No. of Recommendations: 2
HEK...recall buying at $2.69 expecting to sell around $3.50. Well, that went quick. They made an announcement about a merger deal and 4 days later they were at my sell point. I didn't really know the other company very well so I dumped and took my profit.

RNF...shot up to around $34 which is well over my covered call so I got assigned. Now, I bought originally at $30 thinking they were undervalued. My call was about 10% over the buy price. So I made the call plus 10% which is fine by me because I'm really after the 10% dividend stream. I gave up around $1.50 or 5% of potential return in order to make $0.80 or 2.7% of guaranteed return. Either way I made money so I don't consider this a bad thing. I still like them at $34 so I bought back in.

MU...finally assigned at $6. I had originally sold the call at $6 when the stock was floating around $0.25 for $0.38 so instead of selling at $6.25 I effectively sold at $6.38. The price was a little higher but I don't care because my goal was to sell it and make more than it was selling for on the day I wanted to sell for an additional 2% return.

My other open calls expired worthless. I reopened calls on Peabody at $25, NUE @ $40, and RNF @ $42.50.

My market outlook is that originally I expected a continued decline or steady market because the uncertainty about the election will continue to increase as we approach the end of October which generally depresses the market. The Fed "QE-infinity" thing was a total surprise. Last time this benefited all stocks with export exposure. The problem with QE-whatever of course is that it really doesn't do what it is purported to do and right now there is plenty of money sitting around but none of it is moving probably because lack of capital is not the limiting factor on growth. I feel really good now about stocks with exposure to energy, food, and exports, which almost defines my portfolio because those are the markets that I know best. For this reason I did not feel comfortable writing covered calls on CLF (iron and metallurgical coal), AA (aluminum), or MCP (can't safely write calls on this one anyway).

MCP finally dipped slightly upward. Next earnings release is in November. The stock took a nose dive in July/August because of a trifecta:
1. They actually did finally start up operations and somehow Wall Street things it's like a spigot where there is no cost to turn it on or turn it off. Profits won't show up until Q3 from operations.
2. China is still playing a dumping game to try to prevent competition so the stock market responded with news of "there will never, ever, ever, ever be any money to be made in XXX". Where have we heard that one before and how often was the prognostication right for more than a week?
3. Simultaneously with the startup, MCP once again went on a buying binge, and with all that, MCP once again played around with their debt financing.

I expect the Q3 quarterly report due during elections week to once again generate massive earnings "surprise". That is, a huge "surprise" to the Wall Street analysts. No one else would be surprised. At that point if it crosses, $20/share, I'm selling.

SFL continues to go nowhere fast as does CPLP despite being shipping companies. That was my intention when I bought. Looks like I'm in danger of being assigned on CPLP.

GM continues to stay on course where I expected it to be. Bought at $21.50. Sold a call at $22 on the same day for $1.50. Price is $22.75 so I'm still up 9% and not leaving any money at all on the table.

IPGP is another story. I bought at $61.50 and sold a $60 call at $4.81. Right now the price is $57.30 so I'm still up $0.61 or 1% but I was hoping for more. The option price has dropped to about $1 so I'd be in the red right now if I tried to exit early. Going to ride it out for the next month until the option expires.

I've taken some profits here this month. I'm kind of on the prowl now for some additional value plays that I'll hold until after the November elections. Trouble is that I just don't see much. If by mid October I still don't see anything then my last resort would be to buy an S&P 500 ETF and hold it.
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The problem with QE-whatever of course is that it really doesn't do what it is purported to do

One thing QE clearly does do is keep interest rates down. 10 yr treasuries peaked on 9/14 at 1.88%; Friday was 1.65%. 30 yr peaked 9/14 at 3.09; Friday was 2.82. So QE is good for abt 0.25% in interest rates.

And the stock market reacts positively in part because the yield of fixed income alternatives is lowered.

There are some forces out there that would like the stock market to be doing well (and better numbers for the economy would be helpful too) to help Obama get re-elected.

I notice that stocks like Smith & Weston and Olin have both had a bump up since the conventions. Those are stocks favored by gun advocates who fear Democrats might enact gun control. So people are buying guns now in anticipation that Obama will be reelected and Dems may get control of Congress. Perhaps that is too optimistic, but that's how the tea leaves read.

Is this a temporary bubble? Or is the stock market correct in predicting better times ahead?
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My personal feeling is that the stock market itself is far LESS efficient. 10 years ago it was just plain hard to do value investing. Now all that a fundamentalist approach seems to get you anymore is knowing that movements in one direction are favored more than the other direction. Moves that used to take me 3-5 years are now taking months at most. HEK may be an extreme example but it's not that unusual at all.

My personal feeling for why this is, is that there are far fewer people actually doing any thinking about their investing. There are just far more software algorithms, index investors, and technical people following essentially nothing but random noise than actual stock investors.
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there are far fewer people actually doing any thinking about their investing.

When the pros bemoan the loss of the individual investors, I think that is what they are talking about. Tons of money sits on he sidelines waiting for some of the uncertainty issues to be resolved. So yes, individuals are tiny compared to the big firms.

The volatility you speak of could merely be the market marking time. Short term variations fed by various rumors until a clearer path to the future emerges.

Meanwhile repeated incidents of computerized programs crashing the markets makes people more and more nervous about trusting their funds to a system that seems to have priorities other than top quality, ethical, public service.
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Anecdotal evidence seems to point to two retail investing trends. One is the outflow from stock funds into fixed income ones. The other is the rising tide in ETFs.

The first would probably not account for the lack of interest in thinking through the investment process that you highlight. The second certainly does, and it's getting cheaper by the day.

On top of which everybody and his dog is now an options expert. Who cares about fundamentals when you can play the market purely based on its wiggles and squiggles???
MDP Home Fool
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There are just far more software algorithms

something like 75% of all trades on Wall Street now computer generated?
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