Thursday, February 16, 2017

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

The FBI knew about contacts between Russia and Trump advisors prior to the election Trump aides were in constant touch with senior Russian officials during campaign-CNN  The FBI was also aware prior to the election that Russia was attempting to interfere with the election results and kept quiet about it. 

 Donald Trump and his representatives repeatedly denied that his campaign had any contact with Russia. 5 times Donald Trump’s team denied contact with Russia - The Washington Post

 Two days after the election, Russia's Deputy Foreign Minister Sergei A. Ryabkov stated that Russia was in contact with Trump allies prior to the election. Russian Officials Were in Contact With Trump Allies, Diplomat Says - The New York Times Trumps spokesperson Hope Hicks denied there were any contacts. Moscow had contacts with Trump team during campaign, Russian diplomat says - The Washington Post

U.S. wiretaps of Russian intelligence officers and its Ambassador reportedly contradicted the repeated denials of the Trump Administration. 

 Trump latest response is to fall back to his frequent attacks on the failing and Lying Press again: 

"This Russian connection non-sense is merely an attempt to cover-up the many mistakes made in Hillary Clinton's losing campaign."

"Information is being illegally given to the failing @nytimes & @washingtonpost by the intelligence community (NSA and FBI?). Just like Russia"

"The fake news media is going crazy with their conspiracy theories and blind hatred. @MSNBC & @CNN are unwatchable. @foxandfriends is great!"

"The real scandal here is that classified information is illegally given out by "intelligence" like candy. Very un-American!"

Trump was fine when the FBI was leaking information about Hilary to help him win the election.  

 Trump asserted that Flynn was the victim in a press conference yesterday with Israel's PM. After Donald congratulated himself on his amazing victory-again, he made the following observations intended  for the Trump Voters. This kind of rambling garbage will not work on anyone else: 

 “I think he’s been treated very, very unfairly by the media — as I call it, the ‘fake media,’ in many cases — and I think it’s really a sad thing that he was treated so badly. .. People are trying to cover up for a terrible loss that the Democrats had under Hillary Clinton. I think it’s very, very unfair what’s happened to General Flynn, the way he was treated, and the documents and papers that were illegally — I stress that — illegally leaked. Very, very unfair what's happened to General Flynn, the way he was treated".  

 Transcript And Analysis: Trump Hosts Netanyahu, Israeli Prime Minister, At White House : NPR

 Spicer had just claimed that Trump fired Flynn because he could no longer be trusted by him. Donald can not stick to his story line for 24 hours. 



It’s bigger than Flynn. New Russia revelations widen Trump’s credibility gap. - The Washington Post  Trump has no credibility, so it is impossible for him to have a widening credibility gap. He simply has no credibility to lose or to widen.   

 I am not saying here that the Trump campaign cooperated with Russian intelligence to defeat Clinton. All we know now is that the FBI was aware of the Russia efforts during the campaign and were aware of the communications between senior Russian intelligence officers and several members of Trump's campaign. There is no evidentiary link yet between the two and none may be confirmed based on reliable evidence.  
+++++++++++++++

 One question posed by an Israeli journalist to Trump is worth quoting along with Trump's answer.  

QUESTION
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? (emphasis added)

DONALD TRUMP

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.

I will say that we are going to have peace in this country. We are going to stop crime in this country. We are going to do everything within our power to stop long simmering racism and every other thing that's going on. There's a lot of bad things that have been taking place over a long period of time.
I think one of the reasons I won the election is we have a very, very divided nation, very divided. And hopefully, I'll be able to do something about that. And I, you know, it was something that was very important to me.
As far as people, Jewish people, so many friends; a daughter who happens to be here right now; a son-in-law, and three beautiful grandchildren. I think that you're going to see a lot different United States of America over the next three, four or eight years. I think a lot of good things are happening.
And you're going to see a lot of love. You're going to see a lot of love."

 Transcript And Analysis: Trump Hosts Netanyahu, Israeli Prime Minister, At White House : NPR

 'Telephone terrorism' rattles 48 Jewish centers - CNN.com

 Was that Donald Trump or an imposter who says that we are "going to see a lot of love" from him. 
Trump also bragged about his election win in his recent news conference with the Canadian P.M. 

 Trump Brags About Election Win (Again) In Joint Press Conference With Trudeau
He has been taking victory laps since 11/8/16.  I suspect that he will be bragging about his win throughout his term in office and in clearly inappropriate responses to questions on other issues. 

 ++++++++++++

 Influential conservative group: Trump, DeVos should dismantle Education Department and bring God into classrooms - The Washington Post (American Taliban wing of the GOP)

 Hopefully, we can dispense with the science curriculum altogether and have a course just on Creationism with an annual pilgrimage to the creation museum: A. A. Gill on Kentucky's Creation Museum | Vanity Fair; Creation Museum -New York Times. 

 I thought that Sunday school and church were the places to teach religion, but my mind was muddled many years ago with all of the separation of church and state nonsense. 

 We can have a Supreme Leader too, just like they have in Iran, and Donald can be our first one. 

 Donald needs to be given one hour of national TV time every Sunday morning to teach us the good book. First, however, he will need to remove the plastic cover from his bible used in the inauguration and read a few pages. 

 The Curious World of Donald Trump’s Private Russian Connections - The American Interest

 +++++++++

 Andrew Puzder withdrew from consideration as the Labor Secretary within a few hours after Politico posted online Oprah's interview with his former wife who then claimed domestic abuse.  Exclusive: Puzder’s ex-wife told Oprah he threatened ‘you will pay for this’ - POLITICO For some reason that is not clear, Oprah refused to make this video segment available to the news media. Politico gained access since another participant in this show had taped it, kept a copy and provided it to Politico.

 The Administration has issues with women, starting with the President, and why raise a red flag again.

 In case I miss it, please let me know when Donald sues the women for libel who claimed that he made inappropriate sexual advances toward them. One lady has sued Donald for defamation. Apprentice Contestant Sues Donald Trump for Defamation | Time.com

 Donald Trump Libel Threat Clock

 Trump campaign CEO once charged in domestic violence case - POLITICO; Donald Trump’s Campaign Chief, Stephen Bannon, Faced Domestic Violence Charges in 1996 - The New York Times (reportedly, the wife did not show up for Bannon's criminal trial after being threatened so she left town)

 The True Believers could not be happier with Donald and his entourage.

 ++++++++++++

 Donald Trump has only taken questions from the conservative media in the last 2 weeks - The Washington Post

 Why talk to the Lying Press? 

 +++++++

Japan sold a record amount of U.S. treasuries after Trump was elected President.  China has been dumping treasuries as well. Trump’s Asia Threats Risk Treasuries Armageddon - Barron's

 Fortunately, the Federal Reserve is still a major owner of those securities having bought them with money that it created. 


System Open Market Account Holdings - FEDERAL RESERVE BANK of NEW YORK


I continue to move slowly down the ramp leading to my bunker. This process can take time, and I may accelerate my pace soon. 

A. Bought 2 American Express 1.7% Senior Unsecured Bonds Maturing on 10/30/19


Moody's at A2
S & P at A-

 YTM at Total Cost (99.377) = 1.934%

 2016 4th Quarter Earnings 

 I also own 2 American Express 1.55% senior unsecured bonds maturing on 5/22/18 and two 2.25% senior unsecured bonds maturing on 5/5/21.  

 I do not anticipate buying more until the 2018 bond pays off. 


With all intermediate term bond purchases, I am 100% certain that I have the financial wherewithal to hold to maturity and no situational risk will arise that would force me to sell any of them at an inopportune time. I also anticipate buying more when and if the prices decline materially with the proceeds of maturing short term bonds and CDs. 

 It is also important to keep in mind that my cash earns zero in my IB account, almost zero in my Schwab account, and near zero in my Fidelity Government MM fund where the seven day yield has finally risen to .2%. I will likely receive more income from these bonds than from that Fidelity fund during the life of these intermediate term bonds given their significant head start. 

 A. Bought 2 AT & T 2.45% Senior Unsecured Bonds Maturing 6/30/2020


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

 Moody's Baa1
S & P BBB+

YTM at Total Cost = 2.52% 

 2016 4th Quarter Earnings Release 

B. Bought 1 Centerpoint 1.85% General Mortgage Bond Maturing on 6/1/21

FINRA Page:  Bond Detail
Moody's RatingA1 (05/13/2016)
Standard & Poor's RatingA (05/13/2016)
Fitch RatingA (05/13/2016)

 YTM at Total Cost ( 98.236) = 2.28%

I discussed Centerpoint General Mortgage bonds here: Scroll to Item 2 A. Bought 1 Centerpoint Energy 2.2% General Mortgage Bond Maturing 8/1/22

 Fitch Press Release: 1/9/17

 SEC Filings 

 C. Bought 2 CVS 2.125% Senior Unsecured Bonds Maturing on 6/1/21 


 Finra Page: Bond Detail (prospectus linked at Finra Page)
Moody's RatingBaa1 (05/16/2016)
Standard & Poor's RatingBBB+ (05/16/2016)

 YTM at Total Cost (98.316 ) = 2.538%
Current Yield = 2.161%

 D. Bought 2 Sysco 2.5% Senior Unsecured Bonds Maturing on 7/15/21:

Finra Page: Bond Detail (prospectus is not linked here)
Moody's RatingA3 (03/22/2016)
Standard & Poor's RatingBBB+ (03/22/2016)
E. Bought 1 Bank of New York 2.2% Senior Unsecured Bond Maturing on 8/16/23


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

 Credit Ratings: 


Investor Relations | BNY Mellon

 YTM at Total Cost (95.910 ) = 2.892%

A. Sold 100 of ADX at $13.15 and 106 at $13.36
Whenever I decide to pare my stock allocation, any recently bought stock fund is likely to be jettisoned in the process. The 206 ADX shares formerly held in my IB account were bought starting on 10/14/16. The S & P closed that day at 1829 and at 2,316 when I sold 106 ADX in that account, eliminating the position. I still own 107+ in my Fidelity account. 

 Profit Snapshots: 

 I first sold my highest cost lot purchased on 10/24/16 at $12.98. I received a $84 year end distribution for those shares.

 100 Share Lot+ $15.97
2017 ADX 100 Shares +$15.97
I then sold the 100 share bought after the year end ex dividend date at $12.44 (11/30) and the 6 shares bought with the year end distribution paid on the 100 shares purchased on 10/24/16,  which was prior to the ex dividend date

 Profit Snapshot 106 Shares: +$91.02  


IB does not buy fractional shares so part of my year end dividend was paid in cash ($7.32). I will also receive a $.05 dividend that went ex dividend on 2/8 or $5.3.
Total Return = $195.87

Data Date of First Trade (2/2)
Closing Market Price: $13.18
Closing Net Asset Value: $15.7
Discount: -16.05%
Data Date of Second Trade (2/10)
Closing Market Price: $13.36
Closing Net Asset Value: $15.93
Discount: -16.13


The remaining ADX shares were purchased using a commission free trade in my Fidelity account: Item #  5. Reinitiated Position in ADX : Bought 100 at $11.78+ Update For CEF Basket Strategy As Of 2/26/16 - South Gent | Seeking Alpha Those shares may be sold any day now. 

ADX Trading Gains 2014 to Date: $2,876.88

 I have been buying and selling ADX since at least 1984. 


 B. Eliminated the Stock CEF BIF: 

 Profit Snapshot: +$137.25


There was one open market purchase of 100 shares.  The remaining shares were purchased with dividends. 

 Prior Transactions: 

 2016
2016 BIF 300 Shares +$104.12
2013
2013 BIF 200 Shares +$180.07

 Data Date of Trade (2/2)
Closing Market Price $9.05 
Closing Net Asset Value Per Share $11.08
Discount: -18.32%

 Trading Gains to Date: $421.44

C. Sold $1,000 of VEIRX at $70.74

VEIRX Vanguard Equity-Income Admiral Fund 

 I have been pairing my position in this fund since the election in $3K increments. I have decided to change the paring amount to $1K and to pare only after the fund gains $1K in value since my last pare. I have changed the distribution option from reinvestment to cash. 

 The recent rally took the position up $1K quickly. 

4. Continued Paring Recently Bought, Low Yielding Equity Preferred Stocks with Potentially Long Durations:

A. Sold 50 NNNPRF at $22.95: 


Profit: +$32.9

I had one of those odd fills for this 50 odd lot limit order.  

I received one dividend payment of $.2311 per share.

This security was sold to investors at $25 last October. National Retail Properties, Inc. Closes Offering Of Depositary Shares Representing Series F

 Stocks, Bonds & Politics: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks

 Barron's published a recent blog post on REIT preferred stocks: The Case for REIT Preferreds - Income Investing - Barrons.com A new ETF has just been launched that tracks the REIT Preferred Stock Index. InfraCap REIT Preferred ETF  (PFFR)(gross expense ratio is .45). Volume so far has been light.

 Sponsor's Page: InfraCap REIT Preferred ETF

With interest rates rising until mid-December, the first move for this preferred stock out of the gate was down. NNN.PF Stock Chart The shares bottomed near $20.5 in mid-December when the ten year treasury yield rise stalled at 2.6%. The decline thereafter in intermediate and longer term yields provided an opportunity for NNNPRF to bottom and then rise in value. The decline, however, needs to be firmly rooted in an investor's mind. 

 Interest rates did not move up that much over the 2 month period ending in mid-December, yet this security fell by almost 18% quickly or more than the value of three years in dividends.  

 Ten Year Treasury Yields

 12/15/16 2.6%
10/14/17 1.8%
Increase .8%

 While that is a large percentage move, it is nothing much in the larger historical context when both the 1.8% and 2.6% yields are abnormally low. If those rates concern you, maybe you need to study history more.  What will happen when and if the ten year moves to say 6%, which is somewhat about the historical average but still far below high levels that have persisted at times for many years.?


While the ten year treasury hit a stone wall at 2.6% and then fell back in yield, I still believe that it is more likely than not that intermediate and longer term treasury rates will trend up. There is a meaningful possibility that rates will rise faster than the market anticipates. 

 I am consequently in a flipping mode for recently bought fixed coupon equity preferred stocks and exchange traded bonds that have long durations. I do not want much from flipping, maybe one or two distributions and a small profit. I hope over the next few years that I will be able to flip these securities continuously at lower and lower prices, higher and higher yields.  

 Over the past several years, the higher coupon equity preferred stocks have been redeemed at par value by the issuers and replaced with lower yielding ones. Whenever the higher coupon preferred stock is redeemed, it is due to a decline in interest rates that allows the issue to redeem and reissue at a lower cost to it. The owner of the higher coupon preferred stock is left with the par value proceeds and most likely no alternatives to secure the same yield from a comparable security. The owner then has to invest the proceeds into a higher risk security to secure the same yield or accept the lower yielding alternatives. 

 This kind of asymmetric interest rate risk in favor of issuers is present in exchange traded bonds and preferred stocks where issuers have the right to redeem at par value when it is in their interest to do so. Generally, there is only a five year window after issuance preventing an optional redemption. 

 For a security like NNNPRF, the issuer would be happy to allow the owners to keep it during a rising risk environment, when the low coupon is favorable to the company, but the owners are seeing the security going down in price. The unrealized loss in the security can reach levels where it more than offsets the dividend paid by the security, which is not that hard to do when the coupon is 5.2% (.052 x. $25 = $1.3 per annum) 

 National Retail did call for redemption last month is 6.625% series D preferred stock: National Retail Properties, Inc. Announces Redemption

 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
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18 comments:

  1. TENNINDEPENDENTFebruary 16, 2017 at 9:53 AM

    ABX (own): Barrick Gold is moving up this morning in brisk trading:

    Barrick Gold Corp.
    NYSE: ABX
    $20.52 Change +$1.20 +6.21%
    Volume 11.25m
    Feb 16, 2017 10:53 a.m.

    The company reported better than expected earnings after the close yesterday. Adjusted E.P.S. was reported at $.22.

    For 2017, production guidance is 5.60-5.90 million ounces of gold, at a cost of sales applicable to gold of $780-$820 per ounce.

    The company also raised its quarterly dividend from 2 to 3 cents per share.

    http://www.marketwired.com/press-release/barrick-reports-2016-full-year-and-fourth-quarter-results-nyse-abx-2196374.htm

    http://www.marketwired.com/press-release/barrick-announces-dividend-increase-nyse-abx-2196368.htm

    I discussed buying a 50 share lot here:

    Scroll to
    4. GOLD: One of My Hedges Against Nihilism
    A. Bought 50 ABX at $17.92

    http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-recent_4.html

    ReplyDelete
  2. InAvalonFebruary 16, 2017 at 2:14 PM

    "Hopefully, we can dispense with the science curriculum altogether and have a course just on Creationism..."

    TCM is showing the classic film, "Inherit the Wind" starring Spencer Tracy and Frederic March, this month. Well worth seeing (again) as it portrays the attitudes, which appear to persist to this day, of True Believers regarding science, intellectual discourse, and freedom of thought.

    ReplyDelete
  3. TENNINDEPENDENTFebruary 16, 2017 at 5:25 PM

    Cathie: I have seen that movie which is loosely based on the Scopes trial which occurred in my state back in 1925:

    https://en.wikipedia.org/wiki/Scopes_Trial

    ReplyDelete
  4. Land of Milk and HoneyFebruary 16, 2017 at 6:32 PM

    Apparently he followed up with an unhinged press conference today.

    He responded to a question about antisemitism by saying he's the least racist person. Then insulted a black reporter by asking her to set up a meeting that's none of her business by asking if she has friends in the black caucus.

    Yet media is going "I dont' think he's racist but this is sloppy." Why can't people just say the obvious. The man thinks in superficial and generalities, so of course he's racist, antisemitism, anithispanic, antimuslim and anything else that comes in a group. Everyone to him is in a group. After all if YOU are the only thing in the universe, everyone else is just a peg in some group somewhere. Also there's his history of racism at Obama, and the Central Park 5. I could discount his older racism in renting, but not recent statements from him like "he thinks [centeral park 5] are still guilty" after they've been paid millions for being found falsely incarcerated due to improper gov't behavior.

    Oh and before I get to investing directly... Trump didn't misspeak by talking about his huge win in his imagination. He was using the moment to point out that he has a mandate and power, in response to all the recent Russian-related events. Media missed it from what I saw.

    On this:

    Japan sold a record amount of U.S. treasuries after Trump was elected President. China has been dumping treasuries as well. Trump’s Asia Threats Risk Treasuries Armageddon - Barron's

    How does Asian selling of US treasuries effect US fluidity to keep economy going with lending?

    Does Asian selling have other effects on US economy or on the market?

    ReplyDelete
  5. TENNINDEPENDENTFebruary 16, 2017 at 7:59 PM

    LMH: The underlying economic issue is whether demand for treasuries will soak up the growing supply.

    The budget deficits will continue to grow at parabolic rates, creating the need for new and large scale debt offerings in addition to those that are necessary to retire maturing issues.

    If demand declines sufficiently, then treasury rates will have to rise to bring in new buyers.

    China and Japan are the two largest foreign largest nation owners of U.S. treasury debt. The treasury numbers show the downtrend.

    http://ticdata.treasury.gov/Publish/mfh.txt

    Then there is the issue of what the FED will do with its $2.33+ trillion in treasuries. The FED is still reinvesting the proceeds from maturing securities to buy new ones, but that will change.

    When the FED starts to sell some of those holdings and allows other to mature without rolling over, then someone else has to buy that debt. That unwinding process would be occurring when greater and greater amounts of debt need to be sold to pay off maturing bills, notes and bonds and to finance huge new deficit spending.

    At some point, interest rates start to rise for no reason other than the supply overwhelms the demand.

    If that occurs during a period of rising CPI and inflation expectations, the market could then be faced with much higher interest rates than currently anticipated by anyone.

    Overall, I expect many foreign governments and large institutions operating outside of the U.S. will sour on the U.S. in a major way over the next four years. Part of that will flow over into a diminished demand to buy U.S. treasuries; and many will start to question the USD as the reserve currency.

    So, in short, we need China and Japan to buy up our paper in ever increasing amounts rather than decreasing what they already own.

    You might want to bookmark that treasury page listing foreign ownership to keep track of what is happening.

    As to Trump, I view him as the first demagogue elected as the U.S. President. His demonization of the press and his persistent attacks on other democratic institutions like voting are designed to undermine the proper functioning of a democracy. Trump will continue to infuriate about 40% of the voters almost all of the time. Polling is not very accurate so I am allowed to guess. On election day, I would say that about 35% of the population detested Trump and viewed as a pathological liar and an overall disgusting and repulsive human being. I suspect that Trump has gotten than number now up to about 40%. The next 10% will be much harder.

    The question is how voters will react in 2018.

    I suspect that the GOP will continue to hold the Senate and the House unless

    (1) there is a recession

    (2) overwhelming evidence is presented that Trump's campaign cooperated with Russia and the GOP does nothing;

    (3) the GOP has so much infighting that it can not get much of anything done; and/or

    (4) the GOP does so many things that are unpopular that the middle class voter rises up against them in large numbers. An example would be a 20% border tax that is an indirect tax on the middle class who in effect pay for corporate tax cuts by paying more for all imported products.

    ReplyDelete
  6. TENNINDEPENDENTFebruary 17, 2017 at 6:44 AM

    LMH: A young orthodox Jew, Jake Turx, asked his first question ever at a WH Press Conference yesterday. This is the exchange that followed:

    “what we are concerned about and what we haven’t really heard being addressed is an uptick in anti-Semitism and how the government is planning to take care of it. There’s been a report out that 48 bomb threats have been made against Jewish centers all across the country in the last couple of weeks. There are people committing anti-Semitic acts or threatening to——”

    Mr. Trump: “not a fair question.”

    “Sit down,” the president commanded. “I understand the rest of your question.”

    When Mr. Turx tried to speak after Trump claimed to be the "least anti-Semitic person and the least racist person in history, the President said "quiet, quiet, quiet"

    https://www.nytimes.com/2017/02/17/us/politics/trump-press-conference-jake-turx.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0

    Few racists change as they age, so past actions and words are relevant in assessing their real current views.

    Some may become better at hiding it.

    Trump is not one of those people IMO.

    Some will mellow some by the time they hit 70. I do not view Trump as one of those either.

    I have certainly known people who are far more racist than Trump. I personally would say that he is more of a sexist and misogynist than a racist.


    ReplyDelete
    Replies
    1. TENNINDEPENDENTFebruary 17, 2017 at 8:36 PM

      On this topic, the CEO and National Director of the Anti-Defamation League wrote an article asking why Trump shut down this Jewish reporter and simply respond to the question by condemning anti-Semitism.

      "President Trump thinks asking him to condemn anti-Semitism is ‘insulting.’ Why?
      The president's failure to reject hatred is emboldening bigots."

      https://www.washingtonpost.com/posteverything/wp/2017/02/17/president-trump-thinks-asking-him-to-condemn-anti-semitism-is-insulting-why/?hpid=hp_hp-cards_hp-posteverything%3Ahomepage%2Fcard&utm_term=.a2e14bb8f405

      Delete
  7. TENNINDEPENDENTFebruary 17, 2017 at 8:16 AM

    The Bond Ghouls are more befuddled than our President.

    When the government reported some hot CPI numbers, bonds declined in price and rose in yield. Yesterday, most of the decline was erased and the bond rally continues in early morning trading so far today.

    Why? One explanation is that the Bond Ghouls are befuddled and change their moods in what psychiatrists might call a Borderline Personality Order or possibly early onset dementia.

    The rationale given by those who wish to explain their conduct is that the rise in inflation is due to the Y-O-Y spike in energy prices and certain hot core inflation categories that sap consumer spending which in turn will weaken the economy.

    Both theories make a modicum of common sense. Inflation is problematic in several recurring and widespread categories like rising rents that are a major problem for millennials and insurance premiums of all types.

    The bond and gold markets may also be sniffing out the looming disappointments in TrumpEconomics. The 20% border tax would sap consumer disposable income even more while providing corporations with more money that can be spent on increasing dividends and stock buybacks.

    There is also rumblings observable in several stories published by the Lying Press that Trump's grandiose plans are meeting resistance within the GOP.

    I do believe that the enactment of a border tax will result in white middle class voters abandoning the GOP in droves in 2018. I seriously doubt that any of those voters even knew about that proposal in the GOP plans that existed prior to the election. They actually believed that the GOP would cut their taxes. But the border tax is an indirect tax that hits the poor and the middle class the hardest unless the USD rises in value sufficiently to offset the 20% import tax. If that happens, then there would be hatched a plague of other problems.

    The GOP is finding out now that governing is tough while trying to block everything that Obama tried to do is easy.

    They do not have a plan to replace Obamacare. What they presented yesterday was not a plan but a bunch of bogus promises.

    https://www.nytimes.com/2017/02/16/us/politics/affordable-care-act-congress.html

    How are they going to force private insurance companies to continue coverage for those with pre-existing conditions at the same rates provided under current Obamacare plans?

    The government is not even paying now what is owed to private insurance companies under Obamacare since the GOP has cut off funding.

    http://www.latimes.com/business/hiltzik/la-fi-hiltzik-risk-corridor-moda-20170210-story.html



    When and if the republicans come up with one, those who benefit from Obamacare, including those with pre-existing conditions, will likely be royally screwed.

    Many will not believe press reports about the screwing since the GOP has conditioned them to ignore Fake News altogether.


    While the republicans will deny that is true, their rhetoric and false claims will ultimately be rejected by those left out in the cold, which becomes an undeniable fact for them. A few congressional seat losses in 2018 will result in gerrymandered districts on this issue alone.

    ReplyDelete
  8. TENNINDEPENDENTFebruary 17, 2017 at 9:02 AM

    Unilever (own): UN and UL are rising today after Kraft Heinz disclosed that it had make a $143B takeover offer that was spurned by Unilever.

    http://www.cnbc.com/2017/02/17/kraft-heinz-proposes-merger-deal-which-unilever-rejects.html

    I own UL shares with 70 of those share bought in March 2009 at $18.05.

    http://tennesseeindependent.blogspot.com/2009/03/added-to-ulsysco-dupont-mentioned-in.html


    Unilever PLC ADR
    NYSE: UL
    $46.72 Change +$4.15 +9.75%
    Volume 7.81m
    Feb 17, 2017 10:02 a.m.

    http://www.marketwatch.com/investing/Stock/UL

    I last discussed a 30 share UL purchase made at $38.83 in a SA comment dated 11/21/16:

    http://seekingalpha.com/instablog/434935-south-gent/4931695-south-gents-comment-blog-4-reits-preferred-stocks-bonds-regional-banks-healthcare-and#comment-73663301

    I have successfully traded Unilever's stock, primarily the UN class.

    UN and UL are functionally the same shares. UL has a U.K. base and consequently the ordinary shares are priced in British Pence and the U.K. does not levy a tax on the dividends paid to U.S. citizens. UN is based in the Netherlands, so the ordinary shares are priced in Euros and that country will take 15% of the dividend. Historically, that led to UN having a higher price than UL but recently there has been minimal differences which has caused me to shift to UL more.

    UN would not be appropriate in a IRA given the withholding tax which can not be recovered when the security is held in an IRA.

    ReplyDelete
  9. TENNINDEPENDENTFebruary 17, 2017 at 1:58 PM

    To correct a brain misfire in the prior comment, it was UL that historically had the higher price rather than UN due to the absence of a withholding tax.

    ++++++++


    I turned on CNBC for my regular 1 minute per day viewing and saw the President who is back on the campaign trail.

    Perhaps, Trump needs to focus more on his legislative agenda, but campaigning is probably more fun for him.

    Trump is out whipping up the voters who are already with him while growing and nurturing the opposition every day.

    +++++

    There were a number of Democrats who voted for the 2001 and 2003 Bush tax cuts.

    2001 Senate: https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=107&session=1&vote=00170

    The 2003 Senate Vote was closer but 3 Democrats did join the republicans (51 with 3 DEMs to 49 DEMs)

    https://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=108&session=1&vote=00179


    It might be suicide for any Democrat to support DT now (primary challenges).

    That simply means that the GOP can not lose more than 2 votes in the Senate, assuming they first get around a filibuster.

    Many of the GOP senators are opposed to various parts of the House's proposed tax changes, particularly the border tax linchpin.

    E.G.

    http://thehill.com/policy/finance/318683-gop-senator-urges-rejection-of-border-tax-proposal

    I could see at least 5 and probably more GOP senators unwilling to swallow that potentially toxic to them House proposal.

    Over time, the border tax may create more U.S. jobs than without it, but there would be costs. The border tax could cause a loss of jobs if it sparks a trade war.

    Even if there is no trade war, there would be other negative costs.

    The prices paid by consumers for everyday products would rise due to the tax itself and to higher cost of goods due to U.S. production. I seriously doubt the USD would rise anywhere close to offset the tax.

    With consumer personal expenditures accounting for about 70% of the economy, interest rates would rise due to the inflationary impacts of the border tax.

    The Fed would likely start taking away its punch bowl.

    Depending on the inflationary impact, the FED may raise the FF rate so much that a recession results, as it has in the past which leads to job losses.

    Consumers also have to pay more interest on their credit card debt and new mortgages that may slow down or even reverse the housing recovery that will cost jobs.


    White middle class voters cast their votes for republicans who support the border tax without having a clue about the impact on their pocketbook.

    In the end and with exceptions, people usually get what they deserve and that would include countries as well.

    ReplyDelete
  10. TENNINDEPENDENTFebruary 17, 2017 at 4:18 PM

    Closing Price 2/17/17

    Unilever PLC ADR (UL)
    $ 48.53 Change +5.96 +14.00%

    Other consumer product companies had bad days:

    Campbell Soup Co.
    NYSE: CPB
    Today's close $ 58.48
    Change -4.07 -6.51%

    General Mills (GIS)
    Today's close $ 59.23
    Change -2.31 -3.75%

    Those two companies were possible Kraft Heinz targets. As I mentioned when I sold CPB recently, the then current price could not be justified by earnings but was pricing in part a potential takeover premium from Kraft.

    CPB reported today adjusted earnings of $.91 for its second fiscal quarter, beating the expectation of $.88. Revenues were reported at $2.17B vs. the consensus estimate of $2.2B. Revenues in its fresh division fell by 8%.
    The company maintained its adjusted E.P.S. estimate for the fiscal year at $3.09.

    http://www.businesswire.com/news/home/20170217005068/en/Campbell-Reports-Second-Quarter-Results

    The quarter included a $147M impairment charge "to reduce the carrying value of the intangible assets of the Bolthouse Farms carrot and carrot ingredients reporting unit."

    "Organic sales decreased 2 percent driven by lower volume and higher promotional spending."

    I am not interested in even buying back my recently sold 30 shares near the current price. Possibly, I will consider buying $50, preferably between $45 and $50.

    Scroll to
    3. Continued Paring Stock Allocation in Response to Valuations and Overly Optimistic Near and Intermediate Term Future Earnings Projections:
    B. SOLD 30 CPB at $62.86
    http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-recent_4.html

    I did not do anything with my UL position. The stock went ex dividend on 2/8.

    I will be looking at GIS more closely when and if the price falls to below $55.

    I thought the stock was too expensive when I sold my remaining shares at $60.36 back in March 2016:

    Scroll to

    1. Sold 52+ GIS at $60.36
    Profit Snapshot: +$1,285.31
    http://seekingalpha.com/instablog/434935-south-gent/4866986-update-portfolio-positioning-management-4-1-16

    ReplyDelete
  11. Y2000February 17, 2017 at 7:07 PM

    South Gent,

    I was researching FSC and went back to your 12/17/2014 blog to reread your assessment of BDC's. Are BDC's in a better shape now that the sector had gone through some consolidation and the recession is not imminent?

    ReplyDelete
    Replies
    1. TENNINDEPENDENTFebruary 17, 2017 at 8:00 PM

      Y: I am selling the few remaining BDCs into the current rally. I am down to owning 50 shares of TPVG, 100 shares of SCM, and 50 shares of SUNS.

      TPVG and SCM were recent buys and I have sold into this rally 50 TPVG and 100 SCM.

      I also own a few shares of BDCL which is now near break-even on the price given the dividend reinvestments at lower prices but positive on the total return given the extremely high dividend yield.

      2. Sold 100 of 200 SCM-A Small Cap BDC:
      http://tennesseeindependent.blogspot.com/2017/01/observations-and-sample-of-recent_12.html

      The other 100 share lot was bought at $11.37 on 12/8/16 using a commission free Fidelity trade. Fidelity's rating system gives that one a 9.3 rating.

      I discussed selling 50 TPVG here:

      3. Sold 50 of 100 the BDC TPVG at $12.33:
      http://tennesseeindependent.blogspot.com/2017/01/observations-and-sample-of-recent_16.html

      In that post, I have a snapshot of my remaining lot which was bought at $10.61 using a Schwab commission free trade on 11/7/16.

      The purchase of 50 shares of SUNS was made in October 2016 and discussed here:

      1. Bought 50 SUNS at $15.06
      http://seekingalpha.com/instablog/434935-south-gent/4438086-update-portfolio-management-positioning-10-16-15

      I recently discussed eliminating ARCC and PSEC here.


      2. Continued Reduction in Stock Allocation:
      A. Eliminated ARCC: Sold Remaining 50 ARCC
      http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-recent_15.html

      My remaining BDC positions are on my list for disposition. The only question is when.

      You know my opinion about BDCs. I do not like them, but that does not keep me from buying a few shares. FSC was tossed at a loss since I saw no prospect of realizing a profit on the shares. I may have come close to break-even with the dividends. I checked the loss and it was close to $300. I have not looked at it since I sold out. I only recall now being disgusted with the company.

      I am in a profit taking mode now and am moving into my bunker. BDCs which I do not like anyway will not be bought now and what I own will be part of my stock allocation reduction.

      There are some tangible reasons for the rally. The economy does look good now, notwithstanding Trump's comment yesterday that he inherited a mess. He may turn it into a mess however.

      The rise in short term rates will trigger increases in the loans based on Libor spreads, a topic discussed in the preceding linked posts. Most of the Libor floors will be a 1% and the 3 month Libor rate is just shy of 1.06%:

      http://online.wsj.com/mdc/public/page/2_3020-libor.html?mod=mdc_bnd_pglnk

      When the FED raises the FF rate by .25%, that will cause the Libor rate to increase more and loans based on a spread to Libor with no greater than a 1% Libor floor will increase as well. The same kind of higher rate resets occur in the senior secured bank loan fund that I discuss in this post:

      4. Possible Play on Rising Short Term Rates:
      A. Bought Back 50 BKLN:
      http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-recent_15.html


      However, the cost of borrowing will be going up too and the competition for loans still appears intense.

      Another potential problem is that one of the GOP tax plans eliminates the deductibility of corporate interest payments. That would be very bad if enacted for the high risk and high leveraged borrowers who receive these bank loans.

      https://www.bloomberg.com/news/articles/2016-12-16/republican-tax-reform-seen-shrinking-u-s-corporate-bond-market

      When you actually look under the hood of the GOP's tax plan as it now exists, it is scary in many ways.

      Delete
  12. TENNINDEPENDENTFebruary 17, 2017 at 8:39 PM

    This is the most disgusting statement made by an American President in my lifetime:

    "The FAKE NEWS media (failing @nytimes, @NBCNews, @ABC, @CBS, @CNN) is not my enemy, it is the enemy of the American People!"

    https://twitter.com/realDonaldTrump?ref_src=twsrc%5Etfw

    ReplyDelete
  13. InAvalonFebruary 17, 2017 at 9:11 PM

    NPR has an article about Trump's "rebranding" of the term "fake news," in an ongoing effort to undermine the press:
    http://www.npr.org/2017/02/17/515630467/with-fake-news-trump-moves-from-alternative-facts-to-alternative-language

    ReplyDelete
  14. Y2000February 17, 2017 at 10:24 PM

    South Gent,

    I just checked that I still have 9 BDC's, among which the worst performers are FSC and GECC (which bought FULL) and the better (positive but not great) ones are PNNT and TCRD. The severe losses of FSC and GECC are softened somewhat by their nice dividends. I glanced the 10 year charts of these BDC's and it seems that 2016 is a BDC trough after the one during the 2009 Great Recession. However, S&P BDC index is less clear in giving any signal. Wells Fargo BDC Index only began in 2011, but interestingly it is at all time (6-year) high.

    ReplyDelete
    Replies
    1. TENNINDEPENDENTFebruary 18, 2017 at 9:10 AM

      I went back to my post discussing a 50 FSC share purchase. It was made on 12/14/14.

      I wanted to get the day of my purchase to run a total return calculation assuming I reinvested the dividends and still owned the shares.

      The total return was a -24.18, so that one would not have worked on a total return basis.

      https://www.dividendchannel.com/drip-returns-calculator/

      Delete
  15. TENNINDEPENDENTFebruary 19, 2017 at 2:18 PM

    I have published a new post:

    "Observations and Sample of Trades (UMPQ, GMTA, GJO, DLRPRI, MRK): 2/19/17/ Trump The Classless/Trump as the Victim of a Fake News Conspiracy"
    http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-trades-umpq.html

    ReplyDelete

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