Tuesday, March 17, 2009

AT & T and Goodrich Bonds/ Life Insurance Companies/S L Green Realty/Metal Prices/Buy of SBGI & SOLD KSA

S & P changed its long term outlook on AT & T debt to negative but reaffirmed its A rating.  WSJ.com   I view the concerns as legitimate and the opinion is based primarily on the company's higher debt levels and its pension obligations.  The two TCs that I own which contain a senior long term AT & T bond, JZE AND JZJ, both provide for an increase of 1/4% for each notch the debt is downgraded by the rating agencies. JZE: MORE DETAILTrust Certificate JZJ AT & T BOND   
See page S-3 & S-14 for the provision impacting yield due to debt upgrades and downgrades in the JZE prospectus:

Barron's is sticking with its recommendation to buy Hartford Financial (HIG).  
Hartford's stock has been cut in half since this recommendation in early February closing at $6.55 yesterday.  Morgan Stanley downgraded both Hartford and Lincoln National yesterday.  Lincoln was cut to underweight and Hartford to equal weight  MarketWatch  StreetInsider.com  Morgan did say that Pru and Met Life are best positioned to weather the storm according to Marketwatch.  I am just staying away from the common shares of all life insurance companies for now.  There is just too much smoke around some of them.WSJ.com   For now, I will stick with my senior bond positions in Prudential and my floating rate preferred stock issued by Met Life but I would consider buying a lottery ticket in HIG if it fell again to the 3 and change level. 

I own both the common and preferred shares in S L Green (SLG) realty, with the purchases initiated in the 4th quarter of last year and this year, as the price tumbled.   SLG declared its common dividend today of $.375  and its regular dividends on its equity preferred issues, SLGPRC and SLGPRD, both of which are owned by me.   Yahoo! Finance
The ex dividend dates are near the end of this month. 

So far, I have passed on several opportunities to add 50 shares of DKR below $5.  If I have this much trouble making a decision, I may just put it in deep freeze. 

Rio Tinto (RTP) said in its annual report that it does not expect metals prices to rebound in 2009 due to demand issues and a large inventory and production capacity overhang.  - MarketWatch

Andrew Sorkin tries to make the case for paying the Masters of Disasters at AIG. NYTimes.com 
He does have a point when he argues that the government should not try to abrogate or change a private employment contract, no matter how distasteful it may be under the circumstances.  I mentioned yesterday that the Masters would win a court challenge since it is clear that the government can not impair a private contract except in very limited circumstances not applicable to this situation.  Then, as you would expect, Sorkin argues that the Masters might just leave in a hissy fit, go to another firm, and then trade against the AIG derivatives book and make matters worse for the government.  After all, we are not talking about the kind of individuals who stormed the beaches of Normandy on D-Day. 

The author of this article makes a case for purchasing bank subordinated debt. breakingviews
One argument is that the government has bought equity preferred stock in them which would have to be wipe out before the junior debt in the priority chain.  While true, as I have pointed out, it does not prevent the bank from eliminating the common dividend and then defer for up to five years in many cases, some as much as 10 years, the Trust Preferred dividends.  Bary on Bank Preferred Stocks/Depression or Recession/Commercial Mortgages

New home construction jumped 22.2% in February.  Yahoo! Finance
The boost came from new apartment construction. - MarketWatch

Mary has done well for herself since I knew her in the late 1970s. Forbes.com

There was some trading reported to FINRA yesterday on the Goodrich bond that is the underlying security in DKF.  The trades were near par value.
The TC DKF has a higher coupon and trades below par value.  Those factors only suggest that to me that the TC is a better buy than the bond.  It says nothing about buying any Goodrich bond, or whether either price is a good one. My comment is simply to point out a discrepancy in pricing of a functionally equivalent security. 

The Street.com ran a story about what is claimed to be the top 20 strongest annuity insurers.  I do not own an annuity but have considered from time to time buying one.TheStreet.com

I bought a lottery ticket this morning by purchasing 100 shares of Sinclair Broadcasting (SBGI) at $1.  By lottery ticket, I mean highly speculative with many characteristics of an investment in powerball numbers.   This company had a good dividend until it recently eliminated it.    The debt level is way too high.  Its major source of revenue, advertising, is in the toilet.  The stock is down from a 52 week high of around 10.  The earnings for the last quarter were okay if you do not want to consider a 460 million dollar impairment charge. Sinclair Reports Preliminary Fourth Quarter 2008 Results: Financial News - Yahoo! Finance   Yahoo! Finance  Sinclair owns 58 television stations in the U.S. and has a duopoly in 11 markets.   Some of the debt maturity dates are as follows: 618 million due in 2012; 307 million due in 2011;  153 million due in 2012; and 150 million in 2018.  I suspect that the company will not reinstate the dividend until it has a better handle on dealing with the upcoming debt maturities.  I view the debt as the source of the problem, not the decline in advertising revenue which will reverse itself when the economy starts to recover.  The location of its stations are listed at p.5 of its recently filed annual report.    http://www.sec.gov/Archives/edgar/data/912752/000110465909014310/a09-1328_110k.htmThe company owns three stations in the Nashville market.  I may have counted wrong but it looks like 20 of the stations are affiliated with FOX. 

I view all my small purchases of stocks trading under $5 to be a form of lottery ticket.  I simply hope to do better with them than I do when I play the Tennessee powerball.   I consider myself fortunate to match a single number in powerball, still losing all of my "investment" .  After saying that, I thought of the commercial for a job web site that has a guy working with a bunch of chimps, and he has to convince them that investing in the lottery is not a good business plan. But sometimes the left brain has to humor the right brain to keep it involved in the decision making process. 

One of the TCs that I just bought a few days ago at around 11, KSABuys of JWF KSA DIS and NYX/SOLD Entire Position in TFI/ Just a Day of Ignoring My Own Rules, just went ex interest and had a good rise since paying me the semi-annual interest payment received yesterday.  I just sold it for $13.2.  I still have a 50 share position in KSA in my regular IRA which I will keep.  This is primarily a risk reduction transaction in what amounts to junior debt issue of a disability insurance company.  

I will go back to an old man picture in my profile, taken today with my IMAC Photo Booth.  

DISCLAIMER: 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.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. 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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