1. EUROZONE Anemic GDP & China's Tightening of Credit: The 4th quarter GDP of the countries in the euro area was up a paltry .1% in the 4th quarter from the previous 3 months. / ec.europa.eu/ .PDF NYT Over 2009, GDP fell 4% in the euro area. GDP was flat in Germany and up .6% in France and +.3% in the Netherlands. The estimate for the 4th quarter was .4% so this report along with the news that China's central bank tightened again ( NYT), cast a negative tone for the market on Friday. The market ended Friday much better than I expected after being confronted with these developments. The Nasdaq ended up 6.12 and the S & P 500 lost 2.96 or -.27%.
2. Sold 100 SkillSoft (SKIL) at $11.14 (see Disclaimer): This is the third stock sold which was bought under the 2010 Speculative Strategy. Prior to Friday, I had an unrealized loss and I was able to sell it for a small gain after SkillSoft agreed to be acquired by a private equity firm for $10.8, SkillSoft. I bought those shares at 10.35 in early January. While I view the acquisition price as too low, my opinion on the matter is of no consequence. The stock rallied above the offer price on Friday, and I used that opportunity to sell my 100 shares. The proceeds from any stock sold that was bought pursuant to the 2010 Speculative Strategy will have to be reinvested into an income generating security that passes the muster of the LB.
3. New Short Term Corporate Bond ETF: This is the link to the fact sheet on the new SPDR ETF product for short term investment grade corporate bonds (SCPB): www.spdrs.com .pdf The yield on this product is too low now for me to fool with it. However, I placed it in what I call my Category 2 monitor list for bonds which comes after Category 1 with over 200 securities in terms of the attention given to it. The yield is currently around 1.9%.
4. Duke Energy (DUK) (own core electric utility strategy): Duke Energy was expected to earn 25 cents per quarter. Duke Energy reported a 4th quarter adjusted E.P.S. of 28 cents (26 cents GAAP) and revenues of 3.111 billion dollars (3.44 consensus). The estimate as of Friday morning for 2010 earnings was $1.29. DUK: Analyst Estimates for DUKE ENERGY
5. Retail Sales: The one ray of sunshine on Friday was the Commerce Department report that retail sales rose a greater than expected .5% in January. ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES: Latest Release The estimate was for .3%.
6. Sold 100 HGI at $16.83 and Bought 50 GFW at $22.63 in the ROTH (See Disclaimer): HGI was acquired in February 2009 in the Roth at a total coast of $10.47. After collecting a few quarterly dividends, I decided to harvest the gain last Friday. In its place, I will buy bonds. The first half of the bond buy using those proceeds was to add 50 GFW, a senior bond, which was discussed in Thursday's post. Bought 50 GFW at 22.76 This bond yields around 8.25% at my cost. Besides harvesting a good gain, I improve my income flow into the ROTH with GFW compared to HGI. I now own 100 GFW, and do not intend to add more.
7. Bought 100 TWM at $26.19 and Sold 100 ETF QAI at 26.56 (See Disclaimer): I took about a $100 loss on the recently bought ETF QAI, purchased in the main taxable account. I did not care for the news on Friday, with China trying to slow down its economy and Europe looking anemic with a boatload of problems. With the Old Geezer in charge of the trading desk, an outbreak of nerves is commonplace, the eyes start to twitch, visions of sleeping under a bridge start to occur, and the OG reaches for a chill pill but then realizes that none are too be had. And, the ingestion of alcohol is not permitted by the LB. For the OG, the double short ETFs are an alternative to a chill pill, or a chug of a bottle of Maalox with a double shot of Jack mixed into the brew.
A 100 shares of TWM is immaterial, and will not hedge anything to a meaningful degree, even the small cap stocks in the Headknocker's portfolio. Still, it soothes the OG to have this double short ETF in the portfolio over the long weekend under the current circumstances. When looked at this way, the primary purpose for owning TWM now is psychological. I will take up to a $500 loss on it and no more. So, a fall below $21.5 will trigger a sell. (realized gains are over 5 thousand in 2010 so this would be as an insurance offset in the event of a loss) I have owned TWM in the past and did well with it in 2008. The Proshares double shorts have tracking issues, but I do not intend to hold TWM for very long. This is a link to the sponsor's web page: ProShares ETFs: UltraShort Russell2000 – Overview; and to the sponsor's fact sheet: www.proshares.com TWM.pdf
This ETF seeks a return of -200 of the Russell 2000 Index "for a single day" according to Proshares. Thus, this security will attempt to go up twice whatever the Russell 2000 index goes down, and vice versa, over a single day. It goes without saying that this ETF has had a rough time since the market starting moving up in early March, and did very well during the meltdown period from 9/2008 through 2/2009. And one thing to keep it mind, when these kind of double shorts go way up in value, as this one did during the meltdown, it will generate a lot of short term income, as TWM did in 2008, resulting in a $25 short term capital gain distribution in December 2008, more than the current value of the ETF: ProShares ETFs: UltraShort Russell2000 – Distributions So, that kind of distribution is something that I will do my very best to avoid.
As for China: they're on the way out. And we might see Eurozone and other OECD defaults as well.
ReplyDeleteI noticed you buy and sell in 100's usually.. I have always been a buy and hold guy but I'm thinking of selling covered options instead of selling when I feel the stock is ready to be sold. Have you ever tried this tactic?? Selling covered calls for extra income..
ReplyDeleteEVER P: I have only a cash account. I have not added to it since 1984 or withdrawn anything for personal use. I am using the taxable account buildup to fund the maximum contribution to my retirement accounts. I have enough complexity in my positions without adding options. Most of that complexity is due to the sheer number of positions. If I was buying and selling common stocks in large lots, I would consider writing call options which would require me to spend a lot of time learning about options which I do not want to do.
ReplyDeleteI do own several closed end funds that use a buy-write type of strategy, using both individual options and options on indexes . I found that those professionally managed funds did not fare so well during the worse phase of the bear market. In retrospect, the better strategy would have been to lighten up on stocks during the bear market, and not to use a buy-write strategy during the bull phase from 2003 to 2007. During the bull phase, these funds just lost their positions by writing calls or had to buy the options back at a loss. So it was not uncommon to see a relatively low amount of unrealized gains during the bull market and a net loss on the option positions. However, the call writing does generate extra income, at least initially. Some of those funds include several from Eaton Vance, such as ETW and EOI, and a few from ING including IAE which focuses on high yielding Asian stocks. I still own several of them primarily for their income generation, and none of them have yet to reduce their dividends.