Thursday, December 11, 2008

CB Richard Ellis/Mortgage Rates/PFX/ SLM-OSM

There was a summary of study done by some professors from San Diego State about how well buy, hold and sell analysts' recommendations performed over the 1998 to 2005 period.  Stocks with sell ratings went up the most with buy rated stocks going up less than hold and sell ratings.  I thought about that for a moment to allow it to sink into my occasionally thick skull.  

I am not in the market for a mortgage on my home.  I intend to live the rest of my life debt free. If I needed a mortgage, I would start looking at my alternatives.  There was a report yesterday that the average 30 year mortgage hit 5.47%.  The 15 year mortgage fell to an average 5.2%.

I mentioned the other day a buy of a senior bond from Phoenix insurance at 6.06 and the buy was in one of my retirement accounts.  I will generally try to keep some kind of stop loss for an individual security investment in that IRA, and I will do a stop loss in that account at 4 for PFX.    

The market appears to me to be in a range bound movement of mostly in the Dow 8000 to 9000 range, with very fast movements up and down in that range. It does not appear to me, sitting here in the Republican SUV Capital of the World, that market participants have any confidence in the staying power of a rally to and through 9000 on the Dow.   We may have put in a low on November 20th at 7552 for the Dow average and 752 on the S & P, but even that remains to be seen.  I know that I am not about to make significant additions to my stock allocations anytime soon and I would not even consider dipping into my cash allocation to buy stocks now. 

As I have said, I am investing free cash flow and I had some unexpected cash paid into my account today from the Matthews Pacific Tiger fund, which I did not want, and I expect a few other funds will do the same to me.  I also have dividends and interest payments coming in mid-month as always.  So I will plow that back into a few stocks.  Anything bought now will likely have to be held a long time to make it worth the risk of buying it during the worst bear of my lifetime.  

My first inclination was to buy 50 shares of CB Richard Ellis (CBG) which has been mauled and smashed to little pieces- and unlikely to recover anytime soon.  But, and there is always a But, I can not time the point when a stock will start its own private bull market.  Fifty shares of a stock selling for less than $4 is probably worth the risk particularly since I am playing with the house's money on that one.  I discussed this stock briefly in a couple of prior posts. 
I knew that I had owned it and went back to find my last sale and how much profit had been generated over the past 2 years from this stock.  I have not owned CBG since late 2007.  The last sale was made as part of my forced reductions at around 23 in the later part of 2007, caused by my VIX model, and a prior sale was also made in early May at close to 38. (some of the Barron mutual funds have apparently rode CBG down all the way to its current position with large positions too)   I must have not had much confidence in CBG since my maximum position reached 70 shares, the position sold in May 2007, and my re-entry was only for a 30 shares buy and a very quick sale due to the VIX MODEL forced reductions.  The total profit was $330.93 realized in 2007.  So a re-entry now for a long term hold would be with the house's money. So, I will do it. Even though this is extremely minor, I read some stock reports on CBG from Value Line, Morningstar, and S & P.  With the exception of Barclays, all reports were very negative.  Value Line did point out the large recovery potential.  It is also negative that CBG had to raise cash recently by selling around 57.5 million shares at 3.77 (raising about 207 million) after failing to sell a private offering of preferred equity. (the company repurchased over 600 million worth of shares in 2007 at an average cost of $22 according to Morningstar-not good!) It is undoubtedly true that the commercial real market is in a major downtrend and CBG is heavily in debt for its size.  But a lot of the debt may not need to be refinanced until 2011 and 2013, and the downturn in commercial real estate may very well be just a memory by then.  CBG is the largest real estate services firm in terms of sales and has a global reach.  As I said, even a 50 share buy is questionable in this company under current conditions, and I will most likely have to wait years before I sell it. Patience will have to be a requirement.  If it ever gets back to 38, I will criticize this purchase today, saying to myself that I should have bought 100.  If it goes to zero, I will blame my Head Trader. Whatever, I am sure that I would not have touched it now except for the fact that I can be extremely patient with the house's money.   I just happened to finish my research shortly before the closing bell when the market was hitting the skids worrying about Financial Armageddon caused by the GOP's tough love for the UAW and the order for 50 at the market was filled at 3.49 and it continued to fall after my purchase closing at 3.37-down over 17% today.  Patience is the operative word.  Look up and not down.

Sallie Mae had some bad news that impacted the pricing of both its common stock and bonds.  SLM announced that it expected charge-offs from its private student loan portfolio to rise from 600 million this year to 1 billion in 2009.  It did say it expected the losses and had sufficient funds to cover outstanding debt and to fund new loans.Yahoo! Finance
I do not own the common.  I reviewed the story solely due to my position in OSM, the CPI floater issue by SLM, maturing in 2017  and previously discussed. Investment Grade Corporate Bond Spreads/ CPI FLOATER: OSM This news release was enough to keep me from even adding another 50 shares of OSM but not enough -yet-to cause me to sell the bond position.  It is a matter of concern and will require monitoring throughout 2009.  

 I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. In these posts, I am acting as an unpaid financial journalist and an occasional 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.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   

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