Step Away From the Fiat

Ever since $80 a barrel, I’ve known guys way richer than me, shorting it.  I want them all to stop trying to be heroes, stop trying to call the top, and for heaven sake stop losing money.

Seriously, we’re running out of oil, get it through your head. While the price point for a barrel might be a bubble, it’s a price on a curve that is going to keep moving higher.  The only people who are going to make money shorting it, will be lucky or dumb, because to be successful you’ll have to call a top, and take profit on any sign of a pull-back.  Which it could very well do.  But, what’s the point in that? You’ll make a few bucks and get to brag, but that’s not a sustainable investment. That’s not something you can learn from then apply to another phenomena (at least not in your lifetime).  And suppose it goes against you, in my opinion, the worst kind of loss, is one you can’t learn from.

You, and your offspring, would be far better off putting your brain to better use, and trying to spark a little creativity. Look for good investments…instead of sure thing gambles.

There are tons of companies that are going to profit, if oil falls, and they are still okay businesses if oil keeps trucking higher.  Invest in those, if you’re really bearish on short-term oil.

Me, I’m glad to have not touched it, and glad there are tons of other opportunities where I get to be optimistic instead of trader on the brink of getting steamrolled by the next stride oil makes towards $150.

…these are my thoughts, likely not yours…sigh…good luck all!

Let’s get things straight, I’m an investor – not a speculator.  But, when I own a stock, I get intament with it, and often trade calls around owning it.  When @coffeygrinds said Cameco could see a $50 bid from China Nuclear, a bunch of clues fit together.  None of them are solid, and you might be dissapointed after reading this, but here is a summary of my last 2 weeks in Cameco.

I was short CCJ 2010 $50 puts.  Position was going against me for a couple months, but that was okay with me.  Then, on May 2nd, I woke up to find somebody excercised them early.

http://twitter.com/jmclarty/statuses/801857120

Sweet, he ate the time premium.  It was only a few points, but none the less a little bonus.  But think about this, he would have had to send that order on the 1st of may, check out the chart where that puts CCJ.  I thought nothing of it on May 2nd, but by May 8th,

http://twitter.com/jmclarty/statuses/806412897 

it’s was as if he knew something and wanted to get out of a very illiquid position and quickly.

That was reason #1. 

#2 – I was worried about the earnings, I sold calls, because I was worried and I was ready to part with my stock for $45 if it hit it. I twittered I sold $45 calls for june.  I’m just proving that I was skeptical on the earnings.

They missed, the stock sold off in the AM, and analysts setiment was mixed to mildly bearish.  The stock closed even – that’s the wierd part.  I was in Cancun so didn’t think much of it, and tweeted:

http://twitter.com/jmclarty/statuses/810572538.  The stock not selling off after both I predicted it, and the results coming in warranting a sell-off, is point #2.  Don’t worry, I covered my calls for $0.10 more than I wrote them for, after Andy Coffey’s tweet – see point #4.

#3 you got some crazy action on the front month calls and IV climbing.

http://twitter.com/jmclarty/statuses/812825420

#4 @coffeygrinds twittered

http://twitter.com/coffeygrinds/statuses/812798240

you could add a #5, that the stock is definately moving north on no news.

…The part where I’m skeptical is China National Nuclear ready to anti up the +$20B?  That’s the million dollar question, and why I’m not more bullish.

But I’m long the stock, and short puts, cause I don’t mind owning more in the $35 range.

That first part is the painful cheer of my University – *shakes head*

None the less, the world’s got problems ahead when it comes to Water.  I went through PHO, skimmed every 2007 report, and came to some conclusions…PHO sucks as a ‘water’ play. Tons of noise and random other segments.  As far off the topic as ‘Defense’ and ‘Oil’.  Also, too much emphasis on infrastructure, which is debatably not the best way to play it…I want to be in the names purifying, measuring it, desalinating if possible.

After my analysis, if you’re going to own PHO – well don’t. Instead, pick up these names:

AMN, DHR, CCC, PNR, TTEK, BMI/ITRI

They are the leaders of the fund, in my opinion, they are the ones offsetting the dogs. They still span the major areas that the rest of the stocks do and even still include some noise (eg DHR).

I liked TTEK and AMN, cause they are in ‘wind’ as well.  TTEK was the only company (that wasn’t a directionless conglomerate) that was into desalination.  BMI/ITRI have the market cornered on automatic metering….for now (boom/bust cycle happening there forsure).  CCC is into purifying water and air, and they add ultra-violet light systems exposure.  I have an ultra-violet light water purfication system at my cottage - it kicks ass.

I think I’m buying ITRI, CCC, and TTEK.

Update: New friend Buck Woodford, money runner at Teewinot Asset Management, likes TTEK too, he picked it before reading this piece, and it was in my head as the top choice (or the 3) before he added his two cents.  Great minds think alike I guess

You can now follow my money printer, on twitter.  http://www.twitter.com/MoneyPrinter.  It is a feed of my algorithmic actively managed market-making buy-write.  It’s everything including sent orders (SO), canceled (CO), and executed (XO), as well as my observations…and anything else.  ‘w’ means ‘write’ and ‘c’ means ‘cover’.  Right now, it’s produced manually, as are the trades. I funded $11K Canadian and the manual part of my algorithm has me writing puts to get assigned.  I decided it would be better not to do this part for the initial round, and instead start the algorithm already long…that way I can get the automatic portion up and running quicker.  I’m still working on the automatic version, but to do that, I need a better feel for the liquidity, because the automatic version will take constants to tweak things.

So, I bought 100 SSO $76 and 100 HXU at $35.53 on friday afternoon, soley because it’s the May option expiry…that way I start with one entire month.  I would have bought more HXU, I’m planning on doing so, before June, but I just need to transfer another ~15K into Interactive Brokers.

Eventually, I’m going to get my algorithm to tweet the orders it sends, automatically…but this likely won’t be done until July.  It’ll be super cool to just get tweets on my phone telling me the trades the algorithm is making.

I’ll publish summaries after a bit of time.

Myron Sholes was just on bloomberg, he’s originally from Timmins, Ontario…cool!  He moved to Chicago because of the economics research coming out of the school ’spoke to him’.

He spoke in a fluid prophetic manor with respect to those who are “Flexible”. They inherently possess more ‘options’ than those who are inflexible.  Since options have value, flexibility is valuable, which can be invested just like any other form of value. It makes so much sense at any level of an organization’s hierarchy.  From a single person’s perspective to a multi billion dollar empire.  It also parallels the law of large numbers.

He also spoke on ‘Intuition’ and said it can lead us to believe stuff that we don’t correctly understand.  So, true. Guilty. Creating a model, then testing it against data, eliminates this problem and returns progress.

Glad I tuned in.

I sent some good money after bad, and picked up a little more Sandvine. I also bought RIM at $139, and MFC at $38. I’ve been patiently trying to sell some puts on HXU.TO, in order to get assigned, but nobody has hit me, and I got to believe it’s hitting a short term peak. I just want a couple days of red, in a row, and i’ll be long.

I also got IB finally funded. I only funded the minimum, $10K, because I’m just learning the software. Trying out my account, I wrote a single put on SSO, $75, expiring tomorrow. Yah, I know, it’s only ~$50. But I was playing with the cool VOL (volatility) order type.

Check this math out. I put up $1900, and hypothetically make $50 minus the $1 in fees. *If it expires worthless* that’s a smooth 2.5%, or 36% per year pre-tax. The cool part is, if you could pull that off once a month – your money is only on the line 12 days per year…all you need is the balls/stupidity to risk getting assigned. But, I kind of want a little SSO so I can trade the calls on it.

A Mexican entrepreneur took a picture of our group as we unloaded the tour bus after we arrived at Chichen, Itza.  On our way home, she tried to sell us a mickey of tequila with our picture scotched tapped over the label.  $16 USD.  We didn’t buy one…maybe web 2.0 it up, somehow.   But get this, they didn’t have a bottle of water to sell us, on a day when it was 100*F out.

Tips are going to keep Mexicans uneducated.  I’m suffering from an anchoring heuristic, I’m sure, but if tourists keep subsidizing the wages of mexicans working in the tourism industry, then they have little to no incentive to go out and get educated.

I bought an $80 Chess set, reduced for me to $60, then negotiated down to $30.  You know what’s the difference between a pond and a bishop in my Mexican chess set?  Nothing.

It sucks to have been one of the ~16M Mayans during the 50 years that the Spanish invaded…15.8M died, the rest probably wished they did.  But before that, they did really amazing things manipulating gravity, acoustics, and most impressive – the solar angles.

Don’t dive from sketchy dive shacks.  If they don’t clean the tanks properly – bacteria will get in your lungs and kill you vacation.

If I ever have a pet jellyfish, I’m going to name it ‘9V’, because that’s what kind of battery a jellyfish feel like when they sting you.

Last week, I caved to my friend and girlfriend wanting me to come to Cancun…so I fly out tomorrow with them, and my bud’s girlfriend.

Planning on drinking too much, eating too much, not getting my insatiable appetite for diving completely full…and reading like the dork I am.

I was at the bookstore trying to decide between Friedman’s ‘The World is Flat 3.0′ and ‘Globalization and its Disconents’ by Stiglitz, when on the shelf I saw Stiglitz’s new book ‘Making Globalization Work’.  I picked it up and saw on the first page of Sliglitz’s new work, one of the reviews…

“A worthy counterpoint to to Thomas Friedman’s popular The World is Flat” – Brendan Driscoll, Booklist

…so I grabbed all three books.

I’m busy.  I’m young.  There is infite media to consume – books, music, movies etc.  I’ve decided I’m no longer going to consume anything that isn’t referred, by at least one person who I consider more informed than I, and who I share similar interests/goals with.  See, when something is referred, that means it has a higher chance of not wasting my time.  If I have the choice of consuming something random (pretty much just me judging a book by it’s cover, or by some paid for review) vs a referred service/product, well – I have better odds of optimizing my life.

3 years ago, I joked and unofficially appointed a good friend, Adam Franklin, to be my personal movie advisor.  It was after he recommended a great flick.  I joked about paying him a salary, giving a bonus, firing him after a bad call, getting him an assistant and granting him extra vacation – it was, an inside joke for a long time.  But, since then, he has recommended better movies than Sikel and Ebert (I know I butchered their names, sorry, it’s my blog).  I appreciate it, and thank him sincerely for his recommendations.

Why should you accept this promotion? I mean, what’s in it for you?  Nothing that you can put a price tag on, it’s all intrinsic.  If you recommend me something, and I like it, you’ll get a thanks, you’ll have my loyalty, my appreciation, and I will go out of my way to make recommendations back to you.  I will also get to know you better.  I will also make a conscious effort to say to others “I really enjoyed this book, I think you’ll like it, this guy I know – Mr. Smith, also recommends it”.  Who knows how powerful that statement, or chain could become if everyone named dropped while they gave recommendations.  In my eyes, this is one of the most imperative times when anybody can name drop.  I say, if I give you a recommendation, and you agree after consuming the recommendation, please forward my name on with you’re recommendation when you talk to somebody else.  It’s the least I/you can do, right? Do you get what I’m trying to say?  I hope so.

See, this is all part of me expanding, and I’m taking this seriously.  I’ve been expanding my network of smart people, not in a selfish/capitalistic way, my intentions are entirely symbiotic.  If you read this, I consider you part of that network, and I thank you.

To kick things off:

My Dad, and and I, both highly recommend “Boom, Bust & Echo, by Dr. K. Foot” for anybody who likes to extrapolate on population trends, or is into demographics

Roy Verstreate, CEO of Anchor Lamina, personally recommended, a book I’m sure you’ve heard of, but ”Good To Great” is a great read….but it’s a cliche, and if you haven’t read it yet, well, you probably have a reason for not doing so.

Howard Lindzon, recommended a great book, I loved it, any investor will appreciate learning from author Ralph Wagner “A Zebra in Lion Country”.

Larry W. Smith, an economics prof, I’ll call him the best, maybe the most informed thinker I know, he takes the word leadership and squares it, has a list of recommendations. I intend to cherry pick through these, and pass on the ones I like.  First one up is “Globalizations and its Discontents” I buying it today.  He also wrote a book, which is on my ‘to read radar’ -> “Beyond the Internet”.  I’ll let you know.

…don’t get me wrong, I’ve read many other books – but…they are all just…”meh”…and you can find “meh” books on your own.

So any recommendations? Please, leave a comment!

So, the link Paul shared, regarding the mortgage map, was sent to me about 2 weeks sooner by my good bud Thiago Avila.  Thanks, Thiago.  BUT, in my defense, I never got it – because - he sent it to me via Google Chat. I searched and searched my inbox, only to discover he sent it asynchronously, and I must have closed a multi-tabbed browser or something or ie crashed or etc. etc. .  Moral of the story, don’t rely on people receiving google chat messages.