Wednesday, January 18, 2017

Observations, Ruminations and Sample Trades (SNY, OMER, PWFPRT, THO:CA, G:CA )-JANUARY 18, 2016

Over the weekend, the Orange King claimed that the USD was too strong because China was keeping the Yuan too weak, adding that our "companies can’t compete with them now because our currency is too strong, and it’s killing us.” U.S. stocks slump as Trump’s dollar comment rattles investors - MarketWatch 

Trump has claimed repeatedly that China was manipulating it currency lower, an assertion that demonstrates a profound level of ignorance and an unwillingness to change an opinion based on accurate information rather than his own reality creations.  

China is spending billions in reserves to keep its overvalued currency from declining faster-the exact opposite of keeping the Yuan too weak. When China allowed the Yuan to decline at a fast rate during the 2015 summer, the world's stock markets went into a tailspin. 

One problem leading to the Yuan's weakness is capital outflows that China has been attempting to curb. China’s Foreign Reserves Drop Most in 10 Months as Yuan Slumps - Bloomberg

Chinese foreign reserves slide as yuan falls - Business Insider ("The government is also using up foreign reserves to stop the yuan from falling faster than it is.") 

How We Know China's Central Bankers Are Worried About the ("Chinese officials were working hard to support the yuan from crashing even further and inciting panic about the country's financial position.")

"Currency Wars Are the Big Threat to Global Trade" - Barron's

"Sorry, Trump, but Chinese Currency Is Actually Way Overvalued" - Barron's

"Trump Is Still Wrong About the Yuan" - Barron's

"Currency Reserves Drop As China Manipulates Yuan Up In Value": Forbes

China burns through nearly $70 billion trying to prop up its currency - Dec. 7, 2016: CNBC


Trump: 'I don’t like tweeting’

The only reason why Trump tweets is to provide truth to those who pay attention to the false propaganda and fake news spewed from the mainstream media particularly from the NYT and the Washington Post. For example, there are still a few souls who do not recognize that  the "concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive." Yes, Donald Trump did call climate change a Chinese hoax It is shocking, unbelievable really and truly, that the mainstream media has not yet discovered that self-evident truth.  

I See The Light Now

or Hank Williams is almost on point: Hank Williams- I saw The Light - YouTube

or maybe the Infamous Stringdusters' Version of Bob Dylan's 1962 song Don't Think Twice It's Alright - YouTube


I had a scheduled rollover yesterday of a 4 week treasury bill that was auctioned at a .52% rate: Results.pdf

1. Small Cap Biotech Lottery Ticket Basket Strategy

Yesterday was another bad day for pharmaceutical stocks as the Orange King, not to be confused with the Sun King despite many  similarities, expressed his oft repeated opinion that Medicare and Medicaid need to negotiate drug prices directly with the drug companies, adding that this approach was part of his "insurance for everybody" (details to be supplied at a later time) Trump vows ‘insurance for everybody’ in Obamacare replacement plan - The Washington PostTrump’s Strategy for Cutting Drug Prices Is DOA - Bloomberg View

So, I looked around for another small cap biotech lottery ticket to buy.

It may be possible for Trump to brow beat and bully enough GOP representatives too support a federal government price control plan relying on mostly Democrats to pass the legislation. I will believe that when I see it happen.

Bought 30 OMER at $9.03: 

OMER Stock Quote - Omeros Corp.  (OMER) 

If I had to guess, OMER is more likely to produce a winner than Celldex (CLDX) which is the last small cap biotech that I discussed here. 

I will admit to ignorance about the science.  

Importantly, OMER does have an approved product, OMIDRIA, that is currently being sold.

11/10/16 Motley Fool Article: Why Omeros Corporation Is Soaring 17.7% Today

The company does have several current shots on goal: 

Omeros Pipeline 

The furthest along is OMS721 for atypical hemolytic uremic syndrome. I would have to google those words to have a clue.  

Atypical Hemolytic Uremic Syndrome - NORD (National Organization for Rare Disorders)

Symptoms and causes - IgA nephropathy (Berger's disease) - Mayo Clinic

I do not bust any brain cells researching small cap biotech companies, recognizing that any opinion formed even after extensive research would have either a zero value or more likely a negative one. I am basically throwing a lot of names against the wall and hopefully one or two will become 10+ baggers.

I do need to generate at least a lay person's interest in the science before buying and some kind of positive "gut" reaction to the possibilities. To reach that point, I need to spend about an hour reading recent press releases, the last earnings press release, and discussions about the pipeline. I will also do a cursory review the last Annual Report and will quickly look at the history of stock offerings. 

Omeros - 2016 Press Releases

Omeros Corporation Reports Third Quarter 2016 Financial Results ("company reported in October 2016 positive data (p = 0.017) from its Phase 2 clinical trial of OMS721 for the treatment of kidney disorders, including IgA nephropathy and membranous nephropathy, none of which currently have an approved treatment and all of which frequently lead to end-stage renal disease and dialysis. In this trial, OMS721 significantly improved key endpoints of renal function and patients achieved partial remission with 12 weeks of dosing. ... reported in August 2016 that it received scientific advice from the European Medicines Agency (EMA) directed to its OMS721 Phase 3 program for the treatment of aHUS. Based on this EMA advice, the company plans to run the same, single-arm Phase 3 clinical trial to support OMS721 marketing approval applications in both the U.S. and in the EU for the treatment of aHUS.")

Q3 2016 Results - Earnings Call Transcript | Seeking Alpha

2. Healthcare Basket Strategy: Sold 50 SNY 

SNY Profit Snapshot: Barely Worth the Effort

2017 SNY 50 Shares +$130.36
I discussed this purchase here: 1. Bought Back 50 SNY at $38.86Update For Healthcare Basket Strategy As Of 2/25/16 - South Gent | Seeking Alpha

For this lot, I did receive the 2016 annual dividend payment. Fidelity does take the necessary steps to secure the applicable 15% dividend rate mandated under Article 10 of the U.S-France tax treaty.

The $2.25 fee is paid to the ADR custodian and is withheld before the dividend payment arrives at my broker.

Adding the one annual dividend adjusted for the ADR fee to my $130.36 profit, the total dollar return is $211.27 or 10.85% with about an 11 month holding period.

Historically, that is about as good as I have been able to do with this stock, so I harvested my profit and will look for an opportunity to buy back a 50 share lot prior to the next annual ex dividend date.

I have nothing new to add to my prior SNY discussions. 

3.  Intermediate Term Bond Basket Ladder Strategy

Bought 2 AT & T 3% Senior Unsecured Bonds Maturing on 2/15/22

FINRA Page: Bond Detail (bond prospectus linked at Finra Page)

Moody's RatingBaa1 (08/29/2016)
Standard & Poor's RatingBBB+ (02/02/2015)
Fitch RatingA- (10/24/2016)

YTM at Total Cost = 3.042% (bought at 99.701; 99.801 with $2 commission)

AT & T SEC Filings 

2016 Third Quarter Earnings Release 

4.  SOLD 100 PWR.PR.T AT C$21.41

QUOTE: Power Financial Corp. 4.2% Pfd. Series T Stock (PWF.PR.T:TOR)

PWFPRT has a 4.25% coupon until it resets 1/31/19 at a 2.37% spread to the five year Canadian bond for a five year period. Par value is C$25. The break point for the five year bond would be 1.88% on the reset date. If the five year bond is higher than 1.88% on the reset date, then the reset coupon will exceed the current fixed rate one.   

This is an investment grade preferred stock. Power Financial Corporation | Credit Ratings

Profit Snapshot: +C$190.5

I bought this 100 share lot in two fifty lots: at C$19.47 on 10/03/16 and at $C19.52 on 12/8/16. 

I discussed selling a 50 share lot at C$20.97 here.

This security was ex dividend for its quarterly distribution on 1/7/16.

I am moving some CADs into purchases of gold mining stocks. I discussed my reasons in the last post. Item # 1

I have been taking profits on my Canadian reset equity preferred positions. 

I classify the Canadian reset preferred stocks as part of the equity preferred floating rate securities, and trade snapshots can be found in that topic's Gateway Post. Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities

5. GOLD: I have not bought a gold mining stock in years and decided earlier this week to start nibbling on a few of them, just in case my "gut" feeling about gold prices this year proves prescient. As I noted in my last post, there is at least a meaningful possibility that Trump will be a major force in world economic instability. 

Everyone guesses about the direction of gold and silver prices. Few will admit that their serious articles predicting the future directional change in price, based on charts, Fibonacci sequences or some macro issue, are no better than a coin flip-maybe even worse when their successful predictions are measured against the wrong way ones.  

I flipped my current magic coin, which has not yet been fired, and called Heads for gold moving up in price this year. The coin hit the ceiling and bounced on the floor, and Heads was the verdict. I do have some reasons that support that coin flip, so I am not being entirely flippant here.

I am certainly no expert on picking mining stocks, preferring bullion ownership. Miners consume vast amounts of cash in production costs and do not shine much when reporting profits and losses. They are operationally levered to the price of gold and will generally go up or down significantly more than gold's price. Looking at the Volatile Relationship Between Gold and Gold Miners - TheStreet

GLD rose in price yesterday: GLD $115.85 1.64 1.44% : SPDR Gold Trust (1/17/17 close)

A. Bought 100 Tahoe Resources at C$11.93 and Another 100 at USD$9.03 

Toronto Quote:  Tahoe Resources Inc.  (THO:TOR) 

NYSE Quote:  Tahoe Resources Inc. (TAHO:NYSE) 

I bought the Canadian listed shares last Monday when the U.S. stock exchange was closed and then added 100 of the NYSE listed shares yesterday. 

Toronto Listed Shares: Bought 100 at C$11.93 (C$1 commission)
Tahoe Resources Achieves Record Silver And Gold Production In 2016, Announces 2017 Financial And Operating Guidance ("Silver production in 2016 was a record 21.3 million ounces (Q4 2016: 4.8 million ounces), which surpassed the Company guidance of 18 – 21 million ounces. Gold production for the year totaled 385,111 ounces (Q4 2016: 119,932 ounces), in line with guidance of 370,000 to 430,000 ounces. Included in 2016 gold production was record output at the La Arena mine of 204,362 ounces (Q4 2016: 58,388 ounces), 121,562 ounces of production from Canadian operations from their acquisition on April 1, 2016 to the end of the year (Q4 2016: 45,341 ounces) and 48,462 ounces of production from Shahuindo (Q4 2016: 13,801 ounces), including ounces produced prior to commercial production being achieved on May 1, 2016.")

Tahoe Resources Reports 2016 Exploration Results

Summary of Results 2016 Third Quarter  


The information in the preceding snapshots needs no further exposition. 
B. Bought 50 Goldcorp at C$19.23:

Toronto Quote:  Goldcorp Inc. (G:TOR)

NYSE Quote: Goldcorp Inc.  (GG:NYSE)

Goldcorp currently has a four star rating from Morningstar and a fair value estimate of USD$19.

Website: Goldcorp Inc. - Home

Financial and Operating Results:  

There were huge impairment charges taken in 2014 and 2015 that are reflected in the preceding snapshot. Most of the 2014 impairment charge related to the Cerro Negro mine in Argentina.

Goldcorp 2014 Annual Report at page 21l.pdf

The 2015 impairment charge was related to several mines and was based on changes in forecasts for long term commodity prices:

2015 Annual Report at page 6.pdf

Those impairments can change based on those long term price forecasts.

MINE Results 2016 3rd Quarter 


Goldcorp has been paying recently a nominal quarterly dividend: Dividends

Goldcorp Announces Sale of Los Filos Mine ("Goldcorp will receive estimated consideration of $438 million, consisting of $279 million in cash (subject to certain closing adjustments), $71 million in Leagold common shares, and retain certain tax receivables of approximately $88 million. The common shares issued to Goldcorp as consideration are expected to represent approximately 30% of the issued and outstanding shares of Leagold following the closing of the Transaction.  By closing of the Transaction, Goldcorp expects to recognize a reversal of a 2015 impairment in mining interests at Los Filos of approximately $30 to $60 million on a pre-tax basis.")

I may buy a Canadian ETF that owns gold stocks to soak up some of my CADs that are building back up after selling several Canadian reset ETFs.  

iShares S&P/TSX Global Gold Index ETF | XGD (expense ratio .61%)

Ishares Canada has two gold bullion ETFs: 

Hedged to the Canadian Dollar: iShares Gold Bullion ETF | CGL | COMMON HEDGE

Unhedged to the Canadian Dollar:  iShares Gold Bullion ETF | CGL.C | COMMON (expense ratio .5%).

GLD has a .4% expense ratio.

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".  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.


  1. The Y-O-Y increase in CPI was 2.1% through December 2016 on a non-seasonally adjusted basis. That is the index used by the CPI floater PFK in setting its monthly coupon.

    Energy costs are now a positive and hot contributor to inflation.

    Other significant contributions originate from the usual categories:

    Medical care services +3.9% Y-O-Y
    Shelter +3.6% Y-O-Y
    Services ex Energy Services +3.15 Y-O-Y
    Medical Care Commodities +4.7% Y-O-Y

    The government claims that food at home costs were down 2% Y-O-Y, and that is the most important category holding down inflation according to the government's numbers.

    Core CPI was up 2.2% Y-O-Y.

    Rent cost was up 4% Y-O-Y. Health insurance costs were up 5.9+%. That number will probably increase significantly when the new Obamacare premiums start this month.

  2. "Fed's Yellen says 'makes sense' to gradually raise interest rates"

    Link to Speech: "The Goals of Monetary Policy and How We Pursue Them"

    Quote from Speech:
    "Now, it's fair to say, the economy is near maximum employment and inflation is moving toward our goal. The unemployment rate is less than 5 percent, roughly back to where it was before the recession. And, over the past seven years, the economy has added about 15-1/2 million net new jobs. ... That said, as of last month, I and most of my colleagues--the other members of the Fed Board in Washington and the presidents of the 12 regional Federal Reserve Banks--were expecting to increase our federal funds rate target a few times a year until, by the end of 2019, it is close to our estimate of its longer-run neutral rate of 3 percent. ...Nevertheless, as the economy approaches our objectives, it makes sense to gradually reduce the level of monetary policy support. Changes in monetary policy take time to work their way into the economy. Waiting too long to begin moving toward the neutral rate could risk a nasty surprise down the road--either too much inflation, financial instability, or both. In that scenario, we could be forced to raise interest rates rapidly, which in turn could push the economy into a new recession."

    So the usual ifs, ands and buts in the speech but overall less dovish and leaning clearly toward a series of gradual rate hikes.

    I am now knocking back the size of my exchange trade bond and preferred stock basket after running it up during the recent price weakness.

    The USD rose in value, bonds fell as did gold. The strength in the USD and a rise in interest rates will likely be headwinds for gold.

    GLD $114.87-0.98 (-0.85%)
    IEF $105.17 -.75% (-.71%)
    U.S. Dollar Index (DXY) 101.29 +0.99

    The CAD/USD was down 1.7%. Wilbur Ross told Congress that NAFTA will be the first trade priority.

  3. OneBeacon Insurance (OB) was a leading gainer for me today:

    Today's close $ 16.54
    Change +1.38 +9.10%

    Bloomberg reported that OB has put itself up for sale and is exploring offers from rival insurance companies. Possibly, that is in response to White Mountain, its majority shareholder, wanting to buy the rest.

    I discussed this possibility when I bought a lot.

    Scroll to
    C. Bond Like Stock-Nowhere Price Action For Five Years-Possible Turnaround in Motion and/or Possible Acquisition:

    1. Bought 100 OB at $13.83:

  4. Welcome back to your old home.

    I see above the Yellen speech remarks. It was my understanding that the that was planning to raise at least twice next year anyway. I understand the vagaries of the speech. But, I see that you are cutting back on your bond purchases and preferred stocks. I also have been constructing a bond ladder without much guidance except yours. I have been very careful in picking out only short-term CDs and bonds which are a rated by S&P except for one McDonald's bond.

    Your note gives me pause to add more. I am wondering if you think the Fed will be more aggressive and that inflation is really dampened by food costs as above.

    Also, I'm a little confused by the term exchange traded bonds. I suppose that just means bonds traded in the open market for secondary market.

    Anyway, have really learned a lot by reading your blog and your articles on SeekingAlpha and also your personal blog.

    I appreciated very much. I especially like your terminology, e.g. the Orange KING.

    Thanks, Sam

  5. Sam: Exchange traded bonds are not traded in the bond market but in the stock market. They can be bought and sold just like a stock.

    In my short term bond ladder, I am weighted in maturities between September 2017 and February 2018. If short term rates do rise as I anticipate, the proceeds from those maturities can be invested in higher yielding ones.

    I anticipate two rate hikes this year with three being more likely than just one. The last will likely come in the December meeting. The second will likely happen on or before the July 2017 meeting.

    With a short term bond/CD ladder approach, there is a trade off between mitigating interest rate risk and generating income. If I knew that rates would rise as I anticipate, the ladder would be no further out than 18 months, but the future has a way of upsetting one's plans for it.

    If the FED raises short term rates faster than expected, then I would be foregoing some income with a ladder extending out three years.

    There will be a delay in capturing that higher income which I have addressed through using a barbell approach weighted in the first 18 months of a three year ladder.

    There is also the possibility that the FED will not raise rates as fast as I currently anticipate. And there is also the possibility that something will happen that causes interest rates to remain stable for an extended period or even fall.

    One goal of the short term bond ladder is simply to earn more income than would be payable by a MM fund, particularly the very low yielding Fidelity Government MM fund, the highest yielder of two MM funds now available to
    Fidelity customers.

    So, no matter what happens to short term rates, I am better off with the income generated by this bond/CD ladder than with the MM funds used as a source of cash. My IB account pays me zero and Schwab's alternative pays less than Fidelity.