Observations and Sample of Recent Trades (SGY:CA-ZPTAF, VWELX, BIREF): 2/24/17/GOP and Healthcare/ Economic Nationalism = Nihilistic Protectionism

The GOP and Medicare: 

For the past several weeks, I have seen an AARP advertisement that is a video clip showing Trump promising to protect Medicare. 

Protect Medicare - YouTube

The GOP wants to get rid of Medicare in its current form. Paul Ryan is leading the charge: Paul Ryan's Health Care Plan Would Privatize Medicare-NPR; Paul Ryan is determined to kill Medicare. This time he might succeed. - LA Times;A Battle to Change Medicare Is Brewing, Whether Trump Wants It or Not - The New York Times

The GOP almost unanimously voted for a Ryan voucher plan in 2011 that would have doubled premium costs in 2022 for those then under 55.  Those numbers come from the CBO: Figure 1 at page 3

Their 2011 plan did contain more tax cuts for the wealthy in what was then called the GOP's Path to Prosperity and is now called Make America Great Again. The Achilles Heel Of The Path To Prosperity | New Republic

There would be justice given to the Trump middle class white voters when and if the GOP succeeds in replacing traditional Medicare. The rich do not need Medicare. Medicare is a program for the middle class that was signed into law in 1965. 

While more Democrats supported the Medicare's passage than Republicans, the plan did receive meaningful republican support: 

Social Security History

The republican party was far different then compare to where it is now.

The GOP is not a conservative party, and we need to quit humoring them with that label. 

My advice to the GOP is to leave your desire to dismantle Medicare on the backburner until you are able to pass your "tax reform" legislation and your "replacement" for Obamacare that will provide "better coverage" at a "lower price". If you remind people about your plans for Medicare when attempting to repeal Obamacare, you will regret your decision. 

GOP Plan Would Cover Fewer People; Blowback Grows - Bloomberg (giving people a tax credit to buy health insurance will not help those who pay no or a nominal amount of federal income taxes-45% of Americans pay no federal income tax)

Cancer patients, survivors fear GOP efforts to dismantle the Affordable Care Act - The Washington Post

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GOP's Hit List: 

In the coming weeks, those who support the following programs that receive some federal funding may want to keep abreast of GOP efforts to eliminate or severely cut their federal funding. 

Planned Parenthood of course is at the top of that list. The GOP shut down the government due in part to the Democrats' unwillingness to defund that organization. Funding will now be cut off. 

Other programs on the GOP hit list include the following: 

Corporation for Public Broadcasting
National Endowment for the Arts and Humanities
Legal Service Corporation 
AmeriCorps and SeniorCorps 
Export Import Bank
Neighborhood Reinvestment Corporation 
Appalachian Regional Commission 

Popular Domestic Programs Face Ax Under First Trump Budget - The New York Times

AmeriCorps | Corporation for National and Community Service
Senior Corps | Corporation for National and Community Service
LSC - Legal Services Corporation: America's Partner for Equal Justice
CPB | A Private Corporation Funded by the American People
Home - NeighborWorks America
Home - Appalachian Regional Commission

None of those programs help rich people. Making rich people richer is the GOP's key to making America great again, but don't say that out loud since the middle class might not be so anxious to support the GOP's trickle down policies and elimination of programs intended for the poor and/or the middle class.

The GOP has been trying to eliminate funding for many of those programs since 1994. Now they are in the driver's seat to do so.

Funds spent on those programs can then be redirected into building the GOP's wall.  

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Protestors at GOP Town Hall Meetings Are Paid Liberal Activist According to Trump's GOP

They are going to be a lot of upset people who will lose their healthcare when the GOP is finished with them. Many of them receive premium support payments and/or were unable to afford health insurance due to pre-existing conditions. 

Rather than accepting that a significant number of people are upset and concerned about what the GOP will do them, and their concerns are legitimate, many GOP politicians are avoiding Town Hall meetings or are claiming that those who show up to express their feelings and concerns are paid protesters. 

Trump explains those protests to Trump Nation as follows: 

"The so-called angry crowds in home districts of some Republicans are actually, in numerous cases, planned out by liberal activists. Sad!"

At one GOP Sen.'s town hall, protesters scoff at "paid" allegations - CBS News; Contrary to claims, backlash against GOP lawmakers at recent town halls appears organic - MarketWatch

The Alternate Fact Guy, Sean Spicer, said they were a “'very paid, AstroTurf-type movement.” Sean does not talk so good. 

Everybody who disagrees with Donald is a so-called something or another.

No criticism of the Orang King is legitimate in his mind. Just another of the many highly undesirable traits of someone suffering from acute narcissistic personality disorder.

Narcissistic personality disorder Symptoms - Mayo Clinic

As with other GOP Fake News, no proof is offered that this has in fact occurred anywhere. 

Given the GOP's agenda, it is inevitable that citizens will show up at town hall meetings and elsewhere who have legitimate concerns. 

Other republicans claim that George Soros is financing just about all of those protesters. Proof is not required when the GOP creates Fake News. GOP Reality Creations are the New Normal. It does work for them and will continue to do so.

George Soros paid Women's March protesters, say 1 in 3 Trump voters: Poll - Washington Times; Chaffetz Claims Town-Hall Protesters Were Paid Outsiders;

Politfact is wasting its time giving that claim a Pants on Fire rating: Pants on Fire claim that George Soros money went to Women's March protesters | PolitiFact 

The people who make those charges are immune to reason and have been inoculated against receiving and processing accurate information.   

An example is a young faux blonde "reporter" who claims that George Soros funded the Women's March since he made charitable contributions to Planned Parenthood.  

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Sean Spicer-The Alt-Fact Guy In An Alternate Reality Universe: 

White House calls U.S.-Mexico relationship 'phenomenal' as Mexican leaders lash out - POLITICO

Tillerson, Kelly head to Mexico amid deep strains in bilateral ties - The Washington Post

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Maximum Optimism in the Stock Market: 

Goldman Sachs opines that investors are approaching the point of "maximum optimism". I would argue that that they have already arrived. Investors may be banking too much on Trump lifting earnings - MarketWatch

I am continuing to move slowly down a long ramp into my bunker.
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Vanguard - Vanguard Health Care Fund Investor Shares (VGHCX)

I did add $2,350 to my VGHCX position starting on 12/27/16 and into January 2017. 

The fund paid another large year end distribution that resulted in lower prices. 

I reinvested the year end dividend to buy more shares at $185.65 (12/23/16). 

Healthcare stocks in the aggregate underperformed the S & P 500 in 2016. 

The Vanguard Health Care Index Fund ETF (VHT) had a total return of  -3.21% last year.

The SPDR® S&P 500 ETF (SPY) has a total return of 12%.

I own VGHCX shares in two Vanguard accounts. 

I may eliminate the position in one account, which has the higher cost shares, in March provided the shares continue their uptrend in price. That would be part of my ongoing stock allocation reduction
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The GOP's Economic Nationalism = Nihilistic Protectionism/Mercantilism: 

I do not understand why investors are ignoring the protectionist talk originating from Trump and the SS Soul Brothers, Steve Bannon and Steve Miller.  

Bannon and Trump are clearly pursuing a protectionist agenda with a strong nihilistic flavor. 

Existing trade agreements are just one area where Bannon and Trump want to blow up the current world order, create a lot of chaos in the existing world trade arrangements,  and then substitute their America First agenda. 

Bannon has a new name for protectionism and 17th century Mercantilism,

Bannon calls protectionist trade policies  "economic nationalism", which does sound better than protectionism. 

Bannon and Trump are not going to fool America's trading partners with a new phrase for a policy that has failed in the past. 

I have referred many times over the past several months to Trump's seriousness on the trade issues. I simply refer to his frequent speeches and remarks that are crystal clear on this subject for anyone paying attention which of course excludes the Stock Jocks.  

I will just link a transcript of Bannon's remarks yesterday on this subject: CPAC: Steve Bannon and Reince Priebus' Interview Transcript | Time.com; Steve Bannon Touts Trump's 'Economic Nationalist Agenda' - NBC News

For some reason, Bannon and Trump believe that the U.S. can push other countries around to sign new bilateral trade agreements that disadvantage them while bestowing new benefits on the U.S. We shall see how that works out soon enough.  

On Trade, Donald Trump Breaks With 200 Years of Economic Orthodoxy - The New York Times

I thought republicans liked Adam Smith.

Pooh on that guy:

Donald Trump's mercantilist trade policy was debunked by economist Adam Smith more than 200 years ago — Quartz

Steve Bannon is not a conservative. He is the antithesis of a true conservative. He is an extreme reactionary bomb throwing nihilist. The voters chose him and that other guy. So, IMO, the U.S. deserves what happens next. We need to pray that the Stock Jocks are seeing the future correctly rather than hallucinating again.

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Other News: 

FBI refused White House request to knock down recent Trump-Russia stories - CNN; White House adviser asked FBI to dispute Russia reports - The Washington Post

I now want to know whether the FBI had contacted the White House and told them that the NYT report was not accurate. The WH is making that claim now to explain why Priebus tried to put political heat on them to go public about their ongoing investigation.  

White House Staffers Dismissed, Failed Background Checks - NBC News

White House hints at crackdown on recreational marijuana | TheHill; Trump administration signals a possible crackdown on states over marijuana - LA Times

Air Force Stumped by Trump's Claim of $1 Billion Savings on Jet - Bloomberg

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1. Intermediate Term Bond Ladder Strategy-Underweighted

A. Bought 1 Northern States 2.15% First Mortgage Bond Maturing on 8/15/22:

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

Moody's Rating	Aa3 (01/31/2014)
Standard & Poor's Rating	A (08/08/2012)
Fitch Rating	A+ (12/22/2016)

YTM at Total Cost (98.417) = 2.459%

Northern States Power is an electric utility that is wholly owned by Xcel Energy (XEL).   

The prospectus for this first mortgage bond has two basic modifications to a standard make whole provision:

First, the issuer may redeem on or after 7/15/20 at par value plus accrued interest.

"At any time on or after July 15, 2020, we may redeem, in whole or in part, the 2020 Bonds, at 100% of the principal amount of the bonds being redeemed plus accrued and unpaid interest thereon to but excluding the date fixed for redemption."

I doubt that the issuer will find it advantageous to exercise its optional redemption right a par plus accrued interest on or after 7/15/20. The coupon is just too low. The below par value price of this bond supports that opinion. 

The prospectus also shows the costs related to the issuance of the 2022 bond. Underwriters receive part of the proceeds through their underwriting discount, and the issuer has other costs connected to offering too: 

Second, there is a make whole provision for a redemption prior to 7/15/20, but the bond owner only receives the remaining interest payments discounted to present value as if the bond matured that day. 

"At any time prior to July 15, 2020, we may redeem, in whole or in part, the 2020 Bonds at a “make whole” redemption price equal to the greater of (i) 100% of the principal amount of such bonds being redeemed or (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the bonds being redeemed that would be due if such bonds matured on July 15, 2020 (excluding the portion of any such accrued and unpaid interest to but excluding the date fixed for redemption), discounted to the date fixed for redemption on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Yield (as defined below) plus 10 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date fixed for redemption." 

Those exceptions to a standard make whole provision are for the issuer's benefit.  

Xcel Energy SEC Filings

Xcel 2016 4th Quarter Earnings Report 

B. Bought 2 Tampa Electric 2.6% Senior Unsecured Bonds Maturing on 9/15/22:

Tampa Electric is now owned by the Canadian utility company Emera Inc. (EMA:TOR) as a result of its acquisition of TECO Energy: Emera Closes Acquisition of TECO Energy ("Tampa Electric serves nearly 725,000 customers in West Central Florida")

Vital Statistics - Tampa Electric

I bought one bond in a Roth IRA and another in my IB account where there has been a significant cash buildup. I earn zero on idle cash in that account. That is one of several reasons IMO why IB is able to offer low commissions. 

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

Moody's Rating	A3 (07/06/2016)
Standard & Poor's Rating	BBB+ (09/22/2012)
Fitch Rating	A- (05/05/2016)

Taxable Account YTM at Total Cost (98.419) = 2.909% 

Roth IRA Account YTM at Total Cost (98.517) = 2.887%

Make Whole Provision: Page S-13

The company can redeem at par plus accrued interest on or after 6/15/22 (up to 3 months prior to maturity) 

I have discussed Emera in connection with purchases of its reset equity preferred stocks: 

C. Bought 1 Federal Realty 2.55% Senior Unsecured Maturing on 1/15/21:   

Finra Page:   Bond Detail

Moody's Rating	A3 (11/30/2015)
Standard & Poor's Rating	A- (09/21/2015)
Fitch Rating	A- (10/07/2016)

YTM at Total Cost (99.945) = 2.565%

Fitch Affirms Federal Realty Trust's IDR at 'A-'; Outlook Stable (10/7/16)

Issuer's Stock Price Quote:  Federal Realty Investment Trust (FRT)

Analyst Estimates: FRT Analyst Estimates

FRT SEC Filings

FRT 2016 Annual Report

2016 4th Quarter Report

I may buy more of this 2021 FRT senior unsecured bond when and if the price declines materially due to a rise in interest rates. I am not currently concerned about credit risk. As with other intermediate term bonds that I own, the main issue IMO is the category of interest rate risk that I call the risk of lost opportunity. I do not face interest rate risk that might arise by the need to sell one of these bonds at an inopportune time that results in a negative total return.

2. Short Term Bond/CD Ladder Basket Strategy 

A. Bought 1 Bank of India .65% CD Maturing on 5/25/17: 

B. Bought 1 Bank of India .8% CD Maturing on 8/23/17 

C. Added 1 UST 7/31/17 .5%

This brings me up to 3 bonds in my Schwab account and 4 altogether. 

D. Bought 3 State Bank of India .65% CDs Maturing 5/30/17

E. Added 2 UST .5% Maturing on 7/31/17 (1 each in two accounts)

I own 4 of this U.S.T. issue. 

F. Bought 3 Enterprise Bank and Trust .6% CDs Maturing on 8/19/17: 

G. ADDED 1 UST .625% Maturing on 8/31/17

H.  Cluster of Maturities 5/1/2017 through 8/31/17 

The underlying premise of this cluster is that there will be one .25% FF increase on or before the FED's meeting on July 25-26, but I do not know which of the 4 meetings that will happen.  

FRB: Meeting calendars, statements, and minutes (2012-2017)

Stocks, Bonds & Politics: Short Term Bond Ladder: Clustering Maturities Near FED Meetings Where Increase in FF Currently Expected

There are numerous maturities outside of the clusters. The purpose of the cluster is to have a higher weighting during time frames when the FED may raise the federal fund rate. If the increase occurs, I will have funds from maturing securities to invest at higher short term rates.

An increase is possible but not likely in March. According to a Bloomberg calculation, as noted by Randall Forsyth in his Barron's column, the odds of a .25% hike in March have increased to 44%, doubling over the past two weeks. I do have some maturities in March and April.  

The most likely time is June meeting IMO. I do not believe the FED will wait until September.  

If there is no rate increase at the March meeting, then I will not reinvest the proceeds from maturing securities in May through July 26th until there is a .25% rate increase announcement.  

If the increase comes in March, then the proceeds will be reinvested into short and intermediate term bonds, as well as short term CDs, as they are received. 


SU= Senior Unsecured; U.S.T. = United States Treasury
  
2 Trustmark CD .6% 5/2/17
2 State Bank of India CD .65% 5/3/17  
2 MidAmerican Energy 1.1% SU 5/15/17
2 Peoples Savings CDs .55% 5/17/17
3 Citizens Bank PA CDs .65% 5/22/17
2 Citizens Bank CDs .65% 5/22/17
1 Bank of India CD .65% 5/24/17 
1 Bank of China CD .7% 5/15/17
2 Disney .875% SU 5/30/17
1 WFC 1.15% SU 6/2/17
2 FNB .6% CDs 6/5/07
1 Banc of California CD .8% 6/14/17
1 U.S.T. .635% 6/15/17 (auction)
2 Lakeside Bank .55% CD (monthly interest) 6/19/17
2 MMM 1% SU  6/26/17
1 U.S.T. .625% 6/30/17
2 People's United .7% CDs 7/11/17
2 Synovus CDs .75% 7/19/17
2 Guilford Savings CDs .65% (monthly interest) 7/24/17
1 U.S.T. .61% 7/27/17
1 U.S.T. .625% 7/31/17
4 U.S.T. .5%  7/31/17 
1 Bank of N.C. .7% CD 7/31/17 
3 Enterprise Bank & Trust CDs 8/9/17
1 Bank of China .8% CD 8/15/17
2 HBAN .8% CD  8/15/17
1 Southern 1.3% SU 8/15/17
1 CAT 1.25% SU 8/18/17
1 Bank of India .8% CD 8/23/17 
2 Merrick Bank .7% CD (monthly interest) 8/28/17 
3 U.S.T. .625% 8/31/17

Principal Amount = $54K 

One of my basic income strategies is to receive a constant flow of dividends and interest payments. 

When the market crashes again, and it will, I will invest that cash flow in whatever then looks appealing to me. I will not make pre-judgments as to what those securities may turn out to be. 

The short term bond ladder basket adds to that potential reallocation to smashed securities through a constant flow of maturities throughout each month. 

I am starting to fill out 2019 more, using mostly proceeds from stock and stock fund dispositions.       

I.  Sold 2 Aetna 1.9% SU Maturing 6/7/19 and Bought 2 WFC 1.1% CDs Maturing on 4/2/18 That Make Monthly Interest Payments:

 Aetna called this bond at 101: 

Sold at 101.034 or 100.902 after a $2 brokerage commission. I thought that 101 price was a little low since the prospectus contains a standard make whole provision.  

I received $7.81 in accrued interest and made a $21.58 profit on these bonds bough last December: 

YTM at 101.034 = 1.436%

CD PURCHASE: 

J. Bought to FNB of PA. .6% CDs Maturing on 6/5/2017

3.  A Tiny, TINY Rotation into Canadian Energy Producers: 

A. Canadian E & P Lotto Tickets-Bought 100 Surge Energy at C$2.81 and 100 ZPTAF at $2.13

ZPTAF is the USD priced Surge Energy ordinary shares that trade in the U.S. Grey Market. I used a commission free trade to buy that 100 share lot. 

Website: Surge Energy Inc.

Quote Surge Energy Inc  (SGY:TOR) - MarketWatch

Surge Energy Inc. Confirms February 2017 Dividend - Feb 15, 2017

Surge Energy Inc. Announces Intended 15 Percent Increase to its Dividend - On Growing Production Volumes and Free Funds Flow - Feb 8, 2017

Surge Energy Inc. announces upward revision to 2017 production guidance - Dec 13, 2016

2016 3rd Quarter Results.pdf

December 2016 Analyst Presentation

B. Bought 50 BIRCF at $5.73 (commission free trade):

BIRCF is the USD priced ordinary shares that are traded on the U.S. pink sheet exchange.

Closing Prices 2/24/17:

Birchcliff Energy Ltd (BIREF:OTC)---$5.7403 -$0.1132 -1.93%
BIR.TO 7.58 -0.08 -1.04%

The greater percentage decline for the USD priced ordinary shares was due to a decline in CAD's value against the USD. The CAD/USD has been weak since the summer of 2014.  The exchange rate on the day of purchase was about .76 (C$1 buys USD 76 cents)

I lost money on my last round trip trade in Birchcliff so I am more hesitant now to buy shares. Buying a 100 share lot in November 2014 turned toxic due to the Infamous Double Whammy, the collapse in energy prices and the free fall in the CAD/USD exchange rate that flows into the USD priced ordinary shares.

I discussed that less than optimal purchase here: Natural Gas Super Cycle: Bought 100 Birchcliff Energy Ltd. (BIREF) At $9.7547 - South Gent | Seeking Alpha (11/19/14 Post)

I still believe in the natural gas super cycle, but I was early then and may be early now. I did say in a comment to that post that it would be best to leave these small investments alone where I am playing a long term cycle. I need to drill that deeper into my brain.

Company Website: Birchcliff Energy

Our Operations

Company Presentation February 2017

2016 Year End Reserves and Results.pdf

4. Continued Paring Stock Allocation:

A. Eliminated Vanguard Wellington Fund

Quote: Vanguard Wellington Fund-Investor Class (VWELX:MFD)

Profit Snapshot: 143+ Shares +$456.93

Dividends were used to buy additional shares.

I initiated my position with a purchase in 2013: Item # 2 Initiated Position in Vanguard Wellington Fund (VWELX) 

I added to the position slightly in 2014: Item # 3  Added $500 to VWELX at $37.78 

This is a balanced fund. Vanguard - Vanguard Wellington Fund Investor Shares

As of 1/31/17, the weightings were 65.68% in stocks, 32.12% in bonds and 2.2% in short term reserves.

I do not anticipate that the bond allocation will produce positive real returns over the next 1, 5 and 10 years which is one reason for selling this small position. Another reason is my opinion that stock valuations are frothy.  

Is the Stock Market Cheap? - dshort - Advisor Perspectives

I am deeply rooted in value and income investing using traditional and time tested valuation criteria.

I am not going to change.

That innate personality characteristic has served me well: buying in 1982, selling in 1998-2000 (total stock allocation reduction) and buying in March 2009 and thereafter. My dominant investment objective now is capital preservation. I know from experience that both the stock and bond markets can have simultaneous long term secular bear markets. The last time this occurred was between 1966 to August 1982.  That episode will repeat itself in a similar way (perhaps shorter or longer, deeper or shallower). The only question is when.

The proceeds went into the Vanguard Prime MM Fund which currently has a .79% yield. I will park the money there for awhile since I am just fine with that yield now when I make the reasonable assumption that the yield will be rising in the months ahead. 

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