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  • The Crisis May Be In U.S. Small-Caps [View article]
    On this day (July, 28 2014) folks are buying TZA hand over fist. This is obviously to stymie the small cap dip. Funny thing is that all of this activity has created a 'pinning' impact where both sides are at a stalemate. I actually find this a bit fascinating because now ALL players can immediately protect a long position. After all, if people are truly 'rational' the immediate and obvious strategy would have been to buy TZA. And, that's exactly what happened.
    Now, does one hold TZA; and if so, for how long? I earlier suggested selling the weekly TZA 16 calls (which I think spiked at 50, where I made a lucky entry). I'm already out at a quick 10%.
    If you now have $100k worth of TNA and $100k of TZA, what have you accomplished? Yes, that's good only as long as TNA dips more. My suggestion is to sell calls against a reasonable percentage of TZA, just because you probably bought it on the uptick in response to a declining share price of TNA. Selling calls against TZA will 'most likely' provide a greater yield at this point. You don't want to sell calls against TNA at this point. I don't see it dropping below 65-if it does, it will signal a major over-all market sell-off. On the contrary, look to sell LEAP TNA puts (remembering that shorting TZA calls and selling TNA puts are opposing tactics). BUT PLEASE DON'T PANIC OUT OF A ONE-DIMENSIONAL PLAY AT THIS POINT. Yes, if you're simply long TNA you've been bleeding so far this morning. Just be patient and hope that it goes lower! Then you buy more! This is how you make money in this game.
    Jul 28 01:33 PM | Likes Like |Link to Comment
  • Direxion will roll out 3 new leveraged funds tomorrow [View news story]
    And a joyous sound went out through the land, glasses were raised, the masses gazed up above, filled with a new sense of wonderment-even the animals made boisterous noises of contentment.
    Jul 28 01:13 PM | Likes Like |Link to Comment
  • Contango And Backwardation Strategy For VIX ETFs [View article]
    I'm currently short VXX shares. It's normally used as part of a strategy mix. I don't use shares very often to short-not because of availability-but because it's a terrible alternative to using options.
    Jul 28 12:00 PM | Likes Like |Link to Comment
  • Announcing SA's First Outstanding Performance Award Winners [View article]
    If one reviews my stock talk strategies, you'll note that I've trounced the winners. But, I don't want a dime-I hope somebody made a little cash. All I ask is that you adopt a pet or contribute to your local humane society. Note the recent call to short oil as it spiked a couple of weeks ago. Or, the long-standing BBRY calendar spread that is up over 1,000%. Of course, I also suggested shorting volatility long ago-that was perhaps one of the greatest trades of all time.
    Congrats to anyone that lends their expertise to others, and all the best to those that seek to play this game a little better.
    Jul 28 10:10 AM | 5 Likes Like |Link to Comment
  • What Are U.S. Small Cap Stock Prices Saying About The Economy? [View article]
    I'm also short TZA-sorry I didn't make that clear. One or the other positions is assured to be a winner. The winner gets clipped for a gain-the loser is given an opportunity to cooperate-and time generally resolves that issue. Already this morning I've collected on both TNA and TZA short calls. The important thing to remember is that this game can continue for a long time, or can end abruptly with gains. The position that is 'down' is easily adjusted. I can't over emphasize patience. This is not trading (although opportunity can knock earlier than anticipated). So-called day traders would fail miserably playing this game.
    Jul 25 10:18 AM | Likes Like |Link to Comment
  • Why This Is The Most Hated Bull Market Of All Time - Understanding The Folly Of Financial Engineering [View article]
    Joseph, the human animal has been manipulated from day one. As Machiavelli noted in "The Prince" men must be cajoled or annihilated. Over the past 100 years or so, this manipulation, or deliberate obfuscation, has grown exponentially. I certainly concur with you that we have refined the financial engineering and cloaked it with the myth of free enterprise, capitalism and even Friday night football. Our 'system' has violated so many implicit promises and representations that it's hard to imagine that a continuous charade can go unabated. The list is long: bailing out big banks, big car makers, big this, big that...etc. What of the small businessman who had his credit line taken by said TBTF lender? Where is the justice and fundamental fairness in so many examples over the past several years?
    This is why I come across so many bitter folks who reside at 101 Main Street. This disillusionment is not going away.
    Yet, as I retreat from my soap box, I'm left with Neil Gaiman's reminder in "American Gods."In Baton Rouge (1853), George Devol has pulled Canada Bill Jones aside to tell him he was being robbed blind in a crooked game of faro. Canada Bill sighed, and shrugged his shoulders, and said "I know, but it's the only game in town."
    Jul 24 03:45 PM | 10 Likes Like |Link to Comment
  • What Are U.S. Small Cap Stock Prices Saying About The Economy? [View article]
    Well, I'm now up 4.29% (vs down 16.98%) on the TNA 73 calls. Unless TNA rockets to the moon, all positions should evidence standard decay. Once again the casino plays two hands against the middle with a 70% chance of winning.
    Jul 24 03:11 PM | Likes Like |Link to Comment
  • What Are U.S. Small Cap Stock Prices Saying About The Economy? [View article]
    OK- I'm currently short the TNA 7/25 73 and 74 calls, as well as short the TNA 8/16 81 call.
    That is matched against the TZA 7/25 15.50 calls.
    All the positions are currently profitable, except the TNA 73 call, which has a 16.98% book loss-at the moment. Obviously the closer to the money call will exhibit a more 'stubborn' attitude, but it is now beginning to feel the pull of 'old man theta'- the grim reaper of options.
    Note that this straddle (or strangle) is a traditional misnomer, but the advent of inverse etfs allows for new tactics. I do have some short puts in the mix, but the above-referenced calls should suffice for a quick illustration.
    Jul 24 03:06 PM | Likes Like |Link to Comment
  • Soft earnings and new home sales data hit homebuilders [View news story]
    We can't paint all young adults with one brush (although it does seem tempting at times). I recall my finance professor (c. 1972) saying that buying a home would be impossible for most college grads due to inflation.
    Most people in that generation have bought and sold several homes. I don't have kids so I'm left to observe. A compare/contrast suggests a fundamental shift in domestic objectives/behavior-which consists of numerous factors-postponing marriage, women deciding to have kids and raise them alone i.e. w/o a father, more kids living with their parents well into their twenties (and even thirties), a divorce rate that has run at some 50% for decades, concern about job mobility during early career and tougher lending standards.
    This is a marked departure of extraordinary magnitude, particularly when one evaluates sentiments emanating from the end of WWll and remaining somewhat intact until this century. I think too that the first decline in median income since WWll, combined with bleak job prospects and unbelievable student debt burdens, stifles any real enthusiasm for taking on even more responsibility. Hell, if I'm 28, living at home and working a couple of low paying jobs-the absolute last thing on my mind is buying a house. This is the first time in the modern era that this country has encountered this problem. This will tend to get worse because corporations are shedding employees as fast as possible-and the traditional engine of employment-small business, is becoming nothing but a historical artifact.
    Not my intent to be negative-I would like to see younger people getting good jobs, buying houses, joining the country club, etc-but, on average, that life-style is increasingly becoming out of reach.
    Jul 24 02:50 PM | 3 Likes Like |Link to Comment
  • What Are U.S. Small Cap Stock Prices Saying About The Economy? [View article]
    I've noticed that quite a few folks have called attention to the recent 'double-top.' TNA, for instance, has certainly been charging up the mountain, only to fall off-and repeat. This, of course, is representative of the Russell indices.
    I don't see a 'crash' on the horizon-or even a substantial 'correction.' Instead, it seems to me that we are in a somewhat narrow trading zone. If TNA goes to 90, or drops below 65, I would be surprised (I guess). But, I don't attach much significance to 'value.' Value is a function of liquidity and Fed- speak. I would also note that larger players are increasingly on the prowl for smaller/wounded targets. Combine this with trading bots and a general level of euphoria, and it's just hard to see a dip of any real consequence. This assumes, of course, that there is a peaceful equilibrium amongst the homo sapiens. All bets are off if a nuclear war breaks out.
    So, if tomorrow is mostly a replay of today, I'll just continue to take care of my garden. Currently, I have many different straddles with TNA and TZA. Some days I have to water a little bit, other days I have to pull a few weeds. It's been a bumper year so far-always something to clip off the vine. So, my advice is not to fret too much about valuation-that's for those trapped in a singular dimension.
    Jul 23 04:42 PM | 1 Like Like |Link to Comment
  • Stalking Horse [View article]
    As the bard said, 'all the world's a stage...' So, here we are, at this moment in our evolution, and we are just as hapless as the poor souls in Plato's cave, doomed to reach conclusions by watching the shadows on the wall.
    At this juncture, only a scant few sould have turned to look over their shoulder-refusing to accept the illusion of the shadows. Congratulaions on being one of the few. But, as the Good Book tells us (as does Schopenhauer)-wisdom brings sorrow. Like "Hamlet" we have a play within a play, a stage within a stage.
    Jul 22 01:18 PM | 7 Likes Like |Link to Comment
  • The Fed Prisoner's Dilemma: Sell Now Or Keep Dancing? [View article]
    We also have shades of Newcomb's Problem as certain events are in principle unpredictable when predictions are allowed to interact causally with the event being predicted. See for example S.J. Brams, "Newcomb's Problem and the Prisoner's Dilemma," "The Journal of Conflict Resolution" Vol. 19, 1975.
    Personally, I have several screens of strategies that reflect the Nash Equilibrium Point, adjusted as needed by a simplistic Bayesian perspective. But then, as I've indicated many times, I essentially operate as a casino-collecting option premium from those that wish to bet red or black (bull or bear).
    The Fed analogy is interesting, but the macro world is a game of continuous runs. There is no finite point where an equation can be solved. Some folks seem to think 'devil or angel'-but perhaps a few lines from the Rubaiyat of a long ago mathematician are worth considering:

    "We are no other than a moving row
    Of magic shadow shapes that come and go
    Round with the sun-illumined lantern held
    In midnight by the master of the Show."
    Jul 22 12:52 PM | Likes Like |Link to Comment
  • Trouble Looming In The Market... [View article]
    The best advice offered is totally rational-utilize a small fraction of gains to buy insurance. But, alas, the majority of sheep will panic at the exact wrong time. The brilliant traders like Paul Tudor Jones will cover their short positions and go long-once again. This is a simple play, with a simple theme-and it repeats over and over again.
    "And the wheel in the sky keeps on turning.."
    Jul 22 11:01 AM | 3 Likes Like |Link to Comment
  • Goldman to offer bond using total return swap [View news story]
    "Happy days are here again,..."
    Jul 22 10:45 AM | Likes Like |Link to Comment
  • No Need For Alarm Over Housing Starts Even As They Clash With Bullish Builder Sentiment [View article]
    There may be more 'micro' areas than in the past. For example, my partner bought a lot of Miami condos a few years ago. Just when he thought he had made the worst decision of all time, he's rolling in the cash. Elsewhere in Florida, some 55+ communities are selling like hotcakes, while foreclosed properties a few hundred yards away are not moving. The Florida panhandle has had a decent rebound. Atlanta sales of Mcmansions did well last year, but have clearly stalled. Buyers are international (a non-factor in prior years).
    So, the region designated as "South" is probably far more differentiated than, say, the 'mid-west.' Columbia, SC, for instance, is still mired in recession. In fact, many smaller cities and towns are languishing-with no real prospects for improvement. Small business has been clobbered-which I think is a dangerous problem for many reasons.
    Since I now alternate between the Florida beaches and the Georgia/Carolina mountains, I like to try to find mom/pop eateries, and just talk to the locals. People no longer talk about real estate with anywhere near the zest and enthusiasm prior to 2007. All I hear is that food and gas are taking a larger chunk out of smaller paychecks. Another alarming trend is that young people are learning to game the system.
    I suppose I've gotten off the basic topic of real estate sales, but these things are all woven in a tapestry that will play out over the medium and longer-term.
    Jul 22 10:23 AM | Likes Like |Link to Comment