1. ING (own only bonds): ING reported a net profit 71 million Euros. ING wrote down its real estate portfolio by 584 million Euros and took another 852 million Euros in charges for potential losses on its portfolio (323 million of that sum comes from U.S. Alt-A mortgages) ING plans to sell between 6 to 8 billion in assets to pay down a 10 billion lifeline that the Dutch government extended to it last year. ING sees some signs of recovery but believes economic conditions remain challenging. While the profit was small, it was nonetheless an improvement over the 793 million Euro loss for the 1st quarter. ING had at the end of the quarter a Bank Tier 1 ratio of 9.4%. The bank asset leverage ratio was 28.98, which I view as way too high, but it did fall from 30.1 at the end of the 1st quarter, at least it is moving in the right direction. I did not see anything in this report to cause me to sell IND, INZ and ISF.
2. Aegon (AEG) (own bonds only): I no longer own Aegon common (AEG). Instead, I own AEB and AEH, two securities that are uniquely European, in that they are both debt and equity at the same time. Aegon posted results for the second quarter, and the common stock is falling close to 8% in early trading. I do not view the market's reaction to be a response to the earnings release so much as AEGON's announcement that it will sell up to 1 billion euros in shares to buy back part of the Dutch government's "convertible core capital securities" before December 1, 2009. Aegon is selling those shares even though it claims to have a 3.5 billion Euro excess capital position. Aegon claims that it will save up to 370 million by buying those convertible securities back before 12/1/09. Those securities were issued in connection with the Dutch government's rescue effort last October. Paying back the Dutch government with the proceeds of a dilutive common share issuance is find with me, since I do not own the common shares. I would generally view raising capital by selling common shares as a positive for bondholders. AEGON did report a loss of 161 million Euros for the second quarter, but that result was impacted by a 393 million Euro loss on the sale of its Taiwan unit. The underlying income from operations before taxes was 404 million Euros. The 3.5 billion in excess capital at the end of the second quarter is over AA capital adequacy requirements, and represented an increase of .8 million Euros since 3/31/09.
I do not see anything in this report that would cause be to sell one of my bond positions. My buy of AEH was at $4.63 in an IRA (Buy of AEH in IRA), and my purchases of 350 shares of AEB were in increments at 4.8, 5.5 and at 8 in mid September.
Buy of 50 AEB at 4.8/ AEB AND JQC Those prices are low enough to cause me to continue holding these perpetual capital securities for a very long time, just as long as I am comfortable about Aegon's ability to pay the dividends.
3. Barron's Technical Analyst: I regularly read Michael Kahn's Getting Technical column in the online edition of Barrons. I am not sure why. I do not actually implement the recommendations of any of the technical analysts. Nonetheless, I am interested in reading Kahn's opinion about whether the current rally is a bear market rally. He is still maintaining that the charts say it is still a bear market rally, and the bear trendline has not yet been broken by the upswing from the March lows. As of yesterday, the dshort.com website shows that the S & P 500 is up 48.7% from its lows. dshort.com: The charts of other bear markets shown at that web site do not have that kind of decisive break to the upside, followed by a resumption of the bear trend. I made a comment a couple of months ago that this rally at least appeared to be a decisive break in the bear trend, just comparing the current S & P chart to the charts from the prior bear markets. I also do not understand the point that Kahn is making about the 2000-2002 bear market. I would suggest looking at d.short's chart of the 2000-2002 (dshort.com) and then read Kahn's commentary.
4. Bill O'Reilly -An Apostle for the True Believers (TBs)-On a Crusade Against General Electric (GE): When I happened to hear Bill call General Electric the "Evil Empire" Tuesday night, just catching his latest rant while channel surfing, I did not realize that he had accused GE of supplying parts to make roadside bombs which were killing our soldiers in Iraq. TBs are never troubled by facts or facts inconsistent with anything that comes out of their mouths, no matter how preposterous. That is after all one of the defining characteristics of a TB. Bill, in his best imitation of a journalist, said his "sources" had confirmed a federal investigation of American companies supplying radio frequency modules, used in those bombs, to a Singapore company called Corezing International. Bill then said, slyly, that his sources have told him that GE was under suspicion in the case. Wow. One of America's largest and most respected companies was under some kind of criminal investigation about supplying parts to Iran used in the road side bombs killing our soldiers, according to Bill and his sources. Bill said his show "has been told, but cannot confirm, that the General Electric Corporation is under suspicion in the case". Sounds really bad, assuming there was a grain of truth in anything said by Bill and his alleged sources. GE called O'Reilly's "investigation" both irresponsible and maliciously false. I thought that was pretty mild actually. As it turns out, or so GE claims, GE does not even make the radio modules that Bill claims that they sold to IRAN via this Singapore company, and does not even do business with that company. NYTimes.com Bill does have his fans at NewsBusters, a constant source of comedy for both LB and RB, and Lou Dobbs of course, CNN's version of Rush Limbaugh. I do not want to say anything bad about Rush, because he is one of my five favorite comedians, though some of the commentators on newsbusters are gaining on Rush fast.
Since I watch Brian Williams on NBC Nightly News frequently, and view myself as a fair and balanced person, always trying to be objective, it is impossible to understand Bill's rant about NBC News as shilling for the election of Obama.
RB is about to say something that Headknocker disavows in advance, and as usual apologizes profusely for it to anyone offended by the comment. RB did have a giggle when reading this story at NewsBusters about Hillary needing to hit the gym when she returns from Africa. RB would bet that Bill has seen many times the side of Hillary on display when she snapped at that poor African student whose interpreter apparently mangled a question to the Queen of Everything. RB added that Headknocker might need to hit the gym too.
This site has the links to O'Reilly's comments.mediabistro.com: Making irreposible and unfounded accusation, stating them as facts, did wonders for his ratings and the bottom line of Fox, so it does pay to be irresponsible and reckless at the fair and balanced "news" network. Another link to the Fox Video: YouTube
To follow up on Sarah's remarks claiming that the House health plan would create "death panels" to pull the plug on our poor grandmas, Senator Johnny Isakson, a Republican from Georgia, referred to Palin's interpretation as "nuts". An Interview With Sen. Johnny Isakson Maybe Johnny has not heard that it is best for all members of the GOP Tribe to avoid even faint criticism of one of their Apostles. I am also not sure that Senator Isakson has gotten another one of my messages, so I will say it again, John, facts do not matter to the TBs in your party, just make up your own facts and start talking on Fox or Rush's show. It will be just fine. I practice doing it at home all of time, just in case anyone wants me to host a radio show for the TBs.
5. More Positive News Today: The European economy only contracted by .1% in the 2nd quarter, and France and Germany actually returned to positive growth. Walmart posted earnings 0f 88 cents per share this morning, which exceeded expectations, and raised guidance slightly for 2009. The Street was expecting earnings of 85 cents. WMT had 4.2 billion in free cash flow in the first six months of 2009. Toll Brothers (Tol) said that net orders for new homes rose last quarter for the first time since 2005, though traffic "still stinks". On the negative side, retail sales fell .6% in July excluding autos. It would be reasonable to expect that those buying new cars under the cash for clunkers program are cutting back on other purchases.
6. Trading Rules for Unstable Vix Pattern Still In Effect: One of the indicators that I have been using since the summer of 2007 is my VIX Asset Allocation model (Vix Asset Allocation Model Explained), which gained instant street creed with me my issuing a warning signal in August 2007 followed by multiple confirmations shortly thereafter. VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern The model was then successfully backtested. So, I am still sitting on 30% in cash raised in 2007. I did violate the model's elaborate trading rules starting in early March, with a significant move back into stocks, funded mostly with short term bond sales and some cash earning nothing in a money market as noted previously in these posts, based on a much older tried and true trading rule, buy when there is blood flowing in the streets as the Baron once said. The most shocking move to LB, having barely tolerated RB's frolic and detour in the stock market, was when RB bought some Vanguard stock mutual funds after LB had made the case for avoiding stock mutual funds.RB FLIES OFF THE RESERVATION AGAIN LB has regained control over the keyboard here at HQ, a constant struggle, pleading with Headknocker to put- once and for all -the RB into some kind of mental paper shredder, and the LB is now following its own elaborate trading rules for the Unstable VIX Pattern, in a long term secular bear market, referred to as those stinking rules by the RB.Trading Rule for Disfavored Asset Class: I see in that last linked post that RB bought some PICO, forgot about that one. May need to look into it some more today.
I have sold a lot of stock recently into this 50% up move since March. I regret now selling Google, Novartis, and the baby Berkshire Hathaway shares. That is history. C'est La Vie. Under the trading rules, I am allowed to reinvest the proceeds of my recent stock sales into purchases of common stock, along with my cash flow from dividends and interest. By buying stock now, I would not be in violation of the trading rules up to around 30 grand of new buying. When the VIX indicator finally gives its green light, a bull market lasting years may have been ongoing for several months, which was the case coming out of the 2000-2002 and 1990-1991 bear markets. The purpose of the lag is to try and avoid, to the extent humanly possible, a premature re-entry into what may turn out to be a bear rally. Or in David Rosenberg's words, referencing the current 50% rise in the S & P off the March lows, the mother of all bear market rallies. I have been complaining about the near zero per cent short term interest rates over the past several weeks, yet I have compounded that problem by selling stocks recently. Maybe I need to reconsider some bonds that I have passed over.
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