Food Spending At Home Vs. Away From Home [View article]
    Is there a correlation between obesity and eating out?
    Also, it would be interesting to know how many people actually prepare a meal at home. In other words, a further distinction might be made where prepared food ( frozen dinners,etc) is contrasted with buying ingredients and incorporating a recipe. One can buy a frozen meatloaf, or make one from scratch.
    Also, almost all grocery stores now have delis and sections containing deli- type food.
    As a child, we ate at home. My mother made everything from scratch. There wasn't a fast food place until I was 16. Even now, she refuses to buy TV dinners, and what she calls over- priced junk. Her best friend, now 93 years young, makes cheese straws from scratch when she knows I'm visiting.
    Aside from the superficial fact of the noted convergence, peeling back the layers of data will reveal enormous changes in demographics. But, then, I think we already know all about that.
    May 16, 2015. 04:46 PM | 2 Likes Like |Link to Comment
  • Portfolio Structure For Hedging Against A Downturn [View article]
    Some S&P stocks can be down, and vix etfs can be down as well-ouch.
    I think either index puts or stock specific puts are superior-although a nasty sell off will obviously super-charge the vix. BUT, remember that the vix just indexes put activity anyway.
    Suppose a large percent of your portfolio happened to be in GE stock. A unique issue with GE would require appropriate put protection.
    So, the nature of one's holdings should be examined to determine the best insurance. And, with something like GE, it's likely that a collar would be a better choice-thereby providing cheap-or no cost-protection.
    And, as noted, contango is a problem with longer-term holding-although theta is a similar issue for puts.
    The best way to make money-which is entirely another story-is to short volatility spikes. As long as Uncle Sugar is backing the nascent 'recovery', one should short volatility with impunity at each spike.
    Protective buffers can be added via spreads.
    This is what is meant by the term: "shooting fish in a barrel."
    May 15, 2015. 06:21 PM | 1 Like Like |Link to Comment
  • What If Mortgage Rates Go Up? [View article]
    I certainly agree with the refi perspective. As to purchases, ARMs would likely bridge the gap-to some extent.
    The real T-rex in the room is simply poor employment prospects, combined with anemic wages.
    If the current interest rate environment had existed in the 1980's, home buying activity would have been off the charts. To me, that's a telling commentary on the state of the housing market in the second decade of the 21st century.
    And, it's easy to extrapolate: unless and until middle class opportunity returns from the netherworld, why would any sane mind contemplate a home ownership resurgence?
    From time to time, there will be anomalies in data, which some will point to as said resurgence, but it can only be an outlier. Home ownership comes with a bundle of additional costs, such as property taxes, insurance, repairs and so forth. If the most recent data can be believed (76% of US households live paycheck to paycheck), how in the hell can any rational and thoughtful perspective embody any conclusion other than that which is painfully obvious.
    It's truly a tale of the increasingly desperate families juxtaposed against the beneficiaries blessed with a silver spoon.
    Policy makers need to re-examine the issue of housing, and deal with a host of complex issues. Manipulating interest rates is a pathetic approach. It hasn't worked, and it will never work. Half-baked meddling will ultimately make the situation even more dire.
    The good news is that the motivated individual can still go forth and seek his/her fortune. It is the lazy, obtuse and disingenuous that will continue to languish.
    May 15, 2015. 09:52 AM | 6 Likes Like |Link to Comment
  • The Big Chill: What's Wrong With The U.S. Consumer? [View article]
    Where we are in economic history has been predicted more than 20 years ago. Read, for example, "The Judas Economy" and "The End of Work."
    In fact, folks like Alvin Toffler ("Future Shock"), were way ahead of the mainstream economists- going all the way back to the 1970's.
    The amazing thing is that the majority of "experts" try to put current data on a microscopic slide, and then compare to a textbook virus. Changes that move at a tectonic pace are challenging for those involved with economic policy.
    One thing is fairly certain for the ensuing decades: returns to capital will trump wage returns by incredible orders of magnitude. The role of central planners will focus mainly on system stability. The super wealthy will continue to distance themselves from an increasing number of lower middle class people. Indeed, middle class aspirations will largely fade into unachievable expectations, as larger groups of people seek mitigated objectives.
    It's also fascinating- at least to me- that so many young people willingly surrender basic rights- such as the right of privacy- to the false god of social media. When a society so blatantly fails to understand and appreciate the sacrifices of earlier generations, a serious student of history need just extrapolate from the past to reach conclusions about the future.
    But this will play out over the coming decades. I will continue to take the road less traveled, and most certainly will hear a very different drummer. And I know that will make all the difference.
    May 14, 2015. 10:03 PM | 7 Likes Like |Link to Comment
  • See No Evil: What We Chose To Ignore In The April Jobs Report [View article]
    Well, the world needs more sprinkler repairmen-so jobs are out there.
    I'm getting desperate-watched a youtube repair video-but just had knee surgery so, as my wife notes, I'm useless.
    She's currently trying to clear away dirt from the valve, but, alas, a large worm has slowed her progress.
    I suggested that we just buy an old-fashioned sprinkler that we connect to the hose and move around as needed. And wait out the repair schedule.
    I digressed, but the point is that old folks are willing to pay for reputable handymen/women.
    May 14, 2015. 12:20 PM | 1 Like Like |Link to Comment
  • Falling Knives: Do Stocks Really Drop 3 Times Faster Than They Rise? [View article]
    Studies show that fear and regret occupy the center of the human soul. But, the issue is always one of uncertainty-and inability to manage risk.
    The vast majority of people in the market can ill-afford to take losses. Thus, there is a morbid sense of foreboding. Yet, very few people receive any training on money management. Simple things like position sizing and VAR appear to most as abstractions.
    I suspect that the 3:1 off-the cuff observation relates far more to perception. For instance, if NFLX grinds higher for 3 straight days, and then opens lower on the 4th day (temporarily giving back all the gains of the previous 3 days), the very short-term observation seems to support some vague notion of velocity. But, this is nothing more than simple mean regression, and simply notes the inherent ergodicity of price points. For, it could very well be that NFLX is higher still some 7 days later.
    We have a disjointed, quasi-circadian, merry-go-round sort of reasoning when we contemplate these types of relationships. The casino, though, sits eternally confident on the other side, showing a constant disdain-if not smug amusement-at our futile attempts to pry away some little kernel of folk wisdom.
    May 14, 2015. 11:35 AM | 10 Likes Like |Link to Comment
  • Bond Collapse Sends Unheeded Warning Signal To Equity Markets [View article]
    Great summary on bonds. It's amazing that most people don't understand yield/value/price dichotomy. Too many seniors have piled into gold and treasuries the past few years.
    May 14, 2015. 10:55 AM | 1 Like Like |Link to Comment
  • U.S. Consumers Spending Less And Paying Down Debt [View article]
    Some states are increasing gas taxes and eliminating battery operated vehicle credits.
    Savings on gas expense is not an annuity.
    May 14, 2015. 09:12 AM | Likes Like |Link to Comment
  • Gilead Sciences Is Poised To Break Out [View article]
    Do a bit of study on 'roll out'. If done properly, assignment is a non-issue.
    May 13, 2015. 10:45 PM | 1 Like Like |Link to Comment
  • Stocks close flat as rising yields, weak retail sales data weigh [View news story]
    Yes- much churning. Small caps struggling to reclaim high water mark. Volatility in tight range. Oil seems destined to increase a bit more.
    So, could be good oil' summertime again. NBA, baseball, golf, etc.
    May 13, 2015. 09:37 PM | Likes Like |Link to Comment
  • Why A Stock Market Crash May Once Again Be Inevitable [View article]
    If you fear a "crash"- however defined- I submit that you have ignored the Boy Scout motto: "Be Prepared."
    Here's a novel question: how do I take advantage of a "crash?"
    Maybe we start by defining "crash" via Monte Carlo simulation- or think about a range of probabilistic events, accompanied by appropriate strategy sets.
    If you check my stock talk suggestion (about a month ago), I indicated I planned to sell JAN 2016 TZA PUTS ( when TNA was in mid-90's). If you bothered to look at the option chain at that point, you would have noticed a large block of several hundred puts transacted.
    I'm already up on this play- which was initiated to both hedge existing small cap positions, and express my 'tape reading' conclusions. So, I will make money irrespective of whether the market goes up, down or treads water.
    Note that I sold the 10 puts, when TZA briefly dipped below 10.
    We live in a three dimensional world- some physicists think it may be 11 dimensions. But, at a minimum, we experience fluctuations (fully explained or not)- and each of us can develop unique strategies to mitigate same- or, preferably, profit therefrom.
    May 13, 2015. 09:27 PM | Likes Like |Link to Comment
  • Don't Need Rising Rates For Lower Home Prices - Rising Age May Be Enough [View article]
    There are coastal areas in Fl where values have resumed, and even exceeded pre- crash levels.
    The 55 plus communities are very vibrant.
    in my second home community, where prices range from 500k to over 3M- several homes over 1M have sold recently. (One had an indoor basketball court). On the other hand, I've noticed several homes in the upper 600's that have been on the market for several months. A few houses down from me, a guy with a young family paid 865k for a home, and promptly finished the basement and added a pool. He now has over 1M in the property.
    At one time, I thought I was reasonably astute in deciphering real estate trends. It seems tougher than ever to make generalizations. I do meet a lot of guys in their 50's that want to downsize- but it seems that they really want to change design more than eliminate a lot of square footage. Also, children and even grandchildren have a gigantic influence on retirement plans. One of my neighbors wants to move, but the wife is extremely worried that her daughter can't manage the little ones. So, he's thinking that they buy a smaller house in Florida, and keep the other one- until the kids/ grandkids stabilize.
    Finally, I get the impression that some people just test the market, and don't really care if they sell or not. And, I also see an increasing number of Asians and Indians looking around. I conclude that housing demand is reasonably vibrant- and those that both desire a home and can readily afford it- are not content to wait several years for some possible discount.
    May 13, 2015. 11:57 AM | 1 Like Like |Link to Comment
  • A Tale Of Two Graphs- Why Bubble Finance Will Fail [View article]
    "What central bank bubble finance has actually unleashed is a self-fueling form of asset-based credit creation. The options, futures and currency markets, for example, are based on what amounts to loans which are collateralized by small fractions (1-10%) of the underlying’s current market value. As valuations rise ever higher, collateral values follow and implicit leverage grows. It is a financial beanstalk."

    Well, I think you've now connected all the dots. However, gambling is an addiction-and the house gives great odds to the card counters-and, a pre-set profit margin to its shareholders. But, I wouldn't have used 'implicit' leverage. It is leverage thus 'derived' from an iterative, and ultimately, indeterminate 'x'.
    May 12, 2015. 03:11 PM | 1 Like Like |Link to Comment
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