Monday, September 27, 2010

Sold: 50 FTE at 21.75, 50 CNBKA 22.92, 100 BSCH at 21.44, 100 AT & T at 28.69, 50 JZH at 24.45; Bought 40 ZBPRC at 25.28, 50 RA at 9.75/ORHPRA

I was busy most of last week. Almost all of the foregoing trades were executed last week pursuant to GTC orders. I have omitted any reference to the day of the transaction. I am still busy on another matter but should have time to resume my weekday daily posts.

1. Sold 50 of 100 FTE at 21.75 (see disclaimer): FTE just went ex dividend. I decided to place a GTC order to sell my higher cost shares, which were bought first at 21.09, and to keep the shares bought thereafter at $20.47. I will then consider buying back the 50 shares sold at less than $19.5. This is a fairly typical trading pattern for an Unstable Vix Pattern in a long term secular bear market. Vix Asset Allocation Model Explained Simply The market has been in an Unstable Vix Pattern since August 2007. VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern.

2. Sold 50 CNBKA at $22.92 (see disclaimer): I have come to the realization that I have too many stocks in my Regional Bank Stocks basket strategy. By too many, I am referring to 54 stocks. So, CNBKA was sold just to start cutting down the size of this basket to more manageable levels. I may use some of the proceeds from sales to add to other existing positions. CNBKA was bought at 20.53.

3. Sold 100 BSCH at $21.44 (see disclaimer): The BSCH shares were bought at 20.13 in June. The yield on this bond ETF is viewed as too low for the taxable account, particularly given its 2017 term date. I am keeping the two other Claymore term bond ETFs in the retirement accounts: Item # 4 Bought 100 BSCE at $20.16; Item # 7 Claymore Introduces Term Corporate Bond ETFs Bought BSCF at$20.18 I am reinvesting the dividends for BSCE and BSCF.

4. Bought 50 RA at $9.75 (see disclaimer): RailAmerica is a new name for me. Given the size of its debt level, and the loss suffered in the last quarter, I decided to limit my exposure to just 50 shares. RA owns and operates short line and regional railroads in the U.S. (40 in all), with 7400 miles of track. For the Q/E 6/30/10, the company lost 8 cents per share from continuing operations, compared to a 12 cent per share on a comparable basis in the second quarter of 2009. I am concerned about the rising costs of the firm's operations and RA's debt level. The key statistics page at YF shows the price to book at .8 and price to sales at 1.2. For this small investment to work out, the economy will have to continue improving, and the firm will have to do a better job limiting increases in expenses. I have low expectations for this stock, and would most likely be a seller in the $12 to $13 range unless substantial improvements are made in cost controls.

The company was brought public by Fortress Investment Group at $15 per share in October 2009.

5. Sold 100 of 201 AT & T at $28.69 (see disclaimer): I bought those 100 shares in two fifty share lots over a year ago. Buy of 50 AT & T at $24.43 (Feb 2009) & Bought More AT & T at $24.52 (May 2009) Compared to my other purchases made in the first six months of 2009, the AT & T stock price had not increased in value until the last two months, and was selling at below my purchase price as late as early July 2010: T Historical Prices | AT&T The dividend is generous, over a 6% yield at my cost, and I have been reinvesting the dividend to purchase additional shares.

I would agree with Kaminsky's view that VZ and AT & T could both be bruised in 2011 as both incur more costs to retain customers which could become more problematic for AT & T in the event VZ secures rights to the IPhone. I also own the common shares of Verizon. BOUGHT 100 VZ at $26.74 And, I still own senior bonds from both Verizon and AT & T in trust certificate form, though I anticipate a redemption of those trust certificates by their respective call warrant owners. Trust Certificates Links in One Post Call Warrant Exercised on JZE and JZJ Call Warrants and Trust Certificates: XFL CALLED More on the Call Warrant in TCs Call Warrants and Trust Certificates

6. Notice of Redemption ORHPRA and ORHPRB (own ORHPRA): OdysseyRe has called for redemption its two preferred stock issues at their $25 par values. I previously sold my shares of the floating rate preferred at 24 and currently own 100 shares of ORHPRA. Bought 50 ORHPRA at $25 (12/09) Added 50 ORHPRA at $25 (5/10) The redemption date is 10/20/2010. ORHPRA is scheduled to go ex dividend on 9/28 for its quarterly distribution.

Last week, I also received the proceeds of the second partial redemption of the DFY, a senior bond issue from Delphi Insurance, though I will need to study what Fidelity did in connection with that partial redemption since I currently have 8 separate entries for it.

7. Bought 40 of ZBPRC at $25.28 (see disclaimer): This purchase was made when I noticed the redemption notice for ORHPRA. This purchase of 40 shares brings me to just 100 of ZBPRC. ZBPRC is a non-cumulative, perpetual equity preferred stock issued by Zions Bancorporation. Since I do not hold Zions in high regard, I am keeping my overall exposure to its securities at relatively small levels. ZBPRC has a 9.5% coupon on a $25 par value. Prospectus Supplement My prior two purchases were below par value, with just 30 shares purchased at $18.4 and at 23.75. With prior transaction on ZBPRB and ZBPRC, plus the dividends paid to me on all of the Zions securities, I am moving closer to paying with the house's money on Zions' securities. Bought 50 ZBPRB in Roth at $19.9 Sold 50 ZBPRB at 24.38 Bought 50 ZBPRA at 12.5 in IRA SOLD: ZBPRA in IRA at $16.85

Zions still has government equity preferred stock on its balance sheet. As discussed in a prior post, ZBPRC and ZBPRA are at the same level of priority as the government's preferred stock. To eliminate the dividend on ZBPRC, Zions would have to both eliminate its common stock dividend and defer payments on the government's preferred stock. Item # 7

I also still own 100 shares of ZBPRA bought at $7.8. Zions' preferred stock is rated Caa3 by Moody's and B by S & P according to QuantumOnline, and deservedly rated as junk in my opinion.

I doubt that I will buy anymore Zions' securities without first selling one currently owned. My maximum exposure to all Zions' securities would be around $3000, which is a low limit for me.

8. Sold 50 of the Trust Certificate JZH at $24.45 In Regular IRA (see Disclaimer): JZH is a trust certificate that contains a senior Prudential bond maturing in 2033 as its underlying security. The coupon is 6% on a $25 par value. Those shares were purchased on 9/16/2008 at a total cost of $14.81 per share. Subsequent to that purchase, I was able to buy this security at less than $10 in a taxable account, and I still own 100 shares in that account.

If the Federal Reserve's Jihad against savers continues for longer than I expect, I may have been early in selling JZH. Since it is my belief that problematic inflation will likely be a significant risk over the intermediate and long term, I have been paring some of my long corporate bonds which will go down in value in a rising rate environment compared to shorter maturity issues. Rising Rates and Your Investments The SIFMA web site, Investing In Bonds, has a considerable amount of informational material about bonds and bond investing.

While I am not concerned at the present time about Prudential making the interest payments and paying par value at maturity, I am worried about potentially losing a significant part of the appreciation in JZH's share price due to a spike in interest rates. I would much prefer taking my profit, and then wait for an opportunity to buy JZH back after a significant correction in bond prices which causes this security to fall below $20 per share. JZH was trading at below $20 in September 2009. JZH Historical Prices In March 2009, JZH closed at $9.11 per share: JZH I made a purchase at $9.75 in November 2008 and I still own those shares: TRUST CERTIFICATE JZH: PRUDENTIAL SENIOR BOND While it would be shocking to me to see those prices again, I would anticipate that JZH will be selling at below $20 per share for extended periods between 2012 to 2028.

At a total cost of $9.75, the current yield would be 15.38% per year. Using the Morningstar Bond Calculator, the yield to maturity would be 16.58% at that cost.

I had a few more trades last week which I will discuss in the next post.

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