Tuesday, October 11, 2011

Jobs/Mortgage Rates at New Lows/Added 50 TRK at 11.65/Bought 50 ISM at 19.5/Sold 102+ WMT at $53.7/Bought 100 TGX at 1.24 as LT

After reading the minutes of the Staff meeting, published yesterday, our Great Leader, Headknocker (HK), ordered an investigation on who was responsible for the non-optimal trade of SDS in 2008. Recognizing that the Staff scurries for cover when HK launches such an inquiry and everyone points the finger at someone else, it was necessary to engage in depositions and other forms of discovery. After much time consuming effort, HK concluded that it was the Old Geezer who became nervous about the dollar exposure to the double short stock ETFs. While an extra IV of chills pills had been inserted into the OG to calm him, the OG, already a nervous wreck, caused a premature exist in that double short, causing the HK to lose protection in a manner inconsistent with the Nerd Machine's Vix Asset Allocation Model. {See Snapshot of SDS Trade in Mark Hulbert and the Use of the VIX as a Timing Model/Modification # 1 To Vix Asset Model Approved re: Hedging (10/10/11 Post)}.

From this point forward, HK ordered that the OG be quarantined during times of market stress.

The S & P 500 rose 3.41% yesterday to close at 1,194.89. The ^VIX fell 3.18 or 8.78% to close at 33.02. The VIX closed at 45.45 on 10/3/11.  The S & P 500 closed that day at 1099.23.

Last week, the average thirty year mortgage fell below 4% for the first time. The average 15 year mortgage fell to 3.26%. This does not bode well for Mortgage REITs. 

The Labor Department reported last Friday that employers added 103,000 jobs in September. The August number was revised from zero job growth to 57,000 new jobs. The private sector added 137,000 jobs, but 45,000 of that number consisted of Verizon workers returning to work after a strike. The public sector continued to shed jobs, with payrolls falling 35,000 which included 24,400 in public education.  Employment Situation Summary I would expect that downtrend in public sector to continue for several more months, at the the minimum. 

There were some negative numbers in this report. The U-6 number increased to 16.5% in September from 16.2%. Table A-15. Alternative measures of labor underutilization The number of long term unemployed, those who have been without jobs for over 27 weeks, stood at 6.2 million. 

According to the NYT, the well regarded economist Allen Sinai stated that Obama's jobs plan would create about 500,000 to 600,000 jobs. The Republicans are opposed to it, preferring to enact more tax cuts for the Job Creators.

The market reacted positively yesterday to a promise by Merkel and Sarkozy that a comprehensive plan for dealing with the current crisis will be developed by the end of October.

1. Average Down-Bought 50 ISM at $19.5 LAST WEDNESDAY (see Disclaimer): This would be an average up if I had kept the shares bought at $11.85.  Instead, this last purchase was an average down from 50 shares recently bought at $20.62.  I have nothing to add to that recent prior discussion, and my views about SLM's credit risk have not changed since that last purchase. I will not not buy more of either ISM or OSM based on my opinion on the credit risk.

I will simply summarize the terms of this security briefly here. ISM is a senior exchange traded bond issued by SLM (also known as Sallie Mae) that matures on 1/16/2018. Interest is paid monthly based on a 2.05% spread to CPI on a $25 par value. www.sec.gov In short, this security is a floater whose interest coupon will be tied to consumer inflation. The calculation is somewhat complicated and I explain how it is done in several prior posts, including the one linked above discussing my last purchase. I also own 100 shares of OSM, another CPI floater from SLM.  The next ex interest date of ISM is on 10/12, with the payment date generally on the 15th day of each month provided that day is a business day. The next payment date will be Monday, 10/17. The penny rate will of course be variable.  I believe that the October payment will be $.1153 per share.

SLM Corp. 6.398% CPI-Linked Medium Term Notes Series A 2018 closed at $20.16 in trading yesterday, up 39 cents for the day.

Floaters: Links in One Post

2. Sold 102+ of WMT at $53.7 Last Friday (see Disclaimer): The only reason for selling this security was LB's opinion that the shares could be bought at a lower price than the existing cost basis.  The shares sold last Friday were bought in two fifty share lots this year: Added 50 WMT at 52.21 ADDED 50 WMT at $52.68 I also sold the shares purchased with reinvested dividends at a profit. LB may enter a GTC Limit Order to buy back 100 shares, somewhere between $50 to $51 per share.

WMT and the Large Cap Valuation Strategy

"While the RB usually does not dare to interrupt the LB, after recently receiving a warning about placing the RB in a shredding machine, RB did check the closing price for Wal-Mart yesterday. Sure, that is rare for the RB, actually the OG checked it and told the RB. Admittedly, RB is not very good with numbers, but is $54.81 a higher number than $53.7?  Of course, the "Stock Stud" or the "Stock Jock", or whatever the Lame Brain is calling itself now, is much better with numbers, and all that subtraction and addition stuff, than the forever humble and modest RB, who would have bought a million of WMT at $52.21 if it had been in charge and would still own those shares. And to top it off, the RB would be a hit with the Ladies, if the Nerd Machine would just take a vacation. . .  RB better shut up now, LB is becoming peeved again".

3. Bought 100 TGX at $1.24-LT Last Thursday (LOTTERY TICKET strategy)(see Disclaimer): The general goal for this Lottery Ticket purchase is to make enough to fill up my Saturn one time after paying taxes on the profit. That is admittedly a most modest goal. I was able to accomplish that objective in my last round trip, but gas may have been cheaper then than now. Buy of 100 TGX at $1.28-Speculative Lottery Ticket  Sold 100 TGX at $1.63

Theragenics Corporation has a market capitalization of around 42 million, at its current price, and has traded between $1.18 to $2.29 over the past 52 weeks. This kind of company will show up on screens looking for stocks selling at a price to sales ratio of less than 1 and a price to book ratio of less than 1.  Both ratios are a tad below .5 currently TGX Key Statistics  TGX is profitable, earning 4 cents per share for the Q/E 6/2011, up from 2 cents in the year ago quarter. Form 10-Q for Q/E 6/2011 At the end of that quarter, the company had cash and cash equivalents of $28.328 million and marketable securities of $12.658 million. Debt stood at $22 million, down from $23.667 million as of 12/31/10.

The company's business involves surgical products and brachytheraphy seeds used primarily for the treatment of prostrate cancer. The surgical products segment consists of sutures, needles, specialty needles, and guidewires. (see page 13:  10q or  Profile at Reuters.com)

The Board of TGX rejected an acquisition offer of $2.20 in cash made earlier in 2011. Key Developments

Theragenics closed at $1.25 yesterday.

4. Averaged Down by Buying 50 TRK at $11.65 Last Friday (see Disclaimer): I previously sold 100 shares of  Speedway Motorsports (TRK) at $16.08, realizing a small profit on the shares. I subsequently bought 50 of those shares back at $14.65, a fairly typical trading method for non-core positions viewed as attractively valued during an Unstable VIX Pattern Period. Last Friday, I rounded up to a 100 share lot by averaging down with a 50 share purchase at $11.65. LB noted that $11.65 was more attractive than $14.65.

The current quarterly dividend is 10 cents per share, which gives me a yield of around 3.43% at a total cost of $11.65. Price to book is about .6 at that price. The forward P/E is less than 10. TRK Key Statistics

The chart looks awful, a recent series of lower lows.  Chart  The stock traded over $40 per share prior to the Near Depression. TRK Interactive Chart

This is a link to the FORM 10-Q for the Q/E 6/2011. The company owns and operates several major motor speedways in the U.S.

Company website: Speedway Motorsports, Inc.

Speedway Motorsports closed at $12 yesterday, up 48 cents.

I will finish discussing my trades from last week in the next post.  

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