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  • Making Sense Of The China Stock Roller Coaster [View article]
    To understand the market in China you have to understand the people. And to understand the people you have to understand the cultural history. Now you may advance to the first grade.
    Or you might spend an evening with Jesse Livermore.
    Jul 30, 2015. 10:21 AM | Likes Like |Link to Comment
  • U.S. Steel surges despite worse than expected Q2 performance [View news story]
    Suppose stock XYZ (in the horrific commodity business) trades between 48 and 52. If one owns a million shares at 50, the results after any n time (say a couple of years) is lousy.
    But, if another investor owns a million shares, but sells straddles every week-the returns are extraordinary. For instance, just take a look at the income derived from one weekly NUE straddle (just look at option chain and get net from option calculator)-to make it simple suppose each covered call nets 100 and each short put nets 100-for a total of 200. So, if I have 20,000 shares (allowing 20,000/100 covered calls), and sell the same number of ATM puts, I'm netting 20k+20k.
    So, a stock that does nothing can still make an extraordinary return.
    Of course, the reality is that some volatility is needed to maintain option premium amounts. The real world requires a bit more dynamic management, but the financial difference in selling options vs doing nothing is well worth the effort..
    Jul 29, 2015. 04:27 PM | 1 Like Like |Link to Comment
  • The Return Of Deflation? [View article]
    China created a false sense of future expectations by building enormous structures- but with no legitimate demand. Jim Chanos and others noted this at the time, but the masses refused to consider the evidence.
    As a historical paradox, I offer the Marshall Plan as a rejoinder.
    So deflation was disguised, but the masquerade party has encountered the midnight hour, and Cinderella has exited the building. Nonetheless, the gullible pollyannas, with slipper in hand, seek to place the slipper on a foot that never existed. Of course, these are the same folks that ignore the unprecedented drop in median income.
    But, by all means, that .25 increment should be instituted- just to see what happens. I mean, why not give it a go for 72 hours, with the assurance that any short- sighted mistakes can be rectified.
    Jul 28, 2015. 11:28 PM | 3 Likes Like |Link to Comment
  • Don't Take Icahn's High-Yield Concerns Too Seriously [View article]
    Well, need we be reminded of this infamous assurance: "Subprime is contained"?
    Jul 28, 2015. 09:56 PM | Likes Like |Link to Comment
  • Industrials: How Market Illness Spreads [View article]
    Excellent discussion of the 'strange' divergence. It seems that the 'fluff' explodes higher, and the industrial backbone suffers arthritis. In addition to connections with energy and China, which seem plausible on the surface, there are periods when the greater mass of money is transfixed with nothing more than a new story line. To wit, note the 'ink' devoted to social media and the next 'wonder' drug. And, of course, the nod to anything perceived as 'disruptive'-which is superuber and battery powered.
    In other words, it's cool to SHAK to the BABA-and NUE is as old as the bossanova. Although, NUE has been an incredible iron condor performer. AMZN and NFLX are now the brightest stars in the night sky, but they don't operate massive warehouses for raw materials. Nary a heavy piece of equipment can be found at LNKD. No orders to CAT or DE originating from FB.
    Perhaps we find ourselves in the midst of the Great Transformation-a period in human history where we gather around a global campfire, tweet our hellos, sip a SODA, munch a CMG and await our manna from the almighty central planners. "Zero today, zero tomorrow" is our furtive cry, for we know a catch-22 when we see one. After all, that's the NFLX featured movie for the evening. Bon a petit.
    Jul 28, 2015. 05:34 PM | 2 Likes Like |Link to Comment
  • China Meltdown Part II: Now Are You Paying Attention? [View article]
    Sorry to hear of your loss-wish you the best.
    Jul 27, 2015. 11:05 PM | 1 Like Like |Link to Comment
  • Chinese shares slam into reverse; Shanghai -8.5% [View news story]
    I've been short China for a long time- not because of "earnings" or prospects- but rather because China is not an open society.
    And, there is a point in any society where government usurpation of free will results in moral and ethical decay. In theory, if not in reality, any government can make a market a de facto appendage. The game becomes rigged by Big Brother- which is much worse than rigging the World Series by ordinary crooks.
    The 'benevolent' thinking is 'just this one time to calm the masses'- but therein lies the path to addiction.
    Jul 27, 2015. 08:55 AM | 1 Like Like |Link to Comment
  • Are Lower Oil Prices Really A Problem? [View article]
    No sector or selected industry is an island unto itself. Think about ecological systems and the complications inherent in holding one variable constant. One species is not likely to go extinct without subtitles in cause-effect dynamics.
    Jul 26, 2015. 07:25 PM | Likes Like |Link to Comment
  • The New TVA [View article]
    "May the force be with you."
    Well, Kahneman has laid bare the 'farce' of overconfidence. I would stir in a pinch of hypocrisy, a dash of self-righteousness and a heaping helping of cowardly piety.
    "To say the words one truly feels and not the words of one who kneels"- sorry Frank, the corporate culture finds cowardly lions trembling behind their little cubicles. It's not likely that they can "eat it up and spit it out"- no teeth you see.
    We have acquired a distaste of material litter, yet we pollute the fragile gift of reason.
    Jul 26, 2015. 12:49 PM | Likes Like |Link to Comment
  • Scorching earnings not quite enough for airline investors [View news story]
    Once again, my iron- clad rule of airline gaming is proven correct. Basically, you can't pack people in a flying sardine can, fly them all over the planet, expose them to terrorism, exotic viruses and hysterical brats without the high probability of a hiccup now and then.
    And, like home builders, the specter of diminishing returns lurks constantly.
    Much easier to game the inevitable.
    Jul 26, 2015. 10:51 AM | Likes Like |Link to Comment
  • Homebuilders in the red as new home buyers go on strike in June [View news story]
    I'm on record as spoon-feeding folks how to short ITB. I'm currently looking at ITB calls expiring today, and admiring my gains.
    I'm all for people having their own home, but over the years I've made a tidy fortune simply shorting homebuilders (and airlines, and Chinese internet stocks).
    Do I ever buy homebuilders? NO.
    The present value/time value of money suggests that one wait and short at the apex.
    Jul 24, 2015. 01:38 PM | 3 Likes Like |Link to Comment
  • Debating Andy Hall - Oil Market Conditions And The Future Of Oil Prices [View article]
    The small shale producer will behave much like the small builder prior to the collapse. As long as a builder continues to build, he remains plugged into a "reward" system. Lenders continue to loan, and cash comes in- allowing him to pay employees and meet covenant rules.
    It seems counter- intuitive at first blush, but to the builder, he's acting in a rational manner.
    It takes a macro convulsion to stop the madness.
    Jul 22, 2015. 07:09 PM | Likes Like |Link to Comment
  • Homebuilders on the move after strong sales report [View news story]
    I have substantial investments in various mini-storage facilities around the country, so I get a lot of input about real estate activity, and consumer trends in general.
    The data reported by the press (which is gleaned from various government or quasi-government surveys) is misleading. But, we have to understand that the historical methodology-which made reasonable sense for decades-can't give us a true assessment. A confluence of things-demographics, changes in business structure and the unprecedented buying power of hedge funds entering the residential real estate market for the first time-have radically skewed the picture.
    If you look around the USA, you find small 'bubbles' of vibrant activity. In Atlanta, for instance, one can find very limited geographic locales of hot markets. Yet, as one moves away from the city, or from one of the hot areas, you would conclude that the recession lingers. In fact, you can find recent price reductions at some of the heretofore prestigious country clubs that are quite substantial.
    In Florida, I'm noticing a mixed bag of results. And, Chicago seems to resemble Atlanta in many respects.
    I continue to meet retired people that can't sell their homes. I suspect this a new phenomenon. But, that's what happens with data: "liars, damn liars and statisticians."
    The one thing that I know beyond any doubt is if buyers had to borrow money at 10% to buy their first home (like I did)- there would be no real estate market. To me, that speaks volumes about the ultimate reality. Or, in another sense, can wages ever regain the efficacy of the recent past? If so, when? How?
    Finally, look at how newer homes are constructed relative to 15 years ago. The size, quality and amenities have been adjusted downward. Does this show up in the data?
    Jul 22, 2015. 03:17 PM | 4 Likes Like |Link to Comment
  • 4 Things That Are Happening Today That Indicate That A Deflationary Financial Collapse Is Imminent [View article]
    Evidence and logical inference are casualties of human bias. There is no escape from this predicament. Our instruments of reason are still too fragile, and the voices of true logic appear as remote as the ancient priests.
    According to physicists, the most advanced civilizations are categorized as Level lll. We are most likely centuries away from Level l.
    As to our legal system, note that we are only removed from witchcraft trials and trial by combat by a few cosmic moments. In law school I was dumbfounded by the struggle of some of our greatest jurists to even understand basic probability.
    But I agree with the concerns expressed by the author. Yet, I separate the 'stock market' from the cultural dynamics.
    Every civilization that has ever existed on this planet, which covers thousands of years, has ultimately failed. Every economy, every political dynasty, every great army has utterly failed to last beyond a few centuries. Yet, humans have found a way-so far-to 'go forth and multiply.' So, our species is likely to exist and thrive; and that wheel in the sky will keep on turning. As Mario Puzo noted in "Fools Die," we're just an 'x' in an indeterminate equation, and that is the rock upon which we stand.
    Jul 21, 2015. 02:32 PM | 6 Likes Like |Link to Comment
  • Why Hedge Funds Are Not Bullish On Oil [View article]
    Well- just look at the hedge funds that got caught with their trousers down in 2008.
    If you know how to trade, you're making money in oil almost everyday. If you seek rationality in the oil market, you're not faring very well.
    I can recall paying 32 cents/ gallon back in the 60's. But that could never happen in 2015- right?
    Jul 20, 2015. 10:32 PM | Likes Like |Link to Comment
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