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  • Reality Bites: Economy Begins To Shrink As Fed Goes Broke [View article]
    "And so it came to pass, that in the year 2013, the human species-still wholly carbon based and organic- continued to offer its prayers to an assortment of neon gods. Chief among these artifacts and quasi-religious instruments, was fiat money. Fiat money, and its centralized management, allowed the various cultures to interact, and to have some sense of indeterminacy.
    As quantum computing power developed, and it was discovered that DNA linkage would allow human interface with same, the illusions were shattered. Those of the species that could avail themselves of the quantum power, quickly drained the monetary systems, and sought to impose an order eerily reminiscent of the feudal ages (a span of a few centuries that characterized much of what was then referred to as the "Middle Ages").
    By the year 2476, and the advent of genomic equality, all pretense of master planning and intervention had died a slow death. Thus, this marked an end to the natural evolution of the human species, and from that time forward, man's illusions and cognitive biases no longer existed."
    Anon, 3325 AD
    Jan 31, 2013. 12:04 PM | 2 Likes Like |Link to Comment
  • 4 Black Swans That Could Jolt The Market In 2013 [View article]
    It was actually David Hume, the philosopher, that noted, in essence, that it doesn't matter how many white swans one observes, we can never justify the premise that 'all swans are white.' A black swan was discovered in Australia as the continent became settled.
    But, if you really reflect on the fact that millions of observations were made over thousands of years, still one could not declare that 'all swans are white'. In Hume's words: "However easy this step may seem, reason would never, to all eternity, be able to make it."
    I wouldn't categorize an asteroid hitting the planet as a black swan event, because it's happened often in the past, and one came within 4 lunar distances of striking in 2004. We can track that particular asteroid, as well as many others, and assign a probability of any one striking Earth. It is more problematic, however, to track comets.
    For my money, a repeat of the earthquake in the center of the USA would be the most surprising and unplanned event to hit modern man. But, there are non-violent man-made 'problems' such as recessions, bubbles, etc and violent problems i.e.. wars and conflicts. All man-made issues, certainly in modern times, leave the underlying legal and social structure in place (or shift from one dimension to another). Thus, no matter how 'bad' the news seems-the market structure remains essentially in place. We can still play the game. Only an extraordinary natural event (except an all-out nuclear war) can dislodge the societal infrastructure.
    Myt point is that none of the above listed events are really significant-certainly one can plan for those possibilities, and importantly, profit from them. The financial/ real estate bubble was, in the universal scheme of things, insignificant. One could readily play the game. Centuries from now, it might not merit a footnote. But, here in the present, our cognitive biases envelope us. Like the Hotel California, you can check out any time you want, but you can never leave. We are the frenzied prisoners of our own devices.
    Jan 29, 2013. 06:26 PM | 3 Likes Like |Link to Comment
  • U.S. Stock Market - No Worries? [View article]
    "Can the central bank remove all risk from the market?" In theory, I submit the answer is yes. But, perhaps the better question is whether it needs to remove 'all risk' or just the perception of certain types of risk. For example, the data you cite for small business is extraordinarily negative. But, at what point, if ever, does same become a risk? There are sociological implications, and community repercussions, but those folks don't seem to have a voice at this juncture in history.
    I would also submit that it must follow that traditional warning signs, especially those based on sentiment, are all but worthless. I think that a more reflective and sober perspective would ignore traditional bull/bear indices, and instead ponder the resulting mutation-i.e. the central bank has created a creature not previously categorized by market zoologists. This new creature resides in an uncharted eco-system, and draws its nourishment therefrom. The favored progeny are happy to suckle; many more stand silently by, unable to fathom the scene in front of them.
    Jan 23, 2013. 05:51 PM | 3 Likes Like |Link to Comment
  • No Margin For Error: Margin Debt, Quantitative Easing, And Future S&P 500 Returns [View article]
    If Einstein happened to be around to observe the activities and machinations of the entity called 'The Fed' he would no doubt ask 'why the need for so many tortured steps to inflate the stock market'? Euclid would remind us that the shortest distance between two points is a straight line. An infinite amount of electrons can cause an infinite increase in the stock market. Einstein liked thought experiments. Imagine that you had an infinite supply of dollars. Could you not immediately impact the market? And, as a corollary, could you not eliminate volatility?
    The temple is not a temple, and the cowardly lion remained thus so. The wizard was smoke and mirrors, ultimately conning a naive girl to do what he lacked the power to do. It was a small dog that pulled the curtain back, exposing the game and the illusion.
    Great novelists have a way of using powerful metaphor to explain and explode myths that are so ingrained in our culture, that we become myopic-indeed unwilling- to see the real light. As so elegantly noted in "American Gods" we really know that we're being cheated and deluded, but it's the only game in town. Or, as noted in Mario Puzo's novel "Fools Die," we know that we are the ultimate sucker, but we can't help ourselves. Oh, it's not that we're gamblers or speculators, many think of their modus operandi as 'prudent and conservative.' But as Puzo indicates, that rock upon which we stand is just an 'x' in an indeterminate equation.
    So, bring on the rabbits and the illusions. One pill for top down and one pill for bottom up, and it's off to see the wizard- just follow the yellow brick road.
    Jan 22, 2013. 11:16 AM | Likes Like |Link to Comment
  • Repoed, Part 2: A Deeper Look At Banks' Source Of Dry Powder [View article]
    Again, I would note that, and I think the author would agree, the underlying legal/financial skeleton has not changed. Rather, like Dr. Frankenstein's monster, the corpus has been 'amped' and now stumbles awkwardly, full of laboratory adrenaline, devoid of the quintessential human soul.
    The monster looms large and powerful, and the villagers are frightened. A noble experiment to aid humanity or a harbinger of something more sinister? A bridge to enable the timid to play the game once again, or perhaps one illusion flying too close to sober judgment?
    Well, as Frost said...we have miles to go and miles to go....
    Jan 16, 2013. 11:21 AM | 2 Likes Like |Link to Comment
  • Housing In 2013: Another Bubble Approaching? [View article]
    According to The Florida Bar Journal, the clerks still report an enormous backlog of foreclosures. They are hoping that some of the recent bank fraud settlement money can be allocated to resolving the problem.
    The good news (depending on one's perspective) is that beach front condos have been selling at a rapid clip. These are cash deals-almost all investors-who plan to hold and rent to tourists. In talking to some investors, I found that one group was buying in the northwest part of the state for summer rental income, and mid-Florida for winter visitors. The Florida panhandle has a high season which coincides with spring break, and ends in August. Middle and southern areas are exact opposite.
    The BP oil spill is in the rear-view window, and that has made a big difference for vacation business. Retired folks are flocking to places like The Villages. I've also noticed that property taxes and insurance costs (which have a peculiar demographic function) could play a large role in Florida's future. By that I mean that seniors will increasingly focus on low tax areas, and shy away from more traditional retirement destinations (within the state). In fact, it is estimated that 20% of the existing moves to established retirement communities comes from intrastate relocation. To some extent, seniors have elected to arbitrage away the loss of income on their savings accounts by seeking lower tax jurisdictions.
    Jan 16, 2013. 10:00 AM | 2 Likes Like |Link to Comment
  • Insight Into Commodity Investing [View article]
    " This finding reflects the financialization of the commodity markets and helps explain the large increase in the price volatility of non-energy commodities around 2008."
    What contributed to the 'finacialization' prior to 2008? Did not the market instruments change as well as the trading methodology? Do we not have the dark pools, HFTs and ultra-leveraged mentality in corn and palm oil, as well as diapers, cereal and networking services? When the FAJ academicians choose their dependent and independent variables, what are they smoking in those corn-cob pipes?
    Great article though-lots of excellent advice.
    Jan 15, 2013. 08:29 PM | 1 Like Like |Link to Comment
  • A day after rallying thanks to a Goldman upgrade, Logitech (LOGI -4.2%) is selling off following a downgrade to Underperform from Credit Suisse. Weak PC and home electronics peripherals sales continue to make life tough for Logitech, which just saw a CEO change[View news story]
    This crap is exactly why you can short the sugar high. Do your own test. Pick any upgrade, and watch what unfolds within 48 hours. Making a conservative play, i.e.. selling a bear call spread, will be profitable with astounding frequency. The pros know about the upgrades, and collect accordingly. Play the game by counter-punching when they cash in. Of course, one could just spend their time reading an annual report.
    Jan 15, 2013. 11:52 AM | Likes Like |Link to Comment
  • Hedge Funds: The Most Expensive Bargain In Town [View article]
    In the universal scheme of things, hedge funds haven't been around long enough to reach truly valid conclusions. But then again, has any institution or methodology been around 'long enough' to have predictable merit?
    My feeling was that an effective money manager added a dimension to a client's well-being, which would have been difficult to replicate in a standard market. A seasoned lawyer never worries about how many lawyers are clamoring for business-his wisdom and professionalism skew the statistics, and render an 'average' rather useless. This distinction and differentiation result in premium fees. In general, you expect to find a client who has achieved personal wealth seeking a similar level of expertise in a money manager.
    The more pertinent issue might be, as in legal representation, for the provider or money manager to accept only the number of clients that can be accomodated. Matching personality at this level is important, but this is my own personal perspective. I know the bigger players deal with pension funds, and at that level, it's a different game. I always enjoyed working with professional athletes, and entrepreneurs.
    Jan 15, 2013. 09:12 AM | 1 Like Like |Link to Comment
  • Repoed! How The Fed And Depositors Fund Banks' Big Bets [View article]
    Even the most obtuse of market watchers should be able to reflect on the fundamental inconsistency of our time: If all your neighbors and friends left the market, why does it go up? Who supplies the helium to float the balloon? A far more interesting question is to isolate the synchronized winks and nods, exposing the atomic structure i.e.. laying bare the fullness of the greatest illusion in modern times. It is the sub-strata of market consciousness, operating under the veneer of FAS 140 and other gimmicks. That a learned economist/journalist demands the 'evidence' is highly suspect. It adds to the illusion and reminds one of the old adage-'Oh what a tangled web we weave, when first we practice to deceive.'
    Jan 14, 2013. 09:44 AM | 7 Likes Like |Link to Comment
  • Fence-Sitting: The Elusive Art Of More Data And Pullbacks [View article]
    I've been doing a lot of reading and thinking about 'uncertainty' (from a scientific perspective as well as media/laymen usage) vs. ambiguity. Uncertainty is now an ingrained excuse to avoid any number of actions. Yet, we actually live in a time of great certainty. Just a few hundred years ago, nights were darker, superstition and withcraft trumped scientific method, and probability theory didn't exist. It wasn't so long ago that we actually tried people for witchcraft in the US.
    War and pestilence waited around every corner, life expectancy was measured by a coin flip as opposed to actuarial methods, and trial by combat was accepted jurisprudence. So, when placed in any historical context, fence-sitting predicated upon 'uncertainty' is a joke of cosmic proportion.
    Money managers have long-felt the fear of under performing their peers, and being the butt of the joke for having a bad year. They would rather find solace in numbers, than act on behalf of clients. It would seem that corporate decisions and business managers now experience essentially similar environments. Thus, 'uncertainty' is simply the current scape goat for this new age angst. That this is so readily accepted by so-called experts and pundits simply feeds the contrived gremlin. If the medium is still the message, we have a new, modern-day sterility. Just as a child is taught to look both ways before crossing the street, the new age 'homo erectus' contemplates the continued political correctness of every utterance and breath, finding refuge with a like- minded flock.
    Jan 13, 2013. 12:59 PM | Likes Like |Link to Comment
  • VIX - Options Volatility Sonar: Friday Recap [View article]
    The recent chart on BA is similar to IBM chart before break-out. BA wants to take flight-the pesky real world creates resistance.
    I've been playing it just like I did IBM when it ranged between 120/130 for several weeks. Sell put spreads @72 or less, and call spreads @75. I sometimes trade the stock long/short as well.
    I keep thinking though that this stock can 'take-off' not on good news, but just an absence of negative news.
    Jan 12, 2013. 11:15 AM | 1 Like Like |Link to Comment
  • Transportation Stock Breakout Is A Good Omen For Economy [View article]
    I commented a couple of years back about selling NSC 59 puts. Look at 52 week price action on rails for current year.
    Truth is stranger than fiction.
    Similar opportunity to make another 'train-load.' If you're speculating, be sure to buy the cheaper downside puts.
    All aboard the gravy train.
    Jan 12, 2013. 10:59 AM | 1 Like Like |Link to Comment
  • Selling Covered Calls On Most ETFs Guaranteed To Lose You Money In The Long Run [View article]
    So simple, so elegant, so profitable.
    Jan 12, 2013. 10:48 AM | Likes Like |Link to Comment
  • Selling Covered Calls On Most ETFs Guaranteed To Lose You Money In The Long Run [View article]
    Thanks for corrections. Should be 'buy to close' not sell. Yes A should roll-out at some point-perhaps. Could wait out remaining time, and make Fri afternoon decision.
    Yes, no problem with being called away at a profit. Next move, assuming that's the case, and assuming one still wants to own the stock? Considerations are that underlying can move lower vs probability of higher move. If either higher or lower, what is probable range, over n time period? In the example, one would rather have more money than less, and would rather have it sooner than later. If the game ended when B closed his position and the parties had to reinvest in risk-free bonds, B will always be ahead. That's all we can know at that point, for any other possible outcome would be just that-a possibility, not a reality. This initial advantage held by B was simply an enlightened perspective that the subject option was/would be characterized by a range of prices over the term. This perspective would allow fine distinctions, such as understanding that theta can be subservient to implied volatility, where an important announcement is anticipated, or an earnings release is pending. In such a case, an option can maintain a price which reflects no decay (theta). So, while it's generally a true statement that covered calls are best utilized in stable or slightly trending markets, that statement, independent of the dynamics of option pricing, could lead to a sub-optimal strategy.
    Jan 12, 2013. 10:45 AM | Likes Like |Link to Comment