It's Been a Good Year

Time to count sheep. I just calculated my IRR for this year: 7.9%. Not much. But much better that S&P 500 (0%), never mind Nasdaq Composite.

I hope to do better next year. You never know, of course. But I think I learned something this year.

Happy New Year, everybody!

Taking Profits in Intuitive Surgical

I love this company. Intuitive Surgical (ISRG) is a true paradigm changer. It makes surgical robot systems Da Vinci, which are adopted around the world. Initially systems were almost exclusively used for prostate removal. Many analysts tried to predict Da Vinci sales based on this. They were completely wrong. FDA approves new uses of the system all the time, hospitals around the country are experimenting with even more new surgeries.
Company has all components for continues explosive growth. Da Vinci is the only robotic system which has FDA approval. Which means it has a moat, speaking in Buffett's terms. A lot of revenue comes from service and spare parts sales, which is a very stable source of income. New surgeries means new sales.
Why am I selling? First of all, I'm selling only a small part of position. Even after this sale, ISRG is the second biggest position in my portfolio. Again, I love this company. But profits are made to be taken. Discipline trumps conviction. Stock almost doubled this year. And my initial investment into company has quadrupled. Any reason is good enough, taken all together, they told me: take the profit. At least some of it.

Full disclosure: I still have significant long position in ISRG.

Closing Logitech

One more trade gone bad. My worst trade of the year.

I bought Logitech (LOGI) as a trade on return to averages. After stock went down about 20% I thought that it should return back to 200-day moving average. Market didn't agree with me.

Lessons:

1. There was sharp fall in most tech in the middle of the year. It was a good hint for me to close the position. I ignored it. My bad.

2. I misjudged market reaction to the failure of Google TV device, produced by Logitech. I thought that projected sales of the device weren't that great in the beginning and failure wouldn't count for much in the balance sheet. Market ignored the financial side and decided that failed hype should be punished.

3. Last, but not least. I need to put strict time limits for any technical/quantitative trades. It creates discipline which trumps conviction in the long run.

Why I Sold Intel

I closed position in Intel (INTC) today. Decision was made when I heard a preannouncement a week ago. Intel said that revenue for the quarter will miss the mark by smothing likt 15%. They claimed floods in Thailand and subsequent deficit of hard disks reduced production of PCs, and demand for Intel CPUs. Well, it figures.
What was surprising is the reaction of Wall Street. Quarter earnings estimates were cut, but just a little bit. I couldn't believe it when I saw it. Look at the income statement. There are two major expense categories: "Research and Development" and "Selling and Administrative". For Intel, that's essentially fixed costs. I feel that INTC is going to miss initial profit estimate by 25-35%, not by 14%, which is current consensus.
Intel is a great company. It will recover. And it pays great dividend. I think it will fall hard after reporting for the current quarter. It will be time to back up the truck. For now, I prefer to take profit and wait for a good moment to get back.

Full disclosure: I still hold small INTC position on my IRA account.

Why I sold Goldman

I bought Goldman Sachs (GS) in the beginning of 2010. My main idea was that if banksters are crooks and earning big money, I want a piece of action (and it's legal!) Reality interfered. All financials are down (lucky me, got rid of everything else long time ago). It doesn't matter if GS is full of crooks, or management is bad, or it's just bad luck. They lost. I lost with them.

This is not a usual tax related sale. Size of the position and loss I'm taking are not big enough to make any difference. It's a strategic sale. I don't believe in financials right now and I don't want to go into next year with them. Position is closed and forgotten.

AT&T Is Not Buying T-Mobile! I'm Happy

That's great news! I was outraged when heard about the deal in the beginning. But it looks like Justice Department is doing its job, at last. If antitrust enforcement was really good in this country, Ma Bell wouldn't even think about it. But enforcement was lax, so they decided to try. No way.

It's especially good news for T-Mobile (DTEGF.PK) customers. AT&T (T) is consistently worst cell company in the country. I've been there, couldn't wait for 2-year contract to end.

T-Mobile wants to find a buyer? Maybe Vodaphone (VOD)?

Full disclosure: no positions

Cleaning Up More

Closed position in Morgan Stanley India Investment Fund (IIF) today. Another trade which became an investment. I am not sure if this conversion was right or wrong. Result is bad, sure, so it was wrong. I still feel that India is punished for wrong reasons and I'm still holding a significant position in India Fund (IFN). But it's a season of selling for tax reasons. This is a first time in my investing life I'm doing it. Thing is, I sold a lot of positions, taking a lot of profits, did some profitable trading and received a lot of taxable dividends. Now is the time to take some losses too.

Waiting For Santa

There are two questions (in no particular order) for the last two weeks of the year.

Are we going to have Santa Claus rally?

What is the window dressing trade for year end?

Santa was detected well beyond horizon in the end of November. Then he disappeared from the radar. Todd Harrison still thinks that reverse head and shoulders pattern in S&P is not broken, I'm not that sure. We'll see.

Window dressing looks strange. If I'm not mistaken, everybody is selling everything, with exception of muni bonds (I'm glad that I have a significant overall position in several muni CEFs). Another exception: very small number of Nasdaq large cap stocks (GOOG and ISRG in my portfolio). Can we profint from it? I don't know. The most obvious sell-off is in commodities, but swings there can be very big in a very short time and it's a dangerous game. And don't tell me to use tight stops: as they say in London Tube, mind the gaps. Gold behaves strangely. There was a headline on CNBC couple of days ago: "Gold drops 3 percent on Technicall Sell-Off, Euro Fears"". I thought it was a bad joke, looked for similar headlines in Google, there are dozens of them! Come on, people, gold should go up on fears, not down. I think we see a breakdown of the parabolic chart. Two months ago everybody was buying gold, now last fool owns it already. And some fools forced to sell on margin calls.

I'm sitting tight.

Full disclosure: At the moment of publication author had long positions in GOOG, ISRG and muni CEFs:  BTA, CEV, MZF, NMO.

PS. Events in Russia are developing fast, and accelerating. I don't know how they will end, one thing is clear: there will be changes. My heart is with people who went to the meetings in Moscow and other cities on Dec 10. There will be more meetings tomorrow, on 24th and later. The white ribbon below is the symbol of, I hope, new Russia.

Short Term View

Common view: this market is defined mostly by Europe, and metrics don't matter. Common view is usually wrong. Well, I correct myself: common view is usually right, but you can't make money off it. You make money when common view is wrong and you can see it before others. Disclaimer: I don't claim such powers, just trying to make a penny. And another.

Technicals

Ugly. The only bright spot was perfect reverse head and shoulders formation in S&P, but it's got broken today.

Fundamentals

US is surprisingly robust. Stocks should reflect future earnings, right? Well, earnings are great, and they might be even better in the nearest future. The main problem is Europe. Some people say: "so what, US only exports about 5% to Europe, even 10% drop is peanuts", Well, US and Europe are tied together with millions of different connections. Physical goods is just a small part of those connections. Money flows between us are much, much bigger. Europe is going into recession next year with high probability. I think market is trying to discount effect on US markets.
In short, fundamentals are good short term, but uncertain long term.

Sentiment

Funny. I don't have other definition for it. Every time S&P is close to 1250, sentiment is bullish. Every time index drops close to 1200, it's bearish. Sentiment follow market now, I think we can safely ignore it.

And here's the problem: market doesn't have a direction. Doug Kass mad a great call for this year, predicting range bound market. So it is. Even Santa Claus rally failed to materialize so far.
I'm keeping oversized cash cushion and trading the range. Today I opened 3D Systems (DDD) long position again. I think it moved into 14.50 - 16.50 range for now.

Blame Dollar Carry Trade

Financial press looks like blind wise men from the old story: when asked to describe and elephant, one said it was a rope, another one, a column, and a third one, a pipe. What to we see in press lately? European debt crisis, withdrawals from hedge funds, (hyper)inflation which can't ever materialize and intervention of Central Banks. And nobody can see an elephant in the room. Well, almost nobody.. Howard Simons of minyanville.com has this article and couple of others.

In short, in the last couple of years, banks, hedge funds and anybody who wanted and could do it, borrowed dollars (cheap) and bought securities around the world with much higher yield. Underlying idea was that Fed is printing dollars like crazy, that dollar has nowhere to go but down and it looks like an easy and sure way to make huge money. Of course, people always forget that there is no easy and sure way to make money. Fast forward to July 2011. Hedge funds started big attack on Eurozone sovereign debt. There were lots of publications in press how this debt is unsustainable and why some (or many) countries will be forced into default. I don't think all of this press was paid for by hedgies. But significant part of it certainly was. Result: yields on debt are up, but, what is more important, Euro fell more than 10% related to dollar. And this is the level of currency fluctuation which kills carry trade dead. I don't know all the details, they are mystery even for SEC, but it looks like the main reason for MF Global  collapse.

I'm afraid, that MF Global collapse is just peanuts comparing to the size of the problem. We are talking hundreds of billions, if not trillions, of dollars. Coordinated intervention by Central Banks tells me that trillions is a better guess. And dollar carry trade is not restricted to Europe.

We are not out of the woods. Eurozone politicians still don't understand the size of the problem. The other parts of the world are still to find out.

Commenting on the action of Thanksgiving week, I wrote that it looked like margin call action. I think I can further qualify it as a margin call related to dollar carry trade unwinding. Some people think that this problem is not related to US. After all, Europe is only about 10% of US exports. Yeah, right. And one collapse of a big European bank can easily topple all world financial system. If dollar carry trade to unwind fast, we will import huge, massive deflation from Europe.

What investment decisions can be made? The only thing I can think of is to increase cash cushion and hope for the better. Big bank collapse is not a tradable event, everybody would suffer, the question is: how much.

Thank You, Uncle Ben!

This is what we really need: leadership. It looks like Bernanke persuaded heads of Central Banks to do something. They probably didn't have any choice, situation is really scary. It looks like dollar carry trade is unwinding right now. Banks, which borrowed dollars to buy Euro denominated bonds, now are forced to sell everything and buy dollars back, because Euro fell related to dollar and they are probably facing massive collateral calls. I wouldn't be surprised if a lot of hedge funds got caught the same way and now are faced with huge margin calls.

Central Banks action is good, but not enough. Not even close. We need coordinated QE from Fed and ECB. Soft default of Greece killed a lot of liquidity (talk about unintended consequences). Sharp rise of yields on Italian and Spanish bonds created huge strains. International financial system is in a huge trouble. If something big happens (default of one more country, failure of a big bank, exit from one country from Euro), everybody will suffer. We are not isolated in US. We can have much more trouble than in 2008.

Why I Closed Position in 3D Systems

I closed position in 3D Systems (DDD) today. This is a change of plan. Initially, I wanted to accumulate position, trading around it. But I didn't like last earnings report and liked conference call even less. So I decided to make a pause and sold position.

This is a good company, with good growth and excellent balance sheet. But we don't invest in present, we invest in future. And last quarter somewhat reduced my confidence in future. Maybe it was one off quarter. If so, I will change my opinion.

Stock remains a great trading vehicle. I might buy it back when it trades lower. 

Netflix's Bigger Problem

I closed my Netflix (NFLX) position today. Way too late. The only good thing is that I bought it when it wasn't on anybody "buy" list, well below $50. Sure, I should've sold it long time ago. Well, rear sight is always 20/20.

Yes, last quarter report was the trigger. Actually, one little thing in the report: it seems to me that Reed Hastings, CEO of Netflix, wants Netflix to be like HBO. Well, HBO is a part of Time Warner (TWC), and if you look at long term chart, it's not a good investment, to put it mildly. If Netflix wants to be HBO, I don't want to invest in it.

There are a lot of comments. People are rightly questioning latest moves, cost of streaming content, attempts of content providers to charge more and/or strangle Netflix as a competition to cable TV. Everybody is missing one thing: there is almost no content. I cancelled my Netflix DVD subscription not because of price increase, but because couldn't find anything on DVD I wanted to watch. I went through US and foreign classics, some new movies in 2009 and 2010. There are probably 3 movies released in 2011 I want to watch. I watched one in the theater. For 2 remaining I can use pay-per-view on Dish Network, much cheaper than keep Netflix subscription. I don't care about multiple remakes and remakes of remakes. I hate most of the comics based movies. Vampires and zombies are not even funny anymore. There is nothing else out there. I have the impression that content providers are reducing costs by dumbing down their production. Well, they are losing me as a customer.

Somebody might say that my taste is not mainstream, that only fringe watches, for example, Woody Allen movies, that most people want to see transformers and vampires and zombies. Maybe. But I know for sure that there are a lot of people with diverse tastes which are (were) Netflix customers. And many of them have the same problem: there is nothing to watch.

Full disclosure: I don't have any positions in NFLX or TWC.

This is a Breakout. Why am I not Happy?

As children say, the answer is "because".

First of all, breakout (S&P over resistance at 1220) is not confirmed. Let's wait until Monday. Second problem, bigger one: Nasdaq composite did not break out over its resistance level of 2670. Not even close. If you look at charts, during this depression Nazz was the leading index.

I will be happy if market is going up. I will be extremely happy. After all, my long positions exceed my cash and fixed income positions. But I have serious reasons to be careful. Current action doesn't look like bull market action.

Exhibit one: earnings reports and reaction. Google (GOOG) beats by a mile, stock jumps the next day, no follow up. Intuitive Surgical (ISRG) beats, stock jumps the next day, no follow up. Same picture with Intel (INTC), VmWare (VMW).

Exhibit two: market still pretend to depend on Europe. Well, it's a good excuse for market to not go up on great earnings. What would be a next excuse? And next after that?

Actually, Europe deserves extra deliberation. First of all, it's not going anywhere. Second, for better or for worse, but EU economy is bigger than US economy. Now, cutting through BS they feed us from all sides. EU is there to stay. There is no way to dissolve such union, not right now, not in the nearest future. Eurozone, i.e. currency union inside of EU, is there to stay as well. As much as Germans grumble, saving Eurozone is much (orders of magnitude) cheaper than dissolving it. Granted, currency unions of independent countries never survived long before. But Eurozone countries are not politically independent. They are part of EU.
Currently they are coming to a kind of soft bankruptcy for Greece. They will need to recapitalize banks, to create some kind of loan mechanism which can't be killed by speculators. In a year or two we will see something like QE from European Central Bank (ECB). They are moving slow, but they are moving. They will not fall apart, the price is way too high.


So, there is no end of the world coming from Europe. Why, or why am I not happy? Why don't I predict a huge bull market? Because we are in a Great Depression 2.0. Everything is moving faster now, so in 2008-2009 we quickly went through analogy of 1929-1932. Rally of 2009-2010 was quite like rally of 1932-1936. Now we are in analogy of 1937. Everybody tells about austerity, savings, cost cutting. Nobody (that is, except for Fed) is talking about stimulus. That's a huge mistake. We need stimulus. We need inflation. We need more debt, public and private. And everybody is talking austerity, cost cutting, deleveraging.

Unfortunately, analogy ends right here. In 1942, Great Depression was ended by stimulus package also known as World War II. World War now is so scary, it's almost impossible. Even if it happens, it will be the end of the world, not a stimulus package.  And the only modern depression known to us after WWII is going on for 22 years already without any sign of ending any time soon. I mean Japanese Great Depression (1989 - ?).

That's why I am not happy. That's why I don't believe in any big rally. We might get to S&P 1400 by the year end, sure. I will be a seller then. Because austerity is coming, and bear market is coming with it.

US Downgrade is Stupid

I don't know what is used instead of brains at S&P. Up until 2007 they easily stamped AAA on collaterized debt obligations consisting of barely prime or even subprime mortgages. Now they slap downgrade on the country which paid its debts for more than 140 years! Yes, last debt limit debate was crazy, unnecessary and damaging US reputation. But memory of it will fade quickly. After all, there were similar partisan battles in 1979 and 1987 (first time republicans played the role of idiots, second time, democrats).

I agree with Barry Ritholtz. This doesn't say anything about US credibility. It says everything about rating agencies credibility. It's zero. And probably will be below pretty soon.

Game of Chicken

You would think that theatre of absurd around debt limit is senseless. Not at all. It's politics as usual, only at its worst.

On one side we see ideological idiots from GOP. They want nothing less than reversal of Roosevelt's New Deal. Don't be fooled by rhethorics. They tell you that they want responsible government, staying away from business making everything work. In reality they want the end of Social Security, Medicare, undemployment benefits and other things which construct social safety net. That's big business program running amok, desire to hire people as cheap as possible.

On the other side, mostly no less ideological Democrats, including President. They want big government running everything, clean energy (impossible), end of oil (impossible). Thanks God, they at last abandoned idea of "gun control", which in their lingo means total ban on firearms for population.

Until lately, both sides somehow found compromise in the last 30 years. It was messy, expensive, with a lot of unnesessary spending. Both sides are guilty in that spending, GOP sponsoring no less stupid programs than Dems. Government waste is an equal opportunity sport in Washington.

The problem now i entirely of GOP making. As much as I hate many things Dems do, current crisis was created by GOP. They voted for current budget, but now refuse to authorize increase of debt limit necessary to execute said budget. In fact, they are trying to hold the welfare of the whole country hostage of their interest.

They played game of chicken with Obama. They thought they can call his bluff and force him to agree to any extreme program they can think of. Their problem is that in politics they are children compared to Obama. He saw an opening which allows him not only to win White House next year, but also to soundly beat GOP in both Senate and House. He is going for shutdown of government and possible default. And he is putting the guilt sqaurely on GOP, where it's really belongs. They forgot that politics is an art of possible. They wanted impossible and already lost.

Next steps are obvious. On August 2, Treasury will declare which payments will be stopped first. Of course, accourdint to 14th Amendment, part 4, interest and principal payments to holders of Treasuries will be first priority. There will be a lot of hurt, thousands of people are going to be laid off. Next stage will be delay in payments to all government employees which will not be laid off. Then come payments to unemployed.

I hope that GOP will stop somewhere there. Because if everything is going out of control and US defaults on its debts to holders of Treasuries, all financial hell is going to break loose. It's a financial analogy of 6 mile wide asteroid. When it hits, nothing is safe.

Looks like current generation of GOP is done, losers. They are not going to survive this. It's a pity, because a landslide of Dems next year isn't any better for the country. We really need a divided government. But we also need a government which can compromise and find solutions. Well, that will have to wait until 2016 at least.

What's next? I hope that hard default isn't going to happen. GOP really doesn't have any justification for a hard default situation, they are going to be voted out and be happy that they are not rolled in tar and feathers before kicked out of Capitol. So let's hope that after some bickering they vote for debt extension before the end of August. Everything is going to be OK, right?

Wrong. Very wrong. We are going back into depression no matter what solution of debt limit crisis is adopted. Recovery, while it lasted, was triggered by Obama stimulus. That stimulus was tiny compared to what was (and is) really needed. We needed at least twice as much. And we need much more than that now. Instead, we are getting severe budget cuts. Ain't gonna help recovery. Budgets are cut in states, in counties, in municipalities. Now federal budget is going to be cut. Dozens of thousands of people are going to lose their jobs. Some "economists" and all GOP elected want to tell us that that's OK, that private business, facing less competition from governments, will pick up the slack. That's bullshit. Private business is doing nothing of the kind and is not planning to. We are in depression and business is not expanding, with just a few exceptions. There are no real competition for resources: interest rates are very low, wages are stale, unemployment is high. We are going back into deflation mode soon. The only little hope left is QE3, which is probably coming in October or November. I'm afraid that's not enough.

US got out of Great Depression thanks to World War II. World War III is unthinkable. What is going to pull us out this time? Or maybe developed world is going Japanese way for decades of depression?

What am I going to do with my money? I'm keeping big (for me) cash position right now and will keep it until debt limit crisis is resolved one way or another. I'm going to start investing right after debt limit is raised. Unfortunately, there aren't many places to invest in depression. It's going to be fast growing tech and some dividend paying stocks. Tobacco is out. Dying industries (paper books, newspapers, TV stations, movie studios, cable TV) are out of the question. As usual, I'll play it by ear.

We Need More Debt!

Somehow it's a common knowledge that debt is bad All kinds of debt, public, private and corporate. Every day you can see several articles crying: deleverage!

This is totally wrong. It's wrong for all kinds of debt. Reducing debt right now is bad for the country, bad for corporations, bad for the people.

First of all, reducing total national debt is bad for economy. All money is debt. Most people don't understand that, for details, look here: http://seekingalpha.com/article/178797-how-the-government-creates-money
Because money is debt, reducing total debt reduces amount of money in circulation. Which leads to low inflation, and in severe cases, to deflation. Well, many people, especially those living on savings and fixed income would tell me: what's wrong with the deflation? Our income can buy more things! True, but deflation increases cost of credit, depressing business activity. In severe cases (see Great Depression) high deflation leads to dozens of thousands companies closed, failed banks and very high unemployment. In the last hundred years, best growth was achieved in economies when inflation was between 2 and 5%. We are running around 1% right now. We need more inflation, more money, more debt.

Many people say that debt is a bad thing. It's almost from Christian church playbook of Dark Ages, when interest bearing credit was banned (usuty!). Economy was doing great in Europe between 7th and 13th centuries, wasn't it? In some Muslim countries credit is against the law, do they have good economies? Debt by itself is a good thing. It allows corporations to finance their expansion. It allows young people to start living comfortably, go to college, buy a car, a house. It allows government to pay for a lot of things, especially when economy isn't very good.

Word of the day: austerity. Why? Did anybody ever got richer by austerity? Did US escaped Great Depression using austerity measures in 1930-1932 or in 1937? You don't grow corporation using austerity, you don't grow economy using austerity. For people proper measure of debt is a relation between market value and debt. For a person it's a relation between income and debt. And for a government, GDP to debt. Ways to improve picture and grow in all cases is to increase income, not to cut expenses. I can understand austerity measures in Greece, where government sector was more than half of all economy. They need to cut budget and privatize like crazy. There isn't much room for privatization in US (USPS, ports and airports, anyone?) and government sector isn't that big. Main reason for US to take more debt: our government can borrow at outrageously low rate. If I could borrow at 3% for 10 years, I'd be loaded to the gills.

There is one more "reason" to reduce debt: someone sometimes will have to pay it. Well, corporations and governments can live many dozens of years with a big load of debt, just roll it over, preferably at good rates. And now is as good time to roll over debt as ever, at current low rates. Debt is only bad if you can't roll it over.

If we had booming economy, low unemployment and elevated inflation, I'd be first to call for debt reduction, especially government debt reduction. But we are in Great Depression 2.0, we need to pull our country (and the whole world, whether we want it or not) out of it. The only way to do it is to take even more debt.

Midyear Portfolio Review

Portfolio goal. Growth. This is high beta, unapologetic growth portfolio with some safeguards and some boring investments. The goal remains unchanged.

Basic Principles. Most of the stocks in this portfolio were chosen for long term investment, which, for me, is about 18 months. Every stock is under review all the time, with major review of portfolio twice a year. I can trade around any position if I feel like this. Portfolio is not diversified by sectors. Maybe "diversification is the only free lunch" (Jim Cramer), but I'm a big believer in TANSTAAFL (There Ain't No Such Thing As A Free Lunch, popularized by Robert Heinlein). Diversification reduces risk, but it also reduces potential gain. No change in basic principles either.

Paradigm Changers. These are stocks of companies that are changing business in sectors or even in the whole world.

Google (GOOG)

Ultimate disrupter. Google is changing the advertising world. Company is also agressively moving to mobile internet advertisement.

Added to position since last review.

Risk: All great empires were destroyed by internal problems. But there is also a threat of internet fragmentation, with ISPs and device producers restricting the use. Example: Apple (AAPL) banning Google advertisements in applications developed for iPhone and iPad.

Plan: Hold, trade around.

Intuitive Surgical (ISRG)

Robotic surgery that is changing surgery of internal organs. Company has monopoly on robotic surgery right now.
Reduced position since last review.

Risk: new technologies are being developed, legislation changes can reduce demand.

Plan: hold.

Netflix (NFLX)

This company completely changed video rentals model. It's also the best internet movie delivery company. No position changes since last review.

Risk: Things on the Net are changing quickly.

Plan: hold, add on weakness.

VmWare (VMW)

Cloud computing is all the rage, and VmWare is on the frontline. If company wants to create its own cloud, VmWare is the way to go. 

Reduced position since last review.

Risk: it's not clear that internal clouds would win over external ones or over software as a service.

Plan: hold.

ARM Holding (ARMH)
New position. This is an example of a pure brain company. Company designs ARM CPUs for a wide range of mobile devices and licenses them to diferent companies. Most smartphones and all tablet computers I know run on ARM CPUs.
Risk: Tech world is changing quickly, somebody can invent a revolutionary new design and beat ARMH.
Plan: hold.

Banks.

Goldman Sachs (GS)

This is not exactly a bank, more of a broker/trader. Absolutely best Wall Street company. 

No position changes since last review.

Plan: Hold, add on weakness.

Steady growers / high yield. Companies with steady growth, high dividend or both. I am increasing weight of this group, such companies are best investments in depression times.

Annaly Capital Management (NLY)

REIT. Huge dividend and good management are main reasons. Company makes money on distressed mortgages, current holdings are mostly supported by US Government.

No position changes since last review.

Risk: possibility of management mistakes, another real estate crash, rise of interest rates.

Plan: hold, add on weakness, reinvest dividends.

Altria (MO)

I don't smoke. I don't recommend anybody to smoke. But people do anyway, and they pay exorbitant prices for tobacco products. Altria grew profits steadily in any environment, ignoring tobacco lawsuits, tax hikes and anti-tobacco campaigns.

No position changes since last review.

Risk: ban on tobacco, tobacco deregulation, both are highly unlikely. Possible huge legal expenses. New risk: contraband between states, because tobacco taxes vary a lot between states. This is a threat to the whole industry. Once smugglers are established, they can start smuggling cigarettes from other countries, including counterfeit ones. Another new risk factor: DIY tobacco planting. It's inevitable with current high taxes, can grow up to as big illegal business as marijuana or even bigger.

Plan: Reduce position on strength.

Phillip Morris International (PM)

Same reasons to hold as for Altria. Can be also put into "International" category.

Reduced position since last review. I think stock is overvalued at current price.

Risk: legislation changes abroad. World is quickly moving to smoking restrictions everywhere. Most of EU countries banned smoking in restaurants. I visited Czech Republic in 2008, it was impossible to breathe, restaurants were full of smoke. Such a big change. Many countries raised tobacco taxes as well, which will lead to smuggling and DIY growing.

Plan: hold, reduce on strength.

American Capital Agency Corp (AGNC)

REIT. Highest yield among the stocks I know.

Traded around position since last review.

Risk: company is highly leveraged, if interest rates are to go up, yield might suffer.

Plan: hold, reinvest dividends

Intel (INTC)

This is a tech company, but not a paradigm changer anymore and not a fast grower. But it enjoys almost a monopoly position, grows steadily and pays big dividend, which increases almost every year.

Risk: tech world can change fast.

Plan: hold, trade around position, reinvest dividends.

Since last review I closed General Mills (GIS) and Pepsico (PEP).

International

Indian Fund (IFN)

India is the only part of BRIC which I like now.

No position changes since last review.

Risk: political.

Plan: hold, add on weakness.

Morgan Stanley India Investment Fund (IIF)

New position. Also CEF investing in India. I

Risk: political.

Plan: hold.

Since last review I closed Ibero-America Fund (SNF).

Fixed Income

Blackrock Income Opportunity Trust (BNA)

Fund holds mostly high quality corporate bonds and Treasuries. Good depression hedge.

Added to position since last review.

Plan: hold, add on weakness.

Wells Fargo Capital Trust XII (BWF).

I use it to hold cash I don't need right now. Good yield.

No position changes since last review.

Risk: Bankruptcy of Wells Fargo.

Plan: hold, sell when need cash.

PowerShares Financial Preferred ETF (PGF)

This is a bet on recovery in financials plus excellent cash management tool.

No position changes since last review.

Risk: Another crash in financials.

Plan: Hold, sell if need cash, trade around position.

Eaton Vance California Municipal Income Trust (CEV)

California munis are priced very low, and pay a big, federal tax free yield.
No position changes since last review.

Risk: mass bankruptcies of California cities and counties. I don't think it's going to happen

Plan: Hold, add on weakness.

Nuveen Municipal Market Opportunity Fund (NMO)
One more muni fund, this one invests around the country. Big, federal tax free yield.
New position.
Risk: mass bankruptcies of municipalities around the country. Highly unlikely.
Plan: Hold, add on weakness.

Helios Multi-Sector High Income Fund (HMH)
Bought this fund when it traded at big discount to NAV, as a replacement to EAD.
New position.

Since last review I sold Evergreen Income Advantage Fund (EAD), when it was trading at premium to NAV.

Nothing is sacred. Any position can be sold any time I feel like that. I can trade around any position when I see the opportunity.

Bad, Bad Market

This market is bad. And I don't see any improvement soon.

I decided to do most of my blogging on Seeking Alpha (here).

One trade I didn't mention in the blog yet: I sold a small part of Intuitive Surgical (ISRG) position on Monday. This stock is mostly growing, but might have big swings. So I'm trading around the position, now is time to sell some.

Short Natural Gas

Natural gas shot a little bit high lately. Usually it was trading between $3.5 and $4.5 in the last couple of years, now it's just shy of $5.
Shorting is a risky game, so I chose safer strategy: bought some $12 July puts on UNG. We'll see how it plays.

Buying Downturn

Week started down, as I expected. I think it's time to buy a little bit, for a trade. Using 4x2 system, two best candidates were: Waste Management (WM) and Intuit (INTU). I bought both. I'm trying to play volatility, hence yesterday's and today's buys. The best case if I can sell all three (including DECK) by the end of the week at a profit. Of course, trading is never about the best case, but I still hope for a profit. We'll see.

Buying back DECK

Well, it's down to the price I like. Would I hold it for a while? Don't know. I don't really like current market. To put it honestly, I hate it. We'll see.

Apology is in order: I forgot to write here that I sold Waste Management (WM) position last Friday. I mentioned about this trade in my page on Seeking Alpha (http://seekingalpha.com/author/alex-filonov).

Buyin Waste Management

Bought some Waste Management (WM) today. I'm trying to get a feeling of this market, and passive observation doesn't work so far. WM was one of the stocks in 4x2 signal today. This system isn't working anymore, but together with other signs can help. I wanted to buy something, because current pattern is down on Monday and Tuesday, turnaround on Wednesday, up on Thursday and maybe on Friday.
Of course it might not work. It's trading, not winning.

Remembering Mark Haines

This is a sad day. We will never hear again "From the financial capital of univers, this is Squawk on the Street". We won't hear how mighty CEOs and fund managers are cut down to size (sometimes small size) in several words.
Mark made CNBC alive. It was real reality show, not just a dry informational stream. I enjoyed his jokes, his mild attitude, nicknames he gave to people working with him. I will miss him.
Thing I remember the most? March 10, 2009, half joking, Mark said, that S&P 666 intraday on previous day looks like a bottom. And it was. Mark was one of only two people who called that huge, generational bottom.
Rest in peace.

Closed EAD

Tornado season began in Minnesota. Touchdown 3 miles from home, scary.

I closed my Wells Fargo Advantage Income Opportunities Fund (EAD) position. This is a closed end fund, and it currently trades at almost 5% premium to net assets value (NAV). This is too much. Discipline says that I can't hold CEF with more than 4% premium.
This is a good fund, it made me money and it pays good dividend. I will buy it back when it trades at discount to NAV.
I still think that corporate debt is a good place to be right now. I'm looking for some alternative to EAD right now.

Sold DECK

When buying Deckers (DECK) two days ago, I thought that I can keep it for a while. But it was up more than 8% from my buying price intraday today. Discipline tells me to sell in such cases, profit is to be taken when you have it. So I sold it. I can buy stock back if it goes down a little bit more. If not, well, you can't win them all.

You Should Own Stocks (Answer to James Altucher)

I like James and read almost every his article and blog post. I can agree or disagree with him, but his ideas are quite interesting. I strongly disagree with this article, here's my rebuke.

James' reasons not to own stocks and my response.


1. You’re not that good at it

Well, maybe. But even if you worse than professionals (which is a big question), you are still OK if you make decent money. And in today's market everything above 3% is decent.

2. Your competition wants to slit your throat

Not exactly. They want to make money, that's it. If you still make money, who cares if Buffet makes more.

3. Competition, part II

Sure, there is a crowd of crooks on Wall Street. I'm still making money in stocks since 1998. You can too.

4. Competition, part III

Computers are great. As an IT professional, I know that. I also know that computers are only as good as the code you put in them. One wrong assumption, and instead of decent profit you get a huge loss. If it were easy, programmers would be hard to hire, they'd be trading stocks. Well, I am a programmer and I'm trading stocks part time. I'd be glad to do it full time, but it doesn't work this way for me. So far.

5. It’s mostly a scam

Who cares if you make money off it?

6. True wealth in the stock market only comes if you make all the wrong decisions and then get lucky

Dunno. Bad examples here. Buffet didn't invest everything in one company, he created a company and invested its money in a lot of different companies. Gates didn't invest anything, he just created a company and successfully made it an OS monopoly. Of course, both were lucky, but they knew what they were doing.

7.The best investors in the world make on average between 10 and 15%

And ain't it great?! If you can make more anywhere else, take you money there. If not (and most of us can't, saving accounts pay 0.1%, money market 0.3%, if you are lucky), stock market is a place to be. Even if you are not as good as the best ones and take paltry 7%. Somehow I averaged 14% since 1998 and I don't think it makes me the best investor. Or does it? Contact me ASAP if you think so and have a business offer.

8. Competition, part IV

High speed trading is for computers. But looking at current market, I still see a lot of room for people. Volatility is big, you can make money off it. Or find several high growth stocks with good potential and buy them for several years hold. Or buy stocks with 6-7% yield.

9, Well, what about daytrading?

Yeah, it's a separate discipline. I think it should be full time job. Don't have guts for it. I still make money in stock market.

10. Stocks are really boring

Wrong! It's fun! At least for me.

And now, my reasons to be in stock market


1. It's really fun. At least for me.

2. You can really make money by using your brain. Directly. If you think better than half of the market participants, you make money.

3. It's the best way to grow your money.

4. It's fun. What, I'm repeating myself? Well, so be it.

Back From Vacation

Paris is great in April! Returning to Twin Cities when it's around 33 degrees isn't so great. I hope it gets warmer soon, I'm tired of the last winter and of spring which isn't much different from winter.
I opened position in Deckers (DECK) today. This is a great company, fast growing and trendy. I know, I know that UGGs don't look that great, even when on great legs under a mini skirt. But that's just my opinion. I don't smoke either, which doesn't prevent me from having big positions in Altria (MO) and Phillip Morris International (PM). Besides, I like my UGGs when it's below zero, which happens a lot in Minnesota.
I watched this company for some time, looking for an opportunity. I think I found one. Stock is down a lot after reporting a quite good quarter. OK, we like buying low. I will be buying more on the way down, if it really goes down more.

Taking Profits in VmWare

I have the impression that momentum is over for VmWare (VMW). Head and shoulders pattern, visible on the 12 months chart, can lead stock down to mid-60s. I decided to sell part of the position. That was a great ride, position almost tripled in less than 2 years. Time to take some profits. Especially before earnings report.

I might buy shares back if price drops under 80, definitely under 70. This is a great company, leader in the cloud computing software. But right now stock looks overpriced and that H&S pattern doesn't look good.

Selling Some PEP

Pepsico (PEP) is trading within 62-68 range for the last 12 months. Last 6 months range is even narrower, mostly between 64 and 66. Today stock went over 66, so discipline tells me to sell some. I will sell more over 68, and buy back below 64 and 62. Current market is not clear, it might easily go either way, but range trading works in every market. That is, while stock is in range.

Closing RSH

Closed RadioShack (RSH) position today. It was bought for a trade, because RSH was trading below 200-day moving average. Didn't work as I expected, but still sold at a profit. I don't like this market, can't keep this trading position anymore.

Selling Some Phillip Morris

Took some profits in Phillip Morris (PM) today. I was watching patiently while stock grew over $60, but $65 is too much. It's not a bad company, quite opposite, it's a great company. And eventually it might be worth much more. But for now... Tobacco company with 4% yield is not something I call exiting. So I decided to sell some of it. I'm still holding a sizable position and might add on weakness.
On the big scale, it looks like we are up to another round of Wall Street rally. And most probably it's going to be a rally in growth stocks. PM is a staple, it might grow faster than domestic tobacco companies, but my bet is on high growth stocks with four letter tickers...

Full disclosure: at the time of publication author had long positions in PM and MO. Positions can change any time.

Business Travel: Bad Time for Investing

This week was mostly spent on business travel. Didn't have much time to think about investing or to do something. Had just enough time to catch drop in AGNC on Tuesday (Mar 22) and add to position on weakness.

Well, can't complain, this week was just great. If we are to believe technicals, correction is over and a lot of good days are ahead.

Next Victim of Internet: TV

Well, it' official now: Internet killed music industry, newspapers and bookstores. Sales of CDs fell through the floor, Borders (BGP) is in bankruptcy. People don't want to pay $15 for a CD to listen to one hit (maybe two). They buy this song alone on iTunes or on Amazon (AMZN). They don't want to carry a trunkload of books going on vacation or on a business trip. It's much easier to read books on your phone, computer or Kindle.
Not so obvious is the future of DVD and Blue Ray. I think it's the way of dodo, deadwood press and bookstores. I know some people who owns DVDs. But most of us don't want to watch the same movie over and over again. Once is quite enough. Netflix (NFLX) is doing a great job of internet movie delivery. Competitors will be there, sometimes. Blockbuster (BBI) is walking dead, no matter what Icann thinks.
But all this is yesteryear news. Internet is not done, it's just starting.
Next, very obvious target is TV. And I mean everything in TV: content, news, delivery (cable and satellite). Almost nobody can see it now, with one small exception: TV related companies. They see it and their reaction is exactly the same which destroyed any hope of music industry and bookstores. They are trying to fight back. First line of defense: net neutrality. Because cable companies provide significant part of broadband access, they are trying to selectively set transfer rates for different types of content, effectively  killing TV over Internet. There are two reasons why this will not work: competition from phone companies (DSL) and government regulation. I am not a big fan of government regulation, but here it's just necessary. Imagine that phone company charges you different rates for speaking over the phone with different people (in the same area) or depending on the subject of conversation and prevent some conversations from happening. What cable companies want is the internet analog of such approach. Competition should work as well, but in many areas of the country there is none.
Second line of defense: government regulation. Media and cable companies are only against regulation when it doesn't let them screw consumer and all for regulation which helps to screw us. So media companies are inventing new ways how government should help them. Copyright is the most obvious option. I'm all for copyright for 28 years, maybe even for 42. But 100+ years like it is now? And Congress increasing this term all the time, so there is a possibility that works which are copyrighted now will never get into public domain. Attempts to enforce DRM (digital rights management, rights of the corporations, not the consumer) are also in the works.
Funny thing, this is all for nothing. In the worst case, we will have to pay dear for some content, owned by corporations, which we really want to see. But there is a lot of content already created, it's free or very cheap, it's on YouTube or other video sites. Yes, most of it is unprofessional and worth the money you pay for it. But there is some which is good and even great. And it's the way of the future.
Of course, TV as we know it is not going away tomorrow. It will live long, long time. After all, there are hundreds of thousands of horses in this country, 125 years after invention of the car.
What does it mean for investors? Don't even think of broadcast and cable companies. Be very afraid of satellite TV operators. There might be good trades there, but not long term investments. For good (multibaggers) investments look into NFLX and likes. Watch for new companies inventing new business models in this area. Look for content creators which embrace internet, although I don't hold my breath here, content prices will come down, as did music and as books doing right now.

Full disclosure: at the time of publication author had a long position in NFLX and no positions in other companies mentioned. Positions can change any time.

Still Buying Panic

Added yesterday to my position in ARM Holding (ARMH). I have no doubts we are in correction right now. Nasdaq composite is trading below both 13-day and 50-day moving averages. If this correction is like last one, in May-September 2010, Nazz should drop below 200-day MA before recovering. But, I don't even pretend I know everything and can predict the future. So I'm buying more with every good panic. ARMH was my trade of choice yesterday because it dropped a lot and it's a terrific growth stock. Almost every smartphone, every touchpad computer has ARM CPU inside. No, company doesn't produce them, but it's the beauty of the business model: no inventory, no plants, just a bunch of people designing chips and selling licenses to producers.
I'm planning to buy more if price drops more.

Closing General Mills Position

Closed General Mills (GIS) position today. Stock is trading mostly in 35-37 range. I might consider buying it back under 35.50.

Code for Google Docs Portfolio

Update: this code doesn't work anymore. Google closed API access to quotes.

In addition to the yesterday's post, I'm publishing code. Use of code is free and unrestricted.


function colortickers() {
  // Color background of ticker columns depending on price and limits
  var price = 1;     // this will hold the answer
  var sheet = SpreadsheetApp.getActiveSheet();
  var row = 2;
  while (price > 0) {
    price = sheet.getRange(row, 2).getValue();
    if (sheet.getRange(row, 2).getValue()) {
      price = sheet.getRange(row, 2).getValue();
      var low = sheet.getRange(row, 3).getValue();
      var high = sheet.getRange(row, 4).getValue();
      if (low > 0 && price < low) {
        sheet.getRange(row, 2).setBackgroundColor("red");
      } else if (high > 0 && price > high) {
        sheet.getRange(row, 2).setBackgroundColor("lightgreen");
      }
      else {sheet.getRange(row, 2).setBackgroundColor("white");}
    }
    row++;
  }
}


function gettickerprice(ticker) {
  // Function to get current price of stock
  var price = 0;     // this will hold the answer
  price = FinanceApp.getStockInfo(ticker).price
  return price;  // return the answer to the cell which has the formula
}

Managing Portfolio with Google Documents

Last week I had a very unpleasant surprise. I use Yahoo! Finance quite extensively for portfolio management. One of portfolios is set up as a shopping list, with low and high limits set. Very useful feature, you can see at a glance which stocks are trading outside of set limits.
Last week, Yahoo! completely changed portfolios layout. Among other changes, the ability to set and see limits was completely gone. I was outraged, a lot of my work just disappeared. I submitted complaint to Yahoo! and probably was not alone, because couple days later old portfolios layout was returned, and all my limits with it. But this made me think: what if by some whim of somebody such thing happens again?
Here comes Google Documents. There is a whole lot of possibilities for investment management there, and I am just scratching the surface.
Here's the link to the simple portfolio spreadsheet. Columns "Ticker", "Low Limit", "High Limit" and "Notes" are entered by user. Column "Price" is a function based column. Function "gettickerprice" reads current stock price from Google Finance. Price quote is delayed, as per Google Finance rules. Another feature of this spreadsheet: tickers are painted red if price is below low limit and green if price is above high limit. This work is done by script "colortickers", which is also a part of this spreadsheet.
This spreadsheet is public read only. You can (probably) copy it into your own Google account and modify as you wish.
I'm still working on synchronization of Yahoo! Finance shopping list portfolio with this spreadsheet. Not sure it's possible, but we'll see.

Opening ARM Holding

This is the company which was always more expensive than I wanted to pay for it. I was wrong so far, it was growing like crazy. ARM holding (ARMH) designs processors used in the most smart phones, including iPhone, and also in the most touchpad computers, including, of course, iPad. Company doesn't produce chips, which allows it not to spend huge fortunes on chip fab facilities. For comparison, Intel (INTC) currently spends about $15 billion to build 22 nanometer fab. ARMH licenses CPU designs to other companies. With the explosion in smartphones production, ARMH sells more and more licenses every month. Valuation is pretty steep, current P/E is just under 100, but I think company can see several years of explosive growth ahead.
That's why I started ARMH position today, on the second day of Libya related panic. I don't see any dependence between Libia and ARMH, so it looks like a good entry point.
Of course, I'm kicking myself for not buying it at $10 (was thinking about it at the time), but better late than never.

Buying Panic

Panic today on Wall Street. People are worried about Libya. I am not much worried about Libya, so I decided to do a little buying. Maybe I am wrong, maybe I am right, time will show.

Added to positions:

Google (GOOG). I was looking for a good entry point after last quarter report, and capitulated. Company is just too good. And Larry Page as a CEO is exactly what this company need.

Indian Fund (IFN). Technically, India was bottoming last couple of weeks. Today is a good entry point. If I read risks right.

Main risk is that panic will be much deeper this time. I can live with it, there is some cash to continue buying if market drops lower.

Brent/WTI Spread: It's Crazy

I mentioned what I thought then big ($4) spread between Brent and WTI futures here. It was 3.5 months ago. Today's spread is whopper: over $16!

Obviously, this spread has nothing to do with real product supply/demand. Difference between Brent and WTI processing is around $1, and usually it's easier to process WTI. So the only explanation for the difference is supply/demand situation on the futures market. It's not about oil, it's about paper. The question is, why Brent paper, traded on ICE, is much more expensive than WTI paper, which trades on Nymex. I don't have an answer, but there are several ideas which require additional digging.

Idea 1: CFTC started enforcing wash sales rules. In futures world, wash sale is a sale, where buyer and seller are essentially the same entity. This is going on for years, many countries with national (i.e. government owned) oil companies also set up sovereign (again, government owned) investment funds in US, which invest, among other things, in oil futures. It would be a good idea for CFTC to stop such activities, by I've seen no proof that it has any intention of doing that. If it were true, sovereign money could move to ICE, which is governed by British law. Variation of this idea: volume of wash sales sharply increased lately on ICE, without much change in US.

Idea 2: Oil futures suddenly became popular as an investment class in Europe. This happened not long ago in US, right now money is moving to the stock market. Maybe in Europe process of investing in commodities future is just starting? It's very hard to find any information supporting or disproving this idea.

Maybe there are some other ideas out there?

Opening RadioShack

Opened position in RadioShack (RSH) today. This is mostly technical trade.

Technical indicators:

Stock trades more than 20% below 200-day moving average.
Stock crossed over 13-day moving average yesterday, and stayed above today, indicating uptrend.

Fundamentals. I don't usually buy stocks with bad fundamentals, no matter how good technicals are. RSH is profitable company, with single digit P/E and projected growth. Good enough.

Closed PCAR

Closed Paccar Inc. (PCAR) position today. I've got nice 1.5% profit in one trading day, good catch. From the beginning, it was just a trade. Multiple signals (almost 10% drop after good quarterly report, 4x2 buy signal, which mostly doesn't work anymore, technical bottom signal) pointed to possible profitable trade, and trade I did.

Friday Feb 4 Trades

Bought Paccar (PCAR), added to Pepsico (PEP) position. PEP is trading at the bottom of current trading range, PCAR dropped way too much after good quarterly report.

Adding to BNA position

I added to BlackRock Income Opportunity Trust (BNA) position on Jan 27. This is pure cash management decision, stock trades at the lower end of the band and I have too much cash.

Non-Predictions for 2010: Results

I did an experiment about a year ago: tried to predict events that will not happen, even though many people believed they might (here).

Results are good. I'd say they are excellent.

1. Fed will not raise rates.
Fed raised discount rate, but not the federal funds rate. This is the only prediction that partially failed, I give it score of 0.5.

2. Chinese bubble will not pop.
It didn't. Score 1.

3. Israel will not attack Iran.
No attack. Score 1.

4. Gold will not hit $2000.
Still below $1500. Score 1.

5. There will be no commercial real estate crash.
None so far. Score 1.

6. Not more than one EU country will default.
None. Score 1.

My non-predictions were right on. Total score: 5.5 of 6.
I will publish my non-predictions for 2011 shortly. So far I feel that predictions 1,4,5,6 for 2010 are good for 2011 as well. Not so sure about 2 and 3.

Annual Portfolio Review

There were changes in my portfolio since last review.


Portfolio goal. Growth. This is high beta, unapologetic growth portfolio with some safeguards and some boring investments. The goal remains unchanged.

Basic Principles. Most of the stocks in this portfolio were chosen for long term investment, which, for me, is about 18 months. Every stock is under review all the time, with major review of portfolio once a year. I can trade around any position if I feel like this. Portfolio is not diversified by sectors. Maybe "diversification is the only free lunch" (Jim Cramer), but I'm big believer in TANSTAAFL (There Ain't No Such Thing As A Free Lunch, popularized by Robert Heinlein). Diversification reduces risk, but it also reduces potential gain. No change in basic principles either.

Paradigm Changers. These are stocks of companies that are changing business in sectors or even in the whole world.

Google (GOOG)
Ultimate disrupter. Google is changing the advertising world. Company is also agressively moving to mobile internet advertisement.
No position changes since last review.
Risk: All great empires were destroyed by internal problems. But there is also a threat of internet fragmentation, with ISPs and device producers restricting the use. Example: Apple (AAPL) banning Google advertisements in applications developed for iPhone and iPad.
Plan: Hold

Intuitive Surgical (ISRG)
Robotic surgery that is changing surgery of internal organs. Company has monopoly on robotic surgery right now. Added to position since last review.
Risk: new technologies are being developed, legislation changes can reduce demand.
Plan: hold.

Netflix (NFLX)
This company completely changed video rentals model. It's also the best internet movie delivery company. No position changes since last review.
Risk: Things on the Net are changing quickly.
Plan: hold, add on weakness.

VmWare (VMW)
Cloud computing is all the rage, and VmWare is on the frontline. If company wants to create its own cloud, VmWare is the way to go.
No position changes since last review.
Risk: it's not clear that internal clouds would win over external ones or over software as a service.
Plan: Sell some into strength, hold the remaining part of the position.

Banks.

Goldman Sachs (GS)
This is not exactly a bank, more of a broker/trader. Absolutely best Wall Street company.
No position changes since last review.
Plan: Hold, add on weakness.

Since last review, I sold US Bancorp (USB) position. Easy money is made here, and I don't really like banks.

Steady growers / high yield. Companies with steady growth, high dividend or both. I am increasing weight of this group, such companies are best investments in depression times.

Annaly Capital Management (NLY)
REIT. Huge dividend and good management are main reasons. Company makes money on distressed mortgages, current holdings are mostly supported by US Government.
No position changes since last review.
Risk: possibility of management mistakes, another real estate crash, rise of interest rates.
Plan: hold, add on weakness, reinvest dividends.

Altria (MO)
I don't smoke. I don't recommend anybody to smoke. But people do anyway, and they pay exorbitant prices for tobacco products. Altria grew profits steadily in any environment, ignoring tobacco lawsuits, tax hikes and anti-tobacco campaigns.
No position changes since last review.
Risk: ban on tobacco, tobacco deregulation, both are highly unlikely. Possible huge legal expenses.
Plan: hold, reinvest dividends.

Phillip Morris International (PM)
Same reasons to hold as for Altria. Can be also put into "International" category.
No position changes since last review.
Risk: same as with Altria.
Plan: hold, reinvest dividends

Pepsico (PEP)
This is a "staple" company. People are buying its products no matter what. Products sold in US are also addictive, because most of them contain caffeine.
No position changes since last review.
Risk: management mistakes.
Plan: hold, reinvest dividends

General Mills (GIS)
Another "staple", and local company headquartered in Minnesota.
No position changes since last review.
Risk: management mistakes.
Plan: hold, reinvest dividends

American Capital Agency Corp (AGNC)
New position. Another REIT. Highest yield among all the stocks.
Risk: company is highly leveraged, if interest rates are to go up, yield might suffer.
Plan: hold, reinvest dividends

Intel (INTC)
New position. First was bought for a quick trade, didn't work out, held anyway. Later on added to position when stock was crushed after October earnings report. Sold some in the end of December. This is a tech company, but not a paradigm changer anymore and not a fast grower. But it enjoys almost a monopoly position, grows steadily and pays big dividend, which increases almost every year.
Risk: tech world can change fast.
Plan: hold, trade around position.

Since last review I closed Brookfield Assets Management (BAM).

International

Indian Fund (IFN)
India is the only part of BRIC which I like now.
No position changes since last review.
Risk: political.
Plan: hold, add on weakness.

Morgan Stanley India Investment Fund (IIF)
New position. Also CEF investing in India. I bought it as a play on the annual distribution. Usually stock drops after distribution ex-date, and then growing up, because of dividend reinvestment by holders and DRIP plans. Didn't happen with this position, yet.
Risk: political.
Plan: hold until it's up 5% from buying point or for about three months, whichever comes first.

Ibero-America Fund (SNF)
I like EU, and Spain, even less. But this fund is not about Spain anymore. It moved to Latin America, and disqualified itself from my portfolio. According to Cramer, Latin America is always a trade, never an investment.
No position changes since last review.
Risk: Multiple political and other.
Plan: Sell, look for other EU opportunities

Fixed Income.

Blackrock Income Opportunity Trust (BNA)
Fund holds mostly high quality corporate bonds and Treasuries. Good depression hedge.
No position changes since last review.
Plan: hold, add on weakness.

Wells Fargo Capital Trust XII (BWF).
I use it to hold cash I don't need right now. Good yield.
No position changes since last review.
Risk: Bankruptcy of Wells Fargo.
Plan: hold, sell when need cash.

Evergreen Income Advantage Fund (EAD).
One more change of plan. In the second half of last year I completely sold position, when fund traded at premium to NAV, then bought again at discount to NAV. It looks like economy is really improving, so corporate bonds are OK.
Risk: economic slowdown/downturn.
Plan: hold, add on weakness.

PowerShares Financial Preferred ETF (PGF)
This is a bet on recovery in financials plus excellent cash management tool.
Sold part of position since last review.
Risk: Another crash in financials.
Plan: Hold, sell if need cash, trade around position.

Eaton Vance California Municipal Income Trust (CEV)
New position. California munis are priced very low, and pay a big, tax free yield.
Risk: mass bankruptcies of California cities and counties. I don't think it's going to happen
Plan: Hold, add on weakness.

Since last review I sold Helios Total Return Fund (HTR), when it was trading at premium to NAV.

Nothing is sacred. Any position can be sold any time I feel like that. I can trade around any position when I see the opportunity.