Economy:
US retail sales August 2019 (Retail sales rose .4% in August. Excluding autos, retail sales were unchanged)
The ECB accelerated its Jihad Against the Savings Class and the EURO last Thursday by lowering its deposit rate to -.5% from -.4% and restarting its QE program effective 11/1/19: ECB cuts key rate, relaunches QE to shore up eurozone economy - MarketWatch
The impact of the ECB's decision was softened by the number of dissents. Draghi Faced Unprecedented ECB Revolt as Core Europe Resisted QE - Bloomberg
US retail sales August 2019 (Retail sales rose .4% in August. Excluding autos, retail sales were unchanged)
The ECB accelerated its Jihad Against the Savings Class and the EURO last Thursday by lowering its deposit rate to -.5% from -.4% and restarting its QE program effective 11/1/19: ECB cuts key rate, relaunches QE to shore up eurozone economy - MarketWatch
The impact of the ECB's decision was softened by the number of dissents. Draghi Faced Unprecedented ECB Revolt as Core Europe Resisted QE - Bloomberg
The CBO estimates that the U.S. government's budget deficit for the F/Y ending in September 2019 is over 1 trillion dollars through August. CBO says fiscal year deficit running over $1 trillion - MarketWatch However, September is usually a budget surplus month. CBO currently projects that the final tally for the F/Y ending 9/30/19 will be a $960B budget deficit.
For the 11 month period ending last August, the government collected $64B in tariffs compared to $36.7B in the first 11 months of the 2018 F/Y. Budget deficit in August totals $200 billion, U.S. on track to post nearly $1 trillion gap in 2019-A 7 Year High-MarketWatch
Tariffs are collected from U.S. importers. An increase in the tariff tax on U.S. businesses and consumers will probably keep the budget deficit slightly under $1 trillion for the current fiscal year.
For the 11 month period ending last August, the government collected $64B in tariffs compared to $36.7B in the first 11 months of the 2018 F/Y. Budget deficit in August totals $200 billion, U.S. on track to post nearly $1 trillion gap in 2019-A 7 Year High-MarketWatch
Tariffs are collected from U.S. importers. An increase in the tariff tax on U.S. businesses and consumers will probably keep the budget deficit slightly under $1 trillion for the current fiscal year.
Real US debt levels could be a shocking 2,000% of GDP, report suggests U.S. debt will continue to soar until the only option is debt monetization by the Federal Reserve and a massive devaluation of the U.S.D.
Perhaps some enterprising faux blonde at Fox, who wished to retire early, could ask Donald why U.S. real GDP is not surging over 3% as promised when the GOP passed their "tax reform" legislation; and why the FED needs go below zero on the FF rate with those tax cuts, federal deficit spending near $1 trillion per year, and interest rates already at Great Depression levels. Maybe the question will cause the Duck to engage in deep thought about what he actually needs to do?
A negative federal funds rate would cause short term treasury bills to go into negative territory. Money market mutual funds might have to break the $1 net asset value per share just to pay the manager's expenses. The annual real negative return before taxes could surge over 2%. But all of that would require the Donald to think about the repercussions, which is not within his bailiwick.
When Donald demanded that the FED reduce the FF rate to zero or into negative territory, which sounded like he was desperate, he claimed that the U.S. had "no inflation".
On the day after that tweet, the Bureau of Labor Statistics issued a Fake News Report that contradicted the Duck. I have not heard yet whether those responsible will be fired for daring to contradict Donald.
The BLS reported that core inflation rose 2.4% for the 12 month period ending in August.
Consumer Price Index Summary
By merely referring to this BLS report, I am spreading Fake News in Trumpworld, which goes without saying. If you want to know the truth, as the Trumpsters claim, your inquiry needs to start and stop with the Duck's tweets which will be confirmed dutifully on Fox News. Donald says there is no inflation so there is no inflation-end of discussion.
Perhaps some enterprising faux blonde at Fox, who wished to retire early, could ask Donald why U.S. real GDP is not surging over 3% as promised when the GOP passed their "tax reform" legislation; and why the FED needs go below zero on the FF rate with those tax cuts, federal deficit spending near $1 trillion per year, and interest rates already at Great Depression levels. Maybe the question will cause the Duck to engage in deep thought about what he actually needs to do?
A negative federal funds rate would cause short term treasury bills to go into negative territory. Money market mutual funds might have to break the $1 net asset value per share just to pay the manager's expenses. The annual real negative return before taxes could surge over 2%. But all of that would require the Donald to think about the repercussions, which is not within his bailiwick.
When Donald demanded that the FED reduce the FF rate to zero or into negative territory, which sounded like he was desperate, he claimed that the U.S. had "no inflation".
On the day after that tweet, the Bureau of Labor Statistics issued a Fake News Report that contradicted the Duck. I have not heard yet whether those responsible will be fired for daring to contradict Donald.
The BLS reported that core inflation rose 2.4% for the 12 month period ending in August.
By merely referring to this BLS report, I am spreading Fake News in Trumpworld, which goes without saying. If you want to know the truth, as the Trumpsters claim, your inquiry needs to start and stop with the Duck's tweets which will be confirmed dutifully on Fox News. Donald says there is no inflation so there is no inflation-end of discussion.
China will win trade war, reduce reliance on US tech: Strategist
Top economist is on alert after jobs growth hits a 2011 level
Soybean Prices - 45 Year Historical Chart | MacroTrends
Corn Prices - 59 Year Historical Chart | MacroTrends
Fact check of Trump’s claims about China - The Washington Post As usual, it is rare for Donald to be accurate.
Trump's China tariffs delay doesn't mean trade war ending: experts Donald had previously announced that he would add on 10/1/19 an additional 5% tariff tax on top of the 25% tariff already levied on $250B in China's exports. As a gesture of "good will", Donald delayed imposing that additional 5% until 10/15.
Someone in the Trump administration told Bloomberg that the Duck was considering some kind of "interim" deal. Trump advisers considering interim China trade deal to delay tariffs: Bloomberg - Reuters
A senior Trump official denied that Bloomberg report. Senior White House official denies report US considering interim China trade deal
After a senior official denied that option was even under consideration, Donald said he would consider it. Trump says he would consider an interim trade deal with China
Putting aside the question of whether the Duck can sincerely show good will toward China, or anyone else for that matter, even at Christmas, two of the more likely explanations are that Donald simply decided to withhold implementation until after he sees what China is willing to do or is about to cave on his demands in order to improve upon his election chances.
If Donald caves, rest assured that the deal will still be the best trade agreement ever negotiated in the universe's history since the Big Bang, even better than NAFTA 1.01 which has not yet been approved by Congress.
Recent poll numbers nationwide and in battleground states have sent a clear message to Donald that he needs to resolve the trade dispute or at least remove its negative impacts on his rural base.
Gundlach: There will be no U.S.-China trade deal - MarketWatch
China adds US agricultural products to tariff exemptions ahead of trade talks; China exempts U.S. agricultural products from tariffs after reports of potential interim trade deal - MarketWatch
Top economist is on alert after jobs growth hits a 2011 level
Soybean Prices - 45 Year Historical Chart | MacroTrends
Corn Prices - 59 Year Historical Chart | MacroTrends
Fact check of Trump’s claims about China - The Washington Post As usual, it is rare for Donald to be accurate.
Trump's China tariffs delay doesn't mean trade war ending: experts Donald had previously announced that he would add on 10/1/19 an additional 5% tariff tax on top of the 25% tariff already levied on $250B in China's exports. As a gesture of "good will", Donald delayed imposing that additional 5% until 10/15.
Someone in the Trump administration told Bloomberg that the Duck was considering some kind of "interim" deal. Trump advisers considering interim China trade deal to delay tariffs: Bloomberg - Reuters
A senior Trump official denied that Bloomberg report. Senior White House official denies report US considering interim China trade deal
After a senior official denied that option was even under consideration, Donald said he would consider it. Trump says he would consider an interim trade deal with China
Putting aside the question of whether the Duck can sincerely show good will toward China, or anyone else for that matter, even at Christmas, two of the more likely explanations are that Donald simply decided to withhold implementation until after he sees what China is willing to do or is about to cave on his demands in order to improve upon his election chances.
If Donald caves, rest assured that the deal will still be the best trade agreement ever negotiated in the universe's history since the Big Bang, even better than NAFTA 1.01 which has not yet been approved by Congress.
Recent poll numbers nationwide and in battleground states have sent a clear message to Donald that he needs to resolve the trade dispute or at least remove its negative impacts on his rural base.
Gundlach: There will be no U.S.-China trade deal - MarketWatch
China adds US agricultural products to tariff exemptions ahead of trade talks; China exempts U.S. agricultural products from tariffs after reports of potential interim trade deal - MarketWatch
++++++
Markets and Market Commentary:
The main story this month IMO so far is the pop in interest rates which did cause me to pare some of my recently purchased bond substitutes.
When interest rates are so low, it does not take much of a price decline to wipe out the value of one year in interest payments. The iShares 7-10 Year Treasury Bond ETF (IEF) has about a 2.25% yield at last Friday's closing price. IEF closed on 9/3 at $114.07 and at $110.5 yesterday, a decline of 3.13%.
I do not own any bond ETFs. I own individual bonds, and I have the financial capability to hold all of them until redeemed by the issuers. I have hollowed out substantially my intermediate term corporate bond portfolio.
Shorter term maturities have not been negatively impacted by the interest rate spike this month.
The Bond Ghouls have substantially reassessed their predictions about future federal funds rates as shown in the following tables:
Goldman: That big market shift is because things aren't so bad
Gundlach sees 75% recession chance, has a warning about the corporate bond market - MarketWatch He is referring to the FED's yield curve inversion model. IMO, the Fed's yield inversion model has now flashed its signal that a recession will start within 12 months. The questions are whether (1) this time is different due to the unprecedented interest rate manipulation by central banks and (2) the time lag to the recession's onset. I would add at least 3 months to that 12 month period given the economy's current momentum.
Goldman Sachs just dramatically cut its outlook for Apple, predicts 26% downside
The main story this month IMO so far is the pop in interest rates which did cause me to pare some of my recently purchased bond substitutes.
I do not own any bond ETFs. I own individual bonds, and I have the financial capability to hold all of them until redeemed by the issuers. I have hollowed out substantially my intermediate term corporate bond portfolio.
Shorter term maturities have not been negatively impacted by the interest rate spike this month.
The Bond Ghouls have substantially reassessed their predictions about future federal funds rates as shown in the following tables:
 |
| Probabilities for 9/18/19 Meeting |
 |
| Probabilities on or before 12/11/19 Meeting |
Gundlach sees 75% recession chance, has a warning about the corporate bond market - MarketWatch He is referring to the FED's yield curve inversion model. IMO, the Fed's yield inversion model has now flashed its signal that a recession will start within 12 months. The questions are whether (1) this time is different due to the unprecedented interest rate manipulation by central banks and (2) the time lag to the recession's onset. I would add at least 3 months to that 12 month period given the economy's current momentum.
Goldman Sachs just dramatically cut its outlook for Apple, predicts 26% downside
China adds 100 tons of gold to reserves-Seeking Alpha; China has added nearly 100 t of gold to its reserves
OPEC downgrades forecast for oil demand growth in 2019 and 2020
Shift into value stocks could fuel a solid rally, says J.P. Morgan - MarketWatch; JP Morgan's market guru say his 'once in a decade' trade is upon us
The hunt for higher dividend yields leads to preferred shares - MarketWatch
Mortgage rates had worst week in 3 years
New home sales were far from robust with mortgage rates at historically low levels.
++++++
OPEC downgrades forecast for oil demand growth in 2019 and 2020
Shift into value stocks could fuel a solid rally, says J.P. Morgan - MarketWatch; JP Morgan's market guru say his 'once in a decade' trade is upon us
The hunt for higher dividend yields leads to preferred shares - MarketWatch
Mortgage rates had worst week in 3 years
New home sales were far from robust with mortgage rates at historically low levels.
Trump:
NOAA hurricane: Trump pushed for response to Alabama NWS tweet during Dorian - The Washington Post ("President Trump told his staff that the nation’s leading weather forecasting agency needed to correct a statement that contradicted a tweet the president had sent wrongly claiming that Hurricane Dorian threatened Alabama, senior administration officials said."); Trump Pressed Top Aide to Have Weather Service ‘Clarify’ Forecast That Contradicted Trump - The New York Times ("A senior administration official, who asked not to be identified discussing internal matters, said Mr. Trump told his staff to have NOAA “clarify” the forecasters’ position.")
Lying Don called the NYT and WP articles a hoax: “No, I never did that. I never did that. That’s a whole hoax by the fake news media."
Air Force says it sent crews to Trump’s Scottish resort up to 40 times - POLITICO
NOAA hurricane: Trump pushed for response to Alabama NWS tweet during Dorian - The Washington Post ("President Trump told his staff that the nation’s leading weather forecasting agency needed to correct a statement that contradicted a tweet the president had sent wrongly claiming that Hurricane Dorian threatened Alabama, senior administration officials said."); Trump Pressed Top Aide to Have Weather Service ‘Clarify’ Forecast That Contradicted Trump - The New York Times ("A senior administration official, who asked not to be identified discussing internal matters, said Mr. Trump told his staff to have NOAA “clarify” the forecasters’ position.")
Lying Don called the NYT and WP articles a hoax: “No, I never did that. I never did that. That’s a whole hoax by the fake news media."
Air Force says it sent crews to Trump’s Scottish resort up to 40 times - POLITICO
Exclusive: US extracted top spy from inside Russia in 2017 - CNN; C.I.A. Informant Extracted From Russia Had Sent Secrets to U.S. for Decades - The New York Times ("The decision to extract the informant was driven “in part” because of concerns that Mr. Trump and his administration had mishandled delicate intelligence") The source provided the most direct information about Putin's effort to interfere in the 2016 election on behalf of Donald.
Don the Authoritarian continued his attacks on the free press last Sunday:
This kind of tweet, which occurs regularly of course, is a transparent effort to turn voters aways from reliable information.
Nixon would used phrases like "enemy of the people" to describe the press, but those comments were mostly or entirely made in private as I recall. Trump's public attacks on the 'enemies of the people' echo Nixon's private press war — except worse; We the (Enemies of the) People | RealClearPolitics Most of the press attacks were led by Nixon's VP Spiro Agnew who had to resign after pleading guilty to a crime. Nixon did misuse the powers of the President to target journalists.
The problem that Nixon had with the press is the same as Donald. Nixon was upset that the press was reporting the truth, particularly about Watergate. Authoritarians like Donald do not like having their lies pierced with the truth.
Trump groupies only trust Donald to deliver the news. 'It's Kind of Like an Addiction': On the Road With Trump's Rally Diehards
Hypocrisy is a dominant character trait in certain quarters. Sex and self-dealing-welcome to Jerry Falwell Jr.’s Liberty University - MarketWatch
Donald Trump launches Twitter spat with John Legend, Chrissy Teigen
Trump’s “94% Approval Rating in the Republican Party” fabrication, explained-Vox; President Trump's Approval-APNORC.org (79% approval among republicans); 84% in last Monmouth University.pdf His approval rating among Democrats in the Monmouth poll was at 3% with libertarians at a 10% approval rating.
Trump Claims Those Fleeing Bahamas Could Be 'Very Bad People'
Trump administration will deny protected status to Bahamians who fled Dorian
Trump accidentally tweeted an insult at a pastor. Here’s how the pastor responded. Of course, the Trumpsters spewed their vitriol at the pastor after Donald's tweet.
Trump will win presidential election in 2020, business survey reveals
Nixon would used phrases like "enemy of the people" to describe the press, but those comments were mostly or entirely made in private as I recall. Trump's public attacks on the 'enemies of the people' echo Nixon's private press war — except worse; We the (Enemies of the) People | RealClearPolitics Most of the press attacks were led by Nixon's VP Spiro Agnew who had to resign after pleading guilty to a crime. Nixon did misuse the powers of the President to target journalists.
The problem that Nixon had with the press is the same as Donald. Nixon was upset that the press was reporting the truth, particularly about Watergate. Authoritarians like Donald do not like having their lies pierced with the truth.
Trump groupies only trust Donald to deliver the news. 'It's Kind of Like an Addiction': On the Road With Trump's Rally Diehards
Hypocrisy is a dominant character trait in certain quarters. Sex and self-dealing-welcome to Jerry Falwell Jr.’s Liberty University - MarketWatch
Donald Trump launches Twitter spat with John Legend, Chrissy Teigen
Trump’s “94% Approval Rating in the Republican Party” fabrication, explained-Vox; President Trump's Approval-APNORC.org (79% approval among republicans); 84% in last Monmouth University.pdf His approval rating among Democrats in the Monmouth poll was at 3% with libertarians at a 10% approval rating.
Trump Claims Those Fleeing Bahamas Could Be 'Very Bad People'
Trump administration will deny protected status to Bahamians who fled Dorian
Trump accidentally tweeted an insult at a pastor. Here’s how the pastor responded. Of course, the Trumpsters spewed their vitriol at the pastor after Donald's tweet.
Trump will win presidential election in 2020, business survey reveals
++++++
1. Long Term Bond Strategy:
A. Sold 1 Macys 7.875% SU Maturing on 3/1/2030:
This bond was originally issued by May Department Store.
This bond just made its semi-annual interest payment so the accrued interest paid by the buyer was less than $1.
Profit Snapshot: $182.85
Item # 2. Bought 1 Macy's Bond Maturing in 2030 @ 99.5 (1/10/11 Post)
I owned this bond for 8+ years and thought that I ridden it long enough. It was difficult to sell and required about 5 attempts using limit orders which Fidelity retail customers can enter for most bond trades.
FINRA Page: Bond Detail (prospectus is not linked)
Credit Ratings:
Prospectus
Issuer: Macy's Inc. (M)
M | Macy's Inc. Analyst Estimates
Most Recent Semi-annual Interest Payment:
Annual Interest Payment for 1 bond = $78.76
Sold at 118.6
YTM at 118.6 = 5.516%
Proceeds at 118.5 (after $1 commission)
Macy's has been paying down its long term debt which stood at $7.204B for the F/Y ending in 2014 and at $4.683B for the F/Y ending January 2019.
I redeployed some of the proceeds to buy 30 shares of Macy's common stock as a Lottery Ticket which is discussed in Item # 3.C. below.
1. Long Term Bond Strategy:
A. Sold 1 Macys 7.875% SU Maturing on 3/1/2030:
This bond was originally issued by May Department Store.
This bond just made its semi-annual interest payment so the accrued interest paid by the buyer was less than $1.
Profit Snapshot: $182.85
Item # 2. Bought 1 Macy's Bond Maturing in 2030 @ 99.5 (1/10/11 Post)
I owned this bond for 8+ years and thought that I ridden it long enough. It was difficult to sell and required about 5 attempts using limit orders which Fidelity retail customers can enter for most bond trades.
FINRA Page: Bond Detail (prospectus is not linked)
Credit Ratings:
Issuer: Macy's Inc. (M)
M | Macy's Inc. Analyst Estimates
Most Recent Semi-annual Interest Payment:
Sold at 118.6
YTM at 118.6 = 5.516%
Proceeds at 118.5 (after $1 commission)
Macy's has been paying down its long term debt which stood at $7.204B for the F/Y ending in 2014 and at $4.683B for the F/Y ending January 2019.
I redeployed some of the proceeds to buy 30 shares of Macy's common stock as a Lottery Ticket which is discussed in Item # 3.C. below.
2. Bought 100 RNW:CA at C$12.79 (C$1 IB Commission):
Quote: TransAlta Renewables (RNW:CA)
Closing Price Yesterday: RNW.TO C$13.24 +C$0.03 +0.23%
Website: TransAlta Renewables |
Facilities: Facilities | TransAlta Renewables
Facilities in Operation/Development | TransAlta Renewables
Last Elimination: I previously owned the ordinary shares traded on the Toronto exchange and the USD priced ordinary shares traded on the U.S. Grey Market.
Item # 3. B. Sold 150 RNW:CA at C$13.97 and 100 TRSWF at US$10.36 (5/5/19 Post)(profit snapshots: C$165.4 and US$75.74).
Purchase Discussions: Item # 2.B. Bought 100 TRSWF at US$9.55-Used Commission Schwab Free Trade (6/18/18 Post);Item # 2.A. Bought 100 RNW:CA at C$12.91 (6/18/18 Post); Item #2.A. Bought 50 RNW:CA at C$12.45 (7/12/18 Post)
Current Position: 100 shares
Maximum Position: 200 Shares
Purchase Restriction: None
Dividend: Monthly at C$.07833 (C$.94 annually-Rounded)
Dividend Information | TransAlta Renewables
Dividend Yield at C$12.79 = 7.35%
This purchase was part of an ongoing reallocation of bond proceeds into higher yielding common stocks.
Last Ex Dividend Date: 9/12/19 (bought prior to)
Next Ex Dividend Date: 10/11/19
Last Earnings Report (Q/E 6/30/19):
TransAlta Renewables Reports Second Quarter 2019 Results and Declares Dividends | TransAlta Renewables
3. Small Ball-Common Stock Income Generation (all commission free trades):
A. Added 10 JCAP at $19.17:
Closing Price Yesterday: JCAP $19.94 -+$0.03 -0.15%
Website: Jernigan Capital
Last Discussed: Item # 3. Bought 50 JCAP at 19.83 (7/27/19 Post)
After this purchase, Raymond James downgraded JCAP from buy to neutral on 8/5. I do not have access to that report. A summary of the recommendation suggested that the main rationale was the uncertainty related to the possible management internalization which I discussed in my previous post. Jernigan Capital loses a bull; shares slide 4.9% - Jernigan Capital, Inc. (NYSE:JCAP) | Seeking Alpha
The Raymond James analyst is apparently concerned that JCAP will cut the dividend since the external management company will be paid in units of the operating partnership. There is no way to know now whether the internalization will even happen, the cost of the internalization and its impact on the funds available for distribution, and the savings to JCAP resulting from management internalization, or how quickly the cost can be recouped from the savings.
In short just a lot of guesses at the current time about some possible future event.
On 8/16/19, Keybank reiterated at overweight. This bank is the administrator for JCAP's bank credit facility so I would take this recommendation with that in mind. Jernigan Capital Upsizes Credit Facility to $235 Million, Extends Maturity and Adds Banks
On 8/21/19, B. Riley FBR reiterated its buy recommendation for Jernigan Capital and its $26 PT.
I do not have access to any of those reports.
SEC Filings
Last Earnings Report (Q/E 6/30/19):
SEC Filed Press Release
10-Q for the Q/E 6/30/19
Book Value Per Share as of 6/30/19= $19.12
Dividend: Quarterly at $.35 per share ($1.4 annually)
Last Ex Dividend Date: 6/27/19
Next Ex Dividend Date: 9/30/19
Current Position: 60 Shares
Maximum Position: 100 shares
Average Cost Per Share: $19.72
Dividend Yield at Average Cost = 7.1%
Purchase Restriction: Small Ball Rule
B. Bought 50 UBS at $10.66:
Quote: UBS Group AG (U.S.: NYSE)
UBS Group AG Consensus Analyst E.P.S. Estimates (as of 8/30/19)
2019 = $1.21
2020 = $1.32
P/E at $10.66 price and $1.32 E.P.S. = 8.08
Closing Price Yesterday: UBS $11.73 +$0.20 +1.73%
Shareholder information | UBS Global
5 Year Chart: Really Ugly-Major Bear Trend
There was a tradable rally starting in 2016 Spring near $12.5 that petered out near $22 in January 2018. Thereafter the trend was down in a series of lower highs and lower lows, with the share price falling below the earlier $12.5 low hit in 2016.
The stock was demolished in the Near Depression period as shown by the following chart which reflects the Swiss Franc priced shares starting in 2003:
Basic Information Day of Trade (8/30/19):
Dividend: Annually
Detailed dividend payment history | UBS Global
For owners of the USD priced UBS shares, the dividend is paid in Swiss Francs and then converted into USDs. The dividend yield will in part be dependent on the exchange rate.
Last Ex Dividend Date: 5/6/19
Last Earnings Report (QE 6/30/19):
The global wealth management business currently generates about 55% of group revenue. Investment banking contributes about 25%. UBS also has personal and corporate banking operations and is involved in asset management.
Tangible Book Value Per Share as of 6/30/19 = $12.62
UBS Tangible Book per Share | UBS Group AG - GuruFocus.com
Brokerage Reports:
Morningstar (7/23/19): 4 stars with a FV of $17
Previous Buy: None
Current Position: 50 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule (first 20 shares, then 30 at lower prices)
C. Bought 30 Macy's at $14.42:
Quote: Macy's Inc. (M)
M Analyst Estimates
Closing Price Yesterday: M $17.14 +$0.14 +0.82%
I mentioned this purchase in a 9/3/19 comment.
Macy's operates approximately 690 department stores under the Macy's and Bloomingdale's names; and 190 specialty stores, such as Bloomingdale's The Outlet, Bluemercury, Macy's Backstage, and STORY in 43 states as well as
macys.com, bloomingdales.com and bluemercury.com.
The recently implemented tariffs on China's clothing exports is a negative.
Sourced from Macy’s, Reports Second Quarter 2019 Earnings
Category: Lottery Ticket Basket Strategy
Dividend: Quarterly at $.38 per share ($1.52)
There is some risk of a dividend cut. Currently, the dividend is well supported with free cash flow. The Morningstar analyst estimates that 2019 free cash flow will exceed $1B while the annual dividend payments are less than $500M. It remains to be seen how low that will last however, though the Morningstar analyst believes that the $1B+ in annual free cash will last another 5 years.
Dividend Yield at $14.42 = 10.54%
The average yield on CCC rated debt is currently near 11.8%. ICE BofAML US High Yield CCC or Below Effective Yield; Standard & Poor's | Americas So the dividend yield is close to what one could find in speculative junk rated bonds that are vulnerable to a default. As noted above, Macy's SU debt is rated one notch above junk at Baa3/BBB- which is the lowest investment grade rating.
Last Ex Dividend Date: 9/12/19 (after purchase)
Dividend Reinvestment: No
Goal: Annualized total return of greater than 10%
I would be satisfied to collect a number of dividend payments and to sell the stock at a $1 profit.
Consider to Sell: anywhere in the $18 to $22 range
Last Round-Trip: Item # 1.A. Sold 25 Macy's at $25.93-Used Commission Free Trade (1/11/18 Post)(profit snapshot = $201.29)
Chart: Ugly Bear Market
 |
| 10 Year Chart as of 9/3/19 |
Last Earnings Report (Q/E 8/3/19):
This report was released prior to opening on 8/14. The stock closed at $19.36 on 8/13.
IMO, the substantial stock price decline in response to this earnings report was primarily due to Macy's lowered forecast than the earnings and revenues misses for a relatively unimportant quarter. Comparable sales for the quarter were up .2% vs. the consensus .5%.
Guidance:
Macy’s, Inc. Reports Second Quarter 2019 Earnings
Macy's has significant property assets. When reviewing earnings reports and comparing the results to the prior quarters, it is necessary to separate out operating earnings from the retail businesses from one time gains from property dispositions:
"Asset sale gains for the second quarter of 2019 totaled $7 million pre-tax, or $5 million after-tax and $0.01 per diluted share attributable to Macy’s, Inc. shareholders. This compares to the second quarter of 2018, when asset sale gains totaled $46 million pre-tax, or $34 million after-tax and $0.11 per diluted share attributable to Macy’s, Inc. shareholders."
Broker Reports:
Morningstar (8/14/19): 5 stars with a FV of $27 (the Morningstar analyst believes that Macy's needs to close stores in lower-tier Malls which is inevitable)
S & P (8/14/19): 3 stars with a 12 month $15PT
Credit Suisse (8/14/19): Neutral and lowered PT to $19 from $24; lowered 2019 FY E.P.S. from $3.05 to $2.92
Argus (6/29/19): Hold rating
Current and Maximum Position: 30 shares (possibly reconsider with a 20 share purchase below $10)
4. Short Term Bond/CD Ladder Basket Strategy:
A. Sold 2 Canadian Resources 3.45% SU Maturing on 11/15/21:
Profit Snapshot: +$42.68
Item # 2.B. Bought 2 CNQ 2021 SU at a Total Cost of 99.997 (6/4/18 Post)(YTM then at 3.451%)
Finra Page: Bond Detail (prospectus linked)
Issuer: Canadian Natural Resources Ltd.
Canadian Natural Resources Ltd. Analyst Estimates
Canadian Natural Resources - Home
CNQ SEC Filings
Sold at 102.231
YTM at 102.231 = 2.294%
Proceeds at 102.131
B. Sold 2 Walgreens 3.3% SU Maturing on 11/18/21:
Profit Snapshot: +$65.54
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Walgreens Boots Alliance Inc. (WBA)
WBA | Walgreens Boots Alliance Inc. Analyst Estimates
Sold at 102.127
YTM at 102.127 = 2.238%
Proceeds at 102.027 (after $1 per bond commission)
C. Bought at Auction 10 Treasury 28 Day Bills Maturing on 10/8/19:
2.062%IR
Auction Results:
5. Intermediate Bond Basket Ladder Strategy:
A. Sold 2 Sierra Pacific 2.6% General Mortgage Bonds Maturing on 5/1/26:
Profit Snapshot: +$98.25
Item # 1.A. Bought 2 Sierra Pacific 2026 GM at a TC of 97.14 (6/1/17 Post)
Issuer: see link immediately above
FINRA Page: Bond Detail (prospectus not linked
Prospectus
Sold at 102.19
YTM at 102.19 = 2.232%
Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.
The Canadian E & P companies are having a good day.
ReplyDeleteI recently discussed some small ball purchases in Suncor (SU):
Saturday, August 17, 2019
Item # 2. Bought 30 Suncor (SU) at $29.78, 10 at $28.65 and 5 at 27.61-Used Commission Free Trades:
https://tennesseeindependent.blogspot.com/2019/08/observations-and-sample-of-recent-posts.html
Suncor Energy Inc. US$32.70 +$2.29+7.53%
Last Updated: Sep 16, 2019 at 1:28 p.m. EDT
https://www.marketwatch.com/investing/stock/su
The price surge in North American E & P stocks is partly due IMO to the fear about what may happen in the Middle East.
The supply shock may end up being temporary or may become worse, possibly far worse, with further hostilities. Energy infrastructure facilities are easy targets for missile attacks.
Crude Oil WTI (NYM $/bbl) Front Month
$62.82 +$7.97 +14.53%
Last Updated: Sep 16, 2019 at 1:27 p.m. EDT
https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
My energy stocks will benefit...CVX has gone green. But Total and Shell are still in the red for me. At least they provide divs while waiting. Both are EU based. Maybe that's why they haven't done as well as CVX.
ReplyDeleteI'm not getting notices, so I'm posting to do get them.
On MSNBC a commenter made the statement that lowering rates on Thursday will stimulate and may even rescue the economy. It was a desk person saying it as though it's obvious commonly known thought.
I don't get it. Is this believed? How can a rate cut stimulate when rates are already so low, & liquidity isn't the problem? Rate cuts reduce customer spending, which is the more critical part of this economic rally right now. As matter of fact, rates were raised last year and customer spending improved. What rate cuts do, is offset the trade tariffs by lowering the dollar and making US products cheaper to import. Maybe that's what she meant. But didn't say.
Nike's been flagged by some people for a boycott due to ... I asked on the twitter thread... and no one answered beyond something about supporting hijab. I think the company had a person in an ad wearing an hijab. They are taking that as offensively supporting FORCED hijab wearing in foreign countries like Iran & Saudi Arabia. Because being inclusive and supporting choice isn't what they see in the ad. So I am glad I sold, since it was only supposed to be a trade.
Land: If negative real interest rates boosted economies, then Europe and Japan would be busting at the seams now.
DeleteI doubt that any FF cut now by the FED will have a net positive impact on the U.S. economy.
The traditional thinking is that rate cuts do act as a stimulus but that needs to be taken in context.
Lowering the FF range from 5% to 1% and a QE program would be stimulative to an economy in a recession or just moving out of one.
Lowering the FF rate from 2% to 1% in the 11 year of an economic expansion, when inflation is hovering near 2% and longer term rates are at Great Depression levels will caused more harm than good IMO.
The USD is up today against a basket of 6 foreign currencies weighted in the Euro even though intermediate and longer term treasury interest rates have declined some:
U.S. Dollar Index (DXY)
98.58 +0.33 +0.33%
Last Updated: Sep 16, 2019 at 3:12 p.m. EDT
https://www.marketwatch.com/investing/index/dxy
An increase in DXY indicates USD strength.
iShares 20+ Year Treasury Bond ETF
$138.38 +$1.84 +1.35%
https://www.marketwatch.com/investing/fund/tlt
Thanks. That's the impression I had.
DeleteDo you have a sense of whether it's a common belief that lower rates would help? I'm curious how aware or not, the investor community is about this.
DeleteLand: I discussed this subject in my latest post. The common belief is that lower interest rates will cause an increase in GDP growth and inflation.
DeleteThe negative nominal yields and positive nominal yields that are negative adjusted for inflation (and before taxes) that prevail now will inflate the value of risk assets with stock prices being the primary beneficiary.
I just found that section. It completely answers my question. Thank you!
DeleteThere's real results - deflation. And habit that QE type behavior is a punch bowl.
I'm buy & sell trades based on what the market expects, rather than what I expect.
Crude Oil WTI (NYM $/bbl) Front Month
ReplyDelete$59.57 -$3.33 -5.29%
Last Updated: Sep 17, 2019 at 10:10 a.m. EDT
https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
The decline is due to a Reuters report that an unnamed SA source claimed that output would be restored sooner than expected.
https://www.marketwatch.com/story/oils-price-skid-deepens-on-report-that-saudi-crude-plant-may-return-to-normal-sooner-than-expected-2019-09-17?mod=mw_quote_news
I view it as more likely than not that there will be no military strikes against Iran even if there is conclusive evidence of its responsibility. In a tweet, Donald basically said that he was waiting for Saudi Arabia to tell hime what to do. I doubt that SA will want the U.S. to attack Iran in response to this latest attack.
Instead, SA will beef up substantially its security measures around critical production facilities and the U.S. will use whatever evidence it can muster to further tighten sanctions against IRAN and the participation of other western democracies in those sanctions. An attack on Iran will cause crude prices to skyrocket and will likely precipitate several rounds of retaliatory strikes.
If Iran attacks again, there will likely be a military response. Iran's production is certainly susceptible to the same kind of missile attacks.
Perhaps Iran was emboldened to launch this latest attack after there was no military response to attacks on shipping and the shooting down of a U.S. drone.
I am attributing the attack to Iran either directly from Iranian soil or indirectly by a surrogate. The attack was sophisticated and required expertise far beyond the capabilities of a non-state actor. The facilities were far closer to Iran than to Yemen. The U.S. claims that the strikes were from the North. The attack also fits the pattern of Iran increasing its military actions in response to U.S. sanctions while of course denying that it is doing anything.
I suspect that the U.S. already has evidence on the missiles' trajectory and likely launch location. There was a reference in media reports that a guidance systems were recovered.
Hello SG,
DeleteToday there was a sharp rise in the repo rate for overnite lending and the Fed/ Treasury was caught with too little cash; I wondered what u thought of this and its meaning in relation to manipulation of the Fed balance sheet ?
thanks
https://www.ft.com/content/345da16e-d967-11e9-8f9b-77216ebe1f17
G: I would not have much to add to the observations made in this article:
Deletehttps://www.cnbc.com/2019/09/17/fed-to-conduct-technical-repo-operation-tuesday-to-keep-its-benchmark-rate-where-it-wants-it.html
I do not view that event as important compared to everything else that is happening.
What is surprising is that Bond Ghouls now assign a 45.8% chance that the FED will sit pat and make no change in the FF rate range tomorrow:
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
The two events may be linked in some way. I would like to see the FED stand pat since I view a cut as unnecessary based on what is known now and more likely to be harmful on a net basis, which is a frequent contention that I have been making in my posts and will take up again in tomorrow's post.
And, I don't think the FED will be intimidated by Donald spewing his crazy juice on this institution as an almost daily occurrence.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent_18.html