Friday, October 31, 2008

Notable News 10 31 2008

Well, October was the worse month for U.S. stocks since 1987. There was a pretty bad day in October 1987, which was repeated in slow mo during the first 3 weeks of this October.  Consumer spending continues to fall with the Commerce Department calculating the fall as minus .03. The good news is that this last week is one of the better weeks for stocks.  But when you are in the hospital after a wreck with broken bones galore, it is not particularly soothing to hear that everything is okay because you are still alive. 

Cousins Properties corrected a news story that suggested it had major financing concerns. Cousins said it only had 8.6 million in debt maturing before the end of 2009. Cousins also said it had enough cash on hand to complete its developments without accessing its credit line.

Today, for the first time, I bought 50 shares of Alcoa (AA) at 11.49. At that price the dividend is about 6%. The demand for, and the price of aluminum has been falling and Alcoa has had to cut back production. MarketWatch

This last article says aluminum prices have fallen dramatically. After Alcoa reported its earnings for the 3rd quarter, its share price fell to the lowest level in 13 years at over 14 and has continued its decline since then.  Earnings fell 52%. It would be unduly optimistic to believe the deterioration in both demand and price for aluminum will abate anytime soon. But, I am confident that the world still needs it and demand will return of course. Can Aluminum (And Alcoa) Shine Again? (AA, CENX, RTP)  |  October 14, 2008  | By Stephen Simpson - Investopedia Advisor The only  question is whether the decline in price already reflects the dim near term prospects.  

Having shed over 13 years of gains in the stock price, with the current price being around where it was in early 1995, I was willing to stake a small amount of cash that the market has overreacted to the downside. I reviewed the Argus report and found it to be favorable for the long term, maintaining a 50 target price. The reports from Barclays and S & P were far less bullish, expecting only modest appreciation in price over the next 12  months.  When I do a buy like this, I go in small so that I can afford to hold for 3 to 5 years. Alcoa hit a 52 week high at over 44.  I would be very pleased to receive the dividends for five years and sell at over 30.

I have not bought the ETF for investment grade bonds (LQD) yet because it is selling too far above its net asset value. As of the close yesterday, the NAV was 85.91 and the price was 88.01. I will not buy an ETF selling at that much of a premium to its NAV, but I do check it everyday to see when and if the spread narrows. 

The Life Insurance companies have had the crap kicked out of them recently.  I discussed Hartford yesterday.  I saw today that Prudential had traded down to 23, and has now recovered to 30, already trading 3 times the  normal daily volume.  The 52 week high was 101. Wow! I do not own the common but I do own one senior bond maturing in 3 years.  Part of their problem is discussed in these articles. 

Sun Life, a Canadian insurance company that owns MFS mutual fund group, has also been cut in half SLF 

Lincoln National is down to 17 and change after it a 52 week high of  64. LNC: Summary 

While I am not going to buy common stock in Prudential or Hartford, since I do not want anymore exposure to them beyond my existing senior bond position, I am considering taking a nibble on Sun Life or Lincoln, thinking that a recovery in the stock market and the corporate investment grade market will solve a lot of their current problems. 
  I am not a financial advisor but an individual investor trying to navigate my way through a mind field. In these posts, I am acting as an unpaid financial journalist and an occasional ornery political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.    

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