“I am very happy to say that this asset class has proven to be the most successful aspect of my total asset allocation plan resulting in a total to-date profit from capital gain and earned dividends of 35.05%. As you can imagine I am a big booster of your service." - Martin H., CDx3 Notification Service subscriber

Quick Summary

Last Month's CDx3 Investor Results

Special Announcement

CDx3 Company Spotlight

CDx3 Question Of The Month

FREE Special Offer

Next Month's Sneak Peek

April 2010 Update to Preferred Stock Investing Now Available!

Readers of my book, Preferred Stock Investing, Third Edition, are entitled to free periodic updates to the preferred stock tables presented throughout Chapter 15 of the book as long as the Third Edition is in print. Providing free periodic updates helps keep readers of Preferred Stock Investing up to date.

The April 2010 update to Preferred Stock Investing is now available!

And I am also happy to announce that as a special service to readers, the April 2010 update goes beyond an update to the preferred stock tables found in chapter 15. In this update I also take the opportunity to provide you with the results of the "CDx3 Income Engine" (the preferred stock investing method explained throughout the book) as implemented throughout the Global Credit Crisis (2007 - 2009). The nature of the preferred stock market since June 2007 deserves special attention and the April 2010 update to the book would not have been complete without wrapping up the method's performance during these historic (extreme) conditions.

Specifically, the April 2010 update to the Third Edition of Preferred Stock Investing includes updates to the following chapters:

• Chapter 4, "The Global Credit Crisis": how the CDx3 Income Engine performed during the Global Credit Crisis for CDx3 Investors;

• Chapter 15, "Results - How You Would Have Done": the list of CDx3 Preferred Stocks issued during 2009 and an update to the tables of previously issued CDx3 Preferred Stocks that were sold during March 2010 when the market for CDx3 Preferred Stocks returned to one favoring sellers; and

• Chapter 18, "The CDx3 Notification Service": five new preferred stock investing resources have been provided to subscribers to the CDx3 Notification Service (my preferred stock email alert and newsletter service) since the Third Edition was published.

Preferred Stock Investing, Third Edition is one of the most highly reader-rated books of any kind available for sale in the United States. To receive the free April 2010 update to Preferred Stock Investing, Third Edition just follow the instructions on the first page of chapter 15 in the book.

If you have yet to pick up your copy of Preferred Stock Investing, Third Edition you can do so at any of your favorite online retailers (see retailers | see reader reviews). Please pick up your copy today then follow the instructions on the first page of chapter 15 to download the free April 2010 update.

Just Posted On The Preferred Stock Investing Reader's Forum: Citigroup introduced a new preferred stock during March. In a March 31 post to the Preferred Stock Investing Reader's Forum (my "blog") titled "New C-J Preferred: Citi Seriously Underplayed 'Too Big To Fail' Status" I explain how Citi's lack of appreciation for its "Too Big To Fail" status probably cost the Big Bank about $40 million with this new issue. (jump to Forum)

The Last Month's CDx3 Investor Results article continues the story with Citigroup's new 8.5% preferred stock. In this article I examine how much weight investors are giving to Citi's Too Big To Fail crown. Three specific events converged during March that provide preferred stock investors with a rare look at investor confidence in this Big Bank.  (jump to article)

There are three Special Announcements for preferred stock investors this month. First, during March we implemented the only online discussion group specifically for preferred stock investors. The new CDx3 Discussion Group was provided to subscribers to the CDx3 Notification Service (my email alert service for preferred stock investors) a few days ago and already hosts a lively discussion. Second, I provide a link that allows you to take a tour of the subscriber's website. Version 3 of the site, implemented in December, is the most comprehensive resource available to preferred stock investors and has been extremely well received by subscribers. And third, I have summarized some of the research from Preferred Stock  Investing and am making it available to brokers, financial planners and investment groups for free. (jump to article)

In the CDx3 Company Spotlight article I introduce you to Public Storage, one of America's most successful and interesting companies. CEO Ron Havner has guided the performance of his company well beyond the overall market or his peers as I show you in an interesting chart. Public Storage, after paying off a huge chunk of its debt last year is still looking for a use for its nearly $1 billion in leftover cash.  (jump to article)

The CDx3 Question of the Month is presented both here and on the Preferred Stock Investing Reader's Forum. If you visit the Forum you can test your knowledge by clicking on your answer to the question. You will receive an automatic email that provides you with the correct answer and my explanation. Or you can just read the answer in the below CDx3 Question of the Month article. I use this month's question to explain one of the Three Rule of Market Price Predictability from Preferred Stock Investing; specifically, how something called the "time value of money" can determine the best time to make a preferred stock purchase.  (jump to article)

Why wait until next month's CDx3 Newsletter to find out what is going on in the preferred stock marketplace? Throughout the month I post regular research articles on the Preferred Stock Investing Reader's Forum and make them available to you for free. In the Free Special Offer article below I provide you with a link that allows you to receive my posts via an email message rather than having to visit the Forum to see what's new. Any time a new article is posted, you will receive a message in your email inbox automatically - free. (jump to article)

Coming Up For Preferred Stock Investors: Market conditions are returning to those favoring the introduction of new preferred stocks and we are already starting to see new issues. The Next Month's Sneak Peek article at the bottom of this CDx3 Newsletter recognizes that the average market price for the highest quality preferred stocks has now reached the milestone that I told you to watch for in last February's issue. This month I provide the next market price milestone for high quality preferred stocks that you should look for and also identify the pending event that might keep the market from reaching it. (jump to article)

I look forward to reporting back to you in next month's issue of the CDx3 Newsletter.

Huge Investor Demand Greets New Citigroup Preferred Stock

'Too Big To Fail' Status Outweighs New Speculative Grade Rating From Moody's

New preferred stock issues are starting to pick up with more activity during March than we have seen in several months. Citigroup once again grabbed headlines as it introduced a new trust preferred stock that pays an 8.5% annual dividend. The introduction of this new preferred stock from Citi was just the latest of three coincidental events that have allowed preferred stock investors a rare opportunity to directly view how the large, institutional investors (the outfits that buy preferred stocks tens of thousands of shares at a time) view the financial security of this Big Bank.

April 2009: Too Big To Fail

The first event actually happened in April 2009 when Citi, along with a very small number of other Big Banks, was afforded the title "Too Big To Fail." This title was bestowed upon a small number of companies in the U.S., Germany and a few other places when these countries realized that some of their financial institutions had become so successful, had grown so much and employed so many people that any downturn put the entire economy in eminent danger.

February 24, 2010: Downgraded To Speculative Grade

During February of this year Moody's downgraded trust preferred stocks issued by Citigroup. It was not so much that the downgrade had occurred as these ratings go up and down continually over time. What was unique about the February Moody's downgrade of Citi's trust preferreds was that the securities were downgraded below investment grade; Citigroup's trust preferred stocks, since February 24, 2010, have been rated "speculative" or "junk" grade by Moody's.

March 19, 2010: Citi (Too Big To Fail) Introduced New 8.5% Preferred C-J (Speculative Grade)

Being implicitly (or explicitly?) protected by the U.S. government has got to be a bit of a double edge sword, especially when Uncle Sam takes a seat in your boardroom (Treasury announced in March that it will be selling its 27% stake in Citi throughout this year). But from an investor's standpoint, the Too Big To Fail status of Citigroup can add a certain amount of risk reduction. After all, the steps taken by the government over the last couple of years to keep Citi afloat were pretty extraordinary.

On the other hand, having your trust preferred stock rating skewered by Moody's a couple of weeks before you're going to issue 80,000,000 new shares had to leave Citi (and everyone else) wondering which way investors were going to go once the shares became available. Shares downgraded below investment grade is usually more than enough to send investors screaming to the exits.

Would investors brush off the weeks-old landmark speculative grade downgrade from Moody's and put their money on Citi's Too Big To Fail protected status or would the Moody's downgrade scare away shell shocked investors who have just endured nearly three years at battle stations with huge risks extracting pounds of flesh day in and day out?

The new 8.5% C-J allows us a rare opportunity to answer that question.

Rare Case: Speculative Grade Outperforms Investment Grade

By comparing how the market received C-J, the first and only Citi trust preferred stock to be rated speculative grade at introduction while Citi is also wearing the Too Big To Fail crown, to Citi's previous trust preferred stock issues, we can get a sense for whether or not investors put more stock in Citi's Too Big To Fail status or the new Moody's speculative grade rating.

Here is the market price performance during the first eight days of trading (the number of days that C-J has been available when I gathered this data) of Citi's previous four trust preferred stocks (C-O, C-U, C-F and C-G) compared to C-J. Note that C-O and C-U were issued prior to the Global Credit Crisis while C-F and C-G were issued during the crisis, and each of these previous four were rated investment grade when they were introduced (as opposed to the new C-J being rated speculative grade at its introduction).

Where the market price of the previous issues all increased in the initial days of trading, none came close to the rocket ride the we saw with the new C-J over the last several days. The market price of C-J immediately jumped way above its $25 par value to $25.75 and has stayed there.

Huge Daily Demand For C-J Shares

Another interesting comparison is to look at the actual demand for shares in these early days of trading. We would think that if investors were concerned about the Moody's downgrade the volume of shares being purchased every day would be low.

But as the above chart illustrates, the market demand for the new speculative grade C-J was orders of magnitude beyond that of Citi's prior issues, even though the prior issues, at the time of their introduction, were rated investment grade by Moody's. Investors demanded an average of 1.611 million C-J shares per day for the first eight days of trading.

While it is difficult to isolate precise cause-and-affect, I think it is fair to say that if the Moody's downgrade took on more weight with investors than Citi's Too Big To Fail status, you sure cannot tell by how the new C-J was received by the market.

With the "cost of money" at near-zero, 2009 saw a record volume of new corporate bond issues; over $1.2 trillion in new bonds were issued by U.S. companies last year, bringing the introduction of new, high quality preferred stocks ("CDx3 Preferred Stocks" - see sidebar at the top of this newsletter) to a trickle last year. As the first quarter of 2010 is now behind us, the reception that investors have given to new preferred stock issues this year has been enormous.

My book, Preferred Stock Investing, Third Edition, explains how to screen, buy and sell the highest quality preferred stocks during a variety of market conditions and provides readers with the websites and other resources needed to do so. If you would rather someone else do the research, I offer the CDx3 Notification Service (see reader comments). Among many other benefits (see Special Announcement article below), subscribers to the CDx3 Notification Service receive an email message when there are buying and selling opportunities coming up for the highest quality preferred stocks. We do the research and calculations, you make the decisions. To include the highest quality preferred stocks in your portfolio please consider subscribing to the CDx3 Notification Service today.

Preferred stock investors can now check strategies, ask questions and share ideas with the most knowledgeable group of preferred stock investors on the planet. During March the exclusive website for subscribers to the CDx3 Notification Service (take tour) received a unique enhancement - the CDx3 Discussion Group - the only online full-featured discussion group just for preferred stock investors.

The CDx3 Discussion Group was enabled just a few days ago and its already been a huge success. The topics posted by your fellow preferred stock investors have included important and timely topics such as:

• Minimize Withholding Tax On Preferred Stock Dividends

• Here comes a new preferred

• Bank vs Non-Bank Preferreds

• Target Sell Price

• Calling Preferred Stocks

And many more discussions that are relevant and valuable for preferred stock investors are going on right now as you are reading this. All of the largest, and many of the smaller, brokerages and financial planning firms are subscribers to the CDx3 Notification Service. Subscribers can just read along or jump in (anonymously and securely) and contribute their own thoughts, questions and ideas to the new CDx3 Discussion Group. What a great resource!

The new CDx3 Discussion Group is just one of the amazing resources available to preferred stock investors. In addition to the automatic email notifications that subscribers receive when there are great preferred stock buying and selling opportunities coming up, you can now share ideas and ask questions directly to your fellow preferred stock investors! Please consider becoming a subscriber to the CDx3 Notification Service today.

Preferred Stock, Company And 24/7 Marketplace Information In One Place

The subscriber's website provides subscribers with the most comprehensive resource available for preferred stock investors.

The design of the subscriber's website is a direct result of specific input from subscribers through our Continuous Improvement Program.

The subscriber's website is the vault within which I keep research information regarding selecting, buying and selling the highest quality preferred stocks ("CDx3 Preferred Stocks"), the companies that issue them and the marketplace that they trade within.

Once a subscriber signs onto the subscriber's website, the CDx3 Preferred Stock Market Dashboard is presented. The Dashboard provides these seven feature boxes, each of which provide their own focused information, both current and historical:

Take A Tour: The website's Tutorial has several components to it, including a description of the site's features. I have made a copy of the website's feature tutorial available to you. Click on the below link to take a quick tour of the subscriber's website Dashboard.

Click here to view the subscriber website's feature Tutorial

Preferred stock research is very hard to come by. The CDx3 Notification Service is intended for individual investors as well as groups (investing clubs, brokers, families or groups of friends) and all information is provided in plain English for non-experts. If you want to get serious about your preferred stock investments, maybe it's time for you to subscribe to the CDx3 Notification Service too (see reader comments).

Brokers And Investment Groups: New Meeting Materials Now Available

As the most comprehensive research service available for the highest quality preferred stocks, all of the large, and many smaller, brokerage firms subscribe to the CDx3 Notification Service.

My Preferred Stock Investing Group Materials are intended for brokers with a group of clients or self-directed investment groups that are interested in learning something about preferred stock investing.

The Preferred Stock Investing Group Materials include a slide show (27 slides, PowerPoint Show format) and an accompanying handout that provides my commentary for each slide. The handout is available in color and black and white (PDF format) for easy printing.

The materials include my tips regarding how to select, buy and sell the highest quality preferred stocks and summarize much of the research from my book, Preferred Stock Investing. Specifically, the materials are organized into three parts:

Part 1: Approach and Objectives To Preferred Stock Investing

Part 2: How and When To Buy and Sell Preferred Stocks

Part 3: Preferred Stock Investing Resources

To request the Preferred Stock Investing Group Materials just send a blank email message to:

InvestmentGroupMaterials@PreferredStockInvesting.com

You will receive an auto-reply email message with current download instructions.

Who Are These Companies That Issue CDx3 Preferred Stocks?

Public Storage, Inc. (NYSE: PSA)

Public Storage is one of those few companies that analysts will speak of in terms of being relatively recession proof. When the economy slows down those deciding to downsize will need a place to store their belongings for a while; when the economy picks up, people replace old things with newer things, but many of the belongings being replaced go into storage.

The fact is that we have an enormous propensity to hang on to our stuff, even more so when faced with uncertainty about the future.

It's difficult to measure just how hard it is for us to get rid of our old stuff until you look at a map of Public Storage's facilities, placed where we need them the most. These self-storage facilities provide 137 million square feet of net rentable space to the company's customers.

Public Storage is an extremely well run company under the direction of CEO Ron Havner. If you ever get a chance to listen to Havner and his management team on their quarterly investor conference calls, it's worth your time. This is a leader who has an impressive depth of knowledge about his business and customers. And analysts who follow Public Storage have consistently awarded Public Storage with multiple upgrades since last fall (see recent analyst opinions). And when you listen to Havner or read his assessment of his own performance in the company's 2009 Annual Report (PDF, 132 pages), his communications are always clear and easy to understand.

A key financial metric for Real Estate Investment Trusts (REITs) like Public Storage is Funds From Operations (FFO). This is a metric of profitability and despite a nasty economy and commensurate 4% drop in operating earnings, Public Storage's FFO in 2009 actually increased to $5.61 per common share from $5.05 in 2008. And the occupancy of their facilities remained virtually unchanged, declining by a mere 0.8% in 2009 over 2008.

Looking at the company's cumulative total return over the last ten years allows us to see the results of Havner's long-term focus on shareholder value. This chart shows the extent to which Public Storage is consistently a top performer, not just when compared to the broad market (S&P 500) but also when compared to its peers (as measured by the REIT Equity Index).

When you have repurchased a huge chunk of your outstanding debt and still have about $1 billion in cash sitting around, you can be a REIT in 2009 making these kinds of statements:

"We are in a wonderful business with excellent economies, established on a rock-solid financial structure. What is even more impressive is these returns were accomplished with low leverage and abundant liquidity. Public Storage...operated at about half the industry average leverage. A combination of exceptional financial engineering by our talented CFO, John Reyes, and operational excellence, enabled us to produce results far above the real estate industry." (Ron Havner, 2009 Annual Report)

Public Storage is a $16 billion company founded in 1971 and headquartered in Glendale, California. You can learn more about the company's financials, see recent news stories involving the company and much more by visiting Yahoo Finance or the company's website.

Reader Note: The purpose of the CDx3 Company Spotlight article is to give you a sense of the types of companies that issue CDx3 Preferred Stocks. Companies that appear in the CDx3 Company Spotlight either currently, or in the past, have issued CDx3 Preferred Stocks. Since I am not familiar with your financial goals, resources or risk tolerance, my mention of these companies here should not be taken as a recommendation by me for you to buy, or not buy, securities issued by these companies. Companies can issue multiple series of preferred stocks, some of which may meet the CDx3 Selection Criteria while others do not.

When is the best time to buy a preferred stock? - Preferred Stock Investing Reader's Forum.

The correct answer to this question is (C): At the beginning of a new dividend quarter just after the previous dividend is paid.

It is important not to confuse your investing strategies when making a purchase. Answers A (at the end of the dividend quarter just before the dividend is announced) and B (the day before the ex-dividend date) are purchasing strategies for investors looking to have their funds invested for as few days as possible but still claim the upcoming dividend payment. Valid strategies, but both are unrelated to the objective posed by this month's question.

We want to know when to look for a relatively low market price when making a preferred stock purchase.

The answer to this question is rooted in what is called the "time value of money." If I offered you $100 today or the same $100 ten years from now, which would you go for? Having the same money sooner has more value than having the same money later - the time value money.

The time value of money affects the market price of a preferred stock during a dividend quarter in the same way. A preferred stock that is closer to its dividend pay day (end of the quarter) will take on more value as the pay day approaches than an otherwise identical preferred stock that is further away.

The opposite is equally true: a preferred stock that is further away from its dividend pay day will have less value (lower market price) than an otherwise identical issue that is about to pay its quarterly dividend.

This is the basis for one of the Three Rules of Market Price Predictability, the Rule of Buyer/Seller Behavior (Preferred Stock Investing, page 43). The market price of a CDx3 Preferred Stock will tend to rise as the end of the quarter (pay day) approaches.

So when will the market price tend to be at its lowest within any dividend quarter? At the beginning of a new dividend quarter, just after the previous dividend is paid - a good time for buyers.