BOUGHT 100 GJK IN ROTH/JNJ/Modems and DOCSIS 2/Total Business Inventories to Sales Ratio/

After reviewing the results from Johnson & Johnson this morning, I am going to wait for a better entry point than the current price before initiating even a small position.  Sales for the 1st quarter declined 7.2% from a year ago.  Worldwide pharmaceutical sales declined 10.1%,  and worldwide medical devices and diagnostics declined 2.9% compared to year ago quarter.  The company did maintain its forecast for 2009 at $4.45 to $4.55.  I have been cautious about adding JNJ for the reasons discussed in a prior post and this report does not assuage my concerns. JNJ Upgrade by UBS/Buy of GJO/Lottery Ticket Purchases  Besides, I do not have much money left to buy common stocks with the proceeds raised from my short term bond sales.  I would be more inclined to use those remaining funds to buy shares in Pepsico again which were sold in the 70s. The shift to lower my overweight position in short term bonds, all purchased before 2008 with proceeds from stock and mutual fund sales, was the first significant re-allocation to stocks since 2007.   I am still going to invest another 6 grand or so in stock ETFs to substitute for some mutual funds that I intend to sell during the next bull market. BOUGHT VEU AND GJT/ MIKE MAYO BEARISH ON BANKS: A SURPRISE?/

A Good Month But Another Awful Quarter/Ingersoll Rand: Awful Guidance and a Dividend Cut/Can No Longer Rely on Dividends as a Source of Income/Alcoa

I am hoping for a pullback to further implement that strategy having bought 100 of VEU so far.

The Commerce Department reported that retail sales fell 1.1% in March with a significant drop in auto sales. Economic Indicators.gov

I did see that Citigroup recently upgrade Brandywine Realty to buy.  I have a small position in one of its cumulative preferred issues, BDNPRC. BUY 50 BDNPRC/Home Sales/Kudlow's Creation of His Own Reality/LQD & Correction in Bond Prices/

The NYT has an interactive map of the unemployment rate by county.  NYTimes.com

Both Davidson and Williamson counties are significantly below the national average. 

I had a problem with my internet service recently, something about water in the ground block. The cable guy from Comcast looked at my set up and told me that I need to replace my old modem,  since Comcast had upgraded the system to DOCSIS 2 and my modem was capable of handling only DOCSIS 1.  I do not pretend to understand those terms but I bought a Motorola surfboard SB 5101 for $44 and it improved my download speed by a factor of 3.  On some matters pertaining to technology, I remain willfully ignorant. I downloaded a TV show from Apple for my IPOD in a fraction of the time needed by my old modem.  The change in the download speed is extremely noticeable for large files.  The serviceman also said that Comcast would be upgrading to DOCSIS 3 and I will need a new modem to take advantage of the speed offered by it.   Modems have just been released to handle that speed, as I discovered after buying my new modem, that are compatible with DOCSIS 2 and ready for DOCSIS 3 when that service is implemented in my area.  

Manufacturing and trade inventories declined  1.3% in February.  I receive email updates from the government on economic data.  I view this one as important. The Census Bureau has a chart of total business inventories to sales ratios.  During recessions, this ratio will increase, as in 2000 to  2001 when it rose to 1.35 to 1.45.  During a recovery it will fall to below 1.35 and a measure of health in the economy would be a ratio of 1.25 to 1.35.  Starting in mid-2008, it rose from around 1.25 quickly to close to 1.45, and has started to fall again in 2009. Chart: Busines Inventories-Sales Ratios  

I have just started to focus on that data and have not yet looked at ratios prior to 2000. 

I bought this morning, accounting for the entire volume so far today, 100 shares of a synthetic floater, GJK, with a market order filled at $19.83.  The underlying security in this Trust Certificate is the same J P Morgan junior debt issue maturing in March 2014 as PYV.    Par value of $25 will be paid on March 15, 2014.  So in about five years, assuming J P Morgan survives, I will realize close to a $500 profit on those shares or amortized to $100 a year, which generates by itself an annualized return at my cost of around 5% ($100 a year divided by $2000=5%).  This security is a floater with a 3% guarantee which is slightly worse than the 3.25% guarantee of PYV.  Unlike PYV, GJK pays interest monthly whereas PYV pays quarterly.  More frequent payments are always a plus in my book.  The float provision is also different.  GJK floats at .7% above the 3 month T Bill.  So the guarantee is being paid now.  This equates to a current yield of about 3.75%.  So, I calculate the minimum annualized yield after including the amortization of the spread at 8.75% for a five year note.  Unlike the float provision in PYV, I do view it as realistic that the float provision will be activated within the next five years for GJK.  For that to happen, the 3 month T bill will have to rise above 2.3% and stay above that level for the applicable computation period.   At a 4% T Bill yield, the floater would kick in, and the yield would rise to 4.7% computed at par value.  This would translate to about a 5.8% yield at my cost.  Since it is my personal opinion that inflation will be in the cards starting in 2010 and gaining steam for the remaining life of this security, I am calculating a possible range for this security at 9% to 9.5% annually with the capture of the spread in five years.  Since I already own PYV, buying my first shares at a better price at $18.5Buys of a First Mortgage Bond EMO and a JPM TC PYV, this purchase of GJK was marginal for me.  But, I do have a habit of traveling well off the beaten path.

The prospectus link for GJK:  http://www.sec.gov/Archives/edgar/data/1140396/000095013604002227/file001.txt

 

For comparison purposes this is the link to PYV:

 http://www.sec.gov/Archives/edgar/data/1297915/000094787104001800/f424b5_073004-jpm1.txt

Since most of the return for these securities is tied to capturing the spread between cost and par value in March 2014, two factors could lead me to sell before maturity.  One is a rise in price to close to par value within the next year or two or heightened concerns about J P Morgan.

Time to return to my tax return.  I always prepare my own.

Obama said in a speech today that the economy must be built on rocks and not sand.  For the last four years of W's second term, it was built on quicksand. 

DISCLAIMER:

  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  It is always important to follow the investment process. the investment process/links to further information on canadian energy or royalty trustsInvestment Process Part II: Bonds and Bond Like Investments   NOT A RESEARCH SERVICE/Add of PWE Last Week   These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me