Some readers may be interested in Fidelity's response to my email protesting their latest prohibitions on the purchase of certain exchange traded bonds. Fidelity Brokerage Extends Denial of Trading Opportunities to Synthetic Floaters and Even an Exchange Traded Junior Bond DFP
|DFP 2010 TAXABLE|
|GJL GJP GJS GYB 2010 ROTH IRA|
|GJN GYB 2010 REGULAR IRA|
Bought 50 GFW at $24.82 Bought 50 GFW @25.04 Bought 50 GFW at 22.76 Bought 50 GFW at 22.63 Sold 50 GFW at 25.13
Prospectus: Final Prospectus Supplement My current yield for the shares purchased yesterday will be close to 7.5% coupon since par value is $25.
Exchange Traded Bonds:
I have not purchased the TC KTV for a long time. I still own shares bought at under $18. This TC contains as its underlying security a trust preferred security originally issued by First Union, later acquired by Wachovia. And Wachovia is not part of Wells Fargo. Trust Preferred Securities: Links in One Post
The TP originally from First Union has the same ratings now as TPs originally issued by Wells Fargo. The ratings can be found at Wells Fargo Bank.
A list of WFC's trust preferred and equity preferred stocks, along with information about each of them, can be found at Wells Fargo - Investor Relations - Preferred Stock Information.
The First Union TP that is the underlying security in KTV has a 8.04% coupon and was issued by First Union Institutional Cap I. It matures on 12/1/2026. Interest payments are made semi-annually with the record dates on 5/15/ and 11/15.
The KTV coupon is higher than the underlying bond at 8.2%, which gives me a current yield of 7.93%. This is significantly higher than the Wells Fargo TPs that are exchange traded securities. And KTV has a shorter maturity.
KTV also has some call protection based on the following schedule:
"Where the Underlying Capital Securities are redeemed due to an Optional Redemption, the Certificates will be redeemed according to the following redemption price: Redemption Price Date per Certificate December 1, 2006 to November 30, 2007 $26.52 December 1, 2007 to November 30, 2008 $26.42 December 1, 2008 to November 30, 2009 $26.31 December 1, 2009 to November 30, 2010 $26.21 December 1, 2010 to November 30, 2011 $26.11 December 1, 2011 to November 30, 2012 $26.01 December 1, 2012 to November 30, 2013 $25.90 December 1, 2013 to November 30, 2014 $25.80 December 1, 2014 to November 30, 2015 $25.70 December 1, 2015 to November 30, 2016 $25.60 December 1, 2016 and thereafter $25.49"
Page S-14, www.sec.gov
Since par value is $25, I have a lower YTM than my current yield.
4. Sold 52 shares of PBIB at $10.18 for a loss (Regional Bank Stocks' basket strategy)(see Disclaimer): My purchase of Porter Bancorp (PBIB) was clearly a mistake in retrospect. Besides being my only significant loser in the regional bank basket, the OG violated the cardinal rule, pronounced by Headknocker, to avoid buying stocks where the cockroach infestation has been seen. I sold 50 PBIB at 14.7, at a small profit, after seeing evidence of those cockroaches. Item # 6 PBIB.
The following is my comments made that justified the disposal of my position at $14.7:
"Porter was rightfully downgraded to market perform from outperform by Keefe Bruyette based on Porter's 4th quarter results released after the market closed on Friday. A summary of the rationale for the downgrade can be found at StreetInsider. Possibly the management of this small bank sandbagged investors by waiting until Friday afternoon to release this earnings report which recognizes losses that possibly needed to be acknowledged sooner. (The nonperforming loans increased 58.6 million in the quarter to 84.9 million.) This is a quote from the earnings release giving the CEO's song and dance routine explaining the tremendous jump in nonperforming loans in the last quarter: "We took a more aggressive stance in reviewing our loan portfolio at year-end in light of the heightened regulatory scrutiny in the current environment and the prolonged weakness in the economy coupled with our concentration of real estate loans and the economy’s impact on real estate values." The 3 cent loss was a huge miss from the 44 cents expected by the analysts. Reuters.com Due to my concerns about management's credibility at this time, which is currently nil, Porter is a candidate for the chopping block (the "Wilmington Exception" to the Regional Bank Strategy), but I will wait to see if there is a dividend cut before making a decision."
Unfortunately, the Old Geezer can sometimes be sucked into a representation made by management, as his mind has turned to a gooey mush, unlike our LB who has never been fooled by anyone including the Masters of Disaster who pride themselves on all forms of chicanery. So after receiving public assurances from the President of Porter, the OG bought back some shares at 13.27. Well, it has been downhill since then. Porter recently slashed its dividend to just one cent per quarter. www.sec.gov The last earnings report for the Q/E 9/30/2010 showed an E.P.S. of 17 cents, down from 46 cents in the year earlier period.Form 10-Q Porter has not yet redeemed the government's preferred stock but did sale common and convertible preferred stock in a private placement, Form S-3, at prices that I view as dilutive to long term shareholders (see five year chart at Porter Bancorp, Inc. Stock Chart | PBIB).
Notwithstanding the foregoing, I will keep the remaining 55 shares based on the hope that some other bank will put Porter's shareholders out of their misery by acquiring it.