Thursday, August 27, 2009

Investment Philosophy Maxim: If It Makes Your Head Hurt, Just Avoid It

I know that some of my readers, who could care less about European hybrids, are tired of seeing discussions in my blog about them. I am worn out too, just thinking about them. Sometimes, I like to follow an investment policy that says the following: if it makes your head hurt, just avoid it. So, as I have said, the hybrids have just become too difficult for me, and not worth the trouble anymore.

2 comments:

  1. This came from AEGON's Investor relations in response to a question.

    Fitch took action on AEGON's preferred stock, downgrading it to BB (from
    BBB). The actions taking by Fitch are in line with actions taken by
    Fitch on other European financial institutions that have received
    support from their local government.

    The downgrade reflects Fitch's view on the risk on coupon deferral on
    our hybrid securities which was mainly prompted by the European
    Commission publishing comments lately on the concept of 'burden sharing'
    for state-aided financial institutions.

    Refraining from payment on our preferred stock is not part of our plan.
    In addition, we believe that as an insurance company we are in a
    different position than most of the banks that have received government
    support. We have not received any request to defer payments of coupons.

    Kind regards,
    Renske Stoker
    AEGON N.V.
    Investor Relations

    August 27, 2009 10:13 AM

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  2. BRIAN: Thanks for the comment. My blog on this subject has turned into a communal group think.

    It has just become too difficult for a U.S. investor, who already has a large array of investment options, to try and figure out what is about to happen in Europe with this asinine and capital destructive burden sharing policy.

    The two Aegon hybrids that I own will go ex dividend tomorrow, August 28th, and I believe that those dividends will be paid on the 15th. I am not willing to make an assumption about the future.

    The focus of my posts on these hybrids is to develop some arguments that might obstruct any effort by the EC to cause a deferral. I suspect that even the EC will be circumspect about forcing a European firm to violate its loan covenants. The most promising argument is the Mandatory Payment event trigger resulting from a purchase of a Junior Security, which Aegon plans to do later this year with the 1 billion in Euros raised recently.
    http://tennesseeindependent.blogspot.com/2009/08/pay-back-dutch-governmentbuying-junior.html

    The statement that you quote is similar to the statement made by Aegon last March, which i referenced in a post summarizing my purchase of of AEH at $4.63: http://tennesseeindependent.blogspot.com/2009/03/buy-of-aeh-in-iraaegon-statement-of.html It is a statement of current intent. It can not be read in my opinion as any kind of a guarantee that no deferral will take place. It is merely describing a present state of mind and the most current information as of now. The situation is fluid.

    Now I am more positive about Aegon than I am about ING continuing to pay without a deferral. There is also the Alternative Payment Mechanism for Aegon. IF you own an Aegon hybrid, you may want to confirm that it has that provision in the prospectus.

    I am in a hold posture for my Aegon hybrids. I do not intend to buy another European hybrid for the reasons mentioned in my Posts.

    ReplyDelete