1. Campbell Soup (CPB): Campbell, a recently added position, reported earnings of 48 cents per share excluding items, beating the consensus estimate of 42 cents, and up from 43 cents a year ago. Like many multinationals, revenues and earnings were hurt by the strong dollar, a situation that may be in the process of reversing now. I mentioned in my last discussion about Campbell that I expected soup sales to be strong in a recessionary environment. Buys of CPB LQD SYY XKK Campbell stated in its earnings release that U.S. soup sales had one of its strongest performances in years, with sales up 6%. Divestitures subtracted 3% from sales (Godiva chocolate was sold) and currency exchanges caused a 4% decline in revenue.
2. VIX Closes Above 30: I mentioned in a post from Wednesday that volatility may have been priced incorrectly when there was a significant fall in the VIX to as low as 26.57 (#4 Minutes Afternoon Staff Meeting/Bought BMLprg at $8.8/ Sold 2 HSBC Bonds)
The VIX had a spike up today closing at 31.35, up 2.32 or 7.99%. That may be the more appropriate level for the market today. We are not out of the woods yet.
3. Managing Risk of Lost Opportunity in an Unstable VIX Pattern Market: Even after the substantial rally off the lows, the S & P 500 index closed at 888.33 today. We started the year at 903.25. So, it is hard to get excited and nothing has changed in the way I manage risk in a market defined as an Unstable Vix Pattern with heightened levels of volatility, still within the parameters of a long term secular bear market as I define it, which started in 2000. This is a link to a long term chart of the S & P 500 from 1950 to date. Chart - Yahoo! Finance
The S & P 500 is hovering about where it was in April 1997. As I said, hard to get excited about that. We are not that far above the 815 level which, if it is pierced again, will cause even a suspension of buying stock with cash flow. So this is still a dangerous market from my perspective. When managing the risk of lost opportunity in a bear market, I will basically sell some shares into market rises, and then hope to buy them back at a price lower than my lowest purchase price at a later time. I am in effect using volatility, with an overall downward bias, to reap some gains, and to lower my cost basis using FIFO accounting over time. I see no reason at this point in time to change that process of risk management. I have been discussing this process throughout this blog.
The S & P 500 is hovering about where it was in April 1997. As I said, hard to get excited about that. We are not that far above the 815 level which, if it is pierced again, will cause even a suspension of buying stock with cash flow. So this is still a dangerous market from my perspective. When managing the risk of lost opportunity in a bear market, I will basically sell some shares into market rises, and then hope to buy them back at a price lower than my lowest purchase price at a later time. I am in effect using volatility, with an overall downward bias, to reap some gains, and to lower my cost basis using FIFO accounting over time. I see no reason at this point in time to change that process of risk management. I have been discussing this process throughout this blog.
The worse thing that could happen is that a long term secular bull market will actually start soon after I pare a position, and I lose the opportunity to make more money. But, in a long term secular bear market, the risk is to the downside, and to not having sufficient funds available to take advantage of purchasing a stock at even a lower price.
4. Pared Unilever (UL): Unilever just went ex-dividend a few days ago. I bought my position in two increments. The first shares were bought at $18.22, and the second set was purchased at $18.05. I sold the slightly higher cost first shares at $23.38 today. If Unilever falls back to below $18, I will consider buying those shares back.
Profit Snapshot: $138.78
5. U.S. Dollar and Treasury Declines: The dollar and the long treasury are both having some bad days now. I view it as significant that the treasuries are falling in price notwithstanding the FED's intervention. The double short ETF for the 20 year treasury rose 4.96% today and the currency ETF for the Japanese Yen rose 51 cents to $105.55. Japanese government bonds are a very important component of BWX, the International Bond ETF that I own, and those securities have over a 20% weighting in BWX. (22.91% according to the latest information: SPDR Barclays Capital International Treasury Bond ETF) BWX rose .6% today. The Euro currency ETF rose $1.35 to $139.06. The Swiss Franc currency ETF, FXF, rose $.64 to $91.29. The 20 year treasury ETF, TLT, fell 2.51%. The Gold ETF rose 1.73% to $93.85. The Silver ETF rose 1.69%. All of those events are interconnected in my view. Though it would be foolish to predict a trend based on a few days, the worm may be turning against the dollar and the long dated treasury.
One statistic to keep in mind is that the projected budget deficit for the fiscal year ending in September 2010 is currently estimated at 1.8 trillion dollars.
A lot of paper needs to be sold to fill that hole. I may be wrong, but I do not think that the total debt of the U.S. crossed the 1 trillion dollar mark until around 1980 or 1981. United States public debt - Wikipedia
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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 readers of these posts 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. It is always important to follow the investment process. the investment process/links to further information on canadian energy or royalty trustsInvestment Process Part II: Bonds and Bond Like Investments NOT A RESEARCH SERVICE/Add of PWE Last Week 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. Anyone interested in a topic may want to review all discussions contained in the blog about it by using a relevant search term in the box at the top. Opinions are subject to change and they certainly evolve over time as information is assessed and analyzed for compatibility with prior opinions, the only process for a serious investor, and a topic of frequent discussion in this post.
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