Bought 100 GJL/More on Sarah-My Favorite Politico/TIP/

1. Bought 100 of the TC GJL: This TC contains as its underlying bond a senior bond from Daimler North America that is guaranteed by Daimler Ag (DAI). The senior bond matures on November 15, 2013.  The TC will mature at the same time. While the underlying bond is a fixed rate bond, with a 6.5% coupon, the TC is a synthetic floater that pays the greater of 3% or 1.25% over the 3 month Treasury Bill rate, with a cap at 6.75%.  The floating rate is created by a swap agreement which is why I call this type of bond a synthetic floating rate security.  If the swap agreement is terminated for whatever reason, the owner of GJL will receive the fixed coupon rate. Otherwise, the holder will receive the float rate.  Since T Bills are close to zero now, the applicable rate is the guarantee of 3%.  At a total cost (price + commission) of $20.75, by way of example, the guaranteed yield works out to a current yield of 3.614%.  In addition, provided Daimler survives for 3 years and a few months, I will also receive close to a $400 profit on my 100 shares at maturity.  The current yield rate is not likely to improve for some time, since the  Treasury Bill average rate would have to go over 1.75% to trigger the floating rate calculation which would increase the guaranteed yield.  

The prospectus can be found at:www.sec.gov

Interest is paid monthly.  The underlying security is rated BBB+ by Fitch: Fitch Corporate

The FINRA link to the underlying bond information: FINRA - Investor Information - Market Data - Bonds - Bond Detail

I wanted to be sure that the party obligated was not Chrysler, which is confirmed by the above information from Fitch and this filing with the SEC:  Unassociated Document

In order for me to buy a bond issued by any auto company, I had to overcome my deep seated prejudices against investments in virtually anything associated with automobile companies.  I did go off my rocker last Fall and bought 200 FCZ, a senior debt issue from Ford Motor Credit, which has doubled since I discussed it./FCZ  /PARTIAL SELL OF FCZAnd, it is easier to have more confidence in Toyota, Honda or Daimler than say the bankrupt and grossly mismanaged GM.   

GJL was brought to my attention by a reader of this blog.  I knew about it by name but had previously refused to even look at it due to my deep seated prejudices about any investment in auto companies. Possibly, the recent experience with FCZ helped me to overcome those deep seated feelings of aversion.  I do drive a Saturn Aura and like it.  While my aversion was justified for GM and Chrysler, the foreign auto companies do appear to be managed with some considerations in mind other than benefit packages for UAW members. 

2. TIP: This is a link to a helpful article with some interesting charts about  TIPS

3. Vanity Fair Article about  Sarah :  For those of us willing to learn about a political candidate, keeping our mind open about their fitness for high office, never swayed by sound bites and endless repetition of platitudes and cliches masquerading as wisdom or learning, the article in Vanity Fair about Sarah is just another confirmation that she would have been a disaster as President.  Toward the end of the article, the McCain operatives, who saw her refusal to learn close up, came to the conclusion that she "lacked the knowledge, the preparation, the aptitude, and the temperament for the job"

This is not a political observation that is being made, nor is it based on any ideological belief or political position.  I am simply stating  a fact that is so crystal clear that is is troubling that so many millions consider her to the best that the GOP has to offer America.   

Andrea Mitchell's interview is also worth a view.Sarah told Andrea that she was a fighter, not a quitter. So, if a politician is the subject of a comedian's joke, or some criticism from the "mainstream" media,  or some alleged frivolous charges, then they should just quit with a 1 1/2 years left in their term, and then tell everyone that they are not a quitter?  And being  the President of the U.S. is easier than being governor of a state with less than a million people? On Sarah's argument for quitting, about being a lame duck, many governors are  Lame Ducks and several states allow their governors to serve just one four year term, so should all of them resign after a couple of years?      After all 35 governors operate under term limits.  All of this says a great deal about William Kristol's judgment.  I have not learned- yet- to keep my head down when discussing Sarah, need to remind myself that it is best to just smile and nod my head when she is mentioned.  But my favorite photos from the presidential campaign was Sarah locked and loaded with a shotgun on the cover of Newsweek and seated on a sofa draped with the carcass of a dead grizzly bear, fangs and all , and what looks like a dead martian from Orson Wells War of the Worlds on the table.   

4. VIX-Unstable VIX Pattern Continues with Zest:  The VIX is currently back over 30, trading at 31.94 around 11 C.S.T.  The pattern that the VIX movement has shown after falling out of the Phase 2 Unstable Vix Pattern is consistent with the Phase 1 Unstable Vix Pattern that was the pattern from August 2007 to September 2008, except the VIX has not been able to find a level below 20 yet even for a brief time.  Even in a Phase 1 Unstable Vix Pattern, the VIX will occasionally meander down to below 20 during what many would call a bear market rally, but that movement would be just temporary.   I have shed some common stocks recently, which is consistent with my trading rules for a long term secular bear market and an Unstable Vix Pattern.  George Soros recently discussed in an interview  printed in the  WSJ  the need to sell rallies in the current market even if you believe a purchase was made at a price which would be a favorable long term entry point.   

5. Dividends:  I generally gravitate to dividend paying stocks as I have become older and presumably wiser.  Today, Verizon, AT & T and Progress Energy went ex dividend.  One reason for buying the consumer staple stocks in early March was my view that their dividends were relatively secure-relative to companies that have proved to be a disappointment like General Electric and virtually all financial institutions.  At least many of those consumer staple stocks were increasing their dividends rather than eliminating them or cutting the payout to near nil. 

 

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.