Tuesday, September 13, 2011

Sold 50 METPRA at 23.27 in Regular IRA-Total Cost Per Share $13.26/Sold Some Junk Silver Coins Yesterday/European Banks Continue Declining in a Big Way

Marc Faber says the FED is responsible for the bubbles and volatility with its low interest rate policies. He also views gold as relatively low in price.  I would not hazard a prediction on gold's movements, but would be shocked to see it at $6000 to $10,000 per ounce, a range bandied about by Faber.

I sold some more of my junk silver coins yesterday.  I do intend to sell more junk silver coins before the end of this year assuming there is a 2% to 5% spike from the current price, mostly in the $40 to $41 per ounce range. Spot Silver Chart The sale yesterday was made when silver was selling near $41 per ounce.

For now, I am keeping my brilliant uncirculated silver coins, mostly purchased, while selling most of the common date coins taken out of circulation at their face value back in the 1960s, mostly in very good or worse condition, and unlikely to ever be worth more than their melt value.

An example of the silver coins, being kept for now, is a purchase made in 1995, consisting of 2 rolls of brilliant uncirculated American Silver Dollar Eagles (40 coins/40 ounces of silver), a roll of BU 1964 John F. Kennedy Silver Half Dollars, and a roll of BU silver Roosevelt Dimes (50 coins). The total purchase was $342. Silver was then less than $7 an ounce.

While I did sell some gold proof coins last week, when the price hit $1900 per ounce (Sold Some Gold and Silver), I am inclined to keep the bulk of the silver and gold for the reasons those assets were acquired in the first place. Ultimately, I own those type of assets as a hedge for financial Armageddon. (More precisely, a financial Armageddon that involves a collapse of major currencies such as the USD and/or EURO) Until last week, I had never sold any of those precious metals stored in two bank lock boxes.

In the event silver prices collapse, I will use the proceeds recently realized to buy the silver ETF SLV, but I would be looking for a collapse in price below $10 before buying. I can wait.

John Bogle is predicting that stocks will return an average annual return, with dividends, of 7% over the next decade, assuming no apocalypse.  WSJ

The treasury sold 32 billion in three year treasury notes yesterday. The coupon was .25%. With the OID, the yield for those notes would be .334%. www.treasurydirect.gov.pdf

Jonathan Laing asserts in his Barron's column that another round of quantitative easing will have beneficial results. I do expect the FED to announce an "Operation Twist", where the FED sells short term notes and buys longer term issues, and to eliminate the .25% rate paid by it on bank reserves held at the FED.  I fail to see how any of those actions will accomplish anything worthwhile.  When the economy is facing a demand problem, as now, a further reduction in interest rates will only serve to deprive the Saving Class of money to spend.  And, the ten year treasury note is already below 2%, which is at least a sixty year low. The banks are not going to increase their loans by removing their balances with the FED. At most, they would likely shift those balances to earning slightly less by buying two year treasury notes, which yields now less than .25%.  U.S. Government Bonds

China's annualized consumer inflation rate rose 6.2% in August, down from a 6.5% rate in July.  Industrial production increased 13.5% in August compared to a year ago.  

The House GOP members are preparing to pass a bill forcing all states to recognize a permit granted by any state to carry a concealed weapon.  It is extremely easy in many states to secure such a permit, easier than a driver's license.  Bloomberg   Once the GOP came into complete power recently in Tennessee, there highest priority was to pass legislation permitting the carrying of weapons into bars.

The trust certificate (XKK) was ex interest yesterday for its semi-annual interest payment. The underlying security is a senior Goodyear Tire bond.  The TC has a 8% coupon on a $10 par value. I currently own 300 shares and have traded this TC. 

Bloomberg claimed in a story yesterday that the German government was preparing for a Greece default.  Another report at Bloomberg maintained that Greece's default risk had risen to 98%. This article published in the  Guardian a few months ago breaks down the European bank exposure to Greek government debt.

According to a report at CNBC, Italy has turned to China for purchases of its bonds.

Shares of the big three French banks continued to decline yesterday, falling more than 10%. WSJ ( on German bank decline Businessweek)

I am busy on other matters today and for the remainder of this week.  Consequently, I will just make a brief note of a transaction from last Friday in today's post.  I may skip at least one post this week due to time constraints.  Since I will not be able to focus on the market for the remainder of this week, I bought a double short stock ETF near the close in case the bottom falls out while I am distracted by other matters.  LB refused to admit that this purchase was a rule violation. For all other members of staff, one of LB's stinking rules prohibits the purchase of a double short stock ETF during an Unstable VIX Pattern, when the VIX is above 20.   Trading and Asset Allocation in Stable and Unstable VIX Pattern (November 2008 Post)  More on VIX AND ASSET ALLOCATION (November 2008 Post). LB claims that a recent modification to that rule, tailored to narrowly fit the current occasion and circumstances, was duly adopted and passed by it by a vote of 1 to zero after legally appropriate notice and consideration.

LB has also prepared a Complaint and Summons to serve on those wild turkeys for illegally grazing on HQ's property, which complaint contains several counts as one would expect, including trespass, conversion, and intentional infliction of emotional distress on the LB.

1. Sold 50 METPRA at $23.27 Last Friday in Regular IRA-Bought at a Total Cost of $13.26 (see Disclaimer):  This transaction still leaves me with 100 shares bought in a taxable account at a lower price. I previously pared my position in the regular IRA by selling 50 shares. As a result of this last sale, I no longer have a position in the IRA. I will consider buying METPRA back at below $20 a share, though I will make the purchase only in a taxable account. This security pays qualified dividends. All things being equal, I would prefer to own a security paying interest in an IRA, while purchasing securities paying qualified dividends in a taxable account.  I bought several securities paying qualified dividends in IRAs back in 2009 for a variety of reasons, primarily due to my view that those securities presented me with the best opportunity for idle cash at that moment in time.  I don't think that anyone could argue with that assessment given the percentage 2011 realized gains in INZ, AEH and now METPRA, just in the regular IRA. Sold Aegon Hybrid AEH at $23.09 Bought at $4.63

The METPRA shares sold last Friday were bought at a total cost of $13.26:

50 Shares METPRA Total Cost Per share=$13.26/Bought 9/15/2008
This security was the subject of my second post: LIBOR AND THE MET LIFE FLOATING RATE PREFERRED STOCK (October 5, 2008 Post). The stock was then selling at less than $10 per share.

The realized gain on the shares was $492.52, plus about $155 in dividends, for a total gain of $648 on a $663 investment:

50 METPRA Regular IRA 2011 Realized Gain =$492.52-On Investment of $663
MET.PA closed yesterday at $23.25, down seven cents for the day.

Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Floaters: Links in One Post

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