Wednesday, February 15, 2017

Observations and Sample of Recent Trades (ARCC, GAM, BP): 2/15/ 2017/Donald Trump and His Russia Problems

"Phone records and intercepted calls show that members of Donald J. Trump’s 2016 presidential campaign and other Trump associates had repeated contacts with senior Russian intelligence officials in the year before the election, according to four current and former American officials."

Trump Campaign Aides Had Repeated Contacts With Russian Intelligence - The New York Times

Why would Trump campaign officials have several conversations with senior Russian intelligence officials during a Presidential campaign? 

This is a first. And, while it is too early to draw conclusions, this could also be treason. 

The U.S. intelligence agencies have already concluded that Russia attempted to influence the Presidential election on behalf of Trump. Russian Hackers Acted to Aid Trump in Election, U.S. Says - The New York Times

The republican Chairman of the House Intelligence Committee is Devin Nunes who represents California's 22nd congressional district. Devin is apparently unconcerned about Trump campaign officials talking with Russian intelligence officials and sees no reason why his committee should investigate anything relating to Flynn's many connections with Russia. 

Nunes told reporters in January "that Congress should not be investigating any possible contacts between Russia and the Trump camp". Intelligence Committee will investigate possible Russia-Trump links - POLITICO

Nunes was part of Trump's transition team. California Rep. Devin Nunes named to Trump's transition team - LA Times

Instead, this republican, one of the leaders of the Modern Day GOP, wants to launch a full scale investigation into who leaked information to the Lying Press and the potential crimes involving the government's wiretaps of senior Russian intelligence officials and Russia's Ambassador: 

"I expect for the FBI to tell me what is going on, and they better have a good answer...The big problem I see here is that you have an American citizen who had his phone calls recorded.. I’m pretty sure the FBI didn’t have a warrant on Michael Flynn.”  

While I do not know for certain, the U.S. government probably had warrants to tap the Russian ambassador and Russian intelligence operatives operating in the U.S. If Flynn and other Trump officials did not want their conversation intercepted, then they should not be calling those persons. Better to meet them in some secluded area to discuss matters or to pass messages using secure apps like ChatSecure or other clandestine methods.   

Normally, True Believers would not care about U.S. intelligence tapping Russian intelligence operatives, but it is obscene that those taps caught Trump campaign officials and his National Security Advisor talking to them.  

We can all thank the voters of California's 22nd Congressional District for giving the nation Mr. Nunes. 

The House GOP members will change the subject to question the legality of NSA recording conversations of Russian intelligence officers and officials operating in the U.S. that had U.S. citizens as the other party rather than the many issues surrounding why those Trump campaign officials and Flynn were talking with those

I have zero confidence in the GOP to get to the bottom of this issue which includes whether those contacts during the campaign with Russian intelligence officials were in anyway related to Russian's interference in the U.S. election on behalf of Trump. Losing Trump supporters in a primary election would spell certain defeat. Trump Nation is the GOP.  

The only GOP politician who probably can be trusted IMO to pursue a thorough investigation is John McCain.

The current FBI Director did what he could to defeat Hillary and is at a minimum highly suspect. Apparently, the FBI Director kept silent about Russia's interference in U.S. elections when he was publicly blasting Clinton's use of a private email server. 

Jason Chaffetz, the GOP Chairman of the House Oversight Committee, will do nothing. He would prefer to investigate a cartoon character, though he was all over Clinton's use of a private email server. While Trump scandals mount, Chaffetz decides to investigate... a cartoon character - The Washington Post The cartoon character perp is Sid the Science Kid. 

Sessions will not remove himself from the FBI's inquiry and the natural question is to ask why this Trump acolyte wants to remain involved. Jeff Sessions Resists Pressure to Remove Himself in Russia Inquiries - The New York Times


America, meet the nuclear ‘football’ - The Washington Post (meet Rick, the guy who carries the nuclear football and a Mar-A-Lago member who had his photograph taken with Rick).  


I am continuing to move slowly into my bunker notwithstanding these kind of articles: 

A ‘magic bullet’ is about to push U.S. stocks higher - MarketWatch

Bull trend confirmed: Charting the S&P 500’s break to ‘clear skies’ territory - MarketWatch

As bulls overrun Wall Street, one bank sees S&P 500 at 3,000 by 2019 - MarketWatch ("Stephen Suttmeier, a technical research analyst at Bank of America Merrill Lynch, predicted the S&P 500 will rally to 2,445-2,460 by July on its way to 3,000 by 2019, and then hit 5,000 by 2024.").


1.  Intermediate Term Bond Ladder Strategy-Underweighted

The intermediate term bond prices are ticking down some over the past few days as interest rates tick up.  

A. Bought 2 American Express 2.25% Senior Unsecured Bonds Maturing on 5/5/21

FINRA Page: Bond Detail (prospectus is not linked)

Moody's RatingA2 (05/04/2016)
Standard & Poor's RatingA- (05/03/2016)
Fitch RatingA (09/28/2016)

YTM at Total Cost (98.288 ) = 2.427%

B. Bought 2 Amgen 2.25% Senior Unsecured Bonds Maturing on 8/19/2023

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

Moody's RatingBaa1 (08/10/2016)
Standard & Poor's RatingA (08/10/2016)
Fitch RatingBBB (08/11/2016)

YTM at Total Cost (95.685) = 2.982%

C. Bought 2 Microsoft 2.125% Senior Unsecured Maturing on 11/15/22

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

Moody's RatingAaa (11/02/2012)
Standard & Poor's RatingAAA (11/05/2012)
Fitch RatingAA+ (06/15/2016)

YTM at Total Cost (98.176 ) = 2.466%

2. Continued Reduction in Stock Allocation:

A. Eliminated ARCC: Sold Remaining 50 ARCC

Profit Snapshot: +$160.51

As with other externally managed BDCs, my goal is simply to harvest several dividends and to escape with a profit. 

ARCC Stock Quote - Ares Capital Corp (ARCC)(the last ex-dividend date was 12/13/16)

Scroll to "Pure Income Trades 1: Bought 50 ARCC at $14-Update For Portfolio Positioning And Management As Of 7/9/16 - South Gent | Seeking Alpha

I last discussed paring my ARCC position here:  Item # 1. Sold 102+ ARCC at $15.32-Taxable Account and 50 at $15.26-Roth IRA-Update For Portfolio Positioning And Management As Of 8/21/16 - South Gent | Seeking Alpha

I also sold my Roth IRA position last August: +$105.57

Item #1 Added 50 ARCC at $14.15 Roth IRA: Update For Portfolio Positioning And Management As Of 6/26/16 - South Gent | Seeking Alpha

I no longer have a position. 
ARCC Net Asset Value Per Share Trends (Better than most externally managed BDCs and some internally managed ones):
9/30/16: $16.59
6/30/16: $16.62
3/31/16: $16.5
12/31/14: $16.82
9/30/13: $16.35
3/31/12: $15.47
6/30/2010: $14.11
6/30/2008: $12.83 10-Q
9/30/2007: $15.74
3/31/05: $14.96

Sourced: ARCC 10-Qs

B. ELIMINATED GAM: SOLD 109+ (used commission free trade)


Profit Snapshot: +$88.53 I reinvested the year end distribution of $320.29 to buy 9.8167 shares which were sold at $13.41. profit. 

I bought 100 shares at $31.9:cItem # 1 Bought 100 GAM at $31.9: Update For CEF Basket Strategy As Of 7/18/16 - South Gent | Seeking Alpha

I also received a $.2 per share dividend on 2/10/17 or $21.96. 

Total Return = $430.78 or 13.47% on my original investment of $3,198.95 (paid commission on purchase but not on sell)

The holding period was slightly less than 7 months. 

Data Date of Trade (2/7/17): 

Closing Market Price: $32.74
Closing Net Asset Value Per Share:  $38.45
Discount: -14.85%
Average Discounts: 

1 Year: -17.78%
3 Years: -15.96%
5 Years: -15.28%

The discount on the day of my 100 share purchase was -18.43%. 

A. Bought 1 BP Capital Markets 1.375% Senior Unsecured Bond Maturing on 5/10/18


Payment is guaranteed by BP.

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

YTM at Total Cost (99.899) = 1.464%

B. Bought 1 Bank of CHINA .7% CD Maturing on 5/15/2017


Continuing to add to maturity cluster in late Spring and early Summer.

Moody's assigns A1 rating to Bank of China New York branch's MTN drawdown

C. Bought 3 Citizens Bank of PA .65% CDs Maturing on 5/22/17

Citizens Bank is a operating bank subsidiary of Citizens Financial Group Inc. (CFG) 

Credit Ratings – Citizens Bank

Fast Facts – Citizens Bank
Citizens Financial Group, Inc. Reports Fourth Quarter Net Income of $282 Million and Diluted EPS of $0.55

Fitch Affirms Citizens Financial IDR at BBB+

Continuing to add to maturity cluster in late Spring and early Summer. 

D. Bought 2 Citizens Bank N.A. CDs .65% Maturing on 5/22/17:

This is another bank subsidiary of Citizens Financial (see page 19 of previously linked press release). This one was bought in a Fidelity account while the other one was bought in my Schwab taxable account. 

Citizen Financial SEC Filings 

Moody's assigns A3 rating to Citizens Bank N.A.'s senior debt

All CD purchases are covered by FDIC insurance.

4. Possible Play on Rising Short Term Rates:

A. Bought Back 50 BKLN:


The PowerShares Senior Loan Portfolio  (BKLN) owns senior secured leveraged bank loans with floating rate coupons.  

See: Sponsor's Website (expense ratio .65%, 121 holdings as of date of purchase)

Dividends are paid monthly at a variable rate. 

If the GOP proposes to eliminate corporation interest rate deductions, I will consider quickly whether to jettison this ETF. 

I last discussed this ETF here: Paired Trade Sold 50 BKLN at $24.7 and Bought 50 TCBIP at $22.64 10/11/13 Post) 

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


  1. CPI: The government reported that seasonally adjusted CPI increased .6% in January, the largest increase since February 2013.

    Over the 12 month period ending in January, the non-seasonally adjusted CPI increased 2.5%.

    Core CPI was up 2.3% Y-O-Y.

    Among the core categories, inflation trends remain problematic in the following categories Y-O-Y

    Medical care commodities +4.7%
    Services Less Energy Services +3.1%
    Shelter +3.5%
    Transportation Services +3.2%
    Medical Care Services +3.6%

    I believe that it is probable that inflationary pressures will continue to build and will then accelerate when the Trump administration adds to fiscal stimulus through tax cuts and spending increases.

    Among the hot categories in the detailed listings are the following:

    Health Insurance +4.8% (highly suspect given Obamacare rate increases)
    Motor vehicle insurance 7.5%
    Rent of primary residence 3.9%
    Inpatient hospital services 4.6%
    Cable and satellite television and radio service 5.3%
    Legal services 6.6%
    Repair of household items 4.9%
    Financial services 4.4%

    The Bond Ghouls do not like this report.

  2. hello Southgent,

    I saw Ron Baron on CNBC this morning. He said recently he spoke in front of a bunch of hedge fund managers and basically told them that they are trying to predict the unpredictable, for example the were wrong about Trump.

    That the market would rise after a Trump victory.

    His theory is that he is a very very long term investor. And he stated as per this link that the economy doubles every 12 years or so and the stock markets doubles with it.

    He said half of his investing success is related to holding 15 stocks over the long that is 10 to 15 years.

    I know his success came through the teeth of a huge bull market starting in 1992

    I wonder what you thought of his approach and if you know anything about his theory of the stock market and the economy.


    1. Sam: In comments posted at SA on 11/9/16, I said that the stock market would go up and the bonds down after Trump was elected. The question is how far and how long will the Stock Jocks push the market up.

      I frequently discuss the long term cycles issues here and elsewhere. Several of the posts are linked under the heading "Situational Risks and Asset Allocations" and "Long Term Stock Cycles".

      Scroll down the right side of the blog until you see those headings.

      The market has been going up over time as the U.S. economy grows. That is hardly news.

      There are three major problems with Baron's general statement.

      (1) There are prolonged periods where the market goes nowhere and even produces negative real rates of return with dividends reinvested. Some stocks may outperformed during those periods. Those periods include 1929-1949, 1966-1982 and 2000-March 2009.

      (2) Most Individuals have a short time span to save meaningful amounts of money and is not particularly helpful to note what the S & P 500 has done since 1/1/1950.

      (3) Most individuals face situational risks where they have to spend savings. If one of those periods occurs during a long term secular bear market, the potential for bad long term results is enhanced.

      I do not have a problem with those in an accumulation phase holding blue chips or low cost and broad based stock index funds over that entire accumulation life cycle period. Some individual stocks may need to be jettisoned at clearly excessive valuations. For example, KO was at a higher price in 1998 than now. GE was over $55 in 2000 and is struggling now to keep its head over $30.

      For those who are no longer in an accumulation phase, there needs to be a realistic assessment of expenses over the remaining life span and whether the current portfolio and other income sources like a pension or SS are likely to meet those future expenses without making material changes.

      I can not answer that crucial question for those reading this blog. I can only answer for myself and family members.

      As I have noted here many times, the asset allocation decisions are inextricably tied to one's individual personal needs and resources.

      I personally do not need to take any risks and would be able to pay all future expenses, including an extended 10+ year nursing home stay and 24/7 caregiver services, by taking no risks now. That explains why I am pulling back into safer assets now than stocks or long duration bonds.

  3. "Influential conservative group: Trump, DeVos should dismantle Education Department and bring God into classrooms"

  4. Craig Valliere threw some cold water on the perception that Trump's agenda faced smooth sailing through Congress.

    The GOP is in various stages of infighting on Trump's proposal and the Democrats are being pushed into a non-cooperation stance by the increasing fury of their members.

    A similar event occurred after Obama was elected in that the GOP just dug in their heels and refused any cooperation on all major issues.

    A number of Democrats voted for the Bush tax cuts. I doubt that the GOP could round up more than 1 Democrat vote in the Senate. Joe Manchin from West Virginia may not have to worry about facing off against a republican in his 2018 senate re-election effort since he may very well be eliminated in the primary if he continues voting with the GOP.

    If the GOP goes ahead with the Border Tax, they will be beaten over the head in 2018 with a very simple pitch. The Democrats will only need to say that the middle class received a tax increase from the GOP in order for them to cut the taxes of large corporations who are their benefactors. The DEMS need to repeat a catchy slogan with that thought over and over and over again.

    So Valliere is missing the big picture problem when he says some GOP lawmakers are buckling to the retailers' opposition. While that is an issue, the more important one is whether the GOP politicians are willing to vote for a tax increase for every American disguised as a 20% tax on imports in order to pay for a corporate tax cut.

  5. CISCO (own): CSCO reported non-GAAP E.P.S. of $.57 per share, one cent better than the consensus, and raised the quarterly dividend to $.29 per share from $.26.

    Cisco rose $.51 to close at $32.82 during regular trading hours and rose and $.64 in after hours trading in response to this report.

    After Hours
    $33.46 Change +0.64 +1.95%
    Volume 2.62m
    Feb 15, 2017 7:21 p.m

    My last foray into this stock was discussed in some comments at SA.

    I own only 80 shares.

    A 30 share lot was bought in my IB account at $23.09 on 1/28/16.

    A 50 share lot was bought in my Schwab taxable account at $22.96 on 1/21/16.

    The new dividend yield based on $.29 per quarter or $1.16 annually would result in about a 5.04% dividend yield at a total cost of $23 per share.

    Those prices were lower than an elimination near $24.31 in August 2010 and at $24.42 in November 2010.

    Some of those prior round trip trades are discussed here:

    November 19, 2013 Post
    4. Sold 105+ CSCO at $21.2

    Anyone buying CSCO in the late 1990s bubble will have a very long wait before returning to even.

    The price touched $80 in 2000:

    My most significant liquidation today was 113+ shares of Merck at $65.28 as I continue moving very slowly toward my bunker.

    Trump did tell retail executives that tax cuts were coming soon. They are generally opposed to the border tax.

    John Harwood notes that some Senate Republicans are strongly opposed to that linchpin in the House's existing plans that are publicly available.

  6. There's so much cognitive dissonance to deal with.

    Watching Trump and using any sort of logic, there's so much that's not presidential material and is clown-like. He's lacking so many basics, that it's hard to believe...

    ... that Yet voters voted for him and even are mad that these deficits are labeled and the media mentions them. Calling it "denigrating" of him. It's the opposite. He denigrated himself by acting outrageous. More than outrageous, he denigrated himself by acting out, and acting loony, and by using mean-ness. Not being mean so coming up with nasty attacks to share with voters. That's normally happened. But by being mean as a positive value, and something for others to follow. No shame on it at all. THAT's what makes him so different.

    I'm just venting. But it leaves me to the cognitive dissonance. He's so inexperienced he can't step into the job. Yet he's seriously in the position. I keep expecting him to disappear because that would be consistent with the information I can observe. Clown acting people don't get to stay in seriously responsible positions. That's just life. Why isn't it life this time?

    At the same time the market thinks he's great for the economy and that the non-economic risks won't spill over.

    He's too inept to know how to cleverly manipulate as shown by his reactions to various things where a little cleverness would have avoided the problem. Yet he somehow, or his staff, was connected with Russia and he was able to manipulation enough people, that this didn't come out.

    I can't grab enough to figure out what paths make sense investing wise. I'm still in accumulation so I can't be a slow turtle climbing up a ramp to a shelter.

    So that's my position as of today.

    1. LMH: Tomorrow I will publish a question posed to Trump today by an Israeli reporter during the news conference with the P.M. and Trump's full answer.

      I will just quote the question and Trump's first response here:

      Mr. President, since your election campaign and even after your victory, we've seen a sharp rise in anti-Semitic -- anti- Semitic incidents across the United States. And I wonder, what do you say to those among the Jewish community in the states and in Israel and maybe around the world who believe and feel that your administration is playing with xenophobia and maybe racist tones?

      Well, I just want to say that we are, you know, very honored by the victory that we had -- 306 electoral college votes. We were not supposed to crack 220. You know that, right? There was no way to 221, but then they said there's no way to 270. And there's tremendous enthusiasm out there."

  7. Well that was incoherent.

    I look forward to seeing if he ever got close to a reply on the topic.

    You've spilled blood red, paint wildly.

    We got hired and deserve to be here and exceeded expectations in bidding to be here... so don't question us!

    Do I buy gold or liquor? My niece at a young age had the thoughtful idea that you can't do much with gold, but people seem to like liquor, especially if they are upset.

    I look forward to the writeup.

    I listened to the Yellen interview, but didn't hear anything noticeable. Her answer, and it was logical was, we couldn't raise because the economy wasn't hotter. Why couldn't you make it hotter? That's not in our power. But you're raising now. Because it's finally near 2% yes. So why didn't you raise before? All while interrupting her constantly.

    I didn't listen to all of today.

    1. LMH: Gold and liquor might both work.

      I have been discussing gold as potentially one of the best Trump trades. For gold to really shine, chaos will need to move up from the current high levels to extreme with obvious repercussions for the U.S. and/or worldwide economy.

      As I recently predicted, we have seen and will continue to see a number of firsts for a U.S. President.

  8. Goldcorp (own): GG is moving up this morning after reporting better than expected 4th quarter earnings. I own both GG and G:CA:

    Goldcorp Inc.(GG)
    $17.41 Change +0.75 +4.50%
    Volume 1.63m
    Feb 16, 2017, 9:59 a.m

    GG reported net E.P.S. of $.12

    "Gold production of 761,000 ounces at substantially lower all-in sustaining costs ("AISC") of $747 per ounce, compared to 909,000 ounces at AISC of $977 per ounce in the fourth quarter of 2015."

    Gold mining stocks almost never report what I would consider good earnings, but they can report what I would characterize as substantial losses.

    I first discussed the purchase of the Toronto listed shares:

    Scroll To
    5. GOLD:
    B. Bought 50 Goldcorp at C$19.23:

    I then discussed buying GG:

    Scroll to
    5. Continued to Add to Gold Mining Stocks as a Hedge-Impact of Border Adjustment Tax
    A. Bought 50 GG at $16.88 (used commission free trade)

  9. I have published a new post:

    Observations and Sample of Recent Trades (ADX, BIF, NNNPRF, VEIRX): February 16, 2017