Tuesday, June 2, 2009

Evening Notes 6 2 2009/Dollar Index and International Bond ETFs/Microsoft and Windows 7 Release/PST-What Am I doing With 30 shares?/Valero

I am revising some of the older posts to put in green headers and to "justify" the paragraphs, primarily those viewed more than a few times by new readers.

1. Dollar Index Chart & Foreign Government Bond ETFs: This is a link to a chart of the Dollar Index that loads more quickly than the one that I previously referenced in a post.    (NYBOT:DX)  The Dollar Index closed at 78.404 down .775 or 1% at the time of NYSE close (it has since risen some).  BWX closed up 35 cents at $54.71 for a gain of .64% after trading as high as $55.21 during the day.  Before buying or selling BWX or any other bond ETF, I will check the NAV at the sponsor's web site. I would be hesitant to buy BWX if it was selling significantly above its NAV for example. My last buy was on a day that it was selling more than a couple of bucks below its NAV during the wild period last October.   BOND ETFS BWX AND TFI   I still plan to lighten up again on BWX on a move above 56 after recently selling 50 shares.   I have noticed that both BWX and WIP did not pay a monthly dividend on June 1st.  A link to the dividend distribution page for BWX can be found at this page SPDR Barclays Capital International Treasury Bond ETF   and then clicking the PDF link on the left hand side titled  "ETF Dividends"   Both WIP and BWX are low yielding bond ETFs.  The historical dividends are available by clicking the PDF for historical dividends located at the same web page lined above.   I do not own these foreign bond ETFS for the meager dividend income paid by them, but for the potential capital appreciation due to a fall in the value of the dollar.   This requires me to occasionally harvest profit by selling some shares, then hopefully buying those shares back at a lower price when the dollar mounts a rally.  

Financial gurus like David Swenson recommend against buying international bonds as part of an individual's asset allocation due primarily to the currency risk.  This risk is not present when the U.S. investor buys U.S. treasury paper.  Personally, I am comfortable with that risk, am aware of it, and realize that my recent gains in BWS and WIP have been almost entirely due to the fall in the value of the dollar which could reverse course.  In both cases of a U.S investor buying U.S. treasuries or foreign government paper via an ETF like BWX, the investor also faces the risk that a rise in interest rates would cause the value of existing holdings to fall in value, and the risk of lost opportunity, meaning that bonds could be bought later paying a higher interest rate with the same maturity with the funds used to buy them now.    

2.  MICROSOFT RELEASE OF NEW OPERATING SYSTEM:  I am an Apple guy so I am not waiting to upgrade anything based on a new operating system release from Microsoft.  I do own a grand total of 50 Microsoft shares.Ponzi Schemes Galore/BMY, AVY, VZ, SYK, SLG/ GE review by Moody's/ Stop Making Acquisitions NADX/ADD 50 MSFT/Sold Delek            So, I did read the story that Windows 7 will be released in time for the Christmas holiday season, and that is enough to convince me to hold those shares until next year, hoping for a robust upgrade cycle.   R Ya Fin

3. PST-What Exactly Am I hedging with 30 shares of this Double Short ETF for the 7 to 10 year U.S. Treasury:   When I started to become nervous about inflation and my long corporate bond exposure, which would be ravaged by serious inflation, I decided to start buying PST.  Being conservative with double short ETFs I just bought 30 shares at $53.87 in February, thinking that I would add more on weakness, being cautious as usual.  It has occurred to me that 30 shares of PST is not much of a hedge, to say the least, even though it cost over $1500 to acquire those shares.  So, I am going to sell it, maybe tomorrow, and buy a floater.  

This is a link to a recent article on the double short ETFs and the newer triple shorts for the U.S. Treasuries:   WSJ.com

4. Guns in Bars:  One of the most important issues in Tennessee is the right to carry firearms into bars provided you do not imbibe any refreshment which interferes with your aim.  The Tennessee Legislature overwhelmingly passed legislation that would allow any of the very large number of permit holders to carry their weapons in establishments that serve alcohol and the Governor vetoed it.  His veto will soon be overridden.  Guns and dogs are very important in this state.  In fact, tell a man in Tennessee that he had to give up his gun, dog or wife, just choose one, it would not be much of a contest. 

5. VIX and VXD Below 30:  The volatility averages for the DJIA and the S & P 500 both closed under 30 today. The VXD is at $26.63 and the VIX closed at 29.63. 

6. Valero sees 2nd Quarter Loss:  I do not currently have a position in VLO.  I sold my common stock position at 21.24. Sold Alon (ALJ) & Valero (VLO)  I also sold a VLO senior bond contained in the Trust Certificate PJZ after I received a quick pop in the price plus the semi-annual interest payment. Sold PJZ and Bought Nestle Late Today/    (ex date 4/9/09: Market)  While I will buy a refiner, it is more of a short term rental. I simply view the refining business to be capital intensive with generally low returns on capital investment, subject to large swings and other disruptive occurrences like hurricanes, fires, explosions, etc.  After the close, the company announced a 40 million share issuance and another 1 billion in debt to finance a 2.5 billion capital budget for 2009.  VLO also projected a 50 cent loss for the Q/E 6/09 versus street expectations of a 74 cent profit.  R  The shares traded down almost 10% in after hours.  I will just monitor the situation, and I may become interested at about the same level as my prior purchase which was at below $17. Refiners: ALJ and VLO I did trade profitably in the 4th Quarter of 2008 Valero, Delek and Alon, with the later two having convenience store businesses in addition to refining. For some reason, I enjoy researching such issues as crack spread and the sweet and sour cost spreads.  Refiners: ALJ and VLO     GM FORD CITIGROUP/ DELEK (DK) BUY THIS AFTERNOON  

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