ISM/OSM yet again

[youbet]

I bailed on ISM at a loss some time ago. A similar exchange traded debt
security is PFK. It pays 2+% plus YOY CPI and has a better credit rating.
If you want to stay in an inflation linked security you might
consider selling ISM and buying PFK and harvest the tax loss if you
are underwater on ISM. You can check out PFK on Quantumonline.com
This is just a suggestion, of course. Follow my advise or any other
recommendation you find on this forum at your own risk.

Cheers,

Charlie

Thanks Charlie.

At A-, PFK has the same rating as ISM when I bought it. ISM is now BBB+. PFK's nominal yield is 2.4% + yr to yr cpi-u. (I think your 2% figure is a typo) Priced at about $22, it's current yield and YTM are less than ISM.

 

[cute fuzzy bunny]

Yeah but you might have a better chance of not losing your principal.

 

[youbet]

Yeah but you might have a better chance of not losing your principal.

You might..... BBB+ vs A-

 

[haha]

The SLM chairman said "We are still open to being taken over."
So while that may not be immediately in the offing, it may just be a matter of time.

As we have seen, takeovers often suck for bondholders.

Ha

 

[cute fuzzy bunny]

And after seeing the clowns running SLM in action, I think that BBB+ rating will give way to something a whole lot lower before too long.

Probably right after the next press conference/metal detector situation actually occurs.

 

[Texas Proud]

And after seeing the clowns running SLM in action, I think that BBB+ rating will give way to something a whole lot lower before too long.

Probably right after the next press conference/metal detector situation actually occurs.

didn't they get rid of that guy and bring in another... someone who used to run it? Just curious if you are talking about the current CEO...

 

[cute fuzzy bunny]

They brought in a new chairman, but the moron is vice chairman and still CEO.

The moron is also now under heavy investigation for dumping 97% of his SLM shares shortly after being named CEO and sinking the Flowers takeover.

 

[FIRE'd@51]

A couple of my thoughts on SLM.

I would think that in this environment, a takeover of SLM (should it occur) is more likely to be by a higher credit company, rather than a LBO, which could actually result in an upgrade of SLM's debt.

IMO, the more serious threat to SLM's future comes from the noises being made by the Democratic candidates (in particular, HC), that the government should lend directly to students, thereby eliminating the middlemen like SLM. At the moment, this is my biggest concern.

In the meantime, I'm happy to be collecting my inflation indexed interest payments each month, which will average nearly 6% (on par) for the next three months

 

[youbet]

My thinking is pretty much in line with yours FIRE'D@51.

I still have significant concerns, but with the attractive rate being paid for the next few months, I'm holding unless it bumps up a buck where I can sell and break even.

Of course, I regularly find ways to lose my butt in the market making everyone here and DW wife wonder how I ever got to FIRE...........

 

[twaddle]

Another thing that should help you sleep at night is that SLM is taking direct action to improve their credit rating (secondary offering, new lines of credit, etc.) "Fallen Angels" are the most consistent source of high junk bond returns, I believe.

I scooped up a bit of ISM when it fell below 17.

 

[Darryl]

Ha, I sold off the balance of SLM today at $20.42 concluding the wild trading and exciting times. Back to the mutual funds.

 

[FUEGO]

The latest in the OSM/ISM saga:

I got my 1099 from Fidelity today. 11 out of 12 ISM interest payments are properly reported on line 1 of 1099 INT as interest income. However, the 1/16/2007 payment was reported as a Qualified dividend on Line 1b of 1099-DIV.

Not sure if this is Fidelity's fault or SLM's negligent classification of payments. I'm guessing the latter, based on past SLM incompetencies in correctly calculating monthly interest payments using a simple formula.

Has anyone else noticed this on Fidelity's statements or elsewhere? I'm expecting a revised 1099 eventually.

 

[cute fuzzy bunny]

Yep, you'll possibly get one.

In the meanwhile, bask in the slightly improved tax treatment that you may be enjoying.

 

[Nords]

Has anyone else noticed this on Fidelity's statements or elsewhere? I'm expecting a revised 1099 eventually.

Fidelity sent a letter out last week saying that they have IRS permission to [-]blow us off[/-] send 1099s out in late Feb... in order to ensure their utmost accuracy.

In other words their Jan 1099s were just a diversion to keep us happy while they pull together the actual data.

I got their 1099 for one of my accounts this week (an account I shut down in July, so it wasn't likely to have any last-minute trading activity) but I'm still waiting on our (busier) joint account.

You could also log onto their website and send them an e-mail query.

 

[brewer12345]

I got a similar notice from schwab, so I now have a real good excuse to procrastinate on the tax filing.

 

[JohnEyles]

I got a similar notice from schwab, so I now have a real good excuse to procrastinate on the tax filing.

In my experience, the only change has been the amount of dividends
which is qualified.

 

[JohnEyles]

Has anyone recently tried to reproduce the interest calculation
for ISM/OSM ?

For ISM for 2007, I show the following per-share dividends
(in reverse order, last one is Jan 07):

$0.09057
$0.09359
$0.09734
$0.10067
$0.09818
$0.09923
$0.09480
$0.08478
$0.09748
$0.07717
$0.07124
$0.08731

I can't seem to massage these numbers into anthing correlating
with the CPI numbers (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt)
even given the 4-month lag (or whatever it is).

 

[clifp]

The latest in the OSM/ISM saga:

I got my 1099 from Fidelity today. 11 out of 12 ISM interest payments are properly reported on line 1 of 1099 INT as interest income. However, the 1/16/2007 payment was reported as a Qualified dividend on Line 1b of 1099-DIV.

Not sure if this is Fidelity's fault or SLM's negligent classification of payments. I'm guessing the latter, based on past SLM incompetencies in correctly calculating monthly interest payments using a simple formula.

Has anyone else noticed this on Fidelity's statements or elsewhere? I'm expecting a revised 1099 eventually.

My ISM/OSM is an IRA so I guess I'll avoid this latest fiasco. I think I am going to edit this thread, and send it to investor relation at Sallie Mae. I am trying to think of a snappy salutation. Dear incompetent idiots is accurate but may not be received positively.

 

[cute fuzzy bunny]

I suspect the investor relations folks at SLM either quit or jumped out of a window some months ago...

I'm pleased to have done reasonably well with this fiasco. Jumped out at about the same price I jumped in at and raked in $1700 in dividends.

 

[youbet]

Has anyone recently tried to reproduce the interest calculation
for ISM/OSM ?

For ISM for 2007, I show the following per-share dividends
(in reverse order, last one is Jan 07):

$0.09057
$0.09359
$0.09734
$0.10067
$0.09818
$0.09923
$0.09480
$0.08478
$0.09748
$0.07717
$0.07124
$0.08731

I can't seem to massage these numbers into anthing correlating
with the CPI numbers (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt)
even given the 4-month lag (or whatever it is).

Where did the above numbers come from? Did SLM provide them or did you calculate them? If you calculated them, how did you do so?

I calculate the expected yield for my ISM shares based on the bls inflation data every month and, so far, get matching results, except for the two months they screwed up.......

For example, for the current period, Feb 15 - March 14, they're paying 6.36% based on $25 PAR. March 15 - Apr 14 = 6.13% Apr 15 - May 14 = 6.33%. Just multiply those percentages by 25/your price to get your effective yield.

Edited to add: I was able to duplicate your numbers from the bls CPI-U data. See my following post.

 

[youbet]

Has anyone recently tried to reproduce the interest calculation
for ISM/OSM ?

For ISM for 2007, I show the following per-share dividends
(in reverse order, last one is Jan 07):

$0.09057
$0.09359
$0.09734
$0.10067
$0.09818
$0.09923
$0.09480
$0.08478
$0.09748
$0.07717
$0.07124
$0.08731

I can't seem to massage these numbers into anthing correlating
with the CPI numbers (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt)
even given the 4-month lag (or whatever it is).

I checked your Jan number and it works.

202.9 - 198.8 / 198.8 + .0205 X 25 = 1.0280925.

1.0280925 X 31/365 = 0.08732. You have a rounding error in your Jan last digit.

 

[JohnEyles]

Never mind. I was not computing the fraction of a year's
interest carefully enough; I thought a day plus-or-minus would
not really matter, but it's actually one-part-in-30, which is
about 0.1% for the numbers we're talking. Oddly, Excel,
(at least the several years old OSX version I'm using) has a
function to compute the difference between two dates as a
fraction of a 360-day year, but not of the actual (non-leap year)
365-day year we all know and love (what's up with that ?).

Anyhow, thanks, and sorry for the chase of the wild goose.

P.S. For the earlier questioner, the numbers I quoted were
simply dividing the interest payments shown in my broker
account by the number of shares held.

 

[Texas Proud]

Oddly, Excel,
(at least the several years old OSX version I'm using) has a
function to compute the difference between two dates as a
fraction of a 360-day year, but not of the actual (non-leap year)
365-day year we all know and love (what's up with that ?).

Some bonds state they use 12 30 day months, or 360 days... makes the payment the exact same if they pay monthly...

 

[FIRE'd@51]

Has anyone recently tried to reproduce the interest calculation
for ISM/OSM ?

For ISM for 2007, I show the following per-share dividends
(in reverse order, last one is Jan 07):

$0.09057
$0.09359
$0.09734
$0.10067
$0.09818
$0.09923
$0.09480
$0.08478
$0.09748
$0.07717
$0.07124
$0.08731

I can't seem to massage these numbers into anthing correlating
with the CPI numbers (ftp://ftp.bls.gov/pub/special.requests/cpi/cpiai.txt)
even given the 4-month lag (or whatever it is).

I was also able to duplicate your numbers from the CPI-U data, except for your December 2007 number, which should be $0.0826. December 2007 was a month in which SLM overpaid, then corrected it in January 2008 (see post #95 by clifp).

 

[JohnEyles]

Thanks folks. Looks like those of us still holding these things
have some extry-big dividends coming up !