Tuesday, April 19, 2011

EXCHANGE TRADED BOND TABLE/Bought 1 AMR 9% Senior Bond Maturing 9/1/5/2016 at 99.375/TMRK NHTB/Added 70 CSQ at 9.63

This is a link to a video at  Reuters about inflation and growth in China. China's GDP growth in the first quarter of 2011 was 9.7%, higher than the expectation of 9.5%, and down slightly from the 9.8% growth rate reported in the first quarter of 2010. China's CPI rose 5.4% in March compared to a year earlier.  A number of economists discuss these numbers in an article in the WSJ.

In response, the Central Bank of China tightened monetary conditions by requiring most banks to hold more reserves. The new requirement will require most banks to have a 20.5% reserve requirement ratio, while some banks will be required to hold more. This is the 4th increase in the reserve requirement ration in 2011.   

S & P cut the U.S. government debt outlook to negative yesterday.

I have frequently heard the "conservatives" at Fox denounce food inspection as interfering with our liberties. I know that sounds absurd, but I am not kidding.  Glen Beck was one who claimed that Teddy Roosevelt, a Republican President, started Americans on the road to slavery by advocating that food actually be inspected by the federal government to make sure no rats were mixed with the hamburger.  The Reactionary Philosophy of Glen Beck. I have heard equally absurd garbage coming from the mouth of "Judge" Napolitano.

A few weeks ago,  I heard this former New Jersey superior court judge, elevated to prominence at Fox "News", assert that our constitutional liberties were being taken away by food inspection. I am not kidding, just read his rant at the preceding link.  Both of these Fox show people are complaining about the Progressive Era in American government, roughly a period from the 1890s to the early 1920s.

Beck says that progressives were and are a cancer on America. Jon Stewart's take on Beck's statement: Intro - Progressivism Is Cancer and Conservative Libertarian - The Daily Show with Jon Stewart - 03/18/10.

When listening to a FOX show person like the Judge, opinions are stated as facts, and those opinions are more properly characterized as hyperbole or gross exaggerations without even a remote connection to any reliable information. Thus, the Pure Food and Drug Act and the Meat Inspection Act, both passed by the Progressives in 1906, are referenced by the Judge, without giving any background as to why Congress passed those laws over a hundred years ago. According to Beck and the Judge, these kind of laws become in their eyes a simple, totally moronic concept: the government is telling us what "food was worthy of consumption" (the judge is off by about a decade as to when the law passed).  The law was passed of course in response to widespread proof of contaminated meat being sold throughout the U.S.

CBS News ran a story last Friday that the FDA was finding a large number of drug resistant bacteria in the nation's food supply. 

Maybe I am just odd, but I do not mind that the government checks out the meat for germs that can make me sick or even kill me. I would like for the government to spend more money interfering with my freedom to eat contaminated food. For reasons that I feel no to explain, I do not view a restriction on the sale of contaminated meat to be an interference with my freedom, only a fool would.

LB would add at this juncture that someone needs to interfere with the OG's food choice freedoms.  A steady diet of cheeseburgers and hershey kisses are not on too many lists prepared by nutritionists.  And, while it may sound silly to some, the OG views Fritos as a health food, being made from corn which is healthy right. The OG replied that he gets his veggies everyday in a convenient, easy to swallow pill called Veggies4Life which contains "all of that vegetable food crap", the OG added, as the rest of staff just shook their heads in embarrassment.

The Judge is also upset with the progressive movement's success in passing the Seventeenth Amendment, oh about a 100 or so years ago, to the Constitution that required the direct election of U.S. Senators.  And, how is the direct election of U.S. senators by the people an example of the government intruding into my life and freedoms. Really?  I am not kidding, just read the link to his rant.  

Before the Seventeenth Amendment to the United States Constitution was passed giving the people the right to elect their Senators, they were selected by the state legislatures and frequently in a corrupt way. No doubt these reactionaries also want to repeal the Constitutional Amendment giving woman the right to vote so that the government could quit interfering with a man's freedom to dominate the world.

Lastly, the Judge was upset about the government telling employers what wage to pay. What is he talking about in that glib reference, the only possibility is the minimum wage which was first passed as a response to sweat shots exploiting workers.

The GOP coalition, the wingnuts, the religious zealots sometimes referred to here at HQ as the American Taliban movement, the Birthers and reactionaries, and the advocates of "states rights", all of whom want to be called conservative, are a powerful and growing force in America and have found plenty of room to grow and to be nurtured by the modern day GOP.

They are certainly far more dominant political force than True Conservatives like the OG who might as well bang their head against the wall as attempt to engage the rank and file in an intelligent, fact based conversation. Try showing a Birther the facts and see if you make any progress changing their mind? Really, you know what I am saying is true. Facts really do not matter to them.

Any reliable and true fact is false by definition if it does not conform precisely to a pre-existing belief formed without regard to facts or much thought for that matter.

1. Bought 1 Senior AMR 9% Bond Maturing on 9/15/2016 at 99.375 Last Friday (Junk Bond Ladder Strategy) (See Disclaimer): HK exploded after hearing the OG bought this bond. AMR is short for American Airlines. The OG defended the purchase by noting that the yield and maturity were good, the worldwide economic recovery might actually result in earnings down the road at some point in the future, and the HK did not have a bond from a transportation company, other than Travelport, in the Junk Bond Ladder Strategy. LB noted that AMR just filed a lawsuit against Travelport, MiamiHerald.com, and the OG replied that he was playing both sides in the case by owning bonds issued by both the plaintiff and the defendant.

LB then  insisted that the OG had to be removed immediately as HT while HK still has some money left.  The OG is not capable of crunching all of the variables, LB added, and did not fully evaluate all of the alternate scenarios, including without limitation, the aging AA fleet in need of replacement, the skyrocketing cost of fuel, the possibility of an economic downturn occurring upon the withdrawal of fiscal and monetary stimulus, and the extreme debt load of the company.  OG pointed out that AA was not one of the deadbeat airlines that declared bankruptcy when things got tough and that was important to the OG, shows character.

This is a link to the FINRA information on this bond.  Moody's has a Caa2 rating. S & P is at CCC+. Fitch gives its a lowly C.  This bond has been around since 1986.

The long term debt is without question scary at $8.756 billion as of 12/31/2010: see page 63, SEC.  AMR lost 471 million dollars in 2010 (p. 50), but that was an improvement RB just said from a 1.468 billion dollar loss in 2009. "knuckleheads and dimwits", LB could not resist saying.

My confirmation states that the current yield at my  total cost is 8.984%% and the YTM is about the same given the purchase near par value.

2. ADDED 70 to Balanced CEF CSQ at 9.63 Last Friday (see Disclaimer):  My last CSQ purchase was 100 shares at last November. Bought 100 CSQ @ 8.94 I thereafter started to reinvest the monthly dividends to buy additional shares starting with the December 2010 distribution and will likely continue to do so as long as the discount to net asset value exceeds 10%.

This fund is known as the Calamos Strategic Total Return Fund. As of 2/28/2011, the fund was weighted 56.2% in stocks, 19.4% in corporate bonds, 7.2% in convertible preferred stock, 11.3% in convertible bonds, 3.1% in synthetic convertibles, and the remainder in sundry asset classes including cash and sovereign bonds. Composition: Calamos Strategic Total Return Fund Dividends are paid monthly at $.0525 per share. Distributions This gives me about 6.54% at at total cost of $9.63 per share.  The fund is rated 3 stars by Morningstar. As shown on that page from Morningstar, the fund does use leverage.

CSQ closed at $9.54 yesterday, down 10 cents for the day. As of 4/18/2011, the net asset value per share was $11. and the discount was -13.27 based on the $9.54 close.  WSJ.com

3. Trustmark (own-Regional Bank Stocks' basket strategy):  I have not done anything recently in my Regional Bank Basket Strategy. I decided to wait for the 1st quarter earnings reports before doing anything.  The unrealized gain is currently hovering in the $4000 to $5000 range. The realized gains are $5,873.26.  Item # 3 Realized Gains Regional Banks Most of the stocks pay good dividends and the average yield at my cost is probably close to 5%. Trustmark is currently paying a quarterly dividend of 23 cents per share, and I bought 50 shares at TRMK at $19.57. This gives me a current yield on my constant cost basis of about 4.7%. I have TRMK on my list for possible adds.  

I look at a large number of criteria when making choices. I am particularly interested in healthy, small banks growing their service territory and customer base with FDIC assisted acquisitions of failed banking institutions. After the close last Friday, Trustmark announced the FDIC acquisition of the Heritage Banking Group, headquartered in Carthage, Mississippi. Heritage had approximately 224 million in assets and 196 million in total deposits. I counted 8 branches at Heritage's website, with 3 in Carthage. 

When I purchased those shares in Trustmark, I noted several criteria viewed important when making selections in the regional bank basket which is a strategy with a five to ten year time horizon. The first criteria discussed by me was the bank's good capital ratios. I noted the net interest margin which was higher than normal, the good dividend, the bank had already paid back TARP funds to the government, the allowance for loan losses significantly exceeded non-performing loans, and earnings were growing.  The bank subsequently reported good earnings for the 4th quarter of 2010: Item # 8 TRMK The current consensus estimate is for an E.P.S. of $1.54 in 2011 and $1.72 in 2012. TRMK Analyst Estimates I am reluctant to buy more shares at the current price. 

4. New Hampshire Thrift Bancshares (NHTB)(own- Regional Bank Stocks' basket strategy)New Hampshire Thrift Bancshares reported consolidated net income of $2,024,984 or 33 cents per diluted shares for the first quarter, up from 28 cents in the first quarter of 2010.  There is no analyst earnings estimate. NPLs as a percentage of total loans fell to 1.22% as of 3/31/2011. The Tier 1 Core Capital ratio was 8.45%. The bank is paying a 13 cent per share quarterly dividend.

I bought 100 shares at $9.51, and I am content to hold those shares.


The current dividend yield at my constant cost number is around 5.5%.  

This bank has 28 branches, mostly in New Hampshire with 5 in Vermont.  

This is a link to the 2010 Annual Report: Form 10-K

5. Exchange Traded Bonds and Preferred Stocks Currently Owned: I recently prepared a separate YF portfolio containing my holdings in exchange trade bonds and equity preferred stocks. I lump the later with bonds when evaluating my asset allocation since I view their bond characteristics to be far more dominant than their equity attributes. All of these securities in the following table trade on the stock exchange just like a common stock. Exchange traded bonds include trust preferred stocks (in effect junior bonds), European hybrids, baby bonds, trust certificates, and "principle protected" senior notes.   I had to take two snapshots to capture all of the holdings. I have recently sold several holdings as I pared my long term bond positions as well as my exposure to GS issues.

Exchange Traded Bonds and Preferred Stocks Part 1

Exchange Traded Bonds and Preferred Stocks Part 2
The stock market had a bad day yesterday but the preceding portfolio lost about $16.  That is one reason to have bonds in a portfolio. I would remind readers that the OG is a stock investor and only became a bond investor in the summer of 2008 after seeing substantial values arising in trust certificates and other exchange traded bonds after Lehman's failure, possibly a once in a lifetime opportunity.  Many of those positions have been sold at over 100% profits plus distributions.

Exchange Traded Bonds:
TRUST Certificates: Links in One Post
Trust Preferred Securities: Links in One Post
Aegon Hybrids: Gateway Post
Advantages and Disadvantages of Equity Preferred Floating Rate Securities
Synthetic Floaters
ING HYBRIDS: Links in one Post
Floaters: Links in One Post

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