Thursday, March 26, 2009

Sold 1/2 of LXPPRD: Risk Reduction and Risk Transfer/Bought SLGPRC: Anticipated Risk Reduction and Transfer

Today, I sold 50 shares of LXPPRD at $8.9 held in the taxable account that was bought at $6.6 last quarter. BEEPRA VIX LXPPRD/ More on VIX AND ASSET ALLOCATION  This was part of risk reduction and risk transfer technique for an individual security holding viewed as high risk. Buy 50 LXPPRD, Bought PG/ Lexington Realty/Outrage at AIG/ I decided to take the risk on this cumulative REIT preferred issue in my retirement account, where any deferral of the cumulative dividend will not have a tax impact. The stock is ex dividend tomorrow and I have already replaced the shares, sold today at a profit, with a purchase at $7 in a retirement account.  I am not concerned at this time about the security going to zero but I have to be aware of the potential for deferrals of preferred dividends by certain REITS.  This class of securities is both a high yield opportunity at the currently depressed prices and a high risk danger due to the credit crunch, large debt loads and the need to refinance debt coming due, and the drag the recession is having on their operations.  

My goal is to achieve a 10 to 15% annualized yield on cumulative REIT preferred securities as a sub-asset class, including dividends and netting profits and losses on all positions. This requires some trading to take advantage of their volatility.    

I am also going to shift my S L Green cumulative preferred position out of my taxable account to one of my retirement accounts.  I am going to wait for the position in the taxable account to recover from its recent swoon before selling it.  In anticipation of that event, I went ahead today and added more shares in SLGPRC in the retirement account by buying 50 at $10.50.  It goes ex dividend tomorrow, but I am not concerned by tax consequences of dividends in that account including buying a dividend shortly before the ex date.    This brings my total position in the retirement account to 80 shares, and I own 100 of S L Green's other preferred, SLGPRD, in my taxable account.  I also intend to increase my common share position to 100 shares as soon as I develop more confidence in the recovery of NYC real estate. Being a native of Tennessee, I am hardly an authority on NY, and Donald Trump is not in my Rolodex.  I have more confidence in SL Green, however, notwithstanding my  severe knowledge limitations being a member of the hoi polloi (not in the derogatory sense) from the hinterland, than Lexington Realty.  The dividend yield at my most recent purchase is around 18%. SLGPRC Stock Quote - Sl Green Rlty Corp Stock Quote - SLGPRC Quote - SLGPRC Stock Price

The prospectus can be found at:

It is a typical REIT cumulative preferred issue. It is very negative to me that it has no maturity date. The dividend has to be paid in full as long as SLG pays dividends to the common shareholders. Par value is $25.  This type of security would be far more appealing to me if it had a maturity date, even one twenty to twenty five years from now, a time certain when I know that par value has to be paid by the company and not so distant in the future that I will not likely live to see it. 

I am not entirely sure why RB is being drawn to the beaten down financial stocks this month. I do remember the horror from the early 1990s when many of them melted down to near nothing, as now. For those that survived, that was a time to buy but LB has a lot of objections to the picks being made by RB as lottery tickets and the timing of the purchases now, when the darkness still envelops them. But RB was just fascinated looking at the charts of several financial companies after their near death experience in the early 1990s and started to beat his chest, howl and said maybe this time is not different-worse yeah, but not different in the long term sense of the word. LB just views the lottery tickets as a sop to RB and is always circumspect about the kind of cliches disguised as arguments advanced by RB.    

I think that I will go back to a profile picture from a few years ago that shows the essence of LB.  

The 7 year auction of treasuries was well bid today.

I am going to wait to add to my hedges in PST and TBT until I know that the Fed's manipulation of the longer dated treasuries is near an end. There was a good rally today in my TIP position which I do trade. 

So far, I have made a significant shift in asset allocation over the past 30 days out of short term individual bonds into stocks. The cash allocation will not be disturbed without a VIX signal. I am still keeping tabs on my cash flow, however, which will be invested in stocks as soon as I receive my 815 signal at the end of this month.  
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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