Friday, February 10, 2017

Observations and Sample of Recent Trades (FNCL, MLGF, ENY, SPGYF, GG, XGD:CA, XEG:CA) /Trump and the Imperial Presidency

I was hoping that someone in the White House could spell but alas that hope has now sunk into despair.

I am referring to a memo delivered to the press that purportedly justified another one of Trump's reality creations. 


This is Trump's delusional statement made before the U.S. Central Command


“You’ve seen what happened in Paris, and Nice. All over Europe, it’s happening,” he said to the assembled military leaders. “It’s gotten to a point where it’s not even being reported. And in many cases the very, very dishonest press doesn’t want to report it. They have their reasons, and you understand that.”


That is something that only the True Believers knew. 


Whenever there was a terrorist attack, including the ones specifically mentioned by Trump, there has been nonstop 24/7 news coverage out the Yin-Yang.  New York Times


The media requested a list of those terrorist acts that they failed to cover, and then the White House delivered a truly miraculous document. 


I am not referring to the terrorists attacks that were covered endlessly by the news media that are on the WH list, or the references to occasional lone wolf attacks against one or two persons in some distant foreign land which received less coverage. I could say without fear of being contradicted that I am far more likely to hear of  attack on a Christian by a Muslim in India or Australia than a garden variety murder or attempted murder in Nashville.


Nor, am I going to discuss the inclusion of just false claims which is to be expected anyhow. ‘My daughter’s death will not be used’: Parents furious over Trump’s false terrorism claims - The Washington Post 


I am not even going to take issue with the failure to include terrorists attacks by native born Caucasians in the U.S. and the recent murders by a white guy of Muslims in a Toronto mosque.  


All of that is beside the point that I am making now.


Instead, I desperately wanted a Trump republican in the White House who could spell better than a second grader. At least the lying press, who needs to just shut up, can spell.



Shoker! Rediculous chocker Trump attaks and dishoners English with ever-dummer spellings. - The Washington Post



Trump should just sue everyone who points out facts to him for libel. The new libel law needs to provide a cause of action against anyone making a true statement to correct our Commander-In-Chiefs false statements.  


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


Trump says that the media is engaging in fake news by providing correct information that the U.S. murder rate is not at a 47 year high but near a 4 decade low. I am having trouble learning Newspeak and will redouble my efforts. That sentence is hard for me to understand. I have to hit myself a few times in the head before the fog starts to clear. 


Yes, as Trump has claimed many times, the murder rate is at a 47 year high, notwithstanding the claims of the lying press to the contrary.  


The press "does not tell it like it is. Wasn't to their advantage" to tell the truth, quoting a recent statement by Our Leader . Trump repeats false claim about U.S. murder rate - The Washington Post Yes, the entire press is hiding the truth from the American people to further some awful ulterior motive.


Here are some stories written by the Lying Press who just need to shut up since they are just not with the program yet: True is False. False is True.


Some of the Lying Press, referring to the FBI's data on the murder rate (so quaint to still refer to facts), point out that the murder rate is near a 44 year low.


Donald Trump Claims US Murder Rate 'Highest' in '47 Years', Despite FBI Data Showing Otherwise - ABC News


Donald Trump Falsely Claims Highest U.S. Murder Rate | Time.com


Fact check: Trump makes false claim about murder rate - CBS News


In Meeting With Sheriffs, Trump Repeats False Murder Rate Statistic : The Two-Way : NPR


Trump Wrong on Murder Rate (FACTCHECK.ORG)


Trump keeps repeating his debunked claim that the murder rate is at its highest in 47 years - Business Insider


Here's the rub for those who can at least see a problem which is probably less than 50% of the voting population.   


Is Trump just lying about the murder rate being at a 47 year high or is he delusional?  


Fact checkers and the media have been pointing out the FBI data that contradicts his claim for months, which probably answers that question. 


You can be grateful at least that Trump did not threaten to destroy you----yet. Trump offers to 'destroy' Texas senator to help Rockwall sheriff | Politics | Dallas News He was joking of course, and his audience did laugh for reasons known only to them.  


We all know that Trump tells jokes everyday. He was joking when he offered to invade Mexico to take care of those bad hombres. It was a barrel of laughs when he hung up on the Australian P.M. He is the most funny when he tells his daily jokes with a serious face. 


Texas Democrats Angered by Trump’s Remark on Destroying Senator’s Career - The New York Times


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Senator Warren was reading a letter from Coretta Scott King about Senator Sessions who is our new attorney general. She was reading that short letter on the Senate floor which caused the GOP senators to go into apoplexy. They voted to shut her up. Sen. Lindsey Graham (R) stated that silencing Senator Warren was "long overdue". 


Read the letter Coretta Scott King wrote opposing Sessions’s 1986 federal nomination - The Washington Post


After the GOP silenced Warren, two male U.S. Senators, Bernie Sanders and Jeff Merkley, were allowed to read Coretta's letter without being gagged by the GOP.


I doubt that Jeff Sessions will undergo a conversion similar to what happened to Senator Hugo Black (1886-1971) after he moved from being a Senator from Alabama to a Supreme Court Justice. 


At one point in his life, Black joined the KKK. As a Justice, he became the most fervent supporter of the Bill of Rights and civil liberties. That is not going to happen with Sessions.


Jeff Sessions confirmed to be the next attorney general - CNNPolitics.com {52-47 with one Democrat Joe Manchin from West Virginia, who will likely lose his re-election bid in 2018, supporting Sessions. Trump won 68.6% of the vote, carrying every county in that state. The GOP is likely to gain more Senate seats in the 2018 election, given the number of vulnerable Democrats up for re-election then, with the Democrats defending 23 seats compared to 8 for the GOP, unless the nation is then in a serious recession. I doubt that the Democrats will figure out by then how to appeal to white working class voters and FDR and Harry Truman are not around to give them lessons}


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Trump and the Imperial Presidency 


A recent PPP poll found that 51% of Trump voters believe that the Orange King should be allowed to overrule court decisions that he does not like (16% are not sure).   


Polling Question: "Do you think Donald Trump should be able to overturn decisions by judges that he disagrees with, or not? (PPP Poll, February 7-8)


PPP_Release_National_21017.pdf

That would equate to over 30 million adult voters who no longer believe in the very foundations of our democracy. Forget about all of the checks and balances created by the Founding Fathers. Trump will Make America Great Again and Trump Will Make America Safe Again. Forget about Article VI of the Constitution that provides that the Constitution itself is the Supreme Law of the Land. Constitution for the United States - We the People


As I have been saying to deaf ears for a decade or so, the greatest threat to our freedoms and democracy does not originate in foreign lands but from within the United States. 


Apparently, those who call themselves conservatives now are not concerned about Trump's strong authoritarian tendencies or the fact that the courts decide whether laws are constitutional. 


Trump does not decide whether his Executive Orders are constitutional, nor does Congress decide. It has been that way since the Supreme Court decided Marbury v. Madison (full text) :: 5 U.S. 137 (1803)The Supreme Court . The Court and Democracy . Landmark Cases . Marbury v. Madison (1803) | PBS


So 30+M republicans now want to take the U.S. back to the halcyon days before our Constitution was adopted, though leaving the second Amendment in place will certainly be okay.   


The other two branches just need to kneel, swear unswerving allegiance, and agree with whatever comes out of Trump's mouth, and that includes the lying press as the unofficial 4th branch of government keeping an eye on the other three.  


Trump on Immigration Power: I Can Do Whatever I Want - Bloomberg


Trump Calls Hearing on Immigration Ban ‘Disgraceful’ - The New York Times (referring to the arguments before the Ninth Circuit Court of Appeals)


Trump: 'Dishonest press' won't report terrorist attacks | TheHill

With False Claims, Trump Attacks Media on Turnout and Intelligence Rift - The New York Times (journalists are among the most dishonest people on earth according to Trump)

Charges about the lying press are frequently made by Trump but its origins lie in the German term Lügenpresse.  The Nazis use that term against the Jewish and foreign press. 


The ugly history of ‘Lügenpresse,’ a Nazi slur shouted at a Trump rally - The Washington PostDonald Trump Supporters Are Using Nazi Word 'Lügenpresse' | Time.com


It was shocking to hear the Justice Department's lawyer, Anthony Flentje, argue before the Ninth Circuit panel that the courts have no role in deciding whether Trump's immigration EO was constitutional. When Judge Michelle Friedland asked Flentje that question, the government's lawyer paused for several seconds before saying that the courts had no role.

Trump's constant attacks on the judiciary are certainly consistent with his authoritarian personality and his admiration of Putin who does not have to worry about an independent judicial branch.

Demonizing the free press and questioning their trustworthiness have been part of the GOP playbook for acquiring and maintaining power for decades now. The purpose is to cause tens of millions to tune out accurate information altogether and to rely solely on incomplete, misleading and alternate facts provided by GOP politicians, their apparatchiks and "think tanks" funded by the Koch brothers and other major GOP donors, and the GOP's propaganda organs.

Trump is denigrating the free press almost on a daily basis.

You either see it or you don't. I would say only a minority of voters see it, while a majority see nothing at all. I would not expect that to change since people are not going to change.  

Wis. Trump supporters: Despite rocky start, give the president a chance - CBS News


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GOP's Border Adjustment Tax: 

I will be discussing periodically the potential impacts of the GOP's border adjustment tax on particular stocks. I will be assuming that readers are familiar with this tax plan:



How a controversial GOP plan could boost the taxes on a sweater from $1.75 to $17
Would the GOP's border tax adjustment lead to a trade war? | TheHill
Koch Industries Says House GOP’s Tax Plan ‘Could Be Devastating’ - Bloomberg
12 Stocks to Benefit Most From the House Tax Plan - Barron's

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1. Short Term Bond/CD Basket Ladder Strategy

A. Bought 2 First Merchants Bank CDs .65% (monthly interest payments) Maturing on 8/3/17

Common Stock Quote: First Merchants Corp (FRME)


Earnings Report Q/E 12/31/16




B. Bought 1 Costco 1.125% Senior Unsecured Maturing on 12/15/17:




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


Moody's RatingA1 (11/28/2012)
Standard & Poor's RatingA+ (11/28/2012)
Fitch RatingA+ (04/22/2016)

YTM at Total Cost (99.971) = 1.159%

C. Bought 1 Compass Bank CD .8% Maturing 11/8/17


Continuing to build cluster in November 2017-January 2018.


Compass Bank is a wholly owned U.S. banking subsidiary of  Banco Bilbao Vizcaya Argentaria S.A. ADR (BBVA)


Clustering Maturities Near FED Meetings Where Increase in FF Currently Expected


I also own 1 senior unsecured bond issued by Compass: BOUGHT 1 Compass Bank 5.9% Subordinated Note Maturing in 2026 at 76.75Bond Detail (rated at Baa3 by Moody's and BBB by S& P)


D. Bought 1 Bank of China CD  .8% Maturing on 8/15/17


Continuing to build July and August 2017 cluster.


E. Bought 2 JPM 1.05% CDs (monthly interest) Maturing on 2/15/2018





A. Bought 1 Centerpoint Energy 2.25%  General Mortgage Bond Maturing 8/1/22




Finra Page Bond Detail (prospectus linked at FINRA Page)


The Centerpoint general mortgage bonds are second lien bonds to the outstanding first mortgage bonds. The amount of first mortgage bonds outstanding was $102M as of 9/30/16 which is not significant for this company.


Moody's at A1

Fitch at A

Fitch Press Release: 1/9/17 

YTM at Total Cost (98.328 ) = 2.579% 

Centerpoint is a distribution and transmission electric utility with more than 5 million meters. It is also has a 54.1% limited partner interest in Enable Midstream Partners LP (ENBL). 

Stock Quote - CenterPoint Energy Inc.  (CNP)

CNP sold last January $300M in general mortgage bonds maturing in 2027. CenterPoint Energy subsidiary closes on $300 million of general mortgage bonds. That bond was sold with a 3% coupon: Prospectus



3. Oil as a Hedge Against What Trump May Do Further To Piss Off Muslim and Spanish Speaking Oil Producing Nations

I am undertaking a tiny, tiny rotation into Canadian energy companies that is not worth noting but I will discuss nonetheless. 

I need to give oil as a hedge more thought. I am talking about hedges against Trump induced economic turbulence  I regard that scenario as worth hedging against now.  Yes, I know that Trump is really sane and is just acting crazy as if being President is just another reality TV show. 

One scenario is the U.S. leads the world into a worldwide recession caused by a deliberate effort to change the existing world economic order and trade relationships sufficient to cause widespread and negative repercussions worldwide. The result would have an adverse impact oil prices. 

Another is that Muslim nations (possibly joined by Mexico and Venezuela) implement an oil embargo against the U.S. in retaliation for GOP policies, which sends crude up in price and increases the value of Canadian and U.S. oil assets. The embargo may last for days, weeks or months. U.S. strategic oil reserves would be tapped and shale producers would ramp up production, but that would be woefully insufficient to meet current U.S. demand. 

The most that I can say now is that oil may be a hedge under a few possible future scenarios including the one mentioned above.

There are possible scenarios relating to supply and demand where I would not characterize the position as a hedge. The purchase may be justified, for example, by demand coming into balance with supply. 
OPEC output cuts at record 90% compliance: IEA - MarketWatchGlobal oil demand improves but slowdown still forecast for 2017: IEA


Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day)

Short-Term Energy Outlook - U.S. Energy Information Administration (EIA)(current 2017 prediction is total world consumption of 98.09 million barrels per day with production at 98.03)

That may happen later this year depending on OPEC members complying with their quotas, an acceleration of economic growth, and other factors (e.g. shale production levels) 

Sample Trades:


A. Bought 50 SPGYF at $8.16:


Quote U.S. Grey Market Listed Ordinary Shares:  Whitecap Resources Inc. (SPGYF)


Quote CAD Priced Toronto Listed Shares:  Whitecap Resources Inc. (WCP:TOR)






Home - Whitecap Resources - Oil & Natural Gas Resource Player Operating in Western Canada


What interests me about Whitecap is their rapid increase in reserves. Reserve Information The 2016 increases come from acquisitions made during the first half of 2016. Average production levels increased 18% to 49,251 boe/d in the 2016 third quarter compared to the 2015 quarter.


Hedging - Whitecap Resources 


The company does pay a monthly dividend of C$.0233. Dividend Information - Whitecap Resources The dividend rate higher before the crude oil price decline started, but the company did not eliminate the dividend in response.


Those acquisitions were funded mostly by selling or issuing new shares:


Page 12  WCP_MDA_Q3_2016.pdf


In early January, Whitecap sold C$200M of 3.36% senior secured notes maturing in January 2022. 

As previously mentioned in a comment, I also bought small lots in the following small cap Canadian E & P companies: Raging River Exploration Inc. (RRX:TOR) and Advantage Oil & Gas Ltd.  (AAV:NYSE).

Subsequent to my RRX purchase, Raging River made this press announcement that was received favorably by the market: Raging River Exploration Inc. Announces 2016 Year End Reserves, Preliminary 2016 Results and Operations Update

B. Bought Back 100 ENY at $8.63




The Guggenheim Canadian Energy Income ETF (ENY) is a USD price ETF that owns Canadian E & P and energy infrastructure stocks. 


TOP TEN Holdings: 





ENY-Sponsor's Webpage 


I do not approve of Cameco (CCJ), a uranium producer, being included in the index that this ETF tracks before fees and expenses.


Of the stocks in the top ten, I have owned in the past Suncor, Pembina, and PrairieSky.   


As with any USD price ETF that owns Canadian stocks, the ETF price will reflect the currency the CAD/USD conversion rate and the prices of the owned stocks in Canadian dollars. In short, two ways too win or lose or sometimes one of both. 


I will dart into and out of this ETF repeatedly. 


I last rented the security for a few weeks and realized a $73.9 gain. 




Snapshots of other transactions, showing short holding periods:  



2014 +$296.37

2012 +$37.58

2008 +$138.73
2007 $78.95

The most fortunate elimination occurred with the 2014 disposition. Sold 155+ ENY at $17.55 (7/5/14 Post) Shortly after that sell, the shares started to crater as crude oil crashed in price and the CAD declined precipitously against the U.S.D., a double whammy for a Canadian energy ETF priced in USDs.  


C. Added 10 PEO Shares (commission free trade): 





I will probably still have a number of commission free trades when my 1 year period runs out. I am using some of them to buy small amounts in existing positions that have come down in price and generally fit into one of my themes. 


I had liquidated my PEO position in August 2013: Item # 1 Sold 104+ PEO at $27.06-Bought 100 of the Stock CEF PEO at $24.98 (August 2012) I realized a total return on that 100 share lot of $356.78 or 14.24%. If I had kept the shares, then the total return with dividends reinvested would be 4.84% starting on 8/6/12 through 2/8/16. The problem was that energy stocks started to crater in the 2014 summer and are slowly recovering from their pre-crude price collapse prices.


I sold 100 shares in 2011: Item # 3 SOLD:  100 PEO @ 30.62 (7/27/11 Post)

I started last year building it back up and am now up to 151+ shares, more than I owned previously. 


When looking at the historical prices, it is important to keep in mind that this stock CEF pays out significant dividends, mostly sourced from long term capital gains. 


The fund has a minimum 6% annual distribution rate policy and has paid distributions for the last 80 years. It was founded shortly before the 1929 stock market crash. Adams Funds




Top Ten Holdings as of 12/31/16: 




Data as of Date of Trade 2/9/17


Closing Market Price: $19.95

Closing Net Asset Value: $23.59
Discount: -15.43%

Sourced: PEO Adams Natural Resources- CEF Connect


Last SEC Filed Shareholder Report: ADAMS NATURAL RESOURCES FUND, INC. - FORM N-30B - SEPTEMBER 30, 2016 (cost=$500.146+M, value as of 9/30/16=$655+M)


D. Bought 100 Shares of XEG:CA-Impact of Border Adjustment Tax


I also bought back 100 of iShares S&P/TSX Capped Energy Index ETF (XEG:TOR).


Unlike ENY, this Canadian ETF does not own energy infrastructure companies and is a pure play on Canadian E & P companies. It will have a far higher weighting in major Canadian energy companies. 


TOP Ten: 






I recently bought and sold a 100 share position: 





The largest holding, Suncor, recently reported better than expected earnings. Suncor posts strong Q4 earnings-CBC News; Suncor credits higher oil prices and better production for fourth quarter profit | Financial Post


A border tax will be a major negative for Canadian E & P companies. 


Until there is further clarity on this issue, I will keep my exposure to very low and insignificant levels. 


It would do Trump supporters good to pay more at the pump due to a 20% levy on imported oil. The middle class Trump voters should be happy to pay more for energy, clothing, electronics and other imported products to finance a cut in the corporate tax rate which will allow corporations to increase dividends paid to those who are well off.


At a minimum we will know soon enough whether corporations will use their cut money to hire more workers in any meaningful way or use the extra cash to buyback stock, increase the dividends, and management compensation packages. 


4. Continued Paring Stock Allocation: This is a real slow mo process. 




A. Sold 100 MLGF at $26.8 (commission free trade)




Profit Snapshot: +$384.84





Quote: Malaga Financial Corp. (MLGF)


Item # 2 Bought 100 MLGF at $22.95: Update For Regional Bank Basket Strategy As Of 6/22/16 - South Gent | Seeking Alpha


Malagra was part of my regional bank basket: Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST (snapshots of realized gains and losses= Net Gain of $33,165.42 as of 2/2/17)


The rationale was profit taking in stocks that I viewed as having limited upside potential at current prices. While E.P.S. did pick up the 4th quarter, earnings growth has been hard to generate for this bank. The fully diluted 2016 E.P.S. number was $1.88, up from $1.87 in 2015. Malaga Bank - Press Release Loan growth was anemic at 1%.


At a $26.8 price, the TTM P/E multiple is 14.25 which is high IMO for a bank that grew earnings Y-O-Y by 1%. I would not call that multiple irrational, extreme or stretched however. The bank also has good ROE and capital ratios and a very low NPL ratio.  


I am also motivated in part by the decision to reduce my overall stock allocation, so positions have to be selected using some criteria to fulfill that objective.


Another factor, which is commonplace with lightly traded stocks, the bid/ask price was extremely narrow for this thinly traded stock when I sold my shares.


I am also concerned that regional banks have run too far, too fast in a post-election bounce.


   


B. Sold 50 FNCL at $34.47




This ETF can be traded by all Fidelity customers on a commission free basis provided the security is held for more than 30 days.


The primary motives for this sell were to harvest a quick profit and to reduce my stock allocation. Another reason was the decline in interest rates that started in mid-December 2016. Financial stocks shot up in price after the election based on a consensus opinion that Trump's policies would lead to higher interest rates and to a decrease in financial regulations. 


The Bond Ghouls are starting to question the consensus view about interest rates rising. Why? Hard to say as  usual. It may be due to the GOP being unable to agree to a tax cut plan and/or concerns that Trump could spark a major flight to safety out of stocks into bonds. Another reason, which existed post-election when interest rates spiked up and exists now, is the continuation of extremely abnormal interest rate policies by the ECB, other European CBs and the BOJ that make U.S. bonds look good even at historically low yields.  


Profit Snapshot: +$278.53




Quote: Fidelity MSCI Financials Index ETF   (FNCL)



5. Continued to Add to Gold Mining Stocks as a Hedge-Impact of Border Adjustment Tax  


I will trade these positions. 


The Bond Ghouls and Stock Jocks are now focusing on the promised tax cuts and the stimulus and inflationary impacts of those cuts. 


Gold is back out of favor even though no one has seen Trump's plan and only know for certain that he believes that the cuts will be "phenomenal" as in "huge".  


If the plan includes a border tax adjustment, economists believe that the USD will soar in value which would be bad for gold. I remain skeptical. The result may end up being higher prices for imports with no major changes in the USDs value to offset the tax. 


My gut tells me that the border tax will increase imported price by anywhere from 75% to 100% of the tax. 


12 Stocks to Benefit Most From the House Tax Plan - Barron's


Perceptions about the future can be the only current reality however, until proven false by subsequent developments. So, I would anticipate a decline in gold price if a border tax adjustment is proposed by the Administration, even if it unlikely to pass. 


The long term impact of the corporate tax cut could turn out to be a negative for the USD as budget deficits increase and the fiscal health of the U.S. government is called into question by more investors than now.  Sure, tax cuts and spending increases can juice GDP growth some over the short term, but the continuation of parabolic increases in the federal debt couple with higher interest rates will only move forward the day of reckoning for the U.S. and its currency.  




I am more likely to flip gold mining ETFs faster than individual gold mining stocks. Both the stocks and the ETFs are trades. 


ETFs have management expenses that will negatively impact their returns and will own stocks that will underperform. The trick is to pick individual stocks that will perform better than the ETFs.  


A. Bought 50 GG at $16.88 (used commission free trade)


Quote:  Goldcorp Inc.  (GG)





I discussed earlier buying a 50 share lot on the Toronto exchange using CADs.  Sample Trades (SNY, OMER, PWFPRT, THO:CA, G:CA)(scroll to Bought 50 Goldcorp at C$19.23


I have nothing to add to that post. 


Toronto Quote: Goldcorp Inc. (G:TOR)


NYSE Quote: Goldcorp Inc.  (GG:NYSE)


B. Sold 100 XGD:CA at C$14.41 after a brief holding period:


iShares S&P/TSX Global Gold Index ETF  (XGD:TOR) is an ETF traded in Toronto that owns gold mining stocks. It is similar to the NYSE traded Gold Miners Equity ETF (GDX).


The 100 share XGD lot was bought on 1/31/17 and sold on 2/7/17.


I discussed buying this gold stock ETF in my last post. Observations and Sample of Recent Trades (CCNE, GLW, EGO, CGL:CA, XGD:CA): 2/7/17 (scroll to Bought 100 XGD:CA at C$13.28)





I  harvested a profit on a gold stock ETF and bought one of the ETF's main holdings, hoping that the individual stock will perform better going forward as a trade. Goldcorp is the third largest holding in XGD:CA.


Profit: 
XGD:GA 100 Shares +C$111


While I have increased my weighting in both gold bullion through ETFs and gold mining stocks, I am still well below a 1% allocation to precious metals. I generally keep my allocation small since these securities pay no or negligible dividends, and I am an income focused investor. I also recognize that it is extremely difficult to call turns in PM prices, up or down. It is also important that I have characterized precious metals as being in a long term secular bear market that began shortly after I sold bullion in September 2011. Stocks, Bonds & Politics: Recent Gold and Silver Sales (9/15/11 Post) It is far too early to say that the current move up marks the end of that secular bear market.



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



17 comments:

  1. I was shocked during a recent conversation with a family member who looked at me blankly when I brought up notions like "checks and balances," "due process of law," and "independent judiciary." My family member said, "I think they [the original authors of the founding documents] went too far" in defining the freedoms they sought to guarantee. I had no response other than to suggest maybe he should consider moving to another country.

    Like the 30 million Republicans who want a return to those "halcyon days" before the Constitution was ratified, these folks seem to have no idea of the foundations of our democracy, the ideals of the founding fathers, and what it means to live under tyranny. They seem to have no interest in studying history or learning from it. It's...disheartening.

    "A Prince, whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people." U.S. Declaration of Independence

    ReplyDelete
    Replies
    1. Cathie: The first step to recovery is to recognize that the Modern Day GOP is not a conservative party but a deeply reactionary one.

      A conservative party would not be persistently and actively undermining the institutions necessary for the proper functioning of a Democracy.

      Those institutions include three co-equal branches of government, a free press, and voting.

      The most important of those efforts is their largely successful effort to convince tens of millions that the free press can not be believed and should not even need to be consulted as a source of reliable information.

      The "reliable" sources then become GOP politicians and propaganda outlets receiving the GOP's stamp of approval.

      The result is that millions of voters will cast ballots for politicians who will act contrary to those voters' interests.

      An example was the near unanimous 2011 GOP vote to replace traditional Medicare with a voucher system that would have doubled premium costs while giving the uber wealthy more tax breaks.

      Medicare benefits primarily the middle class.

      Medicaid is for the poor.

      The rich do not need those programs, and most wealthy individuals who finance the GOP do not want to subsidize through taxes those programs for the poor and middle class beneficiaries either.

      The issue then becomes how do you convince the middle class to vote against their own self interest, and that is where the undermining of democratic institutions comes into play.

      The GOP's tax plan may provide more proof along that line.

      A 20% border tax on all imports will raise prices for the middle class.

      Some aspects of the tax plan may raise taxes for some middle class families, which was the case with Trump's campaign tax plan.

      Most Trump voters would not know that respected non-profit tax policy experts had arrived at that conclusion and would ignore that information as unreliable in the unlikely event it came to their attention. That is what they have been conditioned to do.

      http://www.usatoday.com/story/money/personalfinance/2016/11/27/some-middle-class-trump-plan-would-mean-tax-increase/94427186/

      To the extent that the final GOP plan has some tax cuts for the middle class, they would be minor and would be offset or more by price increases resulting from a border tax.

      The GOP can now actually take actions that adversely impact the middle class and nonetheless easily convince their voters that a particular plan helps them.

      In order to perform that legerdemain, it is imperative that sources of accurate information will not be consulted or believed by the GOP middle class voters who are being screwed by that party.

      There is no doubt in my mind that I will benefit from the GOP's tax plan.

      Delete
  2. Thoughts...

    https://impeachdonaldtrumpnow.org/

    You could be valuable to a lobby movement as a source of facts when they need them.

    ReplyDelete
    Replies
    1. LMH: While 46% of Americans already want Donald impeached according to the recent PPP poll, he has not done anything yet worthy of impeachment IMO.

      There is significant evidence that he is mentally unfit to be President.

      I would not hold my breath for Pence and a majority of cabinet members to invoke the 25th Amendment, Section IV which just starts the process for removal due to incapacity.


      http://www.annenbergclassroom.org/page/twenty-fifth-amendment

      Then there are practical considerations.

      Even if the Democrats capture control over the House in 2018, which I view as doubtful, they would not be close to the super majority required in the Senate to convict Trump even with substantial evidence that impeachment was warranted under Article II, Section 4 of the Constitution.

      http://www.annenbergclassroom.org/page/article-ii-section-4

      The evidence will have to be indisputable and substantial that Trump had committed "treason, bribery, high crimes and misdemeanors", similar or worse than criminal acts committed by Nixon acting in his role as President. And, the process will never get off the ground even with that evidence for as long as the GOP controls the House.

      Delete
  3. Ed Yardeni's opinion about gold, summarized in a Barron's article about Barrick Gold (ABK), fits partly into my theme underlying the increase in my gold allocation.

    He "notes that gold could be the ultimate Trump trade. On the one hand, the metal could rise if Trump succeeds in juicing the U.S. economy because its price typically rises with inflation. Conversely, it could post gains if Trump’s policies do more harm than good, thanks to its role as a haven during tough economic times."

    http://www.barrons.com/articles/the-barrick-dilemma-1486794312?mod=BOL_hp_we_columns

    I did recently buy Barrick:

    4. GOLD: One of My Hedges Against Nihilism
    A. Bought 50 ABX at $17.92
    http://tennesseeindependent.blogspot.com/2017/02/observations-and-sample-of-recent_4.html

    I have more reasons than Yardeni that relate to Trump's mental instability and reality creations. While his inability to separate fact from fiction would be okay if he was doing his reality TV show, the potential adverse repercussions as the leader of the free world could provide an ideal environment for gold to prosper.

    Though investors who are Trump supporters may need the President to his Ricky Bobby routine before seeing the light.

    I am referring to this scene in Talladega Nights: The Ballad of Ricky Bobby (2006):

    https://www.youtube.com/watch?v=XsJdAu9-q5w

    ReplyDelete
  4. What does the GOP have against puppies and other animals?

    http://www.nature.com/news/us-government-takes-animal-welfare-data-offline-1.21428

    https://www.washingtonpost.com/news/animalia/wp/2017/02/03/the-usda-abruptly-removes-animal-welfare-information-from-its-website/?utm_term=.7e3f6a89829c

    Part of the Make America Great Program apparently includes less effort to prevent animal abuse and/or to make it more difficult for the Humane Society to take remedial actions.

    ReplyDelete
  5. PFK: A reader asked me a few days ago why I did not sell my 100 shares of PFK when the price temporarily slid over $26.

    PFK is a $25 par value exchange traded bonds issued by Prudential makes monthly interest payments at a 2.4% spread over a CPI calculation. The bond matures on 4/10/18.

    https://www.sec.gov/Archives/edgar/data/1137774/000119312506070486/d424b3.htm

    I have harvested profits on other PFK lots totaling $1711.24 on 290 shares:

    Snapshots at
    http://seekingalpha.com/instablog/434935-south-gent/4737606-baby-bonds

    A reader initiated a discussion in Comment Blog # 7. I provided information on how the CPI calculation was made.

    I also did a rough calculation of a likely total return resulting from a purchase at $25.36-25.4 in mid-December 2016, holding it until maturity, and making what I considered to be a reasonable CPI estimate. The total return was over 3% even with a loss of up to $.4 on the security. I ended up buying 100 at $25.36 in my IB account, so my total cost is $25.37.



    http://seekingalpha.com/instablog/434935-south-gent/4939799-south-gents-comment-blog-7-reits-preferred-stocks-bonds-regional-banks-healthcare-and

    I received the last monthly interest payment on 2/10 which was $8.42. Actually, the penny rate was over $.0842 but investors do not receive fractional cent cash dividends. I would have to own more shares to get up to $8.43 for that last interest payment.

    IB informed me today that the next interest payment will be higher at $.08521 as the CPI part of coupon calculation has risen.

    I compared the PFK security in December to a year treasury that provided then less than a 1% total return possibility. I earn nothing on the cash at IB used to buy this security, so I view it as simply an alternative to idle cash.

    If I sold that security today, the funds would go into cash earning nothing. I have built up cash levels in that account already and am trouble bringing it back down through new purchases.

    So basically, I do not care. The option for keeping until maturity, suffering then a $37 loss, is about as good as the option for selling at over $26, realizing a $63+ gain while losing interest payments to the maturity date.

    If may elect to sell when and if the price goes over $26 again provided I have collected one or two more payments. Then I will barely care about harvesting the profit and foregoing the remaining interest payments.

    PFK closed last Friday at $25.74:
    http://www.marketwatch.com/investing/Stock/PFK

    I would not consider buying this security near that price or even at my $25.36 price paid in early December (2 monthly interest payments received since purchase) I am not sure whether I would receive 13 or 14 more payments holding until maturity (starting with the payment that goes ex dividend on 2/2/7/17). That is not worth the effort to discover. The payments could trend up some too.

    ReplyDelete
  6. On Popular Direct, I saw that Highyielddeposit rated them very highly, as did Bauer. They are dismissal on Banco Popular their parent's site (under investing) and they certainly aren't motivated to talk them down.

    So I asked both. Baeur never replied. Highyield did.

    "About Banco Popular North America's financial health, our ratings are based on the call reports that the banks send to the FDIC each quarter. The FDIC makes available these reports publicly about two months after the end of each quarter. So the December 31, 2016 call reports should be available from the FDIC in late February. With these call reports, we derive financial health metrics including Texas ratios and capitalization levels.

    Our financial heath metrics that are based on the call reports tend to assess current near/medium-term health and the potential for failure (and thus changes more quickly to reflect changing conditions at the institution), whereas credit rating agencies like Fitch looks at long-term potential for failure (due to credit issuances needing to be looked at from a long-term perspective due to the nature of the borrowing in question). In short, we feel that our metrics are more closely linked to what the FDIC and federal/state regulators use in their decisions to close a bank."

    https://www.depositaccounts.com/banks/popular-community-bank.html

    They gave Popular de Puerto Rico a lowly C+:
    https://www.depositaccounts.com/banks/banco-popular-de-puerto-rico.html

    They didn't answer my big question, which is how separate are subsidiaries from their parent bank... That's a key here on safety.

    It's all somewhat mute since Popular Direct reduced their yield to 1.15%, and I can get that at Everbank. Or 95% at Discover Bank.

    ReplyDelete
  7. I guess I'm not going to get emails of new blogs. That's too bad because I like reading in email format. But I'm not about to ask you to write less! That's kind of the point of your blogs to cover a lot.

    I asked as a question today on the google blogger forum. This was the reply:

    "
    Chuck Croll said:
    Hi,

    Thanks for sharing your question today - and welcome to the Blogger Support forums.


    Email notification of new blog entries is based on the blog feed. The blog feed for "tennesseeindependent.blogspot.com" is over 2MB in size - and this is 4 x the stated maximum supported size.


    If you require email notification of new blog entries, you need to contact the blog owner. He / she needs to decrease the feed size.


    http://blogging.nitecruzr.net/2013/12/blogs-publishing-large-newsfeeds-can.html

    I hope that this helps you understand the possibilities! Please, let me know if you have more questions!
    "

    ReplyDelete
  8. Here's where I asked:
    https://productforums.google.com/forum/#!topic/blogger/oNt-0HGRQBQ;context-place=forum/blogger

    ReplyDelete
    Replies
    1. LMH: That was industrious of you. So google says that I write too much for them to forward the posts. I am not likely to cut my blog size by 75%.

      I would not pay much, if any, attention to the Bauer or the Highyield bank ratings.

      You don't know anything about the qualifications of those making judgments or whether they have conflicts.

      The rating agencies rate all senior unsecured the same, regardless of whether it matures in one day or 50 years. A failure to pay principal at maturity will trigger a default in all of the senior unsecured debt and all will be in the same boat in bankruptcy regardless of whether one matures 1 day before BK or in a 100 years.

      I have not looked at the Banco Popular relationship with its subsidiaries. Normally, dividends are paid to the parent that funds the dividend paid by the parent.

      While I would not want to rely on the FDIC insurance backup, there is nothing on the horizon yet IMO that would cause me to have concerns about their ability to cover insured deposits. The rubber hits the road when there is a major banking disaster that causes the failure of a major institution and hoards of smaller ones. We came close to that happening in 2008. Then it becomes more relevant.

      I have been purchasing a number of bank CDs through my Schwab and Fidelity brokerage accounts. My main considerations are maturity and yield. The maturity relates to filling holes in my short term bond and CD ladder. The yields are simply better than the .2% payable by the source of cash at Fidelity and the yield on my Schwab sweep account is even closer to zero.

      The banks that offer the highest yields now are the Bank of China, N.Y. and the Bank of India, N.Y. The .95% rates that you mention are higher than those short term CD rates. By short, I am talking about 4 to 7 months. Since I view as more probable than not that the FED will raise the FF by .25% on or prior to the July meeting, and certainly will not be cutting the FF rate anytime soon, you are better off with those savings account rates than with short term CDs. I will pick up higher rates with high quality corporate debt. Some of those issues, maturing in less than a year, can still be bought with YTMs over 1.4%. I bought one last Friday maturing on 11/9/17 that has a YTM of 1.44% and a A- rating from S & P.

      All of those yields mentioned above are likely to produce negative real rates of return before taxes. I am just trying at the moment to preserve capital and earn a little more than the alternatives provided in my Fidelity MM fund, the less desirable Schwab option for cash, and the even less desirable option which is zero in my IB account. I have already made enough since March 2009 after recovering quickly from the Near Depression period where I can coast and take no risks now if I choose to go 100% into risk free or close to risk free investments.

      Since nursing homes in my county are now at $9K per month for a private room, I doubt that the income flowing from these short term bonds, CDs or savings accounts will go far toward meeting that kind of expense when and if I need it.

      Fortunately I do not need to be concerned about situational risks like that nursing home room, but running out of money in retirement for most U.S. households is a substantial situational risk. Money will need to grow at far faster rates to meet their financial goals. The greatest risk may become the failure to take risks

      Delete
  9. Cathie - if it wasn't obvious already the 51% of Trump supporters who think he should be able to overturn a judgement he disagrees with, tells that our education system is a central problem.

    I wonder if there's a fun entertaining TV show that could subtly teach this stuff. Archie Bunker was popular with the bigots as well as the equality-ists. So a show can appeal to everyone.

    SG -
    The party has become one of reactionary social ideology, without any of the economic or governing policy that it used to have. I was thinking about it the other day --- there's no discernable platform for the GOP anymore short of "women's rights", "homosexuality" and countering evolution and environmental concerns.

    ReplyDelete
  10. Bauer Financial is one of the places regularly listed in articles in Forbes and such saying to check your bank's rantings there. The high yield described his method, so it's a matter of whether it makes sense. I don't know enough to have any judgement.

    https://www.standardandpoors.com/en_US/web/guest/ratings/entity/-/org-details/sectorCode/FI/entityId/119487
    Looking at SP there's some poor ranting but they are from 2009 & 2011 so I'm not getting the right info.

    There's a post from me that hasn't show up where I explained about looking on an email notices. No big deal since I included the link separately.

    Cathie -
    my post was intended to have sympathy for your experience and reaction to the situation. I think my own annoyance ... came through instead. :).

    ReplyDelete
    Replies
    1. I liked your mention of "All in the Family." We must be on the same wavelength because that show came to my mind when thinking about my family member's views. He's kind of like like Archie; I'm more like Michael ("Meathead.")

      People need to be taught critical thinking and research skills, and not all education happens in schools. People with a diversity of experience and viewpoints need to get out and talk to each other, face to face, in real life.

      Delete
  11. Here's moody's
    https://www.moodys.com/credit-ratings/Popular-North-America-Inc-credit-rating-24750

    It's from 2017 and (P)B2. No idea what the P is. The B2 isn't great.

    I'm coming to the idea that these rantings are for the debit they've sold. Their deposit holdings may face a different level of risk. That would explain the entirely different rantings.

    If something triggers big risk (such as recession indicators or Trump... well I'm not sure what...), I'll be out fast. Otherwise, when I re-do my banks again soon, I'll worry about it.

    In these last 3 weeks I come a conclusion. I'd though he might be very gifted at a manipulation, like many sociopaths. He is gifted at strategies when it comes to projecting his image. Turns out he's simply not very good at paying attention, and has very simplistic superficial ideas of how to do things. And that sums up the man and his policies. He is more knowledgeable at business than government. That doesn't make him knowledgeable, just makes his meetings with businesses look less ridiculous than his phone calls with foreign leaders. In business, he is a short attention span risky taker who uses tactics of manipulation and bullying. None of which transfers well to business.

    For now he's making people feel good by claiming to do business moves with indivdiual companies -- but likely they are lip service or already in the works.

    Bret postulated that there's a carrot and stick approach being used:
    http://seekingalpha.com/article/4042555-method-trumps-madness?source=all_articles_title
    Is it so?

    I am going to be operating with the assumption that for the most part, other than when it's about his image, this person is superficial in his planning. And that's all there is about it.

    Evidence that he's not more clever (which I thought he might be)... with Australia first he should have known that there was a trading refugees arrangement in place. Second if he didn't want to deal with it, he should have said okay and used the "but they have to pass vetting" as the way to avoid having it go through. That's obvious strategy 101. Also there is the bloody obvious that we have three branches of government and you can't rule without anyone else's authority checking up on you. I know look and wonder why I thought he might be more clever than this, and just acting dumb and outrageous for effect.

    Too bad the voters electoric thought that Clinton's reputation of clever at manipulations was a negative (assuming they're judgement was accurate which I'm not inclined to assume). It's a positive in a job like this.

    So how does this effect my investing? Right now I see nothing bringing the market down. Even his bonehead moves don't seem to fluster. The only worry is that his trade war talk gets flappy enough to look like it may create real impact to the market. I don't think it will, because even that requires more cleverness. So for now there's a disconnect between his effect on the market (positive), and his governance otherwise (uhm).

    It will take at least 6 months for the market to decide that his actions won't happen or won't pass congress or won't work. Or longer.

    The unexpected is if he leaves office. (Via whatever vehicle he invents), I don't see much reaction if Pence is left in place. Too much trust that he's cut of the same economic cloth.

    con't (apparently I wrote too much)

    ReplyDelete
  12. con't

    So the real unexpected is if a foreign government does something notable. I think they'll all try to keep the crazy man at bay, and not tangle. He'll think it's strength that keeps Iran from attacking. But it's that they think he's less stable and more unpredictable than they are. Even a big terror attack, will be seen as "I told you so" not "you created the space for this" and won't rile the markets short of something horrific that hits the financial centers.

    So market's up and down sliding goes back to what's really happening in the economy. That hasn't come up that much in conversation lately. My observation is that the numbers have been looking better and better for economic numbers. Earnings are okay but not stellar.

    ReplyDelete
    Replies
    1. LMH: What will Trump do when North Korea fires off a ICBM? He said in a Tweet that will not happen which means what exactly? And when Iran launches another ballistic missile what will he do? He is going to find out quick enough that those nations and many others will not dance to his tune and his response option are limited short of a military attack and a war. The world is a complicated place and the U.S. is losing its standing in it.

      I will be publishing a post later today discussing Trump and his tax plans that is intended to provide food for thought about their impact on job creation and GDP growth.

      As I have said in some recent comments, I do not see anything yet in the stock market's internals that would suggest an impending correction or bear market.

      I do believe investors are in an irrational exuberance stage that generally ends in a decline far worse than necessary, as in the higher you rise, the faster and further you will fall.

      Personally, I do not need to take risks with my money and would be find earning 1% per annum until my DOD.

      However, as a long time Stock Jock who bought his first stock in 1969, I do not want to leave the party all at once. I am slowly selling positions into this parabolic spike in prices. The analogy would be a turtle moving down a long ramp into a bunker.

      Delete