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.
Friday, April 24, 2009
Sold Part of IR/AVY/Sold FRPRJ: Transfer of Risk to IRA/Bought PJL/FBI Interrogator Comments on Torture/ GR, WBS, CB & Bought 50 MSFT at $17.79
In response to an inquiry requesting a source for my comment in an email exchange that the wash sale rule applied to selling a stock at a loss in a taxable account and then buying it back in a retirement account within 30 days, this is a link to the revenue ruling on this issue:http://www.irs.gov/pub/irs-drop/rr-08-05.pdf
As a consequence I would wait more than 30 days before buying the security in a retirement account that was sold for a loss in the taxable account. This discussion was relevant to my recent decision to hold all of the synthetic floaters in my retirement accounts and to sell them in the taxable account.
The Commerce Department reported a .8% fall in durable goods orders for March. Manufacturers' Shipments, Inventories, & Orders (M3)
Webstar Financial (WBS), a recent lottery ticket buy, posted dismal results for the first quarter. The bank lottery tickets will require a great deal of patience and forgiveness of near biblical proportions. (Sometime, I need to keep a dictionary handy, since I have a propensity to forget the meaning of the word patience, admittedly not one of my few virtues) Webster's loan charge-offs increased to 66 million from 15.8 million a year ago. Nonperforming loans increased to 2.61% of the total. The loss of 41 cents for the quarter was worse than expected and FBR downgraded to underperform. Yahoo! Finance
Okay, all of that was ugly but I only recently bought 50 shares as a lottery ticket so a lot of ugly is already in the share price. Buy of 50 WBS: Lottery Ticket/The Long Tail Contract/AIG FP & Lack of Adult Supervision/TGB upgrade
I am making progress in transferring my synthetic floater exposure to my retirement accounts for the reasons discussed in an earlier post. Bought GYB/DD/Will Hold Synthetic Floaters In Retirement Account /Changing Allocation In Retirements account to 70% bonds/ Stanford & Dick DeGuerin Added another 100 GYB in Regular IRA/ SOLD LQD again/ This will require their sale in the taxable account, a few have already been sold, and their re-purchase in one of the retirement accounts. If I have to dispose of one at a loss to complete the transfer before year end, I will wait more than 30 days to buy the same or functionally equivalent security in the retirement account. There are a large number of synthetic floaters which are functionally equivalent to one another. I recently sold some small stock positions to raise funds in the regular IRA including a small GE position, sold at around 12, bought in the 8 range. Most of my GE position, about 400 shares, is in other accounts and is under water except for a few shares. I added GJN at $12.55 on Wednesday in the regular IRA with the proceeds raised from the JZJ transaction earlier. Except for 100+ share position in a closed end fund, IRR, which owns natural resource companies and attempts to manage risk with optionsING Risk Managed Natural Resources Fund - Overview, the entire regular IRA has now been shifted to bonds or bond like investments which include some equity preferred issues bought at favorable prices like AEH (at <$5), INZ (at <$8) and ISF (at<$5). The Roth is still stock heavy.
The FBI agent who interrogated Abu Zubaydah, Ali Soufan, broke his silence to point out what he asserts to be false claims made Cheney and others. Prior to the start of the torture, and contrary to what has been represented to the public by the Republican supporters of torture, the information that led to the capture of Ramzi bin al-Shibh, the top aide to Khalid Shaikh Mohammed, came from an Al Queda operative using traditional interrogation methods. NYTimes.com
As a result of the FBI's refusal to engage in torture, Soufan was not involved in any subsequent interrogations of Kahlid and others subsequently captured after Abu Zubaydah.
In an editorial yesterday, the WSJ said no administration has prosecuted officials from the prior one for "policy disagreements". WSJ.com For the WSJ, the use of torture is just a policy disagreement between republicans and everyone else in the civilized world, sort of like disagreeing about the amount of the Death Tax, not a criminal violation of U.S. and international law never before sanctioned by a U.S. President to my knowledge before W.
Member of the Republican National Committee believe the Democrats are taking away our freedoms and need to be renamed the Democrat Socialist Party. POLITICO.com The Washington Independent
Taking away our freedoms? Do they know the meaning of Socialism? Do they even have a clue? Looking at the photo of Mr. Poop or Bopp, the RNC sponsor of this resolution, at the Politico web site does provide some evidence of a person who had his brain sucked out of his head at birth, with the hole filled with a gooey mixture of grits and molasses.
I would agree with those who argue that Pepsico's proposed acquisition of two large bottlers is more of a sign of weakness in its U.S. beverage operations. I would expect those acquisitions to add to operational flexibility but hurt returns on invested capital.
Goodrich (GR) reported a good quarter, beating expectations by 28 cents and S & P raised it to a buy. I do not own the common. I do own a GR senior bond in TC form (DKF) bought in the Roth at 20, so I do monitor corporate developments for the purpose of judging credit quality. Buys of DKF, AA and a Lottery Ticket in 50 shares of RF/Heinz & its Boston Market Line/
DKF went ex-interest with its semi-annual payments after my purchase. DKF Stock Quote
Another security that I decided to transition ownership to the retirement account is the First Industrial cumulative preferred. I sold 50 FRPRJ in the taxable account yesterday at $9, bought at $8, and functionally equivalent shares have already been placed in the retirement account. This was sold at a small profit and a couple of dividends were paid since purchase. Hard to Get Excited The rational is that FR has already eliminated the common stock dividend which places the cumulative preferred holder in enhanced danger of a deferral since payment of a cash common stock dividend is just about the only meaningful restriction on a REIT's liberal deferral right. I lose the tax advantage of a qualified dividend in the retirement account but then I do not have to pay taxes on a deferred dividend either.
RB and LB finally agreed to a compromise on the IR stake, and compromise is something LB is prone to do just to stop RB's constant brain chatter, telling RB to shut up would be as futile as trying to teach Mr. Poop at the RNC the meaning of Socialism. As a result of the compromise, RB can keep the shares bought in early March at less than $12. 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 LB sold the higher cost shares late yesterday (purchased first last October at $18.5) at $20.08, for a very small profit using FIFO accounting. This seemed to make both sides of the headknocker's brain content for now.
I added 50 shares to my Verizon senior bond position in TC form by purchasing PJL at $24.2. I do not like this price, much preferring to buy it below $20TRUST CERTIFICATES JZJ AND PJL, but I have felt bad about being shaken out of 50 shares during one of the meltdowns during the 4th quarter of 2008, when the DJIA fell 750 points. PJL TRUST CERTIFICATE & The Volatility Indexes VIX and VXN So I just replaced those shares at a higher price which is never good. I would give myself an F- for selling PJL shares at around 22 and for becoming temporarily unhinged during the October 2008 debacle.
The TC PJL and its functionally equivalent cousin XFL, which I also own, have been discussed in several prior posts:
The FINRA LINK to the underlying bond in both XFL and PJL: FINRA - Investor Information - Market Data - Bonds - Bond Detail
This is a link to the prospectus for PJL:
For comparison purposes, here is a link to XFL:
Microsoft, an owned position, had a quarter that it would just as soon forget. Excluding items, earnings were 39 cents a share versus 47 cents a year ago, with a decline in revenue year over year, a first for MSFT. Revenue declined 6% from the same quarter in 2008. It is still a cash machine. There was a bright spot. Operating margin increased to 32.5% from 29.7% a year ago, due primarily to a significant fall in general and administrative expenses, along with a smaller decline in marketing costs. Morgan Stanley raised MSFT to overweight this morning. The release of Windows 7 is expected for fiscal 2010, possibly as at the start of that period according to MSFT's earnings release (4th paragraph: Yahoo! Finance) . Microsoft's 2009 fiscal year ends in June 2009. My last buy of MSFT was at $17.79. I own just 100 shares. Ponzi Schemes Galore/BMY, AVY, VZ, SYK, SLG/ GE review by Moody's/ Stop Making Acquisitions NADX/ADD 50 MSFT/Sold Delek
In that last link post, I discussed Avery Denison which I did buy later when it slid below $20. I mentioned the possibility of a dividend cut. As long as the dividend is maintained I will hold and avoid the temptation of taking a profit approaching 50% now, since the dividend at my cost has a better yield than most investment grade bonds with a lower tax rate than bonds. That is important to an old geezer.
Chubb, a company that I am considering buying but do not presently own, reporting operating income at $1.43 compared to $1.65 from last year. Those numbers exclude investment gains or losses from Chubb's portfolio. Chubb had 226 million in realized investment losses including impairments. Net written premiums declined 2% excluding the impact of currency fluctuations and 7% with currency adjustments. The first quarter combined loss ratio increased to 88.1% from 83.9% in the same quarter from 2008. Chubb purchased 1.8 million shares at an average cost of $40.87. The earnings beat the consensus forecast by 5 cents but is unimpressive to me. The WSJ points out in its story that CB and other property & casualty insurers claim that the government's support for AIG has allowed it to lower premiums. WSJ.com
I have read similar assertions made in other publications. Generally, although I have a more favorable view of Chubb than other property & casualty companies, there is nothing in this report that would cause me to buy shares now unless I am able to receive a much better price than $40.
There was a report yesterday that Hartford Financial is trying to sell its property & casualty business after talks to sell its life insurance business ended in no deal. Reuters If true, this would indicate significant financial stress at HIG to me. I do not have a position.
MMM is one of the stocks sold prior to the meltdown and I have been trying to determine a good re-entry point. After the report today, I am in no hurry to jump back into the stock. Yahoo! Finance
Excluding special items, earnings fell 41% and revenues decreased 21% from the year ago quarter. Earnings missed estimates by 5 cents. MMM also reduced its forecast for 2009 to $3.9 to $4.3 from $4.3 to $4.7.
There was a report today in the NYT that the treasury has an agreement in principle with the UAW to protect the union member's retiree health benefits in the event of a Chrysler bankruptcy. NYTimes.com
If true, it will create a backlash against the Obama administration and will cause considerable consternation among many independents who would be critical of using taxpayer money to pay for the UAW's generous retiree health benefits. I certainly would be critical of any such agreement.
Obama is reluctant to appoint a commission to investigate U.S. torture practices. NYTimes.com washingtonpost.com
I suspect that he really does want to move forward, and not to focus too much as the ugliness of the past. He is coming under more criticism from the nobel prize winner Paul Krugman who wrote an interesting column in the NYT. NYTimes.com
The A.C.L.U. claims that it has more photos of prisoner abuse, similar to the ones from Abu Ghraib, which will allegedly show that Abu Ghraib was not an isolated case. Los Angeles Times