Thursday, October 18, 2012

Stock Funds Table/Romney and Deceptive Truth Telling/MTB-HCBK/Sold 50 VFH at $33.56/Sold 200 HSE:CA at $28.13 CADs/

The Commerce Department reported yesterday that construction of new homes increased by 15% in September, the fastest pace in more than 4 years. September housing starts are 34.8% above the September 2011 rate.

M&T Bank (MTB) reported third quarter net income of $293M or $2.17 per share, up from $1.32 in the year ago period. The consensus estimate was for $1.85. The shares surged on the news. MTB: 103.07 +5.68 (+5.83%)  I do not own MTB but I do have a small position in Hudson City Bancorp which is being acquired by MTB. If the merger is completed, Hudson shareholders will receive consideration valued at .08403 MTB shares in the form of stock or cash,  with a maximum 60% of the consideration paid in MTB stock. Still, as long as investors believe the merger will happen, the HCBK price should closely track the MTB price. Hudson City Bancorp, Inc. to Merge with M&T Bank

Yesterday Close for HCBK:  HCBK: 8.56 +0.47 (+5.81%)


I managed to make it through twenty minutes of the last Presidential debate. I heard Romney say that he had a plan to create 12 million jobs during his first term. Obama basically said that he had no plan other than to give rich people more money. Whatever. There are a number of forecasters who estimate that the U.S. economy will produce 12 million jobs irrespective of who wins the upcoming election.

An additional 12 million jobs would beat the 10.5 million created under Jimmy Carter's four years. Bush On Jobs: The Worst Track Record On Record - WSJ Is there a single republican that has a positive view of Carter's performance on the economy?

Unfortunately, there are millions who accept statements made by politicians from the same political tribe as true, when most of the statements are simply false or misleading.  (Fact checks on last debate: PolitiFact | Fact-checkingFact-Checks-NYT; Fact check USA TodayAggressive Debate Is Tough on Facts - US Election 2012 - CNBC; and Fact checking- The Washington Post)

Sometimes, a statement could be literally true but deliberately misleading. Romney excels at that kind of lie. For example, Romney made a statement that oil production was down 14% this year on federal land. I would assume Romney meant 2011 when production did fall 13.77%  Table 2 at page 3 So technically, that is not a lie, though some critics of the legal profession would justifiably call it a "lawyer's lie", a form of deceptive truth telling, a statement that is true on its face but nonetheless misleading and expressed with an intent to deceive a jury. (of course, no such thing has ever really happened LB just noted). Some would even call those statements an art form, and forcibly submerge a smile when a particularly artful phrase was used by an adversary. Successful politicians will do their best to imitate this form of deceptive truth telling.

The purpose of Romney's statement was to blame Obama for high gas prices. What did Romney omit in his statement which would change the reaction of the listener? That same government data showed that oil production had increased during Obama's other two years and increased overall 10.6% under Obama. And what else did Romney purposely omit from this data series when making his representation? Production actually decreased 4 out of 5 years shown for the Bush Administration, unquestionably a President who favored oil companies and drilling, and had declined 16.8% overall during the Bush five years covered by this data series. Why were the foregoing facts from the same study omitted by Mr. Romney?

{More information would call into question Romney's underlying thesis, which is that increased production on U.S. federal lands would alleviate high gas prices. One piece of information is that world supply and demand for oil are the main drivers for distillate prices.}

When asked what he would do to insure equal pay for women, Romney told a story about how he asked for binders containing the resumes of women who were qualified to hold positions in his administration. CBS News Video Didn't he know of any women without someone giving him binders and what does that have to do with equal pay? Well, that was a bad answer for sure. To make matters worse, Romney did not ask for those binders. Instead, they were sent to him by an organization,  and his hiring of women during his administration declined from the previous governor.


The reactionary Koch Brothers, who inherited wealth from their daddy Fred C. Koch, one of the founders of the John Birch Society, warned their employees at Georgia-Pacific that they may suffer consequences by casting their votes for Obama and other Democrats. Koch Letter.pdf Helpfully, the brothers gave their workers a list of satisfactory republican candidates approved by them. Some of the consumer products made by GP include Angel Soft, Quilted Northern, Soft'Gentle (all bathroom tissue); Dixie Cups and tableware; Dixie, Vanity Fair and Mardi Gras napkins; and Brawny, Sparkle and Mardi Gras paper towels.

1. Sold 50 VFH at $33.56 Last Tuesday (see Disclaimer): This is my third round trip for the Vanguard Financials ETF. The shares sold last Tuesday were bought in July 2012: Bought 50 VFH at $31.16 
2012 VFH 50 Shares (10/16/12) +$119.97

The largest gain was from 2011: Item # 7 Bought 100 ETF VFH at 30.85 (November 2010)- Sold 100 of the ETF VFH at 34.88 (February 2011):

2011 VFH 100 Shares +403.28
Bought 50 of the Stock ETF VFH at $29.2 (January 2012)- Sold 50 VFH at $31.05 (February 2012)

2012 VFH (2/12) 50 Shares +$92.47
Total VFH Realized Gains to Date=$615.72

Vanguard ETFs are bought only in a Vanguard Brokerage account. Vanguard does not charge a commission for purchases and sales of its ETFs.

Yesterday's Close: VFH: 33.98 +0.39 (+1.16%) 

2. SOLD 200 HSE:CA at $28.13 CAD Last Tuesday (Canadian Dollar (CAD) Strategy)(see Disclaimer): This sale marks my second round trip on Husky shares. The motivation was primarily profit taking and secondarily valuation. HSE.TO Analyst Estimates

Fidelity will use for tax reporting purposes the symbol of the U.S. traded ordinary shares, HUSKF:

2012 Husky 200 Shares +$500.36 Mostly ST
Whenever I sell a Canadian security, I will elect to receive the proceeds in CADs under this Canadian Dollar Strategy. The underlying purpose of this strategy is to generate more CADs without having to buy more by using USDs. The proceeds from the Husky shares will be paid to me in CADs.

Yesterday's Close: HSE.TO: C$28.15 0.00 (0.00%)

3. Intel (own 273+ at an average cost per share of $17.82): Intel reported third quarter GAAP E.P.S. of 58 cents on $13.5B in revenues. Revenues in the 2011 third quarter were $14.2B. The company generated approximately $5.1B in cash from operations. Revenues from the PC client group fell 8% year-over-year, while the data center group reported a 6% increase in revenues. Gross margin was reported at 63.3%. The CEO stated that overall PC business will grow at about 1/2 the rate that the company would normally expect in the 4th quarter. That sounds unduly pessimistic to me.

Intel plans to reduce 2012 capital spending by about $1.2B from the $12.5B amount predicted last July.

I quit reinvesting the dividend in the 2011 third quarter, with the last reinvestment price being $20.13. I may change the dividend back to reinvestment when and if the price falls consistently below $20.

Link to Post Showing Snapshots of Trades: Item # Intel (average total cost per share=$17.82).

INTC  Quote
Yesterday's Close: INTC: 21.79 -0.56 (-2.51%)

4. Renansant (own 155+ Shares: Regional Bank Basket Strategy)Renasant reported third quarter net income of $7M or 28 cents per share, up from 26 cents in the year ago quarter. The consensus estimate was for 25 cents.

Loans, which are not covered by FDIC loss sharing agreements, increased 15.2% over the 2011 third quarter and 13.3% from 12/31/12.

As of 9/30/12, the net interest margin was 3.94%; the efficiency ratio was higher than most banks in my basket at 73.44% (higher is worse); NPLs were 1.26% of total loans; the coverage ratio was comforting at 137.57%; the tangible capital ratio was 7.69%; the total risk-based capital ratio was 14%; the tangible book value per share was $12.16; book value per share was $19.61; and the return on average assets was at .69% (prefer over 1%).

Renansant is headquartered in Tupelo, Mississippi and has used the Near Depression to expand its geographic footprint through FDIC assisted acquisitions of failed banking institutions. The bank has 75 offices in Mississippi, Tennessee, Alabama and Georgia. Renasant Bank Locations Map

I have sold some of my shares but still own 155+ with an average cost of $14.66 per share:

155+  RNST Unrealized Gain as of 10/16/12=$744.77
The shares are held in a satellite taxable account. Bought: 50 RNST at 13.70 (September 2010 Post); Added 50 RNST at 15.85 (March 2011 Post); and added 50 RNST at $13.85 in September 2011 with no write up.

2011 RNST  Two 50 Share Buys: $13.85 & $15.85
2010 RNST 50 Share Buy at $13.0
The current quarterly dividend is $.17 per share. At that rate, the dividend yield at a total cost of $14.66 is about 4.64%. I view it as a positive that the bank did not cut the dividend during the Near Depression. However, the $.17 quarterly rate has been in effect since the third quarter of 2007, and I would view the failure to raise it as a negative. Renasant Bank - Dividends Personally, I would prefer that the payout ratio fall below 50% before the dividend is increased, and that could happen in 2013 or 2014. The current consensus estimate is for a E.P.S. of $1.24 in 2013. RNST Analyst Estimates The total annual dividend at a $.17 quarterly rate is $.68 or almost a 55% payout ratio if the 2013 consensus estimate is hit.

RNST has a good move since closed at $14.69 on 6/13/12:  RNST Interactive Chart

Yesterday's Close: RNST: 19.03 -0.41 (-2.11%) I would not be surprised to see the share price drift down some. If the bank can grow E.P.S. by 20-25% in 2013, then the current price would be about right. The current consensus for this year is $1.01 and $1.24 for 2013 or 22.77% growth year-over year, particularly if the analysts are projecting in late 2013 a similar rate of growth for 2014 and the bank starts to raise its dividend again.

5. Stock Funds Table as of 10/17/12: Yesterday, Headknocker wanted to know about much money was invested in stock funds, and no staff member had a clue which sent Headknocker into a tizzy. The OG started to hyperventilate, and RB went into hiding, as HK's consternation at staff's incompetency grew louder and louder. It is after all hard to get good help these days, when you refuse to pay anything for the work.

So, as a consequence, many laborious minutes were spent by our LB compiling a list of stock funds from various accounts. Some CEFs are held in more than one account.

There was much discussion about whether to classify the Permanent Portfolio as a stock fund when stocks were less than 32% of the portfolio. OG argued that this fund was heavily into gold and silver bullion which scared him more than stocks. So after taking a vote, RB sided with the OG and LB thought that the inclusion of this fund was just asinine:

Permanent Portfolio as of 10/17/12 Average Cost Per Share=$33.42
That fund survived the 2007 stock fund purge without even a pare. {A few mutual funds were kept after selling down to 100 or 150 shares. Two of the 2007 pares to 100 shares are still at that level).

I discussed the Vanguard Star and Life Strategy mutual funds in a prior post.  Vanguard Star and Life Strategy Growth Funds

The foregoing table also contains two other Vanguard mutual funds, Vanguard Equity Income and Vanguard Health. I started an investment in the health care fund by exchanging the proceeds from a bond fund in July 2011. I have done nothing other than reinvest dividends since that time and currently have an unrealized gain of close to $350 on the shares, plus dividends and capital gain distributions.

I have traded the Vanguard Equity Income fund by selling 200 shares in November 2009 at $17.62 that were bought at $14.85 in June of that year. After adjusting for those shares, I have invested $5,000 in cash in 2009 (another $3,000 at $14.85) and have reinvested the dividends to buy more shares that were valued at $9,377.06 at yesterday's closing price:

All pure bond funds are excluded from the table (e.g. GDO, ERC, FAM) as well as PAUDX and XTR.TO.  I have included some balanced funds where there is a 50+% weighting in stocks. One of the poorer performers yesterday was the Janus Balanced fund (up +.15%), due to its bond weightings. Bonds declined yesterday (see below).

I had to make two snapshots since I am, as always, ridiculously over diversified:

Stock Fund Table Part 1

Stock Fund Table Part 2
I accidentally omitted the recently added CGI:CA from this table. Bought 100 of the CEF CGI:CA at 15.78 CAD-Toronto Exchange

Stock Funds Yesterday: +$1,031.06 or +.52%

Stocks Yesterday:
S & P: +.41%
DJIA: +.04%
Nasdaq: +.10%
IYY: (+0.44% (ETF for Total Stock Market)
GLD: +.07% (gold)
VEU +.77% (low cost international stock ETF)

Bond ETFs Yesterday:
TLT (ETF for 20+ Year Treasury Bonds):  -.93%
TIP:  -0.30% (treasury inflation protected bonds)
LQD:  -0.24 (investment grade corporate bonds)
BAB -0.54% (build america taxable municipal bonds)
MUB: -0.28 (AMT Free Municipal bonds)