European Banks and IAS 39/VIX/Sold 50 of the ING Hybrid INZ at 21.21 Bought at a Total Cost of $7.82-Last ING Hybrid Owned/Bought 50 SIVBO at 24.5 in Roth IRA/Bought 50 ACET at 5.07 as Lottery Ticket

Floyd Norris notes in his NYT column that European banks are placing differing values on Greek government debt, even when the same firm audits banks assigning different values to the same debt. The relevant accounting rule, IAS 39, is being applied in different ways.  Although the Greek government bonds trade everyday, Norris maintains that the French bank BNP Paribas claims that the Greek government bond market is inactive and consequently uses a model to value its bonds. The result is that the French banks have gone the furthest to pretend as if those Greek bonds were money in the bank. A letter was written by Hans Hoogervorst of the International Accounting Standards Board  complaining about the disparate treatment. www.ifrs.org While no bank was expressly mentioned in that letter, Norris maintains that Hoogervorst was referring to the French banks. The French banks fell again in trading last Friday: CREDIT AGRICOLE; BNP PARIBAS; Societe GENERALE.   

The credit default swaps market rates the likelihood of a Greek government default at 90-91%. Bloomberg  Barrons.com The Greek government's two year note was priced last Friday to yield 55.76%, another sign of a likely default.

Increased concerns about Europe sent the U.S. stock market into another downward tailspin last Friday. The precipitating event for Friday's move appeared to be the resignation of Juergen Stark, a German, from the six member Executive Board of the European Central Bank, apparently in protest of the ECB's sovereign bond buying program.  MarketWatch The market's decline last Friday seemed to be an excessive reaction to that news.

This is a link to a sobering assessment of the European Crisis situation made by Rob Arnott.

The Volatility Index (VIX) index for the S & P 500 rose 4.2 last Friday to close at 38.52. The index remains in an Unstable VIX Pattern and is dangerously close to moving into the catastrophic phase of that pattern, referred to as Phase 2.  Continuation of Unstable VIX Pattern/Possible Head and Shoulders in the S & P 500 Forming (July 28, 2011 Post). The Unstable VIX Pattern formed as a result of a Trigger Event in August 2007, VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern, which required a reduction in HK's stock allocation. Vix Asset Allocation Model Explained Simply; When VIX Model Gives A Signal To Change Asset Allocation-Each Individual Needs to Assess Their Own Situational Risks;  More Of Less Safe After Averages Fall-Tension with Vix Model (May 2009 Post); More on the Vix Model: What it Does not Predict is as Important as What it Does/Parallels to VXO 1987-1988 (May 2009 Post); SEPTEMBER 2008: FORMATION OF THE DEADLY PHASE 2 OF THE UNSTABLE VIX PATTERN (May 2009 Post); Trading and Asset Allocation in Stable and Unstable VIX Pattern (November 2008 Post).

1. Sold 50 INZ in Regular IRA last Thursday at $21.21 (see Disclaimer):  I do not find the news coming out of Europe to be comforting. My average cost basis for these 50 shares was $7.98:

                                           

I received 11 dividend payments of $22.5 or $247.5 on a total investment of $399 made on 2/18/2009 or roughly 62% just on the dividends.  The share profit was another $653.52 (snapshot last post: Stocks & Politics: Obama's Speech on Jobs and GOP Response/Mortgage Rates/Europe/Bought Municipal Bond CEFs: 200 NMO at 13.03, 200 MUE at $12.89 and 100 BAF at $13.89/Sold NQS at 14.44).

Given what is happening in Europe, I did not want to risk the previously unrealized profit in the shares.  Another consideration is that no tax is paid on the gain since the shares were held in an IRA.  If the opportunity arises and my comfort level with ING hybrids rises, I can buy back the shares at a later time, but only at a much lower price than prevailing today.

ING Groep N.V. 7.20% Perpetual closed at $20.17 in trading last Friday, down 51 cents for the day.

ING HYBRIDS: Links in one Post

2. Bought 50 SIVBO in ROTH IRA at $24.5 Last Thursday (see Disclaimer): SIVBO is a trust preferred stock with a 7% coupon on a $25 par value. Like many bank TPs now selling near par value, SIVBO has minimum upside price potential, while having significant potential downside risks. 

SIVBO is a typical trust preferred stock. The issuer is SVB Capital II, a Delaware Trust, wholly owned by SVB Financial (SIVB), formerly known as Silicon Valley Bancshares.  The TPs are sold to the public by the trust, hence the name trust preferred. The funds realized by the sale of the TPs are used by the trust to purchase a junior bond from SVB Financial.  The TP represents a beneficial interest in the bonds owned by the trust. Distributions are taxed as interest and are cumulative.  Payments may be deferred for up to five years, provided the stopper provision is not activated.  Payment of a distribution on a more junior security, such as common stock or traditional equity preferred stock, would activate the stopper and prevent the bank from deferring interest on the junior bond for as long as those payments continue to be made. SVB Financial has not paid a common stock dividend since 1972, and does not presently intend to pay one. If interest payments are legally deferred, they will accrue interest at the coupon rate of 7%. 

This is a link to the prospectus: www.sec.gov Both the TP and the underlying junior bond mature on 11/15/2033. That maturity date creates a great deal of interest rate risk for any investor desiring to hold the security long term. The value of this security will go down in a period of rising interest rates. Item # 2 Interest Rate Risks- Bonds;  Rising Rates and Your Investments and Risks of Investing in Bonds (SIFMA articles).

I am close to playing with the house's money on SIVBO, given the prior realized gains and interest payments.  Added 50 SIVBO AT $19.20 IN ROTH Added 50 SIVBO at $19.15 Bought 50 SIVBO at $19.49 Sold 50 of the 150 SIVBO at 24.65 Sold Remaining SIVBO at $25

2011  100 Shares SIVBO Fidelity Taxable Account=$513.84

2011  50 Shares SIVBO ROTH IRA=$274.98

2011 100 Shares SIVBO - Vanguard Account +$561.43

+$1,354.57

At a total cost of $24.5, the current yield is around 7.14%. When held in the ROTH IRA for a U.S. taxpayer, that is in effect a tax free yield.  Money will double in about 10.05 years at a 7.14% annually compounded rate. Estimate Compound Interest

SVB Financial may continue to count this TP as part of TIER 1 capital since it had less than 15 billion in assets as of 12/31/2009. (see pages 12-13 of the 2010 Form 10-K)

SVB Capital II 7% Cum. Trust Pfd. closed at $24.6 last Friday, up 10 cents.

SVB Financial participated in TARP and received $235 million. Form 8-K  The bank bought back the government's preferred stock in December 2009. (page 31, Form 10-K)

The current consensus estimate for SVB Financial is for an E.P.S. of $3.3 in 2011 and $3.48 in 2012.  The common is rated 4 stars by Morningstar.

Trust Preferred Securities: Links in One Post

3. Bought 50 of ACET at $5.07 on Wednesday (LOTTERY TICKET strategy)(see Disclaimer): This strategy was a gem in 2008-2010, but has not been working lately. The main purpose for this strategy is to keep RB occupied, and out of the LB's way. I have previously bought and sold this stock as part of the LT strategy: Bought 50 ACET at 5.2-LT (January 2010); Sold LTs ACET at $6.82 (April 2010). Aceto does pay a semi-annual dividend of 10 cents per share, which gives it close to a 3.9% yield at a total cost of $5.1. The price is also near where the stock has bottomed over the past five years. Chart 

RB made this purchase on 9/8, knowing the company was going to report earnings the next morning. Given the short proximity to an earnings release, LB would waited  to review the earnings report before making a decision.  RB could care less about that report.  Instead, the RB was just focusing on the dividend yield and the forward P/E estimate, which was less than 10 times earnings, since it can not handle more than two details without causing an inordinate amount of stress. Only one analyst follows the company and has a 12 cent estimate for the Q/E in June 2011. ACET The OG, always willing to help the RB out, added that the P/S ratio is .35 and the P/B ratio is .86 according to YF which was based on the period ending in March 2011.

Aceto reported Friday morning net income for its fiscal 4th quarter, ending 6/30/11, of $3.494 million or 13 cents per share, down from 17 cents in the year ago quarter. Revenues for the quarter were $121.204 million and $412.428 million for the year.  Non-GAAP E.P.S. for the F/Y was 47 cents up from 39 cents for F/Y 2010. 

Aceto rose 20 cents in trading last Friday to close at $5.31. A tiresome voice was heard to say "power to the RB".

Aceto Profile  Key Developments 

Obama's Speech on Jobs and GOP Response/Mortgage Rates/Europe/Bought Municipal Bond CEFs: 200 NMO at 13.03, 200 MUE at $12.89 and 100 BAF at $13.89/Sold NQS at 14.44

Gartner reduced its 2011 worldwide growth estimate for personal computers to 3.8% from 9.3%.

Obama had fire in his belly for the first time during his speech last night. Daniel Gross expressed some favorable opinions about Obama's jobs plan in his YF column, but noted correctly that the GOP will likely oppose even those aspects of the plan which originated from their brains, with the usual abundant level of hypocrisy and political machination. The WSJ noted that the tax cuts proposed by Obama were designed to help small businesses. A summary of the plan can be found in this article at The Atlantic and in this graphic found at the The Washington Post. Virtually no member of the GOP applauded a single proposal other than the passage of new trade agreements or the need to cut back on some regulations. NYT  Obama's plan was dismissed by Senator Minority Leader Mitch McConnell, as I would expect, even though it was filled with tax cuts for small businesses. (Transcript - Obama’s Speech)

Christine Lagarde, the new IMF chief, said yesterday that the countries "must act now-and act boldly-to steer their economies through this dangerous new phase of the recovery". Bloomberg It is hard to see that actually happening in the U.S.

The BALTIC DRY INDEX continues to turn up, increasing 2.179% yesterday.

Initial claims for unemployment remained over 400,000 for the week ending 9/3. ETA Press Release

Greece is backsliding on the austerity goals required by the EU for more bailout funds.

Freddie Mac reported yesterday that mortgage rates hit another all time low yesterday since it started to compile data. The average rate on a 30 year mortgage loan was just 4.12%. A 15 year FRM averaged a ridiculously low  3.33%. Those rates are tempting, particularly the 15 year FRM, but I will just keep HQ free and clear of any debt.

I mentioned yesterday that my baseball cards are stored with my gold in a bank lock box.  I had a query about that. What do you think is more valuable, a 1958 TOPPs Mickey Mantle baseball card, professionally graded at PSA 8, or a one ounce Gold eagle worth around $1,850? 1958 Topps MICKEY MANTLE #150 HOF PSA 8 | eBay Now, that baseball card cost a penny originally, making gold and silver buys look like pikers in comparison.  The gold would be easier to sell, however.

I did become more concerned yesterday about the situation in Europe, which caused me to exit my ING hybrid position by selling the last remaining shares of INZ bought at less than $8. The same concern caused me recently to sell my last Aegon fixed coupon hybrid, owned in the same account: Sold Aegon Hybrid AEH at $23.09 Bought at $4.63 That concern has been building for awhile, but the tipping point occurred when I read comments made by several officials yesterday about Greece. NYT The market has been signaling concern over the past several weeks by knocking down the prices of European bank shares.  It just was not worth it to risk close to a 200% gain under the current circumstances. I will discuss that transaction and two others made yesterday in the next post.

50 SHARES INZ 2011 Realized Gain Regular IRA=$ 653.52 on $399 Total Cost

I am not making a prediction about what will happen in Europe. I do view the risks of a meltdown as increasing due to a Lehman 2.0 type event, starting with one or more sovereign defaults and cascading into the European financial system.

While Bernanke did not plough any new ground in yesterday's speech, it was nonetheless depressing for the OG to read it. FRB: Speech--Bernanke, The U.S. Economic Outlook--September 8, 2011 "Just a load of B.S", a voice was heard to say, "Uncle Ben is so boring, don't sweat the details, go all-in you bunch of wusses, buy a million of the Baby B, who ate my skittles, set the RB free".  RB concluded by noting that even the Lame Brain should be able to beat the 1.979% yield of the 10 year treasury, assuming the "girlie man starts taking a chance or two".  After all, "that is a pretty small bogey to beat, the RB could earn that compounded ten year return in about two seconds".

What are the odds that an investment in the SPDR S&P 500 ETF Trust (SPY) will beat the return of a ten year treasury bought at yesterday's close with a 1.979% yield, over the next ten years?

What are the odds than two decades back to back will have a negative real return for the S & P 500?

1. BOUGHT 200 shares of MUE at $12.89 on Wednesday (see Disclaimer): The tax free dividends paid by leveraged municipal bond funds look attractive to me. The leveraged municipal bond CEFs are able to borrow money at low short term rates, using those borrowed funds to purchase longer dated and higher yielding municipal bonds. The current dividend yields on many of them are over 6%. There is of course enhanced risk due to the leverage, as well as the credit risks generally associated with municipal bonds today and the interest rate risks of owning longer dated maturities.
   

This is a link to the sponsor's webpage for MUE. The portfolio is weighted in AA rated bonds at 66.3% of the portfolio. Bonds rated at "A" are weighted at 24.4%. Both numbers are as of 6/30/11. The current monthly distribution rate is $.0735 per share. The next ex dividend date is 9/13/11. Dividend Dates and Distribution Amounts Announced for Certain BlackRock Closed-End Funds At a total cost of $12.89, this would equate to around 6.84%. The tax equivalent yield would be much higher for a U.S. taxpayer in the highest tax bracket. Morningstar currently rates the fund at 3 stars. The fund does use a lot of leverage which would make it even more risky in a rising rate environment. 

This is a link to the last SEC filed shareholder report for MUE: www.sec.gov The fund is still using auction rate preferred shares as the source of borrowing. As of 1/31/11, the unfortunate souls who own those shares were  receiving .44% on average over the prior six month period (page 51). A list of portfolio holdings for the period ending in April 2011 can be found in the last filed SEC Form N-Q.

BlackRock MuniHoldings Quality Fund II (MUE) closed at $12.91 in trading yesterday. 

2. Bought 100 shares of BAF at $13.89 on Wednesday (see Disclaimer): This is a link to the sponsor's webpage for BAF. As of 6/30/11, the portfolio has a greater weighting than MUE in "AA" rated municipal bonds, with a 77% concentration compared to 66.3% for MUE. The current monthly dividend for BAF is $.0745 per share, and the next ex date is 9/13/11 also. At a total cost of $13.89, the yield would be around 6.44% at that rate. BAF is also rated 3 stars by Morningstar. This fund also uses leverage. This is a link to the  SEC Form N-Q and to the last SEC filed shareholder report. The leverage is shown as 37% in that shareholder report as of 2/28/11. An investment advisor reported a 15.61% ownership of this fund, on behalf of its clients, as of June 2011, in a SEC Schedule 13-G filing. This is a link to BAF's CEFA page.

BlackRock Municipal Income Investment QualityTrust (BAF) closed at $13.85 in trading yesterday. 

On Wednesday 9/7/11, MUE closed at a -5.08% discount to its net asset value per share and BAF closed a -5.57% discount. The MUE discount remained at -5.08% on Thursday. The MUE net asset value per share was $13.58 as of 9/8/11. BAF's discount expanded some on 9/8 to -5.97% based on a closing price of $13.85 and a NAV per share of $14.73.

3. Pared Trade: Sold NQS at $14.44 and Bought 200 NMO at $13.028 Yesterday (see Disclaimer): In this pared trade, I basically exchange NMO for NQS. Both are leveraged municipal bond funds offered by Nuveen. They are similar funds.

As of 7/291/11, the bonds owned by NMO have an average maturity of 20.40 years, weighted in AAA (16%), AA (44%), A (15.3%) and BBB at 20.9%. NMO - Nuveen Municipal Market Opportunity Fund Unlike NQS, NMO was selling at a discount to its net asset value. The discount was 4.82% at Wednesday's closing numbers.

As of 7/29/11, the bonds owned by NQS have an average maturity of 19.57 years, weighted 15.5% AAA, 38.3% AA, 15% A and 23.3% BBB.  NQS closed Wednesday at a +1.12% premium to its net asset value. Both CEFs pay monthly dividends at the same time and use a lot of leverage. NMO Leverage

Daily Pricing information on Nuveen CEFs is available at that firm's website.

The current monthly distribution rate of NMO is $.0775 per share: NMO. At that rate, the yield at a total cost of $13.03 is around 7.14%. The tax equivalent yield for a high bracket U.S. taxpayer would be higher of course.

This is a link to the last NMO SEC filed shareholder report.

Nuveen Municipal Market Opportunity Fund (NMO) closed at $13.04 yesterday. As of the close yesterday, net asset value per share was $13.69 and the discount to NAV was at -4.75% based on a close of $13.04.  The Nuveen Select Quality Municipal Fund (NQS) closed at $14.44 and at a +.98% premium to its net asset value.

I will discuss the remaining trades from yesterday in the next post. For the most part, I am concentrating on increasing my cash flow, which, along with my cash stash, will give me more firepower later on.  

Bought Back 200 Artis REIT at 13.21 CADs/ Bought 300 of the Bond CEF MMT at $6.49/Acquiring Relevant Information/

I am busy on other matters, so I will discuss two of the trades made yesterday in the next post. 

I mentioned in yesterday's post that I sold some junk silver coins earlier in the week.  I have never paid for that type of investment. Instead, when I was no older than 13, I started to take those coins out of circulation at their face value. I knew then that the government was taking the silver out of newly minted dimes, quarters, and half dollars starting in 1965 because silver had become too expensive.  It did not require much thinking to realize that the coins then in circulation had more value than the face amount and were likely to increase in value.  I had enough information at the age of 13 to evaluate the opportunity and to seize it. At a minimum, I had to make an effort to acquire the necessary information and then make a rational evaluation of that information.  Individual investors frequently fail to make that effort due in large part to a potential lethal combination of laziness and right brain decision making. Power to the RBs, a voice was heard to say in reply.

Unfortunately, forming opinions with little or no accurate factual information is the rule rather than the exception. While there will always be unknowns and unknowables, the odds of making mistakes increase when the RB rules and no effort is made to acquire relevant and available information before forming an opinion and taking action. 

If I had not made an effort to acquire relevant information, I would not have recognized the opportunity when it was presented to me.

There was only so much silver coins that I could put away based on my income then, consisting mostly of mowing lawns at $2 per yard including hand clipping.  Or worse, working for my father during the summer. I still have some of those pay stubs as a reminder.  

Among the coins sold last Tuesday were 9 Peace silver dollars.  My total cost basis was $9. The silver in those coins was worth almost $300 yesterday. 

My mistake was not selling all of that junk silver in 1980, for roughly the same amount, and using the proceeds to buy a 30 year treasury bond yielding 14%. I recognized that opportunity too, but did not seize it. Instead, I kept the coins after rejecting an offer, continued to roll over 3 month bank certificate of deposits yielding 14% or so, and then started to invest in stocks again with gusto in August 1982.   

In looking back, I still probably have every dollar that I made during those years before college, in one form or another. Some funds were used to finance the junk silver coins, or to acquire my first gold piece at the age of 13. Back then, bullion gold was not available for purchase, but you could buy gold with numismatic value. I recall buying when I was 13 a brilliant uncirculated Liberty Head $5 gold piece for $30, minted in the 1880s by the U.S., and I still own that coin. Other funds were used to buy my first stock, HCA, just after it went public in the late 1960s. I still have the baseball cards from the 1950s, many of which are more valuable than the gold, and are stored with the gold in a bank lock box.

I wonder how many Hank Aaron  Hartland statues bought in 1958 are still around, in pristine condition, with the bat:

That kind of item cost three or four bucks new.

In my circle of friends and acquaintances, I was the only kid doing these things back then. Everyone else spent their money almost as soon as it arrived, never on anything of consequence or long term durability, nor with any possibility of increasing in value.

1. Bought Back 200 of ARTIS REIT at 13.21 CADs-Toronto Exchange Yesterday ( Canadian Dollar (CAD) Strategy)(see Disclaimer): The Canadian REITs that I have bought and sold pay dividends on a monthly basis. Since I buy them on the Toronto exchange, I will receive the dividends in Canadian dollars, after payment of the 15% Canadian withholding tax, which is what I want. The general idea is to increase my holdings of Canadian dollars by investing in income producing Canadian securities. The current dividend rate for Artis is 9 cents per month. Artis REIT This gives me about a 8.8% yield at a total cost of 12.21 CADs. 

This is a link to the firm's website: Artis REIT

This is a link to the last quarterly report that I found at the firm's website: cms.tng-secure.com 

Artis owns retail, office and industrial properties primarily in western Canada , but has been buying properties in the U.S.  A recent U.S. acquisition is an office property under construction in Phoenix that is 100% pre-leased to the General Services Administration. cms.tng-secure.com 

This link has a location map of Artis' properties. By clicking the red dot or the province, more information is provided. 

I have previously bought and sold this stock: Bought 200 AX-UN.TO @ 13.41 CAD Sold 200 Artis REIT at 13.88 CAD I am content to collect the dividends and to make whatever I can on the shares. 

2. Bought Back 300 of the Bond CEF MMT at $6.49 Yesterday (see disclaimer): This brings me back up to 1000 shares. I sold 300 shares recently at $6.89 (July 21, 2011 Post). Those shares were bought at $6.61. So I sold those shares at a profit after collecting some monthly dividends and bought them back at a lower price. In the world of bond CEF trading, that is viewed as a win. 

MFS Multimarket Income Trust (MMT) closed at $6.49 in trading yesterday. 

The current monthly distribution rate is $.0425. MFS Announces Closed-End Fund Distributions At a total cost of $6.49, the yield would be about 7.86% with a continuation of that rate.  

This CEF is currently rated 4 stars by Morningstar. As of Tuesday's close, the shares were selling at a -9.74% discount to net asset value which was then $7.19 per share. The fund does use some leverage. The page at Morningstar shows a leverage ratio of 15.16%.  As of 4/30/11, the average annual interest rate on the borrowed funds was 1.24%. 

This is a link to the sponsor's website: MFS Multimarket Income Trust This fund owns a lot of junk bonds as shown on that page. It does have some investment grade bonds (23.12% weighting in BBB and over 17% A or better). Most of the junk is concentrated in BB at 30.04%, which is a higher grade than most of the individual bonds bought in my junk bond ladder strategy. The effective average maturity is 8.23 years as of 7/31/2011. 

This is a link to the last SEC filed shareholder report: MFS MULTIMARKET INCOME TRUST

CEFA page on MMT. Yesterday, the net asset value per share $7.16. Based on a close of $6.49, the discount was -9.36.

I am not a long term holder of bond CEFs and have been flipping them constantly, content with making small profits on the shares and collecting a few dividends. I have held some shares in a few funds for longer than a year.  

ISM Services Index/Swiss Franc/FOR and DSR Ratios Indicate American Consumer is in Better Shape Than Many Believe/Sold Some Gold and Silver/Bought 1 Sears Holding 6.625% Senior Secured Bond Maturing 10/15/2018 at 83.25

The most recent CBO estimate of the Recovery Act's impact on jobs is discussed at this article found at the Center on Budget and Policy Priorities. The CBO report can be accessed at cbo.gov.pdf.

This site has charts showing the long term decline of manufacturing jobs, compared to service industry jobs, in the U.S.

The NIKKEI 225 Index is currently at levels prevailing in 1982. Buy and hold, stocks for the long run?

The Hong Kong purchasing managers index for the total economy fell into contraction today, falling to 47.8 in August, compared to a reading of 51.4 in July. hsbc.com /hk_pmi.pdf

The Swiss National Bank announced yesterday that it will "no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.2" and "is prepared to buy foreign currency in unlimited quantities" The SNB will "take further measures" in the event the "economic outlook and deflationary risks so require". Press Release Swiss National Bank.pdf  MarketWatch The CHF fell about 8% against the EURO in response to this announcement in yesterday's trading. CHFEUR The ETF for the Swiss Franc, FXF, declined 8.34% in trading yesterday to close at $114.8.   The market is not setting the price of a lot of things now. The main Swiss stock index, ^SSMI, rose 4.36% yesterday.  The USD priced ETF for Swiss stocks, EWL, fell 6.43% and the CEF Swiss Helvetia Fund (own) declined 2.37%, in response to that currency loss versus the USD and the appreciation in Swiss stocks.

Based on recent polling results, it is clear that Obama is in serious trouble in 2012. ABC News

I did sell some junk silver coins yesterday, along with enough gold to pay for my 2011 property taxes, home insurance and enough to fill up my Saturn for over a year (slightly less than 2 ounces) This was my first sale of bullion. Gold was over $1900 an ounce at the time.  I had no trouble selling that stuff without leaving the SUV Capital of the World.

The ISM Services index was better than expected at 53.3%. The consensus estimate was for 51. The new orders component was reported at 52.8%. Not everything is woe is me.

The EU is a mess. It is hard to visualize how the EURO survives or why the citizens of the northern European countries will want to bail out their Mediterranean neighbors except that the other outcome would likely be worse.  A report from UBS estimates that leaving the EURO would cost the indebted countries 40 to 50% of their GDP in the first year. ZeroHedge Forbes  And their estimate is the cost to each German would be around €6000 to €8000.  CNBC If that is the alternative, then perhaps another alternative to the current arrangement can be found before the market trashes the EURO.

1. Household Debt Service Payments as a Percentage of Disposable Personal Income: While the talking heads and assorted crystal ball gazing gurus are mostly in a doom and gloom mood now, I wanted to focus on two charts that are encouraging. The Federal Reserve has a data series that it calls the household debt service ratio (DSR). The DSR is an estimate of debt payments to disposable income. Those payments are required payments on outstanding mortgage and consumer debt. Household Debt Service and Financial Obligations Ratios Another data series, called the financial obligation ratio (FOR), adds automobile lease payments, homeowner's insurance, property tax payments, and rental payments on owner-occupied property. Both the FOR and DSR ratios have been trending down markedly, suggesting to me that consumers  are in better shape now to service their financial obligations. This may be due in part to refinancing mortgage obligations at lower interest rates and an increased saving rate coupled with pay downs of the most expensive debt obligations. Some of the decline in the DSR and FOR ratios would be linked to foreclosures and bankruptcies. Still, the consumer may be in better condition now to spend than many believe. This is a chart of the DSR ratio:

Household Debt Service Payments as a Percentage of Disposable Personal Income 

                                        

This is a chart of the FOR ratio:

Household Financial Obligations as a Percent of Disposable Personal Income

Another data series shows that the total amount of personal income has been trending up in recent quarters, which is also true for the total amount of disposable personal income in current dollars: National Income Table 2.1 Bureau of Economic Analysis:

                                                    

2. Bought 1 Sears Holding 6.625% Senior Secured Bond Maturing 10/15/2018 at 83.25 Yesterday (Junk Bond Ladder Strategy) (see Disclaimer):. This was my only trade for yesterday, as the LB's usually frenetic trading activity slows to a crawl while it assesses the many known and unknown variables. I am allowed to buy just 1 junk bond per month, and this Sears senior secured bond fulfills my entire quota for September.

This is a link to the prospectus: Final Prospectus As detailed in that prospectus, the note does have collateral consisting of credit card receivables and inventory, junior in priority than the secured revolving credit facility. Still, that is better than having no collateral at all.

This is a link to the FINRA information on this bond:  FINRA According to FINRA, the bond is currently rated Ba2 by Moody's and BB by S & P.

The current yield is around 7.9%. I will post the exact number from my confirmation later today. The YTM will be closer to 9.8% given the discount to par value and the relatively short period to maturity based on the information that I entered at the Price/Yield Calculator found on the Fidelity website. I will post the exact numbers based on my cost, taken from my confirmation, later today. (ADDED: My confirmation states that the current yield is 7.882% at my cost and the YTM is 9.792%.  The confirmation also confirms that the ratings found at FINRA and mentioned above)

Profile Key Developments

Link to last quarterly report: Form 10-Q This note is discussed at pages 6-7.

FINRA Links to Bonds in Junk Bond Ladder Strategy

Jobs Report: Consistent with Movement Toward Recession/Sold 50 MSFT at 26.7/Decline In Mortgage REITS

The Federal Housing Finance Agency (FHFA), as conservator for Fannie and Freddie, filed lawsuits against 17 financial institutions late Friday, claiming misrepresentations in the sale of mortgages. Those institutions include Bank of America, Ally Financial, Citigroup, Goldman Sachs, J P Morgan, General Electric, Morgan Stanley and several others identified in the FHFA's press release: www.fhfa.gov .pdf Word was leaked about these suits prior to the market open last Friday, and that led to significant losses already in the share prices of those firms.  This is a link to the filings against those firms: Federal Housing Finance Agency - FHFA (and OFHEO) Legal Filings  These are very detailed and long complaints. I just perused one filed against First Horizon (FHN). www.fhfa.gov.pdf

The value of the mortgages included in claims against BAC, Countrywide and Merrill Lynch totaled $57.5 billion, though only $6 billion of that total originated from BAC.  This is just another legacy problem originating from Ken Lewis who just had to acquire Merrill and Countrywide.  GE had the lowest total at $549 million, whereas JPM had the highest individual total at $33 billion. While it is too early to make a prediction, I would anticipate that these suits will be settled by the financial institutions buying back some but not all of the mortgages including in the pools sold to the GSEs.

I noticed at the FHFA website that the government is hiring. For "managers and experts" the salary range is $128,811 to $218,978. Federal Housing Finance Agency - Accountants

I am reinvesting the dividends paid by both of my Royce CEFs, RMT and RVT. Both of those stock CEFs were ex dividend on 9/1/11. 3Q Distributions Declared for Royce Closed-End Funds

Barrons has a favorable article on the MLP Penn Virginia Resource Partners (PVR). I recently bought a PVR senior bond. Bought 1 Penn Virginia Resources 8.25% Senior Bond Maturing 4/15/2018 at 98

A recent article in the WSJ highlights how Hewlett-Packard is scaring off its customers with its latest series of dysfunctional acts and idiotic plans. I would never make an assumption that highly compensated managers are even capable of exercising sound judgment.

Barrons also has a favorable article on GE (own). I have been buying GE shares with cash flow and currently own close to 500 shares. (see snapshot at Item # 4 ADDED 30 GE at 19.95 with Cash Flow) I am reinvesting the dividend. I am not likely to make another open market purchase with cash flow at over $15 per share.

According to a report at the WSJ, the Federal Reserve has asked BAC for its contingency plan in the event economic conditions worsen.

The Labor Department reported that no new jobs were added in August. Employment Situation Summary Job gains for June and July were revised down. I suspect that the August number will later be revised to show a job loss. Private sector jobs increased by 17,000 and that number would have been higher except for 45,000 striking Verizon employees who have since gone back to work. Government employment continues to trend down. Since hitting a peak in September 2008, there have been 550,000 government job losses. I would expect those losses to continue. Importantly, the average work week fell .1 hour and the average hourly earnings decreased three cents. When you spread those numbers over the workforce, the negative impact is significant. I would not be surprised now to see a negative GDP number for the third quarter. The U-6 number, a better reflection of total unemployment and underemployment, rose to 16.2% of the labor force from 16.1%: Table A-15. Alternative measures of labor underutilization  Based on this report, the odds of a recession occurring within the next year have increased in my opinion to about 50/50% from 40%.  Martin Feldstein says the odds are greater than 50%. Video | Reuters.com And, I would also increase the odds significantly that the U.S. has already slipped into one.

Immediate and decisive action is needed to regain momentum in the economy.  I seriously doubt that the Fed can do anything now to pull the economy out of a recession. Some have suggested that the FED could buy longer dated treasuries in order to bring down long term rates. The ten year note closed last Friday at 1.99%, the lowest yield on record. Even lower long term interest rates will only serve to hurt demand further by depriving the saving class of income.  

On the fiscal side, I doubt that the GOP will allow the Obama administration to do much, if anything, seeing a political advantage to a deteriorating economy in the upcoming 2012 election.

I also fault the Democrats for failing to design a long term stimulus program. While the $700+ billion dollar plan did stabilize the economy, and assist in an economic recovery starting in 2009, that stimulus is now gone. The economy needed a massive infrastructure build, lasting at least five years, and the Democrats totally failed in passing such a needed stimulus when they had the votes in Congress.

Both political parties are incompetent now.

I am not exactly sure why anyone would believe the GOP has any answers. Did they learn anything after 8 years of Bush and the Near Depression?  Taxes and the "Job Creators" WSJ Article: Bush On Jobs: The Worst Track Record On Record Their plan involves cutting government spending, more tax breaks for the super wealthy and corporations hoarding their cash, and abolishing the EPA in order to permit more pollution.  The S & P 500 non-financial companies have about $1.1 trillion dollars in cash on their balance sheets, Barrons. So, the thinking is that a lower tax rate for them will give them the confidence to hire, rather than increasing their cash hoard.

Possibly, the GOP's idea of a stimulus package would be to require all adults to buy a bevy of handguns and automatic weapons. Then they could abolish food stamps and require the poor to hunt for their food.

While this might not work well in the intercity, there is plenty of game here in the SUV Capital of the World.  Just the other day, I counted 26 wild turkeys foraging in HQ's front yard, illegally LB just added and with no compensation paid for grazing rights to the HK. And I have an apple tree that attracts deer, and there is an abundance of squirrels and rabbits. Though, it would be necessary to compete with the hawks for the small critters.  So there may be some merit in abolishing food stamps once the poor are taught how to hunt. The Ryan budget plan substantially reduces food stamp expenditures. Ryan Budget Would Slash Food Stamp Funding by $127 Billion Over Ten Years 

If a recession is about to happen, the current level of the stock market does not represent a buying opportunity.   The fear of the unknown will drive the market down further. There are some stocks whose prices seem to me to already reflect a mild recession.

My downside target in the S & P 500 remains 950 during the current cyclical bear market. I hope that it does not fall that low.  I do not see events in the U.S. taking the market to that level. Instead, the precipitating event is more likely to originate from Europe (see  Businessweek article for latest news on the Greek saga).

The Deutsche Bank CEO warned Monday that the sovereign debt crisis in Europe could "kill" weaker banks. CNBC In trading last Monday, Deutsche Bank AG shares fell 7.79% to close at €23.79. Royal Bank of Scotland Group fell 12.32%. Societe Generale S.A shares fell 8.64%. All of those banks were included in the FHFA's lawsuit mentioned above.

The DAX fell 5.28% on Monday.

The incoming European Central Bank President, Mario Draghi, stated that the "solvency of sovereign states should not be taken for granted".

1. Sold Last Thursday 50 MSFT at $26.7 in Satellite Taxable Account  (see Disclaimer):   I wanted to improve my cash flow into this satellite taxable account, which means substituting a bond for the MSFT common shares. The main reason for selling MSFT is that I want to hold my entire position in the main taxable account, where I am reinvesting the dividend. I will buy back the 50 shares sold whenever the price moves below $25. I suspect that this opportunity will occur soon enough which was the primary reason for selling the shares in the satellite account.  

The MSFT shares were bought at $25.55 last May, so I realized a negligible gain. On the bright side, I have never lost money trading MSFT. Since I started to buy shares again in 2009, after a long hiatus lasting a decade, my largest gain was $527.43, as shown in the snapshot found at Item # 1, Added 30 MSFT at 24.15.

2. Decline in Mortgage REITs Last Week:  Another reason for the sharp decline in Mortgage REITs, other than the prepayment risk issue, was the announcement from the SEC last week requesting public comment on matters relating to the regulation of these companies. SEC Seeks Public Comment on Asset-Backed Issuers and Mortgage-Related Pools Under Investment Company Act This announcement is discussed by Ben Levisohn in this WSJ column.  He phrases it as a "plan" to cause these companies to choose one of two bad options: keep their leverage and lose their REIT tax exempt status or lose the leverage and keep the tax exemption. That conclusion is premature.  As noted by Levisohn in another column, two analysts noted that the most likely outcome would be no significant change. WSJ  A similar opinion was discussed in this Seeking Alpha article.

Since individuals have gravitated toward Mortgage REITs due to the Fed's Jihad Against the Saving Class, any action by the SEC to undermine those companies would at least be consistent with government's policy to flagellate savers, keeping them in Money Market Hell "for an extended period of time".  Possibly, Mary realized that Uncle Ben was not causing enough pain to responsible Americans and wanted to rub some salt into their wounds. Without question, the SEC will be doing more harm than good by attacking these companies. {I met Mary many years ago when she was still attending law school. She worked for my firm during the school year}   

It is too early to draw any judgment about the impact of any rule change until an actual rule is proposed by the SEC. The SEC may do nothing after receiving comments, or may simply clarify existing rules without making any substantive changes impacting the Mortgage REITs.

However, the fact that the SEC is thinking about this issue adds an additional risk to owning these companies. I am already concerned about the fall in long term rates causing an acceleration of mortgage prepayments, thereby taking away higher yielding mortgage securities owned by these companies. I only have small positions in mortgage REITs due to their many risks. Regulatory risk, including a change in their status under the Investment Company Act, is just one among many risks and one that has just come out of the nowhere. I doubt that anyone was anticipating that SEC announcement.

At a minimum, the SEC's announcement adds a risk to owning Mortgage REITs which will keep me on the sidelines until the issue is resolved or the price corrections run deeper.  And, due to the heightened risk, I will not do anymore adds in an IRA.

I had no trades from last Friday.  I am now in a slower than slow motion trading mode. LB is In a Slow Mo Trading Mode While Preserving Recently Raised Cash Stash ( June 2011 Post). This will lead to much shorter posts, since I will not be buying much, if anything, until I have a better comfort level than now. During the initial stage of this kind of discomfort, I am content to collect and to hold onto my cash flow.  I may sell a double short stock ETF bought last week on a 5% or greater pop from Friday's close. (see last paragraph: Stocks & Politics 8/31/2011 Post)

My main decision will be what, if anything, to do about the rise in gold and silver prices that have entered parabolic territory. While I always will at least start selling into parabolic rises (Selling into Parabolas), I have never sold yet any silver or gold bullion, primarily due to the reason for owning this type of asset in the first place.

I do regret, however, failing to sell my junk silver during the period when the Hunt brothers were trying to corner the market. Silver Thursday In early 1980, I could have sold that junk silver at only a slightly higher price than now as a result of the Hunt brothers' activity.

By junk silver, I am referring to common date U.S. coins that contain 90% silver (dimes, quarters, and half dollars) minted during or before 1964, as well as common date Peace Silver dollars. U.S. Silver Coin Calculator | Coin News I put a number of those away when I was a teenager, many moons ago, when they were still in circulation. They have been in a bank safety deposit box for close to fifty years. I am not referring to the pretty American Silver Eagle coins (1 ounce), where I was buying rolls of those when silver was less than $7 an ounce. The front side of those U.S. mint silver dollars uses the Walking Liberty front.

I am almost to the point of being able to sell a 1 ounce gold eagle (proof), bought in 1988, and using the proceeds to pay all of my property taxes that are about to come due. I had forgotten that I was buying in 1988, the decades start to blend together. In 1988, 1 ounce of gold was selling at between $400 and  $480 per ounce.  Gold and silver prices are in a parabola now. The gold eagle proof coins are the most beautiful coins every minted in my opinion, using the Saint-Gaudens design. American Gold Eagle 

ISM Manufacturing/Decline in Mortgage REITs Linked to Prepayment Risks/Unit Labor Cost Increase/Sold 100 CZNC at 16.53/Sold 50 CPP at $24/Sold 115+ SGL at $11.51

All of the talking heads have an opinion now on the likelihood of another recession. Mark Zandi says the odds are 40% that the U.S. will have another recession within the next six to twelve months. That seems about right to me.  Roubini told Bloomberg last Wednesday that the U.S. has already entered a recession based on his numbers. I am not inclined to agree with that assessment. Jeremy Siegel places the odds at 25%. Daily Ticker

Labor costs fell 2% in 2010, the largest decline on record. Those costs are starting to trend back up. The government reported yesterday that labor costs rose at a 3.3% annualized rate in the second quarter, while productivity declined at an annual rate of .7%. The increase in labor unit costs originates from a 2.7% increase in hourly compensation and the .7% decline in productivity. Productivity and Costs, Second Quarter 2011, Revised The decline in productivity suggests that employers have wrung out all of the productivity gains from their existing labor force.

The ISM manufacturing index for August was reported yesterday at 50.6, still showing expansion, and higher than the consensus estimate of 48.5. After some really bad regional reports, I was surprised that the number remained over 50.  The new orders component remained slightly below 50 at 49.6, up .4 over July. Employment fell to 51.8 from 53.5.

Headknocker has imposed a restriction on junk bond buying starting yesterday. No more than 1 junk bond can be bought per month until further notice.

The decline in Mortgage REITs yesterday was probably due to Sandler O'Neill downgrading its dividend and earnings expectations across the board, according to an article in Barrons. There are two concerns. One is that the low interest rates will increase prepayments, thus taking away higher yielding securities from these firms. Another is that the Obama administration may try to assist underwater homeowners refinance at lower rates. I mentioned the prepayment risk in a recent post.  Stocks & Politics (8/29/11 Post).

According to a NYT story, the Federal Housing Finance Agency, the overseer for Fannie and Freddie, will soon file  suits against Bank of America, Goldman Sachs, JPM and other banks accusing them of misrepresenting the quality of mortgages sold by them during the housing bubble. (see also Reuters)

1. Sold 100 CZNC at 16.53 (Regional Bank Stocks' basket strategy)(see Disclaimer): This 100 share holding turned into an unrealized long term gain earlier this month, and I decided to harvest it.  The total realized gain was $517.61 on a $1,127.40 investment:

                                 

The realized gain for this particular basket strategy now stands at $7,896.44: Item #3 Realized Gains Regional Banks 

Profit taking was the sole motivation behind this transaction: Bought 50 CZNC at 11.77 Added 50 CZNC at 10.46  I had fortunately harvested a number of large percentage profits earlier in the year, and in 2010. Over the past several weeks, I have seen several of the remaining positions go from unrealized profits to losses, though many issues have bounced back over the past several days.  While the composition of this basket will change, I intend to stay with the strategy for at least the next five years.

Citizens & Northern closed yesterday at $15.69.

2. SOLD 50 CPP at $24 (see Disclaimer): I just bought this security at $21.4 (8/14/11). I was content to harvest that quick gain.  CPP closed yesterday at $23.9.

I am becoming somewhat nervous about Bank of America, finding myself agreeing with most of the points made by Jim Jubak in his recent MSN Money column.

I read an interesting article about the Berkshire deal written by Jesse Eisenger for ProPublica and reprinted in the NYT. He points out that the preferred stock issued to Berkshire could not be included in Tier 1 capital.  I was not sure about that point, so I researched it some. This appears to be the case. At page 3, footnote 13, the Basel I excludes perpetual cumulative preferred stock from Tier 1, while allowing non-cumulative preferred stock to be included in that category www.bis.org.pdf The 1998 update kept this requirement for preferred stock, page 3, footnote 2 at .bis.org .pdf. The preferred stock in the BRK-BAC deal will be cumulative.

Eisenger's main point is that BAC kept claiming that it did not need capital and then does this deal with Berkshire that adds nothing to Tier 1 capital while giving BRK a ten year warrant to buy common shares at a small premium to the stock price then prevailing.

Trust Preferred Securities: Links in One Post

3. Sold 115+ of the Bond CEF SGL at $11.515 (see disclaimer): This is the bond CEF omitted from the table published yesterday since I intended to sell it.  This bond CEF went ex dividend for a large distribution of $1.0882 per share after I bought it (SGL) and later reduced its monthly dividend. Since it is selling near its net asset value now, I elected to sell my shares at near break-even. Over 15 shares were acquired through reinvestment of dividends. My open market purchase was 100 shares @ 11.71 last November.

SGL closed yesterday at $11.40 with a net asset value of $11.59.  WSJ

I had some other trades from Thursday that I will discuss in the next post. I am not doing much now other than improving my cash flow some.  

Closed End Fund Table as of 8/31/11/ Bought Back 50 HBAPRG at 19.29/Bought 200 NPT at 12.2/PSEC NHTB/Bought 1 Cascades 7.75% Senior Bond Maturing on 12/15/2017 at 96.5

New Hampshire Thrift Bancshares (own) announced that it had redeemed the government's preferred stock.

Prospect Capital filed its Annual Report with the SEC showing a net asset value as of 6/30/11 at $10.36 per share. (p. 98). A list of its investments can be found starting at page 102.

The government reported that new orders for manufactured goods rose 2.5% in July. Excluding transportation, new orders were up .9%. www.census.gov.pdf

The S & P 500 average declined 5.7% during August. It seemed worse. The decline started in earnest on July 22, when the S & P 500 closed at 1345.02. The close on 8/31 was 1218.89, a 9.38% decline from 7/22. It is really hard to see much upside from here until the economic data turns decidedly better.

According to the WSJ, Goldman Sachs recently circulated a report estimating that as much as 1 trillion dollars may be needed to shore up European banks.

1. Bought 50 HBAPRG at $19.29 Last Monday (see Disclaimer):  HBAPRG is non-cumulative equity preferred stock, issued by HSBC USA, an indirect wholly owned subsidiary of HSBC Holdings. HBAPRG is a floating rate preferred stock that pays the greater of 4% or .75% above the 3 month LIBOR on a $25 par value. Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Prospectus: www.sec.gov

This is a perpetual security, as is common stock, but HSBC has the option to redeem it now at par value plus accrued dividends. I doubt that will happen. 

I view myself as ahead on this security by simply selling 50 shares at a higher price a few months ago. Comparing HBAPRG to BMLPRJ Sold 50 HBAPRG at 24.02 (April 2011 Post). 

This security may start to look better when the float provision is activated by a rise in the LIBOR rate. Due to the Federal Reserve's Jihad against the Saving Class, likely to last at least another two years, the short term rates are abnormally low. Historical 3 month LIBOR rates can be found at LIBOR Rates History (Historical). 

At a 5% 3 month LIBOR rate during the relevant computation period, the coupon would become 5.75% which translates into a 7.45% yield at a total cost of $19.29 (.0575% x. $25 par value=$1.4375 annualized divided by total cost of $19.29=7.45%). 

When the short rates start to reflect a premium over the inflation rate, this kind of security provides a measure of inflation protection, while the minimum coupon comes into play during periods of deflation, low inflation, or Jihads by central banks against the saving class as now.  Inflation or Deflation: Bond Alternatives I have been discussing these securities since starting this blog in 2008: Bary's Column In This Week's Barron's: Floating Rate Preferred Stocks METPRA GSPRA HBAPRF BACPRE (December 2008 Post); LIBOR AND THE AEGON FLOATING RATE Stock AEB (October 2008); LIBOR AND THE MET LIFE FLOATING RATE PREFERRED STOCK (October 2008). 

HSBC USA Inc. Dep. Shs (Rep. 1/40th of a share of Fltg. Rate Non-Cum. Pfd. Series G (HBA.PG) closed at $20 yesterday, up 35 cents for the day.

I mentioned HBAPRG in a recent post discussing certain classes of securities which will show a strong downside bias during periods of market stress. Item # 1 Fear and Enhanced Volatility in Certain Classes of Income Securities (August 9, 2011 Post)

I am not much of a believer in the Fed's forecast that inflation will start to come down and remain tame when its policies appear to be designed to increase inflation. If taming inflation was the goal now, the federal funds rate would be close to 4%.

2. BOUGHT 1 Cascades 7.75% Senior Bond Maturing on 12/15/2017 at 96.5 Last Tuesday (Junk Bond Ladder Strategy)(see Disclaimer): Cascades is a Canadian company, whose common stock is traded on the Toronto exchange. CAS.TO It makes commercial and food packaging products, tissue paper, fine papers, outdoor furniture and other products. Cascades - Cascades' history Cascades Inc (CAS.TO) Company Profile

This is a link to the FINRA information on this bond:  FINRA

Moody's rates the bond at Ba3 while S & P has it at B+.

Prospectus: SEC.

Interest is paid semi-annually in June and December.

This is a link to Cascades' quarterly report for the Q/E 6/30/11: SEC The company reported operating income before depreciation and amortization of 65 million CADs on sales of 991 million.

My confirmation states that the current yield at my cost is 7.965% and the YTM is 8.306%.

3. BOUGHT 200 of the Leveraged Municipal Bond CEF NPT at $12.1964 Last Tuesday (see Disclaimer): After the FED announced that it would likely continue its Jihad against the savings class for another two years, I cancelled some GTC limit orders to sell some leveraged municipal bond closed end funds. Many of these funds are yielding close to 7%, paying tax free dividends. That result can be achieved by borrowing money at the current ridiculously low short rates and investing the proceeds into long dated municipal bonds.

Hopefully, I can exit the positions before the funds can be squeezed by a rise in their borrowing costs and a fall in their bond holdings caused by a rise in long term rates. I still own several of these funds after paring my overall exposure a few weeks ago.

NPT is a Nuveen fund called  Nuveen Premium Income Municipal Fund 4, rated 4 stars by Morningstar.

As of 8/29/11, it had a net asset value of $12.95 per share and was then selling at a -5.48% discount to its net asset value.  Information about NAV can be found at the sponsor's website: NPT - Nuveen Premium Income Municipal Fund 4, Inc. This type of information is also available at the Closed-End Fund Association. The NAV rose 1 cent on 8/30/11 and the discount widened to -5.71 based on the closing price that day of $12.22.

Dividends are paid monthly, always a plus, at the current rate of $.0710 per share. NPT Distributions  This gives me about a 6.98% yield at a total cost of $12.2.

As of 7/29/11, the fund had 294 holdings with an average maturity in years of 18.74. This will give the fund a lot of interest rate risk. Most of the holdings were rated "A" or higher, with 19.4% at BBB which gives the fund some yield juice. Ratings information on the holdings can be found at NPT Holdings.

The fund shows effective leverage at 38.41% as of 7/29/11. Total expenses, including interest expense, was 1.29% as of 7/29/11. Interest rate expense is of course very low now.

This is a link to the last SEC filed shareholder report for the period ending in April 2011:  NPT SEC

Nuveen Premium Income Municipal Fund 4 closed at $12.34 yesterday.

I had one other trade from Tuesday that I will discuss in the next post.

4. Closed End Fund Table as of 8/31/11: I updated yesterday my table for the CEFs that I own, including recent reinvested dividends, additions and deletions.  I have started to add some to closed end leverage municipal bond funds. I discuss the addition of NPT above. I did not discuss the addition a few weeks ago of NQS. Other recent additions and deletions include the following: SOLD 100 BDF at $18.85 (8/24/11 Post); Sold 200 IGI at $21.52+ (8 19/11 Post); Added to CEFs BTZ SWZ GDV and ERH (8/9/11 Post);  Bought 200 ACG at 7.85 (8/8/11 Post);  Sold 300 WIW at 12.85-Bought 100 IGI at 20.69 (8/4/11 Post); Added 50 CSQ at 9.2 (8/3/11 Post);  Added 50 SWZ at 13.75 (8/2/11 Post); Bought 100 of the Bond CEF BBN at 18.15 (7/29/11 Post);  Bought 100 ERH at 11.69  (7/28/11 Post); SOLD: 100 APF @ 17.47, 100 PEO @ 30.62 (7/27/11 Post);  Pared JSN-Sold 100 at 12.38 in ROTH IRA (7/26/11 Post);  Sold CEF JDD at 11.28 (7/22/11 Post).

I took my stock allocation down some in late July, added to the bond allocation, and then started to add back stock CEFs around 8/8. I have ceased reinvesting the dividends for BTZ, SGL and GDO, effective with the last distributions. I omitted one small position since I may sell it soon due primarily to it now selling near its net asset value. I estimate that the portfolio is evenly split between stocks and bonds at the moment, which is a higher than normal bond allocation for me. I have tilted the bond part to investment grade corporates and municipal bonds.