The market was controlled yesterday by whatever passes for "news" in the world today relating to any effort to resolve Greece's self-inflicted fiscal woes. A story can penetrate every nook and cranny on Earth before the truth has an opportunity to get its boots on. First, there was a report from Reuters, quoting an unnamed German official, that an agreement in principle had been made to help Greece and the market responded with the DJIA surging over 200 points. I then noted a 70 or so point decline in DJIA in a few seconds, turned on the TV, and later heard Melissa on CNBC say that a German source had denied the earlier story. Then, there was a story in the WSJ that the German government and the EU were considering some loan guarantee package for Greece. This is in part out of self-interest. According to the WSJ, German banks hold 43 billion of Greece's debt and France's banks are on the hook for 75 billion. If Greece received no support, it would be likely in my opinion to default on its existing debt. In news stories this morning, it is being emphasized that no deal has yet to be struck. Strikes by civil servants are already occurring as protestors shut down schools and offices and other workers grounding flights. Reuters
Personally, I would prefer to see the Greek government default on its debts so that the consequences of irresponsible spending would be driven home for once to the population and possibly to citizens of other nations would also learn some valuable lessons. I doubt that would happen, but you never know. There is always hope that people will learn before the crap hits the fan. Of course, the default would have to be followed by a refusal to extend additional credit to Greece, until the lenders are made whole which of course never happens with a sovereign default. While that may sound harsh, the importance of the lesson would not be lost, at least quickly, and perhaps greater problems can be avoided down the road by a refusal to constantly reward irresponsible and reckless behavior.
1. Coca Cola (KO) (owned): The Coca-Cola Company reported 4th quarter earnings of 66 cents a share, helped by the weakness in the U.S. dollar and a 5% increase in unit case volume worldwide. For 2009, cash from operations was 8.2 billion. Total revenue for the 4th quarter was 7.5 billion, better than the estimate of 7.2 billion, while the earnings were in line with expectations. KO is a long term hold based on my dividend yield at the purchase price of $38.72: Buy of KO at 38.72
Sales in China grew 29% in quarter, by 11% in the Pacific region and by 7% in Latin America.
2. NYSE Euronext (NYX)(owned): This one was bought during the meltdown. buys of jwf ksa dis and nyx. Most likely I would be a seller on a pop above $30. I have been keeping it only for the dividend yield at my purchase price of $14.76. NYSE Euronext reported 66 cents per share in earnings before items in the 4th quarter, and 58 cents after items. According to Reuters, the analyst look at the core number which was 58 cents, which beat expectations by 10 cents. Moody's cut NYX's rating to A3 from A2 with a negative outlook: MarketWatch
3. SOLD 100 IGE at $32.5 and Sold 100 VIS at $50.37 Yesterday (See Disclaimer): I sold two of my sector ETFs yesterday. IGE was sold at $32.5, and those shares were bought at 27.85. The 100 shares of the Vanguard ETF for U.S. industrial stocks (VIS) was sold yesterday at $50.37. Those shares were bought at $42.46. I intend to use the proceeds to buy individual stocks in those sectors. One factor that motivated the selling yesterday was the low dividend yield of those two ETFs along with their dividend payment schedules. VIS pays an annual dividend and I have already received that dividend in December.Vanguard - Distributions IGE pays a small dividend semi-annually. iShares S&P North American Natural Resources Sector Index Fund (IGE): Distributions With the Old Geezer in charge of the trading desk at HQ, dividend yield has become a top priority.
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| VIS 100 SHARES |
4. Sold 50 of the 100 IPB at $20.28 and Substituted 50 VNOD at 24.65 (See Disclaimer): The addition of 50 VNOD brings me to a total of 150 shares of this senior bond from Vornado Realty. The buy yesterday was in the ROTH, bringing the total to 100 shares, and the other 50 are in a taxable account. I sold 50 of the 100 IPB held in the Roth after it popped to $20.28. IPB is a Trust Certificate containing 15 corporate bonds and a treasury strip. IPB was purchased at at $16.99, and I have received 1 semi-annual interest payment since its purchase last August. I do not intend either to purchase more shares in VNOD or to sell the remaining 50 of IPB. VNOD has been discussed in detail in several prior posts: Item # 4 Bought in ROTH 50 VNOD at 24.86
5. Gary Shilling and Richard Russell: At least Shilling is predictable. Shilling, a perma bear, who will look wise during debacles like the Near Depression, is forecasting once again more doom and gloom Tech Ticker His core prediction is that there is a 40% to 50% chance the U.S. stock market will fall to new lows. I view that prediction as more indicative of Shilling's mindset and perpetual negativity than a sensible forecast. As usual, he is advocating buying 30 year treasury bond with a 4.5% yield and expects a 25% gain in value for those securities as the yield falls to 3%. Personally, I view that as ridiculous at this stage in the economic recovery, where inflation is a far more significant threat than the deflation scenario predicted by Shilling. He also expects continued strength in the dollar and weakness in the Euro, with the euro falling back to par with the dollar. That would not surprise me, provided the time frame was at anytime within the next five years. He is further expecting a fall in commodities which would be consistent with his sky is falling attitude, an outlook shared with the likes of Alan Abelson, as well as his view on the dollar.
A similar outlook was recently voiced by Richard Russell, author of the Dow Theory Newsletter since the late 1950s, who expects a 3000 point decline in the DJIA. News Headlines
6. AINV (own): I currently own 150 shares of Apollo Investment Corporation, having sold the other 50 shares bought at $2.35:Buy 50 AINV at $2.35 in IRA Sold AINV I do not have much confidence in AINV's management, and I have an unfavorable view of Business Development Corporations as a long term investment. My general approach is to collect several dividend payments and sell them for whatever profit I can muster, no matter how small. Fortunately, the high dividend yield allows me to wait and time the moment of my exit. The dividend yields are good for BDCs since, like REITs, they are required to pay out 90% of their income to shareholders in dividends. That is both a benefit and a curse. I discussed some of the negatives about Apollo in this item # 3 of this post: Cramer Likes UBSI/Gannett/Links to Fed Tables: Real & Nominal Rates/Dividends & Interest/The Importance of History in the Investing Process
Apollo Investment Corporation reported net investment income for the Q/E 12/31/09 of 30 cents, down from 37 cents in the year ago quarter. AINV also declared a 28 cent quarterly dividend.
Its net asset value as of 12/31/2009 was $10.4. On 9/30/2006, the net asset value was $16.14 (page 21, note 4 For the Quarter Ended September 30, 2006) That decline in NAV needs to be digested for a second or two. The stock declined 4.47% after this earnings release.
A good discussion of Apollo's earnings report can be found at Seeking Alpha.
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