Friday, September 16, 2011

Bought 50 JSN at 11.07 in Roth IRA/ Bought 50 GBCI at $10.15/Sold 100 of 300 XKK at $10.03/Snapshot: Cash Flow into 1 Taxable Account for 9/15/11

In a long interview with Jim Cramer, treasury secretary Timothy Geithner said that there is an absolute commitment among key European leaders to keep the EU together and do what was necessary to meet their current challenges.    CNBC TRANSCRIPT  He added that there "was no chance" of a Lehman type event coming out of Europe.  This interview, along with some statements made by Germany's Chancellor Angela Merkel, seemed to calm the market last Tuesday and set the stage for a rally. NYT

The Barrons' technical analyst maintains that the long term conditions in the market continue to deteriorate as the market rallied this week.  He references the MACD technical indicator moving into bearish territory this week.  I heard another technical analyst discuss the importance of the MACD indicator:

The ECB, Federal Reserve, and three other central banks will make an unlimited quantity of USDs available to European banks for the next three months.  The FED's counterparty will be the ECB rather than the European banks. This action will relieve some liquidity concerns but will not resolve the longer term solvency issues. WSJ  The equity markets responded positively yesterday to this development. The ^VIX declined 7.6% to close at 31.97. 

There is no ray of sunshine on the jobs front. Initial claims for unemployment rose unexpectedly for the week ending 9/10 to 428,000, up from a upwardly revised 417,000 in the previous week.  ETA Press Release: Unemployment Insurance Weekly Claims Report

Twelve thousand U.S. "Job Creators" have come clean about the existence of undeclared overseas accounts, used in their effort to avoid paying even the lowered rates under the Bush tax cuts. 

1. Added 50 JSN in Roth IRA at $11.07 (see disclaimer): I pared my JSN position in later July by selling 100 shares  at 12.38.  Those shares had been purchased at a total cost of $9.04, as shown in a snapshot found at the preceding linked post. I added 50 of those 100 shares back at  last Wednesday at $11.07. JSN went ex dividend for its quarterly distribution of $.295 per share shortly before this purchase. Assuming a continuation of that rate, which of course can be reduced, the yield at a total cost of $11.07 is around 10.66%. JSN - Nuveen Equity Premium Opportunity Fund As of 9/13/2011, the fund had a net asset value of $11.10 per share and closed that day at a -9.75% discount to its net asset value. The fund seeks to duplicate the price movements of a portfolio 75% in the S & P 500 and 25% in the Nasdaq 100. The fund will also sell options on those indexes in an effort to moderate volatility. 

This is a link to the last SEC filed shareholder report:

Morningstar currently has a four star rating on this fund. A negative is that the dividend has been supported in recent times by a return of capital, as shown in the data found at Morningstar.  The fund is not leveraged.

Nuveen Equity Premium Opportunity Fund closed yesterday at $11.24. 

2. Bought 50 GBCI at $10.15 last Wednesday (Regional Bank Stocks' basket strategy)(see Disclaimer):  I previously bought and sold GBBI as part of this strategy.  Bought 50 GBCI at 13  Sold 50 GBCI at 14.58 The reason for selling the stock, as discussed in that last linked post, was a string of "borderline pathetic" earnings reports.  After a 30% decline in price from $14.58, the stock became interesting to me on a long term valuation basis, in spite of the near term earnings challenges. The current consensus estimate, made by 11 analysts, is for an E.P.S. of 70 cents in 2011 and 97 cents in 2012.  I would expect a decent return in the event GBCI actually hits that 2012 estimate.  Part of that return would be a dividend providing over a 5% yield at my cost. Glacier Bancorp 

Before the onset of the Near Depression, GBCI's common shares hit a high of $40 in 2007. 

The bank did not participate in TARP. 

The last earnings report was okay, but still showed problems. SEC Filed Press Release The bank reported earnings of 17 cents per share.  The net interest margin increased to 4.01%.  As of 6/30/11, NPAs to total assets was high for banks in my basket at 3.68% (though down from 4.01% as of 6/10); the allowance for losses to total non-performing loans increased to 86% from 55% a year ago which is viewed here at HQ as a positive; and the capital ratios are good. Those ratios can be found at page 56 of the last filed SEC Form 10-Q.

Glacier Bancorp closed at $10.58 yesterday. 
3. Sold 100 of 300 XKK at $10.03 Last Wednesday (see Disclaimer):  I started trading this trust certificate, containing as its underlying security a senior Goodyear Tire bond maturing in 2028, during the Dark Period. I have purchased this security as low as $3.8 in IRA. The shares sold last Wednesday has an average cost of $8.02, held in a taxable account, and the holding period was long term:

Average Cost 100 Long Term Shares=$8.02
This TC has a 8% coupon on a $10 par value, a higher coupon than 7% coupon of the underlying GT bond.  The GT bond is rated junk. XKK went ex interest a day before my sale so I did just receive the semi-annual interest payment on those 100 shares sold, as shown below. One reason for selling the shares, besides capturing a long term capital gain, was that the security immediately recouped the value of the interest payment. 

Historically, this TC has been extremely volatile to the downside during times of market stress.  I try to remember to look at its pricing on such days, in order to evaluate a potential purchase.  For example, during the later part of 2008 and into 2009, XKK was frequently selling below $5 a share, hitting a closing low of $3.9 on 3/9/09:  XKK Historical Prices On the day of the flash crash (5/6/10), the price hit $5. XKK Historical Prices 

For my bond positions, I am satisfied to exit a position with any profit from the security, since my main purpose is simply to receive the interest payments. On 50 shares sold last Wednesday, I bought those shares in September 2008 at a total cost of $6.91. The other shares were purchased in May 2010: Added 50 XKK at 8.98

XKK closed at $10.08 yesterday.

4. THE MOST BASIC STRATEGY: GENERATE CASH FLOW TO FUND MORE INVESTMENTS IN GOOD TIMES AND BAD: I have frequently mentioned that this is my most basic and fundamental strategy. I sometimes take a snapshot of the cash flow for one day, coming into a single taxable account, to show exactly what I mean by cash flow generation.   (9/30  and 10/1 will be a bigger days since many quarterly dividends are paid at that time, as well as most monthly dividends paid by CEFs). Two dividends are not shown, received for ZBPRA and AEB, due to space limitations in the snapshots. 



A few of the bonds bought in the bond market make monthly interest payments. All of the GMAC bonds showed above pay monthly as does the one issued by Prudential. During the Dark Period, I was using cash flow to fund purchases. 

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