WSJ: Treasury Yields Fall In Trading Friday

For awhile now I have been saying I am bearish on Treasuries.  I have even gone so far as to put out a list of DOW stocks that are trading with higher yields than Treasuries.  Perhaps it is time to update my list.  Today during intra-day trading, the yield on the 10-year fell as low as 2.531%.  Here is an interesting article from The Wall Street Journal.  Apparently, I am not the only one totally miffed by this phenomenon.  Make no bones about it, I am on the side of the trade that thinks this is a massive bubble forming in Treasuries.

What Warren Buffett Is Buying

Recently, I came across a blog post by a fellow blogger here about what Uncle Warren is currently buying.  Warren recently added to his position in Johnson & Johnson (JNJ), among other names.  However, JNJ really caught my eye. 

If you will remember in a post back on July 26th, I recommended JNJ, as well as MRO, and KMB.  At that time, JNJ was trading at $57.74, and is now trading at $59.35, up 2.79%.  In the same time period the Wilshire 5000 is down by 2.29%. 

It is worth mentioning that KMB is also up 1.79%, and MRO is down 2.49%.  I still like all three names, and Buffett buying JNJ is just a bonus.

For now, I see the market in a long-term uptrend.  Sometime this week, I hope to put together an in-depth post on Treasury Bonds and interest rates that I think you will find interesting.  I have been gathering data and formulating this piece on the upcoming Treasury bubble.  I think you'll find it interesting.  Stay tuned.

I'm Still Beating The Market By Over 3.0%

The Wilshire 5000 closed at 11,203.50, down from 11,680.30, or 4.08%, since my post on 8/7/10.  The Wilshire 5000's 200-day moving average currently sits at 11,579.62, or 3.25% below Friday's close.  The Wilshire 5000 has now closed below it's 200-day moving average for the 3rd day in a row. 

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 41.7% BULLS, and 27.5% BEARS, for a spread of 14.2%. This is in comparison to a reading of 38.9% BULLS, and 33.3% BEARS, for a spread of 5.6% on August 3rd. 

The Volatility Index closed Friday at 26.24, up from 21.74 back on August 7th. 

Now for the portfolio...
1) Verizon at $30.03, down 1.72% for the year, inclusive of dividends.  FTR, the recent spinoff, recently closed at $7.60/share, worth $53.20 to this portfolio currently.

2) AT&T closed at $26.90, up 2.52% for the year, inclusive of dividends.

3) GE closed at $15.38, up by 2.25% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $34.19, down by 21.68% since my buy. 

5) FXP, the doubleshort China ETF, closed at $37.72, down by 13.24% since my buy, and after a 1:5 reverse split.

6) December 18, 2010 SPY $102 Calls closed at $10.53, down from 18.37% since I purchased them this past week

7) NLY closed at $17.39, up by .96% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $249.10 up by 28.57% since my buy. 

9) January '12 Citigroup Calls closed at $.18, down by 59.09% since my buy.  Still long-term bullish on Citi, and I will reiterate this from now until January 2012.

10)  GS closed at $148.08, up by 8.80% since my buy.

Overall, the portfolio is up by .52% (2.84% for the DOW Dogs), versus -2.56% for the Wilshire 5000. The current basket of ten stocks that I am currently invested in, including dividends, is down 7.79% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 3.08% outperform.

Real Estate Bottom Coming Soon? Nope. You Already Missed It.

This article was posted today on the Bloomberg website, stating that housing prices rose in many markets last quarter.  The Van Eck Tillman Real Estate Hotline that I read weekly stated last summer that we had seen a bottom in real estate.  I have been reading Adrian Van Eck's stuff for well over a decade, and my father (a very successful investor in his own right) read him for years before that.  So, it's safe to say, whatever he writes I am listening to.  This article on Bloomberg is just further confirmation that many of the talking heads on the TV either don't do their research, don't know what they are talking about, or both.

http://www.bloomberg.com/news/2010-08-11/home-prices-increase-in-100-u-s-cities-as-tax-credit-helps-boost-demand.html

My Latest Trade

As I detailed in my post a few days ago, I was looking to move out of Gladstone Commercial (GOOD), and into SPY calls.  As I said a few days ago, I wanted to sell GOOD at $17/share on Monday, which I was able to do, and move into SPY calls around $12.75.  I was not able to move into the calls after liquidating GOOD due to the fact that there was no volume in the December 2010 $102 SPY calls on Monday.  However, today was the day!  I was able to get into the SPY calls at $12.90.  If you're paying attention, those options closed today at $13.08.  More later on this week.

What Am I Buying and Selling Tomorrow?

If you keep up with this blog, you know that I have owned Gladstone Commercial Group (GOOD) since I began my portfolio back in January.  Tomorrow, I am going to look to sell my entire position (77.607161 shares, including reinvestment over 7 months).  I am going to look to sell out of that position at $17.00, giving me a nice gain of 26.27%, over an average cost basis of $13.46.

In it's place, I will be purchasing deep in-the-money calls of the S&P 500 ETF, the SPY.  I have stated here quite a few times that I believe we are going to see a nice run in the market through the end of the year.  At a minimum, I am looking for the S&P to hit 1,250 or higher by year's end.  Currently, the index is at 1,121.64, which corresponds to a price of $112.392 in the SPY.  A year-end close in the S&P 500 of 1,250 would correspond, roughly, with a price of $125 in the SPY, up 11.22% (roughly). 

Now, to the trade:
With the proceeds from the sale of all my GOOD stock, $1,319.32 (exclusive of taxes and commissions), I am going to purchase one of the December 18th $102 Calls for ~$12.75 ($1,275 total = 100 shares per contract x $12.75).  A share price in the SPY of $102 correlates loosely to an S&P 500 level of 1,020, down by 9.96%.  Anything above that level and we will still retain some capital, and the breakeven is at $114.75 ($102+$12.75) in the SPY, which equates roughly to an S&P 500 level of 1,148, up 2.35% from here.  Should the market go to 1,250, and we see the SPY go to $125, this trade will pull in a tidy gain of $1,025 ($125-$114.75), or 80.39%.

This is a good example of a) a stock replacement strategy using options, and b) leveraging your money, both of which I am going to do more with in this blog, as I have done in my personal portfolio.  Had I purchased 100 shares of the SPY at $112.392, it would cost me $11,239.20.  If the SPY goes to $125, as I am predicting by the end of the year, I would see a gain of $1,260.80, or 11.22%.  Not bad, but not nearly the rate of return I can get with options for a minimum capital outlay.

"How Hedge Funds Beat The Market"

Here is a link to a free download of a scholarly paper written by Craig W. French & Damian B. Ko.  The paper is highly technical, but still an interesting read.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=927235

My Stock Picks Up 4.94%, Market Up 1.59%

Thanks for visiting my new and improved blog!  Now, let's make some money together...

The Wilshire 5000 closed at 11,680.30, down from 11,735.70, or .47%, since my post on 8/2/10.  The Wilshire 5000's 200-day moving average currently sits at 11,567.13, or .98% below Friday's close.  The Wilshire 5000 has now closed above it's 200-day moving average for the 5th day in a row.  In addition, the 10-day, 20-day, 50-day, and 200-day moving averages are all in an uptrend, which is bullish.

The Investor's Intelligence Survey was released on Thursday night. This week's reading was 38.9% BULLS, and 33.3% BEARS, for a spread of 5.6%. This is in comparison to a reading of 38.2% BULLS, and 34.9% BEARS, for a spread of 3.3% on July 27th.  In recent weeks we have seen the reading of BULLS increase, and BEARS decrease, this is a bullish sign.

The Volatility Index closed Friday at 21.74, down from 22.01 back on August 2nd.  All of the important moving averages for the VIX are currently in a downtrend, also bullish.

Now for the portfolio...
1) Verizon at $29.55, down 3.29% for the year, inclusive of dividends.  FTR, the recent spinoff, recently closed at $7.65/share, worth $53.55 to this portfolio currently.

2) AT&T closed at $26.54, up 1.14% for the year, inclusive of dividends.

3) GE closed at $16.45, up by 9.36% for the year, inclusive of dividends.

4) TBT, the doubleshort U.S. Treasury ETF closed at $35.78, down by 18.04% since my buy. 

5) FXP, the doubleshort China ETF, closed at $34.54, down by 20.55% since my buy, and after a 1:5 reverse split.

6) GOOD closed at $16.97, up by 26.05% since my buy, including the reinvestment of dividends. 

7) NLY closed at $17.50, up by 1.60% since my buy, inclusive of a reinvested dividends

8) AAPL closed at $260.08 up by 34.23% since my buy. 

9) January '12 Citigroup Calls closed at $.21, down by 52.27% since my buy.  Still long-term bullish on Citi, and I will reiterate this from now until January 2012.

10)  GS closed at $155.18, up by 14.02% since my buy.

Overall, the portfolio is up by 4.94% (4.27% for the DOW Dogs), versus 1.59% for the Wilshire 5000. The current basket of ten stocks that I am currently invested in, including dividends, is down 1.22% year-to-date. The spread between my performance and the overall market (Wilshire 5000) is at 3.35% outperform.

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%.