1. KeyCorp Rewarding Failure: During the tenure of Henry L. Meyer as CEO of KeyCorp, the price of the stock has gone from a high of $28 to $4.6 yesterday, which is back to a price level last seen 21 years ago. The company has just massively diluted the ownership of existing shareholders by selling boatloads of stock at that 21 year old price. The retirees who bought KEY for its dividend stream have had it reduced to a penny a quarter. The WSJ lists Meyer's compensation figure at 5.2 million. Executives That simply has to be viewed as just another generous reward for failure. While I am a recent shareholder with a 50 share purchase at $4.6, I do have to wonder why this guy still has his job. He did recently express regret for the stock price at the annual meeting. Angry
2. First Industrial: After the close, First Industrial declared its regular cumulative preferred dividends. Ya Fin The maturity dates for its debt are listed at p. 11 of FR's recent quarterly report filed with the SEC: 10-Q As of 3/31/09, FR owned 796 industrial properties in 28 states and one province in Canada containing approximately 70.8 million square feet of gross leasable space (p.24 of 10-Q). The current market cap is 186 million. I am not sure why a company like this one is not taken out by an entity with a lot of spare cash while it is still struggling. A hard asset company like FR would make a lot more sense for a sovereign wealth fund than buying a ton of bank and investment bank stocks and losing billions by getting in bed with the Masters of Disaster. I own a lottery ticket of just 40 shares in the common, which I may add to, as well as shares in both cumulative preferred issues, FRPPRJ and FRPRK.
FR also reported after the close that it closed on three secured financings totaling 154 million, more than enough to pay off the senior debt maturing this month. I view this development as a positive. Ya Fin
The terms appear to me to be reasonable, and will buy FR breathing room. The mortgages on the three loans cover 51 properties and the loan to value ratio was less than 65%. The company now has less than 25 million coming due before March 2011 after retiring the senior notes coming due this month. I would hope that this development will have a positive impact on both the common and preferred stocks tomorrow.
3. Bob Rodriguez's Missive in Barron's Online: Rodriguez, CEO OF First Pacific AdvisorsFirst Pacific Advisors, LLC, is one of the many pessimists that find an outlet in Barron's. His recent column appearing in Barron's online is worth a read, possibly just to damp down your emerging animal spirits a tad. Barrons.com It is hard to disagree too much with his assessment on the need for the FED to create a lot more money to buy treasury paper to fill the hole in demand likely to happen due the enormous budge deficits occurring in 2009. He estimates that the FED will need to create between 800 billion to 1.5 trillion in new money to buy treasuries. Those estimates seem high to me, but time will tell. It is likewise hard to disagree with his assessment that American politicians are incapable of dealing with the expanding deficit problem and the currently massively underfunded entitlement programs like Social Security and Medicare. This can not be viewed as a good thing long term for the U.S. or the U.S. dollar in my view, so I agree with him on that point. I would anticipate that the U.S. debt- to -GDP ratio will exceed 100% in 2011 too.
4. FPA Capital Mutual Fund Managed by Rodriguez Compared to other Well Known Funds: I have never owned one of the funds managed by Rodriguez, since he has always impressed me as both intelligent and way too cautious even for an old cautious geezer who listens to Frank Sinatra music and buys a lot of bonds now. I reviewed the semi-annual report for FPA Capital for the six month period ending in September 2008, and saw that he had 38% of the fund in cash which is not unusual for him. FPA Capital Fund, Inc. He still lost 34.8% in 2008. FPPTX I also have trouble understanding some of his common stock selections. Considering what has happened over the past decade, his ten year annualized return is okay at 6.32%. The Fidelity Magellan fund lost 49.4% last year and has a ten year annualized return of -3.47% according to the data at MSN Money. FMAGX For comparison purposes, Chris Davis' New York Venture fund also has a negative ten year return and it has a load: NYVTX So, none of this is too impressive to me.
5. RB and LB in Another Dispute About Predictions for Year END 2010 on the DJIA: Many investors need to consider themselves fortunate if they can not yet identify the incessant brain chatter emanating from the Right Brain. In a post earlier this morning, LB said that the "best case scenario" for 2010 would be for the DJIA to close just above 10,000 (item # 9 Morning Notes 6/3/2009: More on TIP Pricing/Sold PST/Record Spreads in 2 and 10 Year Treasuries/Australia GDP ). RB was incensed by that comment. RB wants all readers to know that LB is way too cautious, and RB expects the DJIA to close on Friday 12/31/2010 at 11,896.23.
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