Sold AZM at $24.71-Reducing Exposure to European Hybrids/New Home Sales

1. SOLD AZM AT $24.71-Part of Reduction to European Hybrids Caused by EC Burden Sharing Policy (see Disclaimer) - AZM is a hybrid issue from the German firm Allianz which I just bought. First, let me say that the sell today had nothing to do with Allianz, but the decision made earlier today to cease buying any European hybrid issues, and to start looking for an exit strategy for my existing exposure. I have no reason to even believe that Allianz is one of the 17 firms currently being subjected to the EC approval process of a restructuring plan. The sell of the AZM shares was an easy call to make since I have now limited my exposure in European hybrids to just those issued by Aegon and ING. Also, I bought this issue at a narrow discount to par value anyway. 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

The more difficult decision will be on the AEG and ING hybrids bought at substantial discounts to par. I am now of the opinion that the EC has permanently damaged the existing European perpetual junior debt hybrids and any future bond where the issuer maintains a right of deferral. The EC actions allows for arbitrary and capricious political decisions to decide when and if a junior bondholder is timely paid interest irrespective of what is viewed as the normal criteria for expectations for payment by the owners of those securities. And, I have to act based on my opinion, even if I am the only one in the world with that opinion. In the last analysis, the recent policy statement of the EC, when added to the undesirable features of the hybrids including a lack of a maturity date, their low seniority, and absence of a time limit on deferrals, make them undesirable from my perspective and certainly not worth the trouble.

2. New Home Sales: New single family home sales increased 9.6% in July over the revised June number. http://www.census.gov/const/newressales.pdf Inventory is a 7.5 month level at the current sales rate. The pattern has turned positive for housing.