Today was an interesting day to say the least. We started out on the positive side and shortly thereafter we went ballistic as Ben Bernanke intoxicated the markets with his commentary which led to multiple rumors of QE3. During the day, I believe we were up as much as 165 points on the Dow, but that was short lived as the afternoon brought some pessimism into the market around discussion of the debt ceiling, more Euro crisis chatter, all mostly led by the anchors at CNBC that just seem to be relentless in their attempt these days to aid the shorts in bringing down the markets. As the markets came to a close we actually had to fight to stay positive, wavering back and forth between the high teens and where we closed at 44 point to the positive. My viewpoint, an absolutely dismal day for the markets which continue to show a lack of commitment by the bulls as nobody wants to stay long for any more than a day's trading period. As previously discussed, I am sure the markets will continue to be choppy at least until this debt ceiling issue is resolved, and it will be. Now on top of the Euro crisis, debt ceiling stuff, Moodys came out after the close and put the U.S. on credit watch in the event that the debt ceiling issue does not get resolved by the August 2nd deadline date. Reaction... the S&P futures which were basically flat at the point fell hard by about 10 points to the downside. I have no clue if this will hold, worsen, or improve overnight, but will probably depend on how the news is tolerated by overseas markets which are yet to open. At the end of the day I am still a believer that the big down days should be bought especially when you can find companies that offer great value for the long haul.
So, what did I do today? Well I sold a position on $NE Noble Corp that I have been holding for a while. I bought it in the lower 30's and sold it today after watching it run to the 40's a month or so ago and back to present levels. I took a very small profit (better than a loss) as the news lately for $NE has been very short term bearish but positive for FY 2012. Regardless, I sold out my position and replaced it with shares of $RIG (purchased yesterday) because I think the forward metrics for $RIG are better and it pays a much nicer dividend. On another note I sold August 95 $CALLS on some shares of $V that I own in my portfolio for a nice premium. By the end of the day those options were 20% profitable compared to where I had sole them earlier in the day.
I am watching some interesting moves in the options markets. $GLW Corning Glass has seen some heavy duty volume in the August 19 $CALLS day after day now having more than80k open interest. The same strike/expiration has been hit week after week and since the market has pulled back my feeling is that the same player continues to add at lower prices. I am getting tempted and will probably get in at some time. $MT Arcelor Mittal also has seen some continued buying over the past couple of weeks at the Sept 35 $CALL, hit once again today. Whenever I see repeated options action in the same stock day after day, consistent expiration and strike, the antennae always go up. I am typically not a speculator and try to reserve myself to only selling options, but in the case of repeated large concentrated volume I sometimes can;t help myself but to take a stab every once in a while. I did buy calls in $MT yesterday as disclosed and will look at the $GLW options tomorrow after confirming increased open interest.
Ok folks, that is it for today. Please feel free to comment on anything I have mentioned in this post or any previous posts. I would also love to hear any of your comments if you have the time as I am always interested in other people's trades.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
Wednesday, July 13, 2011
Tuesday, July 12, 2011
My Thoughts On Social Security
As our government sits around the table trying to figure out how to handle our debt ceiling issues, so many topics have been thrown into the mix spanning from government cuts to social program cuts, and so many more that we cannot even discuss in this short post. Here are my two cents in regards to Social Security...
I actually believe that social security should function like an insurance policy, something similar to how your home or auto insurance is handled. Let me clarify... In the case of homeowners insurance we pay premiums yearly to insure the safety of our homes and personal financial security. In the lucky outcome that we do not need to use that insurance we should thank our lucky stars, although all that money was spent and is not recuperable. Do we complain that we spent all that money and got nothing back? Yes, we do, and I myself have been guilty of this in the past as well. The truth is that we pay for the security of knowing we are covered in the event of tragedy and should be thankful if we never need to make a claim as tragedy to our home and family in many cases can be far greater than the premiums paid over the years.
Now getting back to my point. Why shouldn't Social Security work in the same fashion as an insurance policy? Why not use it as an emergency benefit in the event of financial need in our elderly years. I know Americans in general have had difficulties saving money in the past and I am sure that to some extent this bad habit will continue going forward. Hence the need for a government mandated Social Security program. We should continue to pay into Social Security as we have done in the past. The huge difference from today's program is that at the time of eligibility payouts of Social Security funds should be based on your income levels for that particular year, or in more clear terms, your actual needs. Do we all need to collect our Social Security benefits? I do not believe so. Let me give an example. I know some people that are of Social Security age and they are very financially sound. They have several hundreds of thousands of dollars a year in dividend income, other miscellaneous income, and very little debt if any at all. I know this is not the norm but why not start here. In the case of these people, the absence of their Social Security benefits would not affect their lifestyle in any form. In fact I would propose that payouts to these people are not made at all so long as their income situation continues to be strong. In return, those not receiving their Social Security benefits should become eligible for a Federal Tax Credit in the amount of what their Social Security payment should have been for that year. In this case the government would not have to make the payout out of the Social Security funds, retaining the money for more needy individuals and further strengthening the Social Security till. In the case of the tax credit the net effect to the government should be just a small percentage of what they would have had to dole out if in fact the Social Security payment was distributed. Lets look at an example...
My friend makes over $200k per year in dividend income and has additional rental income as well. I would say that he is doing fine and no matter what his Social Security benefit is, it probably does not make a difference in the way he lives. I believe that he takes in somewhere around $18k per year in Social Security. Lets assume that the U.S Government does not disburse these funds because of my friend's income level being strong enough to demonstrate that Social Security benefits are not needed at this time. My friend would get a Federal Tax Credit for $18k and the U.S Government and Social Security Fund would be left untapped in regards to my friends benefits. Without deferring to the CBO or a tax accountant, my kindergarten accounting leads me to believe that this tax credit would end up resulting in a very small tax revenue decrease for the U.S. government, but at the same time improving the solvency of the Social Security Program.
Of course this is just a broad based idea, but I believe it could have some merit and worthy of at the very least a simple study. In order for this program to work it could not be an across the board application, but better yet specifics would need to be considered. Unlike the present commentary that those who make over $250k per year are wealthy, I would say that whether one needs or does not need their Social Security benefits depends on many factors, including but not limited to where one lives, historical income/expense ratios, and surely many other factors as well. The bottom line is that there are many people out there that do not need their benefits today. If tomorrow brings a different scenario then those benefits can be kicked back into service all over again, as benefits are not sacrificed or redistributed, but just held in abeyance until needed in the future if at all. In fact it would probably work best if the decision to take or not take your benefits was based on previous years income / financial stability so that the benefits would always be ahead of the curve if actually needed.
In the end if financially solid individuals do not need the money why take it? Leave it in the system to create more strength, get a tax credit of some sort, and help to create a better, stronger system so that our future generations can enjoy the same security that we have today. Of course I would also recommend that the government stop considering Social Security funds as fungible with other government money.
Once again, this is just my opinion as to how we can get closer to resolving our Social Security problems. Is it perfect, far from it. However it is simple and easy to implement and would most likely work better than what we have in place today. Please feel free to comment and offer suggestions.
Sincerely,
TraderJive
Contact me via Twitter: @TraderJive
I actually believe that social security should function like an insurance policy, something similar to how your home or auto insurance is handled. Let me clarify... In the case of homeowners insurance we pay premiums yearly to insure the safety of our homes and personal financial security. In the lucky outcome that we do not need to use that insurance we should thank our lucky stars, although all that money was spent and is not recuperable. Do we complain that we spent all that money and got nothing back? Yes, we do, and I myself have been guilty of this in the past as well. The truth is that we pay for the security of knowing we are covered in the event of tragedy and should be thankful if we never need to make a claim as tragedy to our home and family in many cases can be far greater than the premiums paid over the years.
Now getting back to my point. Why shouldn't Social Security work in the same fashion as an insurance policy? Why not use it as an emergency benefit in the event of financial need in our elderly years. I know Americans in general have had difficulties saving money in the past and I am sure that to some extent this bad habit will continue going forward. Hence the need for a government mandated Social Security program. We should continue to pay into Social Security as we have done in the past. The huge difference from today's program is that at the time of eligibility payouts of Social Security funds should be based on your income levels for that particular year, or in more clear terms, your actual needs. Do we all need to collect our Social Security benefits? I do not believe so. Let me give an example. I know some people that are of Social Security age and they are very financially sound. They have several hundreds of thousands of dollars a year in dividend income, other miscellaneous income, and very little debt if any at all. I know this is not the norm but why not start here. In the case of these people, the absence of their Social Security benefits would not affect their lifestyle in any form. In fact I would propose that payouts to these people are not made at all so long as their income situation continues to be strong. In return, those not receiving their Social Security benefits should become eligible for a Federal Tax Credit in the amount of what their Social Security payment should have been for that year. In this case the government would not have to make the payout out of the Social Security funds, retaining the money for more needy individuals and further strengthening the Social Security till. In the case of the tax credit the net effect to the government should be just a small percentage of what they would have had to dole out if in fact the Social Security payment was distributed. Lets look at an example...
My friend makes over $200k per year in dividend income and has additional rental income as well. I would say that he is doing fine and no matter what his Social Security benefit is, it probably does not make a difference in the way he lives. I believe that he takes in somewhere around $18k per year in Social Security. Lets assume that the U.S Government does not disburse these funds because of my friend's income level being strong enough to demonstrate that Social Security benefits are not needed at this time. My friend would get a Federal Tax Credit for $18k and the U.S Government and Social Security Fund would be left untapped in regards to my friends benefits. Without deferring to the CBO or a tax accountant, my kindergarten accounting leads me to believe that this tax credit would end up resulting in a very small tax revenue decrease for the U.S. government, but at the same time improving the solvency of the Social Security Program.
Of course this is just a broad based idea, but I believe it could have some merit and worthy of at the very least a simple study. In order for this program to work it could not be an across the board application, but better yet specifics would need to be considered. Unlike the present commentary that those who make over $250k per year are wealthy, I would say that whether one needs or does not need their Social Security benefits depends on many factors, including but not limited to where one lives, historical income/expense ratios, and surely many other factors as well. The bottom line is that there are many people out there that do not need their benefits today. If tomorrow brings a different scenario then those benefits can be kicked back into service all over again, as benefits are not sacrificed or redistributed, but just held in abeyance until needed in the future if at all. In fact it would probably work best if the decision to take or not take your benefits was based on previous years income / financial stability so that the benefits would always be ahead of the curve if actually needed.
In the end if financially solid individuals do not need the money why take it? Leave it in the system to create more strength, get a tax credit of some sort, and help to create a better, stronger system so that our future generations can enjoy the same security that we have today. Of course I would also recommend that the government stop considering Social Security funds as fungible with other government money.
Once again, this is just my opinion as to how we can get closer to resolving our Social Security problems. Is it perfect, far from it. However it is simple and easy to implement and would most likely work better than what we have in place today. Please feel free to comment and offer suggestions.
Sincerely,
TraderJive
Contact me via Twitter: @TraderJive
Today's Trades & Thoughts?
What a day. We started out basically flat for the day while trading within a tight range. At around 2:00pm we saw a nice spike / head fake, whatever you want to call it as a result of the FOMC minutes making some comments about the possibility of a QE3. We continue to feel the pressure of the Euro crisis, specifically Italy as now Greece seems to be totally on the back burner as far as I can tell. Regarding Italy, Burlesconi the Italian PM made a statement today that the country is doing fine, banks are strong, and that an austerity package previously discussed will be pushed ahead and voted on later this week. The finance minister is working hard on this project and is actually someone who is held in high regard on an international level. Not a public person, but apparently very capable. I feel pretty confident that the Italian crisis, if you can call it that, is based more on speculation than on real tangible issues of default, but let the media get a hold of a rumor and the bears run wild. If you listen to CNBC all you hear is what will be the consequences of an Italian default and further contagion to other Euro zones. I still have not heard them actually discuss if this is a really plausible? I wish they would spend some time on the real numbers regarding Italy and not just the CDS spreads and bond yields which are the result of speculation to date. I do not think a default will come to light, but that is just my opinion. Ok, now at the end of the day Moodys downgraded Irish long term debt to junk status. Initially the market fell a little, then recovered back to positive territory. As we wound down the day I believe it was the Moody's comment that caused us to close on our lows, 59 point to the downside. Did we not know about Ireland already? To me this is just old news being piggy backed on top of the Italian issues.
As for trading today, I was somewhat active opening some new positions...
1. $MT - I opened a long position in Arcelor Mittal as I feel it is close to a bottom with near term target of $36. I did not go full boar, I purchased half a position in shares and the other half in options, buying the Sept 34 $CALLS as I have seen this strike/expiration hit week after week causing me to believe that some big money, smarter than me of course, knows something that I do not.
2. $RIG - I purchased some shares of Transocean today as I like the level where they sit and believe that once things clear up shares of RIG will move to the high 70's range and possibly even go over 80 per share. The dividend of $3.25 per year is also a nice stipend while I wait for the shares to move up.
Well that is all for today. I do not expect the markets to bounce back strongly just yet as I think we need some real news out of Europe before we get back on track and that will probably not come until some time over the weekend. For now we can look to U.S. earnings as a hopeful boost, although the financials seem to be in focus towards the end of the week and they do not excite me. Although their earnings may be robust on the bottom line, I believe trading volumes and loan originations will be abysmal at best. Lets cross our fingers and hope that I am wrong. Full disclosure I am long $JPM $NYB via shares and hold long calls otherwise knows as leaps for $GE $BAC $C and $MS.
Stay firm and buy smartly. We will surely see some short term turbulence, which in my opinion provide us with some great mid to long term values.
Please reply with your comments as I am always interested to hear what fellow investors have to say. I am no pro by any shake of the stick, just an investor who is interested in sharing my opinion and hearing yours.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
As for trading today, I was somewhat active opening some new positions...
1. $MT - I opened a long position in Arcelor Mittal as I feel it is close to a bottom with near term target of $36. I did not go full boar, I purchased half a position in shares and the other half in options, buying the Sept 34 $CALLS as I have seen this strike/expiration hit week after week causing me to believe that some big money, smarter than me of course, knows something that I do not.
2. $RIG - I purchased some shares of Transocean today as I like the level where they sit and believe that once things clear up shares of RIG will move to the high 70's range and possibly even go over 80 per share. The dividend of $3.25 per year is also a nice stipend while I wait for the shares to move up.
Well that is all for today. I do not expect the markets to bounce back strongly just yet as I think we need some real news out of Europe before we get back on track and that will probably not come until some time over the weekend. For now we can look to U.S. earnings as a hopeful boost, although the financials seem to be in focus towards the end of the week and they do not excite me. Although their earnings may be robust on the bottom line, I believe trading volumes and loan originations will be abysmal at best. Lets cross our fingers and hope that I am wrong. Full disclosure I am long $JPM $NYB via shares and hold long calls otherwise knows as leaps for $GE $BAC $C and $MS.
Stay firm and buy smartly. We will surely see some short term turbulence, which in my opinion provide us with some great mid to long term values.
Please reply with your comments as I am always interested to hear what fellow investors have to say. I am no pro by any shake of the stick, just an investor who is interested in sharing my opinion and hearing yours.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
Monday, July 11, 2011
Today's Trades & Thoughts?
Today I spent most of my time just watching the markets trade down and then be range bound for most of the day, holding at their lows. I did make some purchases today...
1. I purchased some $LVS Aug 50 $CALLS following some big money as posted by a website that I follow, Whatstrading.com. This is pure speculation.
2. I also purchased and added to my position in $MOS Mosaic believing that the fundamentals of this company as well as the industry are in tact. I believe that global growth will continue to move forward and more food will be needed as populations grow, especially in emerging and frontier markets. I believe Mosaic is a good play back into the mid 80's more or less where I would either take profits by closing my position or sell some ITM upside calls for some additional premium.
I am looking at getting long $RIG & $CAT if the market continues to pull back. I think they both offer some nice long term rewards and in the case of $RIG, a nice dividend to boot at these levels.
That is all for today, as far as I can remember. I will continue to post more of my ideas and actual trades as they come about.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
1. I purchased some $LVS Aug 50 $CALLS following some big money as posted by a website that I follow, Whatstrading.com. This is pure speculation.
2. I also purchased and added to my position in $MOS Mosaic believing that the fundamentals of this company as well as the industry are in tact. I believe that global growth will continue to move forward and more food will be needed as populations grow, especially in emerging and frontier markets. I believe Mosaic is a good play back into the mid 80's more or less where I would either take profits by closing my position or sell some ITM upside calls for some additional premium.
I am looking at getting long $RIG & $CAT if the market continues to pull back. I think they both offer some nice long term rewards and in the case of $RIG, a nice dividend to boot at these levels.
That is all for today, as far as I can remember. I will continue to post more of my ideas and actual trades as they come about.
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
Where Will The Markets Go From Here?
Wall Street once again has come down with the European Plague. Today's new disease is Italy as if we needed another. Do we have another Greece here? Not in my eyes. Greece is a country that has a lot of problems and is on the verge of not being able to pay it's debts without the aid of the ECB and others. They suffer from high unemployment, major structural issues, and a public that does not pay their taxes in large part, but complains that higher taxes are intolerable. Italy on the other hand seems to be in pretty good shape fiscally, struggling just like any other country suffering as a result of a slowing economic venue, but their banks are strong, their outlook is positive, they have a good export market, and their government seems poised to implement necessary levels of austerity in order to curb the possibility of further problems. So what happened today and why is Italy on the chopping block? In my view the biggest problem is that the bond vigilantes need someone else to pick on. Greece is no longer in play as the ECB and others have seemingly controlled the Greek problem for the time being. Yes, I am sure we have not heard the last of Greece, but for now they are no longer on the front burner so to speak. Last week there were rumors that Burlesconi in Italy may pull back on some of the austerity measures proposed by the Italian minister of finance. If this is the case that would not be a positive in my mind, but with what has transpired with Italian bonds last Friday and again today, I would suspect that Italy will receive sufficient pressure both internally and from the ECB and other Euro countries to maintain austerity plans and if anything enhance them to insure fiscal security at least on an Italian level. If it is true that Burlesconi wants to lighten up I think this will be quickly resolved. However, the bond shorts see an opportunity based on speculative talk and go to market and short the heck out of Italian paper driving the rates through the roof and causing the CDS spreads to widen making insurance against Italian bonds very expensive. This in turn causes general market speculation that Italy is just like Greece in terms of quality, but being a much larger part of the Euro zone, the sell off is potentially much larger as an Italian default could be catastrophic which I do not argue. I am pretty confident that this will be resolved in the short as the ECB and Euro zone do not need any more problems to deal with today.
So what do we do as investors... My suggestion is to sit tight and let some of this play out. I would not panic sell! If you feel the need to raise cash, only do so in small part and sell some positions where you can take some profits as we can never complain even in hindsight about taking a profit. Also, if you have some losses, as we all do at times, maybe convert some of those losses into cash and make ready that money for redeployment into better investments when markets show a little more clarity. If you are a dividend player, once again just sit tight and keep collecting that insurance money.
Also keep in mind that there are several issues on the table that can cause some uncomfortable market gyrations. We have the Euro situation, the debt ceiling discussions, and the beginning of earnings season having been kicked off by $AA Alcoa today. By the way, the AA earnings were inline and revenues were good. The overall report in my view was a little lackluster, but that is almost par for the course with AA. I will wait and see what other more significant reports have to offer prior to making any earnings season guesses.
Please feel free to make comments. I write what I believe as per my viewpoint. Right, wrong, or somewhere in the middle it is what I feel at the moment of writing. If you agree that is awesome and I am interested to hear your comments. If you disagree I am also interested in your point of view, but I do ask that you keep this blog clean and respectful at all times.
Thanks for reading....
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
So what do we do as investors... My suggestion is to sit tight and let some of this play out. I would not panic sell! If you feel the need to raise cash, only do so in small part and sell some positions where you can take some profits as we can never complain even in hindsight about taking a profit. Also, if you have some losses, as we all do at times, maybe convert some of those losses into cash and make ready that money for redeployment into better investments when markets show a little more clarity. If you are a dividend player, once again just sit tight and keep collecting that insurance money.
Also keep in mind that there are several issues on the table that can cause some uncomfortable market gyrations. We have the Euro situation, the debt ceiling discussions, and the beginning of earnings season having been kicked off by $AA Alcoa today. By the way, the AA earnings were inline and revenues were good. The overall report in my view was a little lackluster, but that is almost par for the course with AA. I will wait and see what other more significant reports have to offer prior to making any earnings season guesses.
Please feel free to make comments. I write what I believe as per my viewpoint. Right, wrong, or somewhere in the middle it is what I feel at the moment of writing. If you agree that is awesome and I am interested to hear your comments. If you disagree I am also interested in your point of view, but I do ask that you keep this blog clean and respectful at all times.
Thanks for reading....
Sincerely,
TraderJive
Follow me on Twitter: @TraderJive
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