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  • Stock Buybacks And Low Business Investment [View article]
    An interesting issue is whether, and to what extent, the balance sheet is leveraged to buy back stock. If I can borrow money at 1% and use a credit facility to buy stock-I'm likely thinking about my fellow board members. And, if I'm retiring any time soon, the next guy can figure out how to service the debt.
    Retained earnings as a buy-back pool may be a bit of a different scenario. (But, then again, what if Ihave to use a credit facility for normal operating costs?).
    Point is, any number of games can be played.
    A larger issue raised in the article, relates to an increasing oligopolistic and cumulative reshuffling of, what amounts to, society's balance sheet. This is a new phenomenon that escapes the purview of most, if not all, politicians. But, then again, to what extent does it raise political jurisdiction?
    We know from history that large begets larger (Vanderbilt, Gould, Rockefeller, et al). It's almost a logical Darwinian type of scenario-much like the small dinosaur got larger, and larger, etc.
    But, all in all, the corporate board has followed Nash-reaching the happy equilibrium point of maximizing self-interest, while exuding enough rationality to spin the ol' 'between the devil and the deep blue sea.' Or as Flip Wilson might have said "The devil made me buy all this stock back."
    Oct 13, 2014. 01:36 PM | Likes Like |Link to Comment
  • Retuers: Banks under regulatory scope over auto lending [View news story]
    Subprime is contained.
    I'm surprised that WMT is not in subprime auto lending. Why not?
    In fact, why don't they sell cars as well?
    Think about this: you go buy your groceries, get your eyes checked, get a shot for shingles, have your nails done, buy a new truck, and finance the whole days' activities.
    Small businesses are already using international loan sharks. Consumers are using crowd-source financing for loans.
    Oct 13, 2014. 12:21 PM | Likes Like |Link to Comment
  • What Risk-Parity Paring Could Mean For Equities [View article]
    YES-One strategy is to quickly 'over-hedge'-thereby creating a weighted reversal move. IF the direction is nailed, then the amount used to 'overweight' can be captured as quick gains. This, in essence, now lowers the cost of the original hedge-and enhances the overall value of the portfolio.
    Nonetheless, just deciding to take gains on an original hedged strategy, when done collectively (a random process-but with herding characteristics), creates a decrease in put premium.
    Suppose you've booked $10,000 on a put strategy. This sets up a either a bull call spread (or put selling play) where one can risk, say, a third of the previous gains to capture more gains on a reversal.
    The feedback mechanism is interesting, and I think it lends itself to various gaming strategies. This is because the feedback behavior doesn't smooth out until there is a 'concensus.' At this point, there will likely be an exponential function, which in turn, will play out.
    Oct 13, 2014. 12:11 PM | 1 Like Like |Link to Comment
  • Futures slip in Sunday evening action [View news story]
    I commented earlier to expect a small cap spike. I've already been in/out short TZA calls. What spooks the wildebeest on the African plains?
    What drives them across crocodile -infested waters?
    Incidentally, 40,000 year old cave art recently found-will we still exhibit the same inability to calculate odds, the same old biases 40,000 years hence?
    It's quite amusing that the extinct sabre tooth has morphed into a global random number table.
    Oct 13, 2014. 11:54 AM | Likes Like |Link to Comment
  • About Those Small And Mid Caps... [View article]
    I am acting on the premise that small caps will have at least one solid upward spike. If that happens, folks will rush to drop their hedges, which will sustain at least some momentum.
    This view does not factor in a 'significant' event that currently has a low probability. So, there are de minimus scenarios where further downside is possible.
    Therefore, I am taking solid gains from hedges. I have a plan to reset the hedges, on a graduated basis.
    If you got mad and sold calls against your small cap positions last week, you need to be very careful. Or, if you loaded up on inverse ETFs, be careful. Many of the big players are opportunists-they have no problem jumping on a spike just to catch the novice off balance. This is how so many get whipsawed-don't be one of them.
    Oct 13, 2014. 09:43 AM | Likes Like |Link to Comment
  • What Risk-Parity Paring Could Mean For Equities [View article]
    If not 'divine' perhaps pseudo-divine. The easy answer is that humans are afflicted with all manner of decisional bias. These biases have now been studied in great detail- even to the point of imaging the areas of the brain involved in reaching certain decisions. There's also a cultural or 'team' bias at work. Just observe the behavior of various NFL fans today. Once one has 'chosen' a team, then all observations and facts relative thereto will be filtered through an elaborate bias feedback mechanism or protocol.
    So it is with stocks. But the thing is that it could be tulips, or real estate, or any number of things.
    Suppose you're the only person left on the planet, but that a super computer has incorporated all biases and proclivities ever demonstrated in the market since its inception. It arrays this information in a program that replicates any facet of the market, and allows you to play at will. For future periods, it has taken Bayesian like assumptions, and uses with the highest order of probability.
    So, one would still be biased with their initial 'decision'-AND the bias that led to that decision or choice. The computer could even extrapolate comments from financial web sites, such as SA, and the same 'people' would continue to opine-just as though they were still alive.
    Our sole resident of the planet would most likely check his TSLA results daily, and continue to post comments supporting his dogmatic beliefs.
    An extreme example, for sure. But can we readily find the point on the graph that depicts where reality and illusion touch?
    Oct 12, 2014. 12:24 PM | Likes Like |Link to Comment
  • 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