Author: Henry Barnard

I am a voracious reader and also enjoy writing. I often have a very different point of view than the popular one. I do see value in debate, and thought it might add to the public debate on controversial issues if I were to express my contrarian opinions. I also started keeping my poems recently (I've written little pieces my whole adult life but never kept any); and I've been a photographer now for over 25 years. So I will be adding an occasional poem and hopefully interesting photograph to the blog along the way, just to spice things up.

Hedging Naked Calls with Stocks

You sell a naked call on a stock trading at 50 for a 45-day April call at strike price 65. The stock price starts to shoot up immediately and half way to April expiration, the stock price is already at 60, and naturally your call price is way under water. So you start to hedge with 25 shares of the stock. You add 50s shares at 62 and then the final 25 shares at 64.50, so now your naked call is covered.

But the stock price continues to move much higher, all the way to 75 a week before expiration. Now the 100 shares are showing a nice profit, but you need them to cover the April 65 call at expiration. But do you?

What if you rolled the April call at 65 all the way to the LEAPS 85 call at break even on the roll. That gives you a new 10 dollar leeway on this new naked call at 85, which you would again hedge by buying the stock, if need be. Although this tactic creates a lot of time exposure, if you do it, it would allow you to sell your 100 shares and take the profit ($1287) on the stock now that the price has sharply risen to 75, and it may be that the new naked call way up at the lofty price at 85 is a bridge too far for the stock to ever reach, despite the 8-month exposure, given its recent sharp rise.

Would you take that bet? You don’t get paid for not taking risk. If you don’t take the bet, you forgo the $1287 profit on the 100 shares, and merely walk away with the premium on the 65 call after the shares are called away — comparatively little to show for your trade, although now you are risk free, which is a positive. But if you do take the bet, you get the $1287, and if the stock fails to reach 85, you get to keep the premium as well — or the same scenario may play out on the 85 naked call.

Covering Naked Calls

Swamp Won

The swamp takes back Washington. Discouraging.

What can one expect? Much higher taxes on the wealthy but also the middle class…and corporations. Many looney-climate change initiatives that damage the economy because they undermine the use of fossil fuels, which underpin all economic activity. Actions that benefit China and undermine the US, particularly economically. More Russia hysteria as the bogeyman. Stupid and naive deals with Iran and a cold shoulder to Israel. Much money for various countries around the world, while the US deficit explodes. Open borders and mass immigration from Latin America. Political mismanagement and lawlessness and the growth of real poverty in American cities. Repression toward all political conservatives, particularly those who aligned themselves with Trump.

In short, the real decline of the United States, as a strong and economically powerful country, into a country that is economically weak and politically teetering on civil war.

There will be a 3-month grace period for the new administration, and then the wheels start to come off when all the stimulus money and free money don’t produce any turnaround in the economy and the dismal employment picture.

As things get worse and worse, the radical left-wingers will blame it all on conservatives as Nazis.

Keystone

Bearish

I’m bearish on the economy because I think this coming Democratic administration is guided by ideology and much of what they believe undermines business development and kills off jobs, so we will get what we got from Obama — a federal government that’s neutral to hostile to business with policies that unintentionally limit or even reduce jobs growth. Exactly what a stalled economy doesn’t need. At some point, this will show up as a sharp decline in the stock market, perhaps even a prolonged recession.

It may well be a good idea to start to invest elsewhere than in the US, as the US, so deeply divided politically and so disrupted economically, may well be a country in serious long-term decline. And add to that that asset prices like the stock market and the housing sector are seriously overvalued.

Biden’s Dumb Stimulus Plan

Keystone

Canceling the pipeline is another jobs-killing measure by our new president. This at a time when the unemployment rate has not recovered, but may be getting worse again. Fairy tale economics from this Democrat. Raising the minimum wage another jobs-killing measure, especially in states with lower cost of living.

These Democrats are ideologues. Reality isn’t an issue for them. They do what their ideology dictates — whatever the consequences.

Biden’s Dumb Stimulus Plan

Biden’s Dumb Stimulus Plan

Biden’s stimulus plan that raises the minimum wage, of course, undermines jobs by making employers pay more for their least expensive employees, so naturally what these employers will do is cut some of those jobs to protect their profit margins — this is especially true in states with a lower cost of living, as in many of the states in the South. This at a time when it is crucial to stimulate job growth. What’s the word for that. “Dumb” comes to mind.

The bulk of the program is this big giveaway to state government with deplorable finances — think New York and California. In other words, it rewards bad financial behavior by state governments with the most spendthrift mindsets. Another dumb.

Finally, it gives a huge amount of money to colleges and public schools, i.e., financing an education system that is already way overdeveloped to begin with. Another dumb.

And again we have this practice of giving money to people, which is part of the program which actually does address the immediate problem, but I ask you, is it smart for the federal government to be giving money to everyone — is that a smart practice in the long run? I think not.

Put another way, is it wise for the federal government, which is already so deeply in debt, to take on such an unprecedented amount of new debt? That’s what the big giveaway comes down to — an enormous expansion of federal government debt, which is already well beyond anyone’s real understanding before this stimulus plan is even put into effect. It mortgages our children’s future and their children’s future…and their children’s future.

What would make sense here is a massive infrastructure program by the federal government. What should have been done way back in the 2008 crisis but wasn’t. Are we about to repeat history?

Benign Protest

Uncertainty

What happens after you have a fraudulent election.

The canary in the coal mine on the election for me was Arizona — that Arizona would side with a Democrat. That’s Goldwater Arizona siding with a Democrat. Yeah, right. And pigs can fly.

Even many of the Democrats think the election was rigged.

In addition to uncertainty, you pretty much destroy any faith in future elections being at all honest, which means your sacred vote doesn’t actually matter very much. The edifice of American democracy gets rocked. Thus the new and cloying uncertainty.

Today’s Fascists