Bought 100 WLFCP at 10.1/SOLD 100 MSPRA at 21.43/Sold 50 CBG at 13.2/Took Wilshire (WIBC) out of Category 1 and Added 65 Shares at 8.6/Oceanfirst

Over the past several trading days, the market has been reacting negatively to positive earnings news. I view that as a negative sign. While some are saying that the market is using any excuse to take profits, there is an underlying stream of negative developments indicating some deceleration of growth along with more pessimism about jobs. The political environment has also turned decidedly more populist as Obama's problems multiply and openly hostile to large financial institutions. The VIX shot up almost 20% yesterday to close at 22.11, well above the important 20 demarcation line. On the other hand, I have not seen enough evidence of a slowdown that would call into question a slow economic recovery in 2010 and an end to job losses in the first quarter. The sharp, and so far short in duration, pullback in the market averages is indicative of corrections in an ongoing cyclical bull market. However, there is enough negative news in the political arena now to keep me from buying stock in any large financial institution.

1. Keycorp (own common as LT): KeyCorp (KEY) is just another large regional bank whose long term shareholders have suffered greatly under bad management. In any recession, even competent bank managers can not prevent greater than normal credit losses, the distinguishing characteristic between competent and incompetent is one of degree. KeyCorp reported another awful quarter yesterday. The 4th quarter loss from continuing operations was reported at 258 million or 30 cents a share. KEY increased its loan loss reserves by 756 million to 2.5 billion, a staggering 4.31% of total loans. For 2009, KEY reported a loss of 1.581 billion or $2.27 per share. The tier 1 risk-based capital and Tier 1 common equity ratios were 12.68% and 7.46% respectively as of Q/E 12/09.

2. AT & T and Verizon: I thought that this was an interesting article comparing Verizon and AT & T on some key metrics over the past decade: Seeking Alpha

3. Too Much Negative News To Overcome Yesterday: By far the most important negative development in my view was the announcement by Obama that he was going to try to reign in the risk taking of big banks. NYTimes.com WSJ.com MarketWatch This sent the stocks of large banks down yesterday, and two of them are in the DJIA (JPM & BAC). Personally, I am not opposed to reasonable measures that will make it more difficult for the wizards to blow up the financial system while pursuing their own personal agendas to make as much money as possible for themselves regardless of the consequences of their actions to billions.

The next piece of bad news came from the labor department, which reported a 36,000 increase in initial claims for unemployment from the prior weeks revised number. ETA Press Release The last piece of news was the decline in the Philly Fed's manufacturing diffusion index of current activity from 22.5 in December to 15.2 in January. phil.frb.org /business-outlook-survey/2010/ pdf MarketWatch The new orders component fell from the December levels.

On the positive side, the leading indicators from the Conference Board did increase 1.1%.

4. Wilshire Bank (WIBC)(own LT category)/Added 65 shares at $8.6 YESTERDAY (see Disclaimer): Wilshire Bancorp reported a 3.2 million dollar profit in the 4th quarter or 11 cents per share. The forecast was for earnings of 3 cents. For 2009, the earnings were 56 cents per share, down from 90 cents in 2008. Non-performing assets decreased by 12% during the 4th quarter. The allowance for loan losses as a percentage of total gross loans was strengthened during the 4th quarter to 2.56% from 2.24% as of 9/30/09. This is a summary of Wilshire's capital ratios as of 12/31/09:

Dollars In thousands except per share info)	December 31, 2009	Well Capitalized Regulatory Requirements	Total Excess Above Well Capitalized Requirements
Tier 1 Leverage Capital Ratio	9.77%	5.00%	$161,780
Tier 1 Risk-Based Capital Ratio	14.37%	6.00%	193,025
Total Risk-Based Capital Ratio	15.81%	10.00%	134,030

I am taking Wilshire out of my Category 1 and have placed it yesterday in my Category 2 of my Regional Bank Stocks' stratagem. Consequently I can increase my investment now over $300 based on what I perceive as satisfactory results.

Previously I had bought just 45 shares at $6.54. Item # 11 Bought LT WIBC This limit was due to the Category 1 restriction of $300. Since I lifted that restriction by placing Wilshire in Category 2 yesterday, I added 65 shares at to bring my total exposure to 110 shares.

Wilshire is a California based bank that primarily caters to Koreans.

In 2005 -2006, the stock was mostly trading in a channel between 16 to 20, and started to slide in 2007 before the onset of the Near Depression: WIBC Stock Charts - Wilshire Bancorp Inc The only worthwhile analyst report, which I can access, on this small regional bank is from Morningstar which rates it 4 stars.

4. Sold 100 MSPRA at $21.43 (See Disclaimer): I had a good profit in these equity preferred non-cumulative stock so I have harvested the profit yesterday. I bought these shares at $12.88 in May 2009 and received a few quarterly dividends. Bought MSPRA This sale may have resulted from an anxiety attack suffered by the Old Geezer when listening to the Beanpole yesterday morning. Listening to politicians from either Tribe has been known to cause feelings of extreme nausea.

5. VIX: Yesterday, the VIX jumped back over 20, a negative development in my VIX Asset Allocation Model. The move was significant, a rise of almost 20% to 22.11. ^VIX: This pattern of moving for a brief period below 20 and then bursting out to above 20 is indicative of an Unstable Vix Pattern. It would not be surprising now to see the VIX move up some more, possibly into the mid to high 20s. A burst back over 30 would be a very negative event. Vix Asset Allocation Model Explained Simply With as Few Words as Possible

6. Sold LT CBG at $13.20 (see Disclaimer): The movement in the VIX will cause some paring in what I view as speculative positions, particularly those with large unrealized long term capital gains. One of my most successful Lottery Tickets from 2009 was the purchase of 100 shares of C B Richard Ellis in two fifty share lots. One lot was purchased at $2.39 in an IRA and it was sold last year at $9.73. sold 1/2 cbg The second 50 share lot was bought in a taxable account at $3.49 in December 2008. CB Richard Ellis I wanted to wait until at least it turned into a long term capital gain before selling. I sold those shares yesterday at $13.2. So the percentage gains on those two sales were huge. Under the trading rules now in effect, I must invest the proceeds of LT sales into income generating securities that meet the standards of the LB.

7. Health Care Legislation: It is not surprising that the House will be unable to approve the Senate health insurance legislation without amendment. Pelosi admitted that she did not have the votes. From the viewpoint of the more liberal Democrats in the House, the Senate plan did not go far enough and had certain other objectionable features primarily to their union supporters. Obama has made it clear that the Senate should not act until the new senator from Massachusetts is seated, whereupon he will join the other 40 Republican senators in opposing even the watered down Senate version of the healthcare bill that did not include the public option. ABC News That will be enough votes to keep a filibuster alive and prevent a vote on an amended bill. The GOP senses now that he has a winning position by being completely obstructionist on this issue. Consequently, based on the unexpected development in Massachusetts, I would not expect any legislation to pass Congress extending any government supported private insurance to uninsured Americans, and certainly nothing resembling a "public option". In fact, it would be reasonable to conclude that the Democrats have had their one and only chance to do something on this issue for a generation. It is not likely anytime soon for the Democrats to have the 60 votes in the Senate to pass anything that would be controversial on health care, and most likely they will be lucky to have 55 votes after the midterm election. So, for those who supported health reform, the people in Massachusetts just killed your hopes. I was never a supporter of the Democrats' plans based on my fiscal conservatism, and a belief that the nation could not currently afford another large social program at a time when the government was already running trillion plus dollar deficits. Until the medicare and social security funding problems are adequately addressed, which has not yet happened, and bipartisan agreement occurs on how to meaningfully control the rise in medical costs, which may never happen, it is impossible for me to support another expensive health care program.

8. Bought 100 WLFCP at $10.1 (see Disclaimer): This is the income replacement for the 100 shares of CBG. WLFCP is a cumulative equity preferred issue from Willis Lease Finance Corporation. The fixed rate coupon is 9% on a $10 par value. So, the yield at my cost is a tad under 9%. Dividends are paid monthly. Quantum believes that the distributions are qualified dividends: QuantumOnline.com I will not be in a position to verify that assertion until I receive my 1099 for 2010, sometime in early 2011. I did note in the prospectus a statement at page 61 stating the opinion of Willis that payments would so qualify. I have no reason to question that assertion. It is unusual to have a non-REIT cumulative equity preferred stock. The negative feature about this cumulative preferred is that no interest is paid on the deferred amount.

This is a link to the prospectus: www.sec.gov

Willis is a lessor of aircraft engines. The common stock symbol is WLFC. The company has a lot of debt which is the main reason why I have not bought the preferred issue until I ran out of alternatives. WLFC: Balance Sheet for Willis Lease Finance Corporatio

The consensus estimate is for earnings of 2.38 in 2010: WLFC: Analyst Estimates for Willis Lease Finance Corporatio

I did review the last quarterly report which looked good to me: www.sec.gov The company reported diluted earnings per share of 94 cents for the Q/E 9/09. The company also announced recently a stock buyback: /www.sec.gov More importantly for me as a new owner of the preferred stock is that Willis recently closed an extension of its revolving credit facility: www.sec.gov/

In addition to the overall level of debt, another negative factor is the absence of a common share dividend. This simply means that there is nothing stopping a deferral of the cumulative preferred dividend. There is a stopper provision in the prospectus at page 58:

"We will not be permitted to pay or set aside dividends on, or redeem, purchase or otherwise acquire, any of our capital stock ranking junior to the Series A Preferred Stock unless we have paid or set aside for payment all dividends in arrears, if any, on the outstanding shares of the Series A Preferred Stock and any other series of stock ranking equally to our Series A Preferred Stock. As of the date of this prospectus, we only have one other class of capital stock outstanding, which is our common stock and related rights. Our common stock ranks junior to our Series A Preferred Stock as to the payments of dividends and in liquidation."

This would be activated for as long as the firm continued to actually purchase its common stock under its current stock buyback program.

I do not believe that this purchase has much upside appreciation potential in the stock price. I would be content to hold the security for two or three years, collect the dividends, and to sell the shares at $10.3.

9. Baby Berkshire & Regional Banks Provide a Ray of Light Yesterday: My baby Berkshire shares did split yesterday 50 to 1 and provided me with one of the few bright spots in yesterday's carnage. Post split, the shares rose $3.2 after gaining $144 the day before the split. The BRK-B shares are part of my 2010 Speculative Strategy.

The regional banks seem to be benefiting from the political harangues being leveled at their large brethren, and several of the stocks in my regional bank strategy had good gains yesterday along with most of my bonds. I suppose that the adoption of the Obama tax levied only against the liabilities of the big financial institutions, and this new regulatory push, may make the smaller regional banks more attractive to some investors. I have over 20 of these regional bank stocks in my regional bank strategy now. About five new names, my favorites among those not yet owned, have risen too much over the past few days for me to add any of them without a pullback in price. I am trying to remain somewhat disciplined in my purchases, and to avoid chasing stocks which seem to be gaining in popularity by the day now.

10. OceanFirst (OCFC): This small regional bank located in New Jersey reported disappointing results for the 4th quarter. OceanFirst Financial Corp. reported an E.P.S. of just 12 cents, well below the 25 cent estimate. And the bank cut the dividend from 20 cents to 12 cents. I would not expect a dividend in excess of earnings per share to be maintained for an extended period. So I am more disappointed with the earnings report than the dividend cut. I did not see anything in the report that would cause me to jettison my 50 shares or to buy another 50 shares even with a point decline in the stock price. The interest rate margin was 3.76%. Non-performing loans as a percentage of total assets stood at 1.55%.

SOLD NADX IN IRA/BOUGHT Kraft & NESTLE/ Bought Lottery Ticket in CBG at 2.39/ Drags: TALF, AXP and GE

I was wondering when AIG would start suing the originators of the mortgage pools that it insured with credit default insurance.  AIG just filed a suit against Countrywide, now a unit of Bank of America, claiming that Countrywide had misrepresented the mortgages that it bundled into a pool. WSJ.com

Goldman claims that it was not a party to any discussion involving the government's bail out of AIG Yahoo! Finance

 It further claims that it would not have been hurt in the event AIG failed since its agreements with AIG were either fully collateralized or hedged with other firms. 

Most of the large consumer staple stocks are trading at 10 to 12 times earnings and pay decent dividends.  I decided to go ahead and continue buying individual names to construct my own personalized version of KXI, an ETF with global consumer staple stocks.   So far this month, I have started my positions in Heinz, Campbell Soup, Proctor & Gamble, Sysco, Coca Cola, and Unilever which I have previously mentioned in prior posts.  Prior to this month, I had acquired 50 shares of Walgreens which is included in KXI.  Today, I started a position in Nestle (NSRGY) at 31.28 by just buying 30 shares, and I bought my entire position in Kraft.   I am going to fund the remaining purchases out of the recent short term bond sales rather than dipping into cash allocation which has been relatively stable at 30% since 2007.  I  hope to move about another fifteen grand into my personalized world consumer product ETF.  Except for Kraft and Coca Cola, where I now have full positions in place, the trades will be sliced into multiple orders per position to mitigate the damage in the event of a continued slide in prices. ( I sold another 3 International Lease bonds today at a small loss, and those proceeds were used to finance the common shares purchased today)  The remaining purchases will be financed from the proceeds already received from the recent 5 bond sales each in issues from HIG, GE and BAC.  This is a shift in my asset allocation from short term bonds to a common stock sector play, which is nonetheless another flagrant violation of my existing trading rules. The rationale for the violation is to take advantage of what I increasingly perceive as favorable entry points in consumer stable stocks for a long term hold based on valuations and dividend yields.  

I am not going to try to duplicate KXI with all of the securities contained it it and I will ignore its weightings, using my own.  I will focus more on those paying good dividends that I view as sustainable.  Some of the smaller foreign companies will just be ignored, and I do not intend to include Wal- Mart which has over a 7% weighting in that ETF and a larger one in XLP at around 13%.   Consumer Staples Select Sector SPDR FundI will  also not buy a tobacco stock.  Of the remaining stocks in KXI, I will consider adding some shares in Kimberly Clark, Pepsico,  Diageo, Constellation Brands, Heineken, General Mills & Kroger.  Nestle and Heineken do trade in the U.S. but only on the pink sheets.  

I previously sold 100 Kraft at 28.06 for a quick in an out, with the shares purchased at 26.52, but I did hold the shares long enough to collect a dividend.  SOLD KRAFT/GOP & GUNS IN BARS/ EBAY/ KEN LEWIS AND RICHARD PARSONS/DRYSHIPS

I mentioned in that post that I would look for an entry point back into the stock.  It goes ex dividend on Monday and the yield at the current price is over 5%.  Investors were disappointed by the last earnings report.  I went ahead and re-entered the position by buying 100 at 22.26.  I simply view that I am already ahead by having exited the 100 share position at 28.06 and then buying it back about $600 cheaper at 22 and change.

I decided not to be greedy with my recent purchase of 50 NADX at $1.27 on 3/10/09 in my Roth retirement account.  SOLD 1/2 JWF ON SPIKE/ Buy of 50 NADX at $1.27 I  sold it today at $4, hey every little bit helps.   I will keep the higher cost shares in my main account as a lottery ticket holding.  I replaced the NADX lottery ticket by buying another lottery ticket-50 shares of CB Richard Ellis (CBG) at $2.39 in the Roth account. This trading is a form of entertainment for me.   I have previously discussed CBG.  It was not that long ago that I was successfully trading it at much higher levels, as in the 30s, then in the 20s.   I view its business as sound but the current economic environment has put commercial real estate in the toilet.  We are unquestionably in a down cycle for CBG's business, as the price of the stock currently reflects.  Or does it reflect no upturn in the cycle for a very long time and the possibility that CBG might not make it?  I would say more of the later than the former.  I am already familiar with the company and routinely review its earning reports and reports from analysts.  S & P currently has it ranked as 3 stars. Barclays has an equal weight with a $10 target. The last earnings report was okay considering the current state of commercial real estate. CB Richard Ellis Group, Inc. Reports Full Year 2008 Revenue of $5.1 Billion and Earnings Per Share of $0.97: Financial News - Yahoo! Finance

 Yahoo! Finance

C Seeking Alpha

Private investors applied only for 2.5% of the 200 billion the FED pledged to loan to support consumer and small business lending.  This is not a good start in my opinion

 Reuters

 Yahoo! Finance

CBS News WSJ.com

Friedman Billings lowered its target for American Express to $10 and argued AXP would post losses in both 2009 and 2010.  The broker further maintained that a dividend cut was prudent and imminent. - CNBC.com

Several firms cut their earnings estimates for GE. Bernstein expects GE Capital to post a 1 billion dollar loss.  It cut its 2009 estimate to $.81 from $1.18. GE Shares Fall as Analysts Cut Profit Views - Financials * US * News * Story - CNBC.com  Deutshe Bank cut its forecast to 97 cents from $1.20.  This has to do with GE Capital and the recent presentation made by GE.  CNBC.com

The news on GE, AXP and TALF understandably placed a lot of pressure on financials today. 

I accounted for the entire volume on the stock exchange for GJO today.  Almost makes me feel like one of those Masters of the Universe.  I figured that holding that one to maturity in 2030 would add another 2% per year in annualized return.   It is a floater with no guarantee and a poor float provision to boot.  This purchase is more of an inflation hedge than anything else. 

DISCLAIMER:

  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

Notable News 10 22 2008 & END OF DAY TRADES (IR, INTC, TE AND EHL)

The following article summarizes the reasons why commercial real estate is going to tank even more. Commercial real estate investment trusts have already been smashed. Based on a survey of professionals, a recently issued report from Price Waterhouse and the Urban Land Institute predicted negative returns in 2009 and a slow recovery during 2010. The stock prices of many REITs owning office buildings have already been cut by more than 50% over the past year, including those focused on prestige properties in upscale markets like New York, Washington, San Francisco and Boston, including S. L. Green (SLG), Boston Properties (BXP) and Vornado (VNO). For example, Boston Properties hit a 52 week high at 194 and recently was trading in the mid 60s.

Commercial real estate brokers, like C.B. Richard Ellis (CBG) traded at around 41 in July 2007 and it is now fetching less than 6. When you see that kind of carnage, you would expect the worse is over, at least for CBG, but it still reacts negatively when the market becomes spooked.  There are not too many more points to zero for that one, so it may be worth a 50 share nibble soon, with at least a five year holding period expected now for any purchase at the current depressed level, knowing full well that more bad news is to come.  With my risk profile, I can take a gander over the next few days, do some more research on CBG, and possibly buy some using  $200 to $250 and then just try to be very very patient. I elected not to do it today however with CBG down to 5.5.

At around 2:30, C.S.T., it was obvious that this was going to be a bad day so I entered a few odd lot limit orders for blue chips at more than 50 cents under the then existing market prices and they were all filled. My strategy, which seems appropriate for me under these market conditions, is to buy just a tad and then buy more only if the stock continues to fall. This is hard to do on a day like today.

Today, I bought Ingersoll Rand at 18.50, and the stock was at 19.2 when I placed that order. It blew through my odd lot limit order at 18.5, filling it on its way down to a low of 18.2, then the stock recovered some to finish down 7% to around 18.78. In February 2008, and I just checked this,  I sold out my position at over 41.  At my current price, the dividend yield is around 3.9%.  IR did issue a warning recently. MarketWatch IR said at that time it expected earnings of $3.35 to $3.55 this year, which may be optimistic now with the abrupt slowdown, but at my price today I am only paying around a 5 P/E for a pretty solid industrial company. IR: Analyst Estimates IR just completed an acquisition of Trane. I read again all the recent reports that I have including the ones from Value Line, Morningstar and S & P  as well as all of the reports for the next one discussed below. 

I also placed an order to buy 50 Teco Energy, an electric utility operating in Tampa, at 13 and it filled, in similar fashion to the Ingersoll order.  It was placed at a price well below the market with 30 minutes to go and just blew through it to 12.82 before recovering to 13.32. At my cost, it has about a 6.15% yield.  

I also added to my recent initiation of an Intel position by buying an odd lot at 14.46. see prior post: INTEL  This blue chip company is now slightly below its low seen in 2000 and 2002 at around 14.8.  The yield for this cash rich company is coming closer to 4%.

Lastly, I bought 100 shares of an Entergy Louisiana First Mortgage Bond (EHL) at 22.75. Entergy (ETR) is a very large electric utility operating in the south, similar to Southern (SO). This is a link to ENTERGY'S  profile.

The service areas are Arkansas, Mississippi and Louisiana. In Louisiana, its subsidiary used to be known as Louisiana Power & Light.  This security is basically a First Mortgage on all of Entergy Louisiana's assets.  www.sec.gov It has a separate sub for New Orleans based on a review of its SEC 10-Q filing. www.sec.gov The First Mortgage Bond that I bought today has a coupon of 7.6%, a par value of $25 and it matures on 4/1/2032 unless redeemed earlier at par and accrued interest.  It pays interest quarterly and it has already gone ex-interest for the September quarter.  At my cost, the effective yield is 8.35% for a security that is a First Mortgage. I also considered buying today another First Mortgage bond from Entergy Mississippi (EMO), www.sec.gov, that has a lower coupon at 7.2% and was selling at a slightly higher price than ETR. 

I also mentioned in a prior post that I would be adding to a mutual fund, at the bare minimum allowed, on bad days and this certainly qualified, so I added to Janus Balanced. Buy High & Sell Low /Retrospective on the Good & Bad

I can only say that, if we have another waterfall tomorrow, I will probably be placing some odd lot orders for dividend paying blue chips well below the then existing market at around 2:30, like today, but I will not be spending too much of my cash in any given day. When you get a serious down move like today, with most of it toward the close, I also believe that it has to do with forced redemptions pursuant to margin calls, to individuals and to hedge funds particularly, and mutual fund sales to meet redemptions, and I suspect that individuals are throwing in the towel big time this month.  So, for many, doing what I do is not an option. I just view this as another opportunity for someone who has the stomach for it and you never get use to bear markets as bad as this one. A player still has to play the game.    

In these blogs, I am acting as an unpaid financial journalist and an occasional ornery political commentator.    This is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In these blogs, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always view the prospectus for an investment like EHL before considering making an investment.   The same is true for Trust Certificates, preferred stocks, bonds and bond like investments.