Tuesday, November 1, 2011

More Nonsense from Greece/Added 50 STDPRB at $15.44/Sold 50 of 100 HBAPRG at $20.09/Bought 50 UBCP at 7.99/Sold LT RTIX at $4.2

Fred Hickey continues to recommend Microsoft (own), after pointing out that the stock is selling for less than 10 times earnings. Barrons.com

Oscar Schafer recommends Xerox (own), arguing that the stock "could" rebound to $12 to $15 per share. He asserts that Wall Street misperceives this company. Barrons I recently bought XRX shares as a Lottery Ticket. Bought 40 XRX at 7.55 as LT

Stephanie Pomboy notes that a substantially cheaper solution for the U.S. government would have been to buy 2.5 million homes and burn them to the ground. Barrons I would agree with her on that statement.  It was suggested by Hank Paulson, allegedly in jest, during the Near Depression period. DailyFinance I remember that comment, made by Paulson to Bernanke, from the movie "Too Big To Fail".

Brian Rogers sees a three year investment opportunity in emerging market stocks. Barrons Generally, emerging market stocks will be positively correlated with the S & P 500 but with a much higher beta. Consequently, emerging market equities will go down more than S & P 500 during cyclical bear markets and rebound more strongly.

The bankruptcy of MF Global shows once again how quickly an investment bank can turn into dust and ashes. The Masters of Disaster are experts at enriching themselves while incinerating other people's money. The NYT reported that a few hundred million dollars of customer money has gone missing.  Maybe that 700 million will turn up somewhere.

Chicago PMI was reported at 58.4 for October, down from 60.4 in September.  The new order component fell to 61.3 from 65.3.

One of the reasons for the market's decline yesterday was that the Greek government decided to hold a referendum on the deal just reached with the EU and the unfortunate banks who were reckless in lending the Greek state money. NYT  WSJ I would expect the Greeks to vote down that package. The last poll showed that 59% of the Greeks opposed the deal.

The Greeks are angry that foreign lenders will take only a 50% haircut on their loans consumed by the Greek people. NYT The Greeks are enraged that their lenders want 50 cents on the dollar. The lenders need to lose 100% before asking the Greeks to make any sacrifice. Apparently, a majority of Greeks believe that those lenders need to provide even more cash to the Greeks and in return the Greeks will agree to pay far less of it back.

A clear majority of Greeks refuse to recognize that they are the source of their current predicament. The Greek government is simply a funnel, whose primary purpose is to deliver foreign capital to its citizens, thereby enabling them to live far above their means. Until recently, a great deal of that capital was poured into numerous committees who perform no discernible function, just one form of political patronage at work. Greece is without question a Patronage State. One Greek paper estimated that 10,000 people were employed by these committees, at an annual cost of 220 million EUROs. Reuters

The anarchists in Greece want to abolish government. If that happened, do they think that the German and French banks will start sending them checks in the mail regularly. Without any reasonable doubt, it is negligent and imprudent for anyone to loan money to the Greek government. I would hope that U.S. financial institutions will recognize that fact, since it is unlikely to change.

Is Greece the first of many? The Treasury announced that it will need to borrow $305 billion in the 4th quarter and another $541 billion in the 2012 first quarter. Treasury Announces Marketable Borrowing Estimates These amounts are net new borrowings.

Jim Jubak argues in his MSN Money column that Europe has not solved the Greece problem.

Herman Cain, the GOP front runner for President, was accused of sexual harassment by two women during the 1990s when he headed the National Restaurant Association, a Washington, D.C. based lobbying organization. Cain claims that he is innocent.  NYT  POLITICO.com Cain initially claimed to have no knowledge of the amounts paid to settle those claims. POLITICO details his contradictory responses. So far, Cain's alleged conduct does look fairly tame compared to Bill Clinton's long history in this category, though most of the claims made against Clinton involved consensual extra-marital sex.  I do recall the republicans becoming very upset about Clinton lying about his extra-marital activities.  But, Clinton was a Democrat and Cain is a Republican.  

A potentially more damaging event to Cain is alleged campaign financing violations. JSOnline The Washington Post

Rick Perry gave a rambling and bizarre speech in New Hampshire.  POLITICO The Texas Tribune  USA Today It is hard to see a President lurking in him anywhere. He acts and talks like a doofus. That speech makes Howard Dean's performance after losing the Iowa primary look Presidential. Howard Dean's Scream - YouTube I doubt that many TBs will watch it or draw anything from it if it is watched by a few of them. The widespread posting of that video is after all another liberal mainstream plot to discredit "conservatives".

1. ADDED 50 STDPRB at $15.44 Last Thursday (see Disclaimer): My last purchase of STDPRB was during a meltdown, when I picked up just 30 shares at $13. The security has been volatile to the downside during the past several months, based on concerns about European financial institutions. The issuer of STDPRB is Santander Finance. This security is a non-cumulative equity preferred stock that pays the greater of 4% or .52% above the three month LIBOR rate on a $25 par value. www.sec.gov Due to Fed's Jihad against the Saver Class, the applicable coupon is currently 4% and I would not anticipate that the floater will be activated by a rise in the 3 month LIBOR rate anytime soon.  Even at that 4% rate, the yield at a total cost of $15.44 would be around 6.48%. Dividends are paid quarterly and are classified as qualified dividends.

Santander provides a guarantee as provided in the prospectus. The most notable Santander obligation is that it can not pay a dividend on its common shares while eliminating the payment on STDPRB. (p. 47 of prospectus). As long as this bank pays a cash dividend on its common shares, it can not avoid paying the dividends on its preferred shares or the preferred stock issued by Santander Finance which it guarantees, as provided at page 47 in the prospectus.  

I decided to increase my position based on Santander's (STD) earning report released last Thursday. (BloombergWSJ.com; see also Earnings Call Transcript at Seeking Alpha). STD's financial report for the third quarter can be accessed at www.santander.com.  I also own just 100 shares of STD. STD stated that it could comply with the new EU capital requirements without changing its dividend. Of course, statements about future plans and intent are subject to change.

STDPRB ranks "pari passu withe most senior Preferred Securities which could have been issued by the Guarantor" (i.e. Santander)(see page 47).

Advantages and Disadvantages of Equity Preferred Floating Rate Securities That post contains snapshots of my trades in this category of securities.  I have a net realized gain of $445.2 (plus dividends) from trading this security. 

Floaters: Links in One Post

With investors experiencing another anxiety attack about Europe yesterday, STD.PB fell 43 cents to close at $14.82 yesterday. 

2. Sold 50 of 100 HBAPRG at $20.09 Last Thursday (see Disclaimer): I sold my highest cost shares bought first.  Bought Back 50 HBAPRG at 19.29 (9/1/2011 Post). I am keeping for now the lower cost shares bought thereafter.  Bought 50 HBAPRG at $16.8 (10/18/11 Post). I have a healthy respect for the volatility of equity preferred stocks issued by financial companies.  ITEM # 1 Fear and Enhanced Volatility in Certain Classes of Income Securities (8/9/11 Post); see also Embracing Volatility as A Risk Management Tool In the Sub-Asset Class of Equity Preferred Stock (5/13/09 Post).

In the event this security falls to below $16, I will consider buying back the 50 shares and would then sell the higher cost shares bought at $16.8 with a pop over $20. 

HBA.PG fell 76 cents in trading yesterday to close at $19.47.

3. Bought 50 United Bancorp (UBCP) at $7.99 last Thursday (Regional Bank Stocks Basket Strategy)(see Disclaimer): UBCP is a very small bank headquartered in Ohio. It is noteworthy primarily for its dividend yield. The current quarterly dividend of 14 cents is, however, barely covered by net income per share. At a total cost of $7.99, the current yield is around 7%. This last purchase represented an average down. Bought 50 UBCP at $8.49 Bought 50 UBCP @ 8.13 I am reinvesting the dividend to buy more shares. If and when I can sell the highest cost shares for a profit, I may do so.  

I discussed the third quarter report in Item # 1 UBCP The bank reported an E.P.S. of 16 cents per share. 

There have been some recent insider purchases: UBCP Insider Transactions


UBCP closed at $8.08 yesterday.

4. SOLD 50 RTIX at $4.2 Last Week (LOTTERY TICKET strategy)(see disclaimer): I am not sure why the RB bought this stock. The company is not exactly bursting at the seams with profits. The consensus forecast for 2012 is for 18 cents per share, giving the stock a forward P/E of over 23. Since there was a good percentage gain in this LT, LB sold it last week on a pop, possibly to see how much the RB would squeal which turned out to be quite a lot. Those 50 shares were bought @ 2.57 last February.

Lottery Ticket Strategy: New Gateway Post (contains snapshots)

RTIX rose 6.4% in a down market yesterday, closing at $4.49, which provoked a scream from the RB. 

1 comment:

  1. I'm amazed nobody remembers Greece hosting the Olympics, and what a fiasco it was. How much money got flushed on that one? Or they used OPM? (Other People's Money)