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Perferred Stock

When the average trader buys and sells stock, it’s typically the common shares that are traded. As in the importance of the different types of ways of being a shareholder, Owners of common stocks are at the bottom of the ladder. In cases of bankruptcy, common stocks are the last to “get paid”. First is the bondholders, perferred shareholder and any other debt holders.
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With the preferred shares, it works a little different. They don’t call it preferred for nothing. The share is almost like a bond in regards to having a fixed dividend. It preforms as a fixed income security, but it’s not necessarily guaranteed.
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The reason I bring this up to you is because I’ve been looking at the stocks of two companies that have been in the news lately, you have heard of them. The two stocks I speak of is General Motors and Ford Motor company. I will break each one down separately.
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General Motors (NYSE:GM), the common shares were recently as low as $1.70 a couple of weeks ago and now it sits at $4.70 per share (a gain of almost 280%). That would have been a great payday for you if you were willing to take a chance and gamble on the stock. I didn’t take advantage of it because I don’t consider stock trading a form of gambling. The dividend for the common shares will be history once the “bailout” is approved. In regards to the preferred, it will continue to pay out it’s 37% yield per share at it’s current price of $4.25 per share. The payout will be on January 15th, 2009 for shareholders on record on December 26th, 2008. The symbol for General Motors preferred is (NYSE:GPM)
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Ford Motors company (NYSE:F) is also another company that has had their common shares beaten up to their low of $1.01 just a couple of weeks ago too. It now trades at $3.23 per share ( a gain of over 300%). Again another beautiful gain for anyone willing to take that chance too. As for the preferred shares of this company, it’s trading at $9.20 per share and returns a 35% yield per share. The symbol for Ford’s preferred is (NYSE:FPS). I do know that the payout is due within the next month.
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The reason I bring this up is for my readers who are willing to take on the risk of trading the common shares, then let me recommend that you sell now and move into the preferred stocks. After doing the research on these stocks I will also pick up some shares this week. In this coming payout, it will be a 17% yield or better, depending on my cost basis.
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I just hope that I’m not too late since it’s expected that Congress will approve the rescue plan and I’ll miss the jump in the price (however big it may be), which is something else I’ll be banking on for this trade to be ideal.
Do your research and happy trading.

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Is America Doomed?

What is going to happen to America? It seems that the true meaning of capitalism is being destroyed. The problem is capitalism is being destroyed by the very people who say they’re trying to preserve it. How can this be? It’s how I see it. What are your thoughts? here’s mine.

First we started with the financial sector, now it’s the American auto industry. When are the taxpayers going to see the return on their investment in these sectors? At the rate it’s going, I doubt it will ever happen in our life time.

Yes, I know that the government is saying that this will help the economy, but aren’t they the same people who put us in this mess?

In the 1990’s NAFTA was signed and many business’ went over the border to make the products that were being built here in this country. Ford and General Motors have opened factories in Canada and Mexico since NAFTA was past.

When the bill was past in 1996 to help all American buy their own home. I’m sure the politicians were aware of the fact that it would be done with taxpayer’s money through Fannie Mae and Freddie Mac with the help of adjustable mortgage rates. It helped people get into homes that they couldn’t even afford.

Twenty plus years ago we heard that there was going to be more energy efficient cars within ten years. How come my 2005 truck gets the same mileage as the 1985 Grand Am I owned fifteen years ago? What’s with these CAFE laws and all the other regulations that are put on the automakers when the cars haven’t really improved over the decades.

Now after all this crap that has gone on for too long, the companies that are in trouble are going to the people who caused these problems for help. All the while the American people sit in their living rooms watching mindless TV and are none the wiser. Go figure.

I know that this isn’t a political site, but in all actuality this post isn’t about politics. It’s about the way Capitalism is being destroyed by people who have their own agenda. Wall Street and Main Street are one and the same and from where I live, it doesn’t look like capitalism to me.

We need to stop bailing out these companies that don’t handle their business in a proper manner. If you can’t make the business profitable then you shouldn’t be in business.

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Auto Bailout Heats Up

Again the CEO’s of the big three automakers are back in Washington to see if they can still get an auto bailout from Congress. General Motors, Ford and Chrysler are still looking for money to help keep them afloat.

What amazes me is that the three CEO’s think that if they drive down in hybrid cars (instead of their corporate jets like they did last time), that they are going to have any more of a chance to get the money to fuel their needs.

After going back to the drawing board, the companies came back to show what they’re going to do to improve the condition of the three giants. Of course it’s no longer $25 billion that will be needed to save them, this week it’s at $34 billion. Who knows where it will be when it’s all said and done.

As long as the UAW has a hold on the three companies, they will go out of business. The legacy costs are out of control. There are over 15,000 retirees that get paid $31 per hour from their pension plan for not doing anything for the company. The UAW has caused the costs of cars, truck and SUV’s to get out of control. It’s said that $2000 of of the price of every vehicle is due to legacy costs.
With obligations like that how are these companies ever going to turn a profit? There is no way for any company to be able to stay in business if the payroll cost are going up while the workforce is shrinking. How are they to keep their prices in line with their competition?

If you haven’t noticed, you don’t see any of the foreign automakers that build cars here in this country in Washington looking for a handout. It’s because the UAW has no existence in their factories and before you say that it’s not fair that those workers don’t have the right to have an union. They don’t want it, they make on average $35 per hour to work on an assembly line that the robots do most of the work. Before you say that $28-$42 per hour isn’t much for someone living in New York City, these workers are in Alabama and Tennessee, two of the poorest states in this country.

I have always bought American made cars because I believe in keeping my money in this country. It’s not that I’m against the rest of the world, it’s because I’m an American and proud of it. I will continue to buy American made cars as long as they are still American made cars. I know that no matter what happens to these three companies, there will always be cars made here in this country.
Even if the three of them were to go into bankruptcy and close their doors, someone else will buy their equipment and start to build a new automobile made here in America.

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Bankruptcy In America

In America, if a company can’t make a profit and loses money, they have one choice and that’s to file for bankruptcy.  Just because a company is big doesn’t mean that the government has to lend them taxpayer’s money to save it.
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It’s amazing to see how the CEO’s of these big corporations have destroyed the company so much that they need the assistance of the U.S. government and the American taxpayer to save their skin. How can these men with such education be so stupid to take on the extreme risks that they did?
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What I really want to know is how stupid is Congress to keep on bailing out these companies that shouldn’t even be allowed to operate as a business after losing that much capital. Using the excuse that they’re such big business’ within the United States is a lame one at that. Yes, many people will lose their jobs and the unemployment rate will jump into the double digits, but what other choice do we have? Do we keep giving them money until the Federal Reserve runs out of paper to print more? The airline industry went through bankruptcy years ago and they’re still in business (except for Eastern of course).
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Do you really think that if the big three automakers go into bankruptcy that they (or we) won’t survive? We as American people have to not fall for the hype that the CEO’s, Congress and the mainstream media are trying to feed us. Look at all the money that’s was given to the financial industry and now it turns out it wasn’t used for what it was meant to be used for.
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What about the banking system mess? These companies along with Congress have also done the wrong thing to the American people. If it wasn’t for Congress passing all those bills in the 1990’s that allowed the financial sector to lend money out in sub-prime mortgages, we wouldn’t be in this mess.
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What has me really PO’d is that none of the people who are actually at fault, are being held accountable. Hank Paulson, Dick Fuld, Christopher Cox, Frank Dodd, Barney Frank and the President-elect are all to blame for the financial mess. Dick Wagoner, Alan Mulally and the UAW are to be blamed for the failure of the auto industry. I would like to blame Bob Nardelli from Chrysler too, but he just got there (I will blame him for the fall of The Home Depot).
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Capitalism is what this country was built on, if we are to continue as a capitalistic country we need to let companies fall when they fail to make a profit.
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When the decision was made to let Lehman Brothers filed bankruptcy, the company had no other choice but to restructure everything and sell of the assets that they had to clear their debt. If the American automakers are forced to do the same, they too will do what they have to to make the company survive. If they need to sell off assets, I’m sure that there’s an entrepreneur some where in this country that is willing to make profitable business out of the ashes. He could name the first model Phoenix.

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Ethanol And Alternative Energy

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photo by plan my green

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Now with the price of oil being down over 60% since it’s July high of $147 per barrel, it seems that ethanol and other alternative energy sources have fallen out of flavor with investors. It was obvious to see that we needed to find other means to supply our fuel needs when we were paying $4.11 per gallon of gas (national average July 7, 2008), but with the price of gas now at $1.89 (Nov. 24,2008) people and investors are being blinded by how cheap it is at the moment.
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Ethanol is a fuel source that is derived from corn. A fuel source that has been in use for many years. Unfortunately, it has cause the price of corn to be very volatile and may cause a food shortage if we’re not careful.
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Other alternative energies consist of wind, solar, nuclear and natural gas. All of which we can produce and manufactured in our own backyard without the assistance of foreign countries.
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The problem is that with the price of oil falling to where it was in March 2007, it has made the idea of alternative energies less competitive. The credit crisis has also made it even harder to get the funding that is needed to expand on these ideas.
T.Boone Pickens plan of have a major wind farm built in Texas has been delayed because of the lack of financial lending.
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It now seems that President-elect Obama is getting on board with Mr Pickens and his ideas to free this country from the dependency of foreign oils. Word is spreading that within the next stimulus package, alternative energies will be added in.
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Out of the choices that were listed in this post, ethanol is the one that Obama is favoring the most. If that’s the case, ethanol stocks may be something that might interest you. I do not recommend any ethanol stocks because of what is going on with the industry. VeraSun Corp. (NASDAQ:VSE) has filed bankruptcy last week and it’s leading competitor Poet LLC, a private held company is looking to acquire them.

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Henry Paulson And The Recession

Henry “Hank” Paulson was the CEO of Goldman Sachs for many years. He has too many friends in the financial sector as well as on Wall Street. The man should never have been selected by President G.W. Bush, but he was and at the time everyone thought it was a great idea.
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Why was it a great idea? Because at the time the markets were recovering from the tech bubble collapse in the Stock market. He was also one of the guys who help redesign the hedge funds (another reason we have this financial meltdown) as well as pushing the idea of sub-prime mortgages. The Democrats loved him because he was full-filling the “American Dream”, getting everyone into the house they wanted, no matter what.
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It’s now come to a point that he’s out-lived his usefulness in the Treasury Department. He’s been having press conference after conference in just the last couple of weeks that shows that he doesn’t even know what to do for the economy while still trying to help his cronies within the financial sector.
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I’m counting down the days until Paulson will be out of the position. The job will now fall on Obama’s choice for Secretary of Treasury. Timothy Geithner will fill that position next month. The man has a long history with the economy and the Treasury department as well as being in charge of the New York Federal Reserve. Timothy Geithner has made a name for himself on Wall Street and some of the rallying in the markets last week was most likely due to the decision.
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Unfortunately the rally the only last so long in what is now “officially” a recession. That’s right the news was released Monday. The economic advisors and experts have now made it official. Like anyone with a half a brain couldn’t see that two months ago.
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The markets typically show the signs of a recession before it actually is made official. With that in mind, it’s nice to think that a recession is usually 8-12 months long. Looking back the markets have been showing signs of it for at least four months, which means that we can be half way through this mess already.
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As I’ve been saying for the last to months, build up some capital (40%-60% of your portfolio) and wait for the right time to buy to build a new position in the stock market. That time is just about upon us, so I say when the DOW reaches 7500 points again, start putting your money to work behind all that research that you’ve been doing.

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GDP (Gross Domestic Product)

Today the GDP report was released and no one was surprised by the results. As a matter of fact the report shows that spending was pulled back the most in the last 28 years. A clear sign that a recession is close at hand if not here already.
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According to the Commerce Department on Tuesday, the GDP shrank at a 0.5% annual rate during the July-September quarter. The report shows that the economy had slowed due to the housing, credit as well as the financial issues that continue to intensify.
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GDP measures the value of all goods and services produced within the U.S. and is considered the best barometer of the country’s economic fitness. That is what we are lead to believe, but in all true intent and purpose, it doesn’t do that at all.
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The GDP (Gross Domestic Product) was not designed to be the indicator of this country’s growth. It was originally to gauge the country’s wartime production capacity. According to the GDP, no matter what the buying and selling is for it’s looked upon as something good for the economy. It does not matter it it’s for the well being of the people or not, it’s all lumped in together.
Let’s look at all the money that was spent after hurricane Katrina destroyed New Orleans. The $100+ billion that was spent was considered a good thing within the GDP report.
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It doesn’t matter what the money is spent on as long as it’s spent, that’s how the GDP looks upon it. Crime is also looked favorably when calculated into the report. What about social welfare and social issues? they too are considered a good thing for GDP. That’s right, all those lawsuit, divorces and car accidents, according to the GDP they are good things for the economy.
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That’s why a few years ago some people got together and came up with a new way to gauge our growth in the country. It’s called the GPI (Genuine Progress Indicator). I wrote a post called GDP Vs GPI a few months ago and seeing how the GDP report came out yesterday it just made me want to touch base on the article again for those who might have missed it.

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Citigroup

Citigroup (NYSE:C) Is now the center of attention now within the financial sector. Of course it’s expected since they too were doing what the rest of the industry has been doing for the last few years.
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Over the weekend the Federal Reserve and the Treasury department have been talking on how to stabilize the company. The discussions are still going on and not much more is being revealed. Speculation is that they are thinking of assuming some of the risky assets held by the company. As with the rest of the trouble assets that the government has taken over from the other troubled banks. Removing the assets off of Citigroup’s balance sheet will give them the chance they need to put them in a better position to do business and raise capital.
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From all the news coverage I’ve followed over the last few days, Citigroup has declined to comment.
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I was on vacation last week and while spending my time with my family, I didn’t follow any news, but to come back to find out that Citigroup lost nearly 60% of their stock value brought me back to reality real quick. Having Citigroup collapse could possibly bring the end to the entire sector. They are too intertwined within the sector.
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When you think about it, it shouldn’t be a surprise that this is happening. Look what happened to Citigroup last month when they tried to acquire Wachovia (NYSE:WB). They lost the opportunity to Wells Fargo Corp (NYSE:WFC). They are no longer the big dog on the block. As a matter of fact they are probably the most vulnerable of all the financial institutions out there.
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Who knows what is to come this week. Last week the DOW lost 5% and that’s after the 500 point gain on Friday. I’m going to catch up on the thing I missed and watch the action from the sidelines.

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Capitalism

With all the talk about the state of our economy, Obama being more of a socialist-type leader and the out-of-control bailouts, one wonders what is the idea of capitalism that this country was built on.
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Wikipedia defines capitalism as,”Capitalism is an economic system and a form of society, in which resources are controlled by private power, as opposed to a state or public institution.” (to read the rest…)
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If we are to survive as a capitalist country and continue what our fore fathers started two hundred and thirty two years ago, we must stop saving companies that are not doing the right thing to make it in the market.
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The government should have never started with all this financial assistance to save companies that have been doing the wrong thing to make money. Things that could be considered morally wrong and legally questionable at best. If a board of directors want to give millions of dollars to a man that makes decisions that will eventually cause the company to lose billions of dollars, well then they get what they ask for, bankruptcy.
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The big three automakers are another set of companies that should face the music like all other smaller companies must face if they don’t do the right thing to preserve their future. Chrysler became a privately held company about a year ago. The company choose Bob (corporate raider) Nardelli to be the CEO. If you guys are not familiar with Mr. Nardelli let me give you some first hand insight.
In the six years that Nardelli was the CEO of The Home Depot he removed more associates from the floor as well as eliminating many of the employee benefits. In effect of his decisions he ruined the customer service that The Home Depot was known for and help them stand out amongst the competition. How do I know this? I worked for The Home Depot before he got there and was there after he left. As a matter of fact, they fired him to get rid of him knowing that they would still have to give him $209 million departing package.
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Let’s get back to capitalism. If this is the way the government is going to start defining the meaning of the word, well then I suggest that if you have a company the isn’t making the money that it needs to make payroll and pay your suppliers, go to Washington and ask for a bailout.
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I don’t know about you, but I go into business to make money and I have only two choices… to either make it or break it and if I break it, it’s my problem not anyone else’s.

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General Motors And Ford Motor Company

General Motors And Ford Motor Co. as well as Chrysler are in Washington begging for money that they so desperately need. For more than a week we’ve been hearing them say that they will not last very long without the money.
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If the three auto makers go belly up and close their doors, it will cause about two million jobs within the United States. That would be the nail in the coffin in this country’ economy and send us closer to a depression.
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From where I sit, I see three companies that have been dragging their feet for the last three decades. We knew in the 1970’s that they needed to build a better fuel efficient vehicle and they along with the government’s protection, have been keeping the standards and the vehicles being as efficient as they were then.
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Yes, the Ford Expedition, the Hummer as well as the GMC Yukon look and drive great, but that is nowhere near being a wise choice to saving our dependence on foreign oil. None of these companies wanted to build the smaller cars in fear that no one would buy them. Guess what guys, no one is buy the one that you did build and that’s why you’re on your knees in Washington.
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The big three auto makers have the unions that are not helping the matter either. UAW (Union of Auto Workers) have been strong arming the companies for so long that it’s excepted has how it’s suppose to be. The union have been making more money of the workers than the auto maker are.
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BMW, Toyota and Honda all have plants here in America and employ Americans to build their vehicles. There are no unions in any of the facilities and their won’t ever be. They offer their employees great benefits as well as great pay. The average worker in these plants make $40-$48 per hour and don’t have to pay any union dues. They are not forced to work extended hours for the same amount of money per hour. They have the option to contribute to their 401K plan and make their own decision for the retirement.The days of slave labor in manufacturing plants in America are over,and these workers are protected from that type of employment.
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Let’s look at the big three, their average worker make $78 per hour and have to pay a ton of union dues to help them keep their jobs. They are also protected from slave labor, but there are labor laws in this country that do that already. What about their retirement? They are enrolled in the companies pension plan. which is covered with all the other dues they pay. The problem is that the three auto makers can’t even pay for the pensions that are out there already. Their pension payout keeps growing with no end in site.
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Giving the big three auto makers this money is more like throwing it away. These guys have been helped out in the past and will continue needing the assistance of the American tax payer to save their rear end. This is a capitalist country so let’s let capitalism work it way through.
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