Still Booming (and hedging)

Still Booming. I'm still getting hammered by other projects such as one involving the dam at left.  Inbetween these, I'm taking some breaks for much needed RnR such as mountain biking.  It's really become apparent how much the energy boom in oil country is starting to impact all sorts of things unrelated to energy.  It's also apparent from my perspective that to the degree energy prices stay as high as they are (update: Energy Blowoff?), they will begin to spread this persistent component of inflation around.  It's not just that the cost of energy that gets passed around - attraction of skilled people by energy companies to help exploit the boom mean that other industries are going to be hit with labor shortages and higher labor costs.  Since energy employs a diverse skillset that overlaps other unrelated industries, the impacts can be felt relatively far and wide, at least around oil country.  Despite the apparent housing crash, home prices in certain parts of oil country as far as I've seen are booming.  A substantial portion of the economy is switching to the exploration and production of energy and/or alternative sources.  Business plans are being written as we speak to divert yet more resources to take advantage of the need for energy.  These are jobs and costs that can't really be reduced by outsourcing to China and India and are dependent only on the price of energy.  Coupled with persistent high commodity prices, I think the impacts will continue to filter through the economy. (Update: CXO Advisory discusses an interesting paper on energy inflation and the Federal Reserve).

Hedging.  During my hiatus from blogging, I began scaling into a hedge on the market by selling LEAP calls against the general market.  Having generally been long the markets since Summer, 2003, so this is a significant change for me.  I am keeping my longs, and essentially setting up a buy-write position on the market, even though my long stocks and my Shannon trading strategy don't entirely mimic the underlying market.  Fortunately, I scaled in and sold 2/3 of the options before the recent market hiccup.  Unfortunately, I missed selling the other 1/3 and am loathe to do so now.  My reason for hedging wasn't that I necessarily believe the bearish scenarios (link via The Big Picture), rather, it was that I was highly skeptical that the market could advance far enough that the options would lose more than the collected premium.  It's a portfolio optimized for a generally sideways, slightly up or down stock market rather than a zooming or plunging one.  To the extent the market is volatile as well, I'll be a happy investor because the Shannon strategy will harvest volatility profits.

CASTrader.  None of the above has anything to do with CASTrader, of course, but in the near future, I'll hopefully be back to somewhat regular posting.