Bottom Line

Update July 3:

Lost again as the Brazilian returned to grab his 2 million early for Independence Day Party with babes. China grabbed some too, but in a different fashion, not regular. Can sure see where the crooks are this way. Now there is an Arbitration Opportunity somehow because it is Regular. When you have crooks, let them do all the dirty work, hop back on, then rip them off back just before they make off with your hard won lo0+. It's not like they can go to the Cops with their prints all over the scene of The Crime. Too much hassle though for a couple bucks, but worth the nice feeling supposing, What will they say when they get caught? "Zomeone stole 2 quantos from our stack o' lo0+! to bag LIBOR with tonight!" Lo0zy got some 'xplainin' to do... They already got some more to do over other matters. But Barclays got some to do too. It took a while to get caught is all. In Related News, SEC Targets Low Speed Traders. Man Bites Dog! Naw. Just kidding. ;) It is sorta like, "Hey! Your shoelace is untied, so who are you to blame us for Bank Robbery?" There is no honour among thieves any more it seems, but at least with some Fiduciary Aikido techniques, they get caught in the klieg lights doing it to each other.

I'm not that Banksy, but perhaps he is a Banks too. Gold Miners and Silver were big winners. NASDAQ is getting in the Suspect Hairy Eyeball column along with Emerging and Volatility 1. I also added a Small Caps hedge to the mix. They closed early at 1 PM for Independence Day, and maybe to get ready for Hurricane Arthur too.

Wiki has a nice bit on Continuously Compounded Interest up. Banks use it, but it seems to differ from what they give You. They draw the line at Weekly time periods, which is as close to approaching zero as they afford you. Brazil likes to grab even their little stock market bit for16 and a half hours a day, as if it is theirs during that time. Normal banks, it is yours all the time, but on Their Paper. Starting to see how they make out OK using your money, times x Mortgages? Definitely a can of worms there; We should give 'em The Bird. Ao is the start cash. r is the interest percent expressed as a decimal, per "t" time periods. "e" is Euler's Number, the base of the natural logarithm, which is roughly 2.71828. It will give those of little means a nice warm fuzzy. Just add Me to make it interesting. Ao... <3

Update July 2:

But what happened to the Brazilian thief? He used to take a million overnight, every night, like clockwork. I guess he had a big date yesterday because he took $2 million. Not today so far. I guess they didn't buy his story about putting it back in the morning. Maybe he's caught up in traffic or fell victim to it accidentally on purpose. They are Driving Challenged there I know, aside from the Formula One circuit, so it Could Happen.

Gold Miners hedge lost today. USU's (USEC Minerals and Metals) giant leap recently might be behind it. Their Junior Siblings were losing this AM but came back at the end. Emerging markets lost a bit. China lost second day running as the YINN YANGs went awry. Everything else was up in mixed trading I guess. Rarely both sides win, or both lose as YINN and YANG, but generally they conform after time once balanced to cancel each other out. When they don't it folds their hand to an opportunity for entry if there is no fishy business going on. There wouldn't be any of that in China now, would there? 

<3

Update Jul 1 Melt Up: 

Added to losers... Volatility, NASDAQ, S+P, Financials, Silver, China. We Will See for as we said so eloquently before, We intend to be the Morons on the other side of all your Smart Trades. We are those Sto0pid L053r Financial gals, you know. We had to invent a new kind of Algebra, Fo0lean Algebra, describing the psychology of our decidedly ignorant side of all that stock market geniu$. 

Volatility has no Greeks on the options only showing N/A, and that is the biggest loser only showing half the hedge. Added new SVXY VIXY hedge too as SVXY UVXY gets too crowded, and it seemed like a truly ignorant thing to do. This is still up 5 million from yesterday's open. And I spent some of yesterday's excess dollars after a complaint that I was carrying too much cash ($1.067 Billion). Yachts make me seasick so...

Shop till u drop! Toodles! <3

Jun 30, 2014: There are actually a lot more hedges, but here are a few for now. They are generally in order of allocated buying power because those have been the most profitable since opening. I leave it up to you to find out how and why. The first hint is that they all show no quantity because they are all option positions.

Where did the "$" come from?

Short Answer: They Don't Know! We do.

Ben Franklin actually could have patented the US dollar. Like Ben would often do though knowing the power of its potential, he gave it away freely, like the Patent Office he modelled after the British one, perhaps after learning someone took his Published 1742 design of what we now know as the Franklin Stove, made inferior modifications simply to make it Patentable, and patented it there. It likely led to Ben sowing the seeds of the US Patent Office with his Shriner buddies. It is The Real US Patent No. 0000001. Don't try looking. They "allegedly" lost the records that far back, thanks to another kind of lightning Ben didn't wan't to know about. Like Lois Lerner, they likely destroyed it to cover up the truth after grabbing it for themselves first. But we know, thanks to this "B"0000001 Colonial Script, there was a means for B0000002, (Another of Ben's  Coulda Beena patent As Amended, "US Gov't comprising Greed, Avarice, Powerlust, Conceit, Liars, Muggers, Thieves, Jokers, All Others, and a Built In Method of its Own Control based on itself"), B3, B4, B13, X000001 for Samuel Hopkins' Soap (The Pencilled-in  X-Files,) 5,488,891, and etc. The Buck Starts Here. lulz

That is really quite a feat because there was no US Patent Office at the time. Ben just invented USPTO.gov, subsequent to inventing Dawt Gov itself! More perplexing, he allegedly never patented any of his subsequent inventions, leaving the documentations of them open source like The Stove, The $, and The @#$%^ Gov't (placed decidedly Under God's present 20) to fight over it. He knew that the $ Lure of Patent Power alone would spark innovation, improvements, and commerce. Computers can't even get it right; my Shift-4 only has one line through it like a Peso in a bit of wry inventor humour. There is no mutual Lure in a system that works on Yes or No only. Ben trusted that God would protect it from even the onslaught of silly-con braned rockhead robots in the Real World Yes-No-I-Dunno Universe. US B0000002 Gov't, now thinking itself smarter than God, immediately set about unknowingly destroying themselves with "$" for $. They wanna destroy $ in the name of their Opponents to show how smart they are before it destroys them. Ben had his Hairy Eyeball on them way before that though.

I imagine .gov are worth One Dollar, later at least 100 due to chuffed thieves' own invention born of US B0000002, Inflation. Sadly, they plonked Ben's face on everything from the Nickel to the $100 Bill to misdirect the Self Evident blame. Others reckon they ain't worth a Plugged Nickle. It is like the people that stole a computer to get at The Engineer's Secret(s). They have one computer. They have no clue what to do with all the contents. Like Hermes, the unfairly branded Greek God of txt, trickery, deceit, etc., The Engineer likely put a poison pill in Da Thing, willingly or by powers beyond his control, to specifically destroy the morons that stole it. ;)

Anyways, a Spot Strike has a BID and an ASK. The Concept is a helluva lot older than 1848, Ben's Granny, The Concept of Hermes, or even The Concept of Hell itself. It is not only older than Hell, it's older than the concept of a Concept. Ben just eloquently described and branded it, type and all. Start there.

Rho Rho Rho your boat

Gently down the stream, Merrily merrily merrily merrrily, Life is but a Dream. Especially since Janet has taken out Interest Rate risk.

A Lot of models and hedgers like reducing Rho to nuttin'. Imagine being in an Adjustable Rate Mortgage where it drops. The whole nervous lead up to the last FOMC was the threat of interest rate rise and a return of the Rho Factor. It has to go up with a recovery because it has been kept really low since Ben came on the scene. It was supposed to fuel a recovery out of nowhere because people would theoretically spend that extra money like imbibed sailors back in port. Instead they stayed home and bought down their old mortgages while keeping their 401K's up with the times with whatever extra they could throw in it. Now we have an inflated bunch of equities. When Rho comes back, they will be tapped to cover it before those expiring locked in rates bite back.

Rick Santelli likes to watch the Ten Year Bond rate. 262 was the number, meaning 2.62%. Friday they ended at 2.61. The Fed is tapering back its influence from buying back bonds, but not completely yet. Still fair rhoin' so yard away. The Fed still knows there are a lot of Rho Boats far out from shore to rescue from a hurricane coming up. Sure they're taking off, but they say they will be back if the chop gets a little too nasty. Be warned that means if YOUR Rho Boat sinks as an indicator. Just sayin'... Mind that statistic before you become it. But the Fed discovered that while more gas doesn't make the boat go faster, it will surely go farther. Of course that makes it tougher to rescue way out there as well. Thus the applause like sound of smacking their foreheads, and they Taper. The only question that remains is did Ben's bean make a louder sound?

So what about Corporate Bonds which allegedly don't have Fed attachment? CNBC did a whole piece about the corporate bond trade being crowded. The herd has already trampled that pasture, and the grazing is crappy. Literally.

Another FOMC Statement

Janet had her quarterly Q+A session. More Entropy. First a massive nosedive then a snap back the other way 15 minutes later as folks realized that nothing was going to change. Still tapering. No bond increase yet.

Today. the scene was kind of mixed but basically flat. People that watch the Fed say that the second and third days after the FOMC the effect wears off.

One thing that hasn't worn off is inflation. Naturally, real inflation would include food and fuel, and you guessed it. The past two months have seen a ten percent jump in fuel and food. Iraq and the Ukraine have really contributed with a one two punch. The <Fill In The Blank but Not Really> In Chief gave up on red lines since the last couple have been all but obliterated by tanks and other assorted heavy weapons. Presntly, he is AWOL, probably getting phones and pens extracted from nether orifices.

Hedge On I say. Looks good on Paper, but also shows the limitations of Volatility Hedging or Crash hedging since it is static, not dynamic, as you know. We are the Dynamic Part. <3

The Markets Have A Built In Bias

Well, the example hedge is doing OK for now. That is during a 10 point down swing in the S+P 500, over a weekend where we couldn't touch the controls.

So what do we do for an Encore? We could analyse what happened.

Insurgents overran half of Iraq. They did it while everybody was busy in Afghanistan, feverishly working on the Surrender Timetable in the so-called "Preferred War." They want to emulate their stellar success in Iraq, I guess. Naturally being hedgers, we kinda figured something like that might happen, so we protected our downside by hedging the overall short volatility position we had (like Everybody had) over the weekend. Voila!

But the main topic is that the market defaults to fear. We are all nervous nellies. When the Fox News is in the Liberal Happy Henhouse, all hell breaks loose for a few seconds. "Oh, that's nothing!" they all say until it is time for Chicken Dinner. Then they find out that they are on the menu.

A second bias is inflation as they desperately try to print away spending on everything. Cash may be safe for now, but at this rate, not for long. Another thing is lying about US Energy Reserves and Stability I think. As the Middle East gets into a Preferred Third World War, the only way you'll get the Liberals to show up is to bomb it with George Soros Monsanto GMO Pot. Don't worry.... It was likely genetically modified to be addictive as hell. They'll come running armed to the teeth with Bongs an' bullets galore. Or maybe not.

Another default is that bad news is good for hedgers. This is where they can add to one side or the other, and balance it out to make money from a move either way from the current state. Even when the news is sketchy like that from Iraq or Afghanistan half a world away, it adds the needed entropy and uncertainty that by its very nature is unstable. We should be adjusted to the current stable spot, and it will get unstable. Rarely it does nothing where we would suffer albeit minimally.

Overnight options generally don't trade. There is another source of uncertainty that has to be balanced going into it. Unfortunately it could do nothing, creating now what they call a meltup. But at least we tried. That is the best we can hope for. After all, that seems to be better than the alternative prediction theory, and it seems to be the only set of predictions that work for me more often than not. Otherwise, you could be a genius. See below.

Common Sense

The markets defy all Common Sense. Occasionally, some idiot will argue with you about that, saying it makes perfect sense. Then it will go against them after time. Ironically, that statement holds the key to regular profitability, no matter what, defying all common sense.

So why don't we exploit Common Ignorance? Make a perfectly ignorant trade, defying all common sense, and then hedge it, but with an equally ignorant trade, balancing either partially, excessively, or completely the other side ignorant trade. What could happen from that? Well, experience shows that it is generally profitable, and the more ignorant the components, the more profitable. Welcome to Hedge Fund 101.

Hedge funds charge a lot of money for being really ignorant. It is the last thing anybody would think of doing, so they are pretty safe there. They have no shortage of the other side of their trades  because they are doing exactly the opposite of what Conventional Wisdom says they should do. There is no shortage of Self Appointed Genius out there, and we are their Idiots giving away Smart Trades willy nilly. They don't know we have it all hedged, plus we charge them time through a management fee. Hey, we may be sto0pid, but we aren't crazy.

This one started out 4 years ago with $20K. It has been pretty ignorant since then.

I could show you the ignorant components, but then you will run off and do something really ignorant. You will be a victim of your own common sense. It is there for the taking, so you would have to be an idiot not to grab it and use it you would think. But these times are different. For what It is worth... there might be an actual return to something that makes sense! I'm not holding my breath though. It is like waiting for an earthquake. Everybody knows it's coming, but when is a different matter. You can be prepared for it like Fukushima was, only to discover exactly what you didn't know about earthquakes. You would have to be ignorant to have power plants and fuel ready to go on the roof before that. Well, guess what?

Brokers like to protect you from being ignorant. It is criminal if they don't. It is right there in all that boiler plate. Good thing too, because they would not be able to operate without taking the other side of all your smart trades, always being right there to be ignorant. When a stock becomes Hard To Borrow it is likely because they have snapped up all the remaining borrowable shares of it. One doesn't have to look hard to find these. They are the ones with a high valuation that they declare hard to borrow as opposed to ones less than $4. That is because they are preparing to be even more ignorant than you when the Big One comes. They know the most ignorant bastard is the last one standing, and someone has to turn out the lights.

Proxy shorts will be like that. You could hold a boatload of Short ETF's and still lose out to the tsunami of volatility that comes with the nosedive. Some ignorant bastard will likely be short of all that hedged against a short position of the corresponding long side ETF, constantly giving up the contango from each side. Ignorantly, they might backwardate and both be winners for once.

So get out there an' get Ignorant, but hedged of course! You could still fall prey to having two opposing wrongs not being right as can happen, but generally when hedging, two opposing wrongs don't make a right. Instead they make a profit.