I discussed yesterday the paring of the bond CEF GDO, partly due its exposure to European bonds. A research paper released by the San Francisco Federal Reserve shows how U.S. corporate bonds have reacted to shocks emanating from Europe between 2009-2011. FRBSF Economic Letter: Are U.S. Corporate Bonds Exposed to Europe? (2012-17, 6/4/2012) Those shocks are "readily transmitted" to the U.S. corporate bond market, but the "rate of transmission is less than one to one." Higher quality U.S. bonds are impacted less than junk rated bonds. Bonds issued by the U.S. financial sector are impacted to a much greater extent than similarly rated bonds from the non-financial sector.
According to a recently released Federal Reserve report, the median American family had a 2010 net worth no greater than what they had in the 1990s. I have argued repeatedly that the two political tribes have done almost nothing to benefit the middle class, notwithstanding their frequently specious claims to the contrary. Sometimes, one of the tribes makes a proposal that would severely hurt the middle class, which was the case with the GOP's plan to turn Medicare into a voucher system for the purchase of private insurance while cutting taxes even more for the extremely wealthy. GOP's Plan To Bankrupt the Middle Class
It is not surprising that the middle class has lost more wealth than any other income segment, in large part due to a higher concentration of wealth in their family homes. Only 52% of families were able to save anything at all in 2010. Over the 2007-2010 period, the Fed's survey found that the median value of real family income declined 7.7%. Between 2007-2010, inflation adjusted net worth declined 38.8% at the median (pp. 16-17). This report is summarized in articles found at the NYT, Bloomberg and MarketWatch. It can be found in its entirety at federalreserve.gov.pdf.
SL Green Realty (SLG) announced that it will redeem all of its outstanding 7.875% Series D (SLGPRD) preferred stock at its $25 par value plus accrued interest through the redemption date of July 14th. I have owned both SLGPRC and SLGPRD, but no longer have a position. REIT Cumulative Preferred Stocks/Advantages & disadvantages My last transaction in this security was to sell 50 shares of SLGPRD at $25.44 (4/16/12 Post).
The trust certificate, PJR, which is about to redeemed by the owner of the call warrant, went ex interest yesterday for its semi-annual distribution of $.925 per TC. Par value is $25. I own 50 shares bought in 2009 and will realize a $400+ long term capital gain on the shares in a couple of days.
A NYT column written by Bruce Bartlett, a former member of the Reagan and Daddy Bush administrations, highlights a problem with a large segment of GOP tribe members, a total inability to accept reliable factual information which calls into question their beliefs. I can understand the frustration when Daniel Moynihan said that everyone is entitled to their own opinions but not their own facts.
Jeb Bush reportedly stated that his father and Ronald Reagan would have a "hard time" fitting into the modern day GOP. NYT
An article in the WSJ argued that the "leap" in Spain's bond yields suggests that Spain's government may need a bailout. That may turn out to be the case, or it could be just the latest hyperventilation about government bonds yields. It was not too long ago (2000 to be exact), when the U.S. had a 6.5% yield on its 10 year government debt and no serious person maintained then that the U.S. was being shut out of the bond market by having to pay that rate, which was a contention recently made by Spain's treasury minister. CNBC {Historical treasury bill, note and bond yields can be found at FRB: H.15 Release--Selected Interest Rates--Historical Data.}
There is a problem, however, in that 67% of Spain's bonds are owned domestically, NYT, and some of those large owners are themselves in need of a bailout. So, in that sense, Spain is being propped up by some of its undercapitalized financial institutions and that can not be good.
Just based on my personal observations over the past several decades, most people learn nothing from history, and are more likely to draw wrong conclusions even from recent history that they live through, rather than conclusions based on reliable factual information guided by good and unbiased judgment.
In my lifetime, just by way of example, improvident and foolish real estate loans have been the primary cause of several banking crises, requiring massive government bailouts of financial institutions. Regional Bank Basket Strategy Yet, the cycle is repeated over and over again, which at a minimum tends to prove my point about the failure to learn from history. There is something very fundamental to humans that causes identical or virtually identical mistakes to be repeated over and over again by very large numbers of them.
For home prices, one harbinger of problems to come is well understood. The rise in median home prices can not significantly exceed the growth in median family income for very long. Something has to give. Home prices increased at a 20% clip, which was the case for many regions between 2002 to 2007, as median family incomes stagnated in the low single digits. The something, which had to give, was the price. Incomes were not going to match the price increases.
1. Added $250 to PRPFX (see disclaimer): Most of my position in the Permanent Portfolio, (PFPFX), a mutual fund, was established in 2006. The unrealized gain on those originally purchased shares is currently close to $1,500. The total unrealized gain is close to $2,500, which includes unrealized profits on all shares purchased with dividends:
The fund has relatively static asset allocations. The allocation will include 20% in gold bullion and 5% in silver bullion. The fund has consequently benefited by the long term bull market in those precious metals and has been hurt by their more recent declines. Other allocations include approximately 10% to Swiss government bonds; 35% to U.S. bonds, mostly in treasuries with a limited amount of investment grade corporates; 15% in REITs and natural resource stocks; and 15% in "aggressive growth". I put the "aggressive growth" phrase in parenthesis since that part of the portfolio consists mostly of large cap value stocks. (see generally Item # 2 Unusual Allocation Funds)
This fund has a five star rating by Morningstar.
SEC Filed shareholder report for the period ending 1/3/12 (see pages 6-12 for holdings)
I view this fund as sort of a disaster type portfolio. During 2008, the fund lost only 8.36%: Fund returns
The worst three year return was +3.5% (1997-1999), and 2008 was its worst year. The ten year annualized return is currently calculated by MSN Money at 10.2%. I will accept a lower than average return in a big up year, like 2009, for a much better downside year like 2008. It is not the kind of fund that I would use to ride the waves of a long term secular bull market in stocks. But, it has done better than most stock funds in the long term stock bear market.
PRPFX closed yesterday with a $46.66 net asset value per share, up 29 cents or .63% for the day.
2. TINY and Solazyme (SZYM): TINY is the symbol for the BDC Harris & Harris Group, a recent purchase in my Lottery Ticket Basket Strategy. I have discussed Solazyme stock only because those shares are relevant to TINY's price. Item # 4 Bought 80 TINY at $3.3-LT Category-May 23, 2012 Post
When discussing the TINY purchase a couple of weeks ago, I noted that it owned 2,304,189 shares of Solazyme as of 3/31/12. The price of Solazyme shares closed at $9.71 the day before that post. I commented that SZYM was an "interesting company, though not yet profitable." Since that post in late May, UBS started coverage of Solazyme with a buy rating and a $16 price target. The stock has risen over the past two weeks over 20% to close at $12.06 yesterday after hitting a high at $12.59 intraday. The market cap of TINY at a $3.5 price is approximately $107 million. TINY closed at $3.52, up 14 cents per share in trading yesterday.
Solazyme is discussed in this recent article published by Seeking Alpha.
3. Exchange Traded Bond and Preferred Stock Table: The total size of this portfolio segment has declined by close to $50,000 since its high point, due to redemptions and to profit taking. With some exceptions, the value of the securities have mostly remained stable to slightly up since I last posted this table in Item # 3 Exchange Traded Bond and Equity Preferred Stock Table as of 1/10/12 (see also Exchange Traded Bond and Preferred Stock Table as of 10/19/11 and EXCHANGE TRADED BOND TABLE as of 4/18/11) I do not expect much, if any, price appreciation from these securities that currently sell near or above their par values. For trust certificates with call warrants attached to them, the mere existence of that call right will cap appreciation above par value. Call Warrants and Trust Certificates; More on the Call Warrant in TCs.
I have not listed the TC PJR as owned, since I anticipate that it will be redeemed by the owner of the call warrant on June 15th. I still own 50 shares of SCEDN, but will lose 10 of those shares soon due to a partial call by the issuer.
With few exceptions, the trust certificates, which were lost to redemptions, were called by the owners of the call warrant rather than by the issuer.
I include equity preferred stocks in this table, because I view their bond attributes to be more dominant than their equity characteristics. An equity preferred stock does not have an ownership stake in the business, a primary reason for owning equity, but has some of the undesirable characteristics of common stock such as a low priority in the capital structure and a perpetual duration.
Exchange Traded Bonds: New Gateway Post
Trust Preferred Securities: Links in One Post
Trust Certificates: New Gateway Post
Advantages and Disadvantages of Equity Preferred Floating Rate Securities
REIT Cumulative Preferred Stocks/Advantages & disadvantages
Synthetic Floaters
Principal Protected Notes
The synthetic floater GJN rose almost 13% yesterday to close at $24.4. Synthetic Fixed-Income Securities Inc. Fltg. Rate STRATS Ser. 2005-2 for JPMorgan Chase Capital XVII Secs I have sold out of my position. Sold 150 of the Synthetic Floater GJN at $23.02-ROTH IRA (April 2012 Post). I did place a limit order to buy 100 shares last week below $21 which was not filled. There were some orders filled in light trading slightly above my limit price. GJN Historical Prices I did not see anything yet to account for GJN's price action yesterday which occurred on heavy volume for this security. There was also a surge in volume on June 6th.
It is not surprising that the middle class has lost more wealth than any other income segment, in large part due to a higher concentration of wealth in their family homes. Only 52% of families were able to save anything at all in 2010. Over the 2007-2010 period, the Fed's survey found that the median value of real family income declined 7.7%. Between 2007-2010, inflation adjusted net worth declined 38.8% at the median (pp. 16-17). This report is summarized in articles found at the NYT, Bloomberg and MarketWatch. It can be found in its entirety at federalreserve.gov.pdf.
SL Green Realty (SLG) announced that it will redeem all of its outstanding 7.875% Series D (SLGPRD) preferred stock at its $25 par value plus accrued interest through the redemption date of July 14th. I have owned both SLGPRC and SLGPRD, but no longer have a position. REIT Cumulative Preferred Stocks/Advantages & disadvantages My last transaction in this security was to sell 50 shares of SLGPRD at $25.44 (4/16/12 Post).
The trust certificate, PJR, which is about to redeemed by the owner of the call warrant, went ex interest yesterday for its semi-annual distribution of $.925 per TC. Par value is $25. I own 50 shares bought in 2009 and will realize a $400+ long term capital gain on the shares in a couple of days.
A NYT column written by Bruce Bartlett, a former member of the Reagan and Daddy Bush administrations, highlights a problem with a large segment of GOP tribe members, a total inability to accept reliable factual information which calls into question their beliefs. I can understand the frustration when Daniel Moynihan said that everyone is entitled to their own opinions but not their own facts.
Jeb Bush reportedly stated that his father and Ronald Reagan would have a "hard time" fitting into the modern day GOP. NYT
An article in the WSJ argued that the "leap" in Spain's bond yields suggests that Spain's government may need a bailout. That may turn out to be the case, or it could be just the latest hyperventilation about government bonds yields. It was not too long ago (2000 to be exact), when the U.S. had a 6.5% yield on its 10 year government debt and no serious person maintained then that the U.S. was being shut out of the bond market by having to pay that rate, which was a contention recently made by Spain's treasury minister. CNBC {Historical treasury bill, note and bond yields can be found at FRB: H.15 Release--Selected Interest Rates--Historical Data.}
There is a problem, however, in that 67% of Spain's bonds are owned domestically, NYT, and some of those large owners are themselves in need of a bailout. So, in that sense, Spain is being propped up by some of its undercapitalized financial institutions and that can not be good.
Just based on my personal observations over the past several decades, most people learn nothing from history, and are more likely to draw wrong conclusions even from recent history that they live through, rather than conclusions based on reliable factual information guided by good and unbiased judgment.
In my lifetime, just by way of example, improvident and foolish real estate loans have been the primary cause of several banking crises, requiring massive government bailouts of financial institutions. Regional Bank Basket Strategy Yet, the cycle is repeated over and over again, which at a minimum tends to prove my point about the failure to learn from history. There is something very fundamental to humans that causes identical or virtually identical mistakes to be repeated over and over again by very large numbers of them.
For home prices, one harbinger of problems to come is well understood. The rise in median home prices can not significantly exceed the growth in median family income for very long. Something has to give. Home prices increased at a 20% clip, which was the case for many regions between 2002 to 2007, as median family incomes stagnated in the low single digits. The something, which had to give, was the price. Incomes were not going to match the price increases.
1. Added $250 to PRPFX (see disclaimer): Most of my position in the Permanent Portfolio, (PFPFX), a mutual fund, was established in 2006. The unrealized gain on those originally purchased shares is currently close to $1,500. The total unrealized gain is close to $2,500, which includes unrealized profits on all shares purchased with dividends:
 |
| PRPFX Unrealized Gain +$2,423.12 as of 6/11/12 |
This fund has a five star rating by Morningstar.
SEC Filed shareholder report for the period ending 1/3/12 (see pages 6-12 for holdings)
I view this fund as sort of a disaster type portfolio. During 2008, the fund lost only 8.36%: Fund returns
The worst three year return was +3.5% (1997-1999), and 2008 was its worst year. The ten year annualized return is currently calculated by MSN Money at 10.2%. I will accept a lower than average return in a big up year, like 2009, for a much better downside year like 2008. It is not the kind of fund that I would use to ride the waves of a long term secular bull market in stocks. But, it has done better than most stock funds in the long term stock bear market.
PRPFX closed yesterday with a $46.66 net asset value per share, up 29 cents or .63% for the day.
2. TINY and Solazyme (SZYM): TINY is the symbol for the BDC Harris & Harris Group, a recent purchase in my Lottery Ticket Basket Strategy. I have discussed Solazyme stock only because those shares are relevant to TINY's price. Item # 4 Bought 80 TINY at $3.3-LT Category-May 23, 2012 Post
When discussing the TINY purchase a couple of weeks ago, I noted that it owned 2,304,189 shares of Solazyme as of 3/31/12. The price of Solazyme shares closed at $9.71 the day before that post. I commented that SZYM was an "interesting company, though not yet profitable." Since that post in late May, UBS started coverage of Solazyme with a buy rating and a $16 price target. The stock has risen over the past two weeks over 20% to close at $12.06 yesterday after hitting a high at $12.59 intraday. The market cap of TINY at a $3.5 price is approximately $107 million. TINY closed at $3.52, up 14 cents per share in trading yesterday.
Solazyme is discussed in this recent article published by Seeking Alpha.
3. Exchange Traded Bond and Preferred Stock Table: The total size of this portfolio segment has declined by close to $50,000 since its high point, due to redemptions and to profit taking. With some exceptions, the value of the securities have mostly remained stable to slightly up since I last posted this table in Item # 3 Exchange Traded Bond and Equity Preferred Stock Table as of 1/10/12 (see also Exchange Traded Bond and Preferred Stock Table as of 10/19/11 and EXCHANGE TRADED BOND TABLE as of 4/18/11) I do not expect much, if any, price appreciation from these securities that currently sell near or above their par values. For trust certificates with call warrants attached to them, the mere existence of that call right will cap appreciation above par value. Call Warrants and Trust Certificates; More on the Call Warrant in TCs.
I have not listed the TC PJR as owned, since I anticipate that it will be redeemed by the owner of the call warrant on June 15th. I still own 50 shares of SCEDN, but will lose 10 of those shares soon due to a partial call by the issuer.
With few exceptions, the trust certificates, which were lost to redemptions, were called by the owners of the call warrant rather than by the issuer.
I include equity preferred stocks in this table, because I view their bond attributes to be more dominant than their equity characteristics. An equity preferred stock does not have an ownership stake in the business, a primary reason for owning equity, but has some of the undesirable characteristics of common stock such as a low priority in the capital structure and a perpetual duration.
This table includes the following types of exchange traded bond: trust certificates, trust preferred securities, synthetic floaters and principal protected notes. I no longer own any European hybrid securities. Aegon Hybrids: Gateway Post; ING HYBRIDS: Links in one Post
Trust Preferred Securities: Links in One Post
Trust Certificates: New Gateway Post
Advantages and Disadvantages of Equity Preferred Floating Rate Securities
REIT Cumulative Preferred Stocks/Advantages & disadvantages
Synthetic Floaters
Principal Protected Notes
The synthetic floater GJN rose almost 13% yesterday to close at $24.4. Synthetic Fixed-Income Securities Inc. Fltg. Rate STRATS Ser. 2005-2 for JPMorgan Chase Capital XVII Secs I have sold out of my position. Sold 150 of the Synthetic Floater GJN at $23.02-ROTH IRA (April 2012 Post). I did place a limit order to buy 100 shares last week below $21 which was not filled. There were some orders filled in light trading slightly above my limit price. GJN Historical Prices I did not see anything yet to account for GJN's price action yesterday which occurred on heavy volume for this security. There was also a surge in volume on June 6th.
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| Exchange Traded Bonds and Preferred Stocks as of 6/12/12 |
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