Thursday, November 5, 2009

Earnings from NDAQ NADX AOC PRU/Sold 100 WMT/Sold SYK/ Bought 100 GJX & ADDED to ADRD

1. Aon (own junior bonds only): Aon, the largest insurance brokerage firm in the world, reported third quarter earnings from continuing operations of 40 cents and 65 cents excluding certain items, one cent less than the consensus estimates. Organic brokerage revenue fell 3%. This report was released before the market opened last Friday and the common stock fell from $41.19 at Thursday's close to $38.51 on Friday. I saw some minor adverse reaction in the Trust Certificates containing the same junior bond, and I currently own DKK, KVW and KTN. I see no reason to be concerned by this report as an owner of AON bonds. The insurance premium market has been weak during this recession and this was just the first quarter that Aon failed to generate organic brokerage revenue growth out of the last 16 quarters.

2. Prudential (own senior bonds only): Prudential Financial reported good results for the third quarter, with an after tax adjusted operating income of $1.59 per share, beating the consensus estimate by 26 cents. I own only senior bonds, including one maturing in 2012, the CPI floater PFK, and the TC JZH. I have recently pared my holdings in JZH, a fixed rated coupon bond maturing in 2033 (PARED JZH AT $21.5 Pared JZH by Selling 50 at $20.2) and increased my holding in PFK. Added 50 PFK at $17.83 Bought 100 PFK Bought PFK in IRA PFK matures in 2018 at a 25 par value, and pays monthly interest based on a 2.4% float over a CPI calculation that includes a rolling 12 month period. The penny rate has been low recently due to the negative CPI numbers from late last year. Pricing Supplement No. 122 dated March 31, 2006 I will hold the bonds maturing in 2012 until maturity since the interest in paid monthly at a 5.6% rate. I have no intention of selling the remaining shares of JZH since the my cost basis is low: TRUST CERTIFICATE JZH: PRUDENTIAL SENIOR BOND BOUGHT AT $9.75. The buy at $9.75 for example, which I still own, will generate a 15.38% annualized current yield at that cost until maturity in 2033.

3. Strom Thurmond and Rush Limbaugh-The Rhetorical Flourish for the Brain Impaired & Uniformed: Recently, I referenced a video of Thurmond's speech from 1948 that explains why he and other Democrats bolted from that party to form the Dixiecrat party in 1948. They would later join the Republican party and were an integral part of the GOP's resurgence in the south, as explained by one of the individuals who developed the race card strategy for recapturing the South for the GOP, Kevin Phillips. What is the Appropriate Political Label Many do not remember why many of the Southern Democrats marched out of the Democrat convention in 1948 that nominated Harry Truman. They were upset with Truman's executive order that integrated the armed forces. Dixiecrat And they were upset about the Dems platform that called for the end of the poll tax and discrimination based on race in "federal" employment. Thurmond, in defending segregation, referred to these "civil rights" advocated by President Truman to be part of his effort to "dominate the country by force", and the American people had better wake up according the Thurmond or the next thing will be a totalitarian state in these United States. Strom Thurmond Well, the poll tax on voting was eliminated (for its sole purpose was to disenfranchise blacks from voting), and the armed forces have been integrated for over 50 years now. Do we live in a totalitarian state losing our freedoms to the "civil rights" crazed Democrats? While Thurmond's arguments were bought hook, line and sinker by millions of True Believers in 1948, only a few of them would publicly agree with Thurmond's rhetorical flourish now, at least on the content. But the nonsensical and absurd rhetorical flourishes of the segregationists, nothing more than ludicrous opinions stated as facts, live on today and have found many new champions in the modern age. The only difference is that the rhetorical flourish is not aimed at justifying segregation.

I was struck by what Rush Limbaugh said in his interview with Chris Wallace last Sunday. He accused President Obama of intentionally trying to destroy the economy and thought that the "denial of liberty" and the President's "attack on freedom" were just outrageous. Fox Rush Limbaugh (VIDEO) When I listen to Limbaugh or someone like Glen Beck, and since I am a person finely attuned to distinguishing facts from opinion by profession, I am struck by the constant stream of opinions being voiced by them that sound like facts. A statement that Obama is responsible for the job losses is not a statement of fact, for example, but an opinion voiced by an ideologue who is incapable of sifting through all relevant information prior to forming an opinion.
When I read a summary of Wallace's cream puff interview of Limbaugh in Maureen Dowd's opinion column in the NYT, I immediately thought of the rhetoric used by the segregationist in their speeches, like the one given by Thurmond which I have heard many times over the years, that equated any attempt to end segregation and to stop discrimination based on the color of one's skin as an attack on the liberty of all Americans and the beginnings of a totalitarian regime. I am curious how weak minded someone had to be before this argument registered as cogent.

Ms. Dowd is correct in noting Rush's long term memory loss, as in failing to understand or to remember the state of the economy prior to 2009 and what caused its trajectory in 2009 based on what had happened previously. Unemployment was going to reach 10% no matter what anyone did given the massive damage that had already occurred. An informed person could sit down with a True Believer and start to explain what happened over the past decade, and how all of those events shaped what happened in 2009, and the TB would not listen. In fact, Rush was emphatic in blaming poor minorities for the trouble. It would just be way too much information for Rush and the TBs to absorb in order to place current events in proper perspective. No matter how reliable the information, it would not be believed anyway if it did not fit squarely into a previously formed worldview that had never changed during the TB's entire adult life. For the TBs, and their gurus like Limbaugh and Glen Beck, it would be better to just listen to them say that Obama caused the loss of all of the jobs in 2009, and save your breath and just ignore them if you can. I certainly would not want any of them managing my money. But, I would never allow anyone to manage my money anyway, a TB would be the last person to pick in the event my brain turned into total mush.

I would, however, agree with the proposition that the 787 billion "stimulus" bill was poorly designed to create jobs. Laura Tyson Gives Fuel to the Bears Jobs Report-Worse Than Expected Buffett & Cramer on Stimulus Program/ And, the perception, which is justified, is that the Democrats are not focused on economic issues but on other matters such as the health care bill and climate legislation.

And, the cream puff interview of Limbaugh by Chris Wallace is to be expected. He is no Tim Russert. He is just the man version of the faux blondes.

4. Nasdaq OMX (NDAQ) (own): NDAQ was a recent purchase and the stock slid a couple of points in the days after I made the purchase at $19.98. Bought 50 NDAQ at $19.98 I was thinking, prior to the earnings release, about rounding the lot up to 100 shares when the price fell to $18 but decided to wait for the earnings report. After reviewing the report, I am going to wait before buying. NASDAQ OMX reported in line earnings at 42 cents, excluding items, but that was down 18% from a year ago on the same basis. This is not what I want to see before committing more capital.

5. National Dentex (own-Lottery Ticket category): NADX has been one of the more successful lottery tickets purchased over the past year. I bought 50 shares at $1.27 and sold those at $4, and I still own 50 shares bought at $4. LOTTERY TICKET PURCHASES: LINKS IN ONE POST

National Dentex reported 3rd quarter earnings of 18 cents compared to 14 cents in the year ago quarter. Sales, however, declined 7.8% to about 39 million. Net income for the 9 months increased to 95 cents per share compared to 78 cents in the first nine months of 2008.

For NADX, today was a heavy volume day with over 12,000 shares traded. The day started out on a downdraft but the stock closed up 16 cents to $8.33.

6. First Industrial (own common as LT/own preferred): This LT is slightly under water, but that is okay. I have realized good percentage returns on First Industrial's preferred stock. I am playing with the house's money on the remaining shares of FRPRK bought at $8.4 in February: Buy FRPRK First Industrial Realty Industrial reported results for the 3rd quarter and it appears to me this REIT is making progress in stabilizing its business and finances. However, in service occupancy continues to decline, though at a slower rate, falling to 81.7% compared to 82.1% in the second quarter. And, importantly, rental rates decreased 9.4%. Due to the strain on this REIT, it has been able to repurchase some of its debt at a discount to par value, repurchasing 124 million in debt at an average discount of 16% to par value. And, it has continued this program in the 4th quarter. Of the debt repurchased in the 3rd quarter, FR has reduced its March 2011 obligation by 44.1 million and its April 2012 debt maturity by 40.2 million. This is important. Also, this REIT has only 19 million in debt maturing in 2010, which is extremely important. This will give the firm some breathing room and an opportunity to recover as the economy hopefully improves during 2010. Lastly, another important factor for this investment is that 85% of the real estate assets are unencumbered. The firm is also selling some properties in an effort to further improve its balance sheet and liquidity position.

FR reported FFO of 57 cents for the 3rd quarter but that number included a number of special items, including for example a net gain of 36 cents on the debt retirement and 24 cents in impairment charges. Net of all of those items, FR reported a FFO of just 33 cents. Those numbers are far from reassuring.

7. Productivity: The Labor Department reported that productivity rose at a 9.5% annualized rate in the third quarter, the largest increase since the third quarter of 2003. This was much better than the the 6.4% increase predicted by analysts. Productivity in manufacturing rose at a record 13.6% annualized rate. Productivity and Costs, Third Quarter 2009, Preliminary

8. Added to ADRD in the Wrong Account (see Disclaimer): I own the ETF ADRD in the Roth IRA and I wanted to add a sufficient number of shares to bring me to 100 in that account. I own a similar ETF, ADRU in the taxable account with close to 200 shares with the last add at $14.5.(item # 3: Evening Notes) I made an Old Geezer kind of mistake, and mistakenly added the ADRD to my taxable account rather than to the Roth. Both of these ETFs are similar and Powershares is the sponsor. ADRD contains 100 ADRs from large companies in developed foreign markets: - BLDRS Developed Markets 100 ADR Index Fund - ADRD The current expense ratio is .3%. The other one ADRU, which is owned in the taxable account, has 100 ADRs from just Europe and it also has a .3% expense ratio: - BLDRS Europe 100 ADR Index Fund - ADRU There is some overlap as you would expect, but ADRD includes some Japanese and Australian companies, like BHP Billiton, Canon, Toyota, Honda, & Westpac Banking. Japanese companies have about a 13.5% weight, and Australian companies just 5.08% in ADRD, neither are present in the European ADRs ETF ADRU. So now I own ADRD in both the taxable and Roth accounts.

9. Sold 100 WMT at 51.2 and SYK at 47.7 (see Disclaimer): The Old Geezer is in a trading mode for a long term secular bear market until he sees the light at the end of this long tunnel. That means, reduce risk a tad ahead of the employment report on Friday. WMT was just bought at $49.55 so out it went as a risk reduction measure. Bought 100 WMT at $49.55/ SYK was bought to prove a point which I consider to be proven now: Cure for a Lush: A limitless supply of alcohol?/SYK a short?/WaMu: Just another example Socializing risk and Privatizing rewards

10. Bought 100 GJX at $25.01 (see disclaimer): This is the kind of buy that happens when the Old Geezer is at the helm of the trading desk. This is a TP issued by BNSF Capital Trust, wholly owned and controlled by Burlington Northern Santa Fe (BNI), the railroad that Berkshire is about to acquire. This is a typical TP issue. The coupon starts out at 7% and becomes a floating rate security in January 2026. Interest is paid semi-annually at the fixed rate coupon level and then starts to pay quarterly when the floating rate comes into being. The float is 3 month Libor plus 2.35%. This is a link to the prospectus: This is a rule violation in that the final maturity is not until 2055, unless it is called at some point pursuant to the optional call provision summarized at p. S-6. So we are classifying that as sort of a rule violation on maturity dates. In effect, this TP is a junior bond of Burlington Northern. As is the case with the vast majority of junior bonds, interest may deferred for up to five years, with interest paid at the applicable coupon rate on the deferred amounts. I am not currently concerned about that eventuality. Some interesting issues are raised about the stopper provision once Berkshire acquires Burlington.

Why is this an Old Geezer (OG) purchase? The OG is content with 7% a year from an investment grade credit, and does not care about the lack of potential capital appreciation, a thought that sends shivers into the RB. Clip the coupon, play bingo at the Old Folks home, read some theology, play with the dogs, listen to Frank Sinatra music and philosophize about the meaning of life is the OG's M.O. Maybe it is time for Headknocker to send the OG back to Old Folks home to play checkers and bring that young Stock Stud back as the CEO of the operation here at HQ, the brook no nonsense LB. There is one condition, however, the LB has to cease trying to shred the RB and must agree to at least listen to what the RB has to say. No one fully appreciates the management difficulties encountered by Headknocker at the HQ. In fact, Headknocker just informed the OG that his days are numbered as CEO if his caution proves to be over done after the employment report tomorrow.

In one of these upcoming employment reports, there is going to be a surprise. The unanticipated event will not only be job growth but a revision of two prior months to show far less jobs were actually lost. I just do not believe that tomorrow will be that report. Maybe December will be.

Since I may start to do some buying on the European exchange when the dollar rallies against the Euro, I may go ahead and hedge the Euro stock position with a double short on the Euro currency.

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