What the Hell? (Part 2)

Most people go through two stages of life when they really like certainty and predictable patterns.

Really young kids and really old people. Both tend to get very cranky when their schedules are thrown off or they don't get what they were expecting when they were expecting.

I'm neither of those demographics, being uncomfortably in-between, but I do need the predictability in life to keep my balance intact.

I, too, can get cranky.

For as long as I can remember, ever since I've been interested in the release of the  "Federal Open Market Committee" (FOMC) statement on those Wednesdays, they have one of their eight annually scheduled meetings, the statement has been released at 2:17 PM.

The regularity of the timing led me to scoff at the reports that would cite the release as being anticipated at 2:15 PM.

Amateurs.

I never particularly cared why they chose an odd time, perhaps because it is a prime number and, after all these are economists and numbers wonks, but that was the routine.

By contrast, I do care why Comedy Central starts many of their shows at bizarre times, yet I've never been able to uncover an answer. I doubt that the prime number theory applies. Math is frequently not a strong suit for those in the entertainment end of the entertainment business.

In fact, I've always been so attuned to the FOMC announcement that it became a reason for regular party giving with a countdown to 2:17 PM among me and my many friends and admirers, although most of the time it was just me.

And by most of the time, I mean "always."

Comfortably seated at 12:28 PM, the characteristic voice of CNBC's Hampton Pearson cut in with a reading of the statement.

My first thought was that Pearson had gone rogue and decided to flip the middle finger to the embargo on the statement and  decided that he alone would control the markets.

I thought we'd hear doppler like screams coming from Hampton Pearson as he was being hauled away by SEC security people further away from the microphones.

But no.

Click to read more ...

We're Number One !!

Here's something that we don't see very often.

A U.S. city, state capitol, no less, declaring bankruptcy.

That's almost as unheard of, as say, Athens declaring bankruptcy, except that the buildings in Harrisburg are in a greater date of disrepair.

That decision to do the unthinkable can't inspire too much confidence in municipal bonds, even though the city comptroller has indicated that they are still current on the General Obligation notes.

The cynic in me believes that the decision to declare bankruptcy isn't entirely coincidental.

With all of the world's attention focused on Greece and the EU, we're starting to feel a bit left out on this side of the pond, and if there's anything that we need, almost as much as oxygen itself, it's the spotlight.

I think that Harrisburg is looking toward Florida for its inspiration and wants that Andy Warhol moment in the sun.

Florida, as well as some other states, is challenging New Hampshire's hold on being the nation's first Presidential Primary state.

For some reason, it seems important for a state to be the first, probably because that's where the big campaign money goes, as serious candidates need to get their toehold early or fall into the abyss.

And that spending blitz isn't just restricted to media campaigns.

Take for example the tremendous boost just given to the New Hampshire hospitality industry as Mitt Romney, in return for an early endorsement, agreed to provide Governor Chrisite with an unlimited supply of McRIb sandwiches when it is re-introduced onto New Hampshire's McDonalds' menus.

FIrst out of the box has its benefits in most every competitive arena.

No doubt that Harrisburg didn't want Greece or Italy going first. You just know that when that first one goes, the rest will just domino.

Harrisburg simply didn't want to get left in the dust or ash heap that their $300 million trash incinerator bond had them headed.

Sure, those are quasi-nations within the framework of the European Union, but in an "America FIrst" sense of indignation, Harrisburg did what so many other municipalities around the countyr just didn't have the nerve to do.

No one strives to be #4.

Besides, how else does a relatively sleepy backwater state capitol get its share of attention and maybe eco-tourism, which is not to be confused with eco-tourism. Instead, think "Keynes to the City" as being an eco-tourists most favorite guided tour through bankrupt Harrisburg.

There's no special formula or way to predict who will demonstrate the nerve to take on the unknown. It obviously takes a crisp understanding of risk and reward ratios.

I'm sure that every X-Games participant goes through an extensively elaborate algorithm to determine the appropriateness of their next humanly implausible action.

Sometimes "nerve" can be a funny thing.

There was a time that I had the kind of nerve that didn't mind letting it all ride on a single horse race or spin of the roulette wheel. But during that same period of time, I would break out in tremors at the idea of executing a stock trade on my own, much less look at the paper losses.

But then something happened. I don't have any clue just what it was, but it all changed.

The entire risk-reward perspective had become turned on its head.

These days, I can't stomach the idea of losing even a quarter in a slot machine, but am not really moved by a six figure paper loss in a single day.

I've been functioning like that for quite a while, but today I seemed to take a step backward.

With the market continuing to climb for no real reason, here it was, mid-week, the time that I usually like to grab some remaining pennies on the table. I was still delighting in the fortuitous timing of Alcoa announcing another set of disappointing numbers only to have the disappointment well cushioned by a continuing euphoric market.

Well done, Klaus.

This time, despite the fact that there were a number of opportunities that I would have normally taken, I found myself selling only Goldman Sachs and Time-Warner calls.

I struggled with the decision to sell calls on Sallie Mae and Mosaic.

I mentioned Mosaic yesterday as it was the target of a potential takeover rumor.

Sallie Mae, on the other hand, has just showed some nice strength going into earnings next week.

Yet, I couldn't find it within me to make the sales..

I'm rarely undecided, but the "FOMO" hit again.

Fear of missing out. I was worried that I might miss a quick upside move in either and leave a lot on the table.

The other day I read a nice piece by Phil Pearlman, the resident staff psychologist at StockTwits.

His blog title, NetFlix is on Tilt, examined the tendency to overcompensate for stock losses, using a poker players' analogy.

Admittedly, I know knothing about poker, but I liked his take on "Tilt".

For me, avoiding fear, greed and envy were always primary requirements for keeping your head above water. I always looked at those as raw human emotions, but "Tilt" didn't quite fit that category, but it was also worth avoiding. When asked, Pearlman confirmed for me that "Tilt" was not an emotion.

Still, I was left with the feeling that some kind of emotion has to be responsible for causing one to enter "tilt mode"

The tendency to do stupid things in order to erase other stupid actions isn't an emotion, it's just part of human DNA.

In my case, I had nothing stupid in my near past that needed to be compensated for, but I felt that if I went on with my usual modus operandi and sold the calls, I was going to be left out of the game. There's nothing worse than watching that big shiny ball roll down the playing surface and not being able to do anything to get back into play.

I understand that kind of "tilt", but I also get Pearlman's kind, as well.

Neither is good for long term survival.

By the time the market closed on Wednesday, half of the index gains were gone, and in hindsight, I should have made the sales.

Is "regret" an emotion? It's also just another one of our traits, but it is related to envy. Envious of what could have been or just regretful for what never was.

In the meantime, word came across that Slovakia pulled it together and its Parliament endorsed its role in the expansion of the rescue fund.

For another few days, Greece is spared from what everyone believes is the inevitable.

But it doesn't matter.

Thanks to Harrisburg, American pride is restored.

From a grateful nation, thank you for taking on an unnecessary municipal project, passing the blame onto a previous city administration's cronyism and faulting pressure applied from the State House for making the ill-fated decision.

Can you say "tilt"?

A real leader would have blamed it on the Greeks.

But at times like this, a grateful nation will take any winner as it own.

Here's to Harrisburg.

First in our defaults and first in our hearts.

Invest like TheAcsMan

Option to Profit is available as either an eBook or 300+ paperback. Take a humorous look at a serious topic and learn how to make your portfolio finally go to work for you in bull and bear market environments.

See a sneak preview of Chapter 1.  hoco blogs

More about the book and purchase options. Scroll down and read the Szelhamos Rules blog, updated every weekday.

Find  OTP Book at Amazon, B&N or now you can also Order direct  from publisher. Use 10% Discount Code P4S2ZD8H

  

7 Reasons why Criminal Life is Great

Following Wednesday's Moodys downgrades of Wells Fargo and Bank of America, fresh off the heels of a downgrade of Italian debt on Monday, it was not going to be a good day. The only hope was that maybe our Bernanke led Federal Reserve would pull an incredible rabbit out of its hat and just turn things around.

But for the most part, everyone was just waiting for the anticipated "Operation Twist" and its details before commiting one way or another.

Once those details came from the FOMC, which was uncharacteristically following Obama time for release of its statement, the market didn't like the description of our current economic state. Maybe it just couldn't deal with the fact that there were three dissenting votes

In a couple of blinks we went from being up 14 points to down 283.

Just another day at the office, dear. Just a little bit of dissent in the ranks.

Surprisingly, I don't feel like talking about stocks today, as I took another, largely unhedged pummeling, getting only two call sales made, both on beaten down RIverbed Technolgy, which was probably riding Hewlett Packard's coat-tails up this afternoon, as Leo Apotheker, its CEO of almost 12 months was rumored to bedismembered by coyotes.

Instead, I need to come clean and this is a good time as any.

It's not easy saying this, but at some point the truth needs to come out.

No, I'm not a virgin. A game of Twister, years ago, took care of that. And if I was, I don't think that I would admit it.

But as I sit and really think about it, the criminal life is great. The problem is that I'm not a criminal, but there's still time to re-invent myself. In a society where so many occupations are disappearing, there will always be criminality. Some things can't be entirely shipped offshore, even if the Nigerian princes are more authentic 10,000 miles away.

So then there's the whole credibility issue.

I suppose that everyone is a criminal by some definition. Depends on your society and your own personal values and especially how those values may be at odds with others, especially those with power. The guy who "pied" Rupert Murdoch during the Parliamentary hearings is a criminal, although most people watching the proceedings were probably equally criminal, at least in intent.

Years ago, when Jimmy Carter was running for the Presidency, during a Playboy interview he admitted to having "lusted in his heart". Nothing really criminal about that, but had he said that 20 years earlier he would have been condemned as a godless pariah and cast to the bottom of the heap with the other low lives.

Even Mother Teresa had her detractors, so much so that some theologians, perhaps of dubious merit themselves, believe that she is consigned to eternal imprisonment in Hell.

As I've grown accustomed to sitting on my La-Z-Boy, watching TV and trying to trade stocks and options, I've started to wonder whether I'd squandered the first 30 years of my professional life by toeing the line. Working day and and out, not only paying bills on time, but actually paying and other things that now seem so arbitrary.

Growing up in The Bronx, I now realize that the old neighborhood was populated by Mob families. The fathers were always home, were always around to play stickball with their kids and even had their own little coffee shop with blackened windows. The shirts weren't called "wife-beaters" back then, but I suppose they were.

Plus, the streets were always plowed and they had the best fireworks.

Can anyone say "Winning"?

My Sugar Momma and I have religiously watched COPS for about the last 20 years. Even though neither of us know more than the first line of the theme song, some things have become fairly obvious, besides the fact that some people can garner respect in a wife-beater, while others just can't and never will.

But what we really learned is that there's good criminal life and there's bad criminal life. COPS always portrays the bad criminal life.

Stupid people drinking, fighting, stealing and lying. That's bad criminal life. They seem to live in pretty squalid kinds of surroundings, have home-made tattoos and wear their pants down to their knees. They're often very unattractive as well.

Smart people probably stick to just the stealing and lying part although you do catch glimpses of the smart kind that think that they're smarter than those charged with keeping society safe, if you're in the habit of  watching Dateline.

Those often commit the bad kind of crime sometimes while in pursuit of the spoils of the good kind of crime.

That's a bad admixture. You can't do good by doing bad.

But I now realize that there are lots of good reasons to lead a certain kind of criminal life.

1. You make people feel better about themselves

People are so often much too hard on themselves and often suffer from inferiority complexes. Some have the whole thing figured out and just hang out with even more pathetic people to look good by comparison.

Being subjected to the bad kind of criminal activity let's those with a sense of inferiority know that there is someone even less deserving than they for our world's limited resources. Unfortunately, that kind of activity is often associated with very unpleasant things.

Like violence.

But being subjected to the good kind of criminal activity spurs aspirations, the need and desire to improve their own lots in life by seeing that there is another way to break the chains. There's nothing like a good example to spur people on to bigger and better things.

Seeing a hacker profiled on 60 Minutes makes most people believe in themselves.

If that moron could do it, so can I. And I won't get caught, either.

Not only do you feel better about yourself, but you inject your entire defeatist personna with an air of much needed confidence.

Beyond that, if asked to "forgive" a criminal who has wronged them, what greater feeling can anyone have than the magnanimity to provide grace to those that have fallen?

2. There's no time clock

The only thing you need to keep an eye on is your bank balance. That becomes your internal clock. Don't feel like playing criminal with your buddies today? No problem, take the day off. Want to sleep in this morning? Guess what? No problem.

Raining outside? Hetl, I'm not getting my new Crocs wet if I don't have to.

Shower? I don't need no stinking shower.

Get the idea.

3. Society loves a successful white collar criminal

It's true. They really do, unless they were directly effected. Most people admire the fact that people that can enrich themselves without really breaking a sweat.

The "Why didn't I think of that" mentality is common to our species. Best of all, seeing just how easily it can be done leads others toward developing even better techniques to separate people from their assets.

That is the basis for how we advance aqs a society. Unfortunately, the Chinese seem to be outdoing us at the moment, especially when it comes to the integrity of the companies that they take public.

But then consider who you admire more? The person that inherited their wealth, the person that made others toil to an awful extreme and under terrible conditions on behalf of their bottom line, or one that just siphons off other people's money?

Would you rather be America's next successful white collar crime czar or a tele-marketer? Seriously, which one really belongs in jail?

Wouldn't you rather see Bernie Madoff putting his skills to good use outside of jail and perhaps just cram 20 telemarketers into his cell instead?

4. You feel better about yourself

Not only can you check off "Other" or "Consultant" on those forms that ask about your job industry, but you can also choose any professional degree you like, any annual income and any net worth figure when completing surveys or polls.

Want to feel better than you did yesterday? Forget the Zoloft. No problem, just fill out a new form, maybe get yourself a nice new glitzy business card.

Watching your neighbor leave early in the morning for work and then getting home 12 hours later just reinforces that good feeling. That and the ability to hack into his unprotected wireless network while he's gone.

5. Stronger Family Relationships

Study after study shows that the more time parents can spend with their children during formative years, the better the outcome.

Kids that are able to routinely eat dinner with their parents have been consistently shown to be less likely to abuse drugs or alcohol.

The kids that I grew up with, whose fathers were always at home? No doubt they went into the family business and are passing the lessons learned to their loved ones over a nice plate of pasta and mussels.

6. Expanded personal horizons

There's nothing like a taste of success to move you toward seeking even more success. This is not your typical same old, same old 9 to 5. In the good kind of criminal life there's incentive to do well and to reach for even greater rewards. As you do so and as your enterprises thrive, along with your professional credibility comes social responsibility.

Patron of the arts, supporter of worthwhile charitable causes and other activities that support society, particularly as government support dwindles, are all part of the successful navigation of a career in good crime.

During the process you also learn things that you never learned in school, including evolving talents to meet the needs of the moment. In no profession does necessity translate into invention quite as efficiently as in a life of crime.

7. Improved strategic planning

If you look at the data on retirement planning, it's clear that we as Americans have no clue how to plan for the future.

Choose a life of crime and strategic planning becomes your middle name. Escape routes, alibis, Plan B, and so many more considerations before executing a plan. In essence, everything you do is lived out as if a three dimensional spreadsheet.

Those unprepared to deal with strategic planning are doomed to failure and may as well just work for a living.

These 7 reasons alone are compelling enough to get most people to start on their road toward change.

I haven't even mentioned the popular trickle down theory and how all of society benefits from your creation of personal wealth. Money and the time to enjoy spending it benefits all of us. Restaurants, department stores, pasta and mussels delivery boy. Everyone gets their piece.

Beyond the obvious reasons to consider re-inventing yourself are purely financial incentives that are more than just icing on the cake.

Anyone that's had a workplace 401k knows just how bad those are and how limited the investment choices can be. Together with contribution limitations, there's no denying that the self-employment tax deferred plans are so much more favorable.

Of course the ability to itemize your business related tax deductions are only limited by your imagination.

Need well manicured nails to stay at the top of your safecracker game? Simply take you deduction on the clippers and file. Panty hose over your head? Deductible.

Where do I sign up?

Since this blog is required reading in many elementary school classrooms, I want to be certain that it's clear that I'm not exhorting anyone to a life of "bad crime", but serious thought should be given to being the best you can be at the "good" kind of crime.

It's never too early to begin plotting your life of future plotting. 

Now if only there was a way to have all of these benefits without the laibility of prison.

How great would that be?

Wishful thinking.

By the way, what's your PIN, again?.

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.