Sold 100 IFO at $11.22/GE Dividend Hike/China Fund (CHN)/FNFG-Destruction of Shareholder Value/Bought 50 CBLPRD at 23/

Virtually all of 27 European leaders agreed to negotiate a new agreement that would have stricter budget and debt rules for the eurozone countries. The sanctions for non-compliance with budget rules would be semi-automatic. Once the European Commission finds that a country has violated the budget rules, the offending nation would have to secure a weighted majority of nations to prevent sanctions from being enforced. There would be some kind of adoption of balanced budget rules in each nation's laws. The changes will be in the form of inter-governmental agreements that will take months to work out and to approve. I would simply refer to the forgoing as a non-binding agreement to work toward a binding agreement. The muted reaction to by the market to this agreement suggests that many view it as insufficient to deal with the problems.  I suspect that no one will really knows the last act in this ongoing drama. It does appear that the European budgetary problems are about to made worse by a recession.

Moody's downgraded the debt of Societe Generale, BNP Paribas and Credit Agricole last Friday.

A successful investor will always search for accurate and material information. Any piece of material information believed to be true has to be challenged for accuracy before acting upon it.  It can be extremely difficult to make good decisions even with accurate information since there are so many variables that are unknown, unknowable or at best estimates. Anyone who routinely makes investment decisions based on inaccurate information is doing nothing more than rolling the dice. I am never surprised about the sheer volume of inaccurate information possessed by individual investors who are absolutely certain of its accuracy. 

Jim Cramer said that First Niagara overreached with its acquisitions of HSBC branches. Seeking Alpha I would not regard that as a debatable point. FNFG recently slashed its quarterly dividend by 50% to 8 cents per share, due to that $1 billion acquisition. In addition the bank issued a large amount of common stock, equity preferred and subordinated debt to finance the purchase of branches in declining population areas. And, I would not expect a dividend increase from the reduced level in 2012. 

My current estimate is that it will take five to seven years to restore the dividend to 16 cents per quarter, more likely longer than 7 years than less than 5.

In addition to the large dilutive  common share offering to finance this boneheaded acquisition, FNFG sold $300 million of subordinated notes maturing in 2021 bearing a 7.25% coupon (SEC Filing) and $350 million of equity preferred stock. Both of those securities have a higher claim on earnings than the common stock and will restrain increases in the common stock dividend for several years in my judgment. The terms of the equity preferred stock offering are clearly disadvantageous to the common stockholders. The fixed coupon of that issue is 8.625% until 2/15/2017 when it turns into a floater paying a 7.375% spread over 3 month LIBOR.  Pricing Term Sheet

For the current owners of FNFG common stock, bought in the $12 to $15 range, the cost of the HSBC branches will never be worth the cost.  It will likely take a long time, adjusted for inflation, just to recover the lost income from the dividend slash and the loss in the share price.

There was nothing materially wrong with my decision to buy FNFG's shares initially. Instead, my decision proved to be an error based on a subsequent and unforeseeable poor decision made by the Board and the CEO.  However, I recognized early on that the decision to acquire HSBC branches was indefensible and could have sold my position close to $12 range in early August. My mistake was not following through on a sound judgment reached with accurate information. {In my defense, I did not know then that the Board would slash the dividend by 50%. If I knew that the Board would cut the dividend in half back in August, I would have of course dumped the shares without a moment's hesitation.} As I just said, even with accurate information and the exercise of good judgment based on known information, the decision making process has a tendency to err from time to time.  Keeping shares in FNFG is just one example.  

I would prefer owning the new FNFG equity preferred, purchased at par value or less, than the common stock at the current price. That is simply one way to summarize the value destruction to the common shareholders. Anyone owning the common stock will need to express their disapproval at election time for the Board. First Niagara: Just Another Incompetent Bank Board of Directors First Niagara Dividend Slash Without rational dispute, the Board and their 3+ million per year CEO have already destroyed shareholder value for no justifiable reason, solely due to their bad judgment and apparent desire to become an even bigger fish in a small pond being drained. 

Keeye Bruyette downgraded FNFG last Friday to market perform after the stock has already suffered a substantial price decline.

Any NewAlliance shareholder that took 1.1 FNFG shares earlier this year were fragged by FNFG.  Without the acquisition by FNFG, those NAL shares would in my opinion be trading in the $11 to $13 range. 

GE (own 497+) hiked its quarterly dividend by two cents. GE Board of Directors Authorizes Increase in Quarterly Dividend The new quarterly rate will be 17 cents per share. The next ex date is 12/22/11. I am reinvesting the dividend.

The China Fund, a CEF, declared a large year end distribution. When I saw this information, I elected to change my distribution option to reinvestment.  The total aggregate dividend will be $2.9964 per share, payable 12/29/11 to shareholders of record on 12/23. The ex dividend date will be 12/21/11. Of the total amount, $2.8222 will be a long term capital gain distribution. 

1. Sold 100 IFO at $11.22 Last Thursday (see Disclaimer): IFO is a Citigroup Funding "principal protected" senior unsecured note. I recently increased my exposure to Citigroup by adding to my position in another "principal protected" senior note, MTY, and said then that I would sell another to bring my overall exposure to Citigroup  back to my comfort level. Item # 1 Bought 100 MTY at $10.03 I am now back down to eight $1000 par value Citigroup "principal protected" unsecured senior notes. 

I suspect that most of my profit in IFO was harvested with this sale, but will not know for sure until that note matures in late 2012. Item # 1 Bought 100 IFO at $9.35 

2011 Roth IRA 100 Shares IFO Realized Gain +204.98 

IFO is one of the more unusual "principal protected notes".  Generally, with a caveat not likely to come into play, this note will pay the greater of 12% or the percentage gain in the S & P 500 on 12/2/12 from a starting value of 1,106.24 on a $10 par value. So basically I sold a year ahead of the maturity date capturing the 12% and left the possible higher coupon on the table.

2. Bought 50 CBLPRD at $23 on Friday (see Disclaimer): CBLPRD is a fixed coupon cumulative equity preferred stock issued by CBL & Associates Properties, a REIT that owns malls. The coupon is 7.375% on a $25 par value. Prospectus The yield at a total cost of $23 is around 8%. 

I have bought and sold both the common and preferred stocks of this company. I also currently own 50 shares of CBLPRC viewed as functionally equivalent to CBLPRD. The CBLPRD had a slight yield advantage when I made my limit order purchase last Friday. Both preferred stocks go ex dividend for their quarterly distributions on 12/14: CBL.PD CBL.PC

CBL Profile page at Reuters.

CBL Key Developments page at Reuters

CBL-9.30.2011-SEC Form 10-Q

CBL- September 2011 - Press Release for 2011 Third Quarter earnings.

I view REIT preferred stocks as having more disadvantages to them than advantages. While equity preferred strocks are part of the firm's equity capital, the owners of those securities have no equity interest in the business. All of the beneficial characteristics of equity ownership are lacking in them, leaving only the undesirable attributes including a low priority in the capital structure and the perpetual nature of the security.

Equity preferred stocks are senior only to common stocks and will be junior in priority to all debt. The owners of these securities have only their dividends, which can legally be taken away provided no dividends are paid on the common shares. Their bond attributes are more dominant than the equity characteristics, but these securities lack the priority of bonds or a bond's maturity date, the time certain when the company has to pay back the obligation.  For those reasons and others, I regard equity preferred stocks as a disfavored asset class and will lump them together with my bonds rather than stocks for purposes of determining asset allocation percentages.

REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages  This post also contains snapshots of my trades. 

When bought near their par value, REIT preferred stocks have little in the way of upside potential while having considerable downside price risk.

Anyone who questions that observation needs to look at the prices prevailing during the Near Depression period. This is a snapshot of a CBLPRC purchase made in October 2008:

CBLPRC Bought at $10 per share October 2008 

With any purchase now, the intent is to generate only some cash flow and to hopefully sell the security at a $1 or greater profit.   

Embracing Volatility as A Risk Management Tool In the Sub-Asset Class of Equity Preferred Stock

Equity Preferred Stocks as a Disfavored Sub-Asset Class 

More on Investing Process and Blackjack/Large Risks & Opportunities In the Savaged REIT Securities (March 2009 Post)

GE/Added 60 IGR at $6.92/Sold 200 Artis Real Estate at 14.09 CADs/

General Electric (own) may be able to boost its annual dividend to as much as 85 cents per share, from the current 60 cents, according to an analyst at Sterne Agee. TheStreet  Before anyone gets worked up about that possibility, I would add that the annual rate was $1.24 in 2008. As a result of GE's 68% dividend cut in 2009, this company can no longer be trusted as a reliable source of income, and that statement is intended to mean forever in my book.

Morningstar has a five star rating on GE common stock.

Any company that cuts its dividend can not be relied upon ever again by retirees looking for income. Many large industrial companies increased their dividends during the Near Depression period.

Banks are generally an unreliable source of dividend income for retirees, given their propensity to blow themselves up and to otherwise commit mistakes that result in dividend cuts. The natural habitat of the Masters of Disaster, the most overpaid doofuses in the history of civilization,  are financial institutions.

The Master of Disaster Jon Corzine has apologized to the shareholders, employees and customers of MF Global, asserting that he has no idea what happened to the money belonging to MF's customers.  An executive of the  CME will testify that MF Global moved customer money into its accounts.  Reuters

The worldwide Jihad against the savings class continued yesterday as the ECB reduced its benchmark rate to 1%, the lowest on record. ECB: Monetary policy decisions In short, the responsible are being forced to bailout the irresponsible, most of whom profited by reckless, selfish and greedy actions that were either immoral and/or criminal. Of course, those who committed crimes have received a pass from the U.S. government, a topic explored in a recent superficial 60 Minutes episode.

The European Banking Authority has concluded that European banks will need to raise €114.7 billion in equity.  Bloomberg

The European Central Bank squashed hopes yesterday that it would engage in unsterilized bond purchases (quantitative easing). The ECB also indicated that it would not increase its sovereign debt purchases.

Texas Instruments lowered guidance for the 4th quarter. The company now expects E.P.S. to be between $.21 to $.25, down from the prior forecast of $.28 to $.36.  The consensus estimate had been for 32 cents. The revenue forecast was lowered to $3.19 to $3.33 billion, compared to the consensus forecast of $3.4 billion SEC Filed News Release (no position) The reduced guidance was due to "broadly lower demand across a wide range of markets, customers, and products, except for wireless applications processors".

Altera also lowered guidance after the close yesterday (no position).

I am glad to see that John le Carré's "Tinker, Tailor, Soldier, Spy" has been made into a movie, favorably reviewed in the NYT,

1. ADDED 60 to Stock CEF IGR at 6.92 (see Disclaimer): This brings me up to 415+ shares. I also changed my distribution option to reinvestment after noticing that this CEF was selling at over a 14% discount to its net asset value per share.  On 12/6/11, the shares closed at $6.92 which was a 14.57% discount to its then net asset value per share of $8.10.

IGR page at the Closed-End Fund Association

As the name suggests, the CBRE Clarion Global Real Estate Income Fund invest in real estate companies, owning both the common and preferred stocks. 

Last Filed SEC Form N-Q. This form shows the holdings as of 9/30/11. As of that date, the fund had a 81.3% weighting in common stocks and 22.8% in preferred stocks.  The U.S. common stock weighting was at 33.2%. 

Last SEC Filed  Shareholder Report

This fund pays monthly dividends, currently at the rate of $.045 per share. Distribution History Assuming a continuation of that rate, which is no way assured of course, the yield at a total cost of $6.92 would be around 7.8%.

This CEF is not rated by Morningstar.  Morningstar does have data on the fund. This data shows that the dividend has been supported some by a return of capital and the average three year discount is -11.46. The fund uses a modest decree of leverage.

CBRE Clarion Global Real Estate Income Fund fell 17 cents yesterday to close at $6.82. The NAV per share was $8.02 at yesterday's close, creating a discount to net asset value per share of -14.96.

2. Sold 200 Artis Real Estate Investment Trust at 14.09 CADs-Toronto Exchange Last Wednesday (Canadian Dollar (CAD) Strategy)(See Disclaimer): As with other Canadian REITS that I have owned, Artis pays monthly dividends. The shares sold last Wednesday were bought at 13.21 CADs back in September 2011. This is my second round trip transaction in Artis shares. Sold 200 Artis REIT at 13.88 CAD May 2011 I am content to collect some dividends and sell the shares for a profit.

Artis Real Estate Investment Trust closed yesterday at 14 CAD.

For Canadian securities purchased on the Toronto exchange, I will use Canadian dollars to pay for the purchase. All dividends are taken in CADs. The distributions are reduced by a 15% Canadian withholding tax.  Two of the larger positions in this particular strategy are Canadian bond ETFs: Claymore 1-5 Year Laddered Government Bond ETF, CLF Fund Quote - (TOR) (400 shares) and Claymore 1-5 Year Laddered Corporate Bond ETF, CBO Fund Quote - (TOR) (300 shares). 

First Niagara: Just Another Incompetent Bank Board of Directors/SWZ Dividend and Buyback/Bought 70 XIDE as LT at $2.75/Sold 50 BMLPRH at 16.8 and Bought 40 ZBPRC at $25.21/

First Niagara (own) priced 52,941,176 common shares at $8.5 yesterday. SEC Filed Press Release  There is an over allotment option for the purchase of an additional 3.97+ million shares. As noted in yesterday's post, the acquisition of HSBC's branches is viewed as satisfactory proof that both the Board and the CEO are incompetent and are destroying rather than creating shareholder value. First Niagara Dividend Slash On the bright side, it does not appear that the extreme incompetence extends to operations.

First Niagara Financial declined only four cents in trading yesterday to close at $8.97. Possibly, institutional investors were relieved that the stock dilution was out of the way and was less than expected.  I have no plans to average down, except by dividend reinvestment, unless the share price falls below $7.

Fitch placed First Niagara's credit rating on a negative watch. This had to be expected.

After the close yesterday, FNFG priced 14 million shares of non-cumulative equity preferred stock. This security has a $25 par value. The bank expects $338.8 in net proceeds. The coupon is 8.625% until 2/15/2017, and then it will turn into a floater, paying a 7.327% spread to three month Libor. First Niagara Financial Group Announces Pricing of $350 Million Preferred Stock Offering FNFG may redeem the security on or after 2/15/2017 at the $25 par value plus accrued dividends. I view those terms as highly unfavorable to the common shareholders, and further proof of the Board's obvious incompetence in allowing the CEO to pay $1 billion for HSBC branches located in declining population growth markets. Now, I know where 1/2 of my common dividend is going.

FNFG is not done yet raising money to fund the incomprehensible decision to buy these HSBC branches for $1 billion. Next up, the bank plans to float a subordinated debt offering.  As the evidence mounts of the true cost to existing shareholders, and unfortunately I am one, there is no way to describe this decision other than with the term idiotic, and that is being too generous and kind to FNFG's Board of Directors and FNFG's 3 million plus per year CEO in my opinion.  I do not view it as bad, however, as Ken Lewis' megalomaniacal decision to acquire Countrywide Financial.

ING reported that it would take a EUR .9 to 1.1 billion 4th quarter charge to cover guaranteed payments under its U.S. variable annuity products issued between 2003 to 2009.  SEC Form 6-K I recently bought 50 shares of IDG, one of ING's hybrids.

Italian banks borrowed €153.2 billion from the ECB in November. CNBC

European countries and banks will need €1.9 trillion to refinance maturing debt in 2012. MarketWatch Of that amount European banks need to raise 500 billion euros in the first six months of 2012.

S & P added yesterday the European Union and a bevy of European banks to its negative credit watch list. Reuters  Fox Business VOA Breaking News WSJ The possible downgrade includes the currently rated "AAA" EU bailout fund.  So far, the market has ignored all of S & P's warnings about Europe this week. A more negative take on Europe's prospects can be found in Anthony Mirhaydari's column published by MSN Money.

On the pop into the close yesterday, I bought back one of the double short stock ETFs recently sold. Stocks, Bonds & Politics: Earnings: HPQ MDT/U.S. GDP/International Swaps and Derivative Association-Greek Government Debt: Another Example of Rot (11/23/11 Post) A recent modification of the trading rules allows hedges to be bought even with the VIX trading over 20.  Mark Hulbert and the Use of the VIX as a Timing Model/Modification # 1 To Vix Asset Model Approved re: Hedging The ^VIX rose .8 to close at 28.93 yesterday.

Maybe the market is being too optimistic about Europe solving its banking and sovereign debt problems.

1. Bought 70 XIDE at $2.75 (LOTTERY TICKET strategy)(see Disclaimer): Exide Technologies (XIDE) is a manufacturer of motor vehicle batteries.

Link to Exide Technologies profile page at Reuters.

Link to XIDE Key Developments page at Reuters.

This LT selection was based primarily on the usual statistical criteria.  Price to sales is .07; price to book is at .59;  the five year estimated P.E.G. is .6; and the F/Y March 2013 estimated P/E is 3.27, all according to XIDE Key Statistics at YF. Another factor is that the share price has been squashed over the past several months. The stock traded over $12 back in February and was over $9 in May before the bottom fell out. XIDE Interactive Chart  I also read an interesting article about battery technology and XIDE at Seeking Alpha. Of course, I have no technical expertise in this area whatsoever. 

For the quarter ending 9/30/11, the company reported a loss of 5 cents per share on revenues of $772.953 million.  SEC Form 10-Q Exide Technologies Reports Preliminary Fiscal 2012 Second Quarter Results and Revises Fiscal 2012 Guidance

Snapshots of trades made pursuant to the Lottery Ticket strategy can be found at Lottery Ticket Strategy: New Gateway Post. I may harvest the largest unrealized LT gain early in 2012, hovering now over 1500% excluding a 75% annual dividend at my cost basis. 

Exide Technologies closed at $2.75 yesterday.  I am considering buying Exide's senior secured bond. 

2. Sold 50 BMLPRH at $16.8 Last Tuesday (see Disclaimer):  I discussed yesterday BAC's privately negotiated exchange offer for its equity preferred stock. BAC Privately Negotiated Exchange Offers If any public offer is forthcoming to exchange common shares for equity preferred shares, it is unlikely to be meaningful as to the amount, given that 311 million common shares were exchanged in the private offer and BAC previously stated that 400 million was the maximum.  I therefore decided to reduce my position in the equity preferred issues by selling BMLPRH, realizing a total profit on the shares of $10.58. BOUGHT 50 BMLPRH at 16.27 June 2011 I now own only 100 BMLPRJ among the BAC equity preferred stocks.

I only make snapshots of the trades when the profit or loss exceeds $30. (see snapshots at Advantages and Disadvantages of Equity Preferred Floating Rate Securities)

Floaters: Links in One Post

BML.PH  closed at $15.74 Wednesday, down $1.14.

3. Bought 40 ZBPRC at $25.21 Last Tuesday (see disclaimer): I replaced 50 shares of BMLPRH with 40 shares of the fixed coupon equity preferred stock ZBPRC. I have bought and sold ZBPRC. Bought 30 ZBPRC at 18.4 November 2009  ADDED TO ZBPRC AT 23.75 July 2010  Sold 30 of 150 ZBPRC @ 26.47 February 2011  Sold 120 ZBPRC at 26.91

ZBPRC pays non-cumulative preferred dividends. The issuer is Zions Bancorporation whose common shares are currently rated 4 stars by Morningstar.  It has a 9.5% coupon on a $25 par value. Prospectus Supplement

As previously discussed, I have nothing positive to say about the management of this bank. This equity preferred is in my opinion deservedly rated well into junk territory.  That opinion is based on the banks expansion into the Southwest (Arizona and Nevada) when it was clearly apparent that both states were experiencing a real estate bubble. Bank managers are paid a great deal of money to avoid that kind of obvious mistake.

Zions still have government preferred stock on its balance sheet which is not a recommendation for it. Yet, as previously explained, Zions would have to defer the government's cumulative preferred dividend in order to eliminate the dividend on ZBPRC. While that is a possibility, it would be a big step for the bank to take. A very detailed explanation of this issue, as applied to Zions' equity preferred stocks, can be found at Item # 7  Bought 50 ZBPRB in Roth at $19.9

See also: Analysis of Prior Question: ZBPRA vs. ZBPRC OR ZBPRB (December 2009 Post).

ZB.PC closed at $25.15 yesterday.

4. Swiss Helvetia (SWZ: own): The Swiss Helvetia Fund declared a long term capital gain distribution of $1.074 per share and an income dividend of $.168 per share. Both dividends will be paid on 1/27/12. I am reinvesting dividends to buy additional shares. The ex dividend date will be 12/16/11. The fund also announced that it may purchase up to 500,000 shares of its stock. On 12/6/11, the fund closed at $11.16, with a net asset value of $12.59 per share, creating a discount to NAV at that time of -11.36.

More information about this fund is available at the sponsor's website: SWZ.com - Swiss Helvetia Fund It has a heavy concentration in Nestle and Novartis.  Closed-End Fund Association

Swiss Helvetia Fund closed at $11.33 yesterday, up 13 cents.  

First Niagara Dividend Slash/BAC Privately Negotiated Exchange Offers/Sold 200 of the Bond CEF NMO at $13.81/

The ISM services index fell to 52 in November from 52.9 in October. The consensus estimate was 54%.  The new orders component rose slightly to 53.

The OECD reported that the gap between rich and poor continues to accelerate in developed countries.  Bloomberg

Goldman Sachs believes the world will avoid a global recession in 2012. (interview with Abby Cohen at CNBC.com)

General Electric (own 497+) was upgraded to outperform yesterday by Bernstein.  The target price for GE common stock was raised to $21 from $19.

The Australian central bank reduced its benchmark rate by .25% yesterday to 4.25%. Monetary Policy Decision That central bank is concerned about a slowdown in global growth.

In Afghanistan, a woman who is raped is put in jail by the authorities. One key to her freedom is to marry the rapist. CBS News

Jon Corzine, just another Master of Disaster, reportedly rebuffed efforts to control risks at MF Global. WSJ

The head of Vanguard's fixed income division characterizes the inability to fix the U.S. budget problems an "abomination", which is in my judgment unduly polite to the Washington politicians. Fortunately, the world is focusing on the European sovereign debt problems rather than the dysfunction in Washington, but that will change.

1. Bank of America Exchange Offer:  Bank of America filed an Form 8-K earlier this week, stating that it had agreed to exchange certain of its equity and trust preferred for common stock and senior notes. The foregoing SEC form indicates the face amount of each equity and trust preferred issue so tendered by institutions in privately negotiated transactions. This filing does not specifically  indicate the conversion ratios. The exchange includes $314 million in face amount of equity preferred securities and $1.035 billion in trust preferreds. The securities exchanged for those preferred stocks were 125,528,595 million common shares and $442.2 million in senior notes with varying short term maturities ranging from 2014 to 2019. The TPs would have longer maturities.

This SEC filing refers to an earlier filing, made in mid-November, whereby BAC reported the exchange common and senior notes for the listed amounts of equity and trust preferred securities as shown in that filing. Form 8-K

When BAC broached the possibility of this kind of exchange in its last 10Q filing, it mentioned then that the offer, when and if made, would not exceed 400 million common shares. Potential BAC Exchange for Preferred Securities (11/4/11 Post).

As a result of the foregoing privately negotiated exchanges, the total common shares issued in these recent exchanges totals 311,011,300. This is getting close to the up to 400 million shares suggested in the 10-Q filing. I am not aware of any public exchange offer being made.

The foregoing SEC filing does not indicate whether or not BAC will make a public exchange offer.

2. Sold 200 NMO at $13.812 Last Monday (see Disclaimer): NMO was my last leveraged municipal bond CEF.   My position in NMO was recently purchased at $13.03. Last Friday, the net asset value was $13.54 per share, so this CEF had moved from a discount when I purchased it to a premium. I have no interest in holding these bond funds when they start to sell at a premium to their net asset value per share.

NMO page at the Closed-End Fund Association.

Daily pricing information of Nuveen CEFs can be found at Nuveen Closed-End Funds - Daily Pricing. On 12/5/11, the net asset value per share was $13.56.

3. First Niagara's 50% Dividend Slash and Destruction of Share Value by the Current Board and CEO (own: Regional Bank Stocks' basket strategy): FNFG's stock price has declined over the past several months in response to the CEO's plan to pay $1 billion to acquire HSBC branches, primarily for the purpose of increasing FNFG's concentration in the declining growth markets in and around Buffalo. According to the 2010 Census Buffalo's population declined 10.7% since 2000 and 54.9% since 1950. Erie County lost 3.2% the the 2000-2010 period.

Last night, the bank decided to inflict more pain on its shareholders by halving its dividend. According to First Niagara, this move will save the bank $100 million in capital during 2012. SEC Filed Press Release I would not put it that way. Instead, I would just say that it is another 100 million dollar hit to the FNFG's already suffering shareholders. Perhaps the top management will take a similar percentage cut in their take home pay.

The negative reaction by the market to this acquisition is shown by the substantial stock price decline: FNFG Interactive Chart FNFG announced this acquisition on Sunday July 31, 2011, Reuters. The shares closed the previous Friday at $12.25. FNFG Historical Prices

Earlier in 2011, the stock price touched $15 before the Board's value destruction process began in earnest.  I would not now anticipate a return to that level for several years.  I will hold onto my shares, based on the belief that the bank will eventually recover from the recent damage inflicted upon it.  However, a continuation of boneheaded and idiotic decisions will cause me to re-evaluate that decision. More value destruction decisions are certainly possible with the current Board.

I discussed the market's negative reaction to the CEO's dilutive acquisition of HSBC branches in several prior posts: First Niagara Downgrade (10/25/2011 Post); Item # 2 FNFG

In addition to the recent decline in the share price and the 50% haircut on the dividend, the Board of First Niagara has found it necessary to inflict more pain by issuing 450 million dollars of common stock, plus any over allotment up to an additional $33.75 million, at the currently depressed price to fund the acquisition of these HSBC branches, thereby diluting their existing shareholders and likely driving the share price down further in the coming weeks. The bank will also be offering $650 million in preferred stock and notes. Reuters A large equity preferred stock offering would likely keep restrain growth in the common share dividend in my opinion, as earnings are used to pay the higher in priority preferred dividends.

Since I have to be concerned about future Board decisions likely to adversely impact the share price,  I will vote against both the re-election of all FNFG Board members and all matters pertaining to executive compensation, continuing for as long as I own the shares or the entire Board and the CEO are replaced which is unlikely to happen given the passive nature of most shareholders. The vote on executive compensation is advisory now. I would urge all other individual shareholders to do the same.  Once incompetence has satisfactorily been established, it would not be reasonable to assume competence in the future.

I would expect the common shares to continue their decline in response to the most recent developments. I may add to my position when and if the shares decline below $7.

The bank attempts to make the case for its strategy in this filing made in conjunction with the press release announcing the 50% dividend reduction and the large stock offering: Exhibit 99.2

The CEO John Koelmel called this acquisition a "strategic home run" in the last earnings conference call, further calling into question his ability to make sound judgments. Transcript - Seeking Alpha

Mr.  Koemel's became CEO in December 2006 when the stock was hovering near or over $12 per share.  Forbes values his compensation package at over $3 million for 2010.  The annual dividend rate in 2007 was 54 cents and will be 32 cents in 2012. Anyone with a  brain, measured with an IQ five above plant life, can see that both the dividend and share price are going decidedly in the wrong direction, and only a fool would view these recent developments in a positive light.

On the positive side, due to the share price destruction caused by the CEO and the Board, a self inflicted wound permitted by passive shareholders, I will be able to buy shares at lower prices with what is left of my dividend. 

Added 50 of the Stock CEF ADX at $9.77/Gingrich and President James Garfield

The decline in the market yesterday, occurring around noon, was caused by reports that S & P was going to put Germany and five other "AAA" rated European nations on negative credit watch. CNBC  WSJ  Reuters Bloomberg In addition to Germany, that list includes France, the Netherlands, Austria, Finland and Luxembourg.  After the close yesterday, S & P put 15 European nations on credit watch. This signals that there is a 50% chance of downgrades occurring within 90 days. WSJ The S & P missive is reproduced in this Barrons blog. At least this action will keep the pressure on the EU leaders to effectively deal with their problems.

This kind of news was sufficient for me to buy a triple short stock ETF near the close as a hedge for the remainder of this week. I am not likely to keep that kind of hedge for very long. Since I am comfortably in the profit territory this year on my hedges, I am willing to take a loss in exchange for the pacifier effect those securities sometimes have on the OG.

Newt Gingrich, the current leader among GOP aspirants for the Presidency, believes that child labor laws are "truly stupid". CNN  He also made the following statement: "Really poor children in really poor neighborhoods have no habits of working and have nobody around them who works".

Gingrich says that Bachmann is "factually challenged", (The Hill's Blog) an obvious point, but what about Newt's professorial declarations from Mount Olympus?  Gingrich is Michelle's equal in the factually challenged department.  One of his latest whoppers was an assertion that people could use food stamps to travel to Hawaii, PolitiFact.  The factcheck organization PolitiFact has rated five factual statements made by Gingrich with its ignominious "Pants on Fire" classification.  Possibly Newt is less factually challenged than Michelle but it would be a close call.

FactCheck.org recently published an article challenging the veracity of Newt's claim, made in a Fox News interview on 12/3/11, that he never supported "cap and trade" legislation.

Maureen Dowd wrote another column exploring Newt's hypocrisy. NYT Senator Coburn, the Republican senator from Oklahoma, said that he was not inclined to support Gingrich. Coburn added that there are leaders "that instill confidence, leaders that are somewhat abrupt and brisk. Leaders that have one standard for the people that they're leading and a different standard for themselves."

I have been reading a book about the republican President James A. Garfield, whose was murdered shortly after his term began. If Garfield was running among the current crop of GOP hopefuls, he would be clearly head and shoulders above all of them, though the TBs would not be capable of recognizing it. The book was written by Candice Millard and titled Destiny of the Republic: A Tale of Madness, Medicine and the Murder of a President.  A book review can be found at the NYT.

While Garfield was shot, he was really not murdered by the assassin but by his doctors.

Frequently, in this blog, I refer to True Believers as a term describing those who are incapable of learning with their ossified brains. Their beliefs are so immutable that no amount of factual evidence can change their opinion. Reliable factual evidence, inconsistent with those beliefs, is ignored or dismissed, and a considerable amount of effort is made to avoid any information source likely to provide such information. While most members of one political tribe fit neatly within this classification, without rational dispute, there is no single belief system common to all TBs but only a similarity in the mental processes for evaluating information and forming opinions. Paul Krugman has a handle on the TBs running for the GOP presidential nomination, and even used the phrase "true believer" in his column yesterday.  NYT

Garfield's doctors were acquainted with the scientific findings of Joseph Lister, the pioneer of antiseptic surgery, who had proven that sterilizing surgical instruments and other sterilization techniques reduced complications and deaths among patients. As noted by Millard in her book, American doctors were presented with that proof and chose to reject it, in a manner consistent with how TBs normally reject reliable evidence inconsistent with their pre-existing beliefs. In short, Garfield was murdered by a group of TBs, and only one of them, a deranged TB, pulled the trigger.

After Garfield was shot, there was no sterilization of surgical instruments. Instead, a doctor stuck his hand inside the President's body searching for the bullet. Without question, Garfield's attending physicians first tortured him and then killed him with their incompetence. Today, a person with a similar gunshot wound would have most likely been released in a couple of days from the hospital. (NYT on Garfield medical treatment)

1. Added 50 Adams Express (ADX) at $9.77 Last Week (see disclaimer): I will periodically add to my ADX position when the spirit moves me and the discount to net asset exceeds 15%. This brings me up 709+ shares. I am reinvesting the dividend. I also waited until the year end distribution went ex dividend. I will sometimes "buy the dividend" but only when the share price falls by an amount greater than the dividend a day or two before the ex dividend date, and the price is within my buy target range. A recent example of those coincident events was the 50 share purchase of FFBC at $14.87. 

The 2011 ADX year end distribution was 50 cents per share, of which 42 cents was a long term capital gain distribution. The Adams Express Company Meets 6% Annual Distribution Commitment The ex dividend date for that distribution was 11/17/11 and it will be paid to me in stock on 12/27/11. 

This CEF invests mostly in large capitalization stocks, usually what I would characterize as a value investing approach. Occasionally, I have been critical of some decisions made by the portfolio manager. For example, the fund at one time had a large unrealized capital gain in AIG. When it became apparent that AIG was in trouble in 2008, the fund continued to hold onto the shares far longer than I viewed as defensible.  

Last Friday, the fund closed at a -15.46 discount to its then net asset value per share of $11.45. The dividends subtract from NAV, just like dividends paid by mutual funds.  

For those unfamiliar with this fund, it was started before the 1929 stock market crash along with a number of other closed end funds. About Adams Express Many of the stock CEFs back then used leverage and did not survive the crash. (see paper by Harvard Professor on CEFs before the 1929 Crash at bubble_1929.pdf) Buying stocks with borrowed money at prices prevailing in the late 1920s, was not a good idea. ADX, General American Investors (GAM), Petroleum and Resources (PEO), Central Securities (CET) and Tri-Continental (TY) were the only stock CEFs that survived the Great Depression and are currently available for purchase. TheStreet

Fund webpage: Adams Express Company 

This is a link to the last filed SEC FORM N-Q for the period ending 9/30/11. 

This is a link to the shareholder report for the Q/E 9/2011: ADAMS EXPRESS COMPANY - FORM N-30B - SEPTEMBER 30, 2011

This is a link to the shareholder report for the Q/E 6/2011:   ADAMS EXPRESS COMPANY - FORM N-CSRS - JUNE 30, 2011

The largest holding has been and will likely continue to be the CEF Petroleum and Resources (PEO). ADX and PEO share office space and employees:

ADX Ten Largest Holdings as of 9/30/11

ADX page at the  Closed-End Fund Association.

Morningstar has a three star rating on the fund. As noted in the Morningstar report available to subscribers, ADX has never supported a dividend with a return of capital and has paid dividends every year since 1934.

Adams Express closed at $9.76 yesterday.  The closing net asset value per share from 12/5/11 was $11.59, creating a discount to net asset value at that time of -15.96.

In addition to the triple short stock ETF purchase yesterday, I sold my last leveraged municipal bond CEF which I will briefly mention in the next post. 

JOBS/Added 50 of the Synthetic Floater GYB at $15.56 and Sold 100 of the Synthetic Floater GJP at $23.2: ROTH IRA/Bought 50 IDG at $18.55

The November jobs report was encouraging for a number of reasons. Employment Situation Summary The unemployment rate fell to 8.6% from 9% in the previous month. The payroll data showed that private companies added 140,000 jobs. The jobs numbers for October and September were revised up by 20,000 and 52,000 respectively. There continues to be some indication that small business creation is starting to pick up, based on the continued strong growth in jobs reported by the household survey and the substantial decline in the U-6 number.  The U-6 number declined to 15.6% from 16.2%. Table A-15. Alternative measures of labor underutilization The household survey, used for the unemployment rate calculation, has been showing more robust gains in employment, 1.28 million job gains over four months. Reuters The large drop in the unemployment rate was due to a 278,000 jobs gain in the household survey coupled with a 315,000 drop in the labor force.

Alan Abelson, who was bullish on the stock market for about 15 seconds in 1982, give or take five seconds, tried his best to throw cold water on the positive developments last week. Barrons.com Abelson is not someone who sees the stock market glass either half full or empty, or anywhere in between, but either empty or full of raw radioactive sewage.

The EU members are discussing the possibility of funneling as much as 200 billion EUROs through the IMF to help Spain an Italy. Bloomberg The IMF could enforce the EU's budget rules pending treaty changes.

These violent whipsaw moves in the stock market are a lot of fun but are growing tiresome. I would expect a tough slog between 1250 to 1300, as sellers emerge and buyers start to go on strike.

1. Sold 100 GJP at $23.2 Last Wednesday-ROTH IRA (see Disclaimer): GJP is a Synthetic Floater traded on the stock exchange. This trust certificate pays the greater of 3% or 1.15% over the three month treasury bill on a $25 par value. GJP has a 8% maximum rate. Prospectus The underlying security is a senior bond from the electric utility Dominion Resources. Interest payments are made monthly. I have bought and sold this one several times. My last purchase was at $22.25. Bought Back Synthetic Floater GJP at 22.25-ROTH IRA March 2011 I would much prefer to buy this one below $20 per share. I have bought this security twice at below $20. Bought GJP at $17.5 April 2009 Bought 100 GJP at $18.97 October 2009 Sold 100 GJP at 22.42 February 2010 Bought 50 GJP at 20.55 July 2010 Sold: 50 GJP at 23.31 October 2010

 I just parked some cash in this security for a relatively brief period. 

Trust Certificates: New Gateway Post

This is a snapshot of my 2011 trading profits realized from GJP:

2011 ROTH IRA GJP Two Round Trips +233.91

This is a snapshot of my 2010 trading profits from GJP:

2010 ROTH IRA Two Round Trips +450.86

Given the Fed's Jihad against the saving class, which has resulted in abnormally low short term rates for an extended period of time, the applicable coupon has been the 3% minimum since I start to trade this security. I suspect that the minimum will remain the applicable rate for at least another two years given the Fed's statement earlier this year about continuing its Jihad well into 2013. This means that the trading profits realized to date has far exceeded the meager income paid by this security.     

2. Bought 50 IDG at $18.55 Last Wednesday (see Disclaimer): The coupon is 7.375% on a $25 par value. At a total cost of $18.55, the yield is close to 9.94%. Prospectus:  SEC Filing 

I used that natural volatility of the ING hybrids to trade them profitably during the Near Depression period, making several buys under $10 per share. I sold out of them due to my concerns about European financial institutions. Sold 50 of the ING Hybrid INZ at 21.21 Bought at a Total Cost of $7.82-Last ING Hybrid Owned  ING is based in the Netherlands and has both banking and insurance operations worldwide. I still have those concerns. However, the recent decline in prices for these hybrids tempted me sufficiently to re-engage with a very small nibble when the yield on IDG approached 10%. Dividends are currently treated as qualified and are paid quarterly.  

As discussed in my main Gateway post on ING HYBRIDS, these securities are called hybrids since they combine equity and bond features. For regulatory purposes, they have been treated as equity capital. One equity characteristic is that these securities have no maturity date, viewed unfavorably here at HQ. For balance sheet purposes, they are subordinated bonds. The hybrids will be the most subordinated debt on ING's balance sheet. The EC has made it clear that dividends will have to be deferred in the future whenever a European firm receives financial aid from a host government. ING did receive such aid in 2008 and paid it back. It was not compelled to defer the dividend, but would probably be forced to do it next time.

The legality of a potential deferral of the dividend is a complicated topic, and the fear of a deferral has at times caused major downdrafts in these securities.  This topic was a favorite one back in the summer of 2009, receiving a lot of interest from overseas particularly in the Netherlands. (see e.g., Pay Back Dutch Government=Buying Junior Security=MandatoryPayment Event/Bond Investing Process  Summary of Arguments To Stop EC from Causing Deferral of Payments on the Aegon Hybrids  More on ING and AEGON Stoppers.

The issues are whether the repurchase of, or payment on securities issued by ING to the Dutch government back in 2008 constitute mandatory payment events, and the number of mandatory payments triggered by any such event.

ING has repurchased securities issued to the Dutch state, with the last repurchase completed in May 2011. Background to ING’s State aid arrangement with the Dutch Government | ING  The next scheduled payment may be made in May 2012 according to the foregoing linked press release. {After a period of time, links to ING press releases will no longer work. This is a link to the SEC Filed Release indicating an intention to repurchase those securities in May 2012. SEC Form 6-k} Since those securities are Junior Securities in my opinion within the meaning of the hybrids' prospectuses, their repurchase, or making a distribution on them, will trigger 4 mandatory quarterly payments on the ING hybrids after each such Mandatory Payment Event. Other names for this kind of clause include "dividend pusher" and "dividend stopper".  This analysis assumes of course ING is not in bankruptcy or receivership. 

I view the U.S. traded ING hybrids to be functionally equivalent so the main consideration in choosing one involves the yield at my cost. Most of the ING hybrids that I previously owned just went ex dividend, but IDG has an ex date for its quarterly distribution later this month. 

I have mostly bought and sold IND and INZ. I have periodically bought and sold ISF and IGK. BUY OF ISF at $4.6 February 2009  Bought 50 INZ at 6.52 February 2009 Buy of 50 INZ at 7.82 February 2009. Those kind of buy prices highlight more than anything the potential downside risk. 

I have bought and sold IDG at higher prices. Bought IDG at 18,33 in Regular IRA December 2009- Sold IDG at 21.73 April 2010; Bought 50 of the ING Hybrid IDG at 23.96 March 2011-Sold 50 IDG at 24.63 May 2011. In effect, I just bought back the 50 shares at $18.55 sold a few months ago at $24.63. 

ING's SEC filed Press Release announcing third quarter results can be found at Form 6-K.

ING Groep N.V. 7.375% Perpetual Hybrid Capital Sec. closed last Friday at $19.06. 

3. United Refining (own 1 senior secured bond: FINRA): UF recently filed its earning report. SEC Filed Press Release, see also SEC Filed Annual Report for the F/Y ending August 31, 2011: Form 10-K The discussion of the long term debt starts at page 50.

4. Added 50 GYB at $15.56 Last Friday-Roth IRA (see Disclaimer): Based on what I know now, I viewed GYB to be a much better value than the GJP sold in the same account. GYB will be hyper sensitive to concerns about the creditworthiness of Goldman Sachs.

GYB is a trust certificate. The underlying bond is a trust preferred issue from Goldman Sachs Capital I maturing on 2/15/2034 with a 6.345% fixed rate coupon. (Underlying Bond: FINRA) In effect, the underlying security is a junior bond from GS. That rate will not be received by the owners of GYB unless the swap agreement terminates.

Trust Preferred Securities: Links in One Post

GYB is a synthetic floater that pays the greater of 3.25% or .85% above the three month Libor rate on a $25 par value. As with other exchange traded synthetic floaters, there is a maximum coupon. For GYB, the maximum is 8.25%:  Prospectus

GYB was selling at a much larger discount to its $25 par compared to GJP, which was sold, and GYB has a slightly better minimum rate. The float provisions are roughly equal, historically speaking. I would anticipate (guess!) that a float of .85% over the three month LIBOR will be close to a float of 1.15% over the three month treasury bill. If I had to pick one over the other, I would go long term with the .85% spread over the 3 month Libor rather than 1.15% over the 3 month treasury bill, but it could be close.

I am not going to explain synthetic floaters in this post. SYNTHETIC FLOATER

The owners of GYB will be entitled to receive $25 per trust certificate on 2/15/2034, assuming GS survives of course. If GS goes bankrupt, I would expect this security to be worthless.

I buying back some of the shares previously sold. (e.g. Sold 100 GYB at 19.7 in Roth IRA  Sold 100 GYB @ 19.4-Regular IRA  Sold 100 GYB at 18.09

I have bought these shares as low as $10.95:  Bought 100 GYB at $10.95 April 2009 Added another 100 GYB in Regular IRA at $11 April 2009

So far, I have have done will with GYB as shown in the snapshots found at Trust Certificates: New Gateway Post. I have never had a large position, mostly owning 100 shares for a few months.

I am averaging down from my last purchase of 50 shares. Bought 50 GYB at 16.95 in Roth IRA August 2011 More information about this floater can be found in prior posts.

This brings me up to 100 shares altogether. Due to complicated tax issues associated with the swap agreement, I will own synthetic floaters only in retirement accounts.

Based on a total cost of $15.56, the minimum current yield would be about 5.22%. The float would become the applicable rate when the three month LIBOR exceeded 2.4% during the relevant computation period. The maximum coupon of 8% would result in a current yield of 12.85% based on a total cost of $15.56.  The current yield is likely to remain at the bottom end of that range for a couple of years due to the FED's Jihad against the Savings Class that is keeping short term rates artificially low. The YTM would be higher for an investor holding the security to maturity, since the yield to maturity includes the additional yield realized by capturing the spread between $25 and the purchase cost.

For example, assume that the average coupon until February 2034 was 5%. The coupon is now 3.25% but the FED's Jihad is not likely to last for another 23 years hopefully. There will likely be periods when the maximum coupon of 8% is in effect. There will be a range of coupons between 3.25% to 8% during the remaining life of this security. With a reasonable assumption of 5% as the average, the YTM would be around 10.89% using the Morningstar Bond Calculator.

Corporate Asset Backed Corp. CABCO Series 2004-101 Trust Goldman Sachs Capital I Float. Rate Call Ctfs closed at $15.5 last Friday.

Bought Back 100 IRR at $12.17/Sold 400 ACG at $8.122/Sold 100 of the TC PJR at 25.76

I thought that Maureen Dowd hit the nail on the head describing Newt Gingrich as a pompous hypocrite. NYT

Michele Bachmann is in favor of closing the U.S. embassy in Iran in response to the recent incident at the British embassy in Tehran.  ABC News  Someone had to tell her that the U.S. did not have diplomatic relations with Iran.

The ISM reported that its manufacturing index rose to 52.7 in November, a level indicating expansion. New orders rose to 56.7 from 52.4 in the October report.

U.S. auto sales for November were robust. Reuters

I have never owned the trucking company known YRC Worldwide. I knew that it was in serious financial difficulty and was trading near zero. I happened to see a news story while reviewing "InPlay" at Yahoo Finance that the stockholders had approved a 1 for 300 reverse split. The company had previously split its stock 1 for 25 back in October 2010, and that was one of the largest reverse splits in my memory bank. YRC Worldwide.  The 1 for 25 reverse split took the adjusted price for February 2007 to over $1,100 per share. I know that a 1 for 300 reverse split is the largest that I have ever seen.  The former CEO of this company, Bill Zollars, was at one time highly regarded by many pundits.

This WSJ article details how the pilot's union overplayed their hand in negotiations with AMR and will likely now have to accept a far less generous package after the bankruptcy filing. If the unions refuse to make substantial concessions, then liquidation is always an alternative for AMR, resulting in job losses for the employees and a significant cut in their pension benefits.  AMR Bankruptcy The pilot's union refused to submit a generous offer to their members for a vote, which was the last straw for AMR.

1. SOLD 400 of the Leveraged Bond CEF ACG at $8.122 Last Wednesday (see Disclaimer): I mentioned in a recent post that I really do not like this fund. Barrons Article on Income for Retirees (11/22/11 Post) That opinion is based on the fund's use of leverage to buy low yielding U.S. treasuries. While I am not a buyer of our destitute Uncle Sam's 2% ten year paper, other investors are falling over each other for the privilege of earning a negative real rate of return before taxes. As long as that mass delusion continues, I will frequently trade this fund for small profits, collecting a few dividends along the way.  I sold 400 shares on Wednesday that were bought recently in two 200 share lots. Bought 200 ACG at 7.85 August 2011 ADDED 200 OF THE BOND CEF ACG at $7.98 October 2011

Snapshot of 2011 ACG Trading Profits:

2011 ACG Trading Profits=$100.93/ This Transaction: $59.28

Some prior trades include the following: Bought 200 ACG at $8.12 in Roth May 2010; Added 400 ACG at 7.85 May 2010; Sold 200 ACG at 8.35 August 2010; SOLD 200 ACG 8.45 August 2010; Bought 300 of the Bond CEF ACG at 7.63 April 2011; and Sold 300 of the Bond CEF ACG at 7.82 May 2011.  From that litany, it is fair to say that I am not a long term holder of this fund.

ACG closed yesterday at $8.12.

2. Bought Back 100 of the Stock CEF IRR at $12.17 Last Wednesday (see Disclaimer): I have not owned this CEF since 2009. IRR BUY at $12.50 December 2008-Sold 100 IRR at $17.4 October 2009; Sold  109+ IRR at $16.65-Retirement Account (July 2009). So I bought back the 100 sold at $17.4 at $12.17.

Sponsor's webpage: ING Risk Managed Natural Resources Fund - Fund Profile - Overview

The current quarterly distribution is $.363 per share: ING Risk Managed Natural Resources Fund -Distributions

IRR Page at the Closed-End Fund Association.

Morningstar has a 3 star rating on this fund. As shown on that page, the fund has recently supported the dividend with returns of capital, viewed negatively here at HQ. The only practical way for the fund to earn the distribution is with capital gains on stock sales.

As shown in its recent shareholder report for the period ending 8/31/11, the fund uses a buy-write strategy. ING Risk Managed Natural Resources Fund Semi-Annual Report The fund had a net unrealized gain of $43.289 million as of 8/31/11. As of that date, the fund's holding in Exxon and Chevron accounted for 22% of assets.

As of 11/29/11, IRR closed at $11.98 and the net asset value per share was then $13.07, creating a discount to net asset value at that time of -8.34. When I last sold this CEF, it was selling at a premium to its net asset value.  Yesterday, IRR closed at $12.18 with a net asset value of $13.29.

Last Wednesday, the day of my purchase and the big stock rally, the net asset value closed at $13.33, creating a discount at that time of -8.18 based on the closing price of $12.24.  If the price closed above net asset value, I would consider selling this small position.  I have a larger position in BCF.

3. Sold 100 of the TC PJR at $25.76 Last Wednesday-ROTH IRA (see Disclaimer): The trust certificate PJR contains as its underlying security a senior bond from Unum. (prospectus: www.sec.gov) I bought those shares in two fifty share lots in 2010. Bought 50 PJR in ROTH IRA at $23.61 May 2010 Bought 50 PJR in ROTH IRA at 24.88 October 2010

I mentioned in a recent post that I was a seller of this 100 shares lot and would keep the 50 share lot purchased at a  at $16.72 (July 2009). Item # 2 Unum Those shares were bought in a taxable account and I see no reason to add to my tax bill this year. My realized gains in 2011, both short and long term, are higher than they have ever been already.  

Trust Certificates: New Gateway Post The snapshot of the realized gain will also be included in that Gateway Post.

2011 ROTH IRA PJR +129.55

Merrill Lynch Depositor Inc. PreferredPLUS 7.4% Trust Ctf. Series UPC-1 for UnumProvident Corp (PJR) closed yesterday at $25.75.  The coupon is 7.4% on a $25 par value, and there is a call warrant attached to this trust certificate. (see pages S-3 and S-4 at www.sec.gov)

I will discuss the remaining trades from last Wednesday in the next post.

ADDED 50 FFBC at $14.87/Coordinated Actions by Central Banks/Case Shiller/Italy Bond Auction/Network Interface Device/Lipitor-Now Generic

For those who still have phones tethered to land lines, there is a way to determine whether a problem originates inside the house or on the telephone network. There is a device attached to the outside of my house, called a Network Interface Device. Inside that box, there is a connection for a telephone. Anyone can plug a phone into that device and make a call. After plugging my phone into that interface, I was able to determine that there was a problem in AT & T's network. If I had received a dial tone with no static, then the problem would have been inside the house. It probably does not occur to most people to check this out whenever there is a problem. Theoretically, someone could sit in a lawn share outside my house and make long distance calls from that jack. Although I recently cancelled my land line service due to service issues, it would have cost me $85 for a service call if the problem had been isolated to inside the house rather than on AT & T's network.

Several positive news developments occurred yesterday. China cut its bank reserve ratio for the first time since 2008. The reduction was .5%. The reserve ratio is the amount of money banks have to set aside as capital. By reducing that ratio, the banks will have more money to lend. The FED and five other major central banks reduced the interest rate on dollar swaps by 50 basis points. FRB: Press Release--Coordinated central bank action to address pressures in global money markets--November 30, 2011 Reuters MarketWatch  The ADP reported yesterday that private payrolls increased by 206,000 from November to December. adpemploymentreport.com/pdf And, the Chicago PMI for November was reported at 62.6%, up from 58.4% in October.

I made several trades yesterday that will be discussed in subsequent posts. I resisted the temptation to buy a triple short stock ETF near the close, though it was awfully tempting. While I recognized the positive news developments, I did not have the same reaction as the market to them. Maybe the news was worth 200 DJIA points.

As noted in a NYT, rallies based on some news event relating to the European sovereign debt and banking problems have not lasted very long and have quickly reversed, as the "solution" was subsequently seen as inadequate to address the escalating crisis.  The actions taken by the central banks yesterday address only a symptom of the sovereign debt and bank liquidity issues. The rot is still there.  

Italy auctioned some bonds on Tuesday at the highest rates during the Euro era. Italy paid 7.89% on its three year bonds and 7.56% on ten year paper. Please note that the yield curve is inverted in Italy. The market apparently viewed this auction as a success, for reasons that escape my ability to comprehend. However, the yield on the 10 year benchmark bond fell yesterday to 7.1%:  IT 10Y Govt Bond Benchmark 

The WSJ reported that both Spain and Italy were applying pressure on their respective banks to buy their sovereign debt.

The September Case Shiller index for home prices showed a 3.9% decline in home prices over the past year. CNBC Video Most metropolitan areas had a decline in prices from August. The largest decline was 5.9% in Atlanta which also had the largest yearly decline at -9.8%. 

Corning (no position) warned on Tuesday that earnings would be less than expected due to lower demand for LCD televisions and tablet computers. (see also Press Release)

Bill Gross opined in his newsletter that it will take years for Europe, Japan and the U.S. to escape the straightjacket of debt and low growth. PIMCO He also believes that a 5% annualized return for a portfolio will be a good return for the next several years. 

The NYT had an article earlier this week that suggests that Greece will have a hard time collecting the recently instituted property tax. This tax is included in the electricity bill. Theoretically, if it is not paid, electricity will be cut off. Tax evasion is a national sport in Greece which is the reason for submitting the bill for the tax in this fashion.  

Pfizer's best selling drug Lipitor went generic yesterday. Fox News  CBS News  As discussed in this NYT article, Pfizer is acting aggressively to preserve profits generated by this cash cow. I have no position in Pfizer.

S & P downgraded the credit ratings of 15 large banks based on changes in its criteria:  wsj.com .pdf

1. Added 50 FFBC at $14.87 Last Tuesday (Regional Bank Stocks Basket Strategy)(see Disclaimer): First Financial Bancorp went ex dividend yesterday, the day after my purchase last Tuesday. I noticed then that the shares had fallen 25 cents, roughly equivalent to the dividend, and had declined below my $15 target price for a possible add. I have been contemplating the possible purchase of 50 shares, rounding my lot up to 100 shares, after the bank announced that it would pay out its net income per share in dividends. The recent dividend was 27 cents per share, equal to its E.P.S. for the third quarter of 2011. First Financial Bancorp  The regular dividend is currently 12 cents and the remainder is variable depending on earnings.  

This bank operates 116 branches in Ohio, Kentucky and Indiana. 

I bought the other 50 shares at $16.85 back in November 2010. 

I had been taking the dividend in cash. I changed the option to reinvestment after rounding the lot up to 100 shares. 

I discussed the 2011 third quarter earnings report at Item # 2 FFBC (see SEC Filed Press Release) As noted in that discussion, this bank has good capital ratios.

The current consensus estimate is for an E.P.S. of $1.11 this year and $1.2 next year.

Yesterday, the stock recovered the dividend payment and more, rising $1.27 yesterday to close at $15.88.  FFBC Stock Quote The dividend yield shown at Marketwatch is incorrect. The Marketwatch site includes only the variable 15 cent dividend for the current quarter in its calculation. The regular dividend is 12 cents plus the variable dividend.

Realized Gains Regional Banks

REGIONAL BANK BASKET STRATEGY GATEWAY POST

I am coasting until the end of the year.   The foregoing purchase was made with cash flow.

I will discuss the numerous trades from yesterday in the next two posts.  I was a net seller.