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  • The Real Reason Why Unemployment Is Falling [View article]
    I talk to a lot of people in 'small business' (from plastic surgeons, optometrists, accountants, builders to glass repair and a/c services). To a person, they have never been more pessimistic-and, they cite continued erosion of profits, and increased governmental compliance issues. In fact, an optometrist I use told me he has to increasingly compete against Walmart, etc. And, he now has to weigh patients when they come in to see him-apparently due to the new health care laws.
    I didn't mention folks in the real estate business-but there hasn't been a real recovery in that sector.
    What I see, and I think I agree with folks like J. Rifkin, is a steady erosion of small towns (Main Street), where FEWER younger people desire to take over the drug store, furniture store or small law practice. Even lawyers are getting pinched with national competition for wills, incorporation, etc. It may be that a small business linked to serving some major clients is somewhat shielded from this trend. But, I'm thinking in a more basic and fundamental small town context. Look around. Where is the butcher, baker and candlestick maker? The big boxes, funded by big banks and public financing, have proliferated over the last 30 years.
    I think there's a lot at stake relative to small business and the cultural nexus to providing basic life lessons to so many young people. Unfortunately, my scrambled comment in no way even begins to lay bare the subject matter. Ultimately, it may not matter. I can't imagine that we can recall to life the old vibrancy of so many 'mainstreets' across the country. But, we have 'everyday low prices' all the way from here to Mars. And I suppose most folks would rather deal with a drug store chain, rather than consult with the small town druggist that has known you all your life. And, I doubt that most of you have never been to a 'drive-in' movie. Of course, I suspect many of you would just take that opportunity to play video games, or reach out and touch someone via facebook.
    Oct 10, 2014. 04:43 PM | Likes Like |Link to Comment
  • What Risk-Parity Paring Could Mean For Equities [View article]
    Put buying and call selling would seem to be rare-otherwise market swings would be minimal. It could be that as a frothy market becomes exponentially frothy, that investors question the need for insurance. It's a lot like people living on the coast not wanting to renew their hurricane insurance on the 7th anniversary date of the last hurricane. So, rather than not purchase insurance the first couple of years after a catastrophe, the desire to not add insurance as the real risk increases in later years, is all too human.
    The fact that more time elapses after the last loss is cited as proof that insurance isn't needed. "Why we haven't had a flood in these here parts in over 20 years" is, to my way of thinking, horrible risk management. At the very moment insurance is the cheapest, we find the risk of adversity slowly creeping around the corner.
    A perfect example is TSLA. In several articles, long only advocates were adamant in their repudiation of shorting their beloved stock. I suggested bear put spreads as a risk efficient mechanism to both protect, and/or have a basis for reasonable speculation. I closed my TSLA short strategy today for a very healthy gain. The long only crowd is licking the wounds of arrogance-or ignorance.
    Oct 10, 2014. 03:56 PM | 1 Like Like |Link to Comment
  • Threats Remain Despite Wednesday's Rally [View article]
    Indeed, small caps giving back almost all the resurgence. That's why I suggested keeping hedges (e.g. TZA) in place. I thought the market might pull one more rabbit out of the hat to zoom past 2000-not so sure now. Mid-term elections likely hold key to that. BUT, that's still a shorter term focus. Remember that leverage is as leverage does (borrowed from 'money is as money does')-also, selling cascades as a natural phenomenon anyway.
    IMO a more pronounced downturn has been mitigated by far more asture retail players using ETF hedges. The key is not to let a brief period of euphoria question the necessity of insurance. I used yesterdays' smokescreen to add more hedges. And, at this point, I'm essentially loaded for bear-bring it on.
    Oct 9, 2014. 10:57 AM | 2 Likes Like |Link to Comment
  • An Epic Crisis... An Enormous Opportunity [View article]
    Here's a low risk play on ACI:
    *Sell the JAN 20 2017 1 CALL @.90
    *Buy two JAN 20 2017 3 CALLS @.45.
    The trade pays for itself, excluding trading costs, and offers upside if ACI really recovers over the next couple of years. It's the second call that will pick up a lot of value. There can be a small loss if ACI remains stuck around 2ish-but risk/reward exceptional. If nothing changes or ACI goes bankrupt-you're not exposed. So, at the end of the day, it's a very small loss, break-even, or BINGO.
    Beats buying lottery tickets-or betting on top-ranked college teams.
    Oct 7, 2014. 11:23 AM | 1 Like Like |Link to Comment
  • September Jobs Report Was Weaker Than Headlines Claim [View article]
    The big, nasty T-rex in the room continues to be median income. My first 'paycheck' job was for 90 cents/hr. If everyone worked for that now, we could certainly achieve full employment. The problem is that the US is moving in that direction-not the other way. And, yes, while more 'jobs' are opening, the wages aren't paying much more than my old job.
    Reports/studies suggest that almost half of today's jobs will be replaced by technology in the next 20 plus years. Rifkin ("The End of Work") posed these issues decades ago.
    IMO, people have to get off the 'recovery' wave-length, and contemplate that we are in the midst of a 'recalibration.' In a recalibration, the recession siren won't sound. The change is gradual, until the cumulative impact is finally noted. Thus, low interest rates will not resolve the issue-in a cruel twist of irony, it will only;y exacerbate the relentless push to maximize productivity.
    If you're a high school student, thinking about college and beyond, you might want to figure out how to make your parents' jobs obsolete. Solutions have been proposed, but problem recognition is a prerequisite. So, by all means, let's just continue to salivate the first Friday of every month, as the high priests of distorted data venture out of their sheltered towers to inform the masses.
    Oct 6, 2014. 01:41 PM | 5 Likes Like |Link to Comment
  • Brazil set for major rally following election [View news story]
    Sold EWZ calls-sorry.
    Oct 6, 2014. 11:34 AM | Likes Like |Link to Comment
  • Brazil set for major rally following election [View news story]
    Sold the OCT 10 47.50 CALLS earlier-this is a knee-jerk response which will gradually dissipate.
    Oct 6, 2014. 11:33 AM | 1 Like Like |Link to Comment
  • Airline stocks in rally mode [View news story]
    Most professional short sellers bang out profits immediately. This always sets the stage for an uptick. And, many short sellers will take a percent of their quick gains and buy calls-nailing the odds- on rebound. That amounts to big gains both ways, whereas a simple long position just recovers (hopefully) the loss. Of course, it's not a 'realized loss'-the true economic loss is in the opportunity cost of not implementing an optimal strategy.
    But, I am sure of one thing: There will be another 'panic' just as surely as night follows the day.
    Oct 3, 2014. 10:52 AM | Likes Like |Link to Comment
  • Are Commodities Waving Red Flags For Stocks? [View article]
    I'm on record as suggesting that oil should be shorted after the Iraq 'situation' several weeks ago. I also admitted that I closed too early!
    But, some commodities are more important than others. For example, is Dr. Copper as relevant now as 20 years ago? If not, why not?
    And, what impact do currency swings play in pricing commodities?
    I think the author makes some interesting observations, and more importantly, raises not just short term issues, but intermediate questions as well.
    But, for me, this is but one of many variables that play a role in deciphering the macro world.
    An interesting aside is that CSCO is actually cutting back on it's leased square footage-pushing more employees to work outside the office. I've been watching rush hour delays on TV this morning, and I keep wondering when the real future of technology will alleviate so many daily nuisances?
    Oct 3, 2014. 09:55 AM | 1 Like Like |Link to Comment
  • Should You Still Sell Apple And Expect A Market Crash? [View article]
    The key is not to get emotional one way or the other, but to utilize strategies that game the behavior of your fellow humans. I gradually began to view the market as a behavioral random number table. Within this context, there really is no crash, or point of euphoria. In reality, the numerical fluctuations are rather small, in relation to most of what we observe in the cosmos.
    The single, most important concept for the non-trader is to simply continue to lower your basis. Watching your account blink back at you all day long is a recipe for making a wrong move. I can't begin to tell you how many country club men's grills I've been in, where a group of guys are making snap judgments, calling their brokers, and making all sorts of arm chair prognostications.
    I've often wondered what would happen if it's suddenly revealed that our planet, which is actually in the path of a gamma-ray burster (two stars locked in a death spiral), the consequences of which are total obliteration-becomes a live target. The various leaders come out and announce that there is no escape-just spend the final moments with your family. Well, I can just see the Wall Street hustlers dumping everything, your wealthy neighbor Harry comes over and tells you that he managed to get out with a 50% loss, and even the cab driver is excited that he managed to keep some of his $10,000 gain. Once you can understand the extraordinary absurdity of this scenario, you can begin to fathom the various 'mini' gamma-ray bursters that take place almost daily.
    I don't have a problem with buy/hold, etc. My take is that there are optimal and sub-optimal moves that link to present value fundamentals. That, in turn, is grounded in game theory applications that point to the highest probability return, given all the various choices available.
    Oct 2, 2014. 11:06 AM | 4 Likes Like |Link to Comment
  • Small caps enter correction zone [View news story]
    The 52 week low is just a day or so away-but not sure that has any significance. Obviously, you can take some gains from hedges, and/or begin to think about modest long positions. JAN 15, 2016 35 TNA PUTS can be sold for $500. I'm looking at 50 put for $1,100.
    Remember that you can hedge with TZA.
    Oct 1, 2014. 06:16 PM | 1 Like Like |Link to Comment
  • Airline stocks slide after Ebola case reported in U.S. [View news story]
    When the first ebola news came out a few weeks ago, I added to my airline shorts. In fact, I even suggested to several people that some nefarious group would arrange to put an infected person on a major carrier-and buy a boatload of puts the day before. I was being a bit facetious, but if you look back at history, it doesn't take much to spook airline longs. And, when a huge amount of activity is machine traded, actual probability of a significant problem is simply not relevant. The good news (if you're long) is that the shorts will unload, and, once again, the carousel brings childish laughter.
    Once upon a time, flying was actually fun. That ended years ago, of course. When you ask? I'd say about the same time that the stewardess became a flight attendant, the food became stale, and the damn peanuts became subsidized by all kinds of add-on fees. The song says that 1969 was the 'best year of my life.' It wasn't too long after that I learned to short airlines and homebuilders. Been easy money for decades. Don't expect things to change.
    Oct 1, 2014. 01:56 PM | 1 Like Like |Link to Comment
  • Housing┬áSales And Construction Show Slight Improvement To Stagnation [View article]
    I've studied real estate for over 30 years. And, professionally, I've headed an investment group that bought single-family, multi-family, office buildings, storage facilities, resort property, etc. I was also CEO of a hybrid REIT, which made short-term construction loans, and various other mortgage related loans/investments.
    There is 'something' beyond all the numbers, which reflects the gut level mood of society. I think this goes all the way back to early American history, and much has been written about "Manifest Destiny", the Oklahoma land run, rights of ranchers, disputes about cattle grazing, "a man's home is his castle," the constitutional requisite to be a property owner in order to vote-I can keep going for quite a while-but there is an almost instinctive, guttural nexus with replicating that childhood memory of visiting grandma at the farm, of planting flowers on our own unique parcel of the planet.
    As we slowly surrender that historical and psychological bond, we tend to grasp at 'good' news. Anyone over the age of 50 or so can recall the excitement of buying the first home-the feeling of 'we're off to a great future.' We strongly identified with Ward and June Cleaver-even those of us that camped out at Woodstock, and, for a brief time, tried to turn the channel to something that didn't really exist. That historical and unique opportunity has been stolen from too many. Perhaps the theft can be remedied in the not too distant future.
    There are tens of thousands of pages on this subject, so I've added nothing. That first shot of java tends to elicit knee-jerk observations.
    Oct 1, 2014. 08:51 AM | 1 Like Like |Link to Comment
  • Party Like It's 2011 [View article]
    cross-as you note '...all too often, the stock does not continue up but simply returns...'-I agree with you, but how can we use that info?
    What typically happens to otm options is that value increases in a manner unique to option pricing. As the first order rate of change increases with the stock price 'delta', the second derivative 'gamma' creates a 'snap' or 'echo' reaction. I compare this to an echo because if I'm standing on one side of a canyon, and you're on the other, you might hear my yell, and incorrectly think I'm physically closer than reality. So, my perceived presence is something of an illusion. My echo will fade rather quickly.
    You can 'short' my echo, as it fails to correctly portray reality. This can be an 'embedded' GTC order, or used to counter an observed spike. You can study this action by observing option price ranges for a given time period. This has also been referred to as 'spike fishing'. In fact, one can do this with a simple covered call portfolio. How? Rather than automatically selling a call, wait for a couple of up-days, and then sell the call. In other words, player A might sell an ATM call for 1.00. Player B waits for a spike and sells an OTM call for the same premium. Yet, who is better off? B is better as his 'expected value' is higher. Part of that 'expected value' is found in the fact that the OTM option will (a) expire quicker, and (b) will have much lower probability of being assigned (or creating a rollover situation). A 'ladder' can also work for call buyers, but as noted, buying an option requires getting both direction and time correct. Another way to think about selling calls is to think about an inverted pyramid-sell one ATM option, sell two OTM next strike up, etc. I know this is a bit jumbled, but out of time-just something to think about to alleviate boredom.
    Sep 29, 2014. 01:11 PM | Likes Like |Link to Comment
  • Party Like It's 2011 [View article]
    Calls seldom get exercised prior to expiration. Short puts are another story.
    However, if one's stock gets called away (as in a covered situation), then either one doesn't know how to rollover the position, or is content with taking the gain (in essence a contrived sale).
    I think if option call sellers would think in terms of basic finance, the understanding, and results would improve. For example, I view a rollout as just a 'lease extension' where I get more money for the consideration of same. So, a 'rollout' is nothing more than an extension. From a game theory perspective, the odds increasingly favor the nth extension. I would also note that two people can sell the exact same option, but with widely different results. Also, there is a linkage between averaging in the short calls and whether a rollout is even necessary. To some extent, there is an asymmetry between a simple martingale strategy and a rollout dynamic. Most option sellers will make a small foray, and will take fairly quick profits-if possible. If one misses the target initially, adding more positions (or 'climbing the ladder) takes advantage of both decay as expiration approaches, and simple mean reversion. By 'climbing the ladder' I refer to selling options that are out-of-the-money, but have enjoyed a gamma spike. In practice, if I sold an at-the-money option that runs against me, I can now look at the increased premium available to an assortment of OTM options. If a stock has spiked for some reason, the gamma echo (my term) will create an 'illusion of value' that will, in all probability, decrease.
    Sep 29, 2014. 10:50 AM | Likes Like |Link to Comment