Bought 100 MOU at $10.12/NADX Being Bought at $17/ISM Services/Sold HTGC in Regular IRA

The LB has heard rumors that the Heaknocker may be ready for the Old Folks home, now LB would not say such a thing, which goes without saying, LB just heard the rumor after HK appointed that no wit RB as Head Trader. LB mused that it was not sure how much longer it could hold down the fort here at HQ, maintain order and discipline against the continuous onslaught of the RB's nonsensical babble. Fortunately, the RB is too busy listening to Bruce Springsteen's "Born to Run", playing on a repeat cycle on the Itunes music player all day long, to cause much damage to HK's capital position. Besides, how many orders can the lame brain enter in the 60 seconds it is willing to work during a day, before starting to complain of cruel and inhumane working conditions? After all, the favorite phrases for the RB are "Don't Sweat the Details", "Let's Party", TGIF followed in close order by TGIM, TGIT, TGIW, TGIT, and TGIS (ditto on that one). RB just said Yea, all of that is true, but who said go all in on National Dentex at $1, and which company is being acquired for $17, the RB howled in satisfaction for its stock picking prowess. And how many shares did the Nerd buy : Buy of 50 NADX at $1.27 Some earlier comments on this subject need to be quoted in full:

"RB noted that it has more power than the HK and LB know and is going to say something about NADX, bought at $1.07 and $4. Buy of 50 NADX at $1.27 Buy of 50 National Dentex (NADX) When RB was asked how many shares to buy at $1.07, the RB said 10,000 and what did the LB do, the Nerd bought 50 shares of a $1.07 stock. That is no joke. Calling the LB a girlie man is an insult to girlie men worldwide, girlie man does not quite capture the essence of the LB, RB believes the LB has no Weenie at all, certainly no apparatus attached to the weenie, need the RB say more. Isn't this NADX buy of 50 shares proof beyond a reasonable doubt? Sure, if the HK was as destitute as our Uncle Sam, it could possibly be explained. Possibly, the RB is being too harsh, engaging in hyperbole about that weenie, if HK brought in an election microscope to take a hard look at LB on high resolution, you know, take a look down there, something of a man nature might be detected under the highest resolution possible, RB would not totally rule that out, RB added in closing."

RB is tired of all of those stinking rules promulgated by the Nerd, rules on top of rules, adjustments to rules, modifications and exceptions to rules, exceptions to exceptions, a plague of stinking rules.

1. Bought 100 Of MOU AT $10.12 (See Disclaimer): MOU is another principal protected note issued by Citigroup Funding, and guaranteed by Citigroup. It has a 3% guarantee, a $10 par value, and a due date of 3/10/2014. The interest payment may be increased up to 37% based on the percentage gain of the Russell 2000 Index during the relevant annual period. If there is one close in this index above a 37% increase for just one day during the relevant annual period, then the interest reverts back to 3%, no matter what happens thereafter. In fact, this happened during the 1st annual period for MOU owners. The first annual period experienced a reversion back to 3% based on a maximum level violation. The first annual period had a starting value of 394.58 and a maximum level of 540.56. The index easily violated that maximum level from its starting value on 7/23/2009, ^RUT, and one day during the annual period is sufficient to cause the reversion. I am not surprised by the sell off after the maximum level violation, and there will be investors concerned about the credit worthiness of Citigroup. MOU Charts - Citigroup Fdg Inc NT RUSS2000 In the first coupon period for MOU, there were multiple violations of the 37% maximum due to the large percentage gains in the indexes off the March 2009 lows. I would surmise that few individuals buying these notes in February 2009 expected a 37% gain in the index from its 1st year starting value or at least viewed a maximum violation then as less than probable.

The second annual period starts on 2/23/2010 and ends on 2/23/2011, so anything can happen between now and then. I am just betting a small amount that the Russell Index will not experience another large gain in the current period. (page PS-3: Pricing Supplement). Based on the data at YF, the Russell 2000 index closed at 625.07 on 2/23/2010: ^RUT: Historical Prices for RUSSELL 2000 INDEX This would put the maximum level during the current coupon period at 856.3459 for the Russell 2000 Index. One close above that number on or before 2/23/2011 will cause a reversion back to the 3% guarantee for the second straight year. The index closed 4/1/2010 at 683.98, up about 9.24% so far this year. If there is no violation of the maximum level during the second annual coupon period, then the percentage increase is of course determined as of the closing date on 2/23/2011. The next coupon payment date is 3/2/2011.

I am placing a small bet that the Russell will not have a repeat performance in the second annual period. Most of the recent trading has been hugging the $10 par value, up and down by a few cents.

This one has almost a year before the next payment, which is one reason to withhold any serious buying. You could have another reversion even with that large 37% maximum. The opposing argument is that this one has a lot of room to run without violating that maximum. The downside is known: (1) a $20 loss on maturity of the $10 note assuming Citigroup survives to pay par value and (2) a minimum payment of 3% in each of the four remaining coupon payments (2011, 2012, 2013, 2014).

I will at most buy another 100 shares of a $10 par value note issued by Citigroup Funding. This brings me so far to 200 shares of MKZ, 100 MKN, 100 MHC and 100 MOU, so around a current $5000 exposure to Citigroup Funding bonds. The investors who bought these kind of securities issued by Lehman of course are in a world of hurt. These type of securities are unsecured debt obligations.

2. Sold 50+ of the BDC HTGC in Regular IRA: 

Profit Snapshot= $40.52

3. Feds May Not Seek Indictments Against Joseph Cassano/ Mortgage Fraud in the U.S. -One of the Primary Causes of the Near Depression: The WSJ is reporting that the Feds are leaning against even seeking an indictment against Cassano and other former AIG executives at the London Financial Product unit. Cassano was head of the head of this unit which was largely responsible for the near collapse of AIG. I doubt that anyone would seriously argue that AIG would have collapsed but for the huge U.S. government bailout. The individuals in this small unit made 423 to 616 million per year writing credit default insurance on subprime mortgages along with other activities which proved their worth as Masters of Disaster and the best of the best in financial wizardry NYT It is not surprising that the Feds have concluded that nothing was amiss at this unit. After all Cassono told investors in August 2007 that the credit default swaps were a sure thing according to the NYT. (see also: Bloomberg.com: “It is hard for us, without being flippant, to even see a scenario within any kind of realm or reason that would see us losing $1 in any of those transactions,” Cassano said on an Aug. 9, 2007, investor call, according to a transcript.)

After all the FBI largely looked the other way as mortgage fraud became the crime du jour for several years in the U.S. prior to 2008 so there is almost no danger of anyone committing fraud even being investigated in the U.S., let alone charged or convicted. Adding Failures of Law Enforcement to my Top 12 Causes FBI Receives a Generous Grade of F- for Investigating Mortgage Fraud

Alan Abelson pointed out some egregious examples in his Barrons column, which were apparently raised in a lawsuit by Morgan Guaranty Insurance to invalidate its mortgage loan insurance contracts written on loans originated by Countrywide. It would be pleasing for me to see a jury return a verdict against Countrywide in this lawsuit. I mentioned in one of my prior posts on this subject (FBI Failures) the total number of mortgage fraud cases investigations conducted by the FBI nationwide. A diligent law enforcement agency could have launched more than 10 times that nationwide number in just one county in California. 'If you had a pulse, we gave you a loan' - msnbc.com

3. ISM SERVICE SECTOR: The ISM service sector increased to 55.4 in March, greater than the consensus expectation of 54, from a reading of 53 in February.ISM The new order component leaped to 62.3 from 55 in March. The employment number is inching toward 50, with the March reading rising to 49.8.

4. Bad Day for Bonds: BND, the Vanguard Total Bond Market ETF, is down about .5% in early afternoon trading today. The current SEC yield is close to 3.25%: Vanguard - Vanguard Total Bond Market ETF (BND) This would be an intermediate bond fund with an average maturity currently around 6.6 years. Vanguard - Fund Holdings I sold my shares in BND at $79 in 2008: For BND: Is it Safe is not the Right Question. Instead Ask What are the Risks & Rewards/Assume Lost of Principal Possible Those shares are currently trading at $78.4 on 4/5/2010. BND

The long treasury market has already been in a bear market for about a year now. The ETF for the 20 year treasury,TLT, is down about 1.5% in trading this afternoon, currently hovering around $87.5. On December 4, 2008, TLT closed at $112.3 and $107.39 adjusted for the subsequent dividend payments. TLT: Historical Prices for iShares Trust iShares Barclays

I sold out of my TIP ETF shares several weeks ago and this security is down about .75% so far today trading around $102.67.