October 10, 2012 86, 94, 54

BAGAKOAA; October 10, 2012 86, 94, 54

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October/2012

Ok I did not blog yesterday and all I can say is DWTS. Yes, Dancing With the Stars. It is a terrible excuse, but I am using it.

Yesterday was a crazy busy day. After ignoring my desk and 6 days worth of mail, (and we get a lot of mail) I got Jack to school, ran over to my bagel place (they remembered me though I have only been there twice since my retirement), then back home to meet with contractors who are tearing our backyard apart looking for a leak in our pool plumbing and re-landscaping the non-pool area of the yard, and re-doing our master bedroom closet (you all know I am a slave to fashion), then plowing through the stack of mail and 194 e-mails, creating a 29 item action list (Butch would be proud of me.), called my financial advisors to get some questions answered and answer some of their questions, confirm some confirmations (we live in a strange world don't we?) for a trip to New York I am taking tomorrow, help Devin empty our master bedroom closet (not quite Carter and Herbert and King Tutt's crib, but close), hunt down realtor extraordinaire Mike Ameel concerning our commercial property we are trying to wrap up, pick up our cat who had an echo cardiagram (not a happy cat when I got there. They asked me to come in the back room to help get Sebastian back in its Sherpa case. I had no idea he had so many sharp scary looking teeth. I thought about telling Devin he died and leaving him there, but reconsidered and they brought a guy with these gloves you use to handle nuclear waste, but I digress), made it home just in time to go out and grab some essentials for the pantry.

By the time we finished a delicious meal of pizza and wings, it was time for DWTS. After that it was my bed time. Well I did read the IBD (Investor's Business Daily) and a book sent to my by Bob S., Vineyard at The End of The World, about the unappreciated Malbec Grape from Argentina. Off to a good start, I like it. Thanks Bob. On my Kindle, I continued Preston's and Spezi's the Monster of Florence, a great history of Florence woven around a modern day murder mystery.

Then it was too late to entertain you all with craziness from Croninland. By the way the ranks of our readership has swelled to 66 people (Ok it has gone up one, picky picky picky.) My sister Kelly has joined our group. Having her own crazy clan of two boys Conor and Rory) and one girl (Cameron) and a very busy husband Ed, she was honest enough to tell me she won't be able to read it everyday.

I admitted I do not write it everyday and even when I do write it I some times don't read it.

Kelly and her family have recently relocated from Las Vegas, Nevada to Minot North Dakota and they are adjusting very well to the climate and cultural change. Welcome aboard the Salve Lucrum blog train.

Today, I had the pleasure of actually doing some of the 29 things from my action list, but had a chance to have lunch with my former CFO, Gary P. It was good to touch base with him and hear all the good stuff going on at the Zoo, I Mean PADI. I am glad he is doing well and things are pushing along with me. Not that I ever thought differently.

One of my many chores today was waiting to pick up some prescriptions at the pharmacy today. (How many times can you put the word "today" in a sentence?) I now am as well known at the pharmacy as I am at Hanna's. The sound of, "Hey Mr. Cronin." From Albert behind the counter does not have the same effect as the beautiful Deanna, Rachel, Miammi Shanaynay aka Alicia, Beth, Andrea, Dianne, Stephanie, Jessica, Hilary, Ashleigh, Kristin, Brooke, to name a few, saying Hey Mr. Cronin. (Dave H., if I missed any of the ladies please cut and paste this with their names in and resend it to yourself so I don't get poisoned next time I am in.) But I digress.

While standing in line waiting for my Fix, I noticed how many types of hand lotion there are. There were 86 types and sizes of hand lotions. It made me ponder, what kind of society do we live in where you need 86 types and sizes of hand lotion? We only have two hands?

So after my drug score, I looked at the toothpaste aisle. The fact we have a tooth paste aisle should be a warning. 94 different kinds and sizes of tooth paste? While it is true the United Kingdom is just now discovering orthodontia and dental health care (A loyal subject's words not my own.), why do we need 94 different kinds of toothpaste?

Really, come on, we all have teeth and the part we clean is an enamel made of crystalline calcium phosphate. One toothpaste should make us happy. Disgusting.

Later in the day when I was at home completing the sacking of our master bedroom closet, I was counting my white socks. Don't ask why, retirement does weird things to your brain.

54 pairs of white socks. Nuff Said!

Value Versus Verbiage

I did not get to see any market news until this afternoon. Obviously it was our fourth day of decline. Tuesday decline was enough to have us change the flag from Green to Yellow, and today's action will undoubtedly define a market in correction, aka Red Flag.

What does that mean to you as an investor (not talking about day traders here)? You probably want to look at your key holdings, your true blue "core stocks" for us that would be AAPL, MSFT, XOM, ABT, CVX, MCD, PG, BDX, KO, INTC, JNJ, WPZ, BOFI, GLD, and OXY. Be prepared to take a profit when we see a red flag or even now if your gains exceed 10-15%. You don't have to sell it all, but consider trimming your position by the amount of your gains and wait for a better re-entry point.

On you speculative bets, take your profits and consider selling out. Speculative ventures usually get nailed the worst during a correction and we are due for a correction.

What is causing this shift in sentiment? Who really knows? We had some growth downgrades from several regions. Alcoa kicked of the new earnings season with and expected negative note.

(Sidenote here: as you know I was reading Benjamin Graham's Intelligent investor a few weeks ago and it makes me want to wish for the days -LAST EDITION WAS WRITTEN IN 2003 BUT BASED UPON GRAHAMS WORK IN THE 1970S- when you could value a company by performance and to some extent the companies ability to meet or miss expectations. Today, C suite personnel have become extremely good at not surprising expectations so the swings in price are directly influence by what is said during the earnings calls.)

Alcoa added to the bleak outlook as it is a world supplier of an important commodity. To the contrary YUM brand and Costco had great numbers. CVX warned of a lowering in earnings and global demand for the dark icky stuff.

The New Beigebook is here, The New Beigebook is here, zzzzzzzzz. Nothing new to report from the Feds report card.

Let's talk about one of our core holdings MSFT. As you know we have been using the sale of put options to beef up our returns this year. Of the several sold put positions we have only two are in a negative position. AAPL and MSFT.

First off, Bob H. aka Hutch wants some credit for calling the 700 dollar peak for AAPL. I'll give him that one. We executed a sell on a December 625 put on AAPL, meaning we have to buy some AAPL at 625 as share if the price of the shares makes AAPL at 625 attractive. We sold those put at a nice premium so we don't mind if we get "put" or "stuck" Apple at 625.

Microsoft is an interesting long term play below 30. We have the sold puts in place for the December 30 price. They could be called away at anytime and then we would add MSFT at 30 to our position. Not a bad entry point if it were not for a red flag flying.

Now for you brave souls who have been following along with some of the put options we have been selling, we definitely want to change the strategy for the red flag, a falling market. Now we want to consider selling call options.

We will have Salvay and Lewcrum do a special report on selling call options in a few days. Until then, here are some crib notes. In a falling market, you don't want to be buy call options. You either want to sell call options or buy put options. We prefer the sell of a call.

Selling a call option requires you to buy that stock at a future price if that price is above the strike price. For example, AAPL closed today at 641 and change. If you sold a call option for January at 675 and the stock recovered to Bob H's high watermark of 700, you would have to buy the stock back at 700. If the stock continued to slump (quite possible during a market in correction), you would get to keep the premium you sold the call option at. The example sited would set the current call option at 21 dollars and change. If you sold that option you would get 2,100 dollars but you would be on the hook to deliver 100 shares of Apple in January of the stock recovered above the 700 dollar price.

Food for thought. Do your homework and really understand options before playing. It is not a game.

Salve Lucrum

Since 10/10/2012

BAGAKOAA;

I am not a professional investment advisor. Anybody reading my blog and investing accordingly must be out of their minds. I have made more money than I have lost. There are many more qualified people than I to actually tell you how to invest your money.

BAGAKOAA=Boys And Girls And Kids Of All Ages

Salve Lucrum=Latin for Hurrah for Profit.

2012 Year Ending

Dow 13,073

S&P 500 1,358

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