Tuesday, February 7, 2017

Observations and Sample of Recent Trades (CCNE, GLW, EGO, CGL:CA, XGD:CA): 2/7/17

While the two major parties in the U.K. certainly have many differences, they are united in calling the Orange King a racist and a sexist who is not welcomed to spew his "poisonous" words before the British Parliament. Almost two million Brits have signed an online petition requesting that the P.M. refuse an official visit from our President. President Trump Unlikely to Address Britain's Parliament - NBC News That is a unique accomplishment for a U.S. President to achieve. 

Prevent Donald Trump from making a State Visit to the United Kingdom. - Petitions


Donald is making and will continue to make all kinds of firsts for a U.S. President. 


The P.M. will give Donald what he wants in pomp and ceremony because she has no choice. The U.K. has to have a bilateral trade deal with the U.S. without undue delay. Trump would throw a temper tantrum otherwise. 


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There used to be way back in time a significant number of republicans who supported measures to protect the environment. In fact, the EPA was created in 1970 under the Nixon administration. Why Nixon Created the EPA - The Atlantic The republicans who currently support the EPA and environmental protection are barely a faint remnant of the distant past.

The EPA is going to be emasculated under Trump, who in yet another delusional rant called climate change a hoax created by China to gain a manufacturing advantage over the U.S.

Is this Trump tweet delusional?

"The concept of global warming was created by and for the Chinese in order to make U.S. manufacturing non-competitive."  PolitiFact

That statement is no less delusional than Trump's statements that he has won a number of environmental awards and is an environmentalist. Trump’s unsupported claim he has ‘received awards on the environment’ - The Washington Post

The new EPA administrator, Scott Pruitt, is an advocate for those who cause environmental damage, though there is some debate about whether he will cause the EPA to slowly die from a thousand cuts or will just bludgeon it to death over the next four years. Trump has said many times in the past that he wants to abolish the 'Department of Environment Protection', and that appointment is an excellent first step in achieving that objective.

Trump names Scott Pruitt, Oklahoma attorney general suing EPA on climate change, to head the EPA - The Washington Post

Putting Scott Pruitt in charge of the EPA risks irreversible damage to the planet - LA Times

President Trump's EPA Administrator Nominee Scott Pruitt Has a Rep for Politicizing Science | WIRED

Trump's EPA pick took hands-off approach to environmental crisis that shook Oklahoma - CNNPolitics.com

Will Pruitt Bring On Earthquakes as He Did in Oklahoma? Newsweek

What Scott Pruitt Did About Oklahoma's Earthquake Epidemic - The Atlantic

Scott Pruitt, Trump's EPA Pick, Has Challenged Mercury and Ozone Pollution Rules - The Atlantic

It will take some time for Trump and Pruitt to undo EPA regulations to permit significantly more pollution. Trump has most likely been told that he can not change EPA rules with an Executive Order. There has to be a rule-making process that overturns existing rules. Give it a year to two years before rules favored by polluters are in place. Before that is done, the EPA's budget will be slashed to starve it too death.  

There can be no good faith debate now on the GOP's direction on environmental protection.

Anyone who is not in favor of turning back the clock to the 19th century is a LIB ER RAL, and that word needs to be said as if you are spitting out spoiled milk with a scowl of horror on your face.

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Another first is that the Vice President had to break a 50-50 tie vote to secure the confirmation of a Cabinet nominee. Well, at least schools can have guns now to protect against grizzly bear invasions. Betsy DeVos confirmed as Trump's education secretary; vice president casts historic tie-breaking vote - CNNPolitics.comBetsy DeVos Cites Grizzly Bears During Guns-in-Schools Debate - NBC News

Ms. Devos seems like a pleasant and mostly clueless lady to me. She has certainly paid enough over the years to purchase a cabinet seat. $200 Million or thereabouts to the GOP At least she admitted in the past that political contributions were made to acquire something in return. Time.com

I am not sure why the GOP wanted someone as Education Secretary who is not in favor of public schools. I thought they were for public education, but I guess that has changed now.

Betsy DeVos loves charter schools and vouchers -Business Insider

Maybe the republicans need to look at the tuition costs for private schools. I graduated from a private school many full moons ago when the tuition was $650 for a year. That sounds like a reasonable sum for taxpayers to pay for a voucher to attend private school now, but it may only cover the first two weeks or so. I looked it up ($23,929 for the 2016-2017 year). I did not calculate the number of days that $650 would cover now, just eyeballed it. And, that is for Nashville, TN.

Maybe I am just getting old and do not understand much anymore.

The GOP has something up their craw about grizzly bears.

When the republicans took control over the Tennessee legislature, which has been financially beneficial to me along with other well-off residents, the grizzly bear argument was an important reason why a law was passed permitting guns in state parks.

Once as I recall the story, there was a grizzly bear who scared a little girl before departing to parts unknown.

If the citizens had been packing that day, they could have fired their pistols at the bear, mostly errant shots to be sure. Possibly one or two would hit the bear, causing it to become really, really angry and then killing the little girl. It all makes sense to me now after listening to Ms. Devos' testimony.

I have no problems allowing permit holders to carry guns in state parks (though I did raise a question about the GOP allowing guns in bars). I feel sacrilegious for voicing that reservation about guns in bars.

Personally, if a grizzly charged me as I was fetching the morning paper, I would use pepper spray as the better alternative, particularly since I do not own a gun and have never allowed one in my house. Come to think of it, I do not have pepper spray either. I will put that on my shopping list. Pepper spray might work better on those Muslims too. I see everything clearly now. It all comes down to Muslims and bears.

For indoor personal protection, I have instead a nice Louisville Slugger bat autographed by Frank Robinson which I would hate to use against an uninvited person (probably one of those Muslims terrorists flooding the country now due to that so-called Judge's order.) I will use the Louisville Slugger bat on the bear and the pepper spray on the Muslim. Maybe I got that backwards. I could get really confused when attacked by the bear and the Muslim at the same time.  

The government does not want the 9th Circuit to look at evidence showing Trump's true motive which goes without saying. Trump’s loose talk about Muslims gets weaponized in court against travel ban - The Washington Post Yes, he should have been given a Miranda type warning before shooting his big mouth off about banning Muslims and allowing Christians to immigrate.

Now, if Trump had said the same thing about Jews as he did about Muslims, would the government argue before the Ninth Circuit that his intent in issuing an order impacting Jewish migration in favor of Muslims was irrelevant. Would the U.S. government make that argument?

As previously noted, immigration issues are one area where a President has wide latitude to abuse the powers granted to him. I expect widespread abuses of Presidential power over the next four years, far greater than anything committed by Nixon.  Even John Yoo, who authored the infamous  'Torture Memos', has argued that Trump has already gone too far. The President can have people tortured but can not issue an Executive Order to build the Mexican wall. Executive Power Run Amok - NYTimes.com

Note that Yoo also disagrees with the consensus view that Trump can terminate NAFTA without congressional authorization. I have argued the same here. The issue is not decided by a failure to reference that Congressional power in Article 2005 of the NAFTA Treaty. Only Congress can alter a tariff, tax or custom duties in Article 1, Section 8 of the Constitution: Article I: The Legislative Branch — The Enumerated Powers (Section 8)

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Bond Baskets

In both my short and intermediate term bond baskets, I am buying small 1 and 2 bond lots. In the event these bonds significantly decline due to an interest rate rise, I will be purchasing additional lots in selected issues. This is one of many ways that I am attempting to mitigate interest rate risk.


One Fed governor said today that a hike was on the table for the March meeting. Philadelphia Fed’s Harker Says March Is on the Table for a Hike - Bloomberg

I seriously doubt that will happen.

I do anticipate a .25% on or before the FED's July meeting.

Consequently, I have been increasing the short term basket maturities in the April-July time period.

The market is currently anticipating at least one .25% hike on or before the 7/26/17 meeting. Countdown to FOMC - CME Group

Closing Prices 2/7/17: (short to longest durations)

SHY $84.53 -0.02 -0.02% : iShares 1-3 Year Treasury Bond ETF

IEF $105.50 +0.19 +0.18% : iShares 7-10 Year Treasury Bond ETF

TLT +120.60 +0.88 0.74% : iShares 20+ Year Treasury Bond ETF

ZROZ $110.36 +$1.17 +1.07% : PIMCO 25 Year Zero Coupon U.S. Treasury ETF 

1. Short Term Bond/CD Ladder  Basket Strategy 

A. Bought 1 WFC 2.15% Senior Unsecured Maturing 1/30/20


Debt Rating Summary — Investor Relations — Wells Fargo

The 1/30/20 maturity date would now be near my transition date from short term to intermediate term which is three years from the current date.

FINRA Bond Detail: Bond Detail

YTM at Total Cost (99.854) = 2.2%

There is a necessary and inherent trade off when buying a 2.15% bond maturing in 2020.

I am trading more current income compared to the Fidelity Government MM fund in exchange for the probable future loss of income that will arise by waiting and buying the same or similar bond at a lower price and a higher yield.

I call that type of interest rate risk as the risk of lost opportunity. I am not currently concerned about being paid the $1K principal amount at maturity, nor do I have any rational reason to predict that this lack of concern will change prior to maturity.

I will lose the opportunity to use the money tied up in this bond to buy the same or similar bond at a higher yield.

However, I am not 100% certain that I will lose that opportunity in that rates may remain near current levels or may even decline based on unanticipated future events.

I am 100% certain that I would lose about 2% now-per annum-based on the current yield of Fidelity's Government MM fund that was the source of funds use to buy this bond and most of the other bonds/CDs discussed in this blog. And that will continue for awhile at or near the same level. Further, I am not likely to get up to a 2.2% yield from that MM fund prior to 2019.

Further, any discount to par value caused by a rise in short term interest rates will start to narrow as this bond moves closer to maturity. I may have an opportunity within a year of maturity of selling at a slight profit and then reinvesting the proceeds into a higher yielding WFC bond maturing in 2024-2025.

B. Bought 1 UST .75% Maturing 7/31/18: 




C. Added 1 UST .5% Maturing 7/31/17 



D. Bought 1 UST .75% Maturing 3/31/18



I own another UST maturing on the same day with a .875% coupon. 

2. Stocks, Bonds & Politics: Intermediate Term Bond Ladder Basket Strategy 


Due to a number of recent intermediate bond buys, which have not yet been mentioned, I have moved from a significant underweight to just an underweight position. 


Return of my money is more important than the return on my money. 

A. Bought 1 Anheuser Busch 2.625% Senior Unsecured Maturing on 1/17/23


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


Moody's RatingA3 (05/25/2016)
Standard & Poor's RatingA- (11/13/2015)
Fitch RatingBBB (11/09/2016)

Fitch Downgrades BUD Senior Unsecured to BBB from BBB+ (11/16) 

Moody's assigns A3 to bonds; outlook stable (May 2016) 


YTM at Total Cost (98.5) = 2.9%


B. Bought 1 Anheuser Busch 2.5% Senior Unsecured Maturing on 7/15/22




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


YTM at Total Cost (98.618) = 2.775%

C. Bought 2 Comcast 2.85% Senior Unsecured Bonds Maturing on 1/15/23



Comcast: Bond Detail (prospectus linked at Finra page)


Moody's RatingA3 (07/14/2015)
Standard & Poor's RatingA- (02/14/2013)
Fitch RatingA- (04/21/2016)


YTM at Total Cost (99.766) = 2.893% 

Fitch Report July 2016 


3. Continued Paring Stock Allocation:  


A. Eliminated Remaining CCNE:  SOLD 50 CCNE at $23.76


Quote: CNB Financial (CCNE)


Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST (round-trip trade snapshots at the end)



This lot was bought at $11.06: Item # 2 Bought 50 CCNE at $11.06 (6/30/2010 Post)

I read some interesting commentary in that June 30, 2010 post about Jim Cramer. The S & P closed that day at 1030.71.




In Item # 3 titled "The Malaise of the Hamptons", I discuss a Cramer rant that the market was not cheap because the Democrats were trying to destroy the very fabric of U.S. Earnings were then "under attack" or may even be "wiped out by meddling, meddling from an activist anti-business federal government".  This is typical hyperbole and group think, formulated and reinforced by a person's social group, that distorts reality beyond recognition.

Profit Snapshot: +$618.1


2017 CCNE 50 Shares +$618.1
I am selecting individual stock positions to sell based on valuation issues, recent price spike up, and/or disappointing earnings reports. CCNE fit all criteria. 

Total CCNE Trading Gains Since 2009: 


Since I started this basket in the 2009 Spring, I have a net realized gain of $33,165.42. The trades are small lots. My dividend total was $12,659.11 through 12/31/16 and starting on 1/1/2010.  Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST


B. Eliminated Corning: Sold 103 at $26.45 (commission free trade)




Profit Snapshot: +$568.02



In a taxable account, an eighteen month or so holding period for this stock is normal for me. 

One prior lot was bought 8/31/12 and sold 1/30/14:  




2014 GLW 50 Shares +$252.23
That odd lot was bought at $11.98:  Item # 1 Bought 50 GLW at $11.98 (9/5/12 Post)

A lot sold last year in the Schwab taxable account had a similar holding period: 



2016 GLW 102+ Shares +$215.3

The IRA holding period may be a month to about a year: 



2016 GLW 51+ Shares +$84.39

Corning's stock has been erratic over the years and was one of the tech stocks that went into La La Land in the late 1990s. On a split adjusted basis, the share price went over $109 in 2000, up from around $8 in mid-1998.  
GLW


Morningstar rates the stock with 3 stars and has a fair value estimate of $26 and a consider to buy at $15.6. The average target price among analysts is currently at $26.47.


"Core" E.P.S. was $1.55 in 2018. At $26.43, the P/E based on TTM non-GAAP earnings is 17.05.

The 2016 GAAP E.P.S. was reported at $1.47 and included positive and negative items (constant currency adjustments for the yen and won, Taiwan power outage, acquisition related charges, pension mark-to-market, asset disposals, etc.)

Corning Incorporated Completes Strategic Realignment of Interest in Dow Corning Corporation

This disposition was in part due to my long history with Corning.

The current 1 year chart shows upward momentum

4. Continued Increasing GOLD Position as a Hedge Against the Modern Day Republican Party 


Destruction of the existing world order and trade relationships, created by sane, competent and responsible officials from both parties, will likely lead to chaos, less economic growth and greater protectionism.  


The Economist magazine captured this risk on a recent cover. An uncomplimentary drawing of an overweight Trump, wearing his Make America Great hat made in Vietnam, is shown with a scowl on his face as he throws a molotov cocktail. 


The Stock Jocks have bought into Trump's world vision, but I have my doubts.  


When we look back to 2017 from 2020, we will at least have the benefit of hindsight and a lot of data to measure the forecasts being made now and reality, a much different animal than present predictions about the future.  


Canadian Dollar Purchases  


A. Bought 100 CGL:CA at C$10.61 (C$1 commission)





Quote: iShares Gold Bullion ETF Hedged Fund Price Today (CGL:TOR) 


CGL is a gold bullion ETF that trades on the Toronto exchange and is hedged to the Canadian Dollar. 


There is also a Canadian ETF bullion ETF that is not hedged against the Canadian dollar.  iShares Gold Bullion ETF Non-Hedged (CGL.C:TOR)


I did not try to think which one would be better when both the Canadian Dollar is rising against the USD and the price of gold is moving up as well. I let the market tell me on a day when both the CAD/USD and gold rose. The gold bullion ETF hedged to the Canadian dollar performed better. Since the Canadian dollar has been falling against the dollar for most of the past two years, the unhedged bullion ETF has done much better than the hedged version. 


 Sponsor's Website:


iShares Gold Bullion ETF | CGL | COMMON HEDGED TO THE CAD (expense ratio=.5%)
iShares Gold Bullion ETF | CGL.C | COMMON Not Hedged to the CAD (expense ratio=.5%)

CGL Annual Average Total Return for 3 Years Though 1/31/17 -1.75%
CGL.C Annual Average Total Return for 3 Years Through 1/31/17  +3.7%

So this is a bet that both the CAD and gold will rise at the same time.

I also have been buying SPDR Gold Shares (GLD), which has a .4% expense ratio.

I will trade the bullion ETFs and will use them primarily as short term hedges against market turbulence and chaos. A recent example of such use was the purchase of GLD, PPLT and SLV shortly before the Brexit vote. I then sold those positions into the ensuing rally.

I play the long secular bull and bear cycles through bullion ownership. I last sold bullion in September 2011, when gold went over $1900 per ounce, and again in January 2012. I have not bought or sold any bullion since that time.

Item # 1 The Road to Political Power: Lying Works/Recent Gold and Silver Sales (9/15/2011 Post)

Item # 8 Snapshots of Coin Sales In January 2012

B. Bought 100 XGD:CA at C$13.28:

I may sell this one quickly with another pop up. 





Quote iShares S&P/TSX Global Gold Index ETF  (XGD:TOR)


Closing Price 2/7: XGD.TO C$14.27 +$0.01 +0.07%

XGD owns gold stocks and trades on the Toronto exchange;

Top Ten Holdings:




Expense Ratio = .61%

This ETF is similar Gold Miners Equity ETF (GDX) that is traded on the NYSE which has a .52% expense ratio.

GDX Top Ten Holdings:



I bought the Canadian ETF since I currently have an excess of CADs.

The purchase of a gold mining stock or ETF is viewed as a short term trade. The trade starts when I start to worry a lot about chaos.

Trump has the potential for causing more chaos than any prior U.S. President.

The ownership of bullion relates more to their role as alternatives to fiat currencies, particularly in my case the USD. What is Gold's "Fair Value"?

C. Example of USD Gold Mining Stock Purchase (Used Commission free trade):



Quote:  Eldorado Gold Corp. (EGO)

Closing Price 2/7/17: EGO $3.77 -0.02 -0.53%

This stock is a Lottery Ticket selection in the gold mining sector.

A ten year chart looks awful: EGO Stock Chart The shares were trading near $4 late in 2008 and then started to move up, peaking around $22 in 2011. That peak coincided with the peak price in gold. The shares thereafter started to decline in a series of lower lows before bottoming out near $2 early in 2016. The chart highlights that gold mining stocks are not buy and forget investments or long term holds. They are IMO only trading vehicles.  

EGO is currently rated 4 stars by Morningstar with a fair value estimate of $4.5 and a consider to sell price at $7.88. No one knows how much this stock will move when and if gold spikes up in price or starts a long term trend up.  I would not hazard a guess when conditions are ripe for gold mining stocks. 

In 2016, EGO sold its stakes in mines located in China.  Reuters Those dispositions resulted in EGO becoming a much smaller gold producer. A lot depends now on opening Skouries mine in Greece which has faced numerous delays caused by Greece's government after the Syriza party took power in 2015. I would classify political risk as high with this company.


EGO has other mines in Greece: Stratoni (Greece)(silver, lead, zinc) and Olympias (Greece)

Eldorado Gold Corporation - Home


Eldorado Gold: What To Do With The Stock In 2017-Seeking Alpha
Eldorado Gold Plans to Increase Production by 60% - GuruFocus.com

January 2017 Investor Presentation





EGO 2016 3rd Quarter Results 
  
Eldorado Announces Preliminary 2016 Operational Results and 2017 Guidance ("The Company's balance sheet remains one of the strongest in its peer group, with approximately $880 million in cash, cash equivalents and term deposits and $250 million in undrawn credit lines. Sustaining capital for gold mining operations in 2017 is estimated to be approximately $100 million. Planned expenditures for mining development total $315 million.") 

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

19 comments:

  1. Bonds and gold are both rising in price today as Trump continues to make clearly delusional comments.

    More and more people, as Thomas Friedman noted in his NYT column today, will come to the unmistakable conclusion that the President of the United States is mentally incapable of distinguishing facts from his own reality creations.

    Quote From Friedman's Article:
    "Every day, the president’s behavior becomes more worrying. One day he demeans a federal judge who challenges him; the next day, without evidence, he accuses the media of hiding illegal voting or acts of terrorism. His lack of respect for institutions and truth pours out so fast, you start to forget how crazy this behavior is for any adult, let alone a president, and just how ugly things will get when we have a real crisis. And crises are baked into this story because of the incoherence of President Trump’s worldview."

    The True Believers who support Trump will never see it since they live in the same Alternate Universe as Trump where False is True and True is False.

    I am seeing more and more articles about this Alternative Reality that they inhabit. A more humorous versions can be found here:

    https://www.washingtonpost.com/blogs/compost/wp/2017/02/07/i-understand-now-the-trump-administration-is-right-about-everything/?utm_term=.1df429201269


    iShares 20+ Year Treasury Bond (TLT)
    121.79+1.19 (+0.99%)
    As of 10:10AM EST

    SPDR Gold Shares (GLD)
    118.33+0.87 (+0.74%)
    As of 10:10AM EST

    U.S. Dollar Index (DXY)
    100.14 Change -0.26 -0.26%

    ReplyDelete
  2. GILD: I last wrote about GILD here:

    http://seekingalpha.com/instablog/434935-south-gent/4908207-gilead

    All of my concerns expressed in that post have come to fruition.


    Gilead Sciences Inc. (GILD)
    66.40-6.73 (-9.20%)
    As of 10:13AM EST.

    On the positive side of the ledger, I only own 30 shares bought in the low-to-high 70s (10 share lots) and will be able to buy more shares with the dividends now.

    "Gilead Sciences Announces 10 Percent Increase in First Quarter 2017 Dividend"
    http://www.businesswire.com/news/home/20170207006271/en/Gilead-Sciences-Announces-10-Percent-Increase-Quarter

    http://seekingalpha.com/news/3241552-analysts-weigh-gilead-q4-results-soft-guidance-shares-7-percent-premarket

    ReplyDelete
  3. "Druckenmiller Bought Gold After Reversing November Stance"
    https://www.bloomberg.com/news/articles/2017-02-08/druckenmiller-bought-gold-in-december-reversing-november-stance

    He sold gold on election night, believing that Trump's policies were pro-growth and would lead to a rise in interest rates.

    He now questions whether Trump will support the GOP border adjustment tax. The economist consensus opinion is that this tax will cause the USD to surge. That would likely pressure gold to the downside.

    I previously mentioned that there was too much opposition to the border tax that it would probably fail irrespective of Trump's opinion.

    Druckenmiller is a Trump supporter.

    While the price collapse in gold after the election is one reason why I started to nibble, my main reasons do not relate to Trump's tax policies or that decline in price.

    Instead, my concerns relate to Trump himself who I regard as delusional.

    Consequently, I view his inability to distinguish fact from fiction as a significant risk to market stability. The potential is certainly present that Trump will cause chaos that results in a flight to safety trade which may be a tailwind for gold. In that scenario, which may already be unfolding, the USD declines in value, bonds rise in price and fall in yield and precious metals rise in price.

    It is always difficult in real time to explain the market's movements. In 2017 so far, we do know that the USD has weakened while bonds and golds are up.

    So far, the Stock Jocks continue to see nothing perturbing about Trump and view downside risks as non-existent.

    I will continue to sell my stocks to them as the market rises.

    The S & P 500 is currently at 2,294.78, up 1.65 or .07%, as of Feb 8, 2017 at 3:29 p.m E.S.T.

    ReplyDelete
  4. The rise in bond prices since mid-December is starting to call into question the strong post-election regional bank rally.

    I mentioned on 11/9 that regional banks would be beneficiaries of a Trump election for two reasons.

    Comment Made at 8:34 A.M. EST 11/9/16
    http://seekingalpha.com/instablog/434935-south-gent/4931695-south-gents-comment-blog-4-reits-preferred-stocks-bonds-regional-banks-healthcare-and#comment-73572600

    The first reason was that Trump's tax and fiscal policies would be viewed as creating more inflation and consequently higher interest rates than previously forecasted by the market.

    The second reason is that Trump would significantly cut or even eliminate regulations adopted in response to the Near Depression caused in large part by improvident risk taking by banks.

    Something has changed in the consensus interest rate forecast made by the Bond Bookies.

    While the reasons underlying directional interest rate changes are always debatable, I would assign growing uneasiness with Trump that is causing a flight to safety rebalancing into gold and high quality bonds.

    There is also some trepidation that Trump and the GOP congress will actually be able to agree on a tax cut policy anytime soon.

    The strong positive correlation in recent gold and bond prices is a meaningful one IMO, but the precise nature of what is being signaled is, as always, uncertain in real time.

    iShares 20+ Year Treasury Bond ETF
    Today's close $ 122.24
    Change +1.64 +1.36%

    SPDR Gold Trust
    Today's close $ 118.19
    Change +0.73 +0.62%

    SPDR S&P Regional Banking ETF
    Today's close $ 54.91
    Change -0.55 -0.99%

    KRE closed at $34.34 on 11/8/16.

    If there is one ETF out of sync above, it is KRE.

    ReplyDelete
  5. I stopped getting anything. So sure enough, there's a new blog entry. I really don't understand why that isn't forwarded along with comments.

    Went to my first woman's march huddle tonight. It's the next stage in figuring out goals and actions to go with goals... rather than the somewhat random approach so far. (More on the website for the WM.)

    The hardest part was not wondering off every few moments to "where do you start, there is SO much." I made the point that we need a few top down areas that the rest emanate from. Otherwise you're chasing shadows of grisly bears instead of naming the state park you are running through. The constant fabrication was one such topic.

    "The rise in bond prices since mid-December is starting to call into question the strong post-election regional bank rally. "

    Hum. Interesting.

    ReplyDelete
    Replies
    1. LMH: I am receiving comments after checking the "Notify me" box. I am no longer receiving the posts.

      I have removed the follow this post by email box.

      The Democrats have three problems in the 2018 election cycle.

      First, they have to defend 23 Senate seats plus another 2 held by independents while the GOP only has 8 up for grabs. There are several vulnerable Democrat senators up for reelection in states where Trump smashed Clinton, such as North Dakota, Missouri and West Virginia.

      Second, those who voted for Trump are not likely to change their views unless he causes a severe recession beyond a reasonable doubt. In their view, he is doing a good job now. People who live in large coastal cities do not have a feel about what is happening between the two coasts.

      CBS ran a segment last night interviewing some Trump voters.


      http://www.cbsnews.com/news/wisconsin-trump-supporters-give-the-president-a-chance/

      The white male Trump voters supported gagging Senator Warren when she was reading Mrs. King's letter. As Senator Graham said, shutting her up was long overdo.

      Lastly, the GOP has successfully gerrymandered congressional districts, aggregating as many Democrats as possible into one congressional district. The result is there is no relationship between the size of the Democrat vote statewide and the number of congressional seats they win:

      http://billmoyers.com/2014/11/05/gerrymandering-rigged-2014-elections-republican-advantage/

      Consequently, it will be difficult for the Democrats to pick up more than a handful of seats under optimal conditions for that reason alone.

      When the gerrymandering is coupled with the sheer number of voters who are unreachable now with accurate information, the odds of turning the table in 2018 are slim. Without a recession, the GOP will maintain control over the House by a large margin and will gain seats in the Senate.

      Delete
  6. OHI (owned): The market is reacting negatively to OHI's 2017 guidance.

    Omega Healthcare Investors, Inc. (OHI)
    $30.79-1.78 (-5.47%)
    As of 11:53AM EST

    2017 FFO and Adjusted FFO guidance were given in today's 4th quarter earnings report. OHI currently expects adjusted FFO to be between $3.4 and $3.44.

    "Adjusted FFO was $688.7 million, or $3.42 per common share, for the twelve months ended December 31, 2016, compared to $564.4 million, or $3.13 per common share, for the same period in 2015."

    The 2017 guidance is flat with 2016.



    http://www.businesswire.com/news/home/20170208006187/en/Omega-Announces-Fourth-Quarter-2016-Financial-Results

    ReplyDelete
    Replies
    1. OHI: Using a commission free trade, I did buy another 10 OHI today at $30.8 bringing my total up to 176+ in that account. I have another 50+ shares in a Roth IRA. I am reinvesting the dividend.

      The last quarterly dividend was $.62 per share. At that rate, the yield is about 8.05% at a $30.8 total cost per share.

      A slowdown or stagnant FAD growth can impact dividend growth but OHI is not there yet.

      The company reported 4th quarter FAD income of $163.238M which amounts to $.7965 per diluted share or well in excess of the current $.62 dividend.

      As I noted again recently, I would not use the AFFO numbers provided by OHI since they include non-cash revenues. This last quarter had $18.274M in non-cash revenues included in both the reported FFO and AFFO numbers. That number should always be subtracted from FFO to arrive at AFFO.

      http://tennesseeindependent.blogspot.com/2017/01/omega-healthcare-ohi.html

      The CEO made this statement about the flat AFFO guidance for 2017:

      "Our 2017 guidance excluded the impact of new investments beyond plan capital expenditure projects and reflects higher interest costs from converting our $250 million term debt from variable rate debt to fixed-rate debt and projected higher variable rates throughout 2017. . . We continue to reposition assets within the portfolio with asset sales and the transition of certain facilities to new operators. We sold 38 facilities with a realized gains of $50 million basically offsetting impairments of $58 million. We have 20 assets held for sale year and expect these will be sold throughout 2017."

      Page 1
      http://seekingalpha.com/article/4044531-omega-healthcare-investors-ohi-ceo-taylor-pickett-q4-2016-results-earnings-call-transcript

      So the actual results could be higher with lower than anticipated interest rate increases and acquisitions. The flat guidance is not cast in cement.

      Delete
  7. BANC: (Off topic, not sure where to post this)

    This was previously discussed on Seeking Alpha in your Instablog

    http://seekingalpha.com/instablog/434935-south-gent/4932974-south-gents-comment-blog-5-reits-preferred-stocks-bonds-regional-banks-healthcare-and#comment-73669396

    It looks like they are cleaning house.

    http://www.latimes.com/business/la-fi-banc-brownstein-20170208-story.html

    The corporate governance issues have overshadowed the positive financial results. I continue to hold BANCPrC.

    ReplyDelete
  8. Another BANC item:
    http://www.prnewswire.com/news-releases/banc-of-california-board-independent-investigation-concludes-with-no-finding-of-violation-of-law-300404854.html

    (Huge move up in share price today.)

    ReplyDelete
    Replies
    1. Cathie: While I do not own any BANC securities, I have been following the recent developments. I view the report of independent counsel and the firing of the CEO to be major positives. Those two items remove the credit risk overhang which leaves you with interest rate risk being of primary concern.

      The common stock is up almost 20% today which is a verdict by the Stock Jocks that all is clear.

      The SEC is still investigating apparently however:

      https://www.bloomberg.com/news/articles/2017-01-23/banc-of-california-ceo-sugarman-resigns-sznewajs-named-chairman

      The Bond Bookies really can't make up their mind about where to go with interest rates. The rally yesterday in bonds has been wiped out today. The psychologists have a name for that kind of behavior.

      Delete
  9. The weakness in bonds and rally in stocks today is probably due to Trump promising "phenomenal" tax cuts in two or three weeks.

    http://www.realclearpolitics.com/video/2017/02/09/trump_promises_phenomenal_tax_cuts_in_the_next_two-three_weeks.html

    Assuming that promise is not another reality creation, the Bond Bookies are back to worrying about Trump's policies being inflationary.

    Trump is in a non-stop reality creation mode so it is just impossible for any investor to accept a statement as true. There may be a plan on the table in two or three weeks or nothing at all.

    An example today of another lie or delusion, depending on how you want to characterize his statements now, is his claim that Senator Blumenthal lied when relating what Trump's Supreme court nominee told him. Judge Gorsuch reportedly told the Senator that he was disheartened by any criticism of a Judge's integrity which is something that Trump does as easy as breathing.

    Senator Sasse (R) from Nebraska, who I view as honest, confirmed that the Judge had told him the same thing. Sasse said that Gorsuch told him “any attack on ... brothers or sisters of the robe is an attack on all judges.”

    The Justice's representative, formerly a republican senator from New Hampshire, had confirmed in writing that Gorsuch believes "any criticism of a judge's integrity and independence disheartening and demoralizing.”

    https://www.nytimes.com/2017/02/08/us/politics/donald-trump-immigration-ban.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news

    Trump is and will remain the most untrustworthy President in U.S. history. Everything that comes out of his mouth has to be checked out and nothing can be accepted as true without verification from reliable sources.

    ReplyDelete
    Replies
    1. Another delusional comment made by Trump on this topic involved his criticism of Andrew Cuomo's interview with Senator Blumenthal broadcast on CNN.

      Trump's Tweet:

      Chris Cuomo, in his interview with Sen. Blumenthal, never asked him about his long-term lie about his brave "service" in Vietnam. FAKE NEWS!"

      Cuomo's first question was on that very topic:

      http://thehill.com/homenews/administration/318657-trump-blasts-cnn-cuomo-never-asked-blumenthal-about-long-term-lie-of

      False is True. True is False.

      Trump can make demonstrably false statements throughout the day and that will have zero impact on Trump voters.

      For investors, a healthy dose of skepticism needs to meet any statement coming out of his mouth. I am certainly not going to hit the buy or sell button based on his daily hallucinations and delusions.

      ++++++++

      It looks like the Consumer Financial Protection Bureau will be toast soon.

      http://money.cnn.com/2017/02/09/investing/gop-war-elizabeth-warren-cfpb-trump/

      https://www.washingtonpost.com/news/wonk/wp/2017/02/09/gop-preparing-plan-to-gut-consumer-finance-protection-bureau-roll-back-wall-street-reform/?utm_term=.e9e5a36348b5

      By eliminating consumer protections, the GOP will Make America Greater for their big business contributors. Not so much for those who vote for them. The WFC scandal about opening unauthorized accounts was prosecuted by this agency and WFC did not like it.

      Delete
  10. The focus tonight on the travel ban's impact on national security overshadows a more serious national security issue reported by Reuters today relating to Trump's first conversation with Putin:

    "When Putin raised the possibility of extending the 2010 treaty, known as New START, Trump paused to ask his aides in an aside what the treaty was, these sources said.
    Trump then told Putin the treaty was one of several bad deals negotiated by the Obama administration, saying that New START favored Russia. Trump also talked about his own popularity, the sources said."

    http://www.reuters.com/article/us-usa-trump-putin-idUSKBN15O2A5

    His main objection appears to be that the treaty was approved during the Obama Administration.

    There is a major national security issue when the President voices an opinion on a nuclear arms treaty without knowing anything about it or trashes long term allies for no good reason.

    There is a major national security issue when a President conducts foreign policy by tweeting.

    This is a Trump tweet on nuclear arms control:

    "The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes,"

    http://www.businessinsider.com/trump-nuclear-weapons-expansion-risk-2017-1

    More nukes will make America more safe in his opinion.

    ReplyDelete
  11. The level of incompetence at basic information for the job, or desire to learn it, is stunning.

    At some point it has to blow up and correct itself. In real life that's how it happens. I don't know about WH life.

    We're living in Peter Seller's Being There. Only that movie had underlying content.

    ReplyDelete
    Replies
    1. LMH: It is worse than mere incompetence.

      The really scary part is that Trump forms opinions about national security issues (and everything else for that matter) without knowing the facts, creating his own facts and refusing to take the time to engage in anything approaching a thoughtful and rational analysis. Then after forming an opinion in that manner, he is 100% confident that his opinion is correct.

      When he commented before about the nuclear arms treaty with Russia, he called it incorrectly the "Start Up" Treaty.

      http://www.usnews.com/news/politics/articles/2016-10-19/ap-fact-check-trump-gets-facts-wrong-on-start-treaty

      https://www.washingtonpost.com/news/worldviews/wp/2016/10/19/the-many-contradictions-about-russia-in-the-u-s-presidential-debate-starring-donald-trump/?utm_term=.87753509c432

      Delete
  12. Yes, I know... sigh.

    Why did you turn off being able to follow the blog's arrival of new entries by email? Is there some advantage? The box asking for an email is still there. I really like getting email because it's a much easier format to read it in (why I don't know.)

    What would be your top three goals for activist groups to work on?

    ReplyDelete
    Replies
    1. I took down the follow by email box since it was not working properly. That option gave those who subscribed a copy of the posts.

      You can follow comments by checking the "notify me" box to every post. The notify me box which is still here sends you comments to a post.

      If you have already subscribed to receiving posts by email, and it works for you, then it will continue to work, but you have been telling me it was not working and it was not working for me.

      The box that is now at the top is for searching the blog.


      I do believe that leaks are flowing out of White House on his mental stability and competence because too many people are aghast at what they are seeing up close and personal.

      The most important issue longer term for Democrats is to figure out how to address the economic concerns of white middle class voters.

      The current generation of Democrats have largely lost touch.

      The second issue is that Democrats need to work on voter registration and turnout for every election including for state house and senate seats. If they want to take back power in Washington, they need to reverse control in several state houses first before they have a chance to win back congressional seats.

      There is also a need to give people a civics lesson in American Democracy and the importance of a viable free press as the unofficial 4th branch of government keeping an eye on the other 3. People need to get serious about their obligations as citizens and voters.

      51% of Trump voters in a recent believe that Trump should have the power to overrule a court decision.

      Since the Supreme Court decision in Marbury vs. Madison in 1803, the judiciary has had the power to overrule the other two branches when they violate the Constitution which is the Supreme Law of the U.S. Trump's EOs are not the Supreme Law, contrary to what he believes.

      https://supreme.justia.com/cases/federal/us/5/137/case.html

      The government took the position in the Ninth Circuit that the judiciary had no authority to review Trump's EO on constitutional grounds.

      That is an extremely dangerous argument to be making in a Democracy. It is inconsistent with the very foundations of our government and is consistent only with an authoritarian and imperial president, more powerful than any king.

      I have noted for many years now that the main threat to our freedoms and democracy is not from foreign lands and powers, but from within.

      As to issues, everybody has their own that they feel most passionate about.

      The EPA is going to be gutted by Trump and more pollution will be allowed. Environmental protection will be appealing to the younger voters. Trump and the GOP will be vulnerable here in 2 and 4 years.

      There will be a strong tendency in the Trump administration to favor the rich and disadvantage those who put Trump in office. This will be shown by a significant number of laws. Trump will continue to claim he is doing what he can for the forgotten middle class but his actions will tell a different story. Comparing his words to his actions can be a useful technique in appealing to white middle class voters.

      You will see that in his tax legislation that may end up increasing taxes on groups in the middle class. That was the case for his campaign tax plan that would have increased taxes on about 9 million middle class families while enriching further the top 1%. You will see it in the abolition of the fiduciary rule that requires brokers to act in the client's best interest rather than their own. And, the gutting of the Consumer Protection Agency will be another.

      If his trade policies backfire, and cause job losses, that will be something to hammer hard, over and over until it registers.

      Women's issues are important as well to energize turnout and voter registration. Those arguments need to be tailored better toward women who voted for Trump, excluding those who are unreachable due to fervent opposition to abortion with more focus on equal pay, job discrimination, white male put downs, etc.

      Delete
  13. I have put back the follow by email box at the top right hand corner, just in case it is required for anyone to receive comments after checking the "notify me" box below.

    The emails containing comments may be sent to your spam box.

    ReplyDelete