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.
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)
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