Archive for January, 2008

I’m off on a whirlwind business trip traveling three continents in seven days and I’ll likely be un-interneted for most of the time so my posts will be light in the upcoming days.   With rain & snow blasting most of the country I wonder how many days I’ll be stranded in the middle of nowhere but we’ll see how the days unfold.

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When I started my career, I was indoctrinated into the corporate aristocracy culture. What is corporate aristocracy? Like the days of old when the world was ruled by Kings & Queens and a privileged few, corporate aristocracy refers to the ruling few of a corporation. The common names for this corporate aristocracy are the “C” executives: CEO, CFO, COO, CIO, CTO, etc.

During my stint as an underling, I was expected to stand in awe of the corporate penthouse executives and offer nothing but the most expeditious service and response. I worked my way up the corporate ladder with this culture over the last decade and a half but along the way something odd happened, each successive generation seemed to care less and less about the corporate aristocracy.

Today’s youth, and I’m talking about people in their 20’s, all want instant gratification, reward and recognition from everyone with hardly putting in any effort. I think this partially derives from the “everybody gets a trophy after the soccer match” syndrome: everybody is a winner (even the losers).

I’ve had a few situations where a couple of these twenty-somethings said or did something inappropriate in the vicinity of executives and the kids didn’t even flinch. In a previous life, these kids would have been gone but with the labor market so tight for *good* talent, everyone puts up with it.

I’m not sure where we will end up in a decade or two more because as 80 million boomers retire and the echo boomers take over, the world will be a totally different place run in a totally different manner and we will likely see the total end of corporate aristocracy.

Our two new Toyota vehicles came with satellite equipment and complimentary service to XM Radio for a brief period of time.  I was excited to have such a wide variety of choices and sorely disappointment when I heard was the unmistakable sound of “commercials” on my satellite channels.

For some reason, I was under the impression that XM Radio was commercial free.  After all, why would anyone want to pay to hear commercials on a paid service?   I simply don’t get it.

I’ll let the free trial period run its course and let it expire.    It is a near certainty that this company doesn’t have long to live because it occurred to me that I could setup my new vehicles with so many alternatives.  I have an auxiliary port for my iPod which I’ll likely use.  If I can enable my vehicles with WiFi internet somehow, I could install a Mac-Mini and perhaps stream audio from the internet for free so why bother with satellite service?

XM, you have two choices, offer the service for free with commercials or take the commercials off if you want my business.

Chaps, this is just incredulous! This government needs to sort out its priorities pronto because what I’m reading about this so called “stimulus package” is disconcerting in that I won’t be getting a single dime back! According to the Associated Press,

The rebates would phase out gradually for individuals whose income exceeds $75,000 and couples with incomes above $150,000, aides said. Individuals with incomes up to $87,000 and couples up to $174,000 would get partial rebates. The caps are higher for those with children.

Well, if the bloody politicians want to play it like that then I, ala John Galt, will REFUSE to buy and goods or services with my vast disposable income from now until January 1st, 2009. I shall not buy a new 52″ LCD TV nor shall I buy a 24″ iMac nor shall I buy Mac-mini’s, iPods, nor any other gizmo for the rest of the year!

As a matter of fact, I will now DEFINITELY take my next vacation outside the US and I will definitely fly on British Airways or Air France or some other non-US based carrier and make sure it is an AirBus plane while I’m at it.

After busting my arse for the last year, my reward for all my hard work is to subsidize the sea of mediocrity in America. What a cruel joke!

Brothers in arms, I ask that you join me in shunting these inept politicians by refusing to buy any consumer goods over the next 12 months! Viva la liberta!

After blathering on yesterday about sitting in cash, I dove back into the market to rake in $2800 yesterday. I’m a sucker for easy profits. The funny thing is I bought the wrong ETF! I had intended to buy DDM (Dow Double Long) and sell calls short to hopefully profit on a bounce but I ended up buying DXD (Dow Double Short) and sold calls short. How’s that for a 60k mistake!

It’s no big deal because this goes back to my experimental multi-dimensional matrix profit theory I’ve been conjuring up in my spare time.

The simplified theory is to go Double Long on the Dow (DDM) and selling a short position while simultaneously going Double Short on the Dow (DXD) and selling a short (inverse long) position. The key is to look at the time frame matrix from 30,60, 90 days out and optimize the buy/sell equation for an always profitable return.

My portfolio is up 8% so far just 22 days into the new year! We’ll see how the next 25 days go till February expiry…

Happy hunting.

Heck, even dead psychic Edgar Cayce knew the market was going to tank and pretty much anyone else did that follows the news and does a little due diligence with regards to these markets.

What I don’t know is what’s going to happen next.  The Fed’s 75 basis point “emergency” cut leads me to believe things are getting really bad now.   This is also happening at the worst time possible, election year+boomers retiring+high inflation+housing deflation = mega mess.

I’m primarily in cash, a little energy (UNG, OIH) and a little diversified international (EEB) ETF and I believe these investments will be stable or do well over the next year or so but who the heck can be sure?

On the very positive side, looks like there is no point in paying off my mortgage as the Fed cut will likely end up making my ARM adjust downwards from 5.25% to maybe 4% over the next few months.  My next adjustment isn’t until May or June so we’ll see how low the Fed cuts rates by then.   This will free up more cash to invest but invest where?

Looks like 0% APR offers might come flooding back into the market too.   Even more cash to invest but where?

It’s getting close to the time that people are going to realize that they need to adjust their investment philosophies to some extend to try to weather what is an ever changing financial market.   The old “buy and hold” mantra may work for some people with very long time horizons but those with shorter time horizons need to look at alternatives.

I see rough sees ahead as boomers retire and pull money out of market, no longer contribute to 401k accounts and draw heavily on government services like Medicare and Social Security.   Keep in mind that most states offer generous exemptions for seniors from things like property taxes, reduced state fees, and discounts on services so the triple whammy of loss revenue from seniors, loss of revenue from businesses (recession) and loss of revenue from  consumers (sales taxes, property taxes, etc).

Given all the “gloom and doom” possibilities it would be prudent to examine investing strategies and adjust accordingly.  If stocks always moved up like the graph below shows, then “buy and hold” would work well as it has historically.

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I honestly don’t see the financial markets moving in this direction over the next decade.  If you have a time horizon 30 to 40 years in the future then perhaps this strategy will work but you’d need to be in your 20’s for this strategy to work in my opinion.

The inverse won’t be of much help either.  If stocks will only go down over the next decade like the graph below shows then all anyone would have to do is simply short the market or buy bearish ETFs to rake in the profits.

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Unfortunately, I don’t expect the stock market to move in a strictly downward direction just like I don’t expect it to move in an upward direction moving forward.

What I do expect to happen is a mix of thrusts up and thrusts down in the market like this graph:

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In this environment, the optimum strategy is to hold a long position while simultaneously shorting that position.  In this case, profits are made during upswings with an automatic “cash out” exit during strong thrusts up and profits during the downswings as the short position becomes profitable.     If you’d like to take a look at this strategy in more detail, stop by www.ETFCoveredCalls.com to see how this strategy might has been working for me over the past few years.

Here are my top 10 ideas for an economic stimulus:

1. Christmas Redeux or Christmas in February!

2. Black Friday Redeux or Black Friday Good Friday

3. Corporate Buffet – All you can eat iTunes songs, NetFlix Rentals, and cell minutes for a low, low price of $199/month.

4. Buy one car, get one free!

5. Buy one house, get a summer house free!

6. Buy one condo, get two free!

7. Shut down Washington D.C. for one whole year (politicians included)!

8. Mandatory consumption laws: Minimum of $1500/month consumption of awesome American goods per citizen

9. Give those poor rich people some decent tax cuts so they’ll buy more yachts and Benz!

10. Make every ad on TV end with “if you don’t buy this, you’re a nobody”

Have a safe holiday weekend!

As a kid in school I was almost always the one the most knowledgeable. I was a kid that always remembered the historical dates, the math formulas, the chemistry tables, and such but I was also a kid that had difficulty with imagination. My worst subjects were art class, English creative writing and anything else involving creating something from scratch.

During the early part of my career, I made a decent salary because I was good at “knowledge” tasks. I would learn how to do something, apply it and continue on to the next “knowledge” task. It wasn’t until I began to really explore my imagination and creativity that my career really started taking off.

It was no longer a matter of simply knowing how to do a task but finding a way of doing it better and this is what led me to move into senior level management and executive management over the course of my career.

Now I take the knowing and combine it with imagination to come up with new ways to be successful. As it pertains to finance, it was taking pieces of different strategies: index investing, options writing, etc and coming up with a better way to invest: ETF Covered Calls.

It is always disheartening to hear someone say, “No one can beat index investing” because it shows how little creativity or imagination someone has with regards to investing strategies. I think these people should think, “I’m going to try to find a creative way of beating the market” but that rarely happens as too many people are too conditioned to focus on the “knowledge” task vs. the “creative” extrapolation.

Ironically, it was a failure to imagine what would happen if home prices stopped climbing astronomically that has created the current market mess. It was a failure to imagine that 19 hijackers could topple two towers with little more than a bluff that led to the tragedy of September 11th.

It will be a failure of imagination that will lead millions to lose tons of money in this market over the next few months as the markets shudder and shimmy. It will be a failure of imagination that will keep people from profiting during this mess.

On a side note, I’m now an avid art collector of paintings, sculptures and other things that stimulate my imagination and it has only led me to even greater success over the most recent years.

“Imagination is more important that knowledge” -Albert Einstein

This headline might as well read, “Bush, Bernanke support using buckets to bail water out of the Titanic” because that’s what any stimulus package will look like on the USS Titanic Economy at this point.    The chorus is finally gotten loud enough for people to understand what’s going on; it’s a total market meltdown in slow motion that started back in August of 2007.

Fortunately, I’m short as I picked up shares of SDS and will likely get called tomorrow to rake in some additional profit.  My EEB play will expire worthless and I’m looking at selling June or July options for 6% return in this depressing market.

Hope you’re making money today 😉 .