Wednesday, April 22, 2009

BOUGHT RJI/AT & T & IR/WFC & MS/PSEC/Goldman Puts Ford on Conviction Buy List/NYT: Torture approved at the highest level/

The Federal Housing and Finance Administration reported the second straight monthly increase in home prices, with a rise of .7% in February. 

AT & T reported earnings of 53 cents down from 57 cents in the year ago quarter. It had a 471,000 net increase in broadband connections and a 1.2 million increase in wireless subscribers, bringing its total to 78.2 million. There was a non-cash expense of five cents for pension and retiree costs. There were 1.6 million IPhone activations. TV subscribers to its service competing with cable TV increased by 284,000. Considering the recession, this appears to me to be a good performance.  I hold AT & T in both taxable and retirement accounts, initiating positions in both accounts recently, after jettisoning T in an IRA at over 38. AT & T and VZ 

Ingersoll-Rand (IR), one of the purchases made by Right Brain (RB) in its early March frolic and detour, reported a dismal 4 cent loss excluding items which was better than the consensus estimate of a loss of 14 cents. The Most Abused Word: Reform/Buys of IR & DD/Santayana: An Inability to Remember History or Just Creating Your Own Reality to Fit an Ideology Sterne Agee upgraded IR to buy.  But, I am not impressed. 

Setting the bar on the ground and then jumping over it is not a feat worth noting. IR maintained its yearly forecast of $1.4 to $1.9.  If I am willing to take a long view of say five years, IR may be a hold.  On the other hand, if I become disgusted with yet another company that reduced its dividend for shareholders, without any adjustment to management pay and perks, then I may just throw my position overboard.  LB is really disgusted with all of the dividend cuts by major American companies, believing strongly that cuts by IR are really hard to stomach, while RB says hold for the long term given the low entry point.  

DuPont did declare its regular quarterly dividend yesterday. 

The Defense Department released an unclassified version of a report, apparently approved without dissent by Republicans and Democrats, that was critical of how Bush aides facilitated the spread of harsh interrogation techniques developed by the Chinese during the Korean war to cause American prisoners to give false confessions. Nor did the Bush administration make an inquiry into the source and history of the torture techniques approved by W.

This article in the NYT asserts that the torture practices were approved at the highest level in meetings attended by Bush, Cheney, Rice and Ashcroft (then attorney general), where George Tenet described in great clinical detail the interrogation techniques the CIA wanted to use.

My question now is why did anyone believe W when he stared into the camera and said with a straight face that the U.S. does not torture (I will admit that I never believed Clinton either- when he was talking about sex, as in when he said "I have not had sex with that woman". When the subject was not sex with women other this wife, Clinton was more trustworthy than Bush in my opinion.)  

The Democrats have kept a low profile in the past on this issue since their representatives on the Intelligence committee knew about them, and therefore share a degree of culpability.   

John Yoo defended his view of unfettered Presidential power as consistent with the Founding Fathers' intent in the Constitution.

Since the war on terror will last for years, maybe for decades, his argument is basically for dictatorial Presidential powers in a war of indefinite duration.

Many of the apologists for torture are called "conservative" legal scholars who have ties to the Federalist Society, which newspapers like the WSJ refer to as a conservative society.

One of the major "conservative" beliefs of that society is to roll back Supreme Court decisions to the Lochner era, where virtually all regulations and laws designed to protect the public's health and welfare would be ruled an unconstitutional exercises of Congressional powers.

In prior posts, I disagree with the view that the Federalist Society is promoting a conservative agenda. Instead, the only way to  characterize their beliefs, using the most polite term possible, is "reactionary".

I would hope at a minimum to spark some thinking about whether the Federalist Society, Cheney, Yoo and Bybee deserve the label of conservative or something more suitable. 

Morgan Stanley reported a worse than expected loss of 57 cents.

The results included a 33 cent tax benefit from the repatriation of non-U.S. earnings at a lower than previously estimated tax rate. The Tier 1 capital ratio was 16.4% as of 3/31/09, or 12.9% without TARP money. MS cut is dividend to 5 cents from 27 cents.  The effect of the pricing of Morgan's own debt on its reported results is hard for me decipher, but it appears to me that FASB 159 had a negative impact since the pricing of MS debt improved during the quarter (see footnote 4)

As I have mentioned in the past, I am not an accountant, and have no training whatsoever in accounting or banking.  So, I can never be certain that I fully understand FASB rules and the reasons for them. But this rule seems ridiculous to me, since it assumes that the company is buying back all of its own debt during every reporting period, even though this never happens, and phantom income is created when the debt falls in value and then the earnings are penalized when the debt increases in value as I understand it. I believe that the argument for doing this kind of obfuscation has to do with mark-to market rules. I do not have a position in MS. 

Wells Fargo reported earnings of 56 cents.  My only position is small holdings in WFC debt, particularly KTV and JWF. Its Tier 1 capital ratio was 8.28%. Tangible common equity, a figure that purports to represent the amount of assets owned by shareholders, rose to 3.28%, The Baseline Scenario Its allowance for credit losses totaled 22.8 billion, sufficient according to WFC to cover expected consumer losses for the next 12 months and commercial losses for 24 months. 

Brandywine Realty received its second upgrade in a month, with RBC Capital upgrading to outperform.  I own one of its cumulative preferred issues, BDNPRC.  

Goldman put Ford on its conviction buy list. MarketWatch 
I do not own the common but I do have a stake in senior debt of Ford Motor Credit which RB bought in one of its wild and crazy moments. All is well that ends well, as the saying goes. 

This is a link to the prospectus for FCZ: Prospectus 

Prospect Capital, a closed end business development company owned by me, priced a 3.2 million share offering at $7.75. One of the disadvantage of the a BDC is its need to sell shares from time to time to raise capital since it pays so more of its income to shareholders in dividends. 

Cramer prefers Pepsi over Coca Cola. I watched a video of him saying that the reason that Pepsi spun out shares of its bottlers was to avoid consumer backlash over price increases.

The video link is titled "Cramer: Pepsi Pops".  This is not consistent with my memory. The bottling part of the business is capital intensive and the margins are slimmer.  The primary reason for having publicly traded bottlers, where Pepsi and Coca Cola have large stakes, was to divest full ownership in the capital intensive part of the business and to raise margins by selling just the syrup to the bottlers.  Generally, I like Pepsi's Frito Lay business but prefer KO's syrup business better.  So my ideal would be to combine KO's beverage business with PEP's Frito Lay.

I bought 100 RJI this morning at $5.97, as part of my baby steps back into commodities. This is a link to the sponsor's web site: ELEMENTS ETN Products 

This particular ETN has a number of different commodities. Jim Rogers, who knows a lot more than me, said recently that he just bought this one. 

He also developed this index. I sold out of my commodity position due to their parabolic move which is my custom for any asset class. And, to be frank, while I believe that commodities have a place in my asset allocation, maybe anywhere from 0% to 5%, I am not really comfortable holding positions for long periods.  ETN's have their own set of tax issues which make them less desirable in my view than ETFs. Ken Lewis Made 120 billion in Acquisitions since 2001 and BAC is Worth 28 billion: Good or Bad?/GE & FII results/More on WFR/No on Geithner


  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.  It is always important to follow the investment process. the investment process/links to further information on canadian energy or royalty trustsInvestment Process Part II: Bonds and Bond Like Investments   NOT A RESEARCH SERVICE/Add of PWE Last Week   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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