Friday, March 23, 2012

Is Mitt Romney a Pathological Liar?/Bought 50 PWER at $4.66-LT Category/Bought 50 of the Stock ETF DIVS at $25.15/Sold 100 ETO at $19.86

The Trust Certificate, DKQ, has been called by the owner of its call warrant. Structured Asset Trust Unit Repackagings (SATURNS) Series 2003-7 Trust Receipt of Notice of Intent to Exercise Warrants in Full I did profitably trade this security, which contains a senior bond from May Department store, but no longer own it. Instead, I transitioned to just 1 senior bond from Macy's which acquired May. Bought 1 Macy's Bond Maturing in 2030 @ 99.5/Sold 50 DKQ at 23.32 (1/10/11 Post).

A senior executive from BHP Billiton said Tuesday that China's demand for iron ore is "flattening out".

HSBC's manufacturing survey for China, released yesterday, continues to show contraction falling to 48.1 in March from 49.6 in February. That problem is linked to Europe's recession.

Markit reported yesterday that its eurozone PMI index for services and manufacturing declined to 48.8 in March from 49.3 in February.

The U.S. economy is not immune to slowdowns in Europe and China.

The Australian dollar has been sliding some against the USD based on recent news about China's economy, falling from 1.06 on 3/19 to 1.04 yesterday. AUD/USD Currency Conversion Chart Precious metals have also fallen in price.

There was no Canadian withholding tax for the ERF dividend recently paid into my ROTH IRA account. The tax was withheld for the ERF dividend paid into a taxable account.

The U.S. treasury sold 10 year TIPs yesterday with a negative yield. .pdf Investors are willing to accept a negative yield of -.089% for the inflation protection provided by the security. Advantages and Disadvantages of Treasury Inflation Protected Securities In a recent post, I took a snapshot of the unrealized gain from 3 ten year TIPs bought at a 2009 auction in my ROTH IRA. Stocks, Bonds & Politics The coupon then was 1.875%, hardly worth mentioning, except investors are willing to pay me close to $3,800 for those 3 bonds now which generated less than $60 in interest payments to me last year. FINRA - Investor Information on TIP Maturing 7/15/2019

A recent positive article on SandRidge Energy can be found at Forbes, where the author interviews money manager Graham Tanaka who believes the stock "is an easy double-if not triple-from its current price". An author of an article at the Motley Fool believes that SD's aggression could be its downfall. I own SD as part of my LT basket strategy. Bought 40 SD at $7.68-LT Category The shares of SandRidge Energy had a bad day yesterday, closing at $7.63, down 33 cents or 4.15% for the day. I would agree with the argument that there is too much motion at Sandridge.

An article published by Morningstar discusses several esoteric reasons to avoid Exchange-Traded Notes. I do not own any.

According to news reports, Robert Bales, the American soldier accused of murdering 17 Afghanistan civilians, including 9 children, joined the military after an elderly man filed an arbitration case against him for securities fraud. The arbitration panel later awarded that investor $1.2 million against Bales. Reuters ABC News

Jonathan Chait wrote an article for the New York arguing that Mitt Romney lies a lot but he is not a pathological liar, though Chait admitted in an earlier article that "Romney appears unusually prone to dishonesty" even for a politician. In a similar vein, I would note  articles published by Esquire and Vanity Fair.

This observation has nothing to do with ideology.

Chait also wrote a history summarizing Romney's evasions on health care.

I do believe that Romney is not capable of telling the truth with any consistency and will not suddenly change that personality characteristic when and if he becomes President. A typical false claim uttered by Romney is explored in this recent article at I have no reason to dispute Newt Gingrich's statement that Romney is a liar. Gingrich: Mitt Romney is a liar - CBS News

Frequently, politicians from both tribes will state an opinion as a fact, when the opinion is primarily based on ideological beliefs of a political party rather than the best evidence. An example would be Romney's frequent statement that Obama made the recession worse. Such a contention is not supported by the best evidence, as noted in this article at the NYT, but I would not call the statement a lie, which is common characterization among liberals, because I view the statement as more of an argument than a knowing misrepresentation. All politicians lie in that fashion, by stating an argument or an opinion as a fact.

Never before has a toy so aptly summed up a serious political candidate for President. The stock of Ohio Arts, the manufacturer of the Etch A Sketch toy, soared in value yesterday due to its association with Romney's substance as a candidate. CNN  While Romney claims that the Etch A Sketch comment by a top aid, Eric Fehrnstrom, dealt with organizational changes occurring after a candidate receives the nomination, Fehrnstrom was clearly referring to changing substantive positions in order to win the election. YouTube

{This toy is made by Ohio Art,, and I did not find any SEC filings for this company after 2005 when the shares were delisted. While there were news reports about the stock soaring yesterday, apparently only 800 shares traded on the pink sheet exchange, OART Ohio Art Company. I would not touch it!}

1. Bought 50 PWER at $4.66 Last Monday (Lottery Ticket Basket Strategy)(See Disclaimer): As with all Lottery Ticket selections, Power-One's stock price has been smashed with some justification. One could entertain a good faith argument on whether it has been smashed too much. A five year chart reveals a stock trading below its 200 day SMA since January 2011. PWER Interactive Chart The stock did trade in a channel roughly between $10 and $12 in 2011 before breaking down in early 2011. 

Among other products, PWER is a major manufacturer and supplier of photovoltaic inverters used in the renewable power industry to convert wind and solar energy into energy usable in an electric grid. While that sounds cool to the RB, and the OG wants to support clean energy, the solar power energy has been in a world of hurt for over a year now. Solar stocks have been on a downward spiral since 2008, as manifested in this five year chart of the Guggenheim Solar ETF (TAN) that just underwent an ignominious 1 for 10 stock split.

In addition to inverters the company also makes converters and other products used in the data service industry.

I have had Power-One on my LT stock monitor list, which has about 200 names, for over a year but decided to pull the trigger after reviewing this article at Seeking Alpha, published March 15th which also discusses my recent LT buy of RRST. Bought 50 RRST at $3.95-LT Category (3/8/11 Post).

With LT buys, I have no financial pressure, given the small sum associated with each selection. I can wait for a turnaround. Possibly, if every LT selection went to zero, there would be a slightly material impact on Headknocker's capital base, but that event is unlikely to happen. The primary purpose of this strategy is to entertain the RB and keep it from interfering with LB's serious work.

Most LT's are selected based primarily on statistical criteria. The following is a summary of some of this data for PWER taken from YF's Key Statistics page, with the financial data based on information as of 1/1/12 and the stock price at $4.51:

Trailing P/E: 5.12
Forward P/E: 6.73
Price to Sales: .55
Price to Book: 1.38
5 Year Estimated P.E.G.= .53
Total Cash Per Share: 1.68

Of course, this kind of data, except for total cash per share, changes with the stock price.

Profile page at Reuters

The Key Developments page at Reuters points to another problem, a series of revenue warnings by the company.

The 2011 Annual Report shows at page 30 that PWER reported net income of $138.5 million on net sales of $1.0167 billion. This was for the fiscal year ending 1/1/12. This equated to a net income per share of $1.08, down from $1.3 in prior year. The balance sheet does not show any long term debt.

For the quarter ending 1/1/12, the company reported net income of 21 cents per share.  SEC Filed Press Release

S & P does have a report on PWER, rating the stock 3 stars with a $5.5 12 month target price.

This selection may need a lot of patience. As with all LT selections, I can afford to wait.

PWER declined 6 cents in trading yesterday to close at $4.51.

2. BOUGHT 50 Shares of the Stock ETF DIVS AT $25.15 Last Monday (see Disclaimer):
DIVS is a new ETF offering from Russell ETFs.  The name of this ETF describes its focus: Russell Small Cap High Dividend Yield ETF (DIVS). The expense ratio is .38%, and the fund currently has 150 holdings. FactSheets/DIVS.pdf  A list of the holdings can be found at Russell Small Cap High Dividend Yield ETF (DIVS) - Product Holdings. The general idea will be to average down when and if the price declines more than 7.5% plus commission cost or less than $23.1. Once I own 100 or more shares, I may start to reinvest the dividend.

Recently, I have gingerly been adding several stock ETFs just in case the VIX forms a Stable VIX Pattern.

Another fund focusing on small cap dividend payers is the WisdomTree SmallCap Dividend Fund (DES).  Its expense ratio is currently .38% and dividends are paid quarterly. The fund has a large number of holdings. Among the top ten weighted holdings are a number of BDCs and REITs.

Russell Small Cap High Dividend Yield ETF declined 30 cents in trading yesterday to close at $24.68. I may not have to wait for very long to average down.

3. Sold 100 of the CEF ETO at $19.86 Last Tuesday (see Disclaimer): I intend to plow the proceeds from this transaction into an average down. ETO was bought at $18.68 earlier this year and pays monthly dividends.

Eaton Vance Tax-Advantaged Global Dividend Opportunities Fund closed at $19.59 yesterday and went ex dividend for its monthly distribution on 3/21/12.

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