Trade Executed

Yesterday we executed a trade that might be a surprise but was telegraphed once or twice. We bought a small cap domestic bank. As it is a small cap I am going to refrain from mentioning the name at the point as I don’t want to evolve into a small cap tout. Anyone interested in knowing the name can probably find out around July 11 if you take my meaning. If it immediately blows up I will be forthcoming about it. I still believe the big banks are toxic for various reasons including the issue that JP Morgan (JPM) has been enduring for the last month or so and I believe the large banks will continue to struggle. If there is any area that can do well in the domestic banking group I believe it is with smaller cap companies. The name we bought did not take TARP funds, appears to have very good loan quality and its balance sheet appears to be very healthy. Interestingly from June 1st, 2007 into the March 2009 low it only fell 32% (so it held up better than the S&P 500) as the Financial Sector SPDR (XLF) was falling 83%. I found a couple of different numbers for its beta but they were all below 1.00 and I expect it will continue to be a low beta hold which combined with a dividend yield in the high threes seems to make it the right type of hold if the market is done going up meaningfully for a while. At the portfolio level our recent trades have reduced the volatility a little and...

Trade Executed

Yesterday we executed a trade that might be a surprise but was telegraphed once or twice. We bought a small cap domestic bank. As it is a small cap I am going to refrain from mentioning the name at the point as I don’t want to evolve into a small cap tout. Anyone interested in knowing the name can probably find out around July 11 if you take my meaning. If it immediately blows up I will be forthcoming about it. I still believe the big banks are toxic for various reasons including the issue that JP Morgan (JPM) has been enduring for the last month or so and I believe the large banks will continue to struggle. If there is any area that can do well in the domestic banking group I believe it is with smaller cap companies. The name we bought did not take TARP funds, appears to have very good loan quality and its balance sheet appears to be very healthy. Interestingly from June 1st, 2007 into the March 2009 low it only fell 32% (so it held up better than the S&P 500) as the Financial Sector SPDR (XLF) was falling 83%. I found a couple of different numbers for its beta but they were all below 1.00 and I expect it will continue to be a low beta hold which combined with a dividend yield in the high threes seems to make it the right type of hold if the market is done going up meaningfully for a while. At the portfolio level our recent trades have reduced the volatility a little and...

Of Austerity & Depressions

Paul Farrell has an article up at Marketwatch about austerity in the US and depressions. Early on in the financial crisis I made comments that I did not believe we were in a depression and laid out some reasons why. At some point well into the crisis I began to think of it differently. In saying no depression I was thinking in terms of a 1930s type of event but there is no reason a modern depression has to look like the 1930s. At some point I came to the opinion that history would look back on this period starting in the early 2000s and label it a depression. As a note I have a specific recollection of mentioning this a couple of times but I had trouble finding it in the archives (here is one post that comes close) which now consists of 4500 posts; today is post 4501. This is not a call for apocalypse but in looking at the last dozen years, equity prices are 165 SPX points below the 2000 high, the employment situation has deteriorated badly. the housing market has deteriorated badly, we are debating the viability of programs like social security in a way that we have not done before, the country has taken on a debt load that would seem to be very problematic and we still have desperate and unprecedented policies in place trying to stimulate demand that is not really working. The divide between the haves and have nots seems to be the widest it has ever been. As noted countless times before, the last 12 years has not prevented...

Of Austerity & Depressions

Paul Farrell has an article up at Marketwatch about austerity in the US and depressions. Early on in the financial crisis I made comments that I did not believe we were in a depression and laid out some reasons why. At some point well into the crisis I began to think of it differently. In saying no depression I was thinking in terms of a 1930s type of event but there is no reason a modern depression has to look like the 1930s. At some point I came to the opinion that history would look back on this period starting in the early 2000s and label it a depression. As a note I have a specific recollection of mentioning this a couple of times but I had trouble finding it in the archives (here is one post that comes close) which now consists of 4500 posts; today is post 4501. This is not a call for apocalypse but in looking at the last dozen years, equity prices are 165 SPX points below the 2000 high, the employment situation has deteriorated badly. the housing market has deteriorated badly, we are debating the viability of programs like social security in a way that we have not done before, the country has taken on a debt load that would seem to be very problematic and we still have desperate and unprecedented policies in place trying to stimulate demand that is not really working. The divide between the haves and have nots seems to be the widest it has ever been. As noted countless times before, the last 12 years has not prevented...

A Not So Lazy Portfolio

Hopefully we are now back to regular blogging after the Gladiator Fire. The lazy portfolio concept is intriguing on different levels. The blending of assets is interesting as is the idea of getting from here to there with the least amount of work possible. The opposite of a lazy portfolio might be some sort of frenetic day trading procedure. That leaves a lot of room in the middle for all sorts of strategies. Personally I am not a fan of a truly lazy portfolio for my money but there is merit. I thought it would be fun to put together a not so lazy portfolio of individual stocks with a defensive overlay. We don’t own any of these stocks but we do own some names that are similar. The idea with these stocks is there is very little likelihood of a blowup, they are generally well run not that there aren’t occasional problems but of course the fortunes of any company can change at any time for any reason which is where the defensive overlay will come in. I dug up one name for each of the ten sectors, tilted to yield and with plenty of foreign. Only one stock for each sector makes for a poorly diversified portfolio but can still be an interesting blog post (hopefully). Tech–Seagate Technology (STX) Seagate has been around for a long time and has matured into a low debt high yielding stock. It currently yields 3.8% and has a mid single digit PE ratio. Certain parts of tech have become sources of serious yield in the last few years. Seagate popped up...