I hear a lot of talk about China today.
What I don't hear about is the threat made by the hacking group, Anonymous, to "make sure that's this May 7 will be a day to remember." I wouldn't take this too lightly, just one week ago today a single tweet about an attack on the White House spiked the markets down during trading hours. No one is taking them too seriously as they made a similar threat against Israel last month and nothing happened Meanwhile, the Pentagon is claiming the Chinese military is targeting Government computers – oh, if only we weren't sequestering their money, they could fight this new and expensive threat!
America is part of an elite group of 6 countries in the World that spends more on their military than they do on education. If we had more education, we'd probably have more engineers and, if we had more engineers, we wouldn't be so worried about Chinese hackers. China is also in the coockoo club, spending 1.5x more money on their military than education but that's just $99Bn in a country of 1.2Bn while the US spends $663Bn on the military and $107Bn on Education (1/5th and just 3.5% of all Government spending).
Other members of the coockoo club are such luminaries as Iran, Pakistan, their friends India, the UAE and Russia but all of them together don't add up to China and China spends 10% of what we spend. I like the graphic on the left, 23 teachers per missile. We fired 725 tomahawks at Iraq during the 2003 invasion – that's 16,675 teachers! On March 19th or 2011 – just the one day – we fired 124 tomahawks at Libyans, a $1.2Bn day's work for our military (good for BA though!).
I guess one day we can cut out the middle man and just drop students on our enemies. Figure 16,675 teachers must teach about 400,000 students (or used to, in this case) – I doubt even the most hardened of bunkers can withstand 400,000 students being dropped on them from 60,000 feet. It's a win-win because it saves money on the missiles and cuts down on our need to educate the kids with our scarce supply of teachers – if we can target just using poor kids, I'm sure the bill would fly through the House…
In fact, the Heritage Foundation is ahead of me on this one as they have just completed a study that "proves" that poor, immigrant children will cost us $6.3Tn if we allow them to stay in our country. But, if we drop those 11M children on North Korea – we can save $27.5Tn on tomahawk missiles! The conclusion couldn't be more obvious – thanks Heritage Foundation for once again clarifying the public debate!
As Heritage notes: "Our findings are based on empirical research and reflect common sense. Unlawful immigrants have relatively low earning potential because, on average, they have 10th-grade educations and low skills." God forbid we invest $50,000 in a teacher who takes 30 of them into a class for two years ($3,000 per student) and educates them through grades 11 and 12 then, right? That's not even a consideration in the Heritage "study". I say "study" but it's as much of a study as was the 1922 pamplet titled "The Revolt Against Civilization: The Menace of the Under-man," which was used by the Nazis to "prove" that certain groups were simply undesirable. After all, they did a study, it was an economic and social "fact" that reflected their empirical research and, of course, common sense.
I'm not trying to offend anyone here – not even friends and contributors of the Heritage Foundation. In fact, it's your responsibility most of all to tell them that YOU have a line and to let them know when they have crossed it. Read the Under-Man, then read the Heritage Study and use your own conscience. Mine simply dictates I bring this to your attention…
While education spending is declining and we don't want to spend anything at all to help 11M immigrants become productive citizens, we are spending $20Bn a year on our pets. Despite the poor economy, domesticated household pets are regularly enjoying two- and three-course meals. Sales of dog treats alone more than doubled to $2.4 Billion from 2000 to 2012. And it’s not because of a rising population. The estimated 75 million cat and 85 million dog population nationwide has stabilized.
“I care deeply about animals, but, in general, there’s a real history of human beings having more sympathy for animals than their fellow humans,” said Joel Berg, executive director of the New York City Coalition Against Hunger. “This is just another example of the disparities in our society.”
Once again, there's an easy solution to this situation – let us keep the immigrants as pets – a lot of them would be thrilled with 2 meals a day and a place to sleep. Actually, a lot of people in California already do this on the QT with the household help so, shhhhh…
Speaking of homes – ours are on track to gain another 9.6% this year according to CoreLogic but I think that may be light as they were up 1.9% in March and I think we may be bucking the seasonality at some point. In fact, if you exclude distressed sales (which are winding down) prices were up a whopping 2.4% in March alone! We discussed a play on HOV in Member Chat at the close yesterday and, more importantly, we're adding a new income-producing trade to our Income Portfolio on BAC, which I noted early this morning as follows:
By the way, for any who are interested, I do love that you can sell a BAC June $13 call for .40 (BAC now $12.88) against a 2015 $15 call for $1.10. Even if you have a restricted account, you should be able to buy 2 of the 2015 $15s for $2.20, which have a total delta of 2 x .40 = .80 and sell 1 of the June $13s for .40, which have a delta of .48.
So, a $1 move down in BAC (which we don't expect, this is a bullish set-up) will cost you roughly .32 on the trade while a $1 move up will make you the same.
Of course your risk is mitigated by the fact that you are selling almost 20% of your long position in premium over the first 46 days of your 620 day spread. Other than BAC just ringing your bell every month and dropping money on your doorstep – this is about as good as it gets for a simple calendar backspread set-up. Let's do 100/50 in the Income Portfolio.
A trade like this ties up $11,000 in cash less the $2,000 you collect on the sale of the short calls and you also need $10,000 in margin (the gap between $13 and $15) in an ordinary account so call it $19,000 allocated to collect $2,000 every few months – a perfect kind of play for an Income Portfolio. We're doing a half sale so we have the option of doing a 2x roll if necessary but we think BAC will grind up to $15 from here – not rocket.
AAPL, on the other hand, is still rocketing and looks like $465 at the open and we're still mainly in wait and see mode this week as yesterday's volume made the day meaningless so we'll keep watching and look for clearer signals from our indexes.
