Friday, September 29, 2006


I write you from southern California, where I've come to commune with some friends and just get away from things for a few days. But the search for alpha continues, and so far this week, the commodities markets are being good to me. Its all about knowing when to get out - THAT is the question. Right now, its looking like a $300 profit on the call spread that I have just authorized to close out.

Looks like Bill Gross has posted his October commentary over at I'll take a read later today after I wake up for good.

There's probably something else I wanted to mention here, but I'm on vacation. Once I get up and collect my thoughts, I'll figure out the rest. Hope you have a good one today!


Friday, September 22, 2006


Although this has nothing to do with generating alpha specifically, I just have to mention the latest FaceBook news. Is it me or is Yahoo! the acquirer of last resort? What's up with that??? And does the Microsoft ad deal still stand if they do buy out FaceBook? What's the effect on Yahoo!'s numbers if that deal changes?

(See, I could find a way to tie it all back to alpha, even if loosely! Ha!)

Okie, I go now.

Change of Direction

It has been a while since I've been able to sit down devote time to writing. I intend to be better about it in the future. Thanks for following along, those of you still with me.

The latest news is that I am in the process of getting out of my currency trading. It was an experiment who's time has ended. And it definitely not for the faint of heart or stomach. As stated in my lessons learned, part II, unless you have a lot of time (and good money management skills), stay away from currencies. Its just too dynamic and volatile a market, in my opinion, although I imagine it must be great fun to get it right.

From looking at the markets recently, its times like this that I wish I had puts on the long bond. We're not talking crash levels, but just a small dip, seems to be in order. I think Treasuries are completely overbought, but what do I know. I'm just thinking out loud.


Anyway, I'm going to bed. When I wake up, we'll see if my other recent call, a big tech name that we all know, continues its run. Unfortunately, I didn't have any money on that horse either. All I needed were $5 calls for anytime later this year. I think there's still some way to run in that stock, but oh man.

Time to cry myself to sleep.

Saturday, September 16, 2006

Recommended Site

Although not exactly a blog, I have to recommend Bill Gross' monthly commentaries over at This month's is quite good, but then again, all of them are. If you don't know who Bill Gross is, well, you need to get to know him now! So shoot on over and check out his musings. Entertaining always, and downright scary most of the time too, but chock full of thoughtfulness. Paul McCulley also has a monthly commentary that is worth a regular visit. Check out some of the other essays as well. The PIMCO housing project is very interesting. Now if only they had RSS feeds.

Wednesday, September 13, 2006


Looks like I may have inadvertently caused an outage of the blog for a few hours. I attempted to publish my most recent post - Lessons Learned, Part II - while connected to a flaky network. Most of my packets appear to have been lost in the ether. I just tried refreshing the blog to get a nice blank, white page so I re-published and now things appear to be fine. To anyone who might have experienced the outage, I apologize for it.

Now back to your regularly scheduled program, already in progress...

Lessons Learned, Part II

So I explained what went wrong with my unleaded gasoline position.

Around the same time that I opened that account, I opened an account with a different broker specializing in currencies. Now, for all the sexiness of currency trading, I've heard horror stories about them that rival anything you've heard in hardcore rap lyrics.

Anyway, my currency experiment has gone even worse than the commodities. I'll be closing that out completely soon. But this is a lesson's learned piece. The biggest lesson I learned from the currency trading is - OMFG! You need to do this shite every day. If you plan to do any currencies, just drop everything else in your life. You don't need them. Sex is overrated. S.O.s are time sink. To hell with a job. Friends are pretty useless too. Just sit at home in your underwear and trade your pairs. Probably best to find 2 or 3 single pairs and focus on them.

And dammit, when you're up, take the money off the table. Period. A win is a win.


Somehow, I think I wanted to say something different here, but I got distracted. There may be a part 3. Maybe...

Friday, September 08, 2006

Lessons Learned, Part I

First, some background.

My first experiment with options also turned out to be an experiment with futures. 2 for the price of 1. I received a cold call from a broker in late May. Although I didn't have the funds immediately available, I was able to assemble them by early - mid June. The plan was a bull call spread on options for October expiration on unleaded gasoline futures. The reasoning was solid, I think. Entering both summer and hurricane season. Expectations of a bad hurricane season. Instability in the mid east. Nationalization of the oil industry in Bolivia. So I went with it. In 3 weeks, I made 12.5%. (That's not annualized. That was the 3 week return.) After closing out those contracts, I was feeling emboldened. So when my broker came to me in July to do the same thing, I went with an even larger stake.

Mistake #1: Bad money management.

So things progressed fairly well. Until they didn't. The Israel/Hezbollah "war" ended w/o causing any problems between Iran and oil markets. The deadline for Iran to stop enriching uranium came and went. (Loved the "woosh" sound that one made as it went by.) Hurricane activity was so low that the estimates were lowered, and we still haven't seen a level of activity consistent with the lowered estimates. (Kinda like homebuilder stocks. *shrug*)

Mistake #2: Cut your losses.

I held on. Looking for an out. "Hope is a lousy defense." At the first sign of breaking 5% down, I should have been out. Instead, I made a worse mistake.

Mistake #3: Never average down.

I turned the puts in the bull call spread into calls, by buying them back, closing the contracts and sinking the money into more October calls. Now I'm long unleaded gasoline calls in a dropping market. I doubled down on a losing position, like a bad poker player. WTF was I thinking?!?!?!

So now I'm sitting on top of even more calls spiraling toward zero, and I refused to close out the position. Until this past Friday. When I tried calling my broker and couldn't reach him. And I continued watching my calls falling into the apartments beneath me. Glad I didn't need that money for my (future) kid's college tuition, because that 5K is sooooo gone.

And the moral of the story is - apply the same rules that you do for stocks, but even more strictly. Thankfully, knowing how volatile options can be, and futures as well, I went in with the expectation that it could all disappear. And thankfully, not all of it disappeared. I still have some money in some other positions, and a bit in cash. It was expensive tuition, but sometimes you learn the hard way (unfortunately).

Until next time, anyone got a recommendation on an online broker with good response times & order routing and that allows you to trade options and currencies? Stockdiva? I'm not ready for bonds yet, but I can do the options, currencies and futures still. I haven't completely lost my taste for them. Just gotta remember the rules.

Wednesday, September 06, 2006

Rough Week

Wow, this blogging stuff is rough. Or maybe its just the constant state of sleep deprivation I find myself in. Or maybe its the paper losses I just realized.


So lets recap. My REI partners and I are finally close to making some real progress on our first property. It took far too long, IMO, but in one week, we should have banked some refi cash. The lessons learned on that deal will have to fill another post. Suffice it to say that it serves as a solid lesson in how not to purchase property.

My unleaded gasoline October calls got massacred. OMG! Its surreal having your own head handed to you, but now I can honestly say that I know what it feels like. Events like this make me glad I don't have to support any dependents. While the $5K I'm down hurts, it by no means throws off the rest of my portfolio in any significant way. Same for the losses on the currencies. The post-mortem on those deals makes for another post or two, if anyone is interested enough.

As for my big long post, man... The thing I can least stand is that now I have to explain what is going on my head. Just follow along, dammit! (Oh, wait, sorry, I guess you AREN'T mind readers.)


Time to go look at the next charts. My pain medication should start kicking in shortly too, hopefully, because I really need to go to sleep.

Until next time, remember what Bill Joy said: "Hope is a lousy defense."

Damn skippy!

Friday, September 01, 2006

Recommended Blog #3

I'm sure I don't have to elucidate on the sheer pleasure that is DealBook to you, my loyal readers. This is one of the blogs that really helps me construct the big picture in my mind and connect the dots. That creativity is what leads to exciting business ideas and investment theses, IMO. So add DealBook to your feeds, if it isn't already among them.

That's all for today. I'm still fleshing out my BIG post. Its a complex analogy to work out, and this is the first time I've put it in writing. I will keep you posted. So until next time...

Go corn!