Tuesday, March 24, 2009

Sold 1/2 KO at 44.2: Risk Reduction/BOUGHT 30 WL=Lottery Ticket/Bernanke on AIG/Disney Downgrade by GS

Bernanke said that AIG's Financial Products unit, the one that brought down the largest insurance company in the world, engaged in "extraordinarily reckless risk-taking".   This reckless risk taking, undertaken for the personal financial benefit of a few individuals, threatened in the Chaiman's words a "1930s-style global financial and economic meltdown, with catastrophic implications for production, income, and jobs"FRB: Testimony--Bernanke, American International Group--March 24, 2009 
Bernanke was opposed to paying retention bonuses to the employees of the Financial Products unit who were after all, in the Chairman's words, "the primary source of AIG's collapse".  He wanted the bonuses stopped but was advised by the Fed's legal staff that a failure to win a suit could result in punitive damages against the government under Connecticut law. 

Mr. Right Brain bought at book last night for Left Brain, a real cerebral nerd,  called  "The Whole New Mind: Why Right -Brainers Will Rule the Future".  VOA News - Can Right-Brain Thinking Change the World?
Right on, time to put that Left Brain out to pasture, retire the nerd to the old folks home where it can listen to Frank Sinatra and develop rules all day long, rules on top of rules, exceptions to rules, exceptions to exceptions, that no one understands anyway.  

A Goldman Sach's analyst, Mark Wienkes, downgraded Disney to neutral from buy and slashed his target to 20 from 26.  Yahoo! Finance
His reasoning is that Disney is selling at a premium to other media companies and he believes Disney is likely to miss the analysts' consensus second quarter earnings estimate.  I would just focus on this person's time frame.  He is basically saying that there will be a sell off when Disney misses a quarter's earning estimate from the currently depressed level of around 18 a share.

Normally I will limit my lottery ticket purchases to $200 or less.  I would have been embarrassed to buy  only 20 shares of Wilmington Trust (WL).   I instead bought 30 at $9.98 near the close, which is not as embarrassing, so I will label this purchase as a lottery ticket on steroids.   Wilmington is the largest bank in Delaware and has about a 45% share of the deposits in that state.  It was formed in 1903 to manage the wealth of the DuPonts and more than 50% of its total revenue is fee based including wealth management.  The bank did recently cut its dividend in half, reducing it from 34.5 cents to 17.25 cents.  WL reported a 4th quarter loss due to write-downs in its portfolio and loan losses. Wilmington Trust Announces 2008 Fourth Quarter Results - Yahoo! Finance Wilmington Trust Corporation Q4 2008 Earnings Call Transcript -- Seeking Alpha
The stock was down over 12% today in a general retreat by financials after yesterday's huge rally. The current price is within the trading range for Wilmington in the early 1990s.  It has a 52 week high of $35.75 and recently hit a low of $6.76.  The company did issue preferred stock to the government for 330 million and the warrants to buy stock have a strike price of $26.66. If necessary this can be a long term hold.

I mentioned in an earlier post that I might do a risk reduction trade in Coca Cola.  Bungee Jumping Aegon and ING Preferred Stocks/ BlackJack and Stock Investing: Lessons Learned & AppliedI sold late today my highest cost shares at $44.20,  purchased at 41,   and will keep the lower cost shares purchased at 38.72.Buy of KO at 38.72/Newt Gingrich & GOP Ideology on Financial Regulations/UTX/
Those proceeds would then be used to buy the shares back at below my last purchase price of $38.72 or to fund the purchase of another consumer staple stock on a further pullback, such as PEP. 

The Treasury is going to start buying treasury paper this Wednesday.  MarketWatchPrior to that announcement treasuries were trading down, then abruptly changed course and finished up in price and down in yield for the day. 

Most of my orders were for bonds today, and none of them filled.   

The S & P 500 index closed below 815 at 806.33.  

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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