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Want Income? Buy Stocks, Not Bonds!

Did you know that as of today's close, fourteen (14) of the 30 Dow stocks have a higher yield than the benchmark 10-year US Treasury?  It's true!  Today, the 10-year closed with a paltry yield of 2.86%, down from a close of 2.99% on Monday.  As the anti-risk crowd piles up on one side, you should be taking a look at equities that not only afford a higher yield, but have much more room to run on the upside.  Here is the list of the Dow stocks currently sporting a higher yield than Treasuries:
1) Verizon (VZ) 6.43%
2) AT&T (T) 6.28%
3) Pfizer (PFE) 4.45%
4) Merck (MRK) 4.33%
5) Kraft Foods (KFT) 3.91%
6) DuPont (DD) 3.86%
7) Chevron (CVX) 3.64%
8) Johnson & Johnson (JNJ) 3.61%
9) Home Depot (HD) 3.29%
10) Procter & Gamble (PG) 3.22%
11) Coca-Cola (KO) 3.12%
12) McDonald's (MCD) 3.12%
13) Intel (INTC) 3.05%
14) General Electric (GE) 2.91%

Honorable Mention:
1) Travelers (TRV) 2.84%
2) Exxon-Mobil (XOM) 2.81%

S&P 500 ETF (SPY) Up 1.85% Year-To-Date

The S&P 500 is what many consider to be the broad stock market, as it encompasses more names than the Dow, which only includes 30 stocks.  IF you follow this blog, you know that I use the Wilshire 5000 to track the broad market, as it includes even more names than the S&P, and I believe provides a better picture of the market as a whole. 

The ETF that tracks the S&P 500, ticker SPY, closed today at $112.97.  The index closed on December 31, 2009 at a price of $111.44, for a price appreciation of 1.37%.  However, if you follow this blog, you know that I believe in the reinvestment of dividends.  The SPY paid a dividend of $.531 on June 18th of this year, and usually pays a dividend four times a year.  Therefore, with the inclusion of the reinvestment of said dividend, you would have picked up a fractional share on June 18th at a price of $111.73.  All told, with the reinvestment of the dividend, the broad market has returned about 1.85% thus far this year.

My Portfolio Is Beating The Market By Over 3%!

Today was a great day for the market.  If you were paying attention, you noticed that the market posted a better than 2% gain today!  If you've been reading this blog, you would know that I think we are primed for a sustained rally through at least the end of the year, and probably through 2012 as well.  I have been doing a lot of research lately, and all of the data I have looked at suggests that we are going to see a nice run.  Let's get into it...

The Wilshire 5000 closed at 11,735.70, up from 11,507.70, or 1.98%, since my post on 7/25/10.  The Wilshire 5000 has now re-crossed it's 200-day moving average as of today, closing 1.54% above the average.  This is a bullish sign, but I would like to see it maintain above that level for at least a few more days.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 38.2% BULLS, and 34.9% BEARS, for a spread of 3.3%. This is in comparison to a reading of 35.6% BULLS, and 35.6% BEARS, for a spread of 0.0% on July 20th.

The Volatility Index closed Friday at 22.01, down from 23.47 back on July 23rd.

Now for the portfolio...(updated for dividends)
1) Verizon at $29.56, down 3.26% for the year, inclusive of dividends.  FTR, the recent spinoff, recently closed at $7.71/share, worth $53.97 to this portfolio currently.

2) AT&T closed at $26.53, up 1.13% for the year, inclusive of dividends.

3) GE closed at $16.41, up by 9.10% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.74, down by 15.84% since my buy.  I have decided to take the remaining cash in the portfolio and put it to work in this name.  I had roughly $675 in cash from gains that I took in the beginning of the year.  As such, I am buying another 18 shares of this ETF for the portfolio, bringing my current holdings to 38 shares, or $1,659.  I am overweight this name because I think the risk trade is going to be coming back on, and coming back on in a big way.  US Treasuries are near historic lows, and I simply believe they have run out of upside.  As such, I think being short T-Bills is a great place to park money for the foreseeable future. 

5) FXP, the doubleshort China ETF, closed at $33.90, down by 22.02% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $17.03, up by 26.49% since my buy, including the reinvestment of dividends. 

7) NLY closed at $17.34, up by .67% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $261.85 up by 35.15% since my buy. 

9) January '12 Citigroup Calls closed at $.23, down by 47.73% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $152.74, up by 12.23% since my buy.

Overall, the portfolio is up by 5.29% (4.22% for the DOW Dogs), versus 2.07% for the Wilshire 5000. The current basket of ten stocks that I am currently invested in, including dividends, is down .75% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 3.22% outperform.

Quickly before I go, I would like to give an update on the three names I recommended a week or so ago.  Since that time, the Wilshire 5000 is up .73%.  The three stocks I recommended are currently up 1.86%, beating the market by over 1.0%.  JNJ closed at $58.72, up 1.70%.  KMB closed at $65.13, up by 1.56%.  Finally, MRO closed at $34.28, up by 2.73%.

Stocks Are Cheap!

This is a post on another blog that I follow.  This echoes what I have been saying for a while now.
http://gregmankiw.blogspot.com/2010/07/stocks-look-cheap.html

What a Crazy Trading Day!

After opening the day down after a "weak" GDP report, the market clawed it's way back into positive territory for the day.  The Wilshire 5000 closed at 11,492.90, down .04% for the year, and .54% below the 200-day moving average.  My portfolio is now 4.62% in the black for the year, and beating the market by 4.66%.  I will publish an expanded post later this weekend.

Market Closes Below 200-Day Moving Average

The Wilshire 5000 closed today at 11,529.18, .21% below the 200-day moving average of 11,553.34.  The market crossed above the 200-day moving average two days ago, and stayed there before closing below today.  The 200-day moving average is a significant technical mark, while the market is now below that technical level, the 200-day moving average is still in an uptrend, which is bullish.  Every market needs to take a day here and there to rest and consolidate, and today was one of those days.  While the market was down today, the overall fundamentals of the market are bullish.

Names To Buy - 7/26/10

I wanted to post a quick message with some names I am rating as a buy right now:
1) Johnson & Johnson (JNJ) - $57.74 per share currently.  JNJ recently posted earnings of $1.21/share on the 21st of July, beating estimates.  JNJ is currently yielding 3.74% (the 10-year US Treasury is currently 3.03%), is trading at 2.54x price to sales and an 11.91 PE ratio.

2) Kimberly Clark (KMB) - $64.13 per share.  KMB just reported earnings of $1.20, beating by $.07.  KMB currently yields 4.12%, trades at 1.33x price to sales, 9.49x price to cash, and carries a 13.59 PE ratio.

Finally...
3) Marathon Oil (MRO) - $33.37 per share.  Marathon will report earnings on August 3rd.  MRO yields 3.00%, trades at .38x price to sales, 1.05x price to book, 5.26x price to cash flow, and carries a PE of 16.98. 

I think all three of these names are excessively cheap.  As I have detailed in other posts, I think the market is primed for a sustained up leg.  All of these names are yielding near or higher than the 10-year US Treasury, and have exception valuations, especially Marathon.

Portfolio Update - 7/25/10

Before reading, please see the disclaimer in the 'About Me' section.

It has been two weeks since my last post, and we are smack dab in the middle of earnings season.  So far, earnings have been strong, and I expect we will see much of the same this week as we have many large companies reporting this week.

The Wilshire 5000 closed at 11,507.70, up from 11,225.80, or 3.80%, since my post on 7/12/10.  The Wilshire 5000 is now .33% below it's 200-Day Moving Average.  Pretty soon I think we will see the index cross above it's 200-day MA, putting in support, and moving higher through the end of the year.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 35.6% BULLS, and 35.6% BEARS, for a spread of 0.0%. This is in comparison to a reading of 37.0% BULLS, and 34.8% BEARS, for a spread of 2.2% on July 12th. As I said in my last update, ideally we would see the BEAR percentage cross the BULL percentage, which is exactly what we saw in the reading on 7/13/10, one day after I wrote that.  This is a sign of capitulation in the market, which has been confirmed by some other data that I look at on a regular basis.  As you will notice, we have had a fairly steady rally after that reading.  On 7/13, the Wilshire 5000 closed at 11,411.90, almost 1% lower than where we are now.  The prior week on 7/6 the market closed at 10,683.50 with a BULL reading of 37.0%, and a BEAR reading of 34.8%.

The Volatility Index closed Friday at 23.47, down from 24.98 back on July 12th.

Now for the portfolio...(updated for dividends)
1) Verizon at $28.02, down 8.30% for the year, inclusive of dividends.  Verizon saw a nice pop this week on the back of strong earnings.  Many analysts have been saying on TV this week "would you rather own a Treasury sub-3.%, or Verizon yielding about 7%?  I'll take Verizon."  Welcome to the bandwagon folks. FTR, the recent spinoff, recently closed at $7.43/share, worth about $52.01 to this portfolio currently.

2) AT&T closed at $25.54, down 2.65% for the year, inclusive of dividends.

3) GE closed at $15.71, up by 4.41% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.42, down by 26.98% since my buy. 

5) FXP, the doubleshort China ETF, closed at $35.55, down by 18.23% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $17.29, up by 28.42% since my buy, including the reinvestment of dividends. 

7) NLY closed at $17.88, up by 3.80% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $259.94 up by 34.16% since my buy. 

9) January '12 Citigroup Calls closed at $.23, down by 47.73% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $147.38, up by 8.29% since my buy thanks to an SEC settlement, and a strong quarterly report.

Overall, the portfolio is up by 4.31% (-.33% for the DOW Dogs), versus .09% for the Wilshire 5000. The current basket of ten stocks that I am currently invested in, including dividends, is down 1.79% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 4.22% outperform.






In a closing note, I would like to update how my trades in SPY and GOOG calls went.  As you know, I had a nice gain in both going into expiration.  Unfortunately, Google unexpectedly missed earnings, and that call spread expired worthless.  Live and learn.  I also ended up having to cover my SPY calls at a $.11 loss, after a couple tough trading days leading into expiration.  Next time, I will be sure to take profits. 

March options have recently become available for trading.  As such, I have recently purchased a block of C $7 calls for $.05.  I am long-term very bullish on Citi, and I am expecting these calls to net me a nice gain in the next 8 months or so.

Intel, YUM! Beat on Top and Bottom Lines

I love earnings season.  For those of you paying attention, YUM! reported first and beat on both the top and bottom lines.  However, they took a bit of a hit, partly, because they stated the European market was soft, and will remain soft.  Get right out of town.

Intel, on the other hand, killed their quarter.  Their CEO said that was the best quarter they have had in their 40 years of existence, and they also raised guidance going forward.

Fundamentally, I still believe the market is undervalued, and I don't think the three DOW components that have reported will be the only three with this same theme.  I am on the side of the fence that believes the lows for the year are in, and there is money to be made.

If you have been following over the last few days, you would know that I have been playing the SPY $110 calls, as well as the Google $480/$510 call spread.  As of today's close, the SPY call was at $.75 (150% gain), and the Google call spread was at $13.10 (71.24% gain), not too shabby.  As of the close of after hours action in the SPY (following earnings after the bell), the SPY was $.66 above today's close.  This is an even stronger after hours move than last nights, and when I woke up this morning the SPY was trading +$1.00 in pre-market action.  I expect more of the same tomorrow out of the market, and a big gain in my SPY calls.  I am also expecting the Google call spread to move closer to capping itself out.

Tomorrow afternoon I will be raising cash to buy Citi January '11 $7.50 calls at $.04.  JPM will be the first financial to report before the bell Thursday, and we will also see BAC later on.  I expect all of the major financials to beat expectations and take the sector higher.  As such, I want to get into C ahead of the number Thursday pre-market.  Furthermore, I expect to see C beat the $.05 expectations in Friday's pre-market announcement.  C earned $.15 in Q1 2010, and I am looking for a number that is near or slightly higher that performance.  On a valuation side, I believe C is a $5 stock as of Friday's earnings.  Going forward, I see the passage of FinReg to be worth $.25-$.50 to the share price.  I also see the government's complete sale of their shares to be worth north of $1 per share in the stock.  All told, I think $.04 for these options is a huge upside bet.

"All In." - 7/12/10

Both Alcoa and CSX posted Q2 earnings after the bell today, and both of these companies beat estimates on the bottom line AND the top line.  Furthermore, Alcoa boosted guidance on increased demand for aluminum going forward.  Both companies gave a positive outlook for their customers going forward as well.


On a day where the market was up modestly awaiting these announcements, I am left feeling even more bullish than yesterday.  I am expecting an up day tomorrow, followed by earnings beats for both YUM! and Intel.  We'll see.

Yesterday, I told you about a few trades I had made in my personal portfolio, and I think they are worth mentioning what I did.  Between 7/7 and 7/9 I averaged into upside SPY calls expiring this week at $110 (roughly) 1,100 on the S&P.  My average price is $.30, and currently the calls closed today at $.40.  Not a bad little gain.  As I expect the market to make a fairly decent move upward this week, I am going to hold onto my position and see what comes of it.  Currently, the SPY is trading up another $.38 in the after hours.

As I detailed yesterday, I was looking at buying an out of the money call spread on Google today at $470 and $500.  Google made a fairly decent move to the upside this morning, and the $470 calls, I feel, got a bit beyond my price range.  Instead, I purchased a $480-$510 calls spread in Google for this week for $7.65.  I expect Google to trend upwards with the market leading into earnings after the bell on Thursday.  As I detailed yesterday, I am expecting an estimates beating on Thursday, and I think this trade has the potential to be stopped out at $510 pending a solid number from Google.  Time will tell.

What A Rally! Earnings Season Here We Come! 7/12/10

Before reading, please see the disclaimer in the 'About Me' section.

Again, it has been almost a month since my last post.  I need to do a better job of keeping up with this blog.  Here is my current analysis of the market, as well as an update of my portfolio...

The Wilshire 5000 closed at 11,225.80, down from 11,668.80, or 3.80%, since my post on 6/20/10.  The Wilshire 5000 is now 2.57% below it's 200-Day Moving Average.  The Wilshire 500 closed as much as 7.53% below it's 200-Day Moving Average on 7/2/10.  Since then, we have gained almost 600 points on the Wilshire 500 since then.  Furthermore, the Wilshire 5000's 200-Day moving average has now entered into an uptrend.  This is bullish for the market if it holds, which I think it will.  Earnings start in earnest this week, and I am on the side that thinks we will see them come in better than expected, for the most part.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 37.0% BULLS, and 34.8% BEARS, for a spread of 2.2%. This is in comparison to a reading of 41.1% BULLS, and 33.8% BEARS, for a spread of 7.3% on June 29th. In an ideal world, we would see the BEAR and BULL percentages cross, and/or the BEAR reading come in at or above 35.00%.  34.80% for me is close enough for government work, especially with the earnings forthcoming this week.  I think the market has become, or did become, overly bearish in the past two months. 

The Volatility Index closed Friday at 24.98, up from 23.79 back on June 20th.

Now for the portfolio...(updated for dividends)
1) Verizon at $26.65, down 12.78% for the year, inclusive of dividends.  However, on July 1st we had a spinoff of FTR.  Verizon shareholders got 1 share of FTR for every 4.2 Verizon shares held.  Therefore, I have received (7) shares of FTR.  Inclusive of the spinoff, my combined Verizon and FTR shares are down 7.41%, inclusive of dividends since my Verizon purchase in the beginning of the year.

2) AT&T closed at $24.83, down 5.35% for the year, inclusive of dividends.

3) GE closed at $14.95, down by .61% for the year, inclusive of dividends. 

4) TBT, the doubleshort U.S. Treasury ETF closed at $36.99, down by 25.84% since my buy. 

5) FXP, the doubleshort China ETF, closed at $37.36, down by 14.07% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $16.98, up by 25.20% since my buy, including the reinvestment of a dividends. 

7) NLY closed at $18.15, up by 5.37% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $259.62 up by 34.00% since my buy. 

9) January '12 Citigroup Calls closed at $.25, down by 43.18% since my buy.  Still long-term bullish on Citi.

10)  GS closed at $138.06, up by 1.44% since my buy.

Overall, the portfolio is up by 3.22% (-4.42% for the DOW Dogs), versus -2.36% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is down 2.88% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 5.58% outperform.

As I have previously stated, I am near-term bullish on the stock market.  Given the Investor Intelligence sentiment which indicates oversold, the beginning of an uptrend in the 200-Day Moving Average,  and corporate earnings (which I believe will be strong), I believe we are about to see a new uptrend in the market.  Looking further out, I believe the elections in November will yield a more conservative government than most are counting on.  The last time we had a Democratic president, and a Republican Congress was in Clinton's term, and the market performed quite well.  Looking at it in the micro sense, I believe these events will be bullish for the market, and more importantly, my portfolio: 1) the government will be completely out of Citi by fall, good for a few points, in my opinion, 2) Goldman will settle with the government, 3) FinReg will finally be passed, removing a lot of uncertainty from financial stocks, 5) the government will finish up stimulus spending, and 6) financials will see strong earnings as interest rates continue to be held near 0.

In my personal portfolio this past week, I bought Jul '10 SPY $110 calls for an average of $.3088.  I also have an order in for a GOOG $670/$700 call spread for $8.25.  I am encouraged by a series of late day rallies in the S&P from this past week, as well as the prospect of strong earnings this week.  Specifically, I think Google is a good value at this level, and we will see an earnings surprise on the back of strong Android results.

Going forward, I am going to try to do a better job of explaining the trades I am making in my personal portfolio, as well as their results.  Happy trading!

Market Update - 6/20/10 It's Been A Long Month!

Before reading, please see the disclaimer in the 'About Me' section.


Sorry folks, it has been exactly one month since my last post.  I was recently married and honeymooning, and was busy with everything involved with that, as well as catching up with what I missed.  I have been following my stocks and the market eagerly over the past few weeks.  If you've had the opportunity, the last few weeks, in my opinion, have been a fantastic time to buy stocks.  Let's get into it....





The Wilshire 5000 closed at 11,668.80, up from 11,170.00, or 4.47%, since my post on 5/20/10. The Wilshire 5000 has now re-crossed above the 200-day moving average 1.42% to the upside.  I called for the market to trend lower in my last post on 5/20, and surely enough lower it went.  We saw a close of 10,951.70 on 6/7/07. 

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 37.0% BULLS, and 32.6% BEARS, for a spread of 4.4%. This is in comparison to a reading of 43.8% BULLS, and 24.7% BEARS, for a spread of 19.1% on May 18th.  In my last post I indicated that my analysis showed that buying opportunities exist when the BULL reading crosses below 40.0%.  According to my analysis, 6/1 was a great time to start the buying, as the BULL reading registered at 39.8%, the second week in a row under 40.0%.  On that date, the Wilshire 5000 closed at 11,184.7, we have since seen an upward move in excess of 4.0% from that date.  While it is possible that we re-test those lows in the time ahead, my longer term outlook suggests that we have seen the start of a new longer-term upturn in the market, and any weakness would result in another buying opportunity.

The Volatility Index closed Friday at 23.79, down from 45.79 back on May 20th.

Now for the portfolio...(forgive me, I have not updated for dividends since April, but will do so for my next addition)
1) Verizon at $29.13, down 10.23% for the year, inclusive of dividends. 

2) AT&T closed at $25.43, down 3.16% for the year, inclusive of dividends.

3) GE closed at $15.95, up by 6.08% for the year, inclusive of dividends.  I see GE's recent move down as another buying sign.

4) TBT, the doubleshort U.S. Treasury ETF closed at $38.65, down by 22.51% since my buy. 

5) FXP, the doubleshort China ETF, closed at $38.89, down by 10.55% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $16.62, up by 22.95% since my buy, including the reinvestment of a dividends.  Told 'ya this one was a gift at $14....

7) NLY closed at $17.89, up by 4.07% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $274.07 up by 41.46% since my buy. 

9) January '12 Citigroup Calls closed at $.27, down by 38.64% since my buy.  Still long-term bullish on Citi.


10)  GS closed at $138.18, up by 1.53% since my buy.

Overall, the portfolio is up by 4.79% (-2.45% for the DOW Dogs), versus 1.49% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is down .87% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 3.30% outperform.

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,170.00, down from 11,560.00, or 6.84%, since my post on 5/8/10. The Wilshire 5000 has now crossed below the 200-day moving average 2.06% to the downside.  I see this as neutral news, and am looking for the correction to take us a bit lower still.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 43.8% BULLS, and 24.7% BEARS, for a spread of 19.1%. This is in comparison to a reading of 56.0% BULLS, and 18.7% BEARS, for a spread of 36.0% on May 4th.  I am looking for the BULL reading to cross below 40.0% next week.  Given the chart located here, I would see this as a buying opportunity.

The Volatility Index closed Friday at 45.79, up from 40.95 back on May 8th. This is the third week in a row that we have seen the VIX trade above 35.

Now for the portfolio...
1) Verizon at $27.76, down 14.45% for the year, inclusive of dividends.  As this stock falls, the yield is only rising.  If I were in the business of buying on the way down with this "imaginary portfolio", I would be adding to my position as we speak

2) AT&T closed at $26.00, down .99% for the year, inclusive of dividends.

3) GE closed at $16.26, up by 8.14% for the year, inclusive of dividends.  I see GE's recent move down as another buying sign.

4) TBT, the doubleshort U.S. Treasury ETF closed at $38.81, down by 22.19% since my buy.  Given where we are in the market and the worldwide economy, I suspect the Fed is going to keep rates low for quite some time, thus keeping this ETF down for quite some time.  I will ponder moving out of this position in the time ahead.

5) FXP, the doubleshort China ETF, closed at $48.24, up by 10.96% since my buy, and after a 1:5 reverse split.  I suspect this one is not done moving higher.

6) GOOD closed at $14.63, up by 8.23% since my buy, including the reinvestment of a dividends.  Like I said previously, I think this stock yielding greater than 10% is a gift, and will be buying some in my retirement account in the next week or so.

7) NLY closed at $15.34, down by 10.77% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $237.76 up by 22.71% since my buy.  In more Apple rumor news, some analyst just put a $330 price target on this puppy.  We'll see how that pans out.

9) January '12 Citigroup Calls closed at $.29, down by 34.09% since my buy.  I am still very bullish on Citi, especially since it is now trading well below it's tangible book value.  Historically, this has been a great place to buy.  I am looking for all financials to pop after the European thing settles, and financial reform is passed which brings me to....


10)  GS.  I said a while back I would buy around the $136 level, and I am doing so today with 7 shares at $136.10.  This rounds out my ten slot portfolio, and I am interested to see how I weather the storm in the months ahead.

Overall, the portfolio is up by 2.47% (-2.47% for the DOW Dogs), versus -2.85% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is down 3.21% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 5.32% outperform.

TIMBERRRRRRRRRRR!!!! Portfolio Update 5/8/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,560.00, down from 12,408.90, or 6.84%, since my post on 5/2/10. The Wilshire 5000 is now only 2.04% above it's 200-day moving average. 

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 56.0% BULLS, and 18.7% BEARS, for a spread of 36.0%. This is in comparison to a reading of 54.0% BULLS, and 18.0% BEARS, for a spread of 37.3% on April 27th.  I have not seen levels this high since I started keeping a spreadsheet of data back in December.  It will be interesting to see what next weeks reading comes in at, because I can guarantee it won't be this high on the BULL side.

The Volatility Index closed Friday at 40.95, up from 22.05 back on April 30th. According to my handy chart, we have not seen levels this high since roughly May of 2009, right after the market bottomed in early March of 2009.

Unless you have been living under a rock, or have been hiking in the backwoods of Canada, you know that the market fell off a cliff this week on fears of Europe, the Euro, and whatever other story the media can drum up.  Historically, the 200-day moving average has been a pretty important barometer of where the market can and will go.  It will be interesting to see in the next week or so how things shake out, and whether or not the market breaks this support level.  From what I have been listening to and reading, a correction of 15 - 20% seems like a reasonable possibility.  That would take the market to at least the 10,834 (per the analysis by Van-Eck Tillman).  I would be ok with this, as should everybody else with money on the sidelines.  The fundamentals in America are improving, and the possibility of a Greek failure is way overblown.  Greece has the 28th largest economy in terms of GDP, or as I heard on CNBC the other day, roughly the size of Michigan.



Now for the portfolio...
1) Verizon at $28.19, down 13.13% for the year, inclusive of dividends.  As this stock falls, the yield is only rising.  It's also interesting that this stock has been appearing on my DOW DOGS screen since late last year.  This, along with JNJ, are the only stocks currently appearing on that screen.

2) AT&T closed at $26.22, down .15% for the year, inclusive of dividends.

3) GE closed at $16.88, up by 12.27% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $41.32, down by 17.16% since my buy.

5) FXP, the doubleshort China ETF, closed at $46.31, up by 6.52% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $15.88, up by 17.47% since my buy, including the reinvestment of a dividends.  Good traded down in the $15 range on Thursday and Friday, bringing the yield back close to 10%.  If you got a chance to get in at that level, or if you get a chance in the next week or two, I think it's a gift.

7) NLY closed at $15.80, down by 8.09% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $235.86, up by 21.73% since my buy.  I heard a trader say yesterday it is not outside the realm of possibility that this stock trades down near $200 near term.  That would also be a gift, look out for such an occurrence.

9) January '12 Citigroup Calls closed at $.37, down by 15.91% since my buy.  Should have waited another week or two to buy these, but no regrets here.  I estimate that by January 2012 Citigroup should be earning at least $1 per share, and a stock price of $7.50 puts the PE at 7.5.  This is cheap compared to banks like US Bank, Bank of America, and all the rest.  This is a long-term trade, and something to be patient with.

Overall, the portfolio is up by 6.03% (-.37% for the DOW Dogs), versus 0.54% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 0.43% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has increased to 5.49%.

As of right now, I am still waiting for Goldman Sacks (GS) to trade down to the $135 level.  If it does so, I will most likely be a buyer.  Goldman closed down below $145, which people a lot smarter than I are saying is an important technical level.  We will wait and see.

How Democracies Fall

This was sent to me recently.  I found it interesting, and decided to re-post it here.

About the time our original 13 states adopted their new constitution, Alexander Tyler, a Scottish history professor at the University of Edinburgh, had this to say about the fall of the Athenian Republic some 2,000 years prior:

“A democracy is always temporary in nature; it simply cannot exist as a permanent form of government.  A democracy will continue to exist up until the time that voters discover they can vote themselves generous gifts from the public treasury.  From that moment on, the majority always votes for the candidates who promise the most benefits from the public treasury, with the result that every democracy will finally collapse due to loose fiscal policy, which is always followed by a dictatorship.”

“The average age of the world’s greatest civilizations from the beginning of history, has been about 200 years.  During those 200 years, these nations always progressed through the following sequence:

1)         From bondage to spiritual faith;

2)         From spiritual faith to great courage;

3)         From courage to liberty;

4)         From liberty to abundance;

5)         From abundance to complacency;

6)         From complacency to apathy;

7)         From apathy to dependence;

8)         From dependence back into bondage.”

Professor Joseph Olson of Hamline University School of Law, St. Paul, Minnesota, points out that some interesting facts concerning the 2000 presidential election:

1)         Population of counties won by: Gore: 127 million; Bush: 143 million;

2)         Square miles of land won by: Gore: 580,000; Bush: 2,427,000;

3)         States won by: Gore: 19; Bush 29;

4)         Murder rate per 100,000 residents in counties won by: Gore: 13.2; Bush: 2.1

Professor Olson adds: “In aggregate, the map of the territory Bush won was mostly the land owned by the tax-paying citizens of this great country.  Gore’s territory mostly encompassed those citizens living in government-owned tenements living off government welfare.”

Olson believes the United States is now somewhere between the “complacency & apathy” phase of Professor Tyler’s definition of democracy, with some 40 percent of the nation’s population already having reached the “governmental dependency” phase.

Portfolio Update 5/2/10

Before reading, please see the disclaimer in the 'About Me' section.
The Wilshire 5000 closed at 12,408.90, down from 12,693.00, or 2.23%, since my post on 4/26/10. The Wilshire 5000 is now only 10.09% above it's 200-day moving average.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 54.0% BULLS, and 18.0% BEARS, for a spread of 36.0%. This is in comparison to a reading of 53.3% BULLS, and 17.4% BEARS, for a spread of 35.9% on April 20th.

The Volatility Index closed Friday at 22.05, up from 17.47 back on April 26th.  We saw the VIX trade above the 20 level a few times this week, which we have not seen for quite some time.

Now for the portfolio...
1) Verizon at $28.90, down 10.94% for the year, inclusive of dividends.  

2) AT&T closed at $26.26, up .42% for the year, inclusive of dividends. 

3) GE closed at $18.86, up by 25.44% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $45.16, down by 9.46% since my buy.

5) FXP, the doubleshort China ETF, closed at $40.93, down by 5.85% since my buy, and after a 1:5 reverse split which occurred a few weeks back.

6) GOOD closed at $16.20, up by 19.84% since my buy, including the reinvestment of a dividends. 

7) NLY closed at $16.95, down by 1.40% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $261.90, up by 35.17% since my buy.

Overall, the portfolio is up by 10.90% (6.13% for the DOW Dogs), versus 7.93% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 6.59% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has increased to 2.97%. 

As of right now, I am going to get back into Citigroup (C).  I am going to buy the January 2012 $7.50 calls for $.44.  I am going to buy 22 calls, which will control 2,200 shares.  I like the long-term outlook for Citi, and the financial sector as a whole.  It's a sight for sore eyes now that the market has given a discount on a lot of these names, mostly due to the Golden Slacks scandal.  

Speaking of Goldman Sachs (GS), if Goldman trades down near $135/share, I will be adding that name to once again fill all ten slots of the portfolio.  Stay tuned.

Portfolio Update, Better Late Than Never - 4/26/10

Before reading, please see the disclaimer in the 'About Me' section.
The Wilshire 5000 closed at 12,693.00, up from 12,451.40 since my post on 4/16/10. The Wilshire 5000 is now 13.22% above it's 200-day moving average.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 53.3% BULLS, and 17.4% BEARS, for a spread of 35.9%. This is in comparison to a reading of 51.1% BULLS, and 18.9% BEARS, for a spread of 32.2% on April 13th.

The Volatility Index closed today at 17.47, down from 18.36 back on April 16th.

Now for the portfolio...
1) Verizon at $28.94, down 10.62% for the year, inclusive of dividends.  

2) AT&T closed at $26.50, up .91% for the year, inclusive of dividends. 

3) GE closed at $19.30, up by 28.36% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $47.31, down by 5.15% since my buy.

5) FXP, the doubleshort China ETF, closed at $38.77, down by 10.82% since my buy, and after a 1:5 reverse split which occurred a few weeks back.

6) GOOD closed at $17.23, up by 27.46% since my buy, including the reinvestment of a dividends. 

7) NLY closed at $16.96, down by 1.34% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $269.50, up by 39.10% since my buy.

Overall, the portfolio is up by 12.36% (6.13% for the DOW Dogs), versus 10.40% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 8.42% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has decreased to 1.96%.

The Value Added Tax

Many of you who watch the news have been bombarded with the speculation/rumors that the current administration is thinking about adding a value added tax in order to help recoup some of our current and future deficit.  For those of you who don't know, the value added tax, or VAT is basically a federal sales tax, tacked on top of the state sales tax, which is on top of any federal income or wage taxes you may pay.  This has been a popular idea in the past, but usually the idea was to replace the federal tax system with the VAT.  Here is a link to a great article on another blog that I follow.  Please read it, as it is very informative.

Portfolio Update 4/16/10

Before reading, please see the disclaimer in the 'About Me' section.
The Wilshire 5000 closed at 12,451.40, down from 12,486.80 since my post on 4/13/10. The Wilshire 5000 is now 12.13% above it's 200-day moving average, and hit a level of 14.16% above on 4/14/10.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 51.1% BULLS, and 18.9% BEARS, for a spread of 32.2%. This is in comparison to a reading of 48.9% BULLS, and 18.9% BEARS, for a spread of 30.0% on April 6th.

The Volatility Index closed today at 18.36, up from 16.20 back on April 13th.

Now for the portfolio...
1) Verizon at $29.58, down 8.84% for the year, inclusive of dividends.  

2) AT&T closed at $26.35, up .34% for the year, inclusive of dividends. 

3) GE closed at $18.97, up by 26.17% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $47.70, down by 4.37% since my buy.

5) FXP, the doubleshort China ETF, closed at $38.47, down by 11.51% since my buy, and after a 1:5 reverse split which occurred this week.

6) GOOD closed at $16.19, up by 19.98% since my buy, including the reinvestment of a dividends.  This price appreciation, coupled with the fat dividend should contribute a large gain to this portfolio this year.

7) NLY closed at $16.97, down by 1.28% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $247.40, up by 27.69% since my buy.

Overall, the portfolio is up by 10.38% (5.87% for the DOW Dogs), versus 8.30% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 5.97% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has increased to 2.08%.

Portfolio Update 4/13/10

Before reading, please see the disclaimer in the 'About Me' section.
The Wilshire 5000 closed at 12,486.80, up from 12,250.70 since my post on 4/2/10. The Wilshire 5000 is now 12.93% above it's 200-day moving average, up from 12.05% almost two weeks ago. 

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 48.9% BULLS, and 18.9% BEARS, for a spread of 30.0%. This is in comparison to a reading of 48.3% BULLS, and 19.1% BEARS, for a spread of 29.2% on March 30th.

The Volatility Index closed today at 16.20, down from 17.47 back on April 2nd.

Now for the portfolio...
1) Verizon at $30.07, down 7.33% for the year, inclusive of dividends.  Verizon paid a dividend on 4/7/10, which I reinvested as previously stated. 

2) AT&T closed at $26.20, down .23% for the year, inclusive of dividends.  AT&T also paid a dividend on 4/7/10 which I reinvested.

3) GE closed at $18.95, up by 26.03% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $47.85, down by 4.07% since my buy.

5) FXP, the doubleshort China ETF, closed at $7.21, down by 16.36% since my buy.

6) GOOD closed at $15.36, up by 13.83% since my buy, including the reinvestment of a dividend which was received on the 19th of March

7) NLY closed at $17.38, up by 1.10% since my buy, inclusive of a reinvested dividend received on March 30th.

8) AAPL closed at $242.43, up by 25.13% since my buy.

Overall, the portfolio is up by 9.28% (6.15% for the DOW Dogs, the total DOW has returned 5.67% without dividends), versus 8.61% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 4.70% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has decreased to .67%.

Portfolio Update Week Ending 4/2/10

Before reading, please see the disclaimer in the 'About Me' section.
The Wilshire 5000 closed at 12,250.70, up from 12,133.00 since my post on 3/27/10. The Wilshire 5000 is now 12.05% above it's 200-day moving average, up from 11.36% last week. 

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 48.3% BULLS, and 19.1% BEARS, for a spread of 29.2%. This is in comparison to a reading of 46.1% 48.9% BULLS, and 20.5% BEARS, for a spread of 28.4% on March 23rd.

The Volatility Index closed today at 17.47, down from 17.77 last week. The VIX continues to trade below the 20 mark, and has done so for at least four weeks now.


Now for the portfolio...
1) Verizon at $31.28, down 5.10% for the year.  As I have been talking about all year, there was some clamoring this week regarding the iPhone coming to Verizon this year.  This would certainly be great news for both Apple and Verizon, and I am excited about the prospects going forward for both stocks.

2) AT&T closed at $26.34, down 1.31% for the year.

3) GE closed at $18.33, up by 21.91% for the year, including the reinvestment of a dividend in February.

4) TBT, the doubleshort U.S. Treasury ETF closed at $48.91, down by 1.94% since my buy.

5) FXP, the doubleshort China ETF, closed at $7.43, down by 13.81% since my buy.

6) GOOD closed at $14.43, up by 6.93% since my buy, including the reinvestment of a dividend which was received on the 19th.

7) NLY closed at $17.34, up by .06% since my buy.

8) AAPL closed at $235.97, up by 21.79% since my buy.

Overall, the portfolio is up by 8.33% (5.17% for the DOW Dogs, the total DOW has returned 3.24% without dividends), versus 6.55% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 3.51% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has decreased to 1.68%, from 3.87% last week.

"How Do I Pick Stocks?" Here's a list of what to look for...

This is one of the most fundamental questions any novice investor will have.  The basic idea of equities investing is to be able to identify which stocks are presently undervalued, purchase those equities, and have those equities appreciate in price.  Hopefully, this blog will give you some ideas on what to look for.  The purpose of this post is to help with the fundamental analysis of equities, that is, analyzing the financial condition and value of a share of stock.  While it is also helpful to have at least a cursory knowledge of technical analysis as well, it is not as important to have such an understanding when performing long-term investing.

1) What is the purpose of the investment?  Are you building your portfolio or diversifying?  If you're building your portfolio, you need to pick equities in a wide range of industries to mitigate risk.  If you're diversifying, pick an industry, or industries, which you do not currently own.

2) Stock screens are the easiest way to weed through data, do yourself a favor and learn to use one. 

3) Analyze a company's price to cash-flow (most important), price-to-sales (less important), and price to earnings ratios.  When you buy a stock, you are buying a stock based on the expected future earnings of that equity.  Not all earnings are created equal.  Ideally, you want companies that have lower price to cash-flow ratios.  The cash flow statement is almost impossible to pad, and this ratio will tell you exactly how much cash the company is generating from it's primary business activity.  If you're a true beginner, I recommend "Financial Statements for Dummies" to learn more about how to read financial statements.

4) Does the company pay a dividend?  The higher the dividend yield, the better the indication the stock is undervalued.  Given a constant dividend, a higher price results in a lower yield, and vice versa.  However, be advised that not all dividends are sustainable.  Analyze the company's financials and dividend history in order to gain a better sense of whether or not the company will maintain or grow the dividend.  Quarterly conference calls are a good place to get this kind of information.

5) Look at multi-year earnings growth.  This is a fairly common metric that can be found on most websites.  Look at the earnings growth of at least 5-10 companies within the industry that the company in question operates.  What kind of price to sales multiple are companies with similar earnings growth generating?  As another form of analysis, use a stock screen to sort for 100 stocks with price to sales multiples near that of the organization under analysis.  Setup the screen so that it returns those companies, their multi-year earnings growth rates, and their price to sales ratios.  Then, take an average price to sales multiple for those stocks.  IF the company in question has a lower multiple than the average, the price of the stock is undervalued.

The above-mentioned steps are all criteria to value a stock.  Here are some things to look at to try to put the rest of the picture together:

6) Read the annual reports, and listen to at least the most recent conference call.  This will give you a lot of insight into where the business has been, and where management thinks it is going.

7) Formulate an opinion of the business.  I remember the first time I walked into an Apple store.  I was absolutely amazed.  Try to get a feel for the product the company sells, and whether or not the business plan makes sense to you.

8) Read all the latest news articles, and continue to read the news as it comes available.

In conclusion, if after you have performed a fundamental analysis of the company using some or all of the metrics above, as well as performed a "smell test" of the business the organization operates in and everything checks out, odds are it is a good investment.  Investing in undervalued equities that have a good "story" behind them are as close to a sure thing as you will most likely get.  However, identifying those stocks is the trick.  Good luck in your analysis, and happy investing!

Top Stocks I'm Watching Right Now

1) United States Steel (X) - $65.28, .31% yield.

2) Citigroup (C) - $4.13, no dividend.

3) Telecomunicacoes de Sao Paulo (TSP) - $21.76, 9.85% yield.

4) Montpelier Re Holdings Ltd. (MRH) - $16.85, 2.14% yield.

5) San Juan Basin Royalty Trust (SJT) - $20.58, 10.46% yield.

Investing Based on Cash Flow

In one of my first posts on this blog at the beginning of the year, I devoted an entire blog post to "My Dogs of the Dow". In that post, I detailed some of the metrics I use to identify undervalued stocks. Among the criteria is the price to cash flow ratio. While reading my new issue of Forbes over the weekend, I came across this article. The Forbes article details cash flow much more eloquently than I can, and in much more depth than I previously did. This is well worth the read, and I encourage everybody to take a look at this article and study it.

Portfolio Update 3/27/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 12,133.00, up from 12,058.70 since my post on 3/21/10. The Wilshire 5000 is now 11.36% above it's 200-day moving average, up from 11.31% last Sunday. The Wilshire 5000 reached a level 12.63% above it's 200-day moving average on the 23rd.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 48.9% BULLS, and 20.5% BEARS, for a spread of 28.4%. This is in comparison to a reading of 46.1% BULLS, and 21.3% BEARS, for a spread of 24.8% on March 16th. Last week was the largest bull reading and spread we had seen since January 19th, and this week has managed to outdo last week yet again.

The Volatility Index closed today at 17.77, up from 16.97 last week. The VIX continues to trade below the 20 mark, and has done so for at least four weeks now.

Now for the portfolio...
1) Verizon at $30.37, down 7.86% for the year.

2) AT&T closed at $26.72, up .11% for the year.

3) GE closed at $18.34, up by 21.98% for the year, including the reinvestment of a dividend in February.

4) TBT, the doubleshort U.S. Treasury ETF closed at $49.24, down by 1.28% since my buy.

5) FXP, the doubleshort China ETF, closed at $8.40, down by 2.55% since my buy.

6) GOOD closed at $14.51, up by 7.53% since my buy, including the reinvestment of a dividend which was received on the 19th that I did not include in last week's update.

7) NLY closed at $17.33, up by 2.08% since my buy.

8) AAPL closed at $230.90, up by 19.17% since my buy.

Overall, the portfolio is up by 9.40% (4.73% for the DOW Dogs, the total DOW has returned 4.05% without dividends, gaining 2.56% just this week), versus 5.53% for the Wilshire 5000. The current basket of eight stocks that I am currently invested in, including dividends, is up 4.85% year-to-date. The spread between my performance and the overall market (Wilshire 5000) has increased to 3.87%, up from 3.85% last week.

As of right now, I have $2,591.60 sitting on the sidelines from my recent sale of Citigroup and United States Steel. The total value of my simulated portfolio is $10,939.71. I am going to let this cash be for the moment.

When I said a few weeks back that I thought the market was overextended, I was not kidding, and I have not changed my mind. As you can see from the data above, the VIX is at a relatively low level, the Wilshire 5000 is well above it's 200-day moving average, and the Investor's Intelligence Survey indicates that the market is getting more and more bullish/complacent. The market cannot go up forever without correcting or consolidating some. It is my belief that money is made over the long run by being the first one in the ocean when the tide is out, and getting out of the ocean as the tide starts to come in. I'm not sure if that analogy works, but you get my point. I have picked out several names which I think are good investments at these levels. If I can get my money in on the long side after the market goes on sale, even better. I have also not ruled out the idea of buying back into Citigroup or United States Steel, depending on what levels they get to if and when we see a pullback/consolidation. Among the other names that I am currently looking out to fill the two open slots in the portfolio are Telecomunicacoes de Sao Paulo (TSP), Montpelier re Holdings (MRH), Permian Basin Royalty Trust (PBT), and San Juan Basin Royalty Trust (SJT). Some of these names have some pretty hefty dividends. I have yet to decide what I will do, but rest assured it will be published in this space when something is done.

What It Takes To Be A Great Investor

The investment world is often a cloudy, intimidating landscape. For sure, it is not for the faint of heart. Sometimes it can be very difficult for one to put up their own money lacking any formal training or guidance. Oftentimes, it is difficult to trust those giving you advice who have had formal training. With that said, short list of the toolbox that you need to navigate through the scary and meaningless:

1) Confidence. One must have the ability to believe in the thesis which they have drawn, and to stand by it when your own money is on the line even if it does not work immediately. If you believe in your thesis, and your thesis makes sense, more likely than not you will make money. If you're not sure if your thesis makes sense, or you fear your judgment is biased, ask a friend for a second opinion.

2) Patience. If it's too good to be true, it probably is. Historically the entire market only returns something like 8%. At that rate, your money will double roughly every nine years. Every portfolio has winners and losers, and you're not going to pick 100% winners. Don't expect every investment to return 50% every year, you're just setting yourself up for disappointment. If the story is good, and your thesis is sound, you will make money over the long run.

3) Diversification. Jim Cramer says that diversification "is the only free lunch", and he's right. This is right up there with "don't put all your eggs in one basket". Diversification will smooth out your returns over the long haul, and will make you less susceptible to huge swings.

4) The ability to read financial statements. Financial statements tell a story. If you don't know what the story is, where the company has been, and where it is likely going, you might as well throw darts blindfolded. Also, read the notes to the financial statements, the independent auditor's report, the CEO's letter, and listen to the conference calls. Often there is a lot of good information in these pieces. Not everybody reads or listens to this stuff, doing so gives you a leg up on the market, and makes you a savvier investor.

5) The ability to research and seek out new ideas. If mainstream America knows about an opportunity, you're probably the last one to know, and you probably already missed the boat. Be the first one in. Buy when others say sell, and sell when others say buy. Do research to seek out new ideas and opportunities. Then, research those opportunities until your thesis is well supported.

Portfolio Update 3/21/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 12,58.70, up from 11,984.30 since my post on 3/14/10. The Wilshire 5000 is now 11.31% above it's 200-day moving average, up from 11.29% last Sunday. The Wilshire 5000 has been able to extend it's percentage above the 200-day moving average for yet another week

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 46.1% BULLS, and 21.3% BEARS, for a spread of 24.8%. This is in comparison to a reading of 44.9% BULLS, and 23.6% BEARS, for a spread of 21.3% on March 9th. Last week was the largest bull reading and spread we had seen since January 19th, and this week has managed to outdo last week.

The Volatility Index closed today at 16.97, down from 17.48 last week. The VIX continues to trade below the 20 mark, and has done so for at least three weeks now.

Now for the portfolio...
1) Verizon at $30.41, down 7.74% for the year.

2) AT&T closed at $26.71, up .07% for the year.

3) GE closed at $18.07, up by 20.18% for the year, including the reinvestment of a recent dividend.

4) TBT, the doubleshort U.S. Treasury ETF closed at $46.88, down by 6.01% since my buy.

5) FXP, the doubleshort China ETF, closed at $8.37, down by 3.25% since my buy.

6) GOOD closed at $14.50, up by 7.53% since my buy, including the reinvestment of the monthly dividend.

7) NLY closed at $18.170, up by 7.91% since my buy.

8) AAPL closed at $226.70, up by 17.01% since my buy.

Overall, the portfolio is up by 8.73% (4.16% for the DOW Dogs, the total DOW has returned 1.49% without dividends), versus 4.88% for the Wilshire 5000. The current basket of eight stocks that I am invested in is up 4.13% year-to-date. The gap between my performance and the overall market has increased to 3.85%.

Market Update - 3/18/09

Apparently the market CAN go up every single day. The Wilshire 5000 closed today at 12,134.20, now 12.14% above it's 200-day moving average.

The VIX (Volatility Index) closed today at 16.62, a level that hasn't been seen since sometime in 2008 according to the chart I looked at.

As I have been saying for a while now, I think the market is near-term overbought, and we are looking at some type of short-term correction. However, I could very well see this rally extend through the end of the quarter next Friday. Buckle your seat belts.

Market Update - Tuesday March 16th

Wow, the market is just unbelievable these days. Today, the Wilshire 5000 closed at 12,076.31, up from 11,984.3 at the close of last week and 11.93% above it's 200-day moving average.

The VIX closed today at 17.69 as it remains below the 20 level.

Portfolio Update 3/14/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,984.30, up from 11,846.48 since my last post on 3/7/10. The Wilshire 5000 is now 11.29% above it's 200-day moving average, up from 10.72% on the date of my previous post. The Wilshire 5000 began the week more than 10% above it's 200-day moving average, and grew that margin over the course of the week.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 44.9% BULLS, and 23.6% BEARS, for a spread of 21.3%. This is in comparison to a reading of 42.1% BULLS, and 22.7% BEARS, for a spread of 19.4% on March 2nd. This is the highest Bull reading we have seen since January 19th, as well as the largest spread.

The Volatility Index closed today at 17.48, up from 17.40 at the date of my last post. The VIX has now been below the 20 mark for an extended period of time.

All of the data I have mentioned above, as well as the large profits that had been realized in X and C in a short period of time forced me to take profits this week. I now have $2,591.60 in free cash sitting on the sidelines, about 25% of my beginning balance of $10,000. Luckily, I took the profits in C on Thursday, as it was down big on Friday, down to $3.97. As a whole, I think the entire market is overbought in the short-term. If you've been following this blog, you would know that the data certainly points in that direction. When we get a correction, I will put all of the cash to use, possibly buying back into C and X.

Now for the portfolio...
1) Verizon at $29.73, down 9.80% for the year.

2) AT&T closed at $26.57, down .45% for the year.

3) GE closed at $17.04, up by 13.33% for the year, including the reinvestment of a recent dividend.

4) TBT, the doubleshort U.S. Treasury ETF closed at $47.85, down by 4.07% since my buy.

5) FXP, the doubleshort China ETF, closed at $8.29, down by 3.83% since my buy.

6) GOOD closed at $14.44, up by 7.09% since my buy, including the reinvestment of the monthly dividend.

7) NLY closed at $18.11, up by 4.50% since my buy.

8) AAPL closed at $226.70, up by 17.01% since my buy.

Overall, the portfolio is up by 7.76% (1.01% for the DOW Dogs), versus 4.23% for the Wilshire 5000. The current basket of eight stocks that I am invested in is up 2.91% year-to-date. The gap between my performance and the overall market has increased to 3.53%.

Time To Take Some Profits!

I am going to write an expanded post tomorrow, but for right now I want to announce that I am going to take some profits on two stocks: Citigroup ($4.18/share close) which is up 25.46% year to date, and United States Steel ($60.42/share close), which is up 36.98% since my purchase on February 4th. Nobody ever lost money taking profits, and this move frees up $2,591.60 in cash from the sale. When added to the current cash balance of $70.65 that was not previously invested, my cash balance of my portfolio is $2,662.25. I still like the long-term story of both of these stocks, and will look for a pullback to buy back in at a later time. As of right now, as I will detail in a later post, I think the market is overbought in the near term. My $10,000 starting balance is now worth $10,748.57, (7.49% total portfolio gain, a little over 8% on the invested balance, if you're keeping score at home) and I will look to build on that in the time ahead.

Portfolio Update 3/7/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,846.48, up from 11,439.10 since my last post on 2/25/10. The Wilshire 5000 is now 10.72% above it's 200-day moving average. The Wilshire 5000 was last 10% above it's 200-day MA back on 1/21 when the market closed at 11,539.80. The market then closed below 11,000 on 2/4/10, a correction of 4.9%.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 42.1% BULLS, and 22.7% BEARS, for a spread of 19.4%. This is in comparison to a reading of 41.1% BULLS, and 23.3% BEARS, for a spread of 17.8% on February 23rd. This is the highest Bull reading we have seen in over a month, as well as the largest spread.

The Volatility Index closed today at 17.40, down from 19.50 at the date of my last post. The VIX has now been below the 20 mark for over a week, and I see this as a sign that the market is perhaps a bit overbought. When added to the data of the Wilshire 5000, as well as the Investor's Intelligence Survey, the writing seems to be on the wall in the very near term.

Now for the portfolio...
1) Verizon at $29.23, down 11.32% for the year.

2) AT&T closed at $26.73, up .15% for the year.

3) GE closed at $16.35, up by 8.74% for the year, including the reinvestment of a recent dividend.

4) Citigroup closed at $3.50, up by 5.05% for the year.

5) TBT, the doubleshort U.S. Treasury ETF closed at $48.13, down by 3.51% since my buy.

6) FXP, the doubleshort China ETF, closed at $8.62, down by 3.48% since my buy.

7) GOOD closed at $14.13, up by 4.79% since my buy, including the reinvestment of the monthly dividend.

8) NLY closed at $18.14, up by 4.67% since my buy.

9) X closed at $58.90, up by 33.53% since my buy. This stock has shot up like a rocket. X last reached this level a month or so back when it got into the low $60's. Given the extent of my gain so far in this stock, and what I believe to be a looming market correction, I may take my profit on this one in the next few days.

10) AAPL closed at $218.95, up by 13.01% since my buy.

Overall, the portfolio is up by 5.05% (-.84% for the DOW Dogs), versus 3.04% for the Wilshire 5000. The gap between my performance and the overall market has shrunk to 2.01%.

Have a great week, and happy trading!

Taxes, The World, Your Money, and You...

As previously stated, I am not an economist, nor do I practice in a field related as such. From time to time in this blog I will discuss things outside the realm of stocks and bonds, and hopefully it give us an opportunity to learn together.

I have been crafting this blog post in my head for quite some time now. Through the course of my six years of higher education, my recent relentless studying for the CPA Exam, and my new found love for the Glenn Beck program on Fox, I have come to worry about the economic conditions in America. In this post, I am going to discuss what is on my mind, and what I think other people should be analyzing.

For those who are not aware, the current debt of The United States is almost $12.5 trillion. That is a level which is unsustainable, and as that compiles, much like your credit card bills do, the national debt will soon overwhelm the yearly budget. I think there are things that should be done to fix this mess, and this post is going to discuss those measures, and how they related to you.

First, the government should adopt a flat tax that EVERYBODY pays into. Art Laffer was recently on the TV and stated that the United States could begin to eat away at the national debt if we adopted a 12% flat tax that everybody pays into, as well as tacked on some sin taxes. Sin taxes would be tax on guns, alcohol, gambling, and the like. Think about your current tax rate, and then think about how attractive 12% is. Are you with me?

The idea is that more people need to pay more of the tax. The recent statistics indicate that something like half of Americans pay no tax at all. In fact, some people actually get PAID BY THE GOVERNMENT thanks to Refundable Tax Credits (discussed in a previous post). The theory is, and I agree with Laffer, if more people pay more tax then a small percentage of people get big cuts.

Second, cut government spending. The bigger the ship, the harder it is to turn, and that's our government. The larger government gets, the more inefficient and costly it gets. Cut programs not consistent with the intent of the Constitution, frivolous spending, and pet projects. The government should not have to fund wooden arrow makers in Oregon via the stimulus bill. Capitalism dictates if that business is a worthwhile venture, the free market will prop up that business on its own.

Third, do away with the double taxation of dividends. I am betting some readers of this blog don't even know this is happening. If you own a stock that pays a dividend, you know that you get a check in the mail from that corporation every so often. You also know that come April 15th, you pay taxes on those dividends. However, did you know that the dividend that you receive is actually AFTER-TAX proceeds from the corporation? That is, you own part of a company (a share of stock), that company makes money which you have a right to (that's the purpose of buying stock, a stake in future cash flow), that money is then taxed (effectively, since you are a part owner, you are being taxed), that money is paid out to shareholders, and then that money is taxed AGAIN. The effective tax rate of $100 in dividends is 44.75%! Do the math, $100 profit to the company is taxed at the corporate tax rate of 35%, reducing the corporation's (your) cash to $65. That money is then distributed to the shareholders, and taxed at 15%, or $9.75. You are then left with $55.25 from your original $100.

But Chris, why do I care? Dividends are only for the rich! Tax them and throw rocks at them!
Not so fast young Skywalker. I am not rich, nor do I care to have rocks thrown at me. However, I do collect dividends, and if you have any sort of retirement plan, so do you. Individual stocks are owned in mutual funds. A mutual fund is a collection of stocks, basically. When those stocks pay dividends, they flow into the gains realized by mutual funds, which are also owned in your IRA and 401k accounts. As of 2007, there were 64 million participants in 401k plans alone in this country. That is roughly 1/5 of the population. In addition, when accounting for the funds held in only IRA and 401k accounts, those funds held $6.1 trillion in assets as of 2004. How much is $6.1 trillion? Well, that is roughly half of our national debt, and it is greater than the 2009 GDP of Japan, the world's second largest economy. A lot of people have a lot of money invested in stock market assets, therefore I think it is exceptionally wrong to say that taxes on investments are a tax of the rich. Keep that in mind next time you're at an anti-Exxon-Mobil rally.

Third, and finally, I believe we should cut the corporate income tax rate. Of the world's five largest economies, the United States has the highest corporate tax rate. The world's five largest economies, in order, are 1) The U.S., 2) Japan, 3) China, 4) Germany, and 5) France. Their tax rates are 35%, 30%, 25%, 33%, and 33.3%, accordingly. To go one step further, their 2009 unemployment rates were 9.4%, 5.6%, 4.3%, 8.2%, and 9.7% accordingly.

Now, what does all of this mean? I did a simple regression analysis of the tax rates and corresponding unemployment rates of these five countries. There is an 88% correlation (relatively strong) between the corporate tax rate and unemployment in these countries. However, among the four largest (throw out France), there is a 93% correlation.

By lowering the corporate tax rate, it becomes more attractive for corporations to start, maintain, or re-enter the U.S. market. In doing so, jobs are created, and we increase the available tax pool. The countries listed all have strong labor and education bases. Simple logic tells us that if a company can get similar labor, cheaper, and pay less tax on profits (8% less) in China, why would they stay in the U.S.?

This is all food for thought. As always, please feel free to pass this on or comment on this web page. I will post back later this week with the Portfolio Update.

Portfolio Update 2/26/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,439.10, down from 11,499.54 since my last post on 2/19/10. The Wilshire 5000 is now 7.66% above it's 200-day moving average.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 41.1% BULLS, and 23.3% BEARS, for a spread of 17.8%. This is in comparison to a reading of 35.6% BULLS, and 27.8% BEARS, for a spread of 7.8% on February 17th. This is the highest Bull reading we have seen in over a month, as well as the largest spread.

The Volatility Index closed today at 19.50, down from 20.02 at the date of my last post. The VIX has now broken the 20 mark. It will be worth paying attention to see if the VIX stays below 20 for an extended period, as well as to see what the Investor's Intelligence Survey gives us in weeks ahead. This may be a sign that the market is getting back ahead of itself in the near term. Many have suggested that the recent correction was not quite deep enough, and the market needs to consolidate further.

Now for the portfolio...
1) Verizon at $28.93, down 12.46% for the year.

2) AT&T closed at $26.37, down 1.20% for the year.

3) GE closed at $16.06, up by 6.15% for the year.

4) Citigroup closed at $3.40, up by 2.72% for the year.

5) TBT, the doubleshort U.S. Treasury ETF closed at $47.05, down by 5.67% since my buy.

6) FXP, the doubleshort China ETF, closed at $9.05, up 4.99% since my buy.

7) GOOD closed at $13.98, up by 3.71% since my buy.

8) NLY closed at $18.38, up by 6.06% since my buy.

9) X closed at $52.94, up by 20.02% since my buy.

10) AAPL closed at $204.62, up by 5.61% since my buy.

Overall, the portfolio is up by 2.92% (-2.54% for the DOW Dogs), versus -.38% for the Wilshire 5000. The gap between my performance and the overall market has shrunk to 3.30% outperform, down from 3.42% last week.

Have a great week, and happy trading!

Interesting Blog Post...

Interesting post on a blog that I follow. Enjoy.
http://gregmankiw.blogspot.com/2010/02/what-unions-are-getting.html

Portfolio Update 2/19/10

Before reading, please see the disclaimer in the 'About Me' section.

The Wilshire 5000 closed at 11,499.54, up from 11,149.40 since my last post on 2/13/10. The Wilshire 5000 is now 8.64% above it's 200-day moving average.

The Investor's Intelligence Survey was released on Thursday night of last week, as it is every week. This week's reading was 35.6% BULLS, and 27.8% BEARS, for a spread of 7.8%. This is in comparison to a reading of 34.1% BULLS, and 27.8% BEARS, for a spread of 8.0% on February 10th. This is the tightest spread we have seen since tracking this blog, and is the most bearish we have seen the sentiment on the market. We continue to see the bearish sentiment creep up toward the 30 level. A financial newsletter stated today that a 35.0% reading on the bearish side would usually indicate that the market is wiped out, and ready for an upturn. Food for thought.

The Volatility Index closed today at 20.02, down from 22.51 at the date of my last post. The VIX is getting close to breaking that important 20 mark. This, along with the aforementioned data, seems to suggest that perhaps the market is getting ahead of itself short term. That is a sentiment that a newsletter that I read suggested, and I tend to agree with.

Now for the portfolio...
1) Verizon at $29.02, down 12.18% for the year.

2) AT&T closed at $26.22, down 1.76% for the year.

3) GE closed at $16.17, up by 6.87% for the year.

4) Citigroup closed at $3.42, up by 3.32% for the year.

5) TBT, the doubleshort U.S. Treasury ETF closed at $49.57, down by .62% since our buy.

6) FXP, the doubleshort China ETF, closed at $9.34, up 8.35% since my buy.

7) GOOD closed at $13.97, up by 3.64% since my buy.

8) NLY closed at $17.33, up by 2.48% since my buy.

9) X closed at $53.29, up by 20.81% since my buy.

10) AAPL closed at $201.67, up by 4.09% since my buy.

Overall, the portfolio is up by 3.44% (-2.39% for the DOW Dogs), versus .02% for the Wilshire 5000. The gap between my performance and the overall market has shrunk to 3.42% outperform, down from 3.58% last week.

Have a great week, and happy trading! I will update the portfolio at the end of next week, as always, with possibly a post or two on other topics thrown in the mix.

Portfolio Update 2/13/10

Before reading, please see the disclaimer in the 'About Me' section.

Here goes...

The Wilshire 5000 closed at 11,149.40, up from 10,913.90 since my last post on 2/8/10. The Wilshire 5000 is now 5.79% above it's 200-day moving average.

The Investor's Intelligence Survey was released on Thursday night of last week, as it is every week. This survey is a measurement of the sentiment in the market. This week's reading was 34.1% BULLS, and 26.1% BEARS, for a spread of 8.0%. This is in comparison to a reading of 38.9% BULLS, and 22.2% BEARS, for a spread of 16.7% on February 2nd. This is the tightest spread we have seen since tracking this blog, and is the most bearish we have seen the sentiment on the market. I am reiterating the fact that now is a good time to buy, as I have the last 3 weeks.

The Volatility Index closed today at 22.51, down from 26.51 at the date of my last post.

Now for the portfolio...
1) Verizon at $28.93, down 12.46% for the year (ouch...still).

2) AT&T closed at $26.04, down 2.44% for the year.

3) GE closed at $15.55, up by 2.78% for the year.

4) Citigroup closed at $3.18, down by 3.93% for the year.

5) TBT, the doubleshort U.S. Treasury ETF closed at $48.81, down by 2.15% since our buy.

6) FXP, the doubleshort China ETF, closed at $9.40, up 9.05% since my buy.

7) GOOD closed at $14.00, up by 3.86% since my buy.

8) NLY closed at $17.15, down by 1.04% since my buy.

9) X closed at $44.09, down by 0.05% since my buy.

10) AAPL closed at $200.38, up by 3.42% since my buy.

Overall, the portfolio is up by .55% (-4.07% for the DOW Dogs), versus -3.03% for the Wilshire 5000. The gap between my performance and the overall market has shrunk to 3.58% outperform, down from 5.35% last week.

Have a great week, and happy trading! I will update the portfolio at the end of next week, as always, with possibly a post or two on other topics thrown in the mix.

Why a Roth IRA is Better Than a 401k, And Why You Need One Yesterday!

Please see the disclaimer in the 'About Me' section before proceeding...

While it is not my area of professional practice, or perhaps my place to do so, I have undertaken the goal of trying to enlighten my friends as to the benefits of the Roth IRA this year. The Roth IRA was first explained to me in my undergraduate tax class 5 years ago, and ever since, I have been on the bandwagon saying how great these accounts are. A friend of mine asked me for some financial advice last week, and I put together a spreadsheet detailing why a Roth IRA at this stage in our lives (we are both 25, going on 26) is far more beneficial than contributing to a 401k. While I have believed this for many years, I had never put the numbers to the test, so here is quick and dirty version of what I came up with (sorry for the formatting, I am new at this):

Roth IRA
IRA Contribution Limit $5,000
Bi Monthly Gross Pay 2,083 (Assume $50,000 salary)
Tax Paid 521 (Assume no pre-tax deductions, 25% tax bracket)
Paycheck 1,562
Bi-Monthly IRA Contribution 208
Take Home Pay 1,354
Historical Market Return 8% (Historical market return, +/-, with dividends re-invested)
Number of Periods 420 (12 months * 35 years)
Amount at Retirement 930,511
Gross Yearly Distribution 37,220 (Assume: retire at 60, and take 25 equal payments)
Net Distribution 37,220 (No tax paid on Roth IRA distributions)

401k (No Employer Match)
401k Contribution Limit $5,000 (To match Roth IRA example)
Bi Monthly Gross Pay 2,083
Bi-Monthly 401k Contribution 208 (Pre-tax)
Tax Paid 469
Net Pay 1,406
Historical Market Return 8%
Average Fund Mgmt Fees 1.2%
Rate of Return 6.8% (Assuming the average mutual fund fee is 1.2% +/-)
Number of Periods 420
Amount at Retirement 706,754
Gross Yearly Distribution 28,270 (Retire at 60, 25 payments)
Tax paid 4,241 (15% income tax at this level on 401k distributions)
Net Distribution 24,030 (After tax)

401k (50% Employer Match)
401k Contribution (indiv) $5,000 (To match Roth IRA example)
401k Contribution (empl) 2,500
Bi Monthly Gross Pay 2,083
Bi-Monthly 401k Contribution 208 (Pre-tax)
Tax Paid 469
Net Pay 1,406
Historical Market Return 8%
Average Fund Mgmt Fees 1.2%
Rate of Return 6.8% (Assuming the average mutual fund fee is 1.2% +/-)
Number of Periods 420
Amount at Retirement 1,060,131
Gross Yearly Distribution 42,405 (Retire at 60, 25 payments)
Tax paid 10,601 (25% income tax at this level on 401k distributions)
Net Distribution 31,804 (After tax)

Now, before people get all up in arms, please realize that this example is for illustration purposes only, and is a very quick and dirty calculation. To check my math on the returns, you can go to any Future Value (FV) of an annuity calculator, and punch the numbers in yourself.

A few key points:
1) Under this example, there is no calculation for the return on the extra $52 per paycheck that you would take home contributing to the 401k. That will certainly close the gap between the rates of returns.
2) This calculation does not take into account commission fees realized in an IRA account. Assuming $10 per trade (seems to be the average these days), if you make 10 trades in the first few years, that's a sizeable portion of your account balance ($100 ($10x10) divided by $5,000 = 2%, which is more than the management fees on the 401k. However, with time, that amount drops to an insignificant level as you make contributions to your IRA. The management fee on a mutual fund, however, stays constant as a percentage of your balance. Therefore, that 2% shrinks in an IRA, while the 1.2% stays the same in a 401k.
3) This assumes that you invest in the QQQ (the ETF that tracks the DOW, and that the performance of the QQQ exactly mirrored the market, and that the market returned 8%) in your IRA, and that the funds in your 401k match the market. Obviously, your accounts will not achieve exactly those results. In my opinion, the IRA allows you to be more nimble, and offers a wider range of investment choices. As such, it becomes much easier in an IRA account, if you're a wise investor, to beat the market consistently. Not to mention, did you know you can buy investment real estate in your IRA? Can't do that in a 401k.
4) These assumptions basically only work until you take your first distribution at age 60. You'll notice, the rate of return and account balances are not adjusted for the years which follow the initial distribution. However, if I was a better man, and I am, I would bet that the calculation would favor the IRA if it was carried out until the account balance reached $0.

In asking around, fewer and fewer employers are offering company matches these days, and if they are, they seem to be shrinking. I remember about 15 years ago my dad told me he got a dollar for dollar match. Good luck finding that benefit these days. The company that I currently work for doesn't even offer a match (full disclosure, they make up for it elsewhere). I am guessing that as time goes by, fewer and fewer employers are going to offer that match, as the cost of employee benefits seems like it will be on the rise.

I encourage people to interact with this blog. Please leave comments or send personal e-mail, it is greatly appreciated when I hear other's views. If you would like to refute my calculations, I certainly would like to hear those arguments as well, and if you'd like, I will post them in this space.