This is my second post for Friday. I will be busy catching up on some reading over the weekend so there will be no post over the weekend. The next post will be Monday morning.
1. Basel Committee on Banking Supervision: The Basel Committee is the leading standard setting organization for banks worldwide. For those that invest in bank stocks, the Committee is in the process of amending its rules with a target date for implementation in late 2012. If implemented, these new rules are aimed at strengthening the bank's capital in times of stress. For example, if the bank's capital buffer fell below 125% of the minimum, it would not be allowed to pay dividends or bonuses, or buy back stock. WSJ This is the kind of development that will be incorporated into analyst reports and recommendation. An example happened today when Credit Agricole fell over 5% after Merrill Lynch downgraded the stock based on the possible need for significant capital raises by Credit Agricole. WSJ I do not have access to the Merrill report, but it sounded extremely mushy to me based on the WSJ description of it.
This is a link to the last press release from the Committee: Consultative proposals to strengthen the resilience of the banking sector announced by the Basel Committee The following are links to two lengthy reports from the Committee that LB will read when it has time, but these documents may be too boring even for the LB after glancing through them : /www.bis.org/publ/bcbs165.pdf www.bis.org/publ/bcbs164.pdf
The SEC Rule change in 2004, viewed at HQ as the seminal event in the origins of the 2008 financial crisis, implemented the Basel standards. { see Alan Blinder's discussion in NYT ; Nobel winner Joseph Stiglitz's article in vanityfair titled "Capitalist Fools"; John Coffee's article: Law.com; and a Niall Ferguson piece also in vanityfair.com titled "Wall Street Lays Another Egg"}
2. Dividends and Interest: The following discussion relating to dividend declarations is based on my daily review of the WSJ dividend page at its Market Data Center on Thursday evening.
Some investors may not be familiar with a unique security called Holdrs. http://www.holdrs.com/ Definition I have occasionally owned the holder for semiconductor stocks, SMH. When an investor buys one of the holders, they are in effect buying a basket of stocks. In the WSJ dividend page, I noted a dividend declaration from the Utilities Holdrs, UTH, which I have never owned but have considered buying from time to time. The dividends received from each constituent of the Holdrs are paid soon after they are received by the custodian. The composition of UTH can be found at Utilities. One advantage of the Holdrs is that the investor's only expense is the commission to buy them plus a custodian fee of 8 cents per Holdr paid out of dividends. (for more information: FAQ). These securities can only be bought in round lots of 100 shares. Other popular Holdrs include the ones for Oil Service, Retail, and Biotech.
The two equity preferred stocks issued by Odyssey Re, both owned, declared their quarterly dividends. ORHPRB, the floater, declared a dividend of $.2209.
The OSM CPI floater declared its interest payment for January 2010 at $.0152.
The CEF, ETW, a good sized position, declared its regular quarterly dividend of 45 cents (ex 12/22, paid 12/31). It has been discussed in a few posts.
{ Item # 2CEF: ETW ; CLOSED END INVESTMENT COMPANIES: Hopefully Lessons Learned and To be Applied; & Item # 3 CEF Buy-Write Funds/Risks of Bond Funds} ETW is global stock fund that uses a buy-write strategy to hedge risk and volatility: Eaton Vance Investment Managers - Tax-Managed Global Buy-Write Opportunities Fund The last semi-annual report can be found at that web site or at the SEC: Eaton Vance Tax-Managed Buy Write Opportunities Fu I quit reinvesting the dividends to buy additional shares a few months ago and now use it as a source of cash flow. All cash flow from the payment of dividends and interest is used by me to buy more securities, mostly of the income generating kind. I did previously trade some shares in an IRA (Sold ETW and SWZ in Roth IRA), but have not sold any shares in the taxable account.
A couple of small banks that I recently bought declared their dividends. Glacier Bancorp (GBCI) and CVB Financial Corp. Announces 81st Consecutive Cash Dividend.
Prospect Capital, a BDC owned in both taxable and retirement accounts, increased its dividend. The last purchase was a 50 share add in a retirement account: /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
The Utility SPDR (XLU) was ex dividend on 12/18 at $. 36909.Distributions - Select Sector SPDRs
The CEF, Blackrock Real Asset, which is owned in both taxable and retirement accounts, went ex dividend on 12/18.closed end funds: energy and natural resources funds Added to BCF
The two Powershares ETFs that contain a collection of ADRs, ADRD and ADRU, both went ex dividend on the 18th. I view those ETFs as a low cost way to buy a number of foreign company ADRs with one purchase: BLDRS Developed Markets 100 ADR Index Fund - ADRD BLDRS Europe 100 ADR Index Fund - ADRU The 100 in the name stands for the number of stocks in the ETF.
3. Bought 100 Danone at $11.90 (see Disclaimer): Most Americans are familiar with this French company as a result of its yogurt and water brands sold in the U.S.
This is a link to Danone's semi-annual report: phx.corporate-ir.net
Danone trades on the pink sheet exchange in the U.S. under the symbol DANOY: Danone - DANOY One share bought in the U.S. as an ADR equals .2 of the ordinary shares traded in Paris which are priced in Euros:DANO.PA When I looked at that quote in Paris this morning, Danone was trading at 41.83 Euros. Using the handy currency converter at YF, Currency Converter, I could easily calculate that €41.83 then equaled $59.75 I then checked the quote on DANOY on the pink sheet exchange and saw the last trade at $11.95. I divided $59.75 by 5 and got $11.95 which is exactly where DANOY was trading (remember the share conversion is 1 share of DANOY equals .2 ordinary shares). The DANOY was priced better in relation to the shares traded in Europe at the then currency conversion rates than another ADR for Danone, where 1 ADR equals 1 Ordinary share, which was priced at $61.55. Danone - GPDNF LB can really get into this kind of detail as a form of mental exercise to prove once and for all it is still a 16 year old Stock Stud.
It has been my experience that I can not rely on quotes from my online broker for pink sheet trades. I have to do to the pink sheet exchange and look at what is happening.
4. Added 50 Exxon at 67.81 on Friday (see Disclaimer): I read a story in the NYT on Friday (possibly the only subscriber in the SUV Capital) that mentioned that Exxon has lost over 20 billion in it market cap after announcing its 31 billion acquisition of XTO earlier in the week: Exxon/XTO The author of this article, Christopher Swann, points out that some investors may be spooked by the memory of Conoco's acquisition of Burlington Resources for 36 billion, when the price of natural gas was about three times higher than now, which ultimately led to 30 billion in write-downs according to an analyst. The comparisons are just not appropriate, and I do believe Rex Tillerson is a lot smarter than the lemming investors selling Exxon stock now. And, it would be fair to argue that Mr. Tillerson did not become an idiot all of a sudden.
As usual, I apologize to the lemmings for comparing them to some humans.
This article Forbes makes a technical argument in favor of Exxon shares.
The purchase Friday was an average down: BOUGHT XOM at 71.5/Added 50 SIVBO at $19.15
5. Sold 100 of the 200 KVW at $24.75 (see disclaimer): KVW is a Trust Certificate containing a junior bond from Aon. LB entered a good until cancelled limit order to sell 100 KVW at $24.75 before being relieved of his duties as HT by the Headknocker. The HK does not use the word relieved, instead preferring to just say "you're fired, get you ass out of here". But since the LB writes this minutes in a stream of consciousness, with other personalities something intruding in a very rude manner, the LB is going to say "relieved" of its duties as HT.
These shares were my highest cost KVW shares. LB is a firm believer in managing risk, and there has been a great deal of trading in the Trust Certificates that contain the same Aon bond to accomplish several goals. One goal is to book profits. Another is to collect interest payments, and to trade the functionally equivalent TCs in such a manner that my cost basis is reduced over time using FIFO accounting. The KTN shares, for example, were traded until I ended up with 100 shares in an IRA bought at $14 and 50 shares in a taxable account bought at $13.1 on 10/10/08. TRUST CERTIFICATE AON BOND KTN ORDER FILLED KTN add I have bought and sold another TC containing the same Aon bond, DKK, in my Roth IRA, and currently own 100 shares (50 of those shares are in the Roth). I have also bought and sold KVF before starting this blog, as I exchange one functionally equivalent TC for another to achieve a higher yield and to book profits. Another reason for the pare on Friday was that I viewed my total position in this junior bond to be slightly too large with 200 KVW, 150 KTN and 100 DKK, and this pare of 100 KVW brought me back into a comfort zone with this junior bond maturing in 2028. The remaining shares of KVW were bought shortly before starting this blog at $16.08 on 9/30/08. {see generally Item # 4: TRUST CERTIFICATE AON BOND KTN) & Functional Equivalence in Bond Trading; Item # 2 Added 50 of the TC DKK Links To Prospectuses for the AON TCs in One Place Trust Certificates Links in One Post Managing Risk in an IRA: KTN and KVW } Ultimately, the goal is to use volatility to my advantage, to reduce my cost basis using FIFO, and to end up playing with the houses money with the lowest cost shares, easier said than done. LB has had some success achieving those goals in several instances, helped a great deal by the volatility in the September 2008 to April 2009 time period.
6. Added 50 WOSCY at $1.94 (lottery ticket category)(see Disclaimer): I discussed this British company in an earlier post when I bought 50 shares as a Lottery Ticket at a higher price: Bought 50 WOSCY as LT at $2.3 I discussed its earnings after WOSCY released its annual results in this post: Item # 3 /Wolseley I mentioned in that later post from September that I might splurge and buy another 50 shares, recognizing that this one will require some long term thinking and a lot of patience. This is a link to the firm's web site: Home - Wolseley plc
Since my last post on this company, the most important news was its release on November 18th of an interim management statement about its operations: www.wolseley.com -11-2009.pdf This firm is still suffering from a weak housing market, as I would expect, and revenues are still trending down compared to a year ago. Profits fell 41% (46% in constant currency) during the 3 months ending 10/31 compared to a year ago,while revenues declined 13% (20% in constant currency). The share price did start a small decline from my last purchase at 2.3 to the current level after the release of that report: WOSCY.PK: Historical Prices for WOLSELEY PLC ADS By patience, I am talking about five years or more. This is a chart of WOSCY.PK going back to 2001. This stock was trading at over 25 in 2007. WOLSELEY PLC ADS Share Price Chart I am not willing to risk much capital on some type of recovery from the current lows, because the recovery potential is too uncertain now for me to even make an educated guess about the timing and the degree. I certainly do not expect a quick recovery. But this is the kind of situation that I will not ignore completely, so I assign it to my Lottery Ticket category and throw $200 at it, maybe it will work or maybe not. LOTTERY TICKET PURCHASES: LINKS IN ONE POST
7. Sold 50 DFY at 24.45 and bought 50 DFP at 17.1-both transaction in the Roth (see disclaimer): Both of these securities are bonds issued by Delphi Financial, an insurance company. DFY is the senior bond, and DFP is a TP, a junior bond. Why would I do this? It is based on a perception that the difference is just too wide between a senior and a junior bond. The senior one was yielding 8.18% at $24.45 and the junior bond was yielding 10.78% at 17.1. A TP is of course junior in priority, and interest can be deferred as explained in a prior post when I bought 100 DFP in a taxable account. /Bought 100 DFP at $17.1/ And this is just a matter of personal preference. I will go for the 10.78% yield on the junior over the 8.18% on the senior (over 2.5% difference), unless I have very specific and concrete concerns about the credit risk. Also, I was able to sell DFY at a quick profit in the ROTH, the shares just being bought at 22.48 in mid November: Bought DFY at 22.48/Added to BIP/More Silliness from Ideologues/Sold CEF FAX
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