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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: rangermorton who wrote (17217)	11/2/2001 1:43:09 PM
From: rgammon	Read Replies (2) \| Respond to of 18928

Craig, Quotes for these issues are entered in various ways, depending on which service you use. Keep in mind that these are Preferred Stocks. Most of them are fairly thinly traded, a few thousand to a few tens of thousands of shares per day. Enron Cap Resources LP Preferred Class A - quoted as ENE.A or ENEPRA - today about 20.94 Pays 9% (0.09 * $25 / 12) or 0.1875 per share per month. Enron Capital LLC Preferred Class C - quoted as ENE.C or ENEPRC - today about 18.56 Pays 8% (0.08 * $25 / 12) or 0.1667 per share per month. Mission Capital LP Preferred Class A - quoted as ME.A or MEPRA - today about 24.90 Pays 9.875% (0.09875 * $25 / 12) or 0.2057 per share per month. USX Capital LLC Preferred - quoted as XLC. or XLCPR - today about 24.45 Pays 8.75% (0.0875 * $25 / 12) or 0.1823 per share per month. There are about 14 such issues in the universe of 420 or so of Preferred Stocks. These 14 or so issues are all issued by a Limited Partnership or Limited Liability Corp. These companies are set up as separate entities from the corporate parent. The entity issues preferred stock, and loans the proceeds to the corporate parent by buying a long term corporate debenture from the corporate parent. The corporate parent gets a tax deduction for paying the interest (note dividends paid are NOT deductable). The payments from the parent are passed along to the investors who purchased the Preferred Stock shares. Maturity dates range from 2024 thru 2044. Some issuers have the right to extend maturity to as late as 2095. These issues were all issued in the period from 10/93 thru 5/96. Apparently there were some features of the tax code at that time that made this structure attractive. All are presently callable at $25/share. The downside to us as an investor in these issues is that the interest payments are NOT documented on a 1099-Int or 1099-Div, but on a K-1 or Substitute K-1. K-1s are generally not available any earlier than about mid-March, so you will be filing your tax return late in the season if you purchase them in a taxable account. If you are investing in fixed income instruments in a retirement account, then these issues may be attractive. If you prepare tax returns for others (as I do) and you are concerned about your capabilities to handle the K-1s that your customers bring you from time to time, then a few shares each of several of the 14 or so issues will give you the K-1s to add to your personal tax return, giving the practice you need to feel confident when a customer drops one of these down in front of you. If none of these considerations apply to you, that is you are making purchases in a taxable account, and monthly income is NOT important to you, then I suggest that you purchase any of the other 400 or so other issues in the Preferred Stocks universe. A copy of Standard and Poors Stock Guide from your brokerage will show you the listing of Preferred Stocks. The annual issue of the S&P Stock Guide that you can find in bookstores may also have a section that lists the Preferred Stocks. My brokerage is at Merrill Lynch. They are currently publishing a quarterly report that shows all of the items that may be of concern to investors. I can spend a .PDF of this to you, but not thru Silicon Investor (i'll need your e-mail address at home/work to send this megabyte of data at you). In spite of their name, Preferred Stocks are Fixed Income investments. Most issues are valued near $25 with call prices at $25 and pay their dividends quarterly. There are a few issues that are valued near $50 and $100 that are targeted at corporate investors due to the tax deduction that such investors will get from the interest/dividends paid by these particular preferreds. For the rest, prices generally hover between $29 and $20, unless there is some company specific issue that depresses the value of the shares (i.e. rumor of default or bankruptcy - like the Enron issues suffered for a few days following the latest quarterly earnings release). As prices rise towards $30, corporate issuers will frequently redeem the issue (assuming that the issue is callable and they have the cash available) and replace the issue with one that makes lower interest payments (much like a mortgage refinance to get a lower interest rate). Note that some issuers are NOT based in the USA, i.e. Canada, England, Sweden, Spain are those that I can identify, there are bound to be other countries represented. As advised by equity advisors, you are encouraged to have some portion of your fixed income investment in instruments that are NOT tied to the fortunes of US companies. This is more than a little bit. Hopefully it is enough bits to let you know what you want to do next. Robert Gammon rgammon51@yahoo.com