Thursday, September 30, 2010

Sold 50 IDE at 18.7/Sold 100 NABZY at 25.2/Added to JOE at 24.57/WAG/Case Shiller for July-Consumer Confidence-Richmond Fed Manufacturing Survey

This is a link to the results from recent auctions of treasury securities: Recent Note, Bond, and TIPS Auction Results The five year treasury note was auctioned this week with a 1.25% yield. The 7 year was auctioned yesterday at 1.875% (1.89% with OID). The last auction of the 2 year treasury was at .37% (.441% with OID). It is obvious that participants in these auctions do not share my opinion on the more probable than not inflation rate over the intermediate and long term.

The Republican candidate for Governor of New York, a Tea Party favorite, has a long history of sending racist and sexist emails, which provide insight into his frame of mind and true nature. In one email, which shows an airplane landing near some black men, the caption reads "Holy Sh*t. run ni**ers, run!". Another depicts the President and his wife as a pimp and a prostitute, while another has a video clip of African tribesmen dancing with the caption "Obama Inauguration Rehearsal". He does have some new ideas that are even more ingenious than the prisoner massages advanced by Carl's kindred spirit from Nevada, Sharron Angle. Carl wants to place welfare recipients in state prisons, sort of like a dormitory for poor people. CBS News Some of Carl's emails can be read and viewed at WNYmedia.net.

1. Sold 50 of 100 IDE at $18.7 Last Week (see Disclaimer): I bought IDE in two fifty share lots. Using FIFO accounting, I sold the higher cost lot purchased first at 17.4 and kept the shares bought at $16.85

2010 IDE 50 Shares +$49.08

Again, this is a typical trading pattern for a market characterized as being in an Unstable Vix Pattern within the context of a long term secular bear market. At some point, this kind of trading will be replaced with a buy and hold strategy consistent with either a Stable Vix Pattern within the context of a long term secular bull market in stocks (time frame about 15 years) or a Stable Vix Pattern within a long term bear market (time frame 1 to 3 years generally).

2. Walgreens (Owned): Walgreens (WAG) reported earnings per share of 54 cents, excluding 5 cents in restructuring and acquisition costs, for its 4th quarter of F/Y 2010. The consensus estimate was for an E.P.S. of 44 cents. The company completed its 2 billion dollar stock repurchase program announced in 10/09. The cash flow for the quarter totaled $925 million. Revenue rose 7% and same store sales increased by 1.5%. I re-entered a position in WAG last June by buying a starter position of 50 shares at 30.15. WAG rose 11.4% on Tuesday in response to this report. I do not have a price range yet that would trigger a possible sell. I would not be inclined to buy more at the current price and would most likely be a seller in the $35 to $37 range, possibly a tad lower.

3. Case Shiller: Home prices increased by .6% in July compared to June in the 20 city Case Shiller index (.8% for the 10 city index). Year over year, prices increased 3.2% in the 20 city index and 4.1% in the 10 city index. The largest year-over-over year increase was in San Francisco at +11.2% followed by LA at +7.5%. The largest decrease was Las Vegas at -4.9% followed by Charlotte at -3.5% and Tampa at -3.2%. This report can be accessed at www.standardandpoors.com/ sp-case-shiller-home-price-indices.

4. Consumer Confidence and Richmond Fed Manufacturing Survey: Both of these reports were disappointing. The Conference Board reported a decline in consumer confidence to 48.5 in September, compared to the consensus estimate of 51.5. The Richmond Fed Manufacturing Index fell into negative territory for September with a -2 reading. In this Fed surveys, zero is the demarcation line between growth and contraction. Fifth District Survey of Manufacturing Activity - Federal Reserve Bank of Richmond

5. Added to JOE at $24.57 on Tuesday (see disclaimer): My last purchase of shares in the St. Joe Company was at $15.59 during the Dark Period. This stock requires a lot of patience since it is almost entirely an asset play on Florida real estate. My last discussion of JOE was in connection with Cramer's "sell, sell, sell" recommendation made in late June 2010. St Joe This is what I said then about the sell recommendation which I viewed as silly at the time:

"Cramer put St Joe on his sell block last week with a "sell, sell, sell" recommendation even though the stock has lost almost 38% of its value from the recent high of $37.13 on 4/29. Dan Fitzpatrick, the technician at TheStreet agrees with Cramer. If I was inclined to take their recommendation on St Joe, I would go ahead and take my long term capital gain on the shares bought at $15.69. Instead, I am considering adding to my position with the caveat that any purchase now will have to be held for years. I will track just how prescient the sell recommendations from Cramer and Fitzpatrick turn out to be. The sell recommendation was made on Thursday, June 24 with the share price at $22.47" St Joe

St Joe owns around 405,000 acres of land in Florida within 15 miles of the Gulf Coast and 75,000 of those acres are located near Panama City. A new international airport recently opened there built on land donated by ST. Joe. The price of St Joe stock started to decline soon after it become apparent that the Deepwater Horizon fiasco would result in a large oil spill which could potentially impact land values along Florida's Panhandle. While there may be some short term impact, I do not believe that it would be reasonable to predict a significant long term impact, and ST Joe is a long term story. The recession and the implosion in home values may end up having far more important significant impact on Florida Panhandle real estate than the oil spill. However, fear of another spill in the Gulf, or from new drilling off the coast of Cuba, may restrain price increases in the upcoming years.

I do not anticipate any near term favorable earnings reports from this company. The current consensus forecast is for a loss of 28 cents in 2010 and a loss of 7 cents in 2011. The five year high was hit in December 2005 at over $70 per share. Before the rig explosion, the stock hit a yearly high at over $36: St. Joe Company (The) Common St Stock Chart

The shares closed yesterday at $24.15.

6. Sold 100 NABZY at $25.2 (see Disclaimer): I bought shares in National Australia Bank Ltd. (Victoria, Australia) in two fifty share lots. Bought 50 NABZY at 24.7 ADDED 50 NABZY AT 19.51 I received one dividend payment. A large chunk of the gain realized on the shares bought at 19.51 was due to the rise in the Australian dollar against the USD. I noted in the post discussing the buy at 19.51 that FXA , the currency ETF for the Australian dollar, was trading at $83 then. It closed yesterday at $97.14. Chart

6 comments:

  1. I've been in and out of WIW since 12.25 area, and last sold at 12.65, I don't understand why people are chasing TIPS up here, that yield is only about 3.5% now. Note that yahoo dividend yield on quote page is wrong. I emailed them and they are disfunctional, don't know how yahoo stays in biz. They are posting the FORWARD dividend/yield, as if they can predict the future. They take their orders from Morningstar, with whom they have a alliance. My guess is Morningstar wants to sell mutual funds, especially since retail investors have pulled $70 Bil out of stock funds YTD, 21 weeks of redemptions in a row now(see etfdigest.com or zerohedge).
    Yahoo says to me "you need to go to key statistics and look at "trailing dividends" to get the CURRENT dividend" MANY closed-end funds yields are wrong.(WIW, RIT, MGF I own are all bogus TOO LOW). Not to say REITs like RIT won't lower their dist., but I went thru with a fine-toothed comb the top holdings, and they all lowered their dividends in 2008-2009, and many refinanced/issued shares to maintain the payouts.
    Any opinion on MWT-A, I just picked some up, it's $1 off high, with a 4% floor, call date passed, will add at $23 or below. (Similar to my PUK-A) TIA.
    Sold 1/3 RIT 9.45 today, the marketmaker sat on it all day yesterday at 9.24, clear manipulation after taking it down to 9.15(BUY w/ both hands)taking out stops, then he closes at end of day yesterday at 9.34, spikes today.(9.50 is big resistance) Many CEFs are controlled this way.
    Thanks for great blog.

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  2. re: MET-A... meant to add if called it's $25_accrued int.:~)right?

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  3. Gordon: I will consider buying 10 year TIP at auction again when the coupon is greater than 2%. The current coupon on the TIP is unattractive to me, just like the yields on all non-inflation protected treasury notes and bonds. Many brokers allow their customers to place non-competitive bids in $1000 increments free of charge at treasury auctions.

    I would not anticipate Met Life calling METPRA unless there was an inversion in the yield curve at a time of higher 3 month LIBOR rates. I am not sure why Met Life would call a non-cumulative preferred stock where the dividend rate is just 4% at the $25 par value and likely to remain at that level for many months to come. If it did call the stock, it would have to pay par value plus any declared and unpaid dividends, without accumulation of any undeclared dividends. That is not the same as "accrued" interest on a bond. I urge all of my readers to look for these kind of details in the prospectus. My last purchase of METPRA, which was an average up, was at 12.5.

    I currently do not own WIW. I own IMF which was selling at the time of my purchase at a greater discount.

    I will generally compute my own yield information before purchasing a security. For WIW, the current yield, assuming a continuation of a 4 cent monthly dividend, would be 3.79% at a total cost of $12.66. Marketwatch has it correct, as does the sponsor's web site: http://www.guggenheimfunds.com/cef/fund/wiw The distribution has held steady at 4 cents since it was reduced from 5 cents over a year ago. I do not know how YF comes up with its figure but would not assign any ulterior or bad motives to it.

    I do not own the CEFs RIT and MGF. I do own temporarily the CEF CMK which also comes from the MFS group. That CEF closed yesterday at a 8.85% discount to its net asset value. MGF closed yesterday at a 3.85% premium to its NAV. I will generally avoid CEFs selling at a premium to their asset values.

    As to real estate CEFs, I own only IGR and have been reinvesting the dividend. LMP has an expense ratio of 1.63%, net of interest expenses, and is a leveraged fund.

    I am not familiar with the symbol MWT-A.

    The prospectus links for exchange traded bonds and preferred stocks can be found at the Quantumonline.com web site and throughout my blog. For floating rate equity preferred stocks with guarantees, I have those links at my Gateway Post discussing the advantages and disadvantages of equity preferred floaters.

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  4. Thanks again- I meant MET-A (MET-PA) as you guessed. I am a contributing member@ quantumonline as they have made me $$$$.
    Will research all your picks. I like to park money earning 4%+, and not reaching for too much yield now. I bought corporates in 2008 but not as early as you are more keen. I look each day on Fidelity for junk bonds (Ameritrade not so good a list) Recently found SFD Smithfield 7.75% 2013@$99.(Viva carnitas!) Got Ford 2016 & 2018 7.5-8% right before Toyota hit the fan @$97, so timing is everything.

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  5. Gordon: After starting this blog in October 2008, my second post discussed METPRA (10/5/2008). It was trading at $9.8 at that time. My next post was on a similar security from Aegon (AEB) that is in effect a bond that pays qualified dividends (a hybrid security). Both securities were absurdly priced at that time, which is the reason I discussed them first. Still, as fear became worse, both would later fall further with a purchase of METPRA made later at $7 and I quit buying AEB at $4 and change. I am not a buyer of either security at current prices. I believe my last buys of AEB were at 4.8 and 5.5.

    METPRA has a good guarantee and float provision for these securities, slight better than AEB on the 3 month Libor float (1% vs. 7/8%) with both at a 4% guarantee. But AEB has cumulative distributions. see Gateway Post on Aegon Hybrids for more details.

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  6. I like it also, took some profits today while euphoria reins- in WCO, RIT, FEN, and will watch AEB. Buyers come in under $21...@20.95. We won't ever revisit those excellent buy days when you got in. Demand for yield is going berserk. I take profits regularly when the Inpatients chase. I won't risk being overexposed because up to 80% of trading is now computer-driven, meaning down 5% in one day is overdue due to happen. Look at last charts @ etfdigest, the $NASI 1000 overbought area never lies. Fed, election, POMO$ 3 days a week is Q/E2 in progress, over 400K initial claims is a "beat"- all smoke & mirrors.

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