Saturday, March 13, 2010

Bought 70 of the CEF GDO in Regular IRA at 18.61/ Bought 50 BCBP at 9/Conservative or Delusional Reactionaries?

1. Bought 50 BCBP at $9 (Regional Bank Stocks strategy -category 2)(See Disclaimer): BCB Bancorp is a small bank with branches in New Jersey, mostly in Bayonne. I had to look at a map to find the location of Bayonne and Hoboken. So now I know, near NYC. My 50 share order was a limit order. This issue is thinly traded, and a large bid/ask spread is normal.

Since I am allowing myself to add positions to the regional bank strategy in small amounts, I have a bunch of names that I am trying to buy using limit orders. With BCBP, the basket of stocks contained in this strategy now has 31 names in it. So, I am not particularly concerned about the fate of individual banks so much as the validity of the overall strategy going forward. So far at least, the strategy appears to be working but most of the major 100+% gains were bought in the spring and summer of 2009, though a few of the recent purchases have exceeded my expectations too such as UBSI.

BCB Bancorp (BCBP) announced a 8% increase in net income for 2009 to 3.75 million, compared to 3.47 million during 2008. The bank earned 80 cents per diluted share in 2009 compared to 74 cents in the prior year. Both of those numbers represented a decline from the 90 cents earned in 2007. There were 4,676,000 diluted shares as of 12/31/2009. This gives the bank a market capitalization of about 42 million at the $9 price per share: BCBP The bank is currently paying out a 12 cent per quarter dividend. I believe that 12 cent rate was raised from 10 cents in 2008. At the current 12 cent rate, the annualized yield at a total cost of $9 would be about 5.33%. The 10-Q for the 4th quarter has not yet been filed and the press release announcing the 4th quarter results did not have some of the details that I want to examine.

I reviewed the 10-Q filing for the 3rd quarter: form10q I did not see any preferred stock listed on the balance sheet. The bank is purchasing small amounts of its common stock. As of 9/30, the allowance for loan losses was 6 million or 69.77% of non-performing loans. I found the capital ratios set out at page 15: "At September 30, 2009 the Bank’s Tier 1, Tier 1 Risk-Based and Total Risk Based Capital Ratios were 8.88%, 13.04% and 14.15% respectively." Non-performing loans as a percentage of gross loans was 2.05% as of the end of the September 2009 quarter. Net interest margin was 3.31% (p. 16).

BCB is in the process of acquiring Pamrapo, a savings bank with several branches in New Jersey: Pamrapo Savings Bank Locations . While this acquisition has been approved by Pamrapo's shareholders, it has not yet received regulatory approval. If completed, the agreement calls for a 1 to 1 share share exchange. FORM 8-K

BCB has 4 branches, three in Bayonne and one in Hoboken. BCB Community Bank

2. Bought 70 of GDO in Regular IRA at $18.61 (see Disclaimer): I recently sold two BDCs, TAXI and PSEC, in this account which gave me just enough capital to buy 70 shares of GDO. This CEF was the subject of an extensive discussion in last Friday's post: Bought 100 of the CEF GDO at 18.6 It is basically a global corporate bond fund that pays monthly dividends, currently at a 13 cent rate, which will give me about a 8.38% yield at a total cost of $18.61. The fund's average credit quality is investment grade which is another plus. The main feature for me as explained in the prior post is that it will liquidate in 2024.

I like the securities that I now have in my retirement accounts, exclusively devoted to income generating securities mostly bought at favorable prices. It might be best now to leave well enough alone, monitor the credit quality of the bond issuers, and simply reinvest the cash flow when it reaches a level permitting the purchase of another income producing security. There are a few fixed coupon bonds with long maturities that will need to be jettisoned when I become concerned about interest rate risk, including EMO & DFY.

Those who have followed this blog for a long time already know that the retirement accounts are full of fixed coupon bonds, synthetic floating rate bonds with guarantees, REIT preferred stocks bought during the meltdown, equity preferred floating rate stocks with guarantees, ING and Aegon hybrids, a variety of CEFs that pay good dividends, and a few common stocks that have high yields at my cost. So I am happy with the design of the Roth and regular IRA portfolios as throwing off a constant stream of income that can be used for reinvestment.

3. The Know Nothing Apostle of Pseudo Conservatism-Glenn Beck and the Powerful and Growing Know Nothing Reactionary Forces in America: The new voice for pseudo-conservatism beliefs recently claimed that any church promoting "social justice" or "economic justice" was merely using code words for Nazism and Communism. He advised those attending any church promoting social justice to leave and find another one. NYT ABC News I am sure that makes a lot of sense to the TBs. 

Another Beckism was pronounced during his speech to the TBs at CPAC, co-sponsored by the John Birch Society, when he referred to progressivism as a "cancer" that "must be cut out of the system".

I am not going to call the True Believers crackpot, ignorant, delusional Know Nothings. I am far more civil than to use such language. Instead, I would wish that the media and non-TBs cease calling them conservative. 

A more appropriate description would be "delusional reactionaries", but I can understand why some would omit the use of the word "delusional" in that description even though it use would be a fair characterization. Their mantra is to repeal virtually all government regulation to allow those in pursuit of profit to do whatever they want to do. 

For some reason, notwithstanding the lessons taught countless times over the centuries, the Tea Party crowd and their fellow travelers believe that a society with no rules and regulations will improve the health, welfare and economic conditions of the American people. Is that really a defensible position given the history of mankind? 

The rant by Beck at the Republican president Theodore Roosevelt at the CPAC conference was targeting TR's successful efforts to pass the Pure Food and Drug Act and the Meat Inspection Act of 1906 which paved the way for the creation of the FDA. This law was passed after Upton Sinclair and others exposed what was actually happening to the food supply when there were no rules.

The intellectuals of the growing reactionary forces are primarily lawyers, who are members of the Federalist Society. This is a passage that I wrote about them from a post in January 2009:

In law, the reactionaries who call themselves conservative have formed a society, innocently named as the Federalist Society. You know, as in the Federalist Papers. Some of the Supreme Court judges appointed by Republicans, including Chief Justice Roberts, Scalia, Thomas and Alito, share many of the beliefs of the Federalist Society and desire to advance this societies agenda in my opinion. 

One core belief of the Federalist Society is to turn the Supreme Court back to what is called the Lochner era. Another is to eviscerate regulations based on the Commerce Clause, as shown by the successful invalidation in a recent Supreme Court decision of a law that forbade children from bringing firearms into the classroom. (pp 81 to 85 of Toobin's book discussing the Lopez case United States v. Lopez - Wikipedia, the free encyclopedia

This is ably discussed by Jeffrey Toobin in his book "The Nine: Inside the Secret World of the Supreme Court" In that Supreme Court decision from 1905, the Court invalidated a state law mandating the maximum hours a baker could work as violating the baker's freedom of contract. 

The gist of the decision would invalidate virtually all government regulations (health, safety, minimum wage, and any other piece of progressive legislation passed by either the state or federal government for the past 100 years). This is what is called a legal conservative. I would beg to differ. 

At best, they are the intellectual versions of the reactionary forces so prevalent in our society. Some of this struggle for control of the Supreme Court between the dark forces and the rest is summarized in the NPR review of Toobin's book: NPR

Nomination for Supreme Court Stirs Debate on Influence of Federalist Society - New York Times 

Justice Roberts was a member of the Federalist's societies steering committee.

For those unfamiliar with this debate, Toobin's book and the above referenced articles provide a start. There was a great deal at stake in the recent election that went far, far beyond the abortion issue. 

The Supreme Court was rapidly turning under the GOP into a Lochner court and thereby potentially undermining any piece of progressive legislation found to interfere with whatever their main benefactors want to do with labor, the environment, health and safety or anything else that most people take for granted now. Remember Tom Delay. 

He joined the GOP because he objected to the regulations on the use of chemicals in the exterminating business. That is exactly where they are coming from." GOP and the Lochner Era

I noticed in a NYT article today that one of the manifestos of the Tea Party was to invalidate the Supreme Court's ruling in Wickard v. Filburn. This ruling did allow the expansion of federal jurisdiction under the Commerce Clause that allowed for the passage of the Civil Rights legislation in the 1960s (see Heart of Atlanta Motel v. United States - Wikipedia), the environmental protection and worker safety laws, or other federal legislation that the TB's generally find intrusive and unwarranted. What is at stake? 

Virtually every law that most Americans would view as efforts to protect an promote the overall health and welfare of the vast majority of American citizens. The ultimate goal of the TBs is to return America to where it was in the 19th Century, and this is viewed as a positive development by the delusional reactionaries.

The TBs are incapable of learning that the causes of the Near Depression were a fulfillment of their dreams in the financial arena. Revisions to top Twelve Causes of the Not So Great Depression Wild West Capitalism & Brooksley Born 2004 SEC Rule Change Accurate Information is Not a Side to an Issue/ W & the Housing Crisis/Lying Works In Politics /Is the Failure to Learn from History Consistent with Conservatism? Zuckerman editorial 

Instead they rail against the the 700 billion dollar bailout of the financial system in 2008 that was the price to pay to save America from collapse due to the widespread implementation of their core beliefs.

No comments:

Post a Comment