Wednesday, March 7, 2012

HAP/Bought 70 SYRG at $3.32-LT Category/ Sold 1 SuperValu 7.5% Senior Bond Maturing 2014 at 101.75

Sarah Palin, one of the Messiahs of the True Believers, will be the subject of an HBO movie, based on the book Game Change, that will be broadcast this Saturday night. Self proclaimed conservatives have criticized both the film and the book which depict Palin as a woefully inadequate candidate for Vice-President. Their general approach is to claim liberal media bias, a typical ploy when confronted with facts that they do not like. I read the book, soon after its release, and found the facts divulged about Palin's ignorance to be consistent with everything that I already knew about her. Unlike many of her supporters, I had actually watched Katie Couric's interviews with Palin and had made a point of studying her history.

As noted throughout this blog, I will frequently slice the acquisition and disposition of my positions into more than 1 order. I do not view the online commission cost to be a significant expense item.

Over a year ago, I bought, and still own, 50 shares of the ETF HAP that owns companies involved in the production of hard assets. Bought 50 of the ETF HAP at $39.22 (January 2011) I initially enjoyed a relatively short lived unrealized gain in those shares. Then, investors became concerned about an economic slowdown, particularly in China, and the shares fell from over $43 in May 2011 to close to $30 by early October. Hard Assets Prod ETF Chart

While I may be a decent trader, no one can predict the future or how investors will react to future events. And, it is not terribly perceptive to observe, based on several decades of actual experience, that stock prices go up and down. I do not presume to know the best possible price for establishing and building a position. No one has that kind of knowledge, though many may claim such talents due to egotism and/or self delusion.

I intend to buy another 50 shares of HAP but am undecided as to when and at what price. I neglected to average down when the shares fell to $30 and would certainly buy another 50 now at that price having previously missed that chance. If I had bought a 100 or 200 shares initially, however, I would unlikely average down when the opportunity arose. My maximum for this position would be 200 shares.

Market Vectors RVE Hard Assets Producers ETF fell $1.21 yesterday to close at $36.

As noted in this Reuters' article, Greece's private creditors have until Thursday night to "voluntarily" accept a bond exchange. The exchange will result in lower coupons, longer maturities, and a face value slash of 53.5% according to the WSJ. Greece is anxious to restore its "credibility" among its lenders and may have to resort to "pressure" to convince some debt owners to exchange their bonds. Many observers are questioning whether Greece will be able to service the new bonds.

The market is overdue for a pullback. Concerns about Greece, a recession in Europe and a slowdown in China were sufficient to cause yesterday's downdraft, particularly in light of the overbought situation. None of the foregoing issues are surprising in the least however.

The VIX rose 2.82 yesterday to close at 20.87. This trading indicator has been in an Unstable VIX Pattern since the August 2007 Trigger Event.

Mark Hulbert and the Use of the VIX as a Timing Model
VIX and Trading Rules in An Unstable Vix Pattern Within the Context of a Long Term Secular Bear Market
VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern
Vix Asset Allocation Model Explained Simply

1. BOUGHT 70 Synergy Resources at $3.32 Last Monday (Lottery Ticket Basket Strategy) (See Disclaimer): Synergy is a small energy exploration company.

For its fiscal 1st quarter ending 11/30/11, Synergy reported net income of $1.627 million or 4 cents per diluted share, compared to a 8 cent per share loss in the year earlier quarter. SEC Filed Press Release Net cash provided by operating activities was $4.587 million for the 2012 fiscal first quarter. As of 11/30/11, the company had 141 producing wells. For 2012,  SYRG estimates spending $41 million on its drilling program.

The current consensus estimate is for an E.P.S. of 29 cents in the 2012 fiscal year, ending in August, and 59 cents in fiscal 2012. SYRG Analyst Estimates

SYRG sold 14,636,363 shares of stock at $2.75 last December. (page 18 syrg_10q) As noted in that 10-Q, the gas/oil ratio at the end of the 11/30/11 quarter was 52/48 (page 20).

Wellington Management owned 8.56% as of 12/31/2011: SEC Form 13G

Yesterday, Synergy Resources provided an update on its 2012 drilling program.

A detailed discussion of this company can be found in this Seeking Alpha article.

Key Developments page at Reuters

Synergy Resources closed at $3.32 yesterday.

2. Sold 1 Supervalu 7.5% Senior Note Maturing 2014 at 101.75 (Junk Bond Ladder Baseket Strategy)(see Disclaimer): I made a small profit on this bond that was bought in December 2010 at 97.8. I have been selling my lower yielding junk bonds that are selling at a premium to their par values.

I am becoming a little concerned about the signals being given by the stock price. Yesterday, the stock touched $6 during the trading day. The SVU interactive chart at YF goes back to 1985 and that price appears to a low going back to August 1985. SVU needs to eliminate its stock dividend in my opinion.

I have now sold all of my bonds originally issued by Supervalu. I have sold 2 out of  4 bonds originally issued by Albertson's that are now SVU obligations. One of those was recently purchased.  Bought 1 Albertsons 7.11% Senior Bond Maturing 7/22/27 at 73 The YTM at my cost for that bond is 10.587%.

After hitting a new 52 ween low intra-day, Supervalu close up 22 cents at $6.32. 

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