Saturday, May 2, 2009

Trading Rule for Disfavored Asset Class: Sold BDNPRC and Late Buy of Just 30 Pico

One of the trading rules for a disfavored asset class is to trade them to harvest profits, in the hope of realizing 10 to 15% annualized returns in the disfavored asset class. The goal moves up and down based on prior performance of managing the risk. Equity preferred securities are disfavored primarily due to their lack of a maturity. Other reasons include that the dividends payable by many of them are non-cumulative. Equity preferred stocks, being equity senior only to common stock, are consequently less senior than all of the issuing companies bonds, a consideration relevant to a bankruptcy.

So for the second time within the past few months, I sold the shares in BDNPRC at around $14.5 that were bought in late February at $9.25 BUY 50 BDNPRC/Home Sales/Kudlow's Creation of His Own Reality/LQD & Correction in Bond Prices/ I believe that one dividend was received which is a component of this trading strategy for risk management of positions in an unfavored asset class. The prior sale was at $14.75Sold BDNPRC/ WP stories on AIG Financial Products Unit Those shares were bought at around $12.5 in November 2008. So, anyone following this strategy as it unfolds knows what I am likely to do with REIT cumulative preferred issues. Of the ones that I now own, only the two from SL Green and possibly LXPPRD are currently being giving more leeway as to the holding period. The trading strategy being pursued takes advantage of volatility as a risk management tool. Those types of strategies are discussed throughout this blog.Managing Risk for Each Security in the Asset allocation Sold 1/2 of LXPPRD: Risk Reduction and Risk Transfer/Bought SLGPRC: Anticipated Risk Reduction and TransferBuy 50 LXPPRD, Bought PG/ Lexington Realty/Outrage at AIG/

I do change my goal for this sub asset class back and forth, due to my historical performance returns. I am now moving from 10 to 15% back to an expectation of annualized returns of 15 to 20%. Part of this has to do with my successful management of the position in ING and Aegon equity preferred issues, where I realized profits on every share sale, collected several dividends, and ended up with shares yielding over 20% based on the cost of shares currently held using FIFO accounting.

RB wants to say something. These stinking rules are like some biblical plague of locusts that multiply and propagate themselves until even a nerd IRS agent would view the IRS code as a comic book compared to LB's stinking rules. And all of these stinking rules for a sub-asset class that doesn't amount to a hill of beans in the operation here at HQ, now can you understand what it is like listening to all of this crap everyday for 50 years. Help, I am a prisoner!

In rebuttal, LB brought up a discussion a couple of years ago that involved the purchase of baby Berkshire Hathaway shares. BRK-B: LB said how many shares should we buy? RB said "Buy a 1000" And then LB said "Where am I going to get the money to buy a 1000 since we never borrow money to pay for stocks". RB replied "I don't care".

Before going on strike, RB said something about PICO in one of its land and water stories. RB's Water and Land Story: PICO?/ Non-Confirmation Means Vix Does not Confirm a market Move LB was pleased with RB on the St Joe purchase and went ahead and bought 30 shares at $29.52 to replace the proceeds raised from the sale of BDNPRC. RB said something just a second ago, "What a Wimp". But, I did not have time to read the entire annual report prior to the market close, let alone think about it. form10-k.htmRB said "You think too Much." And LB said that no way was it going to risk the headknocker's capital on every idea that pops into RB's head late in the day, notwithstanding that vision thing or whatever it is.

LB added some sentences in this disclaimer about using the search feature at the top of this blog. I use it all the time, just to find what I said about something which is the main reason for writing this blog. It assists me in making investment decisions.


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 readers of these posts 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. Anyone interested in a topic may want to review all discussions contained in the blog about it by using a relevant search term in the box at the top. Opinions are subject to change and they certainly evolve over time as information is assessed and analyzed for compatibility with prior opinions, the only process for a serious investor, and a topic of frequent discussion in this post.

No comments:

Post a Comment