Friday, September 14, 2012

QE3/ING CEF Dividend Reductions/Bought 100 IRDM at 7.68/Bought 50 PIE at $17.08/Select Medical 2015 Bond Redeemed by Issuer/Sold 1 Telecom Italia at 91

In addition to announcing QE3 yesterday, the Federal Reserve extended the likely period for "exceptionally low levels for the federal funds rate" through "at least" mid 2015. FRB: Press Release--Federal Reserve issues FOMC statement--September 13, 2012 That statement, more than QE3, will be an important determinant in my income strategy, sometimes referred to as Coping with the Federal Reserve's Jihad Against Savers & Responsible Americans (August 2010 Post). It is not helpful that a large number of my bonds have been been redeemed either by the issuer or the owner of the call warrant (applicable for Trust Certificates) and that problem is ongoing.

QE3 will consist of an open-ended purchase of mortgage-backed securities at the pace of $40 billion per month.

Links to articles about the Fed's moves: ReutersBloombergNYT; and WSJ.

For the reasons discussed in prior posts, and summarized in this recent article published by TheStreet, the Federal Reserve's 0-.25% rate policy is a negative for banks. The shrinkage in their net interest margins will likely accelerate in 2013 and it now appears that no relief from this unfavorable rate environment is likely before 2015. This will cause me to shrink my bank exposure some more.


David Stockman stated in an interview that the U.S. debt will be downgraded several times since the two parties are incapable of dealing with the fiscal crisis. I would agree with that opinion. The two political parties are too dysfunctional to cope with the fiscal problems.

The Census Bureau released data earlier this week showing that the number of people living in poverty, 46.2 million individuals, was at its highest level in 53 years. Bloomberg The number of individuals without health insurance declined to 15.7% from 16.3%, as young people were able to obtain coverage under their parent's policy due to a provision in Obamacare. The gap between rich and poor continues to grow. Adjusted for inflation, median household income was 8.1% less in 2011 than in 2007 see page 7 of Census Report). The data can be downloaded at


In yesterday's post, I discussed selling 100 shares of the BDC Ares Capital and noted that I still owned 50 shares in my main taxable account (see snapshot in Item # 1 SOLD 100 ARCC at $17.54-IRAs in Two 50 Share Lots). I discovered another 50 shares lurking in one of my satellite taxable accounts  yesterday afternoon, which caused the OG to wonder who bought those shares since he had absolutely no memory of owing them. But there they were so I took another snapshot and maybe I will remember now. I still own 100 shares of ARCC rather than just 50:

50 Shares of ARCC Unrealized Gain +$46.36/Bought by Unknown HT 1/19/2011
This is sort of like finding money laying around the house in some crevice.

An article in Morningstar lists five funds that "shine" and are awarded "gold" status by that firm. Of the five listed, I have owned IGR and RVT for several years. I have traded another, ACG, numerous times and do not currently own it. I have also bought and sold FAX. I do not own GAB, but do own GDV.

VIX: 14.05 -1.75 (-11.08%)
S & P 500: 1,459.99 +23.43 (+1.63%)
GLD: 171.31 +3.39 (+2.02%)

AUDUSD= 1.0547  AUNZ: 23.12 +0.21 (+0.90%)
CADUSD= 1.0325 

The P.M. London gold price fix yesterday was $1,733.25, which occurred before the Fed's action yesterday afternoon. Near the close yesterday, the NY spot price closed yesterday at $1,768.2, up $35.8  per ounce. The NY Silver spot price closed at $34.78, up $1.37 per ounce.

The ING CEFs that I own (IDE, IRR and IGD), reduced their dividends in a press announcement yesterday. ING IDE reduced its quarterly distribution by $.045 per share to $.405. IRR reduced its quarterly dividend by 5 cents per share to$.28. IGD reduced its monthly dividend by $.009 per share to $.084

1. BOUGHT 100 IRDM AT $7.675 Last Tuesday ($500 to $1,000 Flyers Basket Strategy)(SEE Disclaimer):  Iridium provides mobile and data communications for customers worldwide using low orbiting satellites.

Based on data through 6/30/12 and a $7.6 stock price, YF shows the IRDM Key Statistics as follows:

Price to Sales Ratio: 1.46
Price to Book Ratio: .76
Forward P/E: 7.67
Total Cash: 166.66M
Total Long Term Debt: 567.988M (credit facility)

Profile page at Reuters

Key Developments Page at Reuters

SEC Form 10-Q for the Q/E 6/30/12 The balance sheet shows net equipment and property at $1.B.

The stock sold off after the company announced second quarter earnings on 8/2/12, falling from a close of $9.05 (8/1) to $7.51 (8/2).  IRDM Historical Prices I thought that the decline was unwarranted.

For the second quarter, Iridium reported net income of 23 cents per share, up from 16 cents in the 2011 second quarter, on a 1% increase in revenue to 97.3M. Subscriber growth was reported at 21%. SEC Filed Press Release

The company plans to spend approximately $3B to develop, build and launch its next generation of satellites, which entails risks and potential benefits:

For what is worth, IRDM is a top pick of Whitney Tilson, who runs the hedge fund T2 Partners.

IRDM Stock Quote
IRDM: 7.75 +0.16 (+2.11%)

2.  BOUGHT 50 of the Stock ETF PIE at $17.08 Last Wednesday ($500 to $1,000 Flyers Basket Strategy) (see Disclaimer): This company invests in 100 companies located in emerging markets, whose stocks are not listed on a U.S. stock exchange, that "possess powerful relative strength characteristics".  While recent performance in emerging market indexes has been disappointing, due in large part to the downdraft in China's stock market, PIE's index has lost less than the MSCI Emerging Markets Index over the past year and gain more over the past three years. This does not guarantee future out performance of course.

The expense ratio is high for an ETF at .9%. DWA Emerging Markets Technical Leaders Portfolio

With about five exceptions, I am totally unfamiliar with the fund's current holdings: PIE Holdings

This ETF currently has a five star rating from Morningstar. As shown at this site, the dividend is negligible.

Yesterday's closing price: PIE: 17.45 +0.38 (+2.23%)

3. Sold 1 Telecom Italia Capital 6.375% Senior Bond Maturing in 2033 at 91 Last Wednesday (see Disclaimer): I just clipped about a 10% gain plus interest on this bond. I bought it in mid-June 2012: Bought 1 Telecom Italia Capital 6.375% Senior Bond Maturing 11/15/33 at 80

4. Select Medical's 7.625% Senior Subordinated Bond Maturing 2/1/15 Redeemed by Issuer at 101.271 (Junk Bond Ladder Strategy)(see Disclaimer): This bond was redeemed by the issuer last week:

I also received an accrued interest payment of $8.68. The bond was bought back in August 2011: Bought 1 Select Medical 7.625% Senior Subordinated Bond Maturing 2/1/2015 at 98.21 


  1. VALE what a magnifico pick!

  2. The price of iron ore has risen by several dollars since my purchase. Today, the USD price per metric ton rose 6.65 or 6.79% to 104.54. That is still a long way from the $148 price prevailing in April-May 2012. Given the ongoing disputes with Brazil on taxation and royalties, Vale could easily have a surprise on any given day.

    I had a modest goal of selling VALE at over $20 after collecting one dividend. I would forgo that dividend, which goes ex in October, with a pop over $21.

    I would prefer to own the ETF PICK provided I can buy it below $19. It was up $1.75 in trading to day to close at 22.6. I almost got a fill at $18.75 last week.