Uccmal
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Posts posted by Uccmal
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Warren strikes me as a paper guy -- he needs a hard copy of things to get into his comfort zone. So somebody has to print stuff off for him or get his hard copies from the office. His process is probably a bit slower. I doubt that he gives out his cell number much either. So instead of someone setting up the conference call for him, he's all thumbs. My Dad would be the same... :)
But really, he's probably head down working (reading, thinking, calling his brokers) as businesses are on sale, so why waste time with public interviews and statements?
I get that he prefers paper but I have never thought of him as a luddite.
He was using a cell phone before most people, in 1998, during the LTCM thing. He started playing bridge online in 93/94 before the internet took off. His cell number is likely pretty well guarded. His security service at home probably knows how to reboot the router and change in printer cartridge anyways. :-). I think its is more about preferences and disciplined time management.
He is likely watching and waiting and nibbling here and there. Dude is nearly 90... maybe he is having a nap.
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I think there are multiple reasons:
1. He owns too many companies that are bailout candidates or TBTF and thinks keeping his mouth shut is the best way for those companies to get the best deal from the government. He doesn't want to get politicized.
2. His large ownership in certain industries is preventing him from making deals (financials, airlines).
3. He was too early in the GFC.
4. He has access to great economic data and doesn't want to give others ideas with it, until he has acted on it first.
5. The government is making better offers to help than he is, so he has nothing to report.
6. He may have higher than expected claims or more money losing businesses in this environment than the conventional wisdom expects, so needs to hold back more capital.
7. He doesn't think the market is cheap, similarly, he doesn't think BRK is particularly cheap in this environment either.
8. His outlook is negative and he doesn't want to scare anyone. He would rather tell common investors good news rather than bad news, so he is waiting until he is more optimistic.
9. He is saving his insights for the video AGM in May. This one is not inconsequential. He loves the AGM and doesn't want to diminish its value.
Overall though, I consider his silence a negative. If he was bubbling with optimism, he'd already have been on TV.
Well said.
He is waiting, like the rest of us. Companies aren't really very cheap in aggregate, yet.
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Who says we can’t drink?Hopefully with them spending less (can go out, cant drink, cant buy shit) for a month or two the extra money gets them through.You gents are killing me!
Life is too short for cheap beer and wine.To be a realist one has to believe in miracles.Our household right now - short version - consists of [2 x #metooCOVID-19?] - we bottomed out on Saturday March 14th 2020, both ill. Forced to switching to digital retailing [we chose nemlig.com] because of no access to testing as of now. She makes lists of what to order - I type them. At every order - if it's not already on the list - I add wine. Now she has started asking me : "Why are you ordering all that wine?" -I guess it's an unconscious mechanism. [ : - ) ]
To be clear John. You think you were sick with Covid 19. Sounds like you are okay.
I am thinking my whole family was exposed but we cant know for sure. We flew to Southern Mexico in later February for a week (no reported cases there) came home, and my 10 year old daughter got sick. It was definitely a flu like thing with chills/fever fatigue for a few days. The rest of us were fine although both my Wife and I felt off for a day or two. The little one recovered, and the rest of us are fine. I dont think Mexico was the source, but rather the act of travelling was the source of whatever it was. Pearson Airport on TO was still a cesspool.
Back on topic:
- Everyone I know is at home except for a few health care workers.
- Our house cleaner works at a grocery store the rest of her time and is working full weeks. No more house cleaning, but coercing and bribing the kids is working.
- My home reno project is grinding to a halt. It is becoming impossible to work with the kids at home, and with curbside ordering for supplies in effect. Eventually I have to buy (and actually see) parts for the next phase of the job (a powder room). It will get mothballed until next fall. Its spring and the biggest time of year for the "other retailers": HD, Lowes, Nurseries, Home improvement, landscapers, outdoor reno workers,etc, and they are not selling. Lineups for non necessities and online ordering are killing their sales during their Christmas season.
- Online ordering starting to show cracks. Tried to order a couple of books for my daughter and Amazon Prime had a one month wait. Chapters/Indigo promised 3 days but the order is nowhere to be seen.
- Online food orders need to be made 3 weeks out.
I am sure there is more.
- Saving huge money from cancelled travel and wife working from home. Not happy about either outcome.
- Temporarily down around 700k in market losses. Not overly uptight about this. I wont sell anything so it doesn't matter. The companies I hold will all be thrivers, after this.
- In general people are not spending in my area and among my friends. These people can afford it, there is just nothing to spend on. Observationally, there must be huge negative spinoffs into the general economy, hence my basket of puts.
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I do think that those who predict long term changes in human behaviours or society are probably wrong. In five years, I think our economies and societies will look similar to today, although there will some changes at the margin.
Lots of them are accelerations of long term trends.
- The shift to digital continues with more of a tailwind as sections of the population that never shopped online were forced to and realised it was …. Ok.
- Employers realise that working from home can work at scale and will find it harder to justify expensive office rents
- The combination of the above and the recession leads to more “we work” type facilities (although not necessarily WeWork)
- Some employees will realise they got a whole load happier without the daily commute and demand to their employers they do it more, and will also look to shift away from “traditional” office based careers.
- Lots of companies realise they need a more prudent capital structure and raise capital. There is a general deleveraging.
- Individuals remember that having cash savings, even in a non yielding world, is vital as a buffer against lifes emergences. Savings rates go up.
- Governments are forced to finance their emergency spending with more debt issuance and higher taxes. This leads to increasing societal disharmony between old and young and higher vs lower paid.
- Those high quality businesses that were well insulated from the crisis become even more highly valued by investors in a zero interest rate world, and are rated even more higher by the stock market, leading to even more bifurcation between “high quality stocks” and the rest.
- As hospitals are built in ten days, drugs are approved in weeks, and businesses survive with whole departments working online, a lot of bureaucracy is revealed and for what it is and there is a bonfire of red tape and employment.
- China gets a “blamed” for the virus and the trend to move supply chains and against liberalisation of trade continues.
- Certain western governments are shown to be relatively incompetent and liberal democracy continues to be questioned. At the same time certain populists are thrown out of power.
Some of these are likely but some are unlikely, based on observations since 2000 or so.
- Digital purchasing may increase but in whole sectors it just doesn't work that well. i.e. groceries: delivery has always been available, for 120 years, and has never become the primary means of purchase, home supplies: people still like to kick the tires. I can look at 20 profiles of a reno part I need and nothing compares to actually holding and looking at it. This will play out one way or the other in real time, in the next couple of months.
- for alot of people working from home sucks, and nothing really gets done. Not everyone but many. People are social. Maybe it increases a bit, but so many jobs don't work that way. More and more people fly for business every year.
- many companies are never prudent with their capital. Most CEOs in general don't think that way. They are not value investors, and have no investing acumen. Look at the huge number of share buybacks at market highs as an example. Sure they will be prudent for awhile until the heat is off then its back to debt fuelled empire building.
- same goes with people saving. If the aftermath of 2007-2009 has shown me anything its that human nature doesn't change.
- definitely agree about the high quality companies. But that has always been the case.
- bureaucracy never goes away. It gets cut in one area and appears elsewhere. All big organizations have it. That is why the investing curve exists - Peter Lynch covered this really well 30 years ago.
- supply chains might diversify. Probably due more to automation becoming cheaper than sending raw materials to Asia in return for garbage products.
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Following.
I cant even begin to imagine a candidate. I can buy puts on big liquid names but these are not companies I would short. I am just trying to catch a relatively short term action and hedge the rest of my portfolio in the meantime.
My understanding of shorting is that one needs to identify something that is in trouble where the herd still believes it has potential, and shorting exactly at the point it is starting to drop. Shorting based on valuation clearly doesn't work very well. Tesla being the prime example of this, along with hundreds of others.
There are so many things in this environment that can screw up a short. Airlines worldwide should go to zero but they wont due to creative bailout methods. Cruise lines seem obvious but I am not so sure its that obvious. I dont see the public sector bailing them out, but private investors may bridge them cash until they can operate. Cruise lines can also anchor their boats with dramatically reduced costs, or do repairs so they get a few years ahead of the curve on maintenance. And were headed into the off season anyway. Their biggest costs would be staff, fuel and lease costs. Two of those would be really low now. Lease costs could be out off. So, as much as I hate the industry I dont see cruise lines as a viable short. And hating an industry is not a reason too short.
Yeah, its harder than it seems.
Oil is too badly hit to short now. Most E&Ps are trading as if they are in bankruptcy already.
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I know some have complained that this thread has gone off the rails and is of little or no value from an investment perspective.
Let me share some thoughts that hopefully have some investment merit, along with my level of conviction.
1) We are in the bottom of the third as far as this pandemic is concerned (High Conviction). This pandemic still has a long way to run - maybe 3-6 months (maybe longer), and the worst in terms of headlines and quarantines is in front of us, imho, not behind us. It is clear now that the response has been botched, especially in the United States, and what comes next is likely to have a deep and lasting impact on our collective psyches and the economy. Even now, before the infection rate has peaked, hospitals across the country are running low on personal protective equipment for their health staff. As supplies run out, and HCWs are forced to improvise, the infection rate among them will soar. This will weaken our capacity to care for infected patients even further. Our mortality rate in North America will likely track somewher between Italy and China's, but I would guess closer to Italy. Those who are comforted by the low mortality rate are celebrating too soon. Once the healthcare system starts to creak under the strain, and the new infections of the past weak start weakening their hosts the mortality rates will go up significantly;
2) The effects of the pandemic on unemployment, consumer spending, and credit will be long lasting (Medium Conviction). Just because case rates start to fall in the spring/summer doesn't mean we will be economically out of the woods. If we look at the number of folks who will be financially wrecked by this pandemic - service workers, small business owners, uber drivers, hair stylists, plumbers, construction works,... - it is not a stretch to say that the impact will likely be as large as the GFC, if not larger. Those who think everyone will pick up where they left off, and the damage will be minimal need to think more about human behaviour, and the typical household's balance sheet.
So actionable investment insights:
1) It's not too late for Cash or Hedges - There is a lot of talk of lifting hedges and starting to buy out there. In my opinion, that talk is premature. If you are the sort of person who is inclined to hedge or buy long-dated puts in the first place, there are still opportunities to do so out there. For example, Shopify (SHOP) trades at a 48B market Cap ($46B EV) currently and is about 20% off of it's all time highs, even though it had operating losses of $141m in 2019 (and as far as I can tell, has never turned a profit). In fact, operating losses in 2019 increased by 53.5%, while revenue increased by 47%, a modern 2020 business miracle, which of course explains why the market has wisely priced it at 30.5x its 2019 Sales even in the middle of the worst global pandemic in living memory.
2) Wait to make new investments, or if you just can't help yourself, buy Berkshire - If you think all the bad news re: covid-19 is already priced into the market, refer to SHOP above. The vast majority of the market seems to believe the worst is behind us and happy days will be here again very soon. I would not be inclined to jump in to hotels, airlines, cruise lines or any of the battered names until we have more clarity on covid-19's course. Prices remain too high if you assume we are entering a recession or even just reverting to mean valuations. Of course there maybe some truly under-valued gems out there, but I would stress test even these ideas against a very bleak potential demand situation. And, ofcourse, YMMV.
TL;DR - We still have along way to go before this thing is over.
M.
Edited: SHOP is 20% off of it's all time highs
That was a really good post. I have had a conference I was to be at in early July Cancelled. It was to have 30000 - 50000 in attendance. July... think about that for a minute. Hundreds of full time jobs for months eliminated. Multiply that across the globe out to July and August now.
Even if Covid were bought under control tonight, it would take months for the economy to recover. And it doesn't matter what the public is told in terms of social distancing, the damage is done. It doesn't matter if a President says everything opens back up in three weeks, he will be ignored. The 24 hour news cycle will keep feeding the hysteria whether it is justifiable or not.
The economy and the markets are going way down. Last week was just a head fake.
Eventually, some semblance or normalcy will assert itself either due to better treatment, protections, or an outright vaccination, but it will still take months to recover after that.
And Elon Musk should stick to his circle of competence, which is building great companies, with exciting vision, not opining on public health.
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At the moment stock markets are not a reliable indicator of anything. They are caught in the hands of professional manipulators who trade continuously for a living.
They simply are not reflecting reality which is that the main street economy is at least 50% closed.
I wouldn't worry, markets will figure out soon enough that governments can help people stay alive and fed but cannot prop up an entire moribund economy.
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why is Boeing up 30% - world not flying
and TSLA up 10% - factories shut
and Walmart down 5% - actually open and feeding people
stock market doesn't make sense to me!
Government $$$, that's why!
It will be gone in a flash.
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why is Boeing up 30% - world not flying
and TSLA up 10% - factories shut
and Walmart down 5% - actually open and feeding people
stock market doesn't make sense to me!
No sh*t. The stimulus plans to me indicate how dire this is. The stimulus plans are stop gaps at best and meant to keep certain segments of the economy from insolvency, and starvation. Thats hardly thriving.
People are so damn stupid and gullible.
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https://www.ft.com/content/5ff6469a-6dd8-11ea-89df-41bea055720b
"The new coronavirus may already have infected far more people in the UK than scientists had previously estimated — perhaps as much as half the population — according to modelling by researchers at the University of Oxford.
If the results are confirmed, they imply that fewer than one in a thousand of those infected with Covid-19 become ill enough to need hospital treatment, said Sunetra Gupta, professor of theoretical epidemiology, who led the study. The vast majority develop very mild symptoms or none at all.
“We need immediately to begin large-scale serological surveys — antibody testing — to assess what stage of the epidemic we are in now,” she said."
This is the obvious course of action. With H1N1 my parents who were late 60s didn't need the vaccine, while my family did, except the baby (at the time). I think they came to this conclusion via deduction (no one over 60 was getting the symptoms). This time there is no such protected group, that are obviously standing out.
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Yep, Buy-Write can be nice approach in a market like this.
I've started doing this and have had some success...one of them was epic in it's execution.
I've never seen volatility like this in my 30 years of investing...not even close.
The perfect move is to set up your "watch list" of potential candidates ahead of time. Scan that list frequently, ESPECIALLY on down days. If a stock is down 30%+ on just general news, BUY. Wait till the market recovers and position goes back up 30, 50, 80 percent. Write out o the money covered calls 3-6 months out. You will have TREMENDOUS upside and will recover a significant portion of your initial capital.
WASH, RINSE, REPEAT
For example, I bought GES at about $3.80/share. The next day, the stock goes to 11. I sell the September 12 calls. I got back all but $.10/share of my initial purchase price! I now control GES shares, cost basis of $.10/share. I get everything up to $12/share. I also get to redeploy the capital into another position.
So if somebody could do this MULTIPLE times, you could control an incredible amount of stock with very little capital. If somebody could do this 12-16-20 times a year you could get reasonably wealthy.
I have tried this so many times over the years. The one thing anyone contemplating it needs to be aware of is that at some point you most likely become a long time shareholder awaiting a rebound that can be years out. Some examples include OBE(PWT), RIM (BBY), most recently WCP(Whitecap Resources)
BTW: DTEJD, I have been following your posts for years about Detroit and housing and always get alot out of them, so take the criticism from a place of respect.
Al
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Everything is so fast moving that its hard to make any reasonably educated decisions.
The problem I have with writing options is the huge amount of margin they use up. Covered calls would be cheaper but I dont have enough common stock in anything large cap to make it worthwhile putting alot of brain power into.
The other area from my 2008/09 playbook I completely forgot about were Preferred shares. I just had a look at several sets of Prefs for Enbridge, BCE, and Bam in Canada. Enbridge in particular has a few series that are yielding 10-11% and are off close to 50% in the last two weeks. Did people suddenly stop buying oil and gas (rhetorical). BAM and BCE have some yielding near 8-10% and trading down 40% or so. Did people stop using the internet and making calls? I may look at picking up a basket of these and sort the garbage out later. My research department doesn't have the capacity to analyze all the prospectus :-).
I've read guys like Icahn and Tepper are buying some oil patch debt.
I followed up on this into the night (the prefs idea). Turns out many issues that look like a great deal on the surface are not such a great deal. The companies mentioned have covered their bases quite well, which is I guess why I hold them as common stock. The best apparent deals have rate resets attached to them. With interest rates down and likely to stay down for years, they will reset at lower rates.
Most are also perpetual issues that are callable by the companies at par value. The companies will just keep rolling them over indefinitely. In a dropping interest rate environment these prefs sell off. It has the effect of dropping the share price rather than raising it.
In summary, one would only buy these issues for income. There may actually be permanent capital loss.
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Everything is so fast moving that its hard to make any reasonably educated decisions.
The problem I have with writing options is the huge amount of margin they use up. Covered calls would be cheaper but I dont have enough common stock in anything large cap to make it worthwhile putting alot of brain power into.
The other area from my 2008/09 playbook I completely forgot about were Preferred shares. I just had a look at several sets of Prefs for Enbridge, BCE, and Bam in Canada. Enbridge in particular has a few series that are yielding 10-11% and are off close to 50% in the last two weeks. Did people suddenly stop buying oil and gas (rhetorical). BAM and BCE have some yielding near 8-10% and trading down 40% or so. Did people stop using the internet and making calls? I may look at picking up a basket of these and sort the garbage out later. My research department doesn't have the capacity to analyze all the prospectus :-).
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Trying to buy puts on MA, and a couple of others. The implied volatility is way up. The cost is more than the other day, when the stock was higher. Option sellers are expecting a quick reversion right back down. Todays market rise is in response to the expected stimulus plans. Once they come out and eveyrone realizes the economy is operating at 70% things may really drop.
I am sitting out Leaps for now until this volatility settles down to a lower level.
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Trump has begun canvassing his advisers, GOP Senators and other allies about what his course of action should be, according to a senior administration official. He is worried about the impact of soaring unemployment and severe economic contraction on his 2020 presidential reelection bid, and fielded phone calls for much of the weekend from alarmed business leaders. He remains fixated on the plummeting stock market, is chafing at the idea of the country remaining closed until the summer and growing tired of talking only about coronavirus, one person said.
I was wondering when Trump would get bored of talking about coronavirus.
The guy is so stupid it’s unreal. Hundreds of thousands of Americans dying from this would help his re-election chances?
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I was just recollecting 2009, about this time of year. I bought Leaps on HD - share price <$20. Sbux < $10; GE< $10; and American Express (Can’t recall but it was cheap). Hd and Sbux were unrelated to the Financial Crisis in any direct sense. GE had already received bailouts. AXP was affected by the GFC. I held FFh going into March 2009 and it got cut in half after announcing huge bond and derivative gains.
My main point is that things could get a whole lot cheaper from here, regardless of any stimulus measures. The main bailouts occurred in the fall of 2008. The market bottom was in March 2009. Even after the virus runs its course it may take months to years to see any meaningful recovery. We were due for this pull back for years. Covid 19 was just the trigger.
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will/can any of those strategies work?
I mentioned this in another thread, but everybody wants to buy quality names now, saying buy them now that they are on sale. but if enough of us are doing that, will we get the cheap prices we are looking for? (sure, prices have dropped a lot vs just a couple of months ago, but are business fundamentals and prospects the same?)
the same goes for, for example, airlines and hospitality stocks. just here, how many of us are following those stocks guns ready?
maybe pessimism is weighing on on me these days (I fear my country is going to have to face a very bleak future, after CV is gone), but I see all kinds of people, from friends who bro-invest to people who know what they are doing (such as all of you guys!), thinking they are going to make good money out of this. but who does even know when markets will recover?
I think indexing/eTF investing has been pretty popular the last 10 years. The big selling will hit everything. Yes, quality will sell off less but it will still go lower on weakness.
I think this is what we will see. I sold Netflix and Costco on Friday, at a profit. I bought them within a week of selling. As markets tank, and indexes tank, even the very best names will get taken down. Not as much perhaps but that is where one puts to work their valuation skills, and understanding of where things are headed. Netflix makes their money by subscription so they should be immune, but they won’t be. People with margin calls, and those who can’t handle this will sell indiscriminately.
FB, for example has sold off a lot. People are still using the service, probably more than usual, but advertising revenues will drop off somewhat. I expect it to go lower, along with all the best megacaps. I have puts on FB right now.
Markets are going to gyrate all over for awhile yet. Pop on stimulus plans, drop on major layoff and closure announcements. The only White Swan I can see is a sudden discovery that some existing drug firewalls Covid 19, or an outright vaccine.
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Raised cash - about 20% now. Moved most non-dividend paying holdings into 2 year ITM LEAP exposure.
Probably will sit tight for a bit and raise some more cash over the next few weeks, see how this whole thing (starts) to shake out as we approach the warmer months.
I have been buying puts on the up bounces. Sold some stock, some profitable, some at a loss. Probably a net of zero. I cleared all my long orders. The puts are my currency to buy Leaps later on. I figure the US Covid case load exceeds China by Monday morning.
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Just making a list of companies buying back stock or executives buying shares in the last couple of weeks, only.
Starbucks: Announced they would buy in 141 M shares. Unknown on their activity.
Whitecap Resources: cut dividend by 50%. Executives buying shares. Company was retiring shares up until a couple of weeks ago. Company may have stopped. Expect CEO etc. To keep buying.
BPY: Brian Kingston bought 1.4 million $ of shares this week. Company buying shares still. AFAIK. Don’t know if BAM is buying BPY shares.
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Was doing some ETF research for a friend of mine last night, and it prompted me to put in order for the Vanguard S&p 500 etf Canadian dollar (low ball) as usual.
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If you are assuming 6 months then 2 yr. Leaps on quality names that are on sale, some of which will be converted to shares later. Not yet though. Maybe in another 30% down.
Do you really want to get caught in a recapitalizing situations? In 2008/2009 many companies had to recapitalize near their bottoms. I would think it would be better to keep it simple and buy companies at multi-year discounts that will not need to recap.
As to 2nd and 3rd order effects. Perhaps, we are finally seeing oil in a demand and supply destruction phase. I don’t know what the implications are for profitability and price. Nothing really to do with the virus although it may accelerate this.
Its hard to tease apart: If fewer people use oil across the world due to home working arrangements, less business travel etc. then you get lower demand. However, the 2nd or 3rd order effect of this is less supply, and so on.
People have been predicting remote work for 25 years but it never really materializes in a meaningful way. Something about human nature. Working from home really sucks for a lot of people. I have everybody at home right now due to school closures and if my wife and I are still together in 6 months, it will be a miracle. I cannot get anything done. In order to do anything I have to get out - sitting in the Home Depot parking lot typing this. Just bought some ABS pipe for a bathroom build I am doing at home.
In summary, I have no idea how to play this other than buying the very best companies at low prices, and using leaps at some point to juice this (not yet).
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thanks LC. I was just toying with it in my US Margin account. Uncovered Calls were costing me the Entire cost of an equal amount of stock in Margin room. The riskiness is relatively low but the amount of margin I will eat up constrains me in other ways.
I just needed the reminder of why I don’t do this. It’s been 11.5 years. I got caught in the Fall 2008 crash after selling uncovered puts. I had to sit on the phone for an hour with my broker ( they loaned me the extra money for a few minutes) unwinding the puts to get me out of a margin call situation. Obviously, everything worked out ultimately but I learned not to go uncovered.
I don’t hold enough of any US stock position to make it worthwhile to try and go covered.
Good strategy for the way these markets are whipsawing.
Thanks, A
Addendum: All of my put positions are in significant profit positions, even today. I bought them Friday: V, MA, Low (poor quality proxy for HD); Goog, and FB. And my BAm puts from three weeks ago are up 15 x - still not selling though. Looking for 28x to 30 in the next few days on these.
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Bought V,
Sold some IRM calls
Bought back some SPY calls that I sold earlier in the week.
I had a pretty good experience selling calls last week with such high volatility premiums. I was selling calls that would have me breakeven at equity prices seen in the early market response to COVID19 (prices at SP500 levels of 28/2900). With short tenors too, for example 3/31 expiry. I figured, if the markets stay depressed I pocket some nice premiums, if the markets rebound I lose out on the calls but the remainder of my portfolio will outperform.
LC, .can you walk me through one example of this. It eats a lot of margin, non?
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Added BRKB
and also TSCO.. With people wfh, maybe more will start raising chicken!
I hear bats make good eating. Taste like chicken.
Energy Sector
in General Discussion
Posted
What this says to me is that if you have pipe already, it will become increasingly valuable. The repercussions for future supply are interesting to say the least.
SA, And to a lessor degree the other large Mideast countries are going to be facing revolution if the oil price stays down for very long. We saw what happened to Libya’s and Venezuela’s supplies when governments become unstable. Simultaneously we have a virtual elimination of long tail projects by every major player in the world.
The outcome is likely toppled regimes, and a massive price bounce back, down the road. It may become more like railroads, with very few players making a lot of money.
We could speed up the rebalance really quick by turning the gulf fields into glass. China may take exception but I sure Moscow would be on board.