Octopus Overlords

I never have understood the idea of borrowing money to invest. Are people that confident that they'll make money in the market that they're willing to play with a bank's money to do it?

pr0ner wrote:I never have understood the idea of borrowing money to invest. Are people that confident that they'll make money in the market that they're willing to play with a bank's money to do it?

Is the answer really unclear to you?

Now whether all of those people should be that confident is another question.

Yeah, I know. But still, the stupidity of people when it comes to money never ceases to amaze me.

pr0ner wrote:Yeah, I know. But still, the stupidity of people when it comes to money never ceases to amaze me.

Same here. Whenever I see stats on the average American savings rate / credit card debt / income to mortgage ratio, my head explodes.

xwraith wrote:

noxiousdog wrote:I don't see this ending well.

This sounds disastrous and I'm already pretty nervous with the markets at record highs. At some point there is going to be a correction, and a lot of margin will just accelerate the decline.

Yeah, I'm already putting aside cash for that correction. Last time I knew it was coming, but thought the banks would come out well from it (the housing/credit bubble, and had a pretty penny in BofA. However, the bubble was a lot worse and different from what I thought it was, and banking profits and risk were much more opaque to me (the CDS's really seemed to me to exponentially magnify the risk and danger of a market crash).

At this point, everything I still have, I'm holding on DRIPs, and I'm just putting together a stash for the next crash. I don't see it as trying to time the market but rather looking for a good deal at the right time.

I noticed that the DOW crossed 16000 today. Does anybody else have the sense that the market is overbought?

xwraith wrote:I noticed that the DOW crossed 16000 today. Does anybody else have the sense that the market is overbought?

Yah. Big time.

Has there ever been a time when a benchmark hit an all time high when the market wasn't overbought?

Intellectually, I know I should be selling like crazy right now.

Yet I don't. Why not? Emotions. Greed. Fear (of losing out on what maybe be a longer run up). Belief in exceptionalism? The idea that the stocks *I* am in right now are going to be immune to any imminent drops, or retractions in the market. That they may drop, but largely will hold value better than most.
HOGWASH.

Maybe if I list things out, I can get the gumption to do what I know needs doing:

1. The broad investment community agrees that the market is "expensive" right now, indicating that most stocks are currently overvalued, whatever that means.
2. We know there are cycles of highs and lows. It's a natural progression, like birth and death. A sell off is COMING...that is a fact. Just a matter of when.
3. One of the best (and curiously most difficult, for human nature) ways to actually make money in the market is to sell your gains, HOLD cash until the broad market drops (<- this step in particular is the difficult one), then pick up great names at low, low prices. Rinse, and repeat.

I really need to take a much closer look at my holdings, with selling in mind. To be fair, some of them I am waiting for the next dividend to drop, which is in Dec.

Aaaand that's why no one should listen to me for financial advice.

So the beginning of tapering is announced, and the market reacts positively. Thankfully, I didn't heed my own advice and ironically this am spent the last dry powder I had on more Ford shares due to an oversold situation IMO of course.

Two thoughts on the reaction:
1. it's going to be slow, drawn out selling over months, as opposed to every one pouncing on the "SELL!" button as soon as its announced
2. it's long term, GOOD news, since the Fed sees the economy is healthy enough to start carrying its own damn weight again.

I don't quite buy #2 as Mr. Market doesn't seem to be much into the long view of things usually.

Sometimes it's better to be lucky than good. AKA, I did something really dumb.

I have a few brokerage accounts. One of them I use primarly to accumulate blue chips. It's a low commission account but it doesn't have real time quotes or level II. That's fine. I haven't touched it for a while but recently I wanted some DIS options for earnings. I decided to sell some DIS shares, buy the options, hopefully make some money on what I was sure to be an earnings beat, and then buy more DIS shares. So on Tuesday I sold the shares, bought the options with the proceeds, and waited for earnings.

I got squeamish and decided to sell Wednesday with a modest gain (FEB 7 Weeklies, $71.5 calls @$1.30, around a 20% gain). When I punched the order, I got the Regulation T violation warning. I freaked out a little because I thought the account was margin. It was cash. Settlement is Friday. Apparently when they moved from Zecco to Tradeking I had to fill out some margin paperwork and didn't so the account reverted back to cash. Anyway, I did the quick date math and was happy at least that I'd be able to sell on expiration. So I was stuck with the options.

DIS killed it and my $1.30 contracts were $4.25 by this morning's opening. Bid is $5 right now ($76.50 DIS). I did apply for margin and got approval by this morning so I tried to sell again, hoping maybe the margin would be retro but no love. I called and admitted my mistake and the guy sympathized but said the margin would only apply to new trades.

So I'm sitting on these until tomorrow. Can't sell today without getting a Reg T violation. Won't be a problem in the future because I have margin again in the account. My guess is a ~$74 open tomorrow (currently ~$76.60) so the wait will cost me.

But what is the net result? I would have sold at $1.30. Right now the spread is $5.05/$5.20 so I could sell right now for $5.10 easy. Which happens to be the intrisic value. I'll get intrinsic value minus a few cents tomorrow. At $74 that would be $2.50. So even then, my "mistake" will net me around $1.20 extra per contract over what I would have sold on Wednesday, though I'll have to watch $2.50 in 12 contracts disappear overnight .

Why am I typing this out? To get it out of my head so I stop obsessing at the ticker and just suck it up and wait until tomorrow. I have a meeting in 10 minutes and I need to close this out. And as a reminder tomorrow that as long as DIS is over $73 to still be grateful - being dumb and lucky worked out better than being safe and smart.

LOL....nice!

Sir, move AWAY from the TICKER!

Nice, LawBeef.

I've just recently dipped my toe into options trading. They sure do raise the pressure quite significantly.

I considered buying puts to lock in the $5+ price. Probably would have if I weren't getting hammered at work.

Zaxxon wrote:Nice, LawBeef.

I've just recently dipped my toe into options trading. They sure do raise the pressure quite significantly.

Higher risk but I've found that psychologically, they make me take profit or cut a losing positon much quicker. Expiration and decay are powerful motivators once you've seen both wipe out a position.

LawBeefaroni wrote:Higher risk but I've found that psychologically, they make me take profit or cut a losing positon much quicker. Expiration and decay are powerful motivators once you've seen both wipe out a position.

Definitely.

DIS is in the red but just barely. Rising tide in the overall market probably keeping it afloat. Weird feeling, selling half of a position and knowing that if the other half goes to zero, you've still doubled your money. Going to ride the other half until close to market close.

Still have IGT April $16 calls, not looking so good for them. Probably time to cut and run.

TWTR was a great bounce play this morning, if I weren't closing out this DIS I would have been trying that one. Was watching that and SPR.

GOOG is about to get messy (PDF). All so Sergey and Larry can keep more votes.

3/27:
On March 27, the Class C shares will commence trading on a WHEN ISSUED basis (GOOCV). At that same time, the EX DISTRIBUTION WHEN ISSUED market for the class A shares (GOOAV) would be made available. This market represents the ability to trade the Class A stock without entitlement to the Class C distribution.

4/2:
From March 27 through April 2 we will be trading:
++ Class A shares regular way, with entitlement to the class C shares (GOOG)
++ Class C shares when issued (GOOCV)
++ Class A shares on an EX Distribution, when issued basis (GOOAV)

4/3:
After the close of market on April 2, 2014, NASDAQ will review the closing price of the Class C shares (GOOCV) and make a determination and announcement regarding what the adjustment amount for the Class A shares will be on the EX date of April 3, 2014. On the EX date, April 3, the closing price of the Class A shares (new symbol GOOGL) will reflect the adjustment amount.

Effective on the EX date, April 3:
++ Class A shares will have a symbol change from GOOG to GOOGL. The stock is EX on this date and commences trading at the adjusted price.
++ Class C shares have a symbol change from GOOCV to GOOG, and commence trading on a regular way (T+3) basis. The WHEN ISSUED settlement date would be April 8.
++ The market for the Class A shares on an EX Distribution, WHEN ISSUED basis (GOOAV) is suspended since the Class A stock is EX on this date.

6/23:
June 23
Quarterly Rebalancing: Prior to market open on Monday, June 23, 2014, Google Class A shares will be removed from the NASDAQ OMX Indexes and Google Class C shares will become the sole security representing Google in NASDAQ OMX Indexes

I bet arbitrageurs will figure out some way to profit on this.

There's a bigger deal that's about to hit pretty much the whole tech industry.

LawBeefaroni wrote:GOOG is about to get messy (PDF). All so Sergey and Larry can keep more votes.

There's precedent with Berkshire.

noxiousdog wrote:There's a bigger deal that's about to hit pretty much the whole tech industry.

If that stuff is real, they are in for a world of hurt. I just went through corporate price fixing training and the emails are almost verbaitim in the "Do Not Do" list. Why people think it's a good idea to do this stuff is beyond me.

Schmidt responded:

“I would prefer that Omid do it verbally since I don’t want to create a paper trail over which we can be sued later? Not sure about this.. thanks Eric”

If there's anyone who should understand that sending an e-mail IS creating a paper trail - outside of litigation attorneys - it's technology executives.

El Guapo wrote:

Schmidt responded:

“I would prefer that Omid do it verbally since I don’t want to create a paper trail over which we can be sued later? Not sure about this.. thanks Eric”

If there's anyone who should understand that sending an e-mail IS creating a paper trail - outside of litigation attorneys - it's technology executives.

I did laugh at that - and at the one from the HR manager basically saying "good idea!"

stessier wrote:

El Guapo wrote:

Schmidt responded:

“I would prefer that Omid do it verbally since I don’t want to create a paper trail over which we can be sued later? Not sure about this.. thanks Eric”

If there's anyone who should understand that sending an e-mail IS creating a paper trail - outside of litigation attorneys - it's technology executives.

I did laugh at that - and at the one from the HR manager basically saying "good idea!"

And he didn't even think to instruct the other person to double delete the e-mail.

You might as well write "I strongly suspect that I am violating the law by sending this e-mail" at the end.

noxiousdog wrote:

LawBeefaroni wrote:GOOG is about to get messy (PDF). All so Sergey and Larry can keep more votes.

There's precedent with Berkshire.

Yeah. But this dividend split thing is going to be complicated.
IIRC BRKB was created as a lower cost entry rather than splitting BRKA and happens to hae dilluted voting. It wasn't the result of a convoluted split.

noxiousdog wrote:There's a bigger deal that's about to hit pretty much the whole tech industry.

"The Tectopus?"

Wow. That's incredible. And extremely believable.

LawBeefaroni wrote: IIRC BRKB was created as a lower cost entry rather than splitting BRKA and happens to hae dilluted voting. It wasn't the result of a convoluted split.

The differences are pretty minor. It was done to thwart companies making unit trusts, but was designed with 1/6th voting power. I guess that's better than no voting power.

noxiousdog wrote:
The differences are pretty minor.

Don't tell that to everyone having to deal with the backend of this Google "split."

LawBeefaroni wrote:

noxiousdog wrote:
The differences are pretty minor.

Don't tell that to everyone having to deal with the backend of this Google "split."

I don't really understand what you're saying. For every 1 share of GOOG, you're going to get 1 share of GOOG and 1 share of GOOGL.

There will be an interim period where you're trading GOOCV (C shares) and GOOAV (A shares), but thats only 5 days it looks like.

Am I missing something?

noxiousdog wrote:

LawBeefaroni wrote:

noxiousdog wrote:
The differences are pretty minor.

Don't tell that to everyone having to deal with the backend of this Google "split."

I don't really understand what you're saying. For every 1 share of GOOG, you're going to get 1 share of GOOG and 1 share of GOOGL.

There will be an interim period where you're trading GOOCV (C shares) and GOOAV (A shares), but thats only 5 days it looks like.

Am I missing something?

It's a pain. Options contracts are adjusted, GOOG also has mini options so those have to be adjusted. When I say backend, I mean all the brokers, market makers, programmers, traders, etc. If your systems aren't updated you will get pounded. Hard. There will be much testing. Not that they're not up to it but it's a lot of work for everyone else so GOOG can dilute votes.

There will be an interim period where you're trading GOOCV (C shares) and GOOAV (A shares), but thats only 5 days it looks like.

Am I missing something?

Yes, that's my point. It's not that simple.

Three will be GOOCV, GOOG, and GOOAV, not just GOOCV and GOOAV.

Instead of the standard ex date 2 days before the "dividend," the ex date for this switcheroo is the day after the pay date, per rule 11140. On the 27th, Class C shares are created. So you will have GOOG (Class A pre-ex, which is A+C), GOOCV (Class C), and GOOAV (Class A ex, which is A only). Those three issues will trade until April 3. Then GOOG becomes GOOGL, with GOOGL, nee GOOG, holders getting a share of GOOG, nee GOOCV. GOOCV becomes GOOG. And then GOOAV becomes GOOGL with no GOOG/GOOCV shares distributed. And because the adjustment amount will be determined on April 3, all three will be trading in a weird zone until then.

I guess so. It's not like this is the first stock to do a spin off or split though.

Candy Crush Saga IPO not so sweet:

The initial public offering, which debuted on the New York Stock Exchange under the symbol KING, declined $2.52, or 11%, to $19.98. The shares original price was set late Tuesday at $22.50 a share, which was at the midpoint of the expected range.

You can watch the fun.

It's a terrible IPO. But they admitted as much in their prospectus. They don't need $500M, they just deciced to raise $500M.

I've been shorting ZNGA and was looking to do the same with KING if it blew up.

"Federal prosecutors filed criminal charges against PG&E PCG, continuing the saga stemming from the September 2010 pipeline explosion in San Bruno, Calif. If PG&E is assessed the maximum $500,000 fine for the 12 counts alleging that it knowingly broke federal safety rules, it would result in virtually no impact on shareholders. We are reaffirming our $47 fair value estimate and narrow economic moat."

I wonder at what point the pendulum will start to swing back from the overly pro-business age we seem to be in now. Just another small example of a large problem, I think, showing that we may have given corporations a little too much leash in the past couple decades.

Difficult to find and maintain a healthy balance though.

Carpet_pissr wrote:"Federal prosecutors filed criminal charges against PG&E PCG, continuing the saga stemming from the September 2010 pipeline explosion in San Bruno, Calif. If PG&E is assessed the maximum $500,000 fine for the 12 counts alleging that it knowingly broke federal safety rules, it would result in virtually no impact on shareholders. We are reaffirming our $47 fair value estimate and narrow economic moat."

I wonder at what point the pendulum will start to swing back from the overly pro-business age we seem to be in now. Just another small example of a large problem, I think, showing that we may have given corporations a little too much leash in the past couple decades.

Difficult to find and maintain a healthy balance though.

Off the top of my head, BP would likely disagree. I thought the LIBOR fines were pretty steep considering nobody could prove actual harm.

This also doesn't preclude any civil litigation.

But if the $500,000 fines aren't enough, they should be increased.

I agree that it's a meaningless fine but it's not like the incident won't cost them:

Following the San Bruno accident various lawsuits were filed in San Mateo County Superior Court against PG&E Corporation and the Utility to seek compensation for personal injury and property damage, and other relief, including punitive damages. In 2011 and 2012 , the Utility entered into settlement agreements to resolve many of the claims and In September 2013, the Utility agreed to settle the claims of substantially all of the remaining plaintiffs who sought compensation. At December 31, 2013, the Utility has recorded cumulative charges of $565 million as its best estimate of probable loss for third-party claims related to the San Bruno accident and has made cumulative payments of $520 million to third-party claimants.

I imagine successful criminal charges will open up more liability for anything not yet settled.

Good points, and note that the quote is "IF" the max fines are imposed - so it might not even get that merely symbolic slap on the wrist.

Carpet_pissr wrote:Good points, and note that the quote is "IF" the max fines are imposed - so it might not even get that merely symbolic slap on the wrist.

I think that's company spin. This says they could get a bigger penalty if they benefited financially. I read that if it was a financial decision that led to the lack of safety, the fines could grow.

noxiousdog wrote:

Carpet_pissr wrote:Good points, and note that the quote is "IF" the max fines are imposed - so it might not even get that merely symbolic slap on the wrist.

I think that's company spin.

It sounds like that quote is from an analyst report, not PCG. Still might be spin but it's not PCG's spin.

Also, sold my ZNGA puts too early.

LawBeefaroni wrote:

noxiousdog wrote:

Carpet_pissr wrote:Good points, and note that the quote is "IF" the max fines are imposed - so it might not even get that merely symbolic slap on the wrist.

I think that's company spin.

It sounds like that quote is from an analyst report, not PCG. Still might be spin but it's not PCG's spin.

Yeah, M*. Sorry, should have cited.