Friday, November 14, 2008

Whiplash By A Manic Depressive & ING Preferred

The market's behavior is what you would expect of a person in a manic depressive state.  The despair yesterday morning was palpable, as the Dow average sank below 8000, down over 300 points shortly after noon.  For whatever reason, buyers stepped up to the plate and drove the averages up around 900 points before the close.  The buying may have been triggered simply by a move below 8000.  This action does not signify the end of the bear market or even the beginning of the end phase.  Possibly, if you were fortunate enough to buy 1000 share of Emerson Electric at around noon, you could sell 800 near the close, pocket a gain and hold onto the remaining 200.  For most people, these sharp swings up and down are not tradable rallies and are characteristic of  bear markets, mere short term interruptions in the overall negative downturn.  Personally, I believe the market has already corrected more than enough to account for a severe recession lasting for most of 2009.  However, the despair and depression characteristic of  typical bear  will cause a fall beyond rational levels, just as euphoria and greed will accelerate a bull market to extremes to the upside.    Anyone buying now may have to wait many months before seeing the light of day.  Consequently, if I take the risk of buying common stock now, I will not be looking to clip a point or two on price, a strategy that is bound to be unproductive, but I realize that I will have to hold well into the next bull market, hoping that most of my choices now will double or triple in price.  While no one knows what the future will bring, it is hard for me see now any need to rush into stocks this month or even this year, with most stocks on my radar screen having difficulty sustaining any forward momentum.  As long as the VIX stays at the currently unprecedented extreme level, I do not foresee an end to this bear market or even a sustainable up move.

I did note in today's WSJ, market data section on dividends, that ING declared its regular preferred stock dividends for INZ and IND.  ING and Aegon have both eliminated their common stock dividend for the remainder of 2008.   Aegon also declared its regular preferred stock dividends on several of its preferred issues, including AEV, AEH, AEF & AED, yielding at the current prices anywhere from 17.59% to 18.11%.  Dividends - Markets Data Center -  I do not own any of those issues and AEB, which I do own, was not listed.  While I do not know this as a fact, I suspect that the reason for the delay has to with the computation period for the interest calculation using either the 4% guarantee or the percentage based on LIBOR.  I also suspect the reason for the fall yesterday in AEB has to do with being omitted from the declaration of the other Aegon preferred dividends.   I also noted in the dividend section that the Trust Certificate containing a Verizon senior bond that I own, XFL, will also go ex-interest later this month.   

If I had seen the TC containing the Goodyear Tire bond, XKK, fall below 4 yesterday, I would have bought it. See discussion,    Emerson Electric and the Goodyear Tire TC XKK  
The fall was apparently precipitated by S & P putting Goodyear on creditwatch with negative implications, along with other suppliers to the auto industry.Yahoo! Finance
Goodyear responded that over 80% of its sales were into the replacement market, with only 8% of revenues connected to new vehicle sales by the American auto companies.  Goodyear is heavily indebted but still profitable.  Goodyear Reports Third Quarter Results: Financial News - Yahoo! Finance  This particular TC has an 8% coupon and a $10 par value, whereas the underlying bond has a lower coupon of 7%.  I sold 100 in a retirement account after the most recent ex-interest date in mid September at 8.3, and will probably place a GTC limit order to buy it back somewhere south of $4.  At a price of $4 per share, the yield would be 25%. 

Since I sold the Cousins Preferred stock on a pop earlier this weekCOUSINS PREFERRED B (CUZPRB), I am in the market today for a replacement that will give me more of a yield than CUZPRB.  One possibility is to add another 50 of CBLPRC which has fallen about $1.5 to $8.5 since my nibbleCB & L PROPERTIES: COMMON STOCK DIVIDEND CUT., but I am concerned about that company's debt, short maturity schedule, and exposure to retailers.  It is also being adversely impacted by the gory news at General Growth Properties which is another bullet dodged by me, having never owned GGP.  GGP: Summary for GEN GROWTH PROP INC - Yahoo! Finance  GGP is now at $.38 per share and just got kicked out of the S & P 500. Business First of Louisville: I think that I will forego that add for now, although it is tempting at a price that generates close to a 23% yield.   Instead, I am going to focus today on another one which I will discuss later if I decide to buy it.  

The amount of money lost by Freddie Mac is just stunning.  Yahoo! Finance 

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.    

I am not surprised by the record plunge in retail sales for October.  Also, sales for both September and August were revised downward. Retail sales plunge record 2.8% in October - MarketWatch Consumers have put their wallets away and are curtailing spending in a major way given their anxiety about the future. 

Nokia also issued a warning about 4th quarter and 2009 mobile phone sales. Nokia warns mobile device sales will fall in 2009 - MarketWatch  As of a few minutes ago, NOK was trading down $1.9 in the pre-market on heavy volume to 12.25, which would be a 52 week low. This kind of company will fare poorly in a recession.  At the start of the current bear market, NOK was trading at over 40 and is now likely to hit, possibly today, its lows from July 2002 and August 2004.  A close below 11 would take the stock price back to levels last seen in 1998.  Nokia is on my monitor list.  I do not own it and do not plan to buy it anytime soon.  

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