1. FRB: Press Release--FOMC statement--September 23, 2009: The Fed was more positive in yesterday's release about the economy. The Fed said in August that economic activity was "leveling out". A more positive spin was made in the September release, with the Fed saying that "economic activity has picked up" following a severe downturn. If I was going to emphasize any statement in the FED speak, it would be the following one: "The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period" It is that kind of statement that helps me maintain the status quo with my fixed coupon long term bonds. And, it is hard to keep the animal spirit in high gear with an assessment that the economy will need zero federal funds for "an extended period".
The Fed is still on track to end its 300 billion dollar program to buy U.S. treasuries by the end of this October, but extended the period for purchasing mortgage backed securities into the first quarter of next year.
2. Palin Proves, Once Again, that She is Just Clueless: In a recent speech before an audience in Hong Kong, Palin blamed the financial crisis on government interference in the economy. WSJ.com What is needed is more deregulation according to Sarah. As I have said, tens of millions of people never learn any lessons from history, as their ideology distorts reality in real time. This is not a political statement, but simply a factual observation and understanding its truth explains a great deal. It explains why long term bull and bear cycles repeat themselves with maddening regularity. It even explains why the TBs even today believe the nation should have stayed in Vietnam until the job was done. Going to War Decisions: Conservative or Liberal vs. Competent or Incompetent? It explains the rational given for the IRAQ invasion, the reasons for the Nasdaq and Real Estate bubbles, the GOP's belief that regulations caused the financial crisis, and so on. It is not a question of a failure to remember but a failure to ever learn much of anything from history including recent history (Fail to Remember or Refuse to Learn?). An event like the rule change in 2004 by the SEC, part of the Reagan legacy of deregulation supported by the Clinton Democrats, which allowed Wall Street banks to increase their operating leverage, is just one of the countless irrelevant events to ideologues like Sarah, who of course probably have no awareness even now of how that rule change played into the explosion of subprime lending by mortgage companies now extinct and otherwise contributed to the implosion of firms like Bear Stearns and Lehman Brothers. I would recommend that Sarah read one book this year, possibly one of the tomes written about the improvident granting of credit prior to 2008 and then explain how the presence of regulation led to the problem. Yes, take an entire month and read one book would be my suggestion to Sarah, possibly the one by Paul Muolo and Matthew Padilla "Chain of Blame: How Wall Street Caused the Mortgage and Credit Crisis." But that would be futile too. It would be like Katie showing the True Believer Ahmadinejad a picture of Holocaust victims. Facts do not matter to the TBs, never will, just make up your own. Ahmadinejad
A small number of regulations relating to the origination of mortgages in the U.S. could have kept the credit problems within normal parameters. I read the other night about a commentator calling "no-doc loans" and stated income loans as financial innovations. Often when I hear the phrase "financial innovation" used, I understand it to mean that someone wants to make a lot of money, as mortgage brokers did during the credit bubble, and then allow someone else to clean up their mess. The borrower states what they make on a loan application and everyone believes it, no matter how preposterous. 'If you had a pulse, we gave you a loan' - msnbc.com Then it did not help that the FBI and other law enforcement agencies did practically nothing to investigate and prosecute fraudulent mortgage activity. Adding Failures of Law Enforcement to my Top 12 Causes of the Near Depression In other words, the miscreants responsible for the near Great Depression II got away with it and most profited handsomely from the debacle created by them.
3. Prospect Capital (PSEC)(owned): I mentioned in my last post about Prospect that one of the main negatives, from my perspective, was the constant issuance of shares. PSEC is down almost 10% this morning after filing with the SEC a 8-K summarizing a private placement of 2,807,111 shares at $9, well under book value and the closing price from yesterday. prospect8k.htm A few months ago Prospect sold 4.5 million shares at $9. 497 In April 2009, the company issued 3.68 million shares at $7.75 and another 7.76 million shares in May at $8.25. (See page S-2 497). This is starting to look out of control to me.
4. Forest City (owned-Lottery Ticket): This LT has more than doubled since my purchase of 50 shares at $6.3 in May: LOTTERY TICKET PURCHASE: 50 SHARES OF FCEA-FOREST CITY COMMON/ADDED: SOLD FCY I noticed a story this morning that Russia's richest man according to Forbes, Mikhail Prokhorov, signed a "letter of intent" to create a partnership with Forest for the development of the Atlantic Yards project in Brooklyn and the New Jersey Nets future home, the Barclays Center. Reuters The terms of the letter of intent are described in this press release from Forest City: Forest City Subsidiary and Onexim Group I am not sure why I have not sold Forest City, generally I will harvest four month 100+% gains just to avoid losing them.
5. Decline in Existing Home Sales: Existing home sales declined 2.7% in August. The median price declined 12.5% from August 2008.
6. Bought 50 BMLPRH at $13.25 (see Disclaimer): This is an average down from my last purchase at $13.83. This odd lot purchase rounds up my position to 100 shares, which is my limit for Bank of America equity preferred shares. This one was originally issued by Merrill Lynch, and I discussed the terms in my post discussing the prior purchase: Bought 50 WPCS as Lottery Ticket/Sold 100 VIMC at $3.53/Bought 50 of the Floaters USBPRH & BMLPRH/ Sold 100 GJK at $24.6/Sold a Mutual Fund in IRA
7. Vanguard Stock ETFs VV and VTI: Two of the Vanguard stock ETFs that I bought recently went ex dividend today, VV and VTI. VTI is a low cost index fund for the total U.S. stock market and the dividend yield is only around 2% at the current price. My thinking was to buy them during this long term bear cycle as potential substitutions for some stock mutual funds that I would sell during the next long term secular bull market.
Item # 3: BOUGHT VV at $41.45 /SOLD CBLPRC