Buying JNK while trying to avoid junk

I have been out of junk bonds ever since Milken went to jail. Back in February of this year I was “highly confident” that junk bonds were going to survive. At least I hoped, for I was finally ready to jump back in and wallow around in some junk. Since finding ETF religion I decided that was a good place to look first. I have to respect any company that just says it the way it is. When Barclay named its ETF JNK you just knew they weren’t going to try and BS anyone about the quality inside. Well you know what they say, one mans junk is another man’s tres… Well one can always hope right.

So back on February 10th I picked some up at $31.45 and then watched it continue to sag. (What was the name of this thing again?) On March 2nd I tried again at $27.50. Trying to break bad habits these two investments amounted to a little under 20% of my account. Contrast that to a few years ago when a good feeling, I know I have a winner position would have been over 60% and the whole account leveraged. Oh the good old days.

The investment rationale was that the divvy was so crazy high even if a bunch of the bonds defaulted the divvy would still be 10% plus. All we had to do was avoid the whole capitalism system from going under.

So far JNK has paid out roughly 40 cents per share per month since then. April and May were a tad higher. Did I mention that JNK pays out monthly? (I like that part. Monthly cash; dollars and change that you can believe in.)

Old mindsets are hard to counter. I look at the chart since Feb. and all I see is: I could have jumped in and out here and here and here and there. But alas I haven’t, I sit and wait for the beginning of the month. Until the divvy story changes this chunk of my account will be long and slow with JNK.

Here’s to getting a grip with jumping in and out, fast money, trading and to keeping an eye on your EveryDay Money.

Big MO finally saying bye to Kraft

Philip Morris (excuse me Altria for those of you just joining us) bought Kraft in 1988 for 12.9 Billion dollars and now they are giving it away tax free. MO shareholders of record on the 16th of March will get about .7 shares of Kraft (KFT) on March 30th. I picked up my first MO shares back in ’89 and have had the DRIP running the whole time.

So on March 30th I will be handed a few shares of KFT and will have to decide what to do with them. Right now I am leaning toward just starting Kraft’s DRIP and letting it run for awhile. Recently, Kraft has faced some challenges and are in the middle of trying to get things squared away. Investors seem to be underwhelmed with Kraft's efforts. Since the IPO back in 2001 (Philip Morris kept over 80%) the stock has been erratic to say the least.

The good news is those ups and downs can and do work in a DRIP’s favor. Over the years MO’s DRIP has shined the brightest when they were facing bankrupting lawsuits and the stock price tanked. (Case in point: Back in the beginning of 2003 you could have picked up shares for under $40 (if you had the stones). Today MO is trading in the 80’s.) For the past 15+ years I have owned MO it seems we have continually either been on the brink of losing a catastrophic court case or recovering from one.

Is MO a buy or a sell right now? Will Kraft be a buy or a sell after the spin-off? I don’t know. For me MO is an investment not a trade. What either will do in the short term is best left to a coin flip. Now long term, with the DRIP running, I think both will be good investments. Remember I am investing MY money and making MY decisions based off of MY research with a little gut feeling thrown in. When investing YOUR money make YOUR decisions based off of YOUR research and whatever else you want to thrown in.

That’s it for today. Here’s to finding companies that are worth living with long term. And to keeping an eye on your EveryDay Money.

Piloting my ROTH (investing)

For some time now I have thought of ROTHs and mutual funds in tandem. Mutual funds seem to have all the diversity the “professional management” that I equate with a nice safe retirement. So as my wife and I have pitched nickels and dimes into a ROTH the money has always landed in a mutual fund. That is until a short while ago.

Toward the beginning of November (2006) I pushed a hand full of nickels into a ROTH opened with my favorite online brokerage. Now with this money I have none of the diversity or “professional management” but all the fun and excitement that comes from flying the plane instead of merely being a passenger. My thinking was this; surely I could beat the averages since I was only running such a small amount of cash. The money so concentrated that any winner picked would have a dramatic impact on my returns. On the other hand if I stepped on an Enron… well let’s not focus too hard on that hand.

So this year, with spousal support, I will take a turn at piloting my own ROTH. I know full well the long term hazards if this should go against me. This idea of picking individual stocks to place in a ROTH is probably not for everyone. (By the end of 2007 it might not be for me) I’ll let you know.

Do you pick individual stocks for your ROTH or fly with the “pros”?

That’s it for today. Here’s to great returns and fully funded ROTHs. And to keeping a sharp eye on your EveryDay Money.


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What’s in a name? (investing)

American Express (AXP) has been a part of my long term holdings for over 15 years. It has done me well over the years. From the beginning I have had their anorexic dividend reinvested through their DRIP. It is tiny but every little bit helps over the years.

Thursday last, AXP jumped up over 3%. Rumors that Citi Bank maybe looking to buy AXP was suggested as the main driving force for the upward move. I don’t really know, but it is nice to see AXP over $60 per. I just feel a little better when my stocks go up. The reason I’m not more excited is that I have heard this tune before. It seems every so often for the past few years some “pro” starts talking about how great a “fit” AXP would be with (your bank of choice). Nothing has happened yet. Citi and American Express have no comment right now. I think that is what AXP said last time the rumors started.

Let’s say for argument’s sake this time is different, Citi does buy American Express. Two things come to mind quickly. What would they use as a name for the new company? The American Express name is worth its weight in gold, at least I think it is. It would make me a little sad, after all these years, to see the name erased from the corporate landscape. The other thing is would Citi make a cash offer or would we receive Citi stock? I already own a bank and not really sure if I want my money tied up in two.

It is all speculation anyway right now. If I had to guess probability, this Sunday afternoon, it would be less than 20% chance that Citi throws money on the table. Now if come Monday morning Citi announces an offer in that $75 - $100 share range we will know I was wrong. Wrong and a few dollars better off than I was at Friday’s close.

That’s it for today, good luck during the new trading week. And as always keep an eye on your EveryDay Money.

DRIP DRIP (investing)

You put a bucket under a steady drip and in time the bucket gets full. Give it a little more time and it overflows. This is precisely the idea behind Dividend Reinvestment Plans (DRIPs). Those smallish dividend checks that we don’t seem to really know what to do with now have a purpose. Many companies offer the chance to reinvest those checks back into fractional shares. Your dividends buy more shares, which throw off more dividends, which buys more shares… DRIP DRIP DRIP.

Make no mistake; these plans work best over the long haul. I have had a couple of my DRIPs for over 10 years and counting. With DRIPs and a long term view you will see the market different, at least I do. You may even catch yourself looking for the stock to drop some so your dividends will buy you even more shares. The natural ups and downs of the market becomes an advantage over the long run. Your checks buy more when the stock is down and less when the stock is up allowing you to average a good buy price.

Companies that have a strong track record of paying dividends are good places to start looking. You also want companies whose payout ratio is not super high. If the payout ratio is high then they may be using all of the profits to pay dividends instead of using the money to grow the business. Ideally you want a company that is still growing, it doesn't need to have rocketing growth. This growth allows them to not only pay consistently but also increase the size of the dividend, yearly would be nice. Think bigger and bigger drops in the bucket.

A few companies that pop into my head are MO, XOM, GE, and PG. (The fine print: these are ideas only; please do your own homework, make your own decisions, and take responsibility for the good and bad things that result.) Here are some of the companies that mange all the paperwork and details of the DRIP programs for many companies (a place to start). Computershare.com,
Bank of New York, and Mellon Investor.


Remember the sooner you get your bucket under the DRIPs the quicker it will get full and start overflowing.

That’s it for today. Have patience with the DRIPs and keep an eye on your EveryDay Money.

Oh... you mean that drug. (Investing)

So how is that one drug? Which one? The new cholesterol one in clinicals. Which? The one you guys have pumped $800 Million into. What one? The one replacing Lipitor as it gets closer to patent expiration. Oh… that drug. We had to pull it today. It was… killing too many people.

With the report of Pfizer (PFE) pulling Torcetrapib shares fell off the table just as soon as trading started today. Here’s one for the WOW category; 3 month average shares traded is a shade over 32 million. Shares traded today… just shy of 290 million… WOW!!

Pfizer’s troubles are out there for you to find during your DD. The big ones are patent expirations the next few years (going to hurt a lot.) And the pipeline seems to be a little thin in the blockbuster category. But still I wonder? Could the new few weeks be a great time in history to try and catch this falling knife? The company is slashing people and expenses as I type. The dividend stands around 3.5% with today’s closing price. Pfizer also has a good dividend reinvestment program. If I was sitting on a stack of dimes I didn’t know what to do with and plenty of time. I would have to think about it. It would have to be strictly long term time horizon and making use of the dividend reinvestment program. Makes one at least pause and think. And thinking if never a bad thing.

What do you think?

More later.