I am having my annual physical today. My health insurance with Blue Cross has a $5,000 deductible, a HSA plan, but the annual physical is one of the few health costs which will be paid without regard to that deductible. I have never spent one day in the hospital, nor have I even had a cold in over a decade.
So, I am virtually a pure profit customer of Blue Cross Blue Shield of Tennessee. Last year, Blue Cross did not pay a dime on my annual physical. I called them up and was told that my doctor had coded the claim as a regular office visit, which was applied toward my deductible, rather than a physical which would be paid by the insurance. And, there was no credit shown on the statement for the $20 co-payment that I paid. Okay, Blue Cross was not the problem, so a quick call to my doctor's office would straighten the mess out, I negligently surmised in my first billing dispute on a healthcare bill.
About two hours later, after being shuffled back and forth among various offices in Nashville and then to St. Louis, and back to Nashville, I am finally directed to a woman at Baptist Hospital who says she is responsible. Great, I say, always good to find the responsible person, but then she says that she can not change the bill until Blue Cross returns the paper work denying the claim. She tells me to call back in a week.
Well, as you probably have figured out, I call back in a week and she does not answer the phone so I leave a voice mail message identifying the issue again for her. So in a couple of weeks, I receive another statement from Blue Cross, still coded as an office visit, rather than a physical, but at least I have received credit for my $20 co-payment this time. I feel like I am making progress after about 3 hours of my time. Then, I realize that my time is actually worth more than the bill, around $170, so I write a letter, pointing out everything that had happened, enclose my check, and then said in the letter, if you want to do the wrong thing, just deposit this check. Well, that check was deposited that very day.
1. Jobs: The unemployment rate for March was 9.7%, same as in February. March payrolls increased 162,000. This was the largest gain since March 2007. There was the first increase in construction jobs since June 2007. Household survey, which picks up small business, had a 264,000 increase, the third straight month of increases in the household survey. March census jobs were less than expected at 48,000. Employment Situation Summary The non-seasonally adjusted U-6 number, the broader gauge of unemployment, was 17.5% in March, down from the 17.9 reading in February: Table A-15. Alternative measures of labor underutilization The average work week expanded to 34 hours. The futures for the S & P 500 rose on the report. The stock market is closed today.
2. Applied Materials (owned)(2010 Speculative Strategy): AMAT raised its revenue guidance for 2010 last Tuesday to more than a 60% increase from 50%. An article in TheStreet.com has a good summary of AMAT's 2010 revenue guidance and the reaction to it by brokerage firms. Barclays was unimpressed, while Piper Jaffray expect AMAT to hit $22. Barrons has a summary of a Caris & Company report, where the analyst raised the price target to $15 from $14 after AMAT's new guidance. Applied Materials detailed its new guidance in a press release.
There is some debate among staff here at HQ as to whether or not to continue the 2010 Speculative Strategy given the current macro forecasts being made by the department heads for Macroeconomic Forecasts and for Historical Trend Analysis, discussed in yesterday's post. RB wants to expand the 2010 Speculative Strategy to include twenty more stocks with odd lot purchases of 10,000 shares each. The LB is leaning toward selling most of the stocks currently in the 2010 speculative strategy and plow the proceeds into the dividend growth strategy. RB countered, pointing out that the ^VIX has had 25 consecutive days of movement below 20, and under LB's stinking Vix Asset Allocation Model, it was time to shoot for the moon howled the RB. LB replied that the RB had never even read the post about the VIX Model. If the dim wit lame brain had read it, it would have seen that 3 months is required before the formation of a stable vix pattern. And so on it went for hours during the early morning staff meeting, as the OG sipped on his coffee and tried to read the morning papers.
3. ISM Manufacturing: This was a good report. The ISM manufacturing index rose to 59.6% in March, higher than the consensus forecast of 57.5%, and the highest reading since July 2004. The new order index increased to 61.5 from 59.5%: ISM The RB just said "go all in", then it launched into more babble about how it said to go all in back in March 2009. Some readers may remember that was when the LB called the Doc to see if he would inject a quart of valium into the RB. Fed Is Less Gloomy
4. SCEDN (Owned): This may be my favorite equity preferred floating rate security now. I would not be surprised by a call at some point within the next two years at its $100 par value. RB just said that it recommended buying a 1000 at $84 and instead the super cautious nerd LB bought just 50 shares at $ 84 last October. SCEDN went ex dividend on 3/31 for its last fixed coupon and promptly recovered the full amount of that dividend in its share price, staying at $100 per share. Quote Southern California Edison Co. - SCEDN Other investors may be thinking along the same lines as me, since the price is hugging par value. SCEDN has the best float of all of the floaters in my opinion, and it is an issue of Southern California Edison. I much prefer owning a non-cumulative equity preferred stock issued by that utility than a similar issue from any financial institution, the source of all other exchange traded equity preferred stocks: Advantages and Disadvantages of Equity Preferred Floating Rate Securities. The SCEDN will afford decent protection in a rising rate environment, paying a 1.45% spread over the greater of 3 month Libor, the 30 year treasury or the 10 year treasury (using CMT for the treasuries, see Federal Reserve Data on CMTs: 30 year weekly data). Prospectus Supplement I would not personally buy it at $100 however. The 30 year CMT is the higher number now. The Fed weekly data has a 4.68% print on it for the week 3/26/2010. If that was the relevant number during the next computation point for SCEDN, hypothetically speaking, then the yield would be 4.68 + 1.45=6.13% x. $100 par value=$6.13 annually divided by 4 quarters =$1.5325. The prior fixed coupon rate was $1.3373. The last fixed coupon dividend is scheduled to paid on 4/30/2010.
5. Added 50 AMSWA at $5.81 (now part of 2010 Speculative Strategy)(see disclaimer): American Software (AMSWA) was previously bought in the LOTTERY TICKET category. /Bought 50 AMSWA at 6.02-LT There is no reason to repeat the discussion in that post. I would note that a sizable position was acquired in AMSWA by the hedge fund Renaissance Technologies, www.sec.gov. The position disclosed in this SEC filing may or may not be current.
The buy of 50 shares of AMSWA was purchased after compromise #12,243,954,145.17 was reached by the LB and the RB. After AMSWA was cleared for purchase as a result of the foregoing compromise, the voting commenced on the number of shares to be purchased with the number of votes assigned by Headknocker. RB voted its entire 7 vote allocation in favor of buying 10,000 shares, thinking that it had finally figured out how this Democracy at HQ worked, best not to split the votes. The LB, given 8 votes by the HK, voted to buy 50 shares.
The end result was that 50 shares of AMSWA could be bought with the entire 100 transferred to the 2010 Speculative Category, provided AMSWA does not cut its dividend which is currently yielding about 6.2% at a $5.81 price: American Software Inc, AMSW.A This is a link to the Reuters description of American Software and to its key developments page.
6. Simon Johnson: In this interview found a YF's Tech Ticker , Simon Johnson, a MIT professor, thinks that the next meltdown will be collapses in emerging markets including China.
7. MKN and MKZ (own): This unusual security (MKN) was ex interest yesterday with a $1.8 per share annual interest payment on its $10 par value. I like these kind of principal protected securities. The ones which I own are issued by Citigroup and pay the greater of a guarantee (3% for MKN and MKZ) or some rate tied to the annual percentage gain in an index. The key problem is that the percentage gain can not exceed the maximum permissible level, based on closing prices, on any day during the annual period, otherwise the interest rate reverts back to the guarantee. The notes are short term, both MKN and MKZ mature in 2014 at $10. The worst thing that can happen, assuming Citigroup survives to pay par value, is that the investor will receive a 3% annual interest payment each year until the note matures. I managed to pick up MKN at less than its par value late in January, to my surprise. Bought 100 MKN at 9.85 On 4/7, I will receive my first annual interest payment, a 18% interest rate based on the percentage gain of the commodity index from its starting value to the closing date for the first annual period (commodity index java chart: WSJ.com) The closing value of the index on 3/30/2010 will now be the starting value for the second year. Pricing Supplement No. 2009- I believe, subject to further check, that the closing value on March 30, 2010 of the index was 132.67. Note ON MKN The permissible increase is 33%. This means that the commodity index can never close a single day to and including March 30, 2011 over 176.45, during the second annual period. If there is one day of a close above 176.45, then the interest is 3% for the second annual period, no matter what happens after that maximum level violation.
So assume for purposes of illustration, that the commodity index does not have a close above 176.45 before 3/31/2011 and closes 3/30/2011 at 160. Then the interest rate for the second annual period would be 20.599%. If you had one close at 179, just one day above the maximum level, the interest rate would revert back to 3%.
I also own 200 shares of MKZ, a similar security, that has a 31% maximum level tied also to the same commodity index as MKN, though with different starting and closing dates. Pricing Supplement This one has a 3% guarantee and matures on 7/11/2014. This one is nearing the end of its first annual period which will be June 23, 2010 (payment date 6/30/2010). The starting value for the first annual period is 123.338. It has not violated its maximum which would be 161.56. Bought 100 MKZ at 9.91 in the Roth IRA/ So it has room to run over the next 3 months without breaking the maximum number. The index closed Thursday at 133.86, up 1.7 for the day. If the index closed on 6/23/2010 at that level, the percentage gain from MKZ's starting value would be 8.53%, but no telling what will happen over the next 3 months. It would be hard to see a maximum violation during the remaining 3 months, but you never know with these kind of securities. Theoretically it would be possible to receive as much as 31%. MKN hit 18% in its first year.
One of my readers sent me an email discussing the percentage gain of MKN on its ex dividend date. At one point yesterday, it had gained back almost the entire value of the $1.8 interest payment. It was ex interest yesterday so none of those buyers on Thursday will receive the interest payment on 4/7. I could not explain it, and it doesn't matter why to me since I am not a seller of this security. I want to see what happens next.
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