Thursday, February 5, 2009

BUY OF 50 KSA IN IRA AT 16.31/BAC Management: Failure is to Kind a Word to Use/CB & L

I just bought 50 shares of a TC, KSA, at 16.31 in an IRA.  My reasoning for putting this security in my traditional IRA is that I will simply transfer it to my Roth IRA if it goes down a few points, and sell it if it goes up a few.  Hopefully I will collect one or more interest payments.  I had some good luck with timing some Roth conversions just right last year.  The underlying bond in KSA is a junior bond issued by Provident Financing Trust, and Provident has been acquired by a company called Unum (UNM), which is a disability insurance company. I have zero interest in its common.  The coupon on the underlying security in KSA is 7.405% but the TC has a higher coupon at 8.5%.  Maturity is 3/15/2038.   Par value is $25.  Interest is payable semi-annually in March and September, and the next ex date is less than a month away near mid-March.  Needless to say, a lot could go wrong before a 2038 maturity date, so I will have to monitor the company as always for a bond position.  I also have bought a similar TC containing the same underlying security in a taxable account with a 100 share buy, KCC, which is selling for a lower price and has a 8.2% coupon.     But in the meantime, the current yield based on my $16.31 cost is close to 13%.   Interest may be deferred for up to five years for any reason provided UNUM does pay a dividend on a junior security such as common stock.  This makes this issue very similar to bank issued junior debt that I sometimes refer to as as debt preferred or trust preferred. The junior nature of the underlying security in KSA, plus the rating of this bond, does keep me from buying more.  (150 would be my limit and it would take a 10 price to shake me out of the position.)

This article from today's WSJ contains some detail about how AIG lost a ton of money buying subprime securities with the cash collateral it received for loaning out securities that it owned to other firms.   I have previously discussed that particular brand of stupidity.  They were able to goose their returns some for a brief period of time, and then suffered catastrophic losses.  And they want a bonus?

Obama wrote a column in the WP claiming that the failure to pass the stimulus could lead the economy to sink into a recession for years.
Some of the more moderate GOP senators are targeting some spending cuts.  The ones mentioned in the NYT article that they have identified need to be eliminated. 

In several of these posts, I have mentioned that I am investing cash flow as long as the S & P 500 stays above 815.  I have also mentioned that I have taken steps to increase my cash flow that will give me a little more punch.  These actions at least reflect a slightly more positive view of current stock prices as being acceptable for long term buys. 

The technical analyst at Barron's is claiming that the market's health is improving.

I received an inquiry about how long has it been since Bank of America has sold below $4.  I do not know for sure.  The chart that I looked at this morning from Yahoo goes back to 1986, and it adjusts for stock splits.  That chart shows that 4 bucks or thereabouts is the lowest since at least 1986.  A longer term chart from Marketwatch is hard to read, but it appears that the 4 handle destroys all of BAC's share appreciation since the early 1980s.  There is no other word to describe such a result other than failure, and calling Lewis a failure is being charitable.  Undoubtedly, part of the downward price spiral in BAC stock is due to factors such as dumping by investors who are prohibited from owning stocks selling for below $5 and dividend oriented ETFs, closed end and open mutual funds.  I am just saying no to dividend oriented funds due to their generally large concentration of banks which are rapidly eliminating their dividends and plunging in price as we already know. 

I have grown weary of my fellow investors allowing corporations to generously reward their employees for failure, but I am use to it and accept that it will most likely never change.  The walking zombie "professionals" who vote shares for mutual funds apparently have no problem in sustaining the current course.  I would hope that individual investors would take another hard look at executive compensation, now at over 400 times what their average workers earn in salary from 40 times in 1980.  CBS NewsAnd ask yourself some questions.  Do you think that you are getting your money's worth?  Do you really think that the executives are even competent and deserving of anything other than a shove out the door? Are you really worried about losing the senior executives for a better paying job that pays more, assuming that there are some to be had?  As a general rule, it may be best to assume that any executive is being paid too much, and that assumption would be correct more than it is wrong. 

The budget problems in California are starting to resemble a third world banana republic. C CBS News

I had a deer in the headlights look when I saw GE fall to $10.66 this morning. 

Durable goods orders fell 3.9% in December.  Yahoo! Finance

I was just listening some to Larry Kudlow preaching the same gospel that Bush followed for eight years, virtually doing everything Kudlow would want to be done, and the results achieved have yet to alter one line in his theology  or to even to cause him to engage in a moment of re-evaluation.   Kudlow is an excellent finger pointer however. And W was without a doubt the best shoe dodging President in U.S. history.  Kudlow apparently does not want to explain the economic statistics for eight years of W, some of which are summarized by me in the following linked posts.  The economy must be in great shape according to Larry,  since he continues to recommend more of the same.   W's News conference: Reflective or disingenuous?/Pickens on Oil/TECH TITAN VALUATIONS/LLTC /cramer  Tax Cuts for the Wealthy: A Perpetual Growth Machine?/ Job losses/commercial real estate goes begging in Middle TennesseeAnd where are we now exactly, Larry?  It can not be reasonably disputed that W presided over the weakest economic growth in several decades, and that is not counting 2009 which is likely to be dismal in his column. Bush Lead During Weakest Economy in Decades
The national debt increased from 5.7 trillion  to 10.6 trillion as of the day he left office. CBS News
One of my speculative REITs, CB & L Properties, reported earnings this morning. CBL & Associates Properties Reports Fourth Quarter and Annual 2008 Results: Financial News - Yahoo! Finance   I have a small position in its common stock and in one of its cumulative preferred securities, CBLPRC. A 300 Point Misunderstanding I did mention buying 40 shares of the common at $3.7LATE DAY TRADES: GCI, CBL, FR, SLG, NYT, NWSA, and I have taken the position up to 150.   I am concerned about the high leverage and short term maturity schedules, particularly in light of the credit crisis and the clearly deteriorating retail sector. F.F.O. was 80 cents a share and occupancy fell to 92.3% from 93.2% a year ago.  The temporary guidance for 2009 calls for FFO between $3.1 to $3.25.  In an earlier post, I said that I would decide after this earnings release whether to keep my small positions in place.  BAC/ DEMs Being Dems/HRPT PROPERTIES/ DRIVING HABITS IN THE SUV CAPITAL   I intend to keep the positions for now.   I will not however reinvest dividends, and I am not going to add to what I own anytime soon.  I am just in a wait and see mode on this one. 


  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  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.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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