The purchase yesterday of MJV, yielding around 8% and priced near its par value, is the natural and almost inevitable result of what happens after a mere glance at the monthly income generated by my money market funds. I have a harder time looking at that figure than I had looking at all of those red errors during the bear market. Although I am solely responsible for each decision that I make, which goes without saying, I "feel" like I am no longer responsible for what happens after I look at the money market numbers each month. It sort of sends me off my rocker for a few days. I am not sure that I will blame Bernanke for any undesired result visited upon me by purchasing MJV or some of the others that I will soon buy or have bought recently like AMPPRA, just to receive any kind of decent yield. Though I do blame Greenspan for the earlier period of abnormally low short term rates. No, I am going to blame all of those assholes, greedy S.O.B.s, the self proclaimed financial wizards and Masters of the Universe, who profited greatly from creating this train wreck and then walked away counting their money while others pay for their self indulgences. Though, once the articles in the NYT "The Reckoning" series are read, incredibly stupid and greedy would be the two words that come to mind most often. So, will it happen again. Sure it will. The same pattern will be repeated over and over again: Amazon.com: This Time is Different: Eight Centuries of Financial Folly: Carmen M. Reinhart, Kenneth Rogoff: Books This book is apparently pretty thick, not a casual read, which is find with the LB as long as the RB can take a nap. I have read a few reviews of it. NYTimes.com NYT In fact, I would like to send a bill to those wizards in the AIG's London Financial Products unit for starters.
1. Prospect Capital (PSEC) (owned): I recently bought my position in PSEC up to 200 shares by buying 50 shares in my regular IRA at $10.48 Bought 50 WPCS as LT/Bought 50 PSEC/ 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 I expressed misgivings about this firm when I made this purchase, but I have difficulty in passing over completely dividend yields in excess of 15% which at least have a chance of being maintained. Prospect raised in quarterly dividend slightly to $.4075 from $.4062, and it is ex dividend today. Some other posts discussing this firm are: Item # 3 Federal Reserve/Forest City/More Nonsense From Sarah/Bought 50 BMLPRH at $13.25 & BUY 50 GJN /PSEC/
I view the shares recently bought in the IRA to be a trade, whereas I am am willing to take a long term view, which entails more risk, in the 150 shares held in the taxable account. I view PSEC as a speculative income selection.
I will manage my more speculative picks in a retirement account more aggressively, and I will focus mostly on income generating securities bought at opportunistic prices. That is one reason why I am up over 20% now in my retirement accounts compared to my account values at the end of October 2007, adjusted for 2 subsequent 6 thousand dollar contributions. The problem with that approach is that the account could have been higher before October 2007 with a different approach to non-income producing securities. I will give one example to illustrate that point. When I first bought the IPOD, soon after it was released (the release was in late 2001), I was just blown away by it and instantly knew that it would be a smash product. Even an old guy, not particularly adept with computers, had no trouble downloading music from Itunes and transferring the music to the IPOD. So, I did what I normally do under those circumstances. I bought shares of Apple, with a 100 shares bought in my IRA. I do not remember the price exactly but around $12 would be close. AAPL: Historical Prices for Apple Inc. Apple does not pay a dividend so I sold the shares after a pop to around $16. Need I say more.
2. Australian Dollar (owned): I noticed that Australia was the first G-20 nation to start the process of removing the monetary stimulus. The Australia's central bank raised its main interest rate .25% to 3.25%.
3. ISM Service Index: This report, released yesterday, showed the first reading above 50 since August 2008. The market reversed course after its release yesterday. MarketWatch The index hit 37.4% last November. The employment component of this index rose to 44.3% from 43.5% in August. The new order component rose 4.3 points to 54.2.
4. Bought 50 ORHPRB at $20.93 (see Disclaimer): Maybe the game plan is to buy a little bit of every floating rate equity preferred traded on the stock exchange. That is either the game plan or my mind is turning to mush, because I just added one of the few that I do not own this morning. ORHPRB is a floating rate equity preferred issued by Odyssey Re (ORH), a reinsurance firm, that is in the process of being acquired by Fairfax Financial (FFH), which I would view as a positive for the ORH preferred stock purchased this morning. Fairfax
The Odyssey Re equity preferred floater is unusual in that there is no guarantee. This security pays what may be the largest spread over three month Libor, however, with the quarterly dividend payment tied to a 3.25% spread over the 3 month Libor rate. In effect, with a Libor rate of zero, that spread creates a guarantee of 3.25%.
The current yield at my cost is just 4.5% which is a disadvantage for this security, though 4.5% looks good compared to money market rates now. The advantage will appear when the 3 month Libor rate starts to rise. At a 5% 3 month Libor during the applicable computation period as provided in the prospectus, then the coupon rate would be 8.25% which results in a 9.82% yield at a total cost of $21. This is one of those securities that will have some oomph to it as Libor rates increase. This security just went ex dividend. Quantum has the security listed with those that pay qualified dividends with their usual caveats: Preferreds eligible for the 15% Tax Rate Table - QuantumOnline.com
This is a link to the prospectus: e424b5 This issue is non-cumulative, a major disadvantage. Advantages and Disadvantages of Equity Preferred Floating Rate Securities
5. Medical Device Makers (own Medtronic): I noticed that MDT was slumping some this morning so I checked the news. St Jude warned, Reuters. Hospitals are cutting back on purchases as a result of the recession. Another issue with them involves what amounts to a special tax on these companies in the Democrats' health care legislation: WSJ.com Still, notwithstanding all of that I may do another nibble on MDT later today.
6. Bought 100 AOR at $28.27 (see Disclaimer): I was thinking of selling another one of my mutual funds in an IRA today or sometime soon, so I bought 100 shares of AOR, to give this relatively new ETF product from Ishares a test drive as a mutual fund alternative. This one is called the Ishares S & P Growth Allocation Fund, yes the LB opted for the Growth allocation rather than the conservative or moderate allocation, after all the LB can be wild and crazy at times as in never of course, just kidding. This is the link to the relevant page at the Ishares web site: iShares S&P Growth Allocation Fund (AOR): Overview The expense ratio of the component ETFs is around .22% and the expense ratio for AOR will be a tad more at .47% when the expense fee waiver wears off. AOR contains other Ishares ETFs and the current allocation as of 10/2/2009 was as follows:
| ISHARES S&P 500 INDEX FUND | 21.93% | ||
| ISHARES MSCI EAFE INDEX FUND | 20.39% | ||
| ISHARES BARCLAYS AGG BOND FUND | 20.08% | ||
| ISHARES S&P MIDCAP 400 | 10.02% | ||
| ISHARES BARCLAYS SHORT TREASUR | 9.29% | ||
| ISHARES BARCLAYS TIPS BOND | 8.85% | ||
| ISHARES S&P SMALLCAP 600 | 5.42% | ||
| ISHARES MSCI EMERGING MKT IN | 2.85% | ||
| ISHARES COHEN & STEERS RLTY | 1.05% | ||
Cash/Collateral at .05%
I feel your pain regarding Apple. I bought it back in 2005 when it was around $50 and sold it for a very small gain -- too soon, too soon! I was just getting started with investing and my right brain (intuition, love of novelty) was doing the buying. Now, of course, the other side (left brain) is completely in charge, post-"train wreck."
ReplyDeleteI finally got out from under MSFT for a slight gain (wonder of wonders!) just before Goldman-Sachs took it off the Conviction Buy list. I wondered to myself, "What took them so long?"
Right now my biggest decision is whether to buy more VZ, or "diversify" with some T, both offering a relatively secure 6% dividend. AT&T does have the iPhone on its side...for now.
Cathie: My Berkshire story is far worse: http://tennesseeindependent.blogspot.com/2009/06/bought-brkbsold-nvsmasters-of-disaster.html
ReplyDeleteI recently bought back Verizon shares with the intent of selling them on a pop. I prefer AT & T primarily due to the fact that it owns 100% of its wireless network, whereas Verizon owns 55% of Verizon Wireless. I like the FIOS TV push by VZ. Both are suffering extensive land line losses. Both go ex dividend tomorrow. I own bonds from both of them, but my larger bond and stock positions are in AT & T. I would slightly prefer owning Vodaphone (VOD) over VZ. At least VOD has some potential growth opportunities in emerging markets. It may be just a few more months before we know whether Apple will end AT & T's exclusivity on the Iphone, most reports that I have read say the agreement ends in 2010. http://www.pcworld.com/businesscenter/article/173174/atandt_iphone_exclusivity_hangs_on_app_store_profits.html VZ could get a pop with a non exclusive deal with Apple and it would help Apple to tap that market of Verizon customers. But it would be hard to see the end to exclusivity as being a plus for AT & T.
Thank you much for sharing your insightful research and opinions. I have tried on a few instances to purchase various TC's and some other equities and cannot seem to procure thru either etrade or ML, can you point me at a discount brokerage service which handles these?
ReplyDeleteKelley: Most of the time, the Trust Certificates are lightly traded with fairly large bid/ask spreads. I was drawn to them for two reasons back in October. It is easier for an individual investor to buy exchange traded bonds with $10 or $25 par values, as distinguished from a $1000 par value bond typical for the bond market, and Trust Certificates and other exchange traded bonds frequently presented better values than the same or similar bonds from the same issuer traded in the bond market.
ReplyDeleteTrust Certificates trade on the stock exchange so they can be purchased through any brokerage firm. If you are placing limit orders, then it would not be unusual for the order not to be filled due to the low volume. This would not be the fault of the brokerage firm.
I will only use a market order to buy a trust certificate when there is less than a 10 cent spread between the bid and ask, and then for no more than 100 shares. I will sometimes use GTC limit order well below the existing market. A market order will be filled for a round lot, meaning an order for a 100 shares, or multiples thereof, even in this thinly traded market.
A limit order for an odd lot, like fifty shares, will frequently not be filled for a TC when placed at the prevailing bid price and when volume is light.
Also limit orders for odd lots in thinly traded securities are sometimes filled badly, like 1 share on a fifty share sell order , or at a higher price for a buy than any trade during the day. Both of those bad events have happened to me recently in the thinly traded TC or TP (Trust preferred) securities.
Many of the TCs have enjoyed significant rallies over the past few months, and I have now lost interest in almost all of them. I suspect that the next major buying opportunity for them will be during a major inflation scare. The buying opportunity between October to March was due to credit fears of Financial Armageddon.
I am still nibbling at synthetic floaters in TC form, that pay the higher of a guarantee or a percentage above a short rate. http://tennesseeindependent.blogspot.com/2009/05/
synthetic-floaters.html But those securities have likewise enjoyed substantial rallies in price, making them more risky now than they were just a few months ago.
If you could tell me how you are placing the orders, I may be able to provide you with more concrete assistance. If you want to send me an email, the email address is southgent1951@gmail.com, the link is in the profile section of the blog.