Monday, March 20, 2017

Observations and Sample of Recent Trades (SCEPRJ, SWJ, PWCDF)-3/20/17/GOP's Hit List Redux

GOP's Hit List Redux: Trump's Budget 

A few weeks ago I mentioned that the GOP wanted to eliminate funding for several agencies including the Corporation for Public Broadcasting, the Appalachian Regional Commission, the National Endowment for the Arts and the Humanities; the Legal Services CorporationAmeriCorps-Corporation for National and Community Service and Senior Corps - Corporation for National and Community Service. 

Scroll to "GOP's Hit List": Stocks, Bonds & Politics 2/24/17/GOP and Healthcare/ Economic Nationalism = Nihilistic Protectionism

All federal funding for those agencies would cease under Trump's budget. 

The GOP has wanted to eliminate funding for these programs since 1994. 

None of those programs help rich people. Making rich people richer is the GOP's key to making America great again, but don't say that out loud since the middle class might not be so anxious to support the GOP's trickle down policies and elimination of programs intended for the poor and/or the middle class. Trump Takes a Gamble in Cutting Programs His Base Relies On - The New York Times

Trump's Budget Director  Mulvaney: “We can’t spend money on programs just because they sound good.” Trump Budget: Proposal Would Cut Meals on Wheels | Money
Trump’s Cuts to Meals on Wheels Could Hurt Veterans, Raise Health-Care Costs - Bloomberg

CBS interviewed a woman who depends on meals on wheels for food. She voted for Trump and would vote for him again even if he was successful in cutting all federal funds for this program. Why? Trump was going to do things for people like her.   CBS Video

Here's what Trump's budget proposes to cut - CNN
Trump's Budget Plan in 17 Charts - The Atlantic
Trump's 'Skinny Budget' Includes a 20 Percent Cut to Funding for the National Institutes of Health
Trump Budget Cuts Funding For Arts, Humanities Endowments And Corporation For Public Broadcasting : NPR
The 62 agencies and programs Trump wants to eliminate-USA Today
Trump’s budget ripped from Bannon’s nationalistic playbook - POLITICO
Trump’s budget plan hurts Michigan, Great Lakes cleanup
A grim budget day for U.S. science: analysis and reaction to Trump's plan | Science | AAAS

President Trump won big in these places. Now he wants to eliminate 3 agencies dedicated to helping them. - The Washington Post (referring to the Appalachian Regional Commission, the Delta Regional Authority, the Northern Border Regional Commission)  

In the 420 counties where the Appalachian Regional Commission provides assistance, 399 of them were carried by Trump.

I have watched numerous interviews with Trump voters who were or are major beneficiaries of the programs on the GOP's hit list. I will make two observations about those interviews. First, the persons are unaware that Trump plans to eliminate federal funding for the program that helped them in a time of need. Second, when told that the program is on the chopping block, they nonetheless remain Trump supporters.

Another common response is that Trump is not responsible for those cuts. When I heard that kind of remark, I was reminded about many of the Russians killed during Stalin's purges who were convinced that their execution would stop if only someone would tell Uncle Joe. How Many People Did Joseph Stalin Kill? Both Trump and Stalin like the phrase "enemy of the people" or враг народа.

President Crazypants | Real Time with Bill Maher (HBO) - YouTube

80% of Trump supporters believe that he a source of accurate information. CBS News

The Defense Budget will be increased by $54 billion to $639 billion. 

Trump proposes $54 billion defense spending hike - CNN 

What is really important is eliminating the AMT that causes Donald to pay more taxes.  

The GOP is not a conservative party. Trump and the GOP are giving the finger to large segments of their supporters.  


Worth a Read

Employer-Backed Insurance Could Take a Huge Hit from GOP Healthcare Plan - NBC News

Trump 2005 Tax Return May Have Understated Salary By Millions |

Behind Trump’s Russia Romance, There’s a Tower Full of Oligarchs - Bloomberg


1. Intermediate Term Bond Ladder  Basket Strategy

I compiled over the weekend my weightings by year. I have not yet discussed all of the purchases included in the following snapshot: 

The securities maturing in 2020 include only those that mature after March 2020. The weightings in 2021-2023 are mostly a function of better yields than 2020 with shorter durations than those in 2025-2026 that offer only marginally better yields.  

I believe that the intermediate term bonds discussed below can be bought at slightly lower prices now but have not checked the numbers.  

A. Bought 1 Boston Properties LTD 2.75% Senior Unsecured Bond Maturing on  10/1/26:

Issuer: Operating Partnership of the REIT Boston Properties Inc. (BXP) 

FINRA Page: Bond Detail (Prospectus)
Credit Ratings:
Moody's at Baa2
S & P at at A-
Fitch at BBB+

YTM at Total Cost (92.563) = 3.679%

There is a standard make whole provision that applies to optional redemptions prior to 7/1/2026. An optional redemption thereafter would be at par value plus accrued and unpaid interest to the redemption date.

Boston Properties Website

2016 Boston Properties Annual Report

Earnings Report Q/E 12/31/16 

B. Bought 1 Virginia Electric Power 2.75% Senior Unsecured Bond Maturing on 3/15/23: Roth IRA:

Issuer: Operating Subsidiary of Dominion Resources  
Finra Page:  Bond Detail
Credit Ratings: 
Moody's at A2
S & P at BBB+
Fitch at A

YTM at Total Cost (99.417) = 2.856%

Sourced Page 167 Annual Report. 

VEPCO has a higher credit rating from FITCH than its parent Dominion Resources: 

Moody's rates the parent's senior unsecured debt at Baa2 and VEPCO at A2.

C. Bought 1 Alabama Power 2.8% Senior Unsecured Bond Maturing on 4/1/25:

Issuer: Alabama Power, a wholly owned subsidiary of Southern Co.  (SO:NYSE)

FINRA Page: Bond Detail (prospectus not linked)
Credit Ratings:
Moody's at A1
S & P at A-
Fitch at A+   Fitch May 2016 Report

Moody's downgrades Southern Company to Baa2 stable; affirms subsidiary ratings and outlooks-May 2016 Report.

YTM at Total Cost (97.241 ) = 3.191%

Southern Company 2016 Annual Report (Alabama Power report starts at page II-156)

D. Bought 1 BP 2.5% Senior Unsecured Maturing on 11/6/22:

Issuer BP Capital (guaranteed by BP PLC)

FINRA Page: Bond Detail
Credit Ratings:
Moody's at A2
Fitch at A

YTM at Total Cost (97.523) = 2.979%

Investors | BP Global

2. Continued Paring Potentially Long Duration and Recently Bought Preferred Stocks and Exchange Traded Bonds:

A. Sold 50 out of 80 SCEPRJ at $26.62-Roth IRA:

Profit Snapshot: +$90.97:

I still own a 30 share lot bought at $24.96, using a commission free trade, and discussed here.

This is a fixed-to-floating rate security:

"From and including August 24, 2015 to but excluding September 15, 2025, distributions will accrue and be payable at a rate of 5.375% per annum, payable beginning on December 15, 2015 and ending on September 15, 2025. From and including September 15, 2025, distributions will accrue and be payable at a floating rate equal to the three-month LIBOR plus a spread of 3.132% per annum, payable beginning on December 15, 2025. ... At our option, at any time, or from time to time, on or after September 15, 2025, we may redeem the Series J Preference Shares, in whole or in part, at 100% of their liquidation preference, plus accrued and unpaid dividends, if any."

I included fixed-to-floating rate preferred stocks in my niche category of floating rate preferred stocks:

Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities: Net Realized Gain of Profit of $19,430.61

B. Eliminated SWJ-Sold Remaining 30 shares at $25.33 Using a Commission Free Trade:

Profit Snapshot: +$38.84

Final Prospectus Supplement

I discussed that purchase here.

SWJ is a junior bond that matures on 7/15/2052 unless redeemed early at the issuer's option. Interest rate payments may be deferred for up to five consecutive years, which is a common provision in junior bonds. During any deferral period, cash can not be used to pay dividends or to purchase any junior security which would be common and preferred shares as the only securities lower in the capital structure (see page S-7 of the prospectus)

The issuer has the option to redeem at par value on or after 7/25/17.

3. Short Term Bond/CD Ladder Basket Strategy:

I compiled the following list over the weekend. I have not yet discussed all of the bonds and CDs included in the yearly totals. 

The weighting is heavily concentrated in 2017-2018. So far, the 2+ year maturities have not provided much yield improvement over those maturing in 2018. Since I am anticipating a rise in short term rates, I have purposely underweighted 2019 and early 2020 maturities. 

A. Added 1 UST .75% Maturing on 12/31/17 (commission free for Fidelity customers):

This is what the order book looked like at Fidelity when I placed this trade:

I received a higher YTM on this trade compared to my last purchase due to the rise in short term rates.

B. Added 1 UST .75% Maturing on 12/31/17 (commission free to Schwab Customers):

I now own four of these bonds.  

B. Added 1 UST .625% Maturing on 6/30/17:

Order Book:

I now own 4. The first one bond purchase was made on 12/20/16 at a .632% YTM.

4. Continued to Pare Stock Allocation:

Quote: Power Corp. of Canada (PWCDF:OTC)

A. Sold 100 PWCDF at $23.51:

Profit Snapshot: +$237

I discussed this purchase here:

Scroll to USD Priced Canadian Income Stocks: Item # 1 Bought 100 PWCDF at $21.05-Update For Portfolio Positioning And Management As Of 7/9/16 - South Gent | Seeking Alpha

I sold this stock on the ex dividend date.

Prior POW:TO/PWCDF Trades:

Total Trading Profit to Date: $946.19

Power Corporation of Canada | Organization Chart

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. Nektar Therapeutics (NKTR)

    Closing Price 3/20/17
    $22.11+$6.61 (+42.65%

    I own 70 shares as part of my small cap biotech lottery ticket basket.

    I have discussed only a 20 share purchase in my SA comment blog.

    I do not recall when I bought the other 50 shares, but it was close in time proximity to that buy. I may harvest that profit and keep the 20 shares bought at $13.2.


    The FINRA bond page was down for at least a day but recently came back on line.


    Roche went ex dividend for its annual distribution on 3/15/17. I owned 130 shares of the ADR RHHBY on the ex dividend date and sold 100 of my highest cost shares today for a $128.93.

    According to YF, the USD penny rate was $1.018 per share. Adjusted for the dividend, the shares have risen slightly from the $32.38 closing price on the day before the ex dividend date:

    It has been difficult for awhile to generate a decent total return on Roche shares. I will consider reloading at lower prices.

    I have kept for now the 30 share lot bought at $27.2 and discussed here:

    For now, I am content to buy high quality short and intermediate term bonds and to raise cash by paring my stock allocation.


    Another Lotto Ticket in the small cap clinical biotech space, is Omeros (OMER):

    $11.75+1.21 (+11.48%)

    I own 60 shares now. I discussed buying 30 shares here:

    Item 1. Bought 30 OMER at $9.03:

    The company reported 4th quarter results on 3/7:

    I did not see any specific news today. Bret Jensen published an article yesterday evening:

  2. With the yield curve flattening, investors are starting to question the big run up in bank stocks since the election.

    The S & P 500 declined 1.24% today, but the SPDR S&P Regional Banking ETF (KRE) declined by 5.41%.

    I have been selling my regional bank stocks into this rally since I just do not get the enthusiasm.

    I really do not have enough securities anymore for a basket.

    I have been discussing dispositions in these posts. I have not yet discussed paring BBT and eliminating the remaining shares in FFBC.

    Snapshots of those trades are included in my Gateway Post for regional bank stocks:

    Price declines can certainly be more rapid than increases.

  3. South Gent,

    Good call on the RBs. I sold most of the holdings in the sector prior to the election and missed the rally.

    Re. Dundee Corp. Cum. 1st Pfd. Series 3 (DC.PR.D:TOR) the company's equity DDEJF is under quite some pressure lately but DCPRD seems to be holding okay (although still at a distressed level). In this scenario does the price movement in equity DDEJF give you a heads-up on a potential drop in DCPRD?

  4. Y: I have traded several high risk Canadian reset preferred stocks and the Dundee cumulative preferred series D is one.

    I have already eliminated 100 of the 150 shares:

    Item 3.A A. Sold Highest Cost DCPRD Shares at C$13.81

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

    The Dundee common share stock is signaling high risk for the preferred stock but that was true when I first bought shares last summer:

    The common shares are on my monitor list for a Lottery Ticket buy.


    So the answer to your question is yes, but that was known when I bought shares. The fact that I sold 100 of 150 highlights the short leash.

    Another reason for the preferred stock selling at such a large discount to par value is that the 3 month Canadian treasury bill is so low.

    Do you have a position?

  5. South Gent,

    I don't have Canadian $ account to buy Canadian issues but I took 300 shares of DDEJF instead and watched it dropped almost 20% within a month. I was just wondering which side is seeing the right future, the bond guy or the equity guy?

  6. Y: Both the equity preferred investor and the common stock investor see high risks but the equity preferred investor is being paid something to take the risk.

    Dundee is losing money:

    The common shares are selling well below the $14.47 per share "equity value" calculated by the company as of 9/30/16. The company reported "a mark-to-market value per share of approximately $14.23 at September 30, 2016, compared with $14.99 at June 30, 2016 and $16.90 at September 30, 2015."

    The 4th quarter report is due at the end of this month.

  7. BHB: I mentioned in a prior comment that Bar Harbor Bankshares (BHB) was going to split its stock 3 for 2.

    That split became effective today.

    $30.71 +$0.55 (+1.84%)
    As of 9:43AM EDT

    Prior to the split, I owned 150 shares and I now own 225. I did sell 100 shares in 2016 for close to a $1K profit.

    I also previously mentioned that I might pare my BHB position by selling 50 shares after receiving the stock split shares. I have made no decision yet. If I had not sold the 100 shares in 2016, I would sell that many now.

    I did have a favorable view of BHB's acquisition of Lake Sunapee which I owned as well but sold all of my shares last year rather than receiving more BHB shares.

  8. I have published a new post: