Another week of summer trading

I don’t think price movements should be taken too seriously this week or for the rest of the month. The price changes do create volatility that can be taken advantage of, however.

That said, I am beginning to have a few “hits” on my equity radar that are deserving of more research, so hopefully I will have enough time to look at them since I have been taking things relatively easy myself.

I continue to trim my long-term bond position in Limited Brands; I had the selling side of the trade at the 52-week high, but I didn’t have my entire position filled and now the position is trading about 1% less than that amount which is somewhat frustrating – I just wanted to clear out the whole thing at 96 cents. TRACE has the bonds at 92 cents on the dollar, while the exchange-traded version had them at 96 cents on the dollar, so I am unloading and taking my money. I remember the days that TRACE had them at least 5-10 cents higher in the bond market vs. the exchanges, so the market is relatively inefficient on these illiquid issues – a high volume day is considered to be $50,000 traded.

I also note my other long-term bond positions are creeping higher. If they get to the 8% yield stage I’ll consider a liquidation of them, and leak the position and fully dump them at around 7.5%. I also have to time whether I can unload them in 2011 for roughly the same value for tax reasons. TRACE has those exchange-traded issues and the bond values at roughly the same value at present so I am not losing a premium valuation by waiting.

I am also trimming my only equity position, which I had a very minor stake in. It was an obscure play that was slightly under-valued and had a market catalyst that never emerged. It has appreciated somewhat, so I am selling it. With my track record it will probably go up 2000% over the next 3 years after I dispose of it all.

All of this should make for a third quarter update that should hopefully show some more cash in the portfolio – assuming I don’t buy anything, it will get over 10%. Although cash yields a paltry 2% at present, it gives me the opportunity to strike at other opportunities when they arise and come to my attention. It is very difficult to do this when “fully invested” since going into margin to invest involves its own separate set of risks.

I am playing things ultra-conservatively, which doesn’t make for good writing, but at least I will be solvent.

I am also still looking for income-oriented securities, but I am finding this entire sector to be swamped with over-valued issues. It is painfully clear to me that the large amount of money sloshing around there is looking for yield.