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  • Stocks Are Moving Higher But Beware [View article]
    I don't like the word "beware"- If one has to 'beware' then they haven't prepared. Market drops? I can short multi-millions in the blink of am eye (or as Springsteen says-the blink of a young girls' eye). Market rebound? No problem-I can pivot and fire.
    But, I am eternally grateful to those that climb a wall of worry, and just keep on worrying. And, to those of you that panic at the first sight of the big, bad wolf (or grizzly bear), it's been a real pleasure all these years.
    One of these days, rationality will prevail-I predict no later than the year 3535-if man's still alive.
    Aug 22 10:55 AM | Likes Like |Link to Comment
  • Housing Relates To Income More Than Credit Now [View article]
    Once again, it's always about median income and job opportunities. It's really not complicated.
    Median income and job opportunities have dipped post 2007. In fact, many 'new' jobs are 'permanent part-time' jobs, which were crafted to deal with the new health care rules.
    But, even before 2007, companies were engaged in a generation of 'corporate re-engineering'. (That was code for trimming the fat and cutting out the middle guy, etc).
    But, the larger picture relates to a fundamental societal shift-a Darwinian renaisance-somewhat like the oil and sugar trusts-but now supported by central governments.
    The age of mergers, strategic ventures, corporate buybacks, globalization is, in reality, a classic transformation. Main Street is dead, save for a few trinket shops. The soul and vibrancy are now gone. We've made a pact with Big Business and Big Government. Housing? Well, we are in the midst of redefining what it means to have a home-to be part of a vibrant community. Say goodbye to Mayberry. Say goodbye to the way we were.
    But, by all means, you folks keep looking at all the housing data. And, you'll keep coming up with the same superficial conclusions.
    Aug 20 04:21 PM | 1 Like Like |Link to Comment
  • Margin Debt Peaks May Indicate End Of Cyclical Bull Market [View article]
    Notwithstanding margin levels, somebody has to run for the exits and create a stampede. NOW, how that margin is allocated can make a big difference. In 2007, hedge funds were grossly overweight in seed, cattle, coffee-in short, anything that would grow out of the ground or on a tree. There's always something a bit different, and a different cast of characters around to stir the pot. Of course, we now have the additional variable of a 'flash crash'.
    But, if you have the skill, you're already prepared. And, frankly, whether the market goes up or down is just another blip on the eternal screen. There is absolutely no question but that I will make money if the market drops. And, later, it will go up again-and then after more debate and circumstance, it will go down again. So what?
    Aug 19 06:47 PM | 3 Likes Like |Link to Comment
  • A Weird All-Long Strategy [View article]
    Yes-I've seen it before but watched again. Thanks.
    I started wondering about how decisions are made in my early 30's. I'm convinced, as are numerous neuro scientists, that music (and art) play a significant role in brain development.
    I think too that whatever it is that fosters and nourishes imagination is also inextricably linked to decision making. I have no doubt that, as a species, we are in a very elementary place-merely surviving by the intricate firing of neurons-the basic composition of which remains elusive.
    Aug 19 05:37 PM | Likes Like |Link to Comment
  • Momentum Continues For Home Builder Confidence Even As Affordability Continues Its Decline [View article]
    I think we'll have a better perspective by Dec. 31, 2024-but not before the end of that day.
    In the meantime, I'll amuse myself by shorting the homebuilders at peaks-just like I've done since the late 70's.
    I'm not opposed to housing-I reside in one. But I think we've gotten to the point where the Federal Government should get involved. Just imagine how much better the numbers would look-if only we had some incentives and subsidies.
    Aug 19 12:37 PM | Likes Like |Link to Comment
  • How Do I Stick To The Slow, But Sure Process Of Dividend Growth Investing? [View article]
    The trick is to take a trip on a time machine-like Rod Taylor did in 1960. An additional bonus is that you might encounter Yvette Mimieux-don't know that I would go much beyond the year 9595, though.
    Aug 19 12:19 PM | 3 Likes Like |Link to Comment
  • The Greek Handicaps The Week Ahead [View article]
    Over any relevant time, liquidity dwarfs any other variable(s). Other factors are mere trifles (save an alien invasion, nuclear war or deadly virus epidemic). So, I'm long liquidity-but hedged for the possibility of a Mars invasion. Remember that even a fake Mars invasion frightened the public just a few decades ago. Of course, there is a 'play within a play' for the true believers that worship 'financials.' After all, the casino wants all kinds of players-the earnings pundits, the chart technicians, the astrologers and the small investment clubs.
    "Step right up ladies and gentleman, buy your tickets here! Son it's never too early to get in the game-why you'll be rich at 30!Hey Gramps-take a flyer before you get any older-got some safe GM bonds right here-perfect for you older folks needing safety."
    Aug 18 12:38 PM | 2 Likes Like |Link to Comment
  • A Weird All-Long Strategy [View article]
    Thanks-enjoy chess but tend to get a bit impatient. I also came across two elderly guys playing checkers recently at an old service station. I forgot how nuanced that simple game can be. Amazing how these old, traditional games teach us to think through our moves-to anticipate and be prepared.
    Aug 18 10:33 AM | Likes Like |Link to Comment
  • The Stock Market Is Starting To Price In The Next Housing Downturn [View article]
    Some of you new to this game need to know that the housing stocks have historically been 'gamed' by the pros. Go back and look at history-particulalry post WWll. After a recession or downturn, housing stocks get a lot of cheerleading. BUT, this is a very extraordinary sector in that private builders have accounted for over 90% of all activity. This is not the case with aircraft/weapons, soft drinks, etc. So, ABC builder can never hope to grow out of this constraint. Nor can they readily adopt to changing economic, local or demographic trends. If you want to be in something housing related, buy a mini-storage facility.
    To look for tell-tale signs of housing viability via housing stocks is far less reliable than consulting the nearest palm reader.
    Aug 18 10:24 AM | 1 Like Like |Link to Comment
  • A Weird All-Long Strategy [View article]
    The bear call spreads can be staggered in many different ways. Also, you can try to average in, or pick one that's deeper in the money (short call) and which is hedged by a further OTM long. Note that this is a suggested ratio. Certainly you can adjust the number of long shares to mix/match shares. And, of course, it's certainly possible to buy a LEAP call, rather than shares. Options are like treble/bass on a piano, combined with an assortment of different scales, sharps and flats. And, superimposed on that are all the many ways to express tempo, sound variation, and so forth. Playing this game from a long only dimension is like playing one scale (C Major/treble only). It's tantamount to a small child, having his very first lesson:
    "Here we go,
    Up a row,
    To a birthday party."
    (It's played with only the right hand, using only the thumb/two fingers).
    Aug 18 10:04 AM | Likes Like |Link to Comment
  • A Weird All-Long Strategy [View article]
    Here's another play that's simple and has good risk profile:
    *Buy 50 shares of VXX on an up-market note
    *Sell two (or more) bear call spreads against VXX.
    Close the set at a satisfactory profit point (or close pieces where that seems more optimal).
    Aug 18 09:49 AM | Likes Like |Link to Comment
  • Buy-Write CEFs Are An Alternative To An S&P 500 Dividend Fund [View article]
    You're welcome-just hanging around upstate New York at the moment-dejected once again for missing another cut.
    Aug 17 12:10 PM | Likes Like |Link to Comment
  • A Market That Defies All Expectations [View article]
    The vast majority of people are destined to extrapolate prior learning and past experience to explain the present. But alas, the confluence of underlying variables and the unique mix of technology renders such perspective hopelessly myopic.
    So, for example, one can't just look at housing data and reach meaningful conclusions. The employment numbers fail to reveal the pain and anguish of an older generation that has thrown in the towel, or the debt-ridden graduates waiting tables for years. We may very well be in a situation, unique since the industrial revolution, where people are more literate and knowledgeable than ever before. (Admittedly, it does seem clear that very recent trends suggest a marked generational disparity in education). Yet, the Protestant Ethic confronts nano-bots, and a world of adventure and opportunity get measured in little starbuck's coffee spoons. "Well Mr. Applicant, tell me about your aspirations?"
    "Why, I would like to follow in the footsteps of Lewis and Clark."
    "Mmm, who is that-do we have their resume on file?"
    Superimposed on this macro landscape, we note a substantial demographic and societal shift. Unique in all of history, is the desire to replace traditional family with ad hoc solutions-achievable via science and allowed via the legal system. Delays in traditional marriage, a staggering divorce rate (now some 40 years running), declines in real wages-all of these factors are somewhat related, and whether it's a witch's brew or simply a sign of the times engenders it's own revealing observations.
    That the bond market does this or the equity market does that is nothing but an echo of this drum-beat of humanity. If one wants to understand the 'economics' of this age, it's never been easier. Just go to a local service station and engage a few folks in casual conversation. Or, drop by an 'everything's a dollar' store. You could even find a good ol' beer joint overlooking the Gulf of Mexico to pull up a seat. Now, you think these people can pay a higher interest rate for anything? Do you think they're absorbed in reading the WSJ?
    It's now official, and could be announced as early as next week: "Big Brother and Big Government Merge-Congress to Provide Details."
    Of course, Big Brother wants state and local governments to feel as if they have some 'autonomy.' After all, this is a benevolent merger. And, local politicians are needed to assist the big box retailers in completing the annihilation of the 'small business.' We maintain an endangered species list for a variety of animals-the spotted owl, an assortment of toads, whales, etc. We designate some areas as 'green,' and set aside land for parks. Yet, the small entrepreneur is going extinct at an alarming rate. Actually, this is great for the equity market-the small guy is simply too inefficient.
    So, there's the state of the 'economy' and, as Paul Harvey used to say...'now you know the rest of the story.'
    Aug 17 12:05 PM | 6 Likes Like |Link to Comment
  • Buy-Write CEFs Are An Alternative To An S&P 500 Dividend Fund [View article]
    I noticed the concept of leverage mentioned above. Usually one thinks of margin, but I don't think anyone raised the leverage inherent in utilizing LEAPs. When we think of covered calls, we typically (or automatically) think in terms of owning 100 shares of the underlying stock. But, we can go out a couple of years-even longer-and buy longer-term options (for a fraction of the 100 share cost). We can now sell a 'covered' call. The combination of an expiring call PLUS the opportunity cost of the price differential in the LEAP vs the 100 shares can be staggering.
    And, with a modest 'leap' in creativity, we can also buy long-term puts, and sell the weekly or monthly put. In essence, we have a LEAP long straddle, and a short-term short straddle (or strangle). We would typically buy an ATM or ITM long option, so that we get a delta of 1. This simply means that the option will track the 100 shares dollar-for-dollar-our short option would normally be one strike OTM. Here are just a few things to contemplate:
    * Short strangles as a stand-alone play can be quite profitable-the utilization of LEAPs defines risk to the penny;
    *One can amortize a LEAP far quicker than hitting a BEP with shares of stock (think of two identical rental properties-property A was bought for 10 cents on the dollar/property B (100 shares) was bought at FMV).
    *While a LEAP option foregoes a dividend (where paid), the dividend yield can't even 'move the needle' relative to the exponential leverage power of the LEAP spread.
    *During a market melt-down, the LEAP call will limit loss (even a paper loss contains present value implications that can be enormous), and additional LEAPs can now be added (again using cost differential leverage);
    *Market increases are also easily accommodated by collecting on short puts, and rolling out calls (if calls are sold where the p(hitting upper price) w/in t time period is in the upper range), the odds of having the option expire worthless exceeds 95%.
    *Kelly and Martingale rules are substantially easier to consider and implement using options;
    * Note that after hitting the BEP, gains accrue at near 100% (i.e. after transaction costs), BUT the insurance remains.
    *Also, after the BEP, the free cash flow can be utilized (if one is so inclined), in strategies that can yield higher returns. An example would be the simple purchase of a call or put, or the allocated subsidy to a bull call spread (or bear put spread). These moves can actually augment your 'dominant' covered LEAP strategy.
    As a very simple illustration of how this can work, I suggested buying BBRY LEAP puts, and selling the shorter term puts. I first brought this up many months ago, and also indicated via stock talks and comments how the strategy was playing out. Within the past few weeks, I noted the BEP had been passed, and that additional put premium would flow to the bottom line. I've also pointed out that this is NOT a play for day-traders, swing traders or the types that play the market like Buddy Rich used to play the drums.
    While this may seem complicated-it's really not. And, the great thing is that one can 'experiment' with very minimal risk. Indeed, if one is prepared to accept the risk of buying 100 shares and then selling a call, the LEAP strategy will pose far less risk.

    Aug 17 10:44 AM | 1 Like Like |Link to Comment
  • Build A 'Whatever Happens' Portfolio... Now [View article]
    Perhaps the greatest observation I have is that the vast majority of people have no clue as to the subject of 'basis management.' I'm not referring to 'stepped-up' or 'carry-over' basis for tax purposes, but rather acquisition basis-adjusted up or down by such things as dividends received, option premium or hedged premium derived from inverse ETFs or perhaps pair trades. There is a unique present value associated with basis management. And, of course, by present value I raise the concept of the time value of money-or rather the returns to time value strategies compared/contrasted to a given set of alternatives.
    An example of this is a client that bought roughly $2M of gold at the exact wrong time. The rationale for the purchase was that the Federal Reserve would print so much fiat money as to render the dollar worthless-thereby causing a massive run into gold. (He wasn't a client at the time he made this decision!).
    I met this fellow by chance-just standing around a driving range. Long story short, I finally got his basis back to a small positive by selling calls and trading inverse gold ETFs. But, here's the basis point: What is the time value or present value of getting back to even vs. a similar situation where a simple buy/hold mentality was utilized. If the 'B Player' waits until gold gets back to $1,800/oz.-he will feel vindicated that his buy/hold strategy prevailed. Suppose that does happen, say 5 years from now. Player B is oblivious to the fact that Player A essentially traveled forward in time, and has received a relative windfall i.e. via any reasonable assumption as to having the difference in cash to invest.
    Another example is just the purchase of a simple put. Again, if A and B each bought 100 shares of AAPL at the exact moment, but A buys a LEAP put to protect his shares for 12 months. Several weeks later, the market has a tantrum and AAPL drops by 5%. A cashes in his put for a $500 net return. Thereafter, neither A nor B do anything else for the next 30 years. As chance would have it-they both passed away at the exact same time. If we just assume that A took the $500 and bought a 30 year bond, that singular event forevermore created a value discrepancy.
    Certainly this is an extreme over-simplification, yet it gets to a deep and profound difference in strategic approach and methodology. For me, I'd rather have more money than less, and I'd prefer to have it sooner rather than later.
    Aug 16 10:56 AM | 1 Like Like |Link to Comment