Thursday, March 26, 2009

Freedom from Regulations and Irresponsibility/ Sold KXI and Bought GIS

Whatever regulations are adopted in response to Wall Street's latest foray into blowing up the world's financial system will last a few years until undermined or repealed by those who believe that any regulation of wild west capitalism for the profit of a few individuals restrains economic growth.   WSJ.com  Even now the GOP continues to assert that the current financial meltdown was the responsibility of poor minorities, Barney Frank and the Community Reinvestment Act and had nothing whatsoever to do with  their ideology.  Oddly, many of them are arguing that even less regulation would have been the magic elixir that would have prevented the crisis. So, even though they have just lived through the current meltdown, they have learned nothing from it and are already geared up to prevent any changes in the regulatory scheme.  Any information inconsistent with their pre-existing beliefs is just ignored, and there is an enormous body of evidence that must be dismissed by them to persevere in their beliefs, some of that overwhelming amount of evidence is discussed throughout these posts.  For many of them, it ultimately comes down to increasing the amount of money in their pocket and an constructing an ideology around that goal to justify the consequences to others.  Stripped of its verbiage, the ideology can be paraphrased as freedom to be irresponsible.   The same mindset, of a Tom DeLay who wanted to be free to spray pesticides without regulations, or the polluter who wants to dump harmful chemicals into water or air, or the company who wants to be free of rules for worker safety or the Masters of Disaster who want to do as they please, all regardless of the consequences, is the same, freedom to do as they please regardless of the consequences to others as the central core of their belief system.    

I continued building my personalized consumer product ETF by buying General Mills today at $48.52.  I am now far enough along in this endeavor to dispose of KXI, the ETF for world consumer staple stocks,  at 42.75 that I recently bought at  39.09 in the Roth on 3/11/09. BUY OF KXI/CXW, FRE, COMCSA, EBAY /FRUM on Limbaugh/Barton Biggs Back and Forth  My intent was to construct a personalized version of the ETF for world consumer staple stocks with my own selections and weightings, hopefully taking advantage of weakness in this sector to establish positions for a long term holding period, with some maneuvering to reduce risk in individual names by taking advantage of volatility, as shown in the recent Coca Cola trades. 
So, this month I have added new positions in Unilever, Kraft, Campbell Soup, Nestle, General Mills, Proctor and Gamble, Sysco, and Heinz, and sold 1/2 of the Coca Cola position already.  


General Mills recently had an unfavorable earnings report. Hedge Funds Receive Bailout Cash/General Mills/Lottery Tickets & NADX  No doubt this solid company faces headwinds in the months to come.  The stock got hammered pretty good after this report, taking some of the risk out of establishing a long term position at the current price.  I read the recent Barclay's report early this morning.  That firm has an overweight rating but reduced its price target from  $74 to $56, fair enough after that last report. But I wanted to illustrate a point with a comment made by this analyst.  He points out that GIS faces two headwinds, one is from currency exchange which now may be tilting in their favor.  Currency exchange issues, relating to the relative strength or weakness for the dollar, ebb and flow, back and forth.  Who really knows about next quarter or the remainder of this year?  But the other point made by the analyst shows the mindset of many institutional investors.  GIS plans to flow through to the 4th Quarter 2009  EPS from its extra 53rd week thus making comparison year over year with 2010 tougher.  Wow. Why would I view that information as important or having anything to do with the valuation of the company?  Now, that I know it, assuming that I do not forget about it which is what I should do with that kind of information,  maybe it will give me a long term advantage over those who buy and sell stock based on such considerations.  Whatever, I do agree with this analyst that GIS will be under pressure for an indeterminate amount of time until new information puts investors at ease about the problems reflected in the last report. 

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 any reader of these posts, assuming there are more than a couple, 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.  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. 


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