Saturday, March 25, 2017

Observations and Sample of Recent Trades: 3/25/17 (SGZA, FFBC)/Trumpcare Kaput

Trumpcare Kaput:  

A reporter asked Senator Pat Roberts (R.Kan.) whether he supported scrapping the essential health care benefits required in Obamacare policies. 

Senator Roberts responded: "I wouldn't want to lose my mammograms." While he later apologized, his answer tells everyone what he really thinks. 

In the final version of Trumpcare, the GOP was going to scrap the minimum essential insurance requirements that include maternity and prenatal care, emergency room visits, hospitalization, lab services, prescription drugs, mental health and addiction services and pediatric services. What Are 'Essential Benefits' in GOP Health Care Bill Debate? - NBC News; Why maternity & mental health coverage may decide the House GOP bill's fate - CNNLate G.O.P. Proposal Could Mean Plans That Cover Aromatherapy but Not Chemotherapy - The New York TimesObamacare 101: 4 things you need to know about 'essential health' benefits - LA Times

A photograph of the meeting where Trump agreed to eliminate the essential insurance requirements highlights the GOP's tone death on women's issues:

The removal of those items from all insurance policies would have caused the premiums to rise for those who want coverage for all essential services. Young single people would opt out of the insurance pool for maternity and prenatal care, pediatric services, wellness/preventative exams, mental health and addiction services and prescription drugs with limited exceptions. Older folks would drop coverage for maternity care and pediatric services. As the insurance pool shrinks leaving people who need those types of services, their premium costs would increase compared to Obamacare for policies that include them.

That is how risks are managed by insurance companies. To keep premiums down, there needs to be a large pool of people who are not currently utilizing any of those services. The GOP has no clue about such matters. While the CBO estimated that 24 million would lose insurance coverage, the actual number of uninsured persons would include those who can not afford to pay the resulting high premiums for one or more essential services and are consequently uninsured when they need the service.

H.R. 1628, the American Health Care Act, incorporating manager's amendments 4, 5, 24, and 25 | Congressional Budget Office

Why would someone want to add for example maternity and pediatric services? The family is going to have a baby and are thinking ahead about insurance coverage for the child. They would have to pay a lot more under those circumstances than if the cost risk was spread out over the entire insured pool. Most health plans excluded maternity coverage prior to Obamacare: How Obamacare changed maternity coverage. Insurance companies were probably lobbying hard to get the a la carte menu since it would improve their pricing and margins.

Buying a home insurance policy when you house is burning is not going to be favorably priced. And, if the insurance companies are not allowed to price those risks appropriately under the GOP's a la carte system, then they will just pull out.

As I stated several times earlier, I did not believe the GOP would be able to repeal and replace Obamacare. They did manage with their proposals to energize their opponents who probably gained a million plus converts.

I do not anticipate smooth sailing on tax cuts either.

At least that subject is a more natural one for republicans than trying to deal with healthcare which ended up with a 17% approval rating. National (US) Poll - March 23, 2017 - U.S. Voters Oppose GOP Health | Quinnipiac University Connecticut

The problem with the GOP's current approach is their desire to include a border tax to pay for a corporate tax cut. In effect, the GOP would be increasing the taxes for lower and middle income voters with a 20% tax applied to imported goods, while giving most corporations a major tax break. Importers will be screaming bloody murder.  I personally view such a plan to enrich corporations and their shareholders and to tax the less well off as a GOP Death Wish. It is an easy issue to understand for those white blue collar workers.

Next up, the GOP has to increase the debt limit without attaching poison pills to their authorization. Debt limit looks like a real struggle after AHCA debacle - MarketWatch

Federal Debt and the Statutory Limit, March 2017 | Congressional Budget Office

See my 3/1/17 post (scroll to "Will the GOP Shut Down the Government Again?")


Bar Harbor (BHB) split its shares 3 for 2. I received an additional 75 shares last Wednesday: 

This split brings me up to 225 shares with an average cost of $16.69 per share: 

This is the second 3 for 2 stock split that I received since I first bought shares on 2/7/2012. Item # 2: Bought 50 BHB at $30 (2/10/12 Post) That 50 share lot has turned into 112.5 shares now has an average cost per share of $13.4

I sold 100 shares in 2016 held in another account: 

2016 BHB 100 Shares + $ 936.36
I last discussed a pre-split purchase here: 

I was rewarded when BHB made an offer to acquire Lake Sunapee Bank that I owned at the time of the offer and later sold in three separate transactions last year realizing a total gain of $850.87. This is a snapshot of the largest of the three: 

2016 LSBG 100 Shares +$627.02



I am continuing to gradually pare my stock allocation. I am at the end of that process since I can not find anything left that I want to sell. It will be discussing some of those dispositions, which have already taken place, over the next several weeks.  

I am just about done, hopefully, buying short and intermediate term bonds and CDs. It may take two more months to discuss all of those trades here.  


1.  Intermediate Term Bond Ladder Basket Strategy

I received $3K in proceeds from a maturing three month treasury bill in March and used the proceeds to buy the bonds discussed in A, B, and C below: 

A. Bought 1 WFC 3% Senior Unsecured Bond Maturing on 2/29/25

Issuer:  Wells Fargo & Co. (WFC:NYSE)
WFC Page at Morningstar
Finra Page: Bond Detail
Credit Ratings: 
Moody's at A2
S & P at A
Fitch at AA-
YTM at Total Cost (97.266 ) = 3.395%

B. Bought 1 Morgan Stanley 2.625% Senior Unsecured Bond Maturing on 11/17/21

Issuer: Morgan Stanley (MS:NYSE)
MS Page at Morningstar
Finra Page:  Bond Detail
Credit Ratings: 
Moody's at A3
S & P at BBB+

YTM at Total Cost (99.044) = 2.844%

2016 Annual Report 

C. Added 1 Anheuser Busch InBev 2.625% Senior Unsecured Maturing on 1/17/23:

I previously bought this bond in a taxable account. This last purchase was in a Roth IRA account. 

Issuer:  Anheuser-Busch InBev S.A. ADR (BUD:NYSE)
BUD Page at Morningstar
FINRA PAGE: Bond Detail
Credit Ratings:
Moody's at A3
S & P at A- 
YTM at Total Cost (98.476 ) = 2.91%

D. Bought 1 Lexington Realty 4.4% Senior Unsecured Bond Maturing on 6/15/24

Issuer Lexington Realty Trust (LXP)
LXP Page at Morningstar (not rated)
FINRA Page: Bond Detail
Credit Ratings: 
Moody's at Baa2  
S & P at BBB-
Fitch at BBB

YTM at Total Cost (98.591 ) = 4.63%

LXP Analyst Estimates
Welcome to |

I have bought and sold the common stock and currently own 100 shares in Roth IRA accounts plus reinvested dividends.  In my Vanguard Roth IRA account, I still own 50 LXP shares bought  at $7.6 in July 2016.

Item # 1. Sold 100 LXP at 150 in Vanguard Roth IRA Account:Update For Equity REIT Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha

I  sold out of my LXP positions held in two taxable accounts account last year: Item # 2. Sold 250 LXP on Ex-Dividend Date-Taxable Accounts: Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshots= $224.65).  
I had previously sold higher cost lots:
I discussed selling 100 shares in the Fidelity Roth IRA at $11.15 here, realizing a gain of $271.9. 
The LXP common stock position is part of REIT Common and Preferred Stock Basket Strategy which I started to build in the 2013 summer. Trading snapshots can be found at the end of that post. 
LXP Trading Profits To Date = $675.94
It has been difficult to generate a total return in excess of the dividend yield. To do so, I have to buy low and sell the pops: LXP Interactive Stock Chart
LXP has disposed of several properties that apparently contributed to the straight line rent number which is non-cash revenue included in the FFO calculation but excluded from funds available for distribution ("FAD"). Note that the FAD number was $57.415M for the Q/E 12/31/15 up from $52.238M in the Q/E 12/31/15. The straight line rent adjustment, which deducts non-cash revenues from LXP's adjusted FFO, was $2.051M last quarter compared to $12.46M in the 2015 4th quarter. The quality of the cash flow went up, as the adjusted FFO declined Y-O-Y. A number of authors at SA do not understand this point.  
LXP's 2016 Annual Report (debt is discussed starting at page 93)
2. Continued to Pare Potentially Long Duration Exchange Traded Bonds:

A. SOLD 40 SGZA at $24.83:

Profit Snapshot: $51.29

I discussed this purchase here. This lot was bought at $23.5, with the total cost at $23.525 per share.

Quote: Selective Insurance Group Inc. 5.875% Senior Notes due 2043 (SGZA:NYSE)

Prospectus (optional call on or after 2/8/18)

Moody's rates Selective Insurance Group's shelf (provisional senior at (P)Baa2); outlook stable

I still own 50 shares of SGZA bought in a Roth IRA at $24.1 that I discussed here.

I also still own 50 shares in a taxable account that were bought using a commission free trade at $23.53 (12/29/16). I discussed that purchase here.  The yield at that all-in price is about 6.242%.

I will buy this bond when it dips in price. The first price plunge occurred shortly after the bond's IPO in 2013. SGZA Stock Chart The price fell quickly from the $25 per share offering price to about $19.5 due to the interest rate spike that year which started in early May and ended on 12/31/13.

My first purchase was during the interest rate spike in 2013: Item # 3 Bought 50 SGZA at $20.6 (10/19/13 Post) I did not hold onto those shares for long, selling that lot for a $140.58 gain in May 2014.

The second plunge in price occurred during the interest rate spike that started last summer and ended in December 2016. The ten year treasury yield has now worked its way back up to the apex hit during last year's spike. The question now is whether the current spike in that yield has ended at or near the 2.6% level again or is merely pausing for another leg up.

I bought SGZA several times during that price decline using commission free trades in taxable accounts or the $1 commission payable to IB for the trade discussed above.

3. Continued to Pare Stock Allocations:

A. Sold 84+ FFBC at $28.1 (used commission free trade):

Profit Snapshot: +$1,129.21

Quote: First Financial Bancorp (Ohio) (FFBC:NASDAQ)

Stocks, Bonds & Politics: REGIONAL BANK BASKET STRATEGY GATEWAY POST (snapshots of gains/losses = +$36,089.34)

The 2018 E.P.S. consensus estimate was $1.72 when I sold this lot. That translates into a forward P/E of 16.34 at a $28.1 market price. The 2017 estimate was $1.54 which translates into a 18.25 P/E.

I view both P/E ratios to be expensive for this bank or any other bank stock that would be on my monitor list.

4. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 WFC 1.5% CDs (monthly interest) Maturing on 10/1/18:

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. "The GOP has no clue about such matters."

    I have no idea if this is true or not, but if it is, it's strange: I imagine that there are many GOP supporters at the policy-making levels of insurance companies.


    1. The legislators certainly understand how risk pools work. They are caught between the insurance lobby and the voters who elected them. Something will have to give.

    2. Maybe some legislators understand. If the ones that I heard were being truthful, they did not understand the repercussions on premiums that would result from shrinking the insurance pool on services that many people do not need including maternity/prenatal care, pediatric services and mental/addiction services.

      Normally, I do not watch Chris Hayes on CNBC primetime but I did last Thursday to get a better feel for what was happening. He had a former CIGNA executive on the show. Hayes asked why would republicans want to eliminate the essential benefit requirements.

      His reply:

      "They`re listening to health insurance company lobbyists and they - I guess they think those
      lobbyists are the proxy for regular people. And they`re certainly being fooled. In fact, they`re being played by the insurance industry, Joy. The
      insurance industry knows that they can appeal to the ideology of the House Freedom Caucus. They talk the free market and they know that resonates with these folks and they`re selling them a bill of goods. What they would be doing if these were to pass is getting - putting a lot of their constituents into the ranks of the underinsured. Yes, they might theoretically have coverage but it would allow the insurance companies to shift more and more and more of the cost of actual care from them to their
      enrollees. So it`s a sweet deal for the insurance industry and I`m certain that behind the scenes they`re really trying to work - talk this up."

  2. Good call on gold!

    I missed the lobby aspect behind the Freedom party. Grateful to them for being adult enough to say just plain "no" to Mr. Tweeter. Just that word, done once, has changed the dynamic of everything. Not fixed of course, but an important shift.

    Any thoughts on the pullback early today... and banks/yields stocks? For someone who needs to be in the market (longer horizon and more growth needed than you) is any sector/subsector approaching fair value to explore?

  3. LMH: I am a traditional value investor and this market worries me based on my experience. Maybe this time is different and a new age of growth and job creation is about to be given birth by Donald's informed and well thought out policies.

    I really do not see much of anything in the U.S. stock market that interests me or presents what I would consider a reasonable risk/reward.

    I have started to nibble on some high yielding REITs that have come down in price. I mentioned SNR when I last answered a similar question. I did just buy 50 shares of APLE, a hotel REIT, that pays monthly dividends. Brad Thomas just published an article on this REIT. One regional bank is on my radar for a purchase and that is NYCB which is unloved and has failed to participate in the regional bank rally which appears ready to become unglued due to the decline in interest rates and a lack of progress on reducing bank regulations. In the large pharmaceutical stock area, Pfizer (PFE), which I recently pared, is worth a look as is Novartis (NVS).

    There has been no meaningful pullback in the market IMO.

    1. "worries me based on my experience."..." is about to be given birth by Donald's informed and well thought out policies. "



      Thanks for the feedback and ideas of what areas look at least not ridiculous.

      I can at least learn by looking.

  4. I have published a new post: