I hate these bastards so much. I am so happy they tanked after hours due to lower guidance. The only reason they exist is because pimple faced teenagers absolutely have to have to fastest hardware so that they can blast bloody monsters in even more gory detail and have it all run smoothly. This will help my QQQQ puts a bit tomorrow.

Today was a big day to the downside for equities and normally in this situation I would put up a whole slew of charts showing all the technical levels that are violated.  However, today I do not have the time for that and it is not too hard to figure out that all the charts of the indices are very broken. I did, however, make a trade in my Roth IRA and I want to talk about that.

I’ve been waiting for a selloff in bonds and it looks like the TNX may have peaked. Intermediate term and long term treasury bond funds seemed to have cracked the 200 MA but inflation protected securities have not.  I’m betting on a bounce off of the 200. A big part of my Roth IRA is parked in cash yielding about 2% and I want to put some of it to use.  I want to park my money in longer term, higher yielding bonds, but I do not like the inflation risk with conventional long bonds.  Inflation protected securities seem to be a nice compromise. I am not saying that inflation protected securities is a great place to park your cash; I am saying that this decision was based purely on portfolio allocation and it just so happened that today seemed to be a good entry point. Sure, inflation protected securities may continue downward, but given the potential for upside as well as my current portfolio allocation, I am willing to give it a shot.

If you want to buy a mutual fund that buys inflation protected securities, consider the following:

1.  For a bond fund, given that the average return of about 4-6% per year, costs really matter.  Vanguard’s fund, VIPSX, has an expense ratio of 0.20%. Fidelity’s FINPX has an expense ratio of 0.45% and T Rowe Price’s PRIPX has an expense ratio of 0.50%.

2.  Do not buy inflation protected securities outside of a tax advantaged account such as a IRA or a 401k.  The tax code governing inflation protected securities is extremely unfavorable as well as complex.  Don’t get burned by the tax and don’t waste your time reading the tax code.

3.  Inflation protected securities are really a joke.  The bond coupon for a inflation protected security is lower than that of a conventional bond, but the principal that interest is paid on increases at the rate of inflation determined by the CPI.  But here’s the thing…everyone knows the CPI is understated. If the government wanted to rip you off as well as all the social security beneficiaries (and they are already doing that) they will just understate inflation through the CPI. Whatever you do, you probably will not beat inflation, but then again, it sure beats getting a 30% haircut in equities or getting burned by harder by inflation risk when holding a long term conventional bond.

IYT is the ETF for transportation companies.  On a break of $90, this sucker can easily fall back into the 70’s. The UPS warning might be enough to push it over the edge.

I am still a little pissed about selling my XLF puts and missing a fat move down.   On a fat move down on the XLF, you just can’t short it.  There’s too big of a risk of a bounce.  So instead of buying back puts on XLF, I decided to buy a IYR July 63 put for $2.25. IYR is the ETF for commercial real estate.  IYR doesn’t have as much falling potential as IWM and QQQQ (measured by distance from here to prior low) but at least it’s falling as opposed to IWM and QQQQ which are slowly rolling over and about to break down hard (both need to be down a few more cents to confirm). I kind of want to diverify my short setups.

Btw, I got rid of lame XLF July 23 call for $0.45.  I have no faith in owning that option as my insurance policy against a bounce.

Crap, I am not short enough.

UPS Cuts Earnings Guidance
By KATHY SHWIFF
June 23, 2008 5:09 p.m.

United Parcel Service Inc. cut its second-quarter earnings guidance, blaming an “anemic” U.S. economy and “unprecedented increase” in fuel costs for lower-than-expected U.S. package volume and decreased use of its premium air products.

Source: WSJ

This piece of news is very bad news. If you don’t have UPS shipping crap around the country, you got no economy.

It’s over.  Retest of March lows is a near certainty.  1333 didn’t hold and neither did 1320. Uptick in volume is confirmatory.

This ranks as the 2nd worst instance this year of me missing out of a big fat move because I sold too early. On top of that, in my disbelief, I decided to play on the long side and got screwed by doing that as well.

This is precisely why I am a stubborn bear.  Missing out on a big move down feels far worse than being short and being wrong.

I went long one XLF July 23 call for 78 cents. Yes, that’s right, it’s a call and not a put.