"I am a new subscriber to the CDx3 Notification Service and must say that your service is the best organized and documented of any investor service I have seen to date." - Jim S.

Thanks to Jim S. for the kind words and welcome to all of the new CDx3 Newsletter subscribers who signed up during June. This is your first issue of the CDx3 Newsletter, a free monthly newsletter devoted to the interests of CDx3 Preferred Stock investors.

To be sure that you continue to receive the CDx3 Newsletter each month, please remember to add the following email address to your email address book safe sender list:


Here's a summary of the CDx3 Income Engine method for investing in preferred stocks- select only the highest quality preferred stocks, buy them when the research says they tend to be low in price, hold them until the market price tends to reach a high point downstream and enjoy way above average dividend income in the mean time.

In a nut shell, that's it.

The hard part, of course, is knowing the key selection criteria and understanding when and why the best time to buy and sell will tend to present itself.  That has been the focus of my preferred stock research since 2002 and the results are documented throughout Preferred Stock Investing.  Chapter 9 of the book presents the investment results for every CDx3 Preferred Stock since January 2001.

Looking for the highest quality preferred stocks that are not issued by banks? The Last Month's CDx3 Investor Results article below explains how, out of about 1,000 preferred stocks trading on today's stock market, you can narrow the field to the eleven star candidates.  These eleven non-bank CDx3 Preferred Stocks are producing an average yield of 8.4% and are available for about $21.50 per share right now. And the best part is that subscribers to the CDx3 Notification Service receive this list every month - and we do the work for them.

Get 'em while they're hot! As described in this month's Special Announcement article, Amazon has continued the Preferred Stock Investing promotion that they started last month when Borders split off. Amazon is offering Preferred Stock Investing at a very special price and it also qualifies for Amazon's free shipping program.

CDx3 Preferred Stocks are offered by all sorts of great American businesses.  Last month I provided you with an update on apartment developer and operator BRE.  This month's CDx3 Company Spotlight article introduces you to an example from the insurance industry - W.R. Berkley - named as 2007's Best Managed Insurance Company by Forbes magazine.

Investors are always wondering which companies they should stay away from. This month's CDx3 Question Of The Month article explores the apprehension that many investors have been experiencing during this credit crisis, an example of confusion created by the financial press and some help that subscribers to the CDx3 Notification Service receive by the "CDx3 Do Not Buy List" and the 48 companies that are named there.

For our new readers, there is a free calculator available to you that allows you to correctly calculate the effective annual return of preferred stock investments.  The Free Special Offer article below provides you with a download link.  Keep an eye on this monthly CDx3 Newsletter for announcements of future promotions of CDx3 products and services.

At their June 24-25 meeting, the Federal Reserve Board made it clear that their focus is moving off of saving banks from this credit crisis back to inflation fighting.  Does that mean that the Fed now believes that our country's banks can start handling increases in interest rates?  That's what the Fed will have to do to hold off inflation.  What will it mean for preferred stock investors when the Fed starts raising interest rates again?  I will report back to you in next month's CDx3 Newsletter.

CDx3 Bargain Table Identifies 11 Non-Bank Opportunities

Average Yield For Non-Bank CDx3 Preferred Stocks Hits 8.4%

Tired of reading about the credit crisis yet? Investors looking for an alternative to banks during this credit crisis have found substantial diversification opportunities with CDx3 Preferred Stocks*.

This month, CDx3 Investors are considering eleven non-bank CDx3 Preferred Stocks offering an average yield of 8.4% (as of June 27, 2008)from six non-bank businesses.

Why these eleven? At any point in time, there are between 1,000 and 2,000 preferred stocks trading on the stock market. Right now, there are about 1,000.  Of these, 25 reached a point in late June where, research shows, their market price tends to be relatively low, creating an opportunity for buyers. Of these 25, eleven are non-bank issues.

So how is it that CDx3 Investors are able to identify, out of 1,000 preferred stocks, the magic eleven that are ripe for the picking right now?

Subscribers to the CDx3 Notification Service have it easy since they receive an email message each month that identifies such candidates for them on the "CDx3 Bargain Table" (what's this?). But for the do-it-yourselfers, the April 2008 update to Preferred Stock Investing shows readers how its done. If you already have a copy of Preferred Stock Investing, follow the instructions on page 124 to download the update - it's free to you. Or you can pick up your own copy of Preferred Stock Investing here.

Here's a summary of how it works: First, be sure that you are dealing with preferred stocks that meet the ten CDx3 Selection Criteria (Preferred Stock Investing, Chapter 1). This step alone eliminates about 90% of the preferred stocks trading on the market. We're only interested in the highest quality preferred stocks.

Second, the Three Rules of Market Price Predictability from Chapter 5 of Preferred Stock Investing tell us that, during this credit crisis, we should only consider CDx3 Preferred Stocks between two and eight quarters old.  Any younger and their market price may still be climbing which is bad for buyers; any older than that and the market price tends to be distorted by what is called the "call date" (related article).

So now we have selected the highest quality preferred stocks (CDx3 Preferred Stocks*) that are at a point when their market price should no longer be climbing or be distorted by the call date. Now we're down to about fifty preferred stocks. But we're not done yet.  As buyers, we do not want to pay any more than we have to.  We want to make our purchases when the market price of a CDx3 Preferred Stock tends to be at a low point so that we can get a real bargain.

And here is the magic bullet: So when does the market price of a CDx3 Preferred Stock tend to be at a low point? This is where the Rule of Buyer/Seller Behavior (Preferred Stock Investing, page 67) comes in. The market price of a CDx3 Preferred Stock tends to be the lowest during the early days of each dividend quarter. So, each month, we just want to consider CDx3 Preferred Stocks that are at the beginning of a new dividend quarter.  

For July 2008, the CDx3 Bargain Table received by subscribers to the CDx3 Notification Service shows the resulting 25 CDx3 Preferred Stocks. These are preferred stocks that meet all ten of the CDx3 Selection Criteria, are of an age when they tend to be favorable to buyers and are at the beginning of their respective dividend quarters when the market price tends to be at a low point - time to consider buying.

11 From Non-Banks: Of the resulting 25 CDx3 Preferred Stocks listed on this month's CDx3 Bargain Table, fourteen are issued by banks while eleven are issued by non-banks.

As illustrated below, this month's eleven non-bank CDx3 Preferred Stock candidates are from five non-bank industry segments - self storage, shipping centers, industrial buildings, retail shopping centers and office buildings.


You can sure tell who's hungriest for cash by looking at the above chart. Banks are doing everything short of opening lemonade stands to attract cash.

The eleven non-bank CDx3 Preferred Stocks on this month's CDx3 Bargain Table offer an average yield of 8.4% while those issued by banks are offering 10.0% (as of June 27, 2008).

CDx3 Investors looking for investment grade preferred stocks that are issued by companies that have a perfect record of never having suspended dividend payments on a preferred stock, but are nervous about banks, should consider subscribing to the CDx3 Notification Service. As a subscriber, you will receive the CDx3 Bargain Table every month  - we do the work for you.

*CDx3 Preferred Stocks: Regular preferred stocks have to meet each of the ten CDx3 Selection Criteria (Preferred Stock Investing, Chapter 1) in order to qualify as "CDx3 Preferred Stocks." Here are just three of the ten CDx3 Selection Criteria that regular preferred stocks have to meet in order to be considered CDx3 Preferred Stocks; CDx3 Preferred Stocks must:

1.  be rated "investment grade" by Moodys;

2. be issued by a company with a perfect record of never having suspended a dividend on a preferred stock; and

3.  have the "cumulative" dividend requirement, which means that in the unlikely event that the issuing company misses a dividend payment to you (which I have never seen happen with a CDx3 Preferred Stock), they have to make it up to you later; they still owe you the money.


Amazon Continues Promotion Pricing For Preferred Stock Investing

$17.96 Promotion Price Continued From June


Last month I announced that Borders had finally developed their own web site and had ended the somewhat peculiar relationship that they have had with Amazon.

Until a few weeks ago, Borders had outsourced their online presence to Amazon so shoppers who went to borders.com were actually redirected to amazon.com.

When Borders split off a few weeks ago, their new web site at www.borders.com offered Preferred Stock Investing among the new site's stock investing book offerings.

 Amazon promptly launched a promotion for Preferred Stock Investing, offering the book for the special price of $17.96.

Amazon can end this special promotion at any time, so if you've been thinking about picking up a copy of Preferred Stock Investing at a great price, now is the time.

Preferred Stock Investing includes all of the resources that you need to screen, buy and sell the highest quality preferred stocks - CDx3 Preferred Stocks.

The book also lists all of the CDx3 Preferred Stocks issued since January 2001.  Free downloadable updates are also included for book readers including the most recent update that provides the newest research regarding how to take advantage of the current credit crisis using CDx3 Preferred Stocks.

To see Preferred Stock Investing at various retailers, including Amazon, click here.

Who Are These Companies That Issue CDx3 Preferred Stocks?

W. R. Berkley Corporation (NYSE: WRB)

W.R. Berkley is a $4 billion casualty insurance holding company founded in 1967 and an issuer of CDx3 Preferred Stock. W.R. Berkley, headquartered in Greenwich Connecticut, was named Best Managed Insurance Company by Forbes magazine in 2007.

W.R. Berkley, recently changing its trading symbol from BER to WRB, provides various types of insurance, primarily in the United States, including commercial auto, professional liability, workers' compensation, property liability, medical malpractice and many others.

W.R. Berkley's CDx3 Preferred Stock was issued on July 21, 2005, pays an annual dividend of 6.750% and has a current Moody's investment grade rating of Baa3. With a market price (June 27, 2008) of $21.95, the current yield on this CDx3 Preferred Stock is 7.69%.

By the end of 2007, W.R. Berkley completed its fifth consecutive year of achieving a return to its investors in excess of 20% after tax (source: W.R. Berkley 2007 Annual Report). These results prompted W.R. Berkley to announce a 20% increase in its common stock dividend on May 21, 2008.

On June 3, 2008 W.R. Berkley announced the formation of a new company called FinSecure LLC.  FinSecure "will offer integrated property and liability insurance solutions for financial institutions and financial services firms" the company says.

Seeing opportunity where others dare not look is often the secret to success.  Time will tell if W.R. Berkley's expansion into the provision of liability insurance to financial institutions during this credit crisis is well timed or not. But there is no arguing that the demand for such insurance is there.

How do I know which companies to stay away from? - Walter T.

Conflicting information often leaves the individual investor in a quandary. Especially during this credit crisis, information in the financial press would have us believe that this country's banks are as stable as a Hollywood marriage when, in fact, the bank failure rate is no higher this year than it has historically been (two small regional banks have failed this year, out of about 8,500 U.S. banks).

The conflicting information available to individual investors regarding Citigroup, the country's largest bank by assets, is a great example.  At the same time the financial press is screaming 'look out below', we also read the following:

"...Citi shares are up 35% from the low reached in March. And the company is having no problem raising the capital needed to shore up the balance sheet. On May 30, Citi raised $4.5 billion in equity, 50% more than originally planned, due to high demand. In the last five months, Citi has raised $41.5 billion. This is big money we are talking about. Less than 1% of U.S.-listed companies have a market capitalization greater than $41.5 billion. The confidence and demand for Citigroup shares is quite comforting." - Richard Young, June 2008 Intelligence Report

And even though Moody's Investors Service downgraded Citi's preferred stock last December, the resulting rating was A1 -  close to the top of Moody's overall rating scale and right in the middle of its investment grade categories.  Citi's four A1-rated CDx3 Preferred Stocks are currently providing an average annual yield of about 8.5%.

While publicly traded companies report an enormous amount of financial and managerial information to the Securities and Exchange Commission (SEC), very few individual investors have the technical training (or patience) needed to interpret the data. Long ago, companies were formed and staffed with analysts who do have such training; these companies are, of course, the "rating agencies" such as Moody's Investors Service, Standard and Poor's, Fitch and several others.

The rating agencies digest the public, and not so public, information regarding the activities of publicly traded companies.  This information is combined with the analyst's knowledge of the specific industry within which the company competes and a rating is assessed that, theoretically, represents the creditworthiness of the company's common and preferred stock.

Investors the world over then use these ratings as a proxy for investment risk. For better or worse, these ratings are the best assessment available to individual investors.  The extent to which you, as an individual investor, have confidence in the ability of these rating agencies to accurately reflect investment risk in their ratings is an individual assessment that only you can make. But ratings are generally consistent across the multiple rating agencies for a given preferred stock and the company that issued it.

CDx3 Selection Criteria #5 (Preferred Stock Investing, page 12) requires that the issuing company of a CDx3 Preferred Stock have a perfect record of never having suspended dividends on a preferred stock. The CDx3 Do Not Buy List provides CDx3 Investors with a list of companies that have violated CDx3 Selection Criteria #5 by, at some point in the past, suspending dividends on a preferred stock.

Subscribers to the CDx3 Notification Service can access the CDx3 Do Not Buy List from the exclusive subscriber's web site.

There are currently 48 companies on the CDx3 Do Not Buy List.  Some are household names (Delta Airlines) while others are more obscure (Day International Group).

Commonly known or not, CDx3 Investors know to avoid the preferred stocks issued by companies on the CDx3 Do Not Buy List.

Thanks to Walter for the great question. You will receive a free copy of the CDx3 Special Report "Dividend Accounting." Click to submit your question.

Free CDx3 Special Report Also Has Free Companion Excel Calculator

See How To Correctly Calculate Your Effective Annual Return - FREE

The Preferred Stock Investing Reader's Forum provides a free special Excel spreadsheet calculator that you can use to calculate the effective annual return (EAR) of your preferred stock investments.  The calculator allows you to just plug in a few parameters from your preferred stock (such as purchase date, purchase price, sell price, etc.) and see what your effective annual return really is, or will be if you sell.

When you initially download the EAR calculator, it is set up using the Series A CDx3 Preferred Stock from Dominion Re-sources (D-A) as an example.  This is the same CDx3 Preferred Stock that is used as an example through-out the CDx3 Special Report titled "Calculating Your Rate Of Return."

As a recipient of this monthly CDx3 Newsletter, you are entitled to a FREE copy of "Calculating Your Rate Of Return."   So, get them both - FREE - and use them together to learn how to correctly calculate your rate of return on this type of investment.  To download your free copy of Calculating Your Rate Of Return, just click on the following email address:


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.

Federal Reserve Contemplates Raising Rates

Are Banks Healthy Enough To Take The Hit?

One of the results of my preferred stock research was the identification of three primary forces within the U.S. economy that move the market price of certain preferred stocks in a fairly predictable manner. The direction of interest rates, for example, is closely watched. The Federal Reserve Board, at their June 24-25 meeting, left interest rates alone, but made it clear that they are prepared to start raising rates again if inflation starts to set in.  The downside, of course, is that making money more expensive would be bad news for banks during this credit crisis.

If the Fed begins sending signals that they are favoring raising rates, will such an announcement also mean that the Fed believes that banks are on the mend?  Remember, the last of the 2.5 million subprime adjustable mortgage loans that triggered this credit crisis flowed through our financial system this month (source: FDIC).

If the Fed signals that banks are, in fact, on the mend we should see the dividend rates being offered on their new preferred stocks start to come down off of their current high rate of 8.875% (a rate closer to 7% is more common).

And that begs the next question: if you were to purchase one of today's 8.875% CDx3 Preferred Stocks, now selling for about $22 per share, what do you think is going to happen to the market price of your 8.875%-er as the "going rate" falls back to 7% in the future?  The last time that happened in 2002, CDx3 Investors were selling their 8+%-ers for over $27 per share (source: Preferred Stock Investing, page 128). 

In anticipation of lower rates (and the higher market prices that tend to come with them), CDx3 Investors are scooping up today's high dividend payers and will hold them until rates come back down and prices go back up, setting themselves up for a nice capital gain downstream while enjoying above average dividend income in the mean time - the heart of the CDx3 Income Engine.

I will report any signs that the current "buyer's market" is weakening back to you 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 an economics and statistics background who has developed a simple way to earn a respectable return at very low 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 or by subscribing to the CDx3 Notification Service.

Please take a look at 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

Copyright (c) 2008 by Doug K. Le Du

CD Times 3, CDx3, CDx3 Income Engine, CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock, CDx3 Perfect Market Index, CDx3 Bargain Table 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.

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, goals and risk tolerance before investing. You, and not Doug K. Le Du, are solely responsible for your own investment decisions.