Portfolio - "Update"

I've taken a small position in TIPS (Treasury Inflation Protected Securities). I bought the .375's of 2023 at abt 98, so they have a guaranteed profit, minimal if deflation, and a little more than inflation as measured by core CPI, if inflation. I will hold to maturity or only sell if at a good profit and if the price drops in the interim, likely buy more. Also, I added a link to my blog, "Bonds - TIPS Prices." Also, I've included my holdings of GNMAs. The reason I didn't before is because they have, because of the capital they have returned, the face amount is very small. No reason to sell since they do pay 6% interest. I had bought them a long time ago. The only reason I mention them now is because they are also the kinds of bonds besides Treasuries which I would consider if mortgage rates made them worthwhile. My portfolio now stands, in order of largest holding to least......

INTC (Intel)
WAG (Walgreen)
PG (Procter & Gamble)
PEP (Pepsi)
GPC (Genuine Parts)
KO (Coca Cola)
HAS (Hasbro)
MMM (3M)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
.375 of 2023 TIPS (Treasury Inflation Protected Securities)
DPS (Dr. Pepper, Snapple)
6% GNMA (Government National Mortgage Association) Bonds

Stocks make up abt 20% of my assets.  Other assets are CDs, a home mortgage and about 2% precious metals + TIPS.

Ready to Rock n' Roll

The way I see the US economic situation after the government shutdown and possible national debt default, we came out excellently. Sure, abt $24B was lost to the economy and some short-term problems do linger, but, politically it does look like the main obstructionists have been defeated and likely some meaningful compromises can be made to avert the future possible shutdown and debt default early next year. So, likely the US economic situation will be improved by long-term debt reduction and better confidence in our economy, hence most spending held back by consumers and businesses, will now move forward. And, actually the shutdown did help some things from an economic standpoint - less of a budget deficit. So, some short-term pain, but we come away stronger. Plus, 10-year Treasury rates have come down from abt 3% to abt 2.6%, and with Janet Yellin nominated to head the Fed, the Fed likely will stay favorable, which is good for RE, stocks, bonds, etc.

As for stocks, anything can happen, but with good fundamental things in the economy, even if we have a major correction, it is overdue and likely just be a good time to pick up bargains.

My Review of "Warren Buffett's 3 Favorite Books"

5 out of 5 stars.....

Should be read by any serious investor, beginning or even experienced for refreshing one's knowledge. The book focuses on long-term value investing with stocks. But, even if one is a speculator with short-term thinking, I think such a person could benefit because this is such a good, including concise, presentation.

The author shows how to value a stock and best time for a purchase and sale. Rather than go into all the stock financial terms/data covered, I'll just mention one because if a reader just remembers one way to value a stock, I think makes the book worthwhile: PE * (Price / Book Value) < or = 22.5 to be considered a good value. Sure, other data should be weighed, but a pretty good starting point in selecting a stock for further research.

Also included in the book are links to very good videos, to enhance understanding concepts in the book.

Excellent stock investing book!

Portfolio "Update"

I've taken a position in DPS (Dr. Pepper, Snapple), but am really waiting for a significant drop in the stock market, to pick up more DPS or of other stocks I hold or CLX (Clorox). Many stocks have exploded to unreasonable PE's. Also, I see the economy as close to a pivot point - either continuing its recovery, even improving it or, because of the bevvy of obstructionists in Congress, possible return to recession. The really big test will be the 2014 elections to see which way the voters want to take the economy. But, since market timing is unpredictable, I'll just wait and stick with my approach, collecting ever increasing dividends and wait for opportunities to present themselves. Stocks I hold in order from largest holding to lowest:

INTC (Intel)
PEP (Pepsi)
WAG (Walgreen)
PG (Procter & Gamble)
GPC (Genuine Parts)
KO (Coca Cola)
MMM (3M)
HAS (Hasbro)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
DPS (Dr. Pepper, Snapple)


Stocks now make up about 20% of my portfolio. with my goal of about 25% as new cash and dividends come in. Other assets are CDs, a home mortgage and about 2% precious metals.

Portfolio "Update"

I've sold MSFT and JNJ to take profits and along with some new cash, add to my holdings of GPC, HAS, SYY and PG. Currently, since the stock market is correcting, I am holding new cash, in order to purchase stock when the opportunity seems right. My current stock portfolio, from largest position to smallest is:

INTC (Intel)
PEP (Pepsi)
WAG (Walgreen)
PG (Procter & Gamble)
GPC (Genuine Parts)
KO (Coca Cola)
MMM (3M)
HAS (Hasbro)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)


Stocks now make up about 19.3% of my portfolio. with my goal of about 25% as new cash and dividends come in. Other assets are CDs, a home mortgage and about 2% precious metals.

Portfolio - "Update"

One CD of mine matured and I  bought some INTC stock with the proceeds, having also picked up some INTC recently. INTC's yield is about 4.3 %, a little better than the CD. Plus, with only a PE of about 10, it was pretty hard for me to pass up, especially since most other stocks I like have run up quite a bit in price this year. This is my stock portfolio, largest holding to least....

INTC (Intel)
WAG (Walgreen)
PEP (Pepsi)
PG (Procter & Gamble)
KO (Coca Cola)
GPC (Genuine Parts)
MMM (3M)
HAS (Hasbro)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
MSFT (Microsoft)
JNJ (Johnson & Johnson)

Stocks now make up about 18.5% of my assets, with my goal being about 25% as I route some of my cash flow to stocks, as situations present themselves.Other assets are mostly CDs and holding a home mortgage, also about 2% precious metals.

My Review of "The Unfair Trade"

5 out of 5 stars......

The global economy changed everything and it is unfair. Money politics must be destroyed for democracy to flourish. Neo-liberal economics of a free economy is not free to all. Undervalued Chinese currency favored exporting over domestic consumerism....should be less saving in China and more saving in the US. Tea Party and OWS should create new institutions instead of attacking old ones. Nixon taking the US off the gold standard unshackled the FED all the way to today's QE's. Both gold and paper fail because international cooperation is needed. Repeal of Glass-Steagall. Breakup of USSR led the way for more neo-liberal, free-market economics. The great financial transfer of our age - China/Asian savings buying US assets (Treasuries). GWBush/Greenspan - debt/low interest rates led to housing bubble and creation of AAA junk sold all over the world. Euro was the bubble creating power of Europe alowing Italy, Greece, Spain, Portugal,Iceland, etc to borrow at low interest rates.BRICs did well being smart, but commodity inflation hurt many poor like with the Arab Spring. Chimerica led to deflationary forces in the US. China's infrastructure all geared to manufacturing, Germany a moreefficient manufacture than the US because of its better infrastructure. Chinese economy flawed because too dependence on cheap labor. Problems will remain until Chinese become big consumers to lesson deflation in US.

W. Austrailia became wealthy because of mineral resources demanded by China - potential bubble? Race to the bottom - Mexico can't compete with China on manufacturing - so crime/murders rampant. Globalization makes regulating banks harder. Income disparity isn't as important as the disparity of the financial industry and the rest of the economy where "too big to fail" creates all kinds of unfair situations including income disparities.Lobbyists still the biggest problem keeping the financial industry in control. Iceland is a pretty good example how a runaway financial industry wrecked the country, but then Iceland was able to finally cut it down to size, so to speak.

Anyway, the Global economy has caused all kinds of distortions, leaving too many people behind and can only be corrected by proper control of the financial industry, including international agreements so that proper regulation can occur.

My Review of "Europe's Financial Crisis"

3 out of 5 stars....


This book is pretty good in describing the steps which led Europe to its current problems and juxtaposed America's handling of its financial mess which also became part of Europe's mess.

Anyway, the book does think pretty much all financial markets have been tampered with such that their future directions are more uncertain than usual. As for Europe, more planning for the Euro should have happened especially since there are significant problems remaining, mostly political. Weak nations can be bailed out, but it is doubtful politics will allow that, so probably too much austerity will still lead to real recovery being delayed. The author does think it would be wise if a few of the smaller/weaker nations left, but that still would leave Spain and Italy, two nations too large to leave but with much different politics than the strongest nations. So, it is hard to see things working out well in the foreseeable future.

So, a good book in laying out what has happened, but it doesn't seem to me there are any great revelations as to what might happen.

My review of "Street Smarts"

4 out of 5 stars.....

Jim Rogers goes through much of his personal biography, growing up in Alabama, graduated from Yale, studying history, then worked on WS for awhile and got hooked on investing, then off to Oxford to learn more of the world, then got back to finance, hooking up with George Soros and the very successful Quantum hedge fund, all the while having a passion to travel the world and basically figure out things.

Anyway, he is convinced the US is in decline, as all great civilizations eventually do, basically because we are too much in debt...while it is China and Asia which will dominate. Beginning in 1999, he saw a bull market in commodities with US workers falling behind seeking white collar jobs, rather than getting into farming and commodity related businesses. NYC - hotels and airports don't compare to Asia.

He is critical of the 2008 crash, thinking we should have let all the banks, etc go bankrupt...that capitalism can't exist without bankruptcy.....creative destruction as Schumpeter said.

He thinks US education should make greater use of the Internet.............thinks our college system is in a bubble which won't last.

He does feel immigration is great and would prefer no borders. Throughout history the most profitable societies were open to the world.

He does think our federal government should make better use of the Internet and have politicians stay home mostly and vote from there....less contact with DC lobbyists, etc.

He advocates bringing all troops home, not taxing savings and investments, and a simpler tax code.

His key advice to any investor is to ignore him and concentrate on what you know best - everyone has something they know more about than most people.

Overall, a very good book, especially welcome because Rogers is a truly successful investor. That said, one should read the book with a critical eye.....maybe Rogers would understand the US better if he wasn't such a world traveler.....but, I can't say he's wrong...but, personally I do think the US is still unmatched in creativity, I do have more hope for the US than he does.

"You ain't seen nothin' yet!"

Yep. you ain't seen nothin' yet!..........The DOW just set an all-time high.....no big deal since the avg. PE is still a modest 15+ and the Dow Transports just recently also set an all-time high......signalling the economy is operating super well. Also, interest rates weren't this low since just after WWII, also the start of a booming economy. And that's just some of the good news........housing is now booming, yet prices are nowhere near all-time highs of about 8 years ago....and, there is an oil/natural gas boom going on in the US, which means so much more because of the reasonable chance to make us energy independent......no need for our military to protect Saudi oil, etc.......and best of all, most don't even have a clue what is happening.......that just leaves even more room for the boom to go.

Portfolio - "Update"

The only change to my portfolio was the selling of my AVP options and taking the proceeds and buying some MSFT stock.......MSFT, because it pays a good dividend and shows a trend to raising the dividend each year, and is a solid company with a good balance sheet, which fits with all stocks I own, so that I really don't care what the stock price does as the income increases each year, though since all are solid companies, I assume sooner or later the price will exceed its current price.....while I will react to any meaningful changes to the companies. So my current stock portfolio, in the order of largest holding to smallest.....

WAG (Walgreen)
PEP (Pepsi)
PG (Procter & Gamble)
KO (Coca Cola)
GPC (Genuine Parts)
MMM (3M)
HAS (Hasbro)
ADP (Automatic Data Processing)
T (AT&T)
KMB (Kimberly Clark)
SYY (Sysco)
MSFT (Microsoft)
JNJ (Johnson & Johnson)

Stocks now make up about 14.5% of my assets, with my goal being about 25% as I route some of my cash flow to stocks, as situations present themselves.

The "sequester?"

Although I think a deal will be done to avert the March 1st "sequester," I do think the recovery is solidly in place enough, so the sequester, at worst will not harm the economy too much, maybe just causing a slight recession.......but some deficit reduction is really OK at this time to calm financial markets from worrying too much about the nation's deficit and outstanding debt.

As I judge the economy right now, there is plenty of cash around (booming stock and bond markets), more truly wealthy people, plus the economy is now solidly in the recovery mode, slow, but slow is good since more longer lasting. And, CA is currently BOOMING with the budget now forecast to be in surplus by 2014, the largest reduction in unemployment in 25 years, currently an oil boom in Bakersfield, the Facebook IPO, Tesla being Motor Trend Car of the Year, etc. And at about 12% of the nation, enough to lead the economy no matter what obstructionist politicians do. The BOOM is on…..maybe the greatest ever…..sure, there will be a bubble to be popped, but still much too early……as for bid-up RE prices in some areas, just a typical thing happening at the start of a boom. For those who think the middle and lower classes are being left out……true, but just a sign that there are so many more people left to keep the boom continuing, when they eventually benefit from the economy…….plus, booms always climb a wall of worry……the more I hear words like “crazy” and “insane” while things like employment, RE and stock prices are still well below highs, just makes me more confident. So, as far as any negative impact of the "sequester" or market worry about the possible sequester going into effect, I see it as just an opportunity to load up on undervalued stocks, stocks of great companies which have good balance sheets, pay good dividends and have a history of raising them each year......stocks, like INTC (Intel), MSFT (Microsoft) and some stocks I already hold and I think are undervalued like HAS (Hasbro), in particular, but any other which dips decently in price.

Portfolio - "Update"

I recently did make a major change to my portfolio. I sold some stock and raised some cash from CDs to finance a home purchase for my family, where I will live. It was complicated and took advantage of two short sales and a still discounted home price (about 26% from the 2005 new-home purchase price). The result for me, holding the mortgage on the home. So, besides the mortgage, stocks, etc are....

PEP (Pepsico)
WAG (Walgreen)
PG (Procter and Gamble
KO (Coca Cola)
GPC (Genuine Products)
MMM (3M)
ADP (Automatc Data Processing)
HAS (Hasbro)
KMB (Kimberly Clark)
T (AT&T)
SYY (Sysco)
JNJ (Johnson & Johnson)
AVP (Avon Products) 2014 call options

The stock portfolio represents about 13% of my net worth, Gold/Silver about 2%,  and CDs, cash and Mortgage (about 85%). And I will be using my investment cash flow to build up my stock portfolio to about 25% of my net worth, depending upon which stock opportunities exist. Also, I continue to hold no debt.

My Review of "Paying the Price"

5 out of 5 stars......

First off, I already respect the author, Mark Zandi, since he does appear to be one of the more reasoned voices during the last several years during this financial mess of recent years.

And after reading the book, I also conclude this book is well-reasoned and excellent for anyone who seeks to be better informed about what has happened and the risks which lie ahead. Some of the things from the book which I think are noteworthy.....

1. Great Recession bad, but bottomed by 6/2009 with 8.75M jobs lost and unemployment 10+%. By 2012, Occupy WS and youth have re-shaped lives, some good (save more/spend less), some bad (less likely to seize opportunities or start new ventures even though the economy needs them).

2. Large businesses are doing well, WS is back and bank failures have abated. What policy makers did to stem the financial panic and combat the Great Recession (GR) remains controversial, but can be judged a success, including the auto bailout.

3. Obama blundered by saying unemployment wouldn't rise above 8% with the Recovery Act.

4. Government policy stopped deflation in housing, while being least effective with mortgage modifications and re-financing's.

5. Dodd/Frank not perfect but had some good things - didn't solve "too big to fail," but makes failures more manageable like with stress tests.

6. The US outlook has never been brighter.

7. Only when the US gov't went all-in in acquiring stakes and debt of largest US financial institutions did the system's free-fall stop.

8. Unlike 2000, the Global Economy was using US financial institutions for investments/savings - Treasuries first then mortgage-backed bonds. Securitizing of bonds and of mobile homes, credit card debt, no-down, no-doc mortgages, etc resulted in regulators hurt by complexity of the system. Banks usually capitalized at 10xCash, but investment banks 30x and Fannie and Freddie 70x.

9. Fannie and Freddie were bit players -- mortgages dominated by the private sectors, but in 2008 concern triggered panic - Lehman should have been taken over, not permitted to fail. After bailouts, banks resumed lending to each other, FDIC ended silent runs by raising FDIC insurance. TARP made it all work. Also TAF, banks borrowing from the FED via silent auctions, creative loans to investment banks, PDCF, TSLF, QE's, etc all helped. However, ultimate judgment can't be made until the FED begins retreating from all the stimulating.

10. Emergency unemployment insurance is one of the largest economic multipliers.

11. Austerity made Europe worse. The US Recovery Act (ARRA) passed Feb 2009 GR ended in June. CBO said ARRA lowered jobless rate by 2%.

12. Should have been rapid principal markdowns on mortgages. FHA came to life, but offered loans as intended in 1930's. Temp. tax credits worked, stops buyers from waiting for prices to drop further.

13. Bankruptcy is OK for non-financial companies, but not for financial ones since they deteriorate quicker/bank runs, etc. Fixing the financial plumbing - Dodd/Frank not perfect, but helped - stress tests and identifying SIFI's sooner and making sure they have enough capital and liquidity. Important to have large banks so the US remains competitive in the global economy. The US financial system, despite its risks, powers the most productive economy in the world. Financial crises are most difficult because they choke off credit - so, must restart credit ASAP to fuel a staggered economy.

So, an excellent book, especially welcomed because Mark Zandi, the author, I judge to be more open-minded than the typical economist.