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Making Money on Aging Baby Boomers April 30, 2007
It’s before noon. Trading is boring. We may make another meaningless high when it’s all said and done. But I have something else on my mind.
Over the past couple of years there’s been so much talk about positioning your portfolio to take advantage of the aging baby boomer population. Every analyst has wanted you in the body replacement stocks, the assisted living home stocks, and adult leisure living stocks. Since January 1st, these stocks have performed well, but really, what hasn’t?
In my own community, everywhere I look, they are building another 55+ community, with each being more upscale than the next. In fact, for a city that was planned as an urban utopia when it was founded some 35 years ago, there was an incredible uproar about 2 years ago when the first gated community was proposed. It just wasn’t in keeping with the egalitarian vision of the community’s founder and developer. Imagine, building a gate to keep the riff raff out. Much indignation. Righteous indignation, no less.
Not so this time, though. It must be different when the gates are presumed to function to keep the elderly in, and not other people out. Who wants to be surrounded by, or catch casual glimpses of the first batch of boomers to start reaching retirement age. Even if they are financially well-heeled. Who wants it in their backyard? Who wants to catch a glimpse of their own future? Hence, the gates.
Well, I am now an aging baby boomer, but I’m not quite ready for the senior living experience. Not yet, anyway. I would probably lose my keys to the gates, anyway. And by then, I will have forgotten how to clap.
What I am ready for is some creature comforts in my own home, particularly as the body is beginning to get more frequent aches and pains. So after some due diligence, I contacted a hot tub company and they came to pay me a visit. I should have had my antennae go up when I realized that you really couldn’t obtain any meaningful information in any other way.
As a past door to door salesman, I should have known better. It’s the same issue that I have when I travel. I always try the corned beef sandwiches, even though I know that they will be hideous. I never learn.
Well, the representative told us right off the bat that he was low key, he just wanted to match us up with what we wanted. Kiss of death, right there. The “I only care about your interests” should have set a few whistles off. Maybe I shouldn’t have unlocked the gate. Hindsight is such a wonderful thing. But he really didn’t need to do a hard sell. I wanted to buy.
I re-iterated our purchase time frame, which was six months. I had submitted an on-line survey with that same time frame, and I had told the telephone representative who set up the appointment of that time frame. Living in community that has a homeowner’s association, you really do have to do things by the book. And I’m a slow reader. It takes time.
So at the end of his presentation, which wasn’t altogether necessary, since this was the unit I was interested in, he gave us a quote. The quote was high, but that didn’t concern me, as I amortized the product out over 15 years, or so.
I told him that I would start to get my ducks in order, including approval to construct a supporting patio, getting it built and then allowing the necessary 8 weeks of hot tub construction time, as he informed me was necessary.
He then told me that in order to get the special pricing, I had to make the purchase now. I told him that the discount wasn’t that important to me over the course of 15 years, and that I would stick to plan.
What happened next just amazed me. He picked up my phone, without asking, and called someone at the company. A bizarre variation on the car salesman’s “let me talk to the manager in the back room” routine. Except he did it in front of me, referring to me as if I wasn’t there. I was so stunned, I didn’t even react when a fly flew right into my widely opened mouth.
He then offered me an even lower price, so that they could “move product”, if I was willing to take a specific color combination. So much for “each unit is custom made” and takes 8 weeks lead time for delivery.
I re-iterated my plan, as well as the clear indications that I had made over and over again, regarding my time frame. And what do you know? Another phone call. This time he tells the person on the other end that I “gunning for him on price”.
At that point, while he was still on the phone, with my teeth gnashing, I told him that he had “lost me”. I thanked him for his time and escorted him out. I didn’t take his card.
He completely lost the sale.
Why am I telling you all of this? This salesman’s approach was no different from anyone trying to force stocks down your throat. There’s a time to purchase and a time to sell, but you have to do it on your own time. Unless you have tons of discretionary cash, every purchase you make is at the expense of some other purchasing decision.
There are times when I very much want to buy a stock, but I don’t have the cash necessary, am unwilling to margin the stock, and can’t find anything appropriate to sell.
So what do you do? You wait for the next opportunity. There’ll be another hot tub with my name out there, just as there’ll always be opportunity to buy Zimmer Holdings, Sunrise Senior Living and United HealthCare, all aging baby boomer plays.
The boomers are not going away anytime soon. But when they do, there will be a Gen-X strategy, and after that a Gen-Y or whatever they’re called, strategy.
Me? If I could, I would buy even more NYSE right now. Not exactly a boomer play, but I like all of my other positions and don’t want to fold any hands. There will be a next time. Guaranteed.
As a baby boomer, I was looking to let someone make some money this past weekend, but it didn’t work out that way. I guess that as an aging boomer, I should have been concerned with losing an hour’s worth of time. Who know’s how much is left. But every now in then it feels good to get empowered.
Make your own decisions. As we laughingly used to say 20 years ago: “Just say no”.
What Atlantic City Teaches Us April 27, 2007
No, I’m not talking about lessons learned from gambling. I spent 4 days in Las Vegas and didn’t bet a single dime. My addictive personality doesn’t extend to gambling. Atlantic City is almost in my backyard, yet I’ve only been there twice and am not likely to go again. Yet Atlantic City teaches a great lesson. And it’s not just that Gary Puckett and the Union Gap can go on forever in lounges around the country.
What I learned from Atlantic City can be summed up by these words:
Everything dies baby that’s the fact
Everything that dies someday comes back
Put your makeup on
Fix your hair up pretty
And meet me tonight in Atlantic City
An obscure song from a long ago forgotten album, except to the hard core, from the Bard of New Jersey. But these days New Jersey is considered quite chic, at least according to the New York Times. So we have to consider that perhaps these words have gospel like qualities.
No, that song reminds me that every bull market must come to an end. It also reminds me of a withered Burt Lancaster in, perhaps, his last role, with this song playing in the background. Even the great ones come to an end. Everything comes to an end. But I don’t necessarily see this as a downer. The end is just the start of a new beginning. If no one has said that before, I’d like to take credit for it.
These past few days have given me reason to think that we are not heading much higher. At least not in the near term. There’s just too much good will and giddiness. We seem to be ignoring bad signs in the economy, as well as deteriorating technical signs.
I know that the eternal optimists saw this week’s action as positive. We broke through 13,000 and haven’t looked backward. They will point to successive records after the big break. Additionally, they will point out that the market stayed at a new record, even though we were going into the weekend. Forget that weekends are always slow news days. They do. Conventional wisdom has it that the real savvy investors don’t want to be left long over the weekend. Have you watched the nightly news on Saturdays and Sundays? Do you think Brian Williams would routinely take weekends off if anything exciting was likely to happen?
No. Weekends are for resting. The world rests, at least in the ways in which nations interact with one another. Even the Axis of Evil is pretty nice and low key on the weekends. As Shylock said “do I not bleed?” So , too, must we realize that even “Irrational in Iran” as he signs his letters to Dear Abby, gets tired and must get some rest. How else do you get the energy to be evil on Monday. Man must recharge.
I suppose that those were all valid points by the late converts to bullism, but the past few days have been remarkable in their mediocrity and narrow breadth. I am a long term optimist, but let’s be real. Sure, we hit another record close today, yet once again, with the exception of the Dow and the NASDAQ with it’s miniscule gain today, all of the other indices were down. I know that I didn’t really make any money the past couple of days, except for some options trading. And that doesn’t count. You only make money selling calls when the market is down or moving sideways, while the expirations clock is ticking away time value. It’s sort of like treading water. I’d much rather be making my money through stock price appreciation.
Another bad sign? Have you noticed that the speculative or sub-$10 stocks do poorly on really great days? Conversely, they tend to do better on mediocre days. Of course on horrible days, they join in the carnage.
Sirius is a great example. During the bull run of the past 6 weeks Sirius just kept going down, down, down. Luckily for me, just in time for my 2 week report card on Sirius, it decided to go up and up the past 2 days. And why not? Nothing material ha changed at Sirius. It was just doing what these stocks do. People get giddy and throw money at losers, thinking that we’re still in a near term up cycle. They think there’s value in these stocks. As it turned out, my losing recommendation was only for –2.0%. That’s not as horrendous as I was prepared for, 18% ago.
But, there’s still no value in Sirius. Considering that the financials of both Sirius and XM are a mess, I think it’s likely that their merger will be approved. Forget about anti-trust. Maybe with that still hanging over their heads the price remains depressed, but it won’t go much higher until the numbers start to talk. Considering that there’s no FCC limits on speech, theoretically, the sky’s the limit. But now I know better. Aim lower.
So watch out for those low priced stocks. If they start moving up, it’s time to get out. I like to use CMGI as a bell weather. It’s up way too much. It’s a steep fall down.
Granted, the big guns are reporting great earnings. History tells us that there’s no where to go but down when the expectations are so high. And the market is all about expectations and surprises.
But Atlantic City teaches us that everything comes back. After Nebraska, even the E Street Band came back. Better than ever no less. Some day, if I get the energy, I’m going to Google Vinny “Mad Dog” Lopez, to see where he ended up. I don’t think he ever came back.
When Hedges Go Bad April 26, 2007
It happens. Sometimes the most perfectly planned strategies can go awry. That’s the paradox of hedging. On the one hand, everyone wants their stock prices to go up, but on the other hand, you don’t want it to go up too much. Who needs these kind of complications. Wouldn’t it be much more simple if everything was just “buy low, sell high”?
I should have seen the signs this past weekend, when the landscaper gave us his estimate to remove our dead and dying hedges and “pretty up” the front area of our house. I loved my dead and dying hedges. It seemed wrong to pay someone to belittle and then destroy my hedges. But that’s what it will come to.
As it turns out, life mirrors life.
Today was an interesting day. Not particularly profitable, but interesting. Sure the market was up, another record, no less, but it was another of those disappointing kind of days. The overall market was down and with the exception of one of my portfolios that has a large Apple position, all of the others were down, as well. And there is more and more talk about the strength of this bull market. As my good friend and buddy told me, in his world, this is a set-up for a “reverse lock”.
So what was interesting about today? First of all, I woke up to the kind of news that at first sounded great, but after one or two full neural circuit laps I realized that Apple moving up 9 points was not such wonderful news. At first I calculated all of those wonderful profits on the heel of a 9 point gain, and then I realized something. I sold my soul. Those 9 points don’t belong to me anymore.
Granted, I’ve felt like a genius the past couple of months as I’ve sold, bought, sold, bought, sold and let lapse various Apple options. Since Apple has been a fairly volatile stock, its options premiums have been very good. Too good to resist. But sometimes, resist you must.
So I sold Apple May $95 and Apple May $100 options a couple of weeks ago. Up until yesterday, it was looking like a good idea. Apple would linger below $95, I would let the options expire, pocket the premiums and then do it again for June.
What I hadn’t counted on was the surge in price this morning. All of a sudden, I’m at risk to lose all of my Apple shares, but that’s the risk you take in this kind of hedge strategy. You get downside protection, but risk losing out on the upside.
In a nice turn of events, and this is where it gets perverse, Apple gave up about $5 of its gains by the close and finished below $99, so there’s still a chance to hold onto the stock that is pegged to the May $100 options.
Of course, if Apple is above either of those strike prices the day before the expiration, there’s still the chance of buying back the options, at little to no time value, only intrinsic value and keeping the stock. That will work if I think Apple will still keep climbing. But I don’t think there will be that much more upside, at least not until the next major product release figures.
In essence, what I’m saying, is that today was a non-event, in the world of my Apple shares. Who knows what will transpire over the next 16 trading days. That’s when the options contracts expire. In my ideal wold, I wouldn’t mind losing some shares at $95, as long as I can get a good premium on the remaining shares for June’s contracts, either June 100 or June 105.
Part of the strategy sometimes has to also be predicated on tax issues. Some of my Apple shares are in the long term area, whereas others, if exercised would put me into a short term gain position. It may end up being worth it to take a loss on the options, just to hold onto the underlying stocks and avoid the extra tax liability. Too complicated. Again, the “buy low, sell high” is much more appealing, but not as much fun.
Now, for hedges gone bad in the opposite direction, we have LSI. It seems like it’s always something to do with LSI, doesn’t it? Today LSI got hammered. Huge increase in profits, but a small drop in sales. That was interpreted as bad news, and it should have been. But the market was generally positive on LSI’s merger with Agere a while ago and the next quarter may show whether they were justified. If so, look for $12.50. Otherwise, it’s back to $8.25.
In the meantime, LSI dropped almost $1.00, recovering nearly $0.50 from its lows. LSI will be back, I’m sure of that. What probably won’t happen, though, is that LSI will not recoup enough of its price by May expiration to make a June options premium attractive to me. So it will probably be time to get rid of LSI and put the money elsewhere.
I’ll be forlorn, but we have to move on.
As I think more and more about this concept of “reverse lock” I wonder just when to make my moves. It may be time to take profits now and buy back after the next show drops.
And as if Apple and LSI weren’t enough, today was actually another good example of greed and the shoe dropping.
I’ve held shares in Level 3 for a few months. This past Friday, the options I wrote expired, leaving me with a 5% premium profit for the second month in a row. I considered selling the stock on Wednesday, for an overall 13% profit in less than 3 months. I’m not certain why I didn’t. That’s probably where the greed came in. But, you guessed it. It tanked this morning, and it lost about 10% of its value.
I don’t know what the impetus for Level 3’s drop was today. I haven’t checked the wires, but are any of the reasons ever really valid? Similarly, I don’t know what the impetus will be for the market decline that is surely coming our way, as a response to all of this bull talk, but it’s coming. My guess is that they will go simple, and blame it on oil. The esoteric excuses just never caught on. That’s probably why the last market fall never really had legs. No popular support. Too obscure for Main Street.
I’ll blame Level 3 on oil prices, too. Reading the wires will just make my head spin.
And there can be no doubt, that it was oil that killed my hedges. Or the Yen Carry Trade. Take your pick. If you do, then addle up next to the presumably unregistered aliens that will be taking up picks and demolishing our landscape, in an effort to save it.
Sometimes that’s what you have to do.
Throwing in the Towel April 25, 2007
A bad sign on a great day.
We’ll get to that later. But today, it became very clear that he nation does not embrace the “one square” concept. The durable numbers report spoke loudly and clearly. And the stampede was on. The bulls came out of the woodwork. And they were in a wiping frenzy.
Oh yeah, and housing numbers were good.
Huh? How exactly did that happen? Everything we’ve been hearing for the past 6 months has said precisely the opposite. And to confirm that the original opposite data may have been accurate, two of the largest home builders, on the heels of their poor numbers, announced that they were no longer giving guidance. Usually, the market looks at that as a negative sign, but maybe since the Blackstone Group announced that it would not give guidance once it goes public, the street has begun to think differently.
I don’t want to make this a habit, but for the second day in a row, I evoke an image of another Seinfeld episode. “Opposite George”. When everything you do and say is wrong, just do the opposite. There can be no doubt that the mass psychology that drives the market is consistently in error. But everyone knows this and yet the herd is still king.
So what does the market do on such a day? A day when we proclaim our right as Americans to unlimited use of personal hygiene squares we must do something memorable. What did it do, you ask? Did it teepee the Stock Exchange, or better yet, Sheryl Crowe’s home? No, the market goes wild. No body parts are bared, but there was, as Allen Greenspan would have said, “unbrdled enthusiasm”.
Today was pretty much of a straight upshot day. There was a little hesitancy in the late morning, but once the Dow tested and re-tested that 13,000 level, it just shot straight up. But sometimes 13,000 is only a number.
And that’s where the towel gets thrown in. That’s the bad sign. There was lots of talk today about how the short sellers were giving in and buying shares. Amazon was a good example. Great earnings were just reported and the stock soared. Supposedly, the large, very large short position was responsible for the move. Sure. The great earnings had nothing to do with it. Is there anyone who doesn’t shop Amazon? Maybe the shorts don’t, but everyone else does. I think there are more of us than there are shorts.
All of today’s talk focused on what factors could derail the rally. That’s another bad sign. Everyone is now on the rally wagon. Interestingly, no one mentioned sub-prime, Yen carry trade, international markets, the housing bubble, Iran or the other usual suspects. That is, except for oil. But the last time we were warned how the rising price of oil could put the brakes on the economy, nothing happened. Oil rose, the expected didn’t occur, and then oil prices fell again. Now prices are nearing $70, the same danger point of a year ago.
And one guy actually said that tomorrow’s earnings report from Ford could weigh heavily on the market. Is there anyone in the world who also believes that? As far as the market goes, Ford is irrelevant. While it’s still important in our economy, it doesn’t move the market. And now, it has a new neighbor in the also-ran department, now that Toyota is the global leader in auto sales.
But with all the talk today, no one talked about corporate earnings. It’s almost as if everyone now expects earnings to be great. Once again, bad sign. As soon as everyone is of the same mindset, Houston, we have a problem.
What’s worse, is that no one could actually identify a tangible problem. Everyone was now fishing for some obscure and inconsequential event to cause a market turnaround. That’s bad. They are indirectly saying that nothing plausible could stop this market. Bad, bad, bad. What stops markets like this is too much enthusiasm. Unbridled, they call it.
The perfect word to describe the situation could be found in the playbill my friend showed me this morning. His daughter had 2 roles in a play called “Oy”. Looking at the names of the cast members, I don’t know if any had ever had first hand knowledge of that word in its appropriate context. But that’s what acting is all about. Oy.
At times like this, I hope we get some down days. It’s not that I like losing money. It’s only on paper, it’s that I like trading. It’s much easier to trade when there are some bargains to be had.
I did some trading today. Since I expect relatively little upward movement over the next few weeks, I sold some more call options. Yes, you got it right. I sold more LSI options. Really, I couldn’t resist. The LSI May $10 option went for a $0.45 premium. LSI was at 9.90 at the time and there’s only 17 trading days until expiration date. As seen over and over again, LSI has a great habit of giving a spectacular premium, flirts with the strike price and then drops below the strike. I could have sold my LSI for as much as $10.40 over the past 5 months or so, but every month I’ve been able to wring an extra $0.40 out of each share. That’s more than 4% per month. If I could predictably do this all year, I would have my entire portfolio in LSI. At a 48% annualized return, I could afford to retire in about 18 months.
Please, please, do not take that as advice !!!
I also sold some Goldman May $230. That’s only about $4.50 from he current price, so I think there’s a good chance that I may lose the Goldman’s, but it will come back down, and then it’ll be time to buy some more.
Every now and then when I look at the daily comparisons between the Szelhamos portfolios and the Dow, Professionally managed and Mutual accounts, I feel ready to throw the towel in. I always believe that on each and every day the Szelhamos portfolios should outperform the others. But for three of the past 5 days it didn’t. But before I can even begin to drop that towel, we get days like today. Szelhamos usually does great on really up days, and holds its own on really bad days. All in all, it’s those boring days that it tends to underperform. Maybe that’s why I hate quiet days.
Speaking of underperforming, tomorrow is the day to report on Sirius. On a positive note, my rental car has a Sirius radio installed. This one hasone of the newer models. As I listen to CNBC, the LCD screen not only gives the Dow, but also the most actives. What a great diversion from being attentive to details on the road.
I am definitely ready to throw the towel in on Sirius, the stock, but you’ve got to love Sirius, the radio.
With or without Imus.
No, I can’t Spare a Square April 24, 2007
About a month ago, a colleague gave me an idea for a blog topic. So I took her suggestion and into cyberspace it went. I particularly enjoyed writing that one because it evoked some happy memories.
End of story? Not quite. On occasion, I re-submit Szelhamos Rules blog entries on a website called Helium.com. This site rates articles from its many categories in a form of writer’s competition. To make it even more interesting, you can get paid for your submissions, based on your article’s standings in the ratings and the number of people that have read your article.
So after that topic was suggested, I wrote a blog that was entitled, “Is Enough ever Enough”. After posting it on Helium, a few days later, I received an e-mail saying that this was going to be their feature article of the day. As the featured article it received many hits, and a number of those then checked out the Szelhamos Rules website, which was referenced in the article.
Well, when this colleague makes a recommendation, there is reason to listen. Her track record is great in pretty much everything, especially weather forecasting, so it should not have come as a surprise since she has her finger on the pulse of everything. She is in touch with what is going on in the world. In fact, it was she who introduced me to Ing Financial a few years ago. Nice.
I must admit, that although I knew of Sheryl Crowe’s recent Earth Day related recommendation to limit our use of toilet paper to a single square, it never dawned on me that this could be the topic du jour. But no one is a better arbiter of cultural and societal mores than my esteemed colleague.
It seemed only natural that the mere mention of limiting one’s self to a single square would evoke memories of a Seinfeld episode. There aren’t that many television scenes that take place between women in adjoining stalls, so you probably know what scene I’m talking about.
I admire Sheryl Crowe’s frugality. My concern, as always, is not for personal hygiene, it is for the health of the economy.
Granted, now that I know of Sheryl Crowe’s personal habits, I will probably politely decline to shake her hand at next year’s Grammy Awards. But I will be glued to the news wires tomorrow, since it is the release of the all important Durable Goods numbers. What I don’t know is whether toilet paper is a durable good. It certainly was in the 1960’s circa eastern European bathrooms. Hacksaws were mandatory equipment. I think this is where dermabrasion was originally conceived. It just took a couple of decades to move it to where the sun does shine.
Although the market was up again today, the 16th time in the past 18 days, it was still pretty boring. I was disappointed in the action of NYSE. I briefly considered re-buying some deep in the money call options, this time for September, but I passed. I don’t think NYSE will climb back up quite as fast as it did last time, but it will retest the $100 level.
Because LSI fell about $0.25 on Monday, I never did get to sell my options. But sure enough, it was up $0.35 today. If only those days had been reversed. That would have been the perfect scenario. So we’ll see what LSI does today. It’s such a cheap stock, there’s not too much to lose. It’s hard to say no to a monthly 4% income stream.
Of course, just as soon as I can say that “there’s not too much to lose”, there’s always Sirius.
However, to give you a couple of examples of how easily numbers can be manipulated, I give you two recent recommendations. Whirlpool was a buy and Vonage a sell. In order to standardize results, I report on the outcomes 2 weeks after the recommendations. I factor in any days when the market was closed, so that all recommendations are put to the test for 10 trading days.
My Whirlpool recommendation went up 3.5%. Had I waited an extra day, that day being today, when Whirlpool went up $12.50, you could have added another 14% to those returns. In either case, the Dow was up 2.8%. Still a winner.
Vonage on the other hand went up 30.7% after a temporary judicial order allowing it to add new subscribers was handed down. My 2 week period ended the day before, so the recommendation showed a 4.6% gain. Had I waited an extra day, it would have been a 24.7% loss.
It’s amazing how quickly a stock’s price can change, so it should come as no surprise that market sentiment can change just as swiftly. Who knows what the precipitating factors will be. One moment it could be a judicial order, the next it could be a plea to wipe more efficiently.
Tomorrow may be that perfect example of sudden change. Market sentiment may change radically if there is a perceived fear of decreased toilet paper use. Mr. Whipple, of late Charmin fame, is rolling over in his grave. But, Elaine’s words will finally have some meaning. “No, I can’t spare a square”. How I’ve waited for those words to ring true.
I’m in Heaven April 23, 2007
I still remember anxiously awaiting what I thought would be the best day of my life. It was about 45 years ago. I would be in heaven. It was just going to be so, so good.
It was the day that my two best friends were going to meet each other. One of them was my best friend who lived in the same apartment building. The other was the best friend that went to the same summertime bungalow colony. Even though we lived in the same city, back in the old days, your mother did not drive you from place to place for your “play dates”. Back in those days, you could have more than one best friend. Life was simpler then.
In fact, I didn’t know of any mothers that had drivers’ licenses, back then. Mine certainly didn’t. So getting a child from point A to point B was not so simple. Unless it was truly an emergency, there was no compelling reason to get on a bus or subway with your child. Much like our poor house cat, Marbles, who used to freak out every time we took him out of the house. Marbles knew that the only reason we would take him out was to go to the veterinarian’s office. Marbles didn’t like the vet. Well, like Marbles, as a child, I knew that if my mother dragged me along to get on a bus or subway train, it wasn’t going to be very good. We were probably going to the sadist, Dr. Adams, to get my weekly B12 shot.
But this time would be different. Especially since I didn’t have to get on the bus.
So on this much anticipated day, my two best friends met. Sidney and Kenny. They hated each other. I was devastated.
Today, not even Google can help me find these two. But speaking of Google, which I never need an excuse for, yesterday was another one of those potential, “I’m in Heaven” kind of days.
I know what you’re thinking. Yesterday was Sunday. What good or exciting thing coul possibly happen on Sunday?
I was settling in to catch a new episode of the Simpson’s, and what do I see as the opening scene? Marge is sitting at the kitchen table, with her laptop, and she is logged into Google! Next, they show Marge taking full advantage of everything that Google does, and does so well. As in real life, sometimes you search and you find things that you wish you had not, and sometimes things are not what they seem to be. Marge, who increasingly is seen to have an addictive personality, falls into internet game play.
But Google isn’t responsible for that. In this case, it’s more the responsibility of the story writers.
So I sit here awaiting Heaven, Part 3. The trading day after the big Friday run-up. Heaven, Part 2 was last night’s episode. It came only 45 years after the disappointing Heaven, Part 1.
I’m anxiously awaiting LSI’s opening. I need to get a life. I wonder what Sidney and Kenny are doing now? I hope they’re doing better than LSI, it’s down almost 2%. This isn’t the time to sell options on it.
Right now, the market is meandering. Not reacting too much from the announced $90 Billion sale of ABN Ambro to Barclays. Do you remember that it was really not that long ago when our GDP first hit $1 Trillion? Now, we’re getting single company buyouts that would have rivaled our GDP numbers from a generation ago. Had anyone in the U.S. even heard of ABN Ambro more than a few weeks ago?
Today, my wife was home. She had the day off. We’re usually not at home together during the week. She works 3 days, as do I. But we have it worked out to perfection that we rarely overlap. This way, the dog always has coverage. Not that he needs it. He’s pretty self-sufficient.
Anyway, Szelhamos always used to say that my wife had a “flea”, referring to her constant need to be up and going. I could usually find out about her day by checking on our on-line banking activity. It gave me a pretty accurate idea of what she was doing, without having to actually converse.
Today, I think that “flea” rubbed off on me. I couldn’t contain myself, and I have already made 3 trades. I finally sold Annaly and Dell. They reached my targets and it was time, although Annaly offers such a nice dividend.
One of the problems with actively investing a retirement account, where these shares were held, is that you can’t necessarily add more funds to it, when you want to invest. I really wanted to buy some NYSE today, with that $4 drop. I didn’t feel like margining shares in any of the other accounts. So that gave me a good excuse to liquidate the Dell and Annaly. If the NYSE rallies a bit, I will probably sell more call options for $100. As it is, it seems as if I got NYSE near at its morning lows, so it’s looking good. We’ll see. Maybe it will do better than Sirius, which got a serious downgrade today.
As usual, it will be time for my Monday afternoon music lesson trip. I have no skills, other than driving, and I don’t even have to do that anymore. My son now does the driving. At least he still needs me until the road test. He doesn’t need me to play the guitar. He’s much more proficient at that, than I was on the accordian.
If fate allows, I will plug into the wireless network at the music studio. Thank you to the unnamed patron of the airwaves.
I don’t expect too much too happen, maybe a repurchase of the Google May $520’s. I’m considering taking profits in the options and then waiting to see if Google heads up again, in time to sell more contracts. Once again, we’ll see.
And see we did. I bought back the Google call options for a quick profit. Small, but quick, and it all adds up. I just dropped my Google basis another $1, for an $11.55 overall decrease, just on options sales.
As it turned out, today would not be another up day. But it was enough already. Still, although not quite in heaven, it was close, as I was able to make enough trades to make the day worthwhile and still got lots done at home. Not bad, all in all.
As far as heaven goes, I’ll still take yesterday. As it turned out, last night’s Simpsons was a really well thought out episode. After more than 15 years, it actually gave some new and interesting insights into the characters. It was funny and touching, as well. It portrayed the complexities of the child-parent relationship in very meaningful ways.
In hindsight, it makes me regret not watching the Simpsons last week, in order to watch Brad Pitt, in Babel, instead. Even worse, for the first 30 minutes, we forgot to turn the sub-titles on. Even the English was indecipherable.
Lesson learned here?
The Simpsons are forever. Brad Pitt is ephemeral. That’s the difference between heaven and earth.
Missing the Action April 20, 2007
I like Fridays.
I’m home all day, sit with my coffee, laptop and television all tuned and I’m caffeinated to perfection. Usually, that is.
This morning the Dow futures are up about 100 points over fair value and Google is showing up 20 points. I really missed badly on that one. The market didn’t follow its script of the past 4 quarters. Good news from Google was never good enough. Yesterday’s news was no different from the past couple of quarters. Great growth, great profits and the market sends Google down. But not today.
As perfect as today should be, there’s a tear in my eye. I’ll be missing the action, at least the first few heady moments. I have a 9 AM doctor’s appointment. What was I thinking? I can’t cancel it, though. It was made 6 months in advance. It’s a good thing I’m not sick. 6 months is a long time. Although, if I sat and really thought about it, I’m sure I could find a reason to cancel and put off that most wonderful portion of the physical. I’m actually having a difficult time sitting, just in anticipation of that event.
Among other things that I’m worried about is LSI. I might end up losing it today. And when I say “it”, I mean LSI. If the market is way up, LSI might pick up the $0.18 it needs to reach its strike price. In the pre-open, it’s already up $0.04. I may end up buying the options back, just so I can sell it again for May. This one may go down to the last minute. But, alas, I have chores to do that will take me away again from the action right before the close. That’s where faith comes in.
There’s no chance of losing the others today, so they will expire worthless and I get to pocket the entire premium. Then I’m free to do whatever makes sense. I usually try to take it one month at a time, but it doesn’t look like some of my holdings are close enough to strike prices that make it worthwhile for me to risk losing the stocks, given their options premium. So instead, they stay or get traded on their individual prospects.
But just like those mornings when the pre-open futures are way below fair value, I can’t get too excited. Things do have a way of changing. Wednesday was a good example. Somehow the market overcame the early morning negative numbers. I guess you can spin the past couple of days however you like. Following a 108 point gain on Monday and another 54 on Tuesday, maybe the fact that the market didn’t give those gains back is a bullish sign. Of course, the lackluster moves the previous two days, and the puny volume, with a lower broader market may give bearish signals. So you can believe what you want, you have an equally good chance of being correct as the CEO of Goldman Sachs. The difference is that no one will ever know or care about your choices. But that doesn’t really matter.
The really good news is that here it is, 10:20 AM and I am back home already. I love it when they’re on time at medical offices. I even had time to stop at The Fractured Prune, a new franchised donut shop in town, to get some much needed coffee and some freshly made, customized donuts. Great concept, if you don’t mind waiting for your sugar fix.
So as soon as I got in the door, I checked the laptop. The car radio had already given me the good market news, but I had to know how the portfolios were doing.
What I have found was interesting was that despite the 115 point gain early in the morning, almost all of my portfolio’s gains were as a result of Google’s 18 point climb. But what was really puzzling was that the Google May out of the money call options were falling. This makes absolutely no sense. The Google May $520 had spiked up to $5.20 from a $3.10 close, tracking an intraday stock high of almost $493, but has fallen to $2.85, as Google is currently at $489. Implausible action. It doesn’t make any sense that I could buy back my options with still 4 weeks to go, at a profit, while Google has gone up nearly 30 points in that time period. And I thought I was smart.
As the day wore on, it seemed odd that all of the things we were told to worry about after that awful day in February, have quietly gone away. Remember that garbage about the Yen Carry Trade? Here we are short of 13,000, all of Europe is coming to our shores with empty suitcases and everything looks good. Even Iran has started to lower the rhetoric. It seems like that might be good for us, as well, sometimes. But this is about finances, not politics.
In fact, it was Szelhamos’ cardinal rule never to talk about sex, politics, money or religion. That didn’t leave much and I am clearly violating the “money” aspect, but for good cause.
By staying long, and actively trading, the Szelhamos account was up 7.0% form the February fall. That compared to a 6.0% rise in the Dow, a 5.1% rise in my professionally managed funds and 6.0% in my retirement account mutual funds. My professionally managed funds did little to no trading during the time period in question. Still, that was much better than selling and parking the cash.
So I headed out for my last mandated errand, and the market was still up about 125 points. I felt confident. And in hindsight, now that I’ve arrived back home, that confidence was warranted. Of course, I still don’t understand the Google options action. But who am I to complain. I profited on both ends of a hedge. That’s not supposed to happen. I’ve never watched an episode of Star Trek, but I know that Spock would clearly label this is “illogical”.
No matter. As long as there’s no white powder on the money, I don’t care if the laws of logic are violated. Given that I have investments in Altria and Halliburton, I might not even care about the white powder, but that’s hypothetical.
I learned something important today. No, I still haven’t learned how to decipher the options action. I learned that I didn’t really have to sit and stare at the ticker all day long for the market to flourish. It was fully capable of doing it without my watchful eye.
Now I know how a parent feels when their children have grown and gone on to productive lives.
But, I’ll still miss the action.
It was too Good to be True April 19, 2007
Fresh off reaching the new highs, I woke up this morning with a new found sense of energy. Far be it for me to suggest that I was high on the high, but even though it’s only a meaningless number, everyone gets so excited about a new record. This one, was a little wimpy by any standard, but at least it was a record, and that gave yet another excuse for unbridled celebration.
As always, when I am out of town, I turn the alarm clock off, as a sign that the day is about to begin. In the past, it was I who, through the wondrous “snooze button” silenced Imus, after a final 15 minutes of lingering in bed. These days, he’s not there to be silenced anymore. That work has been done for me, so now I silence some unknown voice. Imus filler.
Even in Imus’ absence, life must go on, and it still does, as tradition has determined. The next order of business is always business. So on goes CNBC. The really big news of the morning was all about the Blackberry network outage. Apparently there were many apoplectic people out there, outraged that they couldn’t get their e-mails on the go. I haven’t embraced the Blackberry culture, precisely because I don’t want me e-mails to find me. If only there was a real life version of caller ID, you could avoid everything.
But the Blackberry wasn’t the only outage out there. Reports that Intuit was inundated with last minute electronic tax submissions, enough so to crash their system. The really profound news here is that Intuit was able to successfully intercede with the IRS and get filing extensions for all those who couldn’t get their taxes filed on time.
I don’t know exactly when to buy some Intuit, since I haven’t studied their charts yet for any periodicity or trends. But the message I get from this is that there was large growth in the numbers choosing to electronically file. This has to be a good profit center for Intuit. They used to give this stuff away, in fact, they used to give nearly everything away. Not this year. There weren’t the exhaustive kind of promotions and throw-ins, as in previous years. Now, a single electronic filing was $16 a pop, for each return. That’s right. Individual fees for federal and state. And let’s face it, people who used TurboTax aren’t going to switch to the competitor, just because this past year there was a filing glitch. Intuit will be ready next year, and there will be even more electronic filers. I’ll get back to you on Intuit.
The early news doesn’t look promising. Dow futures are way down, so it looks like it may be a rocky start, but really, who knows. These things have a way of exerting their own mind. Maybe yesterday’s record close was too good to be true. But even with that record close, it wasn’t a particularly good day, at least not in a broad sense. Maybe yesterday should have been a warning signal for what is to come.
Much as I would have liked to stay and watch the ticker on the bottom of the set for the next 6 ½ hours, while drinking complimentary hotel coffee, it was not meant to be on this day. For that, I’ll have to wait until tomorrow, although my “honey do” list will tear me away on a few occasions. As for today, work awaited, so off I went.
I had been busily at work, plying my trade, so I had no opportunity to check the ticker until 11:15, despite the fact that it was ever-present on my computer screen. Happily enough, at that point, the Dow was only down 25 points and was improving. I thought that it would have been much worse, based on the early futures. I didn’t know where else it had been or would be going. I suppose that I could easily have checked a chart or two, but I really didn’t have any interest in the past. The future, well that’s another story. If I could tell the future, I could probably afford to write this blog only 3 days each week.
My portfolios are down for the day, at the moment. That’s 2 days in a row. But on some days, as the other day with Ameritrade, a single stock or two, will disproportionately effect the portfolio’s value. Today, those stocks are Altria and Google. But Altria is taking a very well deserved breather, as it will continue its climb to 75. Given its recent climb and today’s report of disappointing earnings, its drop has been miniscule. Especially in light of how much over-reaction there has been to other stocks that reported disappointing earnings. Now, at 69 is a really good time to buy some more.
Unfortunately, I can’t put my money where my mouth is, because I am fully invested, and missed an opportunity to sell Electronic Arts, which was moving up, even on weak market days, only to plunge during today’s session. Had I stuck to my guns and sold Electronic Arts as I said I would, I could have bought more Altria. There will be other opportunities. Although I’ve missed the opportunity on Electronic Arts a few times, already.
Occasionally, I’m happy that I didn’t follow my own advice. So far, I’ve not repurchased shares of Sirius. To me, it’s inexplicable that it should be going down. But it has been and the climb up just keeps getting more and more difficult, as each attempt up will be met by sellers trying to cut their losses. But I can’t take it back. Next Friday is the 2 week report date for my Sirius recommendation. It won’t be pretty.
At any rate, my day continued to be very busy, so I had little opportunity to get an in-depth feeling for the day at hand. But I knew that the Google news would be coming. By the end of the day as I was ready to bolt for the airport Google was down a bit more than $4 and then completely contrary to what I thought would happen, Google’s stock price reacted appropriately to the great earning’s report. In the after hours market, Google reversed course by nearly $12. Putting it within 8% of my strike price, with 4 weeks still left.
Can you imagine that this still new company posted $1 billion in profits for the past quarter. So I expect that the Google May $520 call option that I sold will be a loser, at least on paper, at my typical 2 week assessment period. But if Google doesn’t get to that $520 ceiling, the option sale will end up being a big winner. Of course if Google goes beyond $520 and gets exercised, my options premium profit may seem paltry when compared to the profits I could have had.
Basically, everything is just a gamble. Really not that different from Las Vegas, except that there are no free drinks and nowhere near as much spandex.
And the day ended, like it always must. Today, it eked out another record high, but I don’t have a smile on my face. Partly because it would bring attention to me as I sit in the terminal waiting for my flight. There’s always something unnerving about a solitary figure sitting and smiling.
But there wasn’t much reason to smile, even with this new record high. The promise of new highs was too good to be true. So far, these have been empty new highs that have me concerned about tomorrow.
At least tomorrow is option’s expiration. Maybe there’ll be some action, but even if not, it all starts again on Monday. More chances to make money, more chances to double guess everything and even chances to lose.
So yes, it’s true, we did reach new highs, but it wasn’t good. Maybe tomorrow.
No News is Good News April 18, 2007
I think that I finally understand the meaning of this age old expression. Adages have always been my failing. I still believe that I would have aced the SAT’s if only I understood the meaning of such phrases as, “every cloud has a silver lining”. Idioms, axioms and adages are all so confusing to me, perhaps due to my over-extended stay in concrete operations.
Believe it or not, I have to maintain regular employment. The blog thing does not pay the bills, actually, it doesn’t even pay for the postage to send out the bills. So, despite the self-projected image of an all-knowing and wise investor, there has to still be a reliable source of income, particularly since the “Thunder Down Under” revue just closed. There went my source of discretionary income.
While toiling away at an attempt to make an honest living, I find that my favorite days are Wednesdays. On those days I work until 7 P.M. and am virtually cut off from the days’ events. Have you noticed the days’ events lately? A hermit’s existence sounds pretty good, right about now. There’s not much good going on.
While cut off, though, I still have the stock ticker running and am watching the movement every moment that I can, but it’s usually in a vacuum. If there are large moves, one way or another, I have no clue as to why. I can only imagine that Greenspan has been raving about the robust nature of the economy or has been outed in a rogue transgender magazine. Most likely by Bernanke, under a pseudonym.
Here’s the thing, though. I don’t want to know what’s going on. Especially the Greenspan fantasy. Granted, it makes it more difficult to comment on the factors that may have driven the market, but it’s so much better for one’s sanity. Really, this Greenspan image will be stuck with me for hours. No therapist would even want to attempt to get to the root of this.
Actually, what I thought about mostly today was that it was my cousin’s birthday. Growing up, she was my only cousin. Through the miracle of future generations, I now have more, but she was one of a kind. Glamorous, poised, worldly and loving. In fact, none of that has changed.
Years ago, when she could have easily spent a night in a far more entertaining way, she took me to a Jerry Vale concert. Remember him? I still do. I even remember the green shirt and blue tie that I wore that evening. But mostly, I remember that she wasn’t embarrassed to take her younger cousin to the Westbury Theater in the Round, where everyone could see us.
Unfortunately, for us, there is almost no one left from the Szelhamos generation.
Of our family’s circle, she is, I believe, the eldest of her generation. I don’t know if she would want that publicized, so I probably won’t tell her of tonight’s blog. Anyway, I was never very good at understanding the family tree concept. I am only now beginning to understand just who is related to who, and am finding myself to be continually amazed at the efforts made to simply survive and then to thrive.
But this isn’t really so unusual. For a generation that had so many of its members wiped out in the Holocaust, close friends become family. For me, the lines were always blurred, but I knew she was my cousin. My only cousin. I never really had any clue who most of the others were, but they were like family. Through the miles, though, we rarely see each other anymore, other than at a recent flurry of sad events, with the passing of another survivor.
I saw her just a few months ago. On a day filled with stress and sadness. She was still glamorous. She was still worldly. And she was still poised. But she was something far more important. She was a glue that could hold the family and its memories together, to be passed to another generation and then another.
Anyway, Happy Birthday.
And how appropriate that the Dow should set an all time high on her birthday. Not so easy when the likes of IBM and Yahoo report disappointing earnings. Luckily, people believed the Intel spin. Sales down, revenues up. That’s not a good combination for long term success, but it was good enough for today.
But for the new, now getting old, economy, the likes of Ebay lifted confidence and prices. Of course, as mentioned yesterday, bad news for Yahoo, could only be good for Google. I still expect Google to go up tomorrow in anticipation of earnings, but don’t expect Google to reach $520 before its May options expiration. I hope that it gets as close as possible, and then if it does, I plan on selling Google June 540’s.
In hindsight, seeing the relatively well ordered moves in Google the past couple of days, I’m thinking that my sale of call options may have been a mistake. Now, I’m not convinced that Google will go down after tomorrow’s earnings report. It just didn’t go up enough to warrant a negative over-reaction, as has been the case following previous good reports.
Thanks in part to Ameritrade, with its day after bounce back, the Szelhamos portfolios did well today, but not as well as the Dow. But any gain is a good gain, and it did do better than the Pros and Mutuals.
Tomorrow is another one of those vacuum kind of days. I will be at the airport trying to get a wireless connection and see what has been going on, but I will probably hope that the laptop battery gives out once I’ve finished reviewing the New York Times on-line obituary pages. That is my daily mandatory reading. No matter what, I will resist the temptation to plug the AC cord into an available outlet once the power is gone.
Here too, no news is good news.
They can’t all be Winners April 17, 2007
You may have noticed that Szelhamos now logs buy and sell recommendations, as well as the performance of the Szelhamos portfolios versus the professional and mutual fund managed portfolios. If you haven’t noticed, check out “Investing with Szelhamos” and “Szelhamos vs. The Pros”. I may start taking my own advice. If I had, I could afford to hire someone to write the daily bog for me.
The 2 week performance of those recommendations, compared against the Dow has been very good. I chose two weeks as the standard, because I have a limited attention span. Besides I couldn’t think of a better way to make the results charts. That’s good enough reason. At least it’s honest. There are no footnotes or beware clauses. But there were a lot of winners.
Additionally, since coming online, the Szelhamos managed portfolio performance has been pretty good, but it really changed today, and not for the best. But it could just as easily change again tomorrow.
The market was just alright today. Even though it was up some 50 points, there were some negative signs, and you know that I tend to be an optimist. So I don’t like to see negative signs. For example, despite valiant attempts, the Dow could not close above its all time highs. It came close, but kept backing away. Not a good thing, especially after the big run up yesterday. I would have much rather seen some measure of profit taking today, instead of this pretense of continued upside today. That’s what we saw in Annaly, Apple and Google today. A little profit taking is healthy. Pretense is not.
Globally, looking at some 140 stocks and funds that I follow, there were only about 70 gainers, versus 65 losers. And that split was sen in all of the portfolios. That’s not typical on a 50 point gain day. Even worse, the NASDAQ and Russell 2000 were down today, while the S&P was up only half as much as it should have been, with today’s Dow gain. The only thing that’s missing is the eerie, scary sounding music.
None of this is good. Tomorrow’s action will be very dependent on the after hours earnings reports by IBM, Intel and Yahoo. Here’s hoping for good numbers. I don’t expect great numbers, though, not even good numbers. As far as Yahoo goes, its bad news is good for Google, so maybe a little bad news would be okay. Some lose, some win.
Of course, I would be happier if not for Ameritrade. Occasionally, I do speak about clunkers. Ameritrade is another one of those. For me, at least. There was a failed option strategy, as well as a mistake in re-investing the special $6 dividend from a year or so, ago. Just one loss after another.
Sometimes it’s hard to distinguish between bad judgment and greed. Greed is a recurring theme for me and should be avoided, at all costs. Bad judgment can only be identified in hindsight, whereas greed can be predicted, although it’s pretty easy to identify losses.
My failed option strategy was to sell long term call options. I don’t do that very much anymore, even though I had a good run with some long term options in Google, Genentech and LSI. At the time, the large premium was so enticing. What I didn’t count on was Ameritrade heading down, and because so much of the options premium was for its time value, there was no offsetting options gain. At least not enough. Why didn’t anyone warn me?
Eventually, I bought back the options, and made some profit on them. But I compounded my mistake. I never sold the underlying stock. I should have either taken the losses, or at least held onto the options. As Ameritrade kept going down, and as time wore on, those options profits would have been quite a bit greater. Had I held onto those options, most of my now significant loss in Ameritrade would be erased. You live, you learn, you lose.
So, the past couple of days saw some really good movement in Ameritrade, but then came this morning’s announcement. The previous days’ up moves must have been based on false hopes. Ameritrade announced decreased revenues, and the sell action was swift and merciless. I got caught in the eddy. It was amazing to see the pre-open numbers this morning. The bottom fell out immediately after the announcement, and there wasn’t even the slightest pretense of a comeback.
If you removed Ameritrade from the Szelhamos portfolio, there would have been a very slight increase in value, as opposed to the abysmal 0.8% decrease. But it didn’t stop there.
To make matters worse, the impact of Ameritrade was so great that it sent the total portfolio value into negative territory for the day. It dragged the Pros down with it. But, I think Ameritrade will rebound over the next couple of days, at least if the Dow is strong, otherwise it will meander lower. But will I sell it? No, even though I can’t wait to get rid of Ameritrade.
I keep hope alive.
But I’m on that kind of a roll. I know that I still have another week or more until I report on the performance of my Sirius recommendation, but it’s also looking pretty bad today. I don’t think it’ll bounce back enough to make it a profitable 2 week holding. Maybe Karmazin should steer clear of Howard Stern, after all.
Bad Karma.
Ironic, Isn’t It? April 16, 2007
The morning has started out according to plan. Sure enough, despite the decidedly strange Friday after hours activity in Google, following its announced purchase of DoubleClick, its price zoomed this morning. No big whoop, as is said by those who are cool.
As hoped, I got, what I think is a good price for the Google May 520’s. Since I sold the call options, Google’s price has stabilized, and maybe even fallen a little. I expect the rest of the scenario to play out this week, as mentioned on Friday.
Today’s funny news, you might even call it “ironic”, at least if you want to be sympatico with today’s Blog theme, is that Microsoft is bringing up anti-trust issues against Google. Microsoft is apparently siding with AT&T and Time-Warner. Another unholy alliance, although I do own AT&T and recently sold Time-Warner.
Meanwhile, AT&T is` slowly re-building its monopolistic dominance, with only Verizon now in its way. Time-Warner, of course, is now best known for its failed attempt to monopolize content and is hoping to regain media relevancy. Maybe it will ask Google to sell back its 5% stake in AOL.
So often when thre are monopoly or anti-trust issues, you hear consumer complaints. Is there anyone complaining about Google seems to be quite adept at seeding the formation of such unholy alliances.
So Google bought DoubleClick. There’s still ValueClick, and aQuantive, whose prices are way up this morning, in anticipation. Somebody will buy them out, as well. Doesn’t anyone separate words with spaces, anymore?
So you tell me. Which is more of a monopolistic threat? Controlling 90% of the nation’s computer operating systems and their desktops or 65% of its internet advertising? Have you heard Yahoo complain? They’re the ones at risk, not Mr. Softie.
But the reality is that Google got the best of the lot, by doing its homework and paying a fair price. Let the losers scramble for the remaining players. They could just as easily made a run at DoubleClick, now they’re left with the also-rans. Losers. In fact, Microsoft is the real loser, because it matched Google’s $3.1 billion offer. DoubleClick wanted to go with a winner, not a dinosaur. Some analysts say that aQuantive might outpace its rivals, but not if DoubleClick will be in the Google family.
And here you go. They just announced a Google and Clear Channel radio ad deal. Now Google is up a bit too much. But if my Google gets exercised at a price that’s about 10% up from this early morning’s price, my Google profit would be about 16%, not including another 3% in options writing. That’s in 13 months, one of my longest holdings in the self-directed portfolio. In the meantime, the Dow has been up 12.9% in that same period. Google should be even higher. It should only go up, but beware of the market’s reaction after earnings are announced after the close on Thursday. If you’ve done your math, though, you see that for that time period, Google has actually underperformed the Dow. But it’s so much fun! I love the world of “what ifs”.
About 1 or 2 weeks ago I mentioned that I would love to see an Apple and Google initiative. This morning, Forbes.com talks about the fantasy of a Google-Apple collaboration. They call it “Goople”. Love it. I wish I had thought of that.
Speaking of which, I sold some more Apple call options, this time the Apple May 95. I just bought some options back on Friday and now sold them again. I’ve been doing this on Apple quite a bit. In fact, today was the 12th time I have made some kind of sale or repurchase of an Apple call option in the past six months. By doing so, I have reduced my cost basis by almost $5 per share.
I don’t mind losing Apple at that price. The premium for 5 weeks was $2.40 per share. More than a 2% premium for a 5% increase in price. That meets my criteria.
Another call option that I wrote this afternoon was for Grey Wolf, a land based natural gas driller. Its been relatively disappointing of a position, although this is now the second call option that I’ve written on it. Without the call premiums, I’m up about a 5% profit, with the premiums, its up to 8%. That’s not much, but it’s my second Grey Wolf position, having closed out the first at about a 10% profit, before rebuying the stock, at a much lower price, a few days later.
That’s what I hope to do with Google. If it gets exercised at $520, I expect it to ultimately fall back down to the $47-480 range. Then, time to buy, again.
While deciding whether or not to write options, today, I continued with my recent greedy streak. About two weeks ago I wrote that I would sell Annaly, Dell and Electronic Arts if they hit certain levels. And they have, but I haven’t sold. I still think that Annaly may reach $17, but I will probably get out before then. It hasn’t hurt that Jim Cramer mentioned Annaly in a positive way this past week.
Do you think Cramer’s a fan of Szelhamos?. Not a friend, but a fan, for as all fans of Cramer know, there are no friends in the world of investing or business, only alliances.
Although I don’t think that Steve Jobs and Bill Gates could ever have been friends, remove a generation and Bill Gates and the Google duo could have been. Ironic, no? Actually, why even remove the generation? Look at Gates and Buffett. Strange bedfellows? Not really, they’re not in any competing businesses.
Maybe untold wealth through business can make friends. I wonder if Bill and Warren are BFF’s? There may not be that much time left, if the actuaries are right, so hurry. Meanwhile, Larry and Sergei have longevity on their side. They might be the perfect friends, if not for Bill, then for Steve.
Remember the Microsoft – Apple operating system wars? An Apple alliance with Google would finally bring Steve Jobs his justice denied.
There’s the irony. Sit back and wait, while Google does Apple’s work.
In Control and Loving It April 13, 2007
As it turns out, no one wants to be the proposed Iraq – Afghanistan Czar. I suppose that the framers of the constitution always intended to split the offices of President of the United States and Commander-in-Chief. Seems like a good idea, that is if you’re a big fan of the “coup d’etat”. It appears that the current Commander-in-Chief, prefers the pre-Musharef system that worked so well in Pakistan, and other places of historical calm and internal security.
Since the Drug Czar position of the ‘80’s seems to have worked out so well, it only makes sense that we should design another czar like position. The original drug czar went on to conquer gambling addiction, by immersing himself in his work. Oh no, I’m sorry, I got that wrong. His addiction to gambling conquered his immersion in the fight against illegal drugs. But at least he retained his well developed sense of sanctimony. A successful creation of another czarship, would just continue the glorious history of czars in the 20th century.
Whatever.
Now, in another instance of lost control, the neo-con architect of our Euphrades based strategy is accused of being less than honest regarding his girl friend’s position and salary at the World Bank. Hmmm. So this is how he is cleaning the place up. Nothing corrupt here. Certainly an example of losing control and loving it.
Control is important. But circumstances cause us to lose control, I guess because those circumstances are so enticing. Giving your girlfriend a higher salary, enjoying all of those casino comps, how can you say no? Even bad people can lose control. Ask Rasputin.
I sit here listening to a talking head strategizing over how one could catapault from last place to first place, in just one day, in the CNBC investing contest. He mentioned a few stocks, including Vonage, as the kind that could help make that leap. The incredulous host questioned the head, and he responded, that all it would take is a few cents move, on a single, even transient piece of good news. Even in this dead and dying company, the percentage increase could be unbeatable in terms of the contest’s objectives.
He was talking about play money, in a play game, certainly not a a real investment. However, No sooner does he make his tongue in cheek comment, than the after hours ticker shows an immediate 8% increase in Vonage. Someone has lost control, while someone else is happily counting his unexpected good fortune.
I’m about to lose control, not as if I’ve ever had any. I think the last day I had control was the last day I picked up a box of Pampers. In the very near future I’m looking at one child turning 21, and the other getting his driver’s license and just about ready to do his airplane solo, in pursuit of his single engine pilot’s license. Although I have flown with him on one occasion and absolutely loved it, I think I may need some of those adult variety Pampers, lest I lose control, during his solo flight.
Sometimes, it seems that the only place we have control is how we use our discretionary funds. That’s why we are such a consumer oriented culture. I remember a college sociology professor once explaining how the disenfranchised dealt with not being able to buy homes in desirable areas, due to prejudicial lending practices. Instead, they used their money, or shark obtained credit to buy flashy cars and clothes.
I think that guy should join with Imus on the mea culpa tour, although tenure probably excuses him from the tour.
When we don’t have discretionary funds, we just borrow. But deep down, when you factor in the “keeping up with the Joneses” phenomenon, we probably don’t really exercise that much control there, either. We just have to make certain big ticket purchases, it’s completely out of our hands.
As strange as it seems, as a small, individual investor, we have lots of control over our destinies. Even though we can’t possibly make a difference, even collectively, we control every aspect of our destiny with our investment choices. It’s better here than anywhere else.
That’s not to say that we are always successful with our choices, but at least we are in control. Unless of course your 401k is entirely invested in your company’s stock. Maybe this means that there will soon be a cabinet level Investment Czar, to coordinate our investing activities. Just more of the natural extension of compassionate conservatism.
At one time, my son was a Libertarian. I’m not sure what he is now, more apolitically conservative, I believe. But I think I get it now. Sure we need meat inspectors, but we also need to control our own destinies. The perfect paradigm will always be found in the egalitarian stock market that has been created since the internet has reshaped our lives, much like the guillotine reshaped lives in Robespierre’s time.
A perfect example of taking control is this afternoon’s purchase of DoubleClick by Google. In the afterhours, inexplicably, Google fell. The $3.1 billion in cash is nothing, since there is so much cash coming into Google. Add DoubleClick to their mix and they will own internet advertising. YouTube was a lark. This is for real. Google is so amazing in placing ads, I have had over 100,000 ad placements in less than a month for this and one other site. Not bad for $15, especially when you consider that Google has already paid me more than that, as I have passively served as a host site for its content and search.
Google reports next week, after the close on Thursday. I’m expecting a run up prior to the report, especially after the news of this DoubleClick deal is digested. At that point, I plan to sell 510 or 520 May calls, if the premium warrants it. Even though that is currently 10% out of the money, the premium should rise early next week, if I get a $4.70 or more premium based on the current price, I’ll be a writer.
Then, as usual, Google will announce great earnings and growth, and the stock price will fall. So I will plan on pocketing the premium, adding to my de facto Google dividend, and hold Google for yet another month.
Now that’s control. And I love it.
Karmazin to the Rescue? April 12, 2007
Yeah, yeah. Today was a great day for the markets, but that’s not what I wanted to talk about. There’ll be plenty of great days to come. Plenty of time to take glee in the day’s events.
No. Today it’s talking about injustice and a solution that’s so simple, yet so just.
As a little prelude, let me remind you that I hate losing money on a stock, especially when there appears to be little reason for poor price performance.
Sirius Satellite Radio (SIRI – OTC) was one of my clunkers this past year. I recently sold it, after finally giving up hope, that the great white maned savior would rescue the company. That savior was Mel Karmazin. I sold my shares just in time to still be able to claim a short term trading loss. That loss was nearly 25%.
Mel Karmazin, the nearly geriatric version of a media “wunderkind” could not rescue this company, at least not in enough time to suit me. I just gave up waiting for its stock to perform as well as its product performs. I love the product. Channel 129, especially.
Two days after I sold my shares, I kicked myself when the long awaited and often denied Sirius – XM Satellite Radio merger was finally announced. That’s what I had given up on. I thought, as did many, that Sirius was soar, once the merger was in the works.
In hindsight, it worked out as well as it could for me, because Sirius has just continued to sink. So I lost less by selling “prematurely”, rather than holding on to welcome the good news.
Karmazin played coy and disinterested all along about the prospects of merger. Now I understand why. But now, Karmazin, the past brains behind Infinity Broadcasting, CBS Radio and Viacom, may once again have a chance to come to the rescue.
This time, he has a chance to rescue Don Imus, his one time charge at CBS Radio, from the CBS scrap heap, so lovingly composted by Sumner Redstone. After all, Tom Cruise seems to be doing quite well in his post-Viacom life.
I imagine that Karmazin could get Imus much more cheaply than he got Howard Stern. The Howard Stern, not that guy in The Bahamas. After all, you can only mortgage your life once, and Sirius has already mortgaged itself to get The Howard Stern.
But everyone knows that the name of the game in satellite radio is not sensitivity to our national mosaic, but rather sensitivity to the number of full paying subscribers.
Karmazin should let Imus make all of his apologies, which he will probably continue to do, even after receiving the CBS axe this afternoon. Let him make those apologies, then Mel, listen to me this once, make a seriously generous donation to Imus’ favorite charities, as well as some culturally sensitive charities, and then let the great one resurrect his career, with Sirius.
He could do this in less time than an intermission during the showing of Gone with the Wind.
What a 1–2 punch. Just like in the old days. Imus and Stern, except this time it will be Stern and Imus.
Adding Imus to the Sirius roster will add subscribers. Imus has a more affluent listener base than Howard Stern, and his base has evolved, along with Imus, over the years. Personally, I haven’t. I still prefer Billy Sol Hargus to Jeff Greenfield.
This is a good time to speculate on an already overly speculated stock. There is not too much downside to Sirius. Even if the merger is ultimately blocked by the FCC, why would it go down any further, especially since there doesn’t appear to be any merger premium in Sirius’ current price.
And in the no rules world of FCC free satellite broadcasting, Imus should invite his greatest and loudest detractors on the air.
It would be fun to bring up past insensitivities on the part of those ardent Imus detractors. Wouldn’t it be great if this was part of a national trend? Couldn’t you just imagine Bill Clinton discussing marital fidelity with Newt Gingrich and Henry Hyde. You would think, that our collective experience would warn us that the loudest of the detractors have the most to “hyde”.
He may not be funny anymore, but at least Imus never has been a phony. He has never had a “holier than thou” halo around his head. As an offender, he was equal opportunity. An opinionated, crabby, ex-marine, who could get us better insights into the minds of leader wannabes than any of the “credentialled” news staff.
He spoke it like it is and never hid behind nuance, even when the potentially powerful or influential were on his show.
Everyone has known for more than 30 years that everything was fair game for ridicule, satire and insult. And everyone aslo knew that there was no venom or mal-intent behind his words, skits or jokes.
Now that the detractors have gotten Imus off the public airwaves for his use of insensitive words that demeaned African-American women, perhaps they will join forces and call for an end to the derogatory, insulting and inflammatory words of mainstream rappers and hip-hop artists. They have given new meaning to demeaning. Perhaps it’s ludicrous for me to put my fifty cents in, but that’s just how I feel.
These guys make Imus even more pale and pasty than he really is.
So, Reverends. It’s time for introspection. Long overdue, actually. You tend to have a lot more credibility when you tend to your own home before trying to mend someone else’s.
Remember your own over the top insensitivities of the past. Reverend Number One, Hymietown has forgiven you. Reverend Number Two, we barely even remember the Brawley stage of your life. So come together and pray to Karmazin, so that he may come to your rescue.
Minutes Away from Boredom April 11, 2007
Maybe I should entitle this, “it just wasn’t Meant to be – Redux”.
We were on the cusp of nine straight up days, shooting for that elusive recent record of 10. But it didn’t take much to derail the train, just a couple of sheets of paper. Even with Warren Buffet’s recent support, the train went off the track.
This slow upward climb toward the 12,750 record level isn’t over, but it did have a big setback today. Yet the day was like most recent days that comprised the past eight straight up days. It was boring. No real news, no volatility, just mo money, mo money, mo money. And then it just stopped.
And what made all of that change later in the afternoon? What made the market turn on a dime and end up dropping nearly ninety points? What makes it hard to believe is that the boring tedium came to an end as result of something even more boring.
Having spent many years in organizations that somehow placed value on the work of committees, I have read many committee meeting minutes over the years. Very often, the value of the committees was questionable. Not questionable was the cost of convening such committees. As great a waste of time and money as convening committee meetings was, I think this was always superceded by the requirement to produce meeting minutes. Although the volumes of minutes that I maintained did ultimately make for good insulating material in our basement.
Have you ever read anything more boring than committee meeting minutes? Insomnia has met its match. But for some bizarre reason, today’s release of the March 21st fed meeting’s minutes sent the market tumbling. What was so amazing about this was that the fed statement from that very meeting is what actually started the eight day market climb. The Fed’s decision not to raise rates was largely credited for boosting the market.
So now the minutes are released and the world ends up spinning the minutes, with an emphasis on the fed’s continuing concern about inflation. For some strange reason, the thought process was now more important than the thought. Maybe my mistake over the years had been to never, ever read the minutes.
Luckily, the memos have not been released. Who knows what kind of havoc that would bring.
I think that I’ll send a memo to my CEO and recommend that we have more committee meetings. Of course there would have to be minutes. Otherwise, why bother? And the memos. There would have to be lots and lots of memos. Otherwise, why bother?
So today some of my favorites were hit hard, but as I mentioned a couple of blog days ago, I really don’t mind, since options expirations are coming up in just 7 more trading days. In some cases, I consider buying back the options that I had sold, if they become cheap enough, so that I can continue to hold the stock, without fear of exercise.
Both Apple and NYSE fell big today, and I don’t think they will reach their exercise prices. I have Apple April 95 and Apple May 100, and NYSE April 105. Those seem pretty safe. And there is no way that Level 3 April 7.50 and Blockbuster April 7.50 will reach their strike prices, so I plan on selling those stocks right after expiration date. Of course, LSI has just continued doing its predictable thing. You know, I don’t mind making money this way, but there really should be a challenge.
I’m actually thinking of dumping all of my investments and just buying LSI and continually selling call options on it. If past history is any indication, I might be able to retire in 3 years, instead of nine, by pursuing an LSI centric investment strategy.
Or maybe not.
What struck me the most though was today’s activity in Kraft. The poor step-child at Altria, that everyone was happy to dump after the sin-off.
Well, maybe it’s because I spend a couple of nights a week in a hotel immediately adjacent to a Kraft plant, but I like this stock, even more than I love the ever present smell of lime jello in the air. Although I’m told that what I might be smelling is the precursor to the jello. Ecch. Poor Elsie.
After the market turned downward this afternoon, Kraft just kept going up. It is now actually up more than 3% since the spin-off, despite all of the anti-Kraft people. Maybe everyone who was going to get out is now out. That’s good for the near term. Although Altria went down a little today, this has turned out to be a great hold.
Making this even better is the continued speculation that Altria will soon announce a spin off of its Phillip Morris International Group. At that point, I think it will be time to sell the Altria and stock up on the international portion, because you know how they still love to use those deadly products in the rest of the world.
Meanwhile, Electronic Arts and Dell are now headed upward, as I mentioned about 2 blog weeks ago, so it will be time to sell those soon.
Both of these companies have been very frustrating. Dell, I discussed before. Michael Dell needs to go if he can’t clear up all of the reporting irregularities at Dell by yesterday. Otherwise, sell Dell to anyone, before it becomes another Gateway.
Electronic Arts on the other hand is the premier video game maker and distributor. But despite all of the new consoles on the market, it’s stock is caught in a rut and can’t seem to break out. After yesterdays 2% gain, it actually did well in it’s follow-up day, despite the stinker of a market. So maybe it’s time for the much awaited move upward.
Maybe I should have called this blog “Arts and Krafts”. I’ll have to review the minutes, someone on the committee may have suggested that. Who knows, maybe the minutes are important.
It was Worth the Wait April 10, 2007
I hate days like today. The anticipation was just awful. The past couple of days have had no movement, no action and were total yawners. That pretty much describes the close of last week and the beginning of this week.
As the talking heads were making their rounds, the general consensus was that we were biding our time, waiting on the sidelines, until today’s news came in. No one was willing to venture out and take a market position, until the news was released.
The last couple of days have been so frightfully slow because everyone has been paralyzed in anticipation of the soon to be announced news.
So today was the day we had long been waiting for. In the world of profitable investing, data is everything. And now that the data is in, everything is different. In the information age, it really is true that news will set you free. And now, with news in hand, we are free to pursue our constitutional right to make profit by buying and selling virtual pieces of paper, or their derivatives.
Was it the beginning of earnings season? Was it the soon to be released Alcoa numbers that has everyone glued to their news feeds.
No, the beginning of earnings season is just an artificial dividing line that instantaneously changes your outlook on a stock and can change market direction on a dime. For no reason at all. Just because someone applies standard accounting practices in a provisionally unique way to a balance sheet. This is typically a prelude to a federal indictment, or so it seems.
And so Alcoa became the first to announce its quarterly earnings. But in contrast to its performance of the past couple of years, Alcoa announced a good quarter, with year to year comparisons up 9%. Based on the past couple of years, this should portend well for tomorrow’s open, unless of course the numbers re re-interpreted.
But, if a few more surprisingly good numbers are released, watch out. We’re going straight up.
But I think that the real reason that Alcoa is up in the after hours market is due to the real bits of news that came out earlier today, having nothing to do with earnings. The kind of news that absolutely everyone cares about because of the very real impact this kind of nes has on our everyday lives.
So wait no more. As if you didn’t already know, here is the news that shaped and shook today’s markets.
The Anna Nicole Smith mystery is now over. There is finally an answer to that age old question, “Who’s your Daddy?” Poor Howard Stern can get on with his life. And as it turns out, the timing of this is perfect for him, because of the other bit of news today.
Yes, that’s right, Howard Stern’s one-time mentor, and now arch-rival, Don Imus has been suspended for 2 weeks, thanks to his insensitive comments regarding the Rutgers Women’s basketball team.
These are the market shakers. And the trickle down has begun. Proctor and Gamble dropped its morning ads on MSNBC, wishing to distance itself from Imus, or perhaps from the lowly rated MSNBC.
The Don Imus debacle is a perfect metaphor for the spins du jour that seek to dissect out each and every move of the market.
In the past, the talking heads would pounce on any public figure who was caught in any kind of scandal, explaining why their mea culpas were poorly executed.
Conventional spin wisdom had it that a full and sincere apology, as quickly as possible, would put the issues at rest. You remember, everyone said that Nixon should just have owned up to his mistakes. Come clean. That’s been the pithy recommendation by all of the damage control consultants for the past 30 years. Whether it was a wayward preacher, an adulterous president or a style setting CEO. Just come clean.
So Imus does precisely that. He makes his appearances on radio and TV shows, apologizing for his words. His remorse seems sincere and he offers no excuses for the words that he uttered. Fascinating that he would be uttering his mea culpas on air to an individual who has yet to apologize for almost single-handedly sending New York into a race riot in the ‘80’s.
Well, the spinning heads need their air time. So they unanimously attack Imus for overkill in his apologies. Too quick and too much. We didn’t have to wait for his apologies, or his apology tour. But it doesn’t really matter. You just can’t win.
I won’t miss Imus if he doesn’t come back. I still listen to him 3 mornings or so, each week, only because his station has the best reception for my morning wake-up. I miss the Imus of 1971. He shared the morning radio line-up with, I kid you not, Oogie Pringle. Anyway, Imus was hilarious. He had one of the funniest comedy albums I had ever heard. I think I may go and check on Ebay to see if there are any available. While I’m at it, I miss Woody Allen, too. And look at him. No apology, happy in life and in movie making. I won’t wait for his apology. Just be funny again.
The sober Imus, the one who does lots of good deeds and for all of the right reasons, is not very entertaining and is ghastly to watch on TV. Thank goodness for the oversized cowboy hats. But for some reason, the high and mighty all pay homage to him, and regularly appear on his show.
Those people will be fair weather friends. They will wait to see if Imus can get out of this, without forever being branded as a social misfit. If so, they will further capitalize on their association with him. Otherwise, don’t let the door hit you on the way out.
Well, now that the news has been disseminated, it’s time to get on with the excitement that the market’s volatility brings.
How I missed that volatility. The excitement. The steep ups and downs. But it looks like the waiting is over, we should get back to the normal level of forced uncertainty by tomorrow.
But then, as a I look at the bottom line, it wasn’t so bad, after all. Maybe boring is good. Eight straight up days. The Dow is up about 2% and I’m up more than 3%. That’s much better than the nail biter days. At this rate, I could be up about 100% this year.
That would be worth waiting for.
It Just wasn’t Meant to be April 9, 2007
“There was not much more for us to talk about Whatever we once had was gone…..”
Immortal words from Harry Chapin.
That’s how I feel today, on this my first day back from vacation. I was fully expecting a busy, robust day. I wanted lots of excitement, the kind that I couldn’t get in Las Vegas. Why would people paint their faces blue, anyway? And the drum banging. Enough, already.
So it looked like today would get off to a great start. Oil futures were down, way down. Through the course of the day, oil fell by more than 3%. You’d think that they would be a good stimulus for a big move up. It just wasn’t meant to be.
And then, on top of that, the Oracle of Omaha, Warren Buffet announces big buys in America’s infrastructure: railroads. When transports are strong, so goes the axiom, America is strong.
Actually, I just made that axiom up, but it’s true.
Planes, Trains and Automobiles as a movie had its moments, but as investment advice, it is precious right now. Although you would like to think that the Oracle’s coyness would have driven all transports up, but not today. It just wasn’t meant to be.
And what’s more, there were rumors of private equity taking over Dow Chemical. More great American industry attracting interest. That should help boost everyone’s confidence. I know it boosted mine. But this is the second time in a month that those rumors have been denied by the good people who bought us DDT. It just wasn’t meant to be.
And the market? Nothing. It just wasn’t meant to be.
We’re about an hour from the close and the market has just turned negative, after teetering all during the trading session. Oops. Now it’s up.
Of course, we’re now at the time of the month that I often hope that there isn’t much upside movement. When we’re 2 weeks away from options expirations, I always like to see sideways movement, so that my optioned stocks can live to see another day.
So far, it’s looking good. I have outstanding options for LSI (what else is new), Apple Computer, Level 3, Blockbuster and NYSE. The average holding time for these options will be 5 weeks. The cumulative net premium will represent an annualized 6.5% return.
Although, you never know what can transpire over the course of the day, much less the next nine trading sessions, but I’m feeling pretty good about keeping all of these and then going onto the next step.
It’s not quite a 12 step program. It’s basically just a 2 step. Even I can master that, as I continually strategize over how to escape going to dancing classes, with my wife. Today’s moral dilemma is whether I should tell my wife that a second class in ballroom dancing just opened up. I hate moral dilemmas. Although I can rationalize not telling her by remembering today’s mantra: “It just wasn’t meant to be”.
As I still ponder what road to take, at the moment, I’m in the waiting room of my son’s guitar teacher. It’s comfortable, there’s background music, usually Peter Frampton, although not always very good, and there’s a wireless connection.
That wireless connection is very important, since the lesson goes from 3:30 until 4:00. Wouldn’t you know it, just at the most important hour of the day. But nothing at all is happening, not in the markets, not in the world. My current favorites are all down today. Altria, Annaly and Apple. I see a trend developing. But they deserved a breather.
And that’s what today is, a breather. Just like me, the market is jet lagged, or as my wife calls it, jet ragged. In a very perverse way volatility in the world drives these markets. It’s all about perception of supply and demand of the things that we value. Oil, life saving drugs, LCD screens, corn, you name it. Do we want it and is there enough of it. It’s all so simple, but the two factors in the equation are always changing, for everything.
None of these stocks pay dividends, so the retained premiums are my dividends. But I assure you that if Pfizer approaches $27.50 and Altria nears $75, I will sell those calls that expire soon after the ex-dividend dates. Nothing beats double dipping.
Take Zelnorm, for example. The FDA has withdrawn it from the US market, although the Swiss government has not. Funny that a Swiss pharmaceutical giant has the rights to Zelnorm, and all of the safety studies were done in Switzerland.
Anyway, my wife loves Zelnorm. She’s willing to risk heart attack and stroke and imprisonment in a Mexican jail. Her plan? Have a neighbor’s elderly grandmother act as her mule to bring the Zelnorm across the border, at any price.
Man, I wish there was a way to capitalize on this.
Meanwhile, while the equation’s factors are all changing, nothing is changing for Vonage. There aren’t that many truly memorable debacles in the IPO world, but this is one. Granted, we witnessed a bankruptcy not too long ago of a vaunted IPO, just weeks after the release, but Vonage is a whole different animal. Somehow the wise men at Vonage are still confident that they can go on, as if nothing had happened. So far, they have been wrong about everything. This is probably not a good time to start listening to them.
Fortunately, I never owned Vonage, although I was intrigued, prior to the , IPO. The technology intrigued me, too, but I never bit, and it looks like no one may ever have the chance.
Every now and then it stinks to be an insider. The sweet deal that Vonage gave its customers will rank among thw worst ever seen on The Street.
But soon, Vonage wil be forgotten and infamy will reign over some other IPO on the horizon.
As far as Vonage goes, you know, it just wasn’t meant to be.
Zelnorm? Who knows? Maybe it will be back. For my sanity, I hope so. Although I know that there aren’t too many ballroom dance classes in federal prison.
All you can Eat April 6, 2007
Yes, it’s “All you can Eat”, pretty much everywhere you go in Las Vegas, but someone is paying the price. Somewhere, watch out, it probably will be you.
This is not a situation where there are winners on both sides, only one real winner and, maybe, a self-perceived winner. In some circles that is synonymous with denial.
But the mentality of “All you can Eat” is now spreading across the world, thanks to unabated capitalism. Although in the rest of the world, it’s not likely that the All you can Eat “bargains” are actually for food. No, food is still in short supply and costs real money. In these places, food is the least likely of the “All you can Eat” commodities.
Where appetites are growing insatiably are in other kinds of consumables, the inedible kind.
India and China are going wild in economic growth, expansion and consumer buying. But how is this really working? Yesterday, in the nation’s newspaper, USA Today, I read a story about a woman in China who bought a new refrigerator for $2,500. Never mind that her monthly salary was $150. Although she marveled at how much food she could store in the new refrigerator, there was some parenthetical dismay that the cost to run it was so high. It’s hard to imagine how she could stock that refrigerator, if she also had the responsibility of paying her bills for those purchases.
Imagine, $1,800 earnings per year and a refrigerator purchased for $2,500.
Using non-subprime lending standards, if you made $1,800 a year, you could afford a home costing about $4,000. And that would be payable over 30 years.
I suppose that out of necessity you can make things last beyond their normal life expectancy. Look at Keith Richards. But in the area of consumer goods, look no further than Cuba. They still have their streets filled with Battista era Studebakers.
But as the Chinese appetite for stuff grows, and there is a sense of entitlement, someone had better watch out, and once again, I’m afraid that it might be you….and me. Because the purchases won’t just stop with the refrigerator. Add up all of the pent up need to consume and the average Chinese citizen will be spending far more than they are bringing in.
What’s that you say? Wages in China will go up, as there is price inflation.
No chance. As long as the government continues its tight leash on the value of the currency, nothing is going up, especially not wages. It’s those low wages that keep the price of exports so low for the rest of us. Can’t mess with that.
If you think that the sub-prime situation was bad, just wait until the Chinese credit markets crash. Although they probably won’t, because they are probably to smart to extend such credit to people that don’t know how to use it. The crash will be elsewhere, all according to plan. Just what we wanted, another conspiracy theory.
Who will win here? If anyone, probably the Chinese government, as they have gotten foreign manufacturers and banks to underwrite the growing demand for credit.
If credit is being extended by foreign manufacturers, no one in China is going to care about their financial straits resulting from Chinese consumer credit defaults. And you know that the Chinese government is not going to clamp down on consumer credit. Easy credit to the less than credit worthy masses buys them more time to delay political reforms. Remember Woody Allen’s observation? Why do people go to war? Answer: For food. And occasionally there must also be a beverage. He can thank Soon Yi for this wisdom.
As long as the Chinese populace is participating in the consumer boom, the party leaders can keep all of the civil liberties to themselves.
But there’s no turning back. You can’t put limits on “All you can Eat”.
“I’m sorry, sir, the All you can Eat applies only to yesterday’s left over plate scrapings won’t go over very well, even with people who are accustomed to brutal government actions.
But I don’t really care about the long term, right now. The Whirlpools of the world are looking good. That is until the monthly bills come due, which will be soon. Buy before the next quarter’s guidance and sell before the next quarter’s earnings report.
At some point people have to make a choice between taking that $150 a month and buying food, electricity for their new kitchen monster or making their coupon payment.
I know what I would do.
Watch out also for the international banks doing business in China. There should be no doubt that they made a deal with the devil to get their foot ultimately caught in the door.
I’m reminded of a Simpson’s episode. Of course, there’s hardly anything that doesn’t evoke such a memory. When Homer proves to be the financial ruin of the Frying Dutchman’s “All you can Eat” seafood business, the Captain decides to prominently feature the gorging Homer in the window, with flashing neon lights, proclaiming: “See the Monster Eat”.
So the mighty international banks wanted to do business in China? Certainly, the quid pro quo was that they would have to extend consumer credit to everyday Chinese citizens. He non-performing loan write-offs in the ‘90’s will be nothing in comparison to what is bubbling in China. Too bad we can’t get some of our money back from Brazil. They have plenty to burn these days, now that they’ve made a regular habit out of slashing and burning the Amazon.
And so, it will all come tumbling down. No matter how you look at it, the Chinese government wins. Bring ruination to the international banks, the industrial and consumer giants and to the nation’s that these powerhouses call home.
But, how about another scenario? What about the unlikely event that the Chinese government will under-write the bailout of the over-extended Chinese consumer. Okay, here’s were conspiracy really kicks in. Where does the government get the money to do this? They simply stop buying US Treasuries and use all of that money internally.
Conspiracy? How is that a conspiracy? Just what will that do to interest rates in the US as there is less demand for our debt? That’s right, interest rates in the US go up, manufacturing and economic expansion come to a halt, and who is there to pick up the slack. Yes, of course, the Chinese manufacturers, with their relatively even cheaper goods, made by happy and contented consumers in China, who know nothing of the responsible use of credit, because they didn’t need to know about it.
They get to eat all they can and won’t even have to pay the bill, ever.
Oh, but I’ll bet you’re wondering how yesterday’s “All you can Eat” Brazilian extravaganza worked out for me.
They really won and I perceived that I lost. But that won’t stop me from trying again some other day. Maybe.
And so I did. The very next night. This time the Japanese won.
High Rollers April 5, 2007
I’m in the city of high rollers.
I’m very out of place here. I tremble at the prospect of losing a quarter in an one armed bandit. In fact, even the slot machines have lost their remaining limbs. So how am I supposed to win?
So then, what to do when in Vegas? Sure, there’s good food, shows and lots of people watching. My favorite people watching event today was in the high slots area. There was a morbidly obese man in a double wide wheelchair. He was feeding the bandit $100 bills, for spin after spin, as he periodically sipped on his beer, puffed away on his cigarette and inhaled the flow from his oxygen tank.
This was a thing of Las Vegas beauty. A true high roller. May as well enjoy things, because we’re all going to end up in the same place.
It’s funny that a couple of years ago, in a run down casino near the Utah border, I saw a similarly afflicted fellow feeding pennies into the bandit.
There are two possibilities here. Either it was the same guy and some of his luck had changed, or the first guy thought that he could take it with him. Why risk the $100’s?
I’m a high roller wannabe, so I’ve got to do something about me fear of gambling. Let’s face it, though, the stock market is a gamble, yet I have no fear nor qualms about participating in it.
I didn’t even have the slightest lip quiver when the market fell 400 points. To me, it’s very perverse that, on paper at least, I lost more in that one day than Szelhamos ever earned in an entire year. There’s something very wrong about that, since Szelhamos worked hard and long hours so that I wouldn’t have to.
But not even a quiver. I had faith that it would rebound. My faith was rewarded and then some.
But once in the casinos, faith will only lead you down the wrong path. How many people have thrown the proverbial good money after the bad? Just one more roll of the dice. Baby needs a new pair of shoes.
Years ago, when I knew everything, I thought that I could outsmart the roulette wheel. My gold expert buddy, who will be guest authoring for Szelhamos Rules, and I drove through the night from our $8 per night campground in Utah to Vegas, some 25 years ago.
We had about $160 and maybe $300 in credit. But we had dreams of striking it rich, without really having to work for it.
Our system worked at first and those singles were adding up. But then, in hindsight, we predictably had a string of bad luck. As I began to tremble more and more with each spin of the wheel, the prospect of losing our eating and living money seemed so real. One big tremor and I knocked over my bourbon and ginger ale right onto the roulette table.
That was it for me. I may as well have thrown up on that table for good shape.
Today though, I am ready to re-start my life as a high roller. In fact it started last night as I plunked down $25 for two tickets to go on New York New York'’ roller coaster.
It was great. Our heads snapped from side to side. I’m still sore this morning, but am ready for some more action.
See, once you get the bug, you can’t stop. Today we’re going to the Stratosphere to do some of those spine snapping rides.
That’s as high roller as I’m ever going to be.
Being 3 hours off, I’m having a tough time dealing with the market. I’m used to checking the pre-open news and prices. Today though, my first check was at noon, Wall Street time. I like to act, not react, so today is pretty much a day off.
Usually, I hate holiday trading shortened weeks. I feel as if I’m being cheated of opportunities to make money. But this week, I don’t mind. Maybe next vacation time I’ll stay in Wall Street’s time zone and do my high rolling where I’m comfortable.
So when I booted up the laptop and tuned into Power Lunch, it appeared to be more good news, so far, at least. Instead of a sell off before the long holiday weekend, we were holding steady.
Maybe the blinking Iranian government, or was that blanking Iranian government, is to be thanked for helping to steady our nerves.
So it goes. Altria continues to impress, even though four days after the new issue, the transfer agent for E*Trade still hasn’t delivered my shares. I couldn’t lock in my profits had I wanted. But I’m not ready, anyway.
And Kraft, poor wretched Kraft? It had a nice up day today, putting it now above its Monday post-spinoff price. It’s what is called “win-win”. Can’t get that kind of stuff in Vegas.
Well, since I felt disenfranchised today, it only made sense to go all the way – cold turkey.
Sitting poolside and having finished this weeks’ People Magazine, I realized that I recognized almost none of the celebrity names. So I did what I think I do best. I scribbled random thoughts, like these, counting down the minutes to return to the room and check on the closing prices and today’s news.
It actually seemed right that the early morning gave us news of Kirk Kerkorian’s offer for Chrysler, of Daimler fame. Interestingly, last night we watched an MSNBC show on the infamous Jeffrey Dahmler. No relationship, as it turns out, although Chrysler’s worth has been cannibalized since Kerkorian’s last offer of about 24 billion. Today’s offer was only 4.5 billion.
I like Kerkorian. We’re in Vegas, so it’s only natural. MGM is an homage to him and he was the driving force behind one of the first IPO’s I ever bought, back in 1983, MGM Home Entertainment, which went private again, just as quickly as it came public. But no matter, I made my profit and ended up buying something else with the profits. That something else was forgettable.
So here’s to you, Kirk Kerkorian. The greatest high roller there is. Not only do you get more wealthy, but you rain wealth on others, rather than tapping them dry.
Let my People Return April 4, 2007
As a freelance biblical scholar, I have literally pored through each and every word of the Pentateuch. The Five Books of Moses. The Old Testament. Whatever your preference. In fact, I have almost done it twice.
I am exceedingly familiar with the various writing traditions and understand the prevailing winds of the times. However, I find myself most skilled at uncovering the lost stories, the ones that have not been handed down, neither via the oral nor written traditions. The very stories that the traditional scholars have sought to keep hidden.
Of course I am speaking of Moses’ return to Egypt. This is only appropriate, with Passover having just started.
Every school child knows of the journey that Moses and his people made through the desert, in their escape from Egyptian bondage. However, what is rarely discussed, and poorly documented, is Moses’ unexpected return to the land of his misery.
Moses was fallible. How many of us has forgotten something on the way to vacation, or during the escape from bondage. He was no different. Nearly midway through his trek to the holy land, Moses realized that he had forgotten to have his mail forwarded. Little did he know that he would never reach his intended destination, but we rarely have the privilege of foresight.
So that journey of 40 years through the desert, it really should have only taken 10 years.
During that additional time, the great psalm writers were busily at work. The not so great psalm writers were also at work. Their greatest contribution to our modern day liturgy? Let My People Return”. It has since been modified, without approval from higher authority, and the antithetical version has supplanted the original.
I write this as I am sitting aboard an airplane, in my now annual attempt to commemorate the return of Moses to his forced homeland. Since I am not particularly interested in setting foot into the Egyptian desert, I’m doing the next best thing. It’s off to Las Vegas. There will certainly be sheikhs and their ilk on The Strip, so there will be no shortage of authenticity.
But let me tell you about the morning, perhaps there’s a sign of Lordly disapproval. I had a 7:10 AM flight. But I was stricken with the plague of sleepiness. When I opened my eyes, all I could see were the not to be believed numbers, 6:17. Would there be more? Vermin, boils, what next? There was no time to call the first born.
In full panic mode, lest the first born be smitten, I woke my son, we bolted out of the house and sped through the rainy roads leading to the airport, which is normally a 25-30 minute drive.
Long story short, the flight was on time and, miracle of miracles, so were we, albeit, the final two to board. Perhaps there was heavenly approval, after all.
One on the plane, my son and I separated to our individual world of middle seats, despite our “A” boarding status, I noticed that many others were aware of Moses’ return to Egypt, as Matzoh boxes were being passed all around. To my right, and to my left, in front and behind. We were all on the same pilgrimage.
For some reason, all of the Matzoh made me think of 3M, as I saw Matzoh Munching Meshoogahs. But, this could not have been a heavenly sign, for 3M is going neither up nor down in any significant way.
But I was resigned to the fact that much of the day I would be in the dark about the goings on in the markets, but I expect no different today, maybe we’ll give up a little, but it’s clear sailing. It will be a good second quarter.
One of the things that gives me a positive outlook is that my speculative stocks are not faring well, at the moment. I don’t really play speculative stocks, but the ones of which I speak are actually sound companies, but below $10 per share. Here’s hoping that LSI rejoins that group, just one last time.
They include Blockbuster, Level 3 and Grey Wolf. I look at this as a good sign when these sub-$10 stocks are not doing well. Money is going in to the big dogs. That’s where the market gets its growth. I would much rather see a 1% rise in Altria and the other Dow 30 or S&P components, than in Blockbuster. Those punies have no trickle dow. They don’t help the cause.
So it’s good. The market is poised to add to its momentum. Maybe an occasional breather, but it’s on.
We arrived in Vegas and in another heavenly sign, as we passed through the sports betting area, what did we see among the bevy of television screens? There it was, in the corner of a bank of displays of baseball and horse racing was CNBC. It stood out like a sore thumb.
I asked someone if you could bet on the Dow, and I received a quixotic look. My son, though, reminded me that I did that every day. No need for a middle man.
Further vindication.
And sure enough, once in the hotel elevator, what did I hear but the unmistakable sounds of middle eastern speak, with only the words “twenty-one” being intelligible to me. This was a sign that I must continue the arduous trip into the modern day desert year in and year out.
Similar to the way Naomi promised her unborn child into the Lord’s servitude, so do I commit to this annual journey.
I will return and I will bring my people with me.
There’ll be no Questions Asked April 3, 2007
I’ve noticed that it’s generally human nature not to ask questions when things are going well.
Did your parents ever ask you, “how is it that you got an A in that course”?
They certainly would have asked how it is that you got that “C”.
Once, in second grade, I received a “U” for conduct. I was in love with my teacher, Miss Spillinger, and as a result of my acting out, I spent lots of time in the corner.
Fortunately, Szelhamos, a newcomer to America at that time thought that the “U” stood for “Uber”. Needless to say, he was quite proud. Or so I thought.
As it turned out, I found out some years later that Miss Spillinger’s father was a client of Selhamos’. I never did find out if anyone other than Miss Spillinger and I knew the truth. Luckily, I was never asked how it was that my conduct was so “Uber”. Believe me, Szelhamos would have asked if he knew that “U” stood for unsatisfactory.
Sometimes, you just don’t want to know the answer. That’s typically the situation as regards my oldest son, who is an erstwhile college junior. At least that’s what the loan payments indicate, as I’ve just complete the FAFSA for the fourth time. The number of credits earned may indicate otherwise, but I’ll never know.
Most often, I’m best off not asking questions, lest I find out. Of course, the innocent Google search will sometimes demonstrate why it’s both best to not ask and not search. This is a derivative of the Clinton military personnel strategy, but you understand. There’s some stuff that you just don’t want to know.
Let’s just leave it at this. Fortunately, we live in a state that considers chickens to be personnel property. I think that’s a legacy to our south of the Mason-Dixon roots. It’s no coincidence that the Perdues set up shop here.
But things are very different when the news is bad. When the market takes a sudden dive, everyone is offering reasons, witness last month. And as everyone saw, the reasons differed wildly. Who was right? Who cares? That’s the beauty of all of this. No one really cares what your track record is, at least not the media. Maybe you, the portfolio owner, cares.
By the way, after today’s stellar performance, with no apparent stimulator, the Dow is back in positive territory, with nearly another 2% to go to reach its recent highs. My portfolios are up 1.2% compared to its highs, with more to go. At least if the pundits are right about Google. More on that, later.
But on days when the market shoots up for no apparent reason, there aren’t too many people asking why, or even offering opinions. In the absence of a world or national catastrophe, it’s still hard for me to fathom large daily swings. But the fact that no one understands the nature of the swings doesn’t stop the experts from opining. Lemmings love opininig. Although lemmings rarely go up.
In the big picture, I think the markets are governed by the moon. What else could explain the tide like quality of the movements that we’ve seen? The moon explains strange behaviors in hospital emergency rooms, why not the strange moves of the market? Wouldn’t you just love it if someone with high street cred looked straight into the camera and said, “it’s due to the actions of the moon, Becky”. I would follow that guy to the moon and back.
But why ask questions? Just go for the ride. Google just got upgraded, so it goes up 3%. It’s been awhile since it’s last series of upgrades. Or do you have a short memory? Barely a month ago, it received a series of upgrades and $600 price targets. So of course, it went in the other direction. But to Google’s defense, as if it needs any, it actually performed very well while the market around it was abysmal. And, to make matters worse, all of the bad news regarding lawsuits and new competition.
Never mind any of those things. Google continually finds ways to make money. Even if a venture fails, the very act of pursuing it probably opened up new doors for even more ventures and adventures. There’s no button-down mentality going on here, as at other places, where even the high level people just pretend to be busy.
Google is one of the stocks that I own that has not recovered its recent lost ground, but it will. It started today. It will more than make up for the lost ground. Once it reaches $500, I plan to look at writing some more call options on Google. I’m still looking for the sweet spot. I would be content to lose my Google at $550.
As Google makes plans to take over the world, I see Mike Myers portraying Sergei or Larry, in his Dr. Evil personna. Today Google announced a deal with EchoStar to monitor, second by second, dish TV viewer’s activities.
Google is creating the new advertising paradigm. Szelhamos Rules, in barely 2 weeks, has had over 50,000 Google ad placements. If Google can monetize this web site it surely is the second coming.
Hopefully, though, Google won’t lose sight of the fact that it is, first and foremost, a search engine. As much inroads as it is making in re-defining the worlds of advertising and marketing, people go Google for the search power.
It is an awesome engine. I hope that they continue to maintain its integrity. If they do, all of the other ventures will continue to succeed, as their captive audience increasingly trusts and values Google products, including hard items, such as the much talked about Google phone.
Actually, I hope Google and Apple go into joint ventures. They would truly be the Microsoft slayer. Of course, the fact that I own shares in both in no way influences that dream.
As I looked over the portfolio, I am still marvelling over the swith from UnitedHealth Care to Altria. It was one of those unintentionally ironic couplings. I had hoped that UNH would stay down a bit longer, as I wanted to re-purchase UNH, but UNH has already started its upward climb. Maybe next time.
AS far as the Altria goes, the expected question by an idealistic one was made. How could you support such a company? It sells cancer sticks.
The answer to that question was quite simple, particularly since we all enjoy the fruits of its upward price spiral.
“There’ll be no questions”.
The Old Days are Back April 2, 2007
There are some things from the old days that I miss and then there are others that are best forgotten.
Today I received a call from a cousin. It was a pre-Passover holiday call. He’s not really a cousin, but probably better than one would have been. He is the oldest child of Szelhamos’ best friend. He is the reason that I still cannot catch a pop-up, and by extension, why Szelhamos’ oldest grandson will never be a long snapper, despite his 6’5” frame. But he always chose me to be on his team. That’s what counts.
We talked a little bit about the old days, that is when his T-Mobile didn’t negatively react with the 59th St. Bridge.
Back in the old days, the extended families would get together for Passover Seders. They’re almost all gone now, but he is continuing the tradition by bringing together the first and second generations. Unfortunately, I won’t be in New York for the holidays, but I will be there in my thoughts and I will remember the wonderful times that Szelhamos had, reveling in his freedom to be observant if he so desired.
Interestingly, the newest Castro wannabe, Hugo Chavez, apparently considers Passover quite sacred. Unlike his atheistic mentor, who will probably have a death-bed conversion, Chavez must have some piety and belief within him. Why else would he ban sale of alcohol on Holy Thursday, Good Friday and Easter Sunday? Isn’t something missing here?
Clearly missing from these holy days are the first two days of Passover, and the Jewish sabbath, Saturday. Either Chavez believes that sacramental indulging is acceptable, or he has a soft spot for “the chosen”. Is there any chance that Fidel will do the “rite” thing and complete his pact with the Almighty? He had a couple of feet of intestine removed. What’s another little snip, appropriately enough, South of the Border.
In a fascinating twist, if Fidel does embrace Abraham and his offspring, will Hugo be far behind? What will this do to his OPEC membership? Only time will tell. The world has seen stranger things, such as the platypus, so this could happen. Actually, Chavez is almost one of the chosen, anyway. I believe that in his inner circles, his surname is pronounced in a very semitic guttaral fashion. Think “Chai”. In fact, it is quite anti-semitic, or at least assimilationist, to pronounce it otherwise.
But until that time comes, I must stick to my beliefs. As my youngest son and I were cruising the other day in an attempt to pile on his driving hours before his road test, I admonished him to pass the Citgo station, even though we were on fumes. The statement has to be made, even if it much like this blog, and there is no one to hear it.
Anyway, the oil boycott is back, at least for me. We’re waiting for you, Hugo, to cross over. That’s probably not a good metaphor.
Unfortunately, another “good old days” event is back as well. More hostages in Iran, and today, a “impromptu” demonstration against the British Embassy. That must have taken the Iranian government by surprise. Yet oil and gold very muted today. No volatility in any of the markets. Maybe we’re getting used to the return of the good old days. Of course, a really welcome return to the “good old days” would have a combination of Harry Truman, Winston Churchill, Ronald Reagan and Margaret Thatcher, back at their helms.
But back to what pays the bills. It was really another great day, today. The market absorbed the deluge of Kraft shares today and the predicted dumping of stock. Yes, Kraft was down, but the increase in Altria’s when issued stock conversion to regular shares more than offset the drop in Kraft. So, despite what you were told by everyone on TV, hold onto your Kraft. The selling will be done soon and then you can get your full value out of the spin off. It was too late to be the when issued shares last week. I got in at 63.00, while continuing to hold pre-announcement shares, with an adjusted price of 53.00, as well as dividends and some new Kraft stock.
I will resist feeling guilty until after the spin off of the Phillip Morris International Group. Then, after I hire someone too count my money, I will wonder how I sunk to such low depths as to invest in the devil.
Last week, I mentioned my planned selling of Electronic Arts and possibly Annaly. Greed is still a factor, and I haven’t gone through with either of those, while I am still doggedly holding onto Dell.
EA was up nicely today, and Annaly continues to butt against its upper Bollinger Band. I’m sensing a breakout, especially if there is some economic slowing and a chance for interest rate drops by August, or so. I see a 17.00 upside to Annaly. EA? I would get out by 53. Even that is pushing it.
There’s more that I want to write, but soon we are heading over to my sister’s home for our Seder. It will be nice, we will talk about the old times and those not with us to enjoy the present times. Fortunately, there are still those who can remind me just how good those memories were and who strive to keep the traditions fresh.
In honor of Szelhamos and other Hungarian holocaust survivors, we will soon launch a web site of pictorial memory. It’s nice to think that some of those old days will always be with us. Move over Chavez.
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