Wednesday, April 17, 2019

Observations and Sample of Recent Trades: FIE:CA, NYMTO, PRHSX, PSAPRE, TPVG, VGHCX

Economy:

"Industrial production edged down 0.1 percent in March after edging up 0.1 percent in February; for the first quarter as a whole. . . Capacity utilization for the industrial sector decreased 0.2 percentage point in March to 78.8 percent, a rate that is 1.0 percentage point below its long-run (1972–2018) average." The Fed - Industrial Production and Capacity Utilization - G.17


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Warren Buffett and Bill Gates say this is the best business book everBusiness Adventures: Twelve Classic Tales from the World of Wall Street eBook: John Brooks: Kindle Store

The preface to that book contains the perspicac
ious observations about Stock Jocks made by Joseph Penso de la Vega in a book called "Confusion of Confusions", originally published in 1688. 


Vega was a  participant in the Amsterdam stock exchange during the 17th century. Amazon.com: The World’s First Stock Exchange (Columbia Business School Publishing) 

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Trump:

B.S. flows from Demagogue Don in seemingly boundless quantities. 




Donald Trump: The stock market should be as much as 10,000 points higher - MarketWatch


Trump Wrong About Tax Law - FactCheck.org (When asked whether there is a federal law that requires him to give Congress his tax returns, Donald Trump responded, “There’s no law whatsoever.” As usual, Donald appeared confident in the truth of his representation when making a demonstrably false statement. 



26 U.S. Code § 6103 (f)

Fox claimed that Trump had a 55% approval rating in a recent poll, asserting that his approval rating was soaring. The poll actually had a 55% disapproval rating which is consistent with most other polls. Fox Business Touts Wrong Donald Trump Approval Rating: 'This President Has Things Going His Way' 

Trump's disapproval rating is stunning considering the good economic numbers. If unemployment is spiking due to a recession before the 2020 election, the republicans are toast. 


On the other hand, Trump could win reelection with job and GDP growth to election day, plus a generally recognized favorable trade deal with China in his pocket. 


The most recent monthly Gallup Poll did show Donald's disapproval ranking decline from 57% to 51%. Trump Job Approval (as of 4/9/19)


Trump Fed pick Stephen Moore said he's not a 'big believer in democracy'- CNN

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While I have numerous policy disagreement with representative Ilhan Omar (D-Minn), Donald and other Fake Conservatives need to be condemned for inciting violence against her. 


Omar is a convenient political target for "conservative" republicans, since she is a person of color and a Muslim who wears a hijab. For many Americans, that is three strikes against her. 


Making matters worse for her, she is prone to making some less than articulate statements and insensitive remarks. 


One of the inarticulate remarks, which is now subject to virulent attacks by the Trumpsters, involves a reference to the 9/11 attack. Trump's 9/11 post on Omar draws condemnation from DemocratsThe Islamophobic Republican Backlash Against Ilhan Omar


In context, she was trying to make the point that American Muslims should not be blamed for what a few Muslims did on 9/11. 


But making those points do not inflame the Trumpsters like the one who threatened to put a bullet in her skull. 


New York man charged with threatening to kill Rep. Ilhan Omar - The Washington Post (Patrick W. Carlineo Jr. of Addison, N.Y. who made the following recorded statement to an Omar staff member: “Do you work for the Muslim Brotherhood? Why are you working for her, she’s a [expletive] terrorist. I’ll put a bullet in her [expletive] skull.” That call was made on 3/29 and the "conservatives" are now trying to amp up the volume for their crazier members.  


Rep. Ilhan Omar says she’s faced death threats since Trump retweeted inflammatory video - MarketWatch


After watching Nancy Pelosi's interview on 60 minutes, Donald turned his vile on both Pelosi and Omar: 



In Attacking Ilhan Omar, Trump Revives His Familiar Refrain Against Muslims - The New York Times

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Citing no authority other than his own divinity, Our Dear Leader claimed that he had the absolute right to deposit apprehended illegal immigrants in sanctuary cities. 



Donald believes that he has the absolute right to do whatever he pleases. Laws do not matter. Facts do not matter. Authoritarian leaders that Trump admires, which is a very long list, do not have to deal with "so called" judges placing checks on them.  

Ignoring the legal issues for now, I would just request the non-Trumpsters to think for more than one second about Donald's plan to capture illegal immigrants, transport them to a sanctuary city, and then leave them there. 


Okay, what happens next? 

The illegal immigrant might stay or just leave. 

Then maybe ICE will apprehend them again, transporting them back again to the sanctuary city, or maybe they will run loose and have lots of babies that become U.S. citizens.   

The rants and ravings of a demagogue like Trump are successful only on those who are uninformed and who not very bright. I would not hold my breath waiting for a change in either condition. 



I am sure France appreciated the advice Donald gave them about how to put out the fire engulfing the Cathedral of Notre Dame: 




Donald is after all an expert on everything and he acquired that expertise, not by study and certainly not by reading, but through some kind osmosis process through his gut where the repository of all of Donald's knowledge can be found stewing in the stomach acid juices. 

Donald Trump knows how to put out the Notre Dame fire (and fix Boeing too!) - CNN 


If only Britain had followed his advice and sued the EU to gain "leverage" rather than attempt to negotiate an exit plan, the U.K. would be rid of its Brexit problems. 


Donald's legal theory was that the EU is liable somehow for England's decision to leave the European Union, a case that would be heard in the European Court of Justice where home cooking would be the only recipe on the menu. 


Donald's legal strategy has always been to sue as a means to gain "leverage" and to force others to settle his frequently frivolous claims to avoid potentially ruinous litigation costs. That is what he means by leverage. 


Donald J. Trump Is A Libel Bully But Also A Libel Loser

USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills  



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1. Health Care Mutual Funds:


Over the past couple of weeks or so, the health care stock sector has been weak based IMO on concerns that the Democrats will have the votes to implement Medicare for all and price controls for drugs. I do not view that fear as justified for the foreseeable future. No republican politician would vote in favor of those Democrat plans and many Democrats would vote against them as well.   


A. Eliminated VGHCX-Sold 68+ at $195.97:


Morningstar Page: Vanguard Health Care Fund (VGHCX)


Closing Price Day of Trade: VGHCX $195.97 -$0.45 -0.23% (VHT was unchanged)


Closing Price Yesterday: VGHCX $188.27 -$2.94 -1.54% 


Since I jettisoned this position, health care stocks have been under pressure, and have underperformed SPX, due to fears about the democrats' health plans including Medicare for All. 


Profit Snapshot: +$1,731.27




I had previously pared my position. Item # 3.B. Sold 47+ VGHCX at $205.2 (2/13/17) (profit snapshot $426.53)

A majority of my total return came from dividends which made this fund tax inefficient compared to the Vanguard Health Care ETF (VHT) that had a better overall before tax performance. 

Recent VGHCX Dividend History: 


I started to take the dividends in cash after the 2016 year end distribution. 

This position was opened in 2011 when I exchanged out of the Vanguard Inflation-Protected Securities Fund into this fund. Item # 3 Exchanged VIPSX for VGHCX (7/6/2011 Post).

I will gradually redeploy the $13,510 in proceeds into the healthcare ETFs FHLC and VHT which I can buy commission free and into PRHSX discussed below.   

B. Added $1K to PRHSX at $77.88 and $500 at $75.9:


Morningstar Page: T. Rowe Price Health Sciences Fund (PRHSX) Fund Performance and Returns


Closing Price Yesterday: PRHSX $74.22 -$1.72 -2.26% 


Rationale: Jean Hynes, the manager for VGHCX that replaced a retiring manager over 5 years ago, has flopped.


Maybe she will find her sea legs down the road, but five years of underperformance compared to Vanguard's health care index ETF VHT is more than enough time to conclude that her active management is not going to cut it. Active management needs to add to index returns, not subtract from it as she has done. Meet the best investor-Ed Owens-you’ve never heard of - MarketWatch


VGHCX was a great fund to own under its now retired manager Ed Owen.


On the other hand, the manager for the T.Rowe Price Health Science fund has been smoking particularly in comparison to Ms. Hynes.


1 Year through 4/2/19


VGHCX  = +11.59%

PRHSX   = +19.32%
VHT        = +17.22%

Annual Average Total Returns through 4/2/19


3 Years:

VGHCX =  +  8.86%
PRHSX  =  +14.73%
VHT       =  +13.01%

5 Years

VGHCX =  +9.47%
PRHSX  = +13.35%
VHT       = +11.33%

10 Years:

VGHCX  = +15.86%
PRHSX   = +21.51%
VHT       =  +16.96%

2. Short Term Bond/CD Ladder Basket Strategy:

I am continuing to pare my intermediate term bond allocation and moving proceeds into shorter term bonds and CDs. 

Spotting early stage trend reversals in interest rates is at best problematic. The ten year treasury has been rising in yield after bottoming near 2.39% (3/28/19), closing yesterday at 2.6%. 2019 Daily Treasury Yield Curve Rates

The ten year yield peaked at 3.24% (11/8/18) before a trend reversal took it down to that 2.39%. 2018 Daily Treasury Yield Curve Rates

The previous spike in yield started after the 10 year yield closed at 2.05% (9/17/17). 2017 Daily Treasury Yield Curve Rates

$11K in adds

A. Bought 2 Broadcom 2.375% SU Maturing on 1/15/20:

I now own 4 bonds. I do not own any other Broadcom bonds. The prior 2 lots were bought last September Item # 2.E. Bought 2  Broadcom 2.375% SU at a total cost of 98.922  (10/14/18 Post) 

Finra Page: Bond Detail (prospectus linked)


Credit Ratings:



Bought at a Total Cost of 99.7
YTM at TC Then at 2.757%
Current Yield at TC = 2.3821%

B. Bought 2 Live Oak Banking 2.45% CDs (monthly interest payments) Maturing on 5/8/20:




This CD was more attractive than a Treasury maturing in May 2020.


C. Bought 2 Wells Fargo 2.45% CDs (monthly interest payments) Maturing on 5/11/20 (13 month CDs):



I have a 2.75% WFC two year CD maturing on the same day. Maybe short term rates will go back up by then.

D. Bought 3 Treasury 1.5% Coupon Maturing on 11/30/19:

YTM = 2.4%


I now own 8 bonds.

E. Bought 2 Treasury Bills Maturing on 6/4/19-A Roth IRA Account:

2.429%IR



I would not make this purchase in my Vanguard Roth IRA account since idle cash earns more in the Vanguard Prime Money Market fund.


Auction Results: 56 day bill





2. Added 100 FIE:CA at C$6.92 (C$1 IB Commission)

Dividend: Monthly at C$.04 per share


Last Ex Dividend Date: 3/25/19


Current Position: 400 shares


Dividend Yield at C$6.92 = 6.94%


I have nothing to add to those previous discussions. 

3. Intermediate Term Bond/CD Ladder Basket Strategy

A. Sold 1 ERP Operating Partnership 3% SU Maturing on 4/15/23


Oddly, my 1 bond was the only trade on 3/28.  It almost makes me fell like a big hitter, watch out, Southgent is about to move the market price with a 1 bond order. 

Profit Snapshot: +$12.93



I discussed buying that bond in this post. Item # 1.B Note that I bought 1 in a Roth IRA account at a 99.551 TC and 1 bond in the Fidelity taxable account at a 99.478 TC. I sold the bond held in the taxable account. I previously sold the bond in a Roth IRA account:  Item # 5.C. Sold 1 ERP 3% SU Maturing in 2023 at 102-Item # 1B. Bought at a TC of 99.591 (4/14/17 Post)  
    
FINRA Page: Bond Detail
Issuer: Operating entity for the REIT Equity Residential (EQR) who does not guarantee the note 

Sold at 100.871
YTM at 100.871 = 2.747
Current Yield at 100.871 = 2.9741%
Proceeds at 100.771

When I see a 2.75% YTM on a A3 rated bond maturing in about 4 years, I am not going to be a buyer which then raises the natural question whether I want to be a seller. I sold and will simply wait for another interest rate spike before considering a repurchase closer to the maturity date and preferably at a lower price than my last entry point.

B. Sold 2 Omega Healthcare 4.5% SU Maturing on 1/15/2025:


Profit Snapshot: +$6.93




Bond History This Account Prior to Sell:




FINRA Page: Bond Detail




Sold at 100.748

YTM at 100.748 = 4.346%
Current Yield at 100.748: 4.4666%
Proceeds at 100.558  after $4 commission (YTM at 4.387%)

This bond is priced by the Bond Ghouls more like a Ba1/BB+ rated bond maturing in 2025.


YTM's of Ba1/BB+ Bonds Maturing in 2025 as of 4/1/19


Lennar 4.75% (Ba1/BB+) = YTM 4.24%

Ball 5.25% (Ba1/BB+) = YTM  4.26%
Ally Financial 4.625% (BB+) = YTM 4.19%
AES 5.5% (Ba1/BB+) = YTM 3.896%

I would go with the rating given by the Bond Ghouls for Omega which would be the high end junk ratings of Ba1/BB+, not the Baa3/BBB- investment grade ratings assigned by Moody's and S & P respectively. The Omega YTM set out above is actually moving toward Ba2/BB in its pricing.


I view nursing home REITs to be the riskiest REIT sector for a variety of reasons, including (1) potential changes in Medicare/Medicaid reimbursements (2) the solvency and leverage of many of their tenants which results in frequent bankruptcies and (3) the complexities and risks of operating nursing homes in general (e.g. litigation, operating expenses). 


I am not likely to buy this bond back.


4. Eliminations:


A. Sold 50 PSAPRE at $24.15-Used Commission Free Trade:






Quote: Public Storage 4.9% Cumulative Preferred Series E Stock (PSA.PE)

Issuer: Public Storage (PSA)

Profit Snapshot: +$178.48




Item # 1.A. Bought 50 PSAPRE at $20.58-Used Commission Free Trade (12/29/18 Post)


That is about as good as it gets now for a 50 share REIT preferred lot.


Security Description:


Prospectus


Par Value: $25

Credit Ratings: A3, BBB+
Capital Structure: Equity Preferred Stock, senior only to common shares
Dividends: Quarterly, non-qualified and cumulative
Optional Issuer Call: On or after 10/14/21
Stopper Clause: Yes, see page 14 of the prospectus
Last Ex Dividend: 3/11/2019  (before sell)

CategoriesAdvantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks and  part of the Equity REIT Common and Preferred Stock Basket Strategy


Prior Round-TripItem # 4.A. Sold 50 PSAPRE at $22.37 (3/10/17 Post)(profit snapshot = $51.04)

B. Sold 30 NYMTO at $24.85-Used Commission Free Trade:





Quote: New York Mortgage Trust Inc. 7.875% Cumulative Preferred Series C.  Stock (NYMTO)


Profit Snapshot: $44.39




Item # 1.A. Bought 30 NYMTO at $23.47-Used Commission Free Trade (12/9/18 Post)


Issuer: New York Mortgage Trust Inc. (a MREIT)

SEC Filings
2018 Annual Report (risk summary starts at page 12 and ends at page 35)
Item # 2.A. Risks of MREIT Preferred Stocks Discussed

Security Description:



Par Value: $25
Issuer Optional Call: On or after 4/22/2020  
Dividends: Paid Quarterly/Non-qualified/Cumulative 
Stopper Clause: Yes  
Last Ex Dividend Date: 3/19/19 (before sell)

3 Year Chart:


Looking at that chart, a possible reentry point would be a waterfall type move that results in a price below $23, assuming no material change in the credit risk of the issuer.

I still own 30 shares of NYMTN bought at $22.9 which is a fixed-to-floating rate equity preferred stock from the same issuer: Item # 1.B.New York Mortgage Trust Inc. Series D Preferred Stock (NYMTN)


C. Pared TPVG-Eliminated Position in Vanguard Roth IRA

I discussed the reasons for paring this position in my last post. Item # 3.B.(4/14/19 Post) 

Profit Snapshot: $88.87 (excludes $4.49 from previous sell)



TPVG Realized Gains to Date: $406.71

TPVG Stock Price 

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.