Stocks, Bonds & Politics

Added to Janus Balanced/ Washington Trust/FNFG UBSI FFBC /Sold 50 BAX at $56.39/Bought 40 SVU as LT at $6.98

2012-01-31T05:46:00.318-06:00

The market came to a realization yesterday, once again after several weeks of forgetfulness, that Greece is hopeless. Germany is becoming frustrated that more money has poured into Greece without much in the way of fundamental change. The finance minister for Germany basically told the Greeks that some outsider needs to be put in charge of Greece's budget, which is not going to happen. The market did recover some from its initial selloff.

The Commerce Department reported that personal income increased $61.3 billion or .5%, and disposable personal income increased .4%, in December. The inflation adjusted increase in disposable personal income was .3%. The savings rate rose to 4% from 3.5% in November. News Release: Personal Income and Outlays, December 2011

1. Added to Janus Balanced Mutual Fund Last Friday: I added to my position in the Janus Balanced mutual fund. I had eliminated or substantially pared my mutual fund holdings in 2007, except for the Permanent Portfolio which I kept intact and continued to buy more. In 2008, that fund declined only 8.36%. By paring, I am referring to selling shares down to 100.

The first mutual fund that I bought during the Near Depression period was the Janus Balanced T. Since I view the ability to manage money during downturns to be more important than riding the wave of a long term bull market, I was impressed with how this fund was doing in 2008. The total loss that year was 15.22%, so I invested some money and have added to it since that initial investment.

Morningstar gives this fund a 5 star rating. The fund category is moderate allocation. The expense ratio is .83%. The bond allocation is over 40%. Based on the Fed's decision to continue its Jihad until the end of 2014, bonds look better to me now than they did a few days ago. I would hope that the fund pares its large allocation to U.S. treasuries before the worm turns and carnage and destruction is visited upon those who hold those securities.

Janus includes all or at least most of its funds in one thick shareholder report. The last filed Form N-Q, which lists holdings, has the Balanced fund portfolio starting at page 13, nvcsr.

Janus Balanced Fund T (JABAX) closed at $25.5 yesterday, down 2 cents.

2. Washington Trust (own: REGIONAL BANK BASKET STRATEGY): WASH reported 4th quarter net income of $7.8 million or 47 cents per share, up from 44 cents in the year ago quarter. SEC Filed Press Release The consensus estimate was 47 cents.

As of 12/31/2011, NPAs to total assets stood at .81%; the allowance for loan losses to non-accrual loans was at 140.33%; the net interest margin was 3.22%; the tangible equity to assets ratio was at 7.21%; and the total risk based capital ratio was at 12.86%.

I still own 50 shares of the 100 bought at $15.26. The other 50 shares were sold @ $20.01. The stock is now trading at over $24. Washington Trust Bancorp

Washington Trust Bancorp closed yesterday at $24.83.

3. First Financial Bancorp (own: REGIONAL BANK BASKET STRATEGY): FFBC reported 4th quarter net income of $17.9 million or 31 cents per share, up from 27 cents in the year ago quarter. SEC Filed Press Release Recently, this bank has been paying dividends equal to its diluted earnings per share. In this latest earnings release, the FFBC Board announced that the next quarterly dividend will consist of the regular 12 cents per share plus a variable dividend of 19 cents per share (equaling the 31 cent E.P.S. reported for the 4th quarter).

As of 12/31/2011, the net interest margin was 4.32%; NPLs to total loans stood at 2.57%; the allowance for loan losses to non-accrual loans was 96.83%; tangible equity to tangible assets ratio was 9.58%; and the total capital ratio was estimated to be 18.75% (10 > well capitalized).

First Financial Bancorp closed at $17.4 yesterday. Bought 50 FFBC @ 16.85 ADDED 50 FFBC at $14.87

4. Sold 50 Baxter International (BAX) at $56.39 Last Thursday (see Disclaimer): I reviewed Baxter's 4th quarter report, released before the market opened last Thursday, and did not comprehend why investors were taking the stock up over $2 per share. I consequently entered a market order to sell the 50 shares recently bought at $49.79. Bought 50 BAX at $49.79 (1/12/2012 Post). The shares did close at $55.65 last Thursday, up $1.28.

The 4th quarter earnings report was okay. SEC Filed Press Release It illustrates a problem common to many large cap companies selling at relatively low multiples. The company reported an adjusted E.P.S. of $1.17, in line with expectations, on a 3% increase in revenues. The guidance for 2012 of $4.47 to $4.57 was lower than the consensus forecast of $4.62. Management estimated 2% sales growth in 2012. For the 1st quarter, Baxter estimated an E.P.S. of $.98 to $1 and the consensus was at $1.04.

2012 Baxter 50 Shares +$314.04

Baxter International closed at $55.3 yesterday.

5. First Niagara (own: REGIONAL BANK BASKET STRATEGY): FNFG reported adjusted net income of 24 cents ($.19 GAAP), in line with expectations. First Niagara Reports Record 2011 Results

As of 12/31/2011, the efficiency ratio was 59.61%; the net interest margin was 3.48%; NPLs to total loans stood at .55%; the allowance for loan losses to NPLs was 133.7%; the Texas Ratio was 8.55%; the tangible equity to assets ratio was 8.57%; and the total risk based capital ratio was 16.47%.

I have been critical of FNFG's management and Board based on their ill-advised decision to buy 195 HSBC branches. First Niagara: Just Another Incompetent Bank Board of Directors First Niagara Dividend Slash

6. United Bankshares (own: REGIONAL BANK BASKET STRATEGY): UBSI reported 4th quarter net income of $20.3 million or 40 cents per share, which included a before-tax non-temporary impairment charge related to some securities of $6.3 million. Press Release As of 12/31/2011, the net interest margin was 3.88%; the efficiency ratio was 51.81% (down from 53.87% on 12/21/10); NPAs to total assets stood at 1.58%; and the coverage ratio was 92.7%.

I am keeping UBSI around due to the dividend yield at my cost (over 7%), and the bank's history of raising that dividend. Bought 50 of UBSI (November 2009)

7. Bought 40 SuperValu (SVU) at $6.98 Last Thursday (Lottery Ticket Basket Strategy)(see Disclaimer): Until this LT purchase of the common, I have limited myself to SVU's senior bonds. I have sold 3 bonds for a profit, and currently own two as part of my Junk Bond Ladder Strategy. I have discussed this company in prior posts due solely to my ownership of its bonds.

The stock declined 12.5% on 1/11/11, closing at $7.34, after SVU released a disappointing earnings report for its third fiscal quarter ending 12/4/11. The company reported adjusted net income of 24 cents, one cent shy of estimates, on a 4% decline in revenues. SEC Filed Press Release The GAAP per share was a loss of $3.54. The company recorded goodwill and intangible asset impairment charges of $907 million pre-tax ($800 million after tax or $3.78 per share).

In retrospect, it would be fair to characterize SVU's acquisition of Albertsons in 2006 to be ill-advised. Some of the debt that I have bought originates from Albertsons.

SVU's debt is its primary problem in my opinion. The recently filed SEC Form 10-Q shows the long term debt and capital lease obligations to be $6.203 billion as of 12/3/2011. (see note 5 at page 11). The maturity dates of those obligations are listed in a table.

Of the bonds listed in that table, I own the 7.5% senior note maturing in November 2014 and the 8.7% note maturing in 2030. Bought 1 SuperValu 7.5% Senior Bond Maturing 11/15/2014 at 97.8 Bought 1 Senior Albertsons' Bond Maturing 2030 at 85.75 I have bought and sold the notes maturing in 2016, 2026 and 2029. Sold 1 Albertsons' Bond Maturing 2029 at 84.125- Bought 1 Albertsons Bond (now part of SVU) at 77; SOLD: 1 Albertsons 7.75% 2026 Bond @ 88.3-BOUGHT 1 Albertsons Bond Maturing 2026 at 80; Stocks, Bonds & Politics: BOUGHT 50 MJT at 25.6/Bought: 1 SuperValu Bond Maturing in 2016 at 98.73- Sold 1 Supervalu 8% Bond Maturing 2016 at 104.125

SVU is paying a too generous quarterly common stock dividend of $.0875 per share. Dividend History: SUPERVALU Assuming a continuation of that rate, the dividend yield would be approximately 5% at a total cost of $6.98 per share.

The stock does have several statistical characteristics common to most lottery ticket purchase. The stock price has been smashed for one. SVU Interactive Chart The forward P/E is 5.63. The five year forward P.E.G. is estimated at .96. SVU Key Statistics

SUPERVALU profile page at Reuters
SUPERVALU key developments page at Reuters.

Supervalu closed at $6.96 yesterday. The 52 week high is $11.77.

Portfolio Repositioning at JQC/Sold 230 ERH at $11.9/ Sold 50 GJO at $18.5 & Bought 50 PYT at $16.24-Both Synthetic Floaters

2012-01-30T05:46:00.150-06:00

The government's first estimate of 4th quarter GDP growth was 2.8% annual rate. News Release: Gross Domestic Product The expectation was for 3%. Growth was aided by a $56 billion increase in inventories, adding 1.94% to GDP, and by an increase in consumer spending. The Federal Reserve's current estimate for 2012 GDP growth is between 2.2% to 2.7%. www.federalreserve.gov.pdf That estimate, released last week, was revised down from the November estimate of between 2.5% to 2.9%.

1. Portfolio Repositioning at the CEF JQC: I own over 1000 shares of this CEF which has changed its investment strategy. The repositioning of this fund's portfolio started on 1/23/12. Update on Portfolio Repositioning

A comparison of the new and old approach is made in this Nuveen document. I am not likely to do anything until I review the next shareholders report later this year. I want to see what the fund is buying. The new emphasis, 70% of the fund, will be senior secured and second lien loans. A large number of senior secured loans are relatively low yielding, as shown in the dividend yield of ETFs that invest in that sector. Senior Loan Portfolio | BKLN Investment Grade Floating Rate ETF (FLTR)

Nuveen Multi-Strategy Income & Growth Fund 2 closed at $8.79 last Friday, up 11 cents for the day. Based on last Friday's closing numbers, the fund was then selling at a 9.38% discount to its net asset value. ( see CEFA page on JQC). Link to sponsor's web page: Nuveen.

2. SOLD 230 ERH at $11.9 Last Wednesday (see Disclaimer): This is another CEF that is currently selling at a premium to its net asset value. On the day prior to my sell, ERH closed at $11.78 and had a net asset value per share of $11.46. The premium was therefore +2.79%. I made a small profit on the shares plus several monthly dividends. Bought 100 ERH at 11.88 April 2011 Post; Bought 100 ERH at 11.69 July 2011 Post; Added 30 to CEF ERH at $10.61. The last small add generated the profit on the shares.

ERH page at the CEFA

Wells Fargo Advantage Utilities & High Income Fund closed at $11.66 last Friday. Based on last Friday's data, the fund was selling a .87% premium to its net asset value.

3. Sold 50 GJO at $18.5 and Bought 50 PYT at $16.24 Last Wednesday-ROTH IRA (see Disclaimer): This trade was one of my responses to the FED's statement that it will continue its Jihad against the Saving Class until the end of 2014. While I feel more secure with the credit risk of a senior bond issue from Wal-Mart compared to a Goldman Sachs trust preferred security, GJO has no minimum coupon and its distributions are tied to a .5% spread over 3 month LIBOR. Short term rates are now likely to remain abnormally low for another 3 years, assuming no change in central bank policies. PYT, on the other hand, pays the greater of 3% or .85% above the 3 month LIBOR rate on a $25 par value. www.sec.gov

Both of these securities are Synthetic Floaters in the Trust Certificate form of ownership. I have made a decent return on PYT by trading it, and really do not want to muck that record up. But, I overcame that psychological issue, barely, and added just 50 shares.

Bought 50 PYT at 11.2 April 2009; Bought 50 PYT in Roth at 13.34 August 2009; Bought 70 PYT at $15.75 November 2009; Pared Trade: Sold 70 PYT at 18.66 & Bought 70 GYB @ 18.49 in Regular IRA March 2010 (PYT bought at $15.75); Pared Trades in Roth: Sold 100 PYT at 19.25 & Bought 100 GYB at 18.98 October 2010 (PYT bought at $11.2 and $13.34). I no longer own GYB which has a similar trading history.

The underlying bond in PYT is a TP maturing in 2034: FINRA

Assuming GS survives to the par value of the underlying security, and assuming I still own PYT at that time, which has a zero probability, I would receive PYT's $25 par value, thereby enhancing my yield to maturity.

Snapshots of the prior trades can be found in Stocks, Bonds & Politics: Trust Certificates: New Gateway Post. I am playing with the house's money on this one with several small realized gains and the following on a 100 share lot:

2010 Roth PYT 100 Shares +$685.02

Merrill Lynch Depositor Inc. PreferredPLUS Floating Rate Callable TRUCs Series GSC-2 for Goldman Sachs Capital I closed at $16.1 last Friday.

GATEWAY POST: Main Table of Contents

2012-01-28T07:25:00.000-06:00

It is better to use the search box to the right to find information in this blog rather than the box at the top left hand corner.

For any new readers, RB stands for my Right Brain and LB for my Left Brain, both in a constant state of discord. The Headknocker (HK), the ultimate boss here at HQ, sometimes referred to as the Great Leader with a tinge of sarcasm, is exactly what the name describes, a real hard case, a more enhanced and older version of the young LB sometimes pictured in the profile section of the post. The LB still believes it is 16 years old (or not a day over 21), with a lot of hair, capable of running a mile without drawing a deep breath, without an ounce of body fat, referring frequently to itself as the Young Stock Stud. The LB is the only Focus Machine at HQ.

The Old Geezer (OG) is a more mellow version of the HK, who reads theology and philosophy, and who is at least willing to listen to the RB, but frequently is subject to a case of nerves which has never afflicted the HK for even a nano second. The HK frequently sends the OG to the Old Folks Home for one or more transgressions involving a failure to advance HK's capital position as Head Trader, which is rarely important to the OG, but is the only important matter to the HK.

All of these characters are caricatures of different personality traits of one individual investor, who is finely attuned to all of their voices, now in his fourth decade of managing his own money.

The left brain (LB) is serious, rational, logical, analytical, organized and highly focused, a linear thinker absorbed with details and looking at the parts rather than the big picture. The right brain (RB) is the antithesis of the LB. The RB is subjective, intuitive & led by feelings, impulsive, creative, emotional, unfocused, and capable of seeing the big picture unlike the LB.

Right Brain Left Brain Inventory

Most of these discussions, involving these personalities and brain characteristics, are intended for instructional purposes, and sometimes for humor. The topic of the role played by the brain structure in making investment decisions is explored in Jason Zweig's book : " Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich" Zweig would call my LB the reflective brain and my RB the reflexive. The reflexive brain gets the first crack at decision making, often the only crack for many investors, which would be viewed as a mortal sin here at HQ.

Being a prolific and wordy writer, this blog has expanded in a short time to over 1000 posts since October 2008, mostly long ones. Consequently, the best way to find specific information in this blog now is to use the Google search box on the right hand side rather than the search box at the top left hand side.

I would recommend that anyone interested in Trust Preferred, Trust Certificates or other exchange traded bonds register at the free site QuantumOnline.com. That site has links to the prospectuses and has other helpful information including credit ratings and a list of the preferred stocks that pay qualified dividends under current U.S. tax law.

Anyone interested in Bonds needs to become familiar with the free FINRA site. FINRA

To find information about a firm's bonds, just enter the stock symbol, click go, then scroll to bond in the "search box", and then you will be on the bond page for that company. You can also search for each bond the trades by customized dates at the bottom of each page.

Some links in this post may cease to work with the passage of time.

READERS OF OLDER POSTS HAVE TO ASSUME THAT THE DATA MENTIONED IN SUCH POSTS WAS CURRENT ONLY AT THE TIME SUCH POST WAS WRITTEN, AND THE READER NEEDS TO CHECK FOR MORE RECENT INFORMATION.

ANDY HALL and The Infamous Stringdusters: Andy HALL SINGING LIVE: YOUTUBE VIDEO LINKS

Gateway Posts for Asset Allocation Theory and Practice:

VIX ASSET ALLOCATION MODEL:USING THE VIX MODEL AS A TIMING INDICATOR FOR LONGER TERM STOCK ALLOCATIONS: The market has been in an Unstable Vix Pattern since August 2007, viewed as a dangerous market for most individual investors and all investors facing significant situational risk.

{Vix Asset Allocation Model Explained Simply With as Few Words as Possible

VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern (August 2007)

VIX and S & P Compared 1990 to 1997

Multiple Confirmations of VIX Model-Canary in a Coal Mine

More on VIX AND ASSET ALLOCATION
Trading and Asset Allocation in Stable and Unstable VIX Pattern
Further Discussion of Volatility and Asset Allocation
Stable and Unstable VIX Patterns Impacting Changes in Allocation to Stocks, Bonds and Cash

Vix Charts from 2004 2005 2006 Stable VIX Patterns Phase 1 and Phase 2

Parallels to VXO 1987-1988

Signal To Change Asset Allocation-Each Individual Needs to Assess Their Own Situational Risks}

Current Status of the Vix Asset Allocation Model (item # 1 6/13/11 Post)
Continuation of Unstable VIX Pattern/Possible Head and Shoulders in the S & P 500 Forming (July 28, 2011 Post)
VIX and Trading Rules in An Unstable Vix Pattern Within the Context of a Long Term Secular Bear Market (8/5/11 Post)
More Discussion on Asset Allocation in Unstable Vix Patterns (item # 3 10/6/11 Post)
Mark Hulbert and the Use of the VIX as a Timing Model/Modification # 1 To Vix Asset Model Approved re: Hedging (October 10, 2011 Post)

DYNAMIC ASSET ALLOCATION:Time for a Paradigm Shift in Asset Allocation Theory: Need Dynamism, Better Assessment of All Forms of Risk, and Due Regard to Volatility Patterns

Using Volatility as a Risk Management Tool for Equity Preferred Stocks: Embracing Volatility as A Risk Management Tool In the Sub-Asset Class of Equity Preferred Stock

Stocks for the Long Run and Professor Siegel: To Professor Siegel: Time for a Re-Think The Roller Coaster Ride of the Long Term Secular Bear Market Duality of Long Term Risks Long Term Stock Risks and Situational Risk/Managing Lost Opportunity Risk in a Long Term Secular Bull and Bear Markets 1974 or 1982: Start of Cyclical Bull in a Long Term Secular Bear Market or the Start of Secular Bull Market? More on 1982 or 1974 Continued Discussion on 1982 or 1974 Historical VIX Patterns The Importance of Identifying the Underlying Causes of Long Term Bull and Bear Markets LONG TERM SECULAR BULL PATTERN 1950 TO 1966/ Long Term Secular Bear Pattern from The Great Depression VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern Static v. Dynamic Asset Allocation Instability & Volatility in Asset Correlations

More on Failures of Standard Asset Allocation Models and Target Funds/Use of Volatility in an Asset Class to Make Adjustments to an Asset Allocation

Gateway Posts for Bonds, Preferred Stocks and European Hybrids:

Exchange Traded Bonds

Exchange Traded Bond and Equity Preferred Stock Table as of 1/10/12

TRUST CERTIFICATES: Trust Certificates: New Gateway Post

FINRA Links to Underlying Bonds In Trust Certificates: LINKS TO FINRA INFORMATION ON UNDERLYING BONDS IN TRUST CERTIFICATES

Trust Preferred Securities: Links in One Post

ING PREFERRED (Hybrid Securities): ING HYBRIDS: Links in one Post

Aegon Hybrids: Gateway Post

Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Synthetic Floaters

Junk Bond Ladder Strategy
Personal Risk Ratings For Junk Bonds
FINRA Links to Bonds in Junk Bond Ladder Strategy
Realized Gains Junk Bond Ladder Strategy
Year End Junk Bond Ladder Table

Floaters: Links in One Post

REIT CUMULATIVE PREFERRED ISSUES: REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

Treasury Inflation Protected Securities as a Non-Correlated Asset

Advantages and Disadvantages of Treasury Inflation Protected Securities:

Bond ETFs: Links in One Post

Hertz Bond Information in One Post

ETC:

Lottery Tickets: Lottery Ticket Strategy: New Gateway Post
LOTTERY TICKET PURCHASES: LINKS IN ONE POST

REGIONAL BANK STRATEGY:
REGIONAL BANK BASKET STRATEGY GATEWAY POST Regional Bank Stocks

Last Update of Table 12/23/2011: Snapshot in Item # 4 Regional Bank Basket Table Realized Gains Regional Bank Basket Strategy

CLOSED END FUNDS: TABLE AND LINKS

CEF Portfolio as of 12/31/2011

Canadian Dollar (CAD) Strategy

Common Stock Dividend Growth Strategy

Large Cap Valuation Strategy

There are well over a 1000 posts in this blog and the foregoing are just some of the major stock and bond topics.

Bought 100 of the ETF HGI at $17.18/FMER NYB/Sold LT TEX at $19.11/Sold 100 AWF at $14.65

2012-01-27T05:40:00.140-06:00

The announcement by the Federal Reserve that it will likely continue its exceptionally low interest rate policy for another three years will cause some asset allocation shifts here at HQ. This is nothing more or less than a forced confiscation by the government of capital amassed by the Saving Class. Bill Gross calls the Fed's policy financial repression. Businessweek

An investor who keeps money in a savings account, treasury bills, or bank certificates of deposits, traditional safe havens for income investors, will lose money after inflation and taxes, most likely for a six year period starting in 2008 and lasting until 2015. Certainly, whatever income is being generated by those safe haven investments is insufficient to make a meaningful contribution toward paying just the increase in everyday expenses.

I have discussed my continuing adjustments to the Fed's Jihad against the Saving Class in numerous posts. (e.g. Coping with the Federal Reserve's Jihad Against Savers & Responsible Americans). The purchase mentioned below (Item # 5) is one coping mechanism, a dividend ETF.

1. FirstMerit (FMER)(own: REGIONAL BANK BASKET STRATEGY): FMER reported 4th quarter net income of $30.5 million or 28 cents per share, up from 25 cents in the year ago quarter. SEC Filed Press Release The consensus estimate was for 26 cents.

As of 12/31/2011, the efficiency ratio was 69.46% (needs to come down); the net interest margin was 3.85%; NPAs as a percentage of loans + ORE (other real estate) stood at 1.06%; the allowance for non-covered loan losses to NPLs was 166.64%; and tangible equity to tangible assets was 7.86%.

2. Sold 30 of the LT TEX at $19.11 Last Tuesday (Lottery Ticket Basket Strategy)(see Disclaimer): This LT was purchased less than a month ago at $12.68-LT, creating close to a 50% quickie gain. This is the second quick profit on a small lot of TEX shares. Bought 30 TEX at $13.59 9/20/11 Post-Sold 30 TEX at $18 10/31/11 Post (See snapshot). Needless to say, our new Head Trader, the OG, likes playing with these LTs.

2012 Terex 30 Shares +$176.98

I may go back to the well again on TEX, but it might take a recession to take the stock back to $13.

Last Tuesday, Terex shares closed at $19.3. Terex closed at $20.33 yesterday.

While some readers might scoff at that $176.98, I would ask you to perform a calculation on how much money would an investor have to put in a money market mutual fund to generate that much money in one year?

3. New York Community Bancorp (NYB:own REGIONAL BANK BASKET STRATEGY): NYB reported 4th quarter net income of $117.7 million or 27 cents per share. SEC Filed Press Release The consensus estimate was for 27 cents.

As of 12/31/2011, the efficiency ratio was 39.15% (improving 235 basis points); the net interest margin was 3.45% (up 12 basis points); non-covered NPLs to total loans stood at 1.11%; and the tangible equity to assets ratio was 7.78%

New York Community Bancorp closed yesterday at $12.72. At that price, Marketwatch calculates the dividend yield at 7.86%.

4. SOLD 100 of the Bond CEF AWF at $14.65 Last Wednesday (see Disclaimer): I made a few bucks on the shares bought at $14.42. (February 2011).

I received $142.20 in dividends giving me a total return of nearly 10%. The shares were held for about 11 months. In addition to the regular monthly dividend, I received a special income distribution of $.322 per share. AllianceBernstein Global High Income Fund

As previously noted, I am content to sell bond CEFs for any profit on the shares.

I sold this CEF because the fund is now selling a premium to its net asset value. CEFA Page on AWF When I bought the shares, the fund was selling at a 6.6% discount to its net asset value.

AllianceBernstein Global High Income Fund closed at $14.97 yesterday.

5. Bought 100 of the ETF HGI at $17.18 Last Wednesday (see Disclaimer): The holdings of this fund currently consists of about 147 securities, mostly international common stocks that pay above average dividends. HGI Holdings

The fund paid out $.905 per share in dividends in 2011. Dividends are paid quarterly and will fluctuate based on the dividends received by the fund's holdings. At a 90 cent annual rate, the dividend yield would be approximately 5.23% at a total cost of $17.18. The fund does not use leverage.

The expense ratio is high for an ETF at .65%.

I noted in the blog a previous sell of 100 shares, back in February 2010 at $16.93, so I did not miss much by selling those shares almost two years ago. After reading that post, I see that I bought 50 shares of GFW at $22.63 as a substitute for HGI, and that worked out just fine.

I have modest goals for this kind of investment. I will be satisfied with a 10% total return, which can be achieved in a year's time with slightly less than a 5% gain in the shares.

Guggenheim International Multi-Asset Income ETF closed at $17.28 yesterday.

Bought 100 HTGC @ $9.7/ERF and MSPRA Mentioned In Latest Richard Lehmann Forbes Column/Bought 2 United Refining 10.5% Senior Secured Bonds Maturing 2/28/2018 at 94.5/PSEC BDGE

2012-01-26T05:45:00.164-06:00

British GDP declined .2% in the 4th quarter, which brought the 2011 GDP down to a positive .8%. Anemic is the only word to describe those numbers, and many economists expect a double dip recession for the U.K. A number of peripheral European countries, including Italy, Greece, and Spain, are already in a recession.

The European Central Bank has a €55 billion loss on its purchases of Greek government debt. NYT

The Treasury sold five year notes yesterday at a .899% yield. The coupon is .875% and the remainder of the yield is in the original issue discount. www.treasurydirect.gov..pdf

Yesterday, the Federal Reserve extended its pledge to keep interest rates at "exceptionally" low levels until late in 2014. The prior target was mid-2013. FRB: Press Release--Federal Reserve issues FOMC statement--January 25, 2012

The Fed's Jihad against the Saving Class continues in earnest. I am just trying to cope with this unprecedented punishment of the Saving Class.

Richard Lehmann recommended Enerplus, a recent add, in his Forbes column. Forbes He states in that article that a U.S. investor can avoid the 15% Canadian withholding tax by owning ERF shares in an IRA. I do not know about that, but do recall one of my brokers collecting that tax in a retirement account. It may depend on whether the broker is on the ball and many of them are out to lunch. Added 90 ERF at $24.69 USDs After those shares were purchased, my broker converted them into the Canadian ordinary shares (ERF.TO), so I will continue to receive my dividends in CADs which is what I want. I want to increase my CAD stash. Canadian Dollar (CAD) Strategy

Lehmann also mentions the non-cumulative floating rate equity preferred stock issued by Morgan Stanley, MSPRA, and I own 200 shares of that one. Advantages and Disadvantages of Equity Preferred Floating Rate Securities; Floaters: Links in One Post; Bought 100 MSPRA at 12.88 in May 2009; SOLD 100 MSPRA at 21.43; Bought 50 MSPRA at 15.7; Sold MSPRA at 18.50; Bought 50 MSPRA at 19.71; Bought 50 MSPRA @ 19.57 in IRA; Sold 50 MSPRA at 21.03 in Roth IRA; Added 50 MSPRA at 19.54; Bought 50 MSPRA at $16.6. This security pays qualified dividends at the greater of 4% or .75% above the 3 month Libor rate on a $25 par value. www.sec.gov

1. Bought 100 HTGC at $9.7 Last Monday (see Disclaimer): Hercules Technology Growth Capital is a business development company that provides equity and debt capital to mostly private technology companies. Like REITS, the BDC will avoid taxation at the corporate level on income distributed as dividends to its shareholders, provided at least 90% of the taxable income is paid out in dividends. This allows the BDC's to pay high dividends, but this comes with a price. Since most of the income is being paid out to shareholders, and their investments are risky, the BDC will frequently have to sell stock to replenish its coffers. Unfortunately for existing shareholders, many of those sales are been at below net asset value.

Last Friday, I noticed that HTGC had declined significantly, and it was for a typical reason. It was selling stock. It sold 5 million shares at $9.61, with an over-allotment option of an additional 750,000 shares. SEC Form The close prior to this announcement was at $10.25.

This is a link to the HTGC web site discussing their Portfolio. As HTGC mentioned in a recent SEC Filing, it will often receive warrants for stock when providing debt capital to these companies. It has 104 warrant positions in technology related companies, and nine of those firms had filed a registration statement in anticipation of completing an IPO. SEC Filed Press Release Of course, the mere filing of a S-1 registration statement does not guarantee that the company will actually be able to go public.

In that press release, HTGC did mention that Coviden recently acquired a portfolio company called BARRX Medical. An acquisition would be another way for HTGC to make money.

This is a link to HTGC's press release announcing third quarter results SEC Filed Press Release Distributable net operating income for the third quarter was 22 cents. The Board declared a third quarter dividend of 22 cents per share. If that dividend rate was annualized, the yield at a total cost of $9.7 would be approximately 9%.

On 9/30/2011, the net asset value per share was at $9.61.

I did trade HTGC successfully in 2009, but had to average down during the Near Depression period to come out ahead. I also apparently reinvested some dividends, though I have no memory of it:

2009 Taxable Account HTGC 165.451 Shares +$228.52

Sold HTGC at $8.67 (July 2009). I also flipped 50 shares in a regular IRA for a $40 profit.

Hercules Technology Growth Capital closed at $9.63 in trading yesterday.

2. Prospect Capital (PSEC)(own): Prospect Capital is another BDC. PSEC recently announced that it and other shareholders of NRG Manufacturing have agreed to sell that company PSEC said that it expected to receive $100 million in cash for its NRG securities before the end of this quarter, plus an additional $14 to be place in escrow and paid out in future periods. PSEC invested $12 million in NRG securities, providing the company with a 59% annualized return. Prospect Capital Press Release

Prospect Capital Corp. closed at $10.64 yesterday. I am reinvesting the dividend paid by the 200 shares owned in a taxable account.

I have discussed this BDC in several prior posts, including the following: Item # 2 Bought 50 PSEC at 10.48 (September 2009 Post); Item # 2 Sold 50 of the 200 PSEC at $12.16 (March 2010); Item # 5 Bought 50 PSEC at 9.5 (July 2010 Post); Bought 50 PSEC @ 9.97 in IRA (November 2010 Post); Sold: 50 PSEC @ 11.5-Regular IRA (January 2011 Post); ; Item # 1 Prospect Capital (PSEC) (June 2011 Post); Added 100 PSEC at 10.1- ROTH IRA (July 2011 Post).

3. Added 2 United Refining 10.5% Senior Secured Notes Maturing 2/28/2018 at 94.5 (Junk Bond Ladder Strategy)(see Disclaimer): I previously discussed this note after buying just 1 bond at a higher price. Bought 1 United Refining 10.5% Senior Secured Bond Maturing 2/18/2018 at 97.25 I have nothing to add to that post.

Prospectus: Prospectus
Finra Information on this Note: FINRA Information
Company Website: URC - United Refining Company

I have assigned a 6 risk rating to this bond. Personal Risk Ratings For Junk Bonds

Although United Refining is a private company, it does file reports with the SEC. SEC Filings This is a link to the last filed SEC Form 10-Q for the Q/E 11/30/11. This is a link to the Press Release announcing those results. The company reported quarterly revenues of $944.031 million and EBITDA of $121.809 million. Net income was reported at 62 million compared to a loss of $8.1 million in the year ago quarter.

My confirmation states the current yield at my cost is 11.064% and the YTM is 11.687%.

For all practical purposes, I am being forced into the Junk Bond Ladder Strategy due to the FED's Jihad against the Savings Class, now likely to extend into 2014.

4. Bridge Bancorp (BDGE)(own: REGIONAL BANK BASKET STRATEGY): Bridge reported 4th quarter net income of $3 million or $.42 per share, up 23% compared to the year ago quarter. The one analyst that provides an estimate had predicted an E.P.S. of 39 cents.

Tangible book value increased to $12.54 per share, as of 12/31/2011, compared to $10.33 at the end of 2010. Bridge Bancorp, Inc. Reports Fourth Quarter and Year End 2011 Results (Nasdaq:BDGE)

As of 12/31/2011, the efficiency ratio was 57.96%; the net interest margin was 3.97%; NPLs to total loans stood at just .68%; the allowance for loan losses as a percentage of NPLS was 260.44%; the total capital ratio was 16.2%; and the tier 1 capital to risk weighted assets ratio was 15%.

Bridge Bancorp closed at $20 yesterday. According to Marketwatch, the dividend yield at that price is 4.6%. I own 150+ shares.

CBU/Edgen Murray/Lottery Ticket Purchases: 100 DRAD at $1.9 & 40 FOE at $6.32

2012-01-25T05:44:00.146-06:00

Edgen Group has filed a registration statement with the SEC to sell common stock. Press Release of Edgen Group Inc. dated December 29, 2011 BusinessWeek I am not seen yet an actual offering. Form S-1

I own 1 senior secured bond maturing in 2015 issued by the Edgen Murray Corporation Bought 1 Edgen Murray 12.25% Senior Secured Bond Maturing 2015 (March 2011). This firm has a convoluted ownership structure as shown at page 5 of that bond prospectus.

If the IPO is successful then there will be a reorganization of that structure into something more convoluted, as shown at page 8 of the registration statement. Form S-1 The company states that it plans to use the proceeds of an IPO to purchase additional limited partnership interests in Edgen Murray II LP and to redeem a portion of the senior secured notes. Apparently, the purchase of additional units in EM II will be used to repay certain amounts under a term loan and revolving credit facility for a company called Bourland & Leverich Holdings which will become a wholly owned subsidiary of EM II after the reorganization. Since EM II and any subsidiary that is at least 80% owned by it guarantee the senior secured note issued by Edgen Murray Corporation, I would view the pay down of debt to be a positive. In sum, I would hope for a successful stock offering since debt will be reduced by equity.

The company filed an IPO registration in 2008 and subsequently withdrew it.

1. Bought 100 DRAD at $1.8949-LT Last Friday (Lottery Ticket Basket Strategy)(see Disclaimer): This is my second entry into DRAD as a LT selection. My prior round trip consisted of a 100 share buy at $1.24 and a sell at $2.14. Those shares were sold in July 2009. After that sale, the shares did continue to rise some, hitting a high of $2.75 in September 2009, before declining again to $1.78 last August. DRAD Interactive Chart

There are a few statistics that remain interesting to me. The price to sales ratio is at .67 and the price to book ratio is at .86. The company also has $1.68 a share in cash with no long term debt. DRAD Key Statistics At the $1.89 price, the market cap of the company is covered almost entirely by its cash.

For the Q/E 9/2011, the company did manage a $99,000 profit or 1 cent per share on $13.439 million in revenues.

While it is just my opinion, this company is just too small to remain independent and really needs to be absorbed by a larger company.

Digirad Profile Page at Reuters

Digirad Key Developments Page at Reuters

Digirad closed yesterday at $1.92.

2. Bought 40 FOE at $6.32-LT Last Friday (Lottery Ticket Basket Strategy)(see Disclaimer): This is another statistical selection. According to FOE Key Statistics, price to book is .86; price to sales is .24; the forward P/E is 8.9; and the five year estimate P.E.G. is .71.

Another characteristic of a LT selection is a smashed stock price. Ferro was trading at over $23 in 2008. The stock then went into a tailspin, hitting $1 by March 2009, and then spurted up to over $16 by March 2011 before entering into another descent. FOE Interactive Chart On a more positive note, the stock did recently cross its 50 day SMA to the upside.

Ferro Profile page at Reuters

Ferro Key Developments page at Reuters

When Ferro issued its last quarterly report, it did guide down its 2011 earnings and revenue estimates. SEC Filed Press The main culprits behind the shortfall were customers working down their inventories and a downturn in Ferro's solar paste business.

I read the latest Credit Suisse report on Ferro. That report is available to Charles Schwab customers. CS has FOE rated at outperform with a $10 price target.

Ferro closed yesterday at $6.29, down 13 cents for the day.

3. Community Bank System (own: REGIONAL BANK BASKET STRATEGY): CBU reported net income for the 4th quarter of 19 million or 51 cents per share, up from 47 cents per diluted share in the year ago quarter. SEC Filed Press Release The consensus estimate was for 53 cents a share.

As of 12/31/2011, the efficiency ratio was at 57.2%; the net interest margin was 4.06%; NPAs to total assets stood at just .36% (NPLs at 1.36%); and the allowance for loan losses as a percentage of NPLs was 204%.

CBU also recently announced that it would purchase 19 HSBC branches in New York. Three of those branches will be purchased from First Niagara and the remainder directly from HSBC. www.sec.gov This is a far more sensible and prudent expansion than the one recently completed by First Niagara. First Niagara: Just Another Incompetent Bank Board of Directors

CBU plans to sell approximately $50 million in common stock to finance this purchase. The company priced 1.852 million shares eat $27, with an over-allotment option of 277,800 shares. Pricing of $50 Million Common Stock Offering

The CBU Board also declared the regular quarterly dividend of 26 cents, compared to the 50% slash made by the First Niagara Board. First Niagara Dividend Slash

I currently own 50 shares of CBU. Bought 50 CBU @ 23.18

Community Bank System closed at $28.15 yesterday. The dividend yield at that price according to Marketwatch is 3.69%.

I would note that the Board of First Niagara declared a 8 cent quarterly dividend yesterday, a 50% reduction from the prior 16 cent rate. FNFG did not remind its shareholders of the recent slash slash in the press release announcing this reduced dividend. FNFG Press Release

4. F.N.B. (own: REGIONAL BANK BASKET STRATEGY): F.N.B. reported net income of $23.7 million, or 19 cents per share, for the 2011 4th quarter. This was unchanged from the year ago quarter. The consensus estimate was for 19 cents.

As of 12/31/2011, the efficiency ratio was 59.27%; the net interest margin was 3.79%; NPLs to total loans stood at 1.55%; allowance for loan losses to NPLs stood at 94.76%; and the tangible equity to tangible assets ratio was 6.65%.

After selling my highest cost FNB shares, I am left with 50 shares purchased at $7.8

5. Trustco (TRST) (own: REGIONAL BANK BASKET STRATEGY): TrustCo reported net income of 8.7 million for the 4th quarter, or $.093 per share. As of 12/31/2011, the efficiency ratio was 46.68%; the net interest margin was 3.35%; the allowance for loan losses to NPLs was 99.9%; NPAs to total assets was 1.27%; and the tangible equity ratio was 7.97%

I apparently own more TRST shares than I have been including in my regional bank table. I noticed the other day some shares in an infrequently visited satellite taxable account, bought no doubt by gremlins. I own 420 shares bought in the market plus reinvested dividends.

Sold 100 GDO at $18.72/Bought 100 TY at $14.82/FNLC

2012-01-24T05:37:00.173-06:00

This is a link to a recent article in SmartMoney that summarizes some of the advantages and disadvantages of closed end funds.

I do not recall Felix Zulauf being optimistic about stocks. I do pay attention to his opinions since he is both articulate and intelligent. I never have his certainty, born no doubt out of a considerable amount of arrogance, but will assign probabilities to his dire predictions.

In last week's Barron's Roundtable (subscription), he made the following predictions:

A. China's GDP will slow to a 7.2% this year, while the U.S. economy will grow in the 1 to 1.5% range.

B. The deflationary pressures are intensifying. The market "could" drop 20% from the first quarter high. The global stock markets will top out in the first quarter. Thereafter, the cyclical bear market, started last spring, will reassert itself and continue into the later half of 2012 or into early 2013.

C. The U.S. dollar will have temporary strength. The 10 year treasury may decline to a 1 to 1.2% yield, which will mark the end of the long term secular bull market in bonds. Emerging market currencies and stocks will decline, and he recommends shorting the emerging market ETF EEM. He believes that it "could" fall at least 20% later this year. That is his minimum expectation. Emerging market ETFs are doing very well so far in 2012. EEM rose 40 cents yesterday to close at $41.78, up 10% so far in 2012. I would add that it would not be that unusual for emerging market ETFs to fluctuate within the range predicted by Zulauf,

D. Given his bearish view of China's growth he recommends shorting the Australian dollar. One way to short the AUD, which I would not do, would be to short FXA, the currency ETF for the Australian dollar which rose .55% yesterday to close at $105.62. On the last trading day of 2011, FXA closed at $102.61 and subsequently paid a dividend of $.312 a share. FXA Historical Prices

E. He does not believe there will be a positive outcome to Europe's sovereign debt and bank problems.

Last year, his long recommendations, for the most part, failed miserably. 2011 Roundtable Report Card - Barrons.com

1. Continued to Pare GDO By Selling 100 at $18.72 Last Thursday-Taxable Account (see Disclaimer): This transaction brings me down to 236.082 shares of the bond CEF GDO, held in a taxable account, with another 120 held in the ROTH IRA after a recent pare. Sold 100 GDO at $18.46 The rational for selling these shares is discussed in that post. The shares sold last Thursday at $18.72 were bought in March 2010 at $18.46. So, I broke even on the shares and received almost two years of dividends. At a total cost of $18.72, the dividend yield is close to 8.17% at the current monthly distribution rate of $.1275.

The OG is content accepting that yield without losing money on the shares.

GDO went ex dividend for its monthly distribution on Wednesday, the day before the last sale so I will receive one more monthly dividend on the 100 shares sold last Thursday.

On the day of my sale, the net asset value per share was $18.78.

Yesterday, Western Asset Global Corp Defined Opportunity Fund closed at $18.69 with a net asset value of $18.84.

2. First Bancorp (FNLC)(own: REGIONAL BANK BASKET STRATEGY): This bank is a minor position in the regional bank basket. First Bancorp reported 4th quarter net income of $3 million, or 29 cents per share, up one cent from the year ago quarter. I am not pleased with the increase in non-performing loans to 3.21% of total loans, compared to 2.39% at the end of 2010. The efficiency ratio is in the top 15% of its peer group at 49.74%. The average for the peer group is 65.45%. As of 12/31/2011, the estimated leverage capital ratio was 8.15% (Well capitalized 5%>); tangible book value per share was $11.3; NPAs to total assets stood at 2.32%; the net interest margin was 3.28%; and the return on average tangible common equity was 11.05%.

After selling my highest cost shares at a small profit, I am down to 51+ shares. Bought 50 FNLC at $12.79

First Bancorp closed yesterday at $15.79 and has about a 4.94% yield at that price.

3. Bought 100 of the stock CEF Tri-Continental (TY) at $14.82 Last Thursday (see Disclaimer): TY is a closed end fund that managed to survive the Great Depression. The inauspicious IPO date was 1/05/1929. Fund Details

I am hesitant to buy much in this fund due to its lackluster 10 year record. Those returns are provided by the sponsor at the foregoing linked page. It has admittedly been a tough ten years for stock investors. A 1.11% average annual return over that ten year period is okay under those circumstances. I can certainly attest to the fact that the last ten years have not been optimal ones.

The main appeal to me is that the fund was selling at over a 15% discount to its net asset value at the time of my purchase. Another appeal for the OG is that the fund mostly buys large cap value stocks. This is a link to the top ten holdings as of last month: Portfolio Details I took a snapshot:

The fund also has a relatively low expense ratio at .6%.

Tri-Continental page at the CEFA

Morningstar rates the fund at 3 stars.

Link to Last Filed SEC Form N-Q: www.sec.gov

Link to last SEC filed shareholder report: SEC Form N-CSR

On the day of my purchase, the stock closed at $14.8, with the fund having then a net asset value per share of $17.45, creating a discount of -15.19 to NAV.

Tri-Continental closed at $14.9 yesterday. The net asset value per share as of 1/23/2012 was $17.53, creating a discount to net asset value at that time of -15%.

RNST SLM/Sold 50 of the TC JBI at $26.47/Sold 50 PHO at $17.96

2012-01-23T05:25:00.207-06:00

The VIX has been in an Unstable Vix Pattern since the first Trigger Event in August 2007, as defined in my Vix Asset Allocation Model. VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern In Phase 1 of that Unstable Vix Pattern, the VIX will have a whipsaw movement mostly between 20 to 30, with spurts over 30 and below 20.

Recently, the VIX experienced a typical whipsaw pattern as it moved quickly from below 20 to over 30, and spiking to a high of 48 on August 8, 2011. This movement would normally be associated with a market decline:

Vix Upward Spike Starting July 26, 2011 VIX Index Chart
Vix Double TOP October 3, 2011 at 45.45
Thereafter, A Move Down In the VIX Until 1/19/2012 with the VIX Now Less than 20

S & P 500 7/26/11 = 1,331.94 Historical Prices
S & P 500 10/3/2011= 1,099.23
S & P 500 1/20/2012= 1,315.38

Generally, until the VIX Stable Pattern forms, the trading philosophy would be to buy hedges for stock positions when the VIX starts to move below 20 and to lighten up on the stock allocation. The spurt into the 30s would require at least some paring of the hedges and selective repurchasing of stock positions. That pattern would be repeated over and over again until the Stable VIX Pattern forms. Mark Hulbert and the Use of the VIX as a Timing Model More Discussion on Asset Allocation in Unstable Vix Patterns VIX and Trading Rules in An Unstable Vix Pattern Within the Context of a Long Term Secular Bear Market

Historically, the Stable Vix Pattern reveals itself by a continuous movement in the VIX below 20 for 3 months, allowing for some minor and temporary blips above 20 without restarting the count. The count now stands at two days.

1. SOLD 50 of the Trust Certificate JBI at $26.47 Last Tuesday-ROTH IRA (see Disclaimer): This TC has a 7.875% coupon paid on a $25 par value. Both the TC and the underlying senior bond, originally issued by Duke Capital (now Spectra Capital), mature on 2/15/2032. www.sec.gov

There are at least three reasons for selling this security. The first is psychological. The OG prefers to avoid messing up a winning streak on a security. JBI was one of the first trust certificates discussed in this blog, and it was then trading at around $17. TRUST CERTIFICATES JBI (October 2008 Post); SOLD 100 JBI AT PAR VALUE January 2009 All of my recent purchases have been made near par value including the shares sold last Tuesday in the ROTH IRA. Bought 100 of the TC JBI at $25.1 October 2009; Sold 100 JBI at 26.5 January 2011; Bought 50 of the TC JBI at 25.31 March 2010; Bought 50 JBI at 24.81-ROTH IRA MAY 2010 (shares sold at $26.47); Sold 50 of 100 JBI at $26.25. Normally I try to resist this emotional issue, which is sometimes successful, but there were some other reasons supporting this sale.

The second reason involves concerns about interest rate risk associated with all long term bonds. One possible outcome of the extraordinary and unprecedented actions by the Federal Reserve is hyper inflation.

The last reason is that there can not rationally be much upside to JBI above $26, given the call warrant attached to the TC which allows its owner to redeem JBI at par value plus accrued interest. While there is no rational upside, there is certainly the usual downside credit and interest rate risks. So when buying trust certificates with long maturities near par value, particularly those with call warrant features, I will likely hold them only for a relatively brief period and will accept small profits on their sale. More on the Call Warrant in TCs Call Warrants and Trust Certificates

2012 ROTH IRA 50 Shares JBI +$68.02

Snapshots of TC trades can be found in the Trust Certificates: New Gateway Post.

2. Renasant (RNST)(own 150+ shares: REGIONAL BANK BASKET STRATEGY): Renasant reported net income for the 4th quarter of $5.79 million or $.23 per share, up from 19 cents in the 2010 4th quarter. SEC Filed Press Release This beat the consensus estimate by 2 cents.

As of 12/31/2011, the net interest margin was 3.84%; the efficiency ratio was at 69.5%; the tangible capital ratio was 7.38%; the total risk based capital ratio was at 14.58%; the tangible book value per share was $11.8; NPLs to total loans not subject to loss share with the FDIC stood at 1.56%; and the allowance for loan losses to NPLs was 127%.

3. Sold 50 of PHO at $17.96 Last Wednesday (see Disclaimer): PHO is an ETF recently bought at $16.5.

4. SLM (own exchange traded CPI floating rate senior bonds OSM and ISM): For the 4th quarter, SLM reported GAAP net income of $511 million or 99 cents per share. Core earnings were reported at $268 million or 52 cents per share, down from $401 million in the 2010 4th quarter. Core earnings declined due to lower gains realized from loan sales and debt repurchases. The consensus estimate was for 49 cents. Loan originations rose 19%. SEC Filed Press Release

On the day of the earnings release, the common shares rose 65 cents to close at $14.29. SLM Corp Stock Price OSM matures in 2017 and ISM in 2018, so I am concerned primarily about being paid par value at maturity.

Floaters: Links in One Post

BOUGHT 100 HUWHY at $17.84/Terex CLGX Intel/Sold Remaining MSFT at $28.47/Sold 50 INZ at $20.74/BOUGHT 50 NVTL at $2.98-LT/

2012-01-20T05:44:00.013-06:00

I am not convinced that this rally has legs and is sustainable. I am not a net seller of stocks into this rally, but I am shifting the stock allocation into different sectors.

Bank of America reported better than expected earnings yesterday. That report is discussed in a number of articles and I have nothing to add to those discussions. MarketWatch Bloomberg I thought that I had sold all of my remaining shares of KRBPRD, but still own 50 shares which are held in a taxable account. I also own several "principal protected" unsecured senior notes issued by either Merrill Lynch or BAC. I also own 100 shares of the non-cumulative equity preferred floater BMLPRJ and 50 shares of CPP. The later security provoked a long dissertation by our LB. Bought Back 50 CPP at $21.35

Terex (TEX), a recent LT purchase, was upgraded to outperform by Baird yesterday. Their price target was raised to $24 from $20. Given the spurt since my purchase at $12.68, I may elect to harvest the gain. TEX closed at $18.75 yesterday, up 4.28%. I also own 1 Terex bond. Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947

CoreLogic (own senior bond) jumped in after hours trading after the company announced that it would report better than expected earnings. I no longer PJS, a trust certificate containing as its underlying security a senior bond issued by First American, now known as CoreLogic, but did well with that bond. (see snapshots at Trust Certificates: New Gateway Post; Bought PJS at 7.2-October 2008; Bought 50 PJS at 17.95 August 2009; Bought 50 PJS at $17.8 in Roth August 2009; Sold 50 of 300 PJS January 2010; Bought 50 PJS at 23.73 June 2010; Added: PJS at 24.72 October 2010; Bought 50 PJS @ 24.6 November 2010; Sold 100 PJS @ 25.2 May 2011; Sold Remaining PJS at 25.15-Roth IRA September 2011. Instead of owning PJS, I now own only the underlying bond in that TC. FINRA

The initial claims for unemployment fell to the lowest number since April 2008. ETA Press Release: Unemployment Insurance Weekly Claims Report For the week ending 1/14/2012, the seasonally adjusted initial claims for unemployment fell to 352,000, a 50,000 decrease from the prior week's adjusted number.

CPI for December 2011 was unchanged on a seasonally adjusted basis. Consumer Price Index Summary

1. Sold 92+ MSFT at $28.47 Last Tuesday (see Disclaimer): After selling my highest cost shares a few days ago, I decided to unload the remainder of my position last Tuesday.

2012 MSFT PROFIT +$403.87

Hopefully, I will receive an opportunity to buy back these shares sometime this year at less than $25.

Microsoft reported its fiscal second quarter earnings after the close yesterday. SEC Filed Press Release Revenues increased 5% to $20.89 billion. E.P.S. was 78 cents up from 77 cents in the year ago quarter. The expectation was for 76 cents.

2. Sold 50 INZ at $20.74 Last Tuesday (see Disclaimer): I just bought those shares at $19 (December 2011). I sold them for the reasons explained yesterday. Item # 4 Sold IDG at $20.42 I am going to need more clarity about the European sovereign debt and banking problems before electing to hold European hybrid securities for more than a few days or weeks.

ING HYBRIDS: Links in one Post

ING Groep N.V. 7.20% Perpetual Deb rose 31 cents in trading yesterday to close at $21.07.

3. Bought 100 HUWHY at $17.84 Last Tuesday (see Disclaimer): Hutchison Whampoa is a conglomerate based in Hong Kong.

Hutchison Whampoa Profile Page at Reuters

Hutchison Whampoa Key Developments Page at Reuters

In the U.S. there is an unsponsored ADS traded on the pink sheet exchange under the symbol. HUWHY

The Chairman of Hutchison Whampoa is Li Ka-shing, one of the richest people in the world and a high school dropout.

Website: Hutchison Whampoa Limited

This is a link to the interim report for the six month period ending in June 2011: hutchison.pdf. Total revenue for the first six months of 2011 was HK $187,359 million, up 26% from the same period in 2010. Profit rose to HK $46,296 million or HK$10.86 per share

On 6/30/11, one Hong Kong dollar was worth about $.1285, which is very close to the current exchange rate. The HK dollar is pegged to the USD which takes away the currency risk as long as the peg remains relatively constant. (see discussion of peg at Businessweek) The approximate value of a HKD $10.86 E.P.S. is $1.4. USD.

Hutchison Whampoa Ltd. ADS, HUWHY Stock Quote - (OTN) HUWHY, Hutchison Whampoa Ltd. ADS Stock Price

The average target price among analysts is HKD 84.8 for the ordinary shares, which gives the stock a P/E of around 4.96 according to Marketwatch: Analyst Estimates, Hutchison Whampoa Ltd. ADS

This is a link to the HK traded share price: 0013.HK: Summary for HUTCHISON At the time of my purchase the HK listed ordinary shares had closed at 69.7 HKDs or $8.98 U.S.Ds. Again, since 1 ADS is worth two ordinary shares, I need to multiply the USD value by 2 which produced a $17.96 value for HUWKY shares at the HK closing price for the ordinary shares.

Since it takes two ordinary shares to equal 1 ADS, the analyst target price for the HUWHY ADS shares would be HKD 169.6 or $21.85 USDs. I thought that was a rationale 12 month upside target given the current low valuation of this stock and the dividend support to the share price.

This is what the confirmation for this purchase looks like:

HUWHY closed at $18.66 yesterday.

4. Bought 50 NVTL at $2.98 as LT Last Tuesday (Lottery Ticket Basket Strategy)(see Disclaimer): Possibly many years ago, I may have bought and sold Novatel Wireless when the company was enjoying some success. After piling up several quarterly losses, the stock can be purchased under the Lottery Ticket strategy, which limits the amount of total exposure to $300 plus any realized gains and/or dividend distributions related to the security in question.

NVTL has an ugly looking chart. I suspect that many investors have given up. The company was launched during the Nasdaq Crazy Period and hit $220 per share in early 2001. NVTL Interactive Chart The maximum period stock distorts the action for the past five years, so I will just focus on a five year chart. Chart In 2007, the stock rose quickly from around $11 per share to $27.75 by June 2007 and then a double top at $26.42 shortly thereafter.

The Near Depression period was not kind to the stock, pretty much a waterfall type decline to a bottom just above $3 in March 2009. The stock then rallied to almost $13 by September 2009, whereupon it commenced another descent.

This kind of price action, by itself, would tell me to be careful. The smashing of the stock price is practically a prerequisite for LT selections. The inconsistent and volatile movement presents enhanced risks and opportunities. I would emphasize the risk side of that equation more than the opportunity side.

As with many other LT purchase, NVTL was bought primarily on statistical data, rather than an understanding of the business fundamentals or products. Currently, the price to sales ratio is .23, the price to book ratio is .56; and the total cash per share is $1.73. NVTL Key Statistics

I did spend a few minutes at the Novatel Wireless website looking at their products. I also reviewed the Profile and Key Developments information available at Reuters.

I checked the current E.P.S. forecast which was for a loss of 18 cents this year. That was not encouraging.

One of Novatel's products was listed by a columnist among the top seven gadgets previewed at the recent consumer electronic show in LV. TheStreet

Novatel Wireless closed at $2.99 in trading yesterday.

5. Intel (own): Intel reported adjusted earnings of 69 cents per share, up from 59 cents in the year ago quarter, on a 21% increase in revenue. The consensus estimate was for 61 cents. Emerging markets is a major source of growth, as more consumers in those markets can now afford to buy a computer.

I quit reinvesting the dividend paid by Intel. My unrealized profit, as of 1/19/2012, was $2,134.61 on 273+ shares.

Eastman Kodak Bankruptcy

2012-01-19T08:21:00.001-06:00

As expected, Eastman Kodak filed for bankruptcy protection today. Reuters I own two unsecured senior bonds maturing in 2013. Eastman Kodak (EK) Bonds-Own 2013 Senior Bond Eastman Kodak Bonds: Update on Third Quarter Earnings Report I would hope now that Antonio Perez, an abysmal failure as CEO, will be told to find other employment soon. Several of his money losing ventures need to be sold or shut down.

My current guess is that the unsecured senior bonds, irrespective of maturity, will ultimately be worth 20 to 30 cents on the dollar, provided EK is successful in selling the 1,100 digital patents that it has been peddling for several months now (2B+), and soon stops the massive consumption of cash caused by its money losing operations. That estimate will change based on future events.

Part of the recovery, if any, may come from stock that is issued to unsecured creditors when a company emerges from bankruptcy. I would not expect the existing common shareholders to recover anything. As noted in this article at Forbes, common stockholders are frequently wiped out in bankruptcy.

Another wild card for the bond owners is the unfunded U.K. pension obligations which I discuss in a recent post. Eastman Kodak

Needless to say, I would not speculate on buying EK unsecured bonds now. RB bought the bonds.

Information about EK bonds can be found at FINRA.

The FINRA site will have trading information on these bonds. The prices for large trades will reflect the estimates made by institutional investors on the potential recovery.

I will occasionally monitor the prices of those bonds just to see how institutional investors are valuing them.

Sold 100 WIN at $12.01/Sold 50 KRBPRD at $24.7/Sold 100 GYB at $17.07/Sold IDG at $20.42/Added 50 of the Synthetic Floater GJN at $19.1-Roth IRA/ Sold 300+of the Bond CEF MMT at $6.83/

2012-01-19T05:33:00.165-06:00

Recently, I have been selling some collectibles acquired many years ago. I would like to emphasize the importance of keeping good records to establish a cost basis. For junk silver coins taken out of circulation in the 1960s, my cost basis is simply the face value of the coin. On other collectibles sold late last year and early this year, I need to establish my cost basis for income tax purposes, which I am able to do with my original check and purchase receipt.

I have started to prepare my 2011 tax return and have already entered the appropriate information for collectibles sold last year. I use the premier edition of TurboTax. That program informed me that collectibles, held for more than 1 year, do not receive the benefit of the 15% cap on long term capital gains, but are instead subject to a maximum 28% cap.

I entered the appropriate information about the collectible sales and the TurboTax program filled out the information on a Form 8949. The total cost of those purchases was $1,146 and the proceeds came to $4,850. The only item which needed proof of the purchase cost was a 1988 4 piece gold proof eagle set purchased for $1,095 and sold for $3,515. Recent Gold and Silver Sales

Most of the items sold so far this year will require documents establishing the purchase cost. Those include some BU Carson City Dollars, a one ounce gold eagle proof coin, and a 4 coin Constitution commemorative set (2 gold, 2 silver). Most of the purchases were made a long time ago, and kept in safety deposit boxes at a local bank. Notwithstanding the age of the purchases, I still have the documents relating to my cost.

1. Added 50 of the Synthetic Floater GJN at $19.10 Last Thursday (see Disclaimer): This purchase brings me up to 150 shares of this Synthetic Floater in the Trust Certificate form of ownership. So far, I have realized gains in this security of $698.98, mostly originating from an opportunistic purchase of 50 shares during the Near Depression period:

2010 Roth IRA GJN 50 Shares +$460.53

BUY 50 GJN at $12 March 2009 Sold 50 GJN at 22.08 December 2010

Prospectus: www.sec.gov

GJN is a Synthetic Floater in the Trust Certificate form of ownership. The underlying security owned by the trust is a Trust Preferred stock, issued by J P Morgan Capital XVII. In effect, GJN represents an undivided beneficial interest in a junior bond issued by J P Morgan whose interest may legally be deferred for up to five years provided no activation of the stopper clause (e.g. no payment on a junior security).

The TP has a fixed coupon of 5.85% and matures on 8/1/2035. The trustee will collect that interest paid by J P Morgan Capital and then swap it with the swap counterparty (Wachovia, now part of Wells Fargo) for the amount due the owners of GJN. This will continue to happen unless the swap agreement is terminated (e.g. by WFC's bankruptcy). If that agreement is terminated for any reason, then the owners of GJN will receive the fixed coupon of the underlying TP (i.e. 5.85%)

For as long as the swap agreement remains in force, the owners of GJN will receive the greater of 3% or 1% over the three month treasury bill rate on a $25 par value, with a maximum interest rate of 8%. Interest is paid monthly.

Given the FED's Jihad Against the Saving Class, the 3 month treasury bill rate is hugging near zero, and is likely to remain abnormally low into 2013. The minimum coupon of 3% is therefore the applicable rate now.

At a total cost of $19.10, and the minimum coupon, the effective current yield would be about 3.927%. The maximum yield, hit when the 3 month treasury bill hits 7% during the applicable computation period, would be around 10.47%. The YTM would be higher due to the discount to par value, which assumes that JPM survives to pay par value at maturity.

The owner of GJN, not the swap counterparty, is exposed to the credit risk of JPM. I am more comfortable with the credit risk of JPM compared to GS or BAC.

Synthetic Fixed-Income Securities Inc. Fltg. Rate STRATS Ser. 2005-2 for JPMorgan Chase Capital XVII closed at $19.42 yesterday. As previously explained, I will buy the synthetic floaters only in retirement accounts due to the complex tax issues associated with the swap agreement.

2. Sold 300+ of MMT at $6.8336 Last Thursday-Satellite Taxable Account (see Disclaimer): MMT went ex dividend for its monthly distribution on Tuesday. I own another 700 shares dividend between the ROTH IRA and the main taxable account. I realized a gain on the 300 shares sold plus several monthly dividends:

MFS Multimarket Income Trust closed at $6.78 yesterday, and went ex dividend for its monthly distribution on 1/17/12.

3. Sold 100 WIN at $12.01 Last Friday-Satellite Taxable Account Last Friday (see Disclaimer): These shares were recently purchased in the same satellite account, geared mostly toward capital preservation, at $11.31 (12/19/2011 Post). I will receive one quarterly dividend.

Windstream closed at $12.35 yesterday.

4. Sold 50 IDG at $20.42 Last Friday (See Disclaimer): These shares were recently purchased at $18.55 (12/5/11 Post): I will also receive one quarterly dividend. IDG is a hybrid security, having some characteristics normally associated with bonds and equity capital. I have been buying and selling ING and Aegon hybrids since the onset of the Near Depression, and view them as both volatile and risky, due to the current European situation, their low priority in the capital structure, the EC's new burden sharing policy and the possibility of a dividend deferral.

ING HYBRIDS: Links in one Post

Aegon Hybrids: Gateway Post

ING Groep N.V. 7.375% Perpetual Hybrid Capital closed at $20.75 yesterday.

5. Sold 50 KRBPRD at $24.7 Last Friday-ROTH IRA (see Disclaimer): These shares were recently purchased at $23.6 (12/15/11 Post). I will receive one quarterly interest payment. KRBPRD is a trust preferred security that is now an obligation of Bank of America.

Trust Preferred Securities: Links in One Post

MBNA Capital D 8.125% TruPs closed at $24.86 yesterday.

6. Sold 100 GYB at $17.07 Last Friday-ROTH IRA (see Disclaimer): These shares were recently purchased in two fifty share lots. Bought 50 GYB at 16.95 in Roth IRA August 2011 Added 50 of the Synthetic Floater GYB at $15.56-ROTH IRA December 2011 GYB is a synthetic floater in trust certificate legal form. The underlying security is a Goldman Sachs trust preferred security maturing in 2034.

2012 Roth IRA GYB 100 Shares +$61.22

Previous small dollar trades of GYB were more lucrative:

2010 Regular IRA +$774. 42

Snapshots of trades involving trust certificates can be found in the Trust Certificates: New Gateway Post.

LINKS TO FINRA INFORMATION ON UNDERLYING BONDS IN TRUST CERTIFICATES

Synthetic Floaters

Corporate Asset Backed Corp. CABCO Series 2004-101 Trust Goldman Sachs Capital I Float. Rate Call Ctfs closed at $17.3 yesterday.

Goldman Sachs common shares rose $6.63 after the company reported better than expected earnings. (see discussions at the NYT CNBC Video; SEC Filed Press Release)

Bought 50 of the Stock ETF VFH at $29.2/Sold 1 Cooper Tire 7.625% Senior Bond Maturing in 2027 at 96/Sold 100 NPBCO at $25.87/Bought 100 of JLA at $11.69-Roth IRA

2012-01-18T05:41:00.152-06:00

While I am certain there are many exceptions, I have always viewed financial professionals as primarily interested in lining their own pockets with customer money. As a consequence of that belief, I have relied only on myself to make investment decisions.

Virtually every week, I read a story that reminds me why I have chosen the path of self reliance. A story in the NYT, written by Gretchen Morgenson, is just the latest among thousands. She details how Citigroup misled two of their large customers, who won an arbitration award against that bank for $54.1 million, which included punitive damages.

Barrons published over the weekend the report card for the Roundtable panelists 2011 selections. Why would anyone pay a fee for those results? Of the 2012 selections made so far by the panelists, I am evaluating only Novartis for a potential purchase. It fits under my Large Cap Valuation Strategy and Common Stock Dividend Growth Strategy.

Enerplus, which was discussed in yesterday's post, declined in trading yesterday after CIBC downgraded the stock to underperform from neutral. Last Friday, UBS upgraded Enerplus to buy. Both of those rating actions occurred after my purchase which occurred last Thursday. Added 90 ERF at $24.69 USDs I do not have access to either report so I am in no position to evaluate the merits of either of them. After the close yesterday, ERF announced that it was selling on a bought deal basis 12.79 million common shares at $23.45, plus an over allotment option for an additional 1.9165 million shares. Enerplus Announces Equity Offering ERF also announced its intent to spend $800 million in 2012 to generate "significant growth in production, reserves and cash flow". Enerplus Announces 2012 Capital Spending Program Importantly, given the low natural gas prices prevalent now, the company stated that oil production will rise to approximately 50% in 2012 from 45% in 2011.

The NY Federal Reserve reported yesterday that its Empire State index for manufacturing rose five points to 13.5. The consensus estimate was for a rise to 11.3 according to MarketWatch. The new order component rose 8 points to 13.5, Empire State Manufacturing Survey (overview) - Federal Reserve Bank of New York

For reasons that are not readily apparent, many investors were comforted yesterday by a slowdown in China's growth. The general belief underlying that comfort is that both a cooling economy and less bothersome inflation numbers will cause China to start a credit easing cycle.

1. Bought 50 of the ETF VFH at $29.2 Last Thursday (see Disclaimer): This ETF was purchased before JPM's 4th quarter earnings report that cast a pall over large cap financials.

VFH is another low cost ETF from Vanguard that owns stocks in the U.S. financial sector. The expense ratio is currently .23%. The fund owned 513 stocks as of 11/30/11.

I noticed last Thursday that this ETF had recently crossed above its 50 day SMA line and was approaching its 200 SMA line. Vanguard Financials ETF ETF Chart

For now, I just bought back 50 shares of the 100 sold at $34.88 last February. I had bought those shares in November 2010. Item # 7 Bought 100 ETF VFH at 30.85 As a Vanguard brokerage customer, I do not have to pay commissions on either the purchase or the sale of Vanguard ETFs.

Vanguard Financials ETF (VFH) quote

I was thinking about buying JPM, USB and/or WFC and decided instead to take the scatter gun approach with a financial stock ETF. This Vanguard ETF will be weighted in those large cap names, but will own all kinds of financial institutions including REITs and insurance companies.

A list of the holdings can be found at Vanguard.

Vanguard Financials ETF closed at $28.95 in trading yesterday.

2. SOLD 100 Cooper Tire 7.625% Senior Bond Maturing in 2027 at 96 Last Thursday (Junk Bond Ladder Basket Strategy)(see Disclaimer): I sold this bond simply to shorten my average maturity some of the remaining bonds held in this basket. This bond matures in 2027, and the OG is becoming concerned again about interest rate risk. Credit risk is more than enough risk for these junk bonds. I sold the bond at near break-even. Bought 1 Cooper Tire 7.625% Senior Bond Maturing 3/15/2027 at 96.647 (April 2011).

3. Sold 100 NPBCO at $25.87 Last Thursday (see Disclaimer): I still own 50 shares of the trust preferred security in the ROTH IRA, bought at close to the same price as the 100 shares sold last Thursday. Those 100 shares were bought near par value back in April 2011. Bought 100 NPBCO at 24.91 The TP and its underlying bond mature in 2032. NPBCO has a 7.85% coupon on a $25 par value. I am not interested in holding long term this kind of junior bond with a long maturity, particularly when the purchase is made at or near par value.

Trust Preferred Securities: Links in One Post

NPB Capital Trust II 7.85% Cum. Trust Pfd. closed at $25.5 in trading yesterday

4. Bought 100 JLA at $11.69 in the ROTH IRA Last Thursday (see Disclaimer): JLA is a stock closed end fund that seeks to replicate a 50%/50% combination of the S & P 500 index and the Nasdaq-100 index. As a result of this strategy, this will necessarily be a large cap U.S. stock fund.

This stock CEF is not leveraged and uses a buy-write strategy. I added this CEF to my Roth IRA to give that account more stock exposure.

The fund has cut its quarterly dividend several times starting in 2008, JLA Distribution History. The last quarterly dividend was $.284 cents per share. The dividend has been supported by a return of capital, viewed negatively by me. The only way for the fund to earn the dividend is with realized capital gains.

This fund is currently weighted 4 stars by Morningstar. As shown in the data at the foreign linked page at Morningstar, the averaged 3 year discount to net asset value is 7.9%.

For this kind of investment in an IRA, I will be content to collect several quarters of dividends and to sell the stock for any profit.

Last SEC Filed Form N-Q, listing the holdings as of 9/30/11: www.sec.gov

On the prior to my purchase, the net asset value per share was $13.36. Based on a closing price of $11.73 on 1/11/12, the discount to net asset value was then -12.2. On 1/12/12, the net asset value per share was $13.37 which, along with the small drop in JLA's market price, caused the discount to widened a tad to -12.49.

Closed-End Fund Association page on JLA

Last SEC Filed Shareholder Report for the period ending 6/30/11: www.sec.gov

This brings me up to 300 shares. I am in the red on the 200 shares bought in the taxable account, though the dividends paid on those shares would bring me into profit territory on a total return basis. I am not reinvesting the dividend. Bought 100 of JLA at 12.84 (January 2011); Added 100 to the Stock CEF JLA @ 12.67 (April 2011). Part of the decline in the shares has been due to an expansion of the discount since me purchases last year.

Nuveen Equity Premium Advantage Fund closed at $11.66 yesterday.

Bought 50 of the ETF VWO at $39.73/Added 90 ERF at $24.69 USDs/Sold 100 GDO at $18.46

2012-01-17T05:49:00.004-06:00

Last Friday, the DJIA declined over 100 points after several news services reported that S & P planned to downgrade the sovereign debt ratings of several European nations. After France confirmed that it would lose its AAA rating, the market rallied into the close, with the DJIA losing only .39% by the close.

The market's tepid reaction to this news is attributed to a belief that the downgrades were anticipated by investors. I would not be so sanguine about it, viewing it as merely the latest shoe to drop in the ongoing blowback from the Age of Leverage. What Will Produce Growth after the Age of Leverage? (September 2009 Post); Underlying Cause of the Current Long Term Bear Market is Too Much Debt (June 2010 Post).

After the market's close last Friday, S & P did downgrade the sovereign debt ratings of several European countries. Portugal was reduced to the junk grade of BB. France and Austria lost their "AAA" ratings and are now at AA+. Spain was downgraded to A and Italy to BBB+. The downgrades for Portugal, Spain and Italy were two notches Bloomberg CNBC Reuters NYT  WSJ

Subsequently, S & P downgraded the European Financial Stability Fund to AA+ from AAA. This was anticipated after France lost its triple A rating. France's ten year note has barely budged in response to the downgrade. FR 10Y Govt Bond Benchmark

Another story circulating last Friday was that Greece and its private creditors had reached an impasse on a debt swap. Reuters Bloomberg

Late last week, Germany reported that its economy declined slightly during the 4th quarter. Germany's debt is still rate "AAA" by S & P.

S & P also rates Canada and Australia at "AAA". I own Canadian government bonds through a low cost ETF traded on the Toronto exchange. BOUGHT 200 CLF:TO AT 20.20 CAD Added 100 CLF:TO-Sold 100 CPD:TO  Bought 100 of ETF CLF:TO at 20.10 CAD Dividends are paid monthly to me in Canadian dollars. (website: CLF - Claymore 1-5 Yr Laddered Government Bond ETF) I currently own 400 shares and plan to do nothing other than sit on those shares and just let the Executor of my estate decide what to do with them, hopefully many years in the future.

I would note that PIMCO has recently introduced two USD denominated ETFs that buy Canadian and Australian debt securities. The trading volume is so far minuscule. PIMCO Canada Bond Index Fund (CAD) PIMCO Australia Bond Index Fund (AUD) Of course, the buyers of those ETFs are subject to currency exchange risks. I am only interested in buying AUD since I prefer to buy the low cost ETFs for Canadian bonds on the Toronto exchange using my existing CAD stash. Canadian Dollar (CAD) Strategy

I raised some cash late Friday, particularly in the IRA, in response to these developments, based on a fairly typical knee jerk response by the OG. It just seems likely that Europe will continue to weigh down the markets and the risk remains to the downside. El-Erian's  analysis of the downgrades seems to be on the mark to me. It will not be until Thursday that I will be able to summarize those sales.

The decline in the EURO is also signaling more trouble ahead for the eurozone. FXE declined $1.43 or 1.12% to close at $126.33 last Friday.

1. Bought 50 of the ETF VWO at $39.73 Last Wednesday (see Disclaimer): By buying this security in my Vanguard brokerage account, I did not have to pay a commission. VWO is a low cost ETF from Vanguard covering emerging markets. The expense ratio is just .22%. and the fund owns over 900 stocks. Vanguard - MSCI Emerging Markets ETF - Overview I am just grateful that I sold this ETF last year at $50.22. I also disposed of Schwab's emerging market ETF on the same day at $29.99. This stock category subsequently fared poorly for the remainder of 2011. China's stock market was a major drag last year. I expect more volatility with emerging market stocks, compared to the S & P 500, and the U.S. major markets are plenty volatile now.

Two year chart links for the SSE Shanghai Composite Index Index; BSE SENSEX Index (India); IBOVESPA - Index (Brazil); and HANG SENG INDEX.

Vanguard MSCI Emerging Markets ETF closed at $39.62 last Friday.

2. Sold 100 of the Bond CEF GDO at $18.46 Roth IRA Last Tuesday (see Disclaimer): While this bond CEF has paid a good monthly dividend, I have had a small loss on the shares for virtually the entire period of my ownership. Until recently, part of that loss was due to an expansion of the discount to net asset value from the date of my purchase. The market price, in relation to the net asset value, has recovered some over the past few days, at least to the point where GDO was selling at a small discount to its net asset value per share. Last Tuesday, the last data available to me when I sold the 100 shares, the net asset value per share was at $18.72 per share, and the closing price that day was $18.44. The discount to net asset value was then -1.5%. Last Wednesday, the shares closed at $18.51, with a net asset value of $18.74 per share, thereby reducing the discount to -1.23.

I sold the 100 shares at near break-even, excluding the monthly dividend. Particularly when the dividend yield is over 8%, I am content to break-even on the shares of a bond CEF.

I still own 120 GDO shares in the ROTH IRA, bought at a lower price. Bought Back 50 shares of GDO at 17.8 December 2010 I can not find a blog reference to the 70 shares bought shortly thereafter at a total cost of $17.75 per share:

GDO 220 Shares ROTH IRA Before 100 Share Sale

I will consider buying the 100 shares back when and if such a purchase would lower my average cost for the remaining 120 shares.

I also own shares in a taxable account. I quit using the dividend to buy additional shares in the taxable account several months ago. I have always took the dividend in cash in the ROTH IRA, which is the norm in that account.

I previously sold 75 GDO in the ROTH IRA at $19.24. Those shares were part of a 100 share lot bought at $18.63. The remaining 25 shares of that lot were sold last Wednesday along with 75 shares bought at $18.47 (April 2010).

Western Asset Global Corp Defined Opportunity Fund closed at $18.45 last Friday.

3. ADDED TO ENERPLUS (ERF) at $24.69 USDs Last Thursday (Canadian Dollar (CAD) Strategy)(see Disclaimer): I noticed last Thursday that Fidelity converted my 100 shares of HUSKF into the Toronto exchange listed HSE:CA. I had an odd number of Enerplus shares, ERF:CA, and was not able to sell them on the Toronto exchange since only round lots were accepted by my broker. I therefore bought 90 of ERF on the NYSE to round up to a round lot in case that I want to sell all of my shares on the Toronto exchange at some point.

I may end up buying more Canadian securities this way since my commission is lower when buying on U.S. exchanges.

My last purchase was a buy at 23.95 CADs: Bought 100 Enerplus (December 2009). I thereafter sold 200 ERF @ 28.05 CAD.

Prior to converting to a regular corporation in 2011, Enerplus was an income trust and did not have to pay Canadian income taxes at the corporate level on the income distributed to its unit holders. This is basically the same kind of tax structure permitted in the U.S. for REITS and Business Development Corporations that allow such companies to frequently pay rich dividends, assuming they have the net income to pay out in dividends. A change in Canadian tax law caused these income trusts to convert into regular corporations. I would generally expect their dividend rates to decline due to double taxation, i.e., the corporation pays income tax at the corporate level and shareholders pay a tax on that part of the income distributed to them as dividends.

ERF is currently paying a monthly dividend of 18 Canadian cents per share. According to the company, this dividend is treated as a qualified dividend under U.S. tax law. Enerplus - News Releases I would not make a prediction on how much longer that rate will continue. In addition to the tax law change, the dividend will be impacted by drilling success, energy prices, production rates and costs.

As noted in this article at Investopedia, primarily concerning another firm's exploration activities in the Bakken shale region, ERF has 74,000 acres in that region and expects to increase production to 20,000 to 25,000 BOE per day by 2014. Bakken formation- Wikipedia

This is a link to the SEC filed news release announcing third quarter results. www.sec.gov As shown in that report, the firm's production is weighted in natural gas which I would view as a negative based on current prices.

Daily net production averaged 83,139 barrels of oil equivalent per day in 2010.

Morningstar does have an analyst report for this company. The stock is currently rated four stars.

Enerplus (ERF) closed at $24.53, up 31 cents, last Friday on the NYSE. On the Toronto exchange, ERF:CA rose 46 cents to close at 25.12 CADs. FXC, the currency ETF for the Canadian Dollar, declined 43 cents last Friday to close at $97.24. The decline in the CAD against the USD would have resulted in ERF rising less in USDs.

Sold 50 MSFT at $27.91/Bought 30 DOLE at $8.34-Lottery Ticket/EK Sears/Comparing Online Bond Brokers/Sold 50+ AF at $9.39/SVU/

2012-01-13T05:37:00.002-06:00

Another major adverse development for Sears is the decision by CIT to quit making factoring loans to Sear's suppliers. Bloomberg Maybe that will be sufficient to wake Eddie Lambert up.

This is a link to an interesting article at Reuters discussing the legal implication of an Eastman Kodak bankruptcy on its UK pension obligations. EK has committed $830 million from 2011 through 2022 to that UK plan. A U.S. pension obligation is an unsecured obligation in a U.S. bankruptcy but apparently the U.K. obligation would be more problematic for EK in a bankruptcy restructuring. Unfortunately, I own 2 EK unsecured senior bonds maturing in November 2013, and fully expect to take a loss on them. Eastman Kodak (January 2012 post); Update on Eastman Kodak's Third Quarter Earnings Report; Eastman Kodak (EK) Bonds-Own 2013 Senior Bond (September 2010 Post)

Bloomberg reported last night that EK was in advanced discussions with Citigroup to provide debtor-in-possession financing. Unless a "last ditch" effort to sell patents bears fruit soon, bankruptcy appears to be EK's option.

I view the WSJ dividend page every night. I noticed that PFK, a CPI floater issued by Prudential, will go ex interest for its monthly distribution on 1/30. This penny rate will float based on a 2.4% spread over CPI. The penny rate for the next distribution is $.1235 per share. The computation is identical to the method utilized by OSM and ISM, except for the spread differentials. I last discussed the computation for ISM in Item # 4 Bought 50 of the CPI Floater ISM at $20.62 (August 2011). I own all of those securities. Bought 100 PFK at 18.47 June 2009 Bought 90 PFK in IRA $18.94 June 2009 Added 50 PFK at $17.83 August 2009 Added 50 PFK in Roth at 20.88-Averaged UP (Last Purchase January 2010) Bought 50 ISM at 19.5 Bought 50 OSM at 15.74 May 2010 (see snapshots of PFK buys at Item # 3: PFK (August 2011 Post); see snapshots cost basis for remaining OSM shares owned at Item # 1 Lehmann's Article in Forbes re: AEB, GSPRA and OSM)

1. Comparing Brokers for Online Bond Purchases: Every year, financial publications publish ratings of online brokers. I will read those reviews since I am a heavy user of online brokerage services. While those reviews will generally be helpful, they are inadequate. It is obvious that those responsible for preparing those ratings have not delved deeply into the online experience of a heavy user. I will frequently point out in this blog several major problems that have never to my knowledge been mentioned in those reviews. The most serious, from my point of view, is the expanding non-sensical trading restrictions promulgated at Fidelity.

I was critical of Vanguard's commission of $50 for online bond trades. That issue was recently cured with the adoption of a $2 per bond commission for Vanguard's Voyager customers. This rate is particularly attractive to me since most of my bond orders are for 1 bond. I now prefer trading bonds with Vanguard when purchasing small lots. I also prefer the order detail provided by Vanguard. Item # 1 Bought 1 U S West Communications 7.5% Senior 2023 Bond @100.13 -ROTH IRA

At TD Ameritrade, junk bonds can not be bought online. I view that as a major negative since investment grade yields are for the most part totally unattractive to me in the 4th year of the Fed's Jihad Against the Saving Class and Responsible Americans. Another drawback is that the minimum purchase is 5 bonds even if there is a seller for a bond willing to accept a lower bid amount. I have consequently avoided placing any bond orders with that company.

I talked to a Schwab bond representative earlier this week to sell an investment grade bond. Both Schwab and Vanguard do not permit investors to sell corporate bonds online, so I had to call a broker to execute the transaction. I view that as a major negative. The commission is higher when the trade is placed through the broker at Schwab, so that is a major negative in addition to the inconvenience. Schwab will charge the online commission plus $25 per trade to sell a corporate bond.

A Vanguard bond broker told me that the same commission would apply for a broker assisted sell order, but I have not confirmed that representation with an order yet. The Schwab representative told me that junk bond purchases may be permitted later this quarter, but the timing was still up in the air.

For exchange traded bonds, Fidelity is by far the worse broker due to its trading restrictions and prohibitions, none of which have been adopted by other brokers that I use and I use several including Ameritrade, Schwab, and Vanguard. I would estimate that Fidelity prohibits its customers from even buying about 1/2 of the available exchange traded bonds, including all synthetic floaters and principal protected notes, plus other bonds such as DFP and AEB. Fidelity Brokerage Extends Denial of Trading Opportunities to Synthetic Floaters and Even an Exchange Traded Junior Bond DFP Fidelity Prohibits New Purchases of Exchange Traded Principal Protected Notes

I may have not mentioned another type of trading rule imposed by Fidelity. If you are a customer, try to enter an order to buy shares of the equity preferred floater STDPRB. This is the message that you will receive:

After seeing that message, I bought some shares at Vanguard a few weeks ago at below $14 per share. It is just irritating the LB with no end in sight.

2. Sold 50+ AF at $9.39 Last Tuesday (REGIONAL BANK BASKET STRATEGY (see disclaimer): AF has been bought and sold several times under this strategy. Bought: 100 AF @ 13.08 Bought 50 AF @ 12.08 Sold 50 AF at $14.09 Sold 101 AF at 14.89

My last purchase was at $8.9. Bought 50 AF at $8.9 September 2011. Soon after buying those shares, the bank released an ugly earnings report. Item # 4 AF

Consequently I elected to exit the position with a small gain and one quarterly dividend payment. The 2012 consensus E.P.S. forecast is 62 cents, down from 74 cents estimated for 2011. AF Analyst Estimates

REGIONAL BANK BASKET STRATEGY GATEWAY POST

Regional Bank Basket Table

Item # 4 Realized Gains Regional Bank Basket Strategy

3. SuperValu (own 2 senior bonds only: 2030 Albertsons and 2014 SuperValu): I have sold three different long term Albertsons bonds, and still own a 2030 maturity which was bought when the current yield exceeded 10%. Bought 1 Senior 8.7% Albertsons' Bond Maturing 2030 at 85.75 Given the discount to par value, the YTM would of course be higher, but I am unlikely to hold any long term bond until maturity given the risks.

Supervalu's shares declined 12.51% last Wednesday after the company announced earnings for the quarter ending 12/3/2011. Same store sales declined 2.9%. The company reported an adjusted net income per share of 24, unchanged from a year ago. The GAAP number was a loss of $3.54 per share. SUPERVALU Reports Third Quarter Fiscal 2012 Results Revenues declined to $6.3 billion from $6.6 billion in the year ago quarter.

Link to WSJ article on earnings report.

Link to Reuters discussion of earnings report

Link to MarketWatch discussion of earnings report

4. Bought 30 Dole Food Company (DOLE) at $8.34-LT (Lottery Ticket Basket Strategy)(see Disclaimer): Dole's stock was trashed by investors after the company reported disappointing third quarter results. SEC Filed Press Release On an adjusted basis, the company reported a loss of 17 cents per share on a 4.9% increase in revenues to $2.09 billion. The consensus estimate was for a 10 cent loss on $2.03 billion in revenues. The report was released after the market closed on 11/17/11, and the closing share price that day was $10.24. DOLE Historical Prices

The current consensus estimate is for an E.P.S. of $1.45 this year: DOLE Analyst Estimates

Link to the Dole Food Company profile page at Reuters

Link to Key Developments page at Reuters.

A number of lottery ticket purchases are made on statistical data. The Price to Sales Ratio for Dole is .1. The Price to Book ratio is .91. The forward P/E, using the current consensus earnings forecast, is 5.72. The five year P.E.G. is estimated at .57. All of that data can be found at the Key Statistics page for Dole at Yahoo Finance.

Another common characteristic of LT purchases is a smashed stock price. Dole's stock qualities on that basis: DOLE Interactive Chart The two year chart looks really ugly, as the stock is trading now well below both its 200 and 50 day SMA. Back in July 2011, the stock was trading over $14 per share.

For this kind of company, subject to a wide variety of factors that will impact earnings on a quarterly basis, many investors and analysts will tend to overreact to temporary factors adversely impacting earnings. The last earnings report caused BofA/Merrill Lynch, for example, to downgrade the stock to underperform from neutral and to lower their price target to $9 from $15.

Later, in early December, Wells Fargo upgraded the stock based on its assessment of the risk/reward profile, estimating that the stock had 35% upside potential to $11 to $12 and limited downside risk after its price drop.

Dole Food closed at $8.22 yesterday.

I would add my usual caveat. This strategy is called the Lottery Ticket Basket Strategy for a reason. And, the RB is in charge, not exactly known for its prudence. "Don't sweat the details, go all in", a voice was heard to say.

5. SOLD 50 MSFT at $27.91 Last Wednesday (Large Cap Valuation Strategy)(see Disclaimer): This reduces my position to 92+ shares. I reduced my average cost basis a tad by selling these shares which were my highest cost shares. This transaction was one that I was contemplating (1/6/12 Post) before MSFT announced that analyst estimates for PC sales were too high for the 4th quarter. (see discussion at Barrons.com). Possibly, I will be able to buy those shares back at below $25 at some point within the next 30 to 60 days.

The shares sold last Wednesday were the first bought of my remaining shares. 50 MSFT at $25.81 (March 2011). The remaining shares were purchased with reinvested dividends and two small odd lot purchases at lower prices.

MSFT Before Sell of 50 Shares

Microsoft closed at $28 in trading yesterday.

Bought 50 BAX at $49.79/Sold 50 AFE at $25.5/Added to MACSX/Sold 1 Vulcan Materials 7% Senior Bond Maturing 2018 at 103

2012-01-12T05:51:00.244-06:00

Last Monday, based on improving economic data, I made a slight shift out of bonds into stocks. The primary stock purchase, however, was Baxter International, which I do not view as particularly sensitive to an improving economy.

The Treasury sold 10 year notes yesterday at the lowest yield on record. This auction was a reopening of a prior 10 year auction, with 9 years and 10 months remaining on the term. The yield was 1.9%. www.treasurydirect.gov.pdf

I am starting to prepare a list of European stocks that have declined in value in their local markets and are even cheaper for me to buy using my USDs due to the recent and ongoing decline of the Euro. I would just call that a double whammy for existing U.S. owners of those securities. Some of the securities being considered are discussed in this Seeking Alpha article. An earlier example of a purchase made after a double whammy was a buy of 100 AXAHY at $14.69 back in June 2010. That post involves a fairly extensive discussion of my analysis that led to that purchase which included the currency exchange factor.

The currency issue is certainly a wild card. By looking at a two year chart of the EUR/USD, I can see that I waited for the conversion rate to fall to around 1.2 before buying AXA back in June 2010. And my subsequent profit, realized a few days after the purchase, was due in large part to just a rally in the Euro against the USD. Sold 100 AXAHY at $16.66 June 2010 (see also: International Trading and Currency Risks) The shares are now trading below my June 2010 purchase price: AXAHY AXA I do not currently have a position.

1. Bought 50 Baxter International (BAX) at $49.79 Last Monday (Large Cap Valuation Strategy)(see Disclaimer): This selection does qualify under the large cap valuation strategy. The current consensus estimate is for a 2011 E.P.S. of $4.31 and $4.64 this year. BAX Analyst Estimates The forward 5 year estimate P.E.G. is 1.18. The company had $4.15 per share in cash as of 9/30/11. Return on equity is around 31.68%.

In 2011, Baxter raised its quarterly dividend to $.335 per share from $.31. Baxter U.S. - Information for Investors: Dividends & Splits The stock does not qualify, however, under the Common Stock Dividend Growth Strategy due to the current dividend yield being lower than 3% and other reasons such as a lack of dividend growth between 2003 through 2008. Common Stock Dividend Growth Strategy

Morningstar currently has a 4 star rating on BAX, and a consider to buy target of $49.

Baxter's profile page at Reuters
Baxter's key developments page at Reuters

For the quarter ending in September 2011, Baxter reported net income of $624 million or $1.09 per share, adjusted for extraordinary items. SEC Filed Press Release Revenues were reported at $3.479 billion for the quarter. Net sales for the first nine months of 2011 were $10.299 billion, up from $9.345 billion in the comparable 2010 period.

BAX is a financially sound company. Its bonds are rated A+ by S & P and A3 by Moody's. FINRA

Baxter International rose 68 cents in trading yesterday to close at $50.86.

2. Sold 1 Vulcan Materials 7% Senior Bond Maturing 2018 at 103 Last Monday (Junk Bond Ladder Strategy)(see Disclaimer): This bond popped after Martin Marietta made a hostile offer for Vulcan. I am taking profits on lower yielding junk bonds when there is a pop over par value. I bought this bond at 95.5. Bought 1 Vulcan Materials 7% Senior Bond Maturing 6/15/2018 at 95.5 (August 2011). I still own a Vulcan bond maturing in 2021: Bought 1 Vulcan Materials 7.5% Senior Bond Maturing 6/15/2021 at 99.874 in Regular IRA I would like to sell that bond at its current price, but have not seen a bid yet willing to accept a 1 bond sale. FINRA

3. Added to MACSX (see Disclaimer): MACSX Matthews Asian Growth & Income is rated five stars by Morningstar. The expense ratio of around 1.13% is low for this kind of fund. In 2011, the fund paid a total dividend distribution of $1.0832 per share. Of that amount, the long term capital gain distribution was $.5915.Distributions - Matthews Asian Growth and Income Fund

I will generally avoid buying any stocks from Asian companies and will achieve exposure to this stock sector solely through stock funds. This fund recently reopened to new investors.Matthews Asia to Re-Open Two Funds I am reinvesting the dividends to buy additional shares.

Sponsor's webpage: Overview - Matthews Asian Growth and Income Fund
Link to top 25 holdings: Top 25

This fund is available on a NTF basis at most major discount brokerages. Fund Purchase Information

This is a link to the shareholder report for the third quarter: matthewsasia.com/pdf I also own Matthews Pacific Tiger Fund for several years, selling most of my position prior to the Near Depression. I initiated a position in MACSX back in 2009. Bought Matthews Asian Growth and Income (MACSX)

Matthews Asian Growth & Income Fund closed at $15.24 yesterday.

4. Sold 50 AFE at $25.5 Last Monday (see Disclaimer): When buying long term bonds at or near par value, I am antsy about the interest rate risk. AFE is an exchange traded bond that matures in 2034. It has a 7 1/8% coupon on a $25 par value. Interest payments are made quarterly. Prospectus

This last purchase was made at $24.88 last March. I have bought and sold this senior bond several times: Bought 50 AFE at $22.87 June 2010 Bought 50 AFE at $23.17 June 2010 Sold: 50 AFE at 24.59 August 2010 Sold 50 AFE at 24.78 September 2008

I still own 200 shares of the exchange traded bond GFW, Final Prospectus Supplement, issued by a related company. Exchange Traded Bonds

American Financial Group Inc. 7.125% Sr. Deb. 2034 rose 10 cents in trading yesterday to close at $25.54.

5. Bought 50 of the stock ETF ENY at $17.18 Last Monday (see Disclaimer): This ETF has a relatively high expense ratio of .65%. ENY - Guggenheim Canadian Energy Income ETF. As of 9/30/11, the fund owned 34 Canadian energy companies. This is a link to the current holdings: ENY Holdings Dividends are paid quarterly. ENY Distributions

I will buy some of the individual names owned by this fund, and currently have positions in Husky Energy, Suncor, and Enerplus. Of those individual positions, Husky is currently the largest at 200 shares after a recent 100 share purchase. Bought 100 HUSKF at $23.81

By buying the ETF ENY, I increase my exposure to this sector a tad without increasing the specific risk associated with individual stocks. The investment theme here involves a belief in the long term potential of Canadian energy companies, particularly those with significant oil sand projects. (see discussion at Barrons, 2/12/11 edition; and my recent post at Item #2 Bought 50 SU at $28.67)

Guggenheim Canadian Energy Income ETF declined 28 cents yesterday to close at $17.06.

The WSJ has a story in today's paper about the glut in natural gas prices. Natural gas prices fell 5.7% in trading yesterday. (Henry Hub spot price declined 17 cents to close at 2.81 Bloomberg)

Exchange Traded Bond and Equity Preferred Stock Table as of 1/10/12/Hulbert Article On VIX/Recent Lottery Ticket Transactions: Bought 30 HUN @ 9.91 and 30 FCE/A at 11.58 & Sold 40 VCBI at 7.64

2012-01-11T05:31:00.005-06:00

The FED made an estimated $76.9 billion during 2011, and delivered its ill gotten gains to the U.S. treasury. It is a racket. The FED basically creates money, uses that money to buy bonds, and then drives down interest rates making those bonds more valuable. Rather than delivering those profits to the U.S. government, more worthy beneficiaries would be the victims of the Fed's Jihad Against the Saving Class, primarily for the benefit of those who enriched themselves during the housing bubble years and facilitated the Near Depression.

Mark Hulbert has penned another article on the use of the VIX as a timing model for stock allocation decisions. MarketWatch As previously discussed, I would not view the movement of the VIX below 20 during an Unstable VIX Pattern period to be a buy signal, unless there was continuous movement below 20 for three months, which historically would signal a prolonged period of low volatility and the onset of a durable bull market. Mark Hulbert and the Use of the VIX as a Timing Model

CommonWealth REIT (own) popped yesterday after announcing its regular 50 cent per share quarterly dividend. I suspect that many investors were anticipating a reduction.

1. Recent Lottery Ticket Purchases: Bought 30 HUN at $9.91 and 30 FCE/A at $11.58 (Lottery Ticket Strategy)(see Disclaimer): Huntsman (HUN) is one of the largest American chemical companies.

The current consensus estimate is for an E.P.S. of $1.68 in 2011 and $1.91 for 2012. HUN Analyst Estimates The 5 year forward P.E.G. is currently estimated at .78. Price to book is 1.29 and price to sales is at .21, through the third quarter of 2011. HUN Key Statistics

SEC Press Release Announcing Third Quarter 2011 Results
Last Filed SEC Form 10-Q
SEC Filed 2010 Annual Report
Huntsman Corp Profile Page at Reuters
Huntsman Corp Key Developments page at Reuters
Morningstar page on Huntsman
Recent Discussion of Huntsman in a Seeking Alpha article.

Huntsman has been paying a ten cent quarterly dividend. At that rate, the yield at a total cost of $9.91 is around 4%. The company is highly leveraged.

Huntsman rose 36 cents in trading yesterday to close at $10.2.

The common of Forest City Enterprises Inc. Cl A (FCE.A) was purchased as a Lottery Ticket back in 2009 with a favorable outcome:

2009 FCE/A 50 Shares Realized Gain= +$327.48

LOTTERY TICKET PURCHASE: 50 SHARES OF FCEA-FOREST CITY COMMON @ $6.3 May 2009 Sold FCE/A LT at $13.23 September 2009

I have also owned briefly an exchange traded bond, FCY, issued by Forest City:

2009 FCY Realized Gain +$213.98

FCY: Forest City Enterprises Senior Bond (FCY (December 2008 Post); FCY: Odd lot limit order filled at $9.95 December 2008; FCY: Forest City Senior Bond & Discussion of Process Use to Make a Purchase Decision April 2009 Post. I have no interest in that bond now, given the credit risk, price, and long maturity. I did purchase again 50 FCY shares at $18.75 (December 2009)I sold those shares at $20.5 (February 2010), and I have not purchased FCY back.

When I was buying and selling these securities primarily in 2009, I was often critical of Forest's management. I believed that the company had the pedal to the metal well into 2008. A highly leveraged real estate company needs to anticipate major downturns in order to survive and prosper during the good times. As a result, the company had too much leverage going into the Near Depression period, and had to raise money by selling stock at $6.6, when the shares had traded over $61 in 2007: Forest City Enterprises Stock Chart | FCE-A

FCE-A is not organized as a REIT, and consequently is under no legal requirement to pay dividends to maintain a REIT's tax status. Theoretically, this should allow the company to retain capital and to use that capital to prudently grows its asset base and enhance shareholder value. That result occurred prior to the Near Depression as the FCE stock price moved from around $2 after the 1990-1992 recession to the $61 level reached in 2007. Due to management's shortsightedness, however, the stock thereafter plunged, hitting a low of $3.71 on April 1, 2009. FCE-A Historical Prices That was a round trip back to March 1993 prices.

One thing is for certain about commercial real estate prices. The elevator does not go up in perpetuity and has a tendency to abruptly fall to the ground floor. While this fact of life is well known, you would not know it by examining the conduct of highly leveraged real estate operators.

Forest City has a lot of debt. As of 10/31/11, the company had mortgage debt of $5.493 billion and another $1.038 billion of senior unsecured debt. The senior notes are summarized at page 15 of the last filed 10-Q.

And, to be fair, it also owns a lot of real estate. The real estate assets are carried at $8.113 billion as of 10/31/11: 10-Q

Forest City Enterprises Profile Page at Reuters
Forest City Enterprises Key Developments Page at Reuters
Link to Company Webpage: Forest City
Link to Last SEC Filed Annual Report: Annual Report for F/Y Ending Jan 2011

I have one tidbit about this trade. Fidelity would not allow me to enter a market order when the bid/ask spread was a penny, claiming that this security was illiquid and Fidelity no longer allows market orders for illiquid securities. Okay, that is fine with me, so I entered a limit order at the ask price, which was one cent above the bid price. The volume was over a million shares. I would just reiterate that the persons responsible for the propagation and expansion of trading restrictions and prohibitions at Fidelity do not have a clue.

Forest City Enterprises Inc. Cl A (FCE.A) declined 9 cents to close at $11.38 yesterday. Volume was over 1 million shares.

As with other LT purchases, the stock of Forest City was deservedly crushed by the market, but it does have upside potential.

2. Sold 40 VCBI at $7.64 (Lottery Ticket Basket Strategy)(see Disclaimer): Virginia Commerce Bancorp has not yet paid back the government's TARP money. And that is the primary reason for taking my profit on this LT purchase. Bought 40 VCBI as LT at 5.56 I do recall that VCBI attempted to sell some stock to fund the repurchase of the government's preferred stock, but withdrew the offering after the price sank in response. SEC Filed Press Release This occurred in 2010. The amount of stock was $75 million, Prospectus. The bank received $71 million in TARP fund, www.sec.gov, and the dividend rate goes up to 9% after five years (late 2013).

Virginia Commerce Bancorp closed at $7.8 yesterday.

3. Exchange Traded Bond and Equity Preferred Stock Table as of 1/10/12: This table includes trust certificates, trust preferred, equity preferred, synthetic floaters, European hybrids, baby bonds, and "principal protected" notes. The common characteristic of these securities is that all of them are traded on the stock exchange and have par values no greater than $25. I have been reducing my exposure to this asset category. I group equity preferred stocks with bonds since their bond characteristics dominate over their equity features. Trust preferred stocks are in effect junior bonds and are senior in priority to traditional equity preferred stocks.

Part 1

Part 2

Exchange Traded Bonds
Trust Certificates: New Gateway Post
Trust Preferred Securities: Links in One Post
ING HYBRIDS: Links in one Post
Aegon Hybrids: Gateway Post
Advantages and Disadvantages of Equity Preferred Floating Rate Securities
Synthetic Floaters
Item # 2 Principal Protected Notes

Sold 50 PJA at $25.4-ROTH IRA/Sold 1 Apria 11.25% Senior Secured Bond at $104/Bought 100 HUSKF at $23.81

2012-01-10T05:45:00.226-06:00

Goldman Sachs predicts that U.S. housing prices will bottom out in 2013 and will not return to their 2006 peak until 2023. MSNBC Three out of 10 mortgage defaults during 2010 were by homeowners who could afford their mortgage payments according to a study referenced in that article.

China's exports rose 13.4% in December, above the consensus forecast of 12.5%.

1. Sold 50 PJA at $25.4 Roth IRA Last Thursday (see Disclaimer): These shares were purchased in December 2010. Item # 2 Bought 50 PJA at 24.65 December 2010 I made a $22.52 profit on the shares and clipped two interest payments. Since the profit is less than $30, I will not provide a snapshot of the realized gain in Trust Certificates: New Gateway Post. The trade links in that post will be grouped under "CTL".

PJA is a trust certificate with a 8% coupon on a $25 par value. I sold this TC to keep my exposure to CTL relatively constant after buying 1 U.S. West Communications bond last Friday in this account. The same kind of trade was made when I bought the same U.S. West Communications bond in a taxable account and sold the TC KCW at $25.44.

My current exposure to CTL is solely in senior bonds and consists of the following:

Bought 50 PJA at 19.45 December 2009

Bought 50 of the TC PJA at 25.06 April 2011

Added 50 of the TC PJA at $24.6 November 2011

150 PJA Taxable Account-Unrealized Gain

(Total PJA Cost=$3,479.61)

Bought 1 U S West Communications 7.5% Senior 2023 Bond at 100.13 -ROTH IRA

Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100

Total Cost of $5,499.61-current exposure to CTL

Trading Gains from FJA, underlying security a senior Embarq bond (now part of CTL)=$974.04 in two 50 lot transactions.

Excluding interest gains and small profits from other CTL related trust certificates, the net exposure after subtracting the FJA realized gains is $4,525.57.

2. Sold 1 Apria Healtcare 11.25% Senior Secured Bond Maturing in 2014 at 104 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): I decided to sell the "Series A" bond, which has a 11.25% coupon, after I had an opportunity to sell just 1 bond at 104, recognizing a small profit on that bond plus interest associated with my holding period. I still own the Series B secured bond, which has a higher coupon, and is selling at a discount to its par value. The main difference in the two series is that the "A" bond has priority in the event of a bankruptcy. The current yield spread between the two series is significant, and I decided to go with the "B" bond, which has the higher yield and greater potential for profit at maturity. Bought 1 Apria 12.375% Senior Secured Maturing on 11/1/2014 at 91.625 Bought 1 Senior Secured 11.25% Apria Healthcare Maturing on 11/1/2014

3. Bought 100 HUSKF at $23.81 Last Friday (see Disclaimer): This brings me up to 200 shares of Husky Energy, with the other 100 shares bought on the Toronto exchange as part of my Canadian Dollar (CAD) Strategy. The HUSKF shares were purchased with USDs on the pink sheet exchange in the U.S. HUSKF Husky Energy

When purchasing foreign securities on the pink sheet exchange, any symbol which ends in an "F" means that the investor is purchasing or selling, as the case may be, "ordinary shares", rather than a ADR. A pink sheet traded foreign security that has a symbol ending in "Y" is an ADR. Research In both cases, the investor is exposed to currency risks. International Trading and Currency Risks

The Husky shares traded on the Toronto exchange closed last Friday at 24.26 CADs: Husky Energy (link to Toronto exchange Quotes) I would expect the HUSKF price to reflect that price in USDs. The HUSKF closed at $23.58 USDs. That tells me that 1 CAD is worth less than 1 USD. CADUSD If I converted 24.26 CADs into USDs based on the closing exchange rate from last Friday, Currency Converter, I would have $23.58 USDs. Now, what if the 1 CAD bought 1.06 USD, which was the case back in late July 2011, then a 24.26 price on the Canadian exchange would translate into a $25.71 price for HUSKF rather than $23.58. Conversely the price could remain at 24.26 on the Toronto exchange but Husky could decline from Friday's close based solely on a decline in the CAD vs. the USD.

While I will end up paying the Canadian withholding tax on the dividend, irrespective of whether I own HUSKF OR HSE:CA, I will receive the dividend in USDs when I own HUSKF, while the dividends for the shares bought on the Toronto exchange will be paid in CADs. Another important difference is that there is a lot of liquidity when trading shares on the Toronto exchange for this security, with narrow bid/ask spreads, while there is negligible volume in the HUSKF shares.

Husky pays a good quarterly dividend, currently 30 Canadian cents a share. Husky Energy - News Releases Based on the closing price on the Toronto exchange last Friday, this would give me around a 4.9% yield at a total cost of 24.26 CADs. The actual yield will depend on the conversion rate at the time the payment is made and will be reduced by the 15% Canadian withholding tax.

Reuters Profile page on Husky
Reuters Key Developments page on Husky
Link to Press Release on Third Quarter Earnings: husky.pdf

For the third quarter, Husky reported net earnings of $521 million or 53 cents per share. Cash flow was reported at 1.326 billion CADs or 1.39 per share. Price to book is around 1.34, with price to sales near 1. HUSKF.PK Key Statistics The current E.P.S. estimate is for 2.42 in 2011 and 2.01 in 2012. Analyst Consensus and Earnings Estimates

For this investment to work in 2012, Husky will need to do much better than 2.01 E.P.S. this year. I would note that production from the Liwan Gas Project is projected to start in 2013/2014. Husky Energy - The Liwan Gas Project – Block 29/26

The Liwan gas project is a major field located about 300 kilometers southeast of Hong Kong in the South China Sea. Husky's partner in this project is CNOOC, traded in the U.S. under the symbol CEO.

I intend to use my CAD stash to buy other securities on the Toronto exchange. I do save a few bucks in brokerage commission by buying HUSKY rather than HSE:CA on the Toronto exchange.

4. Texas Industries (own 1 senior bond: 2020): TXI continues to put up ugly earnings numbers. A few weeks ago, TXI eliminated its common dividend to preserve capital. Item # 5 TXI. For its fiscal second quarter ending 11/30/11, Texas Industries reported a GAAP loss of $21 million or 75 cents per share and an adjusted loss of $11.2 million. The company CEO noted that the improvement in the economy had not manifested itself in "increased construction activity in our markets". Net sales for the quarter were $156.071 million.

JOBS/XIDE/Bought 50 CVY at $20.68/SOLD 52 LARK at $18.75/Edison Mission/Bought 1 ArvinMeritor 8.125% Senior Bond Maturing 9/15/2015 at 93.5

2012-01-09T05:42:00.036-06:00

The Labor Department reported a 200,000 increase in December nonfarm payrolls and a drop in the unemployment rate to 8.5%. Employment Situation Summary The U-6 number continued to trend down, falling to 15.2 from 15.6 in November. Table A-15. Alternative measures of labor underutilization The consensus forecast was for 150,000 jobs and an unemployment rate of 8.7%. Wages increased by four cents an hour. Over the past twelve months, wages rose 2.1%, lower than the 3.4% inflation rate. The decrease in the unemployment rate came largely from real gains in jobs, rather than workers becoming discouraged and leaving the work force.

XIDE rose 11.39% last Friday, closing at $3.13, after Wedbush raised the stock from neutral to outperform, with a price target of $12. CBS News Last Thursday, the Maxim Group initiated coverage with a buy rating and a $7 price target. I do not have access to either report. I own 70 shares of XIDE as a Lottery Ticket and two of its senior secured bonds. Bought 70 XIDE as LT at $2.75 Bought 2 Exide 8.625% Senior Secured Bonds Maturing 2/1/2018 at 81.375

1. Bought 50 of the ETF CVY at $20.68 (see Disclaimer): CVY is an ETF that invests in dividend paying large cap value stocks. For an ETF, the expense ratio is high at .6%.

Sponsor's webpage: CVY - Guggenheim Multi-Asset Income ETF

List of Holdings: CVY Holdings

Fact Card: cvy_fact_card.pdf

Dividends are paid quarterly at a variable rate. CVY Distributions. For 2011, the total payment was $1.107 per share. At that rate and at a total cost of $20.68, the dividend yield would be around 5.35%. The fund is unleveraged.

Morningstar currently rates this fund 4 stars: Morningstar As shown at that page, the dividend is not supported by any return of capital. This is a link to the ETF Guide page on this fund.

Guggenheim Multi-Asset Income ETF closed at $20.7 last Friday, down 2 cents or .1% from Thursday's close. The DJIA Index closed down .45%.

2. Bought 1 ArvinMeritor 8.125% Senior Bond Maturing on 9/15/2015 at 93.5 (Junk Bond Ladder Strategy)(see disclaimer): This purchase was made in a satellite taxable brokerage account held at Vangurad, taking advantage of that firm's new $2 commission rate for a 1 bond purchase (applicable to Voyager customers).

FINRA Information on this Bond

Prospectus: ArvinMeritor

My confirm states that the YTM is 10.283% and my current yield is 8.69%.

ArvinMeritor is now known as Meritor (MTOR). I briefly discussed this company in connection with another bond purchase. Bought 1 ArvinMeritor 10.625% Senior Bond Maturing on 3/15/2018 at 96

The current consensus estimate is for $1.34 for the F/Y ending September 2012 and $1.75 for F/Y 2013. MTOR

This is a junk bond, currently rated B3 by Moody's, CCC+ by S & P and B- by Fitch. The Finra page on this bond provides the ratings, as does the information provided to me by Vanguard on the order and confirmation pages:

Confirmation Page

3. Sold 52 Landmark Bank (LARK) at $18.75 Last Thursday (REGIONAL BANK BASKET STRATEGY GATEWAY POST)(see Disclaimer): Two of these shares originate from a recent 5% stock dividend. This bank is thinly traded, with a wide bid/ask spread. I just decided to take a small profit and reinvest the proceeds in a more liquid stock. Bought 50 LARK @ 16.6

LARK 52 SHARES +$91.89

I totaled up my 2011 cash dividends paid in 2011 by the stocks contained in this basket and the total was $1,660.57. That number is noted at the end of the REGIONAL BANK BASKET STRATEGY GATEWAY POST. Dividends will be an important component of this strategies total return.

4. EDISON MISSION (own 3 2016 senior unsecured bonds-FINRA)(Junk Bond Ladder Strategy): Midwest Generation, a subsidiary of Edison Mission, announced that it had completed the "installation of Selective Non-Catalytic Reduction systems to reduce emissions of nitrogen oxides . . . These new controls will enable Midwest Generation to comply with both State of Illinois and USEPA limits for NOx which are scheduled to take effect Jan. 1, 2012" The company added that it will meet the new USEPA limits on sulfur dioxide that are scheduled to go into effect this month. Midwest Generation owns 6 coal fired units in Illinois.

The emissions problems appear to be more problematic from a cost-benefit analysis for the coal plants at Homer.

In another recent development, EMG closed on $242 million in financing for three wind energy projects, with a total generating capacity of 204 megawatts.

I will discuss the remaining trades from last Thursday and Friday in the next two posts.

Realized Gains Regional Bank Basket Strategy/Private Sector Jobs/Macy's/Bought 1 U S West Communications 7.5% Senior 2023 Bond @100.13 -ROTH IRA/Sold 50 TRMK at 24.7/Sold 50 CBLPRC at $24.88

2012-01-06T05:48:00.019-06:00

ADP reported yesterday that private sector jobs increased by 325,000 from November to December on a seasonally adjusted basis. report.pdf The consensus estimate was for 180,000. That was good news, even though the numbers may have been distorted some by year end seasonal factors. Ultimately, the cure for the U.S. home price problem will be more jobs rather than just low rates. Yesterday, Freddie Mac reported that the average 30 year mortgage loan was at 3.91%, with the 15 year fixed rate at 3.23%. Primary Mortgage Market Survey (PMMS) - Freddie Mac

The Labor Department releases later this morning its report on employment for December. It will be important to see a confirmation in private sector hiring.

Macy’s reported a 6.2% rise in same store sales for December and increased its full year guidance by three cents. The new range is $2.73 to $2.78. I own the 2030 senior bond originally issued by the May Department stores. Since my purchase, both Fitch and S & P raised their credit ratings to BBB-, while Moody's still has the bond rated junk at Ba1. Bought 1 Macy's 7.875% Senior Bond Maturing in 2030 @ 99.5 (January 2010).

Both European bank shares and the Euro had bad days yesterday. This latest decline started Wednesday after the Italian bank UniCredit had to issue stock at a 43% discount to the then prevailing price to sell shares. The CurrencyShares Euro Trust (FXE) declined $1.49 yesterday to close at $127.47. The U.S. Dollar Index (DXY) rose .77 to 80.89, indicating USD strength against a basket of six foreign currencies weighted significantly in the Euro. France's statistics agency believes that France entered into a recession during the 4th quarter of 2011. Insee - Economic analysis

For a change, Microsoft has shown some upward momentum this week, having closed last Friday at $25.96 and at $27.68 yesterday. The stock is now trading above its 50 and 200 day SMA: Microsoft Corporation Stock Chart For me to be impressed, however, I would want to see a strong burst over $29 on heavier than normal volume. The highest cost shares currently owned were the first bought, so I may sell them to lower my average cost some for the remaining shares. (snapshots of 2009 trades can be found at Item # 1: Added 30 MSFT at 24.15 May 2011; ADD 50 MSFT at $17.99 January 2009 Bought 50 MSFT at $17.79 April 2009). I did pare my position some last July and September by selling 100 MSFT @ 27.9 in July 2011 and 100 MSFT @ 27.9 in July 2011. My last buy was at $25.02 back in November. I do not expect much up and down movement in these shares which is why I am commenting on the pop this week.

1. Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100.15 with Commission-ROTH IRA-Last Wednesday (see Disclaimer): I received a message from Vanguard Brokerage that their bond commission had been reduce to just $2 per bond. That is one reason why I will start to favor that company with my bond purchases. For small 1 to 3 bond purchases, the commission will be cheaper than Fidelity. Unlike TD Ameritrade and Schwab, which do not permit online purchases of junk rated bonds, Vanguard does permit their customers to make those purchases.

I also much prefer the order page at Vanguard to the other brokers. This is the detail that Vanguard provided me before I entered the order to buy the 1 U S West bond:

This is a snapshot of the confirmation page:

As shown on that page, the commission rate for this 1 bond purchase was $2. I am a Vanguard Voyager customer. I view this presentation more favorably compared to the other brokers.

I already discussed this bond in a recent post: Item # 1 Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100. U.S. West was later absorbed into Qwest which was itself acquired by CenturyLink Inc (CTL) last year.

FINRA Information on this bond.

My current yield will be a tad below the coupon rate since the purchase was made at a total cost of .15 above this bond's par value In a Roth IRA, this will in effect be a tax free yield from a bond currently rated investment grade.

After adding this bond in the ROTH I elected to sell a trust certificate in that account yesterday that contains as its underlying security a Qwest Capital senior bond. By doing that, I keep my overall exposure to CTL constant. I also shortened my average weighted maturity to CTL bonds some, thereby lessening my interest rate risk associated with long term bonds.

I would add that CTL bond investors need to be concerned about the generous dividend paid to the common shareholders, the overall level of debt and the declining land line phone business.

For small bond purchases, I now prefer Vanguard over my other brokers and will throw more business their way.

2. Sold 50 CBLPRC at $24.88 Last Wednesday (see Disclaimer): This transaction was just a clip of two dividend payments plus a small profit on the shares. Bought 50 CBLPRC at $24.36 I will trade REIT preferred stocks, bought near par value, for small profits. I bought this security as low as $10 during the Near Depression, and that needs to be kept in mind:

50 SHARE PURCHASE CONFIRM CBLPRC AT $10 (10/29/2008)

I also have some other trades in this security: Bought 50 CBLPRC at 21.87 (June 2010); SOLD CBLPRC at 24.25 August 2010; Bought 100 CBLPRC @ 24.36 (November 2010); Sold: 50 CBLPRC at 25.36 (May 2011)

REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

CBL & Associates Properties Inc. Dep. Pfd. (CBL.PC) closed yesterday at $25.

3. Sold 50 Trustmark (TRMK) at $24.7 Last Wednesday (REGIONAL BANK BASKET STRATEGY)(see (Disclaimer): This was just profit taking on a small position. I had a long term capital gain from shares bought at $19.57 (August 2010).

2012 TRMK 50 Shares +$240.57

The Raymond James downgrade to market perform did not influence this decision, but I suspect that this stock has minimal near term upside potential.

Trustmark continued to rise in trading yesterday, closing at $25.37.

4. Realized Gains Regional Bank Strategy-Carryforward:

The total realized gains from this strategy for 2010-2011 was $7,642.05: Item # 3 Realized Gains Regional Banks. This post will track the realized gains for 2012.

2010-2011 Carry Forward: $7,642.05

2012 Summary Gains and Losses:

50 TRUSTMARK (TRMK) $240.57: See Item # 3 Above
52 Landmark (LARK) +$91.89
50+ Astoria (AF) + $10.9 (no snapshot)
100 New Hampshire Thrift +248.02

New Total=$8,233.43

When the gain or loss is more than $30, I will make a snapshot of the transaction and post it in the Gateway Post for this subject: REGIONAL BANK BASKET STRATEGY GATEWAY POST

Eastman Kodak/Year End Junk Bond Ladder Table/More Asinine Trading Restrictions from Fidelity/Vanguard Lowers Bond Commission For Its Voyager Customers

2012-01-05T05:48:00.139-06:00

This article at Seeking Alpha has a table of closed end funds selling at over a 10% discount to their respective net asset values per share, along with the expense ratio of each fund and the current dividend yield. When looking at CEF dividend yields, it is always important to determine whether the yield is supported by a return of capital. Morningstar will provide recent data showing that kind of information.

This table at Barrons.com provides a table of 4th quarter earnings guidance from ompanies in the S & P 500.

The WSJ claims that Eastman Kodak is preparing to file a bankruptcy petition soon, unless it succeeds in a "last ditch" effort to sell some patents. Based on EK's pathetic operating results (Update on Third Quarter Earnings Report), and Kodak's hideous cash burn rate, a bankruptcy appears to be the best option.

Possibly, a bankruptcy may facilitate the sell of those digital patents and address some overhanging liabilities such as unfunded pension costs. The best alternative for unsecured bond owners may be the quick sell of most operations, including all money losing ones, or a shut down of those operations to preserve capital. I do not anticipate recovering more than 20 to 30 cents on the dollar for my two 2013 EK unsecured senior bonds, and that recovery may require a quick sale of those patents for an amount sufficient to pay off all secured creditors including the debtor-in-possession creditors. EK has suffered over the years from incredibly bad management. Eastman Kodak (EK) Bonds-Own 2013 Senior Bond; Moody's and Eastman Kodak

Kodak responded that it had a longstanding policy of not commenting on rumors and market speculation. However, as noted in a prior post, EK did say in response to an earlier rumor about a possible bankruptcy filing that it was committed to meeting all of its obligations and had no intention of filing for bankruptcy. (see EK press release dated 9/30/11: Kodak States No Intention to File for Bankruptcy). So much for the purported long standing policy for not responding to "rumors". I am working under the assumption that a bankruptcy will be filed later this month or in February. No one should be surprised by such a filing.

Moody's lowered EK's senior unsecured debt to Ca from Caa3 and kept the outlook as negative.

I was disappointed to learn that Michelle Backmann has ended her quest to become President of the United States. I have always been entertained by Michele but found another former candidate, who ran for the GOP nomination for Governor of Tennessee, to be even more entertaining. Basil Marceaux : The Next Governor of Tennessee - YouTube

1. Year End Junk Bond Ladder Table (Junk Bond Ladder Strategy): This is easily my highest risk strategy. I have not included in this table my 1 AMR and 1 General Maritime bonds, since both firms have declared bankruptcy and are no longer paying interest on their bond obligations. When I can quantify my losses for those bonds, I will include those numbers in my realized gains/losses post.

Realized Gains Junk Bond Ladder Strategy

FINRA Links to Bonds in Junk Bond Ladder Strategy

Personal Risk Ratings For Junk Bonds

In addition to GMR, AMR, and Eastman Kodak, I have serious and substantial doubts about receiving par value at maturity for my 3 Travelport bonds, 1 AGY Holdings bond, and 1 Reddy ICE bond.

2. Another Fidelity Trading Restrictions: Fidelity's myriad trading restrictions defy any rational explanation. I will just note them in my blog as I am confronted with yet another one.

Yesterday, I tried to sell my 1 Vulcan Materials 2018 bond. FINRA It has a relatively low yield and popped to over its par value after Martin Marietta made a takeover bid for VMC. I recognize that the bond market does not have anywhere near the liquidity of the stock market. To sell my one bond at Fidelity, I have to wait for a bid to be made which would accept that 1 bond. I would prefer a market where I am at least allowed to enter a GTC limit order at my price, but I accept the lack of liquidity issue.

My problem with Fidelity is that I could have sold my 1 bond yesterday at 102. The bids were 150(10) at 102.206 and 50(1) at 102. The number in parenthesis is the minimum amount that the bidder will buy, so I could not sell 1 bond at 102.206 but could at 102. The difference is meaningless to me. If permitted to make that sale, I would have netted close to a $80 profit on that 1 bond.

Yesterday afternoon, the best bid price had fallen to 102.067 with a 10 bond minimum order. There was a buyer of 1 bond at 102, but I was not permitted by Fidelity to sell to that buyer, receiving the trade message copied below.

Another fact relevant to this trading restriction is that the ask price was really close to the bid prices. I could have bought 1 bond at 103.

I was not allowed to even enter the order to sell 1 bond at the bid price of 102, and instead received this asinine message:

In an email response to my complaint about this matter, Fidelity claimed that there was no bid for 1 bond. I then sent to them the following snapshot, which shows the bids late yesterday afternoon contradicting their statement. This snapshot was made immediately after my order to sell 1 bond at 102 was rejected by Fidelity with the foregoing trade message:

Vulcan 2018 Bid Book Wednesday 1/4/2012

The "sell" notation above would take me to an order page to sell the bond at that 102 price.

See also, Fidelity Prohibits New Purchases of Exchange Traded Principal Protected Notes Fidelity Brokerage Extends Denial of Trading Opportunities to Synthetic Floaters and Even an Exchange Traded Junior Bond DFP

Another recent addition to the no buy list is the exchange traded hybrid AEB. AEB will average close to 30,000 shares a day and pays a quarterly, qualified dividend of 4% or 7/8% above the three month Libor rate, whichever is higher, on a $25 par value. I have done very well with that security. See Snapshots at Aegon Hybrids: Gateway Post This is what happened last night when I tried to enter an order for this security at Fidelity:

This same message would pop up if a Fidelity customer wanted to buy the preferred stock HBAPRF, but not for the functionally equivalent HBAPRG from the same issuer, etc. and so on. Ridiculous does not even begin to describe these restrictions. Asinine is too kind of a word to describe them.

3. VANGUARD SUBSTANTIALLY LOWERS COMMISSION ON BOND TRADING: Last year, Vanguard had a flat $50 commission for secondary market corporate bond purchases. I quit using them for those purchases for that reason and instead used other brokers. I noticed yesterday morning that Vanguard had lowered my commission as a Vanguard Voyager commission to $2 per bond, and I bought 1 bond in my ROTH IRA. I will discuss that purchase in tomorrow's post. This is their new commission schedule:

As I will explain in more detail tomorrow, Vanguard is now substantially better than Fidelity for small bond purchases.

I can not sell corporate bonds online at Vanguard, however. I did talk with one of their bond brokers yesterday, and was told that the online commission applies for those broker assisted transactions.

CEF Portfolio as of 12/31/2011/CWH/ISM Manufacturing Index/Sold 50 CBLPRD at $23.71

2012-01-04T05:43:00.191-06:00

The S & P 500 ended 2011 at 1,257.60, falling .04 points over the course of the year. Given the inflation rate for 2011, the real rate of return for this index, with reinvestment of dividends, would be slightly negative. For the major U.S. stock indexes, the Russell 2000 declined the most, with a 5.5% decline, while the DJIA posted the largest gain at 5.5%.

The ten year treasury note ended the year with a 1.874% yield. The 5 year treasury was at .837% and the 30 year at 2.889%. The 3 month Libor rate was last quoted at .58%, with the 3 month treasury bill continuing to hug zero at .02%. The equity risk premium is close to a 40 year high. Barrons.com

According to the WSJ, the forward 12 month P/E ratio for the Russell 2000 was 37.96, 11.21 on the DJIA, and 14.58 on the S & P 500, all as of 12/30/2011. The forward P/E of the MSCI World Index is close to 11.

Bank of America was easily the worst performing stock in the DJIA, losing close to $80 billion of its market value and declining 58%. BAC finished the year at $5.56, and closed 2010 at $13.34. The 52 week high was at $15.31.

The EURO lost 3.2% last year. The Dollar Index rose 1.5%.

The ISM manufacturing index for December rose to 53.9%. The new orders component increased to 57.6. Employment rose to 55.1 from 51.8 in November.

1. Commonwealth REIT (CWH-Own Common): CWH is planning to split off a large number of its properties into a separate company called Select Income REIT and to sell shares of that company in an IPO. www.sec.gov This new REIT will have 253 properties currently owned by CWH, including properties in Oahu, Hawaii. For the nine months ending 9/30/11, the total revenues from those properties were $81.775 million from 21.4 million rentable square feet. The rentable square footage leased was 95.2%.

CWH's last filed SEC Form 10-Q indicates to me that the properties being spun off may be the cream. www.sec.gov As of 9/30/2011, 87% of the total square footage was leased which indicates that the properties being contributed to Select Income will cause a meaningful decline in the lease rate percentage for the remaining properties owned by CWH.

S & P put CWH's credit ratings on negative CreditWatch. S & P noted that the properties being contributed to this new REIT included "some of the most stable assets". Text-S&P

CWH has been divesting properties in this manner for some time. The last divestiture consisted of properties contributed to Government Properties Income Trust (GOV). (see page 4 www.sec.gov). Two prior transactions involved the formation of Senior Housing Properties (SNH) and Hospitality Properties Trust (HPT). CommonWealth REIT

I no longer own the CWH's exchange traded bond (CWHN), which has a $20 par value. Sold 100 CWHN at $21.22 in Roth; Sold 100 CWHN at $20.57

2. SOLD 50 CBLPRD at $23.71 Yesterday (see Disclaimer): I still own CBLPRC. I just clipped the quarterly dividend on CBLPRD and realized a few bucks on the shares recently bought at $23. (12/12/11 Post). This security is a cumulative equity preferred stock issued by the REIT CB & L Properties, an owner of retail properties.

REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

3. Cisco (own common shares only): I am at break-even on my 100+ shares of Cisco after the shares popped yesterday. J.P. Morgan raised its rating to outperform and increased the price target to $21 from $19. TheStreet JPM expects federal IT spending to increase 3.1% in 2012 after declining by 2.1% in 2011.

I have previously traded small lots for profits. SOLD 50 CSCO @ 24.42 (Nov. 2010)-Bought CSCO at 20.39 (September 2010); Sold Cisco (August 2010)-Bought 50 CSCO at $22.45 (June 2010).

My last two buys were near where the stock closed yesterday: Added 50 CSCO at $18.75 (February 2011); Bought 50 CSCO @ 19.55 (November 2010).

Cisco shares were purchased under the Large Cap Valuation Strategy. (see also: Explaining Low Valuations of Large Cap Tech Stocks (September 2010 Post). Microsoft is another large cap tech stock, which I own, purchased under the same strategy.

4. CEF Portfolio as of 12/31/2011: With CEF's, I attempt to achieve a balanced world allocation. I will move the bond and stock allocations up and down, though most of the allocation shifts are relatively minor.

The following table includes several recently received shares purchased with dividends. Some of the largest share purchases included ADX, JQD, RVT and RMT:

ADX Reinvestment

JQC Reinvestment

RMT and RVT Reinvestment

The ADX dividend shown above was mostly a year end capital gain distribution, while JQC, RVT and RMT are quarterly distributions.

Yesterday, the S & P 500 rose 1.55%. The focus of the following CEF table is income generation, mostly on a monthly or quarterly basis. This portfolio rose 1.35% yesterday:

CEF Portfolio as of 12/31/2011

The only remaining large dividend originating from 2011, which will be used to purchase shares when paid, was made by the Swiss Helvetia Fund.

Bought 30 MPEL AT $9.32 as LT/Bought 100 SGL at $10.03/Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100

2012-01-03T05:48:00.134-06:00

Morningstar has a list of 17 Scary Numbers released in the 4th quarter.

According to the WSJ, Bridgewater Associates believes that interest rates will be locked near zero for years in both the U.S. and Europe.

China PMI was to a 50.3 reading in December, higher than the consensus estimate.

1. Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100 Last Friday (see Disclaimer): Based on a series of acquisitions occurring after the issuance of this bond, U.S. West Communications is part of CenturyLink (CTL). U.S. West Communications, formerly one of the Baby Bells, was merged into Qwest Communications International in 2000, and then Qwest was acquired by CTL earlier this year.

CenturyLink Inc (CTL) Profile Page at Reuters

CenturyLink Inc (CTL) Key Developments Page at Reuters

The current consensus E.P.S estimate for 2012 is $2.6. CTL Analyst Estimates

This is a link to the FINRA Information on this bond. According to FINRA, it is rated at the lowest tier of investment grade by the three rating agencies (Baa3 by Moody's, BBB- by both Fitch and S & P.

The bond was originally issued in 1993, and is consequently not available with an Edgar SEC search. The FINRA information indicates that it is continuously callable now.

2. Bought 30 MPEL at $9.32 Last Friday (Lottery Ticket Strategy)(see Disclaimer): This is my second purchase of Melco (MPEL) as a Lottery Ticket. Bought 40 MPEL at $7.36 (January 2011)-Sold MPEL at 11.46 (June 2011):

For this kind of inconsequential investment, I did not conduct much research. I did review the Morningstar report on this company, available to subscribers. The report was generally favorable. The analyst has a 4 star rating on MPEL with a $17 fair value estimate and a consider to buy target at $8.5 or below. Morningstar

MPEL owns and operates casinos in Macau. (profile page of Melco Crown Entertainment at Reuters). It is one of the six companies licensed to operate casinos in Macau.

Melco Crown Entertainment key developments page.

The last filed Form 6-K, providing financial information, can be accessed at the SEC. Condensed Consolidated Financial Statements and Reconciliations Form 6-K is filed by foreign issuers of securities traded in the U.S.

The press release announcing the last quarter's earnings can be accessed at the SEC.

The current consensus E.P.S. estimate is for $.59 in 2012, up from $.49 in 2011. MPEL Analyst Estimates The estimated five year P.E.G. is .35. Price to sales is around 1.43. MPEL Key Statistics The company recently estimated that industry revenue growth in Macau to slow to about 15% to 20% this year. Bloomberg

3. Bought 100 SGL at $10.03 Last Friday-Regular IRA (see Disclaimer): SGL is a closed end fund that invests in bonds worldwide. As of 5/31/11, 47.5% of the portfolio was weighted with bonds priced in USDs, and the rating characteristics of the portfolio at that time were as follow:

Since the fund is actively managed the weighting will of course vary and the forgoing is just a snapshot in time.

This is a link to the last SEC filed shareholder report for the period ending 5/31/2011. www.sec.gov

The last filed Form N-Q, which contains the fund's holdings as of 8/31/2011, cab be found at www.sec.gov.

Closed-End Fund Association on SGL

Morningstar page on SGL.

If realized, the fund will generally pay out in December any realized short and long term capital gains. SGL recently went ex dividend for a long term capital gain distribution of $.2687 per share and a $.0188 per share in a short term capital gains distribution. Distribution Declarations and Updated Price & Distribution Rate Information As noted in the foregoing press release, this fund makes monthly distributions at an annualized rate equal to 6% of the fund's net asset value, as calculated in the matter set forth in that release.

UBS is the sponsor of this CEF. UBS Closed-end Funds

Strategic Global Income Fund closed at $10.17 last Friday. As of 12/30/2011, the net asset value per share was at $11.18, creating a discount to net asset value of -9.03 based on last Friday's closing price.

SOLD 50 KCW at $25.44/Sears/Bought 30 of TEX at $12.68-LT

2011-12-30T05:49:00.148-06:00

Jim Cramer provides his opinions about the Dow 30 stocks next year in this article found at TheStreet.

Medtronic (own) rose 91 cents yesterday to close at $38.34, apparently based on a favorable research report from a Citigroup analyst, who raised the price target to $44 from $40. The report is summarized in Barrons.

Yesterday, an SUV passed me as I was coasting into a red light. I was not approaching the red light at a sufficiently high rate of speed. The general idea among drivers in the SUV Capital of the World is to keep the peddle to the metal until you have to hit the brakes to avoid a collision with the stationary vehicle in front of you. It has always been my belief that those drivers have some sort of brain malfunction, possibly misfiring brain synapses, that probably explains a great deal more than their driving habits. Possibly, they will donate their brains to science for further study.

1. SOLD 50 of the TC KCW at $25.44 Last Tuesday (see Disclaimer): I am not comfortable holding long bonds and will be content to sell them at any profit when purchased near their par values. The TC KCW matures in 2043, so there is a ton of interest rate risk in that security. I collected one semi-annual interest payment and made a small profit on the bond.

Bought 50 KCW at 24.9 August 2011 The underlying security in KCW is a senior bond originally issued by U.S. West Communications (FINRA), which later merged into Qwest in 2000, who was then acquired by CenturyLink (CTL) in 2011.

KCW has a 7.5% coupon on a $25 par value. Qwest's bonds were rated junk before its acquisition by CTL. The underlying bond in KCW is now rated at the bottom rung of investment grade. The TC has a higher coupon than the underlying bond, which has a 7.125% coupon. There is a call warrant attached to this TC. CTL may redeem the underlying bond after 11/15/2013 at 102.740% plus accrued interest. Thereafter, the call option continues as the premium declines gradually.

I still own other TCs issued by companies that are now part of CTL.

Trust Certificates: New Gateway Post

I replaced this security with a purchase of a senior bond issue from U.S. West, which yields about the same as KCW, but matures about 20 years sooner. This kind of swap reduces my interest rate risk, while keeping my cash flow about the same. I will discuss this substitute purchase in the next post.

2. Sears (own 100 SSRAP and 1 Sears Holdings Senior Secured Bond-FINRA): Sears announced on Tuesday its intention to close 100 to 120 Kmart and Sears full-line stores. The company expects to generate $140 to $170 million in cash as the inventory in those stores is sold. Sears Holdings Press Releases The same store sales number for the eight week Christmas period were disappointing, falling 6% for Sears Domestic and 4.4% for K Mart. The common shares, SHLD, fell 27.2% on the day of this announcement and the bonds took a hit too. The longer term bonds fell the most. The common shares fell $12.47 to close at $33.38 last Tuesday. Yesterday, Sears Holdings (SHLD) continued to slide falling 43 cents to close at $32.9.

An article in the WSJ, which discusses this latest negative development at Sears, mentions one of the root causes. Typically, according to an ISI analyst, retail companies spend $6 to $8 per square foot updating their stores every year, while Sears spends $1.5 to $2. Rather than updating the stores, Eddie Lambert has been using cash to buy back stock, spending 5.2 billion dollars over the past five years. Needless to say, that $5.2 billion could buy a lot more shares at today's price.

I have personal stories about the local Sears store in Cool Springs, near HQ, that illustrate the problem. Item # 1 Sears; Item # 4 Sears.

Doug Kass has a Sears bankruptcy as one of his 2012 surprises, TheStreet. By surprise he means a "possible improbable event".

After the close yesterday, Fitch downgraded the senior unsecured debt to "CCC". MarketWatch Fitch kept its rating outlook at negative. The second lien 2018 notes were downgraded to B+ from BB. That is the bond that I own: Item # 2 Bought 1 Sears Holding 6.625% Senior Secured Bond Maturing 10/15/2018 at 83.25.

Floyd Norris makes an excellent case that the problem with Sears is Eddie Lambert. NYT

3. Bought 30 TEX at $12.68 As LT Last Wednesday (Lottery Ticket Strategy)(see disclaimer): As with all LT purchases, this is not a serious buy. I was able to exceed the $300 limit on LT purchases due to prior profits. My last trade of TEX shares netted $116.38 profit on a quick turnaround of 30 shares:

2011 TEX 30 Shares

Bought 30 TEX at $13.59 (9/20/11 Post); Sold 30 TEX at $18 (10/31/11 Post). I also recently bought 1 Terex bond. Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947 (8/31/11 Post). I do not have much to add to those posts.

Morningstar currently rates TEX shares at 5 stars. The consider to buy price is $19.8 or lower.

Terex profile page at Reuters.

Terex key developments page at Reuters

LT purchases are invariably financed with cash flow. Snapshots of the trades made pursuant to this strategy, managed exclusively by the RB, can be found in the Lottery Ticket Strategy: New Gateway Post. The current, total realized gain is $8,922.07 for the LTs since 1/1/2009.

Terex rose 46 cents yesterday to close at $13.09.

I will be using some of my year end cash flow to buy more LTs.

Added 50 IGD at $8.78/SLV/Bought 50 SU at $28.67/At Least Gingrich Is A Consistent Hypocrite

2011-12-29T05:38:00.142-06:00

Newt Gingrich praised RomneyCare, the forerunner of ObamaCare, in a 2006 memo. WSJ Since it is generally believed that virtually all of the TB's are opposed to both health insurance plans, it is no longer viable for any GOP politician to say anything positive about those health insurance plans.

Hypocrisy is a common human trait among TBs, so Gingrich will not miss a beat criticizing his opponent for RomneyCare. At least Gingrich is consistent in his hypocrisy.

I am at least consistent on this issue. I have opposed the Democrats health care plan, primarily for fiscal reasons. I would admit, of course, that private health insurance premiums are increasing at a rapid rate. The premium on my $5,000 deductible plan with BlueCross BlueShield of Tennessee increased 23.5% in December. My Inflation Rate A large number of American households, who do not qualify for Medicaid, simply can not afford to pay for health insurance, and the number of uninsured will continue to rise.

Just as an aside, I would add that my electric utility rate has increased by 25% over the past four years, another component of My Inflation Rate. While other insurance rates are not increasing as fast as health insurance, I have noted substantial increases in auto and home insurance premiums, well in excess of the government's CPI numbers.

I have problems with every broker that I use, and some issues are relatively minor. The prices shown by Fidelity in my list of holdings do not reflect ex-distributions. Other brokers provide the correct adjusted price information. So, when I open up that list on significant ex-dividend days, I will be showing either a greater loss or a lesser gain than the reality. Such was the case yesterday.

Yesterday, I had a number of securities go ex-distribution, including the following:

Monthly: PSEC, CSQ, IGD, JNK, EMLC
Quarterly: IDG, IDE, IRR, GRTPRF, LXPPRD, SLGPRC, SLGPRD, MSPRA, WIN, SHOPRD, SHOPRA, KRBPRD, REM
Semi-Annual: KTN

The market was unnerved yesterday by the substantial increase in the European Central Bank's balance sheet to €2.7 trillion and by the decline in the Euro. Over the past week, lending to European banks jumped by €879 billion.

1. Added 50 IGD at $8.78 Last Tuesday (see Disclaimer): The monthly distribution was 10 cents per share for this world stock CEF. ING Global Equity Dividend and Premium Opportunity Fund - Distributions Effective for the December 2011 payment, the rate was reduced to to $.093. www.ingfunds.com .pdfAs shown by the data at Morningstar, the dividend has been supported in part by a return of capital. Assuming a continuation of that reduced rate, which is of course in no way assured, the yield at a total cost of $8.78 would be around 12.71%.

As of 12/23/2011, the net asset value per share was $9.8 per share. Based on a closing price that day of $8.86, the discount to net asset value was then -9.59. The daily net asset value per share information can be found at the sponsor's web site (IGD) and at the Closed-End Fund Association

IGD is a buy-write world stock fund, using call and put options on major indices.

This is a link to the last SEC filed semi-annual report for the period ending 8/31/2011: ING Global Equity Dividend and Premium Opportunity Fund Semi-Annual Report As of that date, the U.S. had the largest allocation at 31.5%.

My most recent purchase of IGD was 100 shares in a retirement account: Bought 100 IGD at 10.94 (August 2010). Besides the hefty dividend payments, other reasons for the price decline since that purchase were an increase in the discount to net asset value and the European holdings. IGD was ex-dividend yesterday for its monthly distribution.

I also changed my reinvestment option to the purchase of shares, given the higher than normal discount to net asset value. I had quit purchasing shares with dividends in the Spring of 2009.

2. Bought 50 Suncor at $28.67 Last Tuesday (see Disclaimer): Suncor is a large Canadian energy company that has significant assets in long lived oil sands. The stock is currently trading below its 50 and 200 day simple moving averages. The stock traded over $47 in February 2011 and hit $68.35 back in 2010. SU Interactive Chart

The current consensus estimate is for an E.P.S. of $3.33 this year and $3.27 in 2012. SU Analyst Estimates Those estimates could be way off, either up or down depending on the prices of crude and natural gas as well as many other factors including refining margins. Price to sales is currently at 1.14 and price to book is at 1.22. The five year expected P.E.G. is around .39. SU Key Statistics

Suncor is currently rated five stars by Morningstar. S & P rates SU three stars with a $43 twelve month price target.

SU is discussed in this recent article at Seeking Alpha.

As previously discussed, Charles Maxwell mentioned SU favorably as one of the best positioned companies in the Canadian oil sands. (Barrons' Interview 2/12/2011 edition).

I may buy another 100 of SU with my Canadian dollar stash on the Toronto exchange. Those CADs earn nothing sitting in my brokerage account.

Suncor Energy closed at $27.88 yesterday, down 80 cents for the day.

3. Silver: SLV closed at $26.24 yesterday, down 5.74% or $1.6 per share. SLV hit a 52 week high at $47.26 on 4/28/11 and decisively broke below its 50 and 200 day SMA late in September. Since that breakdown, the price would turn down after approaching the 50 day SMA line. SLV Fund Chart

I do not own SLV. I was sufficiently uncomfortable with silver's rise this year that I elected to sell some junk silver coins in early September.

I am not comfortable buying silver above $10 and have not done so. If and when silver falls below that level, I will likely use the proceeds from those sales to buy a silver ETF or more U.S. bullion silver dollars. Sold Some Junk Silver Coins (9/13/2011). I also sold my first gold when the price went over $1,900 per ounce. Item # 1 Recent Gold and Silver Sales (9/15/11) That post contains snapshots of two transactions. Those sales were made on 9/6/11 and 9/12/11. The cost basis for the junk silver was the face value of the coins.

Sold 50 NXYPRB at $25.5 and Bought 50 INZ at $19/Swap Trades Last Week: Intended to Increase Cash Allocation Without Significantly Increasing Risk or Reducing Cash Flow

2011-12-28T05:47:00.320-06:00

Paul Krugman discusses the anti-EPA agenda of the GOP in his NYT column.

True Believers excel at reality creation. Information is created to justify their beliefs. Another personality trait is that a strenuous effort is made to avoid contact with any information that calls into question their beliefs. Frequently, they go a step further and make it difficult for anyone to gather information that would contradict their reality creations.

The GOP is currently doing whatever they can to make it easy for citizens to carry concealed weapons. Houses Passes Bill Making Concealed Carry Permits Valid Across State Lines - ABC News To be fair, there are some GOP tribe members who do not believe that citizens need to carry automatic weapons concealed under a jacket, and some do not believe it is wise to encourage the carrying of guns into bars and playgrounds.

One argument made by the TBs for liberalization of gun laws is expressed by Congressman Cliff Stearns (R), who asserted that those citizens who carry concealed weapons "have proven themselves to be among the most responsible and safe members of our community". Cliff can make that argument because most states do not permit public access to the names of gun permit owners, so there is no way for anyone actually interested in the truth to cross check gun permit information with other data such as convictions for criminal offenses.

One state, North Carolina, does disclose the names of those allowed to carry concealed weapons. The NYT did a comprehensive study of N.C. data and found that a large number of those permit owners committed crimes, including of course crimes with their weapons.

In one example, a man was riding with his daughter on a bicycle. A hot head with a gun, Charles Diaz, pulled along side of them, berating the man and his child for riding on the street. The man got off his bicycle and moved toward Mr. Diaz, who then pulled out his gun and threatened to murder the man in front of his daughter, whereupon the man turned around. Mr. Diaz then shot him in the back of the head, and fortunately the bullet just went through the bicycle helmet just above his left ear.

The TBs do not want the public to have access to this kind of information, which should be available in every state. Shine some light on the TBs' reality creation. The public should have access to the names of gun permit owners so that the news media can cross check that information with other data involving the commission of crimes.

The Tennessee GOP was extremely proud of one of their first legislative accomplishments after gaining control of the state legislature, which was a law permitting weapons to be carried into bars, school playgrounds, and state parks.

1. Sold 50 NXYPRB at $25.5 and Bought 50 INZ at $19 Last Friday (see Disclaimer): I would view the credit risk of these two securities to be roughly equal. For about $950, 50 shares of INZ will produce $90 a year in income, while 50 of NXYPRB would generate $91.875 using $1,275 of capital. I therefore keep my income at roughly the same amount while increasing my cash reserve by $325. The same calculus is behind several of the recent trades.

INZ is an ING hybrid security. NXYPRB is a subordinated bond issued by the Canadian energy company Nexen. NXYPRB has a 7.375% coupon (Prospectus), while INZ has a 7.2% coupon. NXYPRB matures in 2043, while INZ has no maturity date. For me, a 2043 maturity date is likely to be equivalent to no maturity date.

Both INZ and NXYPRB are subordinated bonds that make quarterly distributions. The distributions from INZ are, however, taxed as qualified dividends while the NXYPRB distributions are taxed as interest. NXYPRB.

According to QuantumOnline, NXYPRB is currently rated Ba1 by Moody's and BB+ by S & P, while INZ is rated Ba1 by Moody's and BBB- by S & P.

I am wary of ING hybrids, however, due to the European sovereign debt and banking crises.

I made a negligible profit on the NXYPRB shares, though I did receive several interest payments. Bought 50 NXYPRB @ 25.15

The European hybrids, issued by financial institutions, are very sensitive to concerns about creditworthiness and the fear of a dividend deferral. As a result, the prices of these securities can be extremely volatile during times of financial stress, as shown by the prices that I paid for some ING hybrids during the Near Depression period. I bought INZ for example in an IRA at $7.82 and recently sold those shares at $21.21, Sold 50 of the ING Hybrid INZ at 21.21 Bought at a Total Cost of $7.82 (see snapshot of trade in Item #1 of that post).

Another buy of INZ was made at $6.52 (February 2009).

Another ING hybrid, ISF, was bought at $4.6. All of the ING hybrids, which trade on the NYSE, have $25 par value and have fixed coupons. All of them are perpetual securities, i.e., no maturity date. They are in my terminology "functionally equivalent" so that the main consideration for choosing one over the others is the yield at my cost. Functional Equivalence in Bond Trading (1/8/2009 Post); Item # 1 More on AEB & Exchange Traded AEGON & ING Perpetual Debt Issues: Functionally Equivalent (8/14/09 Post)

I discuss this type of security in my Gateway Post for ING Hybrids. I also discuss some relevant issues about them in a recent post, when I picked up 50 shares of IDG. Bought 50 IDG at $18.55 (12/5/11). One issue discussed in that last linked post involves the triggering of the mandatory payment clause, an issue of particular relevance for the ING hybrid securities for two reasons discussed below.

ING is not paying a stock dividend, always a relevant issue to the owner of a more senior security whose payments can be deferred or eliminated. And, secondly, the Europeans have adopted a burden sharing policy in the event their financial institutions ever again come to their host governments for aid. The gist of that policy is that the dividends on the hybrids will most likely have to be deferred in the future, where legally possible, as a precondition to the receipt of state aid. More on EC Burden Sharing Policy Burden Sharing (see page 8 fn. 26 at ec.europa.eu/competition/state_aid .pdf) ING is still paying back the state aid received in 2008.

I do not intend to repeat my discussions on this subject that can be accessed in prior posts, linked in the ING Hybrid Gateway Post.

INZ has a 7.2% coupon on a $25 par value. ING may at its option call the security at anytime at par value plus accrued dividends. SEC

The approximate yield at a total cost of $19 is around 9.47%. The recent IDG purchase was closer to 10%.

ING Groep N.V. 7.20% Perpetual Deb. closed down 45 cents in trading yesterday to close at $18.55.

Nexen Inc. 7.35% Sub Notes 2043 rose five cents in trading yesterday to close at $25.6.

2. Increasing Cash Allocation While Maintaining or Enhancing Cash Flow: Last week, I made a number of swap trades designed to increase my cash allocation without reducing my cash flow. Any amount added to a money market fund now will earn nothing of course.

So I attempted to increase my cash allocation by close to $5,000 without reducing my income or increasing my risk significantly. The risk part of that equation is always based on judgment and could be proved erroneous by subsequent events. The exchange discussed in Item # 1 above kept cash flow about the same while increasing the cash allocation.

Other trades last week were intended to accomplish the same objective. The income numbers are projected annual amounts, and the cost numbers include the brokerage commission:

Sales:

200 of IMF Proceeds Proceeds $3,556 Income Foregone $120

300 of CMK Proceeds $2,457.84 Income Foregone $136.8

50 Aceto Proceeds $351 Income Foregone $20

50 NXYPRB Proceeds $1,267.02 Income Foregone $91.88

51 CBU Proceeds $1,371.9 Income Foregone $59

Total Proceeds: $9,002.9

Total Income Foregone: $427.68

Purchases:

1 Telecom Italia Bond Cost $943.6 Income $49.5

1 Commercial Metals Bond Cost $955.5 Income $65

50 CSQ Cost $421.95 Income $31.5

50 BCF Cost $ 541 Income $54.34

50 INZ Cost $950 Income $90
50 IGD Cost $446.95 (purchased yesterday) Income $50

Total Cost: $4,259

Total Income: $340.34

Net Increase in Cash Allocation: $4,743.9

Net Loss in Annual Cash Flow: $87.34

I will briefly discuss IGD, purchased yesterday, and included in the table above, in tomorrow's post.

Added 50 of the Balanced CEF CSQ at $8.28/Added 50 of the Synthetic Floater GJS at 13.25-Roth IRA/Added 50 of the Stock CEF BCF at $10.68

2011-12-27T05:33:00.004-06:00

Traveling through the SUV Capital of the World, I routinely have to hit my breaks several times as SUVs pull out in front of me. The degree of pressure applied to my Saturn's brakes varies but occasionally the force is sufficient to activate the anti-lock braking system. Possibly, the Cleons have surreptitiously installed one of their cloaking devices on my car.

The government reported last Friday that both consumer spending and incomes rose just .01% in November, below expectations. The weak income number was due to a decline in wages and salaries. News Release: Personal Income and Outlays, November 2011 The personal savings rate was 3.5% for November.

Eastman Kodak announced that it had sold the Eastman Gelatin Corporation for an undisclosed sum. The sale includes a 575,000 manufacturing facility in Peabody, Mass. I unfortunately own two EK unsecured senior bonds maturing in 2013. Eastman Kodak Bonds: Update on Third Quarter Earnings Report Eastman Kodak (EK) Bonds-Own 2013 Senior Bond Moody's and Eastman Kodak The LB does not believe in miracles so I would be shocked to receive par value at maturity. I rate this bond at 10+ in my Personal Risk Ratings For Junk Bonds.

1. Added 50 GJS at $13.25 Last Friday-ROTH IRA (see disclaimer): GJS is a Synthetic Floaters in the trust certificate ownership form. Trust Certificates: New Gateway Post It is an exchange traded bond. The underlying security is a Goldman Sachs senior bond maturing in 2033. While the underlying bond has a 6.125% fixed coupon (FINRA), the owners of GJS will receive that coupon only if the swap agreement creating the floating rate is no longer in effect. The floating rate is .9% above the three month treasury bill rate on a $25 par value, paid monthly. There is a 7.5% maximum coupon. Prospectus

The Trustee receives the 6.125% coupon payments from Goldman Sachs and then swaps that payment with Wells Fargo for the floating rate payment. Since T Bills are now hugging zero, Wells Fargo is receiving the best part of that deal. It is what it is.

At a total cost of $13.25, I can calculate the minimum and maximum yield for this security. The minimum yield would be about what is being paid now due to the Fed's Jihad against the Saving Class. The 3 month treasury bill is a smidgen above 0%. I will call it zero for purpose of computing the minimum current yield, which would be 1.5%, assuming T Bills are at zero (.8% spread over 3 month bill x. $25 par value=$.20=1.5%). The maximum current yield would be 14.15%. The maximum rate would be hit when the 3 month treasury bill exceeds 6.6% during the relevant computation period.

One way to look at this security is that it juices the 3 month T bill yield due to the spread factor and more importantly the GJS current discount to its $25 par value.

In the foregoing analysis I used the phrase current yield. The yield to maturity would be significantly higher, since the YTM includes the additional yield resulting from the profit on the security. If GS survives to par value value on the 2033 bond, then the owners of GJS will receive their $25 par value. That would be a material increase in the total return/yield for this security.

There are two main factors that make GJS unappealing now. There are concerns about the long term credit worthiness of investment banks. Those concerns ebb and flow and are reflected in common stocks prices of Morgan Stanley and Goldman Sachs as well as the prices of their respective equity preferred stocks, trust preferred stocks and bonds. All of those securities have fallen in price over the past several months.

The other issue is the currently low treasury bill rate. GJS is not likely to provide any meaningful income anytime soon. Possibly, the FED's Jihad against the Saving Class, designed and intended to cause savers and other responsible Americans the maximum amount of pain possible for "an extended period of time", will continue to 2014.

When T Bills return to more normal levels, this security will look better. In the meantime, I will just wait.

I have snapshots of my prior trades of GJS in Stocks, Bonds & Politics: Trust Certificates: New Gateway Post.

Those trades include the following: Bought 100 GJS at 10.5 April 2009 SOLD 100 GJS at $13.06 August 2009 Bought 100 GJS AT $13 October 2009 Sold 100 GJS in the Roth IRA at $15.6 November 2009 Bought: 50 GJS at 14.6 August 2010 Sold 50 GJS @ 16.20 October 2010

My last trade was a buy, and those shares are still owned. I will sell them when and if I can realize a profit and then keep the shares purchased last week. Bought 50 GJS at 16.9 in Roth IRA July 2011

2. Added 50 of the CEF CSQ at $8.28 Last Thursday (see Disclaimer): This small purchase was an average down from my recent purchases. Bought 100 CSQ @ 8.94 November 2010 Added 50 CSQ at 9.2 August 2011 Added 70 CSQ at 9.63 April 2011 I am reinvesting the monthly dividend of $.0525 per share to buy more shares. Distributions - Strategic Total Return Fund

For this kind of investment to work, I will need to make money on the shares at some point. At a total cost of $8.28, the current dividend yield would be about 7.6%. I would need an annualized return of close to 10% before I would characterize this investment as successful. So far, I am nowhere close to that number.

CSQ is a balanced fund that uses leverage. As of 11/30/11, the fund states that the total percent leveraged was 27.11. The portfolio allocation is shown at Strategic Total Return Fund Portfolio. Roughly, the allocation is 60% to stock and 40% to bonds. I would characterize the stock portfolio as titled toward large cap dividend stocks. The bond portfolio has probably been a drag recently with its junk bond weighting which is heavy into "BB" and "B".

This is a link to the last filed SEC Form N-Q that contains the fund's holdings as of 7/31/2011.

The last SEC filed shareholder report is for the period ending 4/30/11.

Calamos Strategic Total Return Fund closed last Friday at $8.45 with a net asset value per share of $9.99, creating a discount to net asset value of -15.42% at that time.

3. Added 50 of the CEF BCF at $10.68 Last Friday-Roth IRA (see Disclaimer): I recently discussed this fund at Item # 5 Added 100 of the Stock CEF BCF at $11.95. This CEF recently went ex dividend for its quarterly distribution of $.2718. BlackRock Real Asset Equity Trust, BCF Stock Quote

BCF closed last Friday at $10.7 with a net asset value per share of $11.72, creating a discount to NAV at that time of -8.7%.

Last SEC Filed Form N-Q BlackRock Real Asset Equity Trust (BCF)

Prior to this purchase, I owned only 102 shares of BCF in a retirement account and those shares have an average cost of $7.9. I have been taking the dividend distributions in cash since the 4th quarter of 2008. So I am ahead in that position:

I also own shares of this stock CEF in a taxable account. I am in the red on the shares in that account and close to break-even with the dividend.

I will discuss some of the other trades from last Friday in the next post.

Medicare Fraud/Regional Bank Basket Table/3rd Quarter GDP Revised Down/Bought 1 Commercial Metals 6.5% Senior Bond Maturing 7/15/2017 at 94.75/Sold 51+ CBU at $26.82/ Sold 50 ACET at $7.02

2011-12-23T05:45:00.046-06:00

The headlines yesterday claimed that the market advanced on positive economic reports. One of those reports was a downward revision in third quarter U.S. GDP growth. The government's latest revision for the 3rd quarter claims 1.8% real GDP growth, down from the 2% estimate made last month. Two months ago, the estimate was at 2.5%. Gross Domestic Product Consumer spending for services was revised down to 1.9% from 2.9%.

In another report, the thirty year, average mortgage rate hit an all time low of 3.91%. Primary Mortgage Market Survey (PMMS) - Freddie Mac The 15 year was at 3.21%. Overall, I view that as a negative signal about the economy. For those who are able to refinance at those rates, it is of course positive.

I do not have a mortgage, being a confirmed member of the Saving Class, but that 15 year rate is sure tempting to the OG. RB just said, "get the loan and lets go to Vegas, play some blackjack for a $1,000 a hand, and have some fun." LB added that the "market was providing an abundance of fund, providing many opportunities for the LB to work on its trading rules for the Unstable Vix Pattern"

A positive piece of news was the decline in initial claims for unemployment to the lowest level since April 2008.

Tokio Marine is acquiring Delphi Financial (DFG) for $2.66 in cash. Delphi has one exchange trade bond, DFP, which popped closer to its $25 par value on the news. DFP closed at $24.45 yesterday. S & P affirmed the ratings of Tokio's core subsidiaries. Reuters SEC Form 8-K

Reuters published an article earlier this week about criminals forming shell companies to fraudulently bill medicare for services and equipment. I mentioned a similar series of stories in a February 2010 Post: Rampant Medicare Fraud Rather than attempting to chase the scumbags after they bill billions to Medicare, a more viable alternative would be verify the legitimacy of every provider before they could bill anything to Medicare. For new companies, the verification could be quite extensive for new companies, including a physical examination of the firm's premises by an inspector which would often catch the criminals before their scheme even starts. By some estimates, the U.S. loses 60 billion a year to Medicare fraud and the criminals show no signs yet of being fearful of a possible conviction or serious jail time in the unlikely event that they are caught and convicted.

The TC HJO, which contains an Aon Capital TP as its underlying security, is ex interest today for its semi-annual interest payment.

The WisdomTree Emergency Market Currency ETF (CEW) went ex dividend for its annual distribution on 12/21/11. The 2011 distribution came to $1.0572 per share. I own 100 shares for diversification purposes.

John Hussman argues in his last commentary that the U.S. is "on the cusp of observable economic deterioration". Hussman Funds Given his generally pessimistic stance, it is not surprising that his Hussman Strategic Growth fund declined only 9.02% in 2008 and rose a horrific 4.63% in 2009. The Hussman Strategic Total Return return rose 6.34% in 2008, which was extraordinary, but then managed only a 5.84% return in 2009. All of those numbers originate from MSN Money. I do not not own either fund.

1. SOLD 50 ACET at $7.02 Last Tuesday (LOTTERY TICKET Basket Strategy)(see Disclaimer): I was satisfied with the percentage return in this LT so I sold it.

Item # 3 Bought 50 ACET at 5.07 as Lottery Ticket (September 2011 Post)

This post contains snapshots of realized gains and losses for this strategy: Lottery Ticket Strategy: New Gateway Post

This is my second round trip for ACET.

2, Trustmark (own: REGIONAL BANK BASKET STRATEGY): BB & T initiated coverage of TRMK with a buy and a $25 price target. Bought 50 TRMK at 19.57 (August 2010)

3. Bought 1 Commercial Metals 6.5% Senior Bond Maturing 7/15/2017 at 94.75 Last Wednesday (Ju nk Bond Ladder Strategy)(see Disclaimer):

Commercial Metals is a publicly traded company. The current consensus estimate for the F/Y ending August 2012 is $1.05 and $1.76 for F/Y 2013. CMC Analyst Estimates

Commercial Metals profile page at Reuters

Commercial Metals key developments page at Reuters.

CMC's business is described in great detail, starting at page 3 of its recently filed Annual Report. As of August 31, 2011, CMC had $222+ million in cash and $1.198+ billion in long term debt. The debt is described in note 9 starting at page 57.

This bond is currently rated Ba1 by Moody's and BB+ by S & P. FINRA While those ratings are still in junk territory, they are much higher than most of the bonds purchased pursuant to this exceedingly risky strategy.

Interest is payable semi-annually in January and July. Prospectus

I am assigning an initial 4 rating in my Personal Risk Ratings For Junk Bonds.

My confirmation states that the current yield at my cost is 6.802% and the YTM is 7.493%.

4. Sold 51+ CBU at $26.82 (REGI ONAL BANK BASKET STRATEGY) (see Disclaimer):
Somehow, I ended up with 50 shares of CBU in two separate satellite taxable accounts. Added 50 CBU @ 25.19 Bought 50 CBU @ 23.18 I decided to sell the highest cost shares bought at $25.19, keeping the shares bought at a slightly lower price in another account. I will look for an opportunity to add to the remaining shares when and if I can average down.

Regional bank stocks had a good rally yesterday. Community Bank System closed at $27.59 in trading yesterday.

After taking a $600+ tax loss on Porter (PBIB), my realized gain for this strategy was reduced to $7,642.05: Item # 3 Realized Gains Regional Banks

This is a snapshot of my current positions in this basket, which does not include shares purchased with reinvested dividend but does include stock dividends:

Regional Bank Basket Table as of 12/22/11

I certainly may be wrong about my big picture forecasts. I currently believe that the stock market is near a cyclical top and is more likely to decline 10% than to rise 10%. If that forecast proves to be correct, then I will have plenty of opportunities to buy securities at lower prices. If I am wrong, then my portfolio will still go up in value, but not as much as the market averages, unless there is a significant move up in non-equity asset classes such as junk bonds, preferred stocks, exchange traded bonds, Canadian bond ETFs, etc.

I have been arguing in this post for about two years now that the S & P 500 would face stiff resistance between 1250 to 1300. As an example, I mentioned in a post from June 2010 that I anticipated range bound movement mostly between 950 to 1250 for at least two more years. Stocks, Bonds & Politics and Item 2 Problems Brewing for Stocks (4/1/2010). This is consistent with my thesis that the rally off the March 2009 lows was a cyclical bull market within the context of a long term secular bear market.

The longevity of this bear market has been caused by too much debt among individuals and governments in most developed countries. More on 1982 or 1974 (September 19, 2009 Post) 1974 or 1982: Start of Cyclical Bull in a Long Term Secular Bear Market or the Start of Secular Bull Market? (September 18.2009 Post) The Importance of Identifying the Underlying Causes of Long Term Bull and Bear Markets (6/27/11 Post) The Roller Coaster Ride of the Long Term Secular Bear Market (5/16/10 Post)

A new reason supporting that range can be found in Jeffrey Grantham's December 2011 commentary: www.gmo.com/ 3Q11.pdf (see Exhibit 1) I am nowhere near as pessimistic as Grantham, but I am certainly cautious now.

Sold 200 of the Bond CEF IMF at $17.78/Bought 1 Telecom Italia Capital 5.25% Senior Bond Maturing 11.15.2013 at 96.429

2011-12-22T05:49:00.005-06:00

European banks drew €489 billion on the European Central Banks new, first ever three year loans. Reuters Is that a positive development in the ongoing financial crisis?

There are two ways to look at it, and both are correct in my opinion. It is positive that the ECB is taking action to prevent solvency events due solely to a lack of liquidity. It would not be wise to allow sound financial institutions to fail due solely to a temporary lack of liquidity. In this context, I would draw a distinction between solvency events due to temporary liquidity problems and solvency due to poor investment and lending decisions and/or recessionary conditions.

However, it is extremely negative that the ECB believes that such a program is necessary. In my judgment, the negative outweighs the positive. These kind of central bank programs are just exceedingly extraordinary. I do not find any comfort that the ECB and the Federal Reserve believe that it is necessary to pull rabbits out of their hats. I would also place these events in a time perspective. Next September will be the 4th anniversary of Lehman's collapse.

I bought a new Apple desktop computer for less than $1200 that contains a 2.5 GHz Intel Core i5 processor. I am amazed by the speed of this computer compared to my older IMAC purchased for several hundred dollars more.

The computer came with a wireless mouse and keyboard. While I have no idea whether it is the new Lion operating system or the mouse, or more likely a combination of both, I can flip back and forth between web pages by simply moving my finger to the left and right, a really helpful feature for me.

I have noticed a major problem, however, with that feature. When writing this blog, I have lost content that has not been saved when I accidentally move my finger sideways which causes a page flip. Instead of flipping the page, a pop up message appears, asking me whether I want to leave the page since content has not been saved yet. It does not matter how that question is answered. I can click the tab that says stay on the blogger page or the tab confirming the exit from that page. Either way, I lose the content that has not been saved yet by blogger's automatic saving feature. The positives of this feature outweigh the negative.

Earlier this week, I mentioned that the federal government was running over a trillion dollars in the red every year now. A trillion dollars would be more than the entire national debt from inception to around 1980. While reading a book about President Garfield, I noted a couple of interesting tidbits about spending during his administration. While Congress did fund the Secret Service after Lincoln's assassination, funding was slashing in half from around $75,000 per year before Garfield became President, and there was no money to provide the President with bodyguards. Garfield was assassinated with no Secret Service protection. Garfield's wife had to enlist the aid of the news media to shame the Congress into spending 30 thousand to repair holes in the White House rugs.

1. Bought 1 Telecom Italia 5.25% Capital Senior Bond Maturing 11/15/2013 at 96.429 on Tuesday (see Disclaimer): This bond is rated investment grade. The current ratings are Baa2 by Moody's and BBB by S & P. Telecom Italia's common stock is traded in the U.S. under the symbol TI. I had read recently a blog in Barrons.com that Gimme Credit had upgraded its credit score for TI based on improving cash flow. I do not currently have a concern about being repaid at maturity.

Telecom Italia profile page at Reuters

Key Developments page at Reuters

Telecom Italia website

FINRA information on this bond

Link to Press Release Announcing 2011 Third Quarter Results: Telecom Italia - 6k
Link to 2010 Annual Report filed with the SEC: Telecom Italia Form 20-F

This note was originally issued in a private placement and later exchanged for one registered with the SEC. Amendment No. 1 to Form F-4

My confirmation states that the current yield at my cost is 5.399% and the yield to maturity is 6.829%. Given the short maturity, the investment grade, and the likely continuation of the Fed's Jihad against the Saving Class into 2013, I thought that those yields were barely acceptable.

2. SOLD 200 of the Bond CEF IMF at $17.78 Last Tuesday (see Disclaimer): IMF is a low yielding bond CEF that invests mostly in U.S. inflation protected bonds. I have been buying and selling this CEF, along with the similar fund WIW, on multiple occasions, usually for small profits after collecting one or more monthly dividend payments. I bought these last shares last October at $17.45. Prior trades include the following: Bought 300 CEF IMF at 16.5 May 2010; Sold: 300 IMF @ 17.23 October 2010; Bought 200 of the Bond CEF IMF at 16.64 February 2011 Sold at Few Days later; Sold 200 IMF at $17.15 February 2011. I trade WIW more frequently. I currently own 200 WIW shares. Item # 1 Bought: 200 WIW at $12.63 (9/29/11 Post)(contains snapshots of prior trading gains for both WIW and IMF).

I may be prejudiced against U.S. government bonds at their current yields. Personally, while I may end up being wrong, I view the current pricing to be asinine. Five year treasury notes are yielding around .86%. The inflation protected 5 year has a negative coupon of close to 1%.

Bloomberg

The current yields of U.S. investment grade and treasury bonds do not reflect a rosy economic outlook for 2012. What does a negative coupon suggest about the world?

The ten year inflation protected U.S. treasury also has a negative yield. IMF does have a better current yield at the indicated monthly rate of 5 cents per share. IMF Distributions

Velocity of Money and Money Creation/GIS TRST/Sold 300 CMK at $8.19/Robust Market Rally Based on Hopium

2011-12-21T05:35:00.180-06:00

For those who are committed Stock Jocks, the website Zerohedge provides a consistent daily dose of negativity about the stock market. The site is especially appealing to connoisseurs of negativity. The site is viewed here as consistent with Alan Abelson's perpetual negativity about stocks, though I find it to be generally more informative than Abelson.

A reader referenced this article that contains some worthwhile discussion supporting a negative outlook for 2012. ZeroHedge One of the charts referenced in that article shows the correlation of the S & P 500 and the velocity of money. This kind of correlation varies over time but the overall correlation is positive. There was a positive correlation, as noted by the author, between 1991 and 2009. There was an overall robust move in stocks and the velocity of money between 1991 to 1999. There was a high positive correlation between 2000 to around 2009, for both the up and down moves of these two indices. There was, however, a negative correlation during the robust stock rally between 1982 and 1987. The point of the author is that the velocity of money has continued to trend down significantly while stocks have rallied since 2009.

The St. Louis Federal Reserve has an abundance of worthwhile charts for those looking to form opinions on the big picture issues. One of these charts is the velocity of M2:

Velocity of M2 Money Stock (M2V) - FRED - St. Louis Fed

If the money does not circulate and is hoarded by financial institutions, then printing more money will not be a catalyst for growth.

It is also questionable whether the Federal Reserve's Jihad will have a net positive impact on economic growth, given the negative impact on the saving class who would be in a position to spend more but for the Jihad. The Real Cost of The Federal Reserve's Jihad against the Saver Class What Are the Reasons for a Continuation of the Fed's Jihad Against the Saver Class

This is a link to a positive article about Trustco (TRST) published by Motley Fool. I am near break-even on my position 370+ share position. I am reinvesting the dividends. REGIONAL BANK BASKET STRATEGY GATEWAY POST

I do not believe that there was any news that justified the market's robust rally yesterday. Some traced the spurt to an uptick in German business confidence, an index that moved up to 107.2 in November from the prior month's 106.6. Bloomberg This sounds ridiculous because it is.

Another purported reason was an increase in building permits. Building permits did jump due to more apartment starts. MarketWatch I would not call a 32.2% spurt in multi-family housing starts, off historic lows, as synonymous with a housing recovery. There was also a slight downward revision in housing starts for the prior month when the consensus called for an upward revision.

The rally yesterday appeared to me to be another one based on hopium. Consequently, I made a small add near the close yesterday to a double short. My current relatively small hedges went from profit territory to slightly negative yesterday.

1. Sold 300 of the Bond CEF CMK at 8.1928 Yesterday (see Disclaimer): Other than two bond CEFs that own U.S. inflation protected securities, CMK was the lowest yielding one currently owned by me. This CEF does pay monthly dividends and was selling at over a 9% discount to its net asset value last Monday. CEFA

I took a small long term loss on this security. Bought 300 of the Bond CEF CMK at $8.39 (August 2010 Post)

It is important to double check the yields provided by financial websites. Marketwatch currently shows that the yield for CMK at 9.52% which is simply not correct. This CEF pays a monthly dividend at the rate of $.038 per share. MFS InterMarket Income Trust I In December, the rate was increased to $.065 but this was not a new monthly rate. Instead, there was an additional distribution for December 2011 so the fund could pay out its income for 2011. Marketwatch assumes that the $.065 rate will be paid for 12 months which is how it calculates a 9.52% yield. A more accurate yield would be 5.56% ($.038 x. 12 ÷ by $8.19 total cost=5.56%). I would not assume any additional payment in December 2012.

I have a few other sales from yesterday that I will discuss in subsequent posts. I am coasting until the end of this year.

2. General Mills (own: Common Stock Dividend Growth Strategy) General Mills reported adjusted earnings per share of 76 cents for its Q/E 11/27/2011, its second fiscal quarter, unchanged from the year ago quarter. The consensus estimate was for 79 cents on that basis. The company reaffirmed its full F/Y 2012 guidance of $2.59 to $2.61, excluding integration costs connected with the Yoplait acquisition and mark-to-mark effects. Margins are being pressured by higher costs.

AMAT/Some Positive Economic News Last Week/Sold 100 TRK at 13.96

2011-12-20T05:44:00.128-06:00

The author of this article at MarketWatch argues that Applied Materials would be good investment for those with a two to five year time horizon. I am likely to add to my 50 share position when and if the price sinks below $10. I am currently sitting on a small unrealized loss after trading AMAT for small gains. Bought 50 AMAT at $12.45 (6/28/11 POST).

Fitch put several European nations on credit watch for a potential downgraded last Friday, noting that a comprehensive solution to the credit crisis appeared "beyond reach" Reuters Bloomberg WSJ

The U.S. GDP is around $15 trillion (research.stlouisfed.org). The total indebtedness is around $52 trillion (Total Credit Market, or about 350% of GDP. Debt was at 250% of GDP in 1998. Of the total indebtedness number, the federal government's share is over 14 trillion and growing at over a trillion per year annually now.

Federal Government Debt: Total Public Debt (GFDEBTN) - FRED - St. Louis Fed

The S & P 500 will need to close above 1,257.64 to end higher for 2011. ^GSPC Historical Prices This index closed at 1205.35 yesterday. Given the inflation rate and dividend yield for this index the closing number would have to be slightly higher to provide a real rate of return for 2011.

There was some positive economic news last week. The PMI number released by the N.Y. and Philly Federal Reserve Banks showed expansion in the manufacturing sector. www.philadelphiafed.org.pdf Empire State Manufacturing Survey- Federal Reserve Bank of New York The new order index rose in the Empire state region to 9.5.

CPI was unchanged in November on a seasonally adjusted basis. Over the past 12 months, CPI has risen 3.4% before seasonal adjustment. Consumer Price Index Summary

The seasonally adjusted initial claims for unemployment fell to 366,000 for the week ending December 10, much lower than the consensus estimate of 380,000. ETA Press Release: Unemployment Insurance Weekly Claims Report This was the lowest number of initial claims since May 2008.

Bank of America closed below $5 in trading yesterday. Goldman Sachs declined $2.4 to close at $87.7, which is close to a five year low. GS Stock Charts

Paul Krugman argues in his NYT column that China's growth is not sustainable and the numbers released by the Chinese government are suspect.

1. Sold 100 TRK at 13.96 Last Friday (see Disclaimer): I had bought this position in two fifty share lots. The first was bought at $14.65. I then averaged down at $11.65 (11/7/11 Post). I am going to re-deploy the proceeds into a higher yielding security. I am still interested in Speedway Motorsports as a long term value play, but would prefer an entry point for 100 shares nearer $11.65 than $14.65. The current quarterly dividend is ten cents per share. By splitting the purchase into two lots and averaging down, I was able to realize a small profit on the shares plus the dividend.

TRK closed at $13.88 yesterday.