Friday, December 4, 2009

JOBS/Bought 50 STL @ 6.58/Added 50 STLPRA @ 8.69/Sold 100 AOR, Sold 100 GJX @ 26.03/ISM/Bought CVBF/Disadvantages of Preferred Stocks/Added to Gold Hedge/NYX BAM

I mentioned in a post in early November that the jobs report would startle the market on the upside one day, and I suggested that it might happen in December. I mentioned that in that report to come the previous two months would be revised significantly to show less job losses. This is what I said on November 5th:

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

The report issued this morning is a welcomed signpost in the economic recovery scenario that even Alan Abelson and his soulmate and ghoul, David Rosenberg, will have trouble explaining away. The economy lost only 11,000 jobs in November.Employment Situation Summary That is close enough to my surprise scenario. The number for September was revised from -219,000 to -139,000 and October was revised from -190,000 to -111,000. Fortunately the Old Geezer was not at the helm with his nervous tizzy for too long yesterday afternoon. HK even asked the RB for its opinion this morning.

1. ISM Index for Services: The market turned south after the release of the ISM survey for services at 9 a.m. C.S.T. The expectation was for a reading of 51.7, showing expansion in that important sector of the U.S. economy. Instead, the number for November showed some contraction, falling to 48.7 in November from 50.6 in October. ISM This took some of the positive momentum away from the better than expected weekly unemployment claims number released earlier in the morning, showing a continuation of the positive trend of lower claims for unemployment. ETA Press Release: Unemployment Insurance Weekly Claims Report The recovery of both the service sector and small businesses are lagging behind the manufacturing sector that is benefiting from the weak dollar and overseas sales.

2. Bought 50 of the TP SPLPRA at $8.69 Yesterday ( see disclaimer): These shares were added to the 50 bought in a retirement account at a higher price. This TP was discussed in that earlier post from November 25th: Bought 50 of the TP STLPRA/ At a total cost of $8.69, the yield is around 9.66% paid in quarterly installments with the next ex date on 12/14. I noticed some minor selling pressure on both the common and TP shares after Sterling gave a presentation on 12/2 at a conference. I have not listened to the audio of the presentation. Usually, a firm will file with the SEC the materials used in the presentation, and I will check to see whether anything has been filed this weekend or next week. If I was going to invest any significant money, I would have listened to the presentation before buying.

3. Mortgage Rates: In my adult life, there has never been a better time for a first time homebuyer to make a prudent purchase of a home that is affordable to them. The 30 year mortgage rate fell to 4.71%, the lowest level since records were started back in 1971. CNBC The 15 year mortgage rate came close to 4.25% recently and has risen slightly over the past few days. Mortgage Rates I saw where Wells Fargo was offering a 4.15% 15 year loan for refinancings: Wells Fargo offering 4.15% 15-Year Fixed Mortgage Refinance Rates Wow! I have no debt and have been in my current home since 1982. But, these low rates are tempting even for a conservative OG. When you add these low mortgage rates to the decline in home prices and the tax credit, the opportunity is clear.

4. First Industrial (own common and preferred): I own the common shares as a LT. I was successful trading the preferred shares during the "troubles" and currently own shares of FRPRK in the regular IRA, playing with house's money, with those shares bought at $8.4 ($25 par value) back in February Buy FRPRK/

First Industrial Realty declared its regular cash dividend on its cumulative preferred shares. The common share dividend was eliminated about a year ago, so the preferred shareholders of FR are in what I call an enhanced danger of deferral. But, for at least another quarter, the preferred shareholders will be paid as scheduled.

5. Bought 50 STL at $6.58 Yesterday (see Disclaimer): The last salvo the LB was able to fire yesterday before the OG came back from the Old Folks home, tired of playing checkers and listening to Frank Sinatra LB assumed, was to buy 50 shares of the common stock of Sterling Bancorp at $6.58 pursuant to the previously discussed plan of adding a bevy of regional bank stocks to the HK's portfolio. The purchase exceeded by a slight amount the maximum for a LT so it was placed in Category 2 of the regional bank stocks: Regional Bank Stocks Some of the recent buys of regional banks have been put in the newest taxable account.

Sterling still pays a decent dividend, currently about 9 cents a quarter for a yield of close to 5.5% at the $6.58 price. STL Stock Quote - Sterling Bancorp Stock

I would say that investing at the low end of the $300 to $2000 range for Category 2 is not based on a lack of confidence so much as a lack of familiarity with this bank, other than some research done initially when buying its TP. I had never heard of it two weeks ago.

6. Bought 50 CVB Financial (CVFB) at $7.94 Yesterday (see disclaimer): When the LB saw the OG's hand starting to shake, it knew that it needed to act fast to further its plan on buying a bevy regional bank stocks. Just a second before OG's coup at the Trading Desk, LB entered a market order to buy 50 CVB Financial (CIVB). This one will be placed also in Category 2 of the regional bank holdings. And, for the reason mentioned above in connection with Sterling, the low level of investment does not reflect a lack of confidence but more a lack of knowledge. I was unfamiliar with this California bank until I saw a story a few days ago that CVB had paid back the TARP funds to the government and even repurchased the stock warrants. I view that as a positive. I also noted when reading its last filed 10-q that the FDIC recently aided its acquisition of San Joaquin Bank, in Bakersfield, acquiring about 690 million in loans and 530 million in deposits. (page 25: e10vq). San Joaquin was shuttered by the FDIC in mid October as the 99th bank failure in the U.S. this year. Street CVB is profitable and earned 19.3 million in the third quarter of 2009 which was a 10.66% increase over the 2008 3rd quarter. The net interest margin was 3.72% and the tangible common equity ratio was at 9.07%. I also came across this name in an article read yesterday morning The dividend yield at my total cost is close to 4.25%, at the current rate of 34 cents per year. The last payment was the 80th consecutive payment: CVB Financial Corp. Announces 80th Consecutive Cash Dividend

7. After the Coup D'Etat by OG Yesterday Morning, He sold 100 of the ETF AOR at 29.1 (see Disclaimer): Maybe the OG needs to call the Doc about a prescription for those chill pills people take for anxiety. But, then the OG does not take pills, maybe that needs to change.

The HK had a dachshund once, who needed to take a phenobarbital tablet once a day, sort of something like that situation is needed for the OG. Otherwise, the dachshund would find something during the day that would make her so nervous that she would have a convulsion. Once when a washer was being drugged out of the house, actually out of her room which was extremely disturbing, the phenobarbital tablet failed to do its job and she needed an intravenous shot of valium to bring her back to normal. The LB, who has been demoted to Head of Strategic Acquisitions here at HQ, said it has always wanted to inject the RB with a quart of that Valium stuff to silence the its constant stream of meaningless gibberish so the LB could enjoy a few hours of peace and quiet. I digress.

When the OG is at the helm, and becomes nervous, the sell button is hit until calm and serenity returns, and then he can return to reading some philosophy. So, AOR was sold yesterday for about a $100 profit, bought on 10/6 at $28.27 : /Bought 100 AOR at $28.27 The OG likes to sell what was just bought in this type of situation since it does not interfere with the detailed plans of the hyper analytical LB who if the truth was known can not remember everything that is owned anyhow.

8. Christine Benz on Preferred Stocks: I am a Morningstar subscriber and do not know if this article written by Christine Benz is available to non-subscribers. It is worth a read to anyone who is a novice about investment in what I call equity preferred stocks. Retirees Preferred Stock I have made similar points about equity preferred stocks. For the most part, the fixed rate preferred stocks are unattractive to me now. They were many opportunities to buy these securities between October 2008 to April 2009 at prices that juiced the yield to levels which could not be ignored even by the a conservative Old Goat investor like the OG. She mentions that these securities can be called if interest rates fall to a level where it pays for the issuer to refinance. That is an irrelevant point, and no disadvantage, when the purchase is made at a deep discount to par value. The FRPRK mentioned above, for example, is a equity preferred stock and was bought at 67% discount to its par value. It would be just fine with me if it was called at $25. And I could say the same about every preferred stock that I have bought over the past year. It is important to understand that these securities rank just about common stock and generally do not have a maturity date. Some are not cumulative either including most of the floating rate equity preferred stocks that I currently own. I recognize the dangers with these securities and invest accordingly.

While Christine is correct in noting that many preferred stocks pay qualified dividends, this does not extend to REITs. A list of those paying qualified dividends, which has not been verified, can be found at the quantum online site.

Added: I neglected to note in the post as originally written that Christine has clearly confused Trust Preferred issues with equity preferred. Trust preferred issues do have maturity dates, and are cumulative, because they represent an interest in junior bonds, and are not properly classified which Christine does, as equity preferred.
I added a comment to her article as Gent1951.

9. Divergence in Predictions by the Stock and Bond Markets: The Barrons technical analysis has a good column pointing out that the bond and stock markets currently see the future differently, and the bond market has a better record at accurate predictions. The RB just told HK that we need some kind of internet blocking device, similar to the ones on the cable to block children's access to undesirable channels, to keep the OG from reading this kind of stuff.

10. With OG at the Helm, Added 50 GLL at $8.49 as a Hedge for Long Bullion Position (see Disclaimer): The OG wants to feel good. And, since the stick in the mud can not bring himself to sell even one ounce of gold, and does not want to feel really bad in case gold plummets from current levels, he added to his hedge for gold bullion by buying 50 of GLL per his previous plan as discussed in a prior post, though this buy was a little lower than he anticipated in that post: Item # 9 Bought 100 XLU/Bought 100 QAI/SOLD AUY/Unemployment and Inflation/Bought 30 ZBPRC at 18.4/ This double short ETF is explained in this post. Bought 50 GLL I mentioned in yesterday's post that, after some trepidation about adding to the hedge (Gold and Chinese Demand), I would go ahead with the add if gold was up at the time of the trade. Gold Prices & Quantitative Easing

11. Sold TC GJX at $26.03 (see disclaimer): The OG continued his selling into the close raising cash by selling 100 of the TC GJX which was recently bought at $25.01. Bought 100 GJX I really dislike buying bond at over par value, and I have taken Uncle Ben off my Christmas Card list for his Jihad against savers. The disdain is expressed in a post from August. I Never Buy Bonds at More than Par Value or CEFs at Premiums to Net Asset Value/ A small change of heart was discussed in this post: Treasury Bills and Notes-Negative Real Rate of Return But there is a limit to what I will stand on securities selling at over par value. If GJX had stayed below $26, I would have kept it. Above $26, it has to go. Par value is $25. In fact, anything that I own with a $25 par value will be sold if I can execute a trade above $26.

Admittedly, the OG becomes a little cranky, one of those afflictions of old age as the mind turns to mush, when thinking about the masters of disaster making hundreds of millions for nearing wrecking the world's financial system and of those individuals who believe and certainly act as if freedom from responsibility was enshrined as a Constitutional Right in the Bill of Rights. And he has accepted his fate of paying for the mistakes and greed of others, sort of, not really.

12. NYSE Euronext (NYX) (owned) and Cramer: Cramer said last night don't buy NYX at the current price of $24.8. This was his growth stock of the year for 2007 ( stock), and it pretty much tumbled from around $95 soon after that recommendation until I bought it in March 2009 at less than $15. He claimed last night that he got people out at $60. Maybe, I do not remember him doing that. I bought at $14.76 on March 6th of this year. Buys of JWF KSA DIS and NYX/ Just a Day of Ignoring My Own Rules I summarized Cramer's recommendation on NYX in that post. He recommended NYX again in December 2008 when NYX fell under $26. He referred to NYX as a solid buy on June 5, 2009: CNBC Personally, I do not see much difference now in the NYX business compared to December 2008 or June 2009. The closing price on June 5th was $29.83, almost five dollars higher than the close yesterday. But I am not a fan of this company and have stayed with it only because my dividend yield is around 8% based on the $14.76 buy. Now, I am concerned about that dividend.

I am more concerned about the future level of this dividend today after reading last night the latest NYX dividend announcement. NYSE Euronex I viewed the wording of that announcement to be a warning of sorts about the possibility of a lower dividend next year:

"With today’s announcement of the first quarter 2010 dividend, the Board of Directors has adopted a quarterly dividend declaration policy. Dividends for future quarters will be determined by the Board taking into account such factors as the Company’s evolving business model, prevailing business conditions and the Company’s financial results and capital requirements, without a predetermined annual net income payout ratio."

I did almost sell the shares recently when the price approached $30, and I will let them go if the dividend is cut. The only attraction to me now is the dividend yield based on the lackluster and uninspiring earnings reports of recent vintage.

13. Brookfield Asset Mangement (BAM)(owned): Brookfield was added during the RB's frolic in March at $13.73. Buy of EWC & BAM Dividends are being taken in Canadian dollars. Brookfield has accumulated close to a billion dollars worth of the bonds issued by the bankrupt General Growth Properties, in an apparent effort to position itself to acquire some of its properties during the bankruptcy process. Simon Properties, a large REIT, is doing the same. BAM is not a REIT.

No comments:

Post a Comment