The TC containing a long term senior bond of Spectra Energy, JBI, was sold at its par value of $25. (actually $25.025) There are several reasons for the sale.
First, at par value, I no longer have the discount to capture. When I first talked about this TC, it was trading at around 17. TRUST CERTIFICATES JBI DUKE
Second, the semi-annual interest payment is coming up in February and I have to pay a 6% state tax on that interest but there is no Tennessee income tax on the sale of securities or on earned income. The tax is only levied on certain categories of interest and dividend income.
Third, I do not view this one as having much upside on price at $25 and another opportunity may arise to buy it back at much lower prices at some point after the interest payment. Individuals have a tendency to sell these TCs after receiving a 6 month interest payment and to buy a few days before they go ex interest which just creates a tax event. Sometimes, based on market events unrelated to the TC, there might be a precipitous fall shortly before the ex interest date and this may actually present a buying opportunity. A rise to par value shortly before the ex interest date is another matter entirely. For someone like me, there are always options and alternatives.
First, at par value, I no longer have the discount to capture. When I first talked about this TC, it was trading at around 17. TRUST CERTIFICATES JBI DUKE
Second, the semi-annual interest payment is coming up in February and I have to pay a 6% state tax on that interest but there is no Tennessee income tax on the sale of securities or on earned income. The tax is only levied on certain categories of interest and dividend income.
Third, I do not view this one as having much upside on price at $25 and another opportunity may arise to buy it back at much lower prices at some point after the interest payment. Individuals have a tendency to sell these TCs after receiving a 6 month interest payment and to buy a few days before they go ex interest which just creates a tax event. Sometimes, based on market events unrelated to the TC, there might be a precipitous fall shortly before the ex interest date and this may actually present a buying opportunity. A rise to par value shortly before the ex interest date is another matter entirely. For someone like me, there are always options and alternatives.
Fourth, it does not look like I am going to come anywhere close in completing my hedge with TBT. Chris Cox: Medal of Freedom?/Massive Dividends for Proshares ETFs/TBT add TBT vs. PST: Hedging Corporate Bond BOND ALLOCATION: MANY MOVING PARTS IN 4TH QUARTER Since I am over exposed to long term corporate bonds, I need to pare the position back some until TBT comes way down in price or at least pick up securities that will compensate me more for the unhedged inflation risk of the long bonds.
DISCLAIMER:
I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. In these posts, I am acting as an unpaid financial journalist and an occasional political commentator. I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine. Any discussion made by me of particular securities is not a recommendation to buy or to sell. Trade at your own risk. Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons. The sale may before or after the post. Before buying or selling any stock, even one recommended by a trusted financial advisor, please research it and make up your own mind which is what I always try to do. Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news. In this post, and all others by me, I am merely describing my reasons for purchasing or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale. The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments. Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed. These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities. All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me.
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