Sunday, May 31, 2009

Sunday Evening Potpourri May 31 2009

This posts assumes familiarity with my VIX Asset Allocation Model. My posts on that model are linked in this Gateway Post: USING THE VIX MODEL AS A TIMING INDICATOR FOR LONGER TERM STOCK ALLOCATIONS

1. VIX Closed Friday Below 30 & VXD at 25.33/Currently Unwilling to Hedge my Stock Portfolio with SDS or TWM: The Vix closed Friday's session at 28.92, down almost 9% from Thursday's close.  I am currently anticipating that the VIX will try to find stability in the 20 or 30 range over the course of the next several weeks. I view the return back to the 20 to 30 pattern after bursting out of that pattern in late September 2008 to be a positive for the market.  I do not plan to buy SDS when and if the VIX approaches 20 or even pierces that important demarcation line in my VIX Asset Allocation model.   

If we were coming out of a long term Stable Vix Pattern and spiked to 28.92 from below 20, then I would be looking to buy SDS as a hedge on a return to below 20.  As the VIX falls, I would expect the S & P 500 to be going up and the double short for the S & P 500, SDS, to be going down about twice as much as the average was moving up. So a fall in the VIX from 30 to below 20 would most likely be linked to a fall in SDS which would normally create an opportunity to buy it at a much lower level, thus increasing its potential effectiveness as a hedge.  I am not going to buy it now for three reasons. 

First, hedging in my opinion needs to be done soon after the start of the Phase 1 Unstable Vix Pattern, which arose in August 2007, when the VIX  returned to below 20 in late September and early October 2007 as the market had its last rally before beginning its long descent, and even more hedging immediately after the formation of the Phase 2 Unstable Vix Pattern in late September 2008. I am just reluctant to put on a hedge 16 months after the start of a bear market, and that hesitation even becomes more acute after 20 months. The current bear market is dated as starting in October 2007.  

Second, so far at least, the market appears to be recovering, there are green shoots starting to appear in important economies around the world, and the VIX is starting to move into a 20 to 30 range possibly as the precursor to finding stability below 20 which would mark the commencement of another investable bull market under the model as now configured.

Third, I reduced my exposure to stocks significantly in 2007, and my current portfolio is weighted more in bonds, cash and alternative assets than to stocks, so a hedge is not really that important to me now anyway.  I am more interested in hedging my bond portfolio by buying TBT and PST at better prices.   I am also more concerned now that a hedge would detract from my performance than add to by reducing my losses. So, I am less in a capital preservation mode than in a capital enhancement mode.   This may change based on some unexpected development.  

There is always the argument that the best hedge is to sell something in need of hedging until there is no real need to hedge it. I will likely do that at some point with my long corporate bonds, just sell a few when I become more concerned about inflation than I am now.  

The volatility index for the DJIA closed at 25.22. ^VXD I view it as the least volatile index, and it was the first to cross below 30 from the elevated levels in the Phase 2 Unstable VIX Pattern.  It will most likely to be the first to cross below 20 too, followed by the VIX, with the Nasdaq and Russell 2000 bringing up the rear. The Nasdaq volatility index is showing more stability than I would expect, closing at 29.44 on Friday. ^VXN

During the last bear market in 2001-2002, the VXN soared to much higher levels of volatility than the VIX.  After an extended period of higher volatility, the VXN found  stability at below 20 in November 2004,  after the VIX found that range 13 months earlier  (Compare  NASDAQ VOLATILITY INDEX Index Chart with  CBOE VOLATILITY INDEX Index Chart)  This time it looks different. It appears that VXN may be able to find stability soon after the VIX or within weeks thereafter.  It can not be said now whether either will soon find that stability.  

2. Dick Cheney is Trying to Lay the Foundation to Blame Obama for any Future Terrorist Attack:  

I never assume a politician from either Tribe is telling me the truth.

I also classify as a lie what a more diplomatic person would say is just an exaggeration or a misleading statement. An example of what I would call a lie is the representation by Bush and Cheney that the aluminum tubes seized by the U.S. before the Iraq invasion could be used to enrich uranium, or their reliance on the forged documents about yellow cake from Niger, or their reliance on the alcoholic former taxi driver called Curveball who the brother of one of  Ahmed's Chalabi's top aides (Ahmed Chalabi - Wikipedia)

In each of those cases, Bush and Cheney ignored the best evidence that contradicted their assertions, failed to even mention the contrary evidence to the public, and instead presented unreliable and false evidence, or bad arguments, as facts. That is what most people use to call lying when I was younger.


One of my many concerns arises from my observation that politicians do not wish to buttress their arguments with facts, free from manipulation, distortion and exaggeration and with due regard to information that casts doubts or questions about their positions. This endemic failure of politicians as a class only makes the voter's path to the truth more difficult, at least for the few of us who still want to blaze that trail. Our task is made that much harder by the many shortcomings of the press and their inability to probe beyond the surface. Tim Russert was an exception and I am not aware of anyone capable of filing his shoes, including David Gregory.

Many members of the press have been cowed by the forces from the right who are quick to label any factual assertion, or even a question with a fact in it, inconsistent with their rigid ideology to be be proof of bias. Nor, does it help that many journalists are not trained in any field that is the subject of their reporting, a factor that leads to a superficiality. So, when I am critical of a politician for not telling the truth, or misleading the public, I am not making a political statement as a member of one of the two Tribes, since I am critical of politicians in general. Instead, I am simply making an observation, in a saddened state, about what passes for intelligent conversation by our leaders on matters impacting us all.

One of the most truth challenged politicians in my memory is Dick Cheney. Cheney is the kind of person who creates his own reality, and then warps and distorts information to fit whatever view he wishes to advance. He gave a speech recently before the self styled conservative organization, the American Enterprise Institute, where he claimed that the "half-measures" taken by Obama against the terrorist threat made America more vulnerable to attack. I am not exactly clear about what he means by half measures, other than the prohibition on torture championed by Cheney. 

Apparently, a full measure is being willing to waterboard a prisoner of war 183 times. That is not my point however. Cheney made at least 10 serious misstatements of facts during the course of that short speech, some would use the term lies, but not me when I am trying to be diplomatic about someone who has caused a great deal of injury to the U.S. and betrayed virtually every real conservative value. Cheney's reality creation in his most recent speech is documented by the two journalists who started to poke holes in Cheney's false claims that he used to justify the Iraq invasion, at a time when virtually all journalists were eager to act as publicists for the administrations claims.  This is a link to their excellent article from those two real journalists about Cheney's speech. McClatchy

Some of the points made in this article, such as the assertion made by the FBI Director in a Vanity Fair article have previously been discussed by me, where Mueller asserted that the torture approved by Cheney as a "full-measure" did not prevent any attacks vanityfair.com, The torture did, however, produce a large number of bogus leads as you would expect which wasted the FBI's time and manpower. Another point previously referenced was the conclusion by the CIA's own inspector general that the torture did not stop any terror attacks. McClatchy

None of that will stop Cheney from claiming that torture saved hundreds of thousands of lives by preventing a second wave attack. I view Cheney to be the most untrustworthy American politician currently living, bested only by Bill Clinton when Bill was answering a question about his sex life. But there is a material difference between a politician lying about their sex life and another one misleading an unfortunately gullible public to justify a war. I know that I am in a minority when I make that point here in the SUV Capital of the World, where virtually no one questions the words of the Dark Force as being anything other than the equivalent of the gospel according to Jesus.

3. Rush Limbaugh Tries to Inflame the True Believers about Sotomayor: Rush is almost never interested in conveying accurate information.  Instead, he has a feel for the worldview and mind set of his audience and knows how to pull their chain, which is not hard to do. I believe that I could do it if I was so inclined. The most recent example is his statement that Sotomayor, while sitting as a judge on the Second Circuit Court of Appeals, ignored the law and supported discrimination against white firefighters in a one paragraph decision in the Ricci case. This is not an accurate portrayal of the decision.  The Court merely affirmed a District Court decision that upheld city of New Haven's right to throw out test results which it reasonably believed led to racially disparate results.  PolitiFact 

One thing that I discovered was that Sotomayor had ruled against the plaintiff who brought discrimination charges  45 out of 48 times. On the three occasions that the discrimination claim was upheld, the decision of the Appeals Court panel was unanimous and Sotamajor was joined in the decision by one Republican appointee. Judge Sotomayor and Race | SCOTUSblog

Has Rush mentioned that tidbit to the True Believers? 

I could go on about Rush, Cheney and James Dobson and other Jerry Falwell imitators. I would imagine that the Democrats are just gleeful that many true independents, willing to vote for candidates from either party,  currently view the GOP as revolving around the Axis of those three individuals.

It is impossible for me to visualize the GOP except in those three white faces, none of whom have much if anything in common with conservatism.

While there is no doubt 20 or even 25% of the voting population who fervently support those gentlemen, and will vote for the GOP no matter what, they are not popular among the true swing voters in a national election and a few senate races. (Most congressional districts have been gerrymandered to insure the re-election of an incumbent which increases polarization in American politics, and diminishes the influence of moderate and independent voters).

The GOP seems intent on self-immolation by allowing themselves to be so identified with this Axis. The best thing that could happen for the GOP now would be to put Cheney out to pasture, just shut him up, and for a few leaders to at least try to distance themselves from Rush, rather than kneeling down and licking his shoes incessantly. If some slight criticism of Rush sends the True Believers into their normal vitriolic, venomous spiel and apoplexy, as it certainly would do, then the GOP politician who wishes to  Man Up  may be able to put together a winning coalition in the next election, sending the Beanpole back to teaching,  by not being so subservient to GOP's assorted wingnuts and religious zealots.

Reagan barely paid any attention to them.

At least the Democrats learned not to become to closely identified with some of their problematic supporters. I really hope that a some point in my life a real and true conservative party will emerge as an alternative to the Democrats. 

Saturday, May 30, 2009

Afternoon Comments after Digesting the Saturday Papers/ How reasonable is a prediction of a 2% 10 year treasury yield and 475 on the S & P 500

1. California Real Estate:  I mentioned in a prior post a study by a professor who claimed that California would work off its inventory of new homes in 2009 and would need new homes to fill demand. VIX Below 40/Housing Recovery?/Budget Deficits & the Value of Treasuries/ABC & CBS Programs on Gun Show Loophole USATODAY.com I also mentioned in several prior posts, including the one linked above, several news reports that home prices had declined in several California markets to such a degree that the median price home was affordable for about 1/2 of the families in the community.  First Industrial/Immelt's Letter/Double Top in the S & P 500?/Home Prices & Household Income/This was a major change from the affordability percentage at the height of the real estate madness, which was around 15% of the families, due to skyrocketing prices far exceeding the range of affordability, a process doomed to fail and to fail badly with much misery. Something had to give, and after a few years of parabolic price increase in a few states the prices have returned to levels that buyers can afford without a funky mortgage product doomed to caused problems. 

The WSJ reported yesterday that home prices in California rose 1.4% in April, marking the second consecutive month of increases. WSJ.com  So there is light appearing at the end of this dark tunnel.  

2. Alan Abelson finds someone less cheerful than him-David Rosenberg: Alan Abelson, the titular head of the perma bear party- who was bullish for a month or two back in the early 1980s-does whatever he can every week to describe the glass as perpetually empty.  One of his favorite journalistic techniques is to pull out his rolodex containing the names of a 100 or so like minded individuals, and call one of them whose outlook is more bearish than his own which is generally hard to do.

This week Alan  features a David Rosenberg, formerly of Merrill Lynch, and now chief economist and head strategist for a firm in Canada called Gluskin Sheff (??), who once again makes his case again for piling into 10 year treasuries and shorting stocks. Barrons.com Just a few weeks ago, around 4/2/09, Rosenberg was predicting that the current rally would falter, with the 10 year treasury soaring in value and falling in yield to a mere  2% while the S & P 500 would suffer another catastrophic decline by falling to the 475 to 650 range.  

In early April, when Yahoo Finance ran the dire forecast made by Rosenberg, the ten year treasury yield was around 2.65%. MDC - Java Chart - WSJ.com Now, it has fallen in price and yields 3.46%. I guess that Rosenberg is sticking to his opinion judging from the chorus of negativity dispensed by him and Abelson in Alan's perpetually ghoulish Up and Down Wall Street column. During their marriage of virulent pessimism, the S & P has risen 25% and their investment of choice, the ten year treasury has fallen in value. One thing about a perma bear like Abelson, as long as he stays pessimistic forever as he will do,  eventually he will look smart and even prescient.  

I do not have the luxury of reaching definitive conclusions about the future course of events. I can only try to evaluate new information free from any bias including any ideological prism which distorts information and any personality quirk which makes some overly pessimistic or optimistic by nature irrespective of the evidence-even overwhelming reliable evidence.

At best, I know that my opinions are based on a range of possibilities for alternate scenarios. In that real world the most definite opinion that I can muster about the future starts with the phrase "more probable than not based on what I know today". Rosenberg's 2% 10 Treasury scenario is one that I would characterize as unlikely.  Is it possible? Yes it is conceivable, a very low possibility of maybe 1 in 7 now. I would submit that it becomes only the probable hypothesis when you ignore or devalue the importance of a large number of other current events and focus your attention just on mortgage delinquencies and similar types of data which are likely to remain negative for several more months.   

I mentioned in an earlier post that I was concerned about the bond asset class failing. Bond Asset class in danger of failing?/Moody's Comments on U.S Debt Rating/BAC Equity Capital Raise Good for Preferred shareholders? It is part of a natural process for bonds to succeed and then fail. It has succeeded for a very long time.  I would make the case that the treasury bond market has been in a long term secular bull market since 1982, with some occasional hiccups typical of a long secular bull market.

Prior to 1982, unless we forget, the long treasury market had failed for an extended period of time, from 1946 to 1981, as noted by Roger Gibson in his book Asset Allocation ( see pp. 34 et seq: Google Book Search ) Looking at Gibson's data, that is a bear market that I would prefer to miss next time. I also believe David Swenson who runs Yale's endowment has little faith in the long term performance of non-inflation protected bonds and keeps them primarily as a hedge against deflation, which would not be the correct course in my view for all times and circumstances. ETF Database NPR

As a consequence, Yale entered 2008 with about 5% in non-inflation protected bonds: Research

So, as far as I am concerned, I will let Rosenberg and Abelson, and their fellow travelers, gorge themselves on long tern treasury paper yielding 3 to 4%. It is good for the country that so many are willing to part with their cash at such low yields to help Uncle Sam out in his time of need. I have said the same about some bond ETFs like BND. For both the Total Bond Market index and all treasury bonds with the possible exception of the TIP, I do not believe that the current yield compensates me for the risks associated with those securities. 

My response was not to sell the low yielding bond ETFs and to buy stocks. Instead, I transitioned my bond investments by selling low yielding bond ETFs and investing the proceeds into other securities that provided me with a higher fixed coupon yield and/or some protection against inflation by having a float provision along with a guaranteed yield.  Those buys are discussed in posts linked in these main Gateway Posts.


Speaking for myself, the opportunities in some of these more exotic instruments have passed.  I am now in a wait and see mode, though I am inclined to keep my floaters with a guaranteed minimum yield as a core part of my asset allocation and most of the securities that I bought at very favorable prices during the meltdowns in the 4th quarter of 2008 and in the 1st quarter of 2009. It is best to become familiar with these types of securities, because there will probably be other similar opportunities in the future. It may take years for the next buying opportunity to arise, and the reason for the meltdown in prices may be different next time, an inflation problem perhaps or something else that spooks the individual investor, who is the primary owner of Trust Certificates, and a major source of trading in the other securities that I bought to replace my bond ETFs.  

Instability & Volatility in Asset Correlations

In a prior post, I mentioned that I was going to focus some attention on the unstable nature of the relationship between asset classes. This post assumes some familiarity with my VIX Asset Allocation Model. USING THE VIX MODEL AS A TIMING INDICATOR FOR LONGER TERM STOCK ALLOCATIONS

For anyone interested in that topic, this is a link to a starter post: Vix Asset Allocation Model Explained Simply With as Few Words as Possible

In addition, it is important to understand the meaning of positive and negative correlation. 

I have just started to dig into this subject more thoroughly. I understand that the relationship between many asset classes is unstable, so that permanent conclusions can not be drawn based solely on historical experience. One asset class may have a low positive correlation or even a negative correlation with the S & P 500 Index during one period and then exhibit a high positive correlation during a severe bear market which would be a negative of course. I discovered this paper written by Willaim Coaker that documents the instability of the correlations between asset classes, and suggests a need for dynamism in constructing an asset allocation scheme, similar to what I have been preaching in this blog which requires a dynamic approach based on conditions in the market and the real world. This is a link to the Pdf of his paper:


One of the most stable negative correlations was between intermediate bonds and the S & P 500 average in years when that stock average declined. In all 8 years since 1970 to the date of Coaker's paper, intermediate bonds gained in value when the S & P 500 declined. This is what you want in an asset allocation. When the Trigger Event happened in the VIX Asset Allocation Model in 2007, the proceeds raised by my reduction in exposure in stocks had to find a temporary home in what would then be viewed as the most likely candidates for negative correlation with stocks. There were several alternatives considered at the time. The alternatives chosen were money market funds, bond ETFs (TFI, BND, BSV, GVI, SHY, TIP, BWX, etc), a municipal bond fund with Tennessee issues, and short term individual investment grade bonds.

Then, in 2008, I did a shift out of some bond ETFs into individual bond or bond like securities such as floating rate securities with a guarantee, trust certificates, trust preferred, fixed coupon equity preferred, and some individual long term bond names, with my buying of those issues documented for the most part day by day after I started this blog in October 2008. I then started a shift in 2/09 of the overweight short term bond positions and used the proceeds to buy stocks in early March 2009, also discussed in this blog.

This was basically a good response to the signal given by the Vix Asset Allocation model in August 2007, but none of those responses were based on any study of historical correlation patterns. It was based on a intuitive understanding of those historical relationships between asset classes based on many years of investing experience. I am now starting to examine in more depth the volatility of correlations among asset classes to better prepare myself for the next bull and bear markets.

An assumption can not be made that an asset class which was negatively correlated in past downturns would necessarily have the same correlation in the next one. Each downturn has to be assessed at its inception or as soon as possible once the investor realizes that a bear market in stocks is underway. In Coaker's study, natural resource stocks earned positive returns in 6 of the 8 down years for the S & P 500.

In August 2007, it would have been foolish to draw any conclusion about the future correlation of natural resource stocks with the S & P 500 based just on that historical negative correlation at the start of a bear market in stocks. In other words, the odds were not 75% in favor of adding to, or keeping the natural resource stocks in August 2007 after the Trigger Event.

The historical probability has to be assessed under the circumstances then prevalent. I would suggest that two factors would have militated against using the past historical correlation when entering the current bear market for the S & P 500: (1) the alternative asset has itself had a high positive correlation with the bull move in stocks and (2) the correlation is more than highly positive, the beta of the other asset is higher, so that the move in the other asset class is stronger in the same direction as the S & P 500 during that indexes bull move.

In fact, several alternative asset classes slid badly in the current downturn. This would include such assets as commodities, natural resource stocks, REITs, and emerging market stocks. My reasoning for jettisoning natural resource mutual funds had to do with the parabolic rise in oil and other commodity prices. The parabolic nature of the rise, plus the additional and obvious problems inherent in demand reduction caused by an economic downturn, would cause a change in the historical negative correlation pattern between those two asset classes and consequently require an reduction or elimination of the natural resource asset class. I have not studied yet the positive correlation statistics for these alternative asset classes during the 2003 to 2008 period, but I lived that history. All of them were moving up with the S & P 500, and moving stronger in the same direction.

This is a link to a prior discussion of beta and positive correlation for emerging market stocks and bonds. Emerging Market Currencies and Bonds as Non-Correlated Asset Classes/Links to Performance Data on Target Funds & More on Their Many Failures

This positive correlation with high beta in the same direction prior to the downturn in the S & P 500 would militate against assuming low or negative correlation in the current bear market. The more reasonable prediction would be a continuation of the the positive correlation with a high beta continuing in the same direction, except the direction would be down during this bear market.

Maybe the negative correlation in an asset class like commodities and natural resource stocks will hold up better in a period (1) where commodity prices had not had a parabolic rise until something happens that causes them to rise quickly while jolting the stock market into a decline (e.g. the first Iraq war in 1990-1991; the 1973 Arab Oil Embargo, 1973 oil crisis - Wikipedia, the free encyclopedia) and/or (2) a real shortage in oil and/or other commodities causes prices to skyrocket which precipitates a decline in the S & P 500 index while natural resource stocks rise in value. Those situations are different than the events which preceded the current bear market. Natural resource stocks had enjoyed several stellar years of large percentage gains. I remember one natural resource mutual fund that I sold in 2007 that had a five year gain of over 400%. You can not make an assumption of negative correlation in a stock bear market after those kinds of gains for natural resource stocks and oil hitting $140 going into a recession. The correlation with the S & P 500 was both positive and at a high beta.

So, after the Trigger Event, all alternative asset categories have to be independently examined and a prediction then made whether or not those assets will have a negative correlation with stocks at that point in time. A high positive correlation and beta before the Trigger Event with stocks would militate against using the alternative asset class. There may even be strong factors present militating against the use of certain bond asset classes, such as a period of stagflation causing both a downturn in stock and bonds. Also, it is important to keep in mind that the VIX Asset Allocation Model does not provided guidance on the severity or length of the downturn in stocks. So when doing the asset allocation, I have to gauge how serious are the events which caused the disruption in the Stable Vix Pattern, causing the formation of the Unstable Vix Pattern, at higher and more dangerous volatility levels. The answer to that question will also impact my allocation decisions in the future. This topic is generally discussed in these posts:



There is one caveat. The formation of another Phase 2 Unstable VIX Pattern in the future will be dealt with immediately by a number of shifts in asset allocation: SEPTEMBER 2008: FORMATION OF THE DEADLY PHASE 2 OF THE UNSTABLE VIX

I am actually starting to work on those potential responses now, realizing that my response in late September 2008 was inadequate in many respects.

I am just writing in this post some very preliminary thoughts on this subject, immediately after waking up this Saturday morning, with no beverage jolt to the mind to help the process, before the thoughts escape me. I will come back to the topics discussed in this post after more study and thought.

Friday, May 29, 2009

Sold out of IR and Bought XLI/ Bought 50 MWA as a Lottery Ticket/Dollar Crumbles with Dollar Index Now Below 80/More Recovery Signs

1. More signs of a Recovery:  India reported that its March Quarter GDP rose a faster than expected 5.6%. Reuters  Japan reported the biggest monthly spike in industrial output since 1953. Yahoo! Finance  The CRB index is about to set its largest monthly rise since 1974.  The Australian dollar surged to an 8 month high.  Reuters
Home prices rose 1.2% in Britain in May.  Reuters
The British Pound hit a new six month high against the dollar. 

Bill Gross thinks that the green shoots will be about what investors can expect from the economy, and "not much more".  He expects just 1 to 2% growth over the next few years with unemployment remaining at high levels of 7 to 8% for years to come.  He recommends high quality investment grade corporate bonds yielding 6 to 8%, and consumer staple stocks like Coca Cola and Proctor & Gamble, both owned by me. International Business Times   PIMCO - IO May 09 Gross 2 2 4 Yahoo! Finance

2. R.H. Donnelley bankruptcy:  The debt ladened publisher of the yellow pages filed for bankruptcy.  I mention this primarily as an object lesson about a company gouging on debt and what can be expected to happen after a company misses a payment on its senior debt obligations. Donnelley missed a payment on April 15 and then it exercised the 30 day grace period for forbearance.  Donnelley ran out of time.  This is to be contrasted with the liberal deferral rights permitted in a typical prospectus for a junior debt issue, which normally allows a deferral for up to five years for any reason without triggering a default.  When a company misses one payment on its senior debt, bankruptcy is just around the corner.

3. Hertz:  HTZ completed its 749 million dollar capital raise by issuing common stock and convertible notes.  Moreover, private equity firms committed to buying 200 million in stock.  Yahoo! Finance  All of this is relevant to my small position in DKR, a Trust Certificate containing a senior bond from Hertz maturing in June 2012, which so far looks like a home run after being purchased in October of last year at $6.45 TRUST CERTIFICATE HERTZ BOND DKR(1/2 of position sold on an earlier spike SOLD 1/2 POSITION DKR, with 2 semi-annual interest payments to date, and close to a 300% rise in price).  I am not critical of my decision not to buy more given my conservative and generally cautious nature, and based on what I knew at the time the opportunity to buy more at around $6 presented itself.  See, generally, Hertz Bond Information in One Post  Since the current yield at my $6.45 cost is around 27% annually, I am inclined to keep DKR until maturity in 2012, receive the interest and hopefully the $25 par value then, unless I become spooked by some subsequent news. 

4.  Continuing Liquidation of Short Term Bonds:  My overweight position in short term bonds which arose out of a shift from stocks in 2007 is gradually being pared, as I see a recovery in their prices to close to par value.  I noticed that my remaining 5 BAC bonds, which mature in 2013, are now being priced at close to par value by the third party used by my broker, and those bonds came close to a 70 price in early March.   The liquidation of the short bond positions fueled the purchase of stocks in early March, and the ones sold since I exhausted those proceeds with stock purchases are being held in a mental escrow. 


5.  Bought 50 shares of Mueller Water Products (MWA)  at $3.62-Lottery Ticket Category:  The best profile description of a company can be found at Reuters.  This is a link to Reuters discussion of MWA  Reuters.com 
The main long term issue with MWA is that it has in my opinion way too much debt for a company of its size that is in a cyclical business.  The company said on its conference call that it was close to breaching its debt covenants, and expects to be in breach later, so it is re-negotiating those covenants. (see p. 3: Seeking Alpha)    Net sales for this water infrastructure company fell 23.6% during the last quarter.  In that last earnings release, the company maintained that the decline in its largest end market may be easing but that its non-residential construction market will continue to decline.   Yahoo! Finance 
Prior to the current recession, MWA's stock peaked at over 19 in June 2007 and hit a low in early March 2009 at less than $2.  MUELLER WATER PRODUC Share Price Chart | MWA - Yahoo! Finance

6. Estimate for Fed's April Revenue Down 34% from a Year Ago:   This is a link to an article in US Today about an estimate by American Institute for Economic Research for the federal government's tax revue for April 2009, with the estimate being 138 billion below April 2007.   USATODAY.com  
This is a link to the research that produced this estimate along with a helpful chart of tax revenue.  Tax Revenue Plummets

7.  Richard Fisher, Dallas Fed President on Unfunded Medicare and Social Security Obligations:  Richard Fisher, the Dallas Fed President, claims that the unfunded U.S. obligation for Medicare and Social Security totals  99.2 trillion dollars. Storms on the Horizon - Richard Fisher Speeches - News & Events - FRB Dallas   International Business Times 

8.  Dollar Index Breaks below 80: The U.S. dollar was being hit hard this morning. INO Equities Stocks Indexes - U.S $ INDEX (NYBOT:DX) Price Chart and Quote

9.  Sold IR and Substituted 100 XLI:  LB broke its promise to RB and sold the Ingersoll (IR) shares at $20.16 that were bought in early March at $11.72.  The Most Abused Word: Reform/Buys of IR & DD/Santayana: An Inability to Remember History or Just Creating Your Own Reality to Fit an Ideology
LB likes security blankets as a rule, and substituted the Industrial SPDR (XLI) by buying 100 shares at $22.16.  This ETF has all of the industrial stocks in it that are part of the S & P 500.  This would include IR but only at a .91% weight of the total holdings.  Composition - Select Sector SPDRs 
The expense ratio for this ETF is just .21% and it contains  59 stocks.   XLI has not done so well during this bear market.  But I am way underweight American industrial companies so XLI is an easy way to diversify quickly into this sector.  

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.

 
 

Thursday, May 28, 2009

Evening Notes May 28 2009/Heinz, Treasury Auction/ZBPRA/Dell

I am doing pretty good this year for an old geezer tortoise, maybe I am a Bond Stud now, up about 15% this year as of the close today. Just for the benefit of all the Young Turks out there, a good portion of my gains this year have come from the bond side of the ledger which includes Trust Certificates, Trust Preferred, and other exchange traded bonds, along with equity preferred issues which I lump with bonds just for the purposes of my asset allocation.  My stocks have done extremely well, so far.  I always want to say "so far" because the bogeyman is always waiting just around the corner to take it all away from me.  

 I have added a new book to my profile, received today, called "Managing the Art of Asset Allocation" by David Darst.  I just glanced at this book, and would estimate that I will finish it sometime in 2011.     The others listed on the profile page are ones that I am reading now, at the rate of maybe 10 pages a week. I hope to finish Taleb's two books by Christmas.

1.  ZBPRA:  A few days ago I purchased a floating rate preferred issue from Zion's bank, ZBPRA, which went ex dividend today and nonetheless rose almost 18% to $10.95 on heavy volume for this security of over 178 thousand shares.  NYSE   I bought it at $7.8 on 5/7. Bought 100 ZBPRA at $7.8/Corrections Corporation Earnings Although I am reluctant to diagnose the mental state of my fellow investors, I suspect that the sudden interest in this equity preferred security is related to the announcement today by Bank of America of its offer to exchange equity preferred stock for common stock.  This caused my two positions in BAC equity preferred securities to spike almost 50% today. Both were sold.  I have no idea whether Zions will do the same.  It is possible.  This is a link to an article that summarizes the opinion of Keefe, Bruyette & Woods that Zion's bank might need to raise 1.3 billion in equity capital.   MSN Money Zions was not included in the first round of stress tests which involved just the  19 largest financial institutions.   

Morgan Stanley recently raised Zions to overweight while cutting its price target on the common stock to $24 from $28.

I did not buy the equity preferred in hope of a pop caused by a conversion, and would simply view another one of those to be a pleasant unexpected bonus.  I just thought that this floating rate equity preferred was attractively priced at the $7.8 per share, particularly when Zions was still paying a common dividend, always a relevant consideration for the preferred shareholder. 

2. Foreclosures:  The Mortgage Bankers Association reported today that a record 12% of the mortgages were delinquent.  Forty six per cent of the new foreclosures were just in four states-California, Nevada, Florida and Arizona.  Mortgage rates are starting to rise too, recently hitting the highest level in about 3 months.  WSJ.com

3. Dell:  I do not own shares in Dell.  I was interested in Dell's comments that it was preparing for a powerful replacement cycle when customers start to buy computers to run the new Window's operating system. NYTimes.com  

4. Treasury Auction:  The market seemed relieved today when the Treasury was able to sell 26 billion in 7 year notes without a problem.  This was the final auction in a week that the Fed was able to sell 101 billion of debt.  The 10 year treasury  is currently yielding about 3.61%. 

5. Heinz:  HNZ increased its quarterly dividend slightly to $.42.  This was a recently acquired position. Buy of HNZ at 31.67/Tax Advantages of Equity Preferred Dividends/Foreclosure Acceleration/Disney Downgrade by Pali/Cap & Trade/NADX 
HNZ also reported earnings of 55 cents, a penny ahead of expectations, but down from 61 cents in the year ago quarter.  The company forecasted earnings for fiscal 2010 in the range of $2.6 to $2.7. Heinz Reports Record Fiscal 2009 Sales and Profit - Yahoo! Finance 

6. MJH:  This is a TC containing a TP issue from Bank of America.  I would have no interest in buying this security at the current price.  I am likely to keep it just because it will be paying me about 24% in interest based on my cost until maturity in 2026 or early redemption.  It declared its regular quarterly interest payment which goes ex in early June.  This security was also added during the early March 2009 panic: Buy of 50 MJH at $7.51/ Pop in My Animal Spirits Balloon/Japan/ Zulauf/CNBC/Meet the Press  I am almost a little shocked that I mustered the nerve to do so much buying in early March. As RB is fond of saying, LB was hiding under the covers calling for its mama when the DJIA approached 6500.  RB Touts His Horn as HQ Closes for the Evening

LB Goes Nuts: Buys 50 TMWEF at $3.24/Sold BMLPRG/ Proctor Update

1. Proctor & Gamble Update:  I recently added some PG as a long term hold at $47.59.Buy 50 LXPPRD, Bought PG/ Lexington Realty/Outrage at AIG/   This news about Proctor's update was disappointing.  P & G expects fiscal 2010 earnings to be in the $3.65 to $3.8 range.  The fiscal 2010 year ends in July 2010. The Street was estimating $3.92.       WSJ.com If I did not own PG at a favorable price for a long term hold, I would not buy it now unless it fell to the low to mid 40s.  I agree with Cramer on this one.  TheStreet.com   So, at best, P & G is hold for me now, with a slight lean toward selling my recently acquired position on any kind of pop.  Flexibility is the second most important word here at HQ, right after the word  "research" with the #3 word being "cautious".   

2. LB can be wild and crazy  at times: Bought another lottery ticket-50 shares of  TimberWest Forest Corp in a retirement account at $3.24:   TimberWest Forest is a Canadian company that trades on the pink sheets here in the U.S. under the symbol TMWEFPink Sheets   TMWEF
It is traded on the Toronto stock exchange under the symbol TWF.Un. I bought  50 shares at $3.24 as another lottery ticket purchase and put it in a retirement account for the reasons discussed below.  The 52 week high was 14.55 and a 52 week low of $1.75.   Most of what I know about this company comes from reading the material at its web site. TimberWest  

The company owns 796,000 acres of land on Vancouver Island, British Columbia.  About 134,000 acres of that land has been identified by the company as best used for other uses besides timber, and it plans to make those acres available for higher uses over the next 10 to 15 years.  That part of the business is managed by CouverdonCouverdon Real Estate  
There are some nice pictures of this land on Coverdon's web page that RB enjoyed looking at.  For anyone interested, this is a map of the land that is for sale by Coverdon. Couverdon Real Estate  
If you want to develop a headache, you can read more about what I just bought at this web page.  TimberWest Forest Corp - Investor Returns 
This security is called a stapled unit which consists of common stock stapled to $8.98 face amount subordinated note, and the stapled unit will accrue interest anywhere from 2 to 12%.  Payments are made quarterly and may be deferred for up to 18 months.  The company has already deferred the January distribution for up to 27 months.  So this is probably best held, if at all, in a retirement account. 

This is a link to its last report.  

 
As you would expect by the fall in price and the current economic environment, things could be a lot better for this timber and land company than they are now.  I am willing to wait, however, since this is just another lottery ticket purchase with less than $200 in exposure. 

3. What to do with BMLPRG:  I just bought this floater at $8.8 for reasons that had nothing to do with what caused it to spike almost 50% today. Minutes Afternoon Staff Meeting/Bought BMLprg at $8.8/ Sold 2 HSBC Bonds
Maybe a thought found a momentary home in one my yet to die aging brain cells about the possibility of a conversion offer from BAC to raise more equity capital. Like a lot of thoughts these days, that kind of thought was both ephemeral and fleeting, playing no role in my decision to buy.  So it is best to write the few thoughts that I have down quickly in this blog before they escape me entirely.     I thought that I would grant my magic coin the power to decide the fate of BMLPRG.  The coin said sell that sucker. Some may say, with an over abundance of  good rational and logical reasons, that a coin flip is not an appropriate way to make decisions on the timing of a security sale.  For the first 50 years of my life, I would be inclined to agree with that point, now I am leaning to believing that randomness may almost be as good a method as a deep, penetrating and thoughtful analysis of the hundreds of pros and cons.  I sold my shares this afternoon at $ 12.45. 


 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.

 

Lottery Ticket Purchase 100 of VIMC: EXTREMELY SPECULATIVE

As a lottery ticket purchase I bought 100 shares of VIMC at $1.97 this morning.  This is a Chinese company called Vimicro International, and its business is described in this description from Reuters:   Reuters.com  It is hard to find any information on the company.  It filed last year an annual report with the SEC for 2007.  Form 20-F I could not find a more recent quarterly report filing with the SEC. 

I did find its 3rd quarter release at Reuters, and I can pinpoint in that report something that attracted me to VIMC as a lottery ticket only.  Cash was listed at 119.762 million U.S. dollars. Reuters  I did not see any long term debt.  The market cap of the company now is around 70 million at the $1.97 price according to the statistics at  Yahoo! Finance.
Price to sales is at .78 and price to book is .48.  Yahoo! Finance

The company also announced a stock repurchase plan  of up to 25 million worth of its ADSs,Reuters.

The only report on this micro cap Chinese company comes from Morningstar which has a favorable five star rating on it.  I recognize, as does Morningstar, that this stock has a high level of uncertainty attached to it and I view it as extremely speculative.  Therefore, I devoted less than $206 of my capital to it, an amount consistent with my lottery ticket category.     I expect some of these lottery ticket purchases to end up as worthless as my powerball picks.

I believe the company did an IPO in the U.S. in 2005 and the stock traded up to $23.34 in 2006 before starting its long descent to the current price of less than $2. For 2008 and 2009, it has been fluctuating in a range of $1 to $4.

This is a link to my Gateway Post on my Lottery Tickets category in my asset allocation scheme. LOTTERY TICKET PURCHASES: LINKS IN ONE POST

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.

 

Sold BACPRE/BAC Exchange Offer to Convert Equity Preferred into Common Stock/ Making Decisions with Incomplete Information/

Update 6 09 2009: I see a number of new visitors coming to my blog seeking information about the Bank of America conversion offer.  At the time that offer was made, I owned two equity preferred floating rate issues which were included in this offer, BACPRE and BMLPRG, and I sold both of them.  I had just bought BMLPRG a few days before the BAC offer,  and was just happy to reap a quick gain of close to 50%.  I bought those two issues to diversify my floating rate holdings, an important part of my bond asset allocation.  For anyone interested in floaters,  this is a link to my Gateway Post that contains links to my discussions of them: Floaters: Links in One Post. 

I already own all of the shares of Bank of America common stock that I want, and I have no interest whatsoever in exchanging those equity preferred issues for common stock.  I was just pleased to sell both of my equity preferred stocks at a nice profit.  When the exchange offer expires, I will check on the prices of the Bank of America equity preferred floating rate stocks to see if any of them fall back into my buy range.  I bought BMLPRG at $8.8 on 5/20/2009:Minutes Afternoon Staff Meeting/Bought BMLprg at $8.8/ Sold 2 HSBC Bonds
There are several floaters that I would be interested in buying at prices prevalent before BAC made its offer, as I discussed in this prior post:   Nerd Talk by LB this Morning 5/20/09
All of them would have to fall substantially in price for me to be interested in buying one of them again.  I will be interested to see what happens to the pricing after the offer for conversion expires.  My interest in them is primarily to add diversity to my floater holdings.

***************Original Post:

1.  Bank of America Exchange Offer to Preferred shareholders/SOLD BACPRE:  I own shares in two equity preferred issues of Bank of America, BACPRE and BMLPRG.  Those issues are surging this morning based on an exchange offer made by BAC today, which is summarized in this press release. Bank of America Announces Exchange Offer For Certain Series of Preferred Stock - May 28, 2009 I sold my shares in BACPRE at $15, which was up 45% this morning, and will simply find another floater to buy with the proceeds.   I can not ignore a pop like the one received today.  As to BMLPRG, I want to think about it some more. It was up 32% this morning at the time I sold BACPRE.   The consideration amount offered in the share exchange for BACPRE was $16.25 and $15 for BMLPRG, calculated in the manner described in the press release.  I just bought BMLPRG, so sometimes a blind squirrel can find that acorn.  I purchased it based on considerations entirely different than the one that launched the equity preferred shares into orbit today.  I did a quick comparison of the issues listed in the BAC press release with the equity preferred issues listed at QuantumOnline.  Preferreds eligible for the 15% Tax Rate Table - QuantumOnline.com 
All of the issues mentioned by BAC in this morning's press release are equity preferred issues, and none are Trust Preferred.  The TP issues have barely budged today, see e.g.  BAC-PB: Summary for BAC CAP TRUST X - Yahoo! Finance

2.  Stock Mutual Fund Managers as a Class have a longstanding record of being beaten by Dumb Indexes:  This is a link to data compiled by S & P that should dispel once and for all the myth that mutual fund managers are capable of outperforming a dumb index. 
Why would I as an occasional intelligent human pay a mutual fund more money to earn less than an index fund? 

3. Having to Make Decisions with Incomplete or Erroneous Information:  One of the many perils of investing in most asset classes is that decisions are invariably made with incomplete and sometimes erroneous information.  I touched on this topic in a prior posts. Bungee Jumping Aegon and ING Preferred Stocks/ BlackJack and Stock Investing: Lessons Learned & Applied 
When I know that I do not know something that I need to know to make an intelligent decision, I become very cautious, and will try to control my risk mostly be limiting my monetary exposure.  FCY: Forest City Senior Bond & Discussion of Process Use to Make a Purchase Decision/    Any decision about purchasing a bond or a stock is made knowing that I am making the decision with inadequate information.  There is never enough information.  I can only cut down on the number of mistakes by trying to gather all of the information that I can as an individual investor, and then try to analyse and evaluate it as best as I can at my advanced age and limited mental abilities.  Then, there are alway lurking out there the larger macro issues that would impact the future of virtually all companies, such as the rate of economic growth or the length and depth of a recession, inflation, interest rates and so on.  At best, I can only make guesses about those larger issues.  So, my choice is to hide under the covers with bank certificates of deposit and treasury bills or to do the best that I can knowing that every decision made has to be with incomplete and sometimes inaccurate information based in part on an educated guess about future macro type issues. I have always chosen the later course. 

But the reason of this discussion this morning has more to do with my purchase of an American General Finance bond in 2007 which matures in a few months.  At the time that I made this decision, I was striving for safety.  I relied on the AAA credit rating given by rating agencies to this company.  I even looked at an earnings report at the SEC.  I knew that American General Finance was a subsidiary of AIG.  I thought that I knew a lot about AIG.  In other words, I did my homework, and I believed then that this was a safe and prudent decision.  

There was one piece of vital information that escaped me, notwithstanding my efforts to gather all pertinent information about this investment decision.  I did not know until sometime in the Fall of 2008 about the activities of AIG's Financial Product Unit in London.  If I had known, I would not have bought any debt in AIG or any of its subsidiaries in 2007.  I have discussed the mind boggling stupidity of the Masters of Disaster at AIG, and this is just a listing of a few posts on the subject.   

In retrospect, buying AIG subsidiary bonds as a safe haven in 2007 was a mistake.  But, it was not a mistake based upon what I could have reasonably discovered about AIG at that time.  All that I can do under those type of circumstances is to limit my risk to any company to a limited amount of money, so that one failure or even a small group of failures, will not have a material impact on me.  That is one reason why I have over 300 securities in my portfolio.  

One of the critical mistakes an investor can make is just to put too much in the securities on one company.  I was watching CBS news last night.  A retired couple had most of their retirement savings, around $700,000, tied up in General Motors bonds.  That would be an extremely serious mistake with any security.      GM's New Deal - CBS News Video

Added 11:30 a.m. :  The recent earnings of American General have been dismal. SECURITIES AND EXCHANGE COMMISSION Fitch recently downgraded its bonds to BB with a negative rating watch.     Yahoo! Finance

Added:  I thought that I would add a link to the Google Finance chart for BACPRE.  It shows a price of just at $3.45 on 2/23/09. BAC-E: 14.58 +4.28 (41.55%) - Bank of America Corp. PRFD 'E'Admittedly I did not have the nerve to buy at that level but then I did not sell either in a panic. 





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.