Wednesday, February 18, 2009

Note on Heinz and BAC Trust Preferred Pricing/Bought GE at 10.89 with Cash Flow

The current fiscal year ends in April 2009. HNZ: Analyst Estimates for HEINZ H J CO - Yahoo! Finance  The consensus estimate for fiscal 2010 is $2.90 or no growth in earnings. 

The willingness of private investors to hold bank debt is driven home by the price of BACPRB, a junior bond issue of Bank of America, that has fallen almost 15% today, to 8 and change, about 1/3rd of its $25 par value and priced to yield almost 20%. BACPRB Stock Quote - Bac Cap Tr X Stock Quote - BACPRB Quote - BACPRB Stock Price This tells me that there is no new source of funds available for this bank in the private sector at rates it could afford to pay and stay in business.  I did recently trim my short term BAC bond exposure in 1/2 and I am not totally adverse to spending less than $400 of those proceeds to buy a longer dated maturity yielding over 20%. When I last commented on this issue it was yielding 15%.  Financials: 3 Strikes and Your Out/CISCO/Regulations and Conservatism I am just thinking about it.  I have to tell myself that a seizure by the FDIC would probably leave me holding a certificate with the same value as used toilet paper. 

S& P downgraded Prudential's debt to A.S&P downgrades Prudential outlook on investments: Financial News - Yahoo! Finance  I do not own the common but I do own a long term senior debt issue in TC form, JZH, and a short term bond. 

The Fed decreased its 2009 forecast for GDP and increased its projection for unemployment. Fed downgrades economic forecast for this year: Financial News - Yahoo! Finance  Industrial production plunged in January with operating capacity now down to 72% which is the lowest reading since February 1983.  As I keep saying, even though I am a staunch fiscal conservative, I am willing to support the massive efforts being undertaken now by the government based on my view that we are skirting the edge of financial disaster of epic proportions even with this massive assistance.  If Marsha had her say, we would already be knee deep into the tar pit of Financial Armageddon with no hope of rescue for years.  I said in an earlier post today that I am rating these programs on a scale of 1 to 10 for undesirability.  Yes, there are all undesirable, but necessary.  If AIG, Merrill, Fannie, Freddie, and Citigroup had been allowed to collapse last year soon after Lehman, as they all richly deserved to do from a moral and equitable point of view,  we would have already been in the GD II before Obama was sworn into office.  

I bought GE today with cash flow received into the main taxable by buying shares at $10.89. 

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