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  • 12% In 12 Years [View article]
    Chad Brown is spot on. Look at it this way: Van Cliburn was one of the greatest pianists of the 20th century. How many hours a day did he spend practicing?
    There is an incredible difference between an accomplished talent like Van Cliburn, and so many reasonably good piano players that ply their craft at churches, weddings and lounges.
    Chess? Billiards? The names of the greatest of these categories remain legends. But for every Bobby and Willie, there are thousands of reasonably proficient players-but many more millions that can only hope and wish.
    The same is true in golf-but here we find the evidence extraordinary, because we know, via statistical evidence, that 99%+ of all people that play on a regular basis can't beat old man par. This is despite countless lessons, new clubs, watching hours of instructional video-it just doesn't matter.
    What I find in a seemingly endless parade of articles, books, etc. is a one-dimensional, rigid conformity-a 'foolish consistency.' I find an utter lack of creativity, a dull awareness of human irrationality and almost no skill (or even a mere acquaintance with all the available tools) level beyond parroting the words 'diversify, diversify.'
    I remember watching Cramer's show a few years ago, when he did something called "Am I Diversified?" People would call in and say they 'owned' ABC, XYZ, etc. I'm thinking, this reminds me of people that collect poisonous snakes. So, you call in and say 'I own an eastern diamondback rattlesnake and a copperhead-am I diversified?'
    "Hell no!' is the response. 'You need to add a king cobra and a black mamba.'

    Feb 3, 2015. 10:55 AM | 4 Likes Like |Link to Comment
  • Bill Gross: Games People Play [View article]
    Michael, I suppose it's an open question as to a time of reflection for most. Here's one of my favorite passages from Schopenhauer, which touches on the issue:

    "As we have said, the common, ordinary man, that manufactured article of nature which she daily produces in thousands, is not capable, at any rate continuously, of a consideration of things wholly disinterested in every sense, such as contemplation proper. He can direct his attention to things only in so far as they have some relation to his will, although that relation may be only very indirect. As in this reference that always demands only knowledge of the relations, the abstract concept of the thing is sufficient and often even more appropriate, the ordinary man does not linger long over the mere perception, does not fix his eye on an object for long, but, in everything that presents itself to him, quickly looks for the concept under which it is to be brought, just as the lazy man looks for a chair, which then no longer interests him. Therefore, he is very soon finished with everything, with works of art, with beautiful natural objects, and with that contemplation of life in all its scenes which is really of significance everywhere. He does not linger, he seeks only his way of life, or at most all that might at any time become his way....Whereas to the ordinary man his faculty of knowledge is a lamp that lights his path, to the man of genius it is the sun that reveals the world. This great difference in their way of looking at life soon becomes visible even in the outward appearance of both."

    In Popper's essay "Indeterminism and Human Freedom", he ask us to think about the 'vagaries of the weather' on the one hand, and 'clockwork precision' on the other. He puts a number of ordinary things (puppies, plants, cars, etc) along a continuum, which best describes the proximity to either pole. But, even as he has us follow him, agreeing with his seemingly simplistic depictions (we have used our common sense)-he hits us: we arranged things "not according to their nature, but merely according to our ignorance."

    So, as we think about these things, and observe inhabitants of the Eccles building sending out puffs of smoke, signaling a tangled web of rather trite information-how is it that a few basis points one way or the other causes wild animals to howl at the moon? But maybe we should ask who entrusted these folks with a set of matches to start with?
    Jan 31, 2015. 12:50 PM | Likes Like |Link to Comment
  • Bill Gross: Games People Play [View article]
    "The End of History and the Last Man"by Francis Fukuyama, and the game of Monopoly by Parker Brothers: wow, what an interesting marriage of ideas.
    Most of you supplied comments relative to Monopoly, but I think the larger, and more interesting issues, are contained in Fukuyama's book. I urge you to read it, although you might want to brush up on Hegel, Locke, Hobbes, Tocqueville and most certainly, Nietzsche.
    I believe the book worth study and reflection, because (and I can't help but oversimplify), our cultural fabric flowing from the industrial revolution thru the twentieth century, juxtaposed against all cultures and governmental systems, shows an underlying convergence or 'cultural relativism.' In all of our cultures, we exhibit a certain folly-a certain human tendency to wage war to protect an economy, for example, as opposed to contemplating the benefits of liberal trade. But, as we look around today, we note a 'continuing convergence in the types of institutions governing most advanced societies; and if the homogenization of mankind continues as a result of economic development, then the idea of relativism may seem much stranger than it does now. For the apparent differences between peoples' "languages of good and evil" will appear to be an artifact of their particular stage of historical development.'
    From this quote (Chapter 31, Immense Wars of the Spirit), Fukuyama goes on to make an interesting metaphor. He says that '...mankind will come to seem like a long wagon train strung out along a road. Some wagons will be pulling into town sharply and crisply, while others will be bivouacked back in the desert, or else stuck in ruts in the final pass over the mountains....Others will have found alternative routes to the main road, though they will discover that to get through the final mountain range they all must use the same pass. But the great majority of wagons will be making the slow journey into town, and most will eventually arrive there....The apparent differences in the situations of the wagons will not be seen as reflecting permanent and necessary differences between the people riding in the wagons, but simply A PRODUCT OF THEIR DIFFERENT POSITIONS ALONG THE ROAD." (Emphasis added).
    I take Bill's point as raising enormous issues as to whether 'the end of man' is accelerated via a deterministic fork in the road of what we call capitalism. As a thought experiment, how would Marx or Lenin have viewed the actions of the Fed? (Remember that both of these guys were big on determinism, whereas most philosophers tend to be weak determinists).
    Jan 30, 2015. 12:39 PM | Likes Like |Link to Comment
  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    Nibbling on that now. Can't loose at this point due to gains on shorting USO. In other words, the short profits are allocated back to UCO.
    Jan 29, 2015. 10:51 AM | Likes Like |Link to Comment
  • Smart-Beta, Small-Cap ETFs Could Outperform [View article]
    Yes- and TNA had a nice day today. Good call on small caps.
    Jan 28, 2015. 10:17 PM | Likes Like |Link to Comment
  • Today's 'Dip' Is A Warning---Get Out Of The Casino! [View article]
    I often refer to the option sellers as the casino owners. But, the mathematical reality is that almost any position can be "rehabbed" using option strategies. If this is true, then why the volatility. The answer is simply that most players lack the requisite skill set.
    In math and physics, the greatest minds to ever live have acquainted us with negative numbers, equal and opposite reactions, and a host of concepts to indicate that nature is not a linear proposition. Yet, it is truly astounding to witness the mortal grief and consternation exhibited so often when nature reminds us accordingly. I had a number of short positions that did quite well today- but I do have larger concerns that relate to this ongoing Great Recalibration. The expansive role of central planning, drug dependence, obesity, decline in education, increase in crime- and our leaders seem all but oblivious to the mutation of social fabric.
    Oh well, tomorrow's another day- do I continue to short USO? Chinese Internet stocks?
    Jan 28, 2015. 09:57 PM | 2 Likes Like |Link to Comment
  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    Sure kg-as a basic premise, we want to sell an option when it hits the high point of its expiration cycle. (If you're buying an option, you obviously want to buy low and sell higher).
    But, our tarot cards don't always provide that info, so we have to utilize the SWAG method. Suppose that we sell a call against XYZ for 1.00, but some pundit comes on TV and swears that the stock is a steal at current prices. If our call jumps to 2.00, we are down-at least temporarily-100 bucks. Our reaction is to sell another call at 2.00. (Note that our 3x ETF has done it's job). Depending on the time remaining to expiration, we might throw another log on the fire, and perhaps we should, given our inherent cover.
    What happens so many times after a stock jumps, is at least some profit-taking. The knee-jerk response stabilizes. BUT ALL WE WANT IS FOR THE STOCK TO GO DOWN, DO NOTHING, OR EVEN GO UP A SMALL AMOUNT. THIS IS WHERE TIME DECAY WORKS IN OUR FAVOR.
    If you look at the p&l for each option, you'll notice that the first option might have lost money-or made a small amount, whereas the other 2 options did the heavy lifting and fueled the returns.
    If the underlying continued to go higher, you would roll out the options, and keep the 3x cover. The ultimate end result will result in more premium.
    Note: the margin software doesn't 'think' this way, so your account will reflect that you sold 3 naked calls. For large plays, I will add long out-of-the-money calls-just to preserve margin. This will cut into profit margins a bit, but, as always, it's a cost/benefit variable.
    Finally, note that averaging in with options is a different animal than with stocks-due to the decay factor.
    Hope this helps.
    Jan 28, 2015. 10:25 AM | 1 Like Like |Link to Comment
  • Daily State Of The Markets: Stuck In The Middle With You [View article]
    In between jokers and clowns- a time for straddles.
    Jan 28, 2015. 09:46 AM | 1 Like Like |Link to Comment
  • Profiting From Market Randomness [View article]
    Personally, I've long believed that an edge is created by adopting casino-like strategies. If I sell a call on a pre-set spike, my odds of collecting exceed 70%. I no longer have any interest in what any stock does, nor do I particularly care what the market does. These things are superfluous and peripheral to dynamic game theory. I don't think about investing or trading-those terms have no meaning to me. And, one has to be prepared to hit back. If I sell a short put, and it runs the wrong way, I will immediately short 500 shares for each short put. And as the drop tapers, I'll sell more puts (or maybe buy calls).
    How many people have had this thought: "Hell, if I'd just done the opposite of what I did, I'd be very wealthy!" You have to come to a fight fully armed. If you lack the fortitude to sell options or short, you might as well enter the ring blind-folded, and one arm tied behind you. Do you play golf? What would you shoot with a bag full of drivers?
    Jan 27, 2015. 04:24 PM | Likes Like |Link to Comment
  • How To Buy And Hold Leveraged ETFs: The Top 7 Outperforming 3x ETFs Over The Past Year [View article]
    I found some time ago that one can use a 3x to 'cover' 'ratio writes' on a 1x ETF. Traditional or textbook thinking is that one can sell 3 calls against 100 shares of a stock like T, MO,etc.
    Well, if a 3x ETF is supposed to deliver a factor of 3, then, in theory, one can sell a 1x ETF call for each 33 shares of the triple powered instrument. Thus, 100 shares should cover 3 short 1x calls.
    The reason to think about that relates to most bid-ask spreads. An ETF like USO has tight spreads (compared to UCO, e.g.).
    Of course, options work differently-much depends on the initial price, and the theta factor. As an option approaches expiration, and is now several strikes away from the money, the additional returns earned to expiration will not match the underlying (or 3x instrument). BUT, in this case, you've likely garnered a 70% return, and can close and reset the new short calls. Note, that you don't have to sell 3 calls at the same time. You can average in on the strikes, which is actually a big advantage.
    This is a very brief thought, and it would take too long to go into detail. Suffice to say, I like this strategy.
    Jan 27, 2015. 03:54 PM | 3 Likes Like |Link to Comment
  • Risk Reward Shows Market In The Toilet For 2015 [View article]
    Good point, but consider put ratio backspreads. It's a concept worth studying. B1asically, sell ITM puts and buy OTM puts in a ratio where the short put covers the cost of the long puts. !:2 is simplest to start with. But look also at others.
    I have these 'embedded' and one can basically not have to manage as it either decays-or pays off if the market drops quickly.
    Jan 21, 2015. 08:32 PM | Likes Like |Link to Comment
  • Consumer sentiment pops higher [View news story]

    "Hey Joe, how's it going?"
    "Doing just fine, Mike-how 'bout you?"
    "Man I'm feeling pretty good since I got some of that medical weed. Mix it with that anti-depressant stuff the doc gave me, and I'm on top of the world."
    "You know", Joe says thoughtfully, "I've gotten a bit partial to a little heroin-just a lil' bit, you know-I'm not hooked or anything."
    "I'm with you Joe. I haven't felt this good in 11 years. Ought to be a way we could tell folks how good we felt-you know, something like a sentiment indicator."
    Jan 16, 2015. 05:07 PM | 3 Likes Like |Link to Comment
  • We Will See $100 Per Barrel Crude Oil Prices Again [View article]
    If you've passed Trading 101, you just want oil to go up. Pick a number-it doesn't have to be $100. And then, you want oil to go down again. After that, you want oil to go up again, etc., etc., etc. I added more UCO. There will come a time to switch to SCO-or use options for various strategies.
    The lowest I ever remember paying for a gallon of gas was a whopping 16 cents. My first job paid 90 cents/hour. Who was it that sang that song...I Wish I was 16 Again? George Burns?
    Jan 16, 2015. 01:03 PM | 4 Likes Like |Link to Comment
  • U.S. Home Builders Hit By Growing Inequality, Inflated Prices, Collapsing Oil Market [View article]
    I would add student loans, change in demographics/ lifestyle to the mix. But w/o question median income loss is a pernicious problem.
    Jan 16, 2015. 11:36 AM | 3 Likes Like |Link to Comment
  • Homebuilder ETFs shrug off dour home sales report [View news story]
    Well, I shorted ITB at 27. All it takes is a few days in this business. How many times have I suggested that one should short ITB in the last year?
    I lost count.
    I've been shorting homebuilders since I was in the 3rd grade. The advent of ITB makes it a lot easier.
    Will it go up again? Sure. If you're long only, you can average back in. But, that's not an optimal way to make money. I'll be out of this trade within a few days-or sooner.
    Here's a perspective via analogy. Try rolling a 200 lb rock up a steep, 300 yard incline. How long did this take? Now, push the rock so that it races back down the hill. How long did that take?
    Jan 15, 2015. 01:35 PM | Likes Like |Link to Comment