Wednesday, December 31, 2008
Took Tax Loss on Linta
I am having to leave HQ earlier than I expected so I made a quick decision to take a tax loss on LINTA and I am still positive in my short term gains for the year. But I do not have the time to search for another candidate. I will explain why I sold 50 LINTA rather than averaging down early next year. LINTA and PBI Redux
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Hi Tenn
ReplyDeleteI have a follow question on AEB. I understand it is a floating rate, however the other preferreds (AEF) are paying about 5% more. I know they do not float but still that seems like a big difference. Any thoughts on why Aegon preferreds which are a3/a- rated have such a high interest rate when compared to other similar rated issues from BA or ML. Thanks
I have about 200 preferred stocks on my monitor list including two Aegon perpetual preferred stocks, AEF and AEH. They do yield over 16%. I chose to go with AEB because of the float provision which was an important criteria. My last buy was at 5.5. I also recently bought two perpetual preferred stocks from ING, another Dutch company, with the last one being INZ at somewhere around 7 which I discussed in a post. I do not like perpetual preferred stocks for the reasons that I mentioned in my post and under-weight them. At the current prices, I would not jettison AEB but I might prefer buying one of the others for the higher yield. It is always relative and relative to the time a decision is made. I have concerns about all life insurance companies as I have discussed in my posts but the current downdraft in their senior bonds and bond like investments like preferred stocks (classified as equity by accounting standards) did present me with some buying opportunities. Bank preferred stocks are Trust Preferred, more bond like than regular preferred stocks but with very liberal deferral of interest provisions. They usually have a maturity date but I am always cognizant that the FDIC now gives priority to uninsured depositors over this debt, I believe as a result of a 1993 change in the preference laws after the S & L debacle of the the early 1990s. I do trade them as shown by a quick turn on KEYPRA and most of the major bank preferred issues including those from BAC and others are monitored for buying opportunities, but I do not consider them long term investments due to their risk. Some of the risks involving Aegon are discussed in my blog and can be found by simply entering Aegon in the search field. I also discuss a great deal why I do not pay a whole lot of attention to ratings from Moody's and S & P and mostly try to rely on my own judgment. I also type very fast and think fast and all of these blogs are written in a stream of consciousness so some factual errors crop up as with the recent one made on the float provisions in Merprl and bacpre.
ReplyDeleteI would agree that 5% is too much to pay for a float provision which gives some inflation protection but is AEB mispriced or AEF mispriced or are they both mispriced for the yield and risk taken by a purchaser at the current price? One point to always keep in mind is that these are very junior securities. For insurance companies, they are obligations at the holding level.