Saturday, March 25, 2017

Observations and Sample of Recent Trades: 3/25/17 (SGZA, FFBC)/Trumpcare Kaput

Trumpcare Kaput:  

A reporter asked Senator Pat Roberts (R.Kan.) whether he supported scrapping the essential health care benefits required in Obamacare policies. 

Senator Roberts responded: "I wouldn't want to lose my mammograms." While he later apologized, his answer tells everyone what he really thinks. 


In the final version of Trumpcare, the GOP was going to scrap the minimum essential insurance requirements that include maternity and prenatal care, emergency room visits, hospitalization, lab services, prescription drugs, mental health and addiction services and pediatric services. What Are 'Essential Benefits' in GOP Health Care Bill Debate? - NBC News; Why maternity & mental health coverage may decide the House GOP bill's fate - CNNLate G.O.P. Proposal Could Mean Plans That Cover Aromatherapy but Not Chemotherapy - The New York TimesObamacare 101: 4 things you need to know about 'essential health' benefits - LA Times


A photograph of the meeting where Trump agreed to eliminate the essential insurance requirements highlights the GOP's tone death on women's issues:




The removal of those items from all insurance policies would have caused the premiums to rise for those who want coverage for all essential services. Young single people would opt out of the insurance pool for maternity and prenatal care, pediatric services, wellness/preventative exams, mental health and addiction services and prescription drugs with limited exceptions. Older folks would drop coverage for maternity care and pediatric services. As the insurance pool shrinks leaving people who need those types of services, their premium costs would increase compared to Obamacare for policies that include them.

That is how risks are managed by insurance companies. To keep premiums down, there needs to be a large pool of people who are not currently utilizing any of those services. The GOP has no clue about such matters. While the CBO estimated that 24 million would lose insurance coverage, the actual number of uninsured persons would include those who can not afford to pay the resulting high premiums for one or more essential services and are consequently uninsured when they need the service.

H.R. 1628, the American Health Care Act, incorporating manager's amendments 4, 5, 24, and 25 | Congressional Budget Office

Why would someone want to add for example maternity and pediatric services? The family is going to have a baby and are thinking ahead about insurance coverage for the child. They would have to pay a lot more under those circumstances than if the cost risk was spread out over the entire insured pool. Most health plans excluded maternity coverage prior to Obamacare: How Obamacare changed maternity coverage. Insurance companies were probably lobbying hard to get the a la carte menu since it would improve their pricing and margins.

Buying a home insurance policy when you house is burning is not going to be favorably priced. And, if the insurance companies are not allowed to price those risks appropriately under the GOP's a la carte system, then they will just pull out.

As I stated several times earlier, I did not believe the GOP would be able to repeal and replace Obamacare. They did manage with their proposals to energize their opponents who probably gained a million plus converts.

I do not anticipate smooth sailing on tax cuts either.

At least that subject is a more natural one for republicans than trying to deal with healthcare which ended up with a 17% approval rating. National (US) Poll - March 23, 2017 - U.S. Voters Oppose GOP Health | Quinnipiac University Connecticut

The problem with the GOP's current approach is their desire to include a border tax to pay for a corporate tax cut. In effect, the GOP would be increasing the taxes for lower and middle income voters with a 20% tax applied to imported goods, while giving most corporations a major tax break. Importers will be screaming bloody murder.  I personally view such a plan to enrich corporations and their shareholders and to tax the less well off as a GOP Death Wish. It is an easy issue to understand for those white blue collar workers.

Next up, the GOP has to increase the debt limit without attaching poison pills to their authorization. Debt limit looks like a real struggle after AHCA debacle - MarketWatch

Federal Debt and the Statutory Limit, March 2017 | Congressional Budget Office

See my 3/1/17 post (scroll to "Will the GOP Shut Down the Government Again?")

++++++++++

Bar Harbor (BHB) split its shares 3 for 2. I received an additional 75 shares last Wednesday: 





This split brings me up to 225 shares with an average cost of $16.69 per share: 





This is the second 3 for 2 stock split that I received since I first bought shares on 2/7/2012. Item # 2: Bought 50 BHB at $30 (2/10/12 Post) That 50 share lot has turned into 112.5 shares now has an average cost per share of $13.4


I sold 100 shares in 2016 held in another account: 



2016 BHB 100 Shares + $ 936.36
I last discussed a pre-split purchase here: 

I was rewarded when BHB made an offer to acquire Lake Sunapee Bank that I owned at the time of the offer and later sold in three separate transactions last year realizing a total gain of $850.87. This is a snapshot of the largest of the three: 



2016 LSBG 100 Shares +$627.02

Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST

++++++++


I am continuing to gradually pare my stock allocation. I am at the end of that process since I can not find anything left that I want to sell. It will be discussing some of those dispositions, which have already taken place, over the next several weeks.  


I am just about done, hopefully, buying short and intermediate term bonds and CDs. It may take two more months to discuss all of those trades here.  


++++++++++++


1.  Intermediate Term Bond Ladder Basket Strategy

I received $3K in proceeds from a maturing three month treasury bill in March and used the proceeds to buy the bonds discussed in A, B, and C below: 

A. Bought 1 WFC 3% Senior Unsecured Bond Maturing on 2/29/25


Issuer:  Wells Fargo & Co. (WFC:NYSE)
WFC Page at Morningstar
Finra Page: Bond Detail
Credit Ratings: 
Moody's at A2
S & P at A
Fitch at AA-
YTM at Total Cost (97.266 ) = 3.395%



B. Bought 1 Morgan Stanley 2.625% Senior Unsecured Bond Maturing on 11/17/21


Issuer: Morgan Stanley (MS:NYSE)
MS Page at Morningstar
Finra Page:  Bond Detail
Credit Ratings: 
Moody's at A3
S & P at BBB+

YTM at Total Cost (99.044) = 2.844%

2016 Annual Report 


C. Added 1 Anheuser Busch InBev 2.625% Senior Unsecured Maturing on 1/17/23:

I previously bought this bond in a taxable account. This last purchase was in a Roth IRA account. 



Issuer:  Anheuser-Busch InBev S.A. ADR (BUD:NYSE)
BUD Page at Morningstar
FINRA PAGE: Bond Detail
Credit Ratings:
Moody's at A3
S & P at A- 
FITCH at BBB+
YTM at Total Cost (98.476 ) = 2.91%


D. Bought 1 Lexington Realty 4.4% Senior Unsecured Bond Maturing on 6/15/24


Issuer Lexington Realty Trust (LXP)
LXP Page at Morningstar (not rated)
FINRA Page: Bond Detail
Credit Ratings: 
Moody's at Baa2  
S & P at BBB-
Fitch at BBB

YTM at Total Cost (98.591 ) = 4.63%

LXP Analyst Estimates
Welcome to lxp.com | lxp.com

I have bought and sold the common stock and currently own 100 shares in Roth IRA accounts plus reinvested dividends.  In my Vanguard Roth IRA account, I still own 50 LXP shares bought  at $7.6 in July 2016.

Item # 1. Sold 100 LXP at 150 in Vanguard Roth IRA Account:Update For Equity REIT Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha

I  sold out of my LXP positions held in two taxable accounts account last year: Item # 2. Sold 250 LXP on Ex-Dividend Date-Taxable Accounts: Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshots= $224.65).  
I had previously sold higher cost lots:
I discussed selling 100 shares in the Fidelity Roth IRA at $11.15 here, realizing a gain of $271.9. 
The LXP common stock position is part of REIT Common and Preferred Stock Basket Strategy which I started to build in the 2013 summer. Trading snapshots can be found at the end of that post. 
LXP Trading Profits To Date = $675.94
It has been difficult to generate a total return in excess of the dividend yield. To do so, I have to buy low and sell the pops: LXP Interactive Stock Chart
LXP has disposed of several properties that apparently contributed to the straight line rent number which is non-cash revenue included in the FFO calculation but excluded from funds available for distribution ("FAD"). Note that the FAD number was $57.415M for the Q/E 12/31/15 up from $52.238M in the Q/E 12/31/15. The straight line rent adjustment, which deducts non-cash revenues from LXP's adjusted FFO, was $2.051M last quarter compared to $12.46M in the 2015 4th quarter. The quality of the cash flow went up, as the adjusted FFO declined Y-O-Y. A number of authors at SA do not understand this point.  
LXP's 2016 Annual Report (debt is discussed starting at page 93)
2. Continued to Pare Potentially Long Duration Exchange Traded Bonds:

A. SOLD 40 SGZA at $24.83:




Profit Snapshot: $51.29


I discussed this purchase here. This lot was bought at $23.5, with the total cost at $23.525 per share.


Quote: Selective Insurance Group Inc. 5.875% Senior Notes due 2043 (SGZA:NYSE)


Prospectus (optional call on or after 2/8/18)


Moody's rates Selective Insurance Group's shelf (provisional senior at (P)Baa2); outlook stable


I still own 50 shares of SGZA bought in a Roth IRA at $24.1 that I discussed here.


I also still own 50 shares in a taxable account that were bought using a commission free trade at $23.53 (12/29/16). I discussed that purchase here.  The yield at that all-in price is about 6.242%.


I will buy this bond when it dips in price. The first price plunge occurred shortly after the bond's IPO in 2013. SGZA Stock Chart The price fell quickly from the $25 per share offering price to about $19.5 due to the interest rate spike that year which started in early May and ended on 12/31/13.


My first purchase was during the interest rate spike in 2013: Item # 3 Bought 50 SGZA at $20.6 (10/19/13 Post) I did not hold onto those shares for long, selling that lot for a $140.58 gain in May 2014.


The second plunge in price occurred during the interest rate spike that started last summer and ended in December 2016. The ten year treasury yield has now worked its way back up to the apex hit during last year's spike. The question now is whether the current spike in that yield has ended at or near the 2.6% level again or is merely pausing for another leg up.


I bought SGZA several times during that price decline using commission free trades in taxable accounts or the $1 commission payable to IB for the trade discussed above.


3. Continued to Pare Stock Allocations:


A. Sold 84+ FFBC at $28.1 (used commission free trade):


Profit Snapshot: +$1,129.21




Quote: First Financial Bancorp (Ohio) (FFBC:NASDAQ)


Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST (snapshots of gains/losses = +$36,089.34)


The 2018 E.P.S. consensus estimate was $1.72 when I sold this lot. That translates into a forward P/E of 16.34 at a $28.1 market price. The 2017 estimate was $1.54 which translates into a 18.25 P/E.


I view both P/E ratios to be expensive for this bank or any other bank stock that would be on my monitor list.


4. Short Term Bond/CD Ladder Basket Strategy:


A. Bought 2 WFC 1.5% CDs (monthly interest) Maturing on 10/1/18:




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.

Wednesday, March 22, 2017

Observations and Sample of Recent Trades: 3/22/17 (AEG, SFLNX)/Trump: The Democrats Invented The Fake News Story About Russian Interference in the U.S. Election

Russian Interference in the Election-Invented by the Democrats to Explain Losing the Election:

Donald's Tweet 3/20/17:

"The Democrats made up and pushed the Russian story as an excuse for running terrible campaign. Big advantage in Electoral College & lost!"


Now we know. The Russians did not interfere in the election to boost Trump's chances of winning. No way Jose. Trump has facts to prove that the entire intelligence community has conspired with the Democrats after the election to concoct this Russian story to explain why they lost to Donald. 


FBI Director James Comey: Trump campaign, Russia ties investigated, no wiretap evidence - CNN


Comey Deals Trump a Political Blow When He Can Least Afford It - Bloomberg


Trump's False tweet that NSA, FBI said 'Russia did not influence electoral process' | PolitiFact

I only watched segments of Comey's testimony on television. Whenever a republican was questioning him, the subject was not Russian interference in the U.S. election, but the leak of classified information that proved that Flynn had lied about his contacts with the Russian ambassador.

Maybe the republicans will be concerned about Russia's interference when its attack is directed at the GOP's nominee.

++++

Possible Coordination Between Trump Campaign and Russia To Interfere In U.S. Election as a Potential Negative for the Stock Market:

This entire subject has the potential for being a major negative for stocks.

While there is no publicly disclosed proof that Trump associates coordinated with Russian intelligence officials, there is smoke and a cast of characters that no presidential candidate should allow anywhere near a campaign including Trump's former campaign manager Paul Manafort.

Paul Manafort’s plan to ‘greatly benefit Putin government'-USA Today

The Alternate Fact Guy, Sean Spicer, recently claimed that Trump's former campaign manager had no important role in the campaign. Sean Spicer says Trump campaign chairman Paul Manafort actually played 'limited role' in campaign - CNN

Manafort will be called as a witness in the ongoing House and Senate investigations. Do not be surprised if he and possibly one or more others plead the Fifth Amendment and refuse to answer questions.

Information is just dripping into the public domain on a continuous basis. The drips may turn into a flood. This subject could turn very toxic for the GOP and their agenda.

+++++

Trump's New Labor Secretary Nominee Alexander Acosta:

Trump's first nominee for Labor Secretary, Andrew Puzder, had to withdraw since too many Senate republicans refused to support him. You would think that Trump would be very careful with his second choice. That assumption would be incorrect.

When Trump's new Labor Secretary nominee was a federal prosecutor, he cut a non-prosecution deal with a former hedge fund manager, Jeffrey Epstein, who was accused of sexually abusing 40 minor girls mostly between 13 and 17. Trump called Epstein a “terrific guy” back in 2002, saying that “he’s a lot of fun to be with. It is even said that he likes beautiful women as much as I do, and many of them are "on the younger side".

Why would any sane President nominate the prosecutor for Labor Secretary who refused to prosecute this guy or cause to be made public again Trump's comments about Epstein? At a minimum, this highlights Trump's poor judgment.

++++++++++++++++++

1. Intermediate Term Bond Ladder Basket Strategy:

A. Bought 1 JPM 3.375% Senior Unsecured Bond Maturing on 5/1/23


Issuer:  JPMorgan Chase & Co. (JPM:NYSE) 
JPM Page at Morningstar
Finra Page: Bond Detail (prospectus linked)
Credit Ratings:
Moody's at Baa1
S & P at BBB+
Fitch at A

YTM at Total Cost = 3.468%

JPM SEC Filings


2016 4th Quarter Earnings Report


B. Bought 1 Laboratory Corporation 3.6% Senior Unsecured Bond Maturing on 2/1/25:




Issuer: Laboratory Corp. of America Holdings (LH:NYSE)

LH Page at Morningstar
Laboratory Corporation of America - Investor Relations 
Finra Page: Bond Detail
Credit Ratings:
Moody's at Baa2
S & P at BBB

YTM at Total Cost (98.088 ) = 3.884%


2016 Annual Report (debt listed at page F-22)

Laboratory Corporation of America® Holdings Announces Record 2016 Fourth Quarter and Full Year Results and Provides 2017 Guidance 


C. Bought 1 Xcel 3.3% Senior Unsecured Bond Maturing on 6/1/25:




Issuer: Xcel Energy Inc. (XEL:NYSE)-Utility Company

XEL Page at Morningstar 
Credit Ratings | Xcel Energy
Finra Page: Bond  Detail (prospectus linked)
Credit Ratings:
Moody's at A3
S & P at BBB+
Fitch at BBB+

YTM at Total Cost (99.255 ) = 3.404%


2016 Annual Report (debt listed at page 91)


Xcel Energy 2016 Year End Earnings Report 


D. Bought 1 Wisconsin Power & Light 2.25% Senior Unsecured Maturing on 11/15/22




The "Ask Price" of 96.785 shown above is the ask price plus a $1 Fidelity commission. 


Issuer: WPL is a wholly owned subsidiary of Alliant Energy Corp. (LNT:NYSE) 

Finra Page: Bond Detail (prospectus linked)
Credit Ratings: 
Moody's at A2
S & P at A
Moody's downgrades Alliant to Baa1, Interstate Power and Light to Baa1, and Wisconsin Power and Light to A2
YTM at Total Cost (96.785 ) = 2.87%% 

Dollars in Millions: 2016




Page 29 Alliant Energy 2016 Annual Report 



E. Bought 1 Federal Realty 2.75% Senior Unsecured Bond Maturing on 6/1/23


I bought this bond in a Roth IRA account. 




Issuer: Federal Realty Investment Trust (FRT:NYSE)-REIT 

FRT Page at Morningstar  
Home | Federal Realty Investment Trust
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: 
Moody's at A3
S & P at A-
Fitch at A-
Credit Ratings | Federal Realty Investment Trust
YTM at Total Cost (96.977 )= 3.292%

2016 Annual Report (debt listed at pages F-19 and F-20)


Federal Realty Investment Trust Announces Fourth Quarter and Full Year 2016 Operating Results


2. Continued to Pare Stock Allocation


A. Sold 200 AEG at $5.69


Quote: Aegon N.V. ADR (AEG:NYSE)


Profit Snapshot: +$136.09




My prior round trip was in 2015: $234.19



2015 AEG 283+ Shares +$234.19
It has been difficult to generate an adequate return on the USD priced Aegon ADR given the decline in the EUR/USD and the overall poor performance of the ordinary shares price in Euros. 

I drew a three year chart comparing the performance of the Euro priced ordinary shares and the USD priced ADR to highlight the previous point: 



Aegon N.V. Interactive Stock Chart 

This chart illustrates what I call the Double Whammy in international stock ownership. The ordinary share price has fallen about 10% but the ADR has dived over 30% due to the decline in the Euro's value against the U.S.D. 


The trend recently has been up in price due solely to better performance of the ordinary shares priced in Euros and traded on the Dutch stock exchange.  


I have had more luck with the USD priced Aegon Hybrids. Those shares are U.S. issued securities whose prices are not influenced by the Euro/USD exchange rates and are in effect junior bonds. I never devoted much money to them but have managed to generate $4,512.81 in realized gains so far. 


I recently nibbled on two of them: AEGON N.V. 6.375% Perpetual Capital  (AEH:NYSE) and AEGON N.V. Floating Perpetual Capita (AEB:NYSE) 


I discussed those recent purchases in my SeekingAlpha comment blogs. 


AEB was bought at $21.9. AEB is a hybrid security that quarterly "dividends" for a U.S. taxpayer at the greater of 4% or .875% above the 3 month Libor rate on a $25 par value. AEG may call at anytime at par value. The 3 month Libor rate has been trending up in yield but is unlikely to surpass IMO 3.125% prior to 2019, the trigger point for increasing the coupon above the 4% minimum. 3-Month London Interbank Offered Rate (LIBOR) Chart-St. Louis Fed That rate will be higher than the federal funds rate set by the Federal Reserve: Effective Federal Funds Rate Chart-St. Louis Fed


Aegon's subordinated debt is rated Baa1 by Moody's and BBB by S & P. 


This unusual security is a junior bond on the balance sheet and in effect an equity preferred stock for regulatory capital purposes. Its potential perpetual character makes it analogous to U.S. equity preferred stocks but it is superior in Aegon's capital structure to equity preferred stocks. The hybrids rank below all senior debt. Distributions have been treated as qualified dividends for U.S. taxpayers in the past, but would be classified as interest in European countries. Quantumonline still shows the qualified rate as still being applicable for U.S. taxpayers. 

My first discussion of an AEB buy was back in October 2008 when I bought 50 shares at $5.5:

AEB AND JQC (10/8/2008 Post)


I bought AEH at $24.81. This security pays dividends at the fixed coupon rate of 6.375% on a $25 par value. There is no maturity date. Aegon can call the security at par now. Given the recent rise in rates, Aegon may not be able to refinance at a more favorable rate unless it used an intermediate term senior bond to refinance.

B. Eliminated SFLNX: Sold 84+ at $15.76

Quote: Schwab Fundamental US Large Company Index Fund 

SFLNX- Rated 4 Stars by Morningstar 


Profit Snapshot: +$112.49




I started a small position in this Schwab fund last year and never built it up. Since I do not want to buy additional shares now, I just decided to eliminate the small position as part of my stock allocation reduction.  


Small stock and stock fund positions are targets for disposal now. 


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