Friday, January 6, 2012

Realized Gains Regional Bank Basket Strategy/Private Sector Jobs/Macy's/Bought 1 U S West Communications 7.5% Senior 2023 Bond @100.13 -ROTH IRA/Sold 50 TRMK at 24.7/Sold 50 CBLPRC at $24.88

ADP reported yesterday that private sector jobs increased by 325,000 from November to December on a seasonally adjusted basis. report.pdf The consensus estimate was for 180,000. That was good news, even though the numbers may have been distorted some by year end seasonal factors. Ultimately, the cure for the U.S. home price problem will be more jobs rather than just low rates. Yesterday, Freddie Mac reported that the average 30 year mortgage loan was at 3.91%, with the 15 year fixed rate at 3.23%. Primary Mortgage Market Survey (PMMS) - Freddie Mac

The Labor Department releases later this morning its report on employment for December. It will be important to see a confirmation in private sector hiring.

Macy’s reported a 6.2% rise in same store sales for December and increased its full year guidance by three cents. The new range is $2.73 to $2.78. I own the 2030 senior bond originally issued by the May Department stores. Since my purchase, both Fitch and S & P raised their credit ratings to BBB-, while Moody's still has the bond rated junk at Ba1.  Bought 1 Macy's 7.875% Senior Bond Maturing in 2030 @ 99.5 (January 2010).

Both European bank shares and the Euro had bad days yesterday. This latest decline started Wednesday after the Italian bank UniCredit had to issue stock at a 43% discount to the then prevailing price to sell shares. The CurrencyShares Euro Trust (FXE) declined $1.49 yesterday to close at $127.47. The U.S. Dollar Index (DXY) rose .77 to 80.89, indicating USD strength against a basket of six foreign currencies weighted significantly in the Euro. France's statistics agency believes that France entered into a recession during the 4th quarter of 2011. Insee - Economic analysis

For a change, Microsoft has shown some upward momentum this week, having closed last Friday at $25.96 and at $27.68 yesterday. The stock is now trading above its 50 and 200 day SMA: Microsoft Corporation Stock Chart For me to be impressed, however, I would want to see a strong burst over $29 on heavier than normal volume. The highest cost shares currently owned were the first bought, so I may sell them to lower my average cost some for the remaining shares. (snapshots of 2009 trades can be found at Item # 1: Added 30 MSFT at 24.15 May 2011ADD 50 MSFT at $17.99 January 2009 Bought 50 MSFT at $17.79 April 2009).  I did pare my position some last July and September by selling 100 MSFT @ 27.9 in July 2011 and 100 MSFT @ 27.9 in July 2011. My last buy was at $25.02 back in November. I do not expect much up and down movement in these shares which is why I am commenting on the pop this week.

1. Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100.15 with Commission-ROTH IRA-Last Wednesday (see Disclaimer): I received a message from Vanguard Brokerage that their bond commission had been reduce to just $2 per bond. That is one reason why I will start to favor that company with my bond purchases. For small 1 to 3 bond purchases, the commission will be cheaper than Fidelity. Unlike TD Ameritrade and Schwab,  which do not permit online purchases of junk rated bonds, Vanguard does permit their customers to make those purchases. 

I also much prefer the order page at Vanguard to the other brokers. This is the detail that Vanguard provided me before I entered the order to buy the 1 U S West bond:


This is a snapshot of the confirmation page: 

As shown on that page, the commission rate for this 1 bond purchase was $2. I am a Vanguard Voyager customer. I view this presentation more favorably compared to the other brokers. 

I already discussed this bond in a recent post: Item # 1 Bought 1 U.S. West Communications 7.5% Senior Bond Maturing 6/15/2023 at 100.  U.S. West was later absorbed into Qwest which was itself acquired by CenturyLink Inc (CTL) last year. 

FINRA Information on this bond. 

My current yield will be a tad below the coupon rate since the purchase was made at a total cost of .15 above this bond's par value  In a Roth IRA,  this will in effect be a tax free yield from a bond currently rated investment grade.

After adding this bond in the ROTH I elected to sell a trust certificate in that account yesterday that contains as its underlying security a Qwest Capital senior bond.  By doing that, I keep my overall exposure to CTL constant. I also shortened my average weighted maturity to CTL bonds some,  thereby lessening my interest rate risk associated with long term bonds.

I would add that CTL bond investors need to be concerned about the generous dividend paid to the common shareholders, the overall level of debt and the declining land line phone business.

For small bond purchases, I now prefer Vanguard over my other brokers and will throw more business their way. 

2. Sold 50 CBLPRC at $24.88 Last Wednesday (see Disclaimer):  This transaction was just a clip of two dividend payments plus a small profit on the shares. Bought 50 CBLPRC at $24.36 I will trade REIT preferred stocks, bought near par value, for small profits. I bought this security as low as $10 during the Near Depression, and that needs to be kept in mind:


3. Sold 50 Trustmark (TRMK) at $24.7 Last Wednesday (REGIONAL BANK BASKET STRATEGY)(see (Disclaimer):  This was just profit taking on a small position. I had a long term capital gain from shares bought at $19.57 (August 2010).

2012 TRMK 50 Shares +$240.57
The Raymond James downgrade to market perform did not influence this decision, but I suspect that this stock has minimal near term upside potential.

Trustmark continued to rise in trading yesterday, closing at $25.37.

4. Realized Gains Regional Bank Strategy-Carryforward:

The total realized gains from this strategy for 2010-2011 was $7,642.05: Item # 3 Realized Gains Regional Banks. This post will track the realized gains for 2012.

2010-2011 Carry Forward: $7,642.05
2012 Summary Gains and Losses:
50 TRUSTMARK (TRMK) $240.57: See Item # 3 Above
52  Landmark (LARK) +$91.89
50+ Astoria (AF) + $10.9 (no snapshot)
100 New Hampshire Thrift +248.02
New Total=$8,233.43

When the gain or loss is more than $30, I will make a snapshot of the transaction and post it in the Gateway Post for this subject: REGIONAL BANK BASKET STRATEGY GATEWAY POST

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