Saturday, February 4, 2017

Observations and Sample of Recent Trades (RMT, CPB, ABX): February 4, 2017

I am continuing to move slightly deeper into my bunker mode as I wait for incoming. 

That simply means that I am slowly paring my stock allocation on a net basis. I am continuing to buy in selected areas, with the most of the buys being in the precious metal, energy and healthcare sectors. The net reduction last week would be in the neighborhood of $10K. 

My Vix Model is heavily into green territory at the moment. A Stable Vix Pattern formed in July 2016. That will slow down paring in and of itself along with SPX being above its 50, 100 and 200 day SMA lines.  S & P at 2,297.42

I explored some of the reasons why a SVP formed so quickly after the August 2015 Trigger Event here: 

 Update For Portfolio Positioning And Management As Of 7/24/16 - South Gent | Seeking Alpha

A Trigger Event In The Vix Asset Allocation Model 8/31/15 - South Gent | Seeking Alpha

In the past, I have talked about using the Model along with more traditional market internal measures like the 200 day SMA line. Under one such approach, a significant reduction occurs when three conditions are met: (1) the S & P 500 pierces to the downside its 200 day SMA line by 5%; and (2) the Vix Model has flashed a Trigger Event and (3) the market is in the first Recovery Period after the Trigger Event.  

A sample of that kind of discussion can be found near the end of this post: Vix Asset Allocation Model - South Gent | Seeking Alpha

I will start selling when none of those conditions and one or more of the following conditions are present: (1) excessive valuations based on traditional measures (2) what I view as the market's unrealistic predictions about the future, and (3) fast parabolic spikes up in price. All of those conditions are evaluated in the context of my dominant capital preservation objective and a lack of situational risks-unless I manage to destroy a large portion of my capital through taking unnecessary risks. Then, I might create situational risk. 

I still own a lot of stocks and stock mutual funds. 

I am lightly paring some individual stock positions that are view as overvalued, a few stock CEFs and ETFs and periodic reduction in the Vanguard Equity-Income Admiral Fund (VEIRX) as the market hits new highs. I normally concentrate more on stock funds rather than individual stocks when reducing a stock allocation. 

The current allocation shift is primarily out of low yielding money market funds in two taxable accounts and into short term bonds and CDs and intermediate term bonds. 

Fidelity has limited its individual customers to two low yielding funds. The highest yielding of those two funds has a current seven day yield of .2% and a weighted average maturity of 75 days. SPAXX - Fidelity ® Government Money Market Fund | Fidelity Investments The expense ratio is .42%. Fidelity charges me over twice as much as I receive from them. That does not compute to the Old Geezer.  

Given the yields on long duration bonds and their interest rate risks now, I am not going to use significant amounts of idle cash to buy more. I will engage in light purchases as part of a normal trading strategy where I buy the dips and sell the highest cost shares into rips, wait and then buy back what was sold at a lower price than the remaining shares that are kept.   


I usually remember to take a snapshot showing the consensus GAAP and non-GAAP forecasts for the S & P 500 as of 12/31. 


2015 Estimates as of 12/31/14

Actual 2015:  Quarter/S & P Close/Non-GAAP/ GAAP

For example, the actual GAAP number for the 2015 first quarter was $21.81. The estimate for that quarter was $33.15 on 12/13/14. That is not a joke.  

2016 Estimates as of 12/31/15:  

Actual 2016 with 42.8% reporting for the 4th quarter: 

The GAAP estimate for the 2016 first quarter was $27.28 as of 12/31/15. The actual GAAP number for that quarter was $21.72. 

I forgot to take a snapshot  as of 12/31/16, so this will have to do: 

As of 1/26/17 

The future projections need to be compared with the actual numbers which can be found at the S & P's website: S&P 500® - S&P Dow Jones Indices

Click "Additional Info" Tab

Click "Index Earnings" Tab

That will cause the data to be downloaded into excel.

Once the investor has a thorough understanding on the issue of reliability, then an informed judgment can be made about how much weight to give future E.P.S. estimates for this index. 

Given that future projections are frequently too high with growth invariably backloaded into the last two quarters, some consideration needs to be given whether there is a systematic effort to manipulate investors into making purchasing decisions based on unrealistic expectations. 

Were the estimate made on 12/31/14 and 12/31/15 realistic about earnings growth in 2015 and 2016 respectively? An estimate that is way off for the next quarter is so unrealistic that it raises a question of ulterior motive.  

The herd views the forward estimates as having incredibility strong weight when determining the rationality of current prices, notwithstanding an abundance of historical data that those estimates are frequently off by more than 20% on the optimistic side. 

The irrational acceptance of forecasts is not likely to change either. 

The rational and informed stock investor IMO needs to accept that as a given until proven otherwise. 

The consensus opinion now is that Trump will lead the U.S. into a new era of robust growth and job creation. 

No consideration is currently being given in pricing decisions to known and material risks. 

There is a frequently voiced opinion that a repeal of the repatriation tax (or its lowering to a low single digit amount), will create U.S. jobs, even though the repatriation tax holiday in 2004 resulted in job losses from most corporations who brought back the foreign cash. The money was used to increase dividends, buy back stock and to increase executive compensation. Senate report says repatriation tax holiday failed to create jobs in US | TheHillOne-time tax break saved 843 U.S. corporations $265 billion - The New York Times

Cisco has already told anyone who will listen and many will never listen that it will use repatriated cash to increase the dividend and share buybacks and to buy other companies which inevitably leads to fewer jobs.  Cisco CEO: If we could repatriate, we’d do a combination of dividends, buybacks, M&A

The last major tax decrease occurred during Bush's term. He had the worst job creation record in modern U.S. history. Bush On Jobs: The Worst Track Record On Record - Real Time Economics - WSJ The response to that fact is that the tax cuts for the wealthy needed to be larger and it would have worked. It is impossible to penetrate reality creations with facts. 

Rich people spend only a fraction of their income. It is the poor and the middle class who spend all or most of their income and who are drivers of a consumer led economy. 

If the government takes away benefits from the poor and mostly provides tax breaks to corporations and the uber wealthy, that is not a prescription for growth in a consumer led economy and is not likely to work anywhere near as well as the herd currently believes.

Publicly traded corporations will use the cash to increase dividends and buybacks and the corporate pay packages of executives. The additional cash will at least cut down borrowing money to buy back stock. 

Where possible, jobs will be cut and outsourced even when the company has more cash. 

We shall see what happens in the next four years. 

I certainly have questions and some skepticism that the result will even be a net positive for the U.S. economy and the potential for economic disasters is high and ignored completely in the current ebullient future forecast.

And, if there is stimulus sufficient to move the needle some, and moving the needle now requires a huge stimulus, it will be at the expense of a worsening federal deficit that is already and out-of-control runaway train traveling at an increasingly dangerous speed until the inevitable result is a wreck of massive proportions.


1. Short Term Bond/CD Ladder Basket Strategy 

A. Bought 2 Old National Bank 1% CDs Maturing on 2/8/18

Old National Bank is the operating bank subsidiary of Old National Bancorp (ONB)

I am familiar with the bank and have bought and sold its common stock several times over the past few years. 

I currently own a 50 share lot as part of my  REGIONAL BANK BASKET STRATEGY

2. Averaged Down: Bought 50 ONB at $12.25 (IB account): Update For Regional Bank Basket As Of 1/19/16 - South Gent | Seeking Alpha

I have sold my highest cost lot in that account bought at $13.1:

 Item # 2. Bought 50 ONB AT $13.1  Update For Regional Bank Basket Strategy As Of 1/6/16 - South Gent | Seeking Alpha

Total ONB Trading Gains (50 share lots) = $444.14

As a regional bank stock investor, I am already familiar with the banks selling FDIC insured CDs to me. The first line of defense is always the bank's solvency.

With a major banking collapse accompanied by something similar to the bank failures experienced in the last bank meltdown, the FDIC would quickly run out of funds to cover insured deposits. The banking system may be to weak for the surviving banks to pay increased insurance premiums to cover the bad banks' depositors without causing a deeper crisis. And, Uncle Sam may be too destitute to raise all of the necessary capital to make depositors whole (a $250K deposit is paid off at $50K).

We can very close to a total financial meltdown in 2008. Next time, and there will be a next time maybe in my lifetime, the banks may not be salvageable. I have lived through numerous banking meltdowns.  It is not like anyone ever learns anything from them.

The FDIC had $77.9B in assets as of 6/30/2016. 2016-09-20.pdf

B. Bought 1 Statoil 1.25% Senior Unsecured Bond Maturing 11/9/17:

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

Moody's Rates at Aa3

YTM at Total Cost (100.022)= 1.221% (bought at 99.922)

This one was bought in my IB account where I am charged a $1 per bond commission. IB pays me nothing on idle cash so anything is an improvement. I have recently increased my cash allocation in that account.

C. Bought 1 Statoil 1.15% Senior Unsecured Bond  Maturing on 5/15/18:

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

YTM at Total Cost (99.461) = 1.574% (bought at 99.361)

Moody's downgrades Statoil's rating to Aa3 -stable outlook

D. Bought 1 Enterprise Products 1.65% Senior Unsecured Bond Maturing on 5/7/18

FINRA Page: Bond Detail (no link to prospectus)

Moody's at Baa1


Moody's rates new Enterprise Products notes Baa1

Fitch Affirms at BBB+/Outlook Stable

YTM at Total Cost (99.967) = 1.676% (bought at 99.867=1.756% YTM)

Enterprise Products Partners L.P. SEC Filings

Financial Results for the Q/E 12/31/16

E. Bought 1 More U.S. Treasury .625% Maturing on 9/30/17: 

The following two snapshots show what Schwab email confirmations look like: 

Schwab does not charge a commission for buying plain vanilla fixed coupon USTs. A commission is charged to buy TIPs and treasury strips. I am not charged by Fidelity or Vanguard for those securities. Consequently, I will not use Schwab to buy TIPs or Treasury Strips. 

F. Bought 1 More U.S. .75% Maturing on 12/31/17: 

Note that the settlement for a treasury purchase occurs the day after the trade. 

I am increasing my cluster around the FED's December 2017 meeting where I currently expect a rate hike that will cause short term rates to rise. 

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

G. Bought at Auction 26 Week Treasury Bill Maturing 7/27/17 (yield .61%)

2. Intermediate Term Bond Ladder Strategy-Significantly Underweighted

A. Bought 1 Public Service of Colorado 2.25% First Mortgage Bond Maturing 9/15/22

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

YTM at Total Cost (98.503 ) = 2.537%

Moody's RatingA1 (08/06/2015)
Standard & Poor's RatingA (09/05/2012)
Fitch RatingA+ (12/22/2016)

Public Service of Colorado ("PSCO") is one of the wholly owned subsidiaries of Xcel Energy Inc. (XEL). As of 12/3/15, this utility provided electric utility service to 1.4M customers and natural gas services to about 1.4M customers.

The 2022 bond is a first lien bond on substantially all of PSCO's electric utility properties subject to "limited exceptions". All of the foregoing is described in the prospectus which needs to be reviewed prior to a purchase.

It is fairly commonplace for non-publicly traded utilities to issue first mortgage bonds which provides them with lower interest rates than senior unsecured bonds.

This alternative means of financing also avoids the parent guaranteeing the subsidiaries' obligation.

There will generally be a number of first mortgage bonds outstanding that are issued under the same indenture. All will have equal claims on the same assets. The prospectus will provide a limit on the total amount that can be issued based on the values of the assets secured by the first lien.

Investors who have bought and sold exchange traded first mortgage bonds are or should be very familiar with multiple securities being issue under the same indenture.

Unlike their exchange traded counterparts, however, the first lien bonds sold in the bond market have "make whole provisions" that penalize the issuer for exercising an optional redemption right and there are many available with intermediate term maturities. The ones available on the stock exchange do not have make whole provisions, permit the issuer to redeem at par value on or after a particular date (generally 5 years after the IPO), and have potentially long durations and maturities.

The 2022 bond prospectus has what I call a slightly modified make whole provision that allows the issuer to avoid making the make whole payment on or after March 15, 2022 or six months prior to maturity. If the redemption occurs prior to that date, then the issuer has to make the bond owners "whole" as follows:

Except for the last sentence, that provision is a typical make whole provision. The issuer has to pay the sum of all remaining interest payments and the principal amount discounted to present value using the comparable treasury rate plus 10 basis points. The treasury rate used is the one that is closest to the remaining term of the bond being redeemed.

A low treasury rate means that the sum of those two values will be discounted slowly.

A 5 year treasury bond closed today at a 1.93% yield. If this bond was redeeming using that closing yield, the discount rate would be 2.03%.  The plus number added to the comparable treasury rate will vary some, but will typically be 25 basis points or lower.

So why would the issuer pay that penalty to redeem a 2.25% first mortgage bond maturing in 2022. The answer is that will not pay the sum of the principal amount and all remaining interest payments discounted to present value to get rid of that bond.

XCEL 2015 Annual Report

Xcel 2016 4th Quarter Earnings Report

Last November, Xcel sold $300M  of 2.6% senior unsecured bond maturing in 2022 and $500M in a 3.35% senior unsecured bond maturing in December 2026. The 2022 bond closed last Friday at 100.05. 

B. Bought 1 Public Service of Colorado 2.5% First Mortgage Bond Maturing 3/15/23

This purchase was made in a Roth IRA account. 

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

YTM at Total Cost (98.977) =  2.682%

With the Public Service of Colorado first mortgage bonds, the emphasis is on the return of my money with a secondary objective being income generation. 

I placed the longer term bond in the Roth IRA where preservation of capital is on steroids. I also turn the 2.682% YTM into a tax free annual yield. 

Unfortunately, it will take about 26.21 years for money to double at that rate: The Rule of 72 (with calculator) - Estimate Compound Interest

Consequently, these short and intermediate bonds are primarily preservation of capital securities and more appropriate for investors like myself, who are no longer in their capital accumulation phase and have the resources to pay current and reasonably estimated future expenses out of existing assets. Households that need to grow capital substantially to meet their financial goals have to take more risks over longer periods of time IMO.

C. Bought 1 J.P. Morgan 2.295% Senior Unsecured Bond Maturing on 8/15/21

FINRA Page: Bond Detail (prospectus is not linked here)

YTM at Total Cost (98.342 ) =  2.686%

Moody's RatingA3 (08/04/2016)
Standard & Poor's RatingA- (08/09/2016)
Fitch RatingA+ (12/13/2016)

JPM SEC Filings 

2016 4th Quarter Earnings Report 

3. Long Term Bond Ladder Basket-Substantially Underweighted 

A. Roth IRA: Bought 1 TIP 1.75% Coupon Maturing on 1/15/28

This bond matures almost one year out of my intermediate term bond range. 

Adjusted Principal at Time of Purchase= $1,152.18

Premium Paid Over Adjusted Principal = $150.5
Inflation Factor at Time of Purchase = 1.15218 

3. Continued Paring Stock Allocation in Response to Valuations and Overly Optimistic Near and Intermediate Term Future Earnings Projections

A. Sold 153 RMT at $8.35: 

Quote: Royce Micro-Cap Trust Inc. (RMT)

Profit: +$98.04

I received two quarterly dividends. The dividends were used to purchase additional shares. In my IB account, fractional shares are not purchased with dividends, which ends up leaving a partial dividend paid in cash.

Data Date of Trade:

Closing Market Price: $8.32

Closing Net Asset Value Per Share: $9.78
Discount: -14.93%

Sourced: RMT Royce Micro Cap Trust-CEF Connect

SEC Filed Shareholder Report Period Ending June 30, 2016

SEC Form N-Q Holdings as of 9/30/16

Sponsor's Website: Royce Micro-Cap Trust (RMT)

Recent Dividends:

Total Realized RMT Trading Gains = $2,451.42

B. SOLD 30 CPB at $62.86

Quote: Campbell Soup Co.  (CPB)

Profit Snapshot: +$237.15

The $62.86 CPB price results in a 19.4 forward P/E based on the forward non-GAAP E.P.S. of $3.24. CPB Analyst Estimates That would be up from $3.09 in the prior 12 months.

The TTM P/E is close to 30 based on GAAP reported earnings.  

IMO, that P/E for a mid-single digit earnings (non-GAAP) grower makes sense only if market participants believe a takeover will probably at a premium price, as in more probable than not but not close to certain. 

I discussed the purchase in Comment Blog # 4 at 11/8/16, 7:31 P.M.

4. GOLD: One of My Hedges Against Nihilism

Gold received a boost last Tuesday when Doubleplusgood's trade guru, Peter Navarro, had extremely harsh words unspoken in public by a high ranking U.S. official since the Nazis were defeated in WWII. Euro spikes after Trump's trade adviser says Germany is using 'grossly undervalued' currency; Donald Trump's trade chief Peter Navarro accuses Germany of abusing euro for own gain

Trump is doing everything that he can to break up the EU. That is an opinion, but it is supported by an array of facts.  

Trump applauded BREXIT and has been targeting continental Europe with abusive comments and criticisms, fitting the stereotype of the Ugly American perfectly. His policies are aligned with Russia who wants to weakened NATO and the EU. 

Both Bannon and his disciple, Doubleplusgood, have significant nihilistic and white nationalist tendencies. Just blow up the existing world order and replace it with something they like better-for U.S. born Judeo-Christian Caucasians- in order to Make America Great Again and to Make America Safe Again.

Steve Bannon’s own words show sharp break on security issues-USA Today

Is Steve Bannon the Second Most Powerful Man in the World? |

Understanding Bannon’s worldview and the policies that follow - Chicago Tribune

Orwell 1984 - O'Brien about freedom and reality (2+2=5) - YouTube

A. Bought 50 ABX at $17.92

Quote:  Barrick Gold Corp.  (ABX)

I have near zero expertise in gold mining stocks.

I have a few general opinions that are my golden rules for investing in gold mining stocks.

First, they are leveraged to the price of gold and in the aggregate will go up or down more than the price of gold.

Second, they spend a lot of money to produce an ounce of gold.

Third, only rarely am I satisfied with their earnings reports.

Four, they are always trades and never long term investments.

Five, before buying, the stock price needs to be smashed, and I need to rationally see a possible catalyst or catalysts that may drive the price higher over the short term. The Trump/Bannon catalyst will likely be an intermediate term catalyst.

ABX 10 Year Stock Chart

Six, I need to define the precious metal market as being in either a long term secular bull or bear market. I currently characterize the market as a long term secular bear market subject to relatively short term cyclical bull moves. 

The current long term bear market started in 2011 after gold went over $1900 per ounce. 

Out of one of those cyclical bull moves within the context of a long term bear cycle, another long term bull market will be born, and it is hard to tell whether the move is another fake out or part of something more lasting.

Seven, many claim that they have discussed the secret sauce that explains gold's next move. 

I could care less about their opinions. 

Gold is a frequent topic of SA articles by those claiming to have discovered the Holy Grail. And there is no shortage of paid subscription services that will divulge to the unwashed masses their secrets for $200+. Cash paid first and then the delivery  of boundless wisdom bordering or even surpassing omniscience will flow from the self proclaimed oracle who for some strange reason needs to sell a few subscriptions.

ABX 2015 Annual Report

ABX 2016 3rd Quarter Earnings Report

Closing Price (2/3/16): ABX $18.93 -0.01 -0.05%

That ends my discussion about Barrick Gold.

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. South Gent,

    Re. your Statoil 1.25% bond purchase why not buy its equity (STO)? STO has a yield of 3.67% and can borrow at a lower rate (because its quasi-government institution status) to pay for capital expenditure and higher dividend to the equity owners that includes government agencies. The stock price is recovering so you also get a chance for capital appreciation. This is one of the Global Majors that is not likely to go under.

  2. Y: The short term bond is more consistent with capital preservation. STO closed at $18.61 last Friday.

    A decline in price equal to the dividend amount results in a total return of zero before taxes and inflation. The stock may generate a greater total return than the short term bond but may produce a negative return as well.

    STO has been rising over the past year. I participate in that stock indirectly through the Norway ETF NORW which I own. Statoil has a 16.67% weighting in that ETF.

    Of the listed holding in NORW, I currently own only the consumer products company Orkla.

    A ten year STO chart looks awful. Before crude started to collapse in 2014, the STO price was near $32 and had been over $42 during the 2008 crude oil spike. In early 2016, the price was under $12.

    When I look at that kind of chart, I do not see a long term investment but at most a trade.

    But, I do not have confidence in making a trade given the erratic nature of the price movement. Is the next move to $20 or $16, $24 or $12? I could only make a wild guess.

    I did ride the common stock from $15 to $22 in 2009. That $22 price was almost 8 years ago!

    ITEM # 5

    If I had bought STO on 6/1/2009 and reinvested all of the dividends, my total return would now be 20.48% producing an average annual total return of 2.45%.

    The Norwegian government link to Statoil supports the high credit rating too:

  3. I have never read or heard a U.S. President make anything similar to this Trump comment about a Federal Judge:

    "The opinion of this so-called judge, which essentially takes law-enforcement away from our country, is ridiculous and will be overturned!"

    The "so-called" judge, a Bush appointee, may need to be thankful that Trump could not have him shackled and taken to the slammer as his new permanent abode.

    I am curious whether the Trump Administration violated one of the prior temporary injunctions by revoking all Visas issued to citizens of those seven Muslim countries.

    The Administration is at least complying with the so-called judges order at the moment and have reinstated those previously cancelled Visas.

    The former Norwegian P.M.Kjell Magne Bondevik, who is also an ordained Lutheran minister, was detained at Dulles for one hour since he visited Iran in 2014.

    His passport clearly showed that he was the former P.M.

    He was placed in a room and then questioned for 20 minutes.

    He was traveling to the U.S. to attend the National Prayer Breakfast.

    He later made this statement:

    “There has been a lot of progress over the last ten years, but this gives great cause for concern, in line with the authoritarian leaders we see controlling other major countries.”

    Besides Trump, the other authoritarian leaders would probably include Putin.

    I have not seen yet an explanation of why other Muslim countries, where Trump has business interests, are not covered by the GOP's Muslim Ban even though their nationals have committed terrorist acts in the U.S.

    Bloomberg: "Trump’s Immigration Ban Excludes Countries With Business Ties"

    A more detailed summary can be found here:

    81% of republicans approve of Trump's performance as President so far.

    I suspect that will be close to a low point, and that Trump's approval rating among republicans will start to move back closer to 100%.

  4. South Gent,

    It is an interesting observation that "If I had bought STO on 6/1/2009 ......average annual total return of 2.45%". However, on the other end of the spectrum many good quality stocks have multiplied several times during the same period. It seems that buying after crash is opportunistic, but the selection of the purchase is even more critical.

  5. Nope, not receiving the new listings into email. Grrr.

    On trickle down, I know it was shown not to work.

    Was that giving breaks to the rich that was tried before. Or was this cutting of corporate taxes -ALSO- part of that trickle down that was tried? How did cutting corp taxes effect the economy in the past?

    So far gov't is honoring the stay. Too bad, because if gov't willfully at his direction ignored a fed court order, it'd be enough to start getting rid of him. At least that's what I read. (If Congress wanted to.)

    1. As to your question about a President defying an existing federal court order, I am unaware that any have done so in the past.

      If Trump did violate an order, and there may have been a violation already dealing with the Visa cancellations, the GOP dominated House Judiciary Committee would never start impeachment proceedings against Trump for that kind of action.

      I doubt that a federal judge would hold him in criminal contempt but at most in civil contempt. Trump already has contempt for any judge who disagrees with him, and would probably wear the civil contempt violation as a badge of honor.

      A judge is certainly not going to throw him jail for disobeying an order.

      In 1977 to be precise, I was representing a divorcee who was not being paid alimony. The husband claimed that he was destitute even though he was a chiropractor with a good business. He was supposed to make payments on his former wife's car but failed to do so and the care was repossessed. I had his financial records and show that he had just bought a new car and his generous spending on himself was well documented. The judge listened to my spiel and looked at the documents being presented. After about 15 minutes, she said that was enough, turned to the bailiff and said take so and so to the slammer and keep him there until he pays up. He found the money before day's end. Off track again.

      There would be a few GOP representatives in Congress who would urge Trump to to comply, but almost all of the representatives know that over 80% of GOP voters support Trump's order and consequently nothing would be done to him.

      It would take obvious criminal conduct provable with overwhelming evidence consisting of tape recordings, documents, and testimony aired on live TV before an impeachment process could garner a few GOP votes. The Nixon case is just the most prominent example. The criminal wrongdoing was proven beyond a reasonable doubt and only a few GOP representatives would vote for impeachment even then. Those who did vote for impeachment would IMO have a zero chance of being elected as a republican today anywhere in the country.

    2. "Trump already has contempt for any judge who disagrees with him"

      I hadn't thought about this positive. While a judge may pander to him and rule his way to avoid controversy... it's more likely that even staunchly republican judges who agree with his general goal of his policies... will have enough ego to get feisty at his denigrating of judges.

      What's so weird is to see the "other side" that's gotten pulled into this, and had their heads turned around and are playing right into his manipulations that aim to make people denigrate others, denigrate anyone who voices an opposing view, and comes at things with a sense of compassion. These are intelligent people, and they already can't see that their emotions are getting played --- and that that is effecting their logic. That's what a sociopath does. Lots of people can play emotional strings. But it takes a special skill to make people think they are being assiduously logical while their emotions have taken charge.

      It has the effect of shutting up - a piece of themselves, that would think through even their emotions.

      Have you seen Dr. Seuss yet?

      It was written in 1930-40's when America First was being used by Lindbergh.

      Now that I think about it, the Jewish community didn't get vocal about the use of America First, which was used extensively in the RNC speech written by Bannon and Miller. Maybe it would have made a difference, if noise had been made on that -- right at the start.

      This time the "notify me" button was auto checked. Last time it wasn't and I missed it.

  6. Just sending so I can check notify, which I forgot to check.

  7. LMH:

    Bush lowered individual income taxes. Most of the jobs are created by small businesses who are not organized as "C" corporations. Many would be organized, for example, as Subchapter S corporations, where there is no federal income tax paid at the corporate level and individual tax rates would apply.

    Another common legal structure is a limited liability corporation that will be taxed as a partnership.

    So Bush tax cuts would directly impact all businesses that were organized as sole proprietorships, partnerships, Sub S corporations or LLCs. It would not be accurate to say that those cuts did not apply to the majority of businesses. Small businesses generally create about 65% of the new jobs. Many medium sized businesses are organized in the same legal structure.

    The BLS data show that Bush's 8 year term had the worst job creation record in modern U.S. history.

    I once took the BLS data and credited Bush with the job losses in 2009 and did not charge him with the losses in his first year. Bush inherited a recession from Bill Clinton and Obama had the worst economic mess in his first year since the Great Depression. The idea was that a President is dealt a hand by his predecessor and is not responsible for that losing hand. I found that Bush had a negative job creation number of -184,00 over 8 years.

    The Bush tax cuts flowed mostly to the top quintile, mostly donors to the GOP, who do not spend anywhere near what they earn each year.

    Instead, their tax savings in the aggregate will be funneled into investments that had favorable tax rates for them in the tax cut legislation, like the 15% tax on qualified dividends and a 15% long term capital gains tax.

    The lowering of the "C" corporation tax rate will have mixed impacts on the real economy.

    Most corporations will use the extra cash to increase dividends, to buy back stock, to increase executive pay and to acquire other corporations that results in job cuts.

    There will be an indeterminate amount used to create new jobs. The assumption is this policy will be a boon to job creation, but that IMO is only a selling point to those who will receive negligible or no benefits.

    Until the cuts are implemented, it will be impossible to say for certain that the overall impact will be positive on job creation.

    I would be confident now, however, in predicting that the GOP's corporate tax plan will increase the federal deficit at a greater rate than under current law and will accelerate the wealth gap.

    The two parties have not been focused on those who fall in middle. The Democrats just paid a big price.

    Listening to Hillary as much as I could bear, I did not hear much directed to the Middle Class.

    I heard a lot on issues like transsexual access to bathrooms.

    That would have been most strange to FDR whose base was the white working class.

    Of course, as with many issues, the GOP is just riling up their base with red meat social issues, and the purpose is manipulation. Apparently, they want a man who was a woman to walk into the women's restroom and that is better?

    The Democrats are more focused on the poor while the GOP, notwithstanding their rhetoric to the contrary, are doing what they can to increase the wealth gap, primarily in favor of the top 1% and secondarily for the top two quintiles. Pay attention to what the two parties do rather than their rhetoric.

  8. The 9th Circuit U.S. Court of Appeals wants the parties to file briefs today before making a decision on the TRO granted by the federal district court judge enjoining the enforcement of the travel ban.

    The best course for the Appellate Court IMO would be to send the case back to the District Court, where a trial on the merits would need to be completed within 60 days.

    If the Appellate Court lifts the injunction, then the same order would need to require a quick trial on the merits.

    I was once involved in a case involving the government where I lost the TRO battle but won the case on the merits, with the trial completed within 30 days after the government commenced its illegal action. A permanent injunction was then issued which was later affirmed by the Sixth Circuit.

    The government could put on evidence that the Muslim Ban was based on imminent national security concerns whereas the opposition could take testimony that the motivation was political and based on religious discrimination which I believe is what happened based on what I know now.

    Giuliani, for example, could be questioned about his conversation with Trump about imposing a legal Muslim Ban where national security arguments could be used to mask the real purpose. He spoke those words in a video interview broadcast on national television.

    Bannon, Miller and Trump could also be required to give testimony, though Trump could be allowed to give trial testimony through a deposition and without being present in the courtroom.

    Officials from Homeland Security would be called to give testimony on the existing vetting process and whether the push to pass the GOP's Muslim Ban originated from them or from the White House's political strategists like Bannon and Miller.

    The Justice Department could be required to point out with evidence the national security interests allegedly involved in Trump's decision.

    Both sides have problems.

    The government's opponents have two major problems. The President does have very broad authority to restrict immigration on an emergency and temporary basis, and courts will be reluctant to look behind a decision purportedly based on national security concerns. The issue of standing to bring a claim is also a significant hurdle.

    Trump's purpose may be to permanently impose a Muslim travel ban or to make immigration by Muslims so difficult that no one will bother. But that case is not yet before the court. The case before the court is a temporary travel ban. The easiest constitutional objections were taken off the table when the Administration reversed the E.O.'s applicability to legal U.S. residents (mostly green card holders). Homeland Security was going to exclude green card holders from the ban, but were reportedly told by Bannon to include those legal residents. Lawyers probably convinced him later that this was a bad idea, assuming he wanted to keep his Muslim Ban.

    On the other hand, there is considerable evidence that the EO was based on political considerations and the current Administrations strong antipathy toward Muslims previously expressed by those who were responsible for the EO, particularly Bannon and Trump.

    There is also evidence that immigrants from the seven countries have not caused a death in the U.S. due to a terrorist act (so why the rush?), while excluding Muslim nations where Trump has business interests and whose citizens have committed terrorist acts responsible for 9/11.

    The EO is on its face discriminatory based on religious grounds, giving Christians preferential treatment.

  9. Trump continues to lambast the federal district court judge who issued the TRO in terms never before seen by a sitting President.

    Some of the newer tweets:

    "The judge opens up our country to potential terrorists and others that do not have our best interests at heart. Bad people are very happy!"

    "Because the ban was lifted by a judge, many very bad and dangerous people may be pouring into our country. A terrible decision"

    It will use the President's power to demean and demonize any judge who disagrees with him. This is of course unprecedented in U.S. history. It is consistent with Trump's past behavior.

    What we have in Trump is someone who is very good at manipulating people as a demagogue. Facts do not matter. It does not matter that the extreme vetting procedures, whatever they might be, could be implemented quickly without causing the disruptions and international ill will. A demagogue could care less about the facts, since the motive is manipulation for political reasons. Whip up the fear and then act like the strong man to relieve the fear generated by the demagogue's own reality creations.

    Yes, Trump is without question demagogue and the first one in our history to serve as President.

  10. LMH: You do have to check the "Notify me" box at the end to receive email updates of comments. Signing up for the email notification at the top right side results only in receiving a post about one day after it is published.

    There are reasons why the nation makes so many harmful mistakes.

    One is that far too many people are so easily manipulated by politicians and can be swayed with cliches and slogans rather than facts and rational analysis.

    The Vietnam and Iraq Wars are just two examples of how easy it is to manipulate a majority into supporting something that is not in the national interest. Sure, lies have to be told to garner support, but merely invoking phrases like national security or images of a mushroom cloud will do the trick for tens of millions.

    The ready acceptance of cliches and slogans has had and will continue to have severe and long lasting negative repercussions for our nation.

    Even when the evidence is clear and cogent that an action weakened national security and produced results contrary to the nation's interest both in terms of cost, national reputation, and human lives, there will be a very large segment of the population who will not accept a fact based conclusion.

    Trump is just using a time proven technique-fear mongering-to gain and then solidify his support.

    Orwell dealt with the issue in what was called the 2 minute hate drill.

    Apparently, I am to believe that a Syrian refugee family vetted over a 18 to 24 month period is going to hack me to death with machetes as I sleep, but Our Leader is going to stop that from happening. They were already on their way to me harm when Trump issued the order.

    If EO's purpose had anything whatsoever to do with national security due to deficiencies in the current vetting process, Homeland Security could have worked quietly over a few weeks and then issued new requirements. That was not acceptable to our political leaders.

    Instead, Trump opted for the EO route to throw red meat to his supporters who want to ban all Muslims from the country.

    During the temporary ban period contemplated by the EO, my prediction is that Trump would make a determination that all travel from certain Muslim countries will be prohibited because he found that those travelers are not being properly vetted. That would in effect become a permanent ban other than for Christians in those countries.

    The EO was also a political statement designed to further solidify GOP voters in his corner with over 80% supporting the ban.

    The Strong Man is expected to take decisive action to protect people from the Threat identified by Leader, which is whatever group is convenient for that purpose. That would be the most vulnerable and least able to fight back in response to the demagogue's fear mongering.

  11. Sometimes that notify me box is automatically checked off before you start writing a comment (probably because you've already checked it for this particular blog entry). Other times it's not checked and you have to hand check it. That's what I was referring to. When it's checked, I do get emails of new comments.

    So you are saying on the top right gets you emails of new blogs for only a day? I've was getting new blog emails, and now am not. I did all the things I originally did that got them sent to me.

    Yes, groups of people can be swayed with emotional arguments that don't have supporting facts, or depth, or pros & cons assessed.

    That has been the case here.

    Also here there is more. Trump goes over the top repeatedly, and violates long held traditions, that are traditions because they create RESPECT for others.

    He is adding to the standard political rhetoric, this sociopathic style of

    1) removing the norms of respect at basic levels in discourse and setting new boundaries that he intends to take advantage of down the road. He's getting everyone used to having the boundary of respect violated.

    2) Attacking others not just for their ideas but for their very existence in his word, for having voices. So the media is enemy, anyone opposing him is enemy and letting in evil, his opponent was "woman, nasty, and repeat images of killing her". This too is breaking down a norm that we use in democracy that others are allowed to speak and we just dismiss them. He is adding a level of animosity at anyone who has courage to speak up. That's been done before, but it's being done now and to an extreme degree. He is doing it, to set up for the future that he can take advantage of this. He's getting everyone used to this level of attack by him on opposition, where they are dismissed as not worthy of even being heard as worthless in human-terms... rather than their ideas are dismissed.

    3) He's using chaos and extreme emotional roller coaster on purpose. It looks like accident and gives him cover of "he's new" or "he'll turn." But it's ON PURPOSE. It's an utterly standard technique. Create enough lack of balance and dizziness in your targets, and they forget what they were going to say. Moreover, they forget what they were really angry about and go after other stuff and get dragged into arguing in YOUR world and not on THEIR tuff, because you're creating a world of chaos and everyone is in your world now.

    That's what makes this different, and more dangerous than usual.

    You're suggesting mental illness. It's this kind of thing that's happening that looks like and IS more than the usual animosities between groups, and poor policies.


    This article was interesting to me. It's picture obviously tells it's viewpoint from the start. Some of the details referenced though, i appreciated:

    That's pretty funny about the guy without money that finally found it. I'm sure it's not the only time...

  12. LMH: The top right side email notification sends to you a newly published blog after about 1 day. It will send to you all published blogs with that time delay.

    There is no automatic checking of the notify me box. I have to check it myself for every blog.

    Trump is mentally ill and I have seen a number of psychologist characterize his disorder as narcissistic sociopath. I will accept that characterization. There is without question a profound narcissistic personality disorder:

    I would just say he has serious mental illness and his illness also includes an inability to separate fact from fiction consistently and probably most of the time.

    The David Muir interview is a good example of delusionary thinking.

    He knows that 3 or 4 million people voted illegally and every single one of them voted for Hillary:

    "PRESIDENT TRUMP: No, not at all because they didn't come to me. Believe me. Those were Hillary votes. And if you look at it they all voted for Hillary. They all voted for Hillary. They didn't vote for me. I don't believe I got one. Okay, these are people that voted for Hillary Clinton. And if they didn't vote, it would've been different in the popular."

    I would call those statements off the charts delusional. He then goes on to mischaracterize the PEW report and to make false claims about that report.

    What I have described is commonplace with him and does not permit IMO an alternative view that is favorable to Trump.

    The only rational alternative view IMO would be that he knows that he is lying all of the time, but has found that lying works as manipulative tool. All demagogues know that lying works, even when the lie can be proven untrue with no doubt possible among the still rational human beings.

    There is an online quiz for narcissism:

    I took the quiz and scored a 3. A narcissist like Trump would be over 20. If Trump answered truthfully, he would have been scored as a narcissist on every question.

    The calls to the Australian and Mexican presidents are consistent with this diagnosis.

    I have seen other descriptions of his mental illness like malignant narcissism. However you want to describe it, his condition is dangerous for the nation.

  13. Wellp for me the "notify me" sometimes starts out checked.

    I am told I am subscribed, but I'm not getting the new blog notices. So I just unsubscribed and resubscribed. I'll see what happens.

    My hesitation about calling it mental illness goes back to school. Personality disorders were not labeled mental illness and were labeled neurosis. Illnesses like Bipolar and schizophrenia were labeled mental illness. Admittedly it's been a while since then. I've seen the same delineation in more recent professional literature, without reference one way or the other to the term "mental illness".

    However, I'm happy to call it mental illness. It is in the category of narcissist and sociopath. There are now brain scans showing sociopath have differences. So it doesn't go way with a little pressure from the world outside of them.

    """However you want to describe it, his condition is dangerous for the nation. """

    We are in agreement.

    What is useful to look at going forward?

    I don't have an answer. Seems like a good question though.

  14. LMH: There is nothing that can be done about Trump. Nothing that anyone says about him will have any impact on the people who voted him into office or the GOP politicians who are his enablers.

    There is a risk that Trump will do something that causes the market to substantially reprice risk assets, particularly U.S. stocks and precious metals.

    I have started to add to my hard assets primarily as a hedge and to harvest more profits in my stock allocation. The later positioning would be done irrespective of the election results, but I may accelerate the process in response to my growing concerns about Trump's mental fitness to be President.

    Trump has done nothing yet that is concerning to the Stock Jocks. He will probably have to start a trade war before investors reconsider their herd opinion about him.

    The upward momentum in stocks is still present. Bad news does not exist. Risks do not exist. Trump is good for the nation and will Make America Great Again, or so I am told.

    I would also be cautious accepting the herd consensus that the GOP prescription for what ails the U.S. economy will work to significantly move the needle. I have seen no cogent analysis about the potential adverse consequences from a border tax and other potential changes.

    I have stated my reservations here and elsewhere about drinking the GOP's kool aid based on historical evidence.

    The tax cut/eliminate regulation fervor has the feel of a cult to me. The belief that the U.S. economy will soar by reducing corporate taxes and unidentified regulations is held with equally unswerving conviction as to its truth.

    Three Tweets slamming the so called federal judge was not enough for Trump. In addition to three tweets quoted above he has launched two more.

    Delusional is the only word that fits:

    "Just cannot believe a judge would put our country in such peril. If something happens blame him and court system. People pouring in. Bad!"

    "I have instructed Homeland Security to check people coming into our country VERY CAREFULLY. The courts are making the job very difficult!"

    One of those terrorist pouring like locusts into the U.S. now was an Iranian baby who has two holes in her heart and needed U.S. surgeons to save her life.

  15. What are hard assets? Metals?

    From my blog, Dap had the thought that if China improves, so will mining and metals. So they may be a rare situation where no matter which way things go with the economy improving or worries increasing, they go up... Only thing is if US does better but China doesn't. I don't see that scenario currently even being hinted at by the data.

    I'll keep the pressure up where I can in petitions, calls to reps, letters, protest attendance. It has two possible positive impacts. 1) on republicans that are on a fence 2) crack what's left of Trump's mental state until something happens that can't be denied. and there's 3) help democrats feel supported.

    "harvest more profits in my stock allocation. The later positioning would be done irrespective of the election results"

    Why? Because it's 1st year in new admin, and by 1 or 2 there's usually a recession?

    "cautious accepting the herd consensus that the GOP prescription for what ails the U.S. economy will work to significantly move the needle. I have seen no cogent analysis about the potential adverse consequences from a border tax and other potential changes. "

    HAve you been able to sort out what ideas are really on the table?

    > The border tax I thought, got nixed, when everyone and his brother informed him it's not a tax paid by Mexican companies, but by Americans.

    > Corporate taxes, are on the table. Will they go through is a question. You're already outlined why they haven't worked as a panacea in the past.

    > Reduce regulations. Would be wonderful. With his lack of knowledge, Im not sure that can be implemented. Other than with banking, and I completely don't know what's better or worse or what Dodd-Frank and Siegel Glass is.

    So I have two questions on Trump and investing. What is really being considered (though the haze of double speak) and what would they do (which you've covered a good bit of).

    I wonder if there is a site by now outlining (listing) all the news -- what EOs, what tweets, what people were stopped (to the extent that media and lawyers could figure it out), what color marbles are we tripping on?

  16. I meant the last comment about marbles to be a joke, not a question to answer.

  17. LMH: The border tax is complicated but it is still alive as an option:

    Generally, the U.S. corporate tax rate would be cut to 20%; export revenues would be excluded from taxable income and there would be a 20% tax on imports.

    I explain why I am paring in this post and other recent ones. It has nothing to do with the first year of a President's term. I am concerned about valuations and what I consider overly optimistic predictions about the future. Part of euphoria is based on a total lack of concern about readily identifiable risks upsetting the rosy forecasts or even demolishing them. And, I normally sell into parabolic price moves up. I will also ride up to a point what I consider to be irrational pricing decisions.

    As to metals, I am focusing primarily on gold as a hedge against Trump originated black swans that wreck economic havoc here and/or worldwide. The base metals would not work in that scenario.

    So far, his erratic, delusional and irrational behavior has only hinted that he may cause chaos that would likely benefit PMs.

    Conditions will change rapidly when he actually does what he is capable of doing to trade relationships and in other matters too numerous to list (break-up of EU, shooting war with IRAN or China, etc.). We will have more information about those risks in the weeks and months ahead.

    Who is in favor, for example, of repealing regulations dealing with the emission of greenhouse gases from coal fired generation plants? Will that be a net creator of jobs in return for more pollution and adverse climate conditions which Trump called a hoax created by China to take away U.S. jobs. Yes, there would be more jobs in the coal industry but less jobs in plants being built now that pollute less. So what is the trade off? Where do you draw the line of safety rules in the workplace, the FDA approval process for new drugs, regulations regarding the safety of food and consumer protection. Cutting back on regulations is a good sound bite but the devil is in the details and will frequently involve what a society is willing to demand or accept in terms of their own health, safety and welfare.

    Dodd Frank will be a target. I have seen wild west capitalism tried over and over again in the banking industry. What happens is that the banks will blow themselves up with regular frequency and their money annihilation can reach levels that they place the entire economic system in jeopardy.

    The deregulatory fervor was highlighted by a 2004 SEC rule change that allowed banks to take on more leverage since they knew how to evaluate risks. It took less than 3 years for them to blow up the economic system with their egregiously bad risk management.

    As with many misguided policies, I benefit. The desire to undo all or most of Dodd Frank and set the bankers loose on an unsuspecting world again has done wonders for my regional bank stocks.

    As a stock owner, I will benefit from a lowering or elimination of the repatriation tax, since that will increase my dividends. I am under no illusion about the impact on the real economy since I have seen how large corporations actually behave over the past five decades.

  18. This with a bit about his germ phobia being connected to his keeping everything pure and everyone out and ancient containts got my attention:


    Erratic is a polite term to use.

    Gold - Electronic Apr 2017
    Change +10.40 +0.85%
    Volume 88,675
    Feb 6, 2017 8:26 a.m.


    I discussed earlier that the courts will be reluctant to second guess Trump's "temporary" Muslim travel ban. The President has broad authority under the immigration laws. When the action involves a purported national security interest, then that hesitation will be even greater.

    It would not be surprising at all to me that the Ninth Circuit lifts the injunction later today or tomorrow.

    Immigration is just one of those areas where President Trump has considerable latitude to abuse the powers granted to him by the Constitution and Congress. There will likely me more highly questionable Presidential actions taken in the name of national security, which have nothing to do with national security, over the next four years.

  20. PETX: My unrealized gain in my Lotto Ticket Aratana (PETX) went up in flames this morning.

    Aratana Therapeutics, Inc. (PETX)
    $6.59-1.44 (-17.93%)
    As of 9:11AM

    The FDA approved the PETX appetite stimulator ENTYCE drug for dogs last year . For some reason, PETX filed with the FDA thereafter a request to change manufacturers and now the government wants more information. PETX says the drug launch will be delayed until late 2017.

    This is strange. It calls into question management's competence in selecting the first vendor. As I have said several times in the past, this small company has too many balls in the air.

    This does not effect the recent commercial launch of Galliprant which is part of the PETX deal with Lilly. I am assuming that is the case since that drug is not mentioned in the SEC filing.

  21. South Gent,

    For the small cap biotech investors two common occurrences are working against them. The worst one is a disappointing clinical trial result. For example, OCRX lost 70% of its value in one day because of a disappointing Phase IIb trial. The second one is capital raising. These small biotech companies need to raise capital all the time. The new issued stock are typically offered at 10-15% discount. For example, CORI announced new follow-on at 19% discount and its stock drop 21% next day.

    1. Y: All of that goes with the territory.

      The PETX situation is different. Their drugs were approved by the FDA last year.

      The class action suits are already being filed alleging that PETX did not give investors any information that their existing manufacturer for Entyce could not manufacture the compound in commercial quantities. I certainly did not know and can find no indication that investors were ever told.

      The drug was approved in May 2016.

      There was a statement late last year that their would be a commercial launch in February 2017:

      Maybe that would have happened with a new manufacturer but you can not change manufacturers without the FDA wanting to find out a lot more as to why and probably inspect the new facility.

  22. EMR (own 190+ shares): I noted in a 1/19/17 comment that EMR was in a clear uptrend and had significantly bucked the downtrend in stocks over the past two trading days.

    After reporting earnings this morning and raising guidance, the stock is surging in early morning trading:

    Emerson Electric Co. (EMR)
    $62.26+2.43 (+4.01%)
    As of 8:34AM

    SEC Filed Press Release

    I don't think that EMR is out of the woods yet. I may elect to pare my position as part of my ongoing stock allocation reduction.

    As noted in my prior comment, EMR is a Dividend King, a higher title than Dividend Aristocrat:

    "EMR is after all one of the stocks whose dividend has been raised for more than 50 consecutive years, one of the few remaining Dividend Kings"

  23. BDGE (own): BDGE reported earnings on 1/27/17 and the report is worth noting:

    4th quarter net income was up 15% to $9.2M, a record for this bank.

    4th quarter E.P.S. was $.50, up from $.46 in the 2015 4th quarter.

    An investor would be hard pressed to find lower NPA and NPL ratios:

    Non-performing Loans/Total Loans 0.05 %
    Non-performing Assets/Total Assets 0.03%
    Coverage Ratio: 2087.35%

    The total capital ratio increased to 15% from 13.6%.

    The tangible equity to tangible asset ratio increased to 7.5% from 6.4%.

    The core efficiency ratio is excellent at 53.57% as is the 1.88% operating expense to average asset ratio.

    Return on average tangible common equity for 2016 was 14.21% compared to 10.23% in 2015.

  24. Bond Ghouls: Many reasons can be offered to explain the behavior of these creatures.

    After Trump's election, the Bond Bookies were certain that Trump would be bad for bonds, believing that his tax and fiscal stimulus measures would add to inflationary pressures building in the economy. I noted that theme early on November 9th in a comment.

    Comment on 11/9 at 6:01 A.M.

    The 10 year treasury yield closed at 1.88% and jumped to 2.07% the next day. The yield topped out at 2.6% in mid-December.

    The trend since then has been range bound at slightly lower levels, mostly in the 2.35% to 2.55% range.

    The ten year is rising in price and falling in yield today and has fallen again below 2.4%:

    Here is the difficult part? Why?

    I would attribute the decline mostly to a flight to safety caused by the erratic and irrational behavior of President Trump.

    One famed stock investor, Seth Klarman, told his clients that stock investors were underestimating the Trump risk.

    Quote from Klarman:
    “The erratic tendencies and overconfidence in his own wisdom and judgment that Donald Trump has demonstrated to date are inconsistent with strong leadership and sound decision-making.”

    I would agree but would go a lot farther on his leadership and decision-making abilities.

  25. South Gent,

    Interest rates are declining/stabilizing. CD offers are less attractive than just a couple of weeks ago.

    I came across 73755LAJ6 that matures on 12/1/2017 with yield-to-worst of 1.932% (the highest rate amongst all short duration bonds in my broker's inventory book). I only took 2 bonds to mitigate the risk that many things could happen before maturity.

  26. Y: I am willing to assume more interest rate risk since my bond/CD ladder has five or more maturities per month. Some months may end up having 8-12 maturities.

    I am not concerned about credit risk given the quality of the bonds. All of the CDs are FDIC insured.

    Although that Potash bond maturing next December was trading above par, I went ahead and bought 2 since the YTM is good for that Baa1 credit rating.

    The price had fallen some so my YTM was 2.04%.


    Potash sold last December $500M in 4% notes maturing in 2026. In the use of proceeds section of the prospectus, the company said that may use the proceeds to redeem the December 2017 note.

    Page S-10

    The prospectus for the 12/1/17 maturity is not linked at FINRA, but I found it at the SEC:

    An optional redemption does require a make whole payment (page S-11), which convinced me to go ahead and buy two.

    In the newer investment grade bonds, there is an option to redeem at par anywhere between 1 and 6 months prior to maturity, with 1 month being the most common.

    This Potash bond does not allow for an optional redemption prior to maturity without a make whole payment.

    I am not set up to calculate make whole payments. It would be reasonable to guess a sum greater than the current price even for a redemption notice sent out today. Potash would have to pay the principal amount and the sum of all remaining interest payments at the 3.25% coupon rate discounted to present value using the adjusted treasury rate for a comparable maturity treasury plus 20 basis points which is not much of a discount rate.

    The 6 month and 1 year treasury bills are currently at .63% and .79% respectively.

    But you might not receive the Fidelity calculated YTM either. I do not see any advantage to Potash for redeeming early given the make whole and the interest that can be earned on the proceeds raised by the December bond issuance at a slightly higher coupon and a 2026 maturity. This does not mean that the company will not redeem early.

  27. South Gent,

    What a strange trading market in the bond world! You got 2 bonds at YTM 2.04% after I bought 2 bonds at 1.932%. So I went back to check the price again. It is now yielding 1.353%. All happened in less than a couple of hours!

    1. The last trade was at 1.497% at 13:03 so it is jumping around.

      The bond traders have an advantage in that they have software that can calculate a make whole payment. That is important information to know when deciding on a price to pay for this Potash bond.

  28. OMER (own 60 Shares-Lotto Ticket):

    I discussed this small cap biotech in this recent blog when I bought 30 shares at $9.03. I later bought another 30.

    1. Small Cap Biotech Lottery Ticket Basket Strategy
    Bought 30 OMER at $9.03:

    The shares have been moving up after closing at $9.26 on 1/30/17.

    Volume was above normal at 612,414 today with the price increasing 8.24% to $11.3.

    I have not seen any news to account for this move.

  29. "As to your question about a President defying an existing federal court order, I am unaware that any have done so in the past."

    I don't think I understand your meaning:

    Jackson & Marshall on the Cherokee Indians
    Lincoln & Taney on Merryman
    Nixon & Sirica on the tapes

    Please explain.


    1. I stand corrected on Ex Parte Merryman. Judge Taney did order Merryman's release:

      I see a difference, however, when the order is an injunction prohibiting the government from enforcing a law and an appealable order requiring Nixon to turn over tapes.

      Are you referring to Worcester v. Georgia decision about the Cherokee Indians:

  30. I was indeed referring to Worcester v. Georgia, but according to that Wikipedia article, the significance given to that case in popular culture belongs to myth: "Worcester... imposed no obligations on Jackson."


  31. By the way, for people who are interested in these President vs. The Court constitutional questions, the University of Chicago Press has a very interesting free ebook ONLY THIS MONTH on Lincoln and the courts, which of course manages to relate to everything. Just punch "University of Chicago Press free ebook" into a search engine.

    And no, I don't work for the U of C Press, or President Lincoln, and certainly not for Justice Taney.


    1. I did successfully download that book after acquiring an Adobe ID and downloading an App into my IPad.

      I did review the Supreme Court's decision in the Nixon tapes case.

      Judge Sirica stayed his order pending review so Nixon never violated a court order:

      "The District Court stayed its order pending appellate review on condition that review was sought before 4 p.m., May 24. The court further provided that matters filed under seal remain under seal when transmitted as part of the record.

      On May 24, 1974, the President filed a timely notice of appeal from the District Court order .. ."

      The temporary injunction issued by the District Court prohibiting enforcement of Trump's EO was not stayed by the courts. A refusal to comply would have consequently violated the order and would be subject to the District Court's sanctions and contempt powers.

      Jackson did not violate any order in the Worcester case.

      In issuing the writ of habeas corpus for Mr. Merryman, Justice Taney decided that only Congress could suspend that writ. Congress did later suspend the writ in the 1863 Habeas Corpus Suspension Act. Taney was acting probably as a Circuit Court Judge when he issued the writ. The full Supreme Court never accepted or rejected his reasoning.

      ARTICLE I, SECTION 9, CLAUSE 2 of the U.S. Constitution:

      "The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it."

      So the writ can be suspended, and the only question is whether the President has the power to do so without Congressional authorization when it is clear that there is a rebellion underway. There is reason to believe that the drafters intended for Congress to have that power alone:

      "Originally, Charles Pinckney proposed the clause with the words "shall not be suspended by the Legislature." This reference to Congress was dropped in the later debate, allowing some to argue that either Congress or the President could suspend habeas corpus. However, it is notable that the Committee of Style moved the clause from Article III (dealing with the judicial branch) to Article I (dealing with the legislative branch), suggesting that suspension was viewed as a legislative power."!/articles/1/essays/61/habeas-corpus?utm_source=rss&utm_medium=rss

      The issue of whether Lincoln had the authority was never resolved by the Supreme Court. His disobedience was later resolved by an Act of Congress.