Wednesday, March 18, 2009

FED Buying up to 300 Billion in Treasuries/Buy 50 of DDT/Nibbled at ST JOE/Sold a Couple of International Lease Bonds/Oracle

1. Fed Buying 300 Billion in Treasury Paper: In its statement released today, the Federal Reserve removed a sentence from its prior statement that it expected a recovery to start later this  MarketWatchThe Fed also said that it would buy up to 300 billion in  treasury paper which caused a major rally in the treasury market. Yahoo! Finance This statement caused a major spike down in my hedge positions in TBT and PST, which is okay since I am looking for opportunities to add to them as I expand my corporate bond positions.   

The Fed's action also knocked the dollar for a loop,  which put some upward momentum for a change in two of my foreign bond ETFs, BWX and WIP and my only foreign currency holding FXA.

2.  Oracle: I own Oracle, as a recent purchase, and was shocked that it declared a dividend. Oracle Reports Q3 GAAP EPS Up 3% to 26 Cents, Non-GAAP EPS Up 16% to 35 Cents: Financial News - Yahoo! Finance 
Under the circumstances, and relatively speaking, I thought Oracle's earnings report was okay. MarketWatch

3. International Lease Bonds: I reduced my exposure to International Lease Finance bonds by selling two bonds.  

4.  Dillards Junior Note DDT: I also added a very speculative long bond position in Dillards (DDS) department store by buying 50 shares of DDT at 5.82.  This is a junior note with a 7.5% coupon and a maturity in 2038.  Interest is paid quarterly.  Par value is $25.  The current yield at my cost is around 32%. DDT Stock Quote - Dillards Cap Tr I Stock Quote - DDT Quote - DDT Stock Price   Technically, it is similar to a typical bank Trust Preferred.  The issuer is Dillard's Capital and Dillards guarantees the note.   Interest can be deferred for up to five years but payments are cumulative. Dillards is still paying a cash common stock dividend.Yahoo! Finance  I will not buy more of DDT.  This purchase is a play on a potential recovery in the economy before something very negative happens to this retailer.  If a retailer bankrupts, I would not expect much recovery as a holder of a junior debt instrument but at a cost of $5.82 anything would be okay.  This security was originally issued back in 1998.  Fitch rates it as junk with a B- rating. Fitch CorporateThe prospectus can be found at this link:
Before buying this bond, I read the latest quarterly earnings report filed by Dillards and a few analyst reports. Dillard's, Inc. Reports Fourth Quarter and Fiscal Year Results: Financial News - Yahoo! Finance Dillard's posts $149M 4Q loss: Financial News - Yahoo! Finance UPDATE 1-Dillard's posts surprise loss, to close 5 stores | Markets | Markets News | ReutersS & P has it rated 3 stars.  Comparable retail store figures were down double digits in recent monthly reports. - Yahoo! Finance  Yahoo! Finance

5. Bond Buying & Frank Sinatra Music:  As I have mentioned, when I was a young man, say three years ago, I believed that bonds were for old geezers, not a young stud like myself.  But, at about the time I started listening to Frank Sinatra for the first time in my life a couple of years ago,  I underwent a change in attitude  and started to add bonds to my portfolio.   So, at best, I am a novice bond investor, at the beginning of my learning curve.   I am not saying that everyone who starts to listen to Frank will become a bond buyer, but I can only speak for myself.

6.  Buy of ST Joe at $15.69: I also did a nibble by buying St. Joe (JOE) at 15.69.  This one is purely an asset play and has to be characterized at the start as a long term hold.  For this one, I am talking 5 years as a minimum holding period.   My last sale was about this time last year in the mid 40s somewhere.  Since then the stock has caved in a big way.  St Joe owns about 600,000 acres of land in Florida and claims that around 426,000 acres are within 15 miles of the coast in the northwest Florida Panhandle. It is the largest land holder in Florida.  Their land near the coast would be worth 4.3 billion if one assigned a value of 10 grand an acre. The inland land of 182,000 acres might be valued at 2 grand an acre.  This would bring the land value to about $50 to $55 a share.  The company owns about 75000 acres around Panama City, in what it calls its West Bay sector.  A new airport is being built in Panama City and I believe that St Joe donated the land for it.   I also like the balance sheet. JOE: Balance Sheet for ST JOE CO (THE) - Yahoo! Finance

  Due to the shutdown in Florida real estate over the past year or so, JOE has struggled to sell much of anything.  The unlocked land value will have to be realized over time and will be dependent on a recovery in real estate.   These estimates on land values are not mine but gleamed from several analyst reports.  Ten grand might look dirt cheap for parcels near the coast in ten to fifteen years, or maybe not. 

7. Land Rich Companies-Tejon, St Joe, Texas Pacific Land and Alexander & Baldwin:  I have been familiar with land rich companies like Tejon Ranch, St. Joe, Alexander & Baldwin, Texas Pacific Land Trust and some others for a very long time.  I did review early today, before making my purchase, reports from Morningstar, S & P and Value Line, and looked at the recent earnings release again.The St. Joe Company Reports Fourth Quarter and Full Year 2008 Financial Results: Financial News - Yahoo! Finance  The St. Joe Company., Q4 2008 Earnings Call Transcript -- Seeking AlphaSo, I have now inched my way back into Tejon Ranch and St. Joe. 

8. Liddy and AIG: I understand why Liddy does not want to make the names of those receiving bonuses public. MarketWatch  I doubt that the real reason is the one expressed by him in his testimony.  I strongly believe that the public's right to know far outweighs the extremely remote possibility of some physical harm coming to one of them.  A few people may have vented their anger in an inappropriate way.    Personally, I believe in shining a light on all of the Master of Disaster at AIG's Financial Product Unit.  For all practical purposes now, AIG is a public company and  should be subject to the same disclosure rules on compensation as any public enterprise.  

  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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