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
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.
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
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:
Has the much-sought-after Moody's credit
worthiness rating of
company has never suspended dividends on a
preferred stock (and remember, these are
multi-billion dollar, decades-old
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
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
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,
Investment Group Learns About Preferred Stock
Investing First Hand
Members Learn About The CDx3
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
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?
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
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,
these companies that issue CDx3 Preferred
AMB Property Corporation
If your local mini-storage
operator does not have enough
storage space for your stuff,
you might try calling AMB
headquartered at Pier 1 in San
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
AMB's facilities are
specifically located in cities
throughout the world that are,
or are near, major
AMB builds high-tech facilities
with a specific emphasis on
quick-in, quick-out handling of
high volume cargo near airports,
seaports and ground
recent announcements by AMB of
the major clients it is putting into
its facilities throughout the world.
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,
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:
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
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).
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
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
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
With the Fed's September 18
interest rate reduction, foreign treasuries, and other
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
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
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.
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
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.
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
Expire, Others Rage On
CDx3 Notification Service Deal Nets 15% Off For
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
want to subscribe to the
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?
CDx3 Notification Service subscriber today.
Also, as a
recipient of this monthly CDx3 Newsletter,
you are entitled to a FREE copy of
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
To download your free copy, 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,
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
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
Newsletters interesting, and
will consider learning more by
purchasing my book, Preferred
take a look at
http://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.
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
send an email message to
and you will be automatically removed
from my address list. Best wishes to