Bette’s gauge of counterparty risk is back with attitude.
Bank equity including common preferreds with preferential dividends = junk.
Hard assets including gold and silver and platinum coins = preferred payment.
Bette Midler, the American singer, is least known for stipulating her 1978 payment for a tour of Europe be paid in South African sovereign gold coins. In her case, kroogs = preferred payment. Inflating paper (at the time) = junk.
As Ticker Trax™ subscribers know, I rarely rely on charts to tell a story, unless the chart is so graphic, the story pops out. In this case, the chart below compares gold’s price as measured by futures contracts with bank equity (Nasdaq Bank Index) the past two or so years. You get the picture. (Sincere apologies to chart aficionados who can work wonders with international banking indexes and commodity timelines.)
Bank share preferreds are probably one of the safest (or so they say) delivery boys for dividends. Most garage-loft investors do not even see these securities in listings as they are kind of hidden. Most of this paper used to sell for around $25 a share and yield about 7%. The thinking is that holders of the preferreds move closer to the front of the line if the issuer goes belly-up.
Just finding the tickers of these things, which have fallen off a cliff, is a chore. I finally found a few. Bank of America (NYSE: BAC, Stock Forum) and many other banks have them. Try charting BAC1D, for example, on Stockhouse. In the old days, not as far as Bette Midler’s kroog statement but a mere two years ago, these preferreds with their 7% dividends sold for the usual $25 or so. Now they sell for $10 or $9 or less and the dividends are more than double what they used to be.
Here is a chart of a Bank of America one for the past two or so years.
See, this is what we mean by counterparty risk. Even preferred status on the dividend queue = junk these days. Hard assets, as in gold coins, Fuji apples, a bag of coffee beans = preferred payment.
Bill to pay
Now, I am not one of those folks who go around saying governments are going to whip away our hard assets by de-feathering our mattresses and GPS’ing the end of our golden rainbows. But I will lean toward the research accomplished this entire decade by the Gold Anti Trust Action Committee.
Marking its 10 years as the Rodney Dangerfield of financial warning systems, its chairman, Bill Murphy, resurrected a sentence he used in advertising the group’s efforts to ease counterparty risk among investors.
“Surreptitious market manipulation by government is leading the world to disaster,” Murphy says.
(I will see Mister Bill this weekend in Canada’s downtown Vancouver, where he will swing by our informal, as in buy-your-own drinks, gathering of Ticker Trax subscribers and mining professionals at Lions Pub. That is just a short jog from where the Cambridge House metals conference and the yearly Cordilleran Minerals Round-Up are taking place. I do not believe Bette Midler will be there.)
Bill Murphy gets points in my ledger for raising awareness of the POLICY aspect of commodities markets. His group’s examination of court documents, research papers, doctorate theses and fineprint deserves to be its own minerals round-up of subterranean intrigue in dank fiscal caves.
Example: Former USA Treasury Secretary Lawrence Summers – “Who could be more qualified to continue Robert Rubin’s gold price suppression scheme than he? After all, while at Harvard University he co-authored a paper, Gibson’s Paradox and The Gold Standard. The bottom line of Summer’s analysis is that ‘gold prices in a free market should move inversely to real interest rates.’Control gold and it will help to control interest rates.” That is some of GATA major.
No need to bore you with another chart. That is all for now about Bette, Bill and banks.
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Vancouver in January
Join us for an early evening drink Saturday Jan. 24, the eve of the annual metals blast in downtown Vancouver, British Columbia. It is buy-your-own drink and mingle with the hard asset crowd. I also will be presenting a 45-minute Ticker Trax™ workshop at the Cambridge House conference that weekend: Sunday at the show.
HOLDINGS: Thom’s cosmos of holdings is listed for free Stockhouse members on www.Stockhouse.com under the “portfolio setting” for user TCALANDRA. He and his family also own recently minted gold coins. He also owns 5-year-old shares of a privately held platinum mine in South Africa’s Bushveld Complex. For more ThomWatch, please click here.
THOM’S STORY:Thom Calandraduring 27 years of road work has helped his audience find value in a quagmire of investment choices. Thom co-founded CBS MarketWatch, MarketWatch.com and FT MarketWatch in Europe. As the voice of Thom Calandra's StockWatch and The Calandra Report, Thom fancied $300-ounce gold before that metal became an investment rage. Thom visited bioscience companies, metals mines and energy companies, along with thin-crust pie joints across the planet, in a search for profit, reliable sources and pizze de trippa. He was not perfect, having settled a U.S. Securities & Exchange Commission complaint in 2004. Thom's novel PABLO BY NUMBERS was completed in summer 2008. Thom is continuing his search for the planet’s finest prospects.