1. INTEL: I bought some shares of Intel on Friday at around $15.25 which is close to my average cost. I will continue to reinvest the dividend to buy more shares until the price crosses 20 to the upside and then I may quite doing it. I am not much of a tech investor, but at least I understand what Intel makes and its usefulness to the world. I generally expect the Europeans to punish successful companies, who achieve a 50%+ market share due to innovation, for competing too hard, and not helping their competitors enough to take market share from them. So, I do not become surprised by the recent fine leveled by the EU against Intel for not being nice to AMD. While a negative for Intel, I do not believe that the action of the EU should over shadow what Intel has been saying about its business bottoming in the first quarter. This investment was the first made with the cash flow accumulated since 2/28/2009, and I used about 10% of that available cash.
2. TBT: ULTRA SHORT ETF FOR THE 20 YEAR U.S. TREASURY:
In a post dated 12/17/2008, I started to discuss using the double short ETF for the 20 year treasury (TBT) as a way to hedge my long investment grade corporate bond positions.
For me, adding TBT was never viewed so much as a bet against the treasury than as a hedge for my long dated maturity corporate bonds. Back in December, I mentioned that the long treasury had reached a 50 year peak in price. My tendency is to sell any asset that hits that kind of milestone, and not dither too long on thinking it to death -which I am prone to do at times.
The 30 year treasury was then yielding 2.65%. At that time, the spread between treasuries and investment grade corporate paper had spiked in the Fall of 2008, as shown in the chart from this week's Barron's. Barrons.com I mentioned in a prior post that this opportunity was one that could not be ignored under my Dynamic Asset Allocation approach. Examples of Dynamic Asset Allocation Other Than Using the Vix as Timing Tool for Shifts into and out of Stocks
The 30 year treasury was then yielding 2.65%. At that time, the spread between treasuries and investment grade corporate paper had spiked in the Fall of 2008, as shown in the chart from this week's Barron's. Barrons.com I mentioned in a prior post that this opportunity was one that could not be ignored under my Dynamic Asset Allocation approach. Examples of Dynamic Asset Allocation Other Than Using the Vix as Timing Tool for Shifts into and out of Stocks
It just seemed reasonable to me then to buy the double short for the 20 year treasury to hedge long corporate bonds that I had been buying in the 4th quarter, given the huge rally in the long treasury up to that point and the fall in investment grade corporate bond prices. Chris Cox: Medal of Freedom?/Massive Dividends for Proshares ETFs/TBT add
Due to the expansion in the spread between corporates and treasuries in the 4th quarter of 2008, it would have been conceivable to make money on both the long corporate bonds and the TBT hedge, just by a narrowing of the spread, with treasuries falling some and corporate bonds rallying. This is what happened in the ensuing months.
After my posts in December 2008 about using TBT as a hedge, Andrew Bary wrote a column for Barron's arguing that the long treasury was due for a fall, and I responded to his column with one of my own. Bary's Column In This Week's Barron's: Another Helpful Column on Bond Investing
It seemed to me that Bary was arguing for buying TBT as a bet. I would not do that. I wanted it as a hedge. (Then later, LB decided that it could trade TBT for a profit, and maintain a hedge, the same approach that left the Headknocker without any stock hedges after the Lehman failure. LB was told never to do that again and to say 1000 times to itself: "LB will never trade a hedge just to make a buck ever again". Unfortunately at times for Headknocker, LB is 1/2 trader. There are always staff issues here at HQ that Headknocker has to deal with)
Bary argues in his column in this week's Barron's that the pressure is still on the long date treasury paper. Barrons.com
It really depends on your point of view about the future course of inflation as to whether or not to agree with him. If you believe inflation is the next big problem, as I do, then you would be inclined to agree with Bary. If we are in for a prolonged period of deflation or very low inflation, then buyers are going to gravitate toward the long treasury yielding over 4%, particularly if the economic recovery is delayed into 2010.
There is also the problem of trying to float too much treasury paper in a world where the Chinese are starting to look skeptically at the U.S.'s ability to deal with our budget problems and to behave responsibility. I take seriously the comments being made by high ranking Chinese officials about the U.S., basically expressing their concern about the huge and growing budget deficits. USATODAY.com NYTimes.com
Maybe the Chinese think it is in their interest now to help the U.S. borrow and spend its way out of our most current pickle.
I have some PST as a hedge. SOLD LQD & BOUGHT PST. But, when the Fed stops its quantitative easing, which may happen in months, not years, the double short on the 10 year will look more attractive to me as a hedge than it does right now. TBT vs. PST: Hedging Corporate Bond Positions
PST will start to look better at that point in time compared to TBT which has risen a lot since I purchased it in the 30s whereas PST has barely budged in price since my purchase of just 30 shares.
Most likely, I will either add more of both PST or TBT if the opportunity arises (i.e. a sharp rally in treasuries), or cut down my long bond position some when I see inflation starting to creep back. The best hedge is to sell something in need of a hedge.
I am not an economist but I do have to make personal judgements to the best of my ability about my own portfolio. Given the sharp rise in TBT, and my belief that we are getting close to a change in Fed policy and an end to the quantitative easing, I may be more inclined to add to PST now. But, I would say there is wisdom in the old saw, if you are going to predict the future, predict often to improve your chances about being right at least once.
I am not an economist but I do have to make personal judgements to the best of my ability about my own portfolio. Given the sharp rise in TBT, and my belief that we are getting close to a change in Fed policy and an end to the quantitative easing, I may be more inclined to add to PST now. But, I would say there is wisdom in the old saw, if you are going to predict the future, predict often to improve your chances about being right at least once.
I would seriously doubt that I would ever hedge more than 20% of the value of my long bond holdings, probably more like 10 to 15%, and then manage the long corporate position to reduce risk further.
Lastly, I would just highlight that the longer dated treasuries have been rising in price and falling in yield even with the Fed engaged in a massive buying campaign.
3. United Technologies (UTX): The CFO at UTX said orders have stabilized, though at a low level. Reuters
4. Use of Torture to Try and Establish a Link between Iraq and Al Qaeda to Justify Invasion?: Maureen Dowd mentioned in her column today that the Bush Administration approved waterboarding a Sadaam security official in order to extract a confession linking Saddam and Al Qaeda.
NYTimes.com
NYTimes.com
Waterboarding was used by the Chinese during WWII to extract false confessions from U.S. POWs. There is more developing evidence that torture was approved to try and establish a justification for the Iraq war after no WMDs were found. Is Conservatism Consistent with Support of Bush's Enhanced Interrogation Techniques/NVS, EBAY, COP, Nestle, JNJ, EMC (referencing a video interview with Ron Suskind on the subject) Ron Suskind:
I would say the evidence leaking out on this subject has not yet risen to the level where I would feel comfortable forming an opinion about its reliability. I am always skeptical of the source and interested in multiple confirmations. Truth finding is a process. But, even with those caveats, these kind of reports are troubling however.
5. Nancy Pelosi & Waterboarding/General Hood Clones: It appears that Nancy Pelosi may have been less than candid, or some would say less than truthful, about her claim that the CIA did not inform of her about their waterboarding practice in 2002. WSJ.com For as long as I can remember, when something unpleasant happens emanating from the government, it seems that both political parties have a hand it.
This would be true for such matters leading to the invasion of IRAQ, the escalation of the war in Vietnam, and most recently the use of torture by the U.S. approved at the highest levels. As I have said, it is best to remain independent and open-minded, and to avoid allegiances that require the defense of the indefensible. It is hard to have much faith in politicians after being a voracious consumer of news for 40 or so years, witnessing first hand such events like Watergate, tens of thousands of false or deliberately misleading political ads from both sides, transparent efforts to manipulate voters, Vietnam, and Iraq II.
This would be true for such matters leading to the invasion of IRAQ, the escalation of the war in Vietnam, and most recently the use of torture by the U.S. approved at the highest levels. As I have said, it is best to remain independent and open-minded, and to avoid allegiances that require the defense of the indefensible. It is hard to have much faith in politicians after being a voracious consumer of news for 40 or so years, witnessing first hand such events like Watergate, tens of thousands of false or deliberately misleading political ads from both sides, transparent efforts to manipulate voters, Vietnam, and Iraq II.
Sometimes, you do have to wonder how competent the leaders are in both government and business. It seems to me down here in the Heartland that there are a few thousand General Hood type characters calling the shots in both business and government. But what do I know? Would it even be possible to read the NYT series called The Reckoning and feel confident about the leaders of our large financial institutions. The Reckoning - Series - The New York Times
Or, would the reader just come away from reading about what happened and say something like: "what a bunch of dufuses". Unlike the former President of Citigroup, I at least know the difference between a CDO and a grocery list, but then I am not one of the financial wizards either. NYTimes.com
Or, would the reader just come away from reading about what happened and say something like: "what a bunch of dufuses". Unlike the former President of Citigroup, I at least know the difference between a CDO and a grocery list, but then I am not one of the financial wizards either. NYTimes.com
But I try not to be cynical and just play the cards that I am dealt here at HQ as best as I can under the restraints and constraints that I have to operate, including the death of millions of brain cells by the year and a lack of access to all pertinent information required to make decisions, a unfortunate hazard of being a lone wolf individual investor.
I tried to get Tyler to read about General Hood, unsuccessfully as you would expect-nothing relevant in history anyway. I had to tell a young one the other day about Hank Aaron, what exactly are the young ones learning now. He has ventured now from the blackjack tables to opening an E Trade account and has been devouring more financial books than I have read over the past few years. He will be a freshman at Northwestern next year.
There is unfortunately an assumption that leaders are promoted to positions of responsibility based on a careful analysis by responsible and wise people. Maybe my ancestor who was at the Battle of Franklin in 1864 would beg to differ with that assumption.
I also thought that Hood's decision making process at the Battle of Franklin provided a good object lesson for business leaders and investors. Second Battle of Franklin - Wikipedia Some of the lessons to be learned from Hood is to beware of impetuous decisions, particularly those influenced by emotion rather than reason; sometimes it is better to pass and just wait for a better opportunity; or just say no and to live to fight another day.
I also thought that Hood's decision making process at the Battle of Franklin provided a good object lesson for business leaders and investors. Second Battle of Franklin - Wikipedia Some of the lessons to be learned from Hood is to beware of impetuous decisions, particularly those influenced by emotion rather than reason; sometimes it is better to pass and just wait for a better opportunity; or just say no and to live to fight another day.
And what about the decision making process by our leaders that led to the invasion of Iraq or the escalation of the war in Vietnam or the inability to control spending and to come to grips with funding for social security and medicare while generating even more new social programs? One day in my life the American people will wake up and wonder what happened to Chinese at the latest Treasury auction, nobody showed up at a treasury auction other than an old geezer from Brentwood to fund our trillion + dollar budget deficit. Then the finger pointing will start, and I would just say maybe it needs to be pointed at ourselves. We are after all electing these people.
6. Empire State Manufacturing Survey: This report had some okay news: Empire State Manufacturing Survey (overview) - Federal Reserve Bank of New York
The new order index shot up 41 points to -3.9 which is good from my point of view. I view this component of these kind of indexes to be the most important data from these surveys.
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 readers of these posts 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. Anyone interested in a topic may want to review all discussions contained in the blog about it by using a relevant search term in the box at the top. Opinions are subject to change and they certainly evolve over time as information is assessed and analyzed for compatibility with prior opinions, the only process for a serious investor, and a topic of frequent discussion in this post.
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