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."

Wow!   

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 View; Trump 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 - MarketWatch; Trump 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 Congress-FactCheck.org
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

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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 - WSJ.com

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. 

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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.

Exclusive - Trump border 'wall' to cost $21.6 billion, take 3.5 years to build: internal report-Reuters

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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

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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 Herald; The Florida mansion that Donald Trump sold to a Russian billionaire now torn down | McClatchy DC

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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

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1.  Intermediate Term Bond Basket Ladder Strategy-Underweighted:

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):

Vanguard Webpage: Vanguard Capital Opportunity Fund Investor Shares

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 

Website 

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 $24: Update 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 pages 10-27) Unless redeemed early by the issuer, this security will mature on 12/15/2029.

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.