Posts from — July 2008

I’ll admit it.  I got my a@# handed to me on my most recent foray into options.  I’ll also admit that I totally stole the title of this post from a phrase my friend Andy uses. I can’t help it, as it sums up BEAUTIFULLY what happened to me today.

Here’s a quick synopsis:

I have been following Visa (V) hard for the last couple months. So going into earnings I decided to speculate a bit, being extremely bullish on the quarter and place a 75/85 bull vertical spread. It wasn’t expensive, and I had defined risk on the downside and playing a spread kept the costs manageable. I was, like MANY, MANY others out there expecting a good 3Q earnings report. All they did was blow their numbers away, AND reaffirm 4Q guidance. All is great right? The aftermarket pops, I go to sleep thinking I nailed it.

Except it didn’t go that way. Futures turned overnight and then V tanked. The bottom fell out. I traded out of my position with a marginal loss when the stock rebounded to 76 or so during intraday.

Easy reminder of where we are economically. Things aren’t behaving irrationally. Tug of war between the bulls and bears is leaving positions hung out to dry. When you think things are going up, they go down.

For now, I’m going back to being safe in the market. Cautious is a difficult card to play, though

Corporate America is an awesome place to find all kinds of things that need changing.  I’ve wrote about them before here.  Another concept I have been trying hard to get myself into is “making my own rules”.  Of course this is within reason, and I’m talking strictly about furthering the business.  For example, I’m not saying go take tons of unsolicited time off. I’m also not saying to DON’T get your work done.  Also it’s probably good practice to follow corporate HR policy.

I AM saying find ways to push your management and their management.

When you spend a couple of years working, you quickly figure out there’s a formula everyone’s following. It’s the “blueprint” of the game.  You get to work, respond to emails, check your calendar of the day, head off to your meetings, put out fires, and hope to keep the project(s) your working on completely on task while getting everything done on that project you can.  All the while being distracted by a myriad of different things like the internet, lunch, and impromptu hello’s with co-workers.  It can be dizzying, especially if you work at a place that works hard to follow some sort of process that everyone cares immensely about following.

So there it is.  That’s what the current formula is.  I challenge you at some moment to change the rules.  Figure out something different to do while staying within your corporate framework.  Push the envelope, its the only way you are going to keep things fresh.

If you’re not GETTING challenged and challenging others, you can guess that you are getting super complacent and not getting the best out of what your doing.  So take a step back, and ask some hard questions AND make people answer them.

Your rewards, fiscal or otherwise, may lay behind those questions…..all which might not have been exhausted if you didn’t decide to “make your own rules”.

So, in reality we are all searching for the thing that is going to make us the MOST happy.  Something that will keep our interest.  Something to keep us working hard, honest and feeling rewarded at the end of the day.

Y combinator had a great post HERE about ideas that they would like to fund. I find posts like this interesting, but not for the fact that you might find some blueprint for a business, but just something that will spurn ideas about a particular niche. It makes brainstorming incredibly easy. Send a link to some friends, stir up the pot about your thoughts, and then start conversing about viability of your combined ideas.

That’s what I spent part of my Monday morning doing, expanding on one of those points. I at least have one idea that I think is valid and viable: A niche auction web presence.

The market is huge and there is just so much that is being done wrong. It operates on pure volume in the eBay world domination model. In general I think you could to try to exploit the market of valuables and goods that need to be verified (Think jewelry, antiques, purses, etc) by a third party for authentication. A couple of things make me think there’s a space for this. First,it’s a totally fragmented marketplace made up of small brick and mortar businesses selling higher priced goods and buyers skittish about whether those goods are authentic. Second, there is also a nice healthy trend of eBay selling counterfeit items. Both of these point towards opportunity.

Execution and figuring out the details are of course the hard part, BUT its also super interesting.

You might find my thoughts interesting, or maybe not. It’s irrelevant to the central point. Staying on the sidelines won’t get you anywhere.

Start blue sky’ing your ideas on something you want to do. There are so many things that need to be improved it’s just silly.

Who’s there?  Opportunity probably.

It’s something that I am constantly searching for.  It’s around almost every door you peek behind.  I tend to think there is one coming up with GOOG releasing earnings.  The markets in the tank for sure, and people are all over the place, but yesterday was promising.  The Freddie, Fannie situation is still looming large in terms of impact on the financial system as a whole, and its hard to be positive about it.

I’m almost always wrong (at least lately), but I am going to put a position out there to make some dough. Liking the 550-580 options ranges.  My play will be some sort of spread there this morning.  Risking a bit of money on the chance that google kills it to make some scratch on premium.

If I can’t be an optimist, I don’t want to invest.  This bear stuff is causing me to go home and kick my dog and yell at random people in the streets.  That’s gotta stop.

Also, on the value side, I strongly suggest you take a look at TEX.  It is starting to trend upward, and a 1.2 billion dollar stock buyback should draw big money interest. I’m in around 44 a share (dollar averaged).  The ride up will be fun.

Everyone seems to have figured out the top and the bottom of the Market lately…er wait, its the top . Its a constant reminder to me of how complex the economy is and how most everyone is dead WRONG. It’s probably why value strategies have withstood the test of time against all detractors as well. It can weather the fact that in the short term, you don’t know which direction the market is moving. Your betting on a longer term trend. The sentiment is so tough to nail down.

It’s not that you CAN’T make money right now trading. It’s just that its a bit harder. People telling you that they called being short today, will loose their arse tomorrow, and hand it all back because they probably were lucky being short in the first place. Anyone that tells you any different is probably not telling the truth. Hell, I can tell how much of a rookie I am as I wanted to be long SPY and short Oil. I couldn’t have been more wrong. Glad I am being overly cautious before putting money out there.

I am going to follow that mantra because sentiment is all over the place.

I get frustrated really quickly to send emails when I am in my office.  I would much rather pick up the phone, walk over to an office or use Instant Messenger.  Since I am somewhat of a geek, IM usually takes precedence.  IM is such a great productivity tool for 1 plain and simple reason:  It instantly closes the feedback loop.  This concept is so under-rated its almost startling.  In a nano-wave society who wants to wait?

But the relevance of this feedback loop goes further than that.  In fact I think it’s an oft overlooked part of most web platforms that make them so appealing (at least the ones that let people express opinions). Of course, blogs have the much beleaguered commenting systems (which are getting better with Disqus.com and others).  Twitter makes great use of this by allowing people to broadcast blast replies in the same way you would the original message. Some would say that FriendFeed even goes a step further and allows comment threads on broadcasted messages/etc.  Really, the platform is irrelevant.  People are following these platforms for the content and the opinions of people they respect, and will usually carry some sort of an opinion themselves.

So, long story short, take notice when you are developing a platform that involves allowing users to broadcast messages.  You probably want to build some way for users to respond to information flow from other users of that system.  If there isn’t a way to close that feedback loop, users will feel abandoned and quickly gravitate towards the millions of OTHER ways to communicate via the Intarwebs.

I usually don’t post about music, and talk about artists I like or dislike, and I’m not going to here.  I do, however, like to relate similar concepts that I understand to things that are difficult to grasp. As I can see it, right now the markets are in a period of dissonance.

If you’ve never heard this term before, its a simple explanation. Listen to some Jazz music, and you will hear all kinds of notes that sound terrible. Like they don’t relate to the notes that were played before. This is dissonance in a nutshell. It’s always been the hardest thing for me to grasp when listening to jazz. It always sounds like they are playing the wrong notes. I mean how hard is that for me to play the wrong notes on MY guitar? I would be an AWESOME jazz artist.

However, it’s also what makes up the genius of some of these artists. Some are able to take these unrelated dissonant tones and create beautiful pieces that are cohesive when listened to as a whole. Therein lies the analogy with the market. In a period of dissonance where things are “unstable”, you need to search harder for options and look deeper for trends that are making sense (called consonance in music). Their tough to find with oil dominating the world as it is, but I assure you this trend will slow or lesson at some point. The market will demand it with exponential increases.

So this is what I’m looking for in the market right now, a small sense of stability that a trend may be building in. But remember, there are tons of companies (notes) that are sounding terrible right now, and the market as a whole is like a bad jazz artist. Search out the Coltrane’s and the Miles Davis’s and you might get rewarded in the long term.