Friday, July 29, 2011

If you must stay in this market you need to create a long / short portfolio.

If you think you are diversified because you own foreign stock, foreign currencies, bonds or treasuries- you absolutely are not!

If you are on margin lower that amount, if you can’t, you NEED to use a good percentage of that margin on short ETF funds and puts.

Make sure you have at least 30% of you margin account in a defensive position.

Short ETF funds that go up in value as the market crashes are going to be the only thing that is going to keep you account from getting debilitating margin calls that can decimate your trading account and your finances.

Puts on the averages or on some of your specific stocks are a must as well, but I prefer to have inverse ETF funds as they don’t expire. In good times, as your portfolio increases you should add funds to your short ETF.

Leveraged inverse ETF funds can be lifesavers but the problem is they suffer from slippage in fast moving markets that go up and down on a daily basis.

A simple solution for this has been selling calls on a portion of these funds when they gain large returns might be the way to go. I don’t recommend using calls in a bull market on these inverse ETF’s as you don’t want to be negate your insurance policy on your margin.

How I am playing this market.

How many times have you heard you need to hedge, hedge, hedge?

Here is how I am doing it:

I bought FXA as a play on Australian currency, interest rates, and as a roundabout way to play commodities.

PFF as a way to get broad exposure to preferred stocks, this will undoubtedly lose value in a down economy but its pays a monthly dividend so that will cushion the blow somewhat.

FAZ 3x levered financial short, be careful with this one as it suffers from major decay thanks to the leverage instruments that need to be rebalanced on a daily basis.

I’ve also stocked up on weekly options on FAZ, Call me crazy but I need even more leverage than this speed bullet provides so I going for out of the money calls and puts, any dramatic move in either direction and this Out of the money strangle can make some serious money.

TVIX is a levered ETF that tracks the VIX and it goes up in value as the VIX index does. I also have a strangle consisting of OTM options on the VIX.

TBT is a 2x inverse 20+ Year U.S. Treasury Bond ETF. Play it with a strangle.


Anyone know of any leveraged ETF’s that provide weekly options aside from FAS, and FAZ?

The markets won't crash until we get a deal.

They aren't going to crash before we get the debt ceiling raised.

The debt ceiling and the cuts to spending won't induce a rally, they will do the opposite. Nothing on the table is going to help GDP or jobs, there is zero stimulus and even worse there will be job cuts to government sector jobs.

We are going to get job loss out of this and decreased benefits to disabled elderly, and poor citizens, in other words Americans that could barely get by before might be pushed over the edge in this "new deal" which is cutting the old deal which served as a safty net for those that needed it most.

There is no hope, no positive change rather all that government has done is display to the world the malaise and the untenable situation they have created and refuse to fix.

Government needs to spend money to make money, stimulus, public works to build and repair infrastructure, alternative energy projects, instead we are going to cut funds to all sectors of the economy when we need to grow instead of contract.

Unless and until we begin to fairly tax the rich we won't be able to start to rebuild this economy. I am not the only one that has figured this out, because of this despair that can be bu with a knife I've moved into cash, I've also purchased a few short-term market investments that are going to make money if the markets tank.

This market is as bipolar as a bachmann.

A lot of market players are wondering why the market hasn't tanked yet. The answer is simple.
Volume has dried to a trickle and the small players that are trying to make some money are on the short side. It doesn't take much of a brain to realize we are in dire straights.

We can't go down in one fell swoop when the market has told the world its supposed to go down in advance.
That's not how the big boys play, they need an unexpected black swan or a flash crash that catches most by surprise.
There is money to be made when the market moves down 150 points down and then climbs back 100 points in no time at all. unfortunately unless you are a high frequency trading bot i don't know how joe and jane retail can take advantage of the wild swings.

Take a look at the faz 50 call that expires today- the low of the day was 8 cents and the high was .77 cents. the catch?
you literally had only a few minutes to sell it for a profit before the markets reversed.

Thursday, July 28, 2011

Lies, lies and scum.

Lets begin with the most egregious fox / right wing lies.

Fox news talking points:

Entitlements are bankrupting the economy; too many people are receiving government checks.


Americans have paid into social security all of their lives- once they retire that money is given back, think of it as a fixed annuity. If you die early with no dependents that money that you paid in remains in the system. Its our money, it isn't a freebie in any way. Kept in mind when we pay into social security it is paid into the system with a more powerful dollar, when we finally retire and get it back its in inflated (worthless) dollars.

Fox news talking points:

The rich pay 50% of all taxes, the poor pay nothing.


While it is technically true that the rich pay 50% of the federal tax, it is a misnomer to suggest that the poor pay no tax. The poor pay a higher percentage of their salaries to taxes than the rich do under the current tax laws.

The poor pay sales tax, city tax, state tax, an oil tax, and the inflation tax.

While the rich own more of the country than they have since the days of the robber barons. the poor and middle class are one cent away from living on the street.

25 hedge fund managers made one billion each last year- they paid 15% capital gains tax on that. 150m sounds like a lot but they have plenty left over to buy that villa in Tuscany, and that flat in London. Just fifteen years ago they would have paid 280million and still had enough for the flat and the villa.

Last year almost 30% of the country made less than 30 grand. Once they pay for the above mentioned taxes, they still (barely) have enough money to pay for food, rent, and a pair of shoes for their feet.

Tell me who pays the higher tax.

Alright, lets make some money.

Volatility is going to peak next week.
We won't see a debt ceiling deal till Sunday or Monday. After its all said and done, i wouldn't expect a relief rally as this entire debacle has just underscored how screwed we really are. Piss poor government with no clue how to make things better, most of us are just praying they won't make it worse. If i had to bet, i would say there is a better likelihood we go lower after we get a deal, instead of higher.

In this market, i am playing a lot of straddles just hoping for volatility in either direction. I've sold most of my positions and i am just waiting on the sidelines with a bunch of options.

I'm also using leveraged ETF's but these funds get hammered in this type of up one day and down the next market routine.

Can an investor be a capitalist and a socialist at the same time?


More importantly, a human being can make a profit and also support social programs that help the less fortunate.

This blog will chart my investing activity, and explore the dysfunctional government that is killing the poor and middle class.

Let’s get one thing straight. A liberal progressive doesn’t have to support Obama. He has been a disappointment to most Dems because he hasn’t gone far enough to the left.

As the nation has moved further to the right, the centrists have moved to the right as well, mainstream democrats resemble republicans of the last decade.

This needs to be said: I personally agree with more socialist viewpoints, but the Republican party can be a good party with a few great ideas. All things being equal i would prefer capitalism over socialism. Better to give someone a job with a fair wage in a company that produces a profit, rather than give them a hand out. My gripe is with an extreme conservative ideology that espouses profits over everything including basic human dignity that social nets provide.

In part i blame Fox news (all newscorp papers) and most blogger market conservatives for extreme right wing viewpoints being talked about in the mainstream as a solution for middle class Americans. In reality, extreme right wing viewpoints are espoused as a political ideology, in reality they are just an excuse for greed, avarice and a lack of compassion for their fellow human-beings. Most right wing zealots seem to have zero sympathy for the downtrodden- all they seem able to do is spew mindless dribble (talking points) about entitlements, taxes and social program's.