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sceneryCrystal Meth   January 31, 2008 (posted 6:00 PM)

I don’t really know much about crystal meth. I’m of a different generation. But I know that I wouldn’t like it.

And this is probably one of those things that a parent would be unlikely to say “how do you know? You haven’t even tried it”. I’m not likely to try it, although I routinely do run my over the counter cough suppressants through a home distillation process in order to remove the impurities.

It’s an elaborate set-up and often prone to flash fires, but is well worth it, allowing me to have the finest non-prescription cold and cough remedies.

But otherwise I’m just not a big fan of frenetic behavior or anything that induces it.

I’d rather be in a purple haze.

Lately, the markets are acting as if they’ve been on crystal meth. Today is the perfect example of freneticism.

Hot off the heels of yesterday’s downgrade of the bond insurers by Fitch, the Dow opened down by 180 points. There’s definitely nothing unusual about that. In fact, it’s probably more unusual these days not to have a triple digit move.

Downright un-American.

On top of the downgrade, the official government jobs numbers weren’t very good. But for no apparent reason, the market made a nearly 300 point turnaround by late morning.

Unpredictable behavior, crystal meth. Need I say more?

Even while the market was at its depths, MasterCard was up about $24 as it just announced great numbers and great prospects for the future. That can only mean that people are spending money. That’s not the sort of thing that you typically expect in a recession.

Never mind the fact that S&P’s top economist said that we have been in a recession since November 2007. He probably pays in cash.

As the crystal meth was beginning to kick in, the market began a “belated Bernanke Bump” and ended the day up over 200 points.

Not bad.

Although, as usual, I got caught being a little pessimistic, since I sold some call options on E*Trade and YRC Worldwide today. I was probably a bit premature in making those sales, but at this age, even “premature” is a treat.

The real turnaround of the day was in Google. Before the crystal meth really kicked in, it was down about $9 in anticipation of the earnings release.

Google has gone down so much over the past month that you really couldn’t expect it to go down anymore. On a P/E and growth basis, it was really getting to be a dirt cheap stock.

And then the stuff kicked it and Google joined the rest of the crowd, finishing the day up about $11.

But here’s the bad thing about crystal meth.

You crash.

Google just happens to fly higher and crash harder than the rest.

Google announced great earnings and the proceeded to get slammed, just like it does every quarter after announcing great earnings. The only difference, at least so I thought, was that this time Google didn’t climb rapidly in the week or two prior to the report, as it has done over the past 2 years.

But as usual, wrong again.

Right now, in the moments after the report that came right at the close of trading, Google was down about $32 points. That only amounts to another 6% or so.

With revenue up about 50% and profits up about 17%, Google posted GAAP and non-GAAP incomes of over $1 billion.

But as usual, not good enough.

Google’s numbers don’t seem to confirm the notion of a recession either. Those dollars are pouring into advertising only because there’s a decent return to be had. They must be selling all of those things that they’re advertising. They’re just not advertising them with Yahoo.

As always, after the post earnings report crash, Google seems to find a way to rebound, as everyone realizes how inexpensive a stock Google really is. But it really is frustrating to see this kind of 2 steps back for every 3 forward kind of thing, when Google just keeps right on doing everything perfectly.

Obviously, when you’re on crystal meth, your ability to have rational thoughts must be compromised. I certainly can’t think of any rational reasons for any of what’s been going on.

Ergo, I am a meth-head.

Once again, Google and Ben Bernanke share something in common. Neither can really catch a break. Google, though, will probably be around a lot longer than Bernanke.

Judging by the action of the markets the past few days, there’s a real split over whether this is a classic “bear trap” and we are certain to head much further downward, or whether this is the beginning of another rally.

I can’t really remember the day to day events surrounding the market collapse in 1987. All I really remember is that my small investment portfolio quickly shrunk, just when I needed the money for a down payment on a house.

Back in those days, you needed 20%. There was no such thing as sub-prime. There wasn’t even PMI. No 20%? No house.

So I don’t really recall the sentiment surrounding Allen Greenspan, who at that time was only in his first year of what turned out to be a record length tenure as Fed Chairman.

Having succeeded the legendary Paul Volcker, who until recently has been quiet about any issues on American soil, Greenspan must have been on the hotseat. You don’t just lose 500 points in a day, when the Dow is at only 2200 or so and not catch a little flak.

But he pulled us through and went on to serve for another 17 years.

Will Bernanke do the same?

I’ll let you know in the year 2025, if not sooner.

What we do know is that the legendary Paul Volcker has lost some of his luster with his recent New York Times interviews, where he broke the unwritten rule regarding slamming any other Fed Chairman.

But he also just came out and supported Obama’s candidacy.

Most pundits have said that Barack Obama hasn’t put together any meaningful kind of economic policy, although he did share the support of Warren Buffett, together with Hillary Clinton.

A few months ago, when Buffett was asked if he would support a Clinton-Obama or Obama-Clinton ticket, he looked at the questioner as if they were an idiot. But he politely said that he didn’t think the combination would be a good idea. That just takes us back to the issue of how many strikes can you have and still win the presidency.

In that case, it may not be the number of strikes, but the quality.

First a Catholic President in 1960, a divorced president in 1980, a woman vice-presidential candidate in 1984, then a Jewish one 20 years later.

Now, in less than 4 years there’s heresy in the air as there’s the potential for a Mormon, a woman and an African American.

Man, what a trip.

We’ve been on crystal meth the past 48 years.

So, I would assume that Volcker’s support is only based on economic issues, so maybe he knows something that no one else does.

Or maybe he’s on crystal meth with the rest of us.

You go, Paul.


Why Bother?   January 30, 2008 (posted 9:00 PM)

I’m not sure why anyone was doing any trading today.

At least before the Fed’s decision on rates was made public today.

Despite a slew of earnings reports from the likes of Boeing, Merck and Eastman Kodak, two of which are still potential market movers, everyone knows that everything hinges on the Fed.

The ability to predict the decision just got more difficult in the morning as the ADP job numbers came out and the GDP fourth quarter numbers were released.

Maybe the Fed governors are in seclusion and don’t know about such mundane things. After 2 days of being locked up during their bi-monthly meeting, they probably get pretty gamey and would do and say anything to get out. Although, I think that being in a locked room with a bunch of economists sounds pretty exciting.

In a nutshell, the data coming in before the Fed’s announcement was mixed. The jobs numbers indicated a pretty good economy and the GDP numbers were showing a slowdown.

Now the worry is that if Bernanke announced the 50 basis point cut that everyone had been expecting, it would be a signal that the Fed knows something that we don't and what they know can’t possibly be good.

More mind games.

As becomes increasingly clear, you just can’t win. John Edwards and Rudy Giuliani will attest to that. But at least they were gracious in their withdrawals. Giuliani especially, in immediately throwing his support to one of his rivals.

A McCain – Giuliani ticket would tick off pretty much most conservative Republicans, maybe even enough for them to slow down their future Hillary bashing. In fact, with McCain around, Rush Limbaugh has completely been ignoring Hillary Clinton and focusing on McCain bashing.

But things will soon return to normal.

If you thought that Dick Cheney was an attack dog, just wait until Rudy is let loose on Hillary and Rush will return to the fold. Because there’s nothing like a threesome.

Although some Huckabee victories in next week’s super-Tuesday primaries could be setting the stage for a McCain-Huckawho ticket, Rudy is trying to get that number 2 slot. He could care less about being Vice-President. He just wants a piece of Hillary.

And really. Who doesn’t?

What a McCain – Giuliani ticket does do is to allow for the unthinkable. Because up until this ticket, no one in their right mind would have suggested a Clinton – Obama ticket. How many strikes could you possibly have against you and still have a viable chance of winning?

The answer is “no more than the number of ex-wives in the McCain-Giuliani team”.

In the case of Romney, who carries his own personal strike in the eyes of evangelicals, due to his faith, the answer is “no fewer than the maximum number of wives allowed by the most underground of sects”.

Think “Big Love”.

But politics took a back seat to economics today. At least, we’re supposed to believe that the Fed’s decisions and policies are not dictated by political concerns. But today’s New York Times already had an article about the next President’s decision time frame on re-appointing Bernanke or making him a one term chairman.

But you heard it first on “Szelhamos Rules”.

And I say “heard” it first, because my principal blog reader is recovering from some eye surgery and is currently unable to read. So we have spared no expense in establishing an audio book version of the blog until he is able to stare at a computer screen once again.

While we were all waiting for the announcement, the market just bided its time. We were pretty much stuck in a very narrow range until the clock struck 2:15.

And there it was.

50 basis points. Who would have guessed?

We went from a 40 point loss to a 200 point gain in just a few moments.

Bernanke scores!

But that Fed rally evaporated in the last 15 minutes, after some of the bond insurers were downrated by one of the rating agencies. Why exactly that was a big deal isn’t clear to me. I don’t even understand why there has to be an industry of municipal bond insurers to begin with.

When exactly was the last time a municipality defaulted on their bonds?

But anyway, great timing, Fitch. A-- holes.

Personally, on behalf of my home equity line, I’d like to thank Ben Bernanke. That 1.25% drop in the last week is like a nice gift.

But it really is too bad that those downgrades came when they did. Besides the fact that I saw all of those gains disappear in the closing minutes, Bernanke can’t catch a break. At this point there’s not much more that he can do.

How much lower can he drop the interest rate? At this point he’s likely to become like the rest of us and just be a bystander as we watch the events unfold before our eyes.

Poor guy. And so well groomed, too.

After the market gave up its impressive Bernanke induced gains, Bernanke was probably wondering himself “why bother?”

Tomorrow, there’s not much going on. It’s likely to be another “why bother” kind of day. Of course, that may all change, if the early sell-off in Asia that’s going on this evening gets worse.

The big news starts at tomorrow’s close as Google announces earnings.

Then, on Friday morning, comes the official government jobs numbers, as well as past month revisions.

And then it all starts again.

At some point, the answer to the question will be “there’s really no reason to bother”.


‘Cause No One Knows What Goes on Behind Closed Doors   January 29, 2008 (posted 9:00 PM)

The tongues were all busy wagging away today.

That’s because today was Day 1 of the 2 day Fed meeting, with a rate announcement scheduled for tomorrow.

Keep an eye on the ticker at about 2:17 PM.

Up until today everyone seemed to be counting on another 50 basis point cut, but then along came the Durable Goods numbers.

All of a sudden, the economy may be slowing, but it doesn’t look as if it’s in a recession.

What’s the Fed to do?

And there they sit, behind closed doors. Seems like this would be a good time for an intervention.

Maybe they should just stay there and wait until it’s safe to come out. Sometimes the bunker mentality is the right way to go, but after the last 1,000 point loss, it’s a little too late to head for the bomb shelter. The shell shock is not likely to go away.

For Bernanke, it will be safe to come out sometime after January 20, 2009. The plume will be gone by then. At that point, the one thing that we can be certain of is that there will be a new President. It’s pretty unlikely that Bush will be able to pull off a Putin-like power hold. Unless Ted Kennedy is so mad at the Clinton’s that he might champion another constitutional amendment to keep Bush in office.

Four more years. Four more years.

But whoever it is that takes the oath next January, you can be pretty certain that it will be time for a new Fed Chairman, unless Uncle Ben can really pull something amazing out of his hat or beard.

Right now, he’s in another “no win” situation. With the market reportedly factoring in a 50 basis point cut, everyone is already predicting a bloodletting if the Fed comes through with anything less. Of course, with the Durable Goods numbers, there’s one less compelling reason for another big cut on top of last weeks 75 basis point cut.

And so the talking heads are all speculating about what the cut will be and what the market’s reaction will be. The only unifying thread among all of these predictions was that the market would go down after the announcement.

With that kind of unanimity of thought, you’d have to believe that the market will use an entirely different psychology textbook for its interpretation of the Fed’s move. So look for an upward move.

Of course, no matter what the market does, there’ll be no shortage of people with “I told you so” kind of explanations.

With the near universal opinion that the Fed’s decision will be either disappointing or at the very least, fully expected, it’s hard to understand why the market was up today and was able to hold the gains. Why in the world would you bid up stocks knowing that they were going to fall off the cliff?

For me, the near term disappointments were the strongest gainers in 2007. The one that has been increasingly punished, despite the absence of bad news, has been Google.

Today, it recovered about $9, but still ended the day with a nearly $5 loss. However, with the after hours announcement that Yahoo is cutting 1,000 jobs, Google is getting hit as well and is revisiting today’s lows.

That, on top of Yahoo’s disappointing numbers, always paints Google into a corner that it doesn’t deserve to be in.

The thinking usually is that if Yahoo is doing poorly then the entire advertising model of search revenue is failing, thereby putting Google at risk.

Just as a parenthetical note, my advertising on Google has only continued to escalate, whereas I eliminated all of my Yahoo advertising campaigns. Multiply me by a few hundred thousand and you may have the makings of a meaningful trend.

But no one ever believes that Yahoo is just simply losing market share to Google.

I believe.

And do Google falls because of the company it keeps. It’s sector companion, Yahoo, should be considered in the same light of those other one time darlings of Wall Street, whose glimmer was expected to return when their founders returned to right the ship. With the exception of Steve Jobs, no returning CEO messiah has been able to breathe life into a moribund company. Jerry Yang could not be expected to do any better than Ted Waites, Michael Dell or even Howard Schultz.

Sometimes it’s best not to go back home. Peter Lynch knew that.

The simple solution is for Google to report its earnings a couple of days before Yahoo makes its report. Then the investing world could see that Google was king and Yahoo is just a case of promise that never materialized.

Simple solution.

For some reason, and maybe it’s the Yahoo yoke, Google seems to not fare well after it announces earnings, regardless of how great its numbers are.

I think that this time will be different. Google announces after the close on Thursday. Given the nearly 200 point loss in the last month, Google is really ready for an upturn. By every objective measure, it is cheap, especially compared to Yahoo.

In the meantime, I just may lock myself in a room as well,

It’s probably safer in there, although these days, it sure would be a nice touch to add some padding to those walls.


Wasted Efforts   January 28, 2008 (posted 6:00 PM)

I’m on my usual Monday morning routine.

The only difference is that my wife is home this morning. She isn’t feeling well.

Seeing my by the laptop this morning this asked if this was “what our retirement would be like, with both of us home?”

Scary thought. Maybe the recent losses in the market weren’t so bad after all. To make up for them, I’ll only need to keep working a couple of extra years.

Problem solved.

Now I can get back to my routine of listening to the pre-open chatter.

It just seems odd to me that an environmentally friendly waste management company would be advertising on a financial business network with a motto of “Think Green: Waste Management”.

If I’m the kind of person that’s transfixed to that crawling ticker, I’m not likely to be thinking about environmentally friendly ways to manage waste at the mere mention of the word “green”.

For me, “green” evokes other images. Not cleansed garbage.

I’m not certain who their efforts are aimed at, but they were certainly wasted on me. I’m not likely to go out and buy and landfill, nor a garbage truck. Not even their stock.

I might decide to get some lemon scented garbage bags later this afternoon.

Another wasted effort came this week as I tried to shop at the new Lowe’s store that open right down the street from the Home Depot.

As a loyal “Homey”, I strayed.

I was trying to find a wardrobe storage cabinet online and found one on the Lowe’s web site. It was perfect.

I ordered it online for in store pickup. I didn’t particularly feel like paying the steep delivery charge and having to wait for the “delivery window”. Besides, I wanted to do the project this weekend.

Since it was a pretty heavy item, somewhere over 100 pounds, my son went along to help.

As directed, I waited 2 hours from the time I received my e-mail confirmation before heading to the store.

When I got to the store, the 2 customer services representatives were speaking to one another and ignored me for about 3 minutes.

When they finally deigned it appropriate to look up, the representative took my confirmation paper and asked me if “I wanted her to get the merchandise?”.

Uh duh.

Instead of the experience that I had at Best Buy, using their online site to purchase an item for store pickup, I waited an additional 30 minutes until they finally bought the cabinet to me. The idea of ordering something on line and just waltzing in and out of the store with package in hand is a nice touch.

Lowe’s has a different take on the process. I would have been in and out of there earlier had I gone directly to the store and made the purchase on the spot.

Although to be totally fair to them, I have not check the latest dictionary updates, to see if the word “convenience” has been recently modified in its meaning.

I got home and opened the package and was actually near the end of the assembly process, when I noticed one odd thing. Hardly any of the pieces had the lamination on them.

I went back to the web site, just to check the picture and confirm that all of the visible surfaces were indeed laminated, as I had thought.

They were.

Following a couple of phone calls, I finally got to the store manager on duty who offered to pick up the item, since I didn’t want to have to haul it back. She would do so only if I would pay the delivery charge.

That didn’t sit too well with me. I wasn’t receptive to splitting the costs, either.

I explained that either the item was defective or it was entirely misrepresented on the web site.

She told me that I should have come into the store to check the item out before ordering it online.

I think I’ll forward her advice to Lands End. Sounds like a good way to run an online catalogue. Hers is an entirely revolutionary idea.

I told her that I wasn’t very happy and would dispute the charge with my credit card company.

She told me that I couldn’t do that because she had my signature saying that I received the item.

Home Depot has nothing to worry about. This “Homey” is coming home.

She finally told me that she would call back later in the afternoon to see if there was anything else that she could do.

She didn’t. So I did.

She offered a free pickup or a 10% discount if I kept the item. She said she could get no others to replace the item and that the store had no others on order, because no one wanted them.


In hindsight, I didn’t want it either.

Interestingly, she did offer to replace the parts that weren’t laminated if I would bring those to the store. Since that was tantamount to returning the entire package, I politely deferred, although I wondered where she would get the replacement parts if there were none other in stock.

I agreed to the pickup.

The next morning, however, I called back and got another store manager on duty who would not give me the name or number of a regional manager, but he did find another store manager to take the case.

That guy simply said, “How about a 50% discount?”

Finally. A wise man. The 50% discount cost Lowe’s less than having to pick the item up from me.

By the time I hung up the phone, I was already painting the now unassembled pieces.

Wasted efforts. But the project is complete.

The Home Depot store may be more drafty and less well lit, but Comcast and Lowe’s are keeping company. And unlike the drafty aisles of Home Depot, my guess is that where Lowe’s is going, it’s going to be hot. Very hot.

Speaking of which, Verizon, my new darling of a provider, announced great earnings this morning. Probably coincidental, but right after I started my rant against Comcast and made the switch to FIOS, Comcast’s stock price started to tank.

Watch out Lowe’s.

It’s nice to have that kind of power.

I’ll be sure not to let it go to waste.

Oh, I almost forgot.

The market today? It least it was up. I hope it doesn’t go to waste.

I bought some more Yellow Roadway shares today. On Friday it spiked up when it announced that it would be releasing its earnings numbers early. Considering that the stock was beaten down a couple of weeks ago, at which point I picked up my initial shares, on Friday investors took that to be a positive sign

Everyone expected that Yellow Roadway just couldn’t wait to announce better than expected numbers.

And as usual, everyone was wrong. The numbers were not good and neither was guidance. So Yellow Roadway gave up all of Friday’s considerable gains. That is if you call 20% considerable.

What a waste to see it lose all of those gains.

Their loss, hopefully my gain.

Let nothing go to waste.


Telephone Calls Don’t Count    January 25, 2008 (posted 5:00 PM)

Once you’ve had a taste of the lucky life, it’s hard to turn back.

My good luck charm was now about 500 miles away. I tried to rationally look at the turnaround this week and firmly came to the conclusion that it was luck. There certainly wasn’t, and rarely is, rational reasons for anything that occur in the markets.

You certainly couldn’t disprove that thesis and it has to have credibility on par with any of the other opinions that are bouncing around from event to event.

Besides, what’s easier to understand? Luck or the re-emerging Yen Carry Trade?

So let’s look at the rational side of things.

Yesterday evening, the combined good earnings reports from Amgen and Microsoft promised to propel the markets forward.

As it is written “and the big boys shall lead them forward”.

Who needed luck when you had good earnings from the big boys? And what better sectors? Pharmaceuticals and technology.

As it turns out, you should never discount the importance of luck, because objective and quantifiable bits of good news didn’t do very much, other than to tease us a little with a strong opening.

Like lots of good things, it didn’t last very long. Certainly not the 36 hours that “Le Weekender” promises.

During that early upside, I sold some February $700 calls on Google. At that point, Google was up by $15. Here we are, just 3 hours later and Google is trying to scratch out a small gain.

I also bought more shares of Riverbed Technology and immediately sold in the money February calls, because there was a 10% premium for a 3 week holding period.

But everything turned around by late morning with nearly a 200 point swing in the numbers. As is most often the case, that swing was in the wrong direction.

How I’ve learned to dread that phrase “and the selling is intensifying”.

If I were to put my contrarian hat back on, with its setting at doubting others, rather than myself, it would have warned me that all of the analysts that suddenly believe that we have turned a short term corner would strongly indicate that we have not.

Got that?

And that’s where the telephone call comes in.

I checked as thoroughly as I could, pretty much on every credible search engine, but nowhere could I find regulations that required that your good luck charm be within easy physical reach.

And so, for a person who really dislikes telephones and the stuff you do with them, I initiated a call. And why not? I already broke some other cardinal rules this week. Breakfast and social conversation. Why not go for it all?

After all, the continuance of good luck was far more important than any self-imposed guidelines regarding social communication and accessory tools to establish lines of communication.

Got that?

So far, there doesn’t seem to be any carry through. But I’m not certain what the waiting period should be. I know that on Wednesday, there was a period of about 90 minutes that we were in the car and did not hear any market related news.

I don’t know if that 600 point turnaround started instantaneously, upon establishing proximal contact with the luckiest man in the world, or whether it took time for that force to establish itself.

I suppose that I could easily check that out by just looking at some charts, but part of me doesn’t really want to know.

Call it the Peter Pan Principle.

But at least the gravity of the situation was just offset by the following question posed by a on air personality of an expert in gold.

She prefaced the question by stating that India, traditionally a large consumer of gold for jewelry was now shrinking away from purchasing the precious metal because the price was just getting too high.

So her obvious question to the expert was “Do you see any other chinks in the metal?”

The expert replied that “The Chinese were never major players in creating worldwide demand for gold, but they were becoming increasingly involved”.

I’m certain that her producer is still cringing and convulsing.

I’m convulsing with laughter. The producer, probably not as much.

I wonder what the e-mails are going to say.

The clear lesson out of this is that every now and then it is worth listening to what’s going on around you.

And that’s especially true when the diversion is much better than the surrounding reality, because with just 2 hours left in this thankfully shortened trading week, we are now down 170 points.

That’s nearly a 300 point swing in case you’re in another state of shock.

But remembering the famous chant, “Torah, Torah, Torah”, I’ll dig deep to find a little more faith.

Or, maybe I’ll try just one more telephone call, just in case.


You Lucky. You Lucky    January 24, 2008 (posted 2:00 PM)

It’s 3 A.M.

I already knew what I already knew. I was with the luckiest man in the world. I didn’t need any more confirmation.

But it came.

The ecstatic guy behind my friend, who was taking a break from the roulette wheel, was slumming it at the slot machine aisles. Even though the roulette wheels had been kind to him, especially after a double dose of good omens, it was time for a break.

The good luck started with a roulette spinner named Ruth, the same name as the luckiest man in the world’s mother, and the same name as my mother-in-law.

Maybe that good luck would trickle down.

Then came the live band’s cover performance of “Glory Days”, which is part of the basement tapes collection, to be viewed again only at either of our passings, which for my part, at least, according to www.tombclock.com, is on June 14, 2008.

Given my friends lucky streak, I’m a little more concerned now, particularly since he bet on the “under” side of that date.

“You lucky. You lucky. You lucky.”

That was the cry.

I didn’t think that the third “You Lucky” needed to be in the title, but for accuracy, it was three “You Lucky’s”.

And as my friend now likes to say, as he is communing with the Chosen People, via James Michner:

Torah, Torah, Torah.

Unfortunately, when he said that, the fellow who was proclaiming “You Lucky”, got a bit frightened, as he thought that there was going to be some kind of maniacal backlash against him by someone who was still carrying grudges from World War II.

As it turns out, the “h” in Torah is silent, so I understand the confusion.

But among the quiet, but confident victories at roulette, came the largest of 3 jackpots at the slots.

Torah, Torah, Torah.

At times like this, faith really can pay off.

Considering that there was a convention of preachers going on at the casino hotel as well, it may have been their calling cry also. After all, it all did start there.

We then decided that there are 2 things that now distinguished us from the middle of the week casino low-lives.

First of all, it was now officially Thursday. Do I have to say anything more than that? The riff-raff was now gone, not even allowed to partake in the all you could eat buffet line.

And secondly, he had more money now than when he stepped through the doorway yesterday. Since I don’t gamble on anything other than the stock market, I was only down the cost of a cup of coffee.

However, if I did gamble, I could have gotten that cup of coffee for free.

Today marks the 4th anniversary of Szelhamos’ passing. I know he would be happy to know that I got to spend part of the day with the luckiest man in the world. I think he was broadly smiling down on the scene when those wheels were spinning. He was at his happiest when we took a little 80th birthday party trip out to Las Vegas. I’m sure that he relived some of those moments today, maybe while munching on some of Pittsburgh’s finest popcorn.

Maybe he knows that I’ve recently put this web site up for sale and the first offer has come in after just a couple of days. But he seems to be telling me to let it ride.

Then it occurred to me. The luck was trickling down. Why not let it all ride?

After all, it all started with yesterday’s ride.

My friend picked me up yesterday at about 2 PM. It was after that that it all turned around in the market. 600 points on just a simple action. Driving up to the hotel’s entrance made more of an impact than any stimulus package or any rate cut ever could.

I don’t have any doubt about that at all.

As luck would have it, he didn’t replicate the last time he tried that, when his rental RV tore off the drive-thru’s roof.

Even good luck needs a break now and then.

The luck continued into the morning, as the market opened on the upside.

Unfortunately, I had a plane to catch and barely could take in the early moments, only having enough time to enter orders to write some more call options on Riverbed Technologies, which was moving up nicely. I also put another order in, but I can’t recall what it was, once again proving that in addition to luck, you need sleep.

In a couple of hours I’ll find out whether that good luck left me, as I left him at the casino’s entrance.

But I learned a lesson from his shouts of “Torah, Torah, Torah”.

I, too, must have faith. I’ve had it before and haven’t been disappointed. The only difference is that now, the faith is being tested like never before.

Was yesterday’s 600 point turnaround a false prophet?

As I looked around, I wondered why there are never any preachers around when you really need them.

But there was something else. Another venture that was probably blessed by the luck in timing. Traveling together with a third friend, we came up with a business idea.Kevin We’ve already registered our domain names and are in product development and marketing phases. The wheels have to move quickly.

Our model’s good looks aren’t going to last forever.

When luck is with you it would be foolish not to take advantage.

So without knowing how this day is moving forward, I’ll assume that being in the shadows of the luckiest man in the world can only bring good things.Szelhamos at Mohegan Sun

I’m prepared for the best and will just sit back and take it all in, while thinking of how much we all miss Szelhamos. But at least today I’ll be able to leave him one of the Jackpot indicator cards that my friend gave to me.

He won’t even have to fill out a 1099-G.

How lucky is that?


I was Wrong    January 23, 2008 (posted 2:00 PM, updated 5 PM)

As time goes on, there’s a greater realization that I’m rarely right about anything. It’s amazing that I’m still above the water. Although, looking ahead, I really do wish that I had gills.

For starters, I didn’t think that Apple would fare quite as badly as its after hours performance would indicate. At noon, Apple is down $25, while the Dow continues to slip and slide away, now down 200 points.

I was also wrong about breakfast.

Despite what I preached to my kids, breakfast was always a meal that I disdained. I paid no attention to all of the conventional wisdom regarding its merit and its relative importance.

Start the day off healthy?

Not me.

I had breakfast this morning.

It was wonderful.

Part of that assessment is that the check was picked up with incredible lightening speed by someone else. When something like that happens it’s really amazing to see the common DNA that we all have, with everyone insisting that the check be sent their way. Part of that common DNA also determines that we’re not really sincere about wanting to pay for that check.

That is what truly distinguishes us from the animals.

That person probably reads this blog and felt sorry for all of the recent personal portfolio losses. A free meal really does make lots of things much better. Especially poetic is that the person who picked up the check ate the least.


At the cost of breakfast to decline in the Dow ratio this morning, I think that a free dinner would be worth about 500 Dow points.

With alcohol, maybe 600 points. And don’t forget, I’m a big tipper.

I was also wrong about my relative disdain for social interaction, particularly when it’s of a business nature.

Conversation was a combination of business matters, personal stories and amusing, yet sanitized anecdotes.

As for selling Yellow Roadway call options yesterday? With everything down, Yellow Roadway is up 12%. Wrong again.


I’m beginning to rethink the contrarian approach. I think that I should completely cut out my consideration of any outside sources of information. Rather than moving in a direction that is generally opposite of those opinions, I should move directly opposite my own opinions.

I probably shouldn’t be so critical, since my decline is still better than the indices, and certainly better than the professionals that I also use, but still, it’s very humbling.

And who needs to be humbled?

A couple of years ago I came to the realization that pretty much everything that my wife and I disagreed about, she was the correct one.

That was humbling. But to her credit, she never rubbed that admission in. In fact, she was quite gracious.

Who needs that?

One of the things that I like about Jim Cramer is that he tends to point out his mistakes, and he allows viewers to point them out, as well.

As Cramer likes to say, I did back up the truck and picked up some more shares of Apple this afternoon. I plan on aggressively selling options on the additional shares to try to make up some of the shortfall, a little at a time.

Interestingly, although he has been a big Apple proponent, he did not recommend picking up Shares in Apple, nor Google after their recent nosedives.

I hope to be able to pick up some more Google shares on Friday, as I expect a little further downdraft after Microsoft comes out with its great, but not great enough earnings numbers at the close of tomorrow’s market.

Even though, unlike Cramer, I don’t have a cable television show and I’m not to dependent on ratings,I do care about the number of blog readers. Somehow, those readership numbers continue to go up.

Oh, I also still have all of my hair, as well, although I may start pulling some of it out. So that, and the size of our relative bank accounts, still will easily differentiate us from one another.

And, to top it off, he’s a good writer, or at least is fronted by a good ghost writer.

Clearly the increasing blog numbers certainly can’t be for the good investment advice and it certainly can’t be because of my grammatically correct writing style. Much too many commas, I am told.

I’m also told that I tend to speak very slowly, especially while on the telephone. Commas are just my way of slowing down the reader.

I also doubt that the numbers are due to lots of inadvertent Google searches or mis-spellings of “Szelhamos”.

But I’ve decided to take my son’s advice.

He suggested that I should get a new name for the blog.

Although he adored “Szelhamos”, it’s not exactly a household name or word.

In fact, in Hungary, where it is a household word, very few hits originate to the site.

If you don’t know what “Szelhamos” means, please go to Szelhamos?, and you’ll understand the name chosen for our mirror site: www.windbagger.com

Just as Szelhamos Rules is the #1 Google site for searches on “Szelhamos”, we’re shooting to make Szelhamos Rules the #1 site for searches on the word “windbagger”.

Shouldn’t be too difficult. Just look at the competition.

In the meantime, writing today’s blog early, due to an impending car ride down to the casinos, is keeping me from overly tuning in the market’s activities.

And that’s a good thing, because a quick glance shows that the Dow is now down by 300 points.

I think I’ll pray for no wireless access this afternoon and evening.

I may drown my sorrows in the slots.

That seems to offer a better rate of return than the markets right about now.

Who knows, maybe I’ll be wrong about that, too.

P.S. Great news. Not only is there internet in the hotel, but the market moved up 300 points. Best of all, Apple moved up $12 from where I read it.

Maybe I was right?


All Good Things Must End    January 22, 2008 (posted 8:00 PM)

And today it did end.

You won’t see it until tomorrow morning, but Apple came out with its earnings after today’s close.

The only word to describe the report is “disappointing”

And worst of all, it was disappointing on all counts. Macs, iPods and iPhones were all less than expected. Maybe those Amazon statistics a few weeks ago that the Zune was outselling iPod was the first telling sign.

The disappointing Mac and iPhone numbers are surprising, though. Back in late December, when the Amazon statistics were released, the feeling was that surging Mac and iPhone numbers would offset any iPod competition related sales slump. The “whisper” numbers all had great Mac and iPhone sales lifting Apple to another quarter of earnings that would outperform the flagging consumer.

But that’s for tomorrow’s blog, because it will definitely effect the markets tomorrow. Right now, in the after hours, Apple is down about 15% and that’s on top of the losses its had in the past 2 weeks. Its been a long drop from $200 and it will be taking others down for the ride.

On the other hand, word is coming in tonight that Australia’s market is up 6%, Japan 3.5% and Texas Instruments has just reported good numbers. Considering that TI is a serial disappointer, this may be a good omen. But they are nowhere close to being the market mover that they used to be. That honor, for technology stocks, belongs to Apple.

So look out below. It probably won’t be as bad as the $23.50 loss in after hours, but it won’t be pretty.

Unfortunately, I don’t always listen to my own advice. Back on December 27th, I suggested buying puts a day in advance of Apple’s earnings report.

But to be totally fair, I also thought that buying calls in the days prior to the report and then swapping those for puts, would be the way to go. As it turn out, there never was a run up prior to the earnings report, as Apple just got caught up in all of the market’s craziness.

But the whole story today is what didn’t happen.

The way the script has been written, everyone expected that the market would open with a loud thud. The conventional wisdom then had it that sometime in the mid to late morning the market would make a comeback, only to sell off in the last hour, testing the morning’s lows.

It really was a good thing that the markets were closed on Monday. The rest of the world had 2 trading sessions to have their meltdown, while we were all wondering whether the Fed would take some decisive action.

With the futures pointing down by 500 points came word that the Fed was cutting the discount rate by 75 basis points. Whether it was coincidental or otherwise, that was the precise amount that everyone said we needed, yet it was at least 25 basis points higher than anyone thought that we would get.

To top it off, this “emergency” or “interim” rate cut comes before the next scheduled Fed meeting. There are some who think another cut may be in the works. At 3.5%, we’re still way above the lows during Greenspan’s tenure.

Of course, there are those who blame Greenspan and believe that it was those low rates that got us into the whole sub-prime mess to begin with. And now, just as quickly, those people will say that low rates are what’s needed to get us out of the mess.

Go figure.

But whoever thought that in a single day we would believe that the Fed got it right and Apple got it wrong?

The market made up its 500 point loss and for a short while was within about 40 points of a break even. Even beleaguered Apple made up from its 5 point loss, down to about $2, before good sense got the better of the Apple bulls.

The big surprise was that after the Dow’s falling back a little from that level, the last hour sell-off never materialized. That page was missing from the script.

At about 2 PM my son called me. A senior in college, he’s taking a derivatives class. He called me to find out how the market was doing, having heard about the 500 point drop, and thinking that it would be a topic of discussion during this evening’s class.

I read him the script, also fully expecting the last hour sell-off. I told him that in class he could refer to how predictable the last hours’ sell-off was, because it was scripted.

The bottom line? Never trust anyone over 30. We have no clue what we’re talking about.

Sometimes experience leads you down the wrong path. History doesn’t always repeat itself.

As I look at the carnage that so far is 2008, the Dow is down 16.3% from its October highs. I suppose that I can get a little solace knowing that I am down about 12.5%.


And that’s good. On Wall Street, I might be considered a superstar. Of course, on Wall Street, my administrative fee would more than make up for the out performance of the portfolios.

Today, I did do a little trading, but again, only in covered calls. I wasn’t ready to take any losses in equity positions. It’s too early in the year for that kind of stuff.

I bought back some February Honeywell options at a small profit, sold some Yellow Roadway February $17.50 call options, sold some River Bed Technology February $20 call options and finally sold some MasterCard February $210 call options.

All small potatoes, but you’ve got to start clawing back at some point. Based on that 12.5% drop, there’ll be lots of clawing going on.

At least tomorrow I’ll have a little respite from all of this gut wrenching action.

Tomorrow, my gold embracing friend, who is usually right when he tells me “I told you should should buy some gold” and I are going for a day of authentic Native American entertainment.

For some reason it’s not politically incorrect to refer to these bastions of entertainment as “Indian Casinos”.

I don’t understand.

But I do understand that as much as I enjoy the second by second action of the markets, that too, must come to an end.

Except that lately, the market really hasn’t been much of a good thing, so maybe I’ll just wait until it does return to being one.

Until then, the only good things that’s ended have been brainless profits.


A Double Dose of Frightening News    January 21, 2008 (posted 4:00 PM)

This was not a very good weekend and I am getting increasingly edgy if I am unexpectedly awakened.

The phrase “don’t worry, everything is alright” is one that I’ve heard too much lately. Somehow, those words aren’t very reassuring.

However, its meaning is really varied, as it has been used all the way from trying to prepare me for Sirloin’s graffiti exploits (see September 17, 2007 Blog and September 24, 2007 Blog) all to the way to an unexpected death, or two.

This weekend, the phrase was used, as my wife’s head was seemingly floating off the edge of the mattress, as she was trying to gently awaken me. My guess is that she is more interested in delaying the collection of any life insurance proceeds than in being able to collect.

Anyway, the floating head didn’t have good news and the end result was one of finality.

But that’s now in the past. Over and done with.

This morning’s awakening was not gentle. It was sudden and with a sense of urgency.

I was disoriented. Because of the darkness, I assumed that it was still very early in the morning. The only thing I knew was that there was no preceding telephone call, this time.

As it turned out, it was about 6:30 AM and there was a mouse caught in the sticky trap I had placed a couple of weeks ago after I spotted a mouse.

It was in the kitchen and my wife told me she couldn’t function with it down there.

So, hero that I am, I went down, and there in the middle of the kitchen floor was the sticky trap, with two, not just one mouse, sinking in the gooey trap that had been set, with just them in mind.

I should have snapped a picture and submitted it to the company. Great for marketing.

But that bad and frightening news was dealt with. A cardboard coffin was quickly retrieved and a prompt “burial” arranged. Simple, yet dignified.

This was much less an expensive affair than we had been used to and the eulogy was nicer, as well.

What I wasn’t prepared for was the next bit of news.

Sure, I knew that today was MLK day. My kid had the day off and the airport was busier than usual. Those are good signs of an extended weekend.

What I wasn’t prepared for was that the markets would be closed today.

For some reason, I failed to remember the extent of MLK day. It’s on par with the biggies, as far as the markets go.

And what better way to celebrate the legacy of MLK than to have the Detroit Auto Show in full gear.

Too bad, because I had a good feeling about today, even though the Asian markets were down overnight. I mean, if you consider a 7% drop to be “down”.

After all, how much lower are we able to go?

12,000 points more to the downside?

But in reality, it’s probably a good thing that we can get an extra day of breathing space.

For me, this is a work shortened week for a different reason.

We are beginning a major construction project at my workplace and will be closed for 2 of the 3 days that I typically work each week. The project will be ongoing for a few months, but the big dig part starts on Wednesday.

We will get a little breathing space as we descend on Connecticut’s gaming casinos for a little respite.

Over engorging in buffet food, it’s not a bad place to go over business, either. Not that we’ll do that, but in theory it would be good.

Being in that environment will just reinforce for me that there should be legalized gambling on the direction of stocks. How different is that from actual investing? In fact, how many people truly do invest, rather than just looking for a way to score some gains?

In fact, some of the people who bet on sports events are actually in it longer term than stock market “investors”.

So I will probably do my usual. It’s not likely that I will make any bets, but I will probably cover a few miles making the rounds over and over again in the casino. I love people watching, especially the low lives that are there mid-week.

The low lives like mean, I mean. I’m sure that there’ll be someone looking at me in the very same way.

But ask yourself, does that person have his own blog?

Probably so.

Well, with nothing else to do, my son and I went out to get an estimate on a car painting job.

The estimate was part of a triple dose of frightening for the day.

The fourth and final dose of fright came as we decided to go to Hooters for lunch.

We actually went for the food.


The Company You Keep     January 18, 2008 (posted 6:00 PM)

Remember this phrase. It’s bound to make the list of top 2008 dumb political quotes. It far out dumb’s 2007’s winner “I have a wide stance”.

Drumroll, please.

“Oh, that must be the other one”.

I think that I have a new found respect for Ben Bernanke.

Suddenly, to me, he looks like a genius.

And that’s not because the futures are way up this morning. It all has to do with comparing him to the company he is forced to keep.

We are all second guessing Bernanke.

But at yesterday’s congressional testimony, one of the learned elected officials, in framing her question, referred to Ben Bernanke as having been the CEO of Goldman Sachs.

That was probably an insult. Even though they are the smartest guys in the room, Bernanke is probably even smarter than them. He just doesn’t seem to allow his intelligence to dictate his actions.

Bernanke quickly and politely corrected the congresswomen and said that he was not the previous CEO of Goldman.

She then asked “well what company were you with?”.

Bernake answered that he was the “CEO of the Princeton Economics Department”.

A cute answer. I believe that they used to be traded on the OTC pink sheets.

Amazingly, the congresswoman said, “Oh, that must be the other one”.

“The Other One”?

That’s how much the esteemed member of this committee knows about the Treasury Secretary and the Chairman of the Federal Reserve.

One and the Other One.

At least you should be able to tell them apart on the basis of facial hair and shaved head versus male pattern baldness head.

Is it that hard?

Hank Paulson and Ben Bernanke must believe that they are besieged by a colony of “Chances”, the idiot garden keeper character that Peter Sellers played in “Being There”, whom everyone believed was a veritable genius.

I don’t think anyone has mistaken this esteemed committee member to be a genius.

Not all committee members can actually be like Barney Frank and truly know what they’re talking about. Our expectations are low for their innate knowledge on the topic at hand. We all know that many of the committee members are virtual idiots, but our expectations are that their staffers, who do all of the groundwork and try to prepare their bosses to not look like idiots, are typically very bright and always dot all of there “i’s” and cross all of their “t’s” before sending their idiot bosses into the public’s eye.

Time for a new staffer.

This morning, I had an appointment that took me away from the computer at the opening bell, but I left for my appointment with the knowledge that GE reported good earnings, albeit, heavily waited overseas, and with the futures pointing up 150 points. And better yet, all of my shares were pointing upward in the pre-open.

By noon, when I arrived home, the Dow was down by 100 points and accelerating. And all of those up arrows? Change of direction and color. So what else is new?

I guess that the market was not reacting overly kindly to the announced economic stimulus package. Expectations were probably higher than what was presented by the president.

The talk on the trading floor is that the stimulus package is “a joke”. Well intended but no efficacy.

This afternoon, I heard a radio interview asking people what they would do with their government stimulus check.

I’m sure that the woman who responded that she would put the money into savings in order to make a summertime trip to England was not what the rescue architects had in mind.

I don’t believe that we have “hit squads” in the U.S., but if we did, I’m fairly certain where they would be heading right now.

It seems that “the other one” will be holding a news conference this afternoon, perhaps to add more clarity to the fiscal stimulus proposal, and maybe helping to send stocks a bit higher.

If we can’t count on “the other guy”, who can we count on?

After all, he used to be the head of all of the smart guys. He must know how to massage and nuance the message to inspire confidence in the troops. We certainly can’t count on Bush and Bernanke.

Jim Cramer’s now classic piece on YouTube, with the “They Know Nothing” cry directed at the Fed, rings more and more true.

The Fed had a window of opportunity this morning to announce an interim rate cut, while the futures were still up. That would have sent the market skyrocketing and would have had no materialistic impact on inflation, which is still the Fed’s major worry. Although, in total fairness, had he done that, it would have added some credibility to those conspiracy theorists who were expecting Bernanke to move the markets with the intent of taking advantage of an options expiration Friday.

You can’t win.

Shortly after noontime, Paulson made a brief statement regarding the stimulus package. His prepared words did nothing.

About 10 minutes of question and answer there was a positive note, although the market’s didn’t reflect it at first. As the Q & A proceeded, Paulson did seem to exude a fair amount of confidence in the US economy and the markets began to take notice, even briefly moving into positive territory.

Paulson especially seemed to be confident regarding jobs numbers and he was fairly clear

The real positive note that I heard from the session was that for once, there seemed to be an indication that there was going to be room for compromise on the stimulus package proposal, rather than terms being dictated from the executive branch.

That’s a 3 syllable word that has basically not been part of the administration’s vocabulary. The last time there was bipartisan support for anything, it took a couple of flaming and crumbling towers.

I don’t expect members of congress to start holding hands and singing “Kumbaya” but at least they could learn who the Fed Chairman and Treasury Secretary are.

Maybe if they really kept company something constructive could get done.


What’s Missing?    January 17, 2008 (posted 4:00 PM, updated 9 PM)

Yesterday I looked at some market charts that sent a very negative message regarding the direction of the market. At least that’s how they were interpreted by the presenter, who is acclaimed in the art of prognostication.

To me, there were peaks, there were valleys. But the real story was that the peaks were never as high as the earlier peaks, even though the valleys were always at the same levels. What was most fascinating is that the previous 2 valleys were precisely 5 months apart and that we are currently, exactly 5 months from the last valley.

As compelling as they may have been, they really were very abstract and didn’t tell me the story. Someone else looking at the same charts may have come to a different conclusion, regardless of how “compelling” those charts may have been.

What does tell the story to me is what’s been missing, so far.

In the past, whenever we’ve been faced with a downdraft in stock prices, companies have stepped up to the plate, recognizing value in their own shares and announced big buyback programs.

That hasn’t happened, yet.

This morning, a lone voice, Novartis, announced a buyback program, but Novartis is hardly the kind of inspiration that’s needed. There are lots of big buy stocks out there that have been battered and haven’t sent any messages to the investing public, other than fear.

A lot is made of insider buying and selling. Most of the time, the insiders seem to get the direction wrong. But when companies announce their buyback programs, that tends to be a sign that shares are undervalued and the companies are willing to pick up shares at bargain prices.

If this isn’t the right time for that, then we’re really in some rouble.

There probably won’t be too much action in the first 30 minutes this morning, a everyone is ready for Bernanke’s congressional testimony that is scheduled for 10 AM. It’s not very likely that there will be kid gloves worn for the duration of Bernanke’s lame duck appointment.

It’s interesting to listen to some of the conspiracy theorists who believe that Bernanke will make a surprise statement or policy decision right before options expiration just in order to throw chaos into the unwinding of options.

Amazing to think that one guy could be responsible for both the Kennedy assassination and the tumbling of an orderly options market.

But leave it to Ben to prove me wrong.

The market opened higher on some good jobless numbers. The impact was across the board and it was good. That was despite the continued bad news from Merrill Lynch and the added drag from its falling stock price.

But shortly after 10 AM it all fell apart. At noon, with the hearings still going on, the market is now down nearly 200 points.

At the moment, I’m not certain what the stimulus was for the rapid and steep decline.

“Was it something I said?”

No doubt that it was, or maybe it was what everyone thought that they heard, but it’s not clear to me what Bernanke could have said that would have come as a major surprise to the investing world.

I doubt that he would have said something like “Only over my cold and dead body will we lower interest rates”.

That would be an unlikely and completely unexpected comment and might send the markets down.


As I listen to the hearings, the questions and comments seem to be powderpuff in nature. Maybe the vitriol was at the very beginning, because as we approach 1 PM, it seems like an unlikely lovefest.

He never gave any credence to an impending recession, refusing to even use the “R” word, instead referring to a generic “business slow down”.

I’m trying to remember that old saying.

“If it smells like a duck....”

The turnaround has been incredible. Most notably, Ameritrade has gone from being up by over $1 in the pre-open, on good earnings numbers, to now being down by over $1.

But if you really want to see what turnaround is all about, just take another look at The Mosaic Company.

You might remember the saga.

A week ago there were expectations for great earnings numbers. On that news, I bought puts when Mosaic was at about $95. To make a long story short, the numbers were great, but Mosaic went down, on an intraday level to about $80. During that time, I bought and sold puts on 2 occasions.

By the close of trading on the day earnings were released, Mosaic recovered all the way back up to $90, where it briefly stopped en route to $110.

Barely a week later, Mosaic is back to $80.

What great trades these would have been. Up and down, over and over.

But for everything else, it’s only down.

This afternoon, I fled from work, with the news that it was snowing unexpectedly back home and that my flight was delayed.

I’m currently sitting in the airport, hoping to get onto an earlier flight, that too, is delayed. But their delay is better than my delay.

In the meantime I have the opportunity to hook into the airports wireless so that I can watch the continued crumbling of the market.

Somewhere from the time that I turned the car radio off to the point that I logged into the computer, the market ceded another 150 points. Now, about 10 minutes from the close, even the last remaining stalwart, Apple Computer, has turned negative, as the Dow is down by about 330 points.

Unfortunately, there’s a reason that it seems that we’ve been this way before. The only difference is that there’s not much to be optimistic about.

Maybe that’s what’s really missing. Optimism.

Oh yeah.

That and leadership.


The 10% Solution    January 16, 2008 (posted 10:45 PM)

Sometimes you can learn a lot through ignorance.

Admittedly, I am not a well read person. So there’s not much that I can draw from the literary world. With the market beginning the day at a level that was 12% below the October highs, I was searching for an apt title for this days’ blog. For some reason, I just knew that the answer that was awaiting me was to be found in the world of literature.

As hard as I tried, I just couldn’t make a go of “Dick and Jane Visit the Museum”.

“See the market plunge. Plunge market, plunge.”

 Or my personal favorite, “See Jane call Dick a worthless piece of trash for investing their retirement account in a Bangladeshi semiconductor company”.

But still, not quite the tone that I was looking for.

Of course. It came to me. The Arthur Conan Doyle novel, “The 10% Solution”.

That title said it all.

I was going to make the parallels between the addictive nature of the cocaine solution that Sherlock Holmes was hooked on and the addictive nature of investing in the markets. And it was all going to be tied into the conventional thinking that 10% represented the drop necessary to classify a market in correction.

Unfortunately, as I tried to check my facts, I learned that I was wrong on both counts. The correct title was “The 7% Solution” and it wasn’t authored by Conan Doyle, at all. I was right about the Sherlock Holmes and cocaine connection, though.

But I did learn that “The 10% Solution” is a widely used expression to mean anything at all. I found references to 10% solutions in health, investing, dieting and even national policy. Google is great for that sort of thing, although it is not really great at maintaining its stock price.

I like those kind of all purpose, but meaningless expressions. It’s almost like saying “a high pressure system is moving in from the west”.

No one really has any clue of what that means. Whether it really happens that way or not, who’s going to know and who really cares?

The high pressure system that was coming our way today had already done its damage to the European and Asian markets and was the same one that raised havoc with ours yesterday.

Every expectation was that it would do the same thing today. And sometimes those expectations make sense. The pre-opening futures were pointing to a horrible open and that’s how it all started.

Although the Dow didn’t fare that badly through the day and only ended with a 35 point loss, there were moments when the Szelhamos Portfolios were getting slammed worse than any previous day that I could recall.

The selling in Apple and Google were relentless, and little else was spared.

Maybe the world just isn’t ready for a thinner MacBook.

But somehow, before the day was over, a big portion of those losses were erased, as perhaps some bargain hunters pulled into town. Still, the S&P 500 finished at another new 14 month low, well below any support level, while the Dow ended up at a 9 month low and the NASDAQ at a 10 month low.

Even then, Apple and Google continued to be punished for no discernible reason. Apple reports earnings early next week. It’s hard to imagine it going down even further after the release of what should be good news.

But common sense has no place in the market’s gyrations.

As if Ben Bernanke wasn’t catching enough heat, the unthinkable has occurred.

In a New York Times Sunday Magazine cover story that will be published on Sunday, the most revered of all Fed Chairman, Paul Volcker, who rarely speaks out on economic policy issues, reportedly has sent some strong criticism in Bernanke’s way. Unless you think that saying that the Fed is not in control is a wonderful compliment. Even I’m not that contrarian.

But any word at all would violate the unspoken rule. Fed Chairman don’t criticize other Fed Chairman. Even Arthur Burns, who may have been one of the worst in US history got a free pass.

Had he not be so bad, by comparison, Volcker would not have been the bigger than life hero that he turned out to be. He may owe his legacy to Burns.

I guess that if you want to put a positive spin on things, whoever the next president turns out to be, their choice for Federal Reserve Chairman will likely take on Volcker-esque proportions of stature. Unless it turns out to be Robert Rubin.

Someone, someday will be saying “Thank you, Ben Bernanke”.

And where does that leave Ben Bernanke? Probably back to the world of academics, only this time, it’s more likely that it would be on the high school level. Maybe indoor track coach.

Not that there’s really any reason to be fair to Ben Bernanke, but it really doesn’t matter what position he would choose to take. No matter where he stands, he will be roundly criticized. All of the characteristics that people thought were great attributes when he was initially appointed are now thought to be major problems.

At this point, everyone thinks that a 50 basis point cut is already built into stock prices. So if the Fed does end up cutting the rate by 50 basis points, it will still look inept.

If it cuts more, it will be accused of causing a sell-off in the market and for spreading panic about the health of the economy.

It must suck to be Bernanke.

But you never know. You can only become the Comeback Player of the Year after you’ve sunk to some unspeakable low.

Right now, that low looks to be more than 10%.

The solution?

Take Rolaids and hang in there.


What a Difference a Day Makes    January 15, 2008 (posted 10:45 PM)

King Tut, the Boy King, died at a young age. He had a short reign, but is, nonetheless, remembered and has become the stuff of legends, thousands of years after his death. Every young school aged child now knows about King Tut. He’s a close second to dinosaurs.

Most school aged kids don’t know about IBM, though. Kids are much more interested in Boy Kings and dinosaurs, than in consulting firms.

Yesterday, IBM was anointed. With a tenure of barely a day, IBM’s reign may be one of the shortest in the history of humankind, having been overthrown by the financial market equivalent of the Visogoths.

To make matters worse, as bad as the action in the Dow was today, IBM was even worse. At least IBM was a benevolent despot and shared the glory with the entire market. Everyone was buoyed by IBM.

Of course, who was I to anoint IBM, anyway? In hindsight, I should have consulted with some kids. Among the things that I may be accused of, “kingmaker” hasn’t been one of them.

I’ve always been uncomfortable around royalty.

Often, the true measure of a good leader is what life is like after their tenure has ended. By that measure, IBM was pretty pathetic.

“Pathetic” would be a kind way to describe today’s action. I don’t even want to run my final numbers for the day, I’m really not interested in finding out whether the portfolios set a new single day record.

The one thing I know is that it wouldn’t be the good kind of record. Only my Country Wide puts were up today, and I sold those at the end of the trading session.

The expected “bad news” from Citigroup was originally deemed to be good news. In fact, after announcing another $15 billion in writedowns, more layoffs and a 40% cut in the dividend, the pre-open numbers had Citigroup up by more than 2%.

Everyone’s initial impression was that these were all of the right steps necessary to upright Citigroup. The new CEO was being patted on the back for taking the necessary decisive actions.

That didn’t last very long. Once the bell was rung, the analysts were uniformly blasting Pandit’s plan as not going far enough. He was blamed for not dumping all of the bad news into this most recent quarter.

That’s the strategy that’s typically used. Throw all of the bad news into a single quarter and get it all out of the way. From a manager’s perspective, there’s only a limited amount of time that you can keep placing blame at the feet of your predecessor. So you may as well lay it on heavy and end up looking great, in comparison.

For some inexplicable reason, Pandit chose not to do that. And so, he was roundly blasted and the questions started pouring it regarding his suitability to serve as Citigroup’s CEO. How could he be a worthy CEO if he doesn’t even know how to take advantage of the “free passes” he was given and has no stomach for playing the “blame game”.

That was bad, but it was only an excuse for its trickle down into the rest of the market. The sell-off was really over done.

When people are pessimistic, any news will get a negative spin.

Take Apple Computer, for example.

At the opening day of the annual MacWorld meeting, with no new blockbuster products to announce, you expected that there wouldn’t be quite as much market movement, as, say last year, when the iPhone was announced.

Actually, the iPhone numbers that were released were far better than anyone ever expected. So much so, that the iPhone already has half the market share that RIMM, the market leader has. And they did that in only 200 days.

As it turns out, AT&T’s negative words a week ago about its business didn’t include its iPhone piece, which has been healthy.

But the kind of good news didn’t matter. The losses in Apple just took off while Steve Jobs was speaking.

And eventually, everything else got sucked in.

As bad as today was, and for me, it was worse than the 417 point drop nearly a year ago.

Tomorrow will be another challenge.

The conventional wisdom was that Intel would come forth with good earnings, as unexpectedly high Mac sales, now equipped with Intel chips, would add a whole new revenue stream.

Throw that together with booming PC sales in the rest of the world and you’ve got the formula for great earnings.

And you’ve probably guessed by now that you would have been wrong.

Intel came out with its earnings after the market’s close, and they weren’t very good.

So hold onto your seats.

In this case, a day won’t make that much of a difference. Tomorrow promises to be every bit as challenging as today turned out to be.

Is it too late for gold?

I’m scouring my mouth for any valuable fillings or crowns and wondering if I can add those to my bottom line for the day.

So if you see me gumming my food tomorrow, you’ll know what lengths I would go to in order to prop up the portfolios.

Hopefully, tomorrow will be a day different from today.

I may be toothless, but I’m not an idiot.


Remember when IBM was King?    January 14, 2008 (posted 10:45 PM)

When I was a kid, and that’s getting to be a long time ago, I remember being in awe of one of my friends.

For his Bar Mitzvah, one of his grandparents gave him a gift that none of the rest of us ever had gotten.

Sure, we got savings bonds, checks and even cash, although we weren’t allowed to come anywhere near any of those things, for danger of blowing through all of the booty.

My friend received a share of IBM stock.

The portion of my booty that my parents let me have really did go to waste. I was allowed to buy a baseball glove and a portable record player. As it would turn out, I developed neither athletic skills, nor musical talents.

So it’s a good thing that they didn’t let me near the rest of the cash.

A share of IBM would have been nice, though.

We would all watch every couple of days or so and marvel at how he could make money by doing nothing at all. We would all feel his pain when the share price fell, but even then we knew that it was only a temporary situation.

There may have even been a split ot two, I can’t recall.

But you can’t keep the king down.

Back then, IBM was king. Forget that no one really had any clue about what a computer was. In fact, we didn’t even know anyone who had an apartment large enough to fit a “computer”.

The PC was still more than a decade away. The PC jr even more.

Somehow, IBM survived the IBM jr. But it’s a different world now and IBM is not even recognizable as IBM.

Coincidentally enough, the PC jr was introduced just as the Reagan Rally was beginning to take hold. That’s when I first got interested in the stock market. When I should have been sitting in my Harvard School of Public Health classes, instead I was sitting in the lounge reading the New York Times Business pages and trying to figure out what to do with the $1,200 that I had amassed.

In case you were wondering, my first stock purchase was Raytheon and I sold my shares at a 25% profit after just a couple of days.

I didn’t make another trade on my own for about 3 years after that, because I thought that there would never be another Raytheon

But today, IBM was king. Pre-announcing much better than expected earnings, everywhere in the world.

Except in the U.S. But conveniently enough, that’s a detail that was overlooked.

And IBM’s news came on the day that Credit Suisse upgraded the entire U.S. stock market.

Now you wonder how IBM’s stock will act when they do announce earnings on Thursday, the day before options expire. There’s bound to be lots of activity in the near money and in the money calls and puts.

I think I’ll stay away from those trades, although I’d be inclined to believe that the price would fall or do little. My guess is that anyone who fell onto the planet tomorrow or after and wasn’t aware of the pre-announcement, would be ripe to bid shares up on the good news, before the short term sharks circle around.

And so, at today’s open, I saw something that I hadn’t seen for a long time. Only green, no red. We’ll see how long that lasts. Late selling hasn’t been the pattern, its been the rule.

Someone compared the year to date to 1982. That was the last time a year started off so poorly, but came on strong. And there can’t be much doubt, but so far 2008 has been pretty miserable.

That was a strange analogy, though.

1982 marked the beginning of the “Reagan Rally”.

The analyst compared today’s reaction to IBM’s news as the beginning of a “Reagan-like” rally.

Let’s see. 1982’s bull market came after more than a decade of poor market performance. Today’s 8 minute rally, to date, comes after nearly 2 weeks of poor market behavior.

No wonder I feel like I’m aging fast. We’ve just condensed 10 years into 2 weeks.

But amazingly, despite a weak attempt to beat back the morning rally, it just kept picking up steam and finally finished near the high of the day.

Today marked the 9th out of 12 trading sessions this year that the close has been in triple digits, if you are a fan of “factoids”.

Over the past few trading days I’d been so busy selling and rebuying options, that I’ve forgotten where I stand with a number of my shares. In fact, I didn’t even document all of the transactions in the blog. I’m a little too tired to check for certain, but I don’t think I wrote about repurchasing my Halliburton shares, done in two equal batches. There may be some others, as well.

With today’s up market, all I did was sell a February $60 Honeywell and I attempted to sell some February contracts on Yellow Roadways and E*Trade. Both stocks had good moves today, but their options stood firm.

Interestingly, although Bank of America was up today, as was the rest of the financial sector, ahead of Citigroup’s earnings announcement tomorrow, Country Wide Financial was down. Considering that it’s price is pegged to Bank of America, at 0.18+ shares of Bank of America for each share of Country Wide, it was surprising that Country Wide would not have gone up today, and is in fact, far from the estimated $7.15 per share price, based on the numbers at the announcement this past Friday.

There’s still time for this deal to unravel, but I don’t think that will happen before February’s options expiration. In the meantime, I will do the fiddling as Country Wide starts to further combust.

Today, though, it was still all IBM.

The King wannabe, the supposed heir apparent to Warren Buffett, presided over another poor earnings quarter out of Sears Holding. It’s shares are now down more than 50% from the point that I considered buying them. At the time it was a choice between Goldman Sachs and Sears.

Goldman has had its ups and downs, but Sears Holdings has only had downs.

I’ll go with the smartest guys in the room against the pretender to the throne, any day.

Welcome back IBM, you always were a benevolent ruler. Here’s hoping that today begins the next Reagan Rally. We’ve been waiting 26 years to overcome the debacle of the PC jr. The time is right.

Long live IBM.


Contrarian, Stupid and Loving It    January 11, 2008 (posted 10:45 AM, updated 3:15 PM)

We may be about to turn the corner.

That’s what everyone is saying now that Bank of America has agreed to purchase Country Wide. I think that it may be one of those rounded corners. Who knows, it may even be one of those perpetual corners. I believe that those are called “circles”.

Some corners just take longer to round, especially the round ones. For some reason, you always seem to end up in the same place.

Right now, that place isn’t very good.

A couple of days ago I was thinking about buying Country Wide puts, even though most thought that Country Wide couldn’t go lower.

It did, but I didn’t act quickly enough to get a reasonable price. As it turned out, the put purchase would only have worked as a quick trade, as I recently did in Mosaic, because Country Wide then rebounded on the rumor that there was a deal in the winds.

For the trader, rumors appear to be much better than conventional wisdom, and they definitely have as much credibility as government economic data, in that they are both subject to significant revision. The real difference is that no one archives rumors. The data is there forever, for everyone to see how inaccurate the “real time” data really is.

Apparently now comes the news that there was extraordinarily heavy call options activity in the January Country Wide call options, indicating the possibility of insider information.

I think that a nice scandal would be a good diversion right now.

This generation needs another Dennis Kozlowski.

And then, Bank of America announced an all stock swap deal for Country Wide. As a result Country Wide dropped a dollar from yesterday’s rumor hyped up close to come more in line with the done deal offer.

Once I heard that Bank of America believed that there was some “good will value” to Country Wide is when I knew it was a clear sign to move in the opposite direction.

You may as well name a clothing line after Mussolini.

Being the non-thinking contrarian that I’ve become, I took a look at both the January and February $7.50 in the put options. There was essentially no difference in the premium. There was 5 weeks worth of free time on the premium pricing.

Priceless. But MasterCard is a whole other issue. It needs to make it clear that it doesn’t hang out in the same circles as American Express and Discover.


So I bought some February puts on Country Wide, in a bet that Bank of America’s stock price will decline over the next 5 weeks as information comes out over the financing of this deal and how they will write down their losses, or how they will capitalize their venture.

At the moment, that is exactly what’s happening to both Bank of America and Country Wide, but for all anyone knows, they may just be caught up in the downward vortex of the entire market.

This is really a huge risk for Bank of America. The easiest thing to have done was to just walk away from their $2 billion investment in Country Wide. Instead, they’re laying out another $4 billion in stock and taking on lots of liability. Sure, they get some tax benefits over the next 5 or 6 years and they’re saying that the deal will be accretive by 2009, but for now, what a drag. Since the market is said to look forward 6 months, there should be nothing but downside until then.

Who knows, the Bank of America and Country Wide numbers may end up dwarfing Citigroup and Merrill’s writedowns. With numbers like that, Mozilo’s estimated severance of $80-150 million represents peanuts, although, it will allow him to have the kind of fun that Ken Lewis, the Bank of America CEO, suggested that he might enjoy after the buyout took effect.

Fun? A modern day example of Nero fiddling.

Speaking of which, today also came the news that Merrill Lynch was writing down an additional $15 billion and was essentially valuing their remaining sub-prime assets at zero. Almost what Country Wide may be worth.

That’s thought to be a bold and positive move. Maybe signaling an end to the saga, for Merrill at least.

So why is the market then down over 120 points in the first 30 minutes? Who let the plug out that caused the vortex?

The fact that the trade deficit numbers just came out indicating a record high deficit certainly calls into question the supposed benefit of a weak dollar. That can’t be a good sign for those American companies whose stock prices have been reasonably stable during the recent plunge, because people kept thinking that their dependence on foreign earnings would insulate them.

Maybe not.

And so, you really do have to wonder what the Fed is doing. Despite yesterday’s strong words, and then later disclaimer about the relative priority of the stock markets to the Fed, there’s really no evidence that they are doing anything with regard to Job #1.

Most everyone agrees that the traditional role of the Fed is to maintain the strength of the dollar. In recent memory, that’s been done through money supply and interest rates. But if these trade deficit numbers are accurate, and that can always be subject to revision, it really may be time for the Fed to get to Job #1.

Oh, and by the way, that could only help the markets and would be good for world wide investor confidence.

Despite the growing importance of China and the EU, it’s still the U.S. that drives the world.

Except it appears as if the Fed misplaced the ignition keys.

Based on yesterday’s words and today’s early action, today is the right time to announce a rate cut.

Shake things up.

There’s no reason to wait a week for the next meeting. That would send a powerful message that Bernanke wasn’t all about the “consensus building”.

It’s about time that the Fed turned contrarian. Being predictable makes it look stupid, and I’m sure that they’re not loving it.


Quienes mas Macho?    January 10, 2008 (posted 9:00 PM)

Special “Happy 10th Birthday, Murray” Edition

Classic comedy lives forever.

But now, in an entirely new century, “macho” has different connotations, for me, at least.

No longer is the correct answer “Ricardo Montalban or Fernando Lamas”.

Today, the answer is “Ben Bernanke es mas macho”.

Just a day earlier, the Fed Chairman was being widely decried as being “too transparent” and a “consensus builder”.

Ouch. Those are hurtful words. People, especially in financial circles can be vicious, particularly as their portfolios are dwindling. But still, have they no civility?

For Michael Bloomberg, being a consensus builder is perceived as a good thing. He may be willing to stake $1 billion of his own money on that. For Fed Chairman? Not so much of a good trait. And besides, he’s only a government bureaucrat, so a $1 billion is a little bit out of his reach, unless he’s been reaching into the coffers, in a “one for you, two for me” fashion.

George Bush the Elder had the wimp label. Maybe we need to see Bernanke skydiving to shake his current day hold on the label.

But in a text release of the chairman’s speech this afternoon, the word was that the Fed is ready to be aggressive. “Substantive additional action” sure sounds like fighting words to me. Not the words of a wimp. Those sounded like the words of a leader, not those of a consensus builder.

The investing world is apparently tired of hearing “can’t we all get along?”

Even more amazing than the newly demonstrated machismo, is that there was a question and answer session after the speech. The really something unheard of. But what do you expect when transparency is the order of the day?

Back in the early Bernanke days he was lauded for his ability to speak in English, rather than in Greenspanish oblique utterings. Back then, transparency was good.

But that was before people realized that they really didn’t want to understand what was going on in the Fed Chairman’s mind. Suddenly, oblique is good. Opaque? Even better. Oblipaque? Best of all worlds.

But with a sense of overdue justice, with the release of the text, the Dow shot up by over 130 points. Then moments later, as the proverbial load was shot, the Dow came down to a more rational 60-point gain by noontime.

Based on the old “Quienes mas Macho” show, the winner was based on appearances and the perception of machismo. There was no way to know anything about “Staying Power”. The common wisdom was that the hunk kind of Hispanic leading men must of had staying power.

But you know about conventional wisdom.

Of course, now we do know that some of those leading hunks were more enamored of other leading hunks.

But that’s another topic and certainly not meant to draw any parallels to the private life of Ben Bernanke.

What happens in the federal vaults stays in the federal vaults.

However, within 15 minutes of the release of the text, it appeared that the chairman’s words didn’t have much staying power.

Although, I’d be happy with 15 minutes and a full head of hair. Sometimes you just want it all.

So after a brief excitement, it was back to normal. But after a short time away from the computer, I returned to see that the Dow was up nearly 200 points.

I need to stay away more often.

Where have I heard that before?

Now that was impressive move, because even as important as staying power, is the refractory period. Just how long does it take to get that Bernanke induced rally going again. After all, he’s not as young as he used to be.

Some less virile Fed Chairman could barely be counted on to generate a rally a month. But with that shiny dome of his, Ben must be flowing with testosterone.

But it was wishful thinking, or maybe transference, because it wasn’t a Bernanke rise at all. Word came out that Bank of America was in the late stages of negotiation about a deal to purchase Country Wide.

It was Mega-merger Mania

They first buying bout came in at $18. At the time, that looked like a great price and a vote of confidence. That was $13 ago.

But it did inspire a buying rally today after the Bernanke glow seemed to be going away.

Best of all, to underscore the lack of ability to either build consensus, or perhaps the need to hide transparency, another Fed governor opened his mouth.

And with his utterances, there was no rise, only a droop. He said that the Fed is not really interested in what happens in the stock market.

Could you just feel the mojo go?


Can you be any more blunt and any less judicious? Why say anything at all in that regard? It’s a lot like the new Cialis commercials that focus on the inevitability of interruptions.

Did anyone really need to bring Bernanke’s moment of glory down to half staff?

But still, the Dow managed a second day of gains. And both 100+ gains.

Who cares whether it was a natural rally or a discount rate drug induced rally.

Quines mas macho?

Whoever makes the rally. Even a wimp can be the man.


I Should Start Reading    January 9, 2008 (posted 9:00 PM)

That’s a bad habit of mine.

I don’t read very much.

I should start with my own blog.

Think Starbucks and think Country Wide Financial. I closed yesterday’s blog with the thought that Howard Schultz’s second coming would be less savior-like and more Michael Dell like in the very short term.

And Country Wide? Sold you you, Bank of America.

They both opened up this morning. Once again, as I was pondering the numbers and considering buying the slightly out of the money puts, I missed the opportunity.

Because, just as was scripted, within about 15 minutes, even though the market was going up, both Starbucks and Country Wide decided to head in the opposite direction.

No sooner had those out of the money puts become in the money puts.

Having missed the opportunity, I had to do something. I certainly wasn’t going to start reading.

Instead, I bought more Mosaic puts, as it did release much better than expected earnings.

Of course, the much better than expected earnings was fully expected. At least that’s what Jon Hilsenrath on the Wall Street Journal, said on CNBC on Monday morning. And that was exactly why the contrarian part of me said to go against the herd.

And to top it off, analysts raised their opinion on the stock, going from “neutral” to “buy”.

Could you ask for better contrarian signals?

The stock popped up by about $4 at the open and then started to stabilize at about a $2 gain in the first 30 minutes. I took that as an opportunity to purchase some slightly out of the money $90 January puts, hoping that lightening would strike twice in just a couple of days. Yesterday’s $95 puts were now too expensive, as they were too deep in the money.

Mostly, I bought the new Mosaic puts because I felt that I missed the put party at Starbucks and Country Wide.

What later happened to Mosaic’s stock price was dizzying, frustrating and finally exhilarating.

Stepping away from the computer for just a few moments, I came back to find that Mosaic was now down by more than $5. With in the money options each $1 move in the stock is mirrored in the option price. For a single contract of 100 shares that would represent approximately a $500 gain.

I quickly tried to see the bid and ask spread on the puts and come up with a fair price at which to sell the puts.

But it was like a rapidly moving target as Mosaic’s price started to recover. And that recovery was rapid, as well.

Before I knew it, that $5 loss was almost completely erased.

I thought that I lost the opportunity.

For a moment, I thought about selling the puts, just in order to avoid a complete loss, as expiration date was soon approaching, and it appeared as if the big sell-off was now long over and done.

When I arrived at work, about 30 minutes earlier than my starting time, I anxiously watched the screen, only to see Mosaic hover at the breakeven level.

I was prepared to close the position later in the day, so that I could either eke out a small gain, or at least limit any losses.

Once I actually started working, I didn’t have an opportunity to check the quotes for nearly an hour. But for some incredibly fortuitous circumstance, I walked in just as Mosaic was hitting its low for the day, down $10.

“Serendipity” is what some would call it.

I quickly put in a bid, under pricing the existing ask price and was able to sell all of my puts.

In about 3 hours the trade on the $90 puts turned in a return of about 130% in addition to yesterday’s gain on the $95 puts. Although that gain was just moderate, at about 30%.

By the end of the day, at a point that I didn’t care anymore, Mosaic was actually up about $0.50

The closing numbers didn’t even remotely tell the story. Had you not watched the gyrations, Monday's blog recommendation to buy the puts would have looked like only a moderately good call, rather than picking up a 15% price drop over the course of less than 2 trading days.

Meanwhile, both Country Wide and Starbucks stayed down, even as the Dow ultimately turned it around and finished up 145 points. Those were good call, as well, I just couldn’t get it done.

We can’t all be cable guys.

At Starbucks, it’s clear that the Howard Schultz magic can’t erase the short term challenges. Once Starbucks gets its next earnings report out of the way, it may be time to pick up shares.

As it was, I was again busy trying to nickel and dime some profits.

I bought back the Google January $700 call option that I sold just yesterday at another profit and then waited for Google to make a move up.

But I was premature in that decision and obviously disbelieving that Google would turn it around.

At least not as quickly as it did.

I sold Google January $680 calls, only to see Google subsequently move up buy over $20, now within easy reach of the new strike price.

Luckily, there’s only 6 trading days to go. Hopefully, Google won’t pick up another 4% in that time.

But so far, these rapid sales and purchases of the call options has helped to soften the volatility. Its required 21 trades since the New Year. At that rate, I would make about 850 trades for the year, nearly 4 times all of last year.

Hopefully, it won’t work out that way, although, I may single handedly deliver E*Trade from its financial woes.

As a result, the Szelhamos Portfolios, which are more heavily Russell 2000 and NASDAQ oriented, have not fared as badly as either of those indices.

Still, its been nothing to write home about.

But since I have the blog, I don’t really need to write home about it.

The ironic thing is that the blog isn’t read at my home.

Maybe I should get the ball rolling.


Back to Normal    January 8, 2008 (posted 7:00 PM)

Today was my first day back to work after a couple of weeks. Other than a little bit of a cold and a strained back muscle, it’s where I wanted to be.

Did I say “wanted”?

Alright, if you want to nuance the words, I needed to be here, because at the rate the losses were piling up over the last week, I may need to move my planned retirement out, by say, 100 years.

The good news about that is that at least I’ll get a chance to meet my grandchildren’s grandchildren.

Up in New England, it’s not only the January snow that’s melting under the 60 degree sun. Today, it’s the entire financial sector that’s puddling up and making a mess of everything.

Sometime tomorrow, or maybe late tonight, this small part of New England returns to normalcy, as all of the media and campaign workers pack up their bags, with no intention of returning in this magnitude for another 4 years.

I don’t know if the financial sector will return to any semblance of normalcy quite that fast. Even the people who make a very good living by buying businesses in distressed industries, don’t seem to be very anxious to attempt bottom fishing in the financials.

Wilbur Ross, who has had his hands in almost every distressed sector was coy when asked about the financial sector. He basically said that there was an opportunity out there, from among the many battered companies, but he declined to name that opportunity.

Good luck trying to guess. There’s lots to choose from.

If anything, the size of the bargains just increased. For Wilbur Ross, at least. I think that there’s still another 250 point downside, to get us down to the 10% level from the most recent high. Of course, that would put us about 13% from the October high. And then, there’s also that talk that we don’t recover from a triple bottom.

Whatever that means.

But I do know enough to know that we’re at a triple bottom. Just look at the charts. It won’t take a genius to see the pattern.

What had started out as a good morning didn’t last very long. But that’s pretty normal.

As usual, I made my plays too early.

I purchased those Mosaic puts yesterday, in anticipation of a drop after they are expected to announce great earnings tomorrow. At the pre-open, Mosaic was up $2, but only on 2,400 shares. A bad sign, for sure.

And sure enough, Mosaic opened down, even while the ret of the market was moving upward. In fact, during the early morning, everything looked great. So much for the bad sign.

Before I knew it, Mosaic was down by $2 and then just as quickly was back in positive territory.

Just as I thought that I may have missed my chance for the trade, Mosaic was back down by $2. At that point I sold the puts and made about a 30% profit for a 24 hour holding period.

At that point, little did I realize that Country Wide Financial would be denying rumors of an impending bankruptcy and AT&T would make comments about slow sales.

At that news, my antenna went up with regard to Apple. Slow sales at AT&T? How does that effect iPhone? Apple had been up nicely in the early hours, but like everything else, turned around on a dime. Apple’s turnaround from its daily high was more than 4% and AT&T’s drop was its biggest 1 day drop in the past 5 years.

And so after I shed my puts, Mosaic proceeded to fall another $4, as the market closed with a 238 point loss for the day.

Sounds like everything is back to normal. Just another missed opportunity.

Sometimes, in hindsight, I think that panic selling might be the right thing to do, but instead, I used the opportunity to trade in and out of the call positions that I had written.

You might remember that yesterday I bought back my MasterCard January options at a profit. There was no opportunity to get a good price on a new option yesterday, but in MasterCard, that opportunity came today, because MasterCard was up about $3 in the early morning.

At that point, I sold some February $230 options for an $8.50 premium per share. A few hours later, MasterCard was about to close the day with a $2 loss. At that point, I bought those options back, but only had to pay $6.30 per share.

MasterCard ended the day with a $2.50 per share loss, but $2.20 of that was offset by trading in covered calls.

Granted that’s still not as good as gold or baseball cards, but I don’t know the first thing about gold or baseball cards.

Unfortunately, I haven’t been hedged in January as much as I would have liked.

Today turned out to be a day of major corporate head rolling.

Bear Stearns, Starbucks and Sallie Mae were the majhor headlines.

In the case of Starbucks, there was an urgent need to return to normalcy and apparently the market believed that the return of its founder and Chairman, Howard Schultz, back to the CEO position would be exactly the kind of extra shot that was needed.

That can be the only reason why Starbucks was up by nearly 10% today, as the overall market was down by nearly 2%.

Schultz’s return received universal thumbs up from all of the analysts.

But just check out the Szelhamos archives when the return of Michael Dell was discussed. Just go to the March 30th blog.

How’d that work out?

It’s easy asking those kind of questions when I already know the answer.

Just as in the case of Dell, there will be some euphoria for a couple of days and Starbucks will go back down. I think that this is another opportunity to pick up some January puts on Starbucks in a day or so.

And the only other thing that I know with great crtainty is that Ciountry Wide’s denial makes it the perfect time to pick up some puts. As low as its stock price has sunk, it showed today that it can even go lower, as it’s closing priice was well above its intraday low.


Is it really such a good thing?


The “R” Word    January 6, 2008 (posted 3:00 PM)

There are some words that just shouldn’t be uttered in polite company.

Everyone has heard of the “F” word, or dropping the “F” bomb.

And of course, last season’s South Park had a hilarious episode that lumped Randy Marsh together with Mark Fertman , Michael Richards and some other guy whose name I can’t remember.

They were all infamous for use of the “N” word, and not as in “My “N” word, a term of endearment.

But the “R” word is all anyone is talking about on the business stations. I guess if you actually say “recession” there is indisputable proof that it is more likely to occur and no one wants that.

For me, the “R” word is “wreckless”.

I know that it doesn’t begin with an “R”, but we can all agree that it should.

On the other hand, no one can quite agree on whether we are heading toward the “R” word, or whether we are currently in the “R” word.

It reminds me of the proverbial “I’ll know it when I see it” response.

By then, no matter what you’re talking about, it’s too late.

But wreckless is what I sense myself becoming. I see it and I know it.

No, I’m not talking about the usual kind of wreckless. You know, the kind that immediately comes to mind to most people.

No, this isn’t about having unprotected sex in the Trailways station in Youngstown, it’s about an undisciplined approach to investing.

That’s wreckless, but sometimes, that’s what’s called for.

I’m still kicking myself over not having made the put purchase on Best Buy. Its gone down $6 from the point that I was too busy performing unneccesary calculations, instead of just following my gut instinct.

The unconsummated gains on those puts would have substantially made up some of the losses of the past week.

A few weeks ago I wrote about a strategy for Apple in advance of its upcoming earnings. I’ll have to re-read that days’ blog posting, because I don’t really remember the details. But since then, Apple has taken it on the chin, along with the rest of the NASDAQ. With evidence of the second generation of Zune taking off, the iPod doesn’t seem so invincible anymore.

And it has just started behaving that way again, as we enter into the final 2 hours of trading. It’s now losing another $5, but it’s in good company, along with Google and Goldman.

On the chins.

I often mention that I don’t make a habit of buying naked puts or calls. When I have, they’ve usually worked out well.

This afternoon, in a moment of wrecklessness, I decided to exercise some unfounded, but contrarian behavior.

This morning, the fertilizer company, Mosaic, was profiled. It’s chart is more like a high tech company during the climb upward. The analyst said that Mosaic was releasing earnings on Wednesday and that they were “blow out” numbers.

So instead, I just bought slightly out of the money January $95 puts.

I bought those puts at a point that Mosaic was up about $0.45 for the day. About 10 minutes later, it was down by more than a $1.

That’s good, but I think there’s more to come.

Wreckless thinking, but I’ve got to make back the losses of the past week.

Greedy, too.

During the up and down of today’s trading, I closed out some of my January options positions in MasterCard, Honeywell and some Halliburton, taking profits in all of those positions.

But before I feel good about that, comes the realization that they were profitable only because the underlying value of the stocks fell.

Today, was one of those days that a rally would have been nice. The pre-open futures pointed that way, but it didn’t last long.

The 70 point gain was wiped out, but the Dow battled back to another 70 point gain, which of course was itself completely wiped out.

At 2 PM, a much awaited speech by the president was aired. The Dow was down 10 points. After a few obligatory jokes and thanking his hosts in Chicago he got into the real topic at hand; the economy.

As soon as he tried to send the message that the U.S. economy has withstood a number of shocks in the past few years, those words of reassurance weren’t so warmly accepted on the trading floors.

Maybe the “R” word should stand for “restrain”.

Restrain from using the phrase “economic uncertainty” over and over again.

That phrase immediately bought another 20 point drop.

Unfortunately, his speech sounded as if he was on the campaign stump. With less than a year to go until the next election, there’s little Bush can do, but what he could do is to be decisive. After all, he is “the decider”. He could spell out precisely what should be done right now, rather than talking about the “sunshine” aspects of the current tax cuts and the evils of estate taxes.

People disproportionately effected by those issues are also disproportionately able to withstand a recession.

What people wanted to hear was the “R” word.


Oh well.

Amazingly, after CNBC’s decision to cut short its live broadcast of the speech, because there didn’t appear to be any policy related information forthcoming, the Dow then turned it around and headed back into positive territory, but not for long.

Was it something he said, or was it because we were being spared the agony of listening any further?

But in the big picture, and in the most important sense, the “R” word stands for “return”.

I’m not talking about such mundane things like rates of return, or the like.

The “return” that means the most was the one that occurred at about 6:30 AM, as I picked my wife up at the airport on her return from her trip to California.

She had been sick the past couple of days and actually cancelled her original return flight so that she could recover a bit. I’m not certain that the “red eye” flight was a way to restore well-being, but there she was.

When I picked her up she still felt awful, but the sight of her on her return was good for my sore eyes.


Nothing Better to Do    January 4, 2008 (posted 5:00 PM)

I never get bored.

If that sounds familiar, it only means that you read yesterday’s blog.

I don’t get bored, but obviously traders do.

How else could you explain this morning’s pre-open reaction to the official Jobless numbers.

The report came out with far fewer new jobs created in December and putting the unemployment rate at 5%, its highest in 2 years. Never mind the predictable adjustments that are certain to come.

Once again, there’s some disconnect between the government numbers and the ADP numbers.

I’ll take ADP. There’s just something about the quality of “official” statistics. ADP has nothing to gain or lose when it reports its numbers.

As a result, with nothing better to do, and boredom setting in, the traders moved the futures down by about 120 points and they sealed the fate of this morning’s open.

If that’s what you do when you’re bored, I’m glad that I’m immune to that human frailty. I have plenty of others, thank you.

Perhaps as a result of boredom, perhaps as a result of Futurama, I watched my first episode of “The Apprentice”. I guess that this new season features celebrities. Apparently people may have been tiring of watching “unknowns” vie for Trump’s approval. Instead, now they can watch “unknown celebrities” vie for his affections.

Sure, I knew Gene Simmons, but when your next best celebrities are Stephen Baldwin and Marilu Henner, it calls for a new definition of celebrity.

The other possibility is that I need to be getting out more often. Yesterday would have been the perfect day for that, as long as I lived in Iowa.

And we all know that’s not going to happen. In my wildest dreams I couldn’t ever imagine going to someone’s house to participate in a political caucus. So for now, I’ll just stay in my lounger.

The problem with that is that it is directly opposite the streaming ticker numbers and I’m getting an aversion to the color “red”. There seems to be no shortage of that color this morning.

Listening to the Council of Economic Advisers’ Chairman spin the Jobs numbers didn’t seem to put anyone at ease. He did try painting a happy face on the numbers, but he kept referring to the job cycle as being in the “mature” phase.

Now that I’m getting into that phase myself, I know that what awaits can’t be that good. So maybe that’s what the traders are now focused on.

30 minutes into the session, the only stock in the Szelhamos Portfolios that flashed a little green was Altria. Clearly, the message is that smoking can be good for you.

Softening the blow are the options, which are moving up in value, as the underlying stocks are falling. At best, that’s a small consolation, as I don’t have as many of my holdings optioned out as I would have liked.

Meanwhile, we are decidedly below 13,000. At this point, we need another 250 point drop to be 10% below the October high. However, if you want to squabble, maybe the new 10% mark should be measured from our most recent high, which was about 13,700, therefore requiring another 600 point drop.

With the early morning pundits looking at a 1700 S&P 500 level at the end of the year, that would translate into a 15,000 Dow Jones.

What the source of their optimism is escapes me at the moment.

As it would turn out, today was the perfect day for me to be busy with projects around the house.

Among the projects was the delivery of a hot tub.

That went very smoothly.

What isn’t going to smoothly is the electrical hook up. The electrician, despite my asking him a few weeks ago whether he needed to come out and see the site in order to know whether there were any special considerations to be up to code, said he didn’t.

As he was nearing the end of the hook up he told me of “one small problem”.

This probably isn’t the place for the details, but foresight is a could characteristic.

As a clue to the way things were going to go today, I did something that I haven’t done in years.

Back in the old days, when my wife was afraid of any gas powered tools, we had an electric lawn mower. I don’t know how many times I mowed over and severed the extension cord, but there were lots of trips to the fuse box to reset all of the tripped breakers.

Yesterday I went to Home Depot and picked up some melamine for a project. Unfortunately, my circular saw had been lent to my son, who said that it was in the trunk of his car. As luck would have it, his car is here, as he borrowed one of our other cars for a trip to Memphis.

Search a I did, I found lots of things in his trunk, but no circular saw.

That’s right. You guessed it.

I borrowed our neighbor’s circular saw, and proceeded to cut right through the wire.

And wouldn’t you know it, but the replacement part is no longer available from Black and Decker.

I did repair the cord, but now must get him a new circular saw.

Otherwise, the Staples delivery was uneventful and I have now completed all projects.

Otherwise, I would have stay transfixed, watching the ticker plunge lower and lower.

There was nothing redeeming to talk about today. Double digit losses in Apple, Google and MasterCard were just the easiest to notice, but it was across the board.

Not a single stock in the Szelhamos Portfolios went up today.

Even on that 400 point down day at least something was up.

Not today.

With nothing better to do other than to think about today’s devastation, I’m scouring the house looking for more projects to keep me busy.

What a year.

It’s time to get a real hobby and give myself something better to do.


Boredom Can be Dangerous    January 3, 2008 (posted 5:00 PM)

I never get bored.

That’s probably the major reason that I look forward to retirement. I like doing nothing. I can watch the ticker go by all day long. And with the marvel of the laptop, it can follow me wherever I go.

Unlike George Costanza, I don’t run the risk of having to purchase the laptop, just because of where its been.

My wife, on the other hand, is always on the go.

Although she would probably rather not be in California at this time, she is in a perverse way, probably in heaven, because she loves to be busy. And there’s no shortage of necessary activities.

Based on the Rabbi’s recent eulogy, heaven is apparently not the place that she should count on running into her younger sister.

But that’s another story.

In the past few days, she has flown cross country, arranged a funeral, re-connected 2 children with their father, cleaned out and gutted a house, had that house painted, carpets ripped up, new carpets installed, purchased new furniture, visited Disneyland, moved her brother into a new residential home and met with a trust attorney.

I’ve probably left out a few things, such as catering the post-funeral reception, crisis counseling sessions, clothes shopping for the kids, meeting with school personnel and some other odds and ends.

Those were a hectic few 30 minutes.

During my return back home, and unexpected vacation, I was channel surfing on New Year’s Day. That’s something that I don’t typically do, since I am usually glued to either CNBC or Comedy Central. Incidentally, I may need to find a new favorite channel, as I learned that Comedy Central will be airing episodes of “Futurama” nightly.

I love cartoons, but this has to be one of my least favorites. It’s hard to believe that this was supposed to be better than “Family Guy”.

Comedy Central must be getting hard up for programming. Who knew that the writer’s strike would effect me personally?

And so cruelly?

It may be time to visit PBS.

Yeah. Right.

So I channel surfed because New Year’s Day is different. There just wasn’t much on. I actually did feel some boredom coming on. It was almost like the scene when Seinfeld was confused about that salty liquid coming out of his eyes. He just didn’t know what is was.

As luck would have it, during that surfing process, I passed Suzie Orman doing a show. I’ve never watched her before, because I always found her voice and tone to be very annoying. I’m not certain whether Judge Judy or Suzie Orman is the anti-Christ, but take your pick. You can’t be wrong.

But just as I was about to push the “channel up” button, a question was asked regarding the strategy of writing call options in a retirement account.

Suddenly, it had my attention.

Unfortunately, she liked that strategy.

That causes me to rethink my strategies.

But I’ll do that some other time.

Because this morning I bought back my Google options, taking nearly the entire premium as a profit, then waited for Google to move up a bit, and then sold some new contracts. This time, I moved the strike down from $770 to $740, but still with a January expiration date.

Google would have to go up another 10% in the next 11 trading days. In the meantime, I moved the combined premium from about $280 per contract to $400, after all expenses are considered.

I ended up doing the same thing with MasterCard. At one point it was down by $8, so I bought back my January $240 option, again keeping almost all of the premium and just waited a bit.

Later, MasterCard recovered about $4 of that loss, so I sold some January $230 calls, for a combined options premium of $315 per contract, instead of $200.

Just like Google, MasterCard would need about a 10% gain in the next 11 trading days to reach the strike price.

It could happen, particularly since both companies have had some pretty explosive days in the recent past.

During what may actually have been a real moment of boredom, I sold some Honeywell February $62.50 options. After being the strongest Dow performer in 2007, Honeywell has been in a really tight range the last 6 months. I got a 2% premium for a 4% move over 6 weeks. That’s not what I usually use as my guidelines, but like I said, I was bored. I just needed to make a trade.

I must have been going through lots of different phases and states today.

During a moment of confusion, I also picked up some shares of Yellow Roadway, which has seen its shares plummet the last week. I quickly sold some January $15 call options, with the hope that in the next 2 weeks the shares will be called. It would be a large profit, but a quick one, if it all works out that way.


Because I hadn’t really counted on Yellow Roadway to keep falling. But it did just that, going down about 5% from where I purchased it earlier in the day. Sort of like a truck going downhill on an icy road, if you get the allegory.

The state of confusion must have started yesterday. I kow so, because I received an e-mail from a reader wondering why there was no new posting yesterday.

So I checked the website and sure enough, the blog I had written was not posted.

Confusion? Technical glitch? Who knows, but it is now on the web site, without the benefit of any after the fact editing..

Meanwhile, I continue to moan about the lost Best Buy opportunity, as it is currently down another $2. In this market, well placed puts can be a good way to go, but as Best Buy shows, you can’t dawdle. I missed the boat because I spent too much time doing calculations and not watching the ticker.

At some point, I realized that I really had been confused with the Yellow Roadway deal, since I thought I had tried selling options on all of my shares, only to discover that I input my order incorrectly and now have plunging shares with no hedge.

So I decided to take a break.

I went to one of the new Dogs of the Dow.

I went to Home Depot to pick up some things for a little project.

As the women behind me on line said “I should have gone to Lowe’s”.

I can’t disagree, especially given the combination of scarce and rude sales associates.

That’s definitely not the typical experience that I’ve had at Home Depot, but none of the familiar faces were on the floor. My guess is that they’ve all gone over to the new Lowe’s that opened up right next to the new Costco’s, which in turn is decimating the BJ’s Warehouse.

Such is life.

Once again, a question of “who shall live and who shall die”.

Tomorrow, I plan to be away from my beloved ticker for much of the day, as I get to work on the projects.

I want to complete them before my wife returns home. After her 2 week ordeal in California, she’ll need some joy.

Who knows, she may even welcome some boredom.


When the Expected Leads to the Unexpected    January 2, 2008 (posted 6:00 PM)

For the first 30 minutes, it looked as if 2008 would get off to an unremarkable start.

Even though I do like volatility, it is good to get a breather on occasion.

That all ended in an instant as soon as the ISM numbers came out. As measured by manufacturing metrics things aren’t looking so great for the economy, but no one expected any revelations.

I know that I’m not manufacturing anything, but someone must be.

No great surprises in the number, though. The only surprise was the overblown reaction. By noon we were already down by over 200 points.

Seems like the old days. What an eternity since 2007.

The move happened too quickly for me. It all occurred while I was mulling over the possibility of buying some put options on Best Buy.

Don’t get me wrong. I love Best Buy. I’ve owned the stock and I certainly own lots of their products, even though I know that I can get them less expensively on-line. I’m still not used to their no longer new aisle redesign to diagonal aisles, but I’ll get over it.

There’s just something about the rush of being told “we don’t work on commission”.

Now that CompUSA is heading into oblivion and Circuit City can’t be too far behind, Best Buy is the place to be.

My son, in fact, has a Best Buy polo shirt that he picked up at the Salvation Army Store. It’s a prized possession. I only wish that had one in my size. Besides, it was hard to turn down with a price tag of only a buck.

The in the money put options, though, were more expensive than the shirt, so I was giving it careful thought, before making my mouse clicks.

But just as I bought Corning puts last month and sold those for a profit, I was now ready to do the same with Best Buy, even though the charts seem to indicate that it usually goes up in early January.

But sometimes you just have that gut feeling. The store seemed empty to me and their weekly circulars aren’t screaming out to me.

That’s scientific.

After a couple of clicks trying to find out when earnings are next reported, so that I could decide between January or February puts, Best Buy proceeded to tank with the rest of the market.

I missed the opportunity for a quick trade.

Based on the action so far, there may not be too many short term opportunities to take some profits. Ordinarily, I would look to buying back call options prior to expiration, just to lock in some profits, if my expectation is that the stock price would rise before expiration.

Not today. With expiration barely 2 weeks away, I’m inclined to see them expire and just roll over into February.

Maybe today was just good old fashioned tax related selling. Especially when you see the best recent gainers were the ones being smacked down. A short term capital gain is much more palatable when you have an additional year to pay your capital gains taxes.

Unlike jumping the gun on buying and selling the Dogs of the Dow, you really can’t jump the gun on tax year related selling. There’s no commissioner out there to ensure that no one prematurely activates the Dogs of the Dow strategy.

The IRS, though, doesn’t have special rules for anyone trading on December 31st. Good luck trying to explain to them that the days’ head start you got on tax relating selling really shouldn’t matter.

It matters. It’s a lot like size. You can delude yourself as much as you want, but deep down, you know that it matters.

Well, the ISM numbers weren’t very good. The expectation for Friday’s Jobs Report numbers isn’t very high, so maybe the unexpected will happen then, as well.

In the meantime, the Federal Reserve appointed 2 new voting members who have a hawkish bias on inflation and the role of the Fed in reducing interest rates.

They’re not for it.

So as oil nears $100 again, with a nearly 4% increase today, manufacturing is down and the dollar is tanking, there continue to be mixed signals regarding the direction of the economy and what the Fed should do.

The read is that they won’t do anything until they see the certainty of recession, by which time, it will be too late to move anything.

When an 800 pound gorilla sits on your head, even the smartest guy in the room may have trouble acting intelligently. And so, Goldman Sachs is taking it on the chin today, as well, as Google and really, everything.

Seems like we never left 2007.

Although, I wouldn’t mind another 20%, but that would really be unexpected, although as we re-approach 13,000 and are again approaching that infamous 10% level that supposedly characterizes a “correction”, that’s precisely the scenario that has lead to those ‘dead baby” bounces.

If that’s the case, yesterday’s resolution to spend less time managing my portfolios may be right out the window.

If it’s a rush that I want, I can stare at my computer screen’s stock ticker at any time. I can’t go into Best Buy on the same basis.

Speaking of Dogs of the Dow, so far, completely expected, as they are part of the Dow (uh duh), they are really depressed today. So maybe today is similar to a post-Christmas Day sale. Whatever you would have invested as part of your Dogs of the Dow Theory initiative, you can pick up more than 1% more shares today. More shares, more dividends.

I still won’t bite.

Maybe next year, or the year after, once the Dogs of the Dow Theory is forgotten by the masses.

Because that’s when the unexpected really happens.


Day of Reckoning    January 1, 2008 (posted 9:00 AM)

It’s done. It’s over. The books are closed for the year.

This is not like the Day of Atonement. It’s not really a “who shall live and who shall die” kind of moment, although it is possible that after carefully considering all of the numbers, an investment strategy may in essence “become dead to me”.

And so, it’s now time to crunch the numbers.

Who shall live and who shall die.

But first, let’s review the year, the inaugural year of the Szelhamos Rules Blog, with now slightly more than 10,000 hits under its belt.

Within just a few days of starting the Blog, the Dow had its first 400 point loss. And as volatile as it has been, there really hasn’t been much reason to look back, unless you like the feeling of nausea.

But first things first.

Yesterday I said we would look at the Dogs of the Dow Theory for 2007 to see just how well one of these sure fire investment strategies has worked.

Sure enough, with the Dow finishing the year up about 6.5%, without considering the effect of reinvested dividends, the Dogs of the Dow was a loser, even after accounting for dividends and the spinoff of Kraft Foods and its dividends.

No surprise, since the entire world now subscribes to the Dogs of the Dow Theory. Interestingly, 8 of the 10 Dogs last year are still dogs.

How’s that for a good investment strategy?

My mattress does better than that.

As Harry Chapin said, “there was not much more for us to talk about…”.

So now, let’s do it.

Today, it will all be about the numbers.

6.43%, 3.55%, 9.83%, -2.66% and 3.87%.

That’s all she wrote.

And just in case your not completely fluent in those numbers, those were the percentage year to year changes for the Dow Jones, S&P 500, NASDAQ, Russell 2000 and Russell 1000, respectively.

Those analysts, and there were lots and lots of them that said that all of the action would be in the large caps, were partially correct. Although the NASDAQ had a nearly a 10% gain, it was skewed by the Horsemen of the NASDAQ, Amazon, Apple, Google and RIMM.

Before I break it down, after all, it’s all about the competition, my entire portfolio ended up 11.67% for the year, after adjusting for funds added to the portfolio over the course of the year, such as for retirement accounts.

One of the professionally managed portfolios returned 11.40%. As expected, that was by Bob Shapiro, of UBS. He seeks to track the S&P 500, so he really did well. But he is as reliable as they come.

The other professionally managed portfolio tracks a blend of the Russell 1000 for Growth and the Russell 3000 for Value.

Maybe it’s the other way around. I forget. It doesn’t really matter.

But there’s a reason that we are considering dropping the services of this manager. His portfolio return was 2.70%.

Now as far as conventional wisdom goes, everyone knows that dollar cost averaging or some variation, is the way to go. That’s precisely how 401(k) plans are designed. Market goes down, you get more shares for your fixed periodic contribution.

Great theory, lousy results. Without investing in any highly speculative mutual funds, just sticking with a mix of large cap, growth and growth and income, the 2 different mutual fund based retirement accounts that my wife and I have each returned about 1%.

In past years, I did occasionally move in and out of different funds, but I didn’t do that this year. Maybe I should blame myself for the poor performance. Automatic portfolio reallocation, as is the rage, wouldn’t have helped, as the ratios between funds just stayed pretty much the same all through the year.

Ordinarily, I’d have a drum roll waiting as I prepare to release the unaudited Szelhamos Rules Portfolio numbers, but this being a federal holiday, I wasn’t really prepared to pay time and a half.

But here goes.

The overall Szelhamos Portfolio returned 25.56% for 2007.

Not too shabby. That makes it a little easier to be able to stay home this week while my wife has to remain in California, trying to put a family back together. Funny, though, how you get used to getting a pay check.

Anyway, back to the good news. The portfolio invested for the benefit of my kids returned 46.43%, in large part due to Apple and MasterCard. It seeks to track the NASDAQ and does occasionally speculate with naked calls and puts, as well as some call writing.

This year, that kind of speculation worked, but without exception, every low priced stock that I purchased for the portfolio just proved why it deserved to be even lower. I can rationalize the losses by thinking about the tax benefits, but I’d rather not have to rationalize.

The self-directed retirement portfolio ended up returning 21.02%. There was lots and lots of covered call writing in that portfolio. Those premiums do add up, but it required many trades, with only a few securities actually entering or leaving the portfolio.

Finally, our portfolio that seeks to track the Dow Jones returned 18.84%. A combination of good stocks, good dividends and options writing.

All of these results are after expenses. Those expenses were fairly minimal on the self-directed accounts, but fairly substantial on the professionally managed and 401(k) accounts.

Bob Shapiro is worth it.

The others?

Not so much.

Given the happenings of the past week, obviously, you never know what will happen from one minute to the next.

My pledge is to spend less time managing these portfolios. If we do give up on the services of one of the managers, I won’t volunteer my services.

It all starts tomorrow.

The house will be clean and well organized by the time my wife returns.

If not, we know exactly “who shall live and who shall die” and by whose hand the end will come.







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