1. GS Downgrades Wal Mart: Goldman Sachs downgraded Wal Mart to neutral from buy, noting the absence of catalysts to drive the price higher. I do not own WMT or any other retailer. If WMT continues to slide, however, I will reconsider my lack of enthusiasm for retailers in general.
2. The Dollar Rallies Because Russia Expresses Confidence in It?: I thought that this explanation for the dollar's strength today was strange. I would not have much confidence in anyone making a decision based on such a comment. The Russian Finance minister did say in an interview that there was no "immediate" plans to switch to a new reserve currency.
The Dollar Index is showing upward movement since I pared BWX some:
3. Bogle Comments on Picking Individual Stocks and Bonds as Gambling/Bogle is Gambling Too: I have mentioned in a couple of prior posts John Bogle's comment that picking individual stocks and bonds was gambling.
While I agreed with his assessment, I have also made the point that staying with a total bond market index now, which is where he has 80% of his investments, is also a form of gambling, except it is not gambling on the success or failure of individual security selections. Nonetheless, it is a form of gambling, with the bet being made, whether you realize it or not, that inflation will not become a serious issue. The total bond market index ETF BND is only paying a tad over 4% for a buy at the current price based on the information provided today at Vanguard's web site. It would not take much of a change in inflation and inflation expectations to wipe out that meager yield by a loss in value of the bonds contained in this index fund. There is also the risk that you may not recover the loss in principal before the time arrives that the asset has to be sold. A bond fund or a bond ETF does not promise to pay you back your original investment, and that is one of the main advantages of holding an individual security.
There is also the risk of lost opportunity, which I would define to mean the opportunity to buy this asset at a lower price and a higher yield by waiting to invest funds that would otherwise be used now to buy this index.
If you had a choice now, would you buy directly a ten year treasury directly from the U.S. treasury under the Treasury Direct program with close to a 4% yield at the next auction or buy BND or the Vanguard mutual fund for the Total Bond Market Index, that pays you now a similar rate? So, Bogle is gambling too in my opinion, and I do not like his bet very much right now, or at any time for the past year for the total bond market index compared to the alternatives available to me. I did recently do a nibble by buying 100 VTI, the Vanguard Total Stock Market ETF, for a long term hold. Part of my reasoning for adding VTI recently was in response to this self query: if not now, when?
4. Credit Card Delinquencies: BAC reported that its default rate on credit cards rose to 12.5% in May. American Express reported a 10.4% default rate. Capital One disclosed a 9.41% default rate for May. There is a significant minority of consumers who are under severe economic stress, and this is not likely to improve anytime soon.
With unemployment rising, there is a tendency among the recently unemployed, or those who have exhausted their unemployment benefits, to max out credit cards to pay bills and then default, with bankruptcy soon to follow.
5. VIX Back over 30: The thirty level is an important number in my VIX model, though 20 is a far more critical demarcation line for defining bull and bear patterns. The failure to find stability under 30 so far is keeping the cash raised from my recent sales of short term bonds on the sidelines for now. This is still a dangerous market. I am allowed under my model to invest cash flow now. I have identified three mutual funds that I intend to eliminate during the next long term secular bull cycle. I just added to one of them today using part of the the cash flow received today, averaging down, that hopefully will give me the opportunity to exit the position sooner and at a profit during the next long term secular bull market. As far as I am concerned, we are still in a long term secular bear market which started in 2000. The kind of move that we have seen since March 2009 is consistent with that kind of pattern, which is a point that Ms. Yamada keeps making with her charts from the 1930s I would not call a rise in the averages which takes us back to where we started the year to be a bull market. If someone wants to call it a cyclical bull market, then that is fine with me. But, identifying a market as being in a secular long term bear or bull patterns effects my trading strategies, so it is a relevant consideration to me.
6. Jeff Matthews on Housing Recovery: I saw a story at Yahoo that Jeff Matthews, founder of Ram Partners, claims that the housing recovery was further along than most people currently believe to be the case.
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.
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. 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. Everyone is responsible for their own investment decisions, and no one should ever make any decision unless they are willing to accept full personal responsibility for it.
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