Monday, May 18, 2009

Potpourri This Evening May 18th/Bought More AT & T

1.  Bought More AT & T:  I bought 50 more shares of T at 24.52 during the late afternoon, in a continued deployment of the cash flow that has built up since 2/28.  The dividend at that price is around 6.6%, and this may be a slight average up from my prior purchase.  AT & T was one of about 10 stocks jettisoned in September 2008, all with the intent of buying them back when things settled down some.  There may be some concern about the a contract with Apple that would require some lower cost data plans BusinessWeek

Moody's did recently revise AT & T's rating outlook to negative.  This was in response to AT & T's announcement that it would be spending 2.35 billion to acquire some rural phone lines from Verizon Wireless.  Yahoo! Finance(if there is a downgrade in the debt, the interest rate on my JZE and JZJ will rise a 1/4 point)  The J P Morgan analyst, Mike McCormick, recently hurt both Verizon and AT & T with an argument that the wireless business of both companies was deteriorating and he cut the target for T to $28 from $30.  He also reduced his rating to neutral from overweight.    Tech Trader Daily - Barron’s Online  
I was just waiting for the downdraft from Morgan's downgrade to subside some before going against McCormick.  T has fallen from $26.69 on 5/6/09. 

I try not to over think a purchase like this one.  If I would like to see a 10% annualized return from AT & T, I am almost to that point with a 6.6% dividend so just a 3.4% annualized appreciation in the stock will cause me to reach my modest objective.   I can also wait to select the exit point to achieve that objective.  A rise to $30 at any point within the next 3 years would be more than enough to harvest that 10% annually. 

2.  VIX Trading Model for Unstable Vix Pattern:The Trading Model in effect here at HQ required a halt to investing cash flow when the S & P 500 closed a month below 815, allowing for a restart once that average closed a month above 815 which happened on 4/30.  So far, AT & T, Intel and PHO have been bought with that accumulation.  


3. VIX closes at 30.24 down 8.7%; VXD at 26.59 down 8.72%: I view the directional move of the VIX out of the Phase 2 Unstable VIX Pattern to be a positive.  I would hope now that the VIX pierces 30 and finds stability in the 20 to 30 range, before making a move to below 20.   

4. TWM as a stock portfolio hedge: Last year I used both the double short ETF for the Russell 2000 (TWM) and the double short ETF for the S & P 500 to hedge my stock portfolio.  I am not set up here at HQ with software programs and pet MITs do work on models.   I just have to depend mostly on my powers of observation.  I noticed when I was trading TWM and SDS that TWM gave me more protection for the buck,  possibly due to the higher volatility of that index as seen in RVX.  TWM vs. SDS: Hedging a Stock Portfolio with minimal small cap exposure
While that is true on the downside, the converse is also true.  I noticed that TWM worked more against me on more of the up days. Today, for example, TWM fell 7.17% and SDS was down 5.75%.  TWM would also be a poor choice in periods when small caps were outperforming large cap companies.   RB will not allow a stock hedge at the present time.  

5.  TBT & TLT: I view today's trade in the 20 year treasury to be a flight from its safe haven status.  Personally, it is impossible for me to view a 20 year bond from any government which yields 3% to be safe. There is a risk of lost opportunity investing in such an instrument and the risk of losing money even if held to maturity due to the real possibility of a negative real rate of return after taxes.  I view long bonds with measly yields just to be  guaranteed losers from my point of view.  The ETF for the 20 year treasury TLT fell 1.55% to 96.52 and the double short ETF rose 2.79% to 50.5.   I checked the Proshares page to see what the closing NAVs and both TBT and PST closed near their respective NAV. ProShares ETFs – Funds - Overview (Hubpage) – – Overview,
At some point, I would anticipate buying one or more treasury ETFS, maybe in 2011 or 2012.  

6. FXA and Commodity Prices: I also got a good rally out of FXA, the currency ETF for the Australian Dollar, which closed up 2.29%, continuing its bull move which started on 3/9/09 at around  $63 closing today at $76.77. Isn't it interesting that it started to move up when the U.S. stock market started to rally.  Many believe that the Australian and Canadian dollars will do better when commodities increase in prices.  I got a 4.05% move in my GSG today, the ETF for the GSCI Commodity Index. FASB/ BOUGHT GSG: Starting a Shift Very Slowly into Commodities

7. Conflict between VIX Asset Allocation Model and More Traditional Models Used at HQ: About 30 grand was re-allocated out of short term bonds into stocks as a result of a shift caused by my Dynamic Asset Allocation, temporarily resolving a conflict between the VIX Asset Allocation Model which wants to wait until it is more safe, meaning a continuous movement in VIX below 20 for 3 months, and the long standing model which requires some buying of common stocks after a massive fall in prices.  It has always been recognized here at HQ that buying at the very depth of a bear market is where most of the money will be made over the long term.  This is a frequent line of discussion in this blog:


RB made the point in its way in its story about Great Uncle Tom buying stocks in the Great Depression, which worked out for a lot of people: RB Wants to Tell a Story/VZ/Posts on Tax Issues relating to Equity and Trust Preferred Stock and Deferral of Cumulative Preferred Dividends

8. Dynamic Asset Allocation: The shift from short term bonds to stocks started on March 3, 2009, a shift that will hopefully  last for several years, with some of the buys made summarized in these posts from March:
















A limited amount of cash was also then used to buy MJH and LXPPDBuy of 50 MJH at $7.51/ Pop in My Animal Spirits Balloon/Japan/ Zulauf/CNBC/Meet the Press
Some of the other securities bought include MDT and WIN.


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 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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