cman

The most impressive piece is the pre loan loss earnings of $9.2b compared to just $7b in Q4. If you normalize the credit losses this would imply $3.50+ of run-rate earnings power. Also, the TCE ratio is up 30 basis points sequentially so they are rebuilding capital very quickly. I bought the stock at <$9 and the L preferred at <$350 and feeling stupid for beeing too timid on position size...

trust preferred = interest income preferred stock = dividend income from a US corporations perspective... interest income = taxed at corporate rate dividend income = taxed at corporate rate after a "dividends received deduction" of 70% so for example, on buffett's GS pfd's he gets 10% less a tax of 10% x (1-70%) x 35% = 1.05% tax / 10% dividend or a 10.5% effective tax rate

http://www.bloomberg.com/apps/news?pid=20601213&sid=agPsi3R8BaWM&refer=home I bought some more pfd's on Monday (USB). Holdings are WFC L, PNC L, BAC E, USB L. I may now sell the USB L for the USB H which is a floater (i see significant inflation on the horizon) as the yield differnetial is now lower and it trades at 40% of par. USB is the most absurd to me. There are few circumstances where USB common equity gets wiped out and the financial system/ economy survives. They generate strong earnings (equivalent to 5% of the loan balances before taxes and loan loss provisions) of which 1/2 are fee driven and they have adequate capital such that the common is unlikely to be diluted by a stress test. The preferred is in very strong shape despite being noncumulative. I bought this at 50% of par and a 16% yield! Using Obama tax rates of 20% divi and 39% marginal this is the equavalent of a 21% fully taxable yield.

I agree that the lack of consistency is terrible. The government seems to be doing their best to manufacture a depression. That said... Citi created the arb of a lifetime. You could buy the series AA and F for about 5-6 this am and short out 7.7 shares of citi common for 1.50-1.80. Basically you double your money on the capital put up for the long. By the end of the day the arb returned about 50-60% I think this bodes well for preferred of strong banks as a worst case which isn't so bad. Makes me like my BAC position more

I also like the PNC L and BAC E (speculative, but interesting risk-reward as a small piece of a basket)