Friday, April 9, 2010

Bought 50 of the CEF CHN at 28.53/Bought 60 of EPV at 21.11/Greece/Bought 50 EBTC at 11.75/Sold 100 JTD at 12.25/Sold IDG at 21.73

The preceding table consists of stocks currently in the regional bank strategy, a basket strategy, which I will post for a few more months whenever I make a change. I have not included the 100 shares of NYB bought in the regular IRA. Those shares might be sold since the gain has become too large to ignore, given the conservative management strategy followed in the retirement accounts. For those banks where there was more than one buy, I use a weighted average cost for the price and the date of the last trade. Worrying about what to do with those 50 shares of Webster Financial is starting to cause the Old Geezer to have anxiety attacks. He was just thinking that he could replace the "vintage" television, which the HG would not even consider lifting off its perch, with a new flat screen with just the profit on WBS.

I read a report from S & P opining that we are overdue for a 10% correction, and I am inclined to agree with that opinion.

Robert Rubin and Chuck Prince testified yesterday that someone told them in September 2007, when it was too late, that Citigroup had about 43 billion of trash on its balance sheet. Who knew? Forty three billion dollars is hardly important enough for a 100+ million dollar Master of Disaster to even concern himself long enough to draw a breath and raise a question or two, like, why is 43 billion dollar of this crap on the balance sheet. But, as I understand it now, Rubin was not paid to know anything, just shoot the breeze with that Saudi prince occasionally, and be a nice shiny ornament hanging in the executive suite.

I received an email notification from the NYSE yesterday acknowledging receipt of my inquiry about Rule 124 (C). My question has been referred to the appropriate department for a response. Item # 3 /Fidelity Response on Odd Lot Trading The inquiry is simply whether Rule 124(C) of the NYSE Rules applies to NYSE ARCA.

1. Bought 50 Enterprise Bancorp (EBTC) at $11.75 (Category 2: Regional Bank Stocks strategy)(SEE DISCLAIMER): It is important to realize that the banks that I am buying now are pretty far down on my monitor list. The regional bank basket has more than 30 names in it before I added just 50 shares of EBTC yesterday.

Enterprise is a small bank located in Massachusetts, headquartered in Lowell. I had to look on a map to find Lowell. I knew the location of Massachusetts. Andy graduated from the Berklee College of Music in Boston. When I attended the graduation, being sure to schedule the trip around the Red Sox's playing at Fenway, I stayed at the Eliot Hotel , near the baseball stadium and the university. By the way the Infamous Stringdusters will have a new album out April 20, and Andy wrote some of the songs. It is available for pre-order at Things That Fly: Infamous Stringdusters: Music.

This is a link to the branch locations: Enterprise Bank :: All Branches/ATM Locations I counted 17, with 15 in Massachusetts and two in New Hampshire. (Salem and Derry).

The bank earned 96 cents in 2009, up from 69 cents in 2008.( page 32 annual report: The bank also recently increased its quarterly dividend to 10 cents per share. At a 40 cent per share annual rate, the yield at a total cost of $11.75 would be 3.4%.

Net interest margin was 4.28% for the year ending 12/31/2009. The allowance for loan losses as a percentage of total loans was 1.68%. The capital ratios are okay, in that they exceed the minimums for well capitalized banks (see page 89:

In the press release announcing the bank's 4th quarter earnings, the bank noted that deposits, excluding brokered deposits, increased 28% in 2009. Total loans increased 14% in 2009 compared to 2008. The bank earned 32 cents in the 4th quarter of 2009, much improved over the 4 cents per share in the 4th quarter of 2008.

2. GREECE: What is going on with the EU and Greece? It is hard to keep track of developments here in the SUV Capital. I noticed yesterday that the yield curve inverted Wednesday for Greek debt, with the two year providing more yield than the 10 year. The 10 year hit 7.6% on Wednesday and the 2 year touched 8%. The cost to insure 10 million in Greek bonds for 1 year rose $53,000 to $466,000 per year for five years.

I suspect that the market is starting to believe that political disagreements will prevent or hinder the EU from actually providing cash to Greece when and if needed by the Greek government. It also appears that interbank lending to Greek banks has apparently stopped, except for overnight electronic trading, thereby forcing the Greek banks to turn to the government for short term funding. The Greek banks suffered 10.68 billion in outflows in January and February.

Trichet was insisting Wednesday that a Greek default was not an option.

Yesterday, the Greek 10 year bond reached its highest interest rate level since the introduction of the Euro: WSJ

A NYT story raises the spectre that Greece will run out of money before any austerity measures and tax increases have a chance to work.

3. Increased Position in Double Short for the European Stock Market- ADDED 60 EPV at $21.11 (LONG/SHORT STRATEGY) (SEE DISCLAIMER): The long part of this strategy is working out fine but the shorts are all in the red due to the market's recent strength. For example, I previously bought 40 shares of EPV at 24.35 in late February: Bought 40 EPV at 24.35 The underlying theme of the long/short strategy is to identify which areas of the market are vulnerable to a correction or a downdraft, and to buy double short ETFs on them. This is at least in part psychological, as it gives me a crutch to continue adding long individual stock positions which I have continued to do. I am anxious about doing it now after the market's huge rally since March 2009, hence I started the long/short strategy to pare double short ETFs, primarily on sectors, with individual long positions. The European stock market does look like it is more vulnerable to a downdraft than the U.S. which explains why I am adding U.S. stocks and increasing my double short position in EPV. The short side will be a losing proposition if the market continue onward and upward. Its purpose is to provide a small cushion in the event of a significant downdraft as well as moral support for continued buying of individual stock positions and CEFs containing Asian stocks (i.e. long Asia/Short Europe).

This is a link to Proshares web page on EPV: ProShares ETFs: UltraShort MSCI Europe – Overview The benchmark index is the MSCI Europe Index. For tracking purposes, I monitor the prices of iShares MSCI EMU Index Fund (EZU) and the Vanguard European ETF (VGK).

I look at data provided by Eurostat about once a week in an effort to assess the relative strength of the European economy compared to the U.S. New industrial orders declined 2% in the Euro area in January compared to December, according to a report released this week: / .PDF A report released yesterday shows retail trade fell .6% in February compared to January 2010. .PDF Unemployment was 10% in February: .PDF And then there are the problems with Greece and potential problems with the other PIGS that threaten the stability of the European Union and its common currency. The problems with the PIGS is just icing on the cake for my selection of the European stock market as a focus of the short side of the long/short strategy.

I made a mistake in selling my double short on the Euro too soon, having bought it near the top of the Euros value against the U.S. dollar. Bought 50 EUO at $17.17 as a Hedge Sold 50 EUO at $19.58 EUO is now trading over $21.

The double short ETFs have tracking problems, and have to be monitored daily on that issue. I use them to give me more bang for the buck. The primary reason for using them is that I have cash only accounts, so I am not set up to short ETFs in the absence of a margin account. Item # 10 Sold Since I have had success with the double shorts, I am not inclined to establish a margin account solely for the purpose of shorting ETFs. There are several long ETFs attempting to track the European stock market, and shorting one of them would at least avoid the tracking problem inherent in utilizing Proshares double short ETFs.

To be clear, LB does not have any psychological issues, nor is it in need of a pacifier. Headknocker claims that he is fearless so this double short strategy is meant solely to ease the nerves of the Old Geezer who is always a little bit jumpy. RB just said that the only thing the NERD is accomplishing with the convoluted short side of this strategy is to lose some of Headknocker's capital, and interfering with the RB's plans to buy Canada, all of it.

I do not have any targets on the EPV shares. It is regarded as an insurance policy. Possibly, I will add 50 shares in the event there is a continued decline and eventually will take a short term loss in the event the European market continues to rise. I just do not know now at what price will cause me to eat the loss. I do have a good sized pool already of realized short term gains available as an offset.

4. BOUGHT 50 OF THE CEF CHN AT $28.53 (LONG ASIA STRATEGY) (SEE DISCLAIMER): Fifty shares of the China Fund was about all of the courage that I could muster on this one. I do not believe CHN provides daily NAV updates. The last weekly update was for the W/E 3/26/2010, and the NAV was $30.39 at that time:The China Fund, Inc. - Welcome So, I believe that I bought my shares at a discount to net asset value yesterday but I do not know precisely how much of a discount.

This is a link to a PDF of its annual report for the year ending in October 2009: .pdf This is a link to the same report filed with the SEC:

While the future will be different than the past, the ten year performance of this fund is outstanding. The increase in NAV was a cumulative 496.38% for the 10 years ending 10/31/2009: (see page 1: RB wanted everyone that it told the Nerd to go all in on CHN 10 years ago. LB replied that the RB is hallucinating again, maybe Headknocker needs to lighten up on the mushrooms in the spaghetti sauce.

Reports filed with this fund with the SEC can be found at Search Results.

The expense ratio is listed in the annual report as 1.44%.

4. Sold 100 of the 200 JTD at 12.25 (See Disclaimer): This transaction occurred earlier in the week. I sold the higher cost shares held in the Roth, which were bought at 11.55 in January. This CEF recently went ex dividend for its quarterly payment. I am going to substitute a non-Citigroup Special Investment Product, which is the sole reason for selling 100 JTD. I needed funds to place a bid on another one of these products. I am full on the Citigroup funding products, and I am now looking at several that are more exotic.

I am keeping the 100 of JTD bought at a more favorable price in the main taxable account in August 2009: Bought 100 JTD at $10.13. I have received 3 quarterly dividends in cash on those shares to date.

5. Sold IDG at 21.73 Yesterday (see Disclaimer): IDG is one of ING's hybrid securities, and the shares sold yesterday were bought at $18.33 recently. I am unlikely to be a long term holder of ING hybrids, except for the 50 shares of INZ bought in the regular IRA at 7.82 in February 2009 to yield around 22.5% per annum at my cost. I have no interest whatsoever in buying European hybrids at current prices including INZ which closed at $21.65 yesterday. Since I do not have to pay taxes on income generated inside the IRAs, my investment will double every 3.42 years at that 22.5% rate. Estimate Compound Interest

I may keep 200 of the IND for the remainder of this year in the main taxable account. I have had success trading the hybrids and do not want to muck it up by unwillingly taking the down escalator again. Aegon Hybrids: Gateway Post ING Hybrids: Links in one Post I am grouping the proceeds from this sale with a small amount of cash in the regular IRA to place a bid to buy a Bank of America special investment product that I found at the quantumonline site.

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