Read ‘Negative Economic Convergence?, U.S. July ‘Existing Home’ Sales’ e-mailed yesterday to the over 10,000 opt-in (for e-mail) Subscribers to StockResearchPortal.com, a Resource Stock Research website.  In part, the e-mail reads:

“Rightly or wrongly, I am sensing a number of negative things starting to converge with respect to the U.S. economy, much like pieces of a bridge falling away, being patched up, falling away again – and with each event weakening the entire structure until it eventually falls down under its own weight.

As I am sure you are well aware, we are less than 3 months away from the U.S. mid-term elections.  This is a time when I typically would expect a great deal of current U.S. Administration ‘drum-beating’ and ‘spending’ to ensure, as best it can, a good mid-term election result.  I remember August, 2008 particularly well (one month before ‘Lehman’ and its then aftermath). I had speculated a few months earlier on Dow ‘Puts’ with a January, 2009 expiry date. I sold those ‘Puts’ in mid-August, 2008 because at the time I sold I believed the then Bush Administration would do everything in its substantial power to  ’prop up’ the U.S. economy until after the November 4, 2008 election date – and if the Republicans were successful in being re-elected until the January 19, 2009 Inauguration Date.  Prior to the time I sold them I had been ‘extremely offside’ on them.  While I made a small profit on those Puts when I sold them, as you may know the leverage in such ‘Puts’ is enormous – either way.  To this day I don’t regret selling because I still think my logic at the time with what I then knew made sense on the day I sold.  That said, after ‘Lehman’ (mid-September, 2008) those ‘Puts’ increased in price by over 3X between mid-August, 2008 and the November 4, 2008 election day.

So what would I do if I owned (i.e. had speculated on with money I could afford to lose) a few Dow ‘Puts’ today with a January 19, 2011 expiry date, given similar political timing with the mid-term elections fast approaching?  For sure …….” continue reading

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