A special welcome to the members of the Capital Gain Dream Team investment group.  I had the pleasure of joining their September 10 meeting, hosted by Smith Barney, to talk about preferred stock investing.  See a photo plus the story in the CDx3 Special Announcement article below.

September 2007 was a great month for CDx3 Investors in several ways.  First, CDx3 Investors received a nice Labor Day surprise when a new CDx3 Preferred Stock was introduced that pays an annual dividend rate of 8.0% - the highest dividend rate on a new CDx3 Preferred Stock since December 16, 2002. 

Only about 10% of newly issued preferred stocks are able to pass the 10 CDx3 Selection Criteria; that means that about 90% are just not good enough.  Those that do pass are referred to as "CDx3 Preferred Stocks."  As the companies that issue CDx3 Preferred Stocks compete for investors, the dividend rates that they've been willing to pay on new issues has been going up.  The Last Month's CDx3 Investor Results article below describes how the competition has heated up to produce the highest dividend rate on a CDx3 Preferred Stock since December 16, 2002.  

Secondly, on September 18 the Federal Reserve Board's Open Market Committee announced an astounding .50% reduction in two key interest rates - the federal funds rate and the discount rate.   To see the amazing effect this policy move had on the CDx3 Income Engine, read the CDx3 Question Of The Month below, submitted by MandyK .

Need to get 12,000,000 gummy bear snacks from San Francisco to Hamburg right away?  In this month's CDx3 Company Spotlight article, we feature another issuer of CDx3 Preferred Stocks - AMB Property Corporation.  Live near a major highway, rail line or seaport?  Chances are that several people in your community work for AMB.

There's been changes in the CDx3 Special Offers this month.  Some expiring, some raging forward, much to the benefit of those considering becoming a CDx3 Notification Service subscriber.

New CDx3 Preferred Stock Dividend Rate Highest Since December 2002

CDx3 Notification Service Subscribers Receive Great Labor Day News

Just when subscribers to the CDx3 Notification Service thought that the dividend rate paid by new CDx3 Preferred Stocks had peaked, a new one began public trading on Tuesday, September 4 that pays a spectacular 8.00% annual dividend.

Subscribers received a CDx3 Buyer's Notification email message (see example) on that day that provided all of the details; but, any way you slice it, this new CDx3 Preferred Stock is the highest dividend payer to be issued since December 6, 2002.

For non-subscribers who own Preferred Stock Investing, you can find out who issued this CDx3 Preferred Stock by following the instructions on page 17 of Preferred Stock Investing (or, become a subscriber to the CDx3 Notification Service).

To qualify as CDx3 Preferred Stocks, preferred stocks have to meet all 10 of the CDx3 Selection Criteria itemized in Chapter 1 of Preferred Stock Investing, including the following:

  1. Has the much-sought-after Moody's credit worthiness rating of  "investment grade;"

  2. The issuing company has never suspended dividends on a preferred stock (and remember, these are multi-billion dollar, decades-old companies); and

  3. Dividends are "cumulative" - if there is some kind of disaster and the issuing company misses a dividend payment to you (which I've never seen happen with a CDx3 Preferred Stock), they still owe you the money. 

The 10 CDx3 Selection Criteria eliminate about 90% of the preferred stocks that are currently trading.

"CD-Like" Risk: In addition to these three CDx3 Selection Criteria, there are seven more criteria that a preferred stock must meet before it can be considered a CDx3 Preferred Stock.  The CDx3 Selection Criteria reduce the risk to what I call "CD-like" risk, and I think you can understand why by reviewing the above three examples.

CDx3 Preferred Stocks are issued at an average frequency of 1-2 per month.  As of this writing, there have been 11 CDx3 Preferred Stocks issued so far this year.  The dividend rate paid by each of these 11 CDx3 Preferred Stocks, and their month of issue, is shown by the navy blue bars on the below chart.

There were two CDx3 Preferred Stocks issued in January, one in February, none in March or April and so on.

First, notice how the dividend rate paid by CDx3 Preferred Stocks, at "CD-like" risk, is well beyond what average bank CDs pay.  This is typical.

Second, CDx3 Investors earn the above illustrated dividend rates, then, as taught to them in Preferred Stock Investing, sell their CDx3 Preferred Stocks for a market price higher than what they originally paid, collecting a nice capital gain as well.  When you add the dividend income and the capital gain income together, you can see by the above chart that it is not too hard to earn a return above 10%, and at "CD-like" risk.  In fact, the CDx3 Income Engine has produced an average effective annual return of 14.5% since January 2001.

To see a chart that compares the average effective annual return of CDx3 Preferred Stocks versus bank CDs since January 2001, click here.

Investment Group Learns About Preferred Stock Investing First Hand

Members Learn About The CDx3 Income Engine

On September 10, members of the Capital Gain Dream Team investment group learned how the investment method described throughout Preferred Stock Investing generates a respectable return, while minimizing risk and the effort needed to do so.

While most investment groups that I have visited with have 5-10 members, the Capital Gain Dream Team has about 20 members, 16 of whom were able to be in attendance at the Smith Barney facility.

Doug K. Le Du, author of Preferred Stock Investing, speaks with the Capital Gain Dream Team investment group September 10, 2007.

We started the meeting by discussing the nature of preferred stocks when compared to other fixed income investments, such as dividend-paying common stocks and bonds.

Members were pleased to learn how the 10 CDx3 Selection Criteria (PSI, page 20) take the emotion out of investment decisions.   All agreed that having specific criteria by which to judge an investment was much better than basing such decisions on other factors, such as how much you might like the company's products or services.

During the meeting, the group was asked to ponder these two questions:

  1. During the current quarter, can you tell me when, the exact date, a CDx3 Preferred Stock is most likely to reach its maximum market price and why?

  2. If I pick a specific date, five years in the future after a new CDx3 Preferred Stock is issued, can you tell me what the market price is going to be on that exact date (within a few pennies) and why?

While initially met with a lot of shaking heads, the members were able to answer both of these seemingly impossible questions 30 seconds after I explained the Three Rules Of Market Price Predictability that Preferred Stock Investing teaches you.

One of my favorite quotes: "All truths are easy to understand, once they are discovered..." (Galileo Galilei, 1564-1642).

Might your investment group be interest in learning about preferred stock investing?

Investment group handout materials, including a slide show presentation (Windows or Mac), are available to you for free.  Like the Capital Gain Dream Team, you can even invite me to join your group for a change of pace.

To take a look at the Preferred Stock Investing investment group materials, click here.

 

Who are these companies that issue CDx3 Preferred Stocks?

AMB Property Corporation (NYSE: AMB)

If your local mini-storage operator does not have enough storage space for your stuff, you might try calling AMB Property Corporation, headquartered at Pier 1 in San Francisco, California.

AMB, founded in 1983, is a $5 billion company that specializes in the ownership and operation of industrial distribution and storage facilities - 140 million square feet of it, spread across about 1,100 buildings in 13 countries.

AMB's facilities are specifically located in cities throughout the world that are, or are near, major transportation centers.

AMB builds high-tech facilities with a specific emphasis on quick-in, quick-out handling of high volume cargo near airports, seaports and ground transportation centers.

Check out these recent announcements by AMB of the major clients it is putting into its facilities throughout the world.

140 million square feet is a lot of storage space in anybody's book.  To see what the list looks like, and maybe even an AMB facility near you, click here.

AMB's Series P CDx3 Preferred Stock was issued on August 21, 2006 and pays an annual dividend of 6.85% per share.  At the time this CDx3 Preferred Stock was issued, Certificates of Deposit at your local bank were paying an interest rate of about 3.91% (source: bankrate.com).

CDx3 Investors who purchased AMB-P in August 2006 are making 1.75x what a CD would have paid, plus CDx3 Investors have an opportunity to earn a nice profit (capital gain) down the road by selling AMB-P for a higher price than they originally paid.   The market price of AMB-P jumped up almost $0.30 (about 1%) in the 48 hours following the reduction in key interest rates announced by the Federal Reserve Board on September 18.

Preferred Stock Investing teaches CDx3 Investors how to determine the exact date that the peak Target Sell Price is most likely to occur - weeks in advance, too.  The CDx3 Income Engine has been right 97.5% of the time since January 2001 (118 out of 121 times). 

From MandyK:  The reduction in interest rates by the Federal Reserve Board [on September 18] was all over the news for several days.  The Dow Industrial Average shot up over 300 points the day of the announcement.  How does this move by the Fed affect the income produced by the CDx3 Income Engine?

By lowering the federal funds rate (the first such move by the Fed since the summer of 2003) and the discount rate (the rate that the Fed charges banks for short-term loans), the Fed injected enormous support for domestic barrowers and lenders alike into the U.S. economy, but at the expense of increasing upward inflationary pressure.

The Big Picture:  High-tech global transport companies like AMB (see CDx3 Company Spotlight article above) are able to move vast volumes of products from anywhere, to anywhere on the globe - really fast.  These advances in high-volume transportation have integrated the world's economies; what happens in one country often affects another, and quickly.  The relative economic isolation that one economy had from another, as seen through much of the last century, is largely gone.

With the Fed's September 18 interest rate reduction, foreign treasuries, and other investors, will slow their investment in anything denominated in U.S. dollars (such as U.S. treasury bonds) since such investments will now pay a lower interest rate.  If a bond in country A was paying 4%, and the same bond offered by country B was paying 6% (all other things being equal), where would you put your money?

This reduction in demand, like any other product, lowers the value of the U.S. dollar, when compared to other currencies; 1 euro, for example, can now get you $1.40 worth of U.S. goods, rather than, say, $1.35 worth of U.S. goods a few weeks ago.  Great, if you live in a country that uses euros as its currency.

But if you live in the U.S., European products that cost $1.35 before the Fed's rate reduction, are now going to cost you $1.40.

For the U.S. economy, the Fed's reduction in interest rates brings much needed relief to barrowers and lenders alike, but lowers the value of the U.S. dollar which, in turn, puts upward pressure on the prices of U.S.-made products (inflation).  Because of the high degree of integration that we now see among the world's economies, this inflationary effect happens almost immediately.

What About CDx3 Preferred Stocks? As explained in past issues of the CDx3 Newsletter, market prices of CDx3 Preferred Stocks tend to move in the opposite direction of interest rates.  The market price of a collection of CDx3 Preferred Stocks increased an average of $0.16 within minutes of the Fed's announcement, with several increasing in value by almost $0.50.

As explained in the July and August issues of the CDx3 Newsletter, upward pressure on interest rates, at that time, created a "buyer's market," with the market price of many CDx3 Preferred Stocks falling to bargain basement levels.  CDx3 Investors have been snapping up CDx3 Preferred Stocks that normally sell for about $25 per share for closer to $20.

This upward pressure on interest rates also produced the highest dividend rates that we have seen on a new CDx3 Preferred Stock since December 16, 2002 (see the Last Month's CDx3 Investor Results article above).

Interest Rates Down, Capital Gain Income Up: With the Fed changing course and lowering interest rates on September 18, does this end the "buyer's market" that CDx3 Investors have enjoyed since early June?  Only time will tell.  But CDx3 Investors may very well be looking to sell their recent bargain basement purchases of CDx3 Preferred Stocks for a nice capital gain as prices head back up.

The CDx3 Income Engine is always trading one form of income for another.  When the Fed lowers interest rates, CDx3 Investors make less dividend income, since new CDx3 Preferred Stocks will be introduced with a lower dividend rate; but market prices go up, so you make more capital gain income when you sell.

It remains to be seen if the Fed's lowering of key interest rates was just a one-time adjustment, or a new longer-term policy direction.

Consequently, there are still some great deals on several CDx3 Preferred Stocks, many producing yields around 8% at "CD-like" risk (see last month's HPT-C example, under "Last Month's CDx3 Investor Results," of how lower market prices increase the actual return, "yield", of your CDx3 Preferred Stocks).  Plus, don't forget about the downstream capital gain opportunity.  The CDx3 Notification Service sends you an automatic email message whenever there is such a buying or selling opportunity.  You don't have to do any of the work; just read your email.

Thanks to MandyK for the great question.  You will receive a complementary copy of the CDx3 Special Report Dividend Accounting.

If you have a question regarding the CDx3 Income Engine, just send an email message to FAQ@PreferredStockInvesting.com or visit the Preferred Stock Investing Google  Group web site at http://groups.google.com/group/preferred-stock-investing, join the group (using an anonymous nick name) and post your question there for others to see.

Some Offers Expire, Others Rage On

CDx3 Notification Service Deal Nets 15% Off For Qualifying Subscribers

Even though the $20 Shell Gift Card web site offer presented in the last two issues of the CDx3 Newsletter has expired, there are plenty of great deals on CDx3 products and services still available.

For example, the $30 Shell Gift Card offer to New Window: $30 Shell Gift Card Subscription offer those who want to subscribe to the CDx3 Notification Service, is still available.  That's like getting a 15+ percent discount.  Just click on the $30 Shell Gift Card image above to see the details of this promotional offer.  Want to know when new CDx3 Preferred Stocks are coming out and have your Target Sell Prices calculated for you?  Become a CDx3 Notification Service subscriber today.

Also, as a recipient of this monthly CDx3 Newsletter, you are entitled to a FREE copy of the CDx3 Special Report titled "Calculating Your Rate Of Return."

This CDx3 Special Report shows you how to correctly calculate your effective annual rate of return on this type of investment, complete with the Microsoft Excel cell functions - FREE.

To download your free copy, just click on the following email address:

CDx3MonthlyResults@PreferredStockInvesting.com. 

No need to type anything in the body of the message, just click the Send button.  You will receive an auto-reply email message with download instructions for your free CDx3 Special Report.

To see the entire library of useful and educational CDx3 Special Reports, including three sample pages from each one, click here.

Market Prices Heading North For Winter

How High Will They Go?

The dramatic dual rate reduction, implemented by the Federal Reserve Board on September 18, produced an immediate and, in some cases, equally dramatic increase in the market price of CDx3 Preferred Stocks.  As market prices head north for the winter, CDx3 Investors look forward to cashing in on some of the low prices that they took advantage of during the "buyer's market" since early June.

How high will the market prices of CDx3 Preferred Stocks go and how will CDx3 Investors benefit?  I'll report back to you on those very issues in next month's CDx3 Newsletter.

 

Remember, I'm not a stock broker; I'm not trying to sell preferred stocks to you; and I don't sell investment advice.  I'm an investment researcher with a economics and statistics background who has developed a simple way to earn a respectable return at "CD-like" risk.  And I've written it down in Preferred Stock Investing.  I'm hopeful that you find these monthly CDx3 Newsletters interesting, and will consider learning more by purchasing my book, Preferred Stock Investing.

Please take a look at http://www.PreferredStockInvesting.com.  And don't forget about my FREE SPECIAL OFFER.

Know someone who might be interested in simple, low-risk investing for non-investment experts?  Have them send an email message to CDx3Newsletter@PreferredStockInvesting.com and they will automatically begin receiving this monthly CDx3 Newsletter next month (plus a CDx3 Special Report) - all FREE.  Then they can make up their own mind.

Many Happy Returns,
Doug K. Le Du

 

P.S.: If you do not want to receive news regarding Preferred Stock Investing, just send an email message to OptOut@PreferredStockInvesting.com and you will be automatically removed from my address list.  Best wishes to you.
Copyright (c) 2007 by Doug K. Le Du
 
CD Times 3, CDx3, CDx3 Income Engine, CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock are trademarks of Doug K. Le Du.  All rights reserved.
Company logos are trademarks of the indicated companies.
Service Marks (SM) are service marks of the indicated companies.
 
This CDx3 Newsletter is formatted for computer screens with a minimum of 1024 horizontal pixels as required for display on Google Groups.
DISCLAIMER: The content of this CDx3 Newsletter is to be regarded as educational, rather than advisory.  There can always be exceptions to trends and/or generalizations that may be discussed herein.  Consider your financial resources and goals before investing. You, and not Doug K. Le Du, are solely responsible for your own investment decisions.