Tuesday, October 21, 2008

Notable News for Today 10 21 2008

The three month LIBOR rate continues to fall from its recent high, a tad over 4.8%, with the setting this morning at 3.83375%. Libor's Move Downward Continues - WSJ.com As I mentioned in many posts, this is relevant to the floating rate preferred stocks.   If it continues to fall, and a normal spread between this rate and the three month treasury bill rate ensues, then the LIBOR portion of the yield equation will not provide much benefit, if any, in the short term over the guaranteed rate in these securities.  They do provide some protection in a rising interest rate environment while providing a yield floor that is attractive with the current low interest rates on alternative investments. Floating-rate Preferreds

The midwestern banks continue to struggle with Key Bank (KEY) , Fifth Third (FITB) and National City (NCC)  posting losses for the third quarter.Ohio regional banks post quarterly losses, build reserves - MarketWatch  I viewed the report from Key simply because I have a position in KEYPRA, with  shares bought at 7 as indicated in an earlier post.  I have about a 71% gain in those shares and maybe I could switch to something else that has more attractive features, like seniority and and outside of the less than favorable preference rules of the FDIC.

MMM had a generally favorable report and did not change its outlook. 3M net climbs 3.2% on nearly $7 billion in sales - MarketWatch3M posts 3rd-quarter gain on higher sales abroad: Financial News - Yahoo! Finance  The stock is rallying this morning.  I have always liked this company but I got nervous a few months ago and sold my position about $20 higher than it is today.  This is one company that I monitor and I will return to it within the next year I suspect.

Caterpillar, which has been cut in half from its 52 week high, reported that earnings were down about 6% from the year ago quarter, but reaffirmed its outlook for the remaining part of the year. Caterpillar profit falls, maintains 2008 forecast | Markets | Markets News | Reuters Sales  rose 13% to almost 13 billion, due to the continuing strength in emerging markets offsetting the slowdown in the U.S.  I do not own this one, but will consider a small odd lot purchase if it continues to fall.  The dividend is over 4%.  I doubt that I will take even a small position before the 2nd quarter of 2009 unless it tanks in a big way before then.

With some of the investments that I make, like BEEPRA yesterday, these are very small positions for me.  I would not miss a beat even if it went to zero.  I took a small position which reflects my personal evaluation of the potential downside, evaluated first, compared with what I was being paid to take the risk, which was a very large dividend yield at 28% annualized, plus the possibility of capital appreciation, all taken in the context of my unique risk profile and financial position.     The preferred issues had been cut in half during the recent troubles.   After measuring and balancing those risks, I did not take a significant position when buying just 100 shares.  You have to be mindful of the potential downside and whether you can afford a realistic possibility of the stock going poof.  I much prefer dealing in higher quality investment grade debt that is being substantially mispriced,  as was the case with many TCs discussed earlier like the two containing senior debt from AT & T with JZE rallying 50% off my buy point at 12.5, but I can not ignore these speculative positions that pay me outrageous sums provided they stay out of bankruptcy.  The Hertz TC is probably the highest yielding, most risky one, discussed in two prior posts, that would give me a 100% annual return based on my cost for about 3 1/2 years assuming it survives for that long. TRUST CERTIFICATE HERTZ BOND DKR

No comments:

Post a Comment