1. Sold 1/2 GJT/All of GJR and 1/5th of JZH: ALL of these sales were in an IRA to raise money to buy TIPs at the treasury auctions in July. The TC JZH has a 6% coupon and the underlying bond is a senior bond issued by Prudential. I sold 50 shares of the 250 owned at $17.77. I discussed this TC in greater detail when I made my purchase.TRUST CERTIFICATE JZH: PRUDENTIAL SENIOR BOND I also sold 50 of the TC GJT at $13, a synthetic floater containing an Allstate bond as its underlying security. This floater does not have a guarantee and I discussed it in detail at the time of my original purchase. BOUGHT VEU AND GJT/ MIKE MAYO BEARISH ON BANKS: A SURPRISE? I subsequently sold the shares bought in my taxable account and bought an equivalent number in a retirement account. I will hold the remaining 50 shares. My retirement accounts do not contain much cash. So, if I want to buy something, something else has to be sold. I have now raised just $3,000 or so to buy some TIPs next month. I intend to devote my entire contribution to the ROTH in 2010 to buying the TIP at the treasury auction. I am moving gradually to a 70% bond allocation in the retirement accounts.
In my retirement account, I eliminated my holding in GJR, a synthetic floater tied to a Proctor & Gamble bond, a floater which has no guarantee and recently popped to over $16, a price that makes no sense to me. GJR
GJR was discussed in detail when I bought it originally in my taxable account, where I subsequently sold it, and bought it in a retirement account. Bought GJR/ Walgreens/Did Right Brain Call the Bottom?Fed Is Less Gloomy: Measure Time Period of Quantitative Easing in Months not Years/BMY/CBG/SYNTHETIC FLOATERS
I intend to buy $2000 worth of the ten year TIP and $1000 of the 20 year TIP next month directly from the treasury. I intend to hold the securities until maturity, which is one reason for putting them in the Roth. The Roth account would be the last one that I would use to pay expenses later on, and most likely will never be needed for that purpose.
2. Zvi Bodie-Another Professor Making the Media Rounds/Fervent Believer in the TIP: Zvi Bodie, a finance professor from Boston University, seems to be the latest professor throwing his hat into the ring for the mantle of financial guru for the masses. He is angling for the post of the anti-Jeremy Siegel along with Robert Arnott. He disagrees with Siegel's thesis that stocks are safe in the long run. PBS Zvi Bodie
I agree with him that stocks are risky in the both the short and long term particularly for investors who face significant situational risks. Bodie recommends that individuals put their entire retirement portfolio in TIPs starting at age 25. Bodie has 100% of his retirement money in TIPs. US NewsWorld
He does take some risks with his non-retirement money.
His advice is also featured in the July 2009 edition of US News & World Report, at p. 21, in an article written by Emily Brandon. He would even recommend that investors leave the market now in that article to avoid losing more(see p. 22). I am also critical of Professor Siegel's advice. To Professor Siegel: Time for a Re-Think
As you would expect, the professor is very critical of the Target funds, and suggests that their primary purpose is to provide for the retirement of those who sponsor and push them. I own one target fund that I intend to jettison during the next bull market. I have likewise become very critical of them. More on Failures of Standard Asset Allocation Models and Target Funds/Use of Volatility in an Asset Class to Make Adjustments to an Asset Allocation
However, personally speaking, I would find it impossible to accept his advice to sell stocks now and plow everything into buying more of the TIPs, since I am convinced that I will outperform substantially the return of the TIP. If bought today, a $300,000 investment in 20 year TIPs would throw off around $7,500 or so for the first year nowTreasury Inflation-Protected Securities (TIPS) WSJ.com. I suspect that many retirees of modest means will need more income than the TIP can generate to supplement their social security. The interest paid would increase some with CPI increases since the coupon is applied to the adjusted principal as increased (or decreased) by the CPI. Assume for example 100,000 principal amount in the TIP bought directly from the treasury, with a 2% coupon, and a 2% average CPI in year one. The principal would increase to $102,000, and the 2% coupon, applied to that amount would generate $2,040 rather than $2000. That is just an example, the actual number would constantly change based on the CPI adjustments to the principal, but the amount of additional interest paid due to the accretion in principal would likely be not much. Remember, the accretions to principal are not received from the government until the bond matures.
3. Senator Ensign: Politician and Hypocrite are Frequently Redundant Terms: Senator Ensign, one of the beacons for the "social conservatives" and long time member of the Promise Keepers (Promises) , admitted to having an extramarital affair with a campaign worker. washingtonpost.com It was Senator Ensign's policy never to be alone in a car with a woman not his wife, he was so conservative about that kind of thing. GOP affairs Affair I understand how the American Taliban wing of the GOP accepts whatever their politicians feed them as equivalent to the gospel. I would just start with the assumption that most of them are just trying to manipulate me with their stories, with different stories used depending on whether you are in a blue district or a rabidly red one where I reside. One thing about the Democrats, there are far less likely to pander to the rigid and intolerant views of the American Taliban compared to the Senator Ensign's of the world.
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. 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. Everyone is responsible for their own investment decisions, and no one should ever make any decision unless they are willing to accept full personal responsibility for it.
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