1. Bank of America: I view my decision to hold onto my BAC common shares after November 2007 throughout 2008 to be my worse mistake in 2008. I had a misplaced faith in Ken Lewis. It was a mistake based on my extremely negative view of financial stocks in the later part of 2007, which reached a crescendo when I purchased the double short ETF for financials, SKF, which I sold after it started to jump around 10 bucks a day or so.
Now, I intend to hold those shares until the middle of 2011 when I will attempt to make an assessment of BAC's recovery potential. Citigroup lowered its price target for BAC today to $18 to $20, which would look good to a recent buyer at $4, but not so hot from my perspective. Citigroup expects BAC to report a loss for this quarter, based in part on higher loan losses, a mark- to- market loss on Merrill Lynch debt and a 875 million dollar assessment by the government. Reuters The key for me is not this quarter or this year, but BAC's long term recovery potential. In that regard, Reuters reports that the Citigroup analyst believes BAC will recover faster than its peers starting in late 2010 or early 2011.
Now, I intend to hold those shares until the middle of 2011 when I will attempt to make an assessment of BAC's recovery potential. Citigroup lowered its price target for BAC today to $18 to $20, which would look good to a recent buyer at $4, but not so hot from my perspective. Citigroup expects BAC to report a loss for this quarter, based in part on higher loan losses, a mark- to- market loss on Merrill Lynch debt and a 875 million dollar assessment by the government. Reuters The key for me is not this quarter or this year, but BAC's long term recovery potential. In that regard, Reuters reports that the Citigroup analyst believes BAC will recover faster than its peers starting in late 2010 or early 2011.
2. Yields on Verizon & AT & T Common Stock and Bonds: The current yields on the common stocks of both VZ and T are over 6%. For a U.S. investor, those distributions are taxed as qualified dividends. The distributions from their bonds are taxed as interest, a much higher marginal tax rate for the high income U.S. investor. It is hard to explain why the common stocks yield more than the bonds now, except for the very long dated maturities.
An investor can view the current bond yields by navigating the FINRA sites. It is important to keep in mind when viewing this data that some of the bond quotes are stale since the issue rarely trades and focus needs to made only on those that trade daily and have recent quotes:
For AT & T:Search Results
An investor can view the current bond yields by navigating the FINRA sites. It is important to keep in mind when viewing this data that some of the bond quotes are stale since the issue rarely trades and focus needs to made only on those that trade daily and have recent quotes:
For AT & T:Search Results
If you see an odd quote, then the price is stale for that particular bond.
I own both the common stock and bonds, finding some appeal in both. It goes without saying that the senior bond distribution can not be reduced or eliminated, something that has almost become the new normal for common stock shareholders over the past year. And, that is one good reason for me not to overlook the bonds. Still, in the current low interest rate environment, it would be hard for me to justify a 6%+ qualified dividend from Verizon and AT & T, based on some fear about a dividend cut at some point in the future.
I noticed today an article in Barron's where Hilliard Lyons upgraded Verizon to buy from neutral, based on its defensive characteristics during the current economic downturn. Barrons
That firm views the dividend from Verizon as secure.
3. Barron's Technical Analyst: The Barron's technical analyst, Michael Kahn, claims that the recent action of the markets foretells trouble ahead for the market: Barrons.com
4. Ex Dividend or Interest Tomorrow: Several securities that I own are ex dividend or ex interest tomorrow. The two Trust Certificates containing the same Aon junior debenture, KTN and KVW, go ex interest with their semi annual interest payment. All of the Glimcher Realty securities that I own as lottery tickets go ex dividend, which includes the common stock GRT and both equity preferred stocks, GRTPRJ and GRTPRG. Also, the senior note from Ford Motor Credit, FCZ, goes ex interest with its quarterly payment.
I sold the CBL preferred stock that I own but kept the common as one of my lottery tickets and it goes ex dividend tomorrow. I also own shares of the closed end investment company, Aberdeen Asia Pacific Income (FAX) which pays monthly dividends. Penn West Energy, another monthly dividend payor, goes ex dividend.
I also own Windstream (WIN) which goes ex dividend, having added to my position in March at the 6 and change level. I own several of the synthetic floaters that go ex interest with their dividends including GJN and GJT. LXPRD goes ex dividend. A first mortgage bond from Entergy Louisiana (EHL) goes ex interest with its quarterly payment. I own all of the S L Green Realty shares that go ex dividend including the common and both equity preferred issues SLGPRC and SLGPRD.
Lastly, the recently acquired floating rate preferred stock, MSPRA, also goes ex tomorrow. I check the dividend page at the WSJ every night to monitor new cash which will be coming into the account, which can be used to purchase common stock. My discussions of the bonds and preferred stocks mentioned above can be found via my Gateway Posts:
I sold the CBL preferred stock that I own but kept the common as one of my lottery tickets and it goes ex dividend tomorrow. I also own shares of the closed end investment company, Aberdeen Asia Pacific Income (FAX) which pays monthly dividends. Penn West Energy, another monthly dividend payor, goes ex dividend.
I also own Windstream (WIN) which goes ex dividend, having added to my position in March at the 6 and change level. I own several of the synthetic floaters that go ex interest with their dividends including GJN and GJT. LXPRD goes ex dividend. A first mortgage bond from Entergy Louisiana (EHL) goes ex interest with its quarterly payment. I own all of the S L Green Realty shares that go ex dividend including the common and both equity preferred issues SLGPRC and SLGPRD.
Lastly, the recently acquired floating rate preferred stock, MSPRA, also goes ex tomorrow. I check the dividend page at the WSJ every night to monitor new cash which will be coming into the account, which can be used to purchase common stock. My discussions of the bonds and preferred stocks mentioned above can be found via my Gateway Posts:
As I have become older, I find some comfort in having a constant stream of income flowing into my accounts from a large variety of firms and governments, generated by an array of different types of securities. Diversity may be on the extreme side here at HQ, but I do not have to worry about a single security or even a group of securities causing serious damage either.
5. Jim Rogers on the Dollar as a Potential Source of a Currency Crisis: I reviewed an article from seekingalpha about Jim Rogers's views on the markets. It would be fair to say that he is long term bearish on the U.S. dollar, and favorably inclined toward buying the Chinese currency and agriculture related securities: Seek
6. Added 30 shares of General Electric with Cash Flow: I bought 30 shares of GE at $11.75 with cash flow. One problem that investors have is focusing on the hear and now. I heard the other day a "professional" saying that the market was overvalued based on current earnings. Now, if you were going to buy GE, would you focus on the earnings in this down cycle, assume that it will continue well into the future, and price GE accordingly. That is what most investors do. Tomorrow is about as far as they can see. What is the stock going to do today, this week or this year, as opposed to what will the earnings look like over the next decade, and when will GE start raising the dividend. Market prices are frequently determined by people who have significant deficits in good judgment and an inability to act on anything other than what is happening now or in the very near future. While it is true that anyone predicting the future needs to predict often to improve their chances of being right once, it is likewise true that using the present as a benchmark for the indefinite future is just ridiculous. This is not likely to ever change, so you just need to get use to it and turn it to your advantage as much as possible.
I remember someone that I know buying a couple of hundred shares of GE in 1981, at the peak of the doom and gloom of high interest rates and inflation, fifteen years or so into a going nowhere cycle for stocks, and by the mid 90s those shares had grown to over 4000 with a dividend yield of over 20% based on her cost. Now, I would not expect anywhere near the stock splits in the future, compared to what happened during that earlier period. It might even be reasonable to predict no stock splits for the next fifteen years. But, do you anticipate GE will recover when the economy recovers, and would you reasonably expect GE to start raising its dividend again? Or, are you an Alan Abelson person, who believes the worst will always be with us?
I read the latest Morningstar report on GE, dated 6/18/2009, earlier this morning. It of course highlights the known problems.
Earlier this morning I entered an order for some bonds. It was a small order to be sure, particularly when measured in the frequent million dollar increments traded by large institutions in the bond market. I was cancelled by my broker soon after entering it, which is not usual, even though I entered a favorable limit price. This is one reason, among many, why I prefer trading Trust Certificates.
7. Bought 90 shares PFK at $18.94 in IRA: PFK is a floating rate senior bond issued by Prudential Insurance that matures on April 10, 2018, with the interest paid monthly tied to a spread of 2.4% over a CPI calculation. The computation is complex, and includes several months of CPI. So even when CPI turns up again, there will be a lag since some months of lower readings would apparently be included in the computation. I bought 90 shares rather than a 100 in my regular IRA since that was all the money that I had in it. Most of the funds used to buy PFK came from the recent sale of 50 JZH, a long term fixed rate coupon bond from Prudential. I like the float provision of PFK, it is better than the ones on the SLM floaters, and I have more confidence in Prudential paying me the $25 par value in 2018. (OSM and ISM are much cheaper however) So I like the idea of having a $600 profit guarantee provided of course as always that the issuer survives to pay me. I would expect CPI to fluctuate all over the place in the next nine years, but I am using now an average rate of 2.5% as an assumption for a 10 year period starting from today. This is used just to give be a rough estimate type of guess of my average interest rate over the remaining life of this bond. So just as an estimate, I would add 2.4% to 2.5%, multiply 4.9% x 25 which gives me $1.225 per share divided by my cost of $19=6.45%. Now the yield is much lower than that now, and probably will remain substantially lower for several more months at the least. I am trying to look at it over the remaining 8 years and 10 months or so of this bond. Now I am not trying to hit a home run with these security. But the return to maturity with the dividend and the capital gain would be more than satisfactory to me in this IRA. And if it falls a lot in value, I will simply include it in my next ROTH conversion which has been a very good strategy over the past six months or so.
Fitch has this senior bond rated BBB. Fitch Corporate
I do not think the Quantum information on the Moody's and S & P ratings are current for Prudential. They are lower than what is shown I believe.
I do not think the Quantum information on the Moody's and S & P ratings are current for Prudential. They are lower than what is shown I believe.
This is the link to the prospectus: Pricing Supplement No. 122 dated March 31, 2006
I would hope that all investors quit using the word safe when talking about securities that fluctuate in value, or for any type of security for that matter. This bond from Prudential is not safe in the sense the average investor uses or understands the word safe. Even a 10 year treasury is not safe if you look at risks other than just credit risk, including the risk of lost opportunity, the risk of not getting you to a point where you need to go, and the risk of having to sell before maturity at a value less than you paid for it. So there are all kinds of risk.
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Tyler will continue his globe trotting ways this summer. After returning this spring from an all expenses paid trip to Jordon, he is flying to Curaco to stay with a girl he met on the Jordon excursion, and then to Paris with another girl. He is 18.
DISCLAIMER
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. 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. Everyone is responsible for their own investment decisions, and no one should ever make any decision unless they are willing to accept full personal responsibility for it.
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