Wednesday, April 1, 2009

FASB/ BOUGHT GSG: Starting a Shift Very Slowly into Commodities

The financials led the rally today based on the hope that FASB will be kind to them tomorrow when it issues revised rules on mark-to-market. WSJ There was also a 2.1% rise in existing home sales for February.  

Left Brain (LB) has ordered no more purchases of financial stocks by Right Brain (RB) until LB can evaluate the new FASB rules. RB just said that LB thinks too much

The ISM manufacturing index rose to 36.3% in March from 35.8% in February. While this may show some stabilization, any reading under 50% shows contraction in the manufacturing sector. MarketWatch

A writer for Marketwatch, Paul Farrell, gives six reasons why he is calling a market bottom and the start of a new bull market. MarketWatch

I own a few publicly traded limited partnerships including Linn Energy (LINE). I received two K-1s from Linn yesterday for the same shares with a letter explaining the reason. I just enter the array of data provided in the K-1s and supplemental statements into Turbotax without thinking too much about why I am receiving two K-1s for the same shares. Ten minutes later, after performing that task, TurboTax informed me that my depletion allowance was $10. Wow, the return on that effort was better than earning the minimum wage. It also took two hours yesterday just to make the downward adjustments in my cost basis for securities sold to reflect returns of capital and to make notes in my tabulations for those still held.(for a nerdy discussion of this issue: Buy of UL/GRT/China Lectures U.S./Return of Capital Adjustments & Long Term Capital Gains/FASB/Google & Skype/)

I mentioned in a post from last night that I may go ahead and buy some stock ETFs now, which would be a modification of the existing rule prohibiting their purchase until I receive the all clear from my VIX signal. A Good Month But Another Awful Quarter/Ingersoll Rand: Awful Guidance and a Dividend Cut/Can No Longer Rely on Dividends as a Source of Income/Alcoa LB, the rule generator, calls it a modification rather than a repeal because it would be limited to buying the ETFs now with the hypothetical proceeds from mutual fund liquidations at the prices reported yesterday. RB replied that we will need to purchase an updated version of the IBM Deep Blue computer to keep track of all of these rules. Deep Blue (chess computer) 

Then the mutual funds that I want to dump would be sold later when the market recovers. This would require a temporary dip into the cash allocation. Since I reduced or eliminated most mutual funds prior to 2008, there is not much left in ones that I now intend to eliminate, about 10 grand. I am going to keep three funds that were reduced to bare minimum levels, SSGA Emerging Market, Matthews Pacific Tiger, and Artio International Equity (formerly Julius Baer). Asset Allocation Problems: foreign currencies, stocks and bondsEmerging Markets (REVISED 9 p.m. 10/20/2008 to include more references) MUTUAL FUND DISTRIBUTIONS IN A BAD YEAR

I am going to keep three others where no reduction was made, Janus Balanced Fund, Dupree Tennessee Tax Free , and the Permanent Portfolio. Comments on Barron's Roundtable I am not sure about a target fund that I kept and have been disappointed with its results. 

Buy High & Sell Low /Retrospective on the Good & Bad

For the time being I will classify that as a keeper but I may decide to substitute an Ishares product, TZE, for it later provided that ETF grows its asset base substantially. iShares S&P Target Date 2015 Index Fund (TZE): Overview

TD Ameritrade launched some target date ETFs that have more assets than the Ishares product, TDH for example. TDX Independence 2020 ETF Overview The expense ratio is high for that one however. The most logical course may be to build my own with ETFs and cut out the sponsors fees and adjust the weightings according to my personal judgment.

I have added Matthews India which I will keep. I have small amounts in three mutual funds in the Roth retirement account which I will try to ignore, having achieved some future tax benefit by including them in a Roth conversion after they suffered steep declines in value. The rest will be liquidated at some point during the next bull market.

Moody's reported that credit card charge-offs reached an all time high since it developed its tracking index 20 years ago.
Ford sales fell 41% in March.  

I try to run my portfolio as an asset allocation fund in a dynamic fashion. For almost two years I have not had any broad exposure to commodities. I sold my commodity plays when they went parabolic which is one of my hard rules. I nibbled on some UNG last quarter which is under water. My gold and silver holdings have not varied in over a decade. 

Today, I added 50 shares of GSG at 24.89, an Ishares sponsored ETF that invests in a basket of commodities. iShares S&P GSCI(TM) Commodity-Indexed Trust (GSG): Overview

It has tumbled a great deal over the past year. I have no clue when the bear market in commodities will end. In my asset allocation, commodities have a place, just not a place after making a parabolic move.A FEW MORE COMMENTS ON DYNAMIC ASSET ALLOCATIONParallels Between VXN 2001-2002 and VIX 9/08 to__ ?/Commodity ETFs The only question is when to start adding commodities back after they were jettisoned due to the parabolic move in that asset class. It is an asset class where I will go to zero, except for physical gold and silver. This particular ETF, GSG, is weighted toward energy.

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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