Hercules (HTGC)/Napco/Outliers and the Processing of Information Independent of Pre-Existing Opinions/VIX: Period for Formation of Stable Bull Pattern

Headknocker forced LB and RB to coordinate their input on the big picture issues over the past week, and to work in unison rather than in conflict, which led to a number of posts about some theoretical foundations of investing, at least foundations as used here at HQ .  Now, we are moving more into nuts and bolts again. 

I own shares in a BDC called Hercules Technology Growth Capital. Yes, I am Chicken Now, and Proud of IT Hercules recently declared a 30 cents per share cash dividend. For the prior quarter, this BDC conserved capital by paying the dividend partly in stock. More Foolishness from the GOP in the Volunteer State/GLEN CASADA & OBAMA/ HTGC, PVX/Ideologues Rarely See What is in Front of Them

I mentioned in that later post that I might add shares after reading the earnings call transcript for the prior quarter, and I did add just 50 shares at around 5. Hercules announced results for the 1st quarter last week, recording a 31% increase in revenues and a 29% increase in net income. 

Net asset value was listed in the earnings statement at $10.94 as of 3/31/09, down from $11.56 as of 12/31/08. This is a link to the earnings call transcript. Seeking Alpha For now, I view this as a hold and a continued candidate for reinvestment of dividends, though only a marginal case can be made for continuing such reinvestment. My last dividend was used to buy shares at less than $5, and my total position is now over 150 shares.
   

HSBC (HBC) became the latest bank to record a gain on the hypothetical purchase of its own debt at a discount to par value, though much of that gain may be dissipated in the next quarter due to a rise in the value of such debt. MarketWatch

This kind of issue, which has previously been discussed under the topic FASB 159, is important in trying to analyse the quality of a bank's reported earnings. I do not own HSBC common stock. I do have a small position in its U.S. unit's senior short term debt, and I previously owned one of that unit's equity floating rate preferred issue, HBSPRF, which I am considering buying back.  Bary's Column In This Week's Barron's: Floating Rate Preferred Stocks METPRA GSPRA HBAPRF BACPRE MERPRL/ Gross interview Forbes

One of my lottery tickets, Napco Security, reported  this morning.

This one was bought at around $1. ROK/Balancing Risk & Reward on SNTA/Buy 100 NSSC at $1.02/Electronic Medical Records & the Stimulus Bill/M & DKQ Net sales fell 14% from the year ago quarter the company had a net loss of 26 cents. The report was mostly ugly with one bright spot, NSSC did reduce its debt by about 3.9 million, having raised it significantly by last year's acquisition of Marks. I will just hold my 100 shares.  The report is too negative from my point of view to add any shares, and not bad enough to take a small profit now. Duality of Long Term Risks/Stocks Under $5: Per Se Lottery Tickets

I had a similar reaction to the earnings report for another lottery ticket Sunopta

One thing about my lottery tickets is that it does not matter what I do. Though, over the past two months, with a number of them increasing more than 100%, they cease to be completely immaterial as a group.  I may do my coin flip on the lottery ticket EWBC when and if it crosses $12.  

My older brother, who is a clinical psychologist, and I were talking yesterday about something that we both consider to be a hoot. The foundation of modern economic thought appears to us untrained souls in the dismal science to be based on human beings acting rationally. I am not sure what economists have been looking at when formulating their models, but apparently a rigid connection to the real world is not a  necessary ingredient, which does have tendency to produce models that are more make believe intellectual artifacts that look good in theory and on paper than an adequate explanation of the forces underlying complex economies and their interdependence. Mike than said that I was an outlier, someone who was a free thinker, not part of a system.  If anyone wants to know where something like the Vix Model comes from, it can originate in anyone who is not frozen to any particular structure or mode of thinking when confronted with new information. Bungee Jumping Aegon and ING Preferred Stocks/ BlackJack and Stock Investing: Lessons Learned & Applied Ideology and opinions can hinder the processing and evaluation of new information as it is received. Psychological issues, particularly those tied up with ego and underlying dogmatism, can also be a major hindrance to rational decision making.  

I have been thinking some about the requirement in the VIX Model requiring a 3 month movement of below 20 in the VIX before committing the bulk of cash raised by the Trigger events in 2007 and the general concern that proceeded them. This kind of requirement was made to avoid a false signal and is more in keeping with my own conservative nature. I do not want to move the cash sitting on the sidelines until I feel safer about the formation of a longer term, investable bull market, where I can at least reasonably hope for 3 or 4 good years of rising averages, as in after 1991 or 2002. Vix Asset Allocation Model is Obvious I am not personally going to vary that period for the first 16 months of a bear market to lessen the odds of a false signal during a bear market rally. I am currently leaning to shortening that period some after 16 months in a bear since that period is long for most bear markets anyway, so that in itself reduces the risk some of a false signal. We started this bear in October 2007 by measuring it from the top of the market averages and since August 2007 as measured by my definition of a bear market, the formation of an Unstable Vix Pattern. That is still sixteen months measured both ways.    

Always ask what does new information mean, not what do I want it to mean or how can I distort it to mean what I want or need it to mean.