Friday, July 31, 2009

End of Day Trades: Sold DRAD/Pared BWX/ Added 100 JQC

1. Sold 100 DRAD: (see Disclaimer): Some of my Lottery Ticket purchases work better than others. I sold 100 DRAD at $2.14 this afternoon, purchased at $1.24 in June: Bought Lottery Ticket 100 DRAD I mentioned in an earlier post that I would likely be a seller in the event the share price crossed the $2 mark. What is a Birther?/CIT More on SIMG & DRAD Some would say why bother with these lottery tickets. My response is that I am almost a $100 richer due this lottery ticket purchase of DRAD shares, almost a double in under two months, and the RB can not do any harm focusing its attention on these selections.

2. Pared BWX: (see Disclaimer) BWX is an ETF containing international government bonds. In a prior post, I mentioned that I would pared the remaining shares of the first lot purchased when BWX crossed $56. This was done late in the afternoon at around $56.25 The first part of that lot (50 shares) was sold when BWX crossed 54, selling those shares at $54.3. Afternoon Comments 6 5 09/Dollar Mounting a Rally/Bonds in a Funk I will not buy those shares back unless BWX falls below $51. As explained in that prior linked post, I am using the movement of the Dollar Index in an effort to manage the currency risk of holding international bonds. The dollar had a bad day today, and the Dollar INDEX (NYBOT:DX) moved closer to 78. The bonds contained in BWX will be very sensitive to the movements of the dollar. As the dollar has lost value recently, the value of the international bonds increased in value for a U.S. shareholder of BWX. Conversely, if the dollar starts a broad based rally and moves back up to say 86 or 88 in this index, I would expect BWX to be falling in price. There are two risks with international bonds. First there is the currency risk which I am attempting to manage in the fashion described in this post and elsewhere in this blog. The second major risk would be a rise in interest rates that would cause these bonds to lose value in their local currencies. I will take the second risk in my remaining shares, since these bonds serve a purpose in my asset allocation plan as a non-correlated asset class. International Bonds as a Non-Correlated Asset

The two sales recently made in BWX were at a profit. They were also my highest cost shares. So, using FIFO accounting, I have lowered my cost basis for the remaining shares, with the last open market purchase made at $47.35.BOND ETFS BWX AND TFI I am reinvesting the meager dividend paid by BWX to buy additional shares. I also own WIP, a smaller position, and I am not managing the currency risk on it. Again, I will not sale what I currently own. I will start to buy back the shares sold when and if BWX falls below $51.

3. Added 100 JQC at $6.31 (see disclaimer): JQC is a closed end investment company. I last discussed this CEF back in early October when I made a purchase at $4.3. AEB AND JQC I also bought some AEB at $5.5 on the same day. ( I raised my position in AEB to 350 shares but I did not make anymore purchases of JQC after that post in October.) The current discount to NAV for JQC is around 19% as of 7/30/09 according to data at the Nuveen site: JQC - Nuveen Multi-Strategy Income and Growth Fund 2 The current dividend yield is around 9.5%. Quote Dividends are paid quarterly. This is a leveraged fund which is one reason why I stayed away from it during the recent troubles. JQC - Nuveen Multi-Strategy Income and Growth Fund 2 The fund owns mostly preferred and debt securities, listed by Nuveen at around 61% of the portfolio and 33.4% consists of equity and convertible securities. The remainder is in odds and ends. I also changed my reinvestment option to buy more shares with the dividends. I am under water some in this holding and I am merely attempting to dig myself out. My total exposure is less than 3 grand.

4. Ariad: This is a link to a couple of articles in Bio Health Investor about the recent Ariad news:
Biotech Biotech I would not have bought 100 shares on Wednesday at $2.55 if I had known about Merck's decision.Bought Another 100 ARIAD Ariad Discloses Information from Merck ARIAD UPDATEAt least, I may be able to recoup some of my loss by including those 100 shares in my next Roth conversion. I will be interested to see if the funds affiliated with the firm named in this SEC filing did more selling after dumping a lot of stock on July 27, 28, 29, selling into the news Ariad released earlier in the week that caused its stock to spike ( see page 10: sc13da107422ari_07282009.htm)

Bought 100 GJO at $16.4/CEF: ETW

1. Bought 100 GJO in Roth at $16.4 (see disclaimer): GJO is a synthetic floater. I previously bought and sold GJO in a taxable account. BOUGHT NVS AND SOLD GJO My main reason for selling this security was its lack of a guarantee and low float rate of just .5% above the 3 month LIBOR rate. Par value of this security is $25. The underlying security in this Trust Certificate is a senior, fixed coupon bond issued by Wal Mart maturing in 2030. As usual with these synthetic floaters, the float is created by a swap agreement which is currently in effect. However, if the swap agreement is terminated for any reason, then the owner of GJO would receive the interest rate as provided by the underlying security, which is 7.55%. I have no reason to believe the swap agreement will be terminated at anytime in the foreseeable future. The swap counterparty is Wachovia, which was recently acquired by Wells Fargo. I previously discussed another synthetic floater, JBK, that did have a swap termination event caused by the bankruptcy of Lehman.

In other words, this security has to be bought with the expectation that the owner will be paid a monthly interest rate floating at .5% above the 3 month LIBOR rate.

This is a link to the prospectus:

This is a link to the FINRA information on the underlying senior bond: FINRA - Investor Information - Market Data - Bonds - Bond Detail I will add this link to my Gateway Post on FINRA.

I view GJO to be one of the worse synthetic floaters. The LIBOR rate is at historically low levels now. This rate is currently around .48%. If this continues for an extended period, I would not be surprised by GJO drifting down in price. The converse may also be true. Once the short rates start to move back up, the interest payable by this security will increase and hopefully the price will follow. This security was selling closer to par value when LIBOR rates were in the 4 to 5% neighborhood. Since September of 2008, most of the trades have been in a channel between $16 to $18 with occasional small spurts out of that channel. From March to September 2008, the trading was in a $18 to $20 channel. Prior to March 2008, the trading activity was mostly in the $20 to $25 range. WM STRATS SRS 2004-5 Share Price Chart | GJO - Yahoo! Finance I would suggest comparing the price since the IPO with historical libor rates: LIBOR Rates History (Historical)

I bought the security today in the ROTH primarily for diversity. The Wal Mart bond is a highly rated credit. In addition, based on history, I would expect the LIBOR rate to eventually return to more normal levels. This site contains historical rates for LIBOR: LIBOR Rates History (Historical) In addition, I bought this security at a discount to par value. If held to maturity, and WMT survives to pay me par value in 2030, I will make over $800 on the security, plus the monthly interest payments. The discount also juices the value to me of the .5% float. At par value, and a .5% 3 month Libor rate, the annualized interest would be 1% or 25 cents annually for 1 share. At a total cost of $16.5, the yield becomes 1.5%, hardly worth buying. But, if and when 3 month LIBOR goes to say 4.5%, then the yield moves to 5% and that is worth 7.57% to me at a cost of $16.5. It does not take much of an average LIBOR rate over the remaining life of this security to beat the current yield on the underlying bond as shown on the FINRA page. If the average 3 month LIBOR rate annualized for the next 21 years is over 3%, then I would be paid more by buying this floater than the underlying bond at a price of over 120. My yield at an average 3% LIBOR would be about 5.3%, starting off much lower in yield than the fixed rate coupon underlying bond of course.

I also discuss this security in this Post: Buy of GJO That purchase was made in a taxable account and later sold. These synthetic securities have some unusual tax issues which is why I hold them now in retirement accounts. Generally, I also prefer to hold bonds paying interest in a retirement account and preferred stocks that pay qualified dividends in a taxable account.

I also have a post on synthetic floaters: Synthetic Floaters

Another related post concerns equity preferred floating rate securities: Advantages and Disadvantages of Equity Preferred Floating Rate Securities

This is a link to a Gateway Post on floaters: Floaters: Links in One Post

I own a large number of floaters, preferring the ones with guarantees that were bought at opportunistic prices.

2. ETW-Closed End Fund (CEF)(see disclaimer): I hold ETW (Eaton Vance Tax Managed Buy-Write Opportunities Fund) in both a retirement and a taxable account. Eaton Vance is the sponsor. EV recently changed the link to its CEFs, and this is the new link: Eaton Vance Investment Managers - Closed-End Funds For ETW, I own all together around 500 shares, with about 100 or so in a retirement account with a cost basis of $8.43 from March 4, 2009. I am under water in the taxable account. Since early March ETW has paid two good dividends and the shares are up over 50%. As of the close yesterday, the discount has narrowed to under 4% to NAV. This is now a candidate for a potential sale in the retirement account, though I may do nothing about it today. ETW is a broadly diversified world stock fund that uses a buy-write option strategy to hedge risk. Eaton Vance Investment Managers - Tax-Managed Global Buy-Write Opportunities Fund That last link contains further links to the annual report. Investors can also find this CEF reports at the SEC: nvq (quarterly holdings) and
Eaton Vance Tax-Managed Global Buy-Write Opps Fund (annual report 12/31/2008). If I decide to sell the shares held in the ROTH, I will keep the shares in the taxable account, probably well into the next secular bull market. Since I have owned ETW, it has been paying a quarterly dividend of $.45 per share. Since I did not mention the buy of ETW in this blog, I will not discuss the sale when and if I actually do it. I am transitioning to more bonds in my retirement accounts.

Ford Motor Credit/ING Hybrid Securities/

1. FORD (own only Bond Position in Ford Motor Credit): My position in FCZ, a Ford Motor Credit senior bond, is one of my bond positions that has more than doubled over the past six to nine months. It was trading at around $7 back in December, when I mentioned that I must have gone nuts to buy shares. (item # 2: FCY: Forest City Enterprises Senior Bond (FCY)/FCZ). The market's view of the parent company, Ford Motor, has improved dramatically since December and FCZ is now trading at above $17 per share. I did subsequently sell 100 of the 200 shares of FCZ owned by me. I still own 100. S & P recently revised the debt outlook for Ford from negative to developing. Information about this bond can be found at the quantum site (free with registration) under the heading Exchange-Traded Debt Securities. The cash for clunkers program did not last long.

2. ING Preferred (own IND, INZ, ISF): I revised the third paragraph in my Gateway Post on ING Preferred this morning to better reflect the nomenclature used to described the ING perpetual preferred securities. ING Preferred Stocks: Links in one Post For a U.S. investor use to seeing clear distinctions between equity preferred and debt securities, the preferred securities issued by the European firms are just strange creatures. Those securities from ING are classified as both equity and debt. Under current U.S. tax law, the dividends are treated as qualified dividends since those securities are included as part of the firm's capital for regulatory purposes. The Quantum site also lists the ING preferred securities with those paying qualified dividends under current U.S. law, subject to change of course. However, in reality, these issues are subordinated debt, and are included in the debt section of the balance sheet. They have features in common with both equity and debt. The most prominent equity characteristic is their perpetual nature. Bonds generally have maturity dates, common stock does not have a maturity. Then, these ING "hybrid" securities becomes more like junior bonds with their cumulative feature.

I did receive a 1099 that listed dividends paid by IND and INZ as qualified dividends in 2008. I also own ISF in an IRA bought at less than $5. My last buy of INZ was at $6.52. So, for purposes of my classification, I will continue to call these securities " equity preferred" since that is how they are classified for regulatory purposes (as part of the firm's capital) and currently for purposes of U.S. taxation. If the U.S. starts to tax the distributions as interest, I will then start to refer to the ING hybrids as subordinated bonds.

All of this was precipitated by an email question from a reader this morning which caused me to look deep into ING's last annual report. This is probably more than anyone wanted to know anyway, except for the stock geeks among us.

I have mentioned on several occasions that I do not like perpetual securities and underweight them. This would include all equity preferred securities from U.S. firms and these strange hybrids from the European firms like Aegon, ING and the one recently issued by Allianz ( Sold 50 KTV & Bought 50 AZM/ Sold 100 SLGPRD at $17.95)


This is a brief update to the post from last night.

Barclays has reduced its price target from $11 to $7 based on a report released this morning, but maintained an overweight rating. Merriman has cut Ariad to a sell. Yah I read the Barclays report but I do not have access to the one from Merriman. The Barclay's analyst says the SUCCEED data is still on track for the 1st quarter of 2010 and that partnership funding is possible for the early stage bcr:abl inhibitor. This is the one discussed in Monday's news release from Ariad that caused the pop in price that day. ARIAD Bcr-Abl Inhibitor - AP24534 Ariad was upbeat in its written earnings release about finding a partner for that drug. The Barclay's analyst views that now as a priority since Ariad has only 6 to 9 months of cash left, and a 27 million dollar milestone payment from Merck has been pushed from the 1st quarter of 2010 to some future date based on revised plans about the development of Aria's key drug ridaforolimus. The analyst did not mention specifically Merck's decision about the Phase 3 combo trial with ridaforolimus and herceptin.

Ariad is a meaningless position to me. If a transcript is made available later today of the earnings call I will read it and pass along my thoughts. Otherwise, I will just hold onto my small number of shares, wait for further information about the SUCCEED trial possibly in September, and then decide what to do. I have bigger fish to fry today.

Added 9:39 A.M. It now appears that sellers earlier this week included several funds related to or affiliated with "Biotechnology Value Fund"sc13da107422ari_07282009.htm (pages 9-10 lists the sales)

Thursday, July 30, 2009

Ariad Discloses Information from Merck that Nullifies the Importance of Tuesday's News Release About Combo Trial With Herceptin

See Update from Friday Morning: ARIAD UPDATE

1. Ariad Pharmaceuticals (owned Lottery Ticket): One reason, among many, that I never invest much money in these small biotech companies is their frequently inexplicable price action. Ariad doubled in price from last Friday's close to its intra-day high on Tuesday. Based on the after hours action tonight, with the stock almost giving up all of this week's gains, it appears that some investors did not like what they heard on the conference call this afternoon. I can only state my point of view, recognizing as usual no expertise whatsoever in this field.

I do not believe the fall after hours has anything to do with the amount of the losses or the revenue. Those issues are not relevant to the current pricing of a small biotech with all of its products still in development. The cash burn rate, while too high, was probably something generally known to investors. The company ended the quarter with 39.5 million in cash after receiving a 22.5 million dollar milestone payment from Merck tied to the start of two clinical trials. Most of the second quarter report dealt with how Ariad hoped to fund its operations for the remaining part of 2009 and in 2010.

If there was something both negative and new, it was the announcement that Merck did not want to proceed with a Phase 3 trial of ridaforolimus in combination with trastuzumab (Herceptin) in patients with metastatic breast cancer, "based on Merck's evaluation of the expected future market environment". That explanation sounded like a bunch of crap to me. Part of the news that drove the stock up on Tuesday, the day before I bought 100 shares, was the news about early stage clinical results on this very subject matter, the combination of ridaforolimus with trastuzumab for the treatment of metastatic breast cancer. Reuters So, a mere two days after releasing this news, ARIA and Merck say forget about that potential use of this key ARIAD drug, because of some garbage about Merck's evaluation of the market, whatever that means. The only legal question is whether Ariad knew or should have known of Merck's reaction when issuing a press release which omitted this extremely material information. Possibly, some of the sellers on Tuesday that drove the price back down from its highs had inside material information. Maybe I am missing something, but I am not pleased with this chain of events. If I do comprehend the events this week correctly, then I will never pay any attention to anything said by Ariad's management again. No matter, I still can not find anything about Merck's decision in this Ariad release from Tuesday: ARIAD

The most important trial is the ongoing Phase 3 trial of ridaforolimus for the treatment of Sarcoma. Here is what Ariad said about that pivotal trial: Ariad "believes that there is a reasonable possibility that the available clinical data at the time of the second interim analysis of efficacy by the independent Data Safety Monitoring Board would be sufficient to demonstrate a statistically significant difference in the primary endpoint of the trial, progression-free survival, when comparing the ridaforolimus and placebo treated patients." So, that was barely a reassuring statement. If that possibility comes to fruition, then Ariad hopes to submit an NDA to the FDA in mid 2010 and then would anticipate FDA approval, hopefully, in late 2010 or 2011. The company expects an interim report on efficacy from the independent monitoring board in September. So that is the key. It was the key a week ago and it remains so now.

I do not want to devote too much time to this lottery ticket investment. I will read the earnings transcript, if seekingalpha prepares one, and the Barclays report on these most recent events,which I would expect to be out soon. I am not about to listen to an hour conference call. I will briefly comment on any new matter gained from reading those documents, including any information on when Ariad learned about Merck's decision on the combo trial with herceptin for breast cancer. I really do hope that I have just failed to understand what really happened, and there is an innocent and honest explanation.

2. Bonuses For Losing Money: After reading Ariad's report, which put me in a foul mood, I then read about Cuomo's disclosure about how the Masters of Disaster paid themselves billions even though their firms lost money. The NYTimes reported this evening that 4793 bankers received more than a million dollars in bonuses last year as their employers accepted billions of dollars from the government. Some of those firms lost money, or paid out more in bonuses than the firm earned.

Sold PG/Pared PGN/Bought 50 of the CEF IAE-Averaging Down

1. Sold Proctor & Gamble at $56.89 (see Disclaimer): Those shares were bought at $47.59 in March: Bought PG While I would view my purchase price a good entry point for a long term hold, it was also a good entry point for a short term trade, and LB is 1/2 trader. Besides, I mentioned how underwhelmed that I was after a Proctor's earnings update. Consequently I noted then a lean toward selling the shares on a pop. / Proctor Update

2. Trimmed Progress Energy by Selling 30 at $39.96 (see disclaimer): The first shares bought of PGN were the highest cost shares, and they were sold this morning at close to break even, possibly with a small profit after adjusting for dividends. I will keep the lower cost shares bought in April at less than $36.

3. Added 50 to IAE at $15.28 (see Disclaimer): IAE is a closed end fund offering from ING that invests in high yielding Asian stocks. I have previously discussed my intent to dump all 30 of my CEFs at some point during the next bull market. By adding some to them now, I am giving myself more leeway, just as a mental issue, of when I will "feel" right selling them. Even Headknocker has to deal with some of the "emotional" issues that arise occasionally in being a long time Stock Jock. Maybe, it is less of an emotional issue and more a product of a competitive spirit. Do you think the young man in the picture shown in this earlier post accepted defeat with quiet equanimity, TBT vs. PST: Hedging Corporate Bond Positions, or the 17 year old shown in the profile picture to this blog.

In other words, lowering my cost basis some now will enable me to sell at a profit sooner during the next bull cycle. IAE has done okay, considering what has happened in the market prior to March of this year, and the current dividend yield is good, around 13% based on my cost. Quote Dividends are paid quarterly. ING Asia Pacific High Dividend Equity Income Fund - Distributions As of yesterday's close, it was selling at a small discount to NAV: ING Asia Pacific High Dividend Equity Income Fund - Overview Several CEFs have cut their dividends over the past year but this one has yet to do so.

This funds fact sheet and reports can be assessed at the ING site: Forms & Literature

I also added 100 shares to a CEF that invests in bonds, selling at about a 10% discount to NAV with a 10% dividend. Dividends are paid monthly. I bought a 100 shares in early 2007, and I am down about $400 on those shares. Adjusting for the dividends, I am done around 1/2 that sum. I view that purchase as a mistake, when made, and it was a mistake to keep the shares throughout 2008. I do not view the purchase now as likely to be a mistake, with improvements in prices for corporate debt, the high current monthly dividend & discount to NAV for this CEF, and the almost nil money market dividends received on cash these days. However, my sole purpose for adding 100 now was to lower my cost basis, and to hopefully sell the 200 at close to break even after receiving more dividends in cash at the current rate. Again, this is more mental than anyone else.

Sold AVY/GE Upgrade/NYX

1. General Electric (owned): GE has not received much love lately. Goldman Sachs took pity on it this morning, upgrading the stock to buy from neutral and raising its price target to $16 from $13. Based on reports, the upgrade was due to comments by Barney Frank that Congressional regulatory "reforms" might not require the separation of GE Capital. The comments made by Frank yesterday are summarized in a Bloomberg article.

2. NYSE Euronext (owned Buys of JWF KSA DIS and NYX): Excluding some charges, NYX reported a Non-GAAP number of 51 cents on a 9.5% increase in revenue. NYSE Euronext's fixed costs decreased by 6%. I am not impressed with these results. The 214 million in operating income was down from 282 million in the second quarter of 2008. The non-GAAP earnings did beat the forecast by 6 cents however.

3. Sold Avery Denison (AVY) at 29.97 (see disclaimer): Avery Dennison is one of the stocks bought in early March 2009 with the following caveat. I would stay with the company for as long as the company stayed with me, i.e, for as long as there was no cut in the dividend. AVY AVY cut its quarterly dividend from 41 cents to 20 cents this morning and I promptly sold my shares. AVY reported earnings of 38 cents per share, down from 93 cents a year ago.

There is an exception to this automatic sale in place since March. If the company cuts the dividend and announces a 5% or greater voluntary pay cut for management, a shared sacrifice, then I will forgive and forget. But my tolerance for dividend cuts, where management continues their own pay as if the good times continued to roll, is at an end.

4. More on the Fat Tax: Headknocker noted that under the Body Mass Index (BMI) chart, no doubt prepared by a bunch of commie liberals, he would owe his fair share of a Tax on excess body fat. The beauty of the Fat Tax is that revenues generated by it will grow at a faster rate than inflation, and even faster than the historic rise in medical costs. Based on his personal observations, Headknocker is positive that his BMI has grown at a faster pace than inflation since at least 1990, and can not imagine how that could be true, given the steady diet in cheeseburgers, fries and sugary soda drinks and his constant thinking about exercise.

There was a debate this morning among staff here at HQ about how Charlie Rangel would avoid paying his fair share. While some say that television makes people look more rotund than the reality, we suspect that may not be true for Charlie. Then RB chimed in, with the observation that Charlie would weigh himself and then pronounce that at a mere 125 pounds, well within the boundaries of that communist BMI index, he owed no Fat Tax.

Health care spending has increased at a faster rate the GDP since the 1960s. In 2007, the Kaiser foundation estimated that health care spending had increased 2.4 percentage points faster than GDP since the 1970s and would equal almost $13,000 per resident by 2016.

Wednesday, July 29, 2009

Sold Remaining shares in the TC PIS/Added to BCF

1. Sold 50 PIS (see Disclaimer): The Trust Certificate (TC), PIS, went ex interest today and I sold my remaining 50 shares at $17.05, as the shares gain about 1/2 of the value of the interest payment today. Those shares were bought in September 2008 at a total cost of $13.69. This leaves me with 200 shares of PKK, as the only TC containing bonds issued by Liberty Media. In addition to the profit and the interest payments received or to be received, another reason for reducing my exposure to Liberty Media bonds is the same as I previously discussed for prior sales (see item # 6: 10 Year TIP Auction/Sold Pepsico/ Sold General Mills/SOLD 1/2 OF PIS POSITION/Sold Almost 1/2 of GRTPRG Position)

2. Added 50 BCF (Blackrock Real Asset) at 9.69 in Roth: (see Disclaimer) I recently sold in my Roth IRA another closed end fund, IRR, that specialized in natural resource stocks after that fund jumped to a premium to its NAV. Sold Some IRR/ I took my BCF position in that account to over 200 shares with a 50 share purchase today at $9.69. Along with the BCF shares owned in a taxable account, this brings my total close to 500 shares. I mentioned in a prior post discussing closed end funds that I might use the proceeds from the sale of IRR to buy more BCF. Closed End Funds: Energy and Natural Resources Funds I mentioned in that post that IRR was selling at a premium to NAV and BCF was then selling at a 10.99% discount to NAV. That discount has narrowed some since that earlier post, but is still close to a 10% discount as of yesterday's close.BlackRock Internet Based on its current dividend policy, which is of course subject to change, this CEF (closed end fund) has over an 11% annualize dividend yield, paid in quarterly installments. Quote The current penny rate is for a quarterly dividend of 27 cents per share or $1.08 annually per share. I would not be shocked by a dividend cut. The fund does generate some income with an option strategy, i.e., selling calls. The link to the semi-annual report (ending 4/2009) for several of Blackrock's CEFs including BCF is currently: BlackRock This sector has been pummeled pretty good in this market. This CEF has a broad range of companies in the natural resource area. I view it primarily as an income generating vehicle which also provides me with broad exposure to this sector, extending beyond energy companies, similar to the ETF IGE, iShares S&P North American Natural Resources Sector Index Fund (IGE): Overview, except BCF is not limited to just North American companies.

My last add to BCF was in February at $6.6, so it has had a good rally since that time.BUY 50 BDNPRC at $9.25/Buy 50 BCF at $6.6/Home Sales/Kudlow's Creation of His Own Reality/LQD & Correction in Bond Prices/

I also added a bank lottery ticket which I will discuss when I have more time tomorrow.

Sold All Verizon Stock/Eliminated GRTPRG & Reduced GRTPRF

1. Sold Remaining GRTPRG at $12.04 and 50 GRTPRF at $12.88 (see Disclaimer) : When I discussed buying GRTPRF last fall, GRTPRF: A WALK ON THE WILD SIDE, I mentioned that the market was pricing this cumulative preferred issues as if bankruptcy was a virtual certainty. At a price of $2.9, the yield was after all 75%. I merely said that I was not so sure about that possibility. Now, the market is more comfortable and I still view the situation as high risk. So I eliminated most, but not all, of my exposure. I still own some shares of the common and GRTPRF. In a sense, what I have done this month with my various positions in Glimcher is to sell the position down to the point of my comfort level, take the profits, telling myself to be content with the dividends received to date, and just forget about what little is left. As Taleb said, the bullet is always in the revolver. Duality of Long Term Risks/Stocks Under $5: Per Se Lottery Tickets/

2. Sold All Verizon Shares at $31.64 (see Disclaimer) A reader asked me the other day what did I intend to do with the Frontier Communications shares once VZ spins them out to its shareholders. One alternative that I mentioned to her was to sell my Verizon shares before the spin-out to avoid yet another tax headache next March, since LB is a magnet for tax issues. I just decided to dump my Verizon shares at a profit in both my taxable and retirement accounts. The retirement account shares had a cost basis of $28.99 from last October. I discussed buying VZ stock last in this post: Afternoon Comments 6 1 09/ Bought XLK-Pared Campbell Soup/ISM New Orders over 50/Bought VZ and Sold PHO/ added 50 FRPRJ as a gamble (subsequent to that post I sold FRPRJ).

Some of what I do is based on feel. I would have to say that the risk reduction started last week is still continuing. One factor that unnerved me some is discussed in this post from a Barrons columnist that I had noted prior to reading it. The VIX is starting to move back up, rising almost 4% today to around 26. The current pattern is of course still an Unstable VIX Pattern which has its own set of trading rules.

LB Raises First Amendment Objection to Tax on the Word "Reform" and RB Solves the Constitutional Problem

LB, one of the nation's leading unheralded and unpublished First Amendment scholars, had more than a few objections to Headknocker's proposed $1,000 tax on the public use of the word "reform". After stating such objections, with numerous legal citations and assorted legal gibberish, RB solved the issue to Headknocker's satisfaction, recommending that the word "baloney" may be substituted for the word "reform" without fear of being taxed by the government. This proposal was a twofer according to RB. First, the public would no longer be confused by the use of reform when they hear baloney instead. Second, there is no prior restraint on speech, since the politicians and others could still use the word "baloney" when they are trying to convince the public that their policy is a "reform." For example, a politician could say my proposal to save costs while increasing expenses by 1 trillion is baloney.

Brief Note on the Soda Tax Proposal by RB

Before leaving HQ for the morning, Headknocker wanted a notice displayed on the blog about comments generated by RB in some recent blogs about a Soda Tax. Those blogs do not express official policy here at HQ. After all, Headknocker owns Coca Cola stock. Buy of KO at 38.72 So, notice is hereby given that all references made by RB about a Soda Tax are hereby disavowed. Instead of a Soda Tax, we are in favor of a $1,000 tax on the public use of the word "reform", with the tax levied upon each such use, with multiple offenders having to pay a progressive fine on "more" usage in keeping with core beliefs of the Democratic Party.

Bought Another 100 ARIAD/ More on the Case-Shiller Index/ARIAD/Daimler AG/COP

1. Case-Shiller 20 City Index of Home Prices: The has a helpful interactive chart in the paper this morning showing the rise and subsequent fall of home prices in the 20 cities included in the Case-Shiller index. Some of the cities that did not experience parabolic type rises in prices between 2002-2006, such as Dallas, Denver and Charlotte, had far smaller declines between 2007 to 2009. Although Nashville is not included in this list, I would expect its chart to be similar to Charlotte. California was one of the epi-centers of easy money fueling unsustainable increases in home prices. The index includes three California cities- San Francisco, Los Angeles and San Diego. Although home prices in those cities fell significantly, they have already started to turn up noticeably in these charts. I would have expected those cities to fall hard and then to recover more quickly. Housing prices in four other cities, where the problems were more severe-Phoenix, Las Vegas, Miami, and Detroit, appear to be stabilizing and starting to turn back up after severe declines. The recovery will be slower in those cities than in the 3 California cities. I view the current trends in many of these cities included in the index as positive, indicating that the fall in most areas is over and the recovery in prices has already started in several areas.

USA Today has a story on its front page this morning titled "Housing prices rounding a corner?". I would not ask that question rhetorically. I believe that the bottom has been found and the upturn has already started with some localities recovering quicker than others.

2. BOUGHT 100 Ariad Pharmaceuticals at $2.55 (owned-Lottery Ticket) (see Disclaimer): I now own 200 shares of ARIA with the purchase this morning of 100 shares of ARIA in my traditional IRA at $2.55. The other 100 has been in a taxable account since last summer. I will trade the shares bought today aggressively while holding onto the shares in the taxable account waiting on more results in ARIA's main drug candidate currently in Phase III trials. I placed the shares bought today in a regular IRA and will include those shares in the next ROTH conversion in case they blow up. That way, I can recover part of the decline, indirectly, by paying less tax on the transfer from the regular IRA to the Roth IRA. This process has been an integral part of my asset management since last October and has worked extremely well, as I managed to transfer securities near their lows and then have them recover in price after the transfer, with some being sold just recently after doubling in price after the conversion.

I did not want to bust a brain cell trying to evaluate the recent news emanating from Ariad, besides I am not equipped to evaluate it anyway. I did manage to read a recent Barclay's report on the firm that was released on 7/27/2009 after the release of some clinical results for Ariad's Bcr-Abl inhibitor AP24534. This is what caused the pop in Ariad's price on Monday. Lottery Tickets Ariad Pharmaceuticals and Webster Financial Barclay's has an overweight on the stock with a $11 target, as shown in this report dated 7/27/09. Barclays calls the results from this early stage trial to show "proof of concept", meaning the data suggests anti-tumor activity including hematologic, molecular and cytogenetic. I do not have a clue what all of that means. I did read the press release and I do understand the statement that 19 out of 23 patients at the highest dosage had no disease progression which is evidence that the disease is being controlled by the drug. ARIAD Bcr-Abl Inhibitor - AP24534 The more important drug for this small biotech, at least over the short and intermediate terms, is the one that caused the pop yesterday that is involved in multiple trials with Merck as Ariad's partner. Ariad Pharmaceuticals The news yesterday caused an initial spike in the stock and a lot of selling into that spike, indicating to me that many market participants viewed the news less favorably than others. Still, even after the intra-day correction yesterday, the stock closed at $2.8, up from the Friday close of $1.73.

I then read a report released yesterday from Barclay's discussing those early stage trials of ridaforolimus in combination with Herceptin and Avastin. The analyst just commented that the data released by Ariad yesterday "suggests potential synergy." I would agree with the analyst that the most important trial involving this drug is the Phase 3 trials for Sarcoma, possibly with more detail released at the ESMO conference in September. If the results of that trial turn sour the stock will likely suffer a significant fall in my opinion, and the risk of having success or failure hinge mainly on one compound is always acute.

3. Daimler (Bond position only): I recently bought 100 shares of a Trust Certificate, GJL, than contains a senior bond issued by the U.S. Daimler subsidiary and guaranteed by Daimler. DAI reported its third consecutive quarterly loss (1.51 U.S Dollars) this morning, but the results were better than expected and the stock rose in European trading. The truck business seems to be the primary culprit, with revenues plunging 60%. Another factor that reduced sales comparison was Daimler relinquishing its stake in the bankrupt Chrysler effective June 3, 2009. GJL is discussed in a prior post: Bought Another 100 of GJL Bought 100 GJL/More on Sarah-My Favorite Politico/TIP/ This TC is lightly traded with large bid/ask spreads. For my last trade, the bid was $20.50 and the ask was at $21 with no volume. I placed a limit order at $20.6 and it was filled immediately. GJL is a synthetic floating rate security that pays the greater of 3% or 1.25% over the 3 month Treasury Bill rate. Given the low T Bill rates, the guarantee is the applicable rate now. The 3 month T Bill rate would have to increase to over 1.75% to trigger the floating rate. The underlying bond matures in November 2013, which is the maturity date for the TC also, as usual, and the TC par value is $25. The underlying bond information (a fixed coupon unlike the TC) can be found at FINRA - Investor Information - Market Data - Bonds - Bond Detail. I currently own 200 GJL, equally divided between taxable and retirement accounts. Interest is paid monthly.

4. Just Another Example of Hypocrisy: Yesterday, I focused on Charlie Rangel, the Democrat Chairman of the House and Ways Committee, who is so eager to impose new "moral" taxes to be paid by others, while evading his own tax obligations with verve, zeal and apparent immunity reserved to the those with influence. Today, I will just mention a Tennessee state senator from the GOP tribe, a married gentleman by the name of Paul Stanley, who has spoke out against Planned Parenthood, saying unmarried people should not have sex. Yes, need I say more about his positions on family values. Apparently, it is not okay to have sex before marriage but it is just fine to have sex with a young female intern who is not your wife. As I have come to expect, the Tennessee legislators are a constant source of entertainment for an aging free thinking codger. The affair was exposed after the woman's boyfriend allegedly tried to extort the preacher senator with pictures of the liaisons. Personally, I have not seen the pictures but Stanley admitted to the TBI that he took some pictures of the young lady-au naturel- in his Nashville apartment . The boyfriend is now in the slammer. The young ladies former husband is also in jail for attacking a man with a hammer after allegedly offering to pay for sex. The local news is reporting that the young lady admitted in a police report some years ago to being a crack cocaine user.

5. USATODAY Discovers the Rally in Corporate Bonds: The rally in corporate bonds has been ongoing for most of 2009. On page 1 of the business section in USA Today, the paper reports this "news". Really, a successful investor has to find the news before it occurs to journalists that something has changed in the market. I do subscribe to this paper, but it is available free on the internet.

6. ConocoPhillips (owned): As expected, COP reported a large drop in earnings for the 2nd quarter, compared to a year ago, reporting earnings at 87 cents a share, two cents ahead of the First Call consensus estimate. The refining part of the business swung to a 52 million dollar loss from a 664 million dollar gain in the second quarter of 2008.

Tuesday, July 28, 2009

The More You Weigh-The More You Pay/

My modest proposal to fund the Democrats new health care program with a Fat Tax, a Soda Tax and more Cancer Stick Taxes has received lukewarm support from the only known liberal here in the SUV Capital of the World. More on the FAT TAX-Combine with a Soda Tax & More Cancer Stick Taxes One of the core principles of Democratic Party is to tax "more" of something, whoever has more pays more. I learned about all of that decades ago. That core principal is a part of their DNA. And, "progressive" is one of the two words that pepper their sentences along with "reform". The FAT TAX is progressive, without question, and it taxes more of something, fitting both core principles of the Democratic Party, i.e., the more you weigh, the more you pay. And that will be the ad slogan which I am giving to Charlie Rangel. I really do not want any credit for any of these ideas. Now, Charlie can not argue with the morality of the tax, since it is both progressive and applied to something that is more. As the reader can see, I have thought of all the angles. Hiring new federal workers to administer the plan will reduce the unemployment rate by a 1% or so. Some individuals will change their behavior in response to the tax, moving closer to less of the more subject to tax. This will do more than anything previously done by the government to restrain the growth in medical costs while also providing a growing source of funding for the Democrats to spend for decades to come. LB has already started researching all of the investment angles. RB is just thrilled that LB has returned to being a Stock Jock , after many months of being a Bond Lover.

I noticed this evening many scholarly articles written about the "Fat Tax" including one published yesterday in Forbes. I was surprised about how much research had already been done on the subject by simply googling the phrase "FAT TAX" Unfortunately, all of these articles are merely confusing the American public, and are heading in the wrong direction. Yes, I agree with all of the critics that taxing fatty foods is not the answer, other than the soda tax of course. If you really want to get at the root of the problem, and to change behavior, the Fat Tax has to be applied to the end product of the ingestion process, not to the inputs, and more tax is progressively applied as the taxpayer moves beyond what is deemed acceptable by the government in the BMI index. What could be fairer?

Sold 50 KTV & Bought 50 AZM/ Sold 100 SLGPRD at $17.95/SLG Earnings/More on the FAT TAX-Combine with a Soda Tax & More Cancer Stick Taxes

1. Fat Tax/Soda Tax/Cancer Stick Tax Increase: Every great idea starts out with a kernel of inspiration, and my modest proposal for a new Fat Tax is certainly no exception. A Modest Proposal to the Democratic Party: Forget About the Surtax and Try a Tax on Fat/Charlie Rangel-A Pillar of Tax Morality?/CPB/ 3 mo LiborThe groundswell of public opinion is already starting to fan out across the land. I have not worked out all of the details yet. And, Charlie Rangel would be hard pressed to avoid paying his full share. National Legal and Policy Center I am confident that revenues from the Fat Tax will grow faster than the rise in medical costs however, just based on my personal observations and the kind of data discussed in the papers today. And that is the beauty of the Fat Tax. The Democrat plan does nothing to contain costs. So we need to find a source of revenue to pay for medical costs that will undoubtedly continue to rise at a rate greater than inflation. If there was in fact a plan to contain costs, while providing insurance coverage to 50 million uninsured people, I would have hoped all of those plans would have already been implemented to slow down the rise in medicare costs prior to now, since the medicare fund is currently running out of dough fast.

The liberals need to get on board with the Fat Tax. Many of them are already proposing a tax on carbonated beverages with calories, CBS News, so we are not that far apart in building a coalition to bring this concept to fruition. And, we are thinking along the same lines. The Soda Tax would raise 140 billion over 10 years, according to CBS, and the Soda Tax could be combined with the new Fat Tax assessed progressively based on the amount deemed excessive under the BMI Chart. Then, on top of that, I would recommend adding more to the Cancer Stick Tax. So, there, I have solved the problem, and it really did not require much time. Now, back to increasing the Headknocker's capital base.

2. Sold 100 SLGPRD at $17.95 (see disclaimer): I bought the shares in this cumulative preferred stock of S L Green prior to the commencement of this blog last October, and I sold those shares this morning at a profit, having also received several quarterly dividends payments. I mentioned in an earlier post that I was going to transfer the risk of holding SLG preferred stock to an IRA, which I have already done by buying shares in SLGPRC at $10.5 and $11.89. Bought SLGPRC: Anticipated Risk Reduction and Transfer Buys of GPOR and SLGPRC

3. SL Green (SLG) (Owned): I still own the common shares of S L Green realty and 80 shares of SLGPRC. UBS initiated coverage on SLG with a sell last Tuesday. The earnings report this morning of $1.20 FFO met the street expectations. I just quickly reviewed the report and saw that the Manhattan occupancy rate was 96.2%. I intend to hold what I now own. I am however taking what can charitably be called wimpish baby steps with my last purchase being just 25 shares at around $15. Add 25 SLG But, that is okay since I am surrounded by critics and under siege from them. I am hopeful that eventually I will acquire enough shares to own, indirectly of course, one Manhattan brick, and I hear that those bricks are a lot more expensive than Tennessee bricks.

4. Case-Shiller Index: I mentioned earlier that I thought it would be important for this index to show a sequential rise in May (see item #2: LINKS TO FED INFORMATION ON REAL AND NOMINAL YIELDS/NEW HOME SALES/ 20 YEAR TIP AUCTION) The index was released this morning and showed a .5% sequential month-to-month increase, the first since July 2006. I view that as positive. The index results can be downloaded at this web page from S&P .

5. Bought 50 AZM and Sold Highest Cost KTV shares (see Disclaimer): Maybe I do too much trading. But, in my defense, there is something to be said about continuous movement, like Muhammad Ali in the boxing ring, to make it harder for the bogeyman and those Black Swans to land a solid punch.

I sold 1/2 of my position in KTV this morning at $24.5. These would be the highest cost shares bought first at $20.50 in February. Buy 50 KTV I then averaged down with another 50 south of $18 shortly thereafter. Rounded KTV to 100 Shares I will keep those 50 shares, which will generate a higher yield than the shares sold today. Those shares will have a current yield a tad over 11.3% based on the purchase cost, whereas the combined 100 shares had a yield of around 10.67%. So, I realized a gain of close to $200 on the shares, plus a dividend, and lowered my cost basis and increased my yield on the remaining shares. That is how I like to manage these higher risk bank TPs.

In its place, I added 50 shares of AZM, a strange creature from Allianz (AZ), the German insurance giant that also owns PIMCO in the U.S. This has one bad feature to it which I will mention first. It is a perpetual debt issue and that explains more than anything else why I just bought 50 shares. AZM is junior subordinated debt as explained in the prospectus and at the AZ web site. Allianz - Bonds and Participation Certificate The 2008 annual report refers to the issue as debt at p.85:

The coupon is 8.375% and the Quantumonline site claims that it is rated A3 by Moody's and A+ by S & P.AZM Search Results - I did not verify that claim. I do not subscribe to any of the rating services.

Par value is $25 but that will probably not matter much for this perpetual security except as part of the current yield calculation at a purchase price of less than $25.

I calculated my yield at a purchase price of $23.78 to be around 8.8%.

This is a link to the prospectus: 424B5

Interest is paid quarterly. Now to the weird part. This is a bond, not an equity preferred stock.

Quantum claims that the payments for this bond qualify for the 15% qualified tax rate currently: (see first page: 15% Tax Rate Table

I then checked the prospectus and found at p. S-57 a claim by Allianz that the payments do qualify as qualified dividends. This may change however, and somewhere in that prospectus I read a passage saying bills had been introduced in Congress to exclude this kind of dividend payments from the qualified dividend category when paid by a foreign institution. I would call that issue one that is in flux, and anything could happen. So, for me, I would not count on that 15% max rate for much longer as the Democrats search for new taxes or to reinstate old ones.

My primary reason for adding this security was for diversity. I take diversity to far beyond the extreme level.

I am already familiar with this firm. I did however read the Morningstar and S & P reports on AZ before buying the bond. S & P currently has it rated 4 stars.

Ariad Pharmaceuticals/Hertz Bonds/Ciber/GE Capital

1. Ciber (lottery ticket-owned): The only positive comment that I can make about Ciber's report this morning is that the firm was profitable in the second quarter, earning 7 cents a share down from 14 cents in the year ago quarter. Revenue fell 18% and 11% of the decline was organic with the rest due to currency fluctuations. At best, this LT, which is in the red slightly, is a hold. The company has reduced its long-term debt by an "impressive" 53.6 million since 2008, down to $112.1. Ciber must have forgot to remind shareholders that the "impressive" reduction was accomplished mostly by a dilutive common stock offering in February. I could go on with the negativity by mentioning that Ciber missed the consensus earnings forecast by 2 cents, missed the revenue forecast, and guided down for fiscal year 2009, but that would be piling on.

2. GE Capital: GE is claiming at GE Capital, its achilles heel for the past year, will not need more capital even under stress conditions. GE expects the losses and impairments at GEC in 2010 to be about the same as in 2009. GE told investors this morning that GEC was running in line with expectations so far this year and was on track to earn between 2 and 2.5 billion this year.

3. Ariad Pharmaceuticals (owned Lottery Ticket): Maybe an old codger with no background in science or medicine needs to make an effort this week in learning more about the Lottery Ticket purchase in Ariad made last summer. This small biotech firm closed last Friday at $1.73, rose to $2.45 yesterday, and is now sprinting up another 34%+ this morning on even more news released earlier today. The positive news today has to do with two other ongoing clinical trials evaluating ridaforolimus, its investigational drug, in combination with trastuzumab (Herceptin) in patients with resistant metastatic breast cancer and with bevacizumab (Avastin) with refractory, metastatic solid tumors. ARIAD Announces Preliminary Data from Two Ongoing Clinical Trials of Its Investigational mTOR Inhibitor, Ridaforolimus, in Combination with Targeted Drugs
Admittedly, I have to just a calculator on my IMAC computer screen to perform simple calculations, so errors creep into my mental calculation, but that looks like almost a double in the first 2 trading days of this week, so far at least. Fifteen minutes into trading, the stock has traded over 7 million shares with an average daily at 576 thousand.

4. Hertz: I still own 50 shares of the TC DKR, bought at $6.45, which contains a senior bond from HTZ maturing in 2012. Hertz Bond Information in One Post I sold the other 50 on a pop to $14 and was then too timid to buy those shares back when DKR fell back down to $6, suffering from a deer in the headlights syndrome. I did ask my Doc about a cure for that, but he gave me the same look as when I asked about a quart of valium to be injected into RB so that LB could get a little peace and quiet. Fed Is Less Gloomy: Measure Time Period of Quantitative Easing in Months not Years/BMY/CBG/SYNTHETIC FLOATERS Needless to say, DKR has done well, now selling for over $20 and I have received two semi annual interest payments on those shares. But the news about Hertz debt issues have taken a turn for the worse, with downgrades in its debt from both Moody's and Fitch recently.

A Modest Proposal to the Democratic Party: Forget About the Surtax and Try a Tax on Fat/Charlie Rangel-A Pillar of Tax Morality?/CPB/ 3 mo Libor

1. Campbell Soup (owned): I read a brokerage report on CPB last night that had an interesting tidbit of information. The analyst claimed that China and Russia accounted for about 50% of the world's soup market. CPB entries into "test markets" in those companies have reportedly shown promise. Campbell recently signed Coca-Cola Hellenic Bottling Company , the largest distributor and seller of beverages in Russia, to distribute Campbell products within Russia, starting in the Moscow region and then expanding in August 2009 to 100 cities and 12 regions in Russia. Russia is the second largest soup market after China according to the WSJ.

2. 3 Month Libor (London interbank offered rate): Many of the synthetic floaters that I own pay the greater of a guarantee or some percentage over the 3 month Libor rate. Floaters: Links in One Post This rate, while generally higher than the 3 month treasury bill rate, closed yesterday at .49625%, the lowest level since the British Banker's Association launched this rate in 1986.

3. Narrowing of Corporate Bond Spreads: Under my dynamic asset allocation approach, the time to add investment grade corporate bonds to my portfolio was last Fall, when the spread between corporate and treasury bonds, as measured by a Merrill Lynch index, reached an all time high. In an article in the WSJ this morning, there is a chart that shows just how far the spread has narrowed since that time, with the spread between investment grade corporates and treasuries cut in half. Junk bonds reached a crescendo of a 21.3% spread over treasuries. My focus in the Fall was to buy Trust Certificates which contain bonds from a single issuer, which trade on the stock market primarily among individual investors, since they were frequently trading back then at significant discounts to the prices of the bonds. As I previously said, it was like buying something already on sale at a further discount. Trust Certificate Links in One Post

4. A Modest Proposal for the Democratic Party-Try A FAT TAX RATHER THAN A SURTAX: Jonathan Swift ran into some trouble a few moons ago by suggesting his modest proposal , something about a recommendation he made in 1729 titled: A Modest Proposal: For Preventing the Children of Poor People In Ireland from Being a Burden to their Parents or Country. Apparently some people can not comprehend satire.

My modest proposal to Charlie Rangel is to scrap all of these ideas about surtaxes and penalties. Instead, my modest proposal is something akin to a user fee.

There is a story on the front page of USATODAY that obesity is the key to the soaring cost of health care, costing an estimated 147 billion in health care costs in 2008. That rang a bell for RB who came up with the idea this morning. Why not tax fat? It is the only fair thing to do. The tax would only be paid by those who exceed the body mass index, with the IRS Centers around the country stocked with weighing machines. Unemployed persons could be hired to conduct the tax assessments on the spot, thus raising revenue while reducing the unemployment rate, a twofer. And the government has already defined obesity and has a table prepared upon which the tax could be based, the infamous "Body Mass Index Table"NHLBI, Obesity Guidelines-Executive Summary-BMI Chart Now, I am not being hypocritical, like Charlie Rangel, since I would be hit myself with this tax and would gladly pay it. It might even help me lose a few pounds, as I quite thinking about exercising and changing my diet and actually do something.

6. Charlie Rangel: The WSJ had an interesting expose of Charlie Rangel's tax evasion practices which seems like a routine matter for the House Ways and Means Chairman. The Journal gives several examples of how Charlie has had some moral failing in paying one tax or another. Hypocrisy is the mother's milk for politicians. Just say one thing and do another, smile and look sincere. The surtax of 5.4% to be paid by others is in Charlie's words "the moral thing to do". At times I may sound a tad cynical, but in this instance it is more due to a low tolerance for hypocrites, particularly of those from the GOP tribe who preach family values as a means to gain power for themselves and then are in reality poster children for the opposite.

Monday, July 27, 2009


1. IGE (owned): IGE is an ETF containing North American natural resource stocks that I added to my portfolio recently. BOUGHT 100 IGE/Forbes Makes Case for Bonds Over Stocks/PFK Retrospective/S & P Economist: No Inflation Threat for Five Years at Least This is a link to a good article at about this ETF.

2. NEW HOME SALES: New home sales increased 11% in June, the largest monthly increase in nine years. The bad news is that the median price continues to fall, down 6% from the May reading. The Case-Shiller index will be released this week. Home Price I will be curious when it will show a sequential increase in home prices, which I would view as important.

3. 20 Year TIP Auction: I decided to stay away from submitting a bid in this auction. The high yield was 2.387%. For those interested, the FED provides data daily on the real treasury yields: U.S. Treasury - Daily Treasury Real Yield Curve Last Friday, the real yield for the 20 year bond was 2.36%. The real yield is after inflation. The Fed also provides us with the nominal yield for the treasury securities on a daily basis. U.S. Treasury - Daily Treasury Yield Curve Last Friday the nominal yield for the 20 year was 4.53%. The break even point was too high for me at around 2.17%, based on those Friday numbers, and I want more than 2.5% in a coupon for such a long maturity. See generally, Advantages and Disadvantages of Treasury Inflation Protected Securities:

4. Dividends and Interest (all of the foregoing securities are owned): A couple of the synthetic floaters (GJN & GJT) go ex interest on Wednesday with their monthly interest payments. Synthetic Floaters The TC PIS, which contains a senior bond from Liberty Media, goes ex interest also with its semi annual payment. I have been paring my exposure to Liberty Media bonds based on my opinion that John Malone has been acting in a manner contrary to the interest of the Liberty bond holders. SOLD 1/2 OF PIS POSITION Reduction in IRA: TC WITH Liberty Media bond-50 shares of PKK (Both sales were in an IRA after a Roth conversion at about twice the value at the time of transfer). I am now down to 50 PIS and 200 PKK in a taxable account. Two senior bonds PMA Capital (PMK) and Prudential Financial (PFK) also go ex interest with their monthly interest payments on Wednesday. PMK is a fixed coupon bond with a $10 par value. PFK is a floater that pays interest based on a 2.4% spread over a CPI calculation. The penny rate for PFK will be $.03458 for the upcoming payment, and as expected this number has declined recently due to the fall in the CPI numbers. Par value is $25. PWE, a Canadian energy company, will go ex with its monthly dividend of 15 cents Canadian. Conoco Phillips (COP) and Brookfield Asset Management (BAm), two positions added during RB's frolic last March, will go ex dividend with their respective quarterly payments. Buy of COP Buy of EWC & BAM Lastly, the recently added TP issue, FBFPRN (Fleet Capital Trust IX) , has its ex interest date for its quarterly payment. Bought 100 FBFPRN/

Pared PKM/Lottery Tickets Ariad Pharmaceuticals and Webster Financial

1. Ariad Pharmaceutical (ARID) (owned): Ariad is a Lottery Ticket purchased before I started this blog. I discussed it briefly when, suffering from old age memory issues, I saw it in my portfolio and had no idea what it was doing there. Old Age Infirmities: Why is a Company called Ariad Pharmaceuticals in my Portfolio The focus of that earlier post was some corporate governance issues, and trying to reacquaint myself with why I bought ARIAD in the first place which was discussed in this post: More on Ariad To be frank, I did not have a clue what caused me to buy it as a LT. Trying to recreate what may have gone through my mind last summer when I bought 100 shares, I determined that it probably had something to do with a drug called deforolimus (or redaforolimus) for the treatment of metastatic cancer. I noted Merck was involved with Ariad on that drug. That drug is in stage 3 clinical trials. There was news this morning about another ARIAD drug, in early clinical trials for the treatment of advanced hematological cancers. This caused the stock to pop some in early trading today. I am certainly not equipped to evaluate these kind of matters, which is why I include these small biotech companies in the LT category and never (and I do mean never) invest much money, since their drugs, even the promising ones, often fail at some point during clinical trials. While Novartis and Pfizer can shrug off failures, they can be devastating for these small biotechs.

2. Webster Financial (owned-Lottery Ticket): WBS is a northeastern bank whose shares were bought at $4.58 as a Lottery Ticket. Buy of 50 WBS: Lottery Ticket The rationale for buying shares was discussed in that linked post. Today, the shares rose over 13% to near $11 in early morning trading based on a 115 million dollar investment by Warburg Pincus. Those shares were bought at $10, a small premium to the closing price on Friday.

For the older investors, or the younger ones with an interest in history, it is generally known that the banks periodically blow themselves up. The last near death experience for many of them occurred in the 1990-1991 period, and bad real estate loans were the primary culprit at that time. Financials: 3 Strikes and Your Out-Financials?/BAC/ Parallels to 1990-1991?/ While it is worse this time for the banks, I am confident that a bull market will arise out of the ashes, sooner or later, in the stocks of some of the financial institutions that survive the blood letting. I have no idea which will prosper in the next bull market for financial stocks, so my approach has been to just buy small amounts of a number of them, and just throw a few out occasionally, as I recently did with UCBH, and hold onto the rest to see what happens. All of these investments will be in what I call my Lottery Ticket category:LOTTERY TICKET PURCHASES: LINKS IN ONE POST I will not risk much capital in them since so many are just severely damaged, and it is too hard now to separate the wheat from the chaff (Matthew 3).

3. Pared PKM (see disclaimer): I sold 50 shares of my 150 PKM shares earlier in the day at $20.11. I bought shares in this TC in two phases, and my first purchase was at a higher cost than the second.Bought 150 TC PKM I mentioned in that post that I would likely reduce my position by 50 shares on a rally above $19 after the payment of the next semi-annual interest payment. Instead, while the ex interest date will be in August, I accomplish the same objective by waiting until the price crossed $20. By selling some of the first shares bought at $17.8, and using FIFO accounting, I lower my effective cost basis in the remaining shares while reaping a decent short term gain on the 50 shares. I did recently add 50 shares of another TC, KRH, that has the same junior bond as PKM as its underlying bond. Bought 50 KRH in IRA/

One thing about buying exchange traded bonds is that I can trade fairly easily most of the time in relatively small amounts. I had no trouble selling those 50 shares of PKM this morning.