I live in Austin, Texas. I want to thank the FBI, the ATF and the Austin Police Department for their hard work. We all owe them our gratitude.

If you have read my blog over the last few months, you know I really try to avoid commenting on the political climate now in the US. As far as investing and trading goes, I think it is counterproductive to do so. 

Recently, many in Washington have denigrated the FBI and the Justice Department, eroding trust in these institutions. I think this is dangerous. 

I probably wouldn’t comment on this today, but I live in Austin and there have been 4 local bombings and 1 bombing in a Fedex facility just south of Austin.  

There has been a HUGE influx of federal agents into town, according to our local news channels. This includes agents of the FBI and the ATF. 

I want this to be over as soon as possible and I believe it will only come to an end after a lot of work by these federal agents as well as our local police. 

Those of us here in Austin, as well as everyone else in this great country owe these law enforcement agents a huge debt of gratitude. 

The Middle Path $SPY $QQQ $IWM $DIA

It’s getting close to about six weeks since the start of the correction. SPY went from about 285 in the final days of January 2018 to a low of about 256 on February 9 or 10. 

There was a rebound to about 275 around February 25 or so and then another pull back to 265 around the first of March. 

Another rally to 277 and now we sit about 275. Let’s take a look. 

Here’s what I see, this looks like a couple of higher highs, after the pull back of course, and a couple of higher lows. This assumes this low holds at 275. 

Providing this happens I think we ultimately get back to the rally and a new high, maybe before the end of this month or the next.  

But until then I am banking a bit on us trading within a range from 275 to around 283. 

Since I am net long the SPY I am selling call credit spreads every time we have an intra-day rally. At the end of the day and selling occurs these spreads fall in value. 

Should we have more of a pull back, I will sell corresponding put credit spreads expiring on the same date as the call credit spreads and thus create iron condors for that date. 

Stocks can go up or go down or they can do the unthinkable. They can go sideways.  

Kevin O’Leary on buying Twitter $TWTR, “I just don’t get it.”

Well, duh! 

Can anyone be surprised when Mr. Wonderful can’t find it in himself to buy TWTR (or NFLX, AMZN . . . . ). He states that you look at the balance sheet and it’s a “piece of . . . well you know what I want to say”. Yeah, Kevin, we know. You mean piece of shit.  

I’ve said it before. I have experience with people like him. He’s an old white guy, very full of himself. Sometimes wrong, but never in doubt. I’m a doctor and a lawyer. I’ve met and I know plenty of people like him. 

Well, because I’m a moron I bought TWTR when it was around 32 and change. I even bought call spreads in it, you know, because I like to buy pieces of shit.  

Old white guys tend to use these platforms less than millennials and have less appreciation for the potential of these platforms. If I am going to follow someone’s recommendations about these types of names, it is not an old white guy pushing his own conservative ETF.  

My investment in TWTR was recent and it was based on a recommendation by Josh Brown, a millennial. As I said it was trading around 32 and change and he recommended a stop at 30. This was on Feb 22. My investment is up about 12% 

Contrast that with Kevin O’Leary’s trade on Boeing BA. It was trading about 350 on Feb 22, today about 327. 

Why do I pick on Mr. O’Leary? Maybe because he’s an old white guy who has no curiosity about the future, with no ability to admit that he could be wrong. 

Does this remind you of anyone else? 



Why Carter Worth is (probably) Wrong about Facebook $FB $TWTR

A very long time ago I decided I wanted to write some fiction. Rather than just haphazardly spending a lot of time writing, I decided I wanted a bit of help. Unfortunately, this was before Google and the only web searches one could do was to use services that compiled and indexed websites. Anyone remember Dogpile? It was advanced for the time, being a compilation of compilations, a meta-search engine.  

So, I went to my local Barnes and Noble and looked for books and came across a book by Stephen King called ‘On Writing‘. It was really, really good. But one of the main takeaways I remember is you have very little hope of being a good writer if you don’t read and read a great deal.  

On this past Options Action (3-9-2018) Carter Worth recommended selling Facebook. It seems his favorite technical indicator is whether or not the equity is underperforming the S&P 500, or underperforming their sector, in this case the $XLK or technology sector.  

I discount this analysis on its face. A technical analyst can say a name is an underperformer and will continue to do so, like CBW does here, or there will be reversion to the mean and outperform.  

That aside, I disagree with this analysis on more fundamental grounds. On January 12th of this year FB announced it was changing its algorithm which would result in less engagement with its users. FB fell 4% that day, understandably because investors that know the product know this could result in less advertising revenue. I was a buyer on that day, and a seller of put credit spreads. 

Why? Because I am an old white guy that uses Facebook. I was unhappy with looking at FB and seeing radical political views from either side and then realizing sometime last year that these were being sent to me by bots. The fact that FB was changing its core business meant they were serious about changing it for the better, so they could continue to make money.  

Since that time FB regained highs up until Feb 1 when the market took its hiatus from advancing. It has consolidated since but over the last week has stayed with its technology brethren.  

Carter Worth makes no mention of this huge announcement about changing algorithms probably because he has no FB account or is even vaguely aware of how it works. I think this is the reason the name has underperformed and why it may actually out perform in the future. I may not be a committed bull on FB, but I am certainly not a bear. 

PS – Dogpile still exists, I assumed they disappeared with many of the early compilers. For a great fictionalized look at this time see the last season of ‘Halt and Catch Fire’ S4E9 here. It’s the one where Yahoo! ends being on the Netscape portal page.  

PSS – kudos to Guy Adami for admitting he was wrong on Friday’s show about the market retesting the low. Contrast that to Dan Nathan making no mention of the put spreads he admitted to buying earlier in the week in SPY, QQQ and IWM. Dan didn’t even come up with a final trade. Just said goodbye and good luck! 

The Cult of Personality, the Fallacy of Testimonials $VRX $GS $NFLX $HLF

We are fascinated in this country by celebrity, turning our most valuable asset constantly in their direction. We watch their tweets, buy their books and listen when they speak. 

When people become celebrities in the financial community we put them on TV, we listen to what they say and we give them our money. If we don’t give them our money, we follow them into trades thinking that whatever made them rich, will also make us rich. 

Thursday night I watched an episode of Dirty Money on Netflix. It’s an excellent series. The episode I watched on Thursday was titled ‘Drug Short’ and started off with Martin Shkreli and his legacy of acquiring the rights to Daraprim, a drug used in treating patients with HIV, and then raising the price 5000%. This action, although lucrative, is immoral. The documentary then goes on to investigate the pharmaceutical company, Valeant. 


Valeant ($VRX) took Wall Street, and particularly Bill Ackman of Pershing Square Capital, by storm. This company acquired drug companies, eliminated research and development (R&D) and raised the prices on orphan drugs, a la Shkreli. The stock price soared helped along by presentations by Ackman and Valeant’s CEO Michael Pearson.  

Ackman seems to have fallen for Pearson’s cult of personality, and much of the financial news industry seems to have fallen for the Ackman’s cult of personality.  

The last year hasn’t been kind for either of these two men. VRX is down about 90% from its highs and Pershing Square has had a horrible year, losing money when everyone else has been making money. Even after Congressional hearings when Ackman promised to look into pricing, nothing has changed about orphan drug pricing. Syprine, a drug used to treat Wilsons Disease, is still about 2500% higher than it was in 2010. 

On Friday at Fast Money Halftime, over half of the hour was taken up by the report that Lloyd Blankfein may leave Goldman Sachs. Although newsworthy, I’m not sure we needed to spend that much time with this, but again it points our fascination with personalities instead of performance. 

Just because someone is rich, doesn’t mean they are smart or gifted. It’s entirely possible they were lucky and we only pay attention to those that are rich, whether by skill or luck. 

We still pay attention to Ackman because he is still rich. Take a look at his big bet on Valeant, or his big short on HerbaLife and then tell me if you think he is smart/gifted? 

At the very least, we should be skeptical of what anyone says, especially celebrities, financial or otherwise.