Financial Sarcasm Roundup for 11/17/14

A month of nothing but haiku and limericks needs some sarcasm to bring the old routine back.

Halliburton and Baker Hughes are getting hitched.  The longstanding independence of Howard Hughes' business legacy is ending.  One legendary drill bit sure had long legs.  Halliburton can now busy itself with the weekly US oil and gas rig count.  Political campaign contributions sometimes determine the outcome of antitrust scrutiny.

High speed traders are playing with fire in the Treasury market.  One fat fingered trading error could easily give the bond market a flash crash that would jeopardize the solvency of several major banks holding government bonds.  A lot of hedge fund managers are going to have their rear ends handed to them on a silver platter because they can't adjust their portfolios to new "regimes" in volatility.  It serves them right.  It also serves the Fed right for digging itself a hole by becoming the world's largest bond hedge fund, and the emergency gates they plan to slam shut will catch a lot of individual bond investors with illiquid securities.

Other hedge funds are cutting their long bets on gold.  It's like they couldn't have messed up more if they had planned to fail.  Exiting long positions in a commodity with a falling price won't look good in their annual reports to shareholders, but hedge fund investors are too dumb to read those reports anyway.  I wonder what hedge funds consider to be a safe haven asset if they are so easily spooked out of precious metals.  Oh BTW, bullion redemptions from gold ETFs haven't broken those instruments' paper hedges just yet, so the retail investor has more breathing room before being locked out of trading this instrument too.

Lots of people won't be able to catch a break when things start breaking down.  I'll watch the multi-lane pileup from the roadside cafe, someplace where a Halliburton truck is mounting a Baker Hughes rig.

Full disclosure:  No positions in any companies mentioned.  Long GDX, not gold bullion or bullion instruments.  

Financial Sarcasm Roundup for 07/28/14

Death and taxes are certainties in life, according to folk wisdom.  Sarcasm should be an additional certainty.

Argentina moves closer to default by refusing to compromise with its holdout bondholders.  I saw this one coming.  Go read my previous Financial Sarcasm Roundups if you can't handle the truth or are too dumb to remember what I've been saying for weeks.  I note with interest the possibility that Argentinian soybean farmers may hoard their crops.  Hard assets like agricultural produce make sense in a high-inflation economy that world markets have isolated.

The IMF is letting us all know that there is no cause for alarm.  That's nice to know.  It's also nice to know that Chair Yellen acknowledged several equity market bubbles and is helping other regulators put exit gates on bond funds.  People should know these things but they prefer to remain ignorant.  Trusting some untrustworthy financial officials is going to get a lot of people hurt.

Bank of America hypothesizes that China is buying Treasuries through a European clearing firm in Belgium.  That would explain the mystery surge in Belgium's Treasury holdings that market observers noted earlier this year.  It's obvious that large holders of Treasuries will have a huge problem on their hands regardless of where they clear their trades.  They won't be able to find buyers to take large volumes in a hurry.  The Fed's bond fund gates for US investors are a message to foreign central banks.  Message received, loud and clear.

I'm pressed for time today because some Silicon Valley techies invited me to a reception down in Menlo Park.  I need to be on the road in a few minutes.  I will seek out sarcasm there but I don't expect to find much I can use, as these things tend towards proprietary discussions of business models.  I hope Models In Tech are on the scene; now those are some models I'd really like to discuss.  

US Investors Should Not Fear Belgium

My daily perusal of Zero Hedge reveals that alarmism never takes a day off.  A corrected Reuters update to monthly demand for Treasuries set off some paranoia about hidden agendas.  One reports clerk at Treasury probably made a fat-fingered mistake and had to re-do the monthly holdings report.  Corrected numbers by themselves are not sufficient evidence for a conspiracy.

The updated US TIC numbers for January 2014 reveal Belgium to be the third-largest holder of Treasuries.  Note that Russia hasn't dropped off the list just yet; we'll have to wait until the March TIC data release in May to see if some oligarchs are moving around.  Anyway, note that the line for "Caribbean Banking Centers" really refers primarily to the hedge funds domiciled there, not the island countries' sovereign cash.  The line for Belgium probably means much the same.  GlobalFundData notes that there are plenty of hedge funds in Belgium.  The Treasury press release for today's TIC data refers to "foreign residents" rather than sovereign governments.  Maybe a bunch of European aristocrats used their family banks to buy Treasuries.  They probably got a good deal as the Fed began backing away from its QE role.

We have nothing to fear from Belgium.  Zero Hedge can relax.  

Deep State Financial Order Of Battle Between Russia And The West

Mike Lofgren's "Anatomy of the Deep State" for Bill Moyers sheds new light on the elite actors shaping national and global policies.  This analytical framework allows consideration of both state actors and non-state actors shaping the confrontation between Russia and the West over Ukraine.  Military analysts discuss "orders of battle" when nation-states face off in a military confrontation.  Financial analysts may compile a financial order of battle in parallel for a conflict's non-violent dimension.  Ukraine Crisis' excellent infographic depicts the financial battlefield.  Here is the Alfidi Capital contribution to the global dialogue.

DEEP STATE Russia

Radio Free Europe / Radio Liberty identified some of Russia's deep state players in 2012.  The Carnegie Endowment recognized in 2011 that Russia's deep state security operatives periodically emerge to harm the Putin regime's opponents.  Anywhere from a few dozen to a few hundred people close to Vladimir Putin control a blend of public and private mechanisms that apportion wealth in Russia.  They have large but not unlimited financial resources.

Russian billionaires have lost significant wealth since the crisis began.  The advance warning that allowed them to escape forced bank recapitalizations in Cyprus is present in this crisis, but the escape routes to more hospitable climes may not be available this time.  Repatriating personal assets to Russia will make them subject to the kinds of political schemes they sought to avoid by relocating abroad.

Gazprom is Russia's state-connected private energy behemoth.  It presents "Gazprom Ukraine Facts" (do a Google search for that term) telling its side of the Russia-Ukraine gas dispute.  Reuters notes that Rosneft is interested in buying an Odessa oil refinery if Russia's state bank VTB forecloses on its unpaid debts.  The tension between Russia and Ukraine over Ukraine's unpaid gas subsidies was one of the triggers for this crisis.  Alfidi Capital believes that any Gazprom and Rosneft financial interests in Ukraine provide both a pretext for further Russian military provocations and pain points the West can target with financial restrictions.

The Financial Times reports that Russian companies have moved large amounts of cash out of Western banks in anticipation of sanctions.  Where those assets end up is anyone's guess but there aren't many places they can go to avoid SWIFT transfer restrictions.  The record drop in Treasuries held in custody at the Fed has Bloomberg and other media wondering whether Russia's central bank is moving its holdings beyond the reach of US sanctions.  It is too early to tell whether Russia intends to sell some or all of its Treasuries.  The ruble's value against the dollar has severely weakened in recent weeks, so the longer Russia waits to sell, the less local cash they will receive.

Putin's Palace is an impressive redoubt that sanctions cannot reach, but the oligarchs who helped build it may not have the patience for a protracted conflict that hurts their fortunes.  There is no evidence in public media  that Russia has the financial equivalent of a Tsar Bomba it can drop on financial markets.  No one would expect a financial WMD that will show Kuzma's mother to the world.  Then again, Dr. Strangelove ended with the detonation of a Soviet cobalt bomb after several Americans were admonished not to fight in the War Room.

DEEP STATE Ukraine

Alfidi Capital has already assessed Ukraine's financial condition.  Many Western commentators have missed how things got so bad.  Ukraine was the third largest recipient of US development aid during much of the 1990s.  Much of that aid appears to have been wasted or looted.  Yulia Tymoshenko, a key leader of Ukraine's nationalist political coalition, is by some accounts an oligarch.  Ukraine's oligarchs are divided against themselves; Dmytro Firtash, a Tymoshenko opponent, has been arrested for allegedly gouging Ukraine to help Gazprom.

Ukraine's dire financial straits and rich physical assets define the country more in the role of prize than combatant.  This East European Gas Analysis map of Ukraine's gas pipelines depicts two very important characteristics that other maps ignore:  compressor stations and gas fields.  Russia cannot cut off gas supplies to Ukraine without cutting off its European customers as well.  Russian forces would have to control all of those stations throughout the entire country to apportion gas flows as rewards or punishments.  Chevron agreed in 2013 to develop the Olesska shale gas field in Ukraine's west.  Shell agreed in 2013 to develop the Yuzivska field in Ukraine's east.  It should go without saying that infrastructure and fields in Ukraine's east are in more immediate danger of falling under Russian control than those in the west.  Control of the Ukraine pipeline network and untapped oil/gas fields is a major strategic prize at stake in Ukraine.

DEEP STATE United States

The White House published an Executive Order on March 6, 2014 authorizing the government to act against anyone who facilitates Russian armed intrusions into Ukraine.  The term "United States person" is defined to include corporate entities, and this includes the foreign branches of US banks and corporations.  This EO is clearly targeted against a handful of Russian citizens and Ukrainian collaborators who have directly interfered in Ukraine's internal politics.  It is not intended to silence any foreign policy debates here in America.  Paranoiacs can relax.  The Magnitsky Act provides further US leverage against specific Russian officials who commit human rights violations.  It is unclear at this time whether American sanctions will prohibit American ownership of Russian-derived securities (ETFs, mutual funds, ADRs of Russian companies, etc.) traded on US exchanges.  That is another shoe waiting to drop, depending on which Russian companies appear on the US Treasury's Office of Foreign Assets Control (OFAC) lists and how the SEC interprets its role in sanctions.

A potential Russian sale of all of its central bank's Treasuries would liquidate about 1% of the US government's outstanding marketable debt securities.  The Federal Reserve has reduced its commitment to quantitative easing but this is an easily reversible decision in an emergency.  The Fed could buy all of Russia's liquidated Treasuries once they were released to the world market, although the difficulty of getting around sanctions barriers would delay the transactions.  I don't think Janet Yellen wants to run afoul of OFAC.  The US Treasury would probably have to authorize the Fed to deal with non-US financial institutions that aren't on the NY Fed's primary dealers list in such an emergency.

US companies may not be very farsighted; it is not clear whether they have considered moving cash out of Russia to avoid retaliatory sanctions from that country.  Indeed, Exxon still appears fully committed to its JV with Rosneft to develop multiple energy projects.  That may now be an untenable arrangement.  A new regime in Crimea will imperil offshore oil and gas leases granted to Western supermajors.  A lot of high-priced MBAs didn't see this one coming.  US-based multinationals that do not have contingency plans for non-Russian cash transfers remain exposed to any Russian financial countermoves.  

Implications for financial markets

The conflict between Russia and the West over Ukraine has a military dimension that is fortunately confined to small areas.  Alfidi Capital's Third Eye OSINT has already assessed Russia's likely military moves.  The remainder of this conflict will take place largely in financial markets and trade relations.  The deep states of the US and its allies have an overwhelming advantage in financial capabilities and will likely inflict more pain on Russia's deep state than the converse.  This is a likelihood, not a certainty.  Investors watching the crossfire can avoid getting trapped on a financial battlefield.

Full disclosure:  This author does not own any positions in any securities of Ukrainian or Russian companies.

The Haiku of Finance for 03/14/14

Moving Treasuries
Avoid sanction custody
Could Russia sell them?

Treasury Secretary Jack Lew In California And Australia

I attended US Treasury Secretary Jack Lew's talk last week at the World Affairs Council.  I like hearing from top public officials firsthand.  They're going to hear from me eventually once my reputation achieves critical mass, so they might as well get used to seeing me at their public appearances.  I held back from publishing my comments on Secretary Lew's remarks because I wanted to compare his San Francisco talk to comments at the G20 ministerial summit in Australia.  He stopped in San Francisco on his way to that summit and I assumed he would stay on message.

I agree with Secretary Lew that resolving the debt limit conflict in Congress is a positive development.  The long history of the debt limit proves that it has never actually limited the growth of the national debt.  Eliminating it completely will end the hypocrisy of pretending to be serious about reducing the national debt.  His comments on international relations were more circumscribed, endorsing Iran's oil and financial sanctions and advocating IMF-style reforms in Ukraine.  Most Americans probably don't know that the US Department of the Treasury has a significant international portfolio.  Treasury has extensive guidelines for implementing the sanctions against Iran.

Secretary Lew addressed Bitcoin obliquely, leaving open the possibility that existing regulation and settlement systems could adapt to digital currencies.  He did not say whether Bitcoin would satisfy any legal tender requirement, which in the eyes of common law is really the most important test for settling transactions.  The IRS has not yet ruled on how gains realized in Bitcoin transactions may be taxed.  I'm guessing they'll be taxed as capital gains because Bitcoin acts like an asset when investors take positions.  If it quacks like a duck . . . it's probably not a swan.

I do not agree with the Secretary's belief that raising the minimum wage will raise significant numbers of Americans out of poverty.  His office should read the CBO's report from last week that projects large job losses from an increase in the minimum wage.  The Treasury's own data shows that most minimum wage earners are young and not heads of households.  They have the rest of their careers to seek wage gains.

I was very shocked to hear the Secretary refer to the cash reserves many large US corporations maintain as "retained earnings."  Oh wow, that is just so wrong.  Retained earnings is an accounting classification for the excess shareholder's equity built up from many profitable reporting periods.  It is not at all the same thing as holding cash!  The retained earnings accumulated in a year may not precisely match the cash committed to capex or other functions.  I can't believe this guy was COO of Citigroup's wealth management unit.  He learned nothing about corporate reporting if he thinks cash on hand equals retained earnings.  I couldn't forgive that misstatement after he said he wanted corporations to spend that cash pursuing growth.  I assess corporate America's huge cash hoard as a hedge against another financial market crisis.  The hoarding reflects the rational belief that Washington has not resolved the underlying causes of the 2008 crisis.  The US Treasury Secretary has a role to play in doing the right thing.  It's nice that he's listening to corporate executives talk about workforce skills training, infrastructure, and immigration reform.  Here are some other things he needs to hear, straight from the CEO of Alfidi Capital.  Bring us real stress tests for banks, the resurrection of Glass-Steagall, and the prosecution of fraudster financial executives if you want us all to get serious about risking cash on growth.

I would have preferred to hear Secretary Lew discuss the financial condition of the US government in more detail.  The evidence of mounting problems has been in the public domain for years.  The Federal Reserve's balance sheet is larger than ever and is extremely sensitive to rising interest rates.  Any potential losses would end its remittances to the Treasury.  The Foreign Credit Reporting System tables reveal the US government's small exposure to foreign debtors.  That is a huge change from much of the 20th Century when the US was the world's largest creditor, and US development aid opened new markets for American exports.  The annual trustees' report for Social Security and Medicare made it clear in 2013 that some of the funds' programs were facing imminent depletion.  Secretary Lew's signature is on those reports.

Here's the postscript from the G20 meeting.  The assembled finance ministers agreed on a two percent GDP growth target for this year.  They do not seem to know how to meet that target.  No one wants to talk about austerity anymore after riots in Greece and Spain spooked the European troika away from policy reforms.  Secretary Lew's advocacy of IMF-type monetary reforms was reserved for the home audience at the World Affairs Council.  The IMF prepared a report for this G20 meeting with notable changes in rhetoric.  The old advocacy of shock therapy through free market reforms is less visible now.  The new tone embraces indefinite monetary stimulus and infrastructure investment.  The Keynesian revolution is complete among the world's policy elite.

Secretary Lew talks a good game.  I like the guy.  His staff needs to prep him some more on financial terminology so that he doesn't appear to be a fish out of water with offhand references to "retained earnings."  This year's G20 action items will be judged by their success or failure in any future crisis.  The Secretary upheld his office's traditional reluctance to comment on the Federal Reserve's monetary policy.  That's a wise choice.  The hard part today is that so much of the G20's agenda is hostage to continued central bank monetary stimulus.  Specifics on just how the Secretary and his counterparts intend to realize two percent global growth are extremely relevant.  The Secretary's case for recovery so far rests on ARRA and Dodd-Frank.  He owes America a stronger case.  

JPMorgan Chase Will Bail Out Your Grandma For Uncle Sam

JPMorgan Chase announced that it will make good on its banking clients' Social Security and other benefit payments in the event Uncle Sam decides to turn deadbeat.  I did a double take when I heard that on NPR this morning, and I read the article to be sure I hadn't misunderstood something.  I can draw one of two implications.  Scenario number one is that JPM is supremely confident that its cash horde will withstand a one-time delay of government payments and it won't get hit with any more SEC fines or forced settlements.  The alternative is that JPM knows something no one else could know about whether it has its own backstop from the US government.

Such an guarantee is very unusual from a SIFI.  Most investors are nonchalant about hedging the possibility of a US default on its shorter termed Treasury obligations.  It sure looks like financial advisors and even portfolio managers haven't explored hedging with hard assets or futures contracts on non-US currencies.  Central banks are making appropriate preparations but the mention of increasing dollar swap lines makes me LOL.  If people panic and sell Treasuries the first thing they'll do is get rid of US dollar proceeds as fast as possible.  Central bank dollar swaps are just as likely to amplify a run on the dollar as mitigate it.

It's too late for your grandma to open a bank account at Chase to seize on this sweet deal.  The next few days will reveal whether one was necessary to bail her out.  

Financial Sarcasm Roundup for 07/08/13

I've got a busy week ahead with attendance at SEMICON West / Intersolar in San Francisco taking up much of my time.  There is still time enough for sarcasm.

The US-EU trade talks are proceeding on schedule.  I predicted last week in my previous Financial Sarcasm Roundup that the eavesdropping revelations would not derail these talks.  Free trade deals are too important to political elites and their business elite patrons to let an unflattering news item get in the way.  Besides, elites love excuses to hob-nob, get their photos taken for PR campaigns, and eat fancy chow like caviar.  Trade negotiations are the perfect venues for such fun.

Thomson-Reuters had to learn the hard way that pre-releasing survey data to premium customers is wrong.  This is the moral equivalent of front-running in brokerage, which is clearly forbidden because it gives inside parties an unfair advantage.  I laugh at the stupidity of hedge fund managers who build algorithms primed to jump at a two-second release.

Temp jobs are booming in the US.  I've been telling people for years, on my blog and in person, that assembling a portfolio of income streams from multiple projects is more resilient than staking your entire professional reputation on a single capricious employer.  Americans who don't read my blog are going to learn this the hard way once they lose their full-time jobs.

Big investors in Asia and Europe still say they're not backing away from US Treasuries.  They're dumber than ever.  Money managers outside the US must be sweating bullets when they watch the value of what's on their books.  Any panic selling of bonds will spike real interest rates here in the US.  We've only seen small jumps in interest rates so far thanks to the Fed's meaningless platitudes on the non-end of QE.

If any of you wonderful genius readers want to link up with me during the SEMICON West / Intersolar conference at Moscone Center, I'm easy to find.  Just wait around the trade booths that have free booze and hot chicks.  If you're a hot chick yourself, email me and ask to hang out with me during the conference.  Attach a full-length photo so I don't waste my time.  You'll have to adhere to my schedule because there are lots of places I need to visit.  Ladies, here's your chance to be arm candy for Yours Truly and impress the locals.  Don't miss out.  

Continuing Lawsuits Against Credit Ratings Agencies

Lawsuits are no fun when you're a target.  Ask the credit ratings agencies like S&P; the federal government is suing them for damages from ratings on subprime mortgage investments.  Reading past the article's discussion of conflicts of interest and the housing debacle is a necessary task in seeing through a smokescreen.  

The government has little interest in recovering real damages.  It has a very strong interest in pressuring rating agencies not to downgrade their ratings of Treasuries.  Lawmakers have decided to ignore the legal debt ceiling, tempting rating agencies to downgrade Uncle Sam's credit.  Moody's hinted that a ratings downgrade was an option after the fiscal cliff standoff but so far has not followed through with action.  I believe it will continue to hold its current rating and "negative outlook" admonishment to avoid being sued by the government.  Moody's has little to fear as long as Berkshire Hathaway is a major shareholder and Warren Buffett remains a top political campaign bundler.

BTW, Europe goes through similar motions about stopping conflicts of interest at credit ratings agencies.  Nothing real will change as long as rating agencies know they must support strong ratings for weak sovereign debt, otherwise legal action would indeed be serious.  

The Haiku of Finance for 11/06/12

Post-election task
Treasury holds up ceiling
Until it crashes

The Haiku of Finance for 09/11/12

Treasury flash crash
That can happen to bonds too
High-speed trader greed

There Are Bigger Numbers Than Dow 13,000

The DJIA is flirting with 13,000 after a few years of resetting closer to what I believe should be its fair market value (hint: a lot lower!).  There are plenty of numbers far larger than that one.  Our planet is about 4.5 billion years old, with 7 billion people living on it, and it's approximately 93 million miles from the Sun.  Okay, I'm goofing off here.

The big numbers we should really concern ourselves with as investors are the federal government's unfunded liabilities, which totaled over $61 trillion in 2011.  That's the figure that will ultimately drive the global bond market away from Treasuries and any other dollar-denominated fixed income investment.  I don't listen to market commentators who urge the investing public not to miss the next bull market into Dow 13,000.

Full disclosure:  No position in Treasuries at this time.

Foreign Debt Holdings Decline In Slow-Motion Run On Dollar

Foreign investors' willingness to continue playing the role of fix provider to Uncle Sam's debt addiction is now being tested.  The Capitol Hill debt theatrics and ongoing postponement of real responsibility are giving foreign bond buyers reason to reduce their Treasury bond purchases. 

My fellow Americans, our time on the mountaintop is ending.  The coming run on the dollar can't be abridged by another round of quantitative easing.  It will require lifestyle curtailments and lowered expectations from every citizen who is not among the top 2% of the income ladder.  Get ready. 

The Limerick of Finance for 07/24/11

Now deficit talks just broke down

Debt default is the talk of the town
Treasuries aren't risk free
Just how much, we shall see

Dollar will lose reserve status crown

Deficit Talks Crash, May Crash Markets Too

I'm not prone to apocalyptic thinking.  Life goes on for most of us no matter what unpleasant surprises come along.  Here's a surprise that won't make life better for Americans.  Bipartisan deficit cutting talks have broken down, and the financial markets are starting to price in the possibility of a U.S. debt default. 

It didn't have to be this way. Politicians could have bit the bullet the bullet in countless ways but grandstanding for next year's elections was more important.  World War I started with a similar series of strategic miscalculations.  Now the global bond market will find out just how risk-free Treasuries really are.  Mutual funds and state pension funds that have to sell off Treasuries in anticipation of a ratings agency downgrade will be the first dominoes in a worldwide cascade. 

The long-dreaded run on the U.S. dollar is almost here. Brace yourselves.

The Limerick of Finance for 05/15/11

Treasury warns of a double-dip
If Uncle Sam doesn't let slip
A new ceiling on debt
That hasn't sunk yet
QE3 buys bonds at a fast clip

The Haiku of Finance for 04/18/11

U.S. debt outlook
S&P:  "Watch out below!"
Rating gonna slide

The Limerick of Finance for 04/17/11

The debt limit will soon be raised
And the bond market will be amazed
Bond buyers will run
Debt default won't be fun
Citizens ignore this, they're unfazed

Updating The Alpha-D For Dec. 2010

Can you guess what changes I've made this month?  Don't worry, I won't make you do that.  I'll spell them out.

First, my entire TDW position got called away when it went through the strike price.  I bought them all back in a wash sale (albeit at a slightly higher price then the called-away price).  That's the risk I take with writing covered calls on a stock I'll hold forever.  I renewed my short-term covered calls on TDW and even sold some cash-covered puts under the position.  TDW is one stock I'm counting on to deliver long-term returns during Peak Oil.

My covered calls and short puts with GDX and FXI all expired, so of course I renewed them all.  Gold and China are my way of hedging the eventual collapse of the U.S. dollar and so far they're doing fine. 

I sold more cash-covered puts under EFA.  The P/E of 12 still looks good to me.  I'll go long when Mr. Market decides to capitulate on the rest of the world outside the U.S. 

My long puts on LMT and IYR will expire next month.  I set them to hedge against the re-bubble in housing and the mega-bubble in the defense/aerospace sector.  Neither of those bubbles has popped yet.  If they expire worthless I'll net them as tax losses. 

My option sales gave me some cash.  I don't like sitting on cash, so I put some of it to work in a CD and a few T-Bills.  Yeah, that extra buck fifty in yield will put me right up there on the Forbes 400 some day. 

Finally, I've made no moves on KEX, FLIR, SCHW, or other stocks I've been watching since mid-2009.  They're great companies but they're just not on sale yet.  I'll wait. 

Updating The Alpha-D Portfolio For Nov. 2010

Here's what I didn't change this month.  I maintain my long puts against LMT (hedging the defense bubble) and IYR (hedging the housing sector). 

I also maintain my long holdings of GDX (gold sector bull), FXI (China bull), TDW (energy services bull and compelling fundamental value).  My covered calls on each expired unexercised and I refreshed them.  I also sold short puts under those three securities.  If they remain range-bound, I keep the cash.  If they drop in a flash crash, I pick up more of what I like at a discount. 

Here's one significant change. For the first time in over two years, I wrote a small number of short puts under EFA.  I do not have a long position yet in EFA but I'm willing to risk acquiring some.  I don't mind a Euro currency crisis or Asian capital controls as the trigger.  I consider EFA to be a way to own non-U.S. markets I can't track myself.  I'm not quite ready to take the same approach with SPY because I'm waiting to see whether a bond market dislocation puts the S&P 500 on sale. 

I didn't add much to my fixed income holdings other than buy a one-month Treasury with my cash proceeds from selling options.  The sickeningly low yields on Treasuries reduce the effectiveness of this yield-enhancement approach.  I just need to stay in the habit of rolling cash into F.I.  It will pay off when interest rates rise after the U.S. is forced to live within its means.