Archive for November, 2007

I was expecting profits of $4000 for December expiry but I came in at $2300 for my aggregate account returns. Overall, for the month of November, I made $4100 which isn’t too shabby. The markets volatility helped tremendously as premiums were high for all the calls I sold.

Now I have to sit and wait until December 21 options expiry to see what kind of action I might get for January 2008. I’ll follow up at the end of the year with a post on my overall returns but as of today, my annual returns for my three accounts; power, mini, arbitrage are 27.43%, 26.88%, and 12.38% (50.12% if annualized) respectively.

This year’s returns almost doubled last years returns (15.87%, 16.14%) fairly comparably but there’s no way that they’ll double again next year. I tend to think that this year might have been a fluke with the market jerking up and down so wildly like a wild bull but I can’t complain because I’m happy with my returns.

I continue to tweak my algorithms and ETF-cashinator to the point where I can now comfortably hope to make at least 1.67% return monthly (20.04% annualized). Of course, a major market melt down can easily wipe out all my gains and I still see a great deal of turmoil in the markets through at least Q1 of 2008 so who knows… I might just sit in cash or invest very conservatively. At the end of the day though, these are all long term investment accounts (except the arbitrage) so it’s no big deal if the markets drop next year.

You can take a sneak peak of the activity over at http://www.etfcoveredcalls.com.

My most recent endeavor with credit card arbitrage has so far yielded, on an annualized basis, 50.12% but the actual return from October 2007 thru December 21st is 12.53 pct. I must confess, the recent volatility in the markets have made the returns a bit beefier than I anticipated.

So to reflect what I did.

Step 1. Borrow 40k from credit card company at 0% for 6 months

Step 2. Invest money in my ETF Covered Call Strategy.

Step 3. Profit

Step 4. Pay back loan (due in January 2008) and keep profits.

So far, I’ve banked $4,741 which isn’t too shabby as Christmas is around the corner and baby needs a new pair of shoes. I’ll have to pay taxes on this amount so I’ll only keep about $3200.

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If you’re curious, you can view the 3 trade transactions here. Although it’s been fairly profitable, I am beginning to wonder if I picked the wrong time to do this; the markets increased volatility, if it continues, will eventually lead to a major sell off as people get tired of the roller coaster ride and begin to fear losing money and bail out. If there is a sell off in late December I’ll have to roll over the arbitrage onto another account for another 6 months and keep churning profits in 2008.

All I really want for Christmas this year is a stable monetary policy.

I’ve ranted about the idiocy of FICO scoring system many times and I’ve discovered a solution to my problem. Like many big banks, I’ll simply move all my credit card debt off balance sheet. Once I do this, PRESTO, no more debt on my credit report and my score should rocket back up to 825 or so.

The real trick of course is to create an RSSIV (Rich Slick’s Structured Investment Vehicle) to bundle my debt and sell to unsuspecting overseas investors. Hopefully, with any luck, a judge will rule that those overseas investors don’t have any right to any of my possessions to collect on those debts should I be unable to repay those loans.

I’ve seen a peculiar pattern on my blog lately.  It seems whenever there are many clicks on an article I write from PFBlogs.org, I subsequently get a ton of spam on my blog.

It occurred that spammer(s) have likely written a script to read the aggregated list with the most clicks and then have their bots send the spam.

To prove this theory, I’d appreciate anyone reading PFBlogs.org to click this post.  If the theory holds and I get many “clicks” then I should receive a ton of spam today.  I will confirm (or invalidate) results tomorrow.

The secret is out, you can save a bunch of money by dumping Geico. I saved 37.5% by dropping Geico and combining my homeowners and auto insurance policy.

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Here’s the money breakdown.

Geico was charging me about $200/month to insure two vehicles (one new & one old). When I switched to my homeowners policy, my new charge was $125/month!

Not only did I save money on my auto insurance but I received a 20% discount on my home owners policy too!

I also increased my coverage 4x with my new combined policy so I’m paying less for more coverage. Amazing!

It was a slow day,
And the sun was beating
On the soldiers by the side of the road,
There was a bright light,
A shattering of shop windows
The bomb in the baby carriage
Was wired to the radio,
These are the days of miracle and wonder,
This is the long distance call,
The way the camera follows us in slo-mo
The way we look to us all,
The way we look to a distant constellation
That’s dying in a corner of the sky,
These are the days of miracle and wonder
And don’t cry baby don’t cry
Don’t cry,…

And I believe
These are the days of lasers in the jungle,
Lasers in the jungle somewhere,
Staccato signals of constant information,
A loose affiliation of millionaires
And billionaires and baby
,
These are the days of miracle and wonder,
This is the long distance call,
The way the camera follows us in slo-mo
The way we look to us all o-yeah,
The way we look to a distant constellation
That’s dying in a corner of the sky,
These are the days of miracle and wonder
And don’t cry baby don’t cry
Don’t cry don’t cry

-Paul Simon

It is getting down right nasty out there.   While everyone stuffs themselves for the holiday in the US, the world bond market is getting trashed like there’s no tomorrow.

From Europe via Forbes,

FRANKFURT (Thomson Financial) – German banks agreed to temporarily suspend trading in Jumbo Pfandbriefs, which are covered bonds with a volume of at least 1 bln eur, following the recommendation of the European Covered Bond Council (ECBC).

‘The ongoing massive disruptions on the international capital markets have also affected the markets for covered bonds, with increasingly negative repercussions for pricing on the European Jumbo Covered Bond market,’ the Association of German Pfandbrief Banks said in a statement.

From Dubai via Credit Watch,

DUBAI (Zawya Dow Jones) — Renewed weakness in the global credit market and increased speculation on a possible currency depeg in the Persian Gulf states have taken their toll on the Islamic bond market.

“Sukuks had a pretty tough week on concerns of weaker dollar and wider credit spreads,” said Nish Popat, director of fixed income at NBD Investment Bank.

 And from Reuters  regarding Asia,

TOKYO, Nov 22 (Reuters) – Japan has been lending securities from its foreign reserves as a way to provide liquidity to bond markets overseas and more effectively manage its reserves, the world’s second-largest after those of China.

Japan’s foreign reserves stood at a record $954.5 billion at the end of October, most of which were held as securities such as bonds, and markets are keen to know what Tokyo does with this massive stockpile.

From Europe to Middle East to Far East and back to the US, there is a global liquidity crisis in the banking industry and people out there are totally clueless: amazing!

Don’t ask me how to fix this mess because the only solution is to let it clear out of the banking system and that will mean huge losses and pain for everybody: investors, consumers,  governments, bankers, etc.

Have a great holiday!

I’m reading over the Feds new “guidance” report and something struck me that begs a question, “What comes after a consumer economy?”   Depending on what statistics you believe, consumer spending accounts for 70% to 90% of the economy.  What happens when the consumer is totally tapped out?

What happens if citizens of society decide that they’d rather live frugally without all those fancy ipods, BMWs, McMansions, Wii’s and other consumer goods.

One political party has been touting an “infrastructure economy” circa 1930s Roosevelt’s public works projects to get America out of the Great Depression.

The other party is fixated on missile defense shields and other military expenditures to fight off 7th century barbarians with sticks and stones living in caves and tents.

I have serious doubts about either successfully replacing the consumer economy.    The only thing I could come up with that may potentially replace the American consumer is a foreign consumer.   I know countries like China & Brazil are hungry for resources, goods and services but will it be enough?

Perhaps this is the grand master scheme of the Federal Reserve – to become the next Japan by devaluing the US currency to the point where  it can export goods.   Does this mean the US Dollar will become the carry trade currency of choice?  No more Yen carry trade, instead we’ll have a USD carry trade.  Borrow money from the Fed and invest in Australia or Europe?

I was going to try to compile a list of all the banks and the billions in write downs and post it here but that little project seems futile as every day there is a new announcement of another billion dollar write down somewhere. Note that these are NEW write downs for 4th quarter not ones from 3rd quarter!

Here’s a quick list of what I did compile and from where:

Bank of Montreal $500 million
Bank of Canada $500 million
Scotia Capital $787 million
Source: Bloomgerg

Barclays – $2.7 Billion
Source: Marketwatch

Bear Stearns – $1.2 Billion
Source: New York Times

Bank of America – $3 billion
Source: LA Times

HSBC – $3.5 billion
Citigroup, Merrill Lynch, UBS – $45 Billion
Source: NY Times

Freddie Mac – $3 to $5 Billion
Source: Reuters

We are quickly approaching Bernake’s $150 billion estimated loss limit so why is there a need to change Fannie Mae rules at this point? Aren’t we almost out of the woods with all these losses or is this the tip of the iceberg?

I’m seeing some reports now estimating $2 TRILLION in potential losses; it’s getting uglier and uglier out there.

The Financial Times is reporting a write-downs might run through the END OF 2008!