Jeffrey McLarty

My sister and I, I can’t put my finger on it, see some fun form of value in the one laptop per child program. I remember mocking it a little at first…but…the smartest of people understand that they might not be right.

This post basically says out loud, that maybe, I might be wrong on the education thing I posted earlier today. I don’t know.

This TED talk is for her, and other extrapolators I know. Listen to it, read between the lines, and be inspired.

Yah, that’s right, I said Extrapolator. That’s my new word. It’s a leader + a thinker who extrapolates on ideas. Pretty sure it’s a real word already, but I’m positive i’m twisting the definition.

I consider myself one, my sister is one too.

Learn & understand quality, not memorize & regurgitate quantity.

…this comes on the back of an 8 part video series with respect to the topic of miss-understood exponential growth, by the masses.

The series is presented by a prof, who lays out the simple arithmetic of the impossibility of infinite growth and then presents the corollaries and extrapolations with respect to demographics and energy.

It was nothing new to me, I’m sharing it with you, in case it’s new to you.

RIMM announces tomorrow.

It has become, a deal stock.  Everybody talks about it, everybody has traded it, everybody has a story about making huge bucks or losing some coin (mainly the shorts). 

See, same applies to GOOG.  Remember when GOOG announced, everybody had ZERO expectations, people were buying puts, and selling calls, scared it was going to tank…and then…and then…they blew away every-body’s guesses out of the water.  That’s all they are, guesses.  Look back at the twitter tape, there was only one bull in my twitter circle, who was long and proud.  Me.  Andy wrote a straddle, and got owned. See, you can look at the chart and see the pansies and bears sold all their shares or went short ahead of the CC.  That’s causality at work.

The market anticipated so much bad news, it priced it into the stock.  This happens, especially to deal stocks.  You know the ones, AAPL, GOOG, RIMM etc.

This is how you tell a deal stock, from not a deal stock:  Find an idiot, and ask them, if they know what a PE ratio is.  If they don’t know what a PE ratio is, you can use them as a test subject for your stock.  Ask them what the ticker is for company ABC.  If they know it, it’s a deal stock.  If they don’t, you guessed it, not a deal stock.

It’s also why, you don’t always have to chase smart money, you can chase dumb money too.  Deal stocks, they go up, higher and faster than anybody with a brain could anticipate. Because these are the only stocks idiots know about.  Idiots find out about them, and think, ‘maybe it’s going to keep going up…I better buy some’.  Self fulfilling prophecy.  So, there are more buyers for those stocks as opposed to the other, non deal stocks.

HEK is not a deal stock.  Will it one day be a deal stock, I hope so, but doubt it.  Because deal stock buyers, laugh in the face of multiplier expansion.

I am going to be off playing Tycoon in Toronto tomorrow…so I’m going to predict, my prediction.  Since RIM has become a deal stock, it’s going to go the opposite direction of the color it trades tomorrow.   If we see red ahead of the CC, look for springboard action in the AM, and get long at the end of the day.  If we see green, well, look out below.  Unless the chart looks like something leaked, don’t be stupid here.

I’m long either way, and I know I’ll do something dumb if I watch in real time.  I’m long, and I plan to hold right on through the worst of any possible sell off.  See, see right there, what I said, that’s me worrying.  A little light in your head should go off - that’s a bullish tell, that I’m worried about a sell off.  I don’t know anything anymore than the next guy does.

But I do know, markets are causal.  Fickle too.

Yes I am however, long a bunch of deal stocks…trying to quit…but they are just such quick fixes, you know?

As oil rises, and urbanization trends continue, I’m thinking about what might happen.  Shipping rates go up - duh.  So, I think sales and margins will improve for concentrated solutions, where the competition selling finished products will be squeezed.

Eg. Canned frozen juice vs the 2L of ready to drink stuff.  If you have to ship 2L, you’ll pay more to ship a very comparable product.

…just thinking out loud…likely many have thought about this already…it just hit me today.

Mad Hatter wrote a post and Ross has covestor. I know my friend Thiago is more informed than I, with a better memory, but a bit of a cowboy, and Howard likes to see all time highs and good price action, and Joe told me a while back that he reads and buys quality.  Any time any of them say they are buying something I get a better picture of what that means, how much work they’ve done, etc.  Its useful, to me at least…sooo…here’s my story:

I buy on 1. ideas/trends 2. fundamentals 3. momentum 4. recommendations. 5. volatility/liquidity of derivatives

My ideas come in the form of trends and observations I read about happening all over the world. Fundamentals are a high priority, I use morningstar premium to help me with that, I find their research great and useful. Momentum is great, and can be scary, I won’t touch momentum if it’s in a field I don’t understand, nor stupid high PEs, but ~25 and under - I’ll look at. Recommendations are high on my list, that means managers of hedge funds, money managers, friends, family and reader(s?) all get a high priority in my infinite search for good stocks. If a stock is trading with liquid options, it will get a higher priority than the one without, especially if implied volatility is generally higher - I like writing calls / shorting puts. I rarely ever use technical analysis, although I probably should. My holding time frame plans range from weeks to 50 years.  Once I buy, I feel committed and prefer to hold through anything.  Like my AAPL buy at $178 a few months ago - held right on through.  I don’t use stop losses, I get that from my dad, he retired at 42.  “If you liked it at $40, you gotta love it at $30″ is what he’d say.

I have a checkpoint set at 18% a year, but a goal of 26% per year…after taxes.

I currently have two accounts. The first holds positions in 19 tickers, right now. The only tickers where I’m not long the stock is FSLR and FCX I’m just short the $210 and $90 puts. I have 6 other open option legs where I offset the downside of my long positions by writing out of the money calls. I’m doing this to CCJ, JCI, and ITU. I’m also long calls on JCI and short puts on CCJ, these are both separate legs, aside from a long position in the stock. Right now this account is 14% cash, and no holding ever gets larger than ~8%.

I’ve just recently opened up an account at Interactive Brokers. I added more almost immediately because I liked them so much.  I opened it to program an algorithm to manage a buy-write for me, on several ETFs. That is going slowly, and looks like it might not work that well. Regardless, I’m going to manage a less complicated version of the algorithm, manually. I own four ETFs, that I actively trade the front month calls on. HXU.TO, SSO, VWO and FNI. I know HXU and SSO have issues with losses/slippage, but I’m sacrificing that slippage for volatility in the form of capturing option premium. I’m 103% invested right now, if you don’t count the fact that i’m twice exposed with the two double longs.  I plan to keep this account nearly 100% invested running my buy-write.

Equity is broken up ~63% (Investments) /37% (ETFs/Buy-Write)…I plan on keeping a ratio close to this, and if I beat the markets in the “Investments” account - cool, but right now, if I lost it *ALL* my “Investments” account and never added cash to the other, so long as I get index like performance on my “ETF account”, I could still retire in less than 30 years…no matter what.

My current watchlist which basically means I’ll write puts out of the money on these stocks all day long (and hopefully get assigned) include: FSLR, FCX, JCI, VE, CVA, MIL, CCC, IBKR, MORN…as well as a few others I can’t remember right now.

In a global economy, if you’re not adding value, you’re going to be left behind.  If you don’t carve out a niche for your own importance, well…there’s a bunch of Indians and Chinese who are going to out-run you.  Totally serious, trends are scary, education is being commoditized.  Make no mistake, if you are not a leader, you will be forced into the opposite.  For the followers, or the ones not adding value, the world will make sure to it that your life will suck…I’m talking to the growd under 30 and not a millionair or happily married.

I’m 23, ready to start making impact.  I’ve got a modest advantage compared to my peers financially, so I’ve got to put it towards good use. Nothing was ever handed to me, I worked hard…so don’t hate.

The question is, what niche do I carve myself? 

Right now, I’m thinking Solar, Wind, or Water.  These are areas that are going to be important for the next 100 years, at least…(right?)

Thanks to my diverse degree in engineering, I’d understand the technology deep at the roots of every one of these topics, but now which one should I run with?

Yah the capitalist in me knows that if you become an expert in any of these fields, it should lead to amazing returns in the ‘folio…BUT it will also lead to opportunities to contribute to society some way some how - obviously, as an engineer, I’m speaking in context of innovation but, but I mean I don’t want to waste my brain, time or money on designing the next UI for RIM, or checking sodium meta bi-sulphate levels at Ontario Power…been there done that.  That work is for [educated] zombies.  Like, actually do some good for the world….somehow…down the road.  And maybe, i’ll never get my shot at it, but experts are tomorrows’ change agents…so I’d rather open the door, leave the option, to potentially become a change agent reather than definately stay a zombie.

I’m talking about marrying a trend here, for life, and serious about it…like…live, eat, and breath a trend…so I can have a chance to make impact.  I’m talking present value.