Got a Bit Nervous on my XLF Puts

About two weeks I go I wrote about selling some XLF Puts. This morning I started getting really nervous about the state of the economy in general. Maybe I have been reading too much of Barry over at The Big Picture, but the more I think about it I might want to be learning basic skills for survival in a post-apocalyptic world. What these skills might be, I have no idea. JUST JOKING.

In all seriousness, I have been getting worried about the state of the US economy (finally). I sold a call this morning, and then I went to look at my short XLF puts. On August 23rd I had done the following:

Sell 1 September XLF 21 put at $1.12
Sell 1 September XLF 20 put at $0.72

Today I bought the 21 put back at $0.87. I will leave the 20 put out there, but I might cover it if I start to get nervous again.

You Don't See This Everyday

The S&P opened today, plunged 15 points, and rebounded to about flat. The September 1300 calls, 60 points out of the money, expiring in 1 week, are up $1.

I could understand puts going through the roof. Lehman is screwed, Fannie and Freddie are done, people like this Swedish guy are calling for a depression. Not a recession, but a DEPRESSION. 1929 style. But calls?

I sold one September ES Mini 1300 call at $3.50. It is now bid at $3.60.

Obama's Speech Patterns

Bill Clinton had one. George Bush had a fake one. Stephen Colbert got rid of his. Now Obama seems to be trying to acquire a southern accent. Maybe he thinks that the northeast and California is so deeply in his corner that he need not try to relate to them through familiar patterns of speech. Perhaps the majority of this country is so stupid that they can't vote for some fast talking black man from up north. Whatever the reason, it infuriates me to hear Obama flatten out his a's. Listen to Obama's lipstick speech as he talks about policAH. He sounds like fucking Cartman.

Here is a good video of Obama speaking clearly and normally with what I would expect would be the normal pattern of speech of a Harvard educated guy. Listen to how he says "policy."

Now here he is talking about policah.

Here is Cartman

Geniuses

Sometimes I wonder if Republican strategists are just smarter than everybody. They seem to be able to spin every possible story to their advantage. VP's 17 year old daughter pregnant by a guy who doesn't want the child? Rational, free-thinking people might believe that this is a call for an end to abstinence only education. Somehow it has turned into a lesson on family values. An inexperienced VP chosen by a party whose main attack of its opponent has been that he is inexperienced? No problem. She brings fresh experience and family values. John Stewart has a great segment on the double talk.

Recession on the Way

Back in March, Warren Buffet declared that, "From a common-sense standpoint right now, we're in a recession." When I heard this, I was not quite convinced. Who is this old bastard from Omaha anyway? Then I heard Young Jeezy's song "Put On." Here Jeezy emphatically declares, "recession on the way."

No surprise that there is a Jay-Z remix of this song. Jay-Z has been bearish on the economy since the release of his American Gangster CD. In the video for "Blue Magic," he waved Euros to symbolizing his lack of conviction in the greenback. Further, in "Jockin' Jay-Z," he also alludes to the recession saying, "Fuck talking bout the recession it's depressin." The recession certainly is depressing, but Jay might be more depressed about a Euro trade gone wrong. If he has been long Euros for the past 11 months he has not been doing too well.

Fortunately, Lil' Wayne waded in on the controversy and cleared a lot of things up, saying, "Nah man, it ain't so bad. Shit, I lost some money on pork belly futures, but you know I made bank shorting oil last month. You got to be on the grind every day in this kind of market."

Buffet also mentioned that he puts on for his city (Omaha, Nebraska).

From the Republican National Convention

Number of mentions of George Bush by

Sarah Palin: 0

Rudy Giuliani: 0

Mike Huckabee: 0

Mitt Romney: 1

Fred Thompson: 0

Joe Lieberman: 0

Michael Phelps is Killing the Environment

Perhaps it is because I am a born cynic and can't stand to get behind anything that seems wildly popular in America. Or maybe it is because I hate Bob Costas. Whatever the reason, I can't stand the Olympic hype. At the center of it, is Michael Phelps. Who can hate Michael Phelps? I can. He is killing our environment. He is setting a dangerous example to children everywhere that mass the consumption of resources that generate massive amounts of greenhouse gasses in their production is acceptable.

It was reported that Michael Phelps eats 10,000 calories a day, 7,000+ calories more than the average man. In order to produce 7,000 calories worth of beef, 308 pounds of carbon dioxide are emitted. Obviously Phelps isn't eating all beef, but I bet he has a lot of protein and animal products in his diet. Let's say the production of the food he eats above that of a normal person emits an extra 150 (instead of 308) pounds of CO2 per day, or 112,420 pounds per year.

The average American drives 12,000 miles per year. If you do this in a 23mpg Ford Taurus, you burn 520 gallons of gas or 10,400 pounds of CO2. If you enjoy driving a sweet Hummer H2 on 22" inch rims, you will burn 923 gallons of gas and generate 18,462 of C02, just 8,000 more than the guy in the Taurus.

So while many people may point to that asshole in the Hummer, just think that he is only doing 7.1% of the damage to the environment that Michael Phelps is. The next time you are driving around in your Expedition with the Windows open and the AC on and some tree hugger in a Prius gives you a dirty look, remind them that their Olympic hero is doing almost 14 times as much damage as you are.

Some people at my dinner table on Friday night did not agree with me. Their argument was that, who cares, it is only one person. Of course at the margin that one person does not make any difference, but nor does the guy in the H2. I countered by making the even more persuasive argument of storming off in a huff.

Sold a Covered Call on RWR

Three years ago, I was bearish on REITs and started selling uncovered calls. As you might expect, I did not do so well. I wish I had stuck it out - there would have been a nice payoff.

After an optimistic round of guests on Bloomberg's morning call, the drop in oil today, and the rally we saw last week, I started thinking that everything might not be as bad as it seems. Unleveraged RIETs owning commercial property as opposed to subprime residential will probably do okay, and the hefty dividend (currently around 5%) will probably carry you through. The other thing which I have not heard mentioned as much is that, if inflation is a big concern, REITs holding physical property might not be such a bad play after all.

With this logic I bought 100 shares of RWR at $69.51 and sold the September 71 calls at $1.00. If the stock is trading much lower at expiration, I will probably roll down to the 70 calls.

At least Barron's agrees with me.