I Just Realized...

...Why Citigroup (5.80%) is still paying huge dividends. It's so simple, I don't know how I missed it. When a company comes out with a preferred issue with a high yield, like Citi at 8%+, it's a great trade to buy the preferred and short the common stock, which provides a very good hedge.

So the answer is still the obvious one: they're supporting the stock price. However, the dividend is supporting the stock price much more than normal. If C is forced to drop their dividend, they will make it much more profitable to buy the preferred and short the common stock, as the whole preferred dividend would be the expected profit, instead of just the ~2.5% spread.

This gives me an idea: go through financial stocks and make a list of companies selling preferred stock while maintaining excessively large dividends. Close the position after the dividends are cut.

I also have some other investment ideas that have been rolling around inside the old noggin over the past month or so.

1. I've been watching oil. I'm thinking that if it pulls back to around $120, I may short DUG (Proshares Ultrashort Oil and Gas) as a play on oil rebounding against a renewed dollar plunge. I still think that the dollar has another leg to fall. I also think that short dollar plays will be very profitable with the overwhelming consensus opinion that the dollar will rebound the rest of this year.

2. Potash Corp. (POT). This fertilizer company is a play on grain prices. It's a Canadian company. I'd consider it if it pulled back to below the 50-day moving average, currently about $180. But it's much too high at $212 now.

3. I'm also thinking about taking a position on interest rates. Two years ago, this was one of the most profitable things I did on my Yahoo! practice account. There are two ways to play this. I can go long with Schwab, but I need to open at least a $25,000 position. Right now, I don't want to use that kind of leverage. I think that rates will take another drop in the next few months, but over the next year or two, I think that bonds will crater and yields will pop. I can also use 2x leverage through TBT (Ultrashort Lehman 30-yr. Treasury index). I missed a nice opportunity to short TBT last week when the 30-yr. hit a yearly high of 4.80%. Bonds haven't been this low since last October, whent the stock market was hitting its all-time highs.