Wednesday, February 29, 2012

Thompson Creek/Added 100 BCF at $12.46/SOLD 1 Nextel 7.375% Senior Bond at 98.75/Sold 300 of the BOND CEF MMT at $7.09

The Case-Shiller home price index for 20 metropolitan areas ended 2011 at 2003 price levels. The one year change in the national index was -4%. Only two cities showed a gain in home prices from November to December 2011. Among the leading decliners month-to-month were Chicago at -2%, Atlanta at -1.8%, and Detroit at -3.8%. For 2011, the leading percentage decliners included Atlanta at -12.8%, Chicago at -6.5%, Las Vegas at -8.8%, Seattle at -5.6%,  and San Diego at -5.4%.

It is almost impossible to believe, but New York allows local governments to borrow from the state pension plan to meet their pension obligations to that plan. The amount borrowed may hit $1 billion next year. NYT In a NYT editorial, it is mentioned that NYC's pension costs have risen to $8 billion in 2012, compared to $1.3 billion in 2002. Out of control and exceedingly irresponsible are the only adequate descriptions. Eventually, there will be major population shifts in response to tax hikes necessary to pay for overly generous benefits, making the problems more acute for states like NY, NJ, Illinois and even California.


Normally, I do not discuss earnings from a company whose stock is bought as part of my Lottery Ticket Basket Strategy, unless I also own the bond. The earnings report from Thompson Creek Metals will be an exception. The common fell yesterday by 15.3% to close at $7.36 based on the contents of TC's latest earnings release. Thompson Creek reports 2011 record molybdenum sales of 40.1 million pounds and revenue of $669.1 million It was not the lack of earnings for the 4th quarter that caused the air pocket in my opinion. It is generally known that molybdenum prices are low, as noted in my earlier commentary. The problem is the projected costs associated with Thompson's Mt. Milligan project which will expand the firm's production into copper and gold. The new cap ex estimate for this project is $1.4 to $1.5 billion, up from the prior estimate of $1.265 billion. The escalating costs of this project eats into its value, and caused two firms to downgrade the stock yesterday.

I mentioned in my earlier post that I was not comfortable with the bullish case for TC given the escalating cost numbers and other unknown inputs such as the price of copper when Thompson starts production and thereafter. Consequently, I limited my purchase to just a LT amount. Bought 30 shares of TC at 8.65-LT Category I indicated then that a significant recovery in Molybdenum prices, which is being mined now, would cause me to revisit this company and possibly add 70 more shares to my position. I do not see such a recovery on the horizon.

Thompson Creek also filed its 2011 Annual Report with the SEC. www.sec.gov The Mt. Milligan project is discussed starting at page 21 and again at page 69.

1. Added 100 of the Stock CEF BCF at $12.46 Last Thursday-Taxable Account (see Disclaimer):  This stock CEF was selling at a modest discount to its net asset value when I purchase more shares last Thursday.  The discount was 3.61% based on Thursday's closing price of $12.49 and a net asset value per share of $13.03. According to Morningstar, which rates the fund at a lowly 2 stars, the average discount of the prior three years has been 3.72%.

The BlackRock Real Asset Equity Trust (BCF) invests in natural resource and material companies. The fund does use a buy-write option strategy.

Sponsor's website: BCF : Fund Profile : Products : Individual Investors : BlackRock

This brings me up to 534.275 BCF shares in the taxable account, where I am at break-even on the shares. I have not been reinvesting the quarterly dividend, currently at 27.18 cents per share. BCF Distributions My highest cost shares were bought first, back in 2008, and I plan to dispose of them when and if the price crosses back above $14. Provided I am able to do so, my average cost per share would be substantially reduced. On a total return basis, I am ahead by the amount of dividends received since 2008, which is okay considering the dividend yield and the unfavorable lot purchases in 2008, a few months before the Lehman failure.  I have bought shares as low as $6.6 (February 2009).  

I have done better in the ROTH IRA where I own 152 shares and have an unrealized profit of over $500 on the shares. The cash dividend adds another 12% or so annually to the total return given my average total cost per share of $8.86:

 

BlackRock Real Asset Equity Trust closed at $12.61 yesterday.  The net asset value per share as of 2/28/12 was $13.08.

2. MetroPCS (own 1 bond: FINRA):  The MetroPCS bond has done well since I bought it. Bought 1 MetroPCS 7.875% Senior Bond Maturing 9/1/2018 at 98

PCS reported a 4th quarter adjusted E.P.S. of 25 cents per share, six cents better than the consensus estimate. SEC Filed Press Release Revenues increased 16% year over year to $1.134 billion. Adjusted EBITDA increased 15% to $362 million.

The common shares, PCS, rose 13.81% last Thursday in response to this report.

3. Select Medical (own 1 bond: FINRA):  SEM reported 4th quarter net income of $36.859 million or 25 cents per share, six cents better than the consensus estimate, on $718.441 million in revenues. SEC Filed Press Release The company reaffirmed its guidance for 2012 of fully diluted earnings per share between $.86 to $.94.

The common shares, SEM, are under consideration for a possible LT purchase.

4. Sold 1 Nextel 7.375% Senior Bond Maturing 8/1/2015 at 98.75 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): This was one of my lower yielding bonds. I sold the position near break-even on the bond. Bought 1 Nextel 7.375% Senior Bond Maturing on 8/1/2015 at 98.25 (August 2011 Post)

I was not pleased with Sprint's last earnings report. Sprint 4Q Earnings Release Nextel was of course acquired by Sprint.

Sprint did manage to sell recently $2 billion in notes: Pricing Press Release (2-27-12)

5. Sold 300 of the BOND CEF MMT at $7.092 Last Friday (see Disclaimer): This is my second pare of this bond CEF. I still own 400 shares in the ROTH IRA. This bond CEF has recently narrowed its discount to net asset value to 3.65% as of 2/24/12. I purchased those shares at $6.95 (10/4/2010 Post). I was content to make a few bucks on the shares plus 17 monthly dividend payments.

2012 MMT 300 Shares +$26.66

Tuesday, February 28, 2012

SHO OMX/Sold 200 of the CEF JQC at $9.094/Added to BAM at $31.16/Sold 100 BMLPRJ at $19.55/Paired Trade: Sold 50 ENY at $18.25 and Bought 100 of the Canadian Stock ETF XEG:CA at 18.24 CADs

1. Sold 200 of JQC at $9.094 Last Wednesday (see Disclaimer): This sale reduces my position to 804+ shares. According to Morningstar, the average three year discount for this CEF is 14.45%. The discount last Tuesday had narrowed to -8.09%, which is uncharacteristically low for this CEF. That caused me to pare my position slightly.

Nuveen Multi-Strategy Income & Growth Fund 2 closed at $9.18 yesterday.  The discount was -7.65% as of yesterday's closing price of $9.18 and a net asset value per share of $9.94. JQC Page at the Closed-End Fund Association

2. Paired Trade: Added 100 of the Canadian Stock ETF XEG:CA at 18.24 CADs and Sold 50 ENY at $18.25 Last Wednesday (Canadian Dollar (CAD) Strategy)(see Disclaimer): I recently bought the ETF ENY, which owns Canadian energy companies, at $17.18 (item # 5: January 12, 2012 Post). While I am certainly no expert on Canadian energy companies, I am familiar with several of them. I have individual stakes in Suncor, Husky and Enerplus. After looking at the portfolio of ENY and the Canadian ETF XEG, I preferred the weightings in the Canadian ETF offered by IShares Canada and available for purchase on the Toronto exchange.

ENY Holdings
XEG Holdings - iShares ETFs

I took a snapshot of the two weightings, covering just the positions with a 1% or greater weighting:

XEG:CA Weightings >1%
                                           

ENY Weightings
The ENY snapshot includes all holdings, whereas XEG has several positions at less than 1%.

Some major differences include the following:

Suncor: XEG at 17.06% and ENY at 3.5%
Canadian Natural Resources: XEG at 13.17% and ENY at 2.61%
Cenovus: 9.24% at XEG and ENY at 2.95%
Talisman: 4.63% at XEG and ENY at 0%
Encana: 4.61% at XEG and ENY at 0%
Petrobakken:  .4% at XEG and 4.99% at ENY
Gibson Energy: 0% at XEG and 3.5% at ENY
Vermillion Energy: 1.49% at XEG and 3.49% at ENY
Batex Energy: 2.15% at XEG and 5.3% at ENY
Freehold Royalites: .29% at XEG and 3.38% at ENY

These two portfolios will likely diverge significantly in performance. ENY has a focus on smaller and more speculative companies. Possibly that focus will bear fruit, but I would prefer a higher weighting in Suncor and Cenovus than the current small ENY allocations. I currently own 50 shares of Suncor, bought recently at $28.67; 150 share of Enerplus and 200 shares of Husky Energy.

iShares S&P/TSX Capped Energy Index Fund (TOR: XEG) declined 22 cents in trading yesterday to close at 18.24. The Guggenheim Canadian Energy Income ETF  (ENY) Fund  declined 8 cents to close at $18.19.

3. SOLD 100 BMLPRJ at $19.55 Last Thursday (see Disclaimer): This non-cumulative equity preferred stock, originally issued by Merrill Lynch, was sold at near break-even. Bought 100 BMLPRJ @ 19.32 (FEB 2011 Post). I no longer own any equity preferred stock issued by Bank of America or one of its acquired companies. Floaters: Links in One Post

Since my gain was less than $30, I will not include a snapshot of this trade in Advantages and Disadvantages of Equity Preferred Floating Rate Securities.

BMLPRJ pays non-cumulative, qualified dividends at the greater of 4% or .75% above the 3 month LIBOR rate on a $25 par value.  Final Prospectus Supplement

4. Added to Brookfield Asset Management (BAM) at $31.16 Last Thursday (Canadian Dollar (CAD) Strategy)(see Disclaimer): Brookfield Asset Management is a Canadian holding company with over a $150 billion in assets under management, focusing on property, power, infrastructure and private equity. Brookfield Asset Management | Home

The company recently released its year end results. Brookfield Asset Management Announces Year End-2011 Financial Results and Dividend Increase The company reported then that the "intrinsic value of Brookfield's common equity was $40.99 per share at December 31, 2011", and the tangible asset value was at $34.52 per share. The current quarterly dividend is 14 cents per share.

This is a link to the shareholder's letter discussing 2011 results: brookfield.com pdf As noted in that letter, the 10 and 20 year compounded returns for BAM shares were 20% and 16% respectively, see page 3.

Link to Earnings Call Transcript for the 4th quarter:  brookfield.com .pdf

The company does file reports with the SEC as a foreign issuer: SEC The foregoing referenced press release is attached to a Form 6-K. SEC

I last bought this security during the Dark Period at $13.73 (March 13, 2009 Post), and still own those shares. Last Thursday, I bought the shares listed on the NYSE rather than on the Toronto exchange, since my commission is cheaper that way. My broker has been converting those shares to the Toronto exchange symbol which is what I want to happen, since I will receive BAM's dividends in CADs rather than USDs. The Canadian Dollar Strategy is in part a diversification move out of assets priced in USDs, and I want to increase my CAD stash with dividend distributions. I pay the 15% withholding tax either way for securities held in a taxable account.

Brookfield Asset Management Inc. Cl A (BAM) closed at $31.66 yesterday. The shares listed on the Toronto exchange closed at 31.63, Brookfield Asset Management Inc. Cl A, BAM.A (TOR: BAM.A), indicating a near parity in the CADUSD exchange rate.

5. Sunstone Hotel Investors (own cumulative preferred only):  Sunstone Hotel Investors beat the consensus estimate by reporting 4th quarter FFO of 29 cents, a 45% increase, on 245.1 million in revenues. SEC Filed Press Release

Sunstone Hotel Investors Inc. 8% Cum. Redeem. Pfd. Series A, SHO.PA
Sunstone Hotel Investors Inc. 8.00% Cum. Redeem. Pfd. Series D, SHO.PD

6. OfficeMax (own 2 senior bonds: FINRA): OMX reported adjusted earnings per share of 17 cents per share, two cents better than the consensus estimate, on a 3.9% increase in revenues to $1.84B. The GAAP E.P.S., which included an impairment charge, was 3 cents.  OfficeMax Incorporated Earnings Release dated February 23, 2012 On the day of the earnings release, the common shares, OMX, rose 9.42% to close at $6.04 and closed at $5.61 yesterday. 

Monday, February 27, 2012

Norwegian Krone/Colt Defense/Bought 50 SDIV at $22.33/RRD/Sold 50 ZBPRA at $20.43/Bought 50 ERF at $24.39-ROTH IRA

I was asked whether there are any ETFs for Norwegian companies. I have bought one, an offering by Global X, called the Global X FTSE Norway 30 ETF. The fund has over a 20% weighting in Statoil. I have considered buying at ETF that includes companies from Denmark, Norway, Finland and Sweden, called Global X FTSE Nordic Region ETF, but have not bought that one. The Nordic ETF includes some significant weights in stocks that I do not favor at the current time. These ETFs will be purchased primarily for diversification purposes. Part of that diversification objective involves the acquisition of assets priced in currencies viewed with some favor here at HQ.

This is a link to a long term chart of the NOK/USD. The NOK was gaining steadily against the USD until the Near Depression period when investors flocked to the USD. The NOK has started to rise again in fits and starts after bottoming at around .1376 in December 2008. Last Friday's close was at .1794.

Just by way of example, $10,000 USDs would have bought about 72,689 NOKs on 12/5/08, near the height of the USD rally against the NOK, and 55,747 NOKs last Friday. Ideally, a U.S. investor, wanting to buy a Norwegian company, would have picked his spot sometime in December 2008, where he could have gotten the best bang for his USDs and stock prices were really in the pits. {when the NOK/USD was near .2 on 6/2/08, before the temporary ascendancy of the USD, $10,000 USDs would have bought about 51,282 NOKs.} Bloomberg

Colt Defense filed its 2011 Annual Report with the SEC last Friday. For the year, the company reported net income of $5.196 million on $208.81 million in revenues, up from a 2010 loss of $11.17 million on $175.805 million in revenues. Sales to the U.S. government declined 34% in 2011 compared to 2010. That is a matter of concern. A large international order received early in 2011 helped the company increase international sales by 76%. The higher overall sales volume improved the efficiency of Colt's two plants.

Colt's right to be the sole source of M4 carbine sales to the U.S. government expired in July 2009 and sales since that time has been on terms of an indefinite quantity and delivery. The U.S. Army is evaluating new carbines to potentially replace the M4. (see page 26, 2011 Annual Report). Backlog was $176.7 million as of 12/31/2011, up from $165.7 million as of 12/31/2010. The company also discussed the possibility of a strike when its labor contract expires on 3/3112. (see page 27). The company ended 2011 with $38.236 million in cash and cash equivalents. Page 68 reveals an operating profit for the 4th quarter of $5.437 million on 64.886 million in revenues. I am barely comfortable owning just 1 bond and will not buy another one. I own 1 of the 8.75% senior notes maturing in 2017, discussed at page 55. FINRA According to FINRA, that bond is currently rated Caa1 by Moody's and B- by S & P.


1. Bought 50 of the ETF SDIV at $22.33 Last Tuesday-ROTH IRA (see Disclaimer): This ETF may be the highest yielding ETF that focuses on dividend paying stocks. Global X Funds I examined the portfolio, and there was an eclectic selection of securities. Global X  SuperDividend ETF Holding The fund seeks to track the performance of the Solactive Global SuperDividend index. That index "tracks the performance of 100 equally weighted companies that rank among the highest dividend yielding equity securities in the world".   The management fee is .58%. When you include the acquired fund fees of Business Development Companies, the expense ratio is .79%. The fund owns several American BDCs and Mortgage REITs which is what I expected to see. 

Dividends are paid monthly and will be variable based on the income received by the fund. Distributions The fund's first distribution was in July 2011. Since the dividend rate is variable, financial websites have the yield wrong, making the incorrect assumption that the last dividend payment is a fixed amount applicable for a 12 month period. With 5 months left in its first year, the fund has paid about $1.01 per share cumulatively for 7 months. I would just hazard a guess that the yield for the entire first year will end up being over 6% assuming a total cost of $22.33 per share. 

I am increasing to a slight extent my equity exposure in the ROTH IRA. 

Last Tuesday, the day of my purchase, the Global X SuperDividend ETF (SDIV) closed at $22.36, slightly above my purchase price. On Friday, this ETF closed at $22.57.

2. RR Donnelley (own 3 bonds only): For the 4th quarter, RRD reported non-GAAP earnings of $85.2 million or 46 cents per share, down from 51 cents in 2010 4th quarter.  SEC Filed Press Release The GAAP number was a loss of $1.78 per diluted share, due primarily to a non-cash impairment charge. The company expects adjusted earnings per share of $1.85 to $1.92 for 2012. Year end debt totaled $3.7 billion or $278.7 million less than at the end of the 2011 third quarter.

The bonds performed better after the report. The 2021 senior bond closed at 102 last Friday, and I bought it recently at 92.69 (2/13/2012 Post), though most of the trades were in the 99 to 101 range. The common stock (RRD) rose 55 cents in trading last Friday to close at $14.1.

3. Sold 50 ZBPRA at $20.43 Last Wednesday (see Disclaimer): This non-cumulative equity preferred stock goes ex dividend for its quarterly distribution on 2/28/11. I decided to exit the position near break-even. Bought 50 ZBPRA at $20 (JULY 2011 Post). I had more success with this security when I initiated my position  at much lower levels: Bought 100 ZBPRA at $7.8Sold 100 ZBPRA @ 18.95Bought 50 ZBPRA at 12.5 in IRA-SOLD ZBPRA in IRA at $16.85

ZBPRA pays qualified dividends on a non-cumulative basis at the greater of 4% or .52% above the 3 month LIBOR rate on a $25 par value. www.sec.gov

Advantages and Disadvantages of Equity Preferred Floating Rate Securities
Floaters: Links in One Post

Zions Bancorp Dep. Pfd. (Rep. 1/40th Interest in a Share of Fltg. Rate Non-Cum. Perp. Pfd. Series A closed at $20.32 last Friday.

4. Bought 50 ERF at $24.39 Last Wednesday-ROTH IRA/Earnings for 4th Quarter a Mild Disappointment (see Disclaimer): I mentioned in a post last week that I would test whether or not Canada would apply its 15% withholding tax for a dividend paid into a retirement account. ERF is a Canadian company that pays monthly dividends, so I will soon find out whether that claim is true. I recently discussed Enerplus: Bought 50 of the ETF VWO at $39.73/Added 90 ERF at $24.69 USDs (1/17/2012). One knock on the company is that about 50% of its production is natural gas. The price natural gas is depressed and likely to remain so for some time.

Recent events have contributed to positive price action for Canadian energy companies. Iran's decision to cut off supplies to Britain and France just highlights the importance of energy production from Canada.

Richard Lehmann recommended Enerplus in a recent Forbes column. ERF and MSPRA Mentioned In Latest Richard Lehmann Forbes Column He mentioned then that Canada exempted dividends paid into U.S. retirement accounts from its withholding tax. I could neither confirm or deny that claim. I read another article recently that claimed that Canada changed its law in 2009 providing for such an exemption. Withholding Tax Rates In another article, the author  asserts that dividends paid by regular Canadian corporations (as distinguished from trusts) into an IRA or 401 (k), for securities held in those retirement accounts, are exempt from the tax.  Canadian Tax Resource Blog  ERF used to be a trust but converted into a regular corporation over a year ago.

I am armed with enough material to complain to my broker in the event a tax is collected on the dividend paid into the ROTH IRA. Of course, for the dividend paid on ERF shares held in a taxable account, the tax will be deducted from the dividend payment. I will then claim a tax credit to recoup those payments.

After I made my purchase, Enerplus reported mildly disappointing results for the 4th quarter.    SEC Filed Press Release The NYSE traded shares fell 68 cents in response to that release and closed at $23.96 last Friday. ERF reported a 4th quarter loss of 299.4M due to a non-cash impairment charge of 334M relating to its natural gas assets. That is not surprising or disturbing given the recent nat gas prices and the likely persistence of low prices given the foreseeable supply-demand factors.

The real negative, from my point of view, is that cash flow fell to C$156.7 million (87 cents per share) from C$162.6 million (92 cents per share) in the year ago quarter.  MarketWatch (called "funds flow" in the ERF report at page 3) Either natural gas prices need to go up significantly, which I do not view as likely for at least a year, or ERF will need to move to a more profitable production mix.

On the positive side, ERF stated in a separate release that it replaced 175% of production in 2011 through the drill bit.  www.sec.gov

I would view a dividend cut, sometime this year or early in 2013, to be a significant and realistic possibility.

I now own 150 ERF shares and will probably not buy more until I see significantly more oil production or much better nat gas prices. 

Friday, February 24, 2012

BYD MDT PSEC/BOUGHT 100 ZFSVY at $24.72/Added 100 of the Canadian Bond ETF CLF:CA at 20.19 CADs/

Boyd Gaming had another uninspiring earnings report that tilted toward the negative. I own the common as a LT and 1 senior bond. Bought 1 Boyd Gaming 9.125% Senior Bond Maturing on 12/1/2018 at 89 For the 4th quarter,  Boyd reported an adjusted loss of 3 cents per share, two cents worse than expected, on a better than expected 9.9% increase in revenues to $606.7 million. The stock has done well since hitting $4.48 on 10/3/11, BYD Interactive Chart, but has slid since that report. 

The Committee for a Responsible Budget has analyzed the proposals made by Romney, Gingrich and Santorum to solve the U.S. budget crisis. Primary Numbers: The GOP Candidates and the National Debt | Committee for a Responsible Federal Budget That non-partisan organization found that all three would increase the budget deficit.

Prospect Capital (owned), a BDC, sold 12 million shares at $10.95, with an option for an additional 1.8 million. Prospect Capital Corporation Prices Public Offering of Common Stock The stock fell in response, which is a normal reaction. A constant stream of stock sales by BDCs is one of their undesirable characteristics.

1. Medtronic (own): This last MDT earnings report is symptomatic of its problems and MDT's lackluster stock performance over the past several years. SEC Filed Press Release For MDT's 2012 F/Y third quarter, revenues rose just 1.7% compared to the year earlier quarter. GAAP net income was $935 million or 89 cents per share, up from $924 million or 86 cents in the year ago quarter.

Adjusted E.P.S. was 84 cents, in line with expectations.

My position in MDT is immaterial and will likely remain so until the company shows more growth, or the price falls below $32. I sold out of my position last May, (sold 209 shares MDT @ $40.68), and I have bought back only 30 of those shares at $33.4 so far.

Medtronic shares have fallen in price everyday since the earnings release and declined 34 cents in trading yesterday to close at $37.87.

2. Bought 100 ZFSVY at $24.72 Last Tuesday (see Disclaimer): Zurich Financial is a large multi-line insurance company based in Switzerland. Last Tuesday, when I purchased the ADR, Zurich Financial Services AG closed at 225.8 Swiss Francs (CHF) in its host market. That would roughly translate to $248.06 in U.S. dollars (USD) using a Currency Converter, at that time. I did not buy those shares but an ADR traded on the pink sheet exchange in the U.S.

Each ADR share is equal to 1/10 of an ordinary Swiss share. ZFSVY- OTCMarkets.com That would give me a USD price for that ADR of around $24.8 based on the closing price in Zurich last Tuesday, SIX Swiss Exchange - Zurich Financial Services AG 

I face the same currency risk with the ADR purchased with USDs as I would by buying the ordinary shares in Geneva with Swiss Francs purchased with USDs.  If the ordinary shares closed at 225.8 and the Swiss Franc rose in value against the USD, the value of the ADR would rise to reflect the greater value of the Swiss Franc, and vice versa. International Trading and Currency Risks

Back in the summer of 2011, the Swiss Franc was rising smartly against the Euro and the USD, which provoked a massive response from the Swiss Central Bank to drive down the value of the Swiss Franc.

On 8/9/11, 1 USD would buy only .72 Swiss Francs, down from 1.16 CHFs in June 2010 (& 1.8 CHF in 2001).  USD/CHF Currency Conversion As a result of the intervention, the USD will buy around .90 Swiss Francs now. Over the long term, it is apparent that the USD is losing its value against the Swiss Franc. I want some assets whose value is price in CHFs rather than USDs.

If I took the conversion value for 8/9/11 of 1 USD=.72 CHFs, and priced Zurich at 225.8 CHFs, then the value of a share in USDs would be about $312.98, and the ADR would be priced at around $31.3 rather than $24.72. The converse would also apply.

So the price of the ADR will change, both up and down, solely on currency exchange in addition to changes in the value for the ordinary shares traded in Zurich's main market. For developed countries, I will accept that currency risk for shares priced in CADs, AUDs, NOKs, and CHFs. I at least comprehend the risk.  

There is a currency ETF for the Swiss Franc, FXF, which I no longer own. On 8/9/11, that ETF closed at $136.78 and is now trading considerably below that number due to the intervention by the Swiss Central Bank. Swiss Franc ETF Chart A central bank can sell currency that it creates in an effort to drive down its value. It remains to be seen whether that intervention will continue or even be capable of restraining further the strength of the CHF. The CurrencyShares Swiss Franc Trust (FXF) rose $1.09 yesterday to close at $109.51.

Zurich pays an annual dividend which will go ex dividend in a few weeks. The dividend will be 17 CHF for each ordinary share. That works out to around $18.85 USDs or $1.885 per ADR which converts into .1 ordinary shares. At that rate, the yield at a total cost of $24.72 is around 7.5%. I did that CHF/USD conversion at last night's prices which was 1 CHF=1.1088 USD. The actual value will depend on the conversion rate at the time of the dividend payment.

If the Swiss Franc gains in value against the USD from now until then, then the dividend will be worth more to me, and vice versa.  (as an example at 1.38 CHF/1USD, near the value on 8/9/11, the value of that dividend in USDs would be around $2.36 per share rather than $1.88)

Financial results for the last quarter were adversely impacted by catastrophic losses, including the earthquakes in Japan and New Zealand. Zurich performs well in 2011 and proposes dividend of CHF 17

This is a link to a recent article published at Seeking Alpha that discusses Zurich.

Another article at Seeking Alpha lists the withholding tax rates for various countries and claims Switzerland has a 35% rate. I do not recall whether that is correct. I do claim tax credits for taxes paid to foreign jurisdictions (see recent discussion at Item # 4 Husky Energy) That article also claims that Canada will no longer collect a 15% withholding tax for dividends paid into a retirement account as a result of a 2009 law change. I am going to test that thesis by buying a Canadian security in my ROTH IRA.  

I did notice this statement in the Zurich Financial press release, announcing earnings and the dividend that claimed the dividend was exempt:


I do read these press releases. 

Zurich Financial Services AG ADS (ZFSVY) closed at $24.64 yesterday. The pink sheet exchange quote, available at OTCMarkets.com, will provide the depth of the order book for this stock.

3. Added 100 of the Canadian Bond ETF CLF:CA at 20.19 CADs-Toronto Exchange (Canadian Dollar (CAD) Strategy)(see Disclaimer): This brings my position in this Canadian government bond ETF to 500 shares:

500 Shares CLF:CA
The Claymore 1-5 Year Laddered Government Bond ETF is a low cost ETF that owns bonds issued by Canada and its provinces, staggered in maturity from 1 to 5 years. As the bonds with a five year maturity mature, the proceeds are rolled into bonds with a 1 year maturity. The expense ratio is .15% and dividends are paid monthly.   

Sponsor's website: CLF - Claymore 1-5 Yr Laddered Government Bond ETF

The Canadian Dollar Strategy is a long term strategy and is in part based on a diversification thesis. I do not want all of my assets valued in USDs. The goal is to increase my Canadian Dollar position over time. I will buy only income securities on the Toronto exchange and will receive distributions in Canadian dollars. I also hope to realize some gains from selling those securities.

In addition to the Canadian Dollar, I also look for assets priced in the Norwegian Krone, Swiss Franc, and the Australian Dollar. For emerging market currencies, I own both stock and bond ETFs and CEFs. The Canadian Dollar position is my largest foreign currency position, and the one most frequently discussed in this blog. International Trading and Currency Risks

CLF fund holdings as of 2/17/2012:

The share price does not move around much {52 week low at 19.86-52 week at 20.54, CLF Fund Chart - (TOR)}  A two cent change is almost an event. That may change in the event of a relatively quick upward move in rates.  

Claymore 1-5 Year Laddered Government Bond ETF closed at 20.20 CADs yesterday on the Toronto exchange.

This security is ex dividend today for its monthly distribution.

I have been adding to my Canadian energy positions and will discuss those trades next week. 

Thursday, February 23, 2012

PLXT PVR PERM/Sold 1 GMAC 6.25% Maturing 4/15/2019 at 92.312/Bought 50 PEP at $62.69-ROTH IRA

I noticed a number of  SEC Form 13G, and one 13D, filings for PLX Technology (PLXT), a LT, so I examined all of them. All of the information is for the period ending 12/31/2011. Artis Capital Management owns 10.3%, 13G; Blackrock owns 6.01%, 13G; Balch Hill Capital owns 9.7%, 13D., and Gagnon Securities at 4.8%. The 13D filing is unusual so I took a closer look. This is what I found to be interesting, keeping in mind Balch Hill's ownership share:



Bought 70 PLXT at $3.37-a LT (Feb. 2011). I do not profess to understand PLXT's products.


In an argument that provoked cheers among the True Believers, Romeny said that Obama has "fought against religion" and has endeavored to substitute a "secular" agenda for one based in faith. I am curious about that argument. Was the Iraq War grounded in "faith"? Preacher Santorum no doubt believes so. Were the Bush tax cuts that benefit primarily the rich part of a "secular" agenda or one based in faith? Is the agenda to dismantle the EPA and to permit more pollution a religious tenet? I could ask at least 100 similar questions.  


I do not recall Reagan pandering to religious zealots. Maureen Dowd is now calling Preacher Rick by a pet name, Mullah Rick. Religious Fanaticism


I have frequently discussed my stake in the Permanent Portfolio, a mutual fund that has an unusual asset allocation that remains relatively static over time.  The allocation includes gold and silver bullion (close to 25%), Swiss government bonds (close to 10%), natural resource and REIT stocks (close to 15%), treasury notes and strips (around 30%), short term investment grade corporate bonds (close to 6%), and growth stocks (close to 15%). SEC Filed Shareholder Report The fund fell only 8.36% in 2008. PRPFX returns  Of course, gold is no longer selling below $300 an ounce, on its way to $1700+, either.

I mention the Permanent Portfolio mutual fund now since there is a recently launched ETF originating from a different sponsor. Global X Permanent ETF (PERM) This idea apparently has its genesis in the theories of Harry Browne who argued that the best portfolio is a static one, evenly divided among four asset categories: Stocks, U.S. Treasury Bonds (Long Term), U.S. Treasury Bonds (Short Term) and Gold & Silver.  TheStreet So that is what this ETF will try to replicate. Fact_Sheet.pdf

{see: Fail-Safe Investing: Lifelong Financial Security in 30 Minutes: Harry Browne: Books}

The constituent elements can change but the stock allocation is in large cap U.S. equities (8.97%). small cap equities (2.98%), REITs (5.02%), natural resource equities (4.96%), and international equities (3.01%), as of 1/31/2012. I would emphasize that three of those asset categories have already undergone large up moves. Short term treasuries would be the sole exception. They would start to contribute something worthwhile in a rising interest rate environment.

It would be possible to replicate most of PERM's portfolio with low cost ETFs. For bullion, the gold and silver bullion ETFs, GLD and SLV, could be used for example. SHY and TLT would be low cost ETFs for short and long term treasury securities. iShares Barclays 1-3 Year Treasury Bond Fund (SHY): Overview - iShares iShares Barclays 20+ Year Treasury Bond Fund (TLT): Overview - iShares Both of those ETFs have .15% expense ratios. The iShares Silver Trust (SLV) has a .5% expense ratio. A low cost large cap ETF for U.S. stocks is the  Vanguard  Large-Cap ETF with a .12% expense ratio. The Vanguard Small-Cap ETF has a .17% expense ratio. For international stocks, I recently bought the Vanguard - FTSE All-World ex-US ETF which has a .22% expense ratio. The Global X Permanent ETF closed at $25.24 yesterday on light volume of just 6,135 shares. I did buy a 100 in a trust account at $25.11 yesterday, where I am the trustee.

{see also discussion of PERM at Zacks.com}

I am content to hold the Permanent Portfolio mutual fund, as a long term hold, but I may decide to trade the ETF PERM in one of my personal accounts.


1. Sold 1 GMAC 6.25% Senior Bond Maturing 4/15/2019 at 92.312 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): I have been selling my lower yielding junk bonds near or above par value. While this bond was not yet near its par value, I elected to eliminate it due to its lower than average coupon and 2019 maturity date. I am substituting bonds with higher current yields. This bond was sold at break-even. Bought 1 GMAC 6.25% Bond Maturing 5/15/2019 at 92.495 (April 2011).

I still own two GMAC bonds with higher coupons and shorter maturities. 

2. Bought 50 PEP at $62.69 Last Friday-ROTH IRA (Common Stock Dividend Growth Strategy)(see Disclaimer): Some of my earliest memories involve sampling Pepsi and Coca Cola.  I have always preferred Coke over Pepsi, and that choice was made after the first taste. It must be biological in origin. I will buy several cartons when the price drops to 3 for $11 which invariably happens at the local Krogers when Pepsi lowers its price.

Other people that I know favor Pepsi and have done so their entire life. There is no way that Pepsi could convert me through any advertising campaign. I doubt that I would switch from my two Coke's per day even if Pepsi gave me their product for free. There may be people who switch back and forth, but I do no know of any.  Some Coke drinkers will drink Pepsi only when Pepsi is the only offering at a fast food restaurant. So there is only so much that can be done with advertising for those who have a taste preference.

The OG does consume  more than a bag per week of Pepsi Frito-Lay products. The exact amount is a secret.  Pepsi controls about 64% of the U.S. salty snack market.

The Pepsi CEO has emphasized recently healthy drinks, and many investors claim that she has neglected Pepsi's main brand. If the OG wants to drink something healthy, he prefers water which is close to being free. The healthy drink push may turn out to be the right strategy long term.

Over the past year or so, Pepsi has lost market share in the U.S. to Coca Cola. I believe that Pepsi's flagship cola brand fell to the number 3 market share position after being displaced by Diet Coke. Fortune  msnbc.com That had to hurt. I am curious though why Pepsi was so slow to respond.

Investors did not care for Pepsi's 2012 E.P.S. forecast, as the shares fell from the $66.74 close on 2/8/12,  PEP Historical Prices When releasing its 4th quarter results, the company indicated that it expected a 5% decrease in adjusted E.P.S. for 2012. SEC Filed Press Release issued by PepsiCo, Inc, dated February 9, 2012 The company is increasing its global advertising budget by $500-$600 million in 2012 "with particular focus on North America". Maybe that will help. But, why was it not done earlier?

In the 4th quarter of 2011, Pepsico reported that core E.P.S. increased 9 per cent to $1.15 and full year core E.P.S. grew 7% to $4.4. SEC Filed Press Release issued by PepsiCo, Inc, dated February 9, 2012 Worldwide snack volume increased by 8% in the quarter and for 2011 (2.5% on an organic basis). Full year cash flow from operating activities was $8.9 billion.

Pepsico plans to increase its quarterly dividend by 4% in June. The company has a long history of raising its dividend. PepsiCo Dividend Information | PepsiCo.com The stock does qualify for purchase under my dividend growth strategy. Item # 6 Common Stock Dividend Growth vs. Long Term Investment Grade Bonds The decline in price just made the stock more appealing as an entry point for a long term hold. I will average down when and if the price falls below $60 by purchasing another 50 shares in the same ROTH IRA account. I will reinvest the dividends.

PepsiCo closed at $63.1 yesterday.

3. Penn Virginia Resources (own 1 bond: FINRA):  The PVR bond is one of my higher quality junk bonds, and has at least gone up in value since my purchase. My main reservation about the bond is that the company is a publicly traded partnership that pays out most of its distributable income to the common unitholders. Bought 1 Penn Virginia Resources 8.25% Senior Bond Maturing 4/15/2018 at 98

PVR Partners (PVR) reported 2011 distributable cash flow, after a provision for replacement capital expenditures, of $143.8 million for 2011 and $36.7 million for the 4th quarter.

Penn Virginia Resource Partners L.P (PVR) rose 58 cents yesterday to close at $24.73.  

Wednesday, February 22, 2012

AMAT/Bought 1 CoreLogic 7.55% Senior Bond Maturing 4/1/2028 at 84.95/Sold 100 TY at $15.65 & Bought 200 FOFI at $6.77/Sold 1 Telecom Italia Capital 5.25% Senior Bond at 101.328 Maturing 11/15/2013

Macy’s reported 4th quarter adjusted E.P.S. of $1.74, beating the consensus estimate of $1.65, and up from $1.57 in the year ago quarter. Same store sales increased 5.2% during the quarter. I own 1 bond. Bought 1 Macy's 7.851% Senior Bond Maturing in 2030 @ 99.5 That bond was originally issued by May Department Stores. This bond trades infrequently. FINRA It is the probably the only bond purchased as part of the Junk Bond Ladder strategy that is now rated investment grade at Baa3 by Moody's and BBB- by S & P.

Xerox, one of the few LT selections with a recognizable name, was upgraded to buy by TheStreet's rating system.

The GOP front runner for President, Preacher Rick Santorum, who is apparently on a personal mission from GOD to save the U.S., gave an interesting speech about how Satan has been attacking the U.S. for 200 years and will continue to do so. CNN.com There is no question who, in Santorum's mush of a mind, is carrying Satan's water in the political arena.

All of my 1099s from brokerages are delayed due to reporting issues. I received a notice last night that the first one was available for download into TurboTax. I quickly noticed one error where the broker reported a zero cost basis for security and treated the entire sales price as a gain. The security was bought via that broker and the gain was actually $16.55 rather than the reported $1250. I just wanted to warn everybody to check each item.

I also found out quickly that even the deluxe TurboTax requires an override entry to deal with accrued interest paid to bond sellers. That program is entirely silent on how to deal with the issue which is negligent on their part. If I did not know better, I could easily have paid several hundred more in taxes that was not owed by me.

When I buy a bond in the bond market, I have to pay accrued interest to the seller. The total sum was close to $2,000 for 2011. My broker included the interest that I paid to the sellers in the amount reported as interest paid to me in the recently reviewed Form 1099. In other words, say I paid $30 in accrued interest to the bond seller and then received in three months $60 in interest from the company. The broker would include the entire $60 as paid to me.  Accrued Interest on Bonds

It is my understanding that I can deduct those interest payments made to the bond seller as a line item in schedule B, provided I received the interest payment in 2011, and the broker included the entire amount in the 1099. I could only make that entry in TurboTax by entering an override in that schedule. I discuss this issue more fully in Item # 1 Tax Accounting For Bonds Purchased and Sold in the Secondary Market. I made a snapshot of accrued interest paid in 2010 in that post, which could not be used then as an offset because I had not been paid interest by the bond issuer yet.

See: IRS Publication 550 (2010), Investment Income and Expenses




1. Added 1 CoreLogic 7.55% Senior Bond Maturing 4/1/2028 at 84.95 Last Thursday (Junk Bond Ladder Strategy)(see Disclaimer): This bond was originally issued by First American. I explain in a prior post why this bond is now a CoreLogic obligation. Item # 3 Bought 50 of the TC PJS at 24.84 Corelogic is a publicly traded company: Profile and Key Developments

This bond is also the underlying security in the trust certificate PJS which also has a 7.55% coupon. The par value of that TC is $25. On the day of my purchase, Merrill Lynch Depositor Inc. PreferredPLUS 7.55% Trust Cert. Series FAR-1 for First American Corp., (PJS) closed at $24.91. At that price and a typical online commission, the current yield and the YTM for PJS would be very close to its 7.55% coupon. I receive a better deal by buying the bond rather than this TC. My confirmation states that the current yield at my cost 8.804% and the YTM is 9.268%:


The bond lacks liquidity however. As shown by the data at FINRA, trading is infrequent. I could probably sell PJS virtually any trading day provided I was willing to hit the bid price. I have traded that security successfully, booking several interest payments and a number of gains. The following are snapshots of the two best trades, and all of them have been profitable:

2010 ROTH IRA 100 PJS +$ 1,079.22

2010 Taxable Account 250 PJS +$1,10018 
This bond was trading infrequently before a large quantity was redeemed by the issuer.  Originally, there was $100 million outstanding. As of 9/30/11, there was only $59.645M left. The smaller quantity contributes to the illiquidity. There is another senior note, with a 7.25%, maturing in 2021, FINRA, with $400M outstanding and a 8.5% subordinated note in the amount of $34.768M due this April. {Page 15 CLGX-9.30.11-10Q}

The current consensus estimate is for a 2012 E.P.S. of 95 cents. 

2. Sold 100 of the Stock CEF TY at $15.65 and Bought 200 of the CEF FOFI at $6.77 (see Disclaimer): The OG wanted to add some spice to the portfolio, though only in a small dose, by buying 200 of FOFI and selling 100 TY. The OG needs to limit the intake of spice  to avoid hyperventilation. Tri-Continental is a more staid investment fund than the First Opportunity Fund (FOFI) which is traded on the pink sheet exchange. FOFI 

While TY sells at a significant discount to its net asset value per share, FOFI has one of the largest discounts among closed end funds. This fund reports NAV weekly, rather than daily, and the last number prior to my purchase originates from 2/10/12. At that time, the net asset value was reported at $9.02 per share and the closing market price that day was $6.65. The discount to net asset value was therefore -26.27%. That kind of discount would inform  investors that something is unusual about this fund. As of 2/17/12, the net asset value per share was reported at $9.1, creating a -25.82% discount based on a closing price of $6.75.

The fund originally invested in financial stocks. The fund management changed when the Horejsi family and their related trusts acquired a substantial stake in the fund. FOFI.PK Major Holders Stewart Horejsi is one of the largest individual investors in Berkshire Hathaway. Phoenix Business Journal Forbes Mr. Horejsi started out as an owner of welding supply business in Salina, Kansas. THE WELDER

The primary change so far has been large investments in four hedge funds affiliated with Wellington Management Company. As of  9/30/11, those 4 hedge funds accounted for 52.5% of the fund's assets:

FOFI Hedge Fund Investments as of 9/30/2011
First Opportunity Semi-Annual Report I do not know anything about those hedge funds. I did read an interview with a mutual fund manage who asserted that the Bay Pond Partners fund, run by Nick Adams, was "highly successful" and closed to new investors. TheStreet The fund also has a sub-advisory agreement with Wellington to manage the "legacy" individual securities.

So, the interesting feature for me at least is that I am buying, indirectly of course, an interest in those hedge funds at a discount.  It would not be correct to say that I am buying those hedge funds at a discount, since I have no control over what the fund does with those positions. If the discount does not narrow, and it may persist at high levels, I do not realize a benefit from that discount, unless the fund sales those positions for a profit and then distributes the capital gains to its shareholders.

List of Holdings at Sponsor's Website:  Fund Holdings
CEFA Page for First Opportunity Fund
Morningstar currently has a 3 star rating on FOFI.

This is a link to the 13G filings made by Bay Pond Partners, one of FOFI's holdings. The first one in that list was for Old Line Bancshares (OLBK)sec.gov; the second one was for Monarch Financial Holdings, (MNRK)sec.gov; and the third one in a long list was for Citizens Republic Bancorp,  (CRBC)sec.gov I randomly checked a few more, and they were small banks or mortgage REITs. I would not pay anyone to make these selection when HQ has LB running our REGIONAL BANK BASKET STRATEGY for free.

First Opportunity  is traded on the pink sheet exchange after the NYSE delisted it in the "public interest". www.sec.gov This was due to the fund's decision to invest significant amounts in private equity funds.

First Opportunity Fund closed at $6.77 in trading yesterday.

A recent detailed discussion of another Horejsi controlled CEF, Boulder Total Return, can be found at Morningstar. I would pay particular attention to the points made by the author on page 2 of that article. Those points warrant, in my opinion, a cautious approach to Horejsi controlled CEFs. I have bought and sold the Boulder Total Return fund and currently have no ownership stake. Please note that my position in that fund was just 100 shares:


3. SOLD 1 Telecom Italia Capital 5.25% Bond Maturing 11/15/2013 at 101.328 Last Thursday (see Disclaimer): While this bond is barely investment grade, I was not enthusiastic about its yield.  When I bought this bond at 96.429 (12/23/11 Post), I noted that the current yield was 5.399% at my cost, with the YTM at 6.829% which is actually good for any investment grade bond with a similar maturity. By selling the bond at over its par value, I more than captured that part of the YTM associated with the profit on the bond at the 11/15/2013 maturity.

Still, I am not interested in that kind of yield, notwithstanding the Fed's Jihad Against the Saving Class and its likely duration. This is particularly the case when held in a taxable account where the interest is taxable by both the Feds and by Tennessee's 6% income tax on dividends and interest.  So I took my $32.99 gain, plus interest, and will take more risk elsewhere for a better yield. 

4. Applied Materials (own: Large Cap Valuation Strategy): For its 2012 fiscal first quarter, Applied Materials reported a non-GAAP E.P.S. of 18 cents (9 cents GAAP) on net sales of $2.19B. The consensus estimate was for non-GAAP E.P.S. of 12 cents on $1.97B in revenues. Revenues were down 18.5% year over year.

The company sees "solid order momentum and improved outlook for our second quarter." SEC Filed Press Release AMAT expects second quarter sales to be up 5% to 10% sequentially, with non-GAAP E.P.S. falling in a range of $.20 to $.28. Prior to that forecast, the consensus estimate was of 16 cents.

I have traded AMAT profitably, always in small lots, and currently own just 50 shares. Bought 50 AMAT at $12.45 AMAT is currently paying a 8 cent per share quarterly dividend.

Applied Materials fell 20 cents in trading yesterday to close at $12.71. 

Tuesday, February 21, 2012

Bought 30 TC at 8.65-LT Category/Sold 100 CHW at $8.29/TEX/Sold All of the Bond CEF BHK at $14.058

This is a link to a positive article on the common stock of RR Donnelley (RRD) published at Barrons.com. The author maintains that RRD can continue its generous dividend and stock buybacks, while reducing its outstanding debt. This may turn out to be the case. I made the argument in a recent post that the bond market was not that optimistic. Bought 1 R.R. Donnelley 8.875% Senior Bond Maturing 5/14/2021 at 92.69 (2/13/12 Post)

Allied Motion (AMOT), a LT, had a good report for the 4th quarter. AMOT added 13.64% in trading last Friday.

Digirad (DRAD), a LT, had a ugly report for the 4th quarter.

General Mills (owned) fell $1.44 last Friday after lowering its E.P.S. forecasts for the quarter and the 2012 fiscal year. The new forecast calls for and adjusted E.P.S. of 54 to 56 for its fiscal third quarter and $2.59 to $2.61 for fiscal 2012. The F/Y ends in May. I own 50 shares plus reinvested dividends. Bought 50 GIS at 35.53 (January 2011). Eventually, I will buy another 50 shares. The stock fits into my Common Stock Dividend Growth strategy.

The Philly Fed manufacturing index improved to 10.2 in February from 7.3 in January.   philfed.pdf

Rick Santorum, one of the two leading  Presidential candidates for the GOP, claimed that Obama and "liberals" were leading religious people into oppression and beheadings similar to what happened in the French revolution.  Christians to the ‘guillotine’  Possibly, it would be a good lesson for Americans to elect this wingnut as their next President.

Santorum referred to public education, run by government, as "anachronistic" last Saturday.  NYT Possibly, his idea of a proper education is to turn the school system into an Americanized version of Pakistan's Madrasah, where American children can memorize the Bible and repeat it all day with their heads bobbing up and down.

His latest assertion is that global warming theory is phony political science.

He further claims that Obama and his allies oppose new drilling technologies so that they "can gain control of your lives". chicagotribune.com His reasoning on that point is best described as idiotic.  The thought process that generates Santorum's opinion is non-existent.

The latest Gallup Poll shows that Santorum is favored by 36% of registered Republicans nationally, extending a lead over Romney who has 26%. PBS


1. Bought 30 TC at $8.65 Last Wednesday-Lottery Ticket Category (Lottery Ticket Strategy)(see Disclaimer): Thompson Creek (TC) is a Canadian mining company. Since this company does not pay a dividend, I did not buy shares on the Toronto exchange. I will only buy income producing securities with my CAD stash. The Canadian dollar is trading close to parity with the USD and the price on the Toronto exchange was almost the same as on the NYSE. 


This Canadian company does file reports with the SEC. 

I intend at some point to buy another 70 shares. I would like to see higher prices for Molybdenum before buying more shares. 

The main reason for limiting my purchase now is the depressed price of Molybdenum. The price is currently below $15 per pound. LME (London Metal Exchange) The price fell precipitously in late 2008 as steel mills cut back production due to the recession. The price for molybdenum oxide fell to just above $5 a pound by early 2009 before starting to recover. The price had been over $30 per pound: 


That metal is used primarily with steel to give it anti-corrosive and other beneficial qualities. Thompson is the 4th largest producer of molybdenum outside China. 

Recent articles at Seeking Alpha and Motley Fool discuss the bull case for Thompson Creek. While a rebound in molybdenum prices would be helpful, the primary rationale for the LT purchase is Mt. Milligan project that will broaden TC into a cooper and gold producer. The article at Motley Fool contains an interview with TC's CEO. This mine is scheduled to start production during the second half of 2013. A lot will depend on the price of copper and the ultimate costs of production. I am more circumspect about this company than the authors of the foregoing articles due to those unknown factors. 

I do monitor the price of TC's senior bond, but have no interest in it at its current price. FINRA 

Investor Fact Sheet from TC: FactSheet.pdf

Thompson Creek Metals closed at $8.79 last Friday.

While the company reported a profit in the Q/E 9/30/11, that was mostly due to an accounting entry relating to a warrant which contributed 25 cents to the 27 cents in GAAP E.P.S..  The adjusted E.P.S. number was 2 cents down from 36 cents per share on a diluted share basis for the Q/E 9/2010. sec.gov

The current consensus is for an E.P.S. of 12 cents this year. The company is spending heavily to bring the Mt. Milligan project to fruition.

2. Sold All of the Bond CEF BHK at $14.058 Last Wednesday (see disclaimer): After investing the monthly dividends to buy more BHK shares, I ceased doing that a few weeks ago. I can not maintain much of an interest in a bond fund paying less than 6%. Based on the current monthly dividend of $.067 per share, and at a total cost of $14.06, the yield would be about 5.5%. I made a small profit on the 200 shares bought at $13.76 (October 2010), and on all of the shares bought with reinvested dividends. 


That table does not include the fractional shares which will be liquidated on the settlement date.

Blackrock Core Bond Trust closed at $14.12 last Friday.

3. Sold 100 of the Stock CEF CHW at $8.2929 Last Wednesday (see Disclaimer): This CEF was purchased at $7.18 last November and I received a few monthly dividends. This fund was sold solely in response to the recent spurt in the VIX prior to last Wednesday.

2012 CHW 100 Shares +$94.7


Calamos Global Dynamic Income Fund closed at $8.49 last Friday.  The VIX closed at 21.14 on 2/15/2012, and thereafter fell the next two days to close at 17.78 last Friday.

4. Terex (own 1 senior subordinated bond: FINRA):  I sold my common stock position in Terex, bought as a LT, too soon in retrospect.  Lottery Ticket Strategy: New Gateway Post Bought 30 of TEX at $12.68-LT Sold LT TEX at $19.11 I currently own 1 Terex senior subordinated bond. Bought: 1 Terex 8% Senior Subordinated Bond Maturing on 11/15/2017 at 96.947

Terex reported 4th quarter adjusted earnings from continuing operations of $32.5M or 30 cents per share. The GAAP number was a loss of $4M. Net sales for the 4th quarter increased 47.4% to $1.326 billion. Excluding an acquisition, net sales increased 20%.

Terex closed at $25.66 last Friday.

Friday, February 17, 2012

SOLD 50 HBAPRG at $20.64/Sold 1 Commercial Metals 6.5% Senior Bond Maturing 7/15/2017 at 99.516/Bought 1 Quicksilver Resources 9.125% Senior Bond Maturing 8/15/2019 at 99/

Yahoo Finance has updated its Key Statistics page for Exide Technologies with information through 12/31/11. This information provides useful information for the selection of Lottery Tickets, and I currently own 70 shares of XIDE as a LT. The price to sales ratio is .07; price to book is .53; and the forward P/E for the F/Y ending 3/2013 is 4.27. I would not place much reliance on the consensus earnings estimate since this company had badly missed in its recent quarterly reports and refuses to give guidance for the foreseeable future.

I do not discuss earnings from companies in the LT category, unless I also own the bond. Two LTs released earnings yesterday, and I briefly reviewed the reports:

Huntsman: SEC Filed Press Release
Par Technology: PAR Technology 

Huntsman rose 7.7% yesterday in response to its release, closing at $13.99. Bought 30 HUN @ 9.91 and 30 FCE/A at 11.58 (1/1/12 Post)

Coca-Cola increased its quarterly dividend by 8.5% to 51 cents. This is the 50th consecutive annual dividend increase. I own 132+ shares as part of my Common Stock Dividend Growth StrategyBuy of KO at 38.72 ADDED 50 KO AT 54.26 Bought 50 KO at 53.77

KO Long Term Unrealized Gain as of 2/16/2012
1. Bought 1 Quicksilver Resources 9.125% Senior Bond Maturing 8/15/2019 at 99 Last Tuesday (Junk Bond Ladder Strategy)(see Disclaimer): This bond was bought as the replacement for the sold and discussed in Item # 2 below. I recently discussed KWK in connection with a 50 share purchase of its common stock. Bought 50 KWK at $5.3-LT Category (2/10/12). I do not have much to add to that discussion. Ultimately, I would anticipate that the success or failure of this investment will largely depend on KWK's emerging oil plays. 

Quicksilver Production Partners (QPP) recently filed a Form S-1 with the SEC. QPP was recently formed by KWK. 

If the IPO is successful, KWK is expected to be the largest unit holder in this publicly traded master limited partnership. KWK would be the general partner. KWK would contribute certain of its Barnett Shale assets to the partnership and will use net proceeds received by it from QPP to retire a portion of its debt. SEC Filed Press Release  

According to FINRA, this senior unsecured KWK bond is rated B2 by Moody's and B by S & P. FINRA 

Prospectus I did not have to pay the seller much in accrued interest, just $.51, since KWK just made the semi-annual payment.

My confirmation states that the current yield at my cost is 9.143% and the YTM is about the same at 9.162% since I bought the bond near its par value.

2. Sold 1 Commercial Metals 6.5% Senior Bond Maturing 7/15/2017 at 99.516 Last Tuesday (Junk Bond Ladder Strategy)(see Disclaimer): I would view this Commercial Metals bond to be "more safe" than the Quicksilver bond, an opinion based in part on the difference in yield.  In the current abnormally low interest rate environment, a two to three percent interest differential is significant. I would pay attention to the judgments made by bond investors as reflected in prices and yields. Those investors are clearly saying that the Quicksilver 2019 senior bond is more risky than the 6.5% Commercial Metals bond, though that conclusion is subject to change based on new information. A few months ago, the KWK 2019 bond was selling at a 10% premium to its par value. 

In the last analysis, I am not interested in a junk bond selling near par value with a 6.5% coupon and a 2017 maturity date.  As a matter of personal preference, I will accept the greater risk for more yield, and then control that risk by limiting my exposure to a nominal sum. I am also more interested in the totality of my cash flow than its individual components.   


3. Sold 50 HBAPRG at $20.64 Last Tuesday (see Disclaimer): I am trading the volatility of floating rate, non-cumulative equity preferred stocks issued by financial institutions. I have traded HBAPRG several times. The issuer is HSBC USA.  This security pays the greater of 4% or .75% above the 3 month Libor rate on a $25 par value. Advantages and Disadvantages of Equity Preferred Floating Rate Securities Floaters: Links in One Post
The 50 shares sold last Tuesday were bought at $16.8 (October 2011 Post).

2012 HBAPRG 50 Shares +$176.08