“I sure wish I
had known about you sooner. I am a retired banker and understand
the banks quite well. You are spot-on on the banks you note” -
Welcome to all of the
new CDx3 Newsletter readers who signed up during December. 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
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I have extended the availability
of the "Quick Guide To Preferred Stock Investing During A
Global Credit Crisis." The feedback from those of
you who have already read this 4-page Quick Guide has been huge
and very positive so I wanted to continue to make this important
document available to readers.
"Quick Guide To
Preferred Stock Investing During A Global Credit Crisis"
If you choose to let this historic
opportunity go by, do so because you feel that it is in your
best interest, not because you are uncertain about how to take
advantage of it.
This is a new report. Please download and read your free copy (PDF,
download now). You'll
be very glad you did.
Thank you for your interest in my
preferred stock research.
Since the Treasury launched its
Troubled Asset Relief Program (TARP) in early October I have
been identifying the financial institutions that this program
provides implicit protection to; if the Treasury ever wants to
see their billions again these sixteen banks cannot be allowed
to fail for the next three to five years (read
why). In the Last
Month's CDx3 Investor Results article I provide you with a
chart showing the whopping 29% average increase in the market
price of the 26 CDx3 Preferred Stocks issued by The Protected
Sixteen banks. If you are looking to ride the recovery wave in
financials, please consider these 26 CDx3 Preferred Stocks.
With tax time on us once again
there are a couple of tax tips that are specific to preferred
stock investors. The
Special Announcement article provides two tips that may save
you not just money, but a lot of hassle as well.
The CDx3 Company Spotlight
article this month is on Public Storage, Inc. Often seen as
recession proof, the self-storage industry seems to do well
regardless of how the economy is doing. Like any hotel, there is
a certain percentage of our population that is in between moving
out of the old place and moving into the new place. As a group,
we have decided to give Public Storage $13 billion in order to
have a dry place to keep our stuff in transition.
The 26 CDx3 Preferred Stocks
issued by The Protected Sixteen banks have so much in common
that you would think that they would all provide you with the
same yield day-in and day-out. Each has met Treasury's
"healthy institution" criteria and, as a result, received
billions of Treasury investment dollars. And each has met the
additional ten CDx3 Selection Criteria and all have the same, or
similar, creditworthiness ratings. But their yields vary from
7.7% all the way up to 13.2%. This month's CDx3
Question Of The Month article answers the question - why
aren't the yields the same too?
The Free Special Offer
article below provides you with a download link to what could be
the most important document you will read during this global
credit crisis. As a reader of this monthly CDx3
Newsletter, you obviously have an interest in preferred
stock investing. This newly published report is titled "Quick
Guide To Preferred Stock Investing During A Global Credit Crisis"
and is available to my readers for free (see link in the Free
Special Offer article below).
The market prices of the CDx3
Preferred Stocks issued by The Protected Sixteen banks have shot
up an average of 29% since I sounded the alarm two months ago
(not to mention their 8+% dividend payments). But they're not
done yet. The Market, over time, tends to equalize the yields on
such investments and there is still lots of disparity to be
ironed out. The average market price for the 26 CDx3 Preferred
Stocks offered by The Protected Sixteen banks is only $19 per
share. These issues have a par value of $25 per share and some
are starting to exceed $26 per share. These 26 CDx3 Preferred
Stocks seem to be on the tip of the spear leading the recovery
in financials, but how much more can the market prices of these
CDx3 Preferred Stocks climb? I will report back to you in next
month's issue of the CDx3 Newsletter.
Up 29% In Less Than Three Months
26 CDx3 Preferred Stocks From
'The Protected Sixteen' Banks Lead Recovery
For those who are
paying attention, every crisis can also produce
opportunity. If you are a serious preferred
stock investor looking for an opportunity to
invest in the highest quality preferred stocks,
the unique constellation of events stemming from
this credit crisis has created just such an
Make no mistake
here- there is unlikely to be another set of
circumstances like this again in our lifetimes.
While I am as weary as anyone else of writing
and reading about banks, the fact is that the
Treasury's $250 preferred stock purchase program
has created an opportunity for preferred stock
investors that is unlikely to ever be seen
How's That? The
U.S. Treasury has essentially protected specific
financial institutions for the next several
years (at least three years but probably five
But the best part is, unlike prior practice,
Treasury has told us, the investing public, who
these banks are (see
For the last two
months, I have been applying the ten CDx3
Selection Criteria (Chapter 1, Preferred
Stock Investing) to this list of "protected"
banks and their currently trading preferred
stocks. The result is a list of just sixteen
banks, The Protected Sixteen (see
and 26 CDx3 Preferred Stocks*.
Up 29% In Three Months:
Since these banks entered the TARP program on
October 7, 2008 the market prices of their 26
CDx3 Preferred Stocks* has gone up by over 29%
(in less than three months):
Because of the
special relationship these banks, and therefore
these 26 preferred stocks, have with the U.S.
Treasury, these 26 CDx3 Preferred Stocks* are
the highest quality preferred stocks trading
today. No other company, and no other preferred
stocks, can claim to be in the enviable position
of these 26 issues.
Subscribers to the
CDx3 Notification Service know that the CDx3
Selection Criteria have had a perfect track
record throughout this credit crisis. The CDx3
Selection Criteria have successfully filtered
out every financial institution that has failed
during this credit crisis. CDx3 Investors knew
to stay away from Washington Mutual, IndyMac,
Freddie Mac, Fannie Mae, Bear Stearns, New
Century and Lehman Brothers from the beginning.
Those who invest in CDx3 Preferred Stocks
haven’t missed a single dividend - ever.
Might there be exceptions down the road,
especially during this historic credit crisis?
Sure. But, to date, there has not been. How many
investment methods can make that claim?
If you are looking
for a way to ride the recovery wave in
financials, the research is very clear; you
should consider the 26 CDx3 Preferred Stocks*
issued by The Protected Sixteen banks.
Market Price Still
Discounted: And their average market
price is still heavily discounted at $19 per
share, well below their $25 par value, so there
is lots of open field ahead as the recovery
Preferred Stock Investing, teaches you how
to select, buy and sell the highest quality
preferred stocks and provides you with the
methods needed to do so.
For those who
would rather receive a simple email message when
there is a buying or selling opportunity coming
up, we offer the
CDx3 Notification Service.
Subscribers to the
CDx3 Notification Service
receive their own exclusive newsletter, called
CDx3 Research Notes, every month. The
January 2009 issue of CDx3 Research Notes
provides subscribers with the trading symbols of
the 26 CDx3 Preferred Stocks issued by The
Protected Sixteen banks.
In a recent
article for Fortune magazine, Bill Gross,
founder of bond giant Pimco, one of the world's
most successful investors and wealthiest
individuals, put it this way:
"...Perhaps the most lucrative pockets of value
are in preferred stocks of banks and financial
institutions that have partnered with the
government in programs such as the Troubled
Assets Relief Program (TARP). While their
profitability may be restricted, their ability
to pay interest and preferred dividends should
But That's Not
All: These 26 CDx3 Preferred Stocks are also
currently providing an annual yield over 10%.
Like I said- every
crisis can also produce opportunity. This is an
extremely rare set of circumstances; the highest
quality preferred stocks, yielding north of 10%,
available at heavily discounted prices enjoying
implied protection from the U.S. government for
the next several years.
It's Your Call:
If you decide that this opportunity is not in
your best interest, great. It's your call. But I
would hate for you to pass this opportunity by
because I had not made it clear enough to you.
Not being familiar with your financial
resources, goals and risk tolerance, I cannot
say what is best for you; only you can do that.
But when you think
of the historic and extreme collection of events
that it has taken for this to occur, I think it
is fair to say that the 26 CDx3 Preferred Stocks
offered by The Protected Sixteen banks present a
unique opportunity that we are unlikely to see
again in our lifetimes.
If you would like
to start adding CDx3 Preferred Stocks from The
Protected Sixteen banks to your portfolio,
please consider subscribing to the
CDx3 Notification Service.
The trading symbols are on page 6 of the current
issue of the subscriber's newsletter CDx3
* CDx3 Preferred
Stocks: CDx3 Investors are only
interested in the highest quality preferred
stocks and there are lots of pretenders to weed
out. Applying the CDx3 Selection Criteria (Preferred
Stock Investing, Chapter 1) will eliminate
about 90% of the regular preferred stocks
trading on today's stock market.
For example, here
are three of the ten CDx3 Selection Criteria
that regular preferred stocks must meet to be
considered "CDx3 Preferred Stocks:"
1. be issued by a
company with a perfect record of never
having suspended a dividend on a preferred
2. 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; and
3. be rated "investment
grade" by Moodys Investors Service.
Having specific and
consistently applied selection criteria takes
the emotion out of your investing decisions and
leaves you with the highest quality preferred
stocks - "CDx3 Preferred Stocks."
Two Tax Tips For Preferred Stock Investors
Don't Be Too Quick To File
Well, here we go again.
Time to settle up with Uncle Sam for 2008.
After many years of
researching preferred stocks I can tell you a couple of
things to look out for when filing your tax return.
Remember that I am an investment researcher, not a tax
advisor. But when you take your shoe box into your
accountant's office this year, be sure to discuss these
two items regarding your preferred stock investing
Avoid An Amended Return: Readers who have
been with me a while will remember this one. There are
several layers of information needed when it comes to
your broker's preparation of your 1099 form at the end
of the year. The primary issue swirls around the
difference between dividend income and interest income
and how those definitions pertain to the income you
received throughout the year from each of your preferred
By law, your broker has to
provide you with a 1099 form (1099-DIV and/or 1099-INT)
by January 31. The problem is that in order make the
proper classification of your income, your broker has to
sync up with the issuers of the preferred shares that
you bought and sold throughout the year, other brokers
who handled the other side of your buy and sell trades
not to mention the Internal Revenue Service and any
rulings they may have outstanding regarding your
Typically, in order to
comply with the law, your broker will provide you with a
1099 by January 31 but, just as typically, you will
receive a revised 1099 (corrected) a few weeks later,
usually before the end of February.
So do not be too quick to
file your tax return based on the first 1099 that your
broker provides to you. While there can always be
exceptions, the first 1099 that I receive each year has
never been the final version. If you have already filed
with the incorrect form, you will have to re-file an
amended return when your broker issues you a corrected
1099 (usually in late February).
Subscription Fee May Be Tax Deductible:
IRS Publication 550,
Chapter 3 titled Investment Expenses explains that,
subject to certain limitations, many expenses that you
incur in order to further your investment income are tax
deductible. Specifically, the section titled "Expenses
Of Producing Income" (see
2007 section) states:
deduct fees you pay for counsel and advice about
investments that produce taxable income. This includes
amounts you pay for investment advisory services."
If you are within the
limitations specified by the IRS, the subscription fee
CDx3 Notification Service
may be tax deductible. Be sure to check this out with
your tax advisor and make sure that you are receiving
every allowable deduction.
These Companies That Issue CDx3 Preferred
Public Storage, Inc.
Public Storage exists to remind
all of us that parting with that
old lawn furniture or couch
would be a big mistake.
This issuer of CDx3 Preferred
Stock has turned our pack-rat
instincts into a $13 billion
Each month, subscribers to the
CDx3 Notification Service
receive an updated CDx3 Bargain
that identifies CDx3 Preferred
Stocks at a point in time that,
research shows, tends to favor
buyers; that is, their market
price tends to be relatively
Since Public Storage has issued
several preferred stocks that
meet the ten CDx3 Selection
Criteria, it is not unusual when
one of their CDx3 Preferred
Stocks appears on the CDx3 Bargain
Table as two of their issues did
Storage, headquartered in Glendale,
California and founded in 1971, has
diversified its business over the
years to now include reinsurance of
tenant property and truck rentals.
have grown their business to over
2,000 self-storage facilities
providing over 126 million
square-feet of net rental storage
space throughout the United States
and Europe. Some of this growth came
from acquisitions including the $5.5
billion purchase of Shurgard Storage
Centers in August 2006.
Storage has self-storage facilities
in most states. If you're finding
that you just cannot part with that
old dinette set,
click here to find a Public
Storage facility near you.
Why Do Some Of The Preferreds
From The Protected Sixteen Have
Much Higher Yields Than Others? -
Annual yields currently being
paid by the 26 CDx3 Preferred
Stocks from The Protected
Sixteen banks (see Last Month's
CDx3 Investor Results article
above) average 10.24%, with a
range of 7.7% all the way up to
Those are very respectable
returns, even at the low end of
7.7%. But Domenic is wondering,
since each of these 26 CDx3
Preferred Stocks enjoy the
implicit protection of the U.S.
Treasury and each meets the
additional ten CDx3 Selection
Criteria, why is there such
variability in their respective
There are a number of factors
that can influence the market
price of a CDx3 Preferred Stock
(beyond perceived market risk).
For example, pension funds may
carry positions with banks that
meet certain criteria and their
positions can include both
common and preferred issues.
When the pension fund makes a
move it affects the preferreds
of one bank (the one they have a
position in) but not another,
even though the preferreds may
be essentially the same (in
terms of risk/return).
Different Dividend Quarters:
Also, not all banks use the same
quarterly dividend cycle. The
research presented throughout
Preferred Stock Investing
describes the Three Rules Of
Market Price Predictability of
CDx3 Preferred Stocks - why the
market price behaves as it does
under varying market conditions.
As we know from one of these
rules - the Rule of Buyer/Seller
Behavior (Preferred Stock
Investing, page 67), upward
pressure on market price builds
as the end of the dividend
If you are looking at banks with
differing dividend quarters, the
market prices of their
preferreds are going to be
behaving differently, depending
upon how close they may be to
the end of their respective
Treatment: There is
also the influence of the
financial media. In the
financial press there are
certain banks that seemingly can
do no wrong (and maybe they, in
fact, cannot). Wells Fargo, Bank
of America and JPMorgan
continually receive very
favorable treatment compared to
some of their peers; peers that
carry the same creditworthiness
To Quick Cash: Bank
structure and sources of capital
differ too. For example, some
investment banks (such as Bank
of America) also have large
retail banking operations and,
therefore, have access to large
volumes of cash on short notice
(raiding CD deposits and savings
accounts, within regulatory
limits of course).
Investment banks that do not
have a retail banking operation
are always seen a bit more
skeptically during tight
economic times (now) as they are
more depended on other (e.g.
foreign) sources of short-term
So, while investment risk
certainly is a key driver of
market prices (and therefore
yields) there are several other
factors that influence the
market price of a CDx3 Preferred
Stock as well - even the 26 CDx3
Preferred Stocks issued by The
Protected Sixteen banks.
As described throughout
Preferred Stock Investing,
market prices move in response
to factors other than risk. It
is this fact that gives
subscriber's to the
CDx3 Notification Service
an investment edge when it comes
to investing in the highest
quality preferred stocks - CDx3
Thanks to Domenic V. for the great
question. You will receive a
free copy of the CDx3 Special
Report "Dividend Accounting."
Submit your question.
"Preferred Stock Investing During A Global
Thank You For Your Interest In Preferred
Stock Investing And The CDx3 Income Engine
CDx3 Newsletter readers have been with me for
quite some time. And from the email that I receive I
know that many of you have read Preferred Stock
Investing and have implemented the CDx3 Income
Engine on your own (the book includes all of the
resources needed to do so without the CDx3 Notification
The 17-month long credit crisis has shaken our financial
system and everyone who is invested in it (which is just
about everyone). Even though the CDx3 Selection
Criteria, day after day, have successfully filtered out
every failed bank for over a year now, and even
though there has not been so much as a missed dividend
for those who have invested in CDx3 Preferred Stocks,
there's still some anxiety.
And that's what concerns me the most. As a researcher, I
have an enormous volume of data regarding the market
price behavior of CDx3 Preferred Stocks.
I can not only explain this market price behavior but I
have the data needed to support my observations. Chapter
9 of Preferred Stock Investing includes the
investment results, using the CDx3 Income Engine, for
every qualifying preferred stock issued since January
Whether market prices are driven down by uncertainty
related to war (2002) or by a global credit crisis
(2007/08...), the market prices of CDx3 Preferred Stocks
behave in certain ways at certain times.
To thank you for your interest, and to provide you with
some very timely insights, I have just published a "Quick
Guide To Preferred Stock Investing During A Global
This is an important and timely document that all who
are interest in using the highest quality preferred
stocks to benefit from this credit crisis should read.
Understanding the CDx3 Income Engine is more important
now than ever.
Enjoy reading the
Quick Guide and thanks again for your
interest in my preferred stock research.
Market Prices Are Up 29% With Open Field Ahead
The Protected Sixteen Have Bounced Off The TARP; What Happens
For the last two months I have been
focusing my writing on Treasury's TARP
program and the unique opportunity that
it has delivered to preferred stock
investors. This program is driving the
market for the highest quality preferred
stocks as I have described for you over
the last two months. I think we can all
agree that a market price jump of 29%
since I starting ringing the bell in
October is pretty hard to ignore.
While it is always possible that
Treasury will add more banks that meet
(a) their "healthy institution" criteria
and (b) the ten CDx3 Selection Criteria,
it is unlikely at this point. In other
words, short of acquisition and
consolidation activity, I am not
expecting the list of the 26 CDx3
Preferred Stocks or the list of The
Protected Sixteen to change much going
The focus now is on making prudent
purchase decisions that meet your
personal financial goals, resources and
risk tolerance. This credit crisis has
provided an unprecedented opportunity
for preferred stock investors via the
TARP program. Will the program meet its
objectives of stabilizing our financial
markets and, if so, what will be the
effect on the marketplace for CDx3
Preferred Stocks as 2009 unfolds?
I'll report back to you in next month's CDx3
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
Newsletters interesting, and
will consider learning more by
purchasing my book, Preferred
Stock Investing or by subscribing to
CDx3 Notification Service.
take a look at
www.PreferredStockInvesting.com. And don't forget
FREE SPECIAL OFFER.
someone who might be interested in simple,
low-risk investing for non-investment
experts? Have them send an email
they will automatically
begin receiving this monthly CDx3
next month (plus a
CDx3 Special Report) - all FREE.
Many Happy Returns,
Doug K. Le Du