1. Dollar in Parabolic Move: I am certainly no technician. It is hard to look at the Dollar Index (DXY) and have a great deal of comfort in the sustainability of the dollar's fast climb. You never know when a parabolic move will end and then crash. I mentioned in a prior post that I would consider buying back BWX or another foreign bond ETF "when and if the dollar index starts to approach 90". Item # 5 The Dollar Index & Foreign Government Bond ETFs WIP & BWX At that level, I suspect that the currency risk inherent in owning foreign bonds would shift in my favor. In addition to currency risk, which is critical for this kind of investment and renders foreign bonds inappropriate investments for many individual investors, recent events have highlighted credit risk even in sovereign bonds for developed nations. Interest rate is omnipresent after such a long term bull market in bonds.
Daryl Guppy, a CNBC contributor, believes that his technical analyst supports a collapse in the dollar after the DXY reaches the $.89 to $.91 range late in June. I am not so interested in the time frame as the range. That range in DXY will most likely be associated with further weakness in BWX and other foreign bond ETFs. I had already concluded that selling the foreign bond ETFs when the DXY approached 75 was advisable, and all of my positions were liquidated by that time. Now, with the parabolic rise in the dollar, these foreign ETFs have declined in value due primarily to the decline in foreign currencies against the dollar. So, when the DXY approaches 90 again, I will consider reestablishing a small position. I am not inclined to go into foreign bond ETFs too deep due to their low dividend yields and interest rate risk considerations, even if the currency risk has possibly tilted in my favor.
2. Added 50 FNFG at 12.62 Today ( Regional Bank Stocks strategy)(See Disclaimer): The recent squall cut my unrealized profit in the regional bank basket by about 3 grand at its most recent apex and several positions went from unrealized profits to losses. One of those stocks was First Niagara. I bought 50 shares of FNFG at 13.7 last February. My last discussion concluded with a summary of FNFG's earnings and capital as of 12/31/2009. Since that post, FNFG reported an E.P.S. for the 1st quarter of 2010 at 16 cents per share, up from 14 cents a share in the year ago quarter. Form 10-Q The net interest margin was 3.61%.
The current dividend penny rate is 14 cents per quarter which gives me around a 4.44% yield at a total cost of $12.62. While First Niagara did not cut its dividend during the Near Depression period, it has not increased it from the current annual rate of 56 cents per share, established in 2008. Before then, the bank was in the habit of raising the dividend, moving gradually from 11 cents in 2000 to 56 cents in 2008, which is an excellent percentage increase over that period of time. This history of raising the dividend prior to 2008, and keeping the dividend steady during the Near Depression period, are two reasons supporting my decision to move to a 100 share round lot on FNFG. However, I do not expect the bank to increase the dividend anytime soon.
As of 3/31/2010, nonaccruing loans as a percentage of total loans was 1.05% and the allowance for credit losses as a percentage of nonaccruing loans was at 115%. At page 59, the bank lists its capital ratios which are good. Tier 1 capital was 7.55%; Tier 1 risked based capital was at 13.08; and total risk based capital was at 14.2.
On 4/9/2010, First Niagara also completed its acquisition of Harleysville National, whose banking subsidiary had 83 branch locations in Eastern Pennsylvania.
3. List of UnderCapitalized Banks: This article at TheStreet.com has a list of 161 undercapitalized banks. This list is discuss in an article at MSN Money.
4. David Rosenberg: In this interview with Rosenberg, he continues to be bearish, and recommends safe income investments. He is looking for S & P 500 at 850 Dave Rosenberg’s CNBC.com Unfortunately, Melissa Lee introduced Rosenberg as having some kind of crystal ball, when he was in fact advocating that investors avoid stocks in March 2009. Barrons's & David Rosenberg Abelson and Rosenberg Again and Again In what I refer to as the last phase of the current long term bear market, I have previously mentioned that I expect the S & P 500 to meander in the 950 to 1250 range for the next two or three years.
5. Greek Wage Increases and Competitiveness: Jim Jubak mentions in his column that wages in Greece, under the national collective labor agreement, rose 6.2% in 2006, 5.4% in 2007, 6.2% in 2008 and 5.7% in 2009 and even more generous pensions at earlier ages as the clock ticked merrily to that nation's current credit meltdown. And Jubak focuses on the fact, frequently mentioned in this blog, that Greece is not alone in its fiscal irresponsibility. It is not like any western democracy has yet to recognize that it has promised more than it can deliver to an aging population. The U.S. government and most of its citizens are among the leaders of those living in a perpetual state of denial.
6. EX DIVIDENDS & INTEREST: PJL a Trust Certificate with a VZ senior bond as the underlying security, went ex interest today for its semi-annual interest payment. Several of the Aegon and ING hybrids are ex dividend tomorrow, including AEB, AEF, AEH, INZ and IND, all owned. PFK, the CPI floater from Prudential, goes ex for its monthly distribution on Thursday, May 27th. The TP from Zions, ZBPRB, was ex interest today. Bought 50 ZBPRB in Roth at $19.9 The two Zions equity preferred stocks, ZBPRA and ZBPRC, are ex dividend tomorrow.Bought 100 ZBPRA at $7.8 Bought 50 ZBPRA at 12.5 in IRA Bought 30 ZBPRC at 18.4/ Analysis of Prior Question: ZBPRA vs. ZBPRC OR ZBPRB The senior bond from Ameriprise, AMPPRA, is ex interest today. The TC with the Embarq senior bond (FJA), now part of CTL, also went ex interest on Wednesday. CTL Bonds BOUGHT 100 of the TC FJA at $15.35 Bought another 50 FJA at $ 14.2
9. Used Mid-May Cash Flow to Buy 50 NABZY at $19.51 Earlier Today (see Disclaimer): I am operating under strict trading rules now. I can buy a stock with cash flow or by selling another stock. I elected to use some of my accumulated cash flow this afternoon to buy 50 shares of the National Australia Bank, buying the shares on the pink sheet exchange. This is a link to the five year chart for the National Australia Bank Ltd. (Victoria, Australia) - NABZY. The stock has fallen from a high of around 29 in October 2009 to $19.51 this afternoon, a decline of 32.76%. Part of this decline can be attributed to the recent slide in the value of the Australian dollar against the U.S. dollar. So, in that sense, it makes more sense now for me to use my U.S. dollars to buy a security that is ultimately priced in Australian dollars than just a few weeks ago.
I checked the price of National Australia Bank on the Australian exchange and found that it has fallen about 25.9% in local currency since October 2009: NAB Stock Charts - (NASDAQ) National Australia Bank Ltd. Stock Charts The closing price was 23.65 AUD. The Australian stock market of course closes well before the U.S. exchanges. I then went to YF to convert 23.65 AUD into U.S. dollars and got $19.5213: Currency Converter This told me that my price on the pink sheets was about the same as the closing price on the Australian exchange for this large bank.
It would make more sense for me to limit myself to U.S. banks. It is after all hard enough for me to figure out what is going on with a domestic bank. But I like to wonder the world with my investments. NABZY pays a good dividend and is scheduled to go ex dividend in a few days. Marketwatch calculates the yield at the $19.51 price at 6.71%. As with other foreign stocks, there will be a withholding tax and the value of the dividend to me will vary based on the relative exchange rates at the time of payment.
While I am certainly have no expertise in trading foreign currencies, I believe in the Aussie Dollar long term against the U.S. dollar and hope to make money over time just on the exchange rate. As I just said, the Aussie dollar has fallen a lot in recent days, possibly due in part to an unwinding of the carry trade as well as weakness in certain commodity prices. This weakness can be seen in the recent price action of FXA, the currency ETF for the Australian Dollar, which has fallen from around $93 in late April to below $83 now. I am more willing to take currency risk in the Australian and Canadian dollars than any other foreign currency with the possible exception occasionally of the Swiss Franc and the Norwegian Krone. I am not yet ready to take the currency risk of the Euro. I have noticed several European consumer staple stocks approaching March 2009 type prices expressed in dollar terms, due to the declines in the Euro and the market, and this is tempting me virtually everyday now. I hesitate due to lack of confidence in the Euro, but I may overcome that problem at some point north of parity with the dollar.
This is a link to the long term chart for NABZY.PK at Yahoo Finance. The later part of 2008 and early in 2009 were in retrospect a good entry point for this stock.
The buys were before the market turned south. I noticed FXE accelerated its decline late in the day. I am contemplating selling one of my double shorts if the DJIA falls to about 9800. As I write this post late in the trading day, it looks like we are headed toward another retest of the February lows soon.
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