Friday, January 15, 2010

CPI/FPL Reacts to Hostile Political Environment in Florida/Sold All of CEF JRO at 11.25 and Bought JTD in Its Place at 11.55/BOUGHT 100 YAMANA GOLD

1. CPI: The CPI rose .1% in December on a seasonally adjusted basis, and has increased 2.7% over the past twelve months before seasonal adjustment.Consumer Price Index Summary On a non-seasonal adjustment basis, the CPI index decreased by .2% in December. The CPI floaters, PFK and OSM, use the non-seasonally adjusted numbers to calculate their respective monthly interest rates. The December number for use in those calculations will be 215.949:

I can now calculate the April 2010 penny rate for OSM (owned):

December 2009 NSA CPI: 215.949
December 2008 NSA CPI: 210.228
Difference =5.721
Divide by 210.228=.027213
Add the Spread of .02%= .0472% annualized interest rate
Multiply by $25 par value=$1.18 penny rate on an annual basis
Divide by 12 months to arrive at the rate for April 2010= $.09833

2. Hugo Chavez, Huey Long Or Charlie Crist: Three Peas From the Same Pod : I noted in a post from yesterday that I had decided that Florida's governor had politicized the Florida Public Service Commission. Possibly, I was being unfair to Governor Charlie in comparing his new style of government to Hugo Chavez. A more appropriate comparison would be to Huey Long. Maybe I am being unfair to Huey's memory. After all, Huey could be entertaining at times provided you did not take it all too seriously. But wait, isn't Charlie a republican or at least claims to be?

It should not be surprising that the newly configured Florida PSC denied almost all of Florida Power & Light's rate request, granting just 6% of the 1.2 billion requested by FPL. The Commission allowed only a 10% return on equity, significantly below the industry average and .75% below their staff's recommendation. In response to this political chicanery, FPL announced yesterday that it was immediately suspending work on all projects representing 10 billion in capital spending over the next five years. The press release issued by FPL is the strongest statement that I have read by an electric utility commenting on a rate decision.

3. Sold all shares of the CEF JRO at $11.25 and Bought in its Place JTD at $11.55 Yesterday in the Roth IRA Account (See Disclaimer) : JRO had recovered nicely and was selling near its Net Asset Value when I sold it yesterday. I substituted another Nuveen CEF, JTD, that is more stock oriented, with close to 75% of its assets in common stocks and the remainder in preferred stocks and bonds. As of 1/13/2010, JTD was selling at a 12.97% discount to NAV and yielding 8.99% at the market price on that date. JTD - Nuveen Tax-Advantaged Dividend Growth Fund JRO was selling, as of 1/13/2010, at a .13% discount to NAV and yielding 6.64% at the market price at the close on that day. This information is of course updated daily, and the NAV and the market price will change daily. The data from 1/13/2010 is all that I had when placing the trades yesterday.

If I am going to own a stock fund in the IRA now, I prefer to own a CEF selling at a discount to NAV, preferably over 10%, and paying a dividend of around 10% or greater at my purchase price.

JTD was also bought in the taxable account a few months ago at $10.13 in August. Bought 100 JTD So it has done well, paying two quarterly dividends after that purchase which I took in cash.

This kind of exchange also reduces my overall bond exposure by a tad in the IRAs, since JRO is a bond fund whereas JTD is about 75% into common stocks.

4. Bought Back 100 shares of Yamana Gold at 12.11 Canadian on the Toronto Exchange/Settled Using Canadian Dollars (See Disclaimer): I sold 100 shares at 14.2 Canadian last November: SOLD AUY No one knows when the current bull move in gold will end. The price was down about 23 cents yesterday from the prior close when I made my purchase, and that was a sufficient drop to more than pay for the cost of my 19 Canadian dollar commission for trades on the Toronto Exchange. The symbol for Toronto is YRI.TO. If I wanted to compare the U.S. exchange price for AUY with the Canadian price, I would simply enter the Canadian dollar amount in the YF currency converter and then compare it to U.S. dollars. Currency Converter

The Canadian dollar has been moving up in value against the U.S. dollar which can be seen graphically by looking at the chart for FXC over the past 9 months, the currency ETF for the Canadian currency: CRRNCYSHRS CAN DL TR ETF Chart FXC was around $77 in early March and is now hovering around $97.5. When I made my trade yesterday afternoon, the converter showed that a 12.11 Canadian dollar price was then about $11.84 U.S which was exactly where Yamana was then trading on the NYSE: AUY: Summary for YAMANA GOLD INC- So the only difference was that it cost me a few dollars more in a brokerage commission. I also keep a stash of Canadian dollars for investment and for currency exposure, and those dollars do not earn any interest. It behooves me to constantly recycle those Canadian dollars to buy securities which pay dividends or at least have some appreciation possibilities.

Gold demand figures can be found by registering at the World Gold Council web site: Homepage > World Gold Council The following linked blog has a reproduction of the third quarter report from that organization along with a discussion. zero hedge

Yamana Gold recently gave an update for its 2010 and 2011 operating outlook. Production from continuing operations will be up around 12% compared to 2009. But there is little change from 2010 to 2011. The company expects a ramp up in production in 2012 with some new development projects. The estimate is for about 1.1 million gold equivalent ounces (GEO) in 2010 and 2011, and then 1.3 million in 2012 and 1.5 million in 2013.

5. Intel (owed): Intel blew past expectations with its 4th quarter report, earning 55 cents per share on a Non-GAAP basis and 40 cent using GAAP. Gross margin was 65%, a record, and revenue increased 28% year- over- year to 10.6 billion, above the forecast for 10.2 billion. For the current quarter, Intel expects revenue to fall between 9.3 billion to 10.1 billion, and the consensus estimate for the current quarter was 9.35 billion.

6. Tidbits: I mentioned yesterday that I had never heard of Westerly, Rhode Island, where Washington Trust Bancorp has its headquarters. /Bought 100 WASH at $15.26 After receiving my Vanity Fair magazine, I started reading a story about the death of Finn Caspersen, the former CEO of Beneficial, and apparently extremely wealthy. The article soon mentioned Westerly as this fellow's home, referring to it as Wasp Old Guard country: There is also an interesting article about Tiger

I am surprised about how well ZBPRA has done since my last purchase at $12.5 on 1/7/2010. Bought 50 ZBPRA at 12.5 in IRA I was almost tempted to sell it yesterday. But if I sold those shares recently bought, and kept the 100 bought at $7.8, what would I buy with the proceeds to produce income? I can at least pat myself on the back for not tendering those shares for the measly $11.5 that Zions offered earlier in the year: Form 8-K

The hunger for yield is causing a stampede to buy bonds and bond funds, driving up bond prices to levels that make them unappealing to me for new investment. I have a bid outstanding on one TC. So, I am not a buyer of bonds at current prices. In fact, it is becoming increasingly difficult to keep my finger off the sell trigger for those which are already owned that have had huge upside moves.

The next ten year TIP auction is scheduled for 4/5/2010. A 30 year TIP will be auctioned on 2/22/2010. /auctions.pdf

The 30 year nominal treasury bond received good bidding yesterday. The coupon was 4 3/8% and 4.640% with the O.I.D.: .pdf

I noticed yesterday that Suntrust Robinson Humphrey started UBSI at neutral. UBSI: Summary for United Bankshares, Inc I do not have access to the report, but I suspect it is at least in part a valuation call. I bought some shares recently at $16.56 on 11/17, and UBSI closed at $21.66 yesterday. Bought 50 of UBSI So that is close to a 31% move in less than 2 months, and many investors might want to capture at least part of that type of gain. published an article on 1/13 expressing its opinion that Pitney Bowes's has more than enough cash flow to continue paying its dividend. On the same day, I read that Cramer backed off some on his assertion, contained in his latest book, that the dividend was safe: CNBC PBI was a recent add on 1/11 based primarily on the dividend yield. Bought 100 PBI at 21.9/

7. S L Green (own common and preferred): I do not recall seeing for at least a year a REIT selling preferred stock to raise capital. Some have sold commons stock and have started to pay part of their dividends in common stock to preserve capital. I noticed that S L Green, a REIT that owns office buildings in Manhattan, raised 122.6 million by selling its series C cumulative preferred stock at $23.53. SL Green Realty Corp. Announces Pricing of $127 Million of Series C Preferred Stock It was not that long ago that I was buying SLGPRC at $10.5 and $11.89: Bought SLGPRC: Anticipated Risk Reduction and Transfer Buys of GPOR and SLGPRC Those buys were in February and March of last year with the lower cost one having a 18% yield at my cost. But the common shares have zoomed from my buy at around $15 to $50 now. But, I was only risking cash flow from dividends and interest in making purchases back then, so my buys were small ones.

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