Saturday, April 29, 2017

Observations and Sample of Recent Trades: 4/29/17 (SCEPRJ, TDIV, WTBA): The GOP's Alternate Reality Universe/S & P 500's Gain Since September 2012 Mostly Due to Multiple Expansion

Another Anemic 1st Quarter GDP Report:  

The government's GDP estimate, released yesterday, will be revised twice in the coming months. The second estimate is scheduled for 5/26/17. 


News Release: Gross Domestic Product


The government has had difficulty measuring 1st quarter GDP growth for decades. It has paid for stock investors over the last several years to ignore the weak first quarter numbers. 


At some point, ignoring the weakness will prove to be the wrong decision, but it is impossible to say now whether the latest report is just another one that should be ignored by investors.  


The government's first estimate for real GDP growth in the 2017 first quarter was an anemic .7% annualized, down from the 2016 4th number of 2.1%. The consensus estimate was for .9% to 1.1% depending on who compiled the data. The Atlanta FED GDP model currently has the number at .2% as of 4/27/17, down from .5% as of 4/18/17. GDPNow - Federal Reserve Bank of Atlanta


The main concern about the data is that personal consumption expenditures increased at a .3% annualized rate. If that continues, then we are in trouble. 


I have been highlighting in several recent posts that consumer spending was at best lackluster notwithstanding the ebullient consumer survey data. As we all things about the future, time will tell soon enough whether this is the start of something bad or merely a short term blip that will reverse in the spring and summer.  


The positives in the report was a double digit increase in business spending. Using annualized numbers, investments in non-residential structures rose 22.1% and residential investment increased by 13.7%. Equipment investment rose at a 9.1% annualized rate. 


("Nonresidential structures: Investment in nonresidential structures consists of new construction (including own-account production), improvements to existing structures, expenditures on new mobile structures, brokers' commissions on sales of structures, and net purchases of used structures by private businesses and by nonprofit institutions from government agencies. New construction includes hotels and motels and mining exploration, shafts, and wells. Nonresidential structures also includes equipment considered to be an integral part of a structure, such as plumbing, heating, and electrical systems." Glossary "N": Bureau of Economic Analysis)


("Residential structures. .Investment in residential structures consists of new construction of permanent-site single-family and multi-family units, improvements (additions, alterations, and major structural replacements) to housing units, expenditures on manufactured homes, brokers’commissions on the sale of residential property, and net purchases of used structures from government agencies. Residential structures also include some types of equipment that are built into residential structures, such as heating and air-conditioning equipment." Glossary "R": Bureau of Economic Analysis)



In several old posts, I have discussed the reasons why the recovery has been so slow over the past 9 years or so. One problem has been lower than normal business investment as a percentage of GDP. (see, e.g. Update On Portfolio Positioning And Management As Of 9/21/15 - South Gent | Seeking Alpha)


++++++


Trump Does Not Lie-The Media Lies About Trump: The GOP's Alternate Reality Bubble That is Impervious to Accurate Information


So far, Trump has told over 400 easily documented falsehoods since his inauguration. All of Trump’s false and misleading claims: the first 100 days - Washington Post


No President has lied more than Donald. No one has come close. He will set a record that will never be matched until the end of days. The record will most likely be a multiple of the combined total of all predecessors.  


Yet, a recent poll showed that 76% of Trump voters believe that Donald does not regularly make false statements. 59% of all adults, including 81% of Democrats and 62% of independents, believe that Trump regularly makes false statements. 


(Part 1 of Poll: President Trump is least popular president at 100-day mark - The Washington Post; a question in part 2 asked whether Donald is honest and 58% said no)


80% of Trump voters think the bigger truth telling problem lies with the news media, meaning just about every news organization in the U.S. other than Fox and Friends, Brietbart, the National Inquirer, and Alex Jones' Infowars and a few personalities like Ann Coulter, Rush Limbaugh, and Sean Hannity who claim to be conservatives.  


Donald believes that the National Inquirer needs to be awarded many “Pulitzer Prizes for their reporting.” MSNBC


100 Days of Whoppers - FactCheck.org
++++++++++++++

S & P 500's Gain Since 9/30/12 Mostly Due to Multiple Expansion:

The following information is taken from data provided by Standard & Poor's (S &P)




2014 Third Quarter S & P 500 Actual GAAP and Non-GAAP Earnings:
GAAP 29.6
Non-GAAP 27.47
S & P 500 at 1972.29 on 9/30/14

Estimated 2017 First Quarter as of 4/20/17 (22.5% reporting)
GAAP 26.41
Non-GAAP 29.11
S & P 500 Closed at 2,387.45 on 4/26/17

S & P 500 has gained 21.05% as both GAAP and NON-GAAP earnings have declined.

2012 Third Quarter Actual Earnings
GAAP 24
Non-GAAP 21.21
S & P 500 Closed at 1440.67 on 9/28/12 (a Friday)

From 9/28/12 through 4/26/17, the S & P 500 has gained 65.72% while GAAP earnings have increased 10%. 

S & P 500 P/E as 4/28/17

TTM P/E Based on Reported GAAP Earnings = P/E 24.17
Forward 12 months Non-GAAP Estimated "Operating Earnings"  = P/E 18.42

The last recession ended in June 2009: nber.org/cycles


++++++++++


BlackRock's Fink Says U.S. on Path to 'Exploding' Deficits - Bloomberg (worse than he thinks)


The latest Trumpcare plan clearly throws those with pre-existing conditions under the bus, primarily in red states carried by the republicans, by giving states the right to opt out of the Obamacare requirement that those with pre-existing conditions can not be charged more than healthy insureds.

Fears of losing pre-existing conditions protection under GOP - ABC News
New bill tests GOP promise on pre-existing conditions | TheHill;
GOP Health Care: Republicans Aim to Keep Pre-existing Conditions-But Only For Themselves | Money

One inherent flaw in Obamacare, as Blue Cross of Tennessee found out when it lost over $500M in three years, is that there are not enough healthy persons in the plans to offset the high costs for those with illnesses. The pain for both insurance companies and insureds in Tennessee was aggravated since Tennessee did not adopt the Medicaid expansion, which caused those with illnesses, who would have been covered by the Medicaid expansion, to enroll in an Obamacare plan.

Then there is the fairness issue to the healthy persons having to pay significantly higher premiums to offset the costs of providing those with pre-existing conditions at the same rate. If that system continued, then more healthy individuals would simply drop out due to premium increases and insurance companies would quit offering policies due to losses. Then the insurance pool would have an even higher sick to healthy people ratio and less options for coverage due to insurance companies dropping out. It is a system designed to fail, starting with the smaller states first.

The only ways for Obamacare's pre-existing condition policy to work long term is to have a single payer system, where coverage extends to the entire population, or to have the state and federal governments footing all or most of the costs for those with significant illnesses above a certain average level. The single payer system is not going to happen in my lifetime. Perhaps, after the baby boom generation passes away, then something could be adopted along those lines.

As I explained in a 2013 post, I would have voted against Obamacare as the wrong solution: Stocks, Bonds & Politics: Why I Would Have Voted Against Obamacare (scroll to end of post)

The republican plan also prohibits insurance policies that cover for abortions. In several blue states, including California and New York, insurance companies are prohibited from excluding abortion coverage by state law and residents in those states would not be entitled to receive credits provided in TrumpDoesNotCare plan.

Most California insurance plans could be ineligible for tax credits under the GOP's new proposal - LA Times;  GOP health care plan would threaten 1M New Yorkers' insurance - NY Daily News

A number of NY republicans intend on voting for this plan nonetheless including the reactionary Chris Collins, an early supporter of Donald Trump, who has found a way to stick it to NYC and other liberal Democratic bastions on Medicaid funding in the current GOP "healthcare" bill. Collins' Medicaid proposal prompts battle with governor - The Buffalo News


+++++++++ 

1.  Intermediate Term Bond/CD Ladder Basket Strategy:

A.  Bought 2 CVS 2.875% Senior Unsecured Bonds Maturing on 6/1/26



Issuer:  CVS Health Corp 
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: 
S & P at BBB+

YTM at Total Cost (95.933) = 3.388%

CVS Analyst Estimates 

B. Bought 2 Kimberly Clark 2.65% Senior Unsecured Bonds Maturing on 3/1/25:


Issuer:  Kimberly-Clark Corp.
KMB Kimberly-Clark Corp Page at Morningstar 
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: 
S & P at A

YTM at Total Cost (97.791) = 2.965%

KMB Analyst Estimates


C. Bought 2 Pepsico 2.85% Senior Unsecured Bonds Maturing on 2/24/26


Issuer:  PepsiCo Inc.
PEP PepsiCo Inc Page at Morningstar 
Finra Page: Bond Detail (prospectus not linked)
Credit Ratings: 
S & P at A

YTM =2.936% 


D. Bought 1 Anheuser Busch Imbev 2.5% Senior Unsecured Bond Maturing on 7/15/22-ROTH IRA Account:
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: 
Moody's at A3
YTM at Total Cost (99.431) = 2.616%

E. Bought 1 Healthcare Reality 3.875% Senior Unsecured Bond Maturing on 5/1/25:




Issuer: Healthcare Realty Trust HR:NYSE)-A MEDICAL OFFICE REIT

HR Healthcare Realty Trust Inc Page at Morningstar
FINRA PAGE: Bond Detail
Credit Ratings:
Moody's at Baa2
Moody's upgrades Healthcare Realty to Baa2; outlook stable
S & P at BBB

YTM at Total Cost (99.977 )= 3.878%


2016 Annual Report

Investor Presentation February 2017
2016 4th Quarter Earnings Report
Supplemental Package for 4th Quarter Report
HR Analyst Estimates

I owned the common shares briefly in 2015:


Item # 2. Bought 50 HR at $23.95 Update For REIT Basket Strategy As Of 8/11/15/Interest Rate Cycles And REIT Stock Prices - South Gent | Seeking Alpha-2. Sold Lower Yielding HR at $26.33: Update For REIT Basket Strategy As Of 10/19/15 - South Gent | Seeking Alpha


The sell was less than optimal.



2. Sold 30 SCEPRJ at $27.29-Used Commission Free Trade:





Profit Snapshot:  +$70.4





Quote SCE Trust IV 5.375% Preferred Series J Fixed-To-Floating Stock (SCE.PJ:NYSE)


I discussed buying this lot 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."

Prospectus


In other words, this security pays a 5.375% coupon on a $25 par value until 9/15/25.

As is typical with U.S. fixed-to-floating rate preferred stocks, the issuer has the option to redeem starting on the expiration date of the fixed coupon period, so owners of this security may never see the 3.132% + the 3 month Libor rate as the coupon. If short term rates are too high, SCE may simply exercise its option to redeem at par rather than pay the floating rate.

3. Continued to Pare Stock Allocation


A. Sold 100 WTBA at $23.12-Used Commission Free Trade



Profit Snapshot: +$1,146.24




Quote West Bancorp Inc


Bought 100 WTBA at $11.67 (6/29/13 Post)


Closing Price 11/8/16: $19.35 WTBA Historical Prices


$19.35 to $23.12 = 19.48% Calculate Percent Increase

$11.67 to $23.12 = 98.11%
Average Annual Return With Dividends Reinvested (start date 6/26/13/end date at 4/7/17) = 24.22%
DRIP Returns Calculator | Dividend Channel
Average Annual Return with Dividends Paid in Cash = 23.03%

I took all of the dividends in cash.


After I sold the stock, WTBA raised its quarterly dividend to $.18 from $.17 per share.







West Bancorporation, Inc. Announces Record Net Income, Declares Record Quarterly Dividend  


This is another small bank that I like and will consider buying back a position at what I view as a more reasonable price for this stock. 


4. Short Term Bond Ladder:


A. Bought 2 WFC 1.25% CDs (Monthly Interest) Maturing on 5/29/18:




I will not buy corporate bonds in my Schwab account since the minimum commission is $10. That leaves me with newly issued CDs and fixed coupon treasuries that can be bought commission free. A two corporate bond order would cost me five times the rate charged by Fidelity or IB.

5. Pared Trade Generated by Boredom: Sold 50 ROBO at $33.11 and Bought 50 TDIV at $31.7


I am discussing this trade out of order. This transaction occurred yesterday. I am generally anywhere from 2 to 4 weeks behind discussing trades. 


I used commission free trades to buy and sell ROBO in my Schwab account. Those commission free trades expire in August. 




ROBO Global Robotics & Automation Index ETF

Fund Holdings - ROBO Global ETFs
Management Fee = .95%
No Dividends Paid in 2015 and 2016

ROBO Profit:  +$50.56




I used a Fidelity commission free trade to buy 50 shares of TDIV which I view as a more conservative technology fund and the expense ratio is lower at .5%. In short, I am more comfortable with TDIV than ROBO. 




TDIV Fund - First Trust ETF VI NASDAQ Technology Dividend Index ETF  


Holdings Over 1%: 




First Trust NASDAQ Technology Dividend Index Fund (TDIV) Holdings


I also bought 30 shares in my Schwab account. Any stock ETF bought at elevated stock market valuation levels is a short term trade.

This fund does pay quarterly dividends: Distribution History

Unfortunately, I sold out of TDIV too soon, which is a known hazard for someone who trades as much as I do.


2014 TDIV 100 Shares +$581.59 
2012 Roth IRA 50 Shares +$101.98. 
Total TDIV Trading Profits = +$683.57

Sold: 100 TDIV at $25.63 (10/17/14 Post)
Item # 5  Sold 50 TDIV at $22.26 (7/27/13 Post)

Among the current TDIV holdings, I own CSCO and INTC. I sold out of Corning as part of my stock allocation reduction this year, and I pared my CSCO position.

Item # 3.B Eliminated Corning-Sold 103+ Shares at $26.45

Item #3.B. Sold 30 out of 80 Cisco at $34.14

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

Wednesday, April 26, 2017

Observations and Sample of Recent Trades: 4/26/17 (GYC, GJP, AXAHY)/ Trump's Tax Plan/ Trump's Tariff on Imported Canadian Softwood

Trump's Tax Plan

The nonpartisan Tax Policy Center estimates that Trump's 15% corporate tax rate will increase the budget deficit by $2.4 trillion over the next ten years. Trump seeks 15 percent corporate tax rate, even if it swells the national debt - The Washington Post The cost would increase to $4 trillion over ten years when pass through entities, like subchapter S corporations, are included in that marginal tax rate reduction. That part of the plan, along with the elimination of the alternative minimum tax, will dramatically slash Trump's tax bill. 


This is a link to the Tax Policy Center analysis of Trump's tax plan used in the campaign: An Analysis of Donald Trump's Revised Tax Plan | Full Report | Tax Policy Center That plan would increase the deficit by about $7.2 trillion over the next ten years. The top quintile would receive about 77% of the benefits.  


Corporations now pay vastly different tax rates as shown in a 2016 study: Debt Fundamentals


The GOP claims that the tax corporate tax cut will pay for itself. Trump's tax cuts will rely on the magic wand of growth;
Could Trump’s Corporate Rate Cut to 15% be Self-Financing? - Tax Foundation


The nonpartisan Committee for a Responsible Federal Budget noted there is "scant evidence" that a major tax cut will pay for itself.  


America Needs Tax Reform, Not More Debt | Committee for a Responsible Federal Budget


The new Trump plan announced yesterday, which is nothing more than a one page outline, would reduce the corporate tax rate to 15%. That reduced rate would also be applied to the pass through structures like subchapter S corporations. The 15% rate would be in essence a "business" tax rate. 


In the pass through structures, the corporation does not pay taxes but the income is currently passed through to the individual owners and taxed at their respective individual tax rates. Since Trump uses those pass through structure, that aspect of his plan would reduce Trump's highest marginal rate from 39.6% to 15%. 


The White House just outlined its tax plan. Here's what's in it: CNBCTrump’s Tax Plan: Low Rate for Corporations, and for Companies Like His - The New York Times


The Small Business Administration estimated that the median income for individuals employed by their own incorporated businesses was $49,204 in 2014 (page 2 United States Small Business Economic Profile) Most small businesses would not receive any benefit from a reduction in the corporate/business corporate tax rate to 15%. Sometimes, I hear a small business owner say they make $250K, for example, when that number is their gross income before salaries, expenses, cost of goods, etc. (remember Joe the Plumber - Wikipedia: Scroll to Controversies).


Trump also proposes eliminating the alternative minimum tax that has required him in the past to pay taxes. 


Trump's new plan would also double the standard deduction while eliminating most deductions, leaving in place deductions for charitable contributions, retirement savings, and mortgage interest. That would simplify the filing process for many taxpayers who now itemize deductions, but would also vastly increase the number of taxpayers who pay no federal income taxes. That number now stands at close to 45%.


Trump proposes to cut the seven individual tax brackets to three: 10%, 25% and 30%.


He also proposes to eliminate the Obamacare care 3.8% Medicare surtax paid by high income taxpayers and the estate tax which is now paid only by the rich given the $5M exemptions per person. The Tax Policy Center estimates that only 11,020 individuals dying this year will have to file a federal estate tax return. Of those only 5190 estates will have to pay a tax. Who pays the estate tax? | Tax Policy Center However, the GOP will sell these kind of tax eliminations and reductions as beneficial to the average Trump voter. The Tax Policy Center and the Tax Foundation will run the numbers on who benefits from this plan other than Donald. I will not be surprised by the results.


Trump's new plan does not currently include a border tax.


I would name this plan the Donald Trump Tax Relief Act. 


Trump tax cuts: Lower rates for individuals and businesses - Apr. 26, 2017


Briefing by Secretary of Commerce Steven Mnuchin and Director of the National Economic Council Gary Cohn | whitehouse.gov


Trump claims that his policies will wipe out the national debt in eight years. Trump Promised to Eliminate National Debt in Eight Years. Good Luck With That - BloombergTrump: I will eliminate U.S. debt in 8 years | TheHill   


Trump’s tax plan sets the stage for Dow 30,000 - MarketWatch
U.S. Government Debt to the Penny (Daily History Search Application)

Government - Interest Expense on the Debt Outstanding 

Amazon.com: Zombie Economics: How Dead Ideas Still Walk among Us eBook 


The question is why. The proposition that the GOP's tax cuts will pay for themselves is absurd. No amount of contrary proof can convince the proponents. If Trump's proposals were adopted and kept for ten years, and the budget deficit exploded $10 trillion above current baseline predictions, that would not prove anything since the argument would be that more tax cuts were necessary, or some other cause interfered with Arthur Laffer's prediction made in a crude drawing on a restaurant's napkin. Arthur Laffer’s Theory on Tax Cuts Comes to Life Once More - The New York Times  There is a reason why facts do not matter to the GOP. Their money comes from people who will benefit from those tax cuts. One need not look any further. As long as that money flows liberally into their coffers, Laffer's theory is an indisputable scientific fact.  The problem is how do you sell that to the vast majority of Trump voters who will not benefit to any meaningful degree. That is when the con job comes into play. 


++++++++

Trump's Tariff on Canadian Soft Wood

The Canadian Dollar started another decline in value against the U.S.D. after the Trump Administration announced a new tariff for Canadian softwood imports. The tariff would average about 20% and is based on the purported below market prices charged by Canadian provinces for harvesting timber on government lands. Trump Slaps Duty on Canadian Lumber, Intensifying Trade Fight - Bloomberg


The Canadian provinces charge an administrative fee to harvest timber which is not set by auction. Consequently, there is a dispute whether the "stumpage fee" is a competitive price or a subsidy.


The Commerce Department valued U.S. imports of Canadian softwood at $5.6B last year.


The main problem IMO is not this fuzzy concept of fair price but the weakness in the CAD/USD that lowers the cost for U.S. purchasers of Canadian lumber.


The tariffs will be applied to  Canadian lumber companies differently but on the Commerce Department's measurement of the subsidy. West Frasier Mills softwood imports would be tagged with a 24.2% "tariff" whereas the tariff on J.D. Irving's imports would be 3.02%: Commerce Makes Preliminarily Determination of Countervailable Subsidies on Imports of Softwood Lumber from Canada

Softwood is used in single family home construction and is a major cost component for new homes.


Tariffs are a form of taxes. The tax is paid by the importer. The impact would be to raise lumber costs for U.S. homebuilders and U.S. home buyers. Trump slaps stiff 20% taxes on US homebuilders - expect higher home prices and 1,000s of construction job losses • AEI


Before NAFTA was adopted, a trade war erupted between Canada and the U.S. after the U.S. slapped a 35% tariff on Canadian shakes and shingles in 1986. Canada responded with tariffs on books, computers, semiconductors and Christmas trees. Canada–US Economic Relations - The Canadian Encyclopedia


NAFTA did not address the softwood dispute which has been handled separately under bilateral agreements with Canada. Canada–United States softwood lumber dispute - Wikipedia


White House Is Said to Draft Plan for U.S. Break From Nafta - The New York Times White House readies order on withdrawing from NAFTA - POLITICO

Trump reportedly weighing Nafta withdrawal - MarketWatch
Most Canadians want new tariffs on U.S. goods if Trump pulls out of NAFTA: Nanos survey | CTV News

Canada is the largest importer of U.S. goods. Trade and InvestmentForeign Trade - U.S. Trade with CanadaU.S. Top Trading Partners U.S. exports to Canada totaled $266.8B last year. U.S. exports to China were at $115.8B.


Trump apparently wants to set in motion the time period for termination, which is 6 months, by Executive Order. That is questionable. NAFTA is a treaty approved by Congress. The NAFTA provision dealing with termination, Article 2205, states that a party may terminate after giving 6 months notice. The party is defined in the preamble as the Government of the United States. This could be yet another unconstitutional EO.  


++++++++++


After Trump's tax plan was unveiled this afternoon, and I would not call a 1 page outline a plan, stocks retreated and bonds and gold rose. 


Closing Prices 4/26/17: 


GLD $120.84 $0.59 0.49% : SPDR Gold Trust

S & P 500 2,387.45 -1.16 -0.05% (intra-day high at 2,398.18)
IEF $106.42  +$0.28 0.26% : iShares 7-10 Year Treasury Bond ETF (intra-day low $106.12)
TLT $122.12 +$0.67 0.55% : iShares 20+ Year Treasury Bond ETF

Akebia Therapeutics, discussed in my last post, had a good day today:


AKBA $12.52 +$3.13 +33.4%


Though I am not likely to change my frugal spending habits when and if I cash out my gain on a 30 AKBA share buy.


At the moment, I am more concerned about Kroger eliminating the 5% discount on Senior's day. Why? This was for the senior citizens own good as I understand the pitch. Kroger acquired Harris Teeter that had several stores in Middle Tennessee including one in Brentwood, where I reside. Harris Teeter had started the senior discounts going up to 10% and that pest is now removed. Kroger closed its Brentwood store, remodeled the Harris Teeter location which was closed after the merger, and then moved into the former HT location. So when competition is eliminated in that fashion, Kroger could do away with the senior discounts for the benefit of those customers. That is how I would explain it.


City of Brentwood : Home (AAA bond rating, city property taxes have remained at the same dollar level, less than $300 per year, as when I built my house in 1982. The county property taxes have gone up, but are now slightly over $2K per year)


Brentwood Real Estate - Brentwood TN Homes For Sale | Zillow


++++++++


1. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Bought 2 WFC 2.25% CDs (monthly interest) Maturing on 4/12/21:





B. Bought 2 Campbell Soup 2.5% Senior Unsecured Bonds Maturing on 8/2/22:


Issuer:  Campbell Soup Co (CPB) 
CPB Campbell Soup Co Page at Morningstar
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: 
Moody's at A3
S & P at BBB+

YTM at Total Cost (98.997 ) = 2.707%

Earnings Report for the Q/E 1/29/17
10-Q for Q/E 1/29/17

C. Added 1 Tampa Electric 2.6% Senior Unsecured Bond Maturing on 9/15/22:




This purchase was in a Vanguard taxable account. Vanguard charges a $2 per bond commission. The other 1 bond purchase was in a Roth IRA account and was discussed in a prior post: Item # 1.B.


Finra Page: Bond Detail (prospectus linked)

Credit Ratings:
Moody's at A3
S & P at BBB+
Fitch at A-

YTM at Total Cost (98.536)= 2.892%


D. Bought 2 Kimberly Clark 2.4% Senior Unsecured Bonds Maturing on 6/1/23:




Issuer: Kimberly-Clark Corp  (KMB)

KMB Kimberly-Clark Corp Page at Morningstar
Finra Page:  Bond Detail  (prospectus linked)
Credit Ratings:
Moody's at A2
Moody's assigns A2 to Kimberly-Clark's proposed notes offering
S & P at A

YTM at Total Cost (98.248) = 2.711%


KMB Analyst Estimates

2016 Annual Report
2016 4th Quarter Earnings Press Release
Kimberly-Clark Announces First Quarter 2017 Results

E. Bought 1 Vodafone 2.5% Senior Unsecured Note Maturing on 9/26/22:




FINRA Page: Bond Detail (prospectus linked)

VOD Vodafone Group PLC ADR Page at Morningstar
Credit Ratings:
Moody's at Baa1
FITCH at BBB+ 
Fitch Affirms BBB+ (Stable Outlook): August 2016
YTM at Total Cost (98.064 ) =  2.885%

VOD Analyst Estimates

Earnings Release for the Q/E 12/31/16
Investors-VOD Website

2. Synthetic Floaters


A. PAIRED TRADE: Sold 50  GYC at $23.39 and Bought 50 GJP at $21.35:


These securities are Synthetic Floaters which I started to trade in 2009. Since synthetic floaters are in the Trust Certificate form of legal ownership, I include snapshots of my round trip transaction in my Trust Certificates Gateway Post.


This paired trade increased my GJP position to 200 shares and reduced GYC to 50 shares.


GYC Position Before Pare:





Trade: SOLD LOT BOUGHT AT $21.51 USING FIFO ACCOUNTING.




GYC Profit: +$93.91




For thinly traded securities and GYC is certainly one of those, it is not unusual to receive multiple fill on a 50 share limit order.


I discussed buying the remaining 50 share lot at $20.95, using a commission free trade, here.


GYC Profits to Date: +$904.5 (prior tally at $810.59, all in small lots)


The largest gain originated from a 50 share lot owned in a Roth IRA= +$336.97



2012 Two Fifty Share Lots 
I last discussed selling shares at $24.01 in this post:

Item # 3. PARED GYC: Sold 50 at $24.01-Taxable Account: Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 8/16/16 - South Gent | Seeking Alpha


GJP Trade:   




In making this paired trade, I viewed GJP, relative to GYC, to be the better value as more fully explained below. 


The owners of GYC are entitled to receive quarterly interest payments at the greater of 3.25% or .65% over the 3 month Libor rate, with a 8% per annum cap, on a $25 par valueThe underlying bond in the GYC Grantor Trust, which is a 2034 senior AT & T bond, and the trust certificate GYC mature on the same date which is June 15, 2034. If AT & T pays off those bonds then, and there is no mishap with GYC, the owners of GYC would receive their par value as well which is $25 per trust certificate.


Prospectus 

The owners of GYC will receive a coupon increase when the 3 month Libor rate exceeds 2.6% during a quarterly computation date. 


At a total cost of $23.39 per share, the current yield at the minimum coupon rate would be about 3.47%.    


The owners of GJP are entitled to receive monthly interest payments at the greater of 3% or 1.15% over the U.S. 3 month T Bill rate on a $25 par value. This security has a maximum coupon of 8%. Prospectus The underlying security is a senior unsecured bond issued by Dominion Resources that matures in June 2035.  


Interest payments are made monthly.  


I discussed a GJP purchase in Item # # 4 here. That post provides more detail.


The 3% minimum coupon is increased when the three month T. Bill rate exceeds 1.85%. 


At a total cost per share of  $21.35, and assuming the minimum 3% minimum coupon, the current yield would be about 3.51%.   


Here are the Advantage of GJP Compared to GYC: 


1. The current yield is similar but favors GJP slightly at $21.35  vs. GYC at $23.39. 


2. GJP was bought at a greater discount to par value which provides more upside price potential prior to maturity and a greater YTM when held to maturity.  


3. GJP's coupon increase will be triggered sooner than the one for GYB. The 3 month Libor rate will be higher than the 3 month treasury bill rate, but will probably not exceed the .5% spread differential in favor of GJP except for brief periods. And, the GJP has a lower threshold at 3% to trigger an increase in the coupon. 


I do not see the credit risk of the underlying bonds to be meaningfully different.  


Dominion Resources senior unsecured debt is rated Baa2 by Moody's and BBB by S & P: Bond Detail one notch higher at Baa1 and BBB+: Bond  Detail


AT &T's senior unsecured debt is currently rated Baa1 and BBB+. 


B. Sold 50 PYT at $20.94 (Used Commission Free Trade)




Profit Snapshot: +$58.15




Quote: Merrill Lynch Depositor Inc. PreferredPLUS Floating Rate Callable TRUCs Series GSC-2 for Goldman Sachs Capital I 


I discussed buying this security in Item # 2.A to this post: 


Bought Back 50 PYT at $19.78 Using a Commission Free Trade: Stocks, Bonds & Politics: Observations and Sample of Trades ( RVT, PYT, TGHA, IDE): 1/29/2017 /The GOP and First Amendment Conservative Values 


PYT is an Exchange Traded Bond in the Trust Certificate legal form of ownership. PYT makes quarterly interest payments at  the greater of a 3% coupon or .85% above the 3 month Libor rate applied to a $25 par value. There is a maximum coupon of 8%. Prospectus The underlying bond owned by the Grantor Trust is a Goldman Sachs 6.345% junior bond (a trust preferred) that matures on 2/15/34. That bond has a $1K par value and trades in the bond market. The PYT trustee receives the interest payments from Goldman Sachs and swaps that payment with the swap counterparty, the brokerage company who created the Grantor Trust, for the payment due the owners of PYT.



This Trust Certificate is scheduled to mature on that same date. Assuming GS pays the trustee the principal amount, the trustee will then redeem the trust certificates at their $25 par value.



Total PYT Trading Gains To Date: $1,061.45 (Snapshots in Stocks, Bonds & Politics: Trust Certificates: New Gateway Post.) 

3. Continued to Pare Stock Allocation:


A. Sold 50 AXAHY at $25.59:




Profit Snapshot: +$190.55




Item # 1. Bought AXA AT $21.74
Update For Portfolio Positioning And Management As Of 3/3/16 - South Gent | Seeking Alpha


Quote: AXA S.A. ADR  (AXAHY:OTC)-USD Priced ADR Traded on the Pink Sheet Exchange
AXA S.A.-Ordinary Shares Priced in Euros

1 ADR = 1 Ordinary Share


EUR/USD Currency Exchange


Axa pays an annual dividend that will generally go ex-dividend sometime in May. I received the annual dividend paid in 2016:





The preceding snapshot shows a gross dividend of $62.49. Out of that amount, I was charged an annual fee of $2.5 which is paid to the ADR custodian and $9.37 to France as a tax.  That tax would be at a 15% rate (.15% x. $62.49 = $9.37). U.S. citizens are entitled to a 15% tax rate under the U.S tax treaty with France. If 30% is withheld, then the investor knows that their broker did not make a relief at source filing asserting U.S. citizenship on behalf of the investor. A failure to do so would be to place the investor in the class of persons from countries that have no tax treaty with France, more or less a stateless person.


I was able to take all of my foreign dividend tax payments as a credit off my 2016 U.S. tax obligation.


Life insurance stocks received a post-election lift based on a consensus opinion that yields and yield spreads would increase due to Trump's fiscal stimulus plans that included massive tax cuts and increased spending on defense and infrastructure. Those plans have bogged down and the treasury yield curve as started to flatten as intermediate term rates decline as short term rates rise. This reversal in trend has caused me to lighten up some on my insurance stocks.


I have one prior round trip and that was in 2010. I held the position for 14 days.



2010 AXAHY 100 Shares +$181.09
Bought 100 AXAHY at $14.69

Closing Price Today: AXAHY $26.94 -0.36 -1.30%


4. Short Term Bond/CD Ladder Basket Strategy:


A. Bought 3 Bank of China .95% CDs Maturing on 7/19/17:




B. Sold 2 Berkshire Hathaway 1.7% Senior Unsecured Bonds Maturing on 3/15/19:





The price shown in the foregoing snapshot is adjusted down by a $2 brokerage commission.


Profit Snapshot: $1.88




I bought 2 Berkshire Hathaway 3.125% senior unsecured bonds maturing in 2026 in anticipation of selling the lower yielding 2019 bonds.  The YTM for that bond at my total cost is 3.266%.


The YTM for the 2019 bond at 100.255 is 1.582%. Bond Detail


I am selling some low coupon bonds maturing in the 6/30/18 to 12/31/19 to buy higher yielding ones maturing in the 2023-2026 range. This is a slight nip and tuck where I am assuming more interest rate risk in exchange for more income.



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.