Pepsico WSF USB and MS Earnings/More on JBK/SOLD BABY BERKSHIRE SHARES/

1. PepsiCo (previously sold): Normally, I prefer to own Pepsico rather than Coca Cola, occasionally owning both at the same time, primarily due to Pepsi's Frito Lay business. However, I now own only Coca Cola and recently sold my Pepsi position. /Sold Pepsico/ I had bought Pepsico at less than $50 after it swooned down after what I viewed as a disappointing first quarter earnings report. Pepsico Buy/ The 1st quarter earnings beat the analyst expectations but I referred to it earlier as uninspiring. PEP While the 1st quarter report was uninspiring, the 2nd quarter report released this morning was not enough to tempt me to buy the shares back. Still, since LB is 1/2 trader, Pepsico will be monitored for a re-entry point. The market may take Pepsi stock down a notch today, but that will be insufficient to temp me to buy back my position. I am also concerned about Pepsi's bid for is two bottlers, PBG & PAS. It is not just that Pepsi may end up overpaying for these bottlers that is the source of my concern. I also view the offer to be an admission of weakness in Pepsi's North American beverage operations.

Excluding items, PEP earnings $1.02 a share compared to $1.05 in the second quarter of 2008. GAAP earnings were $1.06, which beat the forecast of just a buck. Revenues fell 3% to $10.59 below the consensus estimate of $10.99 billion. However, on a constant currency basis, revenues grew 5.5% and income would have increased by 5.5%.

2. USB WFC and MS: I do not own common shares in either US Bancorp or Morgan Stanley. My involvement in MS is limited to a recent buy of 100 of MSPRA, a floating rate equity preferred. Afternoon Potpourri May 26 2009/ Bought MSPRA RJZ & ADX ...

US Bancorp had a decent report this morning, considering the circumstances. It is one of the nine banks that has repaid the TARP funds and that payment cost it 8 cents a share for the 2nd quarter. It also suffered a 5 cent hit due to the special assessment by the FDIC during the quarter which all banks had to pay to replenish the insurance fund. Still, the bank had a small profit of 12 cents beating the forecast of 10 cents. Based on other reports that I have seen recently from more traditional regional banks, those without huge hedge fund type operations, this report appears favorable in comparison.

The loss reported by Morgan Stanley was accounting related, due to the improvement in its own credit and repayment of TARP funds. Since I am not an accountant, I am at a loss to explain how an improvement in the pricing of MS's long debt negatively impacted earnings, except to say it may have something to do with FASB 159.

I will need more time to look at Wells Fargo earnings. I do not own the common. (I did note that charge-offs as a percentage of loans rose to 2.11% from 1.54% in the first quarter, which is troubling.) Instead of the common, I have bought two bonds , JWF and KTV. Trust Certificate Links in One Post So I am already substantially underweight in securities from WFC. I am likely to hold JWF until I become convinced that Wells is in serious trouble, which I do not view as the case now. JWF was partly traded for a nice profit and my remaining shares were bought at $9.15 on 3/6/09: Buys of JWF KSA DIS and NYX/SOLD Entire Position in TFI/ Just a Day of Ignoring My Own Rules The current yield of 15% based on that cost for the remaining life of the bond, which matures in 2034, is worth a lot more to me than selling at profit now, with this security now trading at almost $20 a share: JWF: WELLS FARGO CAP IX Plus, I have built in close to 16 dollar per share gain at maturity. So, while it is tempting to harvest those gains, I like the 15.3% per year (based on my cost of $9.15 per share) for 25 years more.

3. JBK: I thought that it would be helpful to quote some information from the prospectus for JBK, dealing with ownership of the underlying securities of the Trust:

" In addition, Lehman ABS will, with respect to each Deposited

Asset, deliver or cause to be delivered to the trustee (or to the custodian

hereinafter referred to) all documents necessary to transfer ownership of such

Deposited Asset to the trustee. The trustee (or such custodian) will review

the documents within such period as is permitted in the prospectus supplement,

and the trustee (or such custodian) will hold the documents in trust for the

benefit of the certificateholders (Sections 2.01 and 2.02). "

This language can be found at p. 40: http://www.sec.gov/

Although I have no background in dealing with Grantor Trusts (not a subject matter of entertainment law or in tort/antitrust litigation-besides I am 99% retired from all of that anyway), nor have I conducted any research about them, nor do I intend to do any, I believe that the Trust owns the underlying securities based on the above quoted language. U.S. Bank Trust is the Trustee. The Trust issues the Certificates:

"The Certificates will represent an undivided beneficial interest in the assets of the

Trust, which consist solely of the Underlying Securities ..." p. S-1.

4. Proctor & Gamble (owned) (RB added PG at $47.59 during its March frolic and detour-Bought PG ): The WSJ reported this morning that P & G was near selling its pharmaceutical unit for about 3 billion dollars. This division has sales of about 2 billion. P & G announced in December 2008 that it was cutting back on research expenses in this unit in preparation for a divestiture.

5. Bernanke on Unemployment: I have mentioned in several posts that the Fed expects unemployment to remain stubbornly high for some time. This forecast was reiterated yesterday by Bernanke in his testimony before Congress. The FED expects the unemployment rate to peak at 10.1% this year, fall to as low as 9.5% next year and then to as low as 8.4% in 2011. Since the FED is forecasting a slow recovery starting in the second half of 2009, I would label that recovery to be mostly a jobless recovery. If this proves accurate, it will be a tough slog for retailers for years. The Fed is still not concerned about inflation. It is just my opinion but I disagree with Bernanke on that point and agree with Brian Westbury.

6. Silicon Image: SIMG was a recent lottery ticket purchase. One aspect about Lottery Ticket purchases, savored by RB, is that it is not necessary to understand the product made by the company, other than in a superficial sense, as in what passes for understanding after a few cocktails among those who can recite lines like a Grey Parrot with about the same comprehension. So, I will just mention that Silicon Image announced the launch of some new thingamajigs this morning.

7. SOLD 2 BABY BERKSHIRE SHARES AT $2,994.41: (see disclaimer) RB just had a fit, barely able to control itself, hurling the usual verbiage at LB about being an old geezer, too old for the old folks home, constantly interfering with RB's effort to turn Headkocker into a miniature version of Uncle Warren by being too cautious and thinking way, way too much, and to add even more fuel to the fire, LB just sold the 2 BRK/B shares, just to capture a $350 or so short term profit. What a useless nerd, RB purred. Why did LB sell the Baby Berkshire RB asked rhetorically, well the usual myopic, tunnel vision characteristic of the LB, something to do with dividends or no dividends or some similar kind of hogwash incapable of being comprehended by the RB. Whatever, time to move on, RB wants to party now.

Prior to today, the Nasdaq has been up for 10 straight days, the most since 1996.