1. Off to a Bad Start for the New Fiscal Year: The U.S. Government is on a fiscal year which ends in September. Last year, the federal government racked up a budget deficit of of 1.42 trillion, better than the forecast, but I did not break out the champagne. The government reported a deficit of 176.4 billion in October, the first month in the new fiscal year, which is the highest number ever for that month. The S & P economist is forecasting a 1.4 trillion deficit for the current 2010 fiscal year. Maybe the U.S. government wants to find out whether or not it can borrow all of the money in the world. That seems to be the plan.
2. Glimcher Realty (own common and preferred as Lottery Tickets): This is a link to a recent investor's presentation made by GRT. ex_99-1.htm While I intend to keep based on what I know now the GRTPRF shares bought at $2.9, I have been contemplating whether or not to increase my LT in the common, purchased a few months ago at $1.61. LOTTERY TICKET PURCHASES: LINKS IN ONE POST The GRTPRF shares are generating enough cash to justify a purchase of more common. I still view GRT as extremely risky, but it appears to be making progress toward survival. I would like to see it nail down an extension of its credit facility to the end of 2011, which is the most important outstanding issue in my view, at least within the next year.
3. Bought 100 CYB at $25.36 (see Disclaimer): CYB is the currency ETF for the Chinese Yuan. I have been toying with the idea of buying the Chinese currency, believing that is undervalued as against the U.S. dollar, but have not been inclined to make the purchase due to the peg that China has maintained since 2008. Randall Forsyth convinced me in his recent column in Barrons.com that China may allow a gradual increase in the RMD/USD exchange rate. A similar argument was made in this recent article from Seeking Alpha and in this Video from the TheStreet TV. At best, over the short term, there may be incremental and measured increases in the exchange rate. The expense ratio for this ETF is .45%. WisdomTree - WisdomTree Dreyfus Chinese Yuan Fund (CYB) The sponsor for CYB has a four page brochure where it attempts to make the case for owning the Chinese currency. WisdomTree-Case-for-Chinese-Yuan-CYB .pdf I do not have high expectations for price appreciation, nor do I see much downside risk either, at least based on what I know now.
See also: China Signals CNBC.com
4. Bought 50 RRST at $9.92 Yesterday (see disclaimer): RRST, RRSAT Global Communications Net is an Israeli company that provides content management and distribution services to the television and radio industries. It is on my small cap monitor list which has 200 names in it. I look at all of the monitor lists at YF several times during each day, where I subscribe to the real time quotes service, to see if there is any important news or unusual price action. If one of the stocks is moving a lot up or down, I try to find out why. RRST was moving sharply down yesterday morning, and the only news was its earnings report for the third quarter. RRsat There was some discussion at a couple of web sites that the earnings missed the consensus forecast from the small number of analyst who follow the company. A typical claim was made at the learning markets web site, which correctly pointed out that the consensus was 20 cents and the GAAP number reported by RRST was 17 cents. It is sometimes hard to say with these small companies whether the analysts are predicting a GAAP or a non-GAAP number. The non-GAAP number for RRST was .23 cents. Revenues for the quarter clearly beat the forecast at 24.1 million, an increase of 20% over the third quarter of 2008. And it was equally clear that the 4th quarter guidance for revenues at 25.1 to 25.6 million was in line or close to the consensus. Putting that aside, the report looked fine to me, with 18 new contracts signed during the quarter and 12 of those were with new customers. Cash increased to 44.8 million as of 9/30/09, up from 42.8 million at the end of the June quarter. I did not see any debt on the balance sheet. The market cap is just 175 million at the closing price of $10.12. After I purchased my 50 shares, the stock decline to about $9.7 before recovering late in the day.
The current price is near the stock's low, with the highs reached in 2007 at over $25 when the stock was in a $20 to $25 channel: RRSat Global Communications Net Share Price Chart The forward P/E is around 11 with a five year expected P.E.G. of .66 according to YF's "Key Statistics" page: RRST: Key Statistics The dividend yield at the current price is over 3%.
5. ING and Aegon Hybrids/Other Ex Dates: I checked the WSJ.com dividends page last night, and confirmed that Aegon and ING declared their regular dividends for the hybrids which makes payments in December. This includes the following that I own: AEF, AEB, AEH, IND, INZ and IGK. This page will only contain this information for today. While looking at the dividend page last night, I saw that several other securities that I own will soon go ex interest or ex dividend, including EMO (the first mortgage bond from Entergy Mississippi); KTV (a TC containing a TP from First Union now part of Wells Fargo via its acquisition of Wachovia); XFL and PJL (TCs containing a senior Verizon bond); PVX (a Canadian energy trust); Adams Express (a CEF); ZBPRB (a TP from Zions); and FJA ( a senior bond from Embarq now part of CenturyTel); STIPRA (an equity preferred of Suntrust Bank). I try to keep track of this so I look at this page every night.
6. Applied Materials (AMAT): Eric Savitz pointed out in his Barrons. a factoid that I missed from reviewing AMAT's earnings release. The reason why the stock declined yesterday had nothing to do with the firm's upbeat results and forecasts for the semiconductor capital equipment business. Instead, it was the worse than expected forecast for the solar segment, with the CEO called for plus or minus 10% growth. The problem does not appear to be in the thin film solar sector, but in the crystalline silicon sector. (see page 4 Seeking Alpha)
7. Eurozone GDP: The preliminary 3rd quarter GDP for the Eurozone area (16 countries) was released this morning, showing positive growth of .4%, below the .6% expectations. .eurostat PDF This was the increase in 6 quarters.
8. MBIA (Never Owned-And No Desire to Ever Buy): Floyd Norris has an interesting column about MBIA in the NYT this morning. MBIA told investors that every financial transaction guaranteed by this insurance company had to pass "a rigorous underwriting process proving no losses will arise under the worst probable case scenario". That was not true. In fact, as MBIA is now claiming in suits against investment banks, it relied on the claims by the beneficiaries of its insurance coverage, and on the ratings of Moody's and S & P, asserting that it would not have been feasible for it to investigate the securities that it was insuring. Of course, why would anyone insure for a paltry sum a CDO secured by more CDOs that were secured by mortgage backed securities, the infamous CDO cubed? As Norris suggests, MBIA needed to tell investors that its underwriting standards were virtually non-existent when it came to these exotic creations of Wall Street.
9. Enerplus (ERF)(owned): This is one of my Canadian energy trust holdings. Enerplus reported cash flow from operations of 207.2 . Of that amount 45% was paid out to "unitholders" in dividends. The hedging program continues to help offset weak natural gas prices, and ERF realized 40.6 million in cash gains from hedging during the quarter and 129.1 million year to date. There are two main negatives that have kept me on the sidelines with all of the Canadian energy trusts during this year. The first is extremely weak natural gas prices. The second is the change in Canadian tax law in 2011 when these trusts will start to be taxed as regular corporations. Canadian Energy Trusts links to further information on canadian energy or royalty trusts My last buy was Penn West (PWE) in late December 2008, and I discussed some of the negative points about the group in a post mentioning that buy: /Add of PWE Last Week I do not remember what I paid but the stock was trading for less than $10 then.
10. Bought 50 LGF at $5.25 (Lottery Ticket) (see Disclaimer): I have owned this one before, and I believe that it was sold at a profit at about twice the price paid for 50 shares this morning. I am not sure since the Old Geezer has reasserted himself and remembering transactions that did not happen yesterday are not exactly his forte. LGF is Lions Gate Entertainment, a movie and television studio with an erratic history of making money. LGF did have earnings last quarter, reporting 27 cents in net income. e10vq If memory serves, LGF has had a net profit in only three of the last six years. And, when it managed to earn a profit, it was slim pickings. Thus, this one is a Lottery Ticket. What makes it interesting to me at least is its growing TV segment (Mad Men & Weeds) and its library of 12000 films. At some point, it would make sense to just stop making movies, reduce the size of the workforce, and just license what LFG already owns. LGF's Vice Chairman was interviewed on Fast Money last night: CNBC.com LGF recently acquired TV Guide Network and TVGUIDE.com. And it has high hopes for the movie "Precious" Critic Review for Precious washingtonpost.com
When I look at a company like LGF, I try to think of it in terms of assets rather than earnings, sort of a Hollywood version of a land rich company like St Joe. The problem is that the movie business is boom and bust with a lot of bust.