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  • Lumber Prices Fall Sharply: Implications For Bonds And Different Stock Market Sectors [View article]
    Yes-but in some way, it's always a 'new economy'. We stay trapped in a zone a bit beyond perception's reach. Thus, the vista from our lofty perch is only our replication of what we map in our minds.
    According to physicists, we are not yet an advanced society. Of three levels suggested, we are not yet even at Level 1.
    Ultimately, our brains will be downloaded in some strange device that can circumnavigate the universe in perpetuity. Perhaps by the year 7510.
    But, alas, we occupy our thoughts today with wine, roses and lumber prices. So did the ancient Romans.
    Apr 15, 2015. 11:45 AM | 1 Like Like |Link to Comment
  • Public Storage Helps Self-Storage REITs To Strong First Quarter [View article]
    OK-but how do they grow? What's their game plan?
    Yes, the industry is fragmented BUT is that a plus or minus?
    One can make the case that revenue is subject to the influence of perfect competition. In other words, how much pricing power exists for any particular storage unit? What differential advantage can yield higher revenue?
    Which raises the question as to whether growth over the long run is best achieved by acquisition of smaller players. It would seem that expansion can only be achieved by actually buying land and building new stores, or acquisition.
    Apr 15, 2015. 10:16 AM | Likes Like |Link to Comment
  • Shorting Leveraged ETF Pairs: Easier Said Than Done [View article]
    Something to consider: FAS has had a great run. What happens if we have a 5% correction within the next 12 months? What is probability?
    Perhaps a one year put option might contain a suitable risk/reward.
    Or, what about a couple of cheap TZA calls?
    Apr 14, 2015. 05:07 PM | Likes Like |Link to Comment
  • Shorting Leveraged ETF Pairs: Easier Said Than Done [View article]
    Yes-looked at concept of a protocol rebalance, but it appeared to be unwieldly. I think that dominant trends also render a double short strategy problematical.
    On the other hand, I have used various option strategies to capture option income, and to achieve something of a 'double short' play.
    But, consider the relative ease of simply buying 1,000 shares of FAS, and taking the opposite side by buying 10 ATM LEAP puts. And, the cost of the puts could be further offset by selling OTM, shorter-term puts. If we extrapolate based on the above charts, the put options would eventually expire worthless (albeit discounted by the OTM short put income). Of course, we could have shorted both FAS and FAZ with LEAP puts, and our net gain would be the difference in the cost of the puts and the resulting profit form the put returns.
    To take it a bit further, or add another dimension, what result with LEAP straddles, where we buy both ATM calls/puts on FAS/FAZ? There are other option strategies, but by using options we avoid both the necessity to rebalance, and the present value associated therewith.
    Very interesting article.
    Apr 14, 2015. 04:52 PM | 1 Like Like |Link to Comment
  • Lumber Prices Fall Sharply: Implications For Bonds And Different Stock Market Sectors [View article]
    Lumber:residential housing may not be the crystal ball it used to be. It takes a lot less lumber to build a 'tiny house', and millennials (being environmentally inclined), are recycling their wine cartons-to form a new type of gypsum board.
    Of course, a few first time home buyers are opting for the good old-fashioned McMansion (a la Jordon Spieth).
    Apr 14, 2015. 11:42 AM | 1 Like Like |Link to Comment
  • Thought About Buying Twitter, Then Sobered Up [View article]
    Twiddle, twidle, tinkle, twinkle
    Tweets and twerps
    Twinge and cringe
    Tweedledum and tweedledee
    In a twit, no less-tweet, tweet.
    Apr 8, 2015. 11:47 AM | 2 Likes Like |Link to Comment
  • Arbitrageurs Beware: This Popular Volatility Trade Just Doesn't Work [View article]
    There are numerous ways to strategize, as some of you have suggested. But, here's a simple alternative.
    Assuming the initial entry has some degree of rationality (e.g. selling VXX put spreads at market euphoria or selling VXX call spreads at moments of bullish despair); counter-balance the initial gambit at some pre-determined level of profitability.
    So, I currently have UVXY short put spreads (max risk is known), which were offset with short call spreads. This is something similar to an iron condor, but not necessarily equally weighted. I call it an 'unbalanced formation', but the idea is to recognize the 'intrinsic probability' of the above-referenced defects.
    So, the fat tail risk is eliminated via the wings. However, is that a real, long-term risk? Or an extraordinary opportunity? Think about it-what would cause an 'enormous' spike in volatility? Well, what do we have? Greece (again)? Putin invading neighboring countries (again)? A Congressional budget stalemate (again)? Ebola (again)? A terrorist attack (again)? North Korea launches another missile that drops somewhere in the Pacific (again)?
    My point is that there has NEVER been any spike in volatility that couldn't be martingaled for extraordinary profit. Of course, one needs to be prepared for rare opportunities.
    And, should it be determined that a meteor is headed our way that's equivalent to the one that wiped out the dinosaurs-it simply won't matter.
    Apr 7, 2015. 05:19 PM | 2 Likes Like |Link to Comment
  • On Secular Stagnation: Larry Summers Responds To Ben Bernanke [View article]
    Well, here we are in the very early innings of the 21st century-as lost and as clueless as ever. Were it only possible to look back from a futuristic perch-say 2120-how would historians, yet to be born, portray our moment upon the stage? What legacy do we leave-if any?
    We could offer that we would be judged against our unique challenges-but is this great challenge low interest rates and secular stagnation? Is that a noble quest that captures the imagination and passion of generations?
    Or, will historians simply note that the world paused somewhere between the Industrial Revolution and a revolution in evolutionary biology.
    Apr 3, 2015. 09:45 AM | 2 Likes Like |Link to Comment
  • It's Not About The Nail [View article]
    "Time at last sets all things even
    If we do but watch the hour
    There never yet was human power
    That could evade, if unforgiven
    The patient search, and vigil long
    Of him who treasures up a wrong."
    "Mazeppa's Ride" Byron

    There is a seething animosity and presumptive distrust, astoundingly pervasive, lurking just below a thin veneer of civility. The perceived wrong- and perception is reality- relates to politicians...indeed any institution that seeks trust.
    So, it's not a superficial debate about 'diversification.' It's more about 'too big to fail' and 25 million homeowners are wondering why the central planners can't give them some high-powered leverage money. These people continue to play the centuries old game-but increasingly realize that they have been 'wronged.' When those entrusted with maintaining and preserving John Locke's vision (or Jefferson's 'life, liberty and the pursuit of happiness') stack the deck in their favor, it will not go unavenged. History-if it teaches anything-teaches this.
    Against that sociological background, we sip tea and discuss 'diversification.' It's amusing, in some sense, with pundits strutting and fretting across the stage, like an old Three Stooges comedy, quacking 'diversify".
    It is said that when Kit Carson was given a tour of a new public building, he came upon the above-referenced painting and read the words of Byron. Folks there stated that he repeated the words slowly and deliberately, and nodded his head in solemn approval.
    I rather doubt that Kit Carson, a renaissance man in every sense of the word, would have suffered any of the fools thst seek to give us advice predicated on faulty reason and shallow perspective. I think he and Jesse Livermore though, could have compared notes.
    Apr 1, 2015. 11:32 AM | 3 Likes Like |Link to Comment
  • The U.S. Dollar Bull Market Is Over [View article]
    More put activity today, across the board. An interesting question is whether the algo nerds have learned a bit of game theory regarding insurance. If a Bayesian perspective sends preliminary concerns, might we expect a rational actor to procure insurance before a Category One is upgraded?
    Or is it the same old business as usual?
    A drop of 20% would reaffirm my belief in human frailty (and irrationality). I'm prepared for the opportunity, however. If it's ever happened in the past, it can happen again.
    There's always one or more dominant fads that last a few months, and then it's on to something else-leaving the academics to search for the meaning of it all.
    So, long dollar/short oil played out through a host of ancillary instruments, and has been the fad du jour. But there's something we know, as well as we know mortality itself-and that is the absolute, unequivocal certainty of....the end of the fad.
    Mar 31, 2015. 09:48 PM | Likes Like |Link to Comment
  • Hovnanian Enterprises: Why Investors Should Remain Cautious While Investing In This Stock [View article]
    Let me offer another angle. Private or non-public homebuilders were highly represented in the chapter 7 and 11 filings in 2008 and subsequent years. They had NO ability to tap any financial market-except the small town banker-who hid under the nearest bush.
    Mom and pop builders have long dominated the residential market-in many ways they represented the quintessential small family business.
    That business is but a meager shadow of what it was-which means that the public homebuilders were given an extraordinary opportunity. So, despite the lingering hangover all these many years later, we note, perhaps with some surprise, the factual laid out by this author. This should suggest to readers and investors not really familiar with the residential history of home building, that the publicly held builders STILL FACE HEADWINDS.
    My personal take is that residential demand will continue to improve. There is no question whatsoever that owning a home is still considered a major part of the 'American dream.' When I saw a young lady weeping with joy on TV last night-after buying one of those 'tiny homes'-I realized that even a millennial gets excited about home ownership. That indicated to me that pent up demand is a hell of a lot stronger than I thought. And, I think that small builders will begin to re-establish their businesses-at least I hope they do.
    So, what I'm suggesting is that HOV's balance sheet and operating margins (as well as the other major players) will not be the long run decisive factor. Perfect competition may yet return to this industry.
    And, finally, the street characters have manipulated home builders at least since the 1970's. If you think about it, what limits to growth can you list? A family might buy 6 i-phones, 3 laptops, and a host of tech gadgets every year-but a home is such a large purchase, and is made so infrequently, economies of scale and production remain elusive. Consumer preferences change, local rules and regulations become more prolific and political, quality of labor is challenging and local weather and topographical constraints also preclude uniformity. It's not like marketing coke or soap.
    My penchant is to short the rips, and I've been very, very successful doing that over 30 years. But, that doesn't mean that I'm anti-housing-quite the contrary. I do find a lot of modern TV programs, such as 'Tiny House Nation', Flip This House, etc, etc stupidly amusing. But, it's a sign of the times. I mean, just look at what pops up on your TV: "Moonshiners", "Swamp People", "Turtle Man" "Ancient Aliens", "Toledo Housewives" (I know that's not a program now, but just wait), "The Walking Dead", "Pregnant and 16", "Bridezilla Meets Hogzilla", "The Property Brothers," and, of course, there's about 17 programs where people move their tiny house to Alaska and get in all kinds of predicaments, "Fat Guys In Tiny Houses" and, "Surviving Naked in the Swamp.". Not sure what happened to Honey Boo Boo-haven't seen that one recently.
    Mar 31, 2015. 09:20 PM | 1 Like Like |Link to Comment
  • Shorting The VIX: How To Protect Profits In A Volatility Spike [View article]
    For anyone that wants to take a look at my UVXY trade: I'm short the May 15 13/8 put spread. It's currently a very slight gain. And, I'm currently long the shares of SVXY (but I trade any decent spike). If I close SVXY shares and the price doesn't drop by the close of a given day, I will sell SVXY puts (in a ratio to the afore-referenced UVXY short put spread).
    The objective is to capture the UVXY premium, while collecting trading gains on either SVXY shares, or short SVXY puts. At a point where the May put spread shows a 'reasonable' gain, I will look at going out to, say, August or September, and 'reloading.' However, an extraordinary market move (flash crash, etc) may require a different play.
    I also have embedded strategies for a sudden drop-but that's another strategy.
    Good luck!
    Mar 31, 2015. 10:06 AM | Likes Like |Link to Comment
  • Shorting The VIX: How To Protect Profits In A Volatility Spike [View article]
    I think it's important to determine whether a volatility instrument is intended as a hedge, or is simply a gameable construct standing alone. Of course, it might be both, but then we have to ask if that's an optimal use of resources and time.
    As David noted above, we can collar an existing position-but we must have in mind some desire to 'hedge the hedge'-and if that's the case, do we not begin to 'chase our tails?'
    Because a lot of these creations are quite new, it's been tempting to experiment with various strategies. But, again, nailing any directional move will produce better returns. But, to take another look at a vix collar, it might be rather profitable to trade dynamic collars, using the shares to hedge the leverage we gain from using options. In this sense, we simply use the shares to prevent the short call from exploding in our face. What we prefer is to have volatility drop immediately after we institute the collar. We double dip by collecting on both the short call and long put. And, we simply re-load our collar at the next spike and have another go at it. We can do this for days, weeks, months...years.
    My thinking is that option strategies are necessary to avoid having two antithetical positions clash with each other; and, my preference is to collect option premium irrespective of the instruments used. The reason is that income will accrue via expired options, and this can be considerable over time. I would note that it's fine to hold (for time periods consistent with a given price target), shares of say, SVXY. And, this can be 'hedged' with a UVXY short put spread. The maximum gain/loss is known on the spread, and it's also known that a decrease in SVXY will assure a winning UVXY spread.
    And, it's certainly possible to open/close SVXY shares (should the market allow that kind of trading), and one can add shares as well. A consideration at this time with the UVXY put spread is, as noted in the article, volatility is historically low. So, there's a probability component here as well-I mean, does volatility dissipate and vanish in this orchestrated market? Well, thus far human emotions have not been eliminated-so, we have to's just a matter of time. It's that time factor that we want to yield additional returns.
    Mar 30, 2015. 10:45 PM | 3 Likes Like |Link to Comment
  • Volatility: Up She Rises [View article]
    Yes-the index tracks put demand/premium rates. "Fear" is somewhat of a misnomer.
    I suggested previously that the advent of various inverse ETFs have created a 'substitution' effect, thereby driving put premium down. This, of course, leads to a decline in the inverse ETFs (in addition to tracking error).

    And, riddle me this: If we have a Greenspan put, followed by a Bernanke put, followed by a Yellen put, etc.-why should one pay for additional coverage? (Tongue-in-cheek, of course, there's always the LL situation and mo stocks such as TSLA, OPEN, GPRO, BABA have their own volatile issues).
    Mar 30, 2015. 09:51 AM | Likes Like |Link to Comment
  • Sears Holdings: The End Game [View article]
    Any transfer made in contemplation of bankruptcy can be deemed 'preferential' whether 'fraudulent' or not. But, there are time limits on the rule.
    In reality, proving that a public company made a fraudulent transfer is quite difficult. The courts will not typically second-guess a management decision made in a transparent fashion.
    Is the actionable suggestion to short the stock? And, if so, whether to accomplish via long puts, short calls, or selling the stock (basic short)?
    What time frame is required to reasonably anticipate a desired return?I used to trade this stock, but have no position at the moment. Interesting article.
    Mar 27, 2015. 01:08 PM | 3 Likes Like |Link to Comment