Moving Out

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New Beginnings

Portfolio Breakdown:
BAC - 17.9%
TBT - 23.8%
ITUB - 4.6%
AOB - 11.3%
WDC - 20.6%
HOGS - 38.8%
SDX - 16.5%
OCNF - 7.8%
PFE - 9.7%
GS - 15.3%
MBI $14 May, sell call - (0.3%)
HOGS $10 June, sell put - (0.2%)
CAD Cash - 2.6%
USD Cash - (68.4%)

USD/CAD - 1.016

Portfolio Performance:
Return Since Last Update - (5.26%)
Return Since Inception - 179.94%
S&P 500 - 1186.69
S&P 500 Return (June 30, 2009) - 29.14%

Financial Regulation Overhang

Portfolio Breakdown:
BAC - 17.3%
TBT - 21.0%
ITUB - 4.2%
AOB - 14.1%
WDC - 20.9%
HOGS - 38.4%
SDX - 12.7%
OCNF - 6.2%
PFE - 9.2%
HOGS $10 June, sell put - (0.2%)
CAD Cash - 2.4%
USD - (46.2%)

USD/CAD - 1.002

Portfolio Returns:
Return Since Last Update - 0.98%
Return Since Inception (June 30, 2009) - 195.47
S&P 500 - 1192.13
S&P 500 Return (June 30, 2009) - 29.73%

Earnings Season Pause

Portfolio Breakdown:
BAC - 15.7%
PRGN - 7.0%
TBT - 18.0%
ITUB - 4.4%
AOB - 14.6%
WDC - 12.2%
HOGS - 39.8%
SDX - 12.8%
OCNF - 4.7%
PFE - 9.3%
HOGS June $11, sell put - (0.4%)
CAD Cash - 2.3%
USD Cash - (40.4%)

CAD/USD - 1.011

Portfolio Performance:
Return Since Last Update - (1.15%)
Return Since Inception (June 30, 2009) - 192.61%
S&P 500 - 1192.13
S&P 500 Return (June 30, 2009) - 29.73%

DOW 11,000

Portfolio Breakdown:
BAC - 15.6%
PRGN - 7.0%
TBT - 18.1%
ITUB - 4.5%
AOB - 23.2%
WDC - 12.3%
HOGS - 37.7%
SDX - 11.7%
OCNF - 4.7%
PFE - 9.4%
ES - 4.8%
HOGS June $11, sell put - (0.4%)
SDS Apr $31, buy call - 0.1%
VIX Apr $25, buy call - 0.1%
CAD Cash - 2.2%
USD Cash - (51.0%)

CAD/USD - 1.006

Portfolio Performance:
Return Since Last Update - 2.70%
Return Since Inception (June 30, 2009) - 196.00%
S&P 500 - 1194.37
S&P 500 Return (June 30, 2009) - 29.98%

Happy Easter!

Portfolio Breakdown:
BAC - 15.7%
PRGN - 7.3%
TBT - 15.0%
ITUB - 4.6%
AOB - 18.8%
WDC - 11.9%
HOGS - 38.5%
SDX - 10.3%
OCNF - 4.6%
PFE - 7.0%
ES - 4.8%
COIN Warrants - 0.4%
HOGS Jun $10, sell put - (0.4%)
SDS Apr $31, buy call - 0.6%
VIX Apr $25, buy call - 0.4%
CAD Cash - 7.3%
USD Cash - (46.8%)

CAD/USD - 1.0115

Portfolio Performance:
Return Since Last Update - (1.08%)
Return Since Inception (June 30, 2009) - 188.22%
S&P 500 - 1178.10
S&P 500 Return (June 30, 2009) - 28.21%

Protecting from the Downside

Portfolio Breakdown:
BAC - 15.6%
PRGN - 4.6%
TBT - 15.1%
ITUB - 4.2%
AOB - 19.2%
WDC - 12.2%
HOGS - 38.3%
SDX - 9.9%
OCNF - 4.8%
PFE - 7.0%
ES - 4.5%
COIN Warrants - 0.4%
HOGS June $10, sell put - (0.4%)
SDS Apr $31, buy call - 1.0%
VIX Apr $25, buy call - 0.7%
CAD Cash - 7.1%
USD Cash - (44.6%)

CAD/USD - 1.026

Portfolio Performance:
Return Since Last Update - 6.85%
Return Since Inception (June 30, 2009) - 191.38%
S&P 500 - 1159.9
S&P 500 Return (June 30, 2009) - 26.23%

Market Stalling Out?

Portfolio Breakdown:
BAC - 15.4%
PRGN - 5.0%
TBT - 12.6%
ITUB - 12.2%
AOB - 19.9%
WDC - 10.3%
HOGS - 38.2%
SDX - 10.6%
OCNF - 3.3%
PFE - 7.3%
MBI - 21.4%
ES - 4.6%
COIN Warrants - 0.5%
VIX $25 Apr, buy call - 0.8%
CAD Cash - 8.0%
USD Cash - (70.1%)

CAD/USD - 1.0115

Portfolio Performance:
Return Since Last Update - (5.61%)
Return Since Inception (June 30, 2009) - 172.70%
S&P 500 - 1159.90
S&P 500 Return (June 30, 2009) - 26.23%

Getting Back to January Highs

Portfolio Breakdown:
APP - 3.1%
BAC - 14.7%
PRGN - 5.0%
TBT - 4.9%
ITUB - 12.0%
AOB - 17.3%
WDC - 5.9%
HOGS - 35.6%
SDX - 8.8%
OCNF - 3.2%
PFE - 7.0%
MBI - 20.4%
ES - 4.3%
COIN Warrants - 0.4%
HOGS, June $10, sell put - (0.4%)
MBI, March $6, buy put - 0.9%
CAD Cash - 12.1%
USD Cash - (55.2%)

USD/CAD - 1.0165

Portfolio Performance:
Return Since Last Update - 7.28%
Return Since Inception (June 2009) - 188.91%
S&P 500 - 1149.99
S&P 500 Return (June 2009) - 25.15%

Weakening Economic Data

Portfolio Breakdown:
APP - 3.4%
BAC - 16.1%
PRGN - 5.1%
TBT - 5.4%
ITUB - 12.5%
AOB - 15.1%
COIN - 1.7%
HOGS - 37.8%
SDX - 5.2%
OCNF - 3.5%
PFE - 6.0%
MBI - 19.2%
TRLG - 11.2%
ES - 4.8%
CAD Cash - 17.3%
USD Cash - (64.3%)

USD/CAD - 1.0535

Portfolio Performance:
Return Since Last Update - (5.12%)
Return Since Inception (June 30, 2009) - 169.32
S&P 500 - 1104.49
S&P 500 Return (June 30, 2009) - 20.20%

Washington is the Biggest Impediment to US Growth

Portfolio Breakdown:
APP - 3.2%
BAC - 14.4%
PRGN - 2.5%
TBT - 5.3%
ITUB - 12.2%
AOB - 14.5%
COIN - 1.5%
TAMB - 30.1%
HOGS - 35.62%
SDX - 5.3%
OCNF - 3.6%
MBI - 18.7%
TRLG - 8.8%
ES - 2.7%
COIN Warrants (C024064) - 0.5%
CAD Cash - 2.9%
USD Cash - (64.2%)

Portfolio Performance:
Return Since Last Update - 5.24%
Return Since Inception (June 30, 2009) - 183.84%
S&P 500 - 1109.17
S&P 500 Return (June 30, 2009) - 20.71%

The Prior Week of Trading:
Both the heart and the substance of the policies coming out of Washington continue to amaze me, and not in a good way. The populist rhetoric coming from President Obama seems to be never ending; I was particularly struck by a recent comment he made at a News Conference when describing his vision for health care, stating that he ran for President "Not to do what was popular, but what was right". This chilling statement would be enough to give any proponent of democracy pause. The office of the President of the United States is not given through divine mandate, it is held by an elected official as the head of State and representative of the county. When speaking on health care reform, a topic that most agree needs attention, he uses that opportunity to denounce the notion of proportional representation of ideals through government (albeit, tongue in cheek) to attempt to assume a higher moral standard. In contrast, when speaking on issues of financial market reform, he bows to current populist pressure and completely ignores sound and proven economic principles. The duopolistic nature of the policies projected by the President are outrageous and are the biggest threat to growth in the US. The words of David Hume are as poignant today as they were 4 centuries ago when he said that it is a just political maxim to assume all politicians as knaves and that constitutions should be drawn upon that assumption.

More clarity was given on TAMB's earnings (or lack thereof) last week, which have caused me to substantially alter my target price for the stock. Net charge offs for the company was 35.8 million for the quarter causing them to set aside an additional 50.8 million in new provisions for loan losses; this was the main source of losses which were enough to erase the book value of the company. I am mainly concerned that given the loss of shareholder equity and pressure from the FDIC to raise its regulatory capital ratios TAMB will most likely have to initiate a secondary common or preferred equity offering. I would conservatively estimate that given the order to atain a Tier 1 capital ratio of 9%, TAMB would have to issue around 30 million dollars worth of new equity; this would dilute the current share base by about 10 times. At this point I should stress the unavailability of raw information from which I can derive accurate conclusions, the numbers I have listed are only an estimation. To effectively place a large secondary offering, TAMB would most likely reverse split the stock before the offering to maintain its status on the NASDAQ. This action would undoubtedly bring out the shorts to force a short term loss in price to much more than the dilution would warrant. The risk to the downside given these circumstances that I see as both necessary and inevitable is large while the upside normalized earnings scenario now effectively is cut by a factor of 10. I will be looking for opportunities to dispose of my share position daily while being mindful of the market impact I may face in the process given the stock's very low volume.

I added a small position to an old favorite PRGN last week and will look to accumulate in the low to mid $4 range. I believe that earnings for this company will continue its positive trend and see the possibility for a reinstitution of the dividend under a normal operating scenario. I last disposed of this position when the stock traded over $5; given the lower price and my continued positive outlook I believe it is time to add this back into the portfolio. Energy Solutions, ES is a company I have been watching for a while; the stock has been hit recently because of the resignation of the company's CEO (for personal reasons) and I believe this is a good entry point into an attractive stock in an attractive industry. COINU was delisted from the NASDAQ and the security's stock and warrant components were split up, which explains how they are now accounted for in my portfolio breakdown.

Euro vs USD... $USD$ wins in first round knockout

Portfolio Breakdown:
APP - 3.3%
BAC - 13.9%
TBT - 5.5%
ITUB - 12.5%
AOB - 15.3%
COINU - 2.1%
TAMB - 32.0%
HOGS - 35.5%
SDX - 5.8%
OCNF - 3.6%
MBI - 19.0%
TRLG - 8.7%
CAD Cash - 3.1%
USD Cash - (60.3%)

Portfolio Performance:
Return Since Last Update - 5.61%
Return Since Inception (June 30, 2009) - 169.72%
S&P 500 - 1075.51
S&P 500 Return (June 30, 2009) - 17.04%

The Prior Week of Trading:
Greece and China seem to be a sore spot for the market, albeit for different reasons. It looks as though Greece may have used swap arrangements to hide its poor fiscal position to help it join the EU initially; Greece's deficit of 12.7% to GDP last year is well above the 3% limit for Euro zone member countries. As the government debates various measures to bring down the budget gap, public union workers are protesting in the streets and threatening to close facilities such as schools and hospitals. Greece may have to drop out or the Euro zone because of an unsustainable fiscal deficit and unions are refusing to take concessions... sound familiar UAW? The EU treaties do not allow for an ECB bailout of the country through sovereign debt purchases which means that if a bailout comes it would have to be in the form of loans from other member countries. Either option is undesirable and would most certainly continue to pressure the EURO; the only way to remedy this problem is for the Greek government and it's people to do what is necessary to institute fiscal responsibility... necessary, but unlikely.

China has the opposite problem of having too hot an economy and is in the midst of a self described real estate bubble. By continuing to increase the reserve requirements for the nations banks, less money is available in the system for loans; the government is hoping to cap excessive loan creation and money supply expansion before it becomes too much of an issue. The concern here for the global economy is that if growth in China moderates it wont be enough to help propel global demand and spending. I think a better move for the Chinese and the global economy would be to allow their currency, the renminbi, to float freely; this would help stabilize trade imbalances and foster an environment for domestic growth and a better standard of living.

With continuing problems in the EU, the USD should be a beneficiary in the short-medium term. I would expect both the USD and treasuries to perform well as the stock market moves more or less sideways. As economic growth improves, money should shift out of treasuries and into stocks, providing the catalyst for an extension of the current bull market. Jobs seem to be the only missing piece to the economic puzzle; capacity utilization and employment hours worked are moving up, setting the stage job growth and the next inventory restocking cycle. The one concern I have is where sustained job growth will come from; the pending bubble in the housing industry provided jobs after the 2001 recession, but where will the jobs come from this time?

As for my portfolio, the biggest event that happened last week was the earnings release by TAMB; much to my dismay, they reported a loss of 7.37 for the quarter (ouch). The full report is still pending, but I was able to discern a few things from the press release. In a nutshell, it appears as though provisions for loan losses were only increased slightly while their portfolio of loans was reduced by about 15% and assets by about 10%; by selling off OREO and their nonperforming loans the bank has shrunk the balance sheet significantly. I have calculated the majority of the firm's book value to be erased and now there exists little upside for them to capitalize on a turn in real estate values or loan defaults. The only good news I see here is if after these moves they are in a position to report positive earnings growth in future quarters. I am hoping the full earnings report provides more clarity. The only significant change I made this week was to shift funds from TBT to improve my margin and buy more AOB.

Will Jobs Lead a Recovery?

Portfolio Breakdown:
APP - 3.5%
BAC - 15.6%
TBT - 17.2%
ITUB - 12.5%
AOB - 12.4%
COINU - 1.9%
TAMB - 30.1%
HOGS - 42.3%
SDX - 3.5%
OCNF - 3.7%
MBI - 20.6%
TRLG - 9.2%
CAD Cash - 5.7%
USD Cash - (80.5%)

Portfolio Performance:
Return Since Last Update - (10.49%)
Return Since Inception (June 30, 2009) - 155.39%
S&P 500 - 1073.87
S&P500 Return (June 30, 2009) - 16.86%

The Prior Week of Trading:
Another rough week for my portfolio as my high beta exposure has bitten me in the backside. Continuing concerns over sovereign debt risk in Greece has caused an unwinding of risky trades across the globe. The Euro as well as emerging market currencies have been sold off as investors look for safety in the US dollar, translating to declines in a broad range in commodities. The negative correlation between the US dollar and US Equity prices has been very strong as of late, although it is opposite to what the market has seen historically. I am betting on continuing strength in the US dollar (as I have for many months) as I believe the economic position of the US to be more stable than most other nations. However, I also believe the negative equity-dollar correlation to be an aberation rather than a change in the statistical norm. As the US economic recovery continues to outpace other countries and US corporate profits beat estimates, the equity markets should trend higher. I dont think we will repeat the gains seen since March 2009 in a similar timeframe, but do believe US indices to see a more modest 10-15% price gain in 2010.

Given my expectations and current market weakness, I have consolidated my portfolio to my favorite deep value names. I have significantly added to my HOGS position as factory utilization and production news continues to be positive for this company; as a growth stock poised to exploit favourable structural shifts in their demand base, I do not believe the forward P/E of 7.5 to be justified. I am still waiting for the earnings release from TAMB, but continue to believe in the long term success of the company. TAMB is currently priced for bancruptcy with large upside potential, the risk/reward ratio is too good to ignore. MBI, TBT, ITUB and TRLG continue to be core holdings in my portfolio, but I may considering lightening up on TBT for a short period of time given the current global appetite for an asset flight to quality (TBT is the ETF inverse of the Lehman 20+ yr bond index).

Much Needed Pullback

Portfolio Breakdown:
APP - 3.2%
BAC - 14.0%
TBT - 15.4%
ITUB - 11.5%
AOB - 10.5%
COIN - 1.4%
COINU - 2.1%
TAMB - 26.3%
RIMM - 9.6%
HOGS - 20.6%
SDX - 6.5%
OCNF - 3.6%
BP - 7.3%
MBI - 18.8%
TRLG - 8.4%
CAD Cash - 5.2%
USD Cash - (66.6%)

USD/CAD - 1.0665

Portfolio Performance:
Return Since Last Update - (11.37%)
Return Since Inception (June 30, 2009) - 185.32%
S&P 500 - 1073.87
S&P 500 Return (June 30, 2009) - 16.86%

The Prior Week of Trading:
This was one of my worst weeks since I began tracking the performance of my portfolio; although I am more concerned with long-term value, the short term performance still stings. The broader US averages are clearly in a correction phase that may have further room to the downside. The market has chosen to ignore the fact that around 80% of companies who have reported earnings in the S&P 500 have beaten estimates, although this earnings season was expected to be a positive one given prior year comparisons. It seems as though pundits and traders are trying to find excuses to ignore positive data, citing China credit concerns and ongoing sovereign debt worries in Greece and the EU. A stock market is an ongoing price discovery mechanism and this week it seems to be adjusting itself downwards. This presents a buying opportunity for the value investor as a sinking tide often lowers all ships, regardless of intrinsic value.

TAMB spiked towards $1.60 last week on heavy volume, but has since retreated to below a dollar as investors await earnings; I put in a call to the company yesterday and they told me that they are planning on releasing full year results early next week. I am looking for the company to beat estimates of an 0.85 loss and trend back up towards the $2 mark. HOGS also sold off heavy the past 2 weeks and is sitting around its 200 day moving average; valuation metrics for this company are very compelling and I will look to add to my position if further weakness persists. There is no indication that the company is experiencing financial trouble or deterioration in customer demand. I am looking forward to February starting off better than January ended...

Worst DJIA week since March 2009...

Portfolio Breakdown:
APP - 6.3%
BAC - 12.1%
TBT - 13.5%
ITUB - 10.3%
AOB - 9.8%
COIN - 2.4%
COINU - 1.8%
TAMB - 27.9%
RIMM - 8.2%
HOGS - 13.0%
SDX - 5.4%
OCNF - 3.4%
BP - 6.6%
MBI - 16.4%
TRLG - 7.6%
CAD Cash - 6.6%
USD Cash - (51.2%)

USD/CAD - 1.0545

Portfolio Performance:
Return Since Last Update - 1.59%
Return Since Inception (June 30, 2009) - 221.91%
S&P 500 - 1091.76
S&P 500 Return (June 30, 2009) - 18.81%

The Prior Week of Trading:
The dollar moved up slightly as stocks and commodities crashed after another poor policy objective announcement by US President Obama; It is politically popular to blame banks for everything from the recent recession to the death of disco, but it doesn't hold any truth in reality. A tax on the biggest banks to recoup government TARP money (when all have repaid the loans with interest, ex Citigroup) can only have the ultimate effect of restricting lending and adding costs to end user consumers. Additionally, by restricting the capital base from which a bank can draw from to engage in profitable operations not only hurts the performance of that company, but also adversely affects the economy through dampening the credit creation cycle. This is yet another example of how the Obama administration (and usually government in general) thinks only of what is popular short term sentiment instead of what is good for the economy in the long run. Hopefully the debate over the reappointment of Fed Chairman Ben Bernanke doesn't get any more politicized than it already has; in the same vain, a politicized and therefore non-independent Federal Reserve would be the worst thing that could happen now...

My outlook for the future as it relates to my portfolio remains the same; I am concerned about a short term correction but confident in a medium term recovery. Short sellers may be emboldened enough to bring the DJIA down to the 10,000 level but I don't think support will fail there without some negatively newsworthy event. Housing numbers may remain weak and keep a lid on market performance as the lingering effects from the expired government buyers credits have now worn off; although in my opinion, governmnt does too much to support the housing sector as it is. Housing is a relatively small section of the US economy and does not merit the current amount of public resources and backstops attributed to proping up the sector. However, this is a separate discussion for another day.

I am pleased to see TAMB move higher in anticipation of full year results; based upon comparable companies and the trend of earnings and loan losses, I am predicting Q4 EPS to come in close to zero. This should have a very positive effect on the stock, possibly bringing the price to well over $2. Aside from TAMB, the value of most of my positions decreased this past week as both the S&P 500 and DJIA are now in negative territory for 2010. I will continue to hold at these levels as I believe the valuation on the stocks in my portfolio are all very reasonable (otherwise I wouldn't own them!). If a correction persists, I don't expect it to be deep, although sideways trading may prevail for the near term.

Holding Steady

Portfolio Breakdown:
APP - 6.3%
BAC - 13.0%
TBT - 13.7%
ITUB - 11.0%
AOB - 10.0%
COIN - 2.6%
COINU - 1.8%
TAMB - 20.7%
RIMM - 8.7%
HOGS - 13.7%
SDX - 6.1%
OCNF - 3.6%
BP - 7.0%
MBI - 18.0%
TRLG - 8.0%
CAD Cash - 6.7%
USD Cash - (50.9%)

USD/CAD - 1.026

Portfolio Performance:
Return Since Last Update - 6.75%
Return Since Inception - 216.87%
S&P 500 - 1136.03
S&P 500 Return (June 30, 2009) - 23.63%

The Prior Week of Trading:
Its funny how Wall St. sentiment can seem to change on a dime; the indices have drifted up on light volume for the past few weeks and it seems as though the prospect of eventual economic recovery was leading the charge. Although, today was a bit different; Intel reported a blowout quarter last night but was greeted with the Bronx cheer as trading began this morning. It seems as though Intel (and the sector) may be a bit tired, as possibly the broad market. JP Morgan reported results that were light on revenues and served to bring down that stock and the industry as a whole. So, is the market tired and poised to double dip... or is this just a small pullback amidst a cyclical bull? Based on one day of trading, only the most foolish amongst us will try to offer a convincing opinion. Given that the path of least resistance has been higher, I will wait until the market decides to ignore the good news and pull back before I get defensive. In the meantime I can do some small things to add protection like writing some covered calls or trimming those positions closest to my price target. I sold out of TBV, a stock I had reentered a couple weeks ago after a quick gain of about 30%; I still think this stock has room to the upside, but am more hesitant about this position as compared to some of my others. MBI has continued its strong performance and I will look to trim this holding if/when it enters the $6 range; I see $7 as possible resistance but will continue to hold MBI as long as the trend line stays in tact.

Happy New Year!

Portfolio Breakdown:
APP - 6.6%
BAC - 13.6%
TBT - 15.3%
ITUB - 13.2%
AOB - 11.9%
COIN - 1.7%
COINU - 1.2%
TAMB - 18.5%
RIMM - 9.4%
HOGS - 16.5%
SDX - 6.1%
OCNF - 3.8%
BP - 7.2%
MBI - 15.0%
TRLG - 7.7%
TBV - 3.0%
CAD Cash - 7.2%
USD Cash - (57.9%)

USD/CAD - 1.04

Portfolio Performance:
Return Since Last Update - (0.85%)
Return Since Inception - 196.84%
S&P 500 - 1132.99
S&P 500 Return (June 30) - 23.30%

The Prior Week of Trading:
Firstly, I am updating my holdings and performance as of end of day today (Monday) instead of my usual end of day Friday update due to the New Years holiday weekend. The only changes I made to my portfolio heading into the end of the year was to add to my TAMB and OCNF positions on price weakness. I am watching TAMB closely as they are due to report on their ongoing effort to meet a regulatory order from the FDIC to improve some of their key capital ratios; I expect an update on this situation before the company's scheduled earnings release on January 22, 2010. I did not like how RIMM performed following their positive earnings report this past week and am particularly concerned that the market may view the company as behind the curve in terms of smart-phone innovations; it seems as though the ever-fickle consumers have an appetite for phones that are media friendly, whereas RIMM is more one dimensional focusing on enterprise users. Depending upon my disposition going into some key economic data coming at the end of the week I may switch some of my positions to a more defensive posture; expectations are quite high right now and if employment and retail data comes in soft the market may be in for a correction.