Thursday, February 18, 2010

Bought 100 of the TC DKF at 25.87 & Sold 100 of the TC GJX at 25.9/Bought 100 XLK at 21.89-2010 Speculative Strategy/

1. German Chancellor Slams American Financial Wizards: The wizards do not like to be the public eye so much, sort of like the mafia in that regard. Still, when you are paid billions to bring the world to the brink of a Financial Armageddon, and then slither under some rock waiting for others to clean up the mess at their expense, which goes without saying, it is probably necessary to receive some adverse publicity every now and then, particularly when the wizards resume taking bonuses measured with a bunch of zeros. The German Chancellor Angela Merkel is upset with an unnamed U.S. financial firm who allegedly helped bring the world to the brink of the abyss according to Ms. Merkel and "helped faked the statistics" on top of that, a twofer I guess. Congratulations to that unnamed financial firm is all the Heaknocker can say about it. BusinessWeek Please do not misunderstand me, I have the greatest respect for those denizens who make hundreds of millions risking other people's money and suffer no consequences of a serious nature when their multitude of failures blows up a firm or an economy. The Masters of Disaster have arranged for themselves after all compensation in the millions for being some of the greatest doofuses in the history of mankind, and that is quite a feat worthy of anyone's respect. The Goldman wizards at least make money for the firm unlike those wizards in the AIG's Financial Products unit in London. And, I do own some TCs which contain GS junior bonds so I do not wish to include that firm in any excoriation. In fact, Headknocker is going to request an apology from the German Chancellor on behalf of that unnamed behemoth.

Perhaps a new category needs to be established in the Guinness World Records. The category would be a group of individuals working at one firm who caused the most financial losses without committing an act of physical violence and received the most amount of money for it. This would be a tough category to make a selection with many worthy candidates at Citigroup, Lehman, Bear Stearnes and Merrill Lynch. My nomination for the holder of that world record would of course be the Masters of Disaster at AIG's Financial Products Unit in London who were also so generous to Goldman Sachs. Who else has made hundreds of millions per year and caused tens of billions of damage? Still it is a close call. In addition, a memorial needs to be constructed in their memory, with their pictures and names. So far, I am only aware of a few names. Goldman Helped Push A.I.G. to Precipice - NYT L A Times

2. Sold 100 of the TC GJX at 25.90 and Bought 100 of the TC DKF at 25.87 in Main Taxable Account Today (See Disclaimer): This would be an exchange of similar securities. The TC GJX has a lower coupon at 7%, compared to the 8% coupon of DKF. GJX just went ex interest soon after my purchase on 12/23/09 at 25.17. This marks my second round trip on the TC GJX, selling at a small profits soon after an ex date. This Trust Certificate has a Burlington Northern bond as its underlying security.

DKF also contains an investment grade security as its underlying security, a senior bond from Goodrich (GR) maturing in 2038. I bought this one in the Roth last year when it was trading at $20 in March 2009 which gave me a current yield of 10% at that lower price. buy of dkf I still own those shares. My yield at a total cost of $25.87 would of course be lower, as the price goes up the yield goes down. The current yield would be around 7.73% at a total cost of $25.87 on a $25 par value bond with a 8% coupon. The next semi-annual payment is in April.

The underlying bond in the TC DKF has a lower coupon, 7% compared to DKF's 8%. FINRA - Investor Information - Market Data - Bonds - Bond Detail The Finra site shows that the underlying bond is rated BBB+ by S & P and Baa2 by Moodys.

It is common to have differing yields between the TC and the underlying bond due to the circumstances in existence at the time the TC was created by the investment firm. The underlying bond may have fallen or risen in value at the time of its purchase and placement into the trust. A higher yield means that more bonds would be deposited into the trust to generate that extra yield, whereas a lower coupon on the TC would mean fewer bonds supporting the TC interest payments. I have occasionally gone into some detail showing how this works. The latest example of such a discussion involved the Goodyear Tire bond, with a 7% coupon, which is the underlying security in the TC XKK with a 8% coupon. Goodyear Tire XKK

3. Bought 100 of the ETF XLK at 21.89 (2010-Speculative Strategy) Today (See Disclaimer): I will never be much of a tech investor. So, as sort of a default position, when I want to buy some large cap tech stocks, I will buy a small amount in the ETF XLK. This ETF contains the technology stocks in the S & P 500. The Old Geezer previously bought XLK last year at $18.14 and sold the position in October at $20.25. Pared Stock Positions Including the Sell of COP & XLK/Bought 100 GJS AT $13 That sell probably did not make much sense, but the OG does not have to make any sense. And, as the LB, the author of these somewhat wordy minutes of HQ's trading operation, has pointed out many times, it would be purely accidental, a mistake of nature, for the OG to make any sense.

XLK has an expense ratio of .21% and has 83 holdings: Technology Select Sector SPDR Fund This ETF is market cap weighted so Microsoft is the largest holding at 10.25%, followed by Apple (8.47%); IBM 7.7%, AT & T (6.94%), Cisco (6.41%), & Google (6.03%). HP, Intel and Oracle are close to 4.5% plus or minus.

4. IMF Plans Huge Gold Bullion Sales: I thought that gold held up well today considering the announcement from the International Monetary Fund that it will sell 191.3 tons of gold in the open market. Earlier, the IMF sold 212 tons to central banks with the largest of those sales was 200 tons last October to the Reserve Bank of India, which actually started a gold rally.