Hey everybody, I haven't had much time to blog lately between teaching in the day time and taking MBA classes at night, but here's another blog. :)

--First of all, I've gotten not one, but TWO letters this year that read about like this:

"Dear Mr. Upshaw,

      Recently, a former employee of <financial institution> took the personal, private information of many of our account holders.  The employee may have sold your information, which includes your name, address, social security number, and other data, to third parties.  Currently, we are working with authorities to sort out this problem.  We regret any inconvenience, and advise you to watch your credit card balances, bank balances, and credit history very closely over the next few months. 

Have a nice day,

Your financial institution."

--Yes, I paraphrased, but I've gotten one of those letters from both my bank and Countrywide home loans this year.  It seems like I got one last year from another company too, but I can't remember who sent it.  

The whole situation is ridiculous.  Companies have spent thousands getting their servers secured against hackers, just to have some low-level guy/gal walk out with my social security number.  I'm sure legislation already exists to punish this sort of behavior, but there's likely some room for improvement in regards to how companies control their data and how much access employees have to large amounts of sensitive data. 

At least Countrywide did have the decency to offer me a free two year subscription to a credit monitoring service.  Of course, I haven't checked into the service yet, so I'll have to see what sort of quality it offers first. 

Anyways, it's pretty spooky knowing that there are ex-bank and mortgage company employees walking around out there with my SS#, address, name, date of birth, etc.  I mean, there's no telling who's hands that stuff could wind up in.  Does anyone else have any similar experiences?  Anyone here actually been through identity theft?  At the rate my personal info is being sold and traded around on the "personal info" black market, I feel like I'm at a high risk. 

Finally, I survived the market crash.  I was up about 22%-23% on the year, which isn't bad for a guy who only trades a couple of times a week.  However, I held TTWO stock after the ERTS buyout fell through, and I down on that one.  The market going down hurt my portfolio as well.  Overall, I'm near "break even" right now, but have complete confidence that I'll be back in the green in the next week or two.  I'm still learning, and this last week gave me a big lesson.  The big market collapse this week and my experience with TTWO emphasized the importance of buying protective puts. 

I was willing to go long on TTWO when I bought in at $24, so I'm ok with holding a long while if I have to.  I'm familiar with the company, and the balance sheet looks great right now (something like 0 debt and $3 dollars or so in cash per share the last time I looked).  I think they're undervalued right now at $16ish, so like I said, I'm sad that I didn't buy a put to protect myself, but I've had to hold before, and I might do that with TTWO.  If I have enough time to trade, I might sell TTWO at a loss and get into something else more profitable in the short term, but another lesson I've learned is that, if you've got a day job like myself, it's better just to hold and wait a while than to go trading "on the fly" when you don't have time to carefully study your trades and give proper analysis.  

I was up 22%-23% on the year, but now I'm down about 4%.  All things considered (TTWO dropping 40% and the market crashing), I'm pretty thankful.  I learned how to better manage a falling market.  --I need to get into cash instead of stocks, or else stay in stocks but buy protective puts.  I wish all tuition came that cheap.  ...Finally, there's still plenty of time to make my gains back before the year ends, and I expect to do so.

ERTS was in negotiations to buy TTWO.  I did not think that TTWO should do the deal, but I thought that ERTS might have the ambition to raise the bid as they've overpaid for a company or two in the past.  The deal didn't go through, and I was ok with that because I think TTWO has strong financials right now and a good portfolio of IP's coming out over the next year.  However, I didn't see expect them to drop from $24 to $15-$16 in the span of a few days.  I knew that the buyout news might not go my way, and I thought about buying a put to cover my bases, but I didn't. 

In regards to the QQQQ, I saw the market trending downward, and could have profited on that by buying puts as well. 

Overall, I'm used to selling covered calls, and I rarely mess with buying puts unless a stock is trading at a very high price.  I'm not a huge fan of buying options...I prefer to sell them.  If a stock is trending downward, I tend to just hold and ride out the rough waters.  I try not to own stocks that I wouldn't be willing to hold long term.  However, in situations where a stock (TTWO) or a market (QQQQ) is obviously going through a tough time or at the very least an obviously volitile time, I should be more willing to buy puts.  --Many times, I consider options to be overpriced, and I don't bother buying them.  But in both of these situations, especially with TTWO, buying a put or two should have been common sense.   I've been trading a year now, and my trading style is such that it usually doesn't hurt me to wait a week or a month for a stock to go back up.  I don't like buying options very often because they can expire worthless.  I prefer to play it cautious and own stock and sell options.  So, what my cautious style of trading has led to is a reluctance to buy puts and calls.  I dabble in them every so often, but as a habit, I just don't buy either one very often.  That is my problem.  My simple trading style has been successful, but it has caused me develop a "habit" of not buying calls and puts (especially puts) very often.  That came back to hurt me here.  If I had picked up a $25 put on TTWO when I bought the stock at $24something, I would still be sitting in the green right now (rather than down 4% or so).  I *thought* about buying one, but I thought, "if it drops, I'll just wait it out."  And, that strategy still holds true.  I think I can hold and get my money back on TTWO in the next 2 to 12 months.  However, my decision to not buy the put was made out of habit, rather than serious consideration of how much the stock might drop if the buyout didn't go through. 

In other words, I've developed a habit of not-buying options because I often think they're too pricey.  With the financials crashing and the TTWO news approaching, in either case, I should have known that a protective put or two would have been wise.  If I ever wanted to buy a put, either one of those times would have been the time.  Instead, I stuck with my "normal" trading habits that work in normal situations, and I got burned for it.  That's what I get for letting my brain run  on "autotrade" and not fully thinking my way through situations.   Of couse, I'm busy with work and school and all, but doesn't really excuse my lack of judgement here.  I kept treating abnormal situations like I go about everyday trading, and that hurt my profitability.  My trading style had been working for me so far this year, so I think that a bit of overconfidence likely played into this error as well.  newbie mistakes, I guess.

Danny, I can relate. After completely missing the first drop from 144 because I knew I had to stop. I have felt like I let myself down. I do all this work and know which way the market is moving then do something I know I should not have.

I would like to say this before I continue, the SPY went from $113.80 to 128 in under 24 hrs. I think I have my #'s right but that would be $14.20 divided by 128 times 62 trillion dollar market for a total of 6.9 trillion dollars. That is more than half of all the money exchanging hands in the U.S. in a year. I understand about wealth destruction but the size of that swing and the magnitude of what just happened! 6.9 trillion divided by 300 million people in the U.S. is 2.3 million dollars for every person in the USofA. This brings up a fundamental question? What happened to the 6.9 trillion?(where did it go) And how did it re-appear? Meaning was it ever REAL? Some people are playing a shell game here. AIG is a 200 billion dollar company. What happened to that 200 billion in one week. Who's money was it? Pension funds. Whole life policies. All sorts of insurance. Unregulated much of it I would like to add. Look at the charts of the SPY and see the 6 million dollar spikes 15 minutes before the close and after the close. That is pension or IRA money that people called in and is sold on the close only. Two days of that . Who bought all those shares Wednesday and Thursday? Really I cannot help but feel that it is all rigged, but who controls it? Right now I understand many shares were put into weak hands. (NOT stick and stay people) Those people will bail out at the first sign of trouble or take profits as soon as they can. All I really know is that Paulson has aligned the different markets and more legislation was passed so he knows who the big players are and how they bet. That is what scares me. Not the fact that the bottom may fall out. That someone has all the inside information before it happens. Power leads to one thing. Corruption.

Back to my feelings. I am cash right now. I am up 13k and have a sense of calm now. Some how I could see the market was going to make a huge move up. But I did not let greed take over. I SAW those BAC options that I blogged about last month. Guess what they were no longer 2 cents. I knew it was coming so I sold 9:45 and five minutes later I would have been 2k richer if I had waited. You see those type of announcements usually come at 10:00 A.M. not 1:00 P.M. like it did. WHY? Did the banks have to cover more of their short positions? Noon I would have been 7k richer but somehow it does not matter to me anymore.

What I feel is important know is that Congress starts to fix the problem. NO MORE swooping in to save the day like SUPER MAN! Let us please, please fix the underlying problem. Stop writing the bad loans for crying out loud. All they want to do is grease the wheels. They stopped working and need to be replaced. And as we all know retooling a factory takes a lot of money and that is where it needs to be spent. Please e-mail your congressperson and tell them this.

I worked Friday from 6:30 to 6:30 and ten hours Thursday doing commercial roofing. I am tired too Danny! I am glad to see you are trying to better yourself. Good luck and I hope you make it back.

You can freeze your credit report.  http://www.consumersunion.org/campaigns/learn_more/003484indiv.html

I found out I was flying under the credit report radar the first place I rented.  My future landlady called me, on a Monday holiday, said she ran a credit report on me, and the credit report said I wasn't working for my present employer.  She named my previous employer of 6 years previous.  (I didn't apply for any credit while working for my present employer, but did shortly before quiting.)  I had given her an employement verification letter from my present employer.  I told her I would be most comfortable if she got verification directly from my employer on Tuesday.  She got it, but told me I should update my credit.  I'm happy those bastards have no idea where I work.  

Snowman, $6.9x10^12 / 3x10^8 people = 2.3x10^4 $/person.

That is $23,000 per person.  I have found I am not able to keep track of all the decimal places lately in my excitement.  I have made some really exagerated calculations lately and posted them on my blogs.

Oh yea, that is still kind of high, I don't believe most people have that much either.  I didn't understand the previous part of your calculation late at night Snowman.  So my correction may not be correct. 

I saw an interesting theory from a guy who looks like he is off the grid (but on the net) somewhere (on the Iberian peninsula, Spain or Portugal is my guess).  He said he thinks the U.S. government knew they couldn't stop outsourcing.  The only way to keep up the GDP was to fill the hole of outsourcing by inflating the housing bubble.

http://www.youtube.com/watch?v=ohyFhoadAnM&feature=user

Running with Scissors, you're really good at finding cool links.  good deal.  I read your comments all over tk, and I appreciate your comments and links. 

Snowman, as always, thanks for the comments and encouragement.  Yea, I've got confidence that I'll come back.  I'm basically at break even, so things could be much worse.  I respect your trading style, so it's good to hear that you've suffered some similar troubles before. 

Anyways, thanks for the discussion guys.

Out of the blue in June, we got new Credit/Debit Cards from our credit union saying there was some kind of breach that did not affect our account, but they were replacing everyone's cards to be safe. Kind of sobering at the time.

Intersting point though that everyone is worried about the 'hacker' that is going to steal and sell your information when the very real threat of the people working there is far worse and far more likely. Even at our credit union it took them a month to catch an employee who was skimming somehow.

 As for the market, things are moving up in my portoflio, albeit slowly at times, but just taking a patient and steady approach and keeping my eyes open for opportunities.