Tuesday, September 20, 2011

Bought 100 BTZ at 11.90/Bought 30 TEX at $13.59/Bought 50 PHO at $16.5/Greece is Hopeless

Randall Forsyth discusses closed end municipal bond funds in his Barrons' column.  Recently, I have added a few leveraged closed end municipal funds yielding over 6%.  Bought 200 NPT at 12.2 (9/1/11 Post); Bought Municipal Bond CEFs: 200 NMO at 13.03, 200 MUE at $12.89 and 100 BAF at $13.89/Sold NQS at 14.44 (9/9/11 Post).

The 2 year treasury note touched a .12% yield yesterday.

The WSJ dividend page shows that the October interest payment for OSM will be $.1142 per share and $.1153 for ISM.  AGNC, a Mortgage REIT, will be going ex dividend for a $1.4 per share distribution on Wednesday, 9/21/2011.  Other securities which are owned will also go ex dividend that day, including the CEFs EOI, IGR, ETW, ETV and GDO.  Monthly dividends are paid by EOI, IGR, and GDO.

I really do not care for the U.S. stock market being whipped around by developments, or rumors, relating to Greek government debt. What can you say about a society where the government tries to levy a tax on swimming pools, due to widespread income tax evasion? Then the owners of the swimming pools try to evade paying that tax so the government flies helicopters over the "Job Creators" homes trying to find swimming pools undisclosed on the tax forms.  NYT The New Yorker (and see my February 2010 Post, Greece-Entitlement Society Run Amok, Item # 5 in my May 2010 Post Greece-Citizens in Aggressive Denial; and Michael Lewis article in Vanity Fair) The only solutions appear to be either to give most Greek citizens a brain transplant or to visit upon them the consequences of their irresponsibility that will naturally result from an uncontrolled default on Greek government debt.

The Greek government is scrambling to raise revenue with a new property tax, payable as part of the electricity bill to increase the odds of it actually being paid. Bloomberg  Reuters

S & P downgraded Italian government debt to "A" yesterday and kept its credit outlook as "negative". I can almost feel now the potential contagion effect emanating from Greece.

Many believe that U.S. corporations need tax breaks to create more jobs. The Federal Reserve reported last week that cash and other liquid holdings at non-financial U.S. companies rose to $2.047 trillion last quarter. This was the highest number on record and represented a 4.5% increase compared to the first quarter. That number does not include the cash held at the foreign subsidiaries of U.S. companies. The U.S. household total net worth edged down .3% during the last quarter. Household debt declined at a 1/2 percent annual rate in the second quarter.  www.federalreserve.gov. pdf WSJ

The savings rate has been increasing since falling to a 1% to 3% range between 2/2005 to 12/2007: (data research.stlouisfed.org). Savings rate is a disposable personal income minus taxes and expenditures divided by disposable personal income. This is a chart of that rate that shows a problem developing in the waning years of the Age of Leverage:


Intel (owned) sold $5 billion in senior notes. Of that amount, $1.5 billion consisted of 4.8% senior notes maturing in 2041; 3.3% notes maturing in 2021; and 1.95% notes maturing in 2016. www.sec.gov Intel stated in the prospectus that it intended to use the proceeds primarily to repurchase its stock, and for general corporate purposes. If Intel uses all proceeds from that issuance to repurchase stock, Nomura Equity Research opined that earnings would increase by about 9 cents per share in 2012.  Barrons

I did find a list of Countrywide Financial debt assumed by Bank of America in this SEC filing, Form 8-K.  I am going to discuss tomorrow the issue of successor liability in relation to the underlying security in the trust certificate CPP. Item # 1 Bought 50 of CPP at $21.4 (8/15/11 Post)- Sold 50 CPP at $24 (9/2/11 Post) I discuss generally the issue of BAC's liability for the underlying security contained in CPP in that first linked post. This is particularly important given BAC's recent statement that a bankruptcy filing for Countrywide is a possibility if litigation threatens to cripple the parent.  Bloomberg

1. Added 100 BTZ at $11.896 Last Friday (see Disclaimer): This brings me up to 538 BTZ shares.  BTZ is a closed end bond fund that invests primarily in investment grade bonds.  

Last Friday, BTZ closed at $11.89, with a net asset value per share of $13.63, creating a discount to net asset value per share of -12.77 as of that date.  Daily NAV information can be found at the  sponsor's website, the Closed-End Fund Association, and the WSJ's Closed-End Funds data center under "investment grade bond funds". 

Dividends are paid monthly. The current  distribution rate is $.069 per share. BTZ Assuming a continuation of that rate, the yield would be about 6.95% at a total cost of $11.9. 

This is a link to the last SEC filed shareholder report. The credit quality of the holdings as of 4/30/11 can be found at page 11 of that report. A list of holdings starts at page 34. BTZ does use leverage. A summary of the fund's borrowing costs can be found starting at page 67. 

BTZ is currently rated 3 stars by Morningstar.

BlackRock Credit Allocation Income Trust IV closed at $11.86 yesterday.

2. Bought 30 TEX at $13.59 Last Friday (see Disclaimer):  I recently bought a Terex bond.  Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947 I have some interest in the long term potential of this company, whose stock traded over $90 in 2007 and hit $38 earlier in 2011: TEX Interactive Chart As mentioned in the post discussing the bond purchase, Terex makes various types of machinery and equipment, including aerial platforms, cranes and compact construction equipment. Profile | Reuters.com The company lower its earnings guidance last July.  Terex

This is a link to the last quarterly report: TEX-6.30.11-10Q

The consensus estimate for 2011, made by 18 analysts, is for an E.P.S. of 50 cents, increasing to $1.95 in 2012. TEX Analyst Estimates

I intend to hold this small lot until the price goes to zero or over 30.  If the shares fall below $10, I will average down with another small lot purchase.

Before buying that 1 bond, I reviewed the S & P and Morningstar analyst reports.  S & P currently has Terex common shares rated at 4 stars with a $35 price target. Morningstar has it rated 5 stars.

The stock fell 3.9% last Friday to close at $13.57. Terex closed yesterday at $13.5, trading as low as $13.01 intraday.

I suspect that most stock purchases now will have to be made with a very long term view in order to realize a successful outcome.

3. Bought 50 PHO at $16.5 Last Friday (see Disclaimer): I have generally traded this ETF for small gains. I previously bought and sold 100 shares of this stock ETF. The purchase last Friday was just 50 shares, which shows my trepidation under the prevailing macroeconomic circumstances. The last round trip was at higher prices, so I am just grateful to having unloaded 100 shares at @ 19.74 last February. Another realized gain resulted from about a two week holding period in 2009:

PHO is the symbol for the ETF Water Resources Portfolio. The fund currently has just 32 holdings and has an expense ratio of .64%. A list of the holdings can be found at PHO Holdings. Close to 75% of the portfolio is in industrial companies. I find the water utilities to be uninspiring and this ETF has a 13.07% weight in those companies.

Guggenheim has a global water ETF that has 49 holdings, as of 630/11, and a 43.9% weighting in utilities.

During the recent market selloff, PHO has declined about 18% since 7/7/11, when it closed at $20.17. PHO Historical Prices

PowerShares Exchange Traded Fund Water Resource Portfolio closed at $16.29 yesterday, down 18 cents. 

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