Tuesday, February 24, 2009

Masters of the Universe=Masters of Disaster/AIG & Financial Black Holes/M, CBR,TGT/BUY OF ISF

From henceforth, the bonehead egomaniacs, formerly know as the Masters of the Universe, will be called by a more appropriate label-Masters of Disaster. Without a doubt, these clowns need to have an entry in the Guinness Book of Records as the highest paid doofuses in the history of mankind. Likewise, henceforth, the phrase "financial wizards" will be characterized as a contradiction in terms, an oxymoron, or maybe I should just say Financial Moron to avoid confusion and just go easy on the sarcasm. Some readers of these posts may have already caught my sarcastic drift and tone when discussing the wizards and understand that I view them collectively as the most overpaid and incompetent people that have ever walked the face of this planet, maybe in the Universe since the beginning of time and most probably until the end of time.

 It is unfortunate that they are all Americans. It is almost embarrassing. I offer my apologies to the world on their behalf since they have never uttered an apology about anything in their miserable lives and still regard themselves as the cream of mankind, the apex of what we have been struggling to achieve since Adam and Eve walked with the dinosaurs (yes, that is a fact and you can see it for yourself in a Kentucky museum: NYTimes.com)

 But that is what happens when a civilization rewards above all else the business of shuffling papers around and creating artistic methods to screw people out of their money rather than making and inventing something that is actually useful.

The Masters of Disaster at AIG are preparing to report a 60 billion dollar loss for the 4th quarter of 2008 next Monday. This will likely result in further debt downgrades and the requirement that more collateral be posted to support its contracts. The talks with the government revolve around replacing a 60 billion loan government loan with equity and stakes in AIG's operating units.

Black hole is an inadequate description for the phenomenon know as AIG. WSJ.com 

My sole exposure to Macy's is a small position in one of its senior bonds that has tanked over the past week. The company reported a profit of $1.06 excluding items on sales of 7.93 billion. After several downward revisions, the consensus estimate was 99 cents. Sales fell from 8.5 billion in the year ago quarter. Macy's expects a very tough 2009 with earnings in a range of 40 to 55 cents excluding restructuring costs. MarketWatch I have been weighting the possibility of increasing my senior bond exposure by less than $500 but have not made a decision. Macy's is looking to take as much as a 5.5 billion asset impairment connected with its 2005 acquisition of May Department stores. WSJ.com

I still have no interest in the common.

It is depressing to just look at names of some of the companies in the Dow Jones Industrial Average, supposed to be the cream of American industry. Those names include General Motors, Bank of America and Citigroup. AIG was in the average until it was just too embarrassing to keep it, and consequently Kraft was substituted for AIG. USATODAY.com

The giants of American industry are pressing for more assistance from the government. U NYTimes.com

Ciber, a small position at 50 shares, reported flat 4th quarter revenues and a decline of GAAP EPS to 10 cents per share compared to 12 cents a year ago.  

The Office Depot earnings looked horrible. MarketWatch Target's earnings fell 41%. TGT: Summary for TARGET CP - Yahoo! Finance RadioShack earned 50 cents versus the 73 cent estimate. Reuters I always underweight retailers. I do not own any common shares in any of them and it is way too early to even start building a small position. There will be nothing but bad news coming for the remainder of 2009. Wal Mart may have the best chance to hold its current price but no retailer will be immune to the declines in retail spending likely to occur through most of 2009.

The Case-Shiller index for housing prices continues to show declines, with both the 10 and 20 city indexes showing an 19% decline in 2008. Prices have fallen by 27% from their 2006 peak. Phoenix is down 46% since its peak. WSJ.com

Most experts who use housing affordability measures, such as price to income, believe that further declines are likely.

Novartis went ex dividend today and this caused NVS to fall below its 52 week low in early trading today. NVS 

I have mentioned that I view the ING and Aegon preferred stock issues as both dangerous and tempting. I bought 50 ISF at 4.6 in my traditional IRA this morning.

At that price, the yield is over 34%. If it continues to fall in price significantly after going ex dividend tomorrow, I will include it in a Roth conversion. The coupon is 6.375% on a par value of $25, and this is a perpetual security. The brokerage claims that it has a maturity in 2049 but the prospectus says it is perpetual. The common shares fell to below 4 in early trading today. This leaves me about $500 to invest in these speculative preferred stock securities issued by these two Dutch companies.

I write this blog in a stream of consciousness. It has not improved my writing but it has had a tremendous impact on my typing ability, so much so that I am confident that I could now find a job as a secretary if the DJIA falls to its lows last seen in 1932. When I took typing in the 9th grade in Huntsville, Alabama, I was the only male in the classroom and the teacher discriminated against me by giving me a C+. I am confident now that I could beat all of those girls in a rematch.

I am sure that I have mentioned in prior posts that my trading restrictions apply only to my non-retirement accounts, by far my largest, and do not apply to my retirement accounts where I maintain a fairly constant 60% stocks/40 bonds split and only keep cash as a temporary allocation. I try to stay fully invested in my retirement accounts and just try to reduce risk with my trading. VANGUARD ASSET ALLOCATION: IS VANGUARD PROUD? MORE ON VXD

 I am considering switching the retirement asset allocation in favor of bonds but have not done it yet, preferring to use my stock allocation to move into and out of positions which has proven beneficial during this bear market. I sold recently my position in Progress Energy at around 40 in a retirement account and just substituted Pepco (POM) at around 15.4.

I also bought 30 shares of GE today in my regular IRA in the 8.60s somewhere.

I also placed a below market limit order to buy 50 of an Aegon preferred getting smashed today that I do not own. I am more confident in Pepco than I am in GE. So POM was put in the ROTH which has a lot of excess cash now whereas GE was bought in the regular IRA in case it falls further which will make it eligible for the next Roth conversion. Reinvesting the cash in the Roth and redeploying the proceeds from bonds sales in the main account should keep me out of trouble during the next few weeks.

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.