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Shout Out  November 30, 2007 (posted 11 AM, updated 3:15 and 3:50 PM)

I’m not a very outwardly displaying emotional kind of guy, but as I watch this morning’s futures, which are pointing to a 100+ point gain, I was trying to contain my glee. I know how these things can change quickly.

Considering that there’s no one around me, I’m not sure why the glee needs to be contained. After all, I thought nothing of dancing with my laptop. So clearly, it’s not an issue of embarrassment. It must be my Victorian upbringing.

But there’s no doubt that today’s early numbers are due to Bernanke’s speech last night. Based on the September experience, if rate cuts become a reality after the December 11th Fed meeting, there may be another rally waiting to bust out.

I do like watching other people let their glee out. But now, I can’t do it within 150 yards. At least not for another 2 years.

So, I suppose in the vernacular of some segment of society, “here’s a shout out to Ben. Ben Bernanke of Washington D.C., this one’s for you”.

A couple of month’s ago, Bernanke was overshadowed by George Bush’s implausible pronouncements about the role of the federal government in assuring the sanctity of people’s home ownership. But today, he’s the man.

So far, at least.

I’m not really sure what segment of society uses or used to use that expression, but I do know that I’m not part of that demographic. The closer I look at myself, the more I realize that I’ve become part of a demographic that I used to hold in disdain.

And you know, it’s not that bad. If Che only knew.

My guess is that if JFK had not been assassinated, Che would not have been overly involved in exporting communism, as a determined United States would have forcefully stood up to any ingression in the southern hemisphere.

With no other place to turn, Che would have eventually become an unrequited capitalist after his escape to the United States during another of Castro’s purges. The reality being that with Che on the Cuban mainland, he would have been too much of a cult challenge to Fidel’s supremacy. He had to go.

Che probably would have negotiated a great equity position in the tee shirt industry that perpetuates his image and would have gone on to lobby for lower corporate tax rates.

That’s what happens to your ideals.

Before the day is over, there’ll be some more economic data released that may send that glee packing, but so far, so good, as the first bit of news just came out.

Personal economic spending was up a bit, but less than expected. There was a very small drop in the Dow futures, but a big pop in MasterCard’s pre-open. It’s not cash that people are using, as even I have taken to swiping my card at McDonald’s. Yesterday, in fact, on my way home, my wife called me to pick up some sandwich buns. Rack up another credit card sale.

The only downside to this is that our annual tradition of emptying the big change jar will probably result in some disappointment in the distributions are made this summer. I’m just not bringing home as much change as in the old days.

It’s amazing how quickly things have turned around. All of a sudden, with 3 weeks to go until options expiration, I’m looking again at the happy possibility of those options being exercised. Best of all, all of the strike prices that I had selected are at their highest levels. Of course, based on past history, I’ll probably wind up moaning about the prospects of losing these stocks as we near the expirations date.

So predictable.

At the open, the futures did successfully predict a great upward climb. Within the first minute of trading the Dow was up by more than 90 points. On a negative note, it took a full 2 minutes to break the 100 point gain barrier.

At this rate, with 388 more minutes of trading remaining, there should be about another 19,400 points of gain left to go. So look for a closing Dow of about 33,000.

If I have time, I may recheck my math and logic. But right now, I’m too busy trying to keep track of all of the green arrows to really care about math and logic.

Mostly what I should keep track of is my fleeting sense of reality, because as we entered the final hour of trading our 150 point gain completely disappeared. Now that really should have been entirely predictable.

Speaking of which, yesterday was another terribly disappointing day as regards the devolution of my mind and mental acuity. This is where it’s all heading.

When I arrived home yesterday evening, my 11th grader said he needed some help with his math, in preparation for an exam today.

No problem. I’m great at math. Love numbers, love number theory. It’s all good.

I’ll always remember Chapter 4, or at least in previous years I would have always remembered Chapter 4. Because you never forget your personal Waterloo.

I’d like to blame it on being tired, but I just couldn’t grasp the concept of matrices operations I was of no help, at all. I think the drawbridge between my remaining synapse was in the up position. Oh well, at least something works.

First, this summer, it was the inability to grasp MySQL and PHP programming and now matrices. Where is this heading? That’s not a rhetorical question. It’s not going anywhere good.

It no longer remains to be seen whether the market will be heading anywhere good as the day progresses. Just 30 minutes into the day, we were drifting off of the highs, but were still up 120 points. At the time, who knew how much that would be destined to change? I had been looking for a good trading opportunities, but hadn’t found anything yet in the early going.

What I was thinking of doing was buying December $25 puts on Corning. It usually starts going down as we start getting some early holiday shopping numbers. Best of all, it’s gone up nicely the last few days, so it will be due for a fall.

After re-reading the last paragraph, I convinced myself and went through with the put purchase.

I run a few different portfolios. That Corning put was for my kids’ account, which is the most aggressive portfolio. It, luckily for them, has had the best return of all of my portfolios, despite some clunkers like Citigroup and Blackstone.

And then, just as suddenly, or rashly, I decided to set myself up to take tax losses on the Blackstone. I sold December $22.50 call options on the majority of my shares. With a cost basis of $28, the loss will be offset by about $1.70 a share from previous call options premiums. But this one will be a strategic loss. One for the team, as it were.

But even with Blackstone in the dumpster, whereas the NASDAQ is up about 11% YTD, the kids portfolio is up nearly 40%, not including today’s results, which will end up being disappointing as the market drifts further and further into the red in the final hour.

I suppose that I should give a shout out to me, but that would be unseemly. Poor Ben, his influence barely lasted 5 hours.

With the mindset of a cynic, I decided that I was done trading for the day and took our dog for a walk in the woods. We went deeply enough that I actually found the “clubhouse” that my son and his friends built. It was quite impressive, but I’ll have to head out there one more time, this time with a camera, to do it justice.

When we arrived back, winded and sweaty, the market reversed its course once again and was up 25 points, although with a bias toward a downward drift. With minutes to go, it’s still not clear whether we will make it 4 gaining days in a row.

But at least there was ne last hurrah for the Bernanke Bounce before we headed into the weekend. Because, wouldn’t you just know it. Confounding the cynics, as myself, the Dow ended up pulling out a 60 point gain.

Now that it’s all laid to rest, at first, I thought that the weekend would be reserved for pondering the imponderables of some of Google’s latest non-core initiatives, that seem to be undercutting short term price performance. Are the Google twins losing their minds, as well? Alright, I’ll grant them that space exploration is a natural extension of on-line search, but the other ideas?

No, I decided there will be no pondering. Instead, I’ll just dance with my computer to the melody of a nice Victorian tune.

Just another day of pleasant surprises.


Pleasant Surprises  November 29, 2007 (posted 8 PM)

I was a little hesitant about today and how things would work out.

I know that you’re probably thinking that my concern was for the direction of today’s market, especially following nearly 600 points of gains over 2 days.

Far from it, though. There’s more to me than that. Not much more, but at least there’s a scant semblance of a third dimension. My wife won’t allow me to retire until I get much more multi-dimensional.

Clown school doesn’t count.

Today was the day that I was supposed to play host to a recent college graduate, who was interested in shadowing me for a day to see whether or not she was interested in pursuing a career similar to mine.

Superficially, the answer would have to be “why not”. After all, I only work 3 days a week and can take off as much time as I’d like. On top of that, I’m surrounded by great people and I get at least one hug each week and am subjected to all of the sexual harassment that I can take. That makes it pretty easy to enjoy things and certainly that’s a great selling point, if you’re lucky enough to stumble into the same kind of environment.

The stumble took me 20 years.

But this was a little bit different. Even though I had spent nearly 20 years in advanced education and had many “interns” and others over the years, this one came unusually recommended.

The message that I received from a lifelong friend, and as close to a relative as you can get, was the hope that this individual would marry his son, if only he was smart enough to ask her. Academically speaking, there’s no doubting his intelligence, but as I have learned all too well, that part of the brain doesn’t always serve you properly.

I value that person so much, that I even wrote a letter of recommendation to graduate school on this person’s behalf, sight unseen, following only an extended telephone conversation, which best could be described as a “tell me about your life, interests and dreams” kind of interview.

Well, today was the day. She had traveled more than 200 miles to spend just a few short hours, which I thought would be sufficient, particularly if the shadowing process was unusually onerous.

But the first pleasant surprise today was that my shadow was delightful. Nice, personable, interactive and bright. If anything, I may have understated her attributes in my recommendation letter, glowing as it was.

In fact, she asked if she could come on a monthly basis, and I found myself not shuddering at the prospect.

And oh yes, I hope that he is smart enough to propose.

In fact, in a bow to the obligation that I had, I asked her if she had any nice friends for one of my sons, whose recent picture I happened to have with me.

Based on some unintentional findings when doing a Google search, it doesn’t really look as if he really needs any help in that regard. I’m not sure that any self-respecting drugstore would have developed those pictures.

Bless the digital world.

Anyway, she didn’t seem to anxious to answer my question. But when you think about it, I wrote a sight unseen letter of recommendation, the least she could have done was set up a sight unseen blind date.

Was that asking too much? I’ll try again next month.

In hindsight, though, I think that I may have inadvertently asked her if she knew of any nice Jewish boys for my son. That may explain the silence.

To set the record straight, I should have asked for nice Jewish girls.

Alright, so that was now out of the way, thereby leaving time for the real concern of the day. Where were we going from here?

After 2 up days, I was prepared for a return to the norm.

But that would be alright, since those rapid upward climbs are always followed by equally rapid descents. There’s nothing better than a slow, steady advance.

As great a day as yesterday was, I would much rather see 250 trading days of mundane 0.1% gains, rather than these singular pops of 2.5%, surrounded by occasional 200 point losses and punctuated by roller coaster patterns of movement. Who needs excitement of cherries jubilee, when there are bran muffins? There’s a lot to be said for the wonders of regularity, as last night’s South Park episode will attest.

And you thought you knew the real Bono.

Besides, tonight, everyone was waiting for Bernanke’s speech, which hopefully would affirm Donald Kohn’s soothing words from yesterday.

But another pleasant surprise played itself out by the end of the trading day. Despite another mildly volatile session, the market figured out a way to make it 3 days in a row.

No small feat. Small gain today, but still, no small feat.

For me, the pre-open began with what looked like would be really great news and action in E*Trade. In fact, on heavy pre-open volume, E*Trade was up by more than 20% on news that it’s CEO, Mitch Caplan, the architect of the now failed banking and lending strategy was being unceremoniously dumped. That’s what Citadel got in return for pumping $2.5 billion into E*Trade and picking up some loan portfolios at $0.40 on the dollar.

As recently as Monday, Caplan was still aggressively shilling on E*trade’s behalf, although you could tell that a sale of assets was not off the table. He wasn’t at ease as much as he usually was, but these haven’t been ease provoking times. Maybe had he not had a penchant for wearing tight plaid sport jacket patterns on television, he’d still have a job.

But that bit of pleasant news this morning didn’t last, as E*Trade ended the day down nearly 10%.

The new speculation is whether this takes E*Trade off the buyout block, but the consensus is that it doesn’t. Which of course makes it even less understandable why the stock fell today. It’s now thought that Schwab is out of the picture and that Ameritrade is going to be much more interested in E*Trade now that some bad paper is off of its books. Of course, now there’s Citadel to deal with.

I really don’t care, just as long as E*Trade keeps going up in price and Ameritrade does, as well.

Although I had been thinking of selling Blackstone, it rose another 3% today. Maybe the thought is that at these prices, there may be some good buys waiting out there for Blackstone, as long as it can get some financing.

Good luck with that.

I suppose that Schwartzmann’s first public statements in quite a while also have helped. So I’ll continue looking for a short term capital loss opportunity.

I’m happy to say, that despite the relatively lackluster year, as a result of the recent setbacks, I don’t have very many choices for short term losses. I guess that’s good, but I would like to minimize next year’s taxes, although, once again, there’s no reason to complain. The more you pay, can only mean good things.

For the first time in about a month, we can look to tomorrow as perhaps capping off an up week. It’s been a while, but that’s what makes it even more savory than bran muffins.

I’m ready for the surprise that brings us to 14,500 by years’ end.

So for starters, here’s hoping that Uncle Ben doesn’t disappoint tonight.

I’m not ready for any unpleasant surprises.

Oh, before I forget, not that I ever would.

Happy Birthday, Judy


Sesame Street  November 28, 2007 (posted 9:30 PM)

My oldest son is now 21 years old. With time, it gets harder and harder to remember the early years. One thing that I do remember, though, is etched deeply within my memory banks.

Like so many well intentioned parents, we subjected our child to a mind numbing form of behavior management. Long before there were DVD’s, we had the VCR.

Remember those days?

One of those VCR tapes that our son watched incessantly was one in the Sesame Street series. The one song that remains burned in my mind goes like this:

“One of these things is not like the other things

One of these things doesn’t belong

Can you guess which thing is not like the other thing

Before I finish my song?”

That song has its applications to today. Can you guess, boys and girls?

Here’s a hint. The song ends at 4 PM.

Based on the pre-open futures, maybe today will be the day that we string 2 gains in a row, together. That’s definitely not like anything else we’ve seen in a month.

Another show that we had taped for him and that he loved to watch, was “Double Dare”. Remember that show? It seems that has applicability to today, as well. Maybe instead of ringing the opening and closing bells, they should just empty a cauldron of green slime onto the traders below. Now that’s symbolic, especially when we get those 200 day losses.

Today’s first glimpse into the confusion that consistently marks the markets came as the Durable Goods Report was released. The numbers showed a 0.4% decline in orders. It was actually down 0.9% if you took out defense industry expenditures.

The immediate read by the analysts was that this number was worst than expected and they envisioned a drop in the futures, which at that point were up 80. How could anyone disagree with that analysis?

But guess what, the futures just added on another 25 points. Obviously, the “futures” can’t be very smart.

Quick move over to a trader at the Chicago Mercantile Exchange and he explains that the decreased Durable Goods numbers were expected, since a big part of those numbers is predicated on a weak housing market.

Granted, that was in hindsight, but that’s exactly the way the game is played. No one is really wrong, no one is really accountable. My guess is that whoever invented the sub-prime loan will ultimately be awarded a Medal of Freedom form the President at an elaborate outgoing ceremony.

That’s just the way it works. Rarely do high profile people that are incredibly on the wrong side of the market disappear into the ether. In the worst case scenario they become weather forecasters in some low demographic market. Just one more example of where performance really doesn’t count for much.

Monday, for example, the smartest guys in the universe, the ones at Goldman Sachs issued sector downgrades that included just about everything imaginable. Once you got finished going through the list of sector downgrades, there was really no way to have any kind of optimism about the direction of the market, because there was nothing left off of that list.

So in homage to the Goldman list, the market decides to go on an absolute tear.

Now there are some who attribute today’s strong opening to the Fed’s Vice Chairman Donald Kohn’s remarks that suggest there will be further Fed rate cuts to come from their December 11th meeting. But really, do you care who gets the credit, as long as the market moves up? I don’t see anyone crediting me for noting the strong bull signal from Tuesday afternoon’s last hour rebound.

But it still remains to be seen how long that 100 point gain in the first 5 minutes will last. Remember, yesterday had a really good closing rally after it started looking as if we were about to enter the abyss one more time.

Early in the morning, I took advantage of some early strength in both Ameritrade and E*Trade and sold some December call contracts on a small portion of my positions. I sold some $20 Ameritrade and $7 E*trade. Based on their premiums, there seems to be an expectation that something will happen within the next few weeks for those companies. I kept more than 70% of my shares unoptioned, so as to be in a position to get greater profit, if prices surge beyond the December strike prices.

That is called “wishful thinking”.

As the CME trader pointed out, the housing market was weak, and that was further confirmed as the New Home Sales report came out a 10 AM.

And the market did just as expected. And by that I mean that you should read “heavy sarcasm” into that statement.

It went up even more immediately after the news, despite the fact that there is now a nearly 11 month inventory of new homes.

Quick idea for a new Fox reality series. “When Bad News Goes Good”.

I would give up some of my Google advertising budget to place ads on that show, although now that I know that Google plans to get into the “renewable energy space” as a means of social responsibility to offset its massive hardware’s impact on the environment.

Huh? I need help on that one. Why exactly is Google planning to pump hundreds of millions of dollars into alternative energy sources? The Google guys have lots of grand ideas, but so far, the reality is the the only thing that makes money is search. And it makes lots and lots of money. So much so, that no one will ever miss a few hundred million.

As happens 3 days each week, my official source of earnings ultimately took precedence today and I wasn’t able to fully revel in what would go on to be the second largest gain of the year. And best of all, the second consecutive day of gains. If you really like factoids, the past couple of days marked the best 2 day gain in 5 years.

The good news was signaled yesterday, as the market recovered from it’s last hour losses and closed at its highs.

For me the really good news, not to gloat, is that even though the Dow is still down almost 7% from its October high, the Szelhamos Portfolios are 3% above those October highs. That’s just a small consolation, however, as the professionally managed portfolios are tracking the overall market.

A few days ago, I thought that all of the options that I had written would just expire worthless, which is always the goal. But all of a sudden, once again, I’m looking at the possibility of going up against the wall again, as prices on some of my favorites are beginning to climb. The good thing about that is that I’ll have plenty to write and moan about.

Although I still have nice cushions between the current prices of Google, Goldman Sachs and Apple, MasterCard rose another $11 today and is once again knocking on the strike price’s door.

It’s nice having these kind of problems. Those kind of problems are so much easier to deal with than figuring out the new color for our carpets as the office is remodeled.

Best of all, I’m still sitting on a number of positions that I haven’t optioned yet, as I’ve been waiting for prices to climb before selling the call options. Each of those represent good revenue streams.

As I get older I get a greater appreciation for a good stream of anything.

There is a good chance that as the tax year comes to an end, I will write call options on some positions that I am willing to sell for losses, such as Blackstone and Citigroup. Since Blackstone, especially, is deep in the hole, I may get lots more benefit by taking the short term loss rather than keeping the money tied up in a position that has no near term prospects of becoming profitable.

Like Citigroup, however, its nice price activity the last couple of days, will result in a higher call option premium. I may want to take the losses, but I still want those losses to be lessened. So since the options expire before the end of the year, that strategy may end up being the best of all worlds. If tomorrow has any continuing upward momentum at all, I will probably make those options sales.

As I think back to the friendly neighborhood of Sesame Street, I realize that Oscar was probably the character who really didn’t belong with the rest. There weren’t too many cranky characters in that neighborhood. On days like yesterday and today, I feel a lot like Elmo, effusively gushing about what a great few days its’ been. But then I realize how quickly you can transform from Elmo to Oscar, so I’m not really sure if they’re different at all.

I’ll have to go to our VCR archives, since I’m sure we still have that old Sesame Street video and try to watch it with the wisdom that I’ve accrued over the past 20 years. If Elmo and Oscar don’t appear in the same scene, then I’ll know that my theory is correct.

That may turn out to be the unifying theory of the universe that I’ve been looking for. Maybe nothing is different from anything else. It’s all the same, just separated by time and space.

Tomorrow, I hope I get to keep my Elmo face on, but if you notice anything different, you’ll know why.


Yes Virginia, There is a Cyber Monday   November 27, 2007 (posted 8 PM)

Listening to the varied analysts yesterday, there was considerable doubt whether Cyber Monday actually existed.

Just ask Yahoo!

The cynics said that Cyber Monday was just an invention. A marketing ploy and no more. Others said that what we call Cyber Monday was, in fact, not the busiest on-line buying day of the year, at all. Interestingly, they all disagreed on what day actually was the busiest. I guess that sometimes numbers can be very subjective.

But, if you can’t get through to Yahoo!, you can just ask me about the validity of Cyber Monday.

As I looked at the data coming in to the Szelhamos empire of on-line shopping, there was no doubt that yesterday was the busiest traffic and busiest buying day that we’ve seen in the few short months that we’ve been trying to get money out of your pockets and into ours. If that’s not our marketing slogan, it should be.

And unlike the fine folks at Yahoo!, we handled every transaction flawlessly.

Most interesting of all, in unadvertised, under construction sites were receiving hits and buying action. The internet still astounds me. How anyone could have been directed to these sites is beyond me, but it’s less expensive than having to advertise their existence. So who am I to complain?

Someone, for example, did a search for “alan lerner rubber doll” and was directed to one of my sites that specializes in gifts. An Alan Lerner rubber doll is not my idea of a great holiday gift, but what do I know? I certainly don’t know who Alan Lerner is, but I do know of Alan Jay Lerner, the Broadway lyricist. But I can’t imagine that there’s someone looking for a rubber doll of a long ago deceased lyricist as a gift.

But once again, it bears repeating. What do I know?

In a demonstration of utter arrogance, I direct you to “Monetize Me” to see the various links that will take you to the “known” websites. Your on your own if you want to try to discover some of the others. But yet, Google searches led people to some of those sites. More amazingly, is that some people got there without any help from a search engine, at all.

Szelhamos Rules is like that. The vast majority of its hits are direct, rather than being referred or as a result of an advertisement. My friend who manages the website for the major hotel management chain asked me where my readers are coming from and I had no idea. I mean I did know the breakdown of sources, but I had no idea how the people coming to the site directly ever found us. I doubt that they searched Google by the keyword “Szelhamos”, although we are the #1 searched Szelhamos site on the internet.

Something to be proud of.

Since yesterday threatened to be one of those rare days that would have witnessed two up days in a row, something had to be done. And something was done, and with a vengeance.

No one was really quite sure what the impetus was for yet another 200 point decline. Was it the Yahoo! Online payment troubles, or was it Senator Charles Schumer’s infamous letter. The funny thing is that I can’t remember the content of that letter that bought out the furor from the days’ analysts. And it seems to be a non-event in the news. I can’t find reference to it anywhere. But they were all hot under the collar yesterday.

Interestingly, in America’s newspaper, USA Today, there is only a very fleeting reference to Yahoo’s little problem. And believe it or not, no reference to the Szelhamos empire. Certainly no reference to Schumer.

What I do know is that Google, which had been up about $16, ended up losing $10 yesterday, maybe dragged down by a comination of Yahoo! And Schumer.

Today, it was all over the place. In the pre-open it was up and maintained a small gain in the early trading. Then despite the 150 point early gain, it proceeded to lose $10, before finally finishing up by almost $8.

Once again, who am I to complain? Up is up.

Maybe today’s market turnaround all started with Citigroup’s behavior late in Monday’s session. It had been down by another $2, before recovering to make it only a $1 loss. It was unusual to see it trimming its loss while everything around it was just plummeting in yesterday’s final hour.


Today, some substantive Citigroup news came out that wasn’t a death knell.

That was a nice change.

What was considered good news today was that Citigroup has essentially sold an potion to the government of Abu Dhabi to end up being a 5% owner of Citigroup. How that’s good for the rest of us, I’m not really certain, except that Abu Dhabi seems to be as capitalist as you can get and is willing to put other issues aside, when it comes to making a buck. In the meantime, if that’s so good, why is Citi’s stock up less than the overall market, having been in negative territory for most of the day?

You certainly saw the same kind of homage paid when Prince Al-Waleed welcomed Sandy Weill to Saudi Arabia. Amazingly, with the special mid-east meeting taking place in Annapolis today, there is even word that the Tel Aviv stock exchange has ongoing business with the Abu Dhabi stock exchange.

There’s a song called “Love Changes Everything”. It’s a really beautiful song by Sarah Brightman. More appropriately, though, it should be entitled “Money Changes Everything”, but that title was already taken by Cyndi Lauper.

Anyway, a couple of jointly owned falafel franchises and mid-east peace may become a reality. I’ve always wanted the convenience of being able to get a falafel at my local ATM.

In the meantime, the vote of confidence by the Abu Dhabi sovereign funds, a phrase never heard until a couple of days ago, may have meant more for the overall market than for Citigroup.

In fact, Chuck Schumer was back in the news today, but this time in a positive way. He gave his blessing to the Abu Dhabi – Citigroup alliance. The lesson is that they can buy our banks, but not our ports of entry. I guess that there’s no way to effect sabotage through financial institutions.

If not through financial institutions, maybe they can wreak havoc with our insatiable lust for electronics, as word has now come out that Abu Dhabi has picked up a stake in Sony.

Sony and Citigroup. It just goes to show you thyat miserable companies love miserable companies.

Anyway, what Schumer took away yesterday, he gave back today. Almost point for point.

But it didn’t quite work out that way for my portfolios. Even though today’s 215 point gain almost made up Monday’s 233 point loss, my portfolios recovered only half of what they lost the other day. Interestingly, as I was looking for the reason, I found that there really wasn’t an obvious answer. Every single one of my portfolios exhibited the same kind of behavior, recovering only half of Monday’s loss.

I called Senator Schumer’s office to see if I could get restitution for the remainder.

They’ll get back to me. Although I’m also still waiting to hear about the 40 acres. I’m not very hopeful on either count.

Lately, the real message at the end of the day has been that on those rare up days, it was dangerous to get optimistic. Bottom fishers found out that they were nowhere near the bottom in lots of different sectors. Take financials for example. I know I did.

So what made today so different?

In the mid-afternoon it really seemed as if today was just going to be like the rest of the recent days. Even those days that didn’t jump out of the chute and just plunge, but instead rose, those gains would just disappear in the last hour. And those gains would disappear incredibly fast. Yesterday was the perfect example.

But today, it seemed as if the script was going to be adhered to, once again. The market had been up by about 200 points, but as we entered that final hour, the gain fell by 100 points. Just as suddenly, the price drop just stopped. The script was ignored and ad lib buying took hold and took the market right back over its earlier 200 point gain.

Does anyone remember the last time we had that kind of against the grain turnaround?

I’m sure that the answer to that question is something like “a couple of weeks ago”, but who remembers these kinds of things?

What I do know is that a year from now Yahoo will remember that there is, in fact, a Cyber Monday, and they will never doubt it’s existence again.

Now if the Szelhamos empire can have 365 Cyber Mondays each year, I could afford to hire a ghost writer.

Isn’t that what you would really call a win – win situation.

Help me out and I’ll even hire a ghost reader for your efforts.


Putting it into Perspective  November 26, 2007 (posted 10:30 AM)

I was feeling pretty good about last month.

Obviously that feeling had nothing to do with the performance of my portfolios, although I did have some comfort in knowing that they didn't lose as much as did the averages. Perspective matters.

You need to find comfort wherever you can get it.

I learned that from a now discredited marriage counselor.

Perspective matters.

What I was feeling good about was the increasing number of hits at the Szelhamos Rules blog, as well as to the various web sites that help to support this site and it’s efforts to raise some money for charity. The fact that those increased hits will help me afford to get a new pair of shoes is just a bonus.

That good feeling, however, disappeared the other night. But I’m not bitter. My feet don’t like unnecessary changes. And besides, those shoes have become such an integral part of my feet, that the TSA agents that I see each week don’t even notice that I have shoes on.

Precisely, the moment of inflection was right before we sat down to Thanksgiving dinner.

These days, I tend to be fairly singular in my topics of conversation, so naturally I had to bring up the various web sites with everyone and anyone who would even bother to feign attention. The lawn gnome seemed most interested, but I grew tired of having to re-explain advertising strategies to a politically incorrect figurine.

In my mind, it was going pretty well, at least I was impressed. That is until I made the mistake of cornering our next door neighbor. Not in an awkward office Christmas party kind of way, but in a “I need to make every conversation revolve round me” kind of way and now it’s your turn to listen.

As it happens, she is the website programmer and database manager for a major hotel management company. That company is traded on the NYSE and is instantly recognizable, even in Mozambique.

When I told her that the past 30 days had pulled in over 2000 hits, she looked at me and said “that’s about as many as we get every 10 minutes”.

Perspective matters.

That buzz kill sent me back to the pumpkin beer. Thank goodness that seasonal things come but once a year.

The Friday after Thanksgiving also comes just once a year. Based on this past Friday, that’s the sort of seasonal event that I wouldn’t mind seeing on a regular basis. This Monday morning every analyst is also doing their best to kill Friday’s buzz.

Since there wasn’t any exciting nor unsettling news this weekend, there’s not too much reason for a big move this morning, but that really has nothing to do with anything. We’ve had plenty of mornings that the market is just in a bad mood, even absent a mitigating factor.

And sure enough, the pre-open futures are pretty flat.

One stock that had me interested was bought to my attention by a reader who e-mailed me from Japan. On2 Technologies makes video compression software. It is up 13% in the pre-open, but that brings it to only $1.11.

I don’t usually intentionally buy stocks at that price range. I have had stocks go down to that price, but it definitely wasn’t my intention to see those downward moves and I definitely don’t have the nerve to short stocks.

On2 Technologies has only 37 employees and annual revenues of about $10 million, so I’d be a little reluctant to get into this position, but you can’t argue with today’s results. I hope for this reader that his position keeps appreciating. There’s nothing nicer than being able to take profits out of your stocks and apply them toward personal pampering.

I’d like to do that, but I’m setting myself up to make a cardinal mistake in investing. We’re getting tantalizingly close to the end of the year and I would love to defer some sales until next year, so that the taxes could be deferred as well.

That’s risky business. You really shouldn’t let tax considerations make decisions for you, but sometimes it’s hard to resist the lure of decreased or deferred capital gains. By the same token, sometimes, no matter how distasteful it is to take a loss, you may as well get maximum tax benefits from that loss.

It will be interesting to see how the conventional wisdom plays out. Typically, the wisdom is that the end of the year sees selling to take advantage of losses. But we’ve already seen lots of selling, so maybe that negative driving force has been dissipated. By the same token, the “Dogs of the Dow Theory” proponents seem to act earlier and earlier each year and can serve as an upward moving force. Of course, there’s always that end of the quarter mutual fund driven “window dressing” buying that purportedly occurs.

If the early results from “Black Friday” portends well for the rest of the holiday season, which is certainly not assured, there’s a powerful combination of factors to drive the market up in the next 5 weeks.

So, I’ll focus in on that scenario, rather than on a tax driven strategy. See, you can rationalize any self-fulfilling action you want.

Citigroup is a good example of that. The other shoe fell today, as they didn’t exactly deny the news that upwards of 45,000 jobs will be cut. Just for kicks, go to the March 27, 2007 blog which was written the last time Citigroup cut jobs. Just like the last time, on the kind of an announcement that usually sends a stock’s price higher, Citigroup is underperforming. Well, at least the new guy won’t also be the bad guy.

Interestingly, on that day, I also wrote about my trading out of United Healthcare and picking up some Altria. The Altria has done very well, with a 16.5% profit so far, even more when you factor in the dividends and options premiums, which have added on another 4.5% so far.

But what I’ve missed is the recent stealth rally in UNH. One reason that I think that I missed it is that UNH is at the alphabetic bottom of my watch list. I need to get a larger screen or delete some other stocks from my list.

For now, I opted to delete. I got rid of Dell, Intel, GameStop, Boeing and ExxonMobil. So now I can see UNH on my screen, but I think it’s too late.

There’s clearly a lesson to be learned from this.

Perspective matters.

So does size.


Blackout Wednesday  November 23, 2007 (posted 10:30 AM, updated 11 AM, 1:10 PM)

Almost everyone in the western world knows that the day after Thanksgiving is now called “Black Friday”. No one is really sure how that name came about, but Black Friday seems to be starting earlier and earlier in the morning. Amazingly, Black Friday sales account for nearly 10% of all holiday sales and Black Friday accounts for nearly 96% of today’s news stories.

Of course, there’s also the phenomenon of “Cyber Monday” when there is an incredible surge of on-line buying. Cyber Monday hasn’t yet caught on in the same way as a celebrated national phenomenon, but it’s no slouch. From the news reports that I’ve heard, people have been lining up in front of their computers as early as this morning, despite the cold northern blasts.

But the other day I learned about another holiday related phenomenon. This one has not received much press, but apparently is well known within the underground world of a certain segment of our society.

This one, “Blackout Wednesday” is mostly celebrated among college students, who are not likely to pass a celebration up. Given what the future looks like for them, I don’t think that I would pass too many of those opportunities up either.

Blackout Wednesday is not really about the shopping aspect of the season. If they go shopping at all, it’s for alcohol. Occasionally, there may be pizza or wings. But I think the day, or more appropriately the night, is more devoted to the consumption of alcohol, rather than the purchase.

Among college students, the day after Blackout Wednesday is now referred to as “Delirious Tremors Thursday”. Some of the old timers will remember it as “Thanksgiving”.

This year, the lines forming at those bars that are known to be lax in checking ID’s, began late Tuesday evening. Strictly speaking, the activities related to Blackout Wednesday are not reflected in the holiday sales numbers. But just as Black Friday is creeping ever so closely to Thanksgiving Day, so too may Black Friday some time in the future, begin with a celebratory Wednesday tradition.

As has been the case of the past few years, I’m sure that initial reports will show that Black Friday was hugely successful. As a result the early retail holiday numbers will look quite good. But then, as the script is written, and it’s almost as sacred as “Miracle on 34th Street”, the numbers that come in closer and closer to Christmas are going to end up as a disappointment.

And some will be surprised and others will say that it was completely expected. As far as the stock market looking forward by six months, half of those futurists always have it wrong.

Sure enough, by 7:30 AM, the first reports were already coming in regarding the initial successes of the holiday shopping season. Interestingly, if you listened closely to a report coming from a Best Buy, initially they were forecasting 25,000 customers at the store at the King of Prussia Mall. Thirty minutes later, at an update, they were projecting 20,000.

Basing the outcome of that season on the activities of a few frenzied shoppers is sort of like basing the presidential election outcome on the basis of the first votes in from Dixville Notch, New Hampshire,

Actually, I’m just being told by one of my research associate interns that is not a very good analogy, since Dixville Notch has correctly picked the last presidents 10 out of the last 12 elections. Additionally, I’m being informed that the origin of the name Black Friday has to do with the fact that for many national retailers, they don’t reach profits until the Friday after Thanksgiving.

If not for the pursuit of trivia, what exactly would distinguish us from animals?

But for the sake of making a point, I will rarely let facts get in the way. Luckily, the research interns don’t stay with me long enough to ever outgrow their blind idolatry.

From early reports that are trickling in, it also seems that Black Wednesday was quite successful, although none of the participants can seem to remember the details.

My memory, however, is still pretty intact, at least as far as the recent market’s activity has been going. Just about every day for the past 2 weeks has been Black something or other. So it’s no surprise that I’m not terribly excited about the pre-open futures 80 point gain. On a positive note, there’s not much news that will be coming out today to swing it one way or another, but it will be an abbreviated trading session and there will be light volume. So anything goes.

The really good news about today is that there is no 3 PM trading hour. That last hour has been a kiss of death the past couple of weeks. With trading ending at 1 PM today, there really is no final hour of trading.

Once again, I’m being informed that not only am I factually incorrect, but my logic is being called into question as well.

Speaking of reports coming in, Thanksgiving Day marked the first annual meeting of our family corporation, to divide the first quarter’s profits from the various internet based enterprises.

To be a member of the corporation, individuals had to prove at least 1/37th Native American heritage. Who would have guessed that all of the research interns met this qualifying criterion?

I was proud when my children discussed their 2 options for the distributions. They were torn between plowing their money back into the operations or taking it all and going to the race track.

Szelhamos used to love the race track, although he rarely would bet on a horse. If however, he noticed a horse evacuating its bowels during the warm ups, that was going to be the certain winner.

It rarely ever was, but when it was, it was cause for celebration.

He also liked horses with good teeth.

I’m certain that if he was ever able to spot a horse spontaneously relieving itself and flossing, he would have taken out a second mortgage and let it all ride.

As it would turn out, the stake holders chose cash.

Cash is always good, but I’m not yet ready to move into cash positions, myself. Even though the Dow is now down nearly 10% from its October high point, the Szelhamos portfolios are down only 3%. Despite all of the anxiety over those call options hedges, they really do help provide a cushion. Unfortunately, the managed portfolios are down about 9%.

Still, it could be worse.

This morning, the market did open with an upward bias. Although the 100 point gain of the first 15 minutes soon dissipated, I still am hopeful.

But then again, one of those pesky research interns has just reminded me that there is no place for hope in the world of investing.

I didn’t realize that these guys were not being paid to think. I thought they were just not being paid to dig up facts and data. And crushing my hopes and dreams? Priceless.

Either way, it is money not spent well.

Probably the best news of the morning is that the Fed chairman Emeritus believes that we are not headed toward a recession and that the US economy is flexible enough to withstand any housing or energy related problems.

I hope he’s right. Today, in fact, the home builders are strong.

With today’s upward movement, I thought it would be a good opportunity to sell more call options., And so I sold December call options for Goldman $250, Coach $40, Apple $200 and MasterCard $200. I suppose in my own way, I got into a shopping frenzy, as well But, with each subsequent cycle of selling and buying back these call options, the strike prices are consistently creeping up. It is truly the best of all worlds.

In the best of all worlds, the news would always be good. Based on the early reports from the likes of Best Buy and other electronics stores, those big ticket items are flying off the shelves. More big screen TV’s being sold that may not end up having living rooms to house them. You take the good with the bad.

This is also the time of the year that analysts always pump up Corning, the maker of lots of those flat screens. And each year, despite record flat screen sales, Corning’s price performance disappoints. Ironic that on the one hand LCD screen sales are off the wall, whereas their share of the home insulation market is going nowhere. Today Corning was up big. Next year, I’ll try to remember to pick some shares up right before Black Friday, unless my memory is shot from Black Wednesday.

I haven’t owned Corning in about a year, but I did trade in and out of it repeatedly for a couple of years, always between 5 and 10% profits, for very short term holding periods.

I’ll be watching Corning and expect it to fall to a $18-19 level by the end of the holiday season. At that point, I think I would be interested in picking up shares. I know that history doesn’t necessarily repeat itself, but analysts do. It’s almost like the rat that keeps making the same mistake in the maze, despite always getting shocked.

You would think that at some point there would be a learning moment.

Speaking from my own experience, eventually that moment does come. Even if you’re a celebrant of Blackout Wednesday, there comes a point that it’s just not that exciting.

What is a little exciting is some early upward movement in 2 of my recent speculative picks, E*Trade and Lundin Mining. I need some good movement to close the year out with a smile. Either that, or the sudden death of a hereto unknown wealthy relative with no other immediate heirs.

Otherwise, December 31st will just be another excuse for Blackout Wednesday redux.


I’ve Done the Math  November 22, 2007 (posted 9:00 AM)

For me, it’s always been about the numbers. But this one, even a numerophobic sociopath could have and should have calculated.

Or maybe only a numeropathic sociophobe. I forget.

It’s like atheist and agnostic. I know they’re different, but what was that difference again? Effect? Affect?

On a positive note, I’ve looked at some actuarial tables, and I still have enough time left to be all of those. That is, if you believe in the statistics.

Damn numbers. Damn Theists.

See. I’m halfway there, already. Now all I have to do is figure out how to best insult all of our Thanksgiving Day guests today. Maybe I’ll bathe the kosher turkey in a melange of milk and shrimp juice, since I couldn’t stretch the bacon enough to wrap the turkey in it.

Oh, and the scallop and lobster stuffing mix that we left out overnight, will be to die for.

Anyway, the much dreaded “correction”, by most everyone’s definition is almost here. From our October highs to yesterday’s close, we are now down over 9.6%. At this point, all we need is another drop of 50 points and we are officially in correction territory.

For the analyst who called for a “crescendo wave of selling”, you got that right.

Yesterday was one of those very annoying kind of days. In hindsight, I’m really glad that I got to spend several hours in the License and Permit office, going from station to station. It was almost like a Bar Mitzvah party, except no roast beef carving station. At least those few hours spared me a little bit of yesterday’s angst.

I did arrive home by about 2:30 PM and what I found wasn’t very pretty. And I’m referring to more than the boxer clad back from school visitors. But just when it looked as if we were sinking into lower and lower depths, the Dow reversed a 190 point loss and was down by only 45 points with an hour to go. Maybe all that was necessary was my presence in front of the screen. I always knew that Maria Bartiromo could see me.

After all, isn’t that the reason we don’t have televisions in our bathrooms?

What she would see is that I’m no Joey Ramone. By that, I mean, I still have the safety pin deeply buried in my cheek. It’s never coming out. It’s what keeps me going.

Joey never took my advice. Especially about Navistar. Otherwise, he’d still be alive and wealthy beyond his wildest dreams.

If you’re wondering about the Joey Ramone reference, just click on his name and turn your speakers on.

But let’s get back to Maria. Why she’s said nothing, still mystifies me. I think that I may need to add some other descriptors onto “numeropathic sociophobe”. I’ll speak to my wife about that, she well versed in the diagnostic terminology.

When I saw the upward movement of the markets, my first lucid thought was why anyone with reasonable intelligence and lots of discretionary cash, would be buying stocks heading into a holiday and a very volume challenged trading day to come on Friday.

But that was the rational side of me. The other side just breathed a sigh of relief and thought that the program buyers were coming in just prior to that 10% level, so as not to enter the market too late and miss the fire sale.

Lately, the wishful thinking side of me has been on the wrong side, because you know what happened. The market was like a greased pole in that last hour. Yet another 200 point loss.

Usually, I’m somewhat forlorn when the market is closed in observance of a national holiday. Today, I’m going back and forth, from ecstatic to relieved. We really do need a day off.

Maybe two.

Because tomorrow may be Black Friday in more ways than one.

I hope that the ritual pre-dawn shopping and buying frenzy on Main Street and U.S. 1, isn’t offset by a selling frenzy on Wall Street. The old axiom has always been that on light volume days you tend to see dramatic moves in the averages. But these days we see dramatic moves everyday.

It’s not very comforting when you hear the news that with 5 weeks of trading to go, the S&P 500 is in negative territory.

From my perspective, all that means is add another year on, until retirement. But I can’t complain about that. How many people get to work with their best friend?

By the way, congratulations to Doreen and Kevin, Susan and Rob.

Alright, so I’m not a consistent sociopath.

I probably would be a lot more dour this morning, were it not for Google and Deere. My universe of stocks consists of about 125 positions, not including options positions. Some small, some not so small. But yesterday, only 25 were up. And that’s the way it’s been the past 2 weeks, with a couple of exceptions. Man, was that 319 point up day sweet or what?

But if you sit down and think about all we really need is 4 more of those days in a row. That’s not asking too much? Is it?

I’ve done the math. It would work.

Now all I need to do is contact the deities.

It’s in their hands, or in some cases, their multiple sets of hands, right now.

They know where to find me.

Right in front of that TV.

Joey, this one’s for you.

Oh, and Happy Thanksgiving to the more than 1,300 readers this month, including all of you investor class expatriates.

Szelhamos would thank you and all those that watched his personal story.


 It’s Ugly  November 21, 2007 (posted 10:00 AM)

Very pithy.

That was one of the most memorable quotes of the morning.

I think the very first time I heard those words it was from the obstetrician, although it was obviously said in Hungarian. But what did he know? In all likelihood, not only would he not have been an obstetrician, but there was a pretty good chance that he wasn’t even a physician.

Pig farmer comes to mind.

I think that it would have been more reassuring if the word “he” had been substituted for “it”. But such are the nuances of Hungarian pronouns. At least I wasn’t referred to as “hamhock”.

So far, this morning’s pre-open just adds to the ugliness. The prevailing mood is that the next level of support is at 12,000 on the Dow, which will be achieved in a “crescendo of selling”. Another nice quote. I can’t begin to tell you how many times the phrase “Dow Theory” has been used so far, early in the morning. So far, though, not a single “Elliot Wave” has been uttered.

The release of the Jobless Claims Report, along with its revisions, which indicate more claims filed, did nothing to move the futures, however.

Depending on your perspective, those numbers should have moved the futures in the direction of your choice. Reduced inflation fears or weakening economy? It’s your pick. You would have thought that given the overall market sentiment, any news is bad news.

Maybe the guys who move the futures markets just placed their sell position orders last night and are already in The Hamptons, getting a head start on the Thanksgiving holiday. Good strategy, since they can beat the gas price increases that are likely to hit after today’s oil inventory numbers come out. Just a week ago, the experts were saying after a dip in crude oil prices, that we’re out of the woods with regard to $100 oil.

They said the same thing about $80 and $90. But every time we have tested those floors with falling prices, they just snapped right back up.

Today may be the day, although an hour before the release of the numbers, the crude oil traders are playing it coy.

But I don’t see much celebration. Not even from the oil companies, drillers and refiners. Their stock prices aren’t doing any better than the rest of the market. But I suppose someone is raking it in. Maybe that’s why Prince Al-Waleed could afford to sit by his Citicorp stake as he lost billions.

You do have to feel sorry for those Wall Street guys, though. With the long traffic delays on the way to the Hamptons house, they’ll have plenty of extra time to think about how to afford to heat those houses and afford to fill up their gas tanks for the long ride, if their end of the year bonuses don’t materialize.

When sub-prime meets The Hamptons becomes reality, New York will join the rest of the country in realizing that there’s a problem.

Right about now, unless your working for Goldman, it doesn’t look like an unusually jolly season. Maybe the Goldman analyst that follows Freddie Mac won’t be doing quite as well as the rest of his fellow analysts. He downgraded Freddie Mac’s price target from $73 to $28. The first $40 drop must have convinced him. I think that analyst’s name was Rumsfeld.

Luckily, I’ll have plenty of diversions today that will keep me from melting down as I watch the losses keep piling on. Even though there has been an improvement in the futures as we near the morning’s open, recent rends don’t point to anything good coming out of today’s session.

I’ll use the same line of reasoning to avoid participation in our neighborhood’s 5K run tomorrow and touch football game on Sunday.

Both are somewhat awkward to annoy, as our home is on the finish line and is host to half of the football field. It’s amazing how tightly those spandex curtains can be drawn, although the window frame does buckle a bit.

For today, though, there’s still one more parent – teacher conference to go. It’s hard to believe, but next year will mark the end of those annual traditions for us. I’m trying to comb through my archives, but I think that I see a relationship between the Dow and the scheduling of parent – teacher conferences. The end to this tradition can’t come soon enough.

After the conference, I have to make a mad dash to our county’s Permit and Building Office. Today is walk-in day. It starts right after my conference ends. I was there yesterday and told that if I dropped off the application it would take a week for review, as opposed to an immediate review and response on walk-in day.

Who knew that you needed a permit to build a gallows?

Go figure. So I’ll be back.

In the meantime, I had the misfortune of being at the screen when the opening bell finally rang. It only took about 2 minutes for the Dow to drop 100 points.

The fact that 45 of the past 50 immediate pre and post Thanksgiving trading days were in the black doesn’t seem to be swaying the traders. So far, today, they’re being especially brutal on the retailers, even though no new news has been released. As I predicted, yesterday’s double thumbs up to Coach is a devastating body blow, as Coach is down 3%, compared to 1% for the rest of the retailers.

I think that I’ll have to check through my comic book archives to see if there was a stock market in the Bizarro World. If there was, it probably functioned in a rational and completely understandable fashion.

Oh, to be in the Bizarro World.

I rarely venture into the world of metaphysics, but is it possible that we are already inhabitants of the Bizarro World? As I venture out of the house today, I’ll look for other meaningful clues.

At least in the Bizarro World, ugly is good.

Home at last. Home at last.


Disappearing Acts  November 20, 2007 (posted 7:30 PM)

There are a number of things that I knew with great certainty today.

Usually, “great certainty” is the sign of a feeble mind. Today, on the first day of my vacation, my mind felt invigorated, so I had an unusual sense of confidence in my sense of certainty.

One thing that I knew for certain actually stemmed from yesterday evening. It was my first opportunity to watch “Dancing with the Stars”.

I’ve done the Cha Cha. That was no Cha Cha that they were dancing last night. And what a disgrace those judges were. They didn’t even know enough not to award straight 10’s to those make believe Cha Cha artists.

This morning there were other things that I knew with great certainty. What I do know is that I will be writing an angry letter to the head of the network. How do you spell “Eisner”? How could he condone such non-discriminating judges?

Although now that my wife has explained to me that the judges use the same scoring system as is used in golf, I understand that those 10’s were an expression of disapproval.

So I suppose that leaves only one other thing that I know for certain.

The one thing that I really knew would be a certainty is that I would leave my parent – teacher conference this afternoon thinking that the teacher was about 12 years old. I wouldn’t have felt that way 20 years ago.

Ever since Michael Eisner left Disney everyone seems so young. Even Scrooge McDuck.

In hindsight, she was young. I think that I would have thought that even 20 years ago.

When I went back for round 2 of the parent - teacher conferences in the evening, suddenly everyone seemed older. Not me, though. I was invigorated by the days’ turn of events.

By 7:30 A.M, I already knew that today would be a day of disappearing acts. I knew this with great certainty, as you may have gathered by now. As it would turn out, not all disappearing acts are bad.

I knew that today would be the day that the last of the cherry cobbler would disappear. Sometimes you just know. It was bound to happen. There was no sense in trying to further delay the inevitable.

Goodbye old friend. Your disappearance I classify in the “bad” category.

I was reminded of that Simpsons’s episode when Homer finally succumbed and ate their pet lobster, “Pinchy”. It was a bittersweet moment.

“More drawn butter, please” is a phrase that haunts me to this day.

Goodbye old friend.

As I watched the pre-open numbers, I knew that there was more of the inevitable ahead. At that point, the Dow futures were up by over 100 points, on the heels of good numbers from Hewlitt-Packard. It was all looking sweet, with no real inkling of the bitter tears that lay ahead.

But then word came out that Freddie Mac had its own mortgage problems. Freddie Mac? Aren’t they the one’s that wanted caps lifted so that they could make more loans?

More bad loans, I guess. Their reasoning probably went along the lines of, “we don’t lose much money on each transaction, but we make it up in volume”. And can you believe that their regulator didn’t buy that argument?

Worst of all, was the rumor that it was considering cutting its next dividend by 50% and its reserves have fallen below the level set by regulators. It’s probably a good thing that so many people are losing their homes. At least they’ll never know the pain of heating a home when oil is hitting new record highs, as oil was up nearly $4.

Goodbye old friend. 100 point rise, we hardly knew ye.

It was inevitable, but the market did what it does. It did a 240 point swing. It’s gotten hard to keep track.

What had started out as such a deligtful day, filled with lots and lots of green areas, fairly quickly eroded into just another one of those November trading sessions.

But what ended up occurring, I would never have predicted. Granted, volume was light, but the Dow pulled out a 50 point gain in the last 30 minutes. It’s almost as if there was an understudy that hadn’t bothered to read the script. It’s so hard to find good help right before the holidays.

But every now and then, you discover a star.

Admittedly, like everyone else, I wanted a rally, but not the “relief rally” that the cynics were talking about. I tried to get the best of all worlds. In my heart I knew that the great upward movements that were being seen in my old stalwarts, like Google, Apple, Goldman and MasterCard wouldn’t last, so I wanted to capitalize on price spikes by selling some of those December call contracts.

As much as I knew that those gains wouldn’t last, I got a little too greedy, trying to get higher options premiums than the market was willing to pay. I was able to sell some December $750 Google contracts, following a new price target of $900. But I wasn’t able to get any other contracts sold, as the market did the turnaround much quicker than I had expected. Had I settled for a lower option’s premium, I could have bought back those options later in the day, as the market headed south

In fact, later in the afternoon, I tried to buy back my Google contract at a profit, but just then the market turned again. This time, it turned back up and, amazingly, stayed there.

As much as I’d like to think that there’s something good coming our way before the New Year, it’s hard to see it happening. One of my recent purchases, Coach, had been hit hard the last week, but was up yesterday and again today. Unfortunately, a couple of analysts gave Coach the “two thumbs” up kind of support that usually dooms a stock.

So where did it all end? It doesn’t matter, really, because it starts all over again in just a few hours. As it stands, we’re still below 13,000, a full 8% below our highs. The unrequited bulls are still sticking with their end of the year 14,500 prediction.

What makes me think that there’s an outside chance that it may just work out that way is that there are more and more climbing onto the “recession” bandwagon.

Just like the contrarian thinking with Lundin Mining. No one wanted to buy a December call contract yesterday. I looked at that as a bullish sign, and Lundin ws up nicely today. Luckily for me, it offset the carnage at E*Trade.

Just another example of greed. In hindsight, I should have been happy with a 70% gain in 2 days. But no.

E*Trade got hammered yesterday and today. A sale rigt now would still leave me with enough left over to pay the commission on some other poorly conceived trade, but I will continue to have faith.

After all, it’s only money pulling a disappearing act.


Choose Your Friends Carefully  November 19, 2007 (posted 10:00 AM, updated 3 PM)

I’m not bitter. Even though today’s blog title might suggest otherwise.

In fact, this morning I’m actually quite happy, despite the pre-open numbers.

But it’s the big picture that counts and the big picture looks good, at least if we don’t project for more than a week.

I have this week off, the house is empty, the coffee is hot and sitting right in front of me is a gift that my wife bought home yesterday. A wonderfully happy making kind of gift.

Not to diminish that value of this gift, it wasn’t my first choice, but my wife is more astute than I give her credit for. She quickly realized that my request for a Swedish nanny had no basis in necessity. Although I suppose that you could define “necessity” to suit your needs. So that request got a big “NO”.

But as far as it goes, today’s gift is right up there.

My wife didn’t buy this gift, she just delivered it. Strictly speaking, therefore, since we are entering into the holiday gift giving season, she can’t really take credit for the giving aspect. I’ll probably try the nanny thing at least one more time, although none of my credit card rewards programs offers gift certificates for international nannies.

I’m far too sophisticated to settle for a domestic.

But the gift that she delivered will hold me through the nerve wracking waiting period, when I’ll sit around wondering whether there were enough holes punched in the shipping box for the nanny to survive the Atlantic crossing.

Never give up hope.

So, Cherry Cobbler is a nice thing early in the morning. Homemade cherry cobbler is even better. I just wonder whether we have to return the baking dish, or whether we can add it to our collection. We firmly believe in the concept of “eminent domain”. Especially when it comes to Pyrex.

A few weeks ago I wrote about re-discovering some old friends. Man are there dividends to be reaped by being a social being. Now if I only had a friend with vanilla ice cream.

As you get along in life, you realize that the number of friends shrinks, for one reason or another. Death, federal prison, witness relocation and leprosy are all excuses that have been used to sever ties with me. Most of those excuses were from a single person and they were in that precise order.

The others?

What others?

This morning, as always, I started by checking the New York Times Obituary pages. There’s always something interesting there, but I didn’t spend too much time browsing the notices.

What I did read was the article on how “Goldman Sachs Rakes in Profit in Credit Crisis”.

A week or two ago, I wrote how Goldman’s CFO, David Viniar sold 20,000 shares, just at their near term peak. I never did the math, much too depressing.

I also mentioned that David Viniar was a high school classmate.

As it turns out, David Viniar was also the savior at Goldman, at least with regards to setting off the warning signals about their mortgage related risk. He noticed that the Goldman portfolio was overweighted in mortgage based securities and he recommended hedging those investments. His timing, as it turns out was truly impeccable.

The cynical me, just a mere week ago, thought otherwise.

One can only wonder that if Lloyd Blankfein gets the $75 million bonus, how much David Viniar is worth to the company and its stockholders.

But alas, the lesson to be learned here is not that you should hedge your investments. The lesson is that, even at a young age, you should really choose your friends very carefully. Your mother was invariably right, because you never know who they are going to turn out to be.

I don’t really remember much about David Viniar, other than his early 1970’s hairstyle and, if memory serves me right, an ever present backpack and work boots. Of course, since it was the 1970’s, those were historically appropriate fashion statements, but I’m not entirely certain that my mother would have approved of his company.

I can only imagine that the hairstyle is much more Goldman appropriate. And the back pack is now probably lined with vicuna. The work boots? He probably gave those up, at least for the workplace. He probably still has them around for the weekend hikes in The Hamptons.

The article in the Times had lots of names of Goldman alumni, all hperlinked. The likes of Robert Rubin, John Thain and many others. David Viniar was not hyperlinked, nor was it his picture that adorned the article.

I am fairly certain, however, that my mother would now approve of his company.

Goldman Sachs.

One wonders whether he can bake a Cherry Cobbler?

I suppose everyone is entitled to their own fantasies.

For me, right now, the fantasy is that over the next 6 weeks the market will do what it is unlikely to do.

This morning’s futures don’t seem to indicate a start in that direction. And the New York Times article? It’s really old news. It didn’t give Goldman a bump, at all. I guess that not many people are going to be swayed by an article regarding a $220 stock. If Goldman was a $10 stock, the article would have driven all sorts of people into stock positions.

With time on my hands this week, even with the extensive “Honey Do” list that is at my side, I was looking to make trades, but the direction that we appear to be heading toward, is not very inviting.

So I’ll probably make a little bit of a dent in the list. In fact, I have to, because the cleaning people are coming today, and we really don’t want them to know how we really live.

With the opening bell, this morning, I’m beginning to develop a Pavlovian response. These days, that sound of that bell just heralds a sell-off. So far, this morning is no different, and so I sit here uncontrollably shaking and cringing in the corner. The 100 point loss within the first 15 minutes helped to reinforce the whimpering.

Of course, being down 200 points didn’t help. I did take advantage of the drop in mining stocks to purchase some shares of Lundin Mining at $9.75. I thought it was a good sign that no one was bidding to buy December $12.50 call options, even though the stock was about $14 just 2 weeks ago. Not a single bid. How much more contrarian can you get?

Ideally, I love seeing a nice up day at the very beginning of the options month. When the market spikes upward, those options premiums are especially good and there is a full month’s worth of time value, as well. There’s nothing like taking advantage of someone else’s unbridled enthusiasm.

As often is the case, Goldman started a small rally in the Dow. As Goldman turned from a small loss to a gain, the Dow followed about 10 minutes later by cutting its loss by 20 points. Not to take away anything from JP Morgan Chase, which is a component of the Dow 30, it’s really Goldman that should be in the Dow.

If it goes up a few more dollars, I’ll look at the possibility of selling either December $240 or $250 contracts. The $250 contract, which is 10% out of the money, actually offers more than 1.6% premium. By my standards, that’s worthwhile.

But this morning, I’m feeling greedy. I’ll wait, since I have a long way to go to catch up with David Viniar.

When it is all said and done, though, the Cherry Cobbler is much better than a couple of weekends in The Hamptons.


The Goldilocks Economy  November 16, 2007 (posted 9:00 AM, updated 11:30 AM, 1:00 and 4:15 PM)

Every now and then I like to remind myself that I’m a pretty smart guy. A couple of Harvard degrees didn’t go completely wasted, although an analogy to the level of pureness of Ivory Soap may be appropriately drawn.

No one would argue with that analogy. But at least I’ll always be able to point to that 0.56% that is being put to good use. So far, none of that 0.56% has been expended this morning.

Usually, I find myself trying to get into a reassurance mode when I don’t understand something.

A few months ago, I was at a rare place. I just couldn’t understand the basic coding necessary to write a data base collection and analysis program. That was a very disturbing moment. PHP, MySQL and all of that stuff just went over my head. It was as sure a sign of deteriorating mental capacity as I've ever experienced. All of that Sudoku didn’t seem to be helping to maintain that all important mental edge. If you can’t count on some newly discovered 4,000 year old Japanese puzzle to maintain mental acuity, what can you count on? Ginko?

More recently, instead of something going over my head, this time it was under my feet. I just couldn’t get the dance lesson thing. Rumba, Cha Cha, it was all the same gibberish. It was really a bizarre language. Listen, I can’t even understand the basic steps of a Hora.

It’s all much more confusing than PHP and certainly more physically bruising. Mental anguish is easy to conceal. The welts? Not so much.

Now, after months of feigning understanding, I have to admit, I have no clue what is meant by “The Goldilocks Economy”, an expression that is used over and over again by one of my favorite talk show hosts, Larry Kudlow. Without being fawning, Kudlow is the most gracious television host that you can imagine, even when faced ith guests that are at times, at tad unruly.

I find myself rarely agreeing with Kudlow’s positions, but his talk show truly is the model for “fair and balanced” and covers most of the issues that Szelhamos taught me should never be discussed with strangers.

Of course, on a regular basis, Szelhamos would violate that basic rule, as he used to love to push that envelope.

Szelhamos and I used to be regular viewers of “Kudlow and Cramer”. Of the 4 topics that Szelhamos believed shouldn’t be discussed in public by anyone other than himself, only “sex” was excluded from the show. Politics, money and even religion were fair game.

A couple of years ago, the buzz word du jour was “granularity”. Everyone was using it, but it seemed to me as if it was being used in conflicting contexts.

I actually sent an e-mail to Ted David, who used to be my favorite CNBC personality. Now you can occasionally hear him doing business reports on radio. For me, that was a big deal, almost akin to asking for directions. Regardless of how hopelessly lost you are, there’s something on that Y chromosome. Besides, I really dislike any form of communication. Especially if it’s bilateral.

But he replied to my e-mail and gave me the definition of “granularity”. Before you knew it, however, the usage of that word came to an abrupt end.

What I remember most of all from Ted David’s e-mail is that he said that he just wished more people would speak in readily understood English.

With the exception of “The Goldilocks Economy”, I think that Kudlow’s presentations and reasoning are granular.

So far, I’ve resisted sending an e-mail and have even resisted the easy Google search, assuming that most of the hits would end up being pornography sites, since those guys seem to have the best understanding of how to manipulate the Google algorithm.

Speaking of Google, it is up again in the pre-open. In the last week it’s taken a 15% hit. As lately has been my unfortunate situation, I timed the covered call poorly. I bought back my November $700 covered call when I thought Google had reached a short term low, at $715. I took a loss on that transaction, but assumed that I would make it back on the December call option premium.


As of today, it looks as if my Goldman, Apple, Mobil, Ameritrade, Halliburton and Blackstone covered call options will expire without exercise. I’m still undecided about what to do with MasterCard. Even though it is not directly effected by the sub-prime mess, it is indirectly at risk, if there is decreased consumer spending. MasterCard could care less whether people pay their bills or not, they just want to see piles of charges.

Reminds me of the Henny Youngman joke. He said that he never reported the stolen credit card to the police because the thief was charging less with it than his wife.

Amazing, Larry Kudlow and Henny Youngman references in a single blog.

At the pre-open, the numbers were looking positive, although if there’s anything to be learned from the last few decades, it doesn’t really matter. My short term memory is still good enough to also realize that what goes on in the first 360 minutes of trading doesn’t matter very much, either.

Throwing some cold water on the prospects for another Fed cut, word comes out that Fed Governor Randall Kroszner is indicating a higher bar for future cuts. My guess is that he’s Hungarian, so attention must be paid to his opinion. Remember the Pengo.

So far, however, the futures are ignoring the prospects of a hands off Fed.

As we enter another options expiration, I always look forward to the next month. But what I would really like are some good exit points for some of my favorite stocks, because every now and then it’s nice to freshen up the portfolio. New blood is always good, as long as it doesn’t flow in the streets.

Just prior to the noon market turnaround, I uncharacteristically timed some options buybacks correctly. I bought back my Coach options and NYSE options, both a small profits. Shortly after buying those back, at the stock price’s morning lows, they, along with the rest of the market rebounded. Now, I’m hoping to get opportunities to just sell those December options once again.

Just minutes before the closing bell, the market was prepared to close for the first time in a week without a late sell-off. I decided to buy back my MasterCard options at a sizeable loss. I did so for 3 reasons.

First, I think that there’s still more upside to MasterCard, especially before the Visa IPO. Secondly, I needed the short term loss for tax purpose. And finally, I hope to defer a trade of MasterCard until after the New Year, so that I can put off taxes until 2009.

Oh, yeah, there was another reason. I’m addicted to the thrill of trading.

Despite the addiction, it still remains the blood in the street that’s driving the fear right now, we’re more than 1,000 points below the recent highs. Even addicts can still sense fear. I’m not a chartist, not a technician, in fact, I’m not anything, but I can see that the recent market trend is not a good one. We are meeting upward resistance at lower and lower levels.

I’m not sure whether Goldilocks would recognize impending peril. Her past history of behavior indicated that she could not always recognize the warning signs that were abounding.

The real question is WWGD?


When Rules Don’t Apply  November 15, 2007 (posted 8:30 PM)

Today, I don’t really feel like talking about the markets. You can probably guess why that would be the case. In a way, it’s nice to have rules, becuse rules make for a dependable kind of existence.

What you can’t depend on is the follow through that was the topic of a couple of days ago. Today was just a repeat of recent sessions. In the last hour financials, technology and energy sectors just tanked and took everything else along for the ride.

I don’t want to talk about it. And not because it was a day of losses, that’s just part of the bumpy ride, its just that I don’t want to talk about it. There’s really no rule that says that I have to.

Sometimes it’s nice when the whole world is like the Autobahn. Rules need not apply.

I often think about a world where “we don’t need no stinking rules” is the rule, rather than the exception. I often always also think about why Chevy Chase is no longer funny. It’s hard to say whether Gerald Ford’s fading from the public eye, or John Belushi’s death was more to blame, but that’s really not today’s topic.

But you probably don’t have to look very far for the model where rules just don’t apply. It’s called the world of business.

For example, did you hear Warren Buffett’s congressional testimony the other day? Did he not realize that there was a rule about billionaires beseeching Congress to levy higher taxes? On billionaires, no less!! Who knew what a rebel lay inside of Buffet? The last thing we need is a Leninista addressing our congressional leaders. The fact that he doesn’t wear a bow-tie is only part of his cover.

But given that the Democrat controlled congress can’t seem to get much done, don’t expect to see any shrinking billionaire bank accounts anytime soon, because as a rule, billionaires rule. Just not Buffett.

Now you might say that Buffett’s testimony was not really a breach of the rules. Maybe it was more a breach of a personal code of behavior. I won’t get caught up in the semantics, you’ll have to decide on your own. But remember, Buffet murders puppies.

Sure, ostensibly there are rules in the world. You have Sarbanes-Oxley, for one. I’m sure that there are other rules, but Harvey Pitt is no longer taking my calls, so I’m unable to cite any others.

But I now understand why John Thain is leaving the NYSE. It’s for a different reason than Dick Grasso left. I think that he left because of something to do with rules, but that’s just rumor. And as you can probably guess, Elliot Spitzer is not returning my calls, either. So I can’t really get any independent confirmation at the moment.

But in John Thain’s case, it’s pretty easy to understand why he left “The Exchange”. He just wasn’t getting enough vacation time and he wanted to spend more time with his family. Maybe he also didn’t see any chance of advancement in the organization.

How do I know that? Because one of the first rules that I learned when I entered the workforce is that if you are going to leave a job, you give as many weeks notice as the number of weeks vacation that you get. A corollary rule is that the lower on the totem pole you are, the less vacation time you get.

So let’s do some quick calculations. John Thain announces his departure yesterday and will be the new CEO at Merrill Lynch, effective December 1st.

This guy needs more vacation. Does anyone disagree with that? Because to look at him, you really wouldn’t think that he’s be the kind of guy to break any rules.

Can you imagine how little vacation time the lowest guy in the organization must get, if the CEO only gets 2 weeks. That guy, is a holdover from the old days of the unionized trading floor. His job is to sweep up the ticker tape. He’s a specialist. He doesn’t sweep on the paper order forms, just the ticker tape.

Now you can really understand Thain’s push to go to electronic trading. But the reality is, the ticker sweeper guy’s job is secure. Paper or no paper, it’s secure. It’s the more sophisticated version of the Tony Soprano construction site job.

In fact, Thain has an odd background to be in the positions he has held. He was an engineering student at MIT. Granted he later got his MBA and you certainly can’t complain about the trail of successes that he has left behind.

That engineering degree may explain his methodical approach to operations. It may also explain why some rules of civility are breached when discussing his personality. How many CEO’s have the nickname “I Robot”?

The latest fear is that Thain will now start a raid on Goldman Sachs for much needed talent over at Merrill. Sort of like the great futuristic fear of robots recruiting other robots to rise up against their human overlords.

Very unruly kind of behavior, but don’t expect Goldman to even bleed a drop of its precious life giving humours. After all, how much did Goldman suffer when Thain left it for NYSE? Or how badly was Goldman aching when the newly tapped NYSE CEO, Duncan Neidenauer left Goldman a few months ago?

It is unseemly, perhaps even unruly to raid your competitors for their talent. But what are you going to do? Enforce the rules?

Speaking of rules, in an interview yesterday, Neidenauer said that he was looking forward to “some rule changes” so that the NYSE could add to its portfolio. Basically, those rule changes would eliminate the rules.

So even with Thain leaving, there won’t be as much as a second lost in the strategic march at NYSE. In a little bit of a delayed reaction to yesterday’s news, NYX is oversold in the early portion of today’s market

I haven’t yet picked up any additional shares, as I am still waiting for a better price point, that I hope never comes. I’d be more than happy with a straight line march past 100, but I don’t think that it will work that way. I expect another testing at the $80 level, and then I plan to add shares.

Of course, rarely does anything work as planned.

That’s a rule that you can depend on.


It’s All About the Follow Through  November 14, 2007 (posted 10:10 AM, updated 8 PM)

The statistic that I heard yesterday was mindboggling.

But when you think about it, there should have been no surprise, because each of the points that made up the statistic should have been memorable. Well, at least for a day or so.

As it turns out, so far in 2007 we’ve had 20 days in which the market was up or down by more than 200 points. Yesterday was a bit of an anomaly. The 319 point up day was only 1 of 6 such days. 14 of those days were down by 200 or more points. Those kind of days seem to be more easily remembered.

Yesterday was a very much needed up day, after an absolutely crushing few days of losses, capped off my Monday’s buzz killing turnaround.

The statistic that I haven’t seen yet is how many trading days we’ve seen with intra-day moves of 200 or more in both directions. We’ve had tons of those up 100, then down 100 kind of days. You know, the days that give you glee, then ulcers, maybe glee again and maybe perforated ulcers when it’s all said and done.

Those days.

Those are the days when I scour my suitcase to see if there are any remnants of antacid dust in the outside pockets.

I remember a string of days this past June when every trading day for a week saw that kind of whip chain action. I was like a distraught junkie those days, as I was sifting through everyone’s bags for just few particles of the wonderfully gastric soothing dust. When you need your fix, you need your fix.

Back then, the volatility was blamed on repealing the downtick rule on short purchases. But certainly, the decision to repeal the rule was well conceived by wise and sagacious caretakers of our free markets. They would never want to disrupt the smooth functioning of the markets just for personal gain.

Ultimately, the ride doesn’t matter, as long as you’re still alive at the end, and ultimately, the free markets self correct. Sometimes, though, they need a little physical help, like a reduction in interest rates, or some emotional support to put all of their well funded fears to rest.

This morning, prior to the open Bear Stearns came out with positive news and a positive outlook for the financial markets in general. Like Goldman yesterday, which went up about 8%, in the pre-open Bear is up 9%.

In the meantime, Chairman Ben is addressing the CATO Institute. So far, he hasn’t really said much, at least not much to move the markets in either direction. He’s just not an emotional kind of guy.

For me, the 2 most exciting moments came as a limited number of questions from the audience were taken. One asked, how the Fed’s message would get transmitted, since only a couple of thousand people actually understood what it was all about! As if “think tank” members really needed to go the extra mile to demonstrate their condescension.

The other question came from a representative of the National Bank of Hungary. What is the world coming to? Maybe the “Pengo” will become the new international monetary standard. Maybe some old-timers will remember when 10 billion Hungarian Pengos could buy you a molecule of antacid dust.

So while he goes on, the pre-open futures are looking good. In fact, as far as Goldman is concerned, it’s looking too good, as it is nearing the $240 strike price that I had sold my called options for.

This is really getting to be a tired story, but who expected Goldman’s volatility to be more like a bio-tech stock?

Ultimately, the Dow opened with some modest gains and actually kept those gains for the first 15 minutes. Imagine that, 15 minutes without volatility.

With Bear Stearns’ taking the lead this morning, the brokerages were all looking good. Even the faux brokerages, like E*Trade and Ameritrade.

In those first 15 minutes, E*Trade retreated from the $6 level at which I was ready to consider options writing. So far, given a cost basis of about $3.55, the past 2 days with E*Trade have been pretty good. I still expect a return to about the $8 level in the next week.

While Ameritrade was also moving up, I decided to sell some December $22.50 call options on my remaining Ameritrade shares, two-thirds of which were already obligated for November $22.50 contracts. The premium was great, so I couldn’t resist, plus, I also wanted to raise a little bit of cash just in case Goldman surpassed that $240 level and I wanted to buy back my contracts, because I’m salivating at the prospects of rolling Goldman into a December $260 contract.

Note to self. Consider purchasing drool resistant laptop, as constant keybord shorts are annoying and the smoke keeps setting off the hotel’s fire alarm.

As a little extra insurance, as Coach has started moving up again, I sold some December $40 contracts and placed some Saran Wrap on the keyboard.

The December contracts expire a week before we really get an idea of what the holiday shopping season will really be like. Coach has already been hit pretty hard on lowered expectations, so I expect Coach to start moving up near the end of December on what will turn out to be in-line numbers.

At the moment, as I am getting ready to go to my real job, we’re hanging onto some small gains.

The question is what constitutes “follow through”.

I suppose that varies from portfolio to portfolio. Yesterday, my Szelhamos Portfolios were up by more than 5%, whereas the Dow was up by about 2.5%. Most of that gain was due to Apple, Google and Goldman. I am in pretty good condition, because the recent losses in those stocks weren’t really losses for me, as I had the outstanding call options, so despite the Dow still being down 5% from its recent high, the Szelhamos Portfolio are up nearly 1% from its recent high.

As it would turn out, the good news on the markets barely lasted 2 hours. At that point the markets had turned negative. At that early point there wasn’t really any negative news, just a lack of good news.

Later in the mornng, the NYSE denied a rumor that there was going to be a special press conference to announce John Thain’s departure, as had been rumored for the past week.

So sure enough, Merrill Lynch announced their appointment of John Thain as their new CEO.

Merrill’s gain will not be NYSE’s loss, since Thain will leave behind a well oiled machine with lots of stakeholders whose vested interests will see to it that nothing gets the NYSE off course.

In fact, during the last hour sell-off, the one that got me hunting for the antacid chews, left NYSE unscathed.

Even more fascinating was that the supposed cause of the sell off, some more negative words about the state of the credit markets, from of all people the CEO of E*Trade, did nothing to rattle E*Trade’s stock price, as it went up another 10%

Yesterday’s big gainers were doing very nicely. That is until the fine hour rolled along. Before you knew it the Dow was down 100, Google was down $20, Apple tanked and Goldman gave up all of its earlier gains.


For me, “follow through” just means that we don’t lose ground the next day, and perhaps for the next 2250 trading days. At that point, I’ll be ready to move everything into cash.

Maybe into Pengos.


I Missed It  November 13, 2007 (posted 7:00 AM, updated 12:15 and 7:00 PM)

It must be the genetics manifesting itself. That Y chromosome reportedly prevents you from listening and from being aware of what is going on around you. I think I read that someplace. If someone told me about the connection, obviously the theory is wrong. Maybe I listen on the occasions of my choosing.

But it shouldn’t be a surprise that I missed, what for me, who is enamored with numbers, something that should have been a major event.

Somehow, the 5,000th hit was quietly registered on Szelhamos Rules and each day there are new people viewing the all too brief story about Szelhamos.

I missed it.

There were no balloons, no streamers, no clinking of champagne glasses. Or at least not that I know of, since it is possible that I just wasn’t invited. I wasn’t even on the A-list to my own Bar Mitzvah.

What I am acutely aware of is what’s going on around me, as long as it’s on a television screen. So I found it absolutely amazing that following yesterday’s last 30 minute turnaround, no one offered the obvious observation.

No, it wasn’t about the 5,000th visitor, it was about the Dow dipping below 13,000. The last 1,110 points have been shed almost as quickly as Hershey sheds independent directors. That’s sudden, in case you don’t listen.

On a day that oil and gold plunged and the dollar actually strengthened, it seemed to be the perfect day for a little breather. Even the financials were looking pretty good, despite the rumor of an E*Trade bankruptcy and the probable disappearance of Countrywide. Besides, how much more black and blue can you get?

The E*Trade open letter to its clients was probably meant to soothe their fears of a bankruptcy, at least as far as it directly effected their accounts, but it did nothing to soothe investor jitters. Not that the E*Trade guys are necessarily the smartest in the room, but they expect that the worst is not yet over. For them, it may not be. I’m always wary when I’m told not to worry. Maybe that’s why it’s best not to even feign listening.

The smartest guy in the room will be onstage today, as Lloyd Blankfein of Goldman Sachs addresses the Merrill meeting. Can the smartest guy in the room also be the 800 pound gorilla? In this case, only if Goldman comes forth with its own bad news about sub-prime losses. In that case, it’s a freefall, or if you prefer, the last shoe to drop. I just love idiomatic visuals

There’s really nothing Goldman can say to completely upright the market, but it can give it a much needed boost. It certainly can throw it for a loop. Another visual. Especially that of a gorilla attempting the upright thing.

You can be pretty sure that no one will miss his comments. Maybe misinterpret them, but not miss them. The speculation is that Goldman will reveal losses, but sugarcoat them with details of offsetting investment gains. When you think about it, what is more compelling, greed or wisdom?

Even the smartest guy in the room may fall prey to greed. It’s hard to imagine that while everyone else was raking in sub-prime profits, Goldman was thumbing its nose in that direction and shorting the sub-prime paper. If they did, it’s equally hard to imagine that they had such impeccable timing.

It all could of happened that way, I guess we’ll all find out sometime today just how smart the smart guys really were, or whether their knuckles were scraping the floor along with the rest of the tree dwellers.

For Goldman, no matter how bad the numbers, there will always be life after sub-prime. Even Merrill Lynch will go on. Even Citigroup, although if John Thain takes over, Citigroup may just be pared down enough to go back to its old name, Citicorp.

Or maybe, Citibank. Maybe they should just stick to that branch in Forest Hills.

E*Trade, on the other hand, may not be here in a few tomorrows. Being the 19th smartest guy in the room doesn’t give you much of a cushion, especially when the barbarians are at the door.

Darwin would probably be proud of how his treatise has application in every aspect of life, with the exception of European royalty. Those Hapsburgs really are out of step with the natural order of things.

But I’ll save that topic for when we cross 10,000.

Visitors, not Dow.

The past week has really seen a classic transition out of a sector, or at least out of high flying stocks, regardless of their sector. Most of the time, there is said to be a rotation of sectors, but your guess is as good as mine as to what’s ripe right now.

The conventional wisdom is always the same, and as we explored the last mini-correction, not always right. Consumer staples, I suppose is what we’ll be hearing about for the next week. The Altrias, Proctors, General Mills and the like.

I guess that will at least give me another opportunity to crunch numbers in a hindsight look. I don’t really need an excuse to design a spreadsheet. Any occasion will do.

And speaking of occasions, it was only with the parting words of a CBS radio business brief that the sub-13,000 close was mentioned. No big deal, this time around.

The last time that happened, however, it was big news. But the even bigger news was how quickly we then left 13,000 behind. Hopefully, all of the bad news projected for the upcoming holiday shopping season is already factored into these prices.

But I don’t think so.

Despite the adage that the market anticipates six months from now, you know that’s really not true. The market reacts violently to any news that comes across the wires and then moves on.

Lately, however, we’ve been pre-occupied with sub-prime. The Yen carry trade is ancient history. That was a few crises ago. Now it’s all about the sub-prime situation and Blankfein and his revelations, for want of another idiomatic visual, may be the smartest guy to ever put the last nail in the coffin.

The only positive news that I heard today was that the last hour’s options activity was girding up for a bad ride.

Good. The more that believe it the better off we’ll be. Soon we’ll also find out whether today’s semi-rally in the financials was from short covering or whether there’s true buying in the financials.

It’s all in the hands of the male pattern bald gorilla.

Don’t miss it.

As it turns out by mid-morning, the word was out and the word was good.

I guess that everyone was listening, because from Blankfein’s lips spouted the news that bulls love to hear. It’s all good. The 800 pound gorilla will be carrying its offspring to the next oasis. No one will be left behind. The fact that Wal-Mart started the morning off with better guidance only helped.

Forget about those consumer staples, stock up on your cancer stick stocks some other day, because today was the day that everyone got right back on the very big guns that were mercilessly pummeled the last couple of days.

Even poor E*trade was up 15% by noontime and ended up by 40%. Of course, it needed more than a 100% increase to get back to where it was at last Friday’s close. But they are ripe for the picking. Once E*Trade reaches $6 I will consider writing options, which are now denominated in single dollar units on E*Trade.

The fact that there were lots of block trades in E*Trade makes you think that the smart guys are looking for a turnaround, or more likely a takeover. The smart guys don’t mess with sub-$5 stocks, and hard as it is to believe, for a brief moment, E*Trade was one of those.

But nontheless, the rally couldn’t have been timed better for me. With the exception of MasterCard, whose call options I will probably not buy back, it looks as if I’ll have another round of options for December. And if the week continues on a nice uptick, those premiums will be very much worth the angst of waiting for expiration.

I may have missed the 5,000th, but I’ll be vigilant for 10,000.

Not the Dow, the visitors.

By the way, thank you Lloyd. No one can listen if no one is speaking, and you spoke volumes today.


There’s Something Happening Here  November 12, 2007 (posted 10 AM, updates at 11:15 AM and 4:15 PM)

What it is, ain’t exactly clear”.

It must be a sign of my advancing years. Signs, signs, everywhere signs.

Lately, it seems that everything that happens in life can be summed up from a song in the ‘60’s. If you really stretch it, sometimes you may even be able to find some words of wisdom in the early ‘70’s. But that’s it. As much as I’ve tried to read between the lines, there’s absolutely nothing of redeeming quality in “Disco Duck”. I’m sure there’s a message somewhere, but I just don’t hear it.

On the other hand, “Howard the Duck”. Now there’s a redeeming message.

For those of you too young to get the references, I’m sure that Google will be of some assistance. My one goal, in life, is to someday come up with such an obscure reference that even Google won’t find it. Not likely to happen, but we all need goals.

As usual, the other night I was watching South Park and the episode centered around the Guitar Hero craze. Stan and Kyle were trying to rack up points to a 60’s tune. Stan’s father, Randy, who is probably the most under-rated, yet bizarre character in the show, was amazed that the kids were into his kind of music. But when he took out a real guitar and amp and showed them his stuff, the kids were aghast.

No one uses real guitars.

One of my favorite characters, although very rarely used, is Clyde. His one line in the episode was in response to Randy’s guitar solo.

“That’s gay”.

Sometimes, you need the rarely used messenger to really drive home the point.

In a large way, that sums up the market mess that we’re in, as well as recent past messes and in all likelihood, future past messes.

It’s just that no one uses real guitars anymore. Clyde, you have incredible insight. If only everyone’s insights were inversely proportional to the number of words spewed forth.

With that in mind, I’ll try to keep these blogs shorter, but that’s not very likely.

I went to the high school that Moog synthesizer inventor, the late Robert Moog attended. Unlike 5 or 6 others from that high school, he did not receive a Nobel Prize, mostly because of his post-Moog synthesizer work. Neither did he sell 20,000 Goldman shares like another ex-high school classmate. But I suppose that he was at a disadvantage because he was never CFO, only CEO of his company. And Moog was no Goldman.

Many believe that among the graduates from that school, he was far better qualified to be Secretary of Defense, than was Harold Brown, of the Carter administration. He probably could have gotten Begin and Sadat to appear onstage with Clapton and Harrison in the concert for Bangladhesh. That would have probably gotten him a Nobel.

But Robert Moog had a dark side.

No, he wasn’t like William Shockley, a raging racist. He was, perhaps, in the opinion of this humble blogger, far worse.

He also invented the keytar. If anyone was born to play the keytar, it was Arafat, another Nobel laureate.

So you can see where I’m going with this analogy that leads us toward the destruction of all civilization.

Well, at least the “glam metal” bands achieved extinction before the rest of society, so we can enjoy a few moments of relief before the brimstone.

These days, it’s all about the derivatives. They are the harbinger of the brimstone. Totally unnecessary inventions that have no body and have no soul. It’s all about the latest twist and tweak, trying to one up the market. These items are truly examples of virtual reality that reach right out of the video screen and grab you, mercilessly, around the neck.

There was a time that it was all very simple in the real estate market, for example. If you wanted to buy a house, you could. It was very straightforward. You came to an agreement on the price of the house, you found a bank for your mortgage, you plunked 20% down and then you faithfully made 360 monthly payments, burning your mortgage papers after the last payment. Oh, and by the way, you had a job and some proof that there was a stream of income to allow you to afford the house.

There were even some pretty standard rules and formulas to help you figure out whether you could afford the payment and whether you were likely to get the loan. I don’t recall whether “28 and 36 or Fight” was from the Polk administration or some other manifestation of destiny, but that was the cry of the times.

That was then.

Now the rules are gone. They are brokers galore, there are myriads of products to help get you into that home of your dreams.

Unfortunately, unlike the old days, the dual goal of getting you into that home and keeping you there, are gone. Now it’s just a game of origination, shifting of assets and liabilities and pricing risk. The house and the people who inhabit those houses, are just vehicles to get the game going.

Some losers just walk away from their hedge funds and start a new hedge fund, based on some even funkier, hereto unknown derivative. Other losers are thrown out of their homes. Amazingly, both kinds of losers are in the same marginal tax bracket.

As we look at the past week’s activity, the Dow is now down about 8% from its recent high. Despite my recent poor timing for hedge purchases, my Szelhamos Portfolio is only down by 4%. That’s still a lot, but offers at least a little bit of comfort. Of my other portfolios, the one managed by Bob Shapiro of UBS held up quite well, thanks in large part to the continued confidence that he has had in Rio Tinto’s prospects and his faith in the overall investing strategy that he has established for me. He doesn’t get flustered.

Unfortunately, with prices down so much recently, I don’t see any good entry points for selling new call options to continue to hedge the Szelhamos Portfolios, but there may be some good entry points for picking up additional shares in existing holdings or shares in new holdings.

My eye, right now, is actually on the New York Stock Exchange. I’ve owned shares for nearly a year and have already added on additional shares, while continually lowering the cost basis by, you guessed it, selling options.

NYX has held up really well during the latest market onslaught. It can easily withstand a potential loss of John Thain to Citigroup, if that rumor becomes reality.

Coming off the heals of yet another 200 point loss, the pre-open looked comforting. Even a brief scare about some kind of explosion in London didn’t really rock the futures. And wonder of wonders, crude oil was down nearly 3%, but that wasn’t even remotely close to the nearly 50% drop in E*Trade in the pre-open. What were they doing in the sub-prime business, anyway? I’m sure that Ameritrade is taking note of the fire sale going on at E*Trade. Now is the time. Buy E*Trade at going out of business prices, take the write-offs and move on.

Since I own Ameritrade, I’m now happy to see that an hour afr the market open, Ameritrade is in fact, moving up, now nearly 7%. For me, this couldn’t come at a better time, since my November $22.50 options are expiring on Friday and the time is ripe to write some December $22.50 call options. Over the 18 months that I’ve owned Ameritrade, it’s price has barely budged outside of a tight range, although there have been occasional buying dips. But the covered call writing strategy has been great, with premiums outpacing the overall market’s return.

The drop in E*Trade was even worse than Blackstone, whose earnings report and guidance didn’t exactly reward the confidence of its investors. They blamed their losses on IPO related costs. I’m not sure that the market was buying it. They certainly weren’t buying the stock this morning. Blackstone is now so far away from my cost basis that it may be time to take losses, because I don’t see any near time opportunity to sell covered calls at a decent premium.

The only intrigue is that Blackstone just announced that it will be going long in the sub-prime market. There’s nothing wrong with parasitic bottom dwellers, as long as they make profits.

I hate to take losses, unless there’s a better investing opportunity. I suppose that I could roll it into NYX. Or cash. What a novel concept. Cash.


Because without rolling the money into something else, there’ll be nothing happening here.

After a couple of attempts to beat down the market, it finally happened with about 30 minutes of trading left. That 90 point gain turned into a 50 point loss. What’s happening around here isn’t very clear, just as the song prophesied. Google, Apple, MasterCard all continued their plunge.

For today, a NYSE also continue to go lower, I finally bit the bullet and picked up E*Trade shares in the last 5 minutes. From my perspective, NYSE can still go down $85, while E*Trade can go down no more than $3.50

How ironic that a week after Citigroup called a downgrade of its stock by FIBC “irresponsible”, it would find the tables turned, as E*Trade called Citi’s downgrade and warning of an E*Trade bankruptcy irresponsible.

There’s only one thing that certain.

There’s always something happening down here and it’s never clear.


What Doesn’t Kill You  November 9, 2007 (posted 4 PM)

Years ago, I heard that old saying for the first time.

“What doesn’t kill you only makes you stronger”.

I thought that was a strange kind of adage. I don’t mean to dwell on the topic of persistent vegetative states, but excuse me, case in point. Not.

Yesterday’s reference to that state of being certainly has its application in that analogy. Just because something doesn’t deliver a lethal blow doesn’t mean that it leaves you in a stronger position.

Even Borat would understand the implied sarcasm. Not.

Today, from all appearances in the pre-market hours looked to be just another killer kind of day. I didn’t really expect that in any sense or fashion I would come out of this any stronger.

And I don’t plan to end up being surprised by the outcome.

Unless poorer is a synonym for stronger.

But as I recall, it was idiomatic expressions that threw me for a loop on the SAT’s, not synonyms and antonyms. So I’m fairly confident that my somewhat less wealthy state is not leaving any stronger in any of the important categories. I’ve checked all angles of my being and even the spiritual side is feeling a bit less strong, as faith is waning.

This week has been one to forget, especially that teaser up 100 point day.

On a positive note for me, but a negative note for others long in the stock, I finally did take profits in my Electronic Arts puts. My price target was $56.60 based on the charts and it broke below that and so I closed out my position, for a nearly 100% gain. As has been the theme lately, I closed out the position too early, as EA continued to fall and that 100% gain could just as easily been 125%.

But in another misplaced analogy, sometimes getting done too early is better than never getting started, at all. And despite that, Pfizer still lags the market.

Continuing the good news, and there isn’t much of it, Rio Tinto is up another $30.

Yesterday, when I mentioned Rio Tinto, I should have also mentioned Bob Shapiro’s other good pick, that I’ve had almost as long as Rio Tinto. Coincidentally enough, that stock is also an Australian company, and that market is hot. National Bank of Australia hit a new high, nearly $200. It too pays a great dividend and I’m on the house’s money on that one, as well, so there’s not much to lose by going along for the long term ride.

Thank you, Bob.

It’s a nice view way up in the stratosphere, but for the moment, it seems as if you have to go to the other end of the globe to get this kind of view. Other than those 2 stocks, the closest thing to an Australian asset I have is a partially chewed boomarang, and last I checked, there were no bidders on eBay for that item, so in that regard, I am in a very similar state to the guys at Bear Stearns who have no clue as to how to price their remaining sub-prime assets. Hence the surprises when it comes to releasing the write down information.

Jumping the gun is what I did on closing out that Google call options position. Who in their right mind would have thought that Google was ripe for another $20 drop? Had I waited, that loss on the options trade would have been a profit.

It’s hard to rationalize Google’s fall, other than perhaps this is just a healthy pullback. When you think about it, Google should be pretty immune from the forces that seem to be rocking our markets lately. Do you really need to tank up at $3 a gallon and travel long distances to use Google?

I suppose that if you have one of those early model laptops, you know the ones. The ones that came out before long lasting lithium batteries hit the scene. All of those laptops were gasoline powered. But other than those remaining units and the purists that still keep them running, Google is pretty immune from gasoline prices.

And do you really need to make your mortgage payments to search the internet? You don’t even need a roof over your head. Just go to the library and limit your searches to topics other than pornography. It’s too bad that you can’t get “filters” for every aspect of your life. I would start with filtering out those peering over my shoulder as I type.

And finally, do you have to dip into your collection of Euros to use Google? You don’t even have to dip into your stash of gold bullion.

If your keeping score, the answer to all of those is “No”.

As far as the profits that could have been, “Woulda, coulda, shoulda” is getting to be par for the course. Where are those ProShares Ultrashort Dows now that I really need them. At twice the downward movement of the Dow, those shares would really have come in handy over the past week.

Woulda, coulda, shoulda. There it goes again.

Meanwhile, while at the noon hour the Dow is down 150 points, Goldman Sachs has suddenly turned positive. Lately, it really has been a leading indicator, so we’ll see where it leads us today and more importantly, for how long. That’s because Goldman has been turning on a dime over the last week and the Dow has followed its tracks with great loyalty, only a few minutes behind.

Unfortunately, also going along for the ride is MasterCard, which had been down nearly $5 and is now up about $3. Goodbye MasterCard. Short, but sweet was our time together.

Fast forward a few hours and a half hearted rally attempt got the Dow to within 90 points of breakeven, but look at those financials. Hard as it is to imagine, but even Citigroup is up, with barely 30 minutes to go. Not only is it up, but it’s up by 3.5%. I suppose that is less impressive than it sounds, when you consider that it’s dropped about 30% in the last week.

I think that my Citigroup call options are now worth about $0.02. Since I’m on the hunt for good news, at least there’s a tax benefit.

But Goldman, too, is picking up steam, as it, and MasterCard, of course, are each up about $7.

But all of those events were so “5 minutes ago” as to be meaningless, because the Dow started on what used to be a tradition. The old “Friday Afternoon Sell-off”. We really haven’t seen that so much lately. I guess the world has been in too good shape for us to worry about all of those geo-political issues over the weekend.

But not today. It looks like an old fashioned sell-off to send us into the weekend. Say goodbye to those nice Goldman and Citigroup gains. Even MasterCard is feeling the lack of love in the market.

But right now, I don’t care. I’m sitting at the airport, anxious to get home, with the outside chance of making it on time to go to our monthly Film Festival showing, which this week, is in lieu of dance class.

Right now, it looks as if there are going to be some delays, but what little faith that I have left, I will reserve for the belief that I will be home in time to see an art film tonight. No sub-titles either, only British accents to deal with.

Best of all, tomorrow is our 23rd wedding anniversary. To all the naysayers who said it wouldn’t last past 22, what do you say now?

The past 23 years are definitely what have made me stronger.

Thank you, dragam. You know who you are.


Sometimes Theories Work  November 8, 2007 (posted 8 PM)

Today was the kind of day that I had been waiting for.

Honestly though, as much as I profess to have faith, it was an issue of the clock ticking away and putting my faith to the test. I wasn’t certain that my faith would pass the test of consistently increasing stock prices. Lately, my judgment hasn’t been very good. Despite the bad calls recently, the Szelhamos Portfolio value has been going up, even in the face of a Dow that has gone down about 6% from its recent highs.

But with the November expirations date looming, I was fully consigned to losing some of my favorites, because the repurchase of the options contracts that I had written was looking to be overly expensive. As much as I was hoping that the price of some of my key holdings would fall, I was getting less confident that they would.

I would usually turn to Pat Robertson for a reaffirmation of my faith, but now I have to wonder about his judgment. It seemed as if it was beginning to get as bad as mine.

Granted, I like Rudy Giuliani, but I’m having a tough time figuring this one out. Talk about the world being topsy turvy. Pat Robertson and Rudy Giuliani? But I suppose that if Eric Clapton and George Harrison could pull it together, well, why not? And if Bono and I were able to bury the hatchet, obviously anything is possible. Even a Beatles reunion.

Today ended up being just one of those days that’s hard to describe. If you ended up looking at the closing numbers you would have thought that it was just another boring and dreary trading day. It’s what goes on beneath the covers that tends to be of interest. Today was the day to actually hide under the bed and let the big boys duke it out. Occasionally, to satisfy my underlying voyeuristic nature, I did peak out to see what was going on underneath the covers.

It was unspeakable.

Who knew that a day that was starting so well, would devolve into some moments of horror?

For me, the day started with good news. It’s been a while since I wrote about Rio Tinto. I can’t take credit for that one, since my Rio Tinto holdings are not in the Szelhamos Portfolios, they are in the UBS account that is run by Bob Shapiro. I’ve written about Bob in the past, as well. He is a great man to have on your side and he is major part of my overall diversification philosophy. Today proved why diversifying your investment strategies and your investment managers can be a great idea.

In fact, I believe that it was the very first blog written for Szelhamos Rules. It was entitled “Diversify, Diversify, Diversify” and it spelled out the rationale for maintaining more than one investment portfolio and portfolio manager.

But Bob Shapiro is the one who selected Rio Tinto for me. Bob is a “buy and hold” kind of guy, while I am not.

More often than not, Bob is right. When I’m right, it’s because I did lots of trading to make a potentially mediocre situation into a good one. Not Bob. He buys, he holds. When appropriate, he cuts losses and moves on. No hoopla, no fanfare. Just results. Good results. Occasionally, there’s a Christmas card, as well.

Rio Tinto is my oldest holding. I’ve had it since 1996, with a cost basis of about $63. Over the years, Bob has sold shares and we have been playing with the house’s money for quite a while. Its been that good. Besides that, Rio Tinto has always paid a nice semi-annual dividend and they deface a part of the world that really has no impact on me.

But what was especially nice was waking up to hear that a unwanted takeover bid for Rio Tinto was made, with Rio moving up over $100 in the pre-open.

Despite the wild gyrations today, Rio Tinto ended up with nearly a $90 gain. Not bad. Especially when you consider where we went today.

Where we went was al over the place.

It wasn’t that bad in the morning. I was a little upset when I saw that in the pre-open Google seemed to be reversing its after hours drops yesterday. I was expecting a $10-15 drop at the open, yet Google was pointing up another $3. And so were Apple and MasterCard. They were testing my faith and I was close to crossing over to the other side.

I know that I’ve been beating a dead horse, but I really wanted all of those stocks to fall a bit so that I would have a chance to buy back my call options contracts. When I say “fall a bit”, I really meant “fall a lot”. But with Google above $740 and MasterCard above $200, only Apple seemed like it would have a chance of closing below its $195 strike price by next Friday.

During lunch, I watched Ben Bernanke’s testimony. I didn’t really hear much that was nerve wracking. To me, the only potentially frightening comment was that the Fed was not chartered to bail out investors from their stupid mistakes. Those weren’t Bernanke’s words, they were mine.

But should that have spooked the market? Did anyone really believe that the Fed was there to bail out idiots. Okay, maybe idiots who also happen to be at risk for losing their billionaire status, but not regular idiots.

But whatever he said did spook the markets and they fairly quickly fell to a 200 point loss. A half hearted rally took it down to just a 100 point loss, but soon we were back to another 200 point loss.

On a happy note, for me, anyway, Google was down nearly $50, Apple, Goldman Sachs and MasterCard were down by more than $10. Even an invincible, like VMWare, fell below $100. But VMWare was like Apple, MasterCard and Google in that regard. It was just another one of those straight upward climbing stocks that really did need a breather.

But those drops were good news. The Goldman selling is really overdone and I didn’t need anymore, but the Google was welcome and gave me the opportunity to buy my options back. Now I’m keeping my fingers crossed that Google will slowly start to make its way back up. At that point, it’s time to start selling options again. And even more predictably, I can start moaning about how much I really want Google to fall again.

The nice thing about history repeating itself is that there’s really no urgent need to learn from your mistakes.

MasterCard? Well, that’s still another story. For me, it has to fall another $20 before there’s a chance of buying it back. With all of the hype about how invincible MasterCard is to the whims of the economy, you can be sure that its next bout of volatility will take it back down.

With all of the big losses in those stocks, my hedge positions made money. When the dust settled, somehow it was a day of profits.

For today, anyway, the theory was good. But for me, the theory has to keep working about another 8 years. In that time, I will probably make about 2000 more trades than Bob Shapiro, based on my last years’ activity, and I’m not certain that I’ll be the better off for it.

Ordinarily, that would call for introspection.

For me, it’s just a reminder that theorems need no proof. They only need faith.

And mine is back. It’s back baby. It’s back. With a little help from Rio Tinto, thank you.


Waking Up can be Dangerous to your Health  November 7, 2007 (Posted 9:30 AM, updated 7:30 PM)

The statistics are pretty clear on this one. The most likely time to have a fatal heart attack is the moment that you try getting out of bed. That’s why people in persistent vegetative states have such long life spans.

It’s nice when there’s not too much to worry about. I guess that if you’re in one of those states your biggest concern is about rolling electricity brown-outs.

On mornings that I’m out of town, I have a very bad habit. That habit has the potential to potentiate the morning heart attack index.

I reach over to the nightstand, find the remote control and turn the television onto CNBC. As I’m sitting up and putting on my glasses I check out the pre-open numbers, pretty much in a smooth continuum of motion.

This morning had heart attack written all over it as the Dow Futures were down by nearly 150 points. At the time, who knew that we would have been relieved if only the carnage had stopped at 150 points?

But I went to bed last night well prepared for this kind of open, because the news about GM’s massive non-cash write down was released yesterday evening. You just knew that there was going to be some price to be paid. I was mentally prepared, but that didn’t help the actual health of my portfolios.

As a rule, I don’t pay too much attention to the opening futures. They have a habit of leading you astray, or at the very least, to over-react. This morning’s plunge was blamed on a trio of factors, only one of which is actually news, and that’s the GM write down.

The other 2 factors that are being cited are the price of oil as it’s getting ready to cross the $100 level and the value of the U.S. dollar, a it reaches new lows. Again.

The oil number may change quickly, since the Inventory Report will be released this morning. I’m sure that somewhere in the world there is an active betting pool going on as to whether oil will reach $100 today. Since it’s denominated in dollars and the dollar continues to fall, there is that additional invisible push upward on the price. For me, it just means that next summer’s trip to Europe will cost lots more, but the good news is that we pre-paid for the villa. Now that was a smart investment.

As it turned out, we didn’t quite get to $100, but you wait.

On top of all of that, there is the recurring rumor that the Chinese may be ready to diversify their investment portfolio out of U.S. Treasuries. Hopefully, they won’t attempt to outbid me for the Tuscany villa. This time, though, it was more than just a rumor. It was based on an actual statement from someone in a position to effect that kind of change.

If that were to happen in a really big way, think of the sub-prime mess, only in inverse. It wouldn’t be like the borrower defaulting, it would be more like the lender taking off with the money.

Interestingly, this morning saw an expanded discussion on credit use by Americans. Hopefully, no one besides me was watching, as the virtues of MasterCard were extolled. The last thing that I want to see right now is another upward pop in MasterCard’s stock price. We need to have that puppy come down a bit before I’ll go after it.

As bad luck would have it, after another 360 point drop, MasterCard kept its head above water.

But the reality is that Americans just continue to use their credit cards more and more and are building up huge debts. But MasterCard doesn’t care, it’s not on the line if there are defaults. It’s not the bank, just the broker. The more people use their cards, the more MasterCard makes. Nice model.

In fact, yesterday marked my entry into the world of real life Americans.

For the first time ever, I used a credit card in a fast food restaurant.

Sure, it was convenient, but that particular credit card offers a 3% rebate for any restaurant charges. If the cashier only understood, then he would have known why I ordered 622 Big Macs. Those rebates really add up if you do it in volume.

When it comes to credit cards, I’m an equal opportunity exploiter.

Take Discover Card, for example. An absolutely horrid stock, that was spun off from Morgan Stanley. I got some shares and dumped them as quickly as possible. But I also got the card which offers some good incentives to use it.

Besides a 5% rebate on restaurant charges in the current quarter, they just came out worth a $10 rebate if you bought $200 worth of groceries in November using their card.

When we had my son’s 21st birthday party a few weeks ago, it may have marked the first time that a Discover Card was used at a Ruths Cris Steakhouse. In fact, I quietly asked the waitress if the card was accepted. It was. I exploited.

Even better yet, then you can trade these Discover Card points in for Gift Cards that have their own built in incentives, such as $20 for a $25 Best Buy gift card.

Exploitation is so much fun. Now I know how the Pharoahs must have felt. And you can get so much accomplished.

The new Costco American Express Card offers 2% rebate on all travel. And I travel a lot. The catch is that the rebate is in the form of a Costco coupon. Well, considering that the brand new Costco that opened near our house is like one of the modern wonders of the world, that should be no problem finding a way to spend that extra $750 each year.

But I don’t even come close to a friend of mine who ha enough points to live a year at some of the world’s most exclusive resorts. Maybe it’s for a month, but no one holds me to journalistic standards. I know that I don’t, just check the punctuation after you’ve finished checking the facts.

But it is nice to be at a point that the interest rates really don’t bother me and neither does credit score. So I just collect credit cards just to take advantage of their perks and then discard them when they’ve outlived their usefulness. That model I learned by watching activities in a Nursing Home.

So far, I’ve covered fatal heart attacks, persistent vegetative states and the horrors of old age. Who knew that this morning would be so filled with glee? I’ll blame my mood on this morning’s futures.

It promises to be a dangerous day. Stay tuned for more if your heart can stand it.


Under the Radar  November 7, 2007 (posted 7:45 PM)

I had liked Apple’s new trading strategy. It’s been keeping a low profile lately as Google and MasterCard continued to march forward even when those around them were swooning. And it hasn’t been the good type of swoon.

And there have been plenty of reasons to swoon.

At a time when gold breaks $820 and oil hits $75, now news come out that American children are demanding that the Tooth Fairy begin to use Euros for all transactions.

How embarrassing.

And if you thought that Citigroup’s $5 billion and then $11 billion write downs were staggering and disruptive to the markets, just wait for tomorrow as we await the effect of GM’s $39 billion, just announced this evening.

Granted, these are apples to doughnuts kind of comparisons, but write downs tell us that something is badly broken. Never mind that the slate is being wiped lean, the slate is broken.

As far as Apple goes, once you get to a certain stock price, it’s not very easy to keep a low profile, especially when your product is decidedly high profile and yours is as cool a stock to own as your products.

Is there anyone that doesn’t have an Apple stock story?

For my readers in Bangladhesh, please excuse the reference to a stock whose share price is far greater than your per capita income. It was a reference that was made without taking into consideration various economic sensitivities.

Let me try to re-phrase that into a more situationally appropriate setting.

Is there anyone that doesn’t have an apple, or any other edible foodstuff?

You don’t really see anyone flaunting their Google home pages or their affinity MasterCards, do you? But everyone flashes their iPhones, iTouch and iPods. Suddenly, it’s cool to be cool. Even the Goth kids want to be cool, because there’s a limit to how much of an outsider you can really be. And you need your tunes.

For the last week or so, nothing has been able to slow down Google and MasterCard and they have just kept climbing higher and higher. From their heights, there’s lots of rubble below, but I guess all of those people defaulting on their mortgages are still using their credit cards, and best of all, paying off their balances, while still searching the internet. Maybe they’re searching for a viable sub-prime lender.

Good luck in that endeavor.

It’s one thing to blow off your mortgage, but you’ve got to keep your MasterCard viable, because you know how hard it is to get a new credit card. Sometimes opening up the envelope isn’t enough. Sometimes you even have to dial an 800 number. Arduous or what?

As has, unfortunately, been my theme lately, even though I own both Google and MasterCard, I’m not exactly happy to see them shattering all kinds of records.

The latest price targets are staggering. $850 for Google and $250 for MasterCard. Sounds great, since my cost basis for Google is about $435 and for MasterCard it’s $135.

But during a moment that I really did think that I was the smartest guy in the room, I decided to sell call options on these stocks. $700 for Google, which is now at about $740 and $165 for MasterCard, which just closed above $200. At the time that I sold those calls, I didn’t think that there was any way for those stocks to surpass their strike prices.

Wrong on both counts, and in a big way.

The way it’s looking, I’m not going along for the ride, even after going through thick and thin together. It reminds me a little bit of, for the want of a better word, a dirtbag that I went to school with. His wife supported him all the way through college and then all the way through professional school.

About a week before graduation he told her that he had outgrown her and it was time for each of them to move on so that they could be with people more fitting their position in life.


So Google and MasterCard will soon be leaving me behind.

It was good while it lasted. But I’ll be honest. If their prices retreat to about $720 and $180, I would take them back. We would learn to work through our problems.

The only saving graces that I had were that some of my other large holdings looked as if they were going to see their call options expire worthless, meaning that I get to keep the premium and the stock. Goldman Sachs is one of those. I have $240 call options written and would love to see Goldman re-approach that level, because there would be a great December $240 or $250 options premium. Although, there is something unsettling watching it fall from $245 to $215 in the blink of an eye.

Another one of those is Apple. I sold some $195 November options, and Apple was looking pretty good. It looked as if it would come in below $195 by expiration date.

I like to have my cake and eat it, too.

Not that Apple has much of a direct role in keeping a low profile during these most recent days, but it has really been below the radar.

Apple was undergoing a stealth rally. There were no headlines, no great press releases and no new product buzz. But each day Apple would move up just a bit. A percent here and there really adds up. And even on the most abysmal of days, Apple just hung in there. It looks as if it’s really making a base at $180.

So it was all well and good, that is, until today.

But Apple didn’t come out with any new news, no new numbers. Nothing happened.

Except for one little thing. Google.

Yesterday Google finally announced its long rumored plans for the so-called G Phone. Clever, huh? Not an iPhone, a G Phone. I don’t think the twins at Google are behind that name. They’re a bit more imaginative than that.

As the official word finally came out, Google rallied and continued to rally today, but a funny thing happened to Apple.

Since no one really understood the “Android”, as the G Phone is being dubbed, Apple, which everyone would have assumed had the most to lose by some ubiquitous Google wireless and telephone software, actually went up a little bit yesterday, in what was an otherwise negative day.

What was that all about?

But today, they finally got it. The G Phone offers no competition to the iPhone at all. In fact, the Google software will theoretically be just as available for the iPhone as for any other piece of wireless hardware. Imagine that, something that legions of techies and fashionistas have wanted, a Google and Apple marriage.

And so on that understanding, Apple got out of stealth mode.

That’s good, up to a point. And now you know that point is $195. At least until November 16th. After that? Who cares? That’s the next cycle of options. That’s almost like trying to care about the Social Security Fund. Does anyone really care whether it will be solvent in 2041?

That’s really a rhetorical question. Even Daniel Patrick Moynihan didn’t care enough to hang around long enough to find out the answer. So what’s the odds of me making it?

Another rhetorical question.

Once again, with just some 8 trading days left until the end of this month’s options contracts, once again I find myself waiting for a fall in prices. It’s especially discouraging when you do get one of those random 362 point drops and the very stocks that you wanted to see plummet just thumb their noses at you and go in the opposite direction.

Is that any way to treat the person who rescued you at $440?

But I continue to have misguided faith. Apple won’t let me down. Sure, there’s only a 1% margin until it gets to $195, but maybe some disappointing early, but eventually meaningless European iPhone numbers will come in and help knock the price down a bit.

Those European numbers probably will end up being meaningless, since Apple probably doesn’t have much of its guidance pegged to Europe, since the European Union has clearly demonstrated it has no regard for intellectual property. Remember the iPod and iTunes debacle? Apple just needs a presence in Europe, for presence sake only. There’s not likely to be much money in it and no downside.

But since every reaction we see is based on some short term read or mis-read, some disappointing European numbers would be welcome.

What a misanthrope I’ve become, always hoping for bad news.

Since I’ve given up reading the newspapers, I haven’t been getting my fill of bad news lately.

But there’s always tomorrow.


When Good Rumors Go Bad  November 5, 2007

That sounds like a series idea for the Fox Network. By next week, I’ll probably be kicking myself for not protecting my intellectual property.

But when you think about it, how much intellectual process is there out there, when Fox retains the name “20th Century Fox”? Hello, Rupert. Have you checked the masthead of The Wall Street Journal? Have you checked the date? Now what century are we in? Currently, I mean?

Is there a consumer base that would be driven away or confused by the change of name? It’s not like the change from United Airlines to Allegis, years ago. I think that Chuck Prince was behind that one, at least that’s the rumor running around, but I’ll have to recheck my sources.

When you reached a certain level of personal wealth, irrational behavior is characterized as “eccentric”. Additionally, individuals with British, Australian or South African accents often sound more intelligent or are thought to be in greater possession of their sanity than is truly the case.

Game, match and point goes to Murdoch, in whatever order he prefers.

Admittedly, watching yesterday’s Simpson’s annual Halloween episode got me thinking, which is always a dangerous situation. Anyway, you may, or may not remember that I was on the topic of the “Seven Deadly Sins” last week. Coincidentally enough, that was one of the topics on yesterday’s Simpson’s episode. Appropriately enough, Ned Flanders was the vehicle to explore the deadly sins, but in this episode we also got a glimpse into the evil side of Marge.

It’s been a long time in coming.

But unless you don’t believe the infallibility of information garnished from the Simpsons, it doesn’t appear that “rumor mongering” is one of those 7 deadlies. Nowhere did I hear it mentioned, although lust, greed and wrath were rolled into one amusing vignette.

With rumors leading the way, by the close of Friday, it became clear to the smartest guy in the room that Chuck Prince’s departure was not going to do anything for Citicporp’s stock price, especially when the rumor mill indicated the obvious, that there were more write downs to come. It really did, and based on this morning’s pre-open really does appear as if Prince’s departure was already built into the price.

I looked around the room and noticed that I was the only one inhabiting it. Despite the fact, I still felt pretty stupid, because a few weeks ago I bought in the money Citigroup options and then just a couple of days ago I bought Citigroup shares. How’s that for timing? You would have thought that there was a lesson to be learned from the reaction of Merrill Lynch’s stock price after Stan O’Neal got the boot.

The most amazing revelation to hit the wires, is that Sandy Weill, on whom much of Citigroup’s woes must be blamed, was recently in Saudi Arabia, pitching himself as the Citigroup savior. Rumor, has it, that Prince Al-waleed, the largest stockholder wants Weill back, at least on an interim basis. Maybe the Prince is trying to figure out how to parlay a $4 billion loss to a $5 billion loss. Naming Weill as interim CEO would be just the trick.

The fact that Weill wasn’t shot before either boarding or departing the plane is proof enough that money trumps politics and religious hatred.

The expression “It’s all about the Benjamin’s” has special meaning for both Weill and Al-waleed, as Benjamin was the 12th son of one of their joint patriarchs. I’m sure that if we knew where his grave was, we could confirm that he was rolling over.

My best advice for Mid-east peace is for Israel to become a publicly traded company and allow Saudi Arabia to purchase a sizable minority stake. There’s nothing like a vested interest to guarantee continued good health and prosperity. Maybe Tony Soprano would bust a couple of legs to protect a vested interest if it misbehaved, but isn’t that really counter-productive? Obviously, the Saudi Princes have a more reasoned approach to self-interest.

Put this one into the playbook.

Invite the fruit of the loin of thine enemy to lead you to into the promised land, or the next best land.

I always did want a Nobel Peace Prize to share the mantle space along with other indicators of previous triumphs.

And so, today’s pre-open is once again, pointing to a 100 point downturn, with you guessed it, Citigroup leading the way.

Although I’m not disproportionately invested in the financials, I do have shares in Ameritrade, Citigroup, Goldman, Blackstone and NYSE, as well as some lesser financial holdings in Bank of America and some regional banks. At the moment, it certainly seems over invested. Only Citigroup is not currently hedged with call options, because I just picked the shares up a couple of days ago. In hindsight, that would have been the time to write the options, but my expectation was that it would be going up in the short term. If I’m not mistaken, that is why you purchase shares.

But lately, that hasn’t been the case for me. Take Citigroup. Please take Citigroup.

That’s because, as the smartest guy in the room, I bought into the logical line of thinking, regarding the impact of Prince’s departure. Big mistake. And that goes against everything that I’ve been spouting. Although go contrary to the contrarian position may be a defensible position.

What isn’t really defensible is that the short term decision to put the organization into Robert Rubin’s hands. That’s nothing more than a vote for the status quo.

What will happen with Citigroup is now obvious.

They will dump every conceivable loss into this quarter and give its new CEO a clean slate. They will be likely to get rid of Smith Barney, unless Larry Fink takes the job, in which case he could probably find the obvious synergies that Chuck Prince couldn’t.

Any asset sales will be put immediately to use to support the previous stock buyback program, because if there was ever a time to support the price of the stock, now is the time for management to step forward.

So far, the departure of Chuck Prince rumor, as good as it sounded, is turning out quite badly.

Be careful what you wish for and always keep one eye opened while sleeping.

Meanwhile, a much as Citigroup was setting today’s nasty tone, the market did recover from its nearly 150 point loss in the late morning. By 3:30, for a brief moment, the Dow was actually in positive territory.

Just about the only thing that I had going for me today was that Elecronic Arts was reverting to true form. My put options have 9 more trading days and I think that EA will show its true colors as the details of its earnings report are fully digested. I was so positive that ERTS would fall after its earnings report that I bought put options for only the second time in my investing career. At the moment, the option is now in the money, with ERTS at $58.80. I think that ERTS has $56.60 written all over it by November 16th.

On a seemingly positive note, the reality of a Google phone hit today. Google just thumbed its nose at the rest of the market and to me, in particular, since I’m still on the line for those November $700 calls that I wrote. Deja vous, anyone?

And Goldman just doesn’t know when to stop. All I wanted was that it stay close to the $240 strike price that I had written. I really didn’t intend for it to fall over $30 from its very recent high. But I’ll bet that David Viniar, the Goldman CFO is feeling pretty good about getting out close to a high. I know I would feel pretty darn smart, even if there were other people in the room with me.

Now that the trading day is almost over, with just 20 minutes to go and the Dow temporarily in positive territory, comes the bad news that call options buying is way up, especially in Goldman. That means that bottom feeders are at work. With so many of them plying their trade, they’re bound to trip over one another.

It’s that kind of speculation, when you really do think that you’re the smartest guy in the room, that trouble is sure to find you.

What we really need now is just one more good rumor to get our minds away from trying to out think the unthinkable and the unfathomable.

Did you hear the one about Robert Rubin and the under aged carny?


Picking the Wrong Horse   November 2, 2007

About 30 years ago, when I was really into the ponies, I bet on a horse named El Patron two weeks in a row.

You can look it up. El Patron was a really good horse. Not a great horse, but really good. He was just one notch below the best in the land. The one sin that he had, though, was vanity. That never showed up in the charts, though.

The first week that I bet on him it was the night’s featured handicap. It was a photo finish. I ran inside to look at the monitor so that I could be among the first to see the photo and cash in my winning ticket. When the photo was flashed on the screen, normally you would see the horse’s heads in profile, as their noses crossed the finish line. In El Patron’s case, his head was fully turned toward the camera. Had he been in the correct position, he would have won by a head. You would have sworn that he was smiling at the camera. He ended up losing by an ear.

The very next week, against the very same horses, El Patron was going off at great betting odds. He was, without a doubt, the best horse of the race. But in another photo finish, El Patron lost by a head. Not in the way most other horses would lose by a head, but in the way only El Patron could manage. Once again, he was looking straight at the camera. This time I think he was laughing.

At me.

I did learn my lesson that time. Finally. I should have learned after the first photo finish.

I stopped my pony chasing and I especially came to frown on the sin of vanity. To this day, no one will ever accuse me of being vain.

Lately, no one will accuse me of picking a winner, also.

It was a bet between Exxon Mobil and Electronic Arts. I chose Electronic Arts as being the one that would lose more of its value after its earnings were released.

Exxon came out with earnings before yesterday’s bell and it and Citicorp set the tone for yesterday’s horrible tape.

Electronic Arts was no slouch, either, losing more on a percentage basis than the Dow and even more than Exxon.

The clear winner, right?

Well, it was for a nanosecond or so.

Earnings were finally released at 4:20 and they were not very good. They had an 18% decrease in net revenues, announced a major reorganization and the probable shutdown of London operations.

The first after hours trade in the aftermath of these reports sent Electronic Arts down by additional $3 on top of the $2.50 it lost during the regular session. That was a combined 10% loss. I was dancing with my laptop.

Unfortunately, the options don’t trade in an after market. So I would have to wait until the morning to quickly trade out of my put options.

At least that was the plan.

For some bizarre reason, following what must have been a very well received conference call that must have spun an unbelievable story, Electronic Arts erased that entire loss and finished the after hours session up $0.80. They somehow spun the report that contained not a single shred of good news into something that appealed to everyone with discretionary cash, waiting for the next sure fire investment.

I had gone from counting a year’s worth of profits on a 36 hour trade to wondering how to stem the losses.

But that momentary $5.50 drop will never show up on the charts, either. It’s not like Electronic Arts turned its head and smiled at the camera, but it’s no different.

What exactly did I say about head games? In El Patron’s case it was a head game of a physical nature. In Electronic Arts’ case it was of a very different nature. Sooner or later, Electronic Arts will come crashing down from the weight of this afternoon’s dizzying spin. In this morning’s pre-open, it is up despite a new sell recommendation from Deutsche Bank.

Later, I found myself staring into the mirror. Unlike El Patron, I wasn’t smiling, just shaking my head. Wondering what today would bring.

And here we are, it’s now today. Maybe saner heads will prevail. Or maybe they’ll just get rid of Chuck Prince. Either way, it’s all good, as long as it helps the bottom line.

The latest Prince rumor, supposedly from someone very close to the situation, is that this weekend will see the ouster. Rumors. More rumors. But like it or not, those do move and shape the markets.

The fact that news was just released that he cancelled an expected conference appearance for this Sunday gives some more credence to the rumor. Sometimes rumors turn out to be true. Especially when you consider the aftermarket report that the Citicorp Board has now called for an emergency meeting on Sunday.

Me? I like rumors. I just wish I had a good way of spreading them, or at least profiting from them.

As bad as yesterday was, however, my hedges really smoothed things out. The market was down 2.6%. The Szelhamos Portfolios were down only 1.1%. That’s still a lot more than I would ever like, but it should have been worse. My other accounts mirrored the overall market.

This morning, the oft revised jobs numbers were released. Not only were there minimal revisions to last month’s rally provoking numbers, but this month’s number was great. Coupled with the report that wages were stable, these numbers did not support inflationary fears.

And so the pre-open numbers responded as one would expect and 10 minutes from now we’re looking at a 70 point gain at the open.

That gain ended up lasting for 2 minutes. By 9:32 A.M., the Dow was in negative territory. So hold on tightly, because by 9:39 we reversed it again and by 9:50 it was decidedly down.

Even with the Dow down or up, I especially don’t like what I’m seeing because most of my big boys are pointing way up and they are erasing yesterday’s losses that bought them all closer to their strike prices. I am getting a little tired of buying these options back in order to keep the stocks, but so far, that has consistently worked out to be a good decision, especially since the volatility makes for even better options premiums if the terms are rolled forward. On a day like today, the way it’s shaping up in the first 30 minutes, those “big boys” may get tired out and fall in behind the rest of the pack. Goldman Sachs already has, now down $13.

A high school classmate is the CFO at Goldman and news just released indicated that he unloaded 20,000 shares. Can you believe that he didn’t call me? I had to read about it just like everyone else. Is that bullish or bearish? Normally, there isn’t a great correlation when there’s insider activity. But the CFO?

On days like this, if the trend continues, the Szelhamos Portfolios will under perform the market, but all that matters is what’s left when the game is over. I’m not certain how to define that endpoint. I’ll have to ask my heirs for their opinion.

Bottom line? I still would have been better off the past 2 months had I not written those call options, although there are still 2 weeks of trading until November’s expiration. Unfortunately, this week’s turn back the clock phenomenon only relates to clocks. It doesn’t extend to our actions and decisions. For that, you have to wait until April, or whenever that endpoint finally does arrive. I understand, from the same sources that provided the most recent Chuck Prince information, that deathbed conversions are acceptable.

When you consider that yesterday’s 362 point loss was only the fourth largest loss of the year, you realize that there are lots of possibilities.

Do you hear that, Electronic Arts? Just because you’re up $2 and Exxon Mobil continues to fall, you’re not invincible.

And stop smiling at me.


Follow Your Gut   November 1, 2007

After yesterday’s Fed announcement, the initial reaction of the markets was the right one. It quickly dropped 100 points, but it just as quickly regained that and even more. For any sane person’s perspective, there was nothing but bad news buried in the accompanying text to the Fed’s interest rate decision. It wasn’t even buried very deeply. It was more like a carcass on your doorstep. You just knew that sooner or later it was going to stink up the place.

Now that’s a metaphor worth waiting for.

Today is both sooner and later. From the looks of things, it’s really going to stink today, and I couldn’t be happier.

Lately, my initial reactions have been wrong. That’s why I haven’t been fully able to capitalize on the huge gains in Apple, Goldman Sachs, Google and now, MasterCard. Gut wrenching is what its been.

My initial reaction when I bought these stocks is that they would go up.

Uh duh.

And they did. Google took 2 years to get to this point, but the more than 50% gain is worth it. Apple took about 18 months to double. Also worth the wait.

Despite the fact the hedging those bets have limited the gains, it still continues to be a good strategy, as the Szelhamos portfolios still lead the market indices by over 2%. So I guess that I really have nothing to complain about, other than the fact that I could be typing on a solid gold keyboard right now, instead of on some 21st century non-biodegradable plastic.

I’m even okay with the fact that I still need to delay my insistence on being called Mr. Money Bags. Someday, mark my words, it will be Mr. Money Bags.

If I had studied hard enough in college, instead I would be aspiring to Dr. Money Bags. But you can’t live in the past.

But with each significant dip in the indices, that hedging strategy just gets better, so I continually find myself hoping for big down moves. Not sustained down moves, just periodic hiccoughs. It’s those hiccoughs that will make the difference between my current name and my wannabe name.

With another 2% to go until we reach the recent highs on the Dow, the Szelhamos Portfolios are already at their high point, recovering more than the market recovers.

This morning the futures are pointing down by over 160 points, thanks to another downgrade of Citicorp, whose naked call options I hold at $45. They are ready to become worthless in 2 weeks. Bad gut reaction. I thought that its CEO, Charles Prince would be fired 2 weeks ago and that would send the stock way up. For some reason, despite a consistent bad barrage of news from Citicorp, he just keeps hanging on while the stock price keeps heading south.

The latest rumor about Citicorp is that it may be cutting its 5% dividend. The contrarian opinion is that when a large company cuts its dividend it is sending a strong buy signal. In the meantime, another 2 top executives were fired. Who hired all of these recently fired guys, anyway. Shouldn’t that guy be fired, Chuck Prince?

I wouldn’t feel sorry for Chuck Prince. Even the bruises to the ego can recover pretty quickly. Look at Bob Nardelli. It’s amazing how soothing and healing a $240 million bandaid can be.

To show my support for his near term ouster, I picked up some Citicorp shares during the mid-afternoon, at a point when Citicorp was down $3. Today was ex-dividend day, so there’ll be nearly 3 months before the possibility of the dividend hammer hitting. In the meantime, maybe the stock purchase will offset the beating that I will end up taking on the poorly conceived options purchase.

Interestingly, a couple of days ago, I was watching an interview with Bob Nardelli and he opined about the Stanley O’Neil situation at Merril Lynch. Although he didn’t say so directly, it was obvious that he drew a parallel to his own situation at Home Depot, painting O’Neil and himself as poor victims.

During the same interview he heaped lavish praise on his new workforce at Chrysler. The best in the automotive industry, he said. So he must have been very surprised, when not even 2 days later, word comes out that Chrysler will be cutting 11,000 factory jobs. To soften the blow, Chrysler also announced that it was ending production on the PT Cruiser.

Well, at least it was worth it then. And we won’t have to worry about those numbers until at least next month’s Job Report.

That news just came out 20 minutes ago, so in all fairness to Mr. Nardelli, he may not have heard about it yet. CEO’s are always the last to know. Poor guys.

In the meantime, I’m anxiously awaiting the Electronic Arts earnings report. They were supposed to be out before this morning’s opening bell, which is now less than 30 minutes away and still no news

Earlier in the morning Exxon Mobil announced its earnings and they were slightly below expected numbers, with profits down 10%. In the pre-open Exxon is down about $1.70, despite a continuing climb in crude.

At least they were good corporate citizens and announced when they were supposed to, as opposed to Electronic Arts. But if the market does stay down at these pre-opening depths, you couldn’t ask for a better day for earnings to be released, especially if you’re holding puts.

So far, the only news release out of Electronic Arts is that they’ve just released the third in their Command and Conquer series. More ominous, as far as their future guidance goes the EA CEO stated that “game prices must drop”. Seems odd to make that kind of statement today. That can’t be good for the coming quarters. Although to be totally fair, he was talking about a 5 year time frame, in response to competition from China, where he says they are giving games away for free.

How exactly is that capitalism?

Even more ominous is that a Chinese video gaming company came public today and its ticker symbol is the same as my initials. It came public at $15.50 and was expected to open at about $18. Now that’s capitalism. There’s probably an unlimited amount of demand for free video games. I guess you make it up in volume.

Who knew that Electronic Arts actually had a product. I thought it was just a stock. Now that’s a novel approach.

Oh, I forget. People who are into the Electronic Arts stuff usually aren’t into novels.

Needless to say, of the 2 put strategies, Exxon is the one that I did not follow and Electronic Arts is the one that I did.

Maybe it was the gut reaction that Electronic Arts would get punished more, having had nearly a 20% rise in the last month.

So far, EA is just following the market downward, although outpacing the decline a bit. Because I am holding puts, it is just about the only profitable thing that I am holding this morning. Tempering the bad news of the early 240 point drop is that much of my drops are on profits that I wouldn’t have received anyway, since Goldman is falling, but MasterCard and Google are bucking the trend and are now even further away from my November strike prices. As we call this in the professional world of investors: “inexplicable”.

It’s one of those can’t win for losing kind of metaphysical moments. As we would refer to it in the world of professional philosophers.

At times like this, it’s nice to have more than one profession to fall back on.

The latest news that I’ve seen is that now EA will be reporting earnings after the closing bell. That change likely means that they don’t want to be caught in the vortex. That should be a bullish signal on their numbers, so I may end up trading out of my puts near the end of the day. At the moment, that would be a 25% profit, but it’s likely to be a really volatile number. That 28% profit, though, is not that big in absolute dollars and doesn’t begin to take away the Citicorp sting, which has now hit a new trading low.

But if you want to be a real contrarian, you would read into that move that they realize that the EA numbers, good as they might be, will still end up disappointing The Street. So maybe, just maybe, delaying the earnings report may minimize the downdraft to the price.

That may especially be the case when you consider that the Jobs Report comes out tomorrow morning. If the Jobs numbers are good, and based on Wednesday’s ADP numbers, all indications are that they will be good, there may be a lift to the market. That lift could lift EA’s stock price, as well, or at least minimize any disappointment.

Head games. It’s all about the head games and who has the most sanity left when it’s all done.

Or, it’s possible that I was wrong about when they were supposed to report.

As all of this unwinds, I think I still have my sanity, although I’m not sure how much lining I have left to my gut.

Now where’s that carcass when you really need it?




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