Comment by phil

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phil
February 12th, 2013 at 12:19 pm

Cook turns out to be a big disappointment but all that talk about the iWatch got people's hopes up unrealistically.  AAPL down 2% from yesterday's highs but doesn't mean much.  

Silly/DC – It's been the same since time began.  They used to trade beads and that worked for thousands of years.  It wasn't that the beads (even shells in some culture) couldn't be make by just anyone who felt like doing some work but that the amount of work it took to find certain beads had a certain fixed value and someone was willing to trade an hour or two of other labor for it.  There's nothing unfair or wrong with that system – it's a logical way to echange goods and services with each other and gold also has no value other than it's hard to find and hard to dig up (and pretty) but you don't pay more for gold than anything else – it's just a generally rational exchange of labor.  

I consult for a few hours and make $1,600 and I take that $1,600 and buy an ounce of gold that took 5 guys in South Africa a few days to dig up.  They got paid $150 each ($750) and their boss kept $250 for running the mine and the other $600 went to whoever purified and certified and transported and stored and sold the gold along the way and they all TRADED their labor for a few hours of my consulting skills although they didn't actually need my consulting skills at the same time that I wanted their gold but the exchange of money allowed me to give my consulting to someone else who traded his skills for money to another person who needed them and that's, very simply, how the entire economy works.  

The money itself is an artificial construct to facilitate the exchange of goods and services – the illusion in the whole thing is that money can run out or that there can be too much or too little or whatever.  None of that matters – I will always consider a few hours of my consulting to be worth an ounce of gold and an ounce of gold buys me a weekend in Vegas or pays the quarterly condo fee on my place in Killington.  How do you think people in Zimbabwe were able to live with hyperinflation?  Once you realize the money itself is an illusion – it's actually quite liberating.  

If you tell me tomorrow that I need $200,000,000,000 to pay my quarterly condo fee in Killington then I'll immediately turn around and tell someone my hourly rate for consulting is $50,000,000,000 and they will pay it and tell someone else that their rates have gone up until everyone has what they really want – which is goods and services – not pieces of paper.  The people who labor under a false illusion in this system are the people who place too much faith in the pieces of paper – or make their living moving the bits of paper around or lending them to people in exchange for more bits of paper – they are the ones that lose out when the bits of paper begin to lose their value because the people KNOW what their labor is worth – this is why price-fixing and wage freezes and inflation caps never work – it's the money that's artificial – so what difference does it make how much the Government owes.  

By any logic that says America is in trouble, Japan should have burst into flames and sunk into the sea ages ago.  The fact that Japan's economy still exists PROVES that America is miles and miles (and decades) away from any real financial crisis and no amount of rhetoric about debt and obligations and inflation is going to change that.  

Thanks for reminder on TLT ($25KPs) – they bottomed out at .63 so far, back to .73 now so no roll yet.  March $118s are $1.05 so all moving as expected.  

Gross/1020 – One of those guys who makes his living moving around those piles of money.  To say he has a vested interest in avoiding inflation (with over $1Tn loaned out to others) is a vast understatement. 

SSO/8800 – Again, I would not play SSO at all because it's an ultra.  Check out the 5-year underperformance.  S&P up 12%, SSO down 2%.  That says it all – you have something like a 2% annual handicap and that's only because SSO recently made up almost 20% of the gap on this recent run.  Ultras are STUPID long-term plays – got it?  If you want to play S&P up 10% in a year, why not just buy the SPY Jan $140/150 bull call spread for $6.70 and sell the $130 puts for $3.50 for net $3.20 on the $10 spread that's in the money now.  So, if the S&P stays flat or goes up 10% – you make $6.80 (212%) and your break-even is way down at $133.20, down $18.68 or 12.3% below the current price.  TOS says net margin on that one is $13 so you're still making better than 50% on margin – even without PM or you can just do the straight spread and make 50% at $150 anyway.  

Another mother/1020 – I actually already have one of those (half brother).  

Thanks for Cook summary Wombat.  

Too big/Pharm – Good perspective.  

Cook/Jerconn – Yes, he said FU to people who want AAPL to buckle under to pressure and I like that a lot!  

Wrong/DC – That's interesting.  So will you be heading off to the bank to re-negotiate your mortgage?  Of course not – the real trick (which you need to wrap your head around) is that money itself is not a useful store of value.  I can immediately trade my labor for what I need but I don't NEED your money if I'm in a place where I can make a direct trade for my services.  There's a Gilligan's Island episode I wrote about once, where Mr. Howell finds a gold mine and ends up with a ton of gold but then the other castaways start charging him in gold for everything they do for him until they all have big piles of gold and he has none left.  

Anyway, you buy a house SPECIFICALLY with the expectation that you will be better able to pay your mortgage over time.  Your labor will become more valuable but, in short, you will be paid more Dollars for the same work so you are BETTING the value of currency vs. the amount of labor you are able to do in a week will diminish while the person lending you the money is betting, via interest, that it will only diminish by a certain amount and that the money you return to them over time will be more than they could make if they instead put the money "to work" elsewhere.  

Oddly enough – as we can see from current banks reports – if they DON'T put the money to work – it does them no good at all.  In fact, look at AAPL and their $135Bn.  It's effectively useless if they don't do something with it.  The government has the same expectation of income growth you do and only when idiot Republicans take charge and sabotage the normal growth of revenues does the system fall apart.  They create an artificial failure to pay off debt and then, eventually, it occurs to them that the people who are owed the money are the same rich people they are trying to protect from the tax man and then you have an S&L crisis or a Sub-Prime crisis or whatever but it's just fiscal idiocy – not a fault in the overall system.  

Drones/Angel – Where do you get your news?  That's total BS!  

AAPL/DC – Or buy!   AAPL Friday $480 calls at $2.15 – 5 in both $25KPs.