Thursday, March 10, 2011

Added 50 WMT at 52.21/Bought 50 of the TC JBI at 25.31/Sold 100 of the 200 WLFCP/Sold 50 of the 150 SIVBO at 24.65

I wanted to add a note to myself to begin this blog, otherwise I will forget. The P.M. London fix for the price of gold was $1,350.25 on November 18, 2010: Past Historical London Fix The maximum level for MOL in its current annual period is therefore 1,606.7975 per ounce based on the afternoon London fix. 

The afternoon London fix for the price of gold on 7/27/2010 was 1,168 per ounce.  The maximum level for MTY in its current period is therefore $1,576.8  Both calculations assume the historical data at Kitco is correct. 

MTY Prospectus: Final Pricing Supplement
MOL Prospectus: SEC 

American Capital Agency (AGNC), a recent nibble in the ROTH, declared a $1.40 per share first quarter dividend.

The WSJ reported yesterday that Bill Gross had sold all the U.S. government and agency debt owned by the fund that he manages, the Pimco Total Return Fund.

1. Added 50 WMT at $52.21 on Tuesday (Large Cap Valuation Strategy) (see Disclaimer): I convinced myself to purchase another 50 shares of WMT after writing my post published last Monday. Item # 1 WMT and the Large Cap Valuation Strategy  I have nothing to add to that discussion about the rationale for adding 50 shares.  WMT was ex dividend yesterday, and I am reinvesting the dividend to buy additional shares.  

WMT almost fits the criteria for the Common Stock Dividend Growth strategy after its recent dividend increase. However, the threshold starting yield for that particular strategy is 3%. 

2. Bought 50 of the Trust Certificate JBI on Monday at $25.31 (see Disclaimer):  Judging by the decline last Monday in JBI's price and the substantial increase in volume to over 10,000, I thought that there was a good chance that the call warrant owner had given notice of a redemption at par value plus accrued interest.  Since this TC just went ex interest for its semi-annual payment, there would be a minimal amount of accrued interest.  And, it would make sense for the call warrant owner to exercise its option given the pricing of the underlying bond, a senior bond issued by Duke Capital, formerly part of Duke Energy and now part of Spectra Energy (SE). The underlying bond is rated investment grade.

I make an effort to determine whether there was any public notice of such an exercise, and could find none before placing the order last Monday.  If the warrant is exercised I will lose a few bucks on those 50 shares, but have already realized good gains trading this security which I first discussed when it was trading around $17 in 2008. TRUST CERTIFICATES JBI DUKE (Oct 2008)  SOLD 100 JBI AT PAR VALUE (January 2009)

I recently sold 100 of JBI at $26.5

This TC has a higher coupon than the underlying bond. The TC has a 7.875% coupon, whereas the underlying bond has a 6.75% coupon. The TC has a $25 par value and matures at the same time as the underlying bond in 2032. JBI Prospectus The difference in coupons does add an incentive to the call warrant owner due to the number of bonds owned by the trust to support the higher coupon payment. Though, if the TC is not called, I also have a better deal than a purchaser of the underlying security, not only with the higher coupon but also with the narrower premium to par value.

I checked Wednesday night and still did not find anything to suggest an exercise of the call warrant. JBI closed at $25.32 on Wednesday on relatively normal volume for it of 1447 shares. The yield at that price, as shown at Marketwatch, is 7.78%.

When I check something like that out, I will do a Google search limited to the past week, and will check the SEC website as well as the sites for the major business wires. This is a link to  JBI's filings at the SEC. The last filing was the trustee's distribution report to the owners of this TC. Trustee's Distribution Statement to the Corporate Backed Trust Certificate

This form shows that the trust owns $43,435,000 in principal amount of the underlying senior bond originally issued by Duke Capital. That bond is lightly traded which could be a hindrance to a full call by the owner of the call warrant. 

3. Sold 50 of 150 of the Trust Preferred SIVBO at $24.65 on Tuesday (see Disclaimer):  I am keeping the 50 shares for now purchased in the ROTH IRA at $19.20 in the ROTH IRA. 

I sold 50 of the 100 shares held in a taxable account.  Using FIFO accounting, I sold the 50 shares bought at a total cost of $19.65 per share.  This resulted in a long term capital gain:

The shares kept have a slightly lower total cost at $19.31.  The yield at my sales price is close to 7% which is somewhat concerning since this junior bond matures in October 2033. I may buy it back when the price falls back to my original purchase price, assuming no change in the credit quality. That kind of fall would be due to a significant rise in long term interest rates. The decline in the price during the Near Depression was due to fears over credit quality. 

I have nothing to add to my discussions on this TP made in several prior posts: Added 50 SIVBO at $19.15 Bought 50 SIVBO at $19.49 Added 50 SIVBO AT $19.20 IN ROTH All of those purchases were made in 2009. The bank that issued the junior bond owned by the trust has been doing fine: SVB Financial Group. I am not currently concerned about the credit risk, only the interest rate risk to my unrealized profit.

4. SOLD 100 OF THE 200 of the Fixed Coupon Equity Preferred WLFCP at $11.42 on Tuesday (see disclaimer): I bought the 200 shares of WLFCP in two 100 share lots: Bought 100 WLFCP at 10.1 Bought 100 WLFCP @ 10.33. I have trimmed my position by selling 100.  This security has a 9% coupon on a $10 par value and pays dividends monthly. I sold the first shares bought, realizing a long term capital gain, plus the monthly dividends for over a year.

I am running way behind in discussing my trades. I had several trades from Wednesday that will be discussed in tomorrow's post and the one to be published next Monday. I will not discuss the sector double short ETF bought yesterday afternoon. 

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