Monday, January 20, 2014

SAN/SOLD: 209+ ZTR at $13.88, 202+ NMO at $12.33, 41 INTC at $26.73/Sold Roth IRA: 50 of 100 KFN/P at $24.46, 50 TCBIL at $22.45/Bought: 100 EWM at $15.23, 100 DRE at $14.99/Orkla, GE, Intel, IF, CSX

In this post, I will be discussing some trades made before Thursday of last week. A selection of trades made after Wednesday will be discussed in the next post which will include two stock eliminations. As noted below, I am in a cash raising mode at the moment.

Big Picture Synopsis


Stable Vix Pattern (Bullish)
Closing Price 1/17/14: VIX: 12.44 -0.09 (-0.72%) 
Short Term: Hoping for a 10%+ Correction
Intermediate and Long Term: Bullish

Goldman Sachs asserts that the U.S. stock market is "lofty by almost any measure".  The GS S & P 500 target for 2014 is 1900., MarketWatch

S & P 500 earnings grew about 6% last year while that index gained over 32% in value.

Last week, an article published by Bloomberg noted that the spread between the 10 year treasury yield and the earnings yield of the S & P 500 was the smallest since March 2011. The S & P 500 experienced almost a 20% decline thereafter.

"We ate the seed corn". The phrase refers to the U.S. government who has used increasing amounts of debt to finance consumption rather than to invest productively. I am quoting from a Morningstar article that summarizes Ray Dalio's five stage model for the birth and death of empires. According to Dalio, the U.S. is in stage five. Dalio's model is predicting a long "relative" decline for the U.S.

Without question, the U.S. government needs to be more circumspect about spending trillions of borrowed money. The government's debt was less than $1 trillion when Reagan took office. Historical Debt Outstanding - Annual 1950 - 1999 It is now over $17 trillion. Debt to the Penny

Felix Zulauf says China is now in a "terminal stage" of financing GDP growth with credit expansion. He recommends shorting the ETF EWH, which owns Hong Kong stocks. I have bought and sold that ETF, and no longer own any shares. Zulauf expects a crisis to hit sometime this year and would consequently be a buyer of TLT, the ETF for the long treasury bonds, and gold.

Short Term: Neutral to Slightly Bearish
Intermediate and Long Term: Slightly Bearish
The Difficult Path to Interest Rate Normalization

According to an article published by MarketWatch, a number of large investors are bailing on short and intermediate term bonds based on a belief that an accelerating economy will cause the FED to raise short term rates sooner than currently anticipated by the market.

It is my current opinion that the long term secular bull market in bonds, which started in 1982, "probably" ended on 5/1/2013. Assuming that proves to be correct, a good year going forward would be to have a total return equal to an investor's current bond yield. In other words, the investor does not suffer a net diminution in value that would partially offset the income paid by the bonds and bond funds owned by the investor.

Successful trading will consequently become far more important in the future than in the past 30 years- just to keep from losing money.

The alternative and less likely scenario is that powerful deflationary forces will keep rates abnormally low for many more years, providing the necessary background for some return in excess of annual income.

A 6-7% annualized total return from my bond portfolio would be viewed as a good result going forward.

Bonds rallied last week and I lightened up into the rally.

Friday's closing prices:
TLT: $105.48 +0.44 (+0.42%) : iShares 20+ Year Treasury Bond ETF
LQD: $115.44 +0.13 (+0.11%) : iShares Investment Grade Corporate Bond ETF 
Recent Developments:

The January NY Manufacturing index for general business conditions rose to 12.5,  the highest rate in more than one year. The new orders component rose to 11 points, a 2 year high. Empire State Manufacturing Survey (overview) - Federal Reserve Bank of New York

The Philly Fed index increased to 9.4 from a revised 6.4 in December. January 2014 Business Outlook Survey - Indicators Suggest Continued Growth - Philadelphia Fed

CPI increased .3% in December (.1% core), seasonally adjusted, and by 1.5% for the year ending in December without any adjustment. Consumer Price Index Summary

Real hourly earnings declined by .3% in December. Real Earnings  Most of the workforce has received little or no real wage growth over the past decade or so. As noted in an article written by Russ Koesterich, titled "Wage Woes", real wage growth peaked for most families in the late 1990s. This is without question a serious long term problem.

Industrial production rose .3% in December. For the 4th quarter, industrial production increased at an annual rate of 6.8%, the largest quarterly increase since the 2010 2nd quarter. Capacity utilization increased by .1% to 79.2 which is 1% below its long run average. Industrial Production and Capacity Utilization

Omega Healthcare increased its quarterly dividend by 1 cent to $.49 per share. This REIT has been raising its quarterly dividend several times during each calendar year.  In 2013, the rate was raised to $.45 in January from $.44, and was raised again by 1 cent per share in April, July and November. Omega Healthcare Investors, Dividend History I recently bought 100 shares: Bought: 100 OHI at $29.85 

Santander (own common SAN and equity preferred SANPRB): 

Santander Consumer USA Holdings filed a IPO prospectus with the SEC. S-1/A  

Santander bought this business in 2006 for $636M. It was then known as Drive Financial based in Dallas and was later renamed Santander Consumer USA. In 2011, Santander sold a 25% interest to three private equity firms for $1 billion. SAN is selling some of its shares in the IPO but most of the shares being sold are owned by those three private equity firms. 

Fortune magazine published a negative article on Santander.

SAN went ex dividend for $.205 per share on 1/10/14. I have been reinvesting my dividends which avoids Spain's withholding tax.

CSX (own 100 Shares):

The market had a severe negative reaction to CSX's 4th quarter earnings report and conference call. The E.P.S. number was in line with the Yahoo Finance consensus estimate.

Closing Price 1/16/14: CSX: $27.24 -$1.99 (-6.81%)(intra-day low at $26.76)
Closing Price 1/17/14 CSX: $27.23 -0.01 (-0.04%)

Earnings Call Transcript - Seeking Alpha

A statement made at page 7 of the transcript probably contributed to the decline:

"However, achieving a 10-15% EPS CAGR over the next two years will clearly be more challenging than we envisioned in early 2013 for two reasons".

Given the extraordinary gains that contributed to earnings in 2013, and the headwinds in coal, a more subdued forecast was in order and was not surprising to me at least.

At page 6 of the transcript, the company mentions that it is committed to pay out 30% to 35% of trailing 12 month earnings in dividends. CSX repurchased $353M in stock during 2013.

CSX reported net income of $426M or $.42 per share, up from $.38 per share in the 2012 4th quarter after adjusting those results for a $57M gain from a real estate transaction. Revenues rose 4.7% Y-O-Y. CSX carried 6% more carloads during the quarter even with a decline in coal shipments. Chemical and agricultural shipments increased by 18% and 16% respectively. Intermodal shipments rose by 10%.

However, the operating ratio increased to 71.1 in 2013 from 70.6 in 2012. Expenses increased 7% in the quarter. Those negatives were expected and were offset in my opinion by the positives. The company maintained in its press release that it remained on track to reduce the operating ratio to the high 60s by 2015. The market apparently does not accept that future prediction.

The company expects to increase oil shipments by 50% in 2014. CSX shipped 46,000 loads of crude during 2013. Most of these shipments originate from the North Dakota region and are destined for east coast refineries. Prior to the 2013 4th quarter, CSX was moving one train per day hauling crude but started moving two trains during the last quarter. Reuters

The price decline took away most of my unrealized profit: Item # 5 Bought: 100 CSX at $26.33 (12/12/13 Post) As noted in that post, I have modest goals for that 100 share position.

There was similar decline from $25.29 to $22.65 in June 2013 based on nothing specific that I could find. CSX Interactive Chart

The Dow Jones Transportation Average Index has been hitting new all time highs recently. The index closed at 5334 on 12/31/12 and at 7503.83 on 1/15/14 (+40.68%). ^DJT Historical Prices

Aberdeen Indonesia Fund (IF)

I received last week 14+ shares purchased with this CEF's year end distribution:

Long Term Capital Gain=$110.37
Most of that dividend was characterized as a long term capital gain.

I had taken another distribution ($22.58), made in September 2013, in cash and most of that distribution was a long term capital gain distribution:

I repurchased shares in this fund back in August 2013: Item # 4 Bought Back IF at $11.23

I had traded a 100 share lot for a $110.77 profit earlier that year: Item # 5 Sold 100 IF at $12.91 (April 2013)-Bought 100 of IF at $11.64

The Indonesia stock market had been in a downtrend starting in May 2013, but bottomed out in August. Composite  Chart and JKSE Historical Prices. That market has mostly been moving in a channel since that time. Unfortunately, the Indonesian currency has continued to weaken against the USD.

On 8/5/13, when I bought the last 100 share lot, one USD would buy about 10,029 Rupiahs. On 1/16/2014, one USD would buy about 11,828 rupiahs. I would add that the Rupiah is rallying some since 12/31/13, when one USD would buy 12,217 rupiahs. Until the Rupiah stabilizes, and hopefully regains its conversion rate pre-May 2013, this fund will face a substantial negative currency headwind.

I will be averaging down at some point with a 50 share buy.  I have not changed my long term positive view of this emerging market.

USD/IDR Currency Conversion Chart (Indonesian Rupiah)

IF page at CEFConnect

General Electric (own 531+ shares):

While I view GE's 4th quarter report as okay, I was left with a blah kind of feeling about it. SEC Filed Press Release E.P.S. was reported at $.53 per share, excluding items, which was in line with estimates. Revenues rose 3.1% Y-O-Y to $40.38B. GE's industrial profit margin did not meet the expectations set by the company earlier in the year and reaffirmed as late as last month. Bloomberg Industrial segment profits rose 12.2%. The backlog numbers look good. GE generated $17.4B in cash from operating activities in 2013, with its industrial businesses contributing $11.5B of that amount. The backlog of equipment and services was at its "highest level ever at $244 billion, up $15 billion from the third quarter".

Earnings Call Transcript - Seeking Alpha (see page 2 on failure to hit margin goal)

The shares declined in response to this report last Friday:

Closing Price 1/17/14: GE: $26.58 -0.62 (-2.28%)

Orkla (own 100 shares):

Schafer recommended Orkla in the 2014 Barrons Roundtable.

Video Interview with Schafer: Video - Oscar Schafer

Bought 100 ORKLY at $7.61


1. Sold 209+ ZTR at $13.88 (see Disclaimer):

Snapshot of Trade:

Closing Price 1/13/14: ZTR: $13.85 -0.05 (-0.36%)

Snapshot of Profit:

2014 ZTR 209+ Shares +$198.52
As shown in the preceding snapshot, I realized a gain on all of the shares purchased with the dividends. The total dividend amount was $119.85, which brings the total return number up to $315.36 or 11.7% annualized based on my total cost per share including the shares purchased with dividends. The initial purchase was made about 10 months ago.

Item # 2 Bought 200 ZTR at $12.835 (March 12, 2013 Post)

Prior Trade: I still own 100 shares bought in the ROTH IRA:

Item # 4 Bought 100 ZTR at $12.82-ROTH IRA (7/16/13 Post)

Security Description: The Zweig Total Return Fund (ZTR) is a balanced CEF.

ZTR Page at CEFConnect

Data Day of Trade (1/13/14):
Closing Net Asset Value Per Share: $15.24
Closing Market Price: $13.85
Discount: -9.12%
Three Year Average Discount: -11.51%

When I bought the shares on 3/5/13, the discount was at -11.29%, based on a closing net asset value of $14.43 and a market price of $12.88. The narrowing of the discount contributed to the gain.

Rationale: I achieved my goal of a 10+% annualized return. I will consider buying back the shares when the market undergoes a significant correction.

Throughout my investing history, which goes back more than 4 decades, I have never been comfortable with moon shots. I may even be more comfortable navigating cataclysmic declines such as the ones experienced in 1974, 2000-2002 and September 2008 to March 2009. Why? I view stocks as "safer" after those 50%+ declines. A huge price decline reduces risk, while a 80%+ rise without even a 10% correction increases risks for both new purchases and the loss of unrealized profits. In short, the parabolic rise creates more anxiety in the OG.

Closing Price Last Friday: ZTR: $13.87 -0.09 (-0.64%)

2. Sold 50 of 100 KFN/P at $24.45 Roth IRA (see Disclaimer): I sold the highest cost 50 lot bought first at $24 and kept the lowest cost 50 share lot bought at $23. On 1/6/13, this security went ex dividend for its quarterly distribution, and I will receive that distribution on the 100 share lot. The payment was $46.09.

Quarterly Dividend 
Snapshot of Trade:

2014 Sold 50 KFN/P at $24.46
Snapshot of History:

Item # 9 Added 50 KFN/Pr at $23-ROTH IRA (12/17/13 POST)Item # 1 Roth IRA: Bought 50 KFNP at $24 (11/27/13 Post)

Security Description: The KKR Financial Holdings LLC Pfd. 7.375% Series A (KFN.P) is an equity preferred stock that pays cumulative and non-qualified dividends at the fixed coupon rate of 7.375% on a $25 par value.

Rationale: While I made only a $8.98 profit, plus one dividend payment on the 50 share lot sold, I have reduced my risk by both lowering my cost basis and improving my current yield based on the lower total cost per share number.

This kind of trade, which involves splitting orders into small pieces, allows for averaging down without exceeding my exposure limit and is a standard and routine trading technique that I implement as part of my risk management.

When and if the price falls below $22, I would consider buying back the 50 shares sold at $24.46, assuming no material adverse event specific to the issuer. Assuming that purchase was made, I would then likely sell the shares bought at $23 on a pop back to $24.5 to $25, or higher and then keep the shares bought at less than $22. Admittedly, this is small ball designed to take advantage of the natural volatility in share prices. For those unfamiliar with the phrase "small ball", it is a baseball term: Small ball - Wikipedia

As previously noted, KFN may be acquired by KKR, assuming shareholder and regulatory approval, which should cause an increase in the credit rating of KFN/P.

Closing Price Last Friday: KFN-P: $24.35 -0.15 (-0.61%)

3. Sold 50 TCBIL at $22.45 in Roth IRA (see Disclaimer): This is another example of small ball.

Snapshot of Trade:

2014 Roth IRA Sold 50 TCBIL at $22.45
Snapshot of History:

Snapshot of Profit:

2014 Roth IRA 50 TCBIL +$43.48
I also received one quarterly interest payment of $20.31.

Rationale: This was a spur of the moment decision.

In the final analysis, I am not pleased that the Federal Reserve has left me with unsatisfactory income choices due to its long lasting Jihad Against the Saving Class. The investor assumes a ton of interest rate risk in TCBIL, which matures in 2042, in order to receive a 6.5% coupon on a $25 par value.

While my current yield was higher due to the par value discount, it would still be easy to lose the value of one year's interest payments due to a relatively small rise in long term interest rates. The pop in rates starting last May caused this security to decline 18.67% from a closing high in May until I purchased 50 shares at $21.3. Item # 5 Paired Trade Roth IRA Sold 50 DRE at $15.95 & Bought 50 TCBIL at $21.3 (10/19/13). The paired trade worked in that TCBIL rose some in price, paid me more in a quarterly distribution, while DRE subsequently declined in price, closing at $14.92 on 1/13/14. This is what is meant by small ball.

After selling TCBIL, I decided to repurchase DRE discussed below in Item # 4.

I will consider buying 50 TCBIL shares back when and if this junior bond slides sufficiently to produce a 8% current yield. That would require a price below $20 after taking into account commission cost.

Closing Price Last Friday: TCBIL: $22.49 +0.09 (+0.40%)

4. Bought Back 100 DRE at $14.99 (see Disclaimer): I have been buying this security in the ROTH IRA but this purchase was in a taxable account.

Snapshot of Trade:

2014 Bought DRE 100 Shares at $14.99
Security and Company Description: The Duke Realty Corp (DRE) is an equity REIT that owns, develops and manages industrial and medical properties.

Company Website: Home - Duke Realty

A list of properties by locality can be found in the 2012 Annual Report starting at page 15. 2012 10-K

In December 2013, Duke Realty sold $250M in 3.875% senior notes maturing in 2021. The proceeds were used to redeem $250M of maturing notes that had a 5.4% coupon.

Back in January 2013, the company sold $250M in 3.625% senior notes maturing in 2023. The company redeemed that month its outstanding 8.375% Series O equity preferred stock. Duke Realty Corporation Redeems Series O Preferred Shares in Alignment With Capital Strategy

In September 2012, Duke Realty sold $300M in 3.875% senior notes maturing in 2022.

The company has been refinancing debt at lower interest rates.

Prior Trades: In 2013, I realized a $368.22 profit trading small lots in the Roth IRA (snapshot in first linked post below).

Item # 5 Paired Trade Roth IRA Sold 50 DRE at $15.95 & Bought 50 TCBIL at $21.3 (October 2013)-Item # 2 Bought 50 DRE at $14.5-Roth IRA August 2013;  Item # 1 Sold 100 DRE at 17.24-Roth IRA (April 2013)Item # 4 Bought 50 DRE at $13.79-ROTH IRA (November 2012)(no mention in the blog of the other 50 share buy included in the 100 share lot sale)

I had one other flip: Item # 3 Sold 50 DRE at $15.31 (May 2011)Item # 5 Bought 50 DRE @ 13.45-ROTH IRA (February 2011)

Recent Earnings Reports: For the 2013 third quarter, Duke Realty reported a core FFO of $.28 per share and an AFFO of $.22 per share. The company described leasing momentum as "very strong". In-service occupancy was reported at 93.5%. Same property net operating income growth was up 4.4% compared to the 2012 third quarter. The company reaffirmed 2013 FFO guidance of between $1.07 to $1.11. SEC Filed Press Release

On 9/30/13, Duke owned or jointly controlled 771 in service properties with more than 147M square feet of leasable space. Industrial properties represented 82.8% of that square footage. 10-Q at page 24

2013 3rd Q 10-Q (net real estate investments at $6.885+B after depreciation; long term debt at $4.435+B; 41.4M shares were sold at $14.25 in January 2013 raising approximately $571.9M and another $60.7M was raised during the first nine months of 2013 by selling 3.7M shares under the "market equity program", page 16;)

Rationale and Risks: I view Duke Realty as a turnaround play in the REIT space. This potential was apparently recognized recently by BMO Capital who raised DRE to outperform with a $18 price target.

An improving economy will benefit industrial REITs in several ways. Perhaps the most important is an improvement in occupancy levels. Needless to say, rent is not received on vacant space. Rent increases are easier in good times and there is more competition for good locations among potential customers.

The dividend yield at a total cost of $14.99 per share would be about 4.53%. I would judge this kind of investment to be a success with a 10% annualized total return.

There is much to dislike about DRE's recent past, including a horrendous dividend cut in 2009 and a massive destruction of shareholder value during the recent Near Depression. Those items and other negative issues and facts are discussed in Item # 4 Bought 50 DRE at $14.5-Roth IRA August 2013. One of the risks is that there are low barriers to entry.

In 2009, the quarterly dividend was slashed first from $.485 to $.25 and then to $.17. The dividend has has not been raised since the $.17 per share quarterly rate was established in the 2009 second quarter. Dividend History | Investor Relations | Duke Realty That is just a huge negative from my point of view.

The share price did a swan dive, quickly moving from a close over $44 in February 2007 to a head first splash into concrete, bottoming near $5. DRE Interactive Chart Fortunately, I did not own the stock during that period of time.

On a more positive note, the quarterly dividend was continually raised from $.225 in 1994 to the $.485 rate in effect during 2008. The share price went from $8 in 1993 to $44 in early 2007.

Given the recent abysmal dividend and stock history, I elected to repurchase the shares in a taxable account rather than risk losing money in a retirement account. I do not anticipate a dividend increase anytime soon and the current yield would be relatively low for securities owned in a retirement account where a premium is placed on income generation.

Basically, and then is just a matter of judgment, I view the downside risk for a long term hold to be minimal at a $15 per share purchase price while the potential upside is greater provided the economy continues to improve. So, if I am become an involuntary long term owner, I would eventually expect to realize a decent, far from spectacular, total annualized return over a 5 to 10 year period.

The company discusses risk factors incident to its business starting at page 7 of its 2012 annual report: 2012 10-K

Future Buys and Sells: I monitor the Duke Realty preferred shares for possible purchase but the yields on those securities have generally been too low.

At a $23.63 price, the 6.6% fixed rate coupon DREPRL has about a 6.98% yield. DRE.PL Stock Quote I would probably be a buyer of a small lot at a 7.5% yield. S & P rates DRE's preferred stocks in junk territory at BB while Moody's gives those securities a Baa3, which is the lowest investment grade rating.

I would generally prefer to own this REIT's common shares, which at least give me an equity kicker for playing the potential turnaround. Preferred shareholders have no ownership interest in the business, although a change of control provision when present in the prospectus may give them a right to convert into common shares, provided there is a change of control and the issuer does not elect to redeem the preferred stock at par value.

If I can achieve a $17 price within 12 months, I would likely sell the shares. At some point, it would probably make more sense to quit trading this security and just hold it long term when purchasing shares between $12 and $15. I may elect to hold the shares long term provided Duke continues to make progress filling its vacant space and implementing same store operating income growth.

Closing Price Last Friday: DRE: $14.92 -0.18 (-1.19%)

5. Sold 202+ NMO at $12.33 (See Disclaimer):

Snapshot of Trade:

Snapshot of Profit:

Item # 4  Bought: 200 NMO at $12.02

Security Description: The Nuveen Municipal Market Opportunity Fund (NMO) is a leveraged municipal bond fund that pays monthly dividends.

NMO Page at CEFConnect

Last SEC Filed Shareholder Report (period ending 10/31/13): NMO SEC Form N-CSR

Sponsor's Webpage: NMO - Nuveen Municipal Market Opportunity Fund

NMO at Morningstar  (rated 3 stars)

Rationale: I decided to lighten up some on longer duration leveraged bond funds, choosing mostly recently acquired positions that could be sold at a profit.

Closing Price Last Friday: NMO: $12.41 +0.06 (+0.49%)

6. Pared Intel Again Before Earnings: Sold 41 at $26.73 (see Disclaimer): This trade was made before Intel reported earnings last Thursday.

Snapshot of Trade:

2014 Sold 41 Intel at $26.73
I have been selling my higher cost Intel shares while keeping the lower costs shares bought shortly after Lehman's failure.   

Snapshot of Position Before Pare:

191+ Shares Average Cost Per Share=$16.95
Snapshot of Position After Pare:

150+ Shares Average Cost Per Share=$16.32
Snapshot of Profit:

2014 Intel 41 Shares +$298.35
This transaction include a 40 share odd lot purchased in November 2009. Item # 6 Added 40 shares of Intel at $19.08 (12/3/2009 Post)

I pared the Intel position late in 2013, realizing a gain of $358.85. Item # 5 Pared Intel: Sold 42 at $23.64 and 45 at $25-Highest Cost Shares (12/10/13 Post) As shown in a snapshot contained in the preceding linked post, my average cost prior to starting the pares was $17.91 per shares with the first purchase made 10/14/2008 at a total cost of $16.04, with the next purchase a few days later at a $14.73 cost. I still own those shares.

The total profit realized from shares purchased after Lehman's collapse now stands at $657.20. I am down to less than 1 share purchased with reinvested dividends and have sold all of the shares purchased in that manner profitably. I am no longer reinvesting the dividend.

Rationale: The reasons for paring this position are discussed in Item # 6 of the 12/10/13 Post. I am now more comfortable holding the remaining shares after taking some profits, harvesting several years of dividends, and reducing the average cost of the remaining shares to $16.32 per share.

It remains to be seen whether Intel can make a good return selling chips for smartphones and tablets. There is a considerable amount of debate on two critical points: (1) will Intel's new products  be able to gain significant market share in those mobile devices and (2) will Intel earn a favorable return on its invested capital. Some of that debate can be found in Intel focused articles published almost daily at Seeking Alpha. Even the Intel bulls will admit that margins for mobile chips will be lower than the 60%+ realized by Intel for its PC chips and will cause that number to shrink as those lower margined products become a larger part of Intel's business.

The Jefferies' analyst, Mark Lipacis, recently reiterated a buy with a $32 price target. If I see that $32 price this year, I strongly suspect that the remaining 150+ shares will be sold. The Jeffries analyst predicts that Intel could gain a 50% market share in tablets and a 20% share in smartphones by 2016. If those numbers prove prescient, and that is one huge "if", then Lipacis may be in the ballpark with a $3.00 E.P.S. number for 2016.

As noted by Tiernan Ray in his Barrons blog, there has recently been a rush of good analyst vibes about Intel in advance of Intel's earnings. The JPM analyst, who had been in the bear camp, changed direction last week before Intel released its 4th quarter report, raising his price target to $29 from $20. And, as noted in that last referenced Barron's article, Bill Nygren observed that Intel is spending more money now on mobile than the rest of its competitors combined.

After the close last Thursday, Intel reported 4th quarter E.P.S. of 51 cents per share on revenues of $13.8B. The consensus estimate was for $.52. The company generated approximately $6.2B in cash from operations. Revenues for the P.C. Client Group was $8.6B, up 2% sequentially and flat year-over-year. The Data Center Group revenue was up 9% Y-O-Y. Gross margin was reported at 62%. Intel reports tablet and smartphone chips in a third division that it calls "Other Intel Architecture" which had an operating loss of $620M in the 4th quarter.

Prior to the earnings release, the consensus estimate was for an E.P.S. of $1.9 in 2013 and $1.9 in 2014. Intel actually earned $1.89 per share in 2013, down from $2.13 per share in 2012. The company expects 2014 revenue to be flat with 2013.

Earnings Call Transcript - Seeking Alpha

The shares sank almost 5% in after hours trading (1/16/14).

Closing Price Friday 1/17/2014: INTC: $25.85 -0.69 (-2.60%)

7. Bought Back 100 EWM at $15.23 (see Disclaimer):

Snapshot of Trade:

2014 Bought 100 EWM at $15.226

Closing Price Day of Trade 1/15/14: EWM: $15.22 -0.24 (-1.55%)

EWM Historical Prices

iShares MSCI Malaysia Index Fun ETF Chart

The S & P 500 rose that day 9.50 or +0.52%.

Security Description: The iShares MSCI Malaysia ETF (EWM) is an ETF that owns stocks based in Malaysia.

Sponsor's website: iShares MSCI Malaysia Index Fund (EWM): Overview - iShares (expense ratio after waiver=.49% and .51% without waiver; 45 holdings as of 1/14/14; 12 month dividend yield 3.06%)

Most emerging markets have substantially underperformed the S & P 500 over the past one and three years. Through 12/31/2013, EWM had a one year total return of 7.09% and an annualized total return of just 6.57% over the 3 year period ending 12/31/13. The ten year annualized total return is much better at 12.92%. iShares MSCI Malaysia ETF (EWM): Performance - iShares

I am not familiar with the stocks owned by this index fund: iShares MSCI Malaysia ETF (EWM): Holdings - iShares

FTSE Bursa Malaysia KLCI Index Chart (2 years)

USD/MYR Currency Conversion Chart

EWM Page at Morningstar

Geographic Area: 127,350 square miles (roughly the size of New Mexico)

Population: 28.33 million in 2010 Malaysia - Wikipedia

Literacy: 93.1% Literacy rate by Country- Wikipedia

Malaysia | Data-World Bank (forecasted 2014-2016 GDP growth between 4.8%-4.9%-see chart)

Malaysia GDP Annual Growth Rate

Prior Trades: I realized a $172.64 profit trading EWM last year and hope to do better in 2014. Item # 5 Sold 100 EWM at $16.01 (9/21/13 Post)-Item # 4 Bought Back 100 EWM at $15.29 (8/17/13 Post); Item # 1 Sold 100 EWM at $16.45 (May 2013)-Item # 1 Bought 100 of the ETF EWM at $15.23 (January 2013)

Rationale and Risks: I am hoping to catch this market on an upswing. By selling shares last year, I was simply reaping whatever profit I could given the overall lackluster performance of Malaysia's stock market.  As shown in the performance numbers referenced above, this market can take off and produce really good returns:

2010: +36.24%
2009: +51.36%
2007: +45.49%
2006: 36.2%
2003: +25.07%

While GDP growth has slowed some in Malaysia, growth is still averaging over 4% per year.

The risk is highlighted by the negative 41.36% return in 2008 and the recent weakness in Malaysia's currency against the USD. On May 6, 2013, one USD would buy about 2.98 MYRs (Malaysia's ). On 1/15/14, the day of my last EWM purchase, one USD would buy about 3.29 MYRs. USD/MYR Currency Conversion Chart That 10.4% MYR currency decline flows through into the value of Malaysian stocks owned by a U.S. ETF priced in USDs. The MYR decline coincided with the taper scare and the concomitant rise of U.S. interest rates starting in March 2013.

The OG may need to acquire more patience with this ETF.

Closing Price Last Friday: EWM: $15.03 -0.06 (-0.40%)

Politics and ETC:

1. U.S. Efforts in Afghanistan Make It Safe for Farmers to Grow More Opium: The Afghanistan government is corrupt and unlikely to remain in power against a determined foe once the U.S. and its allies remove their combat forces. A couple of news stories published last week highlight the transformation of Afghanistan into a "Narco-Criminal State"

The first article summarizes the testimony of a special inspector general who noted that opium production was at an all time high, notwithstanding $7 Billion In U.S. Aid to reduce that production.

In the second article, published by Newsweek, the title sums up the end result: "America Abandons Afghanistan to Drug Lords"

NYT story pointed out that Afghan police officers were not being paid, though the problem would allegedly soon be remedied. How long will the U.S. fund the pay for Afghanistan's police and armed forces? We will soon walk away. "Money Pit: The Monstrous Failure of US Aid to Afghanistan | World Affairs Journal"; "The Afghan Money Pit".

Many will argue that the government could have done better with different strategies and even more money spent in that country. I seriously doubt it.

Americans and our politicians from both tribes just need to accept the fact that we can not snap our fingers and change the world.

The end result of the Afghanistan War was not due to ineffective strategies or insufficient funds devoted to the cause. It is really more about the limits of America's power. The end result was already predicted by what happened to prior efforts to change that country made by Russia and Great Britain.

The U.S. will continue to delve into these long term wars in far away places believing that a new strategy and different plans will somehow change the result. Politicians will never just tell the American people that the best option is a limited military engagement such as the use of air power and a few members of the special forces. In retrospect, the best result was achieved in Afghanistan after the Taliban was routed and dispersed in 2001, with minimal expenditure in funds and minimum U.S. casualties. War in Afghanistan (2001–present) For most politicians, advocating that kind of limited involvement would be political suicide.

The total price tag for both wars is estimated to be over $4 trillion. TheHill  Whatever the number ends up being, all of that money will be borrowed and will need to be financed and refinanced for as long as the U.S. exists. Perhaps that thought needs to linger in a few million brains for longer than a nanosecond.

More citizens certainly need to actually think about all of the costs, balanced against the purported national security objectives, before supporting long term conflicts in places like Vietnam, Iraq and Afghanistan. But, as I said, that is a hopeless objective to achieve. The lessons from Vietnam were obviously not learned by a clear majority of U.S. citizens and the vast majority of policy makers and politicians. I never expected Bush Jr. and Cheney to learn anything. Closed minded people are not capable of learning anything. Closed minded people who create their own reality, and are unable to engage in anything remotely resembling an intelligent assessment of reliable information, are simply dangerous in positions of authority.

2. Chris Christie: So far, there is no smoking gun showing that Christie was directly involved in road closure near Fort Lee. At a minimum, that petty and vindictive act reinforces a common perception of Christie as an ill tempered and vindictive politician. I am talking about temperament rather than policies here. Obama has the temperament to be President but lacks leadership skills. Christie may or may not have more leadership skills, hard to say until he has to deal with national and foreign policy issues, but he lacks the temperament needed in a President.

I  thought that it was unlikely that Christie could win the republican nomination for President before this development. If the GOP wants to win in 2016, rather than self-destruct again, they would nominate someone like Bob Corker, the senator from Tennessee, who would draw independents rather than repel them. I voted for Corker.

Jimmy Fallon and Bruce Springsteen gave quite a performance the other night, singing new lyrics for "Born to Run" that mocked Christie. Bruce Springsteen & Jimmy Fallon: "Gov. Christie Traffic Jam" ("Born To Run" Parody) - YouTube

That rendition may end up being as memorial as Tina Fey's impression of what's her name from Alaska, who has considerable difficulty forming a coherent thought.  (e.g.: Tina Fey as Gov. Palin - YouTube)

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