Thursday, July 19, 2012

GJX/LEXCX/More Inanity in Tennessee/EDG/Sold 152 BCF at 10.38-Roth IRA/Sold Remaining GDO in Taxable Account at $19.69/BOUGHT 100 of USMV at $29.29/Sold 50 of 100 GOV at $23.45

I received an email notice that Moody's upgraded the senior secured Edgen Murray bond to Caa2 from Caa3. I own just one bond. Bought 1 Edgen Murray 12.25% Senior Secured Bond Maturing 2015 at 97.5

One of the mutual funds that I dumped during 2007, as the OG became increasingly nervous about the world, was the ING Corporate Leaders Trust Series B Fund (LEXCX). Sometimes the OG just reacts to gut instincts, possibly some sort of subconscious Pavlovian reaction, and the conscious reasoning later catches up and justifies the action. Such was the case in 2007, when I developed the VIX Asset Allocation Model that led to even more selling in 2007. Buy High & Sell Low /Retrospective on the Good & Bad (October 2008 Post); Vix Asset Allocation Model Explained SimplyVIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern Before that model was developed during the summer of 2007, I was dumping stock ETFs and mutual funds and LEXCX was one of those:

Some might say that the OG reads too much, which makes him prone to anxiety attacks, both justified and unjustified by events.

While I have no regrets on virtually all of those liquidations or reductions, I have had some second thoughts about LEXCX recently. For one, I like its oddness. It is a passively managed grantor trust that started with 30 stocks in 1935 and is prohibited from buying any new stocks. Holdings can change only with spin-offs and mergers. (sponsor's website: ING Corporate Leaders Trust Fund Series B - Class A - Fund ProfileLEXCX - Mutual Fund Quote for ING Corporate Leaders Trust Series B - MSN Money). That seems to have worked out fine, just send those money managers packing. The ten year annualized return is 8.32% according to MSN Money, though I am glad that I missed the 2008 performance. The ten year annualized return of Fidelity Magellan is 2.51%. I counted 22 companies left in the LEXCX portfolio as of 12/31/11. 2011 Annual Report pdf One of them is Berkshire Hathaway, which was not among the original 35, but was picked up when BRK acquired Burlington Northern. A recent article about this fund appeared in the which caused me to take a look again. I have not made a decision on when to buy back shares.

Apparently, the trust certificate, which formerly traded under the symbol GJX, was called. That TC contained a Burlington Northern TP as its underlying security. When Berkshire acquired Burlington, this security was voluntarily delisted from trading in 2010,, and disappeared from my radar entirely until yesterday.  Delisting  of an exchange traded bond sometimes happens when the issuing company is acquired by another company. I sold my position before the delisting. Sold 100 of the TC GJX at 25.9 I reviewed a snapshot from another person's account last night that shows this security being redeemed at it $25 par value. I did not find any press releases announcing this redemption using a 30 day google search. I would assume that the TC was redeemed by the call warrant owner. I did note a large trade of the underlying bond on 7/13/12 at 105. FINRA In any event, based on that snapshot, it appears that the owner received the $25 par value for this TC irrespective of who redeemed it.

I am not a believer in the current market rally, though I am not aggressively selling into the rally. I  have been adding small positions in stock ETFs while selling some individual common stocks. This is basically tweaking. The add discussed in Item # 2 below is an example, as is the  recent adds of three ETFs that invest in MLPs. I am at or near my bottom allocation for stocks, which is still sizable. And, of course, money market rates are guaranteed to lose money adjusted for inflation.  One bright spot about money market yields now is that almost no taxes have to paid on the income received from them. I think that I would prefer paying taxes at my highest marginal rate on 4% compared to 0% or .001%.

I have never given money to a political candidate. I have money to give but simply refuse to fund, even indirectly, campaign commercials. Those advertisements frequently contain no useful information or misleading statements. If I made a contribution, I would be indirectly supporting the spread of misleading and false information designed to deceive.

I try to change the channel whenever a political ad starts, but I was slow the other night reaching for the remote. I heard the incumbent Republican candidate for Tennessee's 4th Congressional District, Scott DesJarlais, say that he voted against Obamacare because it would inject the government in between the doctor and his patient. Mitt Romney and other GOP politicians, who routinely lie about Obamacare, have made the same assertion. This claim has been rated as false by PolitiFact. I do not care whether all members of the GOP tribe want to repeal that law. I understand their herd instinct. I do care that the so called "conservative" party insists on misrepresenting the law's provisions for the purpose of misleading the uninformed and gullible. (see list of statements at PolitiFact | Health Care statements and see analysis of false claims made by both sides) There are legitimate grounds for honorable people, capable of telling the truth and being accurate with their facts, to oppose this legislation. Unfortunately, I have yet to hear a single politician from the so-called "conservative" party even make an effort to go down that path.

Bill Haslam, the Republican Governor of Tennessee, is being strongly criticized by large numbers of GOP tribe members for failing to follow "conservative values". His sin was to hire a gay person and a muslim. RealClearPolitics

The Tennessee legislature recently passed legislation, which Haslam signed, that prohibits a sex education teacher to discuss "gateway" sexual activities. ABC News Mentioning such an activity will lead to disciplinary action against the teacher and a fine of up to $500 for any outsider crossing that boundary, whatever it may be. U.S. News Colbert put his spin on this Tennessee law. Gateway Hug - The Colbert Report

One of the primary objectives of the Tennessee GOP was to secure the right to carry guns into bars and parks where children play.

One of the leaders of the Tennessee GOP, Marsha Blackman, has been elected co-chair of the RNC Platform Committee at the upcoming convention. USATODAY Marsha, a Michele Bachmann clone, is my congressional representative whose district was tailored made for a reactionary True Believer.

I will always fall behind discussing my trades during earnings season. The delay can reach a week or even 10 days at times.  There is only so much one person can do. I own over 400 securities personally, and also manage accounts for family members and a testamentary trust. I am monitoring perhaps another three or four hundred securities for potential purchase. I will look only at major news items that appear about those  securities when the item appears at the end of YF monitor list.  

1. Sold Remaining GDO in Taxable Account at $19.692 Last Monday (see Disclaimer): The only remaining shares in a taxable account were bought with reinvested dividends. I took this snapshot shortly before selling those shares.

I was able to sell those reinvested shares at close to a 7.5% profit after the brokerage commission. When I am able to accomplish that feat, I simply add to the total return provided by the dividend. For a bond CEF that already pays close to 8%, that is not an insignificant addition to its total return. 

I have decided to own GDO only in the ROTH IRA, where the distributions are tax free when paid. Hopefully, if I withdraw those funds at some later date, the law will be the same as now.

I currently own 120 GDO shares in the ROTH IRA at an average total cost per share of $17.837.  

ROTH IRA 120 GDO Shares Unrealized Gain +$224.75
Back 50 shares of GDO at 17.8 December 2010 I did not make a note of the 70 shares added a few days later at a total cost of $17.75.

At the current monthly dividend rate of 12.75 cents per share, the yield at my total average cost is about 8.577%.

Morningstar GDO Page
Closed End Association Page: CEFA 

On July 13th, GDO closed at a -1.11 discount to its net asset value of $19.82. For me to add shares in the ROTH IRA, I will need to have a greater than 5% discount plus a cost per share lower than my existing average cost. In other words, I am not likely to buy anymore shares anytime soon.

Western Asset Global Corp Defined Opportunity Fund closed at $19.56 yesterday.

2. Bought 100 of the Stock ETF USMV at $29.29 Last Monday (see Disclaimer): This is another one of the relatively new ETFs that select stocks based on their lower volatility numbers.

Stock Quote: iShares MSCI USA Minimum Volatility Index Fund (USMV)

Sponsor's webpage: iShares MSCI USA Minimum Volatility Index Fund (USMV)

The expense ratio is .15%.

As of 7/16/12, this ETF owned 123 securities. Holdings

Dividends will be paid quarterly.

The OG prefers less volatility compared to more. The RB is looking for a super duper volatility fund.

The closing price on 12/30/11, the last trading date of 2011, was $26.72, adjusted to $26.56 to account for subsequent dividends.  USMV Historical Prices  Using the adjusted price, the increase would be 9.61% until my purchase at $29.29. I calculated the percentage increase for the ETF for the S & P 500 (SDY), using the adjusted price and last Monday's closing value of $135.43, as 8.95%. (SPY Historical Adjusted Price as of 12/30/11=$124.31).

iShares MSCI USA Minimum Volatility Index Fund closed at $29.52 yesterday.

3. Sold 150 BCF at 10.3766 Last Monday-Roth IRA (see Disclaimer): This transaction is part of the ongoing de-risking process. Last Friday, this CEF closed at a premium to its net asset value. It went ex dividend for a $.264 quarterly dividend on 6/13/12. I have been taking the dividends in cash and generated a profit on the shares. Part of this position was bought during the Near Depression period:

2012 Roth IRA BCF 152 Shares +$223.02
I still own 544+ BCF shares in a taxable account. I am not reinvesting the dividend due to the fund selling at a small premium or narrow discount to its net asset value.

4. Sold 50 of 100 GOV at $23.45 Last Monday (see Disclaimer): I sold my highest cost shares purchased first. Those shares were bought at $22.9. I am keeping the shares bought at $21.22 about a month later. This is a fairly typical trading pattern in a volatile market.

Government Properties Income Trust closed at $23.48 yesterday. 

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