1. Timberwest (TMWEF) (owned): This is a lottery ticket purchase that is slightly in the red. LB Goes Nuts: Buys 50 TMWEF at $3.24/Sold BMLPRG It was originally bought with the realization that business for this timber company was weak, and likely to remain so for several months, and that patience was the operative word. Just based on a review of information at the firm's web site, Timberwest appeared to be a value play, owning 796,000 acres of land on Vancouver Island, and its timber operations would ultimately turn around with an economic recovery. TimberWest reported its results for the second quarter this morning, and I was not surprised by the loss of $.07 per stapled unit. Due to economic conditions, Timberwest has cut back on production, and its log sales volume was down 56%. On the bright side, real estate sales were 6.7 million.
2. Verizon (owned): Verizon Wireless had 1.1 million net customer additions in the second quarter. I am starting to wonder where all of these new customers are coming from, since many analysts have said for years that the market is saturated with no room for growth. Based on what Scot Moritz, the senior tech reporter from TheStreet.com said in this video, anything over a million would be solid.
3. Silicon Image (owned-lottery ticket): SIMG was a recently added lottery ticket purchase. Bought 50 SIMG as Lottery Ticket I started to read the earnings call transcript this morning, and the CEO sounded upbeat about the firm's prospects for the second half of 2009. The book to bill was greater than 1 now, and the mix of legacy and new products was shifting too more normalized levels. The firm expects growth in the second half based on recent design wins, and sees growth across all segments of its business. For now I just checked the cash on the balance sheet as of 6/30/2009 from its earnings release this morning, with short term investments listed at 144.37 million and cash at 18.583 million, or about 163 million. This was down from 169 million as of 3/31/09. The non-GAAP loss was 6 cents on 37.3 million in revenue. The GAAP loss included pre-tax restructuring expenses of 7.1 million. SIMG expects revenue for the next two quarters to range between 44 to 46 million (see pp. 4-5 of transcript from seekingalpha). The company said it was "positioned for profitability" in the second half of 2009 and for 2010 (see p. 5). I am all for positioning for profitability.
4. Wilmington Trust (owned as Lottery Ticket): A few days ago, WL preannounced weaker than expected earnings, and the stock fell back close to where I initiated my lottery ticket position. WL=Lottery Ticket The 2nd quarter results were released this morning, and I can say that Wilmington Trust is doing better than another lottery ticket purchase Regions Financial. On an operating basis the bank did record 8.8 million in net income. A loss was suffered however due the write-down of securities, primarily a 23.4 million loss on pooled trust preferred securities.
5. Obama Comments on the Arrest of the Henry Gates, a Harvard Professor: Obama, while professing not to know all the facts, sided with the black Harvard professor arrested for disorderly conduct, saying the police "acted stupidly" As I understand it, a neighbor saw two black men breaking into the professor's home, and this was not disputed. The professor had to pry open his front door, and was being helped in his effort by a cab driver who had brought him from the airport. For those of us who do not live our lives with massive and heavy chips on our shoulders, we would hope that one of our neighbors would report such an incident to police, and then would be pleased that the police showed up to investigate. This is not how Mr. Gates reacted to the police doing their job. The police report said Gates refused to come out of the house or to provide identification, and became verbally abusive, made threats, and yelled at the officer. I found Obama's comments at the press conference to be offensive, and it reveals a great deal about what is actually going on in his head. For that reason, the most important matter to learn about the incident has nothing to do with Mr. Gates but with how Obama reacted to it.
Obama's comments elevated this incident to a prominent feature story on page 1 of today's USATODAY.
This is a link to the police report: cnn/2009/07/23/0498.001.pdf
6. Buffet on Inflation: If someone told you many years ago that the U.S. would be running a 1.8 trillion dollar budget deficit in FY 2009, and the FED was creating money like crazy and holding short interest rates at near zero, would you be concerned about the potential inflationary impact of running huge deficits and flooding the world with dollars? The government is scheduled to borrow over 200 billion next week. Bernanke is not worried, but he was not worried about the developing subprime crisis until it was too late. In May 2007, he said the problem was contained and will not cripple the economy. I generally have a favorable view of the Fed Chairman, and I do believe that he has done a great deal to avert a Second Great Depression. But, for me, Bernanke has already proved that he is not omniscient. Warren Buffett is concerned about inflation, while acknowledging that deflation is the short term concern.
7. SOLD 50 CBG AT $9.73 (see disclaimer): The shares sold this morning were the 50 shares bought in the Roth a few months ago at $2.39. Bought Lottery Ticket in CBG at 2.39/ I am going to keep the 50 shares purchased a slightly higher price in the taxable account, and will wait at a minimum one year after their purchase before deciding what to do with them. The IRA shares were selected for sell this morning solely due to the lack of tax consequences for harvesting a short term gain, which exceeded 280% in about 4 months. I know that I previously said that CBG would be held for more of a gain, and that may still happen for the other 50 shares. I thought that it would be irresponsible not to harvest this kind of gain in the IRA. Besides, the IRA accounts are geared toward producing income, either with bonds or high yielding commons stocks, as exemplified by the recent purchases of T (at around $23) and DD (at less than $17) in that account. I am shifting the retirement accounts to 70% bonds or bond like investments such as preferred stocks, bought on an opportunistic basis. By opportunistic, I mean such buys so far in 2009 of AEB at $4.8 (Buy of 50 AEB at 4.8), ISF at $4.6 (BUY OF ISF), GYB at $11 (Added another 100 GYB in Regular IRA) LXPPRD at $7 (Buy 50 LXPPRD), INZ at $7.82 (Buy of 50 INZ at 7.82), SLGPRC at $10.5 & $11.39 (Bought SLGPRC: Buys ... SLGPRC ) , AEH at $4.63 (Buy of AEH in IRA), DKF at $20 (Buys of DKF), GJN at 12 (BUY 50 GJN), PYT at $11.2 (Bought 50 PYT) and several more including several sold after pops such as DKK, GRTPRG (sold yesterday), 1/2 of GJT, and GJR. Similar type purchases were made in the 4th quarter of 2008. That is my main focus in these accounts, opportunistic buying of bonds and bond like investments, along with buying some high yielding blue chip stocks. The opportunistic buying of these income securities has not only generated both realized and unrealized capital gains, many of them will deliver substantial yields in interest for years to come, provided, of course, the firms remain solvent and out of bankruptcy.
The lottery ticket purchases in those accounts have to be traded more aggressively. For me, as a general rule, I prefer being more cautious with a retirement accounts, even if I believe now that I will never need those funds. And, while this point should not be important to anyone but me, I am up about 20% in the retirement accounts since this bear market started with this kind of mind set (adjusted for subsequent contributions), while I am still down a tad in my taxable accounts.
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