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  • Stocks: How 'Bad News Is Good News' Is Very Bad News [View article]
    tampat,Oxyman- Eric got me going this Saturday morning-glad to share a little satire and humor-
    Jun 8, 2013. 12:31 PM | Likes Like |Link to Comment
  • Stocks: How 'Bad News Is Good News' Is Very Bad News [View article]
    For the word went out through the land that the gods would 'taper', and there was a great hew and cry amongst the people. "The Power to Taper is the Power to Destroy" the signs said.
    Overnight, the alarm went out, and a vast multitude of Realtors and Mortgage Brokers coalesced into a mighty army. Armed with receipts of their political donations, they descended upon the sacred land. A mighty torrent of humanity swept through K Street and on to the gleaming artifice of the gods.
    They were joined by a procession of limos and Porches - the chants began, slowly at first as the crowd found a common voice: "Don't Taper Me Bro!"
    Finally, the Bearded One appeared, resplendent in commencement garb. The crowd turned suddenly still and quiet. A dove flew slowly above the crowd, as if to convey a message of peace.
    "Be not concerned," the 'Bearded One' proclaimed. "For we are data dependent."
    The mighty crowd gasped and became drunk with the power of the message. Much wickedness and lasciviousness followed, as the opiate of leverage engulfed the masses.
    And as the evening approached, there were those that sought to sketch the trees and daffodils- a curious certainty permeated the dense fog, a lone voice was heard:
    "Now I think I know what you tried to say to me
    And how you suffered for your sanity
    And how you tried to set them free
    They would not listen, they're not listening still
    Perhaps they never will."
    Jun 8, 2013. 11:09 AM | 5 Likes Like |Link to Comment
  • Could This Strategy Be The Holy Grail Of Investing? [View article]
    Some of you seem to think that one can become a professional golfer and concert pianist in one easy lesson-just send in $19.99 plus shipping and handling. And, if you call now, you can get a free copy of our video entitled "How to Make $100,000 Per Year Playing Poker." But wait, have you ever wanted to learn how to play chess and find the perfect mate?

    The author is sharing some very valuable information. But, like any information, it requires a receptive mind and a diligent work ethic.
    Jun 8, 2013. 10:11 AM | 1 Like Like |Link to Comment
  • Could This Strategy Be The Holy Grail Of Investing? [View article]
    SteadyOptions-excellent idea to deal with IRA limitations. I call the second account a 'contra' account (from accounting principles)-but it is a parallel management tool, required by nonsensical limitations.
    As an illustration of how powerful this idea can be, I advised some folks who held a lot of AAPL shares in their IRA account to short AAPL in the contra account (pending an announcement on dividends and buybacks). This saved them a lot of money. In the meantime, they were able to modify their IRA accounts to provide a little more flexibility-but my opinion is that the contra account allows far more flexibility, AND provides a visual feedback mechanism that creates a greater sense of empowerment and control over their financial destiny.
    Quick note: spread trading is a grinding and somewhat tedious process-a ton of patience is required, and an understanding of theta differentials over time is a must. And, a short-term trader with a hot hand will trounce an options specialist who is always playing the odds and taking what the market allows-it's an ebb and flow, where the tactical management of a patient and well informed player will be rewarded over time. It's not unlike a "buy/hold" stock investor from a time perspective-it's just a completely different game.
    Jun 8, 2013. 09:52 AM | 1 Like Like |Link to Comment
  • Could This Strategy Be The Holy Grail Of Investing? [View article]
    Delta management is the term often used to deal with large portfolios. For instance, we typically need 2 ATM puts to hedge and protect a delta of 1. However, delta neutral strategies are not the same as perfect insurance at any point in time.
    You also can make decisions as to protecting the basis of your portfolio, or basis plus unrealized gains. But, I think for most people, they are confronted with the age old adage: "a little knowledge is a dangerous thing...drink deep or taste not."
    But every person has a 'situational' challenge that is somewhat unique. There's a big difference between owning TSLA at 30 vs 100. The insurance configuration might be rather different-to deal with a different risk profile.
    I am convinced that there is a 'holy grail'-if: the criteria is (a)not to incur absolute losses, and (b)to be satisfied with slow and grinding strategies. But, this does require management time and there is a lengthy learning curve.
    For an elementary overview of how I think about strategy, feel free to look at my instaposts. I only wrote three, because I felt that I was wasting my time. But, some of you might find the material useful.
    Jun 7, 2013. 08:27 AM | 1 Like Like |Link to Comment
  • Time To Short The Homebuilders [View article]
    Most seem to be missing the link between median income and price- price is and always will be, a function of income. Certainly low mortgage rates mitigate the decline in median income, but cannot be a perfect offset.
    My first mortgage was a fixed income product at 10%. It was only good for 10 years. Yet, demand for housing was very robust.
    My take is that most people would rather have a more optimistic employment future, and not be so calibrated to an extraordinarily low interest rate. Again, and this may be unique to how I think, but I would personally prefer greater income (and the prospect to increase same steadily over my career) than pin my future on low mortgage rates. For instance, suppose I want to sell 2 years later> If rates are up, and median income is still languishing, what are my odds of selling at (a) a modest gain, (b) break-even or (c) a loss?
    This is an economic perspective, but making money in the markets requires that you put the odds in your favor. It's not so much about deciding whether to be long/short, but in devising strategies that offer the best payoffs relative to your resources. In fact, merely posing a one-dimensional or directional question reflects linear thinking-which is sub-optimal in a fractal world.
    Jun 7, 2013. 07:43 AM | Likes Like |Link to Comment
  • Housing Stocks Got Well Ahead Of Housing [View article]
    Perhaps a few years of pent-up demand + unprecedented hedge fund flow into residential + NOL tax adjustments + first time homebuyer's tax credit + midnight renewal of first time home buyer's tax credit + historically low mortgage rates + Harpo, Hempo and the other Marx brother's programs + a handful of small time cash investors + foreclosures, short sales and sheer abandonment +the pot of gold at the end of the rainbow +bankruptcy and elimination of mom & pop builders from the face of the Earth + ...
    But give me a home, where there ain't no alley cats-where seldom is heard a policeman's siren, and the sky is hazy all day. What? You want two cats in the yard? You want a very, very nice house so you can put the flowers in the vase? Cool. But beware the nursing home greeter-he seeks to take your mother's very fine house.
    Jun 6, 2013. 09:14 AM | 1 Like Like |Link to Comment
  • Are Gold ETFs Now Being Seen In A New Light? [View article]
    Peter, thank you for taking the time to share your perspectives.
    Jun 6, 2013. 08:34 AM | Likes Like |Link to Comment
  • Is The Fed Losing The Battle For A Sustainable Recovery? [View article]
    Once upon a time, I believed the "market" could price in event X1 or X2 or...Xn. But, I now find such punditry paradoxical-if not amusing.
    The greatest physicist of all time worked without any sophisticated testing equipment-not even a simple computer. He used thought experiments and posed simplistic-even childlike-questions. So, imagine that Uncle Albert has an infinite supply of electrons/money, and he decides to play games with the 'market.' Albert can precisely calibrate any index he wishes, at any point he desires, for any time period he desires. The rest of the humans on planet Earth can go about their business-but their opinions are ineffectual to move Albert's desired calibration one iota. Thus, the theoretical notion that markets can price in human propensities, asteroid strikes, or the price of ice cubes at the North Pole fails the theorteical threshhold. And, if there is a weakness in theory, then there will be weaknesses in predictability.
    Too rigorous? Ok-we just change the number of people in the game, and allow no one to have an infinite amount of influence. Note, though, that coalitions will likely develop, pooling their influence, to attain the same objective as Uncle Albert. To the extent that influence is dissipated and groups fail to align, an observer would see an associated degree of volatility. BUT, what is being "priced in" is nothing more than the sum of the collective self-interest, which is now and always based on perception and corresponding biases.
    Suppose that we can talk Uncle Albert into playing his game within a range, and that we can secure Albert's assurances that he will participate in the game, but with far less than his infinite ability and wherewithall. This would certainly allow clusters of pooled interests to create and manage optimal strategies. Now, suppose a giant "vat experiment" where all humans exist only in a computer program. There is no need-or use-for housing, food, transportation, etc. In short, there is no economy. Nonetheless, a virtual game has been devised whereby an illusory economy has been created. The creation of the 'economy' was done only to make the 'market' game more interesting. Over time, the computer programs somewhat incorporated the contrived economic game as establishing associated limits and boundaries- but no one was inherently bound to abide by same-it became a sort ot tit-for-tat evolution.
    Jun 5, 2013. 12:02 PM | 1 Like Like |Link to Comment
  • Are Gold ETFs Now Being Seen In A New Light? [View article]
    "yesterday is dead and gone, and tomorrow's out of sight...help me make it through the night..."
    Like your approach Peter. I use options to essentially accomplish the same thing (except, I think I can beat the returns, but who knows over a longer time frame). In short, by layering in calls, puts and spreads I'm constantly extracting option premium.
    And, yes, speaking of age, the advantage to the 'been there, done that' crowd is that it is no longer a life/death struggle-just a game. The objective should be to 'win' for something useful-like donating to the humane society.
    Jun 5, 2013. 06:23 AM | 2 Likes Like |Link to Comment
  • Housing Prices Are Being Dangerously Distorted By Big Institutional Money [View article]
    This is one of the reasons I shorted ITB.
    Jun 4, 2013. 09:14 PM | Likes Like |Link to Comment
  • The Downside Of Buying Stocks On Sale Through Selling Puts [View article]
    This observation leads us to consider whether to sell more OTM puts, with less probability of being assigned i.e. underlying price moves are log normal, or far fewer puts, but with higher premium and greater odds of getting assigned (ignoring for the moment that we can avoid/delay assignment).
    On stocks like GOOG or AAPL, one can look at a 700 put for GOOG or a 400 put for AAPL, and 'load the truck.' It looks like free money. But, isn't it funny how risk always seems to lick its chops at this point?
    One final note-puts generally maintain 'value' a bit more than calls due to the fact that elevated volatility typically favors puts. So, a short put can experience a gamma rush. I used to tell my staff that puts can be like the month of March-in like a lion, out like a lamb. That's why most traders/investors should go ahead and add cheap OTM long puts. There's another strategic reason to do that as well, but running late for tee time.
    Good luck to all!
    Jun 4, 2013. 08:33 AM | Likes Like |Link to Comment
  • The Downside Of Buying Stocks On Sale Through Selling Puts [View article]
    It's a little more nuanced than that, and here's one observation: It's entirely possible that, say, Joe and Steve sell the same put within a 30 day time period. If Joe sells an ATM put on e.g. CAT when it's trading at 100, Steve might come along a couple of weeks later and sell the same put for 3x the premium. Simply remember that CAT has been prone to some nasty sell-offs, before rebounding and recovering-at least in part. (One wouldn't want to sell the same put after a sell-off-BUT the premium would be greater even though CAT is trading at a much lower price).
    This underscores the time sensitivity of the 75/25 ratio you alluded to, and simply created a riskier period. Thus, selling puts is obviously a far more effective tool, AFTER a sell-off; assuming we want to play the odds. If we continue to sell puts in a bull market, we will be lulled into a sense of complacency. My suggestion is to sell put spreads, and short a small number of shares per spread and width of spread. And/or sell bear call spreads simultaneously with the short put spreads.
    In observing new traders, short puts that hit a delta of 1 scare them out of their position. QUESTION: Why wouldn't one's reaction be to leave the puts in place, but double or triple short the stock. In other words, if a stock like BIDU begins to hammer your short put position, don't run! Retaliate by shorting 200 shares for each short put. It's like Sean Connery said in "The Untouchables": "If they pull a knife, you pull a gun. If they put one of your guys in the hospital, you put one of theirs in the morgue..."
    My point is that there is ALWAYS a counter-move. So, the real issue is not so much about selling or not selling puts but (a)there is a time to reap and a time to sew, (b)hedging is almost always appropriate, (c)plan for sudden moves so that your counter-moves are reflexive.
    Jun 3, 2013. 10:37 PM | Likes Like |Link to Comment
  • The Fed Could Derail The Real Estate Recovery [View article]
    As to the relationship between cash purchases and mortgage rates, I suppose one take would be that (outside of investors) cash buyers sold a more expensive house and down-sized. They first needed a buyer to convert their house to a cash position.
    In Florida, some realtors have stated that housing activity seemed to evaporate over the last 3 weeks.
    The sustainable answer is that real estate is now, and forevermore, wedded to median income. This is as fundamental as any socio-economic law can be. And, over any length of time, will absolutely and unequivocally prevail. That an extremely slight uptick in historically low mortgage rates causes so much consternation and gnashing of teeth, should beg a number of questions. Paramount among these questions is a very simple one: how long are suppressed rates needed? (Note: the answer "as long as necessary" will not earn any credits for reasoned and cogent analysis.")
    Jun 2, 2013. 01:01 PM | 1 Like Like |Link to Comment
  • Short Selling A Pair Of Leveraged ETFs: A Goldmine Or A Bad Idea? [View article]
    As a follow-up, the FAS/FAZ strategy has been successful. BUT, note that the strategy requires basic management for best results. For example, I initially made money by selling calls against FAZ; and, of course, the FAS bear call spreads worked against me. But, I used the FAS portion as a hedge to sell FAS puts (and added to the FAS bear call spreads-at increasingly higher premiums). The FAZ bear call spreads plus the FAS short puts hit a quick BEP against the FAS spreads. Last Friday, the FAS spreads FINALLY paid off. The moral of the story is that chickens come home to roost, high-flying birds eventually need oxygen and selling option premium is the next best thing to owning a racetrack.
    The amusing thing Friday is that I had expiring short puts on both FAS and FAZ. I had the FAS set to close at .10, and didn't bother with FAZ (because I didn't mind assignment). I was away all day (golf) and assumed that I would be the proud new owner of 2,000 shares of FAS-given the news. So, I suppose the FAS got filled at market open. The FAZ had almost no value left-so that won't get assigned either. Sometimes if you just leave things alone (assuming a good structure), you get pleasantly surprised.
    Again, I recall that the author was discussing shorting the actual shares. I rarely short shares-it's too easy to use options.
    Jun 2, 2013. 12:25 PM | Likes Like |Link to Comment
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