Friday, January 21, 2011

LB Fired As Head Trader/Bought 50 HBAPRF at 20.69/ Fidelity Prohibits Purchase of HBAPRF

The OG will discuss most of the trades made today in the next post.  The purpose of this post is simply to explain why LB was fired and our new head trader, the Old Geezer, was appointed to take LB's place.  This is the second post for today.   

1. Bought 50 HBAPRF at 20.69 on Friday (see Disclaimer):  While the LB did a comparison between HBAPRG and HBAPRD before buying 50 HBAPRG earlier this week, the Lame Brain forgot to compare HBAPRG with HBAPRF.  I believe that HBAPRF was clearly a better buy at $20.69 than the purchase of HBAPRG at $23.31, though the "F" series advantage is primarily in the future.

As previously mentioned, I am only nibbling at the equity preferred floaters since I view their current prices to be unexciting.   If and when the 3 month LIBOR exceeds 4%, and investors start to worry a lot about rising rates, these securities may start to look better to folks than they do now, when all of them are stuck on their respective guarantees and prices have risen a lot since I started to buy them in October 2008. Advantages and Disadvantages of Equity Preferred Floating Rate Securities   Floaters: Links in One Post

HBAPRF pays a qualified dividend at the greater of 3.5% or .75% above the 3 month LIBOR rate. Form 424(b)(5) The float provision is the same as HBAPRG.  Since HBAPRF was cheaper in price, its .75% float would yield more than the .75% paid by HBAPRG.   Both of these floaters are now paying their guarantees.  While HBAPRF's guarantee is 1/2% lower, that difference was eliminated in the higher price for HBAPRG that LB, our former HT, paid earlier in the week.  Bought:  50 HBAPRG at 23.31  Both are exposed to the credit quality of HSBC USA. 

HBAPRG closed at $22.73 today, down 58 cents.  The yield after that decline, based on its 4% guarantee, is around 4.48%.    HBAPRF closed at $20.75, with very heavy volume of 366,039 shares, and yields 4.43% at that price based on its 3 1/2% guarantee.    

I also found out today that Fidelity prohibits new buy orders for HBAPRF, another totally inexcusable restraint on their customers.  I received the following message when I attempted to buy HBAPRF in that account: 

I placed the order with another brokerage company.   If you are a Fidelity customer, and would like to have the opportunity to buy this security and the others on Fidelity's no buy list, I would suggest sending them an email.  Other securities on the no buy list include JBK and DFP, all synthetic floaters and principal protected senior notes traded on the stock exchange.  Fidelity Brokerage Extends Denial of Trading Opportunities to Synthetic Floaters and Even an Exchange Traded Junior Bond DFP Fidelity Prohibits New Purchases of SIPs

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