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No. of Recommendations: 4
Continuing this morning’s selling, I solicited three bids at Zions Direct for my 2 Cooper Tire’s 7.625’s of ‘27, 2 WeyCo’s 7.95’s of ’25, and 1 Goldman’s 6.45’s of ’36, where the inside-markets were 97.500 x 99.00, 112.65 x 113.558, and 95.753 x 96.350, resp. I got no bid for Cooper; a single, low-ball for WeyCo; and a single, but very decent bid for Goldman. I accepted both, because I’m serious about getting the trash out of my portfolio before markets blow up again. So, this morning’s score-card (net commish each direction) is 1 Win, 1 Loss, 2 Scratches.

Valmont’s 6.62’s of ’20. In on 01/28/11@104.250. Out today @110.071. Achieved YTM was a nominal 17.9%, vs. 6.0% nominal if held to maturity and what would have been an inflation-adjusted, negative 0.1%.

US West’s 7’s of ’14. In on 01/28/11 @106.000. Out today at 103.550. Achieved YTM was a nominal 1.8% nominal, vs. 4.9% nominal if held to maturity and what would have been an inflation-adjusted, negative 0.4%.

WeyCo’s 7.95’s of ’25. In on 04/10/03 at 116.486. Out today at 108.150. Achieved YTM was a nominal 6.7%, vs. 6.5% nominal if held to maturity and what would have been an inflation-adjusted, negative 1.4%.

Goldman’s 6.45’s of ’36. In on 04/10/10 @96.273. Out today @94.764. Achieved YTM was 6.7%, vs. a nominal 6.8% if held to maturity and what would have been an inflation-adjusted, negative 1.1%.

I own other issues and quantities of US West, WeyCo, and Goldman. So I was glad to trim my exposures. I disliked letting go of Valmont, because the company is doing will, and I don’t have much exposure to their industry. But the nominal YTM was low, and my inflation-adjusted YTM was negative. So, according to my newly-adopted investing rules (that all returns be positive on a 5% inflation-adjusted basis), the position had to be sold.

Like everyone else, I have no idea what lies ahead for markets. A deflationary depression? An inflationary one? A bit of both? I do know, as I argued with Lokicious and his fellow war-mongers ten years ago, that invading Afghanistan on the pretense of moral outrage and self-defense was not a good idea and that it would have a “blow-back” effect on the US and global economy, which it is currently doing. The CO projects that Federal revenues for 2011 will be $2.2 trillion, but that expenditures will be $3.8 trillion, or a shortfall of $1.6 trillion that both political parties want to cover from cuts to social spending. However, other sites project that actual military expenses for 2011 will be $1.2, which comes to a whopping 54% of all available revenues.

Currently, those expenditures are being covered by borrowing at historically-low interest- rates. In the short run, the price of anything can be suppressed. But, eventually, supply and demand come into equilibrium, meaning, though China et al are only too happy to lend money to the US as it defeats itself militarily by spending itself into bankruptcy fighting vanity wars begun by Bush and continued by Obama, nonetheless , they are, in effect, beginning to demand higher rates, as they decrease their purchases of Treasuries relative to former levels. Who’s going to make up the shortfall? The Fed though QE3 QE4, QE umpteen? US voters by paying a war tax? Who knows? But I do know this. Interest-rates will be going higher, as well as inflation-rates. The survivalists worry about Weimar-type hyper-inflation. That’s a possibility, but not my chief worry. My chief worry is holding debt that won’t offer a real rate of return if interest-rates and inflation rates continue to muddle along in their present trading-range. If rates do tend upward, then I’ll take a hit, but not as bad a one as if I did nothing to prepare for it. So I’m selling now what should be sold before I have to sell later what I can.
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