1. Existing Home Sales: December existing home sales fell 16.7% from the November, a higher decrease than the 11.6% decrease forecasted by analysts. WSJ.com Prices rose for the first time in over two years, however, and the level of inventories declined 6.6% and the current level of inventory represents about a 7.2 month supply. And, to put things in better perspective, always a good idea for those aiming toward being fair and balanced, the December 2009 number is 15% above December 2008. December Existing-Home Sales The economist for the National Association of Realtors, Lawrence Yun, explained that this data series has been undergoing gyrations recently due to swings driven by the tax credit. I would expect the number to accelerate again in the months prior to the current expiration of the tax credit.
2. SOLD 50 GJF at $24.25 (see Disclaimer): GJF is a TC containing a senior AT & T bond. I own the same AT & T bond via the TCs JZE and JZJ, both bought at favorable prices during the meltdown, with JZE bought at $12.5 in October 2008. Some Nibbles Got Filled: JZE, PJS, INZ and FAX When I bought GJF at $21.4 last June, I mentioned that the primary reason for buying it then was purely psychological: " But, the main reason for buying GJF is to keep me from selling any shares of JZJ or JZE, at least for now, a purely psychological issue for LB, who is 1/2 trader, to harvest profits. So if GJF goes up a couple of points, I will just sell it and keep the other two hopefully, thereby relieving the urge to sell one of the other TCs containing this AT & T bond." Bought GJF GJF and JZE are functionally equivalent, except JZE has a base current yield at my cost of 12% per year until maturity in 2031 or early redemption, plus a 100% gain on the shares. I say base yield, because this particular security has a guarantee of 6% which can rise from that current rate .25% for every downgrade of AT & T's debt, as explained in their respective prospectuses:
GJF Prospectus: www.sec.gov
The only difference on the rate with JZJ is that the base guarantee is 6.375% rather than 6%. Due to the debt upgrades after the underlying bond's issuance, the rate sunk from the initial rate to the base guarantee rate. So the rate for GJF and JZE can not go lower than 6%, it could go higher with downgrades in AT & T debt.
All of the above has been discussed in great detail in prior posts:
Before I started talking about them, there was frequently some really nutty discrepancies in price between these functionally equivalent TCs, as I noted for example in this post: Emerson Electric and the Goodyear Tire TC XKK I referred to the spread between GJF and JZE at that time as madness, unbelievable, in that GJF was trading at $24.4 and JZE was at $18.42.
That kind of craziness is no longer present. JZE is trading near the equivalent security GJF.
The 6.75% rate referenced in the above link is the starting rate of both JZE and GJF, which has been reduced in three .25% increments to the current rate of 6% due to upgrades in the AT & T debt. Those upgrades occurred, I believe, after SBC Communications acquired AT & T (then a long distance company), and that improved the credit quality of the old AT & T debt such as the underlying bond in these three TCs.
The RB just said get back to the point. At the price that I sold GJF, the yield is less than 6.2% and the discount to par is just 75 cents. If I am going to take a risk on this 2031 bond, I prefer to do it only with securities where my entry points were far lower than the GJF purchase, which is the case with my buys of JZE and JZJ in 2008.
3. DSP Group (owned LT Category): I noticed that DSPG was upgraded to Outperform yesterday by RBC Capital Markets, who also raised the price target to $10 from $8. I bought just 50 shares at 5.62. I do not have a price target now, and will wait to review the next earnings release to form one in my head.
4. Peter Cooper Village & Stuyvesant Town Apartments: MetLife developed this enormous complex in New York City in the 1940s and sold it to a group led by Tishman Speyer for 5.4 billion in 2006. The new owners have defaulted on the debt and turned the keys over to their lenders. Apparently, and unfortunately, the loans are non-recourse to the borrowers. The Stuyvesant Town apartments are valued now at around 1.8 billion, about 1/2 of what the Tishman Speyer led group paid for the complex in 2006. I remembered reading a Barrons.com story about this transaction, titled "Out of Control". It seemed to be a very good deal for MetLife at the time, and an incomprehensible one for these so called property experts who paid top dollar for these properties.
5. Macquarie Power & Infrastructure Income Fund (owned): I bought 100 shares of MCQPF recently at $5.84. The firm recently updated its operational outlook for 2010. The firm expects higher revenues from its Cardinal gas cogeneration facility due to higher rates and less maintenance (meaning less down time). The wind generation facility is expected to generate slightly higher revenue in 2010. Cash flow from the very small hydroelectric units is expected to be higher due to more favorable hydrological conditions (more water). And, the biomass facility is expected to do better in 2010 due to solving some operational problems: macquarie.com/news2010.pdf
6. TheStreet.com (TSCM) (owned LT category): This LT had an accounting problems connected with their former subsidiary, Promotions, that have apparently been resolved so it could report results for the 2nd and 3rd quarters of 2009 and give preliminary results for the 4th quarter. When this LT was originally selected with a buy of 100 shares at $1.88, it was based primarily on the valuation being close to the cash on the balance sheet, and a hoped for recovery in its business with a gradual return of more individuals to the stock market. As of 12/31/2009, the company had approximately 82.7 million in cash and marketable securities and no debt which is about a 6.3 million dollar increase in cash year over year. The market value of the company at the current price is about 77 million: TSCM: Summary for TheStreet.com A story at the TheStreet discusses the results adequately. This stock has a decent dividend at my cost, paying now about 12 cents a year: TSCM Stock Quote That is about 6.38% at a total cost of $1.88.
7. S L Green (SLG)(own common and preferred): I really do not know much about Manhattan real estate except that it is expensive. SL Green Realty Corp. reported its 4th quarter results. FFO was one cent less than expectations at 87 cents, down from $1.03 in the same quarter from 2008. The REIT signed 24 new leases in Manhattan and 29 for its suburban properties. The firm continues to repurchase debt at a discount, and has now retired 779.2 million in debt for 577.3 million since October 2008. That is one way to take advantage of a financial crisis. My cost basis on the common shares bought during one of the meltdowns at less than $15 and around an $11 average price on the preferred. Since the common is not yielding much, due to dividend cuts, I may sell it when the gain turns into a long term capital gain. Those shares were bought on 1/27/2009, so I am almost there for a huge percentage gain. I may allow my magic coin to make the decision, however. If I do sell those common shares, I will invest the proceeds in a security that generates substantially more income now. I plan to keep the preferred shares indefinitely.
8. HRPN (owned) Penny Rate: I mentioned that the penny rate for the first quarterly payment made by HRP Properties for HRPN will be .3333. Item # 3 GE Intel Yahoo/Conspiracy of Silence/Added 100 HRPN AT 19.15/BERNANKE CONFIRMATION Thereafter, the penny rate for a full quarter would be .075% x. $20=1.5 divided by 4= $.375. The lower first payment is due to a short quarter for the first payment. The issue started to trade on 12/2/09 and the quarter apparently started on 11/15/09: HRPN: Historical Prices for HRPT PROP 7.5 NTS www.sec.gov So, I believe that Marketwatch has the yield at yesterday's closing price of $19.08 wrong at 6.99%, the error being due to taking the first quarterly payment of $.3333 and annualizing it. The actual current yield at $19.08 would be 7.86%.
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