Tuesday, February 21, 2017

Observations and Sample of Recent Trades- 2-22-17 (BSCL, DCPRD,FFHPRG, BBC, SCHC, PGNX)/Trump as Alex Jones' Fake News Parrot/The GOP and The Coal Industry

Alex Jones and His Fake News Parrot:

Mr. Jones believes that 9/11 was an inside job and the massacre of children at Sandy Hook did not occur and was staged by the government.  In Trump’s Volleys, Echoes of Alex Jones’s Conspiracy Theories - The New York Times

FLASHBACK: Alex Jones said 9/11 inside job on the day it happened » Alex Jones' Infowars: There's a war on for your mind!

Alex Jones "Sandy Hook is a SYNTHETIC, COMPLETELY FAKE with ACTORS!!" 01-13-2014 - YouTube

One of his legions of fans took him up on his recommendation that Hillary Clinton's child sex operation known as Pizzagate needed to be investigated further. Alex Jones Pulls Video Urging Fans To Investigate ‘Pizzagate’ After Fan ‘Investigated’ It With A Gun

He also claimed that the government was involved in the Oklahoma City Bombing.

Jones was apparently the first nationally known person to label the press as the enemy of the people.

When California was suffering drought a few years go, Jones suggested that the draught was fake news manufactured to protect a fish, and Trump later repeated that claim.

The Secret Agenda Of The California Water Drought Exposed - YouTubeTrump's 'fishy' statements about the California drought

Another fake news stories promulgated by Infowars and given credence by the parrot was that the press was covering up acts of terror committed by Muslims InfoWars is behind President Trump’s idea that the media is covering up terrorist attacks - The Washington Post

I mentioned Alex Jone's in my last blog. Trump has repeatedly refused to distance himself from Mr. Jones: Why Won’t Donald Trump Denounce Sandy Hook Deniers? - The New YorkerDonald Trump and the “Amazing” Alex Jones - The New Yorker;

Other examples can be found here: Have Conspiracy Theories Gone Mainstream? How Alex Jones and Steve Bannon Pushed Them Into the Spotlight - The Atlantic

In fact, Trump praised Jones in a radio interview:  "Your reputation is amazing. I will not let you down" Donald Trump praises Alex Jones' 'amazing' reputation - CNN

Trump is certainly not letting Jones down.

Many of the "fake news" stories given credence by Mr. Trump originate from Mr. Jones' radio show that is enjoyed by Trump voters nationwide.

A frequent Trump tactic is to accuse others of doing what he is in fact doing. He is the creator of fake news and consequently attacks the news media as fake news when they contradict him with facts. False is True. True is False.

The GOP is not a conservative party.

Border Adjustment Tax:

If the border adjustment tax becomes law, I doubt that the GOP will control the Senate after the 2018 election.

This is an easy issue for middle class white voters to understand. Trump and the GOP promised to help those voters and make America Great Again. And, look what they got for voting for them, a major tax increase to pay for a corporate tax cut. Possibly as many as 80% of Trump voters will not believe it since the Lying Press would be pointing out that Fake News. However, with liberal spending on catchy political ads on their favorite TV channels, up to 20% can be peeled off in the next election.

Border tax could wipe out retail earnings by 50% or more, analyst says

There are other facets of the House plans that can cause bad results as well. The Stock Jocks, mostly loyal Trump supporters, only see what they have been told to see-a 20% corporate tax rate with none of the baggage.

The problem for the GOP is that they are now sowing the seeds for their own defeat.

And for long term investors, it is not going to matter much in the scheme of things to have the GOP tax plan dismantled when the Democrats regain power, and they will, except the next time could see a Democrat party swung into the rich folks confiscation business. Neither Clinton nor Obama were part of the liberal wing of the party, contrary to GOP protestations to the contrary.  That would be Bernie Sanders. When and if that wing has power to pass legislation, you will find out the differences.


Mike Pence-The Reasonable Sounding Donald Trump Clone

I would recommend to the Europeans to ignore Mike Pence and listen to Donald Trump.

Pence said that Trump is a firm supporter of an independent and free press, but both Pence and Trump will continue  "call out the media when they play fast and loose with the facts."  It is just laughable. Was he talking about our Donald? 

The problem is not the media placing fast and loose with the facts, but reporting facts that Pence and Trump do not like. It would be impossible for any truthful person to call Trump's comments as supportive of an independent and free press. 

The Europeans of course see the contradiction between what Pence told them and what has been coming out of Donald's mouth for months. Pence defends Trump media attacks during Brussels trip-CNNMike Pence Tries to Reassure Europe on U.S. Support-Time.com Mike Pence Europe Trip-The New York Times.

Pence does not make policy. He is only the reasonable sounding talk version of Donald Trump.

Trump enjoys creating chaos. I suspect that the Europeans and the Stock Jocks will gradually become more aware that chaos and nihilism are the two new sheriffs in town.  

I do agree with Trump that our Nato allies need to honor their defense spending commitments.


Trump Tackles Regulations To Create More Jobs:

Trump told his enthusiastic supporters at the recent campaign rallies that he had already taken steps to Make America Great Again by eliminating two regulations. This was part of his plan to bring jobs to America. Let's take a look under the hood.

The first elimination was an SEC regulation that required energy and mining companies to disclose payments to foreign governments.

You may be wondering how the elimination of that regulation creates U.S. jobs. If that thought just entered your brain, then you are thinking too much if you are a Trump supporter.

It looks and smells like a craven pay back for the financial support given to republicans by those two industries.

Kevin McCarthy, the GOP House Majority Leader, claimed that the real reason was to relieve an "unreasonable compliance burden on American energy companies that isn’t applied to their foreign competitors”. A big signing: Donald Trump signs a law repealing a disclosure rule for oil companies | The Economist

USA Today: Trump signs legislation to scrap Dodd-Frank rule on oil extraction

Isn't this a coincidence: Yes, ExxonMobil under Tillerson fought oil payment disclosure rule | PolitiFact Global News Service

The other elimination was a pending EPA rule governing the discharge of coal waste into streams and rivers. House to repeal Obama coal rule Wednesday | TheHill; Mountaintop Removal Mining: Digging Into Community Health Concerns

The GOP will say that they are in favor of environmental protection while permitting substantially more pollution. It is part of their True is False and False is True campaign.

One GOP politician claimed that the GOP was "not doing anything negative for the environment" by allowing more toxic substances to contaminate water supply.

At least the GOP was not claiming-yet-that coal slurry in the drinking water provided nourishing minerals.

An independent analysis found that this rule would have protected and improved about 6,000 miles of stream and 50,000 acres of forest between now and 2040.

I doubt that this rule will stop the decline of strip mining in Appalachia. As I have discussed in several posts, electric utility companies are building combined cycle natural gas fired plants to provide both baseload and intermediate generation. That trend is going to continue regardless of whether the stream rule goes into effect.

Combined-Cycle Power Plant – How it Works | GE Power Generation
Power plants with maximum efficiency and state-of-the-art technology - Siemens
Combined Cycle Power Plant Construction - Bechtel
Average utilization for natural gas combined-cycle plants exceeded coal plants in 2015 - Today in Energy - U.S. Energy Information Administration (EIA)

The GOP politicians know all of that since it is widely known except among Trump voters.  I would challenge anyone to find a republican engaging in an honest discussion with their constituents or anyone else about this trend.

The government estimated that this rule would cost 124 coal mining jobs per year.  One of Trump's supporters at his Melbourne Florida campaign stop was gleeful that the rescission of this rule would allow all of the coal miners to keep their jobs.  The Washington Post

The better alternative than permitting more air, water and land pollution would be to devote government resources toward retraining and possibly relocation. That sensible approach is also the losing one for politicians outside of the deep blue states.

There is no question that the coal industry wants to be unshackled from pollution regulations, and the GOP is willing to help.

Murray Energy CEO claims global warming is a hoax

Murray will sue reporters for making claims about his environmental record: Murray Energy vs. WV GazetteCoal Company, West Virginia Newspaper Reach Settlement in Libel Suit | 89.3 WFPL News Louisville

In this particular example involving the stream regulation, it is a question of whether the nation wants less water and air pollution for possibility 126 more jobs in the coal industry. And, while those jobs may be lost in the coal industry, that is not equivalent to saying that those workers are unemployed or are unable to find other jobs that are safer.

After Advancing Scott Pruitt Confirmation, Senator John Barrasso (R-WYO) Heads Over to Energy Lobbyist Fundraiser

GOP senators will say that they are in favor of protecting the environment while arguing that it is important to emasculate the EPA to create jobs. Talk is cheap.

Find out first how much money is given in campaign contributions by the mining and energy industries.

Sen. John A Barrasso: Campaign Finance/Money - Industries - Senator 2016 | OpenSecrets

Then look at what they do rather than what they say. They are without question going to permit more water, air and land pollution. Global warming is a hoax for them because money talks more to the GOP than science.

The EIA last Coal Report was for 2015 and was published in November 2016. Annual Coal Report - Energy Information Administration As of 12/31/15, there were 65,971 persons employed in coal mines. Of that number, 40,045 were employed to work in underground mines and the remaining 25,814 worked on the surface (i.e. strip mining). The number was at 87,755 at the end of Bush's second term.

I will update this post when the 2016 employment numbers become available in order to measure just how successful the GOP will be in bringing back coal mining jobs in return for substantially more pollution. I do believe that the removal of pollution regulations will make the coal companies more profitable, and that is the name of the game.

The coal industry has never had a President and Congress more willing to do its bidding and follow its orders in lock step.

Trump to roll back Obama’s climate, water rules through executive action - The Washington Post

Trump is an environmentalist just like all republicans. Donald Trump, environmentalist?


Trump's Well-Oiled and "Fine Tuned Machine":

Trump claims that his administration is a "well-oiled" machine. He frequently complains about the Democrats challenging his cabinet nominees.

Of the 549 key political appointee positions, Trump has not even named a person for 515.

Donald Trump nominations list

Anyone home in Trumpville? - The Washington Post


Pedophilia appears to be the "red line" conservative Republicans won't cross to side with Trump fan Milo — QuartzCPAC rescinds Milo Yiannopoulos' invitation after swift backlash - Feb. 20, 2017


The Trump White House is already cooking the books - The Washington Post


The appointment of Lt. Gen. H.R. McMaster to replace Flynn is a vast improvement IMO.

McMaster did not have the option to turn down Trump's offer since he is on active duty. Several other retired generals turned down the job. But, in this case, all is well that ends well.


1. Intermediate Term Bond Ladder Basket Strategy-Underweighted

A. Added 1 Centerpoint 2.25% General Mortgage Bond Maturing on 8/1/22 (IB Account)

I now own two of these bonds. The prior 1 bond purchase was at a 98.328 total cost and a 2.579% YTM. 

FINRA Page: Bond Detail

Moody's RatingA1 (01/30/2014)
Standard & Poor's RatingA (02/14/2013)
Fitch RatingA (03/18/2016)

YTM at Total Cost ( 98.805) = 2.485

Moody's  January 2014 Report

B. Bought 2 Exxon 2.709% Senior Unsecured Bonds Maturing on 3/6/25

FINRA Page: Bond Detail (prospectus is not linked)

Final Prospectus Supplement

Moody's RatingAaa (02/25/2016)
Standard & Poor's RatingAA+ (04/26/2016)

YTM at Total Cost (97.61) = 3.045%

2016 4th Quarter Earnings Report

C. Bought 100 BSCL at $21.14 (commission free ETF for Schwab customers)

The Guggenheim BulletShares 2021 Corporate Bond ETF (BSCL) owns investment grade bonds that mature in 2021. The fund will liquidate on or about 12/31/21. 

As of 12/31/16, the average duration was 3.92 years. The fund then owned 343 investment grade bonds.

Sponsor's Website: BSCL (expense ratio .24%)

Fund Holdings 

Dividends are paid monthly at a variable rate: Fund Details

D. Bought 1 WFC 2.1% Senior Unsecured Maturing on 7/26/21

Moody's RatingA2 (07/20/2016)
Standard & Poor's RatingA (07/20/2016)
Fitch RatingAA- (10/04/2016)

YTM at Total Cost (98.103) = 2.553%

E. Bought 2 Entergy Louisiana First Mortgage Bond Maturing on 10/1/2026

I bought 1 in my IB taxable account ($1 Commission)

I bought 1 in my Vanguard Roth IRA account, which at least turns this first mortgage bond into a tax free one. I have to pay $2 per bond in my Vanguard accounts. 

S & P raised the rating of this issuer's secured bonds to A from A- last August. Moody's apparently stopped rating this issuer's secured debt in 2015. It was last rated by Moody's at A2.   

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

Prospectus (IPO Late September 2016)

YTM at Total Cost (94.715 ) = 3.037%
YTM at Total Cost Roth IRA (94.65 ) = 3.045%

The price had fallen some when I bought this bond in my Vanguard account which resulted in a higher YTM even with the $1 extra commission.

However, when I placed that order, Fidelity had an even lower price for a one bond lot:

The Vanguard order book did not display the 254 bonds available at 94.387 with a 1 bond minimum.

Make Whole Provision: 

The issuer can redeem at par plus accrued interest on or after 7/1/2026. 

2. Long Term Bond Basket Strategy-Substantially Underweighted

A. Bought 1 TIP with a 2.5% coupon maturing on 1/15/29

Bond Detail
Adjusted Principal Amount = $1,124.25
Inflation Factor 1.12425
Original Issue Date: 1/15/2009 (20 Year TIP)
Premium Payment Over Adjusted Principal = $259.72
Originally Issued 1/15/2009: TIPS/CPI
Reference CPI Dated Date 1/15/09 = 214.69971
Reference CPI 2/9/16: 241.37557

Stocks, Bonds & Politics: TIP Trading in the Secondary Market

Update On Buying TIPs In The Secondary Market - South Gent | Seeking Alpha

The Mechanics Of Purchasing A TIP In The Secondary Market - South Gent | Seeking Alpha

B. Sold 1 Qwest Capital Senior Unsecured Maturing in 2031

Profit Snapshot:

FINRA PAGE:  Bond Detail

QWEST was acquired by CenturyLink Inc.  (CTL).

I discussed this purchase in a 1/4/17 comment that can be found here. As noted in this comment, I owned in the past fixed coupon Trust Certificates that had this bond as their underlying security.

Fitch has a BB+ rating. Fitch Places CenturyLink's BB+ on Negative Credit Watch

3. Continued Profit Taking in Canadian Reset Equity Preferred Stocks:

A. Sold Highest Cost DCPRD Shares at C$13.81

Profit: C$50.5

I discussed buying those shares here: 

Item 5. Bought 100 DCPRD: 50 at C$13.45 and 50 at C$13.1-IB Taxable AccountUpdate For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 8/25/16 - South Gent | Seeking Alpha

I am keeping a 50 share lot bought at C$12.27 (11/22/16).

This Dundee equity preferred stock is viewed as high risk.  

This reset equity preferred stock pays cumulative dividends at a 4.1% spread to the three month Canadian treasury bill. 

B. Sold Remaining 50 shares of FFHPRG at C$18.4:

Profit Snapshot: C$168.5

I include Canadian reset equity preferred stock in my equity preferred floating rate category. Snapshots of round-trip trades can be found here: Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Profit = $19,339.54 (all small lots)

4. Continued Paring of Stock Allocation:

A. Eliminated the ETF SCHC:

Profit on 63+ Shares: +$67.93

Quote: Schwab International Small-Cap Equity ETF  (SCHC)

This Schwab ETF can be traded commission free by Schwab customers. When paring my stock allocation, I will toss a number of ETFs that are at my portfolio's fringe, and a 63+ share position in an international small cap stock ETF qualifies as an inconsequential holding and a source for cash.  

B. Eliminated BBC Again: Sold 30 at $21.24

Quote BioShares Biotechnology Clinical Trials Fund (BBC)

Profit Snapshot: +$77.18

This ETF is extremely volatile. The stocks owned by this fund do not have approved drugs, but are clinical stage biotech companies. When there is a drug failure, the price generally collapses and soars on positive news about an ongoing trial or an FDA approval. When the company receives an FDA approval, it will be taken out of this ETF during the next semi-annual rebalancing and reconstitution.

BBC Fund Chart

Biotechnology Clinical Trials Fund


I use this fund as part of my Small Cap Biotech Lottery Ticket Basket Strategy: Update on Small Cap Biotech Lottery Ticket Basket Strategy

C. Sold 50 PGNX at $10.42:

Profit Snapshot: +$216.11

2017 PGNX 50 Shares +$216.11
The stock popped on news that it was going to be added to the S & P 600: 

Closing Priced 2/16/17: PGNX $10.54 0.92 9.56% : Progenics Pharmaceuticals Inc.

Progenics Pharmaceuticals and Shutterfly to Join S&P SmallCap 600

I bought this lot at $5.95 last July: Item # 4 Bought 50 PGNX at $5.94-Update For Healthcare Basket Strategy As Of 7/29/16-Growing Lottery Ticket Component - South Gent | Seeking Alpha

PGNX Trading Profits To Date = $330.61

5. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Potash 3.25% Senior Unsecured Bonds Maturing on 12/1/17

FINRA Page: Bond Detail

Moody's assigns Baa1 rating to Potash Corp's notes; under review for downgrade

YTM at Total Cost (100.950) = 2.04%

Potash may redeem this bond now but will have to pay a make whole payment.

Pages S-11 and S-12: Prospectus

Any optional redemption prior to the maturity date requires Potash to make that payment. It would be the sum of the principal amount plus all remaining interest due on the note discounted to present value using the comparable treasury rate plus .2%. Since the bond matures in December, the comparable treasury rate would be less than 1 year. The discount rate would be slow since the 1 year treasury bill was trading at .79% when I bought this bond. Any shorter maturity would have a lower yield. As the discount rate moves lower, the make whole payment goes up. I can not calculate the make whole redemption amount but would generally note that it would require a slightly lower payment than the sum of principal amount ($1K per bond) plus the interest payments at 3.25% owed to the maturity date.

Last December, Potash sold $500M in a 4% coupon senior unsecured bond maturing in 2026. In the Use of Proceeds section of that bond's prospectus, POT stated that it may redeem the 3.25% note maturing in December 2017. Prospectus

If Potash does not redeem early, then I will lose some on the bond but the FINRA calculation on the YTM at my total cost would be 2.04%. If Potash redeems early, that number will change based on the variables then existing (time to maturity and the discount rate).

B. Bought 1 TransAmerica Pipeline 1.625% Senior Unsecured Bond Maturing on 11/9/2017

FINRA Page: Bond Detail (prospectus is not linked)

Moody's at A3
S & P at A-

YTM at Total Cost = 1.438%

This security can be called at the greater of par value "or a discount rate of Treasury plus 12.5 basis points". FWP I interpreted it as a make whole provision that would use the sum of the principal amount ($1K) and the remaining interest due until maturity discounted to present value using the comparable treasury yield plus 12.5 basis points. I found the  Prospectus which confirmed that interpretation.

C. Bought 2 Guildford Savings CDs .65% (monthly interest) Maturing on 7/24/17

D. Bought 2 People's National CDs .55% Maturing on 5/17/17:

These low yielding, short term CDs are view only as a better alternative to idle cash sitting in the Fidelity Government MM fund: SPAXX - Fidelity ® Government Money Market Fund | Fidelity Investments The current seven day yield has been stuck at .2% for awhile. Taxable Money Market Funds - F (Alphabetically) - Barron's

E. Bought 2 U.S.T.s at Auction-Treasury Direct Account:

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. I did not discuss Trump's Fake News creation of a terrorist attack in Sweden.

    Trump is the creator of Fake News and consequently blames the media for what he is doing.

    The same technique is used by demagogues throughout history.

    Just by way of an example, Hitler accused the Poles of attacking a German radio station which did not happen. The attack was made by Germans dressed as Poles and is known as the Gleiwitz incident. That was just one of the operations staged by Germany under a plan knows as Operation Himmler:


    Germany accused Poland of aggression and launched an invasion 1939 based on those false and staged events. Germany was the aggressor, of course, but it accused the Poles of being the aggressor.

    Trump's Swedish incident is noteworthy for several reasons.

    First, he invented the occurrence and was consequently creating Fake News.

    Second, rather than admit that he was wrong, he then says that he was actually saying something different. That indicates a willingness to continue his deception after he makes a false statement.

    Although Trump was clearly referring to a terrorist attack that he said had just occurred in Sweden, he then states that he was referring to an interview on Fox with a filmmaker who is a conspiracy theorist, much like Trump in that respect.

    This brings me to the last point. Trump sources his information from unreliable sources and then repeats them as true for a worldwide audience. While that may be okay for a reality TV star, it makes him look like a fool as President of the United States that he so easily gives credence to false information and gives that false information a worldwide broadcast in his capacity as President.

    1. Trump is the creator of Fake News.

    2. Trump accuses others of creating Fake News which is a demagogic trait.

    3. Trump sources information from unreliable places like Alex Jones Infowars, Fox and Friends, and Breitbart, and rebroadcasts false information as true without bothering to check the facts first. That is a very dangerous approach for a President.

    4. When fact checkers point out that his factual representations are clearly false, he keeps making them over and over again and can not be dissuaded by anyone to quit.

    1. Regarding Trump as the Fake News Creator-In-Chief, the WP is compiling a list of his false and misleading statements made by President Trump. The WP found 132 false or misleading claims in the first 33 days:


  2. South Gent,

    Bought 2 bonds (74913GAT2) with a YTM of 1.719% matures at 6/1/2017, S&P BBB-. It has the make whole provision.

    1. Y: FINRA has outdated credit ratings on CenturyLink bonds.

      Fitch rates CTL senior unsecured bonds and those issued by Qwest at BB+, and the rating is under review for a possible downgrade:


      That report is dated October 2016. FINRA gives the Fitch rating at BBB- as of that date. I am not sure what FINRA is smoking, a phrase used recently by Sweden's former PM in reference to Trump.

      S & P has a BB rating on CTL's senior unsecured:


      That does not matter for a note maturing in June 2017.

      The credit profile of this company is sinking and becoming riskier which is relevant for intermediate and especially longer term bonds.

  3. South Gent,

    There maybe many unknowables that push the ytm so high. Given the 6/1/2016 maturity I am willing to take 2 bonds for its high yield. I am staying away from intermediate and long term bonds at the moment.

  4. The problem with the border tax is that the Dems would need to present the issue as clearly as you have. Tax on them to pay for richer people's tax cuts. Creepy of me to wish it gets passed, so the nature of all of this is more readily revealed?

    In Trump's rejection of antisemitism... was an antisemmitic remark. It's subtle and I want media to ask him what he meant by it.

    "Maybe it comes up more."
    (paraphrased, he used another word than "comes up.")

    There's an antisemitic idea that Jews get too much attention for antisemitism. They are too whiny about it. On the RT (antisemitic) site's article about the repeat bomb threats at US Jewish Community Centers (JCCs), the comments were lists of people claiming "the Jews did the threats to create attention for themselves." That's just typical. I've heard that so many time. Even if the person sounds normal online, when I've continued discussion they inevitably every single time wind up quoting something that could have been in the fake book, Protocol of the Elders, the guide book for how to be antisemitic.

    I ran this by others, including those in respected organizations, just to make sure it wasn't my imagination or overreaction. Yep, sounds like Trump was saying Jews are a little whiny about antisemitism.

    I want the media to know about this and ask him what he meant. Pretty ironic that after multiple attempts to get him to dismiss antisemitism, his stream of consciouness mind, put a classic attack at Jews right in the middle of his rejection.

    I think it'd be a great chance to "catch him in the act" on bigotry. An image that would actually resonate with people.

    At any rate. I should spend some time on investing... so I'll go do that. When will there be a pullback so I can buy something??

    1. LMH: I do not recall Trump making a statement along those lines. He did say that day that he will denounce anti-Semitism whenever he gets the chance. A reporter noted that he was given to chances recently and he did not do it.

      He did say "You don't know where it's coming from, but I hope they catch the people."


      Trump can not feign empathy with other people very well. Clinton was much better at it.

      How high will the market go before correcting? There is no answer to that question. I am selling everyday into the rally. This is basically the same approach that I followed in 1998-2000. I do believe that the Stock Jocks are way too optimistic now.

      When and if that optimism bumps up against the cold hard reality which can no longer be denied, then we will be the higher you rise, the harder you fall mode.

      When I finish paring my stock allocation to fairly low levels, I doubt that I will be back in any meaningful way until there is another catastrophic bear market similar to 1929-1932, 1974, 2000-2002 and 2008-March 2009. Those catastrophic declines are becoming more frequent. I doubt that the solution to the last crisis, caused by too much debt, will be solved long term by the parabolic increase in government and corporate debt worldwide.

  5. The media plays two versions of his comments on anti-semitism. One leaves out that phrase (and a few other minutes.) I assume for expediency in keeping things short. The original clip that I've seen at least one more time, had the phrase. It's a little hard to notice because it's got the incoherent, not connected, stream of consciousness ("what did he say??") way of talking that he does.

    The people I contacted (including one that was the guest for the topic on one of the big media channels), heard it too. It's definitely not my imagination.

    I'm not asking when will the crash be. I'm lamenting that there isn't even a small pullback to buy into. The 5% type.

    1. LMH: Dips are unpredictable. If you wait for a 5% to 10% decline, the market may continue going up 15% to 20% before falling 5% to 10%.

      Historically, a 5%+ decline happens 3 times a year.


      Between 2011-2015, there were 6 declines between 5% and 10%:

      Figure 1:


      I do believe that the market is now more prone to massive declines than prior to the 1997 Asian Contagion episode which was the first warning shot IMO fired relating to the still basic and fundamental problem that is getting worst, not better: fueling growth with parabolic increases in debt.

      I am not saying that you did not hear something.

      I did read a transcript of his remarks at the black history museum provided by Time magazine:


      What I found striking about those remarks is that the passage about anti-Semiticism is brief and appears in the middle as an afterthought stuck in front of a sentence thanking Ben Carson and his family for joining Trump.

      In other words, the remarks about Jews is placed on the same level as his remarks about Carson being with him and being such a swell guy. He talked more about Carson than he did the Jews and the recent acts of anti-Semiticism.

      "The anti-semitic threats targeting our Jewish community and community centers are horrible and are painful and a very sad reminder of the work that still must be done to root out hate and prejudice and evil.
      I want to thank a great friend of mine, Dr. Ben Carson, and his beautiful family, Candy and the whole family, for joining us today. It was very special to accompany him and his family for the first time seeing the Carson exhibit. The first time. I love this guy. He's a great guy, really a great guy. And he can tell you better than me, but I'll tell you what, we really started something with Ben. We're very, very proud of him."

      The overall impression for me is that someone twisted his arm, probably his daughter, and told him to say something about the Jews after he clearly refused to condemn anti-Semiticism twice after being given the opportunity by two different Jewish reporters. He obviously did not want to say anything IMO.

  6. There is an ongoing rebound in oil and gold prices today:

    SPDR Gold Trust (GLD)
    Change +0.94 +0.80%
    Volume 909,022
    Feb 23, 2017 9:57 a.m

    Gold - Electronic Apr 2017
    Change +16.20 +1.31%
    Volume 148,609
    Feb 23, 2017 9:48 a.m

    The spot gold price is up $10.3 as of 9:59 E.S.T.

    1. hello Southgent,

      I think pairing your stock allocation presently, given your financial situation, is prudent.

      You seem to indicate that you will not be back in the market in any significant way until there is another catastrophic bear market.

      I know in the past, you had recommended using the Vix allocation asset model.

      As I remember it, during the first recovery period, With the Vix going below 20. You would use this time to really sell. And I can't remember when you would put on your short positions of SDS.

      I wonder if you still give any credence to this methodology, or if you think that the market has gone up so fast without good underpinnings of revenue growth, and given the alignment of "new thinking for corporate tax reduction etc.", that we are setting up for a major fall.

      Thanks a lot

  7. SAM: Yes, I will not make a meaningful reallocation to stocks out of high quality bonds and short term CDs until there is a catastrophic stock market event, which I define as a 45%+ decline in the S & P 500.

    I do not know when that will happen or how high the stock market will go before the next catastrophic event. I do believe that catastrophic events will be more frequent than in the past as conditions for instability become worse over time. In other words, I may not have to wait that long for the next one.

    World Debt Clock

    There have been three of those events in my lifetime as an investor. They present the best wealth creating opportunities provided the investor has the nerve and the cash to invest when others are fleeing.

    I do view Trump as a creator of instability. The market is way too optimistic about the positives and the lack of any negatives.

    The catastrophic declines can be caused by a massive reversion to a reasonable valuation for the S & P 500. That kind of decline occurred in 2000-2002. Even after a 50% decline, the forward P/E of the S & P 500 was still at the top end of its historical ranges.

    The market crash in October 2009 started out as a reversion to reasonable values but cascaded into the Great Depression due to inappropriate policy responses, a massive number of bank failures before there was FDIC insurance, and the evaporation of wealth caused by margin calls that contributed to a market free fall.

    Market crashes can also be a reversion to reasonable fair value ranges which was the case of the October 1987 one day crash, followed by a long period of going nowhere.

    The Recovery Period in the VIX Asset Allocation Model occurs after the Trigger Event. The market is currently in a Stable Vix Pattern, defined by the model as an investable cyclical bull market in stocks. In the past, there has always been a period after a Trigger Event where the VIX returns to below 20 readings that provide an opportunity to lighten up at better prices than those prevailing during the TR. That may not occur next time.

    The next TR may be the catastrophic event. There is no VIX data for 1929-32 or 1973-1974. Those declines just went south with no meaningful relief until they became catastrophic events.

    I can afford to be prudent now. I will still venture into stocks to play a theme (e.g. gold) but the moves will be tiny. I am reducing my stock allocation every day, usually in the $3K to 10K per day range.

  8. South Gent,

    This is a great insight putting everything in perspective.
    We also discussed in the past a currency war (e.g., Asian currency crisis in 1997) could potentially be another black swan event.

  9. Southgent,

    Thanks so much for your answer. I certainly respect and listen to what you have to say.

    I know in the past you would guesstimate/quantify risk-benefit ratios of events happening. Since of course, the future is unknowable.

    You had written in 2011 that the next bull market would need (as in 1982 )the support of governments and individuals and developed nations to borrow increasing amounts of money to spend.

    There also would need to be technologic innovation. Also there would need to be a dampening of inflation.

    I am still trying to understand your fear of a massive correction. I could see during a garden-variety recession 10 to 20% declines.

    I know I am missing something from your thinking process in terms of the risks of debt, possible political instability, problems in Europe and a Fed which is constantly behind the curve.

    I know that the St. Louis Fed charting shows household debt service as a percent of disposable income to be very low and stable.

    I certainly am not trying to argue with you. You have had experience and understanding way beyond my depth, so I'm just trying to understand your thinking.

    Thanks again



    1. Sam: The new debt bombs are not in U.S. Consumer debt, which was the main underlying cause of the 2008 Near Depression, but in government and corporate debt worldwide. The next flash point could well start in EM debt that is denominated in USDs. Another possible precipitating event would be a worldwide slowdown sparked by the onset of trade wars.

      The other problem is that interest rates and inflation will probably rise significantly before the next major de-leveraging episode that will dramatically increase the servicing cost of government and corporate debt.

      I have referred to the declining DSR and FOR ratios as one reason underlying the current bull move for years. U.S. consumers are still in the aggregate in good shape due to refinancing their main debt obligation, their home mortgages, at abnormally low rates long term. However, the principal amount of their debt is also increasing and a lot of that debt is high cost debt.

      The burden of debt service payments as a percentage of disposable personal income can rise through increases in non-housing debt that has to financed at higher rates than mortgage, potentially aggravated with the next recession and higher unemployment that results in less disposable income.

      The NY Fed has a chart that separates non-housing and housing debt:


      There are significant debt problems that are concentrated in certain groups, such as millennials and their student debt, and lower income houses with expensive subprime loans. Youngsters with student loans living in apartments, where rents have been increasing at a faster rate than CPI for years now, are particularly vulnerable in cutting back spending on discretionary items.

      And, the precipitating event can be a reversion to reasonable valuation ranges without being directly tied to external economic factors, with 2000-2002 being the clearest case IMO.

      I have been saying that I do not see anything in the market internals yet that point to a correction. When and if the thundering herd changes direction, the move down will be faster than the move up.

      Since I am far from being comfortable with the market's valuations now, do not share the Stock Jocks enthusiasm for Trump, and do not need to take any risks, I am not going to wait for the trap door to open with a rope around my neck. I have participated in the rally since 2009 and started a reallocation back into stocks in February 2009.

    2. Sam: I went back and reviewed that 2011 post. At that moment in time, I viewed the market's rally off the March 2009 low as most likely a cyclical bull market within the confines of a secular bear market, more similar to the bounce in 1975-1976 after the 1973-1974 bear market. I changed my opinion in 2012 to a long term bull market based on a number of factors, including the continued decline in the DSR ratio and low interest rates/inflation.

      Also, a snapback rally from a catastrophic decline in a long term secular bear market was getting long in the tooth by 2012. For two years or so, it does not matter whether the rally is a snapback from the catastrophic loss period or the start of a new longer term bull market. It has to played either way.

      You can see my opinion changing in 2012 posts and in my SA comments. I started to leave SA comments early in 2013 when I was stating my case, more likely than not as always, that strong secular forces were supporting a long term bull market:


      2/12/13 comment

      2/25/13 Comment:

      4/29/13 Comment

      My thinking does evolve with as I process more facts and new information.

      Even though I am reducing my stock allocation, I intend to keep somewhere in the $400 to $500K range in stock funds, where I have turned off dividend reinvestment, and several individual stocks (probably 20 to 30 individual stocks). I recognize that stocks may continue an upward spiral.

      Part of the reduction plan will involve selling higher cost shares, where I will keep lower price shares.

      I have also adopted a plan to sell $1K for my Vanguard Equity Income fund when the value rises by $1K since my last pare, while keeping my allocation at over $50K. I will not sell any shares in stock funds held in my T. Rowe Price stock mutual fund account and those funds in the aggregate are material in my asset allocation.

  10. Y: IMO, central banks have been facilitating trade wars over the past several years through abnormal monetary policies designed to weaken their respective currencies.

    We are now moving into a period where the CBs will gradually ease out of those extremely abnormal policies.

    The next round in the trade wars may start through the implementation of tariffs, most likely started by the Trump Administration.

    The U.S. may call its tariffs border taxes but those who pay those "taxes" will view them as indistinguishable from a tariff.

    When I refer to the VIX Model, I am referring to the S & P 100 volatility data between 1986 and 1990 and the S & P 500 data that starts in 1990. My comments about Recovery Periods after a Trigger Event refer only to events starting in 1986 to the present.

    There was no period in the two catastrophic events occurring prior to the volatility data series, where the market recovered to a higher level.

    The market just kept sinking with brief rallies until passing what I call the catastrophic event threshold.

    The basic problem underlying instability is too much borrowing to fund spending/growth.

    Since the last upheaval starting in 2008, based in large part on excessive household debt, the overall debt levels for governments has skyrocketed upward. Corporate debt has increased dramatically, and the debt held by EM companies denominated in USDs is certainly a potential flash point.


    The McKinsey report on debt accumulation since 2007 ends in the 2nd quarter of 2014 for developed economies and 4th quarter 2013 for developing economies ("Global debt has grown by $57 trillion and no major economy has decreased its debt-to-GDP ratio since 2007")


    The cure for too much debt is not going to be parabolic increases in new debt.

    Trump is a debt lover. Before he went into the licensing his name business, his enterprises went bankrupt 4 times and he lost almost $1B due to mismanagement and a failure to align debt accumulation with the ability to service debt.


  11. BHB (OWN 150 Shares): Bar Harbor announced a 3 for 2 stock split. This will be the second such split since I bought my first lot.

    Bar Harbor Bankshares Announces [Three-for-Two] Stock Split as a Large Stock Dividend


    BHB completed its acquisition of Lake Sunapee earlier this year.


    I owned Lake Sunapee shares when that acquisition was announced.

    My last BHB purchase was discussed here:

    Scroll to
    1. Added 50 BHB at $31.61:

    As shown in a snapshot at that post, my remaining 150 shares have an average cost per share of $25.03.

    Bar Harbor Bankshares (BHB)
    $43.50 Change -0.30 -0.69%
    Volume 10,392
    Feb 23, 2017 3:59 p.m

    I personally would not buy shares at this level. I will wait until I receive the stock split shares to make a decision about paring this position. I am not reinvesting the dividend.

    I did sell a 100 share lot held in another account for a $936.96 (2/11/16)

    See Snapshot at http://seekingalpha.com/instablog/434935-south-gent/4880022-update-regional-bank-basket-strategy-5-6-2016

  12. I have published a new post:

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