Tuesday, August 22, 2017

Observations and Sample of Recent Trades: AKBA

Market Commentary:

Low inflation and interest rates, and their impact on bond prices, continue to provide major support for stock prices. By this measure, stocks look fairly cheap: BMO: CNBC  ("The market looks expensive relative to its history when you look at a lot of the traditional measures like price to sales, price to earnings and so forth," said Jack Ablin on CNBC's "Futures Now" this week. "But when you look at the stock market through the lens of bonds, the stock market still looks cheap.")

Stock prices look attractive now — compared to bonds - MarketWatch

Rob Arnott: Dump U.S. Stocks, Buy Emerging Markets - Barron's

Fed's Big Bond Unwind May Clobber U.S. Stocks, Corporate Debt - Bloomberg 

I would not use the word clobber. A persistent rise in inflation and interest rates could easily spark a 20% correction at some point in that rise.  

The Stock Jocks soon concluded after the election that small cap U.S. stocks and regional banks were two sectors likely to benefit from a Trump administration. The rationale was similar. Trump's policies would be fiscally stimulative for the U.S. economy. Small caps in general are far more dependent on growth in the U.S. economy compared to those that are components of the DJIA or the S & P 500. Those anticipated fiscal policies would primarily be a major tax cuts and massive increases in infrastructure spending. The increased demand fostered by those fiscally stimulative policies would also cause interest rate spreads to widen, helping the regional banks.  

Both banks and small caps started to turn south earlier this year, indicating to me that more investors have come to the conclusion that the Trump trade is kaput. 

The Russell 2000 index closed in negative territory for the year last Monday. That index is frequently the most volatile of the major broad stock indexes and the first to start a correction.  

At the Close on 8/21/17: RUT 1,356.90 -0.89 -0.07% : Russell 2000 

Close 12/30/16 (last trading day): 1357.13
52 week high = 1,452.09
Off 6.55% from 52 Week High as of the Close on 8/21/17

The Russell 2000 had a good rally today and is now down 5.55% from its 52 week high, hardly a downdraft that would cause me to conclude that the uptrend is over rather than just paused for consolidation: ^RUT 1,371.54 +14.63 1.08%

Correction Becomes More Likely As U.S. Transports, Russell 2000 Lose 2017 Gains: Forbes

The CBOE volatility index for the RUT is still comfortably below 20. 

Close on 8/21/17: ^RVX 17.61 -0.15 -0.84% 
Close on 8/22/17: ^RVX 16.17 -1.44 -8.18% 

As with the other major stock indexes, RVX is well within its Stable Volatility Pattern. Given the larger ranges of what is historically stable readings compared to the VIX, I have adjusted the VIX Model ranges to take into account RUT's inherently more volatile nature as explained in a 1/1/2009 Post.  
Stocks, Bonds & Politics: Small Caps and RVX model

When the entire market is moving toward a correction, the RVX will generally be the first volatility index to spike over 20, followed by the CBOE NASDAQ 100 Volatility (VXN), and then the VIX, with the  DJIA VOLATILITY Index (DXD) being the last.  

There is no major difference in the U.S. economy in 2017 compared to the last four years of Obama's term other than a slowdown in job growth under Trump. 

First Seven Months: Job Additions 

2017: 1.29M (last two months are preliminary estimates)
2016: 1.372M
2015: 1.624M
2014: 1.694M
2013: 1.344M
2012: 1.24M
2011: 1.174M

Bureau of Labor Statistics Data

The True Believers have a different take on this data. For them Trump is a job creating machine.

Yet the stock market has skyrocketed after Trump's election. Maybe Trump will deliver something that the Stock Jocks want, but that is far from clear. Most likely, we will see a watered down "tax reform" bill that will be inadequate to move the GDP needle much and could easily be overwhelmed by other secular forces that turn more anemic. 

The market is more likely reacting to a synchronized upturn worldwide with the U.S. continuing to provide 2% or so real GDP growth as in prior years. 

The market needs at a minimum a 10% to 15% correction soon IMO. The problem with these parabolic rises occurring years into a bull cycle is that more downside can be created when there is a trend reversal. It needs to at least be remembered that the 50% decline in 2000-2002 was primarily a readjustment of the high multiples built up in the last 1990s. Big declines can be set up by too big of runups.   


Market News

Metals: Copper prices hit highest since Nov. 2014 - MarketWatch

Auto trade emerges as roadblock as first round of Nafta negotiations wraps up - MarketWatch


More on North Korea and Trump:

Trump promises North Korea 'fire and fury' over threats- 8/9/17  ("North Korea best not make any more threats to the United States. They will be met with fire and fury like the world has never seen... he has been very threatening beyond a normal state. They will be met with fire, fury and frankly power the likes of which this world has never seen before""

North Korea warns of 'merciless strike' ahead of US, South Korea drills-August 20, 2017North Korea says US causing 'uncontrollable phase of a nuclear war' with military drills | The Independent

Has anyone noticed any change in North Korea's threats since Donald ramped up his rhetoric?  


Trump and General Pershing:

Once again, Trump gave confirmatory evidence that he inhabits a self created alternate reality. 

Trump creates his own reality. Trump voters willing inhabit that alternate universe created by Donald and become most annoyed when anyone dares to pierce that bubble with accurate information. Those who pierce the bubble with accurate information are known as the Fake News Media and liberals. So here we are: True is False and False is True.  

After the terrorist attack in Spain, Trump published the following tweet recalling his previously invented story about General Pershing dipping bullets in pigs blood and shooting Muslims in the Philippines:

Besides being a totally inappropriate response to that terrorist attack, there is no factual support for Trump's reality creation.

He told the same story to cheering supporters during the campaign. In Trump's story, Pershing's forces captured 50 Muslim insurgents in the Philippines. Pershing then allegedly ordered his men to dip their bullets in pig's blood and  to execute 49 of the 50 unarmed prisoners, allowing one to survive to tell the tale. According to Donald, who knows nothing about American history that is real, that stopped Muslim terrorism for 35 years. 

The fact that Donald makes things up is hardly news. What's his point? That the U.S. execute suspected Muslim terrorists by shooting them with bullets dipped in pig's blood? 

The fact that Donald uses this kind of made up violent story as an Aesop type fable with a happy ending (no more Muslin terrorists) is just a deeper, more troubling dimension to the story without historical backing.  

And, if Donald actually knew anything about Islam, there is no adverse, hereafter consequences flowing from being shot by bullet dipped in pig's blood. Trump responds to Barcelona terror attack by spreading debunked rumor - Aug. 17, 2017;

PolitiFact gave Donald's reality creation a pants on fire rating.

After Barcelona attack, Trump said we should study John J. Pershing. Here's what Trump got wrong. - The Washington Post ("The Philippines were acquired after the United States won the Spanish-American War in 1898, and an insurrection arose following attempts to pacify the country as it sought independence from colonial rule. Pershing studied the Koran and drank tea with tribal leaders to emphasize he was there to put down violence, not continue a religious war the Spanish had waged for centuries. . . . In one series of campaigns between 1902 and 1903 around Lake Lanao on the southern island, Pershing would focus on more violent religious groups in fortified positions, allowing them room to escape " The story recounted about Pershing was made up by strongly anti-Muslim internet users after 9/11)

Study Pershing, Trump Said. But the Story Doesn’t Add Up. - The New York Times


The GOP Is Not a Conservative Party:

IMO, Donald Trump would close down the free press and name himself dictator for life if he could get away it.

A recent poll found that 52% of republicans would allow Donald to continue being President without having to run for re-election, which is a requirement in Article 2 of the U.S. Constitution and the Twelfth Amendment. Analysis | In a new poll, half of Republicans say they would support postponing the 2020 election if Trump proposed it

What are the differences between a true conservative and a reactionary?  

One major difference is that true conservatives have a deep and abiding respect for the conservative values embodied in the U.S. Constitutions. 

The republicans who would support Donald remaining as President without an election are not conservatives. They are reactionaries and the GOP is now a reactionary party. 

Reactionary in this context simply means to return to a distant historical point when conditions were much different than now and believed by the reactionaries to be much better. For many republicans that would be a some point before the Progressive Era started with the GOP President Teddy Roosevelt and certainly before FDR. Others would go back much further in time.  

In the case of those 52% of republicans who would support Donald postponing the next election, the back to the past period would be when King George III of the United Kingdom - ruled America. The King George coronation portrait reproduced in the proceeding link shows George decked out in gold cloth. George also suffered from mental illness late in his life. 

What happened to all of those King George VII statutes. Well, that is an easy one. They were generally viewed as inappropriate after England lost the Revolutionary War in 1785.   

6 in 10 Trump approvers say they will never, ever, ever stop approving of Trump - CNN (perhaps that would include hanging CNN journalists on the White House lawn)

Given the strength of the U.S. military, the greatest danger to the Republic comes from within, particularly among those who no respect for the True Conservative values embodied in the Constitution, and that threat is growing exponentially.

IMO, White Nationalists far outnumber liberals, properly identified as such, and are a more dominant political force that is not understood by college educated persons who live in places like NYC, Boston, and San Francisco. 


150 Years Later, 23% Of Americans, 40% Of Southerners, Side With Confederacy

Poll: Majority sees Confederate flag as Southern pride - CNN 

The Democrats who live in the large coastal metropolitan areas do not understand the strength of White Nationalism or how to peel off white voters from the GOP who panders to their fears. That is shown vividly by the inept campaign run by Hillary. 

Those confederate statues throughout the South, other than being places for pigeons to alight, are memorials to White Nationalism and Supremacy. It is just that simple. Statues are not built to teach history or culture but to make a statement that we venerate the persons depicted and celebrate their acts. For southern generals, their acts were treason against the USA.    

The statues do not discuss history or provide historical lessons. Removing them does not change the White Nationalist culture or any historical facts.  

There is plenty of room in confederate cemeteries to place those statutes in historical context.  

One of my great++ grandfathers was under General J.B. Hood's command at the Battle of Franklin (1864). Moving one of JB's statues to the McGavock Confederate Cemetery at Franklin will enable JB to at long last rejoin the men, many in mass graves, that died carrying out his order to charge entrenched Union positions, or what many call the Southern version of Pickett's Gettysburg charge.   

Most of those statues will still be in public places throughout the South 100 years from now.  


Paul Allen and the U.S.S. Indianapolis:

The cruiser U.S.S. Indianapolis was sunk by a Japanese submarine a few days before Japan surrendered in 1945. An expedition funded by Paul Allen, a founder of Microsoft, found the remains 18,000 feet deep in the Philippine Sea. Allen furnishes some pictures at WWII Battleship USS Indianapolis Discovered | Paul Allen

400 of the 1196 sailors and marines on board died in the initial attack and others died in the water, some eaten by sharks, before an alert pilot, who was not looking for the ship, saw evidence of the wreckage and 316 persons were then rescued. The shark aspect entered movie folklore in Jaws (1975) - Quotes - IMDb.

Wreckage of U.S.S. Indianapolis, Lost for 72 Years, Is Found in the Pacific - The New York Times

The article linked above briefly mentions that the Captain of the Indianapolis, Charles Butler McVay was court martialed by the Navy, but was officially exonerated by the Navy in 2001-The New York Times. However, that was the result of a Congressional Resolution that cleared the Captain after a Congressional investigation. USS Indianapolis CA-35

What is not mentioned  in the news stories is that the Navy used the Captain as a scapegoat, knowingly withheld information from the defense that would have exonerated the Captain, gave the defense almost no time to prepare, knew that the charge was bogus, and just plain and simple railroaded the Captain. The Captain killed himself in 1968. USS Indianapolis CA-35

‘We knew the ship was doomed’: USS Indianapolis survivor recalls four days in shark-filled sea

There was a recent, bad movie made about this disaster: USS Indianapolis: Men of Courage - Wikipedia


Secret Service and Trump:

Trump’s clubs charge $60K to rent carts to Secret Service as agency runs out of money - MarketWatch

As The Trumps Travel, The Secret Service Can't Even Afford To Pay Some Agents


1. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Lake City Bank 1.7% CDs (monthly interest) Maturing on 9/9/19 (2 year CDs):

B. Bought 2 Lake City Bank 1.5% CDs (monthly interest) Maturing on 9/7/18 (1 Year CD):

C. Bought 2 Compass Bank 1.35% CDs Maturing on 2/20/18 (6 month CDs):

D.  Bought 2 American Express Bank 1.85% CDs (semi-annual interest) Maturing on 2/24/20:

E. Bought 2 Bank West 1.45% CDs Maturing on 5/21/18 (9 month CD):

The current MM rate at Schwab is .1%. This brings me up to 6 Bank West CDs maturing at various intervals in May 2018. All of those CDs have 1.45% coupons and pay interest at maturity.

$10K Inflow into Short Term Bond/CD Ladder Basket

While the Fidelity MM fund has ticked up to over .6%.

Schwab is at .1%. That rate was at  .5% a few weeks ago. So any CD purchase at Schwab produces much higher income streams than leaving the funds in Schwab's MM sweep account.

2. Long Term Bond Basket Strategy:

A. Sold 1 TIP 1% Coupon Maturing on 2/15/46-ROTH IRA:

Profit Snapshot: $51.44

Stocks, Bonds & Politics: TIP Trading in the Secondary Market
Update On Buying TIPs In The Secondary Market - South Gent | Seeking Alpha
The Mechanics Of Purchasing A TIP In The Secondary Market - South Gent | Seeking Alpha
30-year Breakeven Inflation Rate Chart-St. Louis Fed

30 year non-inflation protected Treasury Rates

Purchase Date 12/19/16: 3.12%
Sell Date 8/11/17: 2.79%

It was the decline in the 30 year nominal yield that produced virtually all or all of the $51.44 profit. If the nominal treasury yield had gone up, I would have had a loss.   

30 Year Break-Even Inflation Rates

12/19/16 1.99%  30 Year TIP Yield at 1.13%
8/11/17 1.88%  30 Year TIP Yield at .91%

B. Bought 5 Montgomery County Tennessee 2.125% GO Bonds Maturing on 4/1/26


Credit Ratings:
S & P at AA+

YTM at Total Cost (99.939): 2.132%
Tax Free Current Yield = 2.126%

Montgomery County TN. - Google Maps

Optional Redemption: At par value on or after 4/1/23: 


Tax Matters: Federally Tax Free/No AMT

I also own 15 Montgomery County GO bonds with a 3% coupon maturing on 4/1/27: EMMA

3. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Sold 1 Dynegy 8.034% SU Note Maturing on 2/2/24:

I am just not comfortable owning bonds rated deep into junk territory now.

Profit Snapshot: +$18

Issuer: Dynegy Inc.  (DYN)
DYN Analyst Estimates

FINRA Page: Bond Detail

Credit Ratings:

Moody's at B3 for Senior Unsecured Moody's affirms Dynegy's B2 CFR; assigns Ba3 rating to $2 billion secured term loan; outlook is stable
S & P at B+

Sold at 97.5
YTM Then at 8.546%
Current Yield at 8.24%

Bought at a Total Cost of 95.6
Stocks, Bonds & Politics: Item # 1. E.
YTM Then At 8.928%
Current Yield At 8.4%

B. Sold 2 Tucson Electric Power 3.05% SU Bonds Maturing on 3/15/25:

Profit Snapshot: +$63.92

Tucson Electric is now a subsidiary of the Canadian utility Fortis.
Fortis Inc. Stock Quote (Canada: Toronto)

FINRA Page: Bond Detail

Credit Ratings:
Moody's at A3
S & P at A-

Sold at 99.573
YTM Then at 3.113%
Current Yield at 3.06%

Fidelity uses a third party service to value the bonds owned in my account rather than the market prices. The end result is that bond values show in my holdings page are invariably lower than the market prices.

This Tuscon Electric bond was valued by Fidelity at 99.069 on the day that I sold my two bonds.

I hit the bid price which was 99.573.

Bought at 96.277
Stocks, Bonds & Politics: Item # 1.C.
YTM Then at 3.592%
Current Yield at 3.17%

4. Small Cap Biotech Lottery Ticket Basket Strategy:

A. Sold 30 AKBA at $15.27:

Item # 3.A. Bought at $9.17 on 3/30/17

Profit Snapshot: +$181.03

Bret Jensen published an article about this company last July: Revisiting Akebia Therapeutics - Akebia Therapeutics, Inc.-Seeking Alpha

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.

Saturday, August 19, 2017

Observations and Sample of Recent Trades: DEA, ZURVY

Market Commentary:

The slight decline in the stock market last Thursday and Friday and flight to high quality bonds was IMO an anxiety attack about Trump. Some investors may be starting to question whether Donald's administration will be a positive for the U.S. economy. He needs to quit campaigning and pandering to his base of White Nationalists and reactionaries and start to focus on being President. I do not expect that to happen.

The problem remains Trump, not his advisors or staff as noted by Senator Corker (R-TN). Dickerson: Corker's critique of Trump is "extraordinary" - CBS News I voted for Corker. 

Bannon told the Weekly Standard that the "Trump presidency that we fought for, and won, is over." This indicates to me that Bannon will soon start attacking those Trump advisors which Bannon views as hostile to his White Nationalist ideology, including Gary Cohn, Kushner, and the Treasury Secretary. He views those more traditional republicans as the enemy. It is possible that his efforts to undermine those advisors will contribute to the ongoing dysfunction of Trump's Administration. 

Breakdown between Dow, S&P 500 and GE sends an ominous stock-market signal - MarketWatch

Here’s the shocking truth about the Russell 2000’s P/E ratio - MarketWatch

7 signs the stock market is ready to run smack into a wall - MarketWatch

I suspect that the Stock Jock's have not lost faith yet in the GOP's ability to deliver on what they perceive as important to the economy, which is fewer regulations and tax cuts for rich people and corporations. The S & P 500 only fell .6% last week which is nothing in the scheme of things. 

Possibly the poor earnings reported by many box retailers, with Foot Locker being just the latest example, is a warning sign of deeper and emerging problems with consumer spending rather than just a shift to online purchases. 

FL $34.38 -$13.32 -27.92% : Foot Locker, Inc. 

Some of the perma bulls point to an improvement in retail sales last month, as reported by the Commerce Department, while failing to note the many issues that I highlighted in my last blog, including Amazon's Prime Day occurring last month and the fact that non-seasonally adjusted sales are falling. Just look at the non-seasonally adjusted sales for May, June and July.  

Eventually, the Commerce Department will have to have actual sales and seasonally adjusted sales add up to the same number.  


The First Civil War in America:

The Civil War between the Confederate States of America and the United States was not the first Civil War in the U.S.

The first one, which involved substantial loss of life and property, was between Loyalists/Tories and the American revolutionaries who fought for independence from England.

The Tories included business people, Anglican parishioners and clergy, Americans whose jobs were directly or indirectly tied to the British Empire and others who believed the revolutionaries to be a mob intent on disrupting stability. Call them conservatives. Their common tie was to the existing order. Loyalist (American Revolution) - Wiki

There has always been issues that profoundly dividend American citizens. Those issues change over time. but the battle lines are always present.

A newly published book titled Scars of Independence: America's Violent Birth explores the widespread violence and mayhem among Americans during the Revolutionary War. While the author might add some details here and there, the violent birth angle was already well understood by those who had studied the conflict. There was considerable peer pressure to join one or the other side. Neutrality was not an option.

I mentioned in my prior post that my lineal ancestors found for the Confederacy in the Second Civil War.

In the First Civil War, they fought against the British, Tories and their allies the Cherokee Indian Nation.

My grandfather on my mother's side (around 9 generations removed) fought at the Battle of Eutaw Springs as an officer under the command of Major General Nathanael Greene, an important Revolutionary War general. My lineal ancestor had already lost an arm fighting in a previous battle involving the Cherokee. In that Battle of Eutaw Springs, the British were supported by two Loyalist regiments.

In June 1832, Congress passed a law granting pensions to those who served in the Revolutionary Army. The applicants had to appear before a Court and provide sworn and detailed testimony about their activities during that war, usually at a courthouse. Pensions enacted by Congress for American Revolutionary War Veterans

Reviewing those accounts provides a window into what was actually happening that would normally not be found in other historical accounts.

I will link here three of those applications that mention my great grandfather and another distant lineal relative and further discuss the their battles involving Tories and Indians allied with the British:

It is understandable that the Cherokee Indians would ally themselves with England since their land was being taken by the western movement of white settlers. Cherokee Indians - Part 4: Revolutionary War, Cherokee defeat and additional land cessions | NCpedia


Trump Stands by His Comments That "Very Fine People" Participated in the Tiki Night March:

Trump claimed multiple times in his Tuesday news conference that he wants the facts. He claimed to have watched videos of the the Tiki lit night March where the participants repeatedly chanted the racist slogans "Blood and Soil" and "Jews Will Not Replace Us".

Trump concluded that there were very fine people in that night, Tiki lit march and castigated the press for failing to report that "fact" observed by the President of the U.S. Since the media did not report as true Trump's version of facts, that provided in his warped mind another example of the dishonest Fake News Media. Transcript of Trump's contentious Aug. 15 press conference - ABC News

These kind of comments from the President of the U.S. are deeply troubling on many levels except for the White Nationalists and reactionaries that form Trump's base. Anyone to the left of Alex Jones, Sean Hannity, Ann Coulter and Bannon, all of whom embody the antithesis of conservative values, are liberals for those Trump supporters 

One of those levels is that the President arrives at decisions and expresses an opinion based on information that is demonstrably false. He has no interest in facts but only his reality creations. While that is fine for a reality TV star, it is extraordinarily dangerous for a U.S. President. Ideology is not relevant in making that conclusion.  

Elle Reeve, a young woman employed by Vice News, may have the best footage of that march as well as interviews with Trump's "very decent people" who participated in it.

Watch VICE News Tonight’s full episode “Charlottesville: Race and Terror” – VICE News

'Vice News Tonight' has breakout moment with Charlottesville coverage - Aug. 16, 2017

Vice News' Elle Reeve Confirms There Were No 'Very Fine People' Among White Supremacists

I respect her unwillingness to be cowed by the White Nationalists.

Trump may have missed this video as well as where several of his supporters surrounded a black guy, kicked and beat him. Really stupid and violent people. Their attack occurred in a bank's drive-in lanes and consequently was captured by the bank's video. All of the perpetrators can be identified and no doubt will claim self defense when and if arrested by the police.  Interview: 20-Year-Old Deandre Harris Speaks Out About Being Assaulted by White Supremacists in Charlottesville, Va.White supremacists continue to target badly beaten DeAndre Harris - NY Daily NewsGeorgia man linked to beating of DeAndre Harris in Charlottesville (attacker claims he is not a racist and only acted in self defense)

Pence 'stands with' Trump on Charlottesville remarks | PBS NewsHour

A Short History Of Torches And Intimidation: Forbes (the Nazis were fond of torchlit night time marches.

The following tweets, published on 8/17/17, show a direct appeal to White Nationalists who view view monuments to Confederate generals as embodying American values:

Trump is directly appealing to the White Nationalists in those tweets. The tweets reproduced above and below simply need to stop. No positive results can be reasonably expected to occur from such divisive tweets. 

There is no change in history or White Nationalist culture by taking those monuments down or relocating them.  Anyone making that argument is simply appealing to the weak minded by making a totally bogus claim. History is not changed by removing or relocating monuments to White Supremacy. 

Donald also launched a tirade against two GOP Senators, Jeff Flake (AZ) and Lindsey Graham (SC) on the same day: 

Top Trump donor ponies up to take out Flake - POLITICO (the donor is Robert Mercer, a right wing reactionary); The billionaire GOP patron behind Trump's social media bot army - NY Daily News

Trump Lawyer Forwards Email Echoing Secessionist Rhetoric - The New York Times

In Gallup's Daily Opinion poll, Trump's approval rating rose to 36% on Tuesday 8/15/17 and then to 37% on 8/16 and 38% on 8/17 from 34% on 8/13/17: Gallup Daily: Trump Job Approval | Gallup Disapproval has gone from 61% to 57%. Apparently, his Charlottesville comments have improved his standing among some Americans as one would reasonably expect. 


Carl Icahn and Trump:

Carl Icahn’s Failed Raid on Washington | The New Yorker


1. Intermediate Term Bond/CD Ladder Basket Strategy

A. Bought 1 Capital One Bank USA 1.9% CD (semi-annual interest payments) Maturing on 8/17/2020 (3 year CD):

This bank has a five star rating from Bankrate: CAPITAL ONE BANK (USA), NATIONAL ASSOCIATION Review 

B. Bought 1 Capital One Bank 2.35% CD (semi-annual interest payments) Maturing on 8/16/22:

I am only nibbling in CDs maturing between 1/1/20 and 12/31/22 and may continue to do so as long as inflation continues to trend down. 

One of the more powerful deflationary forces today is price transparency. 

It was not long ago that it would take considerable effort to compare prices among retailers. Now, the consumer can do that through an internet connection and several websites provide price comparisons. The end result is that too many customers now gravitate toward the lowest price offering and sales are lost unless competitors restrain price increases or lower prices.

Many consumers probably believe that Amazon's prices are lowest. I have found that many items can be bought more cheaply at a box retailer like Kroger. I have also found that WMT's online store, which has free shipping on orders over $35 with no membership fee, frequently has lower prices on items that I normally buy compared to Amazon.  Eventually, that price discrepancy will cause Amazon to lower prices to more competitive levels. 

C. Bought 2 VIACOM 3.45% Senior Unsecured Notes Maturing on 10/4/26:

Issuer:  Viacom Inc. Cl A (VIA)
VIA Analyst Estimates

FINRA Page: Bond  Detail (prospectus linked)

CREDIT RATINGS (barely investment grade):
Moody's at Baa3
Moody's downgrades Viacom's long-term debt ratings to Baa3 from Baa2 and its commercial paper rating to Prime-3 from Prime-2; Outlook StableMoody's says Viacom's (Baa3) sale of its approximately 50% stake in EPIX is credit positive
S & P at BBB-

Yield at Total Cost (95.890) = 3.991% ($2 per bond commission at Vanguard; placed in taxable account rather than Roth IRA due to credit risk issues)
Current Yield at 3.39%

Viacom has a boatload of debt. See Note 4 at page 8: 10-Q for the Q/E 6/30/17
Earnings Press Release for the Q/E 6/30/17 (fiscal third quarter)

2. Short Term Bond/CD Ladder Basket Strategy:

I am increasing my allocation to short term bonds and CDs, using a ladder strategy where there will be a constant flow of redemption proceeds over the next three years that hopefully can be invested at some point in risk assets when the risk-reward balance tilts toward reward which is not the case now IMO.

A. Bought 2 Goldman Sachs Bank 1.5% CDs Maturing on 8/16/18:

B. Bought 3 Lake City Bank 1.5% CDs (monthly interest) Maturing on 9/2/18:

Bankrate has a 4 star rating: LAKE CITY BANK Review.

Lake City Bank is the operating bank owned by the bank holding company Lakeland Financial based in Warsaw, Indiana:

Lakeland Financial Reports Record Performance (LFKN)
Efficiency Ratio: 45.52%
Charge Off Ratio: -.03%
Coverage Ratio 450.75%
NPL Ratio .28%

C. Bought 3 Citizens Bank NA 1.15% CDs Maturing on 10/16/17:

Bankrate has a 4 star rating: CITIZENS BANK, NATIONAL ASSOCIATION

This bank is an operating subsidiary of the bank holding company Citizens Financial Group Inc. (CFG)

CFG Analyst Estimates

Citizens Financial Group, Inc. Reports Second Quarter Net Income of $318 Million and Diluted EPS of $0.63

D. Bought 3 Provident Bank 1.35% CDs (monthly interest) Maturing on 5/25/18:

Holding Company: Provident Financial Services Inc. (PFS)
PFS Analyst Estimates
Provident Financial Services, Inc. Announces Second Quarter Earnings and Declares Increased Quarterly Cash Dividend

E. Bought 3 Pinnacle Bank CDs 1.3% CDs (monthly interest) Maturing on 2/28/18:

Holding Company: Pinnacle Financial Partners Inc. (PNFP) (headquartered in Nashville, TN.)
PNFP Analyst Estimates
PNFP Reports Diluted Earnings Per Share of $0.80 for 2Q 2017

I have a .75% treasury bill maturing on 2/28/18.

$14K Inflow into Short Term Bond/CD Ladder Basket

3. Stocks, Bonds & Politics: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:

A. Bought 50 DEA at $19.64 (Used Commission Free Trade):

Quote: Easterly Government Properties Inc. (DEA)
Website  Easterly Government Properties, Inc.

Substantially all of DEA's revenue comes from leasing commercial properties to the U.S. Government through the General Services Administration.

Last Earnings Report:

Easterly Government Properties Reports Second Quarter 2017 Results

Cash available for distribution ("CAD") increased to $11.357M from $10.399M in the 2016 second quarter.

FFO was reported at $.31 per share and adjusted FFO at $.29. I view the CAD number to be more important than the other two cash flow numbers.

The current quarterly dividend is $.25 per share with the next ex dividend date in September: Easterly Government Properties Announces Quarterly Dividend

DEA does not provided a CAD per share number in its press release.

Using the weighted average diluted share number of 39.8453M and the CAD number of $11.357M, I calculated the CAD per share number to be $.285 per share which is sufficient to cover the $.25 per share quarterly dividend.

Brad Thomas published a detailed article about DEA last June, which provides more detail than I will provide here: This REIT Is Actually Printing Dividends - Easterly Government Properties (NYSE:DEA) | Seeking Alpha

I have owned this REIT in the past, but do not recall in which account or the dates of purchase or disposition. I have not discussed this stock in my blogs.

4. Continued to Pare Stock Allocation:

A. Sold 100 ZURVY at $30.47 (used commission free trade):

Profit Snapshot: +$1,126.03

Quote: Zurich Insurance Group AG ADR (ZURVY)

Like many European companies Zurich pays an annual dividend. I received in cash annual dividends starting in 2012 through this year.

My last dividend was received in May 2017:

The fee of $1.50 is paid to the ADR custodian once a year. The tax rate was 15%. I generally recover foreign dividend taxes as credits to my federal income tax liability. The rules are complex.

My plan will be to consider buying back shares when and if the price falls below $27 between now and the 2018 ex dividend date.

The ADR has outperformed the ordinary shares over the past few weeks as the Swiss Franc gained in value against the USD:

The ordinary shares are traded in Zurich and are priced in Swiss Francs (CHF).

CHF / USD Currency Chart. Swiss Franc to US Dollar Rates

My largest taxable account gained in value last Thursday and Friday. 

I am further along in realigning the positions in that account to preserve capital. Stock positions are very limited in that account now and investment grade corporate bonds, Tennessee Municipal bonds, exchange traded bonds and preferred stocks, short term U.S. treasuries and CDs, dominate. I have several stocks that went up in value. 

My brokers use a third party to establish value for bonds, rather than market prices, and my accounts consequently understate the value of bonds since the third party assigned values are almost invariably below the bid price for those bonds. 

Interest rates declined slightly last Thursday so those securities mostly went up in value or remained unchanged (e.g. CDs). 

The most significant stock allocation now is in Vanguard and T. Rowe Price mutual funds (close to $300K) and a lesser amount in individual stocks. 

I did come close last Friday morning buying 30 shares of Exxon when the price slipped to a 52 week low at $76.05, but decided to wait for a better entry point or just forget about it in the event the price does not sink further.  

XOM $76.64 0.38 0.50% : Exxon Mobil Corporation 

DisclaimerI 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.