Friday, November 20, 2009

Bought DFY at 22.48/Added to BIP/More Silliness from Ideologues/Sold CEF FAX

1. Bought 50 of DFY at $22.48 Yesterday in the ROTH (see Disclaimer): Recently, I have sold two stock mutual funds in the Roth, both were included in a Roth conversion from the regular IRA in October 2008. It will take some time but I intend to buy bonds with the proceeds. Yesterday, as my last trade for the day, I bought 50 DFY at $22.48, an exchange traded senior bond issue from Delphi Financial Group maturing in 2033. The coupon is 8%, paid quarterly, and the par value is $25. The Quantum site shows that it is an investment grade bond. The current yield at my cost is around 8.9%. DFY Stock Quote - Delphi Finl Group Inc NT SR 8% 2033 This is a link to the prospectus: e424b5 I previously bought a junior bond issue from Delphi and discussed this insurance firm in that post: Bought 100 DFP at $17.1 I also discussed the last earnings report in this post: Delphi

Shortly after that purchase of the junior bond DFP, it went ex interest and has risen some in price. The payment dates for distributions for both DFP and DFY are the same, in February, May, August and November. Quarterly pay dates for a bond are preferred here at HQ to semi-annual payments, the sooner the better is our philosophy. Part of the investment approach is to invest the dividend and interest stream into more securities that pay dividends and interest, so the compounding effect works better with an increased frequency of distributions. No funds have ever been withdrawn from the brokerage accounts except to move to another brokerage account, and no funds have been added by me since 1984.

I had no trouble in filling my odd lot order for DFY. The spread between bid and ask was unusually narrow. My market order was filled at the ask price. On two prior occasions during the past week or so, I entered a market order to buy 50 of this security, and nothing happened for a minute so I cancelled the orders.

Today, DFY is experiencing extremely heavy trading. Volume is normally less than 10 thousand and today it has already traded 350,000 before noon. I did not see any recent news on DFG but the common is trading down over 2%.

2. Marsha-My Congressional Representative/Gerrymandering to Defeat the Goals of the Democratic Process: My congressional district was designed by the state legislature for the exclusive purpose of frustrating the proper functioning of a democratic system. The evident purpose for all gerrymandering was to insure that incumbents would rarely face a serious challenge. So the SUV capital, a suburb just outside of Nashville, was combined with SUV Capital II Germantown, a suburb of Memphis two hundred or so miles away, and then bypassing Nashville the district moves north to capture Clarksville, near the Kentucky border just across from the Ft. Campbell military base. A few republican precincts ware picked up in Franklin as the district snakes its way through mostly deserted farmland to pick up Germantown. In other words a monstrosity clearly designed to insure that a GOP candidate would always win no matter what. Brentwood was taken out of Democrat's district so both parties receive benefits from the gerrymandering. The Democrat was almost defeated as the votes from the SUV Capital almost overwhelmed his traditional Democrat precincts. Item # 4 LIBOR AND THE AEGON FLOATING RATE PREFERRED STOCK True Believers Gather in Washington Marsha In that last linked post, I discussed my opinion, which I view as 100% certain, that Marsha and her GOP colleagues would have allowed the world to sink into a worldwide depression last September if they had been in charge. Their proposals would have guaranteed a financial system collapse in September 2008, and manifested a profound ignorance about what was happening.

This kind of gerrymandering occurs throughout the U.S. for the express purpose of defeating the democratic ideals embodied in voting and creates a form of extremism in both parties, making it more difficult for moderates to have any voice at all. Marsha is what I would call a southern version of Michele Bachmann from Minnesota, except possibly more prone to simplicity, ignorance, and erroneous statements. Michele Bachmann: Sarah's Soul Sister

It is hard to escape Marsha's inane politico speechifying. I was trying to eat dinner last night at a local meat and three, and as you would expect Fox News was the only television station allowed to be broadcast here in the SUV Capital of the World. CNN is viewed as subversive, watched by communists and liberals. And there she was, along with her soul sister Michele, making some claim that an independent panel's "recommendations" about breast panel screening was the precursor of what can be expected from government managed health care, a form of rationing, the death panels extraordinaire.

Now, this is just painfully inaccurate and deliberately misleading, and I would expect nothing less of Marsha and Michele. Medicare is by the way a government run health care program and no changes were made or contemplated in Medicare or Medicaid coverage. I did read the report which contained the recommendations: Screening for Breast Cancer: Recommendation Statement This panel does not set federal policy (Secretary Sebelius Statement on New Breast Cancer Recommendations). The panel consists of doctors who are non-partisan. NYT Their report does contain information which may interest women over the age of 40 who want to make informed decisions. Informed decisions based on accurate information is not what the TBs want to see.

I found these statements in the recommendations:

"The USPSTF recognizes that clinical or policy decisions involve more considerations than this body of evidence alone. Clinicians and policymakers should understand the evidence but individualize decision making to the specific patient or situation."

"[t]he decision to start regular, biennial screening mammography before the age of 50 years should be an individual one and take into account patient context, including the patient’s values regarding specific benefits and harms. (Grade C recommendation)"

Then Fred Barnes started to talk on the Fox show, saying something like this is what the federal government wants to do, ration health care, and that is what Sarah Palin was talking about when she discussed "death panels", a false characterization since Palin was referring to an earlier version of a the health "reform" bill that would have allowed doctors to bill medicare for giving counsel to their patients who wanted it about durable powers of attorney for health care which involves many types of issues, granting someone the power to make health care decisions when you are unable to do so or whether or not you would want to continue life on artificial life support (the Terri Schiavo kind of issue that everyone needs to make) It was just a pathetic mind-bending distortion by Palin which is what I expect from her, either patently ignorant or a deliberate distortion. Once this type of silliness starts to gain momentum with the tens of millions of TBs in the U.S, the likely spreaders of the disinformation in the media would include Glen Beck, Sean Hannity and Rush Limbaugh, who echoed the death panel/ breast screening nonsense. Beck Limbaugh It is really impossible to have an intelligent conversation with a TB.

Now, I view myself as a True Conservative and the foregoing characters as something else entirely. Readers of this column know that I oppose the health "reform" bills that the Democrats have proposed including the one passed by the House which I would have voted against, based on my views of its likely cost and the current fiscal situation of our government.

Both of my parents are alive, and I have had a great deal of first hand experience on what Medicare and their supplemental Blue Cross insurance policies will cover. The bottom line is virtually everything. There are some coverage limitations and restrictions. For example, my mother who is 86 has a host of problems with her feet. Except for an occasional shot of cortisone, nothing that her foot doctor does for her is covered. But the outcry about the recommendations of the independent panel does raise some long term issues about the desire of American's to receive whatever medical benefits they want as some kind of fundamental constitutional right, regardless of the ability to pay for those benefits or the large and growing hole in the nation's balance sheet. This issue was discussed in a front page article in today's NYT written by Kevin Sack.

3. SOLD All Shares in CEF FAX Yesterday at $6.52 (See Disclaimer): This CEF contains Australian government and corporate bonds. I discussed it in some detail in a blog from October last year when it was selling at a 29% discount to NAV. Some Nibbles Got Filled: JZE, PJS, INZ and FAX As of yesterday, the discount had narrowed to just a tad over 2% This is an example of what I try to accomplish with CEF purchases. When a CEF is bought at a substantial discount to par value, it is possible to make money by a narrowing of that discount. In addition, I was paid a good monthly dividend in cash, and the NAV rose for FAX between October 2008 to now. Since this holding accomplished all of its objectives to a far greater extent than hoped for at the time of purchase, it was sold yesterday. I am also concerned that the Australian dollar has risen too far too fast which recently caused me to sell my currency ETF for the Australian dollar. Sold FXA I currently own both the Canadian dollar and the Norwegian Krone.

This finishes my discussion of yesterday's trades.

4. Taming the RB Animal Spirit: Not much as been heard from the RB since it was allowed to buy 100 shares of Yahoo. Maybe the LB has finally squashed it having force fed the RB this article from Seeking Alpha.
Reuters had a downbeat article today that budget shortfalls in the states may threaten "millions" of jobs.

5. Added 50 shares to BIP at $15.75 (see disclaimer): Somewhere along the line, OG acquired some shares of Brookfied Infrastructure Partners (BIP), a publicly traded partnership at some point during the troubles last year, probably bought with cash flow received that day. The OG's memory, which is for all practical purposes a hollow shell, is that the distributions paid by BIP were treated as a return of capital, which reduces the tax cost basis in the partnership units owned but are not taxed currently. This appears to be the situation when I reviewed information at the BIP web site: Tax Information | Brookfield Infrastructure Partners A summary of its current infrastructure holdings can be found at this page: Current Operations | Brookfield Infrastructure Partners One new operation that was just acquired is described in the following press release filed with the SEC and involves the recapitalization of Babcock and Brown Infrastructure (ASX:BBI) which has now been renamed Prime Infrastructure. Press Release BIP's operations are more fully describe in its 20-F filing with the SEC, which is the annual report designation for foreign companies: Form 20-F (see pages 33 to 34) The yield at a total cost of $15.75 is around 6.73%. Dividends are paid quarterly with the next ex date on 11/25.

6. Utility ETFs: Yesterday I discussed buying XLU, the Spider ETF that contains the electric and gas utility stocks that are members of the S & P 500. Bought 100 XLU/Bought 100 QAI/SOLD AUY Since the list is limited just to S & P 500 components, the list has just 35 names in it. Composition - Select Sector SPDRs The top five companies account for a tad over 34% of the weighting. Vanguard has a broader ETF for Utilities, VPU, that has 88 firms. This ETF includes the small and mid cap names and has an expense ratio of .25% Vanguard - Fund Holdings Ishares has a sector Utility funds for the U.S. (IDU), similar to the Vanguard ETF, but at a higher cost. The expense ratio is .48%, and odd lots are permitted. One that I might add at some point to achieve further diversity is Ishares Global Utilities Sector Index fund. (JXI) This one would include the larger U.S. utilities as well as the big caps from overseas like E.ON, RWE and Iberdrola. This ETF has 77 holdings and an expense ratio of .48%.

This is a link to SSSA's International Utility ETF SPDR S&P International Utilities Sector ETF The volume is too light on this one, and the bid/ask spread is too large. XLU rarely has more than 1 cent spread and always a lot of volume. Wisdomtree also has an international only utility fund with an expense ratio of .58% that has more trading than the SSSA product. WisdomTree - WisdomTree International Utilities Sector Fund (DBU)

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