Wednesday, March 1, 2017

Observations and Sample of Recent Trades: 3/1/17 (SUNS, RFT, VHCOX, VEIRX, TANNL)- More on Trump and Russia/ The Cost of the GOP's Wall/ Another Government Debt Limit Increase Deadline Approaching

State of the Union: Change in Tone, Lofty Phrases and No Specifics:

I never listen to politicians give speeches. Reading the transcripts, which takes at most a few of minutes, is about all that I can tolerate.   

The Stock Jocks went bananas in response to this speech. 

Closing Prices 3/1/17: 

S & P 500  2,395.96 +32.32 +1.37%

DJIA 21,115.55 +303.31 +1.46%

I would just point out that nothing has happened yet to warrant their boundless enthusiasm. 

America is apparently no longer the dystopian wasteland described in Trump's inauguration speech, but has become once again the land of hope, change and "miracles" since Donald is now our leader. 

Transcript And Analysis: President Trump's Inauguration Speech : NPR

He promised to stop drugs "from pouring into our country."

"Dying industries will come roaring back to life."

"Our terrible drug epidemic will slow down and ultimately stop. And our neglected inner cities will see a rebirth of hope, safety and opportunity."


I hate to be a party pooper. But that is just B.S. 

Flowery language is not a substitute for specifics.
Markets Need to Hear More Details From Trump - Bloomberg ViewTrump Strikes a Better Tone. So What? - Bloomberg View

Trump was still talking the same jive as in the past. 

He claimed credit for the stock market's rise since the election, but we shall see whether he takes the blame when the next bear market arrives. 

His tax plan, which has not been disclosed yet, apparently contains a "massive" tax cut for the middle class. 

Trump did not specifically mention whether the plan will include a border tax which could take away that gigantic tax cut and more. There was a vague reference to a border tax:  “When we ship products out of America, many other countries make us pay very high tariffs and taxes, when foreign companies ship their products into America, we charge them almost nothing.” That sentence at least suggests that Trump favors some kind of border tax. 

The GOP normally sells tax cuts for the wealthy by throwing a chicken bone to the middle class. No specific mention was made about lowering the top corporate tax rate to 20%. There was an oblique reference to creating a level "playing field for American companies". 

The same protectionist and nihilistic tone about existing trade agreements, which stock investors choose to ignore, was present in the speech. 

New U.S. trade policy seeks to challenge influence of World Trade Organization - MarketWatchTrump administration would ignore WTO rulings it sees as anti-U.S.: FT | Reuters

There was nothing in this speech that would cause me to increase my stock allocation. I will continue to move slowly down a long ramp into my bunker. I sold into the rally yesterday.

Trump’s Address to

Reality Check: Trump's Congress speech - CNN
Fact-checking Donald Trump's address to Congress | PolitiFact

Part of the robust rally yesterday may be due to short covering, as suggested in tis article: Here’s the real reason behind Dow 21,000 (no, it’s not Trump's speech) - MarketWatch

Bank of America hikes S&P 500 target as bull market finds new converts - MarketWatch


Maintaining Focus on Capital Preservation and Income Generation

In a January 1/10/2017 post, I forecasted a positive first quarter for the S & P 500 but that this index would end up having a negative total return for the year. Stocks, Bonds & Politics: Thoughts About 2017- Leaning More Toward Preservation of Capital/ 2016 Performance Numbers So far at least, I am correct about the first quarter. 

My thinking is that the market is going to be disappointed by what actually transpires in Washington, and the actual real GDP and earnings growth for the year. I am also predicting that there will come a time later this year when the market will no longer be able to ignore the potential negatives flowing from Trump's trade policies or his Russia problems.  

Sometime this month, I will be down to about a $400K-$500K range in my common stock stock allocation which includes stock funds. Of that amount, about 20% will be in equity REITs.  I have been whittling down the common stock allocation by $2K to $10K per day. I intend to stop paring that allocation somewhere in that range. I am behind in discussing those trades here.   

The Bond Ghouls were spooked today by all of the stimulus talk contained in Trump's speech.

Closing Prices 3/1/17: 

IEF $104.77 -$0.73 -0.69%: iShares 7-10 Year Treasury Bond ETF

TLT $119.47 -$2.27 -1.86%: iShares 20+ Year Treasury Bond ETF 
ZROZ $109.24 -$3.13 -2.79% : PIMCO 25 Year Zero Coupon U.S. Treasury ETF 

Shorter duration bond ETFs were barely impacted by the rise in rates with some ETFs moving up in price: 

SHY $84.40 -0.06 -0.07% : iShares 1-3 Year Treasury Bond ETF 

FLOT $50.82  +$0.04 +0.08% : iShares Floating Rate Bond ETF 
TDTT $24.81 -0.05 -0.20% : FlexShares iBoxx 3 Year Target Duration TIPs 
SHYG $47.90 $0.13  +0.27% : iShares 0-5 Year High Yield Corporate Bond ETF

Trump mentioned again a $1 trillion infrastructure plan and tax cuts for everybody. Would it be too much to ask whether anyone has actually prepared an infrastructure spending bill or whether the House and Senate GOP members would approve anything close to that amount. 

I did read a Bloomberg story tonight that the White House was going to start infrastructure planning meetings tomorrow.

As to funding, many Democrats will oppose the so-called private-public partnerships where private companies receive tax credits and then charge the taxpayers for using the infrastructure project. Republican fiscal hawks are not in favor of spending that kind dough without spending cuts elsewhere.

Even if some material increase in infrastructure spending is approved before year end, which I would question, the first stage involves developing specifications, drawing up specific detailed engineering plans, and then placing the projects out to bid.

Then there will need to be prepared environmental impact statements for many projects which will cause further delays in spending.

Lastly, there are simply not enough skilled construction workers to build $100B more in infrastructure projects each year for the next ten years.  Math Will Kill Trump's Infrastructure Plan - Bloomberg View And much of the skilled construction labor which does exist would have to be pulled off existing and planned private construction projects.

Just a lot of assumptions, hopes, and dreams about La La Land piled on top of one another to arrive at $1 trillion in new infrastructure projects over a ten year period.

If all of Trump's grandiose promises come close to fruition, then the result will be much larger budget deficits occurring at a time when interest rates are moving up.  

Would anyone care to guess where the federal governments debt will be on 1/31/2021? As of 2/27/17, the debt stood at $ 19,931,228,821,002.78. Debt to the Penny My guess is $23.2 trillion. My guess is that the average interest cost will rise about 2% last January to 3.8% in January 2021. Government - Average Interest Rates on U.S. Treasury Securities

I do not expect much up or down action in the bonds maturing this year or in 2018 that I bought below par value. The one year treasury closed yesterday at .931%, rising 3/32 in price. The 3 month Libor rate is moving up some, closing yesterday at 1.064%. London Interbank Offered Rates - Markets Data Center -

I am starting to see some minor price decreases for bonds maturing in 2019 or later. 

I want short and intermediate interest rates to go up, which is why I am using a bond/CD ladder with multiple maturities every month. 

I hope that the proceeds received from maturing instruments can be plowed back into higher yielding securities of equal or better quality. Securities in my short term bond/CD ladder start maturing next week. 


The GOP's Wall Building:

Earlier this month, the GAO released a comprehensive report relating to existing fencing and the costs for maintenance. GAO Report February 2017.pdf At page 28 of this report, the government notes that there were 9,287 breaches in pedestrian fencing over a five year period ending in fiscal 2015. Those are cases where the fence has been cut, sometimes removing enough of the fence for a vehicle to pass through the opening. 

There are many examples where illegals go over the fence or under the fence as well. The report contains pictures starting at page 29.

Trump says he is going to build a wall along the entire border, not a fence. Anyone who claims that it will be a fence is spreading Fake News. There was a recent report by CNN where the reporter claimed that multiple sources told him that Homeland Security was proposing to build a fence rather than a wall.

The Senate Majority Leader Mitch McConnell (R-KY) has assured the American public that the border wall will cost $15 billion at most and possibly as low as $12 billion. CNBC: Estimating the true cost-and worth-of Trump's border wall He also made promises about the cost of the Iraq War that were off a couple of trillion, give or take a few billion.


Will The GOP Shutdown the Government Again?:

The Stock Jocks are not worried about anything and their answer to the preceding question is a resounding no way. 

As some readers may recall, the GOP decided to shutdown the government when the Democrats refused to defund Obamacare. United States federal government shutdown of 2013 - Wikipedia

The GOP next threatened to shutdown the government in 2015 unless the Democrats agreed to defund Planned Parenthood. Donald Trump-Shut down the government to defund Planned Parenthood - POLITICO (August 2015 Article)(Trump agreed that the government needed to be shutdown then unless Planned Parenthood was defunded) 

The shutdown was avoided  by a deal that would suspend the debt limit issue until 3/16/17.

Looming Debt Limit Divides Trump’s Treasury and Budget Chiefs - Bloomberg

Trump’s 2017 Debt Limit Price, if Any, Remains Unclear | Bloomberg BNA

Okay, here we are again bumping up against the debt limit. 

The stock market IMO is too sanguine that the GOP controlled Senate and House with Trump as the President will increase the government's debt limit to avoid another government shutdown and a possible default on U.S. government debt. IMO, given the GOP's control, they now own the debt ceiling increase, so they need to act like grown ups.  

The shutdown may be triggered again by the GOP attaching poison pills to a debt limit increase that no Democrat could support and then blame the Democrats for shutting down the government.    

David Stockman-Everything Will Grind to a Halt in 2017 - YouTube


The Purported Investigation into the Alleged Conversations Between Trump allies and Russian Intelligence Officers:

I discussed in my last post the concerted efforts made by the White House to knock down the NYT story that there were contacts between Russian intelligence operatives and Trump allies during the campaign. The NYT article was based on 4 anonymous sources and none of those sources claimed there was any evidence that those contacts involved the election.

The GOP Chairman of the House Intelligence Committee, Devin Nunes (R.Calif.) has concluded, prior to the onset of his Committees purported investigation into the matter, that there is no evidence of any such contacts period. Why? Some folks told him so.

“As of right now, I don’t have any evidence of any phone calls. It doesn’t mean they don’t exist … What I’ve been told by many folks is that there’s nothing there,” Nunes said.

House Intelligence chairman says he hasn’t found evidence of Trump team’s ties to Russia - The Washington Post

Maybe the "folks" know that there is nothing, or maybe those folks are involved in a cover-up and know there is something. We do know that the Intelligence Committee has not started its investigation yet.

Nunes will do what he can to help Trump and block a thorough investigation. He will not request Trump's tax return that may show business relationships with unsavory Russian characters or maybe there is nothing there which is why he want disclose them (???).

Nunes has come up with a new version of Flynn's conversation with the Russian ambassador about sanctions, but has refused the Democrats' request to obtain the FBI's transcript.

Nunes admitted that he did respond to the White House request to knock down the NYT story but claims that is perfectly okay.

For Nunes, the only concern is catching the people who leaked to the NYT that there were contacts. (????).

If there is direct evidence of cooperation to influence the election, and I do not know of course one way or the other, the GOP controlled Senate and House Intelligence Committees will not find it.

Comey's FBI might as well be on the Trump payroll IMO.

New NYT Story Published Last Night:  

Obama Administration Rushed to Preserve Intelligence of Russian Election Hacking - The New York Times ""American allies, including the British and the Dutch, had provided information describing meetings in European cities between Russian officials — and others close to  Russia's president, Vladimer V. Putin-and associates of President-elect Trump, according to three former American officials who requested anonymity in discussing classified intelligence. Separately, American intelligence agencies had intercepted communications of Russian officials, some of them within the Kremlin, discussing contacts with Trump associates..... American intelligence began picking up conversations in which Russian officials were discussing contacts with Trump associates, and European allies were starting to pass along information about people close to Mr. Trump meeting with Russians in the Netherlands, Britain and other countries.")

Sessions spoke twice with Russian ambassador during Trump’s presidential campaign, Justice officials say - The Washington Post (Sessions denied any such meeting under oath in his confirmation hearing) 

The True Story of the Comey Letter Debacle | Vanity Fair 

White House accused of blocking information on bank's Trump-Russia links | US news | The Guardian

Wilbur Ross's Russian partners raise questions in commerce confirmation | McClatchy DC;

Another Trump cabinet nominee Wilbur Ross faces Russia questions | Miami HeraldThe Florida mansion that Donald Trump sold to a Russian billionaire now torn down | McClatchy DC


Worth a Read

White House eyes plan to cut EPA staff by one-fifth, eliminating key programs - The Washington Post (EPA will be emasculated)

Does Stephen Miller Speak for Trump? Or Vice Versa? - Bloomberg

Trump, Putin, and the New Cold War - The New Yorker


A. Bought 1 U.S.T. 1.5% Maturing 8/15/26:

CUSIP: 9128282A7
Bond Detail


YTM = 2.433%

B. Bought 1 U.S.T. 2% Maturing 11/15/26:
CUSIP: 912828U24
Bond Detail


YTM: 2.4335%

C. Sold 100 RFT at $24.75 (commission free trade):

Quote: RAIT Financial Trust 7.625% Senior Unsecured Notes (RFT)

Security: Exchange Traded Baby Bond

Par Value: $25
Maturity Date: 4/15/24
Optional Call On or After: 4/15/17
Issuer: RAIT Financial Trust (RAS) 

Prospectus Supplement


Profit Snapshot: +$87.04


I discussed the purchases here:

Item # 2 Bought 50 RFT at $23.05: Update For Bond And Equity Preferred Stock Basket Strategy As Of 7/31/15 - South Gent | Seeking Alpha

Item # 5 Bought Roth IRA: 50 RFT at $24.28 (August 23, 2014 Post)

RFT is a risky senior unsecured bond. I am not into bonds that carry a meaningful amount of both interest rate and credit risk. 

I still own 50 shares of this ETB in a Roth IRA account where the interest payments are at least tax free:


I discussed buying that lot here:  Item # 5 Bought Roth IRA 50 RFT at $24.28 (8/23/14 Post)

Stocks, Bonds & Politics: Exchange Traded Bonds: New Gateway Post

Stocks, Bonds & Politics: Exchange Traded Baby Bonds
Baby Bonds - South Gent | Seeking Alpha 

2. Continued to Pare Stock Allocation:

A. Sold 115+ VHCOX at $57.97 (2/17/17):

Profit Snapshot = +$522.35


I still own 116+ shares, with a lower cost basis, which I will keep. 

The fund is closed to new investors, and I want to keep my foot in the door.

I discussed buying those shares in these posts: 

Item # 5 Initiated Position in VHCOX (4/19/13 Post) 

Item # 3 Added $250 to Vanguard Capital Opportunity Mutual Fund  at $51.66 (1/18/15 Post) 

My average cost per share for the remaining 116+ shares is $42.16:

I will just risk that unrealized gain. I reinvested the 2016 year end distribution to buy more shares, but I have now turned off the reinvestment option.  
B. Sold 50 SUNS at $17.45 on Ex-Dividend Date:

Quote: Solar Senior Capital Ltd. (SUNS:NASDAQ)

SUNS is a micro cap BDC.


I discussed purchasing this lot here: Bought 50 at $15.06-Update For Portfolio Management And Positioning As Of 10/16/15 - South Gent | Seeking Alpha

The shares gained $.23 on the ex-dividend date which was 2/21/17.

Profit: +$117.48


Dividends are paid monthly. Solar Senior Capital Ltd. Announces Monthly Distribution of $0.1175 Per Share for February 2017

SUNS SEC Filings 


Solar Senior Capital Ltd. Announces Quarter and Fiscal Year Ended December 31, 2016 Financial Results; Declares Monthly Distribution of $0.1175 per Share for March, 2017 ("At December 31, 2016, the net asset value (NAV) per share was $16.80, a modest increase from the prior quarter")

I am always pleased when I can sell the shares of an externally managed BDC for a profit after harvesting a number of dividend payments. I also was able to buy the shares at below net asset value per share and to sell at a 3.9% premium to NAV per share.  

SUNS Net Asset Values Per Share: 

Q/E 12/31/14  $17.65
Q/E 9/30/15   $17.06  (Page 3 Form 10-Q)
Q/E 12/31/15   $16.33 (Page 2 Form 10-Q)
Q/E 12/31/16 = $16.8

I do not find anything comforting in that NAV per share trend either. 

C. Sold $1K of the Vanguard Equity Income Fund-Admiral Class (VEIRX) Yesterday

As previously noted, I am selling $1K of this fund when it rises by more than $1K from my last $1K pare. I will cease paring when the value sinks below $50K. 

VEIRX Vanguard Equity-Income Admiral Fund VEIRX Quote

I mentioned the last $1K pare in this post: Stocks, Bonds & Politics: Observations and Sample of Recent Trades (ADX, BIF, NNNPRF, VEIRX): February 16, 2017/Trump the Befuddled

Closing Price 3/1/17: VEIRX $72.31 +0.86 +1.20%

3. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 WFC 1.4%  CDs (monthly interest) Maturing on 9/4/18:


B. Bought 1 UST 1% Coupon Maturing on 9/30/19:


YTM at Total Cost (99.055) = 1.375%

C. Bought 1 UST 1.375% Coupon Maturing on 1/15/20:


YTM at Total Cost (99.73047) = 1.47% 

When I buy a UST in the secondary market, I will only use a broker that does not charge a commission.  Schwab, Fidelity and Vanguard do not charge a commission for purchases of plain vanilla treasuries. Schwab will charge a commission fro TIPs and Strips. 

All of my short and intermediate bond purchases are made pursuant to my now dominant capital preservation objective.  

Note that I am buying just one of these low yielding, fixed coupon treasury securities maturing in 2019 and thereafter.  If interest rates rise, as I anticipate, I can buy in one bond lots with the proceeds of maturing securities. 

D. Bought 1 State Bank of India .65% CD Maturing on 5/30/17:


4. Long Term Bond Basket Strategy-Minimum Exposure

A. Sold 50 TANNL at $25.53


Profit Snapshot: $67.78


When I bought this exchange traded baby bond, the symbol was TANO: 

Item # 2. Added 50 TANO at $24Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 2/3/16 - South Gent | Seeking Alpha

The TravelCenters of America LLC 8% Senior Note due 12/15/29 is a senior exchange traded baby bond issued by TravelCenters of America LLC (TA) that makes quarterly interest payments. Par value is $25. The issuer has the option to redeem at par plus accrued interest on or after 10/15/18. Prospectus (risk factors are discussed starting at page S-5 which include no financial covenants) Unless redeemed early by the issuer, this security will mature on 10/15/2030.

I still own 50 shares of TANNL. 

I view this bond as risky. I am de-risking my portfolio.   

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. Gold is declining today as both interest rates and the USD move up.

    U.S. Dollar Index (DXY)
    Change +0.35 +0.34%
    Mar 2, 2017 9:47 a.m.

    $117.90 Change-1.17 -0.98%

    iShares 7-10 Year Treasury Bond ETF (IEF)
    104.46 Change-0.32 -0.30%
    Volume 174,261
    Mar 2, 2017 9:59 a.m

    The two year treasury note hit its highest level since 2009:

  2. I have some early morning movers in my small cap biotech basket.

    Nektar Therapeutics (NKTR)
    14.69+1.68 (+12.91%)
    As of 10:01AM EST.

    Karyopharm Therapeutics Inc. (KPTI)
    $ 12.45 +1.42 (+12.88%)
    As of 10:04AM EST

    The move in KPTI is apparently related to this news release:

    Amicus Therapeutics, Inc. (FOLD)
    $7.91+0.31 (+4.01%)
    As of 10:05AM EST

    There was a pop in FOLD yesterday. The price closed at $6.49 on 2/28/17 and at $7.6 yesterday.

    FOLD's drug for Pompe's disease was mentioned by Trump during his State of the Union address. The company also reported results on 3/1/17:

    1. KPTI rose $2.81 yesterday to close at $13.84 based on this press release:
      After the market closed, KPTI released this negative press release:

      I wonder why the company could not release the good and the bad at the same time.

      I own 30 shares that were bought at as part of my small cap biotech Lottery Ticket basket strategy.

      2. Bought 30 KPTI at $7.11:

      I sold another 30 share lot realizing a $115.25 gain:

      6. Small Cap Biotech Lotto Basket Strategy:

      It looks like the glaring omission made in KPTI's first press release will cause the stock to give up all or most of yesterday's gain.

      Before the Bell Today:
      -2.46 -17.77%
      Mar 3, 2017, 8:03 a.m

      The compound in question is Selinexor which is in 35 ongoing studies. Apparently, and I am ignorant on scientific and medical matters, the compound works better in combination with other compounds than by itself.

    2. The second KPTI press release reference in the preceding comment came after the market closed yesterday. The first reference press release was issued before the market opened yesterday.

    3. KPTI: I do not like what happened yesterday with a pump the stock press release before the market opened and then another one after the market closed about a trial failure.

      I sold earlier today my remaining 30 KPTI shares at $12.04.

    4. Good move.

      I witnessed more than one pump and dump situation in ARWR (another small biotech which you may still have in your basket) which I held from 2007-2012. It was foolish of me to keep it that long, but a good lesson.

  3. South Gent,

    My biotech lotto ticket basket is the only basket that is up (+1.4% as of 11:20am)today. The biotech sector seems to have a negative correlation with the general market. I have accumulated over 50 companies in this basket, majority acquired in early 2017.

    1. Y: The small biotechs will frequently dance to their own tune. They can go up, like today, when the market goes down.

      Over longer periods of time, the correlation is a mild positive one, currently at about .53.

      If the market tanks, I would expect IBB to follow. The correlation would become a stronger positive one.

      IBB has a 3 year standard deviation of 25.10 compared to SPY at 10.37, so it will be far more volatile than the S & P 500.

      There could be individual biotech names that would buck a major downtrend based on positive trial results.

    2. South Gent,

      Thank you for that good insight, reinforcing the importance of the relative allocation of the biotech sector in a portfolio. I have a much better handle at this sector after adopting your lotto ticket basket approach.

  4. RHHBY: Roche is having a rare good day:

    Roche Holding AG (RHHBY)
    $32.46 +$1.91 (+6.27%)
    As of 11:40AM EST.

    I own 130 shares. My last purchased was 30 shares bought at $27.2 and discussed here:

    Roche's Aphinity Succeeds, Boosting Breast-Cancer Business

  5. This Bloomberg article published today points out the same obstacles to Trump's $1 trillion infrastructure plan that I discussed in this post.

    One interesting tidbit is that it took 23 years to repair the San Francisco-Oakland Bay Bridge after it was damaged in the 1989 earthquake.

  6. MPW: As previously discussed, I have sold down my MPW to a 50 share lot. Snapshots of those transactions can be found here:

    I noticed yesterday that the shares declined by several per cent.

    A company called Adeptus Health (ADPT) accounts for about 7% of MPW's revenues. Yesterday, ADPT was down about 50% based on this SEC filing about ADPT's inability to file a timely 10-K:

    I would note that ADPT's stock hit a high at $73.44 last May and has been in free fall since that time. The price is now $2.98.

    MPW's 10-K mentions the 7% number at page 21 in the risk summary section:

    Another material reference can be found at page 95.

  7. After Yellen's testimony today, the odds of a .25% increase at March's meeting rose to 86.4% from 77.5% yesterday. I would put the odds at almost 100%.

    As discussed earlier, a FF increase of .25% in March would increase the likelihood of three .25% increases this year with the second occurring during the summer and the third in December.

    The favorable ISM services report released earlier today is consistent with three increases this year.

    All of the foregoing caused a minor change in my short term bond/CD basket.

    I jettisoned at near par value (and break-even) all of my U.S. treasuries maturing between July 2018 through 2019 plus one maturing in early 2020. I will redeploy later.

    1. Two of the treasuries sold today were recently bought and discussed in this post. I am referring to the 1% coupon maturing in 9/19 and the 1.375% maturing in January 2020.

    2. Thanks for the fed update & other info! On to the new one.

  8. I published a new post:

  9. Finally found you again, I hope you are well. I'm researching bonds and CEFs. Found these. Pioneer High Income Trust [PHT]: 7.8% yield
    Pioneer Municipal High Income Advantage Trust [MAV]: 5.1% yield
    BlackRock Enhanced Capital and Income Fund [CII]: 7.1% yield

    Are you familiar with these?

    1. Brian: Does Canada tax interest payments from U.S. municipal bonds?

      Two of those funds have significant leverage (PHT and MAV). There is a lot of risk now associated with leveraged closed end funds. Those funds borrow money short term to buy longer term bonds. Short term rates are about to rise more in the U.S. and longer term bonds may continue to go down in value.

      Leverage cuts both ways. The value of the bonds bought with borrowed money can go down in value.

      I discuss the risks of leveraged bond CEFs here:

      Scroll to Appendix Section-"General Risk Discussion for Leveraged Bond CEFs"

      I would recommend taking the time to read that entire discussion.

      Another risk inherent in leveraged CEFs is a severe downdraft in prices that requires the CEF to deleverage at an inopportune time. Look at it as a forced margin call. I discuss that type of risk here:

      Scroll to RNP Presents a Good Historical Example of One Risk Inherent in Using Leverage:

      I discuss factors impacting the dividend payment here:

      Scroll to APPENDIX: 1. Factors Impacting a Dividend Payout for Leveraged Closed End Bond Funds Using VKQ as an Example

      CII is an unleveraged stock CEF that uses a covered call strategy. Most of the dividend is supported by return of capital.

      You can see the ROC component by going to CEFConnect and clicking the distribution tab:

      The monthly dividend has recently been cut from $.1 to $.0828 per share. I personally do not classify return of capital as a dividend.

      You can bookmark the title of this blog which will bring you to the latest one:

      If you click the notify me box in the comment section, you will receive all comments by email.

      My posts are too long for Google to send via email.

  10. Thanks for this SG. I will leave them alone for now. If a stock is RRSP eligible then taxes are not a problem, however I doubt they qualify for any tax relief. All the preferred share bargains seem to be gone too. I'd still like to get some higher yields.

    1. Brian: There would be no reason for a Canadian taxpayer to buy a U.S. municipal bond unless Canada treated the interest as tax free. If the interest is not tax free, you would be better off buying an equivalent taxable bond which yields more.

      I am gradually selling potentially perpetual preferred and potentially long duration exchange traded bonds that I bought late last year during the interest rate spike.

      The prices recovered since the apex of that spike, which was in mid-December. The ten year treasury hit 2.6% before starting to drift back down with a 2.31% closing yield on 2/24/17:

      However, the potentially long duration exchange traded bonds and preferred stocks are holding steady, or continuing to rise in price some, even though the ten year treasury is moving back to the spike apex point of 2.6% and is currently near 2.5%.

    2. Brian: You can buy individual bonds at IB. You just need to click the "bond" tab and enter the CUSIP number. The commission is $1 per bond. Some bonds are available in one bond lots.

      I have been discussing one and two bond purchases in every post over the past several weeks. You can see which ones were bought in my IB account by looking at the snapshot.

      The last IB bond purchase was discussed here:

      Item # 1 D. Added 2 BB&T 1.45% Senior Unsecured Maturing on 1/12/18:

      Possibly the most recent bond purchase in that account, which I have not yet discussed is one Vodafone 2.95% senior unsecured bond maturing on 2/19/23 which was bought a total cost of 98.253 producing a YTM of 3.275%.

      The price has ticked down slightly since that purchase.

      An example of a higher rated bond maturing in 2023, which frequently can be bought in a one bond lot, is the Diageo 2.625% senior unsecured maturing on 4/29/23 that closed at a 2.85% YTM today:

      While these investment grade bonds rated BBB+ or higher will not provide the same yields as those CEFs, they do have the advantage of maturing at a time certain, with relatively low credit risks, and without the problems that I discussed that are inherent in leveraged bond CEFs.

      The questions that I can not answer for readers involve their situational risks, risk tolerances, financial goals and needs. Buying these relatively low yielding bonds will not be a desirable option for a lot of people since the total return potential is too low for them to meet their financial objectives. That is a decision that needs to be made by each individual investor.

      For myself, I can hold to maturity all of the bonds that I have been buying, if need be, and I do not need the income.

      Consequently, interest rate risk issues are not that relevant to me in my short and intermediate term bond baskets. I am effectively dealing with a rising rate scenario through the ladder approach.

  11. SG - I will try this week. I would like to build my own bond ladder and manage it myself. My plan was to start with 1 - 3 years and go from there. I appreciate your guidance.

    I have a lot of money coming in the next 6 months with the sale of my business and real estate. Your timing is excellent.

    I will layer in prefs too.

    Thanks ,Brian