1. Advanced Battery Technologies (owned Lottery Ticket Category): ABAT has not done much since I bought 50 shares of this Chinese company as a LT in October. Bought 50 shares of ABAT at $4.12-Speculative Lottery Ticket This company is discussed briefly in a TheStreet TV interview with Bryan Ashenberg (Breakout Stocks Portfolio Manager) as an interesting speculative play. It trades at 8 times 2010 estimated earnings, and has exposure to the electric vehicle market that he likes.
2. SOLD 1/2 of STLPRA $9.4 & Bought 50 PLP at $20.4-both transactions in the Roth IRA Yesterday (see Disclaimer): HK was advised by the LB on this transaction, and LB refers to this kind of exchange as bunting for a single. RB calls it "thinking small". RB just said that it would characterize these transactions as "thinking microscopically" and the phrase thinking small does not do it justice.
A reader asked me about the exchange traded senior bond (PLP) from Protective Life (PL) a few days ago. I replied that I had placed an order to buy 100 PLP at around $19.7, and it had not been filled. The price then jumped a bit so I let it go. I went ahead and bought 50 at $20.4 in the Roth and may buy the other 50 after the ex interest date, which is today, when and if it falls back to $19.7. Par value is $20 on this bond, the coupon is 8%, and the maturity is in 2024. Interest is paid quarterly.
This is a link to the prospectus: www.sec.gov/ Quantum has the security rated as investment grade, and I did not attempt to verify that assertion.
I sold 1/2 of the trust preferred from Sterling Bank at $9.4 yesterday, which seemed like a high price to me for what amounts to a junior bond with a $10 par value and a maturity date in 2032. Those shares were just bought in early December at $8.68, shortly before the quarterly ex interest date: Item # 2 Added 50 STLPRA at 8.69 The other 50 shares which I am keeping are in the regular IRA.
So, when thinking small, (RB asked are nano particles small?) this is a laundry list of considerations: (1) a profit was realized along with one dividend on the 50 STLPRA; (2) PLP is an investment grade senior bond compared to STLPRA being a junior bond; (3) PLP matures about 8 years sooner than STLPRA; and (4) I do not give up much yield by the switch. The yield on PLP at a total cost of $20.4 is about 7.84%, while STLPRA would yield about 8.9% to an investor buying at a total cost of $9.4. That one percent differential is too little given PLP's status as a senior bond from an investment grade issuer with a shorter maturity. One main difference between junior and senior bonds is the deferral rights an issuer has for the junior security. I may have not made this exchange in a taxable account. In the Roth, tax issues involving gains are not relevant, nor am I concerned about buying a dividend or an interest payment since I am not taxed on those distributions in the retirement accounts.
HK acknowledged that the RB has de minimis input into management of the retirement accounts. But LB has somehow stumbled into a significant gain in these accounts since 11/1/2007 adjusted for the two subsequent 6 thousand contributions, as of today.
3. Pervasive Software (owned-Lottery Ticket): I went to the magicformula web site last night (free with registration) and ran a typical screen looking for lottery tickets. I generally will do that about twice a month. The screens are based on the formula designed by Joel Greenblatt and described in his book "The Little Book That Beats the Market", which I have read. The Little Book That Beats The Market When searching for potential LT purchases, I will run a screen of 50 stocks with a minimum market cap of 50 million. I ran that screen last night and Pervasive Software was one of the 50 names. I recently added that name as an LT coming to it with a different screen. Bought 50 PVSW at 4.72-Lottery Ticket
4. Professor Siegel Responds to Jason Zweig : The Professor is just one of those people who will never adjust his thinking. In an article posted yesterday at Yahoo!, the Professor responds to the criticism leveled at his research by Jason Zweig in a WSJ article written last July, which I discussed in an earlier post. WSJ Exposes Jeremy Siegel Siegel is not, however, addressing the basic and fundamental problems in his own thesis: To Professor Siegel: Time for a Re-Think Stocks have unquestionably failed as an asset class for extended periods of time, with two major secular bear markets just in my lifetime. For individuals with a limited time on this earth, and frequently facing a myriad of situational risks, those long periods where stocks fail can be critical to the individual investor.
So Zweig and Siegel are arguing back and forth about the reliability of data before 1871. I would question whether any data before 1920 is even relevant or material to support Siegel's thesis, even if he did not manipulate the data. The data prior to 1871 is probably not reliable as Zweig claims even if it was relevant and material information.
Over my lifetime, starting on 1/1/1951 to 12/31/2008, there have been two long term secular bear markets. Over that period of time, the inflation adjusted annualized return of the S & P 500 with dividends was 6.49%, which I would view as a good long term inflation adjusted return. CAGR of the Stock Market: Annualized Returns of the S&P 500
But, I want to roughly break out two long term secular bull markets as I define it:
1/1/1949 to 12/31/1965: 14.4% annualized after inflation
1/1/1982 to 12/31/1997 (part of those years I would not include): 14% annualized after inflation
Now let's look at some of the bear data, and these are significant durations in an individual's life:
1/1/1966 to 12/31/1981= -1.04% annualized
1/1/1998 to 12/31/2008: -1.44% annualized
So, while it is difficult without question to identify whether the stock market is in a long term bull or bear pattern, and then to adjust your asset allocation accordingly, the significance of making a correct assessment can not be questioned by Siegel or anyone else without sounding ridiculous.
5. RB Requests an Exemption to LB's Trading Rules for Lottery Tickets: RB is thankful for the opportunity to pick five new Lottery Tickets. It is generally known to readers of this blog that RB is on a mission to acquire Canada, all of it, its good to have goals, and wonders whether HK would grant a limited exemption to the Nerd's Rulebook for Lottery Tickets. RB would like to buy 100 shares in a Canadian company for less $600 and have it count for 2 of the 5 Lottery Tickets that it has been allowed to purchase. LB said that the NO WIT was just trying to swallow the rules governing LT purchases with exemptions and exceptions. The exemption requested by the RB is fundamentally inconsistent with the entire strategy of LTs, LB noted. HK said that LB was right about the fundamentals, but RB has played a critical role in 2009. HK will grant it a one time exemption so it can combine the maximum limits of 2 LTs into 1 purchase, and have it count as 2 of its 5 LT purchases granted to RB by the ever generous HK as a reward for the RB's vision thing actually working in 2009.
Today's picture is of the oldest living member of her clan, my mother, and the newest, a baby girl who is the granddaughter of Sam, who is pictured as a toddler being held by my grandmother in the picture shown in this post: Left Brain & Right Brain Decision Making