Monday, November 1, 2010

Sold: 100 of the 200 XKK at 9.96, 151 GIW @ 9.26, 100 DHS @ 38.16, 100 DEW @ 42.51/Bought 100 VV at 54, 50 BCBP @ 8.82

Alan Abelson, who was bullish on stocks for about 10 minutes in the early 1980s, has now turned against bonds. Maybe this perma bear, the glass is perpetually empty or full of raw sewage kind of guy, believes in the 3 month T Bills yielding .13% as a worthwhile investment for the Old Geezer crowd, where a million dollars will generate $1300 a year in income. The belief that the long term secular bull market in bonds will soon end may even be close to a consensus opinion now. The bond market has yet to cooperate with such a prediction, thereby drawing ever increasing amounts into bond funds at abnormally low rates.

For the most part, Abelson relies on and quotes from a recently published missive by Bill Gross. Run Turkey, Run I would certainly agree with Bill's opinion that both political tribes are equally adept at running up big deficits, though they manage to do it in somewhat different ways. It is nothing but a "big con" as noted by Gross.

Roubini said in an interview on CNBC that the U.S. is headed for a fiscal train wreck. In his opinion, both parties are contributing to the coming fiscal crisis, and I do not see how any sensible person could disagree with that opinion. Of course, sensible persons exclude by definition all True Believers (and others capable only of thinking in cliches), ideologues, virtually all politicians, and those incapable of distinguishing fact from fiction or unwilling to even make that effort.

David Stockman referred to the both parties as delusional, and the GOP as engaging in "rank demagoguery", in an interview last night on 60 minutes. CBS News

Ultimately, the printing of vast sums of money by the Federal Reserve to buy a huge supply of debt issued by the U.S. treasury, used to finance the nation's propensity to live far beyond its means, will result in troublesome inflation. The end game is viewed as inevitable here at HQ, though not entirely unavoidable. Only the timing can not be predicted with any precision.

I have been using some of my Canadian dollar position to buy Canadian bond ETFs on the Toronto exchange. Ishares also has a number of bond ETFs containing European government and corporate bonds offered on the London exchange. Examples of a few that I monitoring include the following: iShares Barclays Capital Euro Corporate Bond ex-Financials 1-5 (EEX5); iShares Barclays Capital Global Inflation-Linked Bond (IGIL) | Holdings; and iShares Barclays Capital Euro Corporate Bond ex-Financials (EEXF). Before dipping into those kind of funds, I will need a much stronger USD and higher interest rates, however.

1. Sold 100 of the 200 XKK at 9.96 on Thursday (see disclaimer): XKK is a trust certificate containing a junk rated senior bond from Goodyear tire, which has been the subject of several posts. The par value is $10 with a 8% coupon. During the Near Depression, this security could have been bought at less than $5 on several occasions, producing a greater than 16% yield for any such purchase (e.g. see post from 12/2008, Goodyear Tire TC XKK). The pricing on this TC has at times been more than just a little crazy: XKK Historical Price I mentioned buying some shares in this blog as low as $3.8 in March 2009, and that was not even the low price for that day. Buys of CPB LQD SYY XKK/Regressive Taxation-Cap & Trade Of course, as long time readers are aware, RB had engineered a coup d'etat, dethroning the NERD as Head Trader, in early March 2009, which explains the frenzy of buy orders noted in March 2009. On the day of the flash crash, XKK fell to $5. I have been trimming by stake in XKK and I am now down to owning just 100 shares.

The reasons for selling the 100 shares on Thursday includes simple profit taking and a risk/reward evaluation of continuing to hold shares rather than selling at near par value. Part of that evaluation was the recent loss reported by Goodyear Tire for the 3rd quarter. 10q

2. Sold 151+ shares of Wilber (GIW) at $9.2623 on Thursday (Regional Bank Stocks's basket strategy)(see Disclaimer): I gradually came to the conclusion that I was spending too much time trying to decide what to do with my Wilber shares. Wilber agreed to be acquired by Community Bank Systems (CBU) in a mostly stock deal. I bought the shares in Wilber in two lots: Bought 100 GIW at 7.03 Added 50 GIW at 6.55

3. Added 50 to BCBP at $ 8.82 on Thursday (Regional Bank Stocks' basket strategy)(See Disclaimer): After selling Wilber, I decided to add to my 100 share position in BCBP by buying another 50. BCB Bancorp is about the same size as Wilber, except it is located in NJ rather than NY. BCBP recently completed a merger with another small bank called Pamrapo Bancorp on 7/6/2010. Form 8-K The Board of BCBP recently declared a quarterly dividend of 12 cents per share. At a total cost of $8.82, the yield would be about 5.44% at that rate for 1 year.

4. Sold 100 DHS at 38.16 and Bought 100 VV at 54 in a satellite account on Thursday (see disclaimer): The ETF DHS was recently bought at 35.32. I have bought and sold VV, a low cost ETF from Vanguard: BOUGHT VV at $41.45 Sold 102 VV at 49.43 I sold those shares after reinvesting some dividends to buy another stock ETF, OEF, for the S & P 100 pursuant to the Large Cap Valuation Strategy. The reason for selling DHS and buying back VV was different. I wanted to keep my stock ETF exposure roughly the same but to switch more of the stock ETF holdings to Vanguard ETFs bought through Vanguard. First, I do not pay commissions for those Vanguard ETFs bought in my Vanguard Brokerage account. The Vanguard ETFs and mutual funds also count towards the account balances necessary to receive a reduced commission rate for me. I also sold the WisdomTree ETF DEW, noted in Item # 5 below, for the same reason as DHS.

The expense ratio for VV is lower than the WisdomTree funds at .12%: Vanguard - Large-Cap ETF - Overview Dividends are paid quarterly.

5. Sold 100 DEW at $42.51 on Thursday (see Disclaimer): I bought 100 DEW at 38.82 around 8/18/2010. The reason for selling those shares is the same as discussed in number 4 above. I have decided to start buying Vanguard stock ETFs directly from Vanguard. Most likely, I will replace this one with either VEU, previously bought and sold at lower levels, or VT. BOUGHT 100 VEU at $29.8 Sold 100 of the ETF VEU at 38.6 I am in no hurry to do so. VEU is an index ETF for world stocks excluding the U.S. and has an expense ratio of .25% and has around 2257 stocks. Vanguard - FTSE All-World ex-US ETF VT is the Vanguard ETF for the world stock market and has a .3% expense ratio. Vanguard - Total World Stock ETF - Overview

DEW 100 Shares +$354.45EE

6. SOLD 100 DTN at $45.86 on Friday (See Disclaimer): This stock ETF was bought in July at 42.45 and sold for the same reason as DEW and DHS.

7. Provident Financial (PFS)(own-Regional Bank Stocks' basket strategy): Provident Financial Services reported net income of 13.5 million or 24 cents per share, in line with estimates and up from 15 cents per share earned in the 3rd quarter of 2009 . As of 9/30, the net interest margin was 3.5%; NPAs to total assets stood at 1.61%; NPLs to total loans was at 2.38%; and the allowance for loan losses to non-performing loans was at 66.43%.

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