Wednesday, October 8, 2008
MET LIFE FALL AFTER WARNING
The Met Life (MET) common stock fell about 14% this morning. I sold my common stock earlier in the year. I have recently been buying on dips the Met Life floating rate preferred issue (MET-pa), usually in 50 share odd lots to average down. I do that when I become very cautious and I am walking on egg shells now. I will place a limit order to buy shortly after posting this blog. For those who know me, I am not embarrassed to place an odd lot day limit order below the existing market when I am in a preservation of capital mode. This security has already traded down to 8.25 this morning and is currently a few cents over 9. The announcement today by MET LIFE understandably impacts the shares of the common stock but it has no meaningful relevance to the desirability of the preferred stock in my opinion. For that security, the main issues are whether Met Life can pay the dividend and the potential positive impact on yield relating to the float provision tied to 3 month LIBOR (that rate was 4.32 yesterday which will make it the applicable rate if it stays that high because the floater provides for the greater of 4% or 1% above 3 month LIBOR). According to Reuters, Met is still earning a lot of money and its cash cushion increased from 15 billion to 21 billion during the latest quarter. Reuters The proposed sale of 75 million shares, Yahoo! Finance, while dilutive to existing shareholders, is a net positive for a preferred stockholder interested mainly in the company surviving and just paying the dividend. I discuss the risks of this issue in my prior post which at the METPRA title in it and I would suggest anyone read the prospectus for the floater available at the SEC and my discussion of this security is subject to the same caveats contained in my prior blog on this subject.