Oracle as an Oracle

I've never done well investing in the technology sector, with a couple of notable exceptions

Let me list my failures: Intel, Dell, Hewlett Packard and Yahoo. There may be some others, but there are times when I buy stocks in companies without even knowing what it is that they actually do.

Probably not a good idea.

Nearly 30 years later, I still recall a close call in the technology sector.

I received an allocation in the IPO for  hot company called Eagle Computer. It was perceived as a real competitor to the IBM PC back in the very early days when a PC cost about $5,000 or more, if you wanted a second floppy drive for storage.

Funny story.

Its charismatic CEO was killed in a car crash on the day of the IPO.

Only an oracle could have foreseen that.

The underwriters actually refunded money to IPO investors and ran their next IPO a few months later without me. Eventually, the proprietary Eagle Computer, bereft of its guiding light, morphed into an IBM clone and then was sued out of existence by IBM along with some other early players.

In hindsight, maybe that's not such a funny story.

I was spooked by the reliance on a single individual and continue to be so.

Technology seems to be highly linked to charismatic individuals.

Okay, sometimes, like Bill Gates, they're not really charismatic, but in his own way, he was. Who else could turn mosquito netting into a sexy way of saving lives?

Ballmer?

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It's Getting Cold

What's in the Szelhamos Portfolio?

I'm glad I'm sitting indoors today.

Even Laszlo the Dog doesn't want to go outside. It's cold, dreary and the grass is wet after a record 13 inches of rain in September. I suppose that dachshund bellies are close enough to the wet grass that they'd rather take a respite from romping on days like today.

Laszlo is sharing the La-Z-Boy with me.

My thoughts are with my kids who are going to the Sunday Night Football game, seeing the Ravens versus the Jets. It's going to be very cold and with rain in the air. Not my kind of day or night.

Listening to the TV commentators repeat what great football weather it is, my thoughts turn in another direction:

Morons.

Lately, the weather down here has been good for only one thing. Growing mushrooms.

Watching Herman Cain jump out of a van and gather mushrooms from my lawn is a clear message that there's been more than enough moisture and that economic times are truly trying.

Imagine if that image was really true. The very idea of paying for my own personal lawn grown mushrooms on a Godfather's Mushroom Pizza is abhorrent to me, but not as abhorrent as eating a Godfather's Pizza. It's that same concept, that of paying a monthly fee for the right to use a debit card to spend your own money, that's beginning to rub lots of people the wrong way.

I guess that Bank of America had that same Herman Cain image in mind. After all, what better strategy than to follow in the footsteps of a winner.

In reality, Herman Cain, instead of gathering other people's mushrooms and offering them off for re-sale, is gathering votes in straw polls in Florida and Kansas, having just won the Kansas Women's GOP Straw Poll, probably the most prestigious of all of the Women's straw polls in the former dust bowl.

Bank of America.should consider using Godfather's Pizza's consulting firm. That firm is so out in front, they already have a fallback ad campaign if Cain falters.

In that event, look for life-sized posters of their new spokesperson, Chris Christie, who is already hunkered down in the Godfather's test kitchen, but is coyly resisting the coaxing to come out.

As the sun is setting early in the eveningI know, from having lived a lifetime on the east coast, that when the cold rainy days in October arrive, it's time to hunker down for the winter and resist the need to go out and face the elements.

Sure, there may be an occasional nice warm day, and sure, despite knowing better, there's always the hope that winter will skip coming around this year, but that's never the way it works out.

I keep thinking that when our youngest son finishes college in a couple of years, Sugar Momma and I will move to California, her home state.

But the other day she asked me what I would do if we moved to California. Would I still spend the entire day parked in front of the computer and the "annoying" people on CNBC?

The problem is that I don't think that they're annoying, by and large. I think Judge Judy is annoying, yet she doesn't.

The reality though, is that I'm glad that I'm sitting indoors everyday. I don't venture very far from my La-Z-Boy, especially during market hours. I don't think that would change very much even after a move to a sunnier and warmer climate, although I might be more apt to head outside to shake off a particularly bad trading session. Maybe a quick glance at the ocean's soothing shores or the sight of a drive by shooting would help to settle some frayed nerves.

This past Friday, after a particularly brutal week, where my "God's Bounty" portfolio of Freeport McMoran, Mosaic and Rio Tinto was emasculated by some other deity, I needed that kind of light hearted romp. Even the Lord's precious metals got swamped, but in hedging my bets, I went with Zoroaster, playing the short side of silver.

Turns out, the movie "Contagion" isn't very funny. It also turns out that this monotheism may be a seriously cramping  belief system.

But early on Sunday, there was potentially good news, maybe even market moving news, hearing that Ali Baba is interested in buying Yahoo!

I don't know what positions Malta or Estonia will take on a proposed buyout, but we need some good news soon.

As opposed to the upcoming winter, I know that spring is coming. I also know that despite global warming things won't change that drastically during my lifetime to substantively change the natural order of things.

With that said, the natural order of things clearly included Yahoo! become a laughing stock and Ali Baba being in a position to buy it, hook, line and sinker.

But when it comes to the stock market, it appears that there is less and less concordance, correlation and connection.

News has become largely irrelevant, at least in terms of predicting market reaction.

The old adage, "Sell in May and go away" had been largely written off for years, just like "Dogs of the Dow" hasn't worked terribly well of late.

But as we closed out the third quarter this past Friday, it seems that the old selling adage may have finally been a winner.

Does that mean "buy and hold" is coming back, too? Maybe Communist hunting is next.

I do know that "buy low and sell high" hasn't been working out lately. Maybe that one will be back in vogue soon. Maybe even sooner than spring's predictable blossoms.

Looking at the early Asian markets trading, right now it's not looking very promising, as we get ready to start a new quarter.

Despite the paper losses of the past few weeks, for me its been a good options premium period. With three more weeks left to go for the October cycle, I'm already ahead of the September cycle.

That's a small comfort, since September was the second worst month of the year, but I'm hopeful for some good opportunities.

Like some of the old stock market adages, it's hard to know when to let go of the optimism. But by the same token, you can't completely dismiss the optimism. Otherwise you'd have to face the dark side and become an avowed short seller.

I'm not going there. At least not yet, the deperation hasn't hit that level.

This coming week our weather forecast is for a couple of nice, very warm days. Maybe a little bit of movement in Europe, a little bit of merger and acquisition news and a little bit of global warming can all help get rid of this gloomy and cold overhang.

In the meantime I'm going to watch the football game safely in the warmth of my home and look for my kids in the stands.

I know that it's highly unlikely that I'll spot them, but if you hope and wish for enough unlikely things, sooner or later one of them is going to happen.

I just hope it's the right one.

Sorry kids. You're on your own on this one. Hope you're bundled up.

Invest like TheAcsMan

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Selling a Kidney for Crack

I know that my short term memory is degraded, but I still remember what 2008 was like. It wasn't very good.

Even if I didn't remember, I could just dig up an old spreadsheet or look through my Quicken archives and would be reminded of the pain.

Every now and then, even though I don't pay too much attention to stock charts, I'll pull up 5 year charts just to see how low we coud sink when times get tough.

Stocks, like people, can sink to unimaginable depths.

Luckily, and totally serendipitously, that was the time that I started a strategy of aggressively selling covered call options and sticking to a relatively tightly controlled universe of stocks, so the pain wasn't as bad as it could have been. Always solid companies, never any speculative plays.

I've always thought of speculative stocks as being Zombies that could come back and devour its master if guard was ever let down.

Back then, though, I also worked for a living and actually made lots of money. In fact, by my estimation obscene amounts, particularly relative to my actual degree of effort.

I like to think of it in mathematical terms, except I'm reminded that the divisor can never be "zero".

Now, I sit and try to generate income from my holdings by selling and re-selling call options on the portfolio's holdings. It's been a really good alternative to the alternative.

As each monthly cycle begins I find myself in an optimistic frame of mind.

This past week, the beginning of the October cycle was no different. In fact, if anything, I was even more optimisitc after coming off an absolutely stunningly good last week of the September cycle.

During that week the market fought back from early day losses on a couple of days and rallied on other days in the face of no news, or even bad news.

Does it get any more bullish than that? Even more so when the markets appeared oversold in previous weeks. Like that wound up coil some people like to use in their attempts at imagery.

Funny how things work out.  I questioned my own sanity based upon last Friday's rally going into the weekend. There were so many open questions remaining in Europe, I never did understand where the optimism was coming from. Despite that, I was still looking forward to a great month coming and lots of new options income.

Did I mention "funny how things work out?"

Despite the terrible market in 2008, I never felt any desperation, even on a day when I may have lost the equivalent of 200 Color TV's (using 1964 Color TV Index).on paper. Having a job and employment income was probably a factor in maintaining a calm demeanor.

A few weeks ago, on the day the NYSE commemorated the tenth anniversary of the September 11th attacks, we had a 300 point drop, yet it was just an ordinary day as far as drops go. No stress and no worries.

Yesterday and Wednesday had very different feels to them. Sometimes it's not just about the magnitude, sometimes there's a qualitatively different feeling. Yesterday, in fact, it was the FOMC report, that led me to believe that they need to measure their words more carefully and perhaps consider "qualitative easing" for a change.

Adjectives can be really hurtful.

Gloom. That's the feeling. The same kind of feeling back in February 2009, which was the last time we'd had a week like this. It was just a couple of weeks later thatthe "Haines' Bottom" was called.

I actually shuddered to look at my largely unhedged positions today. Were it not for the plummet in silver and the subsequent rise in the ProShares UltraShort Silver ETF, which slowly has come to be about 9% of my portfolio, there really would have been some frightening numbers .

I actually have images of the short silver ETF's being my portfolio savior, if we can shave another $3-4 off the price of the metal.

And I don't really believe in saviors, but am willing to accept delivery from my misery. When I'm knocking on the door, I'll take all rites.

Just another form of hedging, that's all.

Unhedged, those shares were really easing the pain. Seems appropriate, as silver is also the antidote to a Zombie attack when forcefully thrust.

But one week into this 5 week options cycle, I was so woefully unhedged that the blows were all full body and the options premium income was much lower than I typically expect. Considering that September was the second worst income month of the year, I was feeling the pinch.

The other night we were watching some show on the National Geographic channel about cocaine. They profiled a Chicago addict who was going through a couple of hundred dollars each day.

Sugar Momma and I both wondered where he was getting the money from and then we found out, even though we both had a clue.

It was from that bad kind of crime that I covered in Wednesday's blog "7 Reasons Why Criminal Life is Great".

But sometimes you do what needs to be done. When faced with your personal stress test you do things that you may not be proud of.

So I looked at my babies and I do love them all and wondered which ones to sacrifice in order to generate some income.

Unfortunately, there weren't any really good prospects. In fact, the only promising position was the UltraShort Silver ETF. Just about everything else was deeply in the red.

Loving all of them equally, but loving the ETF most, it was a difficult decision, but Daddy needed some money.

Sigh. Like an addict going after that crack rock, I sold call options on about 30% of my ETF's. Almost like Abraham ready to sacrifice Isaac for a chance at the unknown.

However, instead of selling in the money or near the money calls, I sold the October 2011 $17 options, at a time when the ETF had already been up about $1.80 to $14.40

Sort of like Abraham using a magician's trick sword.

I've been confident that the metals would realize that gravity was an important contender and haven't been selling the covered calls in anticipation of that realization.

Until now.

I just needed that fix. It really did feel like selling your last remaining kidney for just one last crack rock.

Self-respect is pretty unimportant.

Dennis Gartman, that ubiquitous CNBC contributor must feel the same way, as he told people to "go out on the street and raise cash".

I think he was exhorting people to panhandle. I don't think Mayor Bloomberg is going to be a fan of that strategy. But at least that clears up the question of why Gartman spit on my windshield yesterday morning as I exited the Holland Tunnel.

To his credit, he was the only one out there with a magnetic credit card reader and a Skype connection.

Personally, despite my desperation, I am still the guardian of my dignity and would sooner sell apples or jump out my first floor window.

For a brief moment there was a 100 point climb off the lows when a FInancial Times report was misinterpreted. When the realization came that the report indicated that the European banks needed capitalization yesterday, those 100 points were gone in a flash.

I did take that opportunity to close out sold call option contracts on Transocean and DuPont, in anticipation of some kind of a bounce.

That may be overly optimisitc, as I don't expect the same kind of week closing rally as we had last week.

But at least I didn't take it quite to the lengths of the Greek banks.

The fact that Greek banks were offering lakeside villas for every new account deposit in excess of 50 Euros was not likely to create the kind of extra capital hordes that would be necessary to forestall collapse.

Can you imagine the size of the crack rock that it would take for Greece to pass that stress test?

Interestingly, the Greek banks may be in better shape than our very own Bank of America, where a new account deposit of $50 now gets you a major equity position, as shares have now fallen to a new all-time low point.

Moynihan, stop bogarting that crack pipe.

As bad as today was and as regrettable as the actions were, extending the metaphor, at least I can grow a kidney back.

We've all done it before and will likely all do it again.