Observations and Sample of Recent Trades (VGSTX, GMRE, AMU, EBAY, MS): 2/15//2017

Trump's National Security Advisor Michael Flynn and Chief of Staff Reince Priebus

On the day Obama imposed very mild sanctions on Russia for interfering in the U.S. election, Michael Flynn called the Russian Ambassador to discuss issues. 

He has denied that he discussed the sanctions imposed that day. 

The Vice President went on National TV and denied flat out that Flynn discussed sanctions with the Russian Ambassador. Face the Nation transcript January 15, 2017: Pence- CBS News

As it turns out, the NSA of course was listening to the conversation according to numerous sources, and Flynn did talk about the sanctions. 

The WashingtonPost cited nine sources: National security adviser Flynn discussed sanctions with Russian ambassador, despite denials, officials say - The Washington Post; National Security Adviser Mike Flynn, Security Risk

"Two of those officials went further, saying that Flynn urged Russia not to overreact to the penalties being imposed by President Barack Obama, making clear that the two sides would be in position to review the matter after Trump was sworn in as president."

There is a legal issue about whether Flynn violated the Logan Act in talking to the Russian ambassador. An interesting issue is who asked him to initiate the conversation. I would suspect Donald told him to make the call in order to assure Russia that a different policy would be followed when Trump became President.  

Trump has not said a word in Flynn's defense. 

National Security Adviser Michael Flynn's job security in jeopardy - CBS News

Reince Priebus is being attacked publicly as incompetent. Trump friend says Priebus is ‘in way over his head’ - The Washington Post

We have not even made it through a month yet, and the Chief of Staff and the National Security Advisor may be looking for new employment.

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Bond Buying-Small Lot Trades:

I am buying bonds in 1 and 2 bond lots.

In the event interest rates move up and bond prices fall, I have the financial capability to average down with more 1 and 2 bond purchases. I will also have proceeds from maturing bonds and CDs to reinvest at higher yields.

I am more likely to add to intermediate term bond positions since I would not anticipate meaningful downward price adjustment on the short end.

The bonds discussed in Item # 1 below would likely be examples where I would buy more with the proceeds of maturing bonds and CDs.

Brokerage commissions are not a relevant cost factor since I pay the same commission at Fidelity or Interactive Brokers when I buy one bond five times or 5 bonds at the same time. I pay $5 in both scenarios.  

I do not pay a commission to buy newly issued CDs or fixed coupon treasuries in my Schwab and Fidelity accounts. Since I have to pay a commission to Schwab when buying treasury strips or TIPs, I will not use that broker to buy those securities, but will instead use Vanguard or Fidelity where I can buy those securities commission free.

The treasury strips and TIPs will only be bought in ROTH IRA accounts for tax reasons. When held in a taxable account, the taxpayer would have to pay taxes on "income" that is not received. I am philosophically opposed to doing that.


1. Intermediate Term Bond Ladder Basket Strategy-Underweighted

A. Bought 1 Northern States Power 2.6% First Mortgage Bond Maturing on 5/15/23

                                                           

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

Moody's Rating	Aa3 (01/31/2014)
Standard & Poor's Rating	A (05/14/2013)
Fitch Rating	A+ (12/22/2016)

YTM at Total Cost (99.915) = 2.632%

Fitch Rates Northern States Power Company-Minnesota's FMBs 'A+'

Northern States Power is an electric utility company and a wholly owned subsidiary of Xcel Energy Inc. (XEL).

B. Bought 2 EBAY 2.6% Senior Unsecured Notes Maturing on 7/15/22:

Finra Page Bond Detail (prospectus linked at Finra Page)

Moody's Rating	Baa1 (07/20/2015)
Standard & Poor's Rating	BBB+ (07/20/2015)
Fitch Rating	BBB (09/27/2016)

YTM at Total Cost (97.892 ) = 3.023%

In July 2105, Fitch downgraded Ebay's senior unsecured debt to BBB from A- due to the PayPal separation. Moody's downgraded to Baa1 from A2 for the same reason.

2016 4th Quarter Earnings Report

C. Bought 1 Morgan Stanley 2.5% Senior Unsecured Maturing on 4/21/21

FINRA PAGE: Bond Detail

Moody's Rating	A3 (04/21/2016)
Standard & Poor's Rating	BBB+ (04/18/2016)
Fitch Rating	A (12/13/2016)

YTM at Total Cost (99.321 ) =  2.671%

2.  Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Praxair 1.25% Senior Unsecured Bonds Maturing on 11/7/18

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

YTM at Total Cost (99.732) = 1.406%

Moody's assigns A2 ratings to Praxair's new notes

Company Website: Industrial Gases, Supply, Equipment & Services | Praxair, Inc.

SEC Filings

2016 3rd Quarter Earnings Report

Last Bond Offering Prospectus (February 2016: 3.2% senior unsecured maturing in 2026)

B. Bought 2 Lakeside Bank .55% CDs (monthly interest) maturing on 6/19/17

C. Bought 2 Bank of China .55% CD Maturing on 4/17/17:

I have another Bank of China CD, with a .75% coupon bought in late December, that matures on 4/19/17. I am continuing to group maturities in the Spring and summer as I anticipate a .25% FF hike on or prior to the FED's July meeting. 

3. Equity REIT Common and Preferred Stock Basket Strategy

A. Bought 50 GMRE as a Potential Trade (used Commission free trade)

Quote: Global Medical REIT Inc. (GMRE)

I may average down with another 50 share purchase when and if the price sinks below $8.

GMRE is a new and small externally managed REIT that owns healthcare properties. The market cap at the $8.36 price is close to $148M. The initial public offering occurred last June with stock sold to the public at $10 per share. Prospectus

Website: Global Medical REIT

This REIT has been busy acquiring properties since its IPO:

2/1/17 Press Release: Global Medical REIT Inc. Provides Acquisition Update

1/4/2007 Press Release: Global Medical REIT Inc. Provides Acquisition Update

12/21/16 Press Release Global Medical REIT Inc. Provides Acquisition Update

11/30/16 Press Release: Global Medical REIT Inc. Provides Acquisition Update

10/10/16 Press Release: Global Medical REIT Inc. Announces Closing of Multiple Acquisitions of Medical Properties

Prior Trades: I owned this stock briefly last year and managed to exit the position profitably which was not easy to do. I discussed selling 150 shares in Comment Blog # 7 (12/17/16 at 10:31 A.M.)

I discussed those purchases in my SA Comment Blogs. I realized a short term capital gain of $121.75. (snapshots at Stocks, Bonds & Politics: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy).

My most recent discussion was in a comment published here.

Given that this REIT is new, I do not anticipate that the dividend will be covered by cash flow.  The last earnings report had negligible revenue and negative cash flow. 2016 3rd Quarter Financial Report 

The market reacted negatively to that report. The close prior to the release was $8.51 and at $7.82 on the date of the release (11/10/16) with an intra-day low of $6.73. GMRE Historical Prices  It is hard to fathom what investors were expecting.

I would anticipate an improvement when GMRE reports its 4th quarter results, but it will be awhile before the quarterly dividend of $.2 per share is even supported by FFO, let alone FAD.

I am not going to buy more than 150 shares of this REIT until the dividend is well covered by cash flow. Until then, I am in a flipping mode.

Global Medical REIT Inc. Announces Cash Dividend of $0.20 Per Share

4. Continued Paring Stock Allocation:

A. Sold 209+ AMU at $21.27

Profit: Net of +$267.66

As shown in the preceding snapshot, I had to average down after I made a less than optimal purchase on 7/13/2015. Since this ETN has a good dividend yield, I am satisfied harvesting the net profit after receiving several quarterly dividends.

I see own 100 AMU shares and 231+ shares of the functionally equivalent AMJ which tracks the same index.

B. Eliminated the Vanguard Star Fund (VGSTX) Position at $24.36:

VGSTX is a low cost fund of funds with a expense ratio which includes only the expenses charged by the funds owned by VGSTX. The fund does not charge investors for a fee above those expenses. It is a balanced fund that is weighted 60% in stocks and 40% in bonds. Sponsor's Website: Vanguard - Vanguard STAR Fund (MUTF:VGSTX)(expense ratio .34%)

I previously pared this position by selling shares bought with dividends. Item # 2. Pared Highest Cost Vanguard Star Fund shares Bought With DIVIDENDS: Update For Portfolio Management And Positioning As Of 10/24/15 - South Gent | Seeking Alpha I then sold my highest cost 45.523 shares bought with dividends for a profit of $51.07. 

This fund has a 4 star rating from Morningstar.

I am concerned about both stock and bond valuations. The Vanguard Star Fund has a weighting in low yielding investment grade quality bonds through its ownership of the Vanguard Long-Term Investment Grade Fund, the Vanguard GNMA Fund, and the Vanguard Short Term Investment Grade Fund.  

Vanguard - Vanguard Long-Term Investment-Grade Fund; GNMA Fund Investor Shares; Vanguard - Vanguard Short-Term Investment-Grade Fund Investor Shares

In the event of a major downdraft in the stock market, those bond funds would probably enable the Vanguard Star fund to outperform the S & P 500. However, if interest rates are rising during that stock market decline,  those funds would be going down as well. During times of extreme stress such as October 2008-March 2009, even high quality corporate bonds went down in price. U.S. treasuries managed to produce gains during that period.   

The preceding links to the investor class funds. I am not sure why this fund does not own the slightly lower cost Admiral Class shares which require a $50K minimum. 

Those bond funds will likely restrain the performance going forward IMO even if stocks continue to move up. 

My out-of-pocket investments were made in 2009 and 2010: 

The remaining shares were purchased with dividends. 

Vanguard only provides at its website the dividends paid for the past two years:  Vanguard - STAR Fund - Distributions

Profit Snapshot = +$3,782.44

Quote: Vanguard STAR Fund (VGSTX:MFD)

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.