Tuesday, January 10, 2017

Short Term $1K Par Value Bond/CD Ladder: 1/10/17 Purchases /Current Exchange Traded Bond and Preferred Stock Basket

In addition to the two CNQ bonds maturing next January, and discussed in my last post, I added the following: 

ROTH IRA Short Term Bond/CD Purchases 

Bond Buys ($1 per bond Commission) 

All of these bonds are senior unsecured investment grade bonds and were bought in 1 bond lots under par value.  However, the $1 commission took me a smidgen over par value for the WFC bond. 

The Virginia Electric Power senior unsecured bond, referenced in the snapshot above, has been bought earlier in a taxable account. That purchase was discussed briefly in the comment section here: Short Term Bond Ladder - South Gent | Seeking Alpha or Update For Portfolio Positioning And Management 2016 4th Quarter - South Gent | Seeking Alpha.

I will keep my exposure to the securities issued by one company to less than $15K as a risk mitigation measure. That limit includes securities throughout the capital structure starting with common stock and ending with first lien bonds. I will exclude FDIC insured CDs from that limit but those investments are spread among a number of banks in relatively small amounts. 

My exposure to Vodafone is currently slightly less than $2K in senior unsecured debt. 

I am more likely to hit that limit with Dominion Resources (D) or Wells Fargo (WFC) securities, though I am not currently close.    

Virginia Electric Power (now called Dominion Resources): Matures 1/15/18

FINRA Page: Bond Detail (prospectus linked at the FINRA Page)

YTM at Total Cost = 1.509%

Bond Ratings:  

Moody's RatingA2 (02/01/2016)
Standard & Poor's RatingBBB+ (02/01/2016)
Fitch RatingA (02/01/2016)

Vodafone Group: Matures 9/26/17

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

YTM at Total Cost = 1.281%

Bond Ratings: 

Moody's RatingBaa1 (07/23/2014)
Standard & Poor's Rating
Fitch RatingBBB+ (08/26/2016)

Wells Fargo: Matures 1/16/18 

FINRA Page Bond Detail (prospectus linked at FINRA Page)

Bond Ratings: 

Moody's RatingA2 (05/14/2015)
Standard & Poor's RatingA (12/02/2015)
Fitch RatingAA- (10/04/2016)

YTM at Total Cost = 1.437%

ROTH IRA: FDIC Insured CD Buy (commission free at Fidelity)

$2K Wells Fargo Bank 1.55% CD Maturing 1/22/19 Monthly Interest Payments 

Taxable Account Short Term Bond/CD Purchases: 

Bond (2) Senior Unsecured BBT

FINRA Page: Bond Detail (prospectus linked at FINRA page)

Bond Ratings: 

Moody's RatingA2 (08/18/2015)
Standard & Poor's RatingA- (11/14/2012)
Fitch RatingA+ (10/04/2016)

YTM at Total Cost: 1.39%

I also own BBT common and have pared my position down to 171+ shares: 

Some of those shares were acquired in exchange for National Penn shares.  The last common share purchase was discussed here: 

3. Added 50 BBT at $32.35-Satellite Taxable

FDIC Insured CD Purchase (commission free at Fidelity) 

$2K J P Morgan 1.8% Maturing 1/20/20 Monthly Interest Payments

This short term bond/CD basket extends out to three years; so the JPM CD purchase was slightly outside of that time range. 

I am now close to the $200K allocated to this basket strategy. For an investor who generally moves at a snails pace, I have taken this allocation from zero in about 2 weeks which is abnormally fast for the Old Geezer.   


Exchange Traded Bond and Preferred Stock Basket Strategy

I have nipped at the exchange traded bond and preferred stock basket ($25 par values, either in CADs or USDs): 

Basket as of 1/10/17: (click to expand)

I include some ETFs in this basket, which I do not own, for comparison purposes. Currently, the only own bond ETFs are the Guggenheim BulletShares 2020 Investment Grade Corporate Bond ETF (BSCK) and iShares Floating Rate Bond ETF (FLOT)

The primary dispositions involved profit taking in the Canadian equity preferred reset sector with the most profitable disposition being 300 shares of ENBPRP:  

2017 ENBPRP 300 Shares  +C$1,814  (USDs= +$1.458.25)

For that sale, I immediately converted the CAD proceeds into USDs which cost me 1% of the principal amount. 

Fidelity's 1% currency conversion fee is built into the conversion price. I also had to pay a C$19 Fidelity commission. Those two fees consumed a meaningful amount of my profit before fees and commissions. I have fired Fidelity as my international broker. IB would charge $2 for that currency conversion back into USDs (possibly C$3 for a 300 shares trade/100 shares is C$1).   

The primary reason for that exchange is that I have ceased buying Canadian securities in that Fidelity account. A secondary reason is that I do have concerns about how the CAD will react when and if Trump sets in motion the repeal of NAFTA, which he probably has the power to do as President without the approval of Congress. Yes, President Trump really could kill NAFTA - but it wouldn't be pretty - Nov. 15, 2016 He has certainly promised to do so during the campaign on numerous occasions unless Canada and Mexico meet his demands for revisions.  The market is currently assigning a zero chance of a trade war erupting with Mexico, Canada and/or China. 

About 75% of Canada's exports go to the U.S. Top Canadian officials met Trump team for trade talks: paper | Reuters

The flip side is that Canada imports more goods from the U.S. than it exports to the U.S. Foreign Trade-Census Bureau 

A lot of havoc can happen quickly in trade relations.    

I still own 200 ENBPRB held in my IB account. 

For the Canadian reset equity preferred stocks, I have a realized profit YTD of C$2,481 and have increased my CAD stash through those dispositions by C$9,758. I am using them in part as a hedge for longer duration fixed coupon bonds and potentially perpetual preferred stocks.  I classify the Canadian resets as part of my floating rate equity preferred category. Snapshots can be found in the Gateway Post for that topic: Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities 

That classification excludes Synthetic Floaters which pay interest and are classified with other bonds in the Trust Certificate legal form of ownership. 

No comments:

Post a Comment