The Market Ticker
Commentary on The Capital Markets

Want a 10-bagger?

Buy the November $10 BBRY calls for about 50 cents.

There's a rumor that Lenovo will bid for the company as early as this week -- at $15, with a $3 override available to get a deal done around $18.

I don't have a clue as to the provenance of this reported rumor, but if you're into such things that's a very cheap play as these things go.  The market doesn't appear to believe the rumor is real, given the (relatively) low implied vol on the option -- which is part of what makes it relatively attractive to consider.

Those calls are too close-in time-wise to be a decent bet on the next earnings release -- with the Passport included, which appears to be selling very well.  That makes this one a pure play on an M&A deal, which are usually (unless you have inside information) a loser for the common rube like myself.

Nonetheless if you're into such plays this one looks pretty attractive.

View this entry with comments (registration required to post)
 

Financial engineering is not a positive-sum or even zero-sum game -- it is a negative sum game.  It must be due to the simple fact that nobody works for free, as I've repeatedly pointed out.

IBM got monkey-hammered this morning on their earnings release; they've been one of the financial engineering "kings" over the last few years, and missed -- badly.  They no longer believe their EPS goals are achievable, citing weak sales.

Uh, yeah.  Weak sales eh?  How's that good?

The fact is that it's not just spending and revenue.  It's also the leverage amplification that IBM (and others) have used to "goose" results over the last few years, leveraging extremely low borrowing costs and abusing stock buybacks.

The chickens are beginning to come home to roost on these practices.  Do not be deceived into believing this is a "one-off" or "one company story."  It most-certainly is not.

The entire market has been lofted by this nonsense; now, into the maw of what should be a cyclical exhaustion point we're going to get the backside of these practices, and IMHO it's going to sting, with little that can be done to dampen it.

The financial forecast appears to me to be cloudy with a chance of random portfolio butt****ing.

View this entry with comments (registration required to post)
 

I remain amazed at the way our government is so ******ned stupid -- and arrogant -- as to believe that they can demand "keys" to some sort of lock on demand and nobody will ever get them other than the authorized parties.

The latest incantation of this is found here:

FBI Director James Comey said as much Thursday in a speech at the Brookings Institution in Washington, suggesting the agency might ask congress to force companies to provide what amounts to a “back door” to law enforcement to obtain password-protected data on targeted personal mobile devices.

“We’re hoping to start a dialogue with congress” on updating laws that require tech companies to comply, he told the audience.

**** you James Comey.

And I say this not because I want to see bad guys get away with things as a result of encryption.  I say it because I do not want to wake up one morning and find that utterly nothing works that has a computer in charge of it, which incidentally includes our electrical grid, our communications systems along with military command and control.

It is the height of arrogance to believe (as the NSA has done in the past) you can design in some sort of "back door" and nobody will be able to discern that (1) it is there, and (2) figure out how to pick the lock.

You can bet your last nickel that there are legions of Chinese hackers under government control that are tasked with doing exactly that.  You can also bet that Sir Jihadist will be trying as well.

Neither of those entities pose a good outcome for America should they succeed, and eventually one or more of them will.

It is utter insanity to intentionally put such a mandate on manufacturers, because doing so means that there is a commonality of the means to get in, and once that's discovered by someone who has improper motive for its use we are all ****ed.

You will wake up one morning to find that every nuclear plant in the United States has shut down and the emergency generators will not start, meaning that the time before you all glow in the dark will be measured in hours.  Your cellphone will not work because the software in the switches and tower radios will have been corrupted and impossible to reload without a JTAG machine, which is a pain in the ass and will take weeks to correct, if not longer.  Your data on disk will be either re-encrypted with someone else's password (the bad guys) or worse, simply erased and when you think you'll be ok with the backups you will find that the bad guys corrupted the process months or even years ago and while you might keep backups for that long, all the data you generated in the interim period after the corruption took place will be utterly gone.

If we get really unlucky all of our battlefield equipment that has computers in it won't work either (that's most of it these days, by the way....)

Pilots are increasingly being allowed to use iPADs and similar devices for sectionals and aircraft procedures.  What happens when none of them work, all at once, because the boot code has been overwritten -- and nobody has the paper ones in the big carry-on any more?  I'll tell you what happens -- commerce by air ceases on an instant basis.

What happens when the computers that control oil refineries are corrupted and commanded to overpressure the pipes and other process equipment?  We have massive explosions nationally everywhere, all at once.

What happens when every civilian and government "regular" computer is rendered inoperable at the same time?  All commerce grinds to an instant halt.

The FBI is criminally insane.

Someone will figure out and exploit this.  I am absolutely, utterly, 100% certain of it, and it will happen at the worst possible time, because that's how jackasses that do this sort of thing operate.  They will gain entry, quietly corrupt everything, wait months or even years and sit on it until there's a natural event or other catastrophe that we could otherwise handle but exploiting it will dramatically multiply the damage -- and then they will pounce.

We are not the smartest people in the world and we have no monopoly on brainpower.  What we can devise in this fashion someone else can break through -- that much is a certainty.  Mandating this sort of back door is utterly insane and anyone in our government arguing for same must be shouted off the stage and removed from their office.

View this entry with comments (registration required to post)
 

Sigh....

I wrote the other day on a bestselling author who had written an op-ed on a person who sideswiped his parked car.  He was lamenting that the police observed that "People just aren't honest anymore."

His challenge was to ask the person who hit his vehicle to prove that wrong.

I went after him, and I believe justly so, pointing out just a handful of the myriad scams and frauds (that is, dishonesty) that permeates literally every nook and cranny of our society today.

Jason has written some pretty decent little puff pieces for Fox as of late.  But I gotta tell you -- I still think I'm spot on with my commentary, and here's why.

The simple fact of the matter is that it is Jason, and you, and I, and the rest of us, that make all these scams and schemes possible.  We do it through our silence, we do it by participating, we do it when we advocate for or support forcibly taking someone's money to hand to another in the form of food stamps or AFDC, Section 8, Medicaid or otherwise.  We do it when we go along with Obamacare or even allow the "traditional" health insurance rip-off model to function.  We do it when we accept the claim that "2% inflation" is proper, even though that is admitting to the wanton and intentional destruction of value of what we have previously earned and, absent such intentional interference purchasing power would increase as technology improves instead.  We allow politicians to run ponzi schemes that must mathematically fail and impoverish our children, grandchildren and those not yet born -- screwing our own kids.  We are complicit and thus to blame because we do not cast our wooden shoes into the gears of the machine, destroying it or at least slowing it down.

It's only when our car gets ripped up that we write columns about honesty -- or the lack thereof.

And therein lies the gist of my post, and the message behind it.

My decision to sell MCSNet was a long-considered process, just as was my decision to get the hell out of Chicago.  As with my decision last year to close down most of the forum all of the various factors, including where I am in my life, what I see on the road ahead at a personal level, how much flexibility I want (and expect to need) during the months and years ahead and how I both need and want to spend the remaining sand in my hourglass (given my inability to know how much is there until it is almost gone, as is nearly-always the case) bears large on these sorts of decisions.  No small part of any such decision for me is whether I believe I'm playing the part of Don Quixote or whether I'm advancing an important idea.

It's a funny thing, really -- I've written recently about 3+ Sigma events and that one should not ignore them, a lesson I learned in my 20s (and then I promptly didn't follow my own advice a couple of times in my 30s.)  While I would not change the outcome of those disasters, as on-balance I'm very happy with them with the benefit of hindsight, the fact remains that they were quite-arguably objectively wrong decisions without that benefit.  Who knows where I'd be today had I made a different decision at those critical times; what I do know is that I wouldn't be here.

We all have one life, and there are no do-overs.  But for those of us who have children, and the author that I was commenting on does (as do I), what we do extends beyond ourselves.  

If we take seriously the exercise of the greatest power mankind has -- the power to create life -- then I allege that to saddle our progeny with knowingly-fraudulent institutions and practices when they are too young to understand or do anything about them is an outrageously damnable thing to do.

I can defend walking off and disconnecting to the extent possible if you discern that you're not making headway on positive change.  Others, including your children, can follow that example and while it is by no means a perfect solution it has a positive delta.  I can especially defend it if, predicated on both your personal assessment and life you decide that winding it down to the extent practical will bring an increase in the number of times you smile (or better) in a day.

But what I can't support is complaining only when you get reamed by the very processes and societal "norms" that you exploit and countenance in your daily life, and which will screw your kids.

It seems that more than a few people simply didn't get it.

Maybe, with a bit more reflection, you will.

View this entry with comments (registration required to post)
 

2014-10-18 07:53 by Karl Denninger
in Politics , 326 references
 

Oh, good lord, what sort of dolt do we have here?

Senior Republicans on Capitol Hill Friday criticized Ron Klain, President Obama’s choice to be “Ebola czar,” as a figurehead with no health background.

“Given the mounting failings in the Obama administration’s response to the Ebola outbreak, it is right that the president has sought to task a single individual to coordinate its response, “said Rep. Ed Royce, R-Calif., chairman of the House Foreign Affairs Committee. “But I have to ask why the president didn’t pick an individual with a noteworthy infectious disease or public health background?”

Uh, yeah.

And this points out a few things -- first, that the entire "czar" system is stupid to begin with, since it does not carry Senate confirmation requirements.  Second, they're virtually all figureheads, if not all.

These are pure patronage jobs, and in this sort of context that's dangerous.

Who cares if he's a good manager?  I don't.  What I want is for people with cabinet-style access and control to be cabinet members and subject to Senate confirmation.

There is a check and balance system in our government for a reason -- it is specifically to prevent any one person or party from appointing to powerful positions individuals that have no need to pass through the gauntlet of public approval via some means.  We don't get to vote for the Secretary of Defense, but the Senate does.

The compartmentalization and limited power structures in our federal government are the work of genius that makes the United States unique.  We have massively damaged that structure over the last 30 years, and this Russian-dictator-style "czar" system is just the latest insult.

It is well past the time to dismantle all of these, starting with the so-called "czars."

View this entry with comments (registration required to post)
 

Main Navigation
Full-Text Search & Archives
Archive Access
Get Adobe Flash player
Legal Disclaimer

The content on this site is provided without any warranty, express or implied. All opinions expressed on this site are those of the author and may contain errors or omissions.

NO MATERIAL HERE CONSTITUTES "INVESTMENT ADVICE" NOR IS IT A RECOMMENDATION TO BUY OR SELL ANY FINANCIAL INSTRUMENT, INCLUDING BUT NOT LIMITED TO STOCKS, OPTIONS, BONDS OR FUTURES.

The author may have a position in any company or security mentioned herein. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.

Market charts, when present, used with permission of TD Ameritrade/ThinkOrSwim Inc. Neither TD Ameritrade or ThinkOrSwim have reviewed, approved or disapproved any content herein.

The Market Ticker content may be reproduced or excerpted online for non-commercial purposes provided full attribution is given and the original article source is linked to. Please contact Karl Denninger for reprint permission in other media or for commercial use.

Submissions or tips on matters of economic or political interest may be sent "over the transom" to The Editor at any time. To be considered for publication your submission must include full and correct contact information and be related to an economic or political matter of the day. All submissions become the property of The Market Ticker.