Sold 50 COP at 56.63/Bought 50 BNCN at 9.99/ Sold 50 of the 150 of VNOD at 25.54/SOLD 50 PLP at 22.06/C/ OSKB/Bought 50 DKK AT 24.5

The Infamous Stringduster's released their third album today, "Things That Fly". The album is listed under "new and noteworthy" in the country section at Apple's Itunes. It can be downloaded for $9.99. Andy wrote some of the songs, including "Those Who've Gone On" and that is him singing on that one and on "Love One Another", and playing the dobro.

The table is updated to reflect recent transactions. Again, the yield shown in this table is not at my cost but at the last price shown and is calculated by YF. For those positions in this basket where I have bought shares on more than one occasion, the price shown in the table is an average weighted cost of all of the transactions and the date reflects only the last purchase date. I also do not include the small commissions in the cost.

This table reflects a basket strategy. With a basket strategy, I am spreading my risk in a sector far, wide and of course thin. There are currently 35 names in the regional bank basket, and my exposure to the entire basket is not deemed material. And I would expect over time several of the banks in that basket to disappoint. So far, I am astounded about how well some of them have done, especially those where I had a low opinion of the institution when I made the purchase and still do in some cases. Even the Headknocker is mildly pleased with the results so far.

1. Southwest Bancorp (own-Regional Bank Stocks strategy): I am surprised that this one has done so well since my purchase at 6.84. After I purchased it, the bank entered into an agreement with the U.S. Controller of Currency relating to the bank's lending. See Item #10 OKSB In that post, I mentioned that I had low confidence in this bank. Well, I am not a bank analyst.

This bank has just about doubled in price since my purchase in January 2010.

Southwest Bancorp reported its 1st quarter results yesterday, and the market liked it. Shares rose yesterday 9.58% to $13.16. OKSB The bank reported an E.P.S. of 23 cents per diluted share. The consensus estimate was for 7 cents. Total capital to risk-weighted assets increased to 15.28 from 14.55 at the end of the 4th quarter of 2009, as did the Tier 1 capital to risk-weighted assets. Tangible common equity to tangible assets was 7.87% as of 3/31/2010, up from 7.61% at the end of the prior quarter.

2. SOLD 50 PLP AT 22.06 in Roth (See Disclaimer): Since I have run out of money in the retirement accounts sufficient to buy even 100 shares of another principal protected note whose distributions are linked to the performance of an index, I elected to sell my 50 shares of PLP. I was hoping to sell 100 PJS for a good profit rather than waiting for First American to purchase it at its par value, but I got a bad fill on my limit order for the shares held in the Roth, as explained below.

While the process for selecting PLP as a source of funds is by its nature prone to error, my primary reason for selling it was this bond was selling at over a 20% premium to its par value, and I would not consider purchasing it at $22.06. I purchased this bond in late December at $20.4, and I received one quarterly interest payment. As noted in the post discussing the PLP purchase, I was not an enthusiastic buyer at $20.4. I own about 45 individual securities in the ROTH IRA, and it is at best an imperfect process in selecting one as a source of funds. And, it goes without saying that I might end up being better off with PLP than the principal protected note purchased in its place. Some of the principal protected notes will only be purchased in a retirement account due to their actual or potential tax issues.

3. Pared 50 of the 150 VNOD at $25.54 (See Disclaimer): The reason for selling part of my position in VNOD, held in the ROTH, is to raise funds for the possible purchase of more principal protected notes linked to stock indexes. I am hoping to buy two or three more principal protected notes in the retirement accounts, serving different objectives and purposes. Even without PJS being sold in its entirety, the VNOD and PLP transactions now give me the opportunity to at least bid on two 100 share round lots of principal protected notes somewhere close to the $10 price. Those shares of VNOD were purchased in the ROTH at 24.86 last February, and 1 quarterly interest payment has been received to date.

While VNOD is a senior investment grade note issued by Vornado Realty, I am concerned about any bond maturing so far in the future. An investor has to be extremely sensitive to interest rate risks inherent in all long bonds. This particular bond matures in 2039. I still own 100 shares but it would be fair to say that my finger is on the trigger and is itchy. This is also the kind of buy that is the direct result of Uncle Ben's Jihad against savers, which has been going on for so long now that it is hard for the OG to even remember the good old days when he could get 4% in a savings account or a short term CD.

4. CITIGROUP(C)(own principal protected notes): My interest in Citigroup is due to the recent purchases of several Citigroup Funding's principal protected notes. I am not looking at Citigroup as an equity investor. Instead, I am focusing on whether or not it is likely to survive until 2014 when those notes mature.

Citigroup reported net income of 4.4 billion which translates into 15 cent per share. The massive number of common shares issued as a consequence of Citigroup's well publicized troubles is a matter of concern to the common shareholders. From my perspective, the conversion of all of that dividend paying preferred stock into non-dividend paying common stock is a plus for the bond owners. The earnings report is satisfactory to me as an owner of short term notes. As of 3/31/2010, the Tier 1 Capital Ratio was 11.2%. Tangible book value was $4.09. Loan losses fell to 2.4 billion, down 22% from the 4th quarter of 2009.

5. WSJ Reporter Greg Zuckerman Tidbits on SEC Suit Against GS: Zuckerman's interview at YF's Tech Ticker highlights a point about the timing of the SEC Complaint against GS. Zuckerman claims that there was no contact between GS and the SEC for seven months before SEC sprung the civil fraud charge on Goldman in Court. And, contrary to custom, the SEC did not notify GS prior to the suit being filed.

I would not agree with Zuckerman that the complexity of the SEC's case would be a legitimate justification for a long delay from the start of the investigation to the filing of the Complaint. This makes the filing suspicious in my view under the circumstances of the pending financial reform legislation, as shown by a number of Democrats pointing to it yesterday to beat recalcitrant republicans over the head. But no GOP politician will agree to much of anything advanced by the beanpole.

At its core, the SEC is presenting a relatively simple case. It boils down to whether or not GS had a legal duty as a middleman to inform all potential participants in the Abacus deal of Paulson's involvement in selecting the securities: (1) given its lengthy disclaimers in the offering materials on that subject, (2) the general obligation of brokers about not disclosing a clients' position to third parties, (3) even though Paulson did not have the legal authority to select any of the securities contained the CDO and ACA had every interest in selecting securities that would perform satisfactorily given its guarantee; and (4) the structure of the Abacus deal itself would inform an investor that some participants would in effect be betting on the decline in the securities which would cause any prudent investor to pause and ask why.

The issue of materiality, involving the alleged failure to disclose Paulson's role in the selection process, is a subject of an article in the NYT today.

Another interesting tidbit is that the two republican commissioners voted against bringing suit against Goldman. WSJ.com I personally do not view it as a strong case and would be interested to know whether there were any discussions about a consent decree before suit was filed.

An article in the WSJ points out the obvious, the losses suffered by the investors in Abacus would not have happened without Moody's and S & P rating the garbage AAA.

And, it is not surprising that the regulatory authority in the U.K. has launched an investigation of G.S. after Brown's comments. MarketWatch It doesn't exactly help that RBS inherited the loss of ABN AMRO on the ABACUS deal and the U.K. government had to bail out RBS. Some would say that the U.K. government has a conflict of interest and needs to recuse itself from the investigation.

6. ANOTHER PROBLEMATIC TRADE FILLED BY KNIGHT TRADING VIA FIDELITY- KNIGHT SOLD 26 SHARES OF A 100 SHARE ROUND LOT OF PJS at MY LIMIT OF $24.69 (See Disclaimer): Some would say that I deserved it since I did not place an all or none condition on the trade. And, I should not be surprised that it was Knight who partially filled the limit order on the 100 share round lot with just 26 shares. At first the first fill was for 4 shares and then another 20 came along. I wonder who bought that 4 share lot. I know who accounted for all of the shares available for sell at 24.69 yesterday. The responsible party was sitting here at HQ's trading desk.

Knight holds the record in my trading experience, now with over 40+ years under my belt, with a one share partial fill of an order of mine. If the exchanges accepted orders for fractional shares, I would inevitably receive a fill by that firm of less than a share, so that my commission could conceivably exceed the proceeds of the sale in some circumstances. I take some responsibility for this of course since I had a round lot and could have conditioned the order. Still, it does not happen to me anywhere else. My excuse, other than the usual one of the OG being HT yesterday, is that I wanted to go ahead and realize the profit on these shares to enable me to reinvest the proceeds when and if an opportunity arises. {I have frequently seen that conditional orders are harder to fill and are not displayed even when the order is the best offer.} I was willing to accept less now than the $25 being offered by First American to redeem PJS. PJS Tender by First American Now, I may just sell the remaining 74 shares with a market order just to put another problematic trade in the rear view mirror. The 24 shares sold had a cost basis of $9.41. So there are 26 shares left with that basis and the other 50 was bought in August 2009 at $17.8. So, with the interest payments, I can not complain too much about it. Bought 50 PZB at $16.05/Bought 50 PJS at $17.8 in Roth/

I did complain about a fill of 50 PJS shares by Knight in the taxable account at $17.95, when the ask price was $17.79. See Item # 10 PJS Of course, I got nowhere, why bother, it is not worth the aggravation, but it turned out okay nonetheless. Along with the shares bought at $7.2, I will have a good profit in the shares plus the really good interest payments at my cost: Bought PJS at $7.2 I have 150 shares in the taxable account and will just tender them to First American to avoid another problem involving PJS on a Knight Trading fill. Still, notwithstanding my good fortune on PJS, I am peeved again. RB just said that being peeved is a natural condition for the "Fabulous LB". Ever since the LB saw how Fabrice Tourre referred to himself as the "Fabulous FAB", the RB added, the insufferable LB has started to refer to itself in the same manner.

7. Bought 50 BNC Bancorp (BNCN) and Sold 50 Conocco Phillips (COP) at 56.63 (See Disclaimer)(Satellite Account): In the account which I refer to as the satellite account, its primary purpose is capital preservation via a FDIC insured savings account and certificates of deposit bought with funds on deposit in that savings account. Now, given the Jihad by the Federal Reserve against savers, I am refusing to rollover the CDs. Instead, I have been trading stocks with some of those funds. Given that preservation of capital is paramount in the Satellite account, I have a hair trigger on the stock trades and have focused mostly on stocks with good dividends just in case I get caught in an unforeseen downdraft. I am keeping for now the 50 shares of COP held in the main taxable account purchased recently at 51.35. The 50 COP shares sold yesterday were bought at $51.22 and a 5 1/2 point quick gain was sufficient to harvest in this satellite account given its overriding purpose. How much money would it take earning 1% to generate that same profit in a year?

I would add that the saving account rate is not that bad at 1.1%, given the current circumstances, and is understandable given the Jihad against savers. Still, given the duration of this Jihad, which is nothing less than a wealth transfer from responsible Americans to those who made billions threatening the very economic fashion of our nation, it is nonetheless disgusting in its purpose and longevity.

I wanted to buy another bank instead of BNCN, but the price jumped on me over 5% today. So, I went back to my fall back as the replacement for PBIB recently sold. Initially, I tried to buy BNCN in my Fidelity account and nothing happened for a minute or so. I cancelled the Fidelity order that apparently disappeared into the ether. So, I entered the order in the satellite account and there was no problem in receiving a quick and satisfactory fill.

BNCN recently came to my attention as a result of an FDIC assisted acquisition of Beach First National Bank, headquartered in Myrtle Beach, S.C. For those who enjoy reading a bank's agreement with the FDIC on such matters, this is the link to the agreement: Purchase & Assumption Agreement This transaction involved the purchase from the FDIC of 620 million in assets, which includes 490 million in loans, and a loss sharing agreement. The OG prefers looking at the slide presentation: Investor Slide Presentation Beach First had 7 branches, six located in the Myrtle Beach area and one on Hilton Head. This is a geographic expansion for BNCN which had been operating in eastern North Carolina, north of Charlotte and extending in a northeasterly direction to Winston-Salem, High Point, Lexington and Greensboro. The branches are listed at page 16 of its recently filed annual report: Form 10-K

I would add that I really can not judge the wisdom of this expansion without knowing in great detail about the bad assets. And I know almost nothing about the loans that sunk Beach First.

BNCN did remain profitable during the Near Depression period. The bank earned 18 cents for the 4th quarter of 2009 and 62 cents per share for the year, up from 52 cents per diluted share in 2008. However, it is apparent that the bank was adversely impacted by the recession since the E.P.S. number for 2007 was $1.05 per diluted share. This also gives me a baseline on normalized earnings before the acquisition of Beach First.

The bank is paying a quarterly dividend at 5 cents per share. Again, this bank was not my first choice for the #35 spot in the regional bank basket.

The tangible book value was 9.43 as of 12/31/2009. So I just paid a slight premium to tangible book. Book value is $13.2 per share. The total risk-based capital ratio was 12.79%. Net interest margin was 3.39%.

8. Bought 100 LMZ in the Roth at $10.06 (see Disclaimer): I accounted for all of the volume on this one yesterday. I entered a limit order at the ask price given the narrow spread.

This is not a principal protected note, except in the limited way discussed below, but it has some similar characteristics. It is a note issued by Bank of America that matures on 3/24/2012. So, I am subject to the credit risk of BAC. No payments are made prior to maturity. This is the link to the prospectus: Term Sheet No. 256

This one is going to be difficult to explain. Ultimately, the performance of LMZ depends on the S & P 500.

The maximum payment at maturity is $12.16 so about a maximum gain of close to 20% based on my cost in less than 2 years.

The Starting Value for the S & P 500 is 1105.24. The participation rate is 200%. The benefit of this security is that I can hit the maximum of $12.16 without a 20% gain in the index due to the 200% leverage factor. The table on page TS-4 of the prospectus shows that I hit a $12 value with a 10% increase in the S & P 500 from the starting value. A 10% increase would be a closing value of 1215.76. The S & P closed yesterday at 1197.52 ^GSPC Granted this one has almost another two years to run and anything can happen. But, if there was a close a few points above where we are now, I would have close to a 10% annualized yield on this one, holding until maturity.

The downside is problematic, however. There is no guarantee after a 10% decline in the S & P 500 from its starting value of 1105.24 as of the closing date in 2012. I am about to introduce a new term into the discussion, called a Threshold Value. This number is 90% of the Starting Value which will be 994.72. If the closing value of the S & P 500 in 2012 is between that Threshold Value and the Starting Value, I will receive $10. That is the good news on the downside, a 10% buffer applied to the Starting Value and the index is well above the starting value now. The problem is that I am at risk below that 994.72 number on a 1 to 1 basis. The example given in the prospectus of the downside risk is an ending value in the S & P 500 at 773.67. In that hypothetical, I would not receive my $10 at maturity but $8 calculated in the manner shown in the prospectus at page TS-3.

I will go this type of security in limited amounts for the following reasons. The 200% participation rate on the upside gives me some oomph even if the S & P meanders into the closing date at around the same level as now. So, for me, I just view this as a play for a scenario where the S & P starts to meander within a narrow range, similar to what happened after the cyclical bull move from October 1974 to mid-1976. Second, I have a decent buffer establish already before I even have to worry about a decline below the starting value, and then I would have another 10% buffer.

An additional unfavorable aspect of this security is the cap of $12.16 which limits my upside potential. One of my readers will be critical of this purchase. I went with it knowing its upside limitation, and the potential downside risk, given its usefulness in the going nowhere for 2 years scenario, which is possible, and the percentage increase that it currently has above its starting value and its short maturity.

9. Added 50 of the Trust Certificate DKK at $24.50 (See Disclaimer): I have bought and sold the Trust Certificates containing the same AON TP so many times, that I have now lost track. I am keeping the TC KTN which was bought in both the taxable and retirement accounts at around $14, easily my best buy for this grouping of four TCs containing the same underlying security.

This one has a $25 par value and a 8% coupon, just like KVW which I have also bought and sold and currently own 100 shares bought at 16.08 in September 2008. I suspect that I am playing with the houses money on these TCs containing the AON TP maturing in 2027. I believe that my last buy was 50 shares of DKK in the Roth IRA, bringing the total in that account to 100 shares which I still own: Bought 50 DKK at 24.78

The underlying bond is investment grade, a Trust Preferred, currently trading over its par value: FINRA - Investor Information - Market Data - Bonds - Bond Detail I would classify the underlying security as a junior deferrable interest bond in TP legal form. The trust preferred stock is issued by a Trust who uses the proceeds from its initial sale to buy a junior bond issued by Aon, and the TP security represents a beneficial interest in that bond. Regular Preferred and Trust Preferred Trust Preferred Securities: Links in One Post DKK adds another legal layer. DKK is a Trust Certificate that contains a Trust Preferred as its underlying security: Trust Preferred and Trust Certificate Distinguished Trust Certificate Links in One Post

Interest is paid semi-annually in June and December.

I trade four Trust Certificates containing this same bond and currently own KTN and DKK. The yield information is as of the closing prices on 4/19 calculated by Marketwatch:

KTN Stock Quote Prospectus www.sec.gov 8.05%

DKK Stock Quote Prospectus www.sec.gov 8.17%

KVW Stock Quote Prospectus 424B5 8.01%

KVF Stock Quote - Prospectus 424B5 7.75%

The advantage for DKK yesterday would increase slightly on a YTM basis given its percentage discount from the $25 par value. KVF closed at its $25 par value, while KTN has been selling at a premium for months now. KVW closed at $24.97 on 4/19 and has an identical coupon to DKK at 8%.

See also: Functional Equivalence in Bond Trading

/ KTN add

TRUST CERTIFICATE AON BOND KTN

Managing Risk in an IRA: KTN and KVW

TRUST CERTIFICATE AON BOND KTN ORDER FILLED

CORRECTION ADDED 4/22/2010: LB forgot that HK also owns 100 KVW bought at 16 in late September 2008. HK said the LB is losing it.

10. Lesson For the Young Neophyte Masters of Disaster: Now, if someone is going to twist in the wind for the Goldman Abacus disaster, it is not going to be Lloyd. Even if the Fabulous FAB had been carrying out the wishes of the higher ups, explicitly or with a wink and nod, there is isn't any question about the identity of the fall guy, and that needs to be a good lesson for all of the young turks out there. This is a quote from Lloyd discussing the matter in a voice mail for GS employees:

"Still, it is important to put the SEC's action in context. The core of the SEC's case is the allegation that one employee misled two professional investors by failing to disclose the role of another market participant in a transaction. Importantly, we had assumed risk in the deal and we lost money, just like the other two long investors. I will repeat what you have heard me say many times in the past: Goldman Sachs has never condoned and would never condone inappropriate activity by any of our people. On the contrary, we would be the first to condemn it and take immediate and appropriate action"

So that is a valuable point to remember for a young master of disaster. MAN OVERBOARD! Hey, throw Fabulous a life jacket. Oh, it can be a cruel world.

I am curious about a couple of points. Was the trash that GS sold to the Europeans already owned by them prior to this deal being put together? And, did GS become an involuntary investor in the CDO after it was unable to unload all of the crap and was that the source of their 90 million or so loss? I do not know the answer to either question, but I would view the answers as important.