The Barbell Strategy of Investment

In the book "The Black Swan" there is a long discussion of the traditional investment theory of "portfolio management"----in a time of crisis, traditional theories of "portfolio management" are not effective because...in a moment of raw panic, such as in 1987 or recently in 2007....everything goes down....and mutual funds provide NO hedge.... The only thing that works was shown pretty dramatically in the Wisconsin Pension Fund during the crisis of 2007-2013...even when participants that 50-50 split between fixed and variable, they took large reductions in pension income reduction.... The "Barbell theory" as described in "The Black Swan" proposes 90% in fixed or very conservative and 10% in very agressive speculation such as options and very high growth stocks. That is the theory...we will see....stay tuned.

Reduce Your Basis---Monetize the Math

For very conservative investors, reducing the basis by covered call writing can be a way to increase profits...So..whether it is by dollar cost averaging, or call writing...getting that basis lower increases the probability of profit.

"The Future is Wide Open" and other funny stories

Whenever my family leaves town, or at least in the old days when the kids were in the back of the Ford Aerostar...we used to insert a cd of Tom Petty's greatest hits, and the first number or so was the song with the line "The Future is wide open." It was kind of a soothing ritual...and during times of stress...like leaving for college...leaving for a job...etc, etc,,,well to summarize...we wore out the cd...I am not sure statistically whether we did indeed reduce the amount of stress...we did not have a proper test group...but still....here is my review of the concept. Whenever we listened to the song, as the older guy in the group, I just wondered whether anyone had really tested just how wide open the future was....and then last week, I heard a presentation in which a guru said that the stock market pundits who say that one should "never limit your upside" are simply full of "xxxt"....The truth that the money pros all know is that one "ALWAYS" limits the upside, and takes the other side of the transaction, making oneself the banker, not the river gambler....writing calls, shorting...anything but gambling on the eternal upside.... So there it is,,,about the "Future is Wide Open"....and now I think of Tom Petty as a financial guru...I do need to get another cd so I can never forget the message....

Charts Describe the Past; Options Speculate on the Future: Do not confuse the two

Whenever one reads a written piece of promotion from a Wall street firm, one usually finds the disclaimer, "Past results to not imply future performance." And one might wonder why this is so...because it is required to tell investors that the past is gone...done...and yesterday does not matter... Someone needs to tell those chart guys the above paragraph....all the chart guys seems to think that they seem to know....trust me..they don't...and legally cannot....make a note of it.

"You Don't Know the Future---Trust me": a classic from www.tastytrade.com:

In a quick overview of financial education by Trader Bob last week on Tasty Trade, which broadcasts at www.tastytrade.com he mentioned that in traditional instruction, as limited as it is for our high school and college graduates...there is the learned behavior of having a "belief" about the future...as in ,,,after analysis I believe that...a) the market is going down, or b) or going up or c) going sidewise.....ditto for individual stocks. In reality, when listening to the pundits on tv, they mostly just recite the data points from the past and point to "interesting" and "foreboding" signs,,,maybe giving them a "double top" or such magical name to impart some meaning to the lines and formations....and in the end, making you believe that because they have shown you this funny little diagram, they know something very deep and profound about the future----and to which, Trader Bob says----"Trust me--you do not know the Future". As a test for me of his instruction, I have begun placing both bullish and bearish option positions on a "paper" trading platform called "Think or Swim". Immediately after placing the positions, I have been carefully noting that one of the positions is profitable, and one unprofitable literally seconds after putting the trade on...and mostly, it does not go as I presume...and I think...and as I believe...merging my belief and my knowledge....and well...it all has added up to squat...and in the end...it is best that I get "agnostic" or "sanguine" or in Trader Bob's favorite term---"Delta Neutral."

The Inverse Barron's Front Page Pic Rule

On the Saturday before the Stock Market Crash of 1986 was the picture of a HUGH BULL... Right before the Market began the Bull Market, there was a picture of a huge BEAR...Market pros know and plan accordingly. On April 20, 2013, the picture on the front of Barrons said "Dow 16000".. On CNBC one of the commentators correctly said, "Market traders down here consider that bearish"----This Inverse Barron's front Page Rule has gone on for a long time. Make a note of it.

Gold: :Point and Counterpoint: Bear Trader Writes

"Bear Trader Writes: SPX has held at support so far, both the 50 Day EMA and the Charles Dow style rising trend line, at 1541. Slow Stochastic reads "sell". Momentum indicators are very weak. Myself, I would wait until Halloween. Turbulence ahead, the options boys will do well. I mean, you and I hold overnight which makes us "buy and hold" people nowadays. Trends are hard to spot. NEM and ABX are up yesterday and today on considerably lower volume after being down on much higher volume. Two days does not make a trend. More like five. NEM - my best guess is sell at 36 stop at 32 until technicals become clearer. My guess is 75% you wouldn't lose money (not including commissions). Currently very oversold. ABX - my guess is sell at 22 stop at 17 until technicals become clearer. 75% confidence as above. Very, very oversold. Wall Street Journal recent article said stay away from miners. There is recent bad press about Barrick. I think this is bullish. On Fri, Apr 19, 2013 at 11:56 AM, Richard Woulfe wrote: Bear Trader--- All the reasons I have heard why gold has plunged are looney...at these levels, such as NEM, and ABX it seems like a little bit would be ok... what do you think? We are in a little SPX bounce today---if holds above 1541, then there could be the argument that it still is in the "up" channel. However, from years of summer trading on Wall Street, I have a bent to be away....and stay away till the weather cools, ----how do you see it? wolfman