Tom Armistead's  Instablog

Tom Armistead
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I am a retired accountant, having spent the early years of my career in the insurance industry and the later part in the field of accounting. My insurance experience has given me the willingness to accept investment risk if I feel the return justifies it; also, an interest in applying risk... More
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Tom Armistead's Instablog
  • Adding Raytheon  6 comments
    Jul 31, 2013 11:31 AM | about stocks: RTN

    Today I added Raytheon to the Synthetic Dividend Growth Portfolio, long Jan 2015 57.5 calls, short Jan 2014 77.5 calls. Too bad I didn't do it earlier, before earnings, which have juiced it a bit today, to a 52 week high.

    I like the dividend, over 3%, and the P/E, 12.

    Another adjustment, I rolled Jan 2015 LEAPS on General Mills (NYSE:GIS) from 40 to 42, reflecting my preference to keep the strike on the long positions at about 80% of the share price.

    Disclosure: I am long GIS, RTN.

    Stocks: RTN
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  • Maverick Trader
    , contributor
    Comments (171) | Send Message
    Tom I thought you got out of this mousetrap. It's going to snap soon.
    31 Jul 2013, 07:55 PM Reply Like
  • Tom Armistead
    , contributor
    Comments (6225) | Send Message
    Author’s reply » MT,


    I went to cash with my discretionary portfolio back in February, went off hiking the Appalchian Trail to clear my mind. I left the other 75% of my holdings in Vanguard index funds, they've been there for over 10 years.


    Coming back, with my mind cleared, I need income, so I started running the Synthetic DGI portfolio to generate income selling calls while limiting my downside exposure. I own LEAPS and sell covered calls against them.


    I'm concerned that the present situation will not end well, but it could be a long time before it goes bad. If you check out the STLFSI, it's very low, that has gone along with good market returns in the past, for years at a time.


    If the market makes it from a level of about the 55th percentile to the 90th, there will be a lot of money to be made. Just like Chuck Prince, we have to dance.


    I'm trying to have my cake and eat it too, be in the market but hold lots of dry powder. If we ever get back to where we were in 2009, I don't scare easy at times like that and I know how to make money under chaotic conditions.


    So yes the situation is unnatural and unhealthy, but I have elected to participate, with cash in reserve, and a defensive posture by means of options.
    31 Jul 2013, 08:16 PM Reply Like
  • Maverick Trader
    , contributor
    Comments (171) | Send Message
    I understand completely. Sometimes, your hand is forced whether you like it or not. I wish you the best and hope you can ride the wave and then make it to shore safely. Myself, I would rather sit idly by and wait. But as you pointed out, it could be for awhile and that does bother me a bit. We are similar in that times like 2009 are those that I seem to function the best. I feel there are too many forces at work and we may revisit those lows sometime soon.
    31 Jul 2013, 08:34 PM Reply Like
  • bbarberayr
    , contributor
    Comments (218) | Send Message
    I wouldn't compare now to 2009 as that was a terrible time in the economy after several years of a good economy (being somewhat artificially supported).


    I believe that we are grinding out the excesses in the economy and that things gradually get better over a period of years. Hopefully it is a strong foundation this time, but even if it is not, you've got a lot of vigilance and support from the government, Fed, ECB, etc. to keep things moving forward.


    If you compare the current cycle to the previous one, we probably are around 2005 and not 2007. In 2007, things were optimistic and stocks were fairly expensive. Now, stocks are not cheap, but reasonably priced and should grow with the economy.
    1 Aug 2013, 09:25 AM Reply Like
  • Tom Armistead
    , contributor
    Comments (6225) | Send Message
    Author’s reply » I'm in the process of coming around to your point of view.


    In the US, at least, questionable monetary policy has yet to create a large inventory of questionable loans that will never be repaid. While regulation is still lax, the previous excess in the area of mortgage lending and securitization is unlikely to be repeated.


    Reservations would center on China, where the government itself doesn't know the extent of the credit bubble. They added the ability to gather information on non-bank and off balance sheet lending, then neglected to report it publicly...


    As you say, stocks are not expensive. I think we're at about the 55th percentile, which leaves at lot of room to the upside, and buy the dips mentality could prevent any substantial correction.
    1 Aug 2013, 09:46 AM Reply Like
  • Maverick Trader
    , contributor
    Comments (171) | Send Message
    I was only saying that stock prices in 2009 - when everyone was exiting - was when I was really making moves.


    But Bbar let's be honest, your comments about vigilance and support from the government and Fed are a bit "superheroish". Do you really put that much faith into the Fed?? What is the definition of insanity? Doing the same thing over and over and expecting different results. Could we conclude the Fed is past insane? I'll put my faith in something more sane and that is selling this market and accumulating cash.
    1 Aug 2013, 12:28 PM Reply Like
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