JP Morgan Quarterly Guide to the Markets:
I view JPM's quarterly reports a valuable resource and a must read. Those reports can be downloaded here: Guide to the Markets - J.P. Morgan Asset Management
The most current report is this one: 2Q17
I highlighted some material in a previous comment.
The chart at page 18 shows the time periods for past expansions and recessions. The average expansion period is 47 months going back to 1900. The current expansion is now at 94 months, including April 2017, bested only be the 1990s and the early 1960s.
Next recession will hit during Trump’s first two years - MarketWatch
The fact that the current recovery has been subdued, however, may auger for it lasting longer than the historical averages.
The Stock Jocks place a zero percent probability on a recession occurring within the next two years IMO, based on the market's elevated valuation levels. As I recently demonstrated, most of the stock market's gains since September 2012 has been due to a multiple expansion rather than earnings growth.
Earning will decline during a recession, possibly back to 2012 levels for the S & P 500, and will generally not recover to pre-recession levels for at least two years after the recession ends. Stocks, Bonds & Politics: S & P 500's Gain Since September 2012 Mostly Due to Multiple Expansion
A chart at page 17 shows a major pickup in credit demand in Europe and improving PMI numbers.
Charts at page 66 show the substantial increases in M2 money supply as a percentage of GDP and the paltry returns from 6 month CDs compared to pre-Near Depression levels.
As previously noted, light vehicle sales look like they have already peaked, and real capital goods orders ex-defense do not look so hot either (chart at page 21).
The Table at page 41 shows the performance numbers for each fixed income category since 2007. The best performing category of the past ten years has been junk bonds at an average annual return of 7.5%. I would not expect that category to be near the top over the next ten years. The annual and cumulative performance numbers for TIPs have generally been lackluster. TIPs led the pack only in 2011. The ten year annualized total return of the ETF TIP was 4.01% through last Monday: iShares TIPS Bond ETF (TIP) Total Returns
++++++++
Economic Reports and Stocks:
"The FOMC views the slowing in growth during the first quarter as likely to be transitory". The Fed - Federal Reserve issues FOMC statement
The ADP reported on Wednesday (5/3) that private payrolls increased by 177K last month. The March number was revised from 263K to 255K. ADP National Employment Report | April 2017
The ISM services PMI rose to 57.2 last month from 55.2. The new orders component surged to 63.2 from 58.9. Employment was down .2 to 51.4. Prices rose meaningfully to 57.6 from 53.5.
Red flag: U.S. productivity slumps in first quarter - MarketWatch (DOWN .6% annualized in the 2017 third quarter: Productivity and Costs, First Quarter 2017, Preliminary)
S & P Experian Consumer Bank Card Default Rate at 3.31% for March 2017.pdf (March 2016 was reported at 2.92/South region near 3.6%)
Dow’s rally from election through Trump’s first 100 days is a postwar record - MarketWatch
None of the positive reports will matter unless consumers pick up their spending appreciably from first quarter levels.
++++++++
Mostly Politics:
Donald certainly has an affinity for foreign leaders who are autocrats or who have strong autocratic tendencies, particularly when they are ruthless. His praise for Vlad is well known of course, and he recently congratulated Turkey's leader for acquiring dictatorial powers.
The latest is that he invited the Philippine's President Duterte to the White House. Perhaps they exchange their favorite barbs about the last U.S. President. Duterte's favorite was to call Obama a "son of a whore".
This is one of Duterte's more famous statements: "Hitler massacred three million Jews. Now, there is three million drug addicts. I'd be happy to slaughter them" Duterte's knowledge of history rivals Trump and possibly a few elementary school children.
While in White House, Trumps remained selling points for ‘very special’ Philippines project - The Washington Post
Donald went back to his divisive, demagogic and incendiary ways in a speech given in Harrisburg, PA.
He accused the "failing New York Times", CNN and MSNBC of being incompetent and dishonest. The True Believers chanted "CNN Sucks". Trump accused the free press as consisting of "very dishonest people".
The New York Times reported the circulation revenues increased 11.2% in the Q/E 3/31/17.
FULL SPEECH: President Donald Trump 100 DAYS RALLY in Harrisburg, Pennsylvania 4/29/2017 Trump Live - YouTube
When referring to the Democrats opposing his wall along the entire border with Mexico, Trump made the following statement: “If the Democrats knew what the hell they were doing, they would approve. Obviously they don’t mind the illegals pouring in, the drugs pouring in. They don’t mind.”
The GOP has been successful in their decades long effort to undermine the free press. Tens of millions are now unreachable with accurate information and are forever firmly ensconced in a self-contained alternate reality world where true is false and false is true.
The success of this program can be found in the demonstrably false statements made by Trump being taken as true by tens of millions now. Those people now believe that the free press is lying when the media provides a true narrative to counter Trump's incessant and demonstrable lies.
Stocks, Bonds & Politics: Trump The Classless/Trump as the Victim of a Fake News Conspiracy
Stocks, Bonds & Politics: Trump and the Imperial Presidency
Stocks, Bonds & Politics: GOP's Problems With the First Amendment
Stocks, Bonds & Politics: Unchangeable Opinions Formed Without Accurate Information
A recent opinion column, written by Brian Klaas from the London School of Economics, sums up the ways that Trump is damaging institutions necessary for a properly functioning democracy. The five ways President Trump has already damaged democracy at home and abroad - The Washington Post I have made the same points and do not view them as susceptible to reasonable debate.
If the Modern Republican party is a conservative party, which is clearly not the case, then telling the truth is no longer a conservative virtue.
Stocks, Bonds & Politics: The GOP and First Amendment Conservative Values
++
Trump: GOP health care bill 'guarantees' coverage for pre-existing conditions - CNN;
GOP Health Care: AARP Says New Plan Raises Pre-Existing Costs | Money;
Latest ACA Repeal Plan Would Explode Premiums for People with Pre-Existing Conditions (only common sense really);
CAP Estimate Finds House Republican Health Care Bill Is Underfunded by About $200 Billion (State-by-State Numbers Available) - Center for American Progress;
Experts: Pre-existing coverage in House GOP bill would fall far short: USA Today
How the Republican health bill could affect those with employer insurance, too - MarketWatch;
GOP healthcare bill Allows Employers to Gut Coverage Protections-Business Insider;
GOP health bill could make it easier for companies to reduce coverage for workers;
An Estimated 52 Million Adults Have Pre-Existing Conditions That Would Make Them Uninsurable Pre-Obamacare | The Henry J. Kaiser Family Foundation; What Are Pre-Existing Conditions and What Would the GOP Bill Do? - NBC News;
Trump Says Premiums Will Come Down Under New Health Bill - Bloomberg (the GOP voted to allow insurance companies to charge seniors five times as much as young adults, rather the 3 to 1 ratio cap in Obamacare: Who Wins and Who Loses in the Latest G.O.P. Health Care Bill - The New York Times)
Tweet from Joe Walsh (R-Ill): "Sorry Jimmy Kimmel: your sad story doesn't obligate me or anybody else to pay for somebody else's health care." (Joe: all insureds, regardless of the type of insurance, pay other insured claims through their premium payments when they have no claims themselves. I have paid for home insurance since 1982 without a single claim; never had a claim for medical either other than the annual physical)
Upton Embraces Health Bill-Bloomberg ("Upton’s amendment would provide $8 billion over five years to reduce premiums and other costs for those with pre-existing conditions who have a gap in coverage and reside in states that received waivers from some of Obamacare’s requirements under another provision in the bill.")
Trump, Upton and other GOP politicians will tell their constituents that they took care of those with pre-existing conditions. Upton has already stated that this funding will more than cover those that will be impacted by the GOP's change in pre-existing condition coverage. CBS News Many will actually believe that representation, until they actually have to buy insurance after their state opts out of Obamacare's requirement that prohibited insurance companies from charging more for pre-existing conditions. Those with a serious pre-existing condition or multiple ones will find out differently assuming the Senate goes along with the House's version allowing state's to opt out. Many will be GOP voters in Red States. "The top 11 states with the highest percentage of people that have pre-existing conditions all voted for President Trump. In Louisiana, 30 percent of people under the age of 65 have a pre-existing condition." GOP health care bill differs from Obamacare on pre-existing conditions - CBS News Blue states will not opt of Obamacare's coverage requirements.
Prior to Obamacare, there were 35 states that had high risk pools and over $2.6B in claims for 226K insured people had to be spent by those states just in 2011. Premiums were higher and most had waiting periods of 6 to 12 months before coverage started for known conditions.
Healthcare is near 20% of the economy now and is projected to be at 25% by 2025. 2016-2025 Projections of National Health Expenditures Data Released Yet, the GOP held no hearings on their bill and ignored the comments from the most knowledgeable groups. (e.g American Medical Association, AARP, the American Hospital Association, the American Cancer Society, America's Health Association, Consumers Union, Cystic Fibrosis Foundation: Over 50 Organization oppose the American Health Care Act | Congressman Jim Cooper (Nashville) The CBO did not have time to even score the bill.
EPA removes climate change information from website - CNN (mainstream climate science is now per se false and nothing more or less than Fake News)
Gallup Daily: Trump Job Approval | Gallup
Near 100-Day Mark, Trump Approval Exposes Fragmented US | Gallup
Investors Embrace Good Trump, Ignore Bad One - Bloomberg Gadfly
Trump "directly involved" in post-inauguration hunt for person who retweeted side-by-side snapshots of Trump and Obama inauguration crowds using a Government email account-CBS News (Trump could not stand evidence that contradicted his claim about the crowd)
Trump threatens government shutdown in the fall - CBS News
Trump: ‘We may terminate’ U.S.-South Korea trade agreement - The Washington Post
Pence: Tax Plan Could Increase Deficit 'Maybe in the Short Term' - NBC News (Pence talks in such an earnest manner too, a totally dishonest statement from Pence)
Bernanke: Trump's pledge to revive U.S. manufacturing is "not realistic" - CBS News ("I don't think any serious nonpartisan analyst of tax cuts would suggest it's going to pay for itself. It may help a bit on the growth side")
'That's enough': Donald Trump abruptly ends Oval Office interview after wiretapping questions
Congress Defies Trump, Gives Big Raise to NIH Medical Research - NBC News (just shows how reactionary Trump is)
Wilbur Ross jokes airstrike on Syria served as ‘after-dinner entertainment’ - MarketWatch
Donald Trump Taps Anti-Contraceptive Activist Teresa Manning To Oversee Family Planning Program for Low Income Americans (Teresa is known for her scientific insight, once saying that “contraception doesn’t work”)
Pipeline Companies Push Back Against Trump's ‘Buy American’ Rule - Bloomberg (raises their costs)
Bloomberg Interview: Trump Weighs Breaking Up Wall Street Banks, Raising U.S. Gas Tax - Bloomberg
Forty-Nine Straight Hours Inside Trump’s Washington Hotel - Bloomberg (just gaudy)
Trump Administration Hires Official Accused Of Sexually Assaulting Students (just locker room talk I guess, or boys just being boys maybe, except this guy allegedly likes other boys. His lawyer denied everything, referring to the accusers as being disgruntled).
So, Donald thinks that the slave holding President Andrew Jackson could have prevented the Civil War: Trump's wacky history lessons continue -CNN; President Donald Trump Asked If Andrew Jackson Could Have Prevented the Civil War, Here's the Answer : NPR Trump is almost totally ignorant about American history. A reporter needs to ask him about the last book he read. He has no interest in reading anything, much preferring pictures.
Hunting down runaway slaves: The cruel ads of Andrew Jackson and ‘the master class’ - The Washington Post (Andrew Jackson's 1804 Ad in the Tennessee Gazette: “Stop the Runaway, Fifty Dollar Reward Mulatto Man Slave, about thirty years old, six feet and an inch high, stout made and active, talks sensible, stoops in his walk, and has a remarkable large foot, broad across the root of the toes — will pass for a free man.… ten dollars extra, for every hundred lashes any person will give him, to the amount of three hundred (Signed) ANDREW JACKSON, Near Nashville, State of Tennessee") Jackson was also known for the The Trail of Tears-The Indian Removals [ushistory.org] I do not share Trump's man crush on Jackson.
+++++++++++
1. Intermediate Term Bond/CD Ladder Basket Strategy:
I view JPM's quarterly reports a valuable resource and a must read. Those reports can be downloaded here: Guide to the Markets - J.P. Morgan Asset Management
The most current report is this one: 2Q17
I highlighted some material in a previous comment.
The chart at page 18 shows the time periods for past expansions and recessions. The average expansion period is 47 months going back to 1900. The current expansion is now at 94 months, including April 2017, bested only be the 1990s and the early 1960s.
Next recession will hit during Trump’s first two years - MarketWatch
The fact that the current recovery has been subdued, however, may auger for it lasting longer than the historical averages.
The Stock Jocks place a zero percent probability on a recession occurring within the next two years IMO, based on the market's elevated valuation levels. As I recently demonstrated, most of the stock market's gains since September 2012 has been due to a multiple expansion rather than earnings growth.
Earning will decline during a recession, possibly back to 2012 levels for the S & P 500, and will generally not recover to pre-recession levels for at least two years after the recession ends. Stocks, Bonds & Politics: S & P 500's Gain Since September 2012 Mostly Due to Multiple Expansion
A chart at page 17 shows a major pickup in credit demand in Europe and improving PMI numbers.
Charts at page 66 show the substantial increases in M2 money supply as a percentage of GDP and the paltry returns from 6 month CDs compared to pre-Near Depression levels.
As previously noted, light vehicle sales look like they have already peaked, and real capital goods orders ex-defense do not look so hot either (chart at page 21).
The Table at page 41 shows the performance numbers for each fixed income category since 2007. The best performing category of the past ten years has been junk bonds at an average annual return of 7.5%. I would not expect that category to be near the top over the next ten years. The annual and cumulative performance numbers for TIPs have generally been lackluster. TIPs led the pack only in 2011. The ten year annualized total return of the ETF TIP was 4.01% through last Monday: iShares TIPS Bond ETF (TIP) Total Returns
++++++++
Economic Reports and Stocks:
"The FOMC views the slowing in growth during the first quarter as likely to be transitory". The Fed - Federal Reserve issues FOMC statement
The ADP reported on Wednesday (5/3) that private payrolls increased by 177K last month. The March number was revised from 263K to 255K. ADP National Employment Report | April 2017
The ISM services PMI rose to 57.2 last month from 55.2. The new orders component surged to 63.2 from 58.9. Employment was down .2 to 51.4. Prices rose meaningfully to 57.6 from 53.5.
Red flag: U.S. productivity slumps in first quarter - MarketWatch (DOWN .6% annualized in the 2017 third quarter: Productivity and Costs, First Quarter 2017, Preliminary)
S & P Experian Consumer Bank Card Default Rate at 3.31% for March 2017.pdf (March 2016 was reported at 2.92/South region near 3.6%)
Consumers Show Signs of Frailty - Bloomberg Gadfly (Capital One's credit card charge-offs at highest level since 2011 and are rising)
None of the positive reports will matter unless consumers pick up their spending appreciably from first quarter levels.
++++++++
Mostly Politics:
Donald certainly has an affinity for foreign leaders who are autocrats or who have strong autocratic tendencies, particularly when they are ruthless. His praise for Vlad is well known of course, and he recently congratulated Turkey's leader for acquiring dictatorial powers.
The latest is that he invited the Philippine's President Duterte to the White House. Perhaps they exchange their favorite barbs about the last U.S. President. Duterte's favorite was to call Obama a "son of a whore".
This is one of Duterte's more famous statements: "Hitler massacred three million Jews. Now, there is three million drug addicts. I'd be happy to slaughter them" Duterte's knowledge of history rivals Trump and possibly a few elementary school children.
While in White House, Trumps remained selling points for ‘very special’ Philippines project - The Washington Post
Donald went back to his divisive, demagogic and incendiary ways in a speech given in Harrisburg, PA.
He accused the "failing New York Times", CNN and MSNBC of being incompetent and dishonest. The True Believers chanted "CNN Sucks". Trump accused the free press as consisting of "very dishonest people".
The New York Times reported the circulation revenues increased 11.2% in the Q/E 3/31/17.
FULL SPEECH: President Donald Trump 100 DAYS RALLY in Harrisburg, Pennsylvania 4/29/2017 Trump Live - YouTube
When referring to the Democrats opposing his wall along the entire border with Mexico, Trump made the following statement: “If the Democrats knew what the hell they were doing, they would approve. Obviously they don’t mind the illegals pouring in, the drugs pouring in. They don’t mind.”
The GOP has been successful in their decades long effort to undermine the free press. Tens of millions are now unreachable with accurate information and are forever firmly ensconced in a self-contained alternate reality world where true is false and false is true.
The success of this program can be found in the demonstrably false statements made by Trump being taken as true by tens of millions now. Those people now believe that the free press is lying when the media provides a true narrative to counter Trump's incessant and demonstrable lies.
Stocks, Bonds & Politics: Trump The Classless/Trump as the Victim of a Fake News Conspiracy
Stocks, Bonds & Politics: Trump and the Imperial Presidency
Stocks, Bonds & Politics: GOP's Problems With the First Amendment
Stocks, Bonds & Politics: Unchangeable Opinions Formed Without Accurate Information
A recent opinion column, written by Brian Klaas from the London School of Economics, sums up the ways that Trump is damaging institutions necessary for a properly functioning democracy. The five ways President Trump has already damaged democracy at home and abroad - The Washington Post I have made the same points and do not view them as susceptible to reasonable debate.
If the Modern Republican party is a conservative party, which is clearly not the case, then telling the truth is no longer a conservative virtue.
Stocks, Bonds & Politics: The GOP and First Amendment Conservative Values
++
Trump: GOP health care bill 'guarantees' coverage for pre-existing conditions - CNN;
GOP Health Care: AARP Says New Plan Raises Pre-Existing Costs | Money;
Latest ACA Repeal Plan Would Explode Premiums for People with Pre-Existing Conditions (only common sense really);
CAP Estimate Finds House Republican Health Care Bill Is Underfunded by About $200 Billion (State-by-State Numbers Available) - Center for American Progress;
Experts: Pre-existing coverage in House GOP bill would fall far short: USA Today
How the Republican health bill could affect those with employer insurance, too - MarketWatch;
GOP healthcare bill Allows Employers to Gut Coverage Protections-Business Insider;
GOP health bill could make it easier for companies to reduce coverage for workers;
An Estimated 52 Million Adults Have Pre-Existing Conditions That Would Make Them Uninsurable Pre-Obamacare | The Henry J. Kaiser Family Foundation; What Are Pre-Existing Conditions and What Would the GOP Bill Do? - NBC News;
Trump Says Premiums Will Come Down Under New Health Bill - Bloomberg (the GOP voted to allow insurance companies to charge seniors five times as much as young adults, rather the 3 to 1 ratio cap in Obamacare: Who Wins and Who Loses in the Latest G.O.P. Health Care Bill - The New York Times)
Tweet from Joe Walsh (R-Ill): "Sorry Jimmy Kimmel: your sad story doesn't obligate me or anybody else to pay for somebody else's health care." (Joe: all insureds, regardless of the type of insurance, pay other insured claims through their premium payments when they have no claims themselves. I have paid for home insurance since 1982 without a single claim; never had a claim for medical either other than the annual physical)
Upton Embraces Health Bill-Bloomberg ("Upton’s amendment would provide $8 billion over five years to reduce premiums and other costs for those with pre-existing conditions who have a gap in coverage and reside in states that received waivers from some of Obamacare’s requirements under another provision in the bill.")
Trump, Upton and other GOP politicians will tell their constituents that they took care of those with pre-existing conditions. Upton has already stated that this funding will more than cover those that will be impacted by the GOP's change in pre-existing condition coverage. CBS News Many will actually believe that representation, until they actually have to buy insurance after their state opts out of Obamacare's requirement that prohibited insurance companies from charging more for pre-existing conditions. Those with a serious pre-existing condition or multiple ones will find out differently assuming the Senate goes along with the House's version allowing state's to opt out. Many will be GOP voters in Red States. "The top 11 states with the highest percentage of people that have pre-existing conditions all voted for President Trump. In Louisiana, 30 percent of people under the age of 65 have a pre-existing condition." GOP health care bill differs from Obamacare on pre-existing conditions - CBS News Blue states will not opt of Obamacare's coverage requirements.
Prior to Obamacare, there were 35 states that had high risk pools and over $2.6B in claims for 226K insured people had to be spent by those states just in 2011. Premiums were higher and most had waiting periods of 6 to 12 months before coverage started for known conditions.
Healthcare is near 20% of the economy now and is projected to be at 25% by 2025. 2016-2025 Projections of National Health Expenditures Data Released Yet, the GOP held no hearings on their bill and ignored the comments from the most knowledgeable groups. (e.g American Medical Association, AARP, the American Hospital Association, the American Cancer Society, America's Health Association, Consumers Union, Cystic Fibrosis Foundation: Over 50 Organization oppose the American Health Care Act | Congressman Jim Cooper (Nashville) The CBO did not have time to even score the bill.
EPA removes climate change information from website - CNN (mainstream climate science is now per se false and nothing more or less than Fake News)
Gallup Daily: Trump Job Approval | Gallup
Near 100-Day Mark, Trump Approval Exposes Fragmented US | Gallup
Investors Embrace Good Trump, Ignore Bad One - Bloomberg Gadfly
Trump "directly involved" in post-inauguration hunt for person who retweeted side-by-side snapshots of Trump and Obama inauguration crowds using a Government email account-CBS News (Trump could not stand evidence that contradicted his claim about the crowd)
Trump threatens government shutdown in the fall - CBS News
Trump: ‘We may terminate’ U.S.-South Korea trade agreement - The Washington Post
Pence: Tax Plan Could Increase Deficit 'Maybe in the Short Term' - NBC News (Pence talks in such an earnest manner too, a totally dishonest statement from Pence)
Bernanke: Trump's pledge to revive U.S. manufacturing is "not realistic" - CBS News ("I don't think any serious nonpartisan analyst of tax cuts would suggest it's going to pay for itself. It may help a bit on the growth side")
'That's enough': Donald Trump abruptly ends Oval Office interview after wiretapping questions
Congress Defies Trump, Gives Big Raise to NIH Medical Research - NBC News (just shows how reactionary Trump is)
Wilbur Ross jokes airstrike on Syria served as ‘after-dinner entertainment’ - MarketWatch
Donald Trump Taps Anti-Contraceptive Activist Teresa Manning To Oversee Family Planning Program for Low Income Americans (Teresa is known for her scientific insight, once saying that “contraception doesn’t work”)
Pipeline Companies Push Back Against Trump's ‘Buy American’ Rule - Bloomberg (raises their costs)
Bloomberg Interview: Trump Weighs Breaking Up Wall Street Banks, Raising U.S. Gas Tax - Bloomberg
Forty-Nine Straight Hours Inside Trump’s Washington Hotel - Bloomberg (just gaudy)
Trump Administration Hires Official Accused Of Sexually Assaulting Students (just locker room talk I guess, or boys just being boys maybe, except this guy allegedly likes other boys. His lawyer denied everything, referring to the accusers as being disgruntled).
So, Donald thinks that the slave holding President Andrew Jackson could have prevented the Civil War: Trump's wacky history lessons continue -CNN; President Donald Trump Asked If Andrew Jackson Could Have Prevented the Civil War, Here's the Answer : NPR Trump is almost totally ignorant about American history. A reporter needs to ask him about the last book he read. He has no interest in reading anything, much preferring pictures.
Hunting down runaway slaves: The cruel ads of Andrew Jackson and ‘the master class’ - The Washington Post (Andrew Jackson's 1804 Ad in the Tennessee Gazette: “Stop the Runaway, Fifty Dollar Reward Mulatto Man Slave, about thirty years old, six feet and an inch high, stout made and active, talks sensible, stoops in his walk, and has a remarkable large foot, broad across the root of the toes — will pass for a free man.… ten dollars extra, for every hundred lashes any person will give him, to the amount of three hundred (Signed) ANDREW JACKSON, Near Nashville, State of Tennessee") Jackson was also known for the The Trail of Tears-The Indian Removals [ushistory.org] I do not share Trump's man crush on Jackson.
+++++++++++
1. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Bought 2 Bank of Montreal 1.9% Senior Unsecured Bonds Maturing on 8/27/21:
Moody's at Aa3
S & P at A+
YTD at Total Cost (98.035): 2.374%
BMO Bank of Montreal Page at Morningstar
BMO Analyst Estimates
B. Bought 1 Baylor, Scott White 1.947% Secured Bond Maturing on 11/15/21:
This company is the largest not-for-profit healthcare system in Texas with 47 hospitals.
I can not find a prospectus for this bond, but am reasonably confident that it is a secured bond as described in this 3/17/16 Moody's Press Release: Moody's assigns Aa3 to Baylor Scott & White Health's (TX) Ser. 2016 and 2016A; outlook stable
Fidelity Information:
There are a number of bonds from this issuer with different maturity dates and coupons. The $50M in principal amount for this 2021 bond will make it illiquid and will result in infrequent transactions.
Finra Page: Bond Detail
Credit Ratings:
Moody's at Aa3
S & P at AA-
YTM at Total Cost (97.1) = 2.62%
C. Bought 2 Norfolk Southern 2.9% Senior Unsecured Bonds Maturing on 6/15/26:
Issuer: Norfolk Southern Corp. (NSC:NYSE)
Finra Page: Bond Detail (prospectus linked)
NSC Norfolk Southern Corp Page at Morningstar
Credit Ratings:
Moody's at Baa1
Moody's affirms Norfolk Southern's Baa1 senior unsecured rating; outlook stable
S & P at BBB+
YTM at Total Cost (97.280) = 3.245%
2017 1st Quarter Earnings Report
10-Q for Q/E 3/31/17
2016 Annual Report
NSC Analyst Estimates
D. Bought 2 Cigna 3.25% Senior Unsecured Bonds Maturing on 4/15/25:
Issuer: Cigna Corp. (CI:NYSE)
CI Cigna Corp Page at Morningstar
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Moody's at Baa1
Moody's confirms Anthem's and Cigna's ratings following DOJ lawsuit
S & P at A
Fitch at BBB+
Financial Rating | Debt Ratings | Cigna
YTM at Total Cost (99.457) = 3.328%
2016 4th Quarter Results
2016 Annual Report
CI Analyst Estimates
CI SEC Filings
Anthem-Cigna Drama Shifts to $15 Billion Spat Over Merger - Bloomberg
E. Bought 1 HCP 3.15% Senior Unsecured Bond Maturing on 8/1/22:
Issuer: HCP- A REIT
Finra Page: Bond Detail (prospectus linked)
HCP Inc Page at Morningstar
Credit Ratings:
Moody's at Baa2
Moody's downgrades HCP's ratings to Baa2; outlook stable
S & P at BBB
Fitch at BBB
Fitch Removes HCP from Rating Watch Negative; Affirms 'BBB' IDR
Fitch Downgrades HCP to 'BBB' on HCR Spin-off; Places Ratings on Negative Watch
YTM at Total Cost (99.865) = 3.177%
2017 First Quarter Report 2016 4th Quarter Report
HCP 2016 Annual Report
HCP Analyst Estimates
HCP Completes Sale of a Portfolio of 64 Brookdale Communities for $1.125 Billion
2. Continued to Pare Non-REIT Stock Allocation:
A. Sold 50 Canadian Natural Resources at $33.22:
Profit Snapshot: +66.02
I discussed buying 50 shares in Item # 3.
CNQ Canadian Natural Resources Page at Morningstar
Canadian Natural Resources - Home
Canadian Natural Resources Limited Announces the Acquisition of Working Interest in the Athabasca Oil Sands Project and Other Oil Sands Assets
I am hoping to buy back these shares at less than $27. Oil prices have started to slide again. U.S. crude production is ramping up. Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day)
Another problem is that the CAD continues to weaken against the USD. CNQ is priced in USDs. XE: CAD / USD Currency Chart A decline in the CAD/USD exchange rate flows into the USD priced shares traded on the NYSE.
B. Eliminated OB: Sold 101 + at $18.23+ (used commission free trade):
OB Stock Price - OneBeacon Insurance Group Ltd. Cl A
Profit Snapshot: +$442.97
I discussed this purchase here: Item # C.1 1. Bought 100 OB at $13.83: Update For Portfolio Positioning And Management As Of 8/21/16 - South Gent | Seeking Alpha
OB agreed to be acquired for $18.1 per share in cash. Intact Financial Corporation to Acquire US Specialty Insurer OneBeacon Insurance Group, Ltd. for US $1.7 billion
C. Gold:
My long view about gold and silver is that they are in a long term secular bear market that started in 2011. The last long term bear market lasted from 1980 to 2001, bottoming near $260 in February 2001. Gold Prices - 100 Year Historical Chart | MacroTrends (uncheck "inflation adjusted" to get nominal prices) The long term chart does not adequately reflect the top out in early 1980, which was at $850 per ounce. That is the price based on the London fix on 1/21/1980. On an inflation adjusted basis, gold is currently significantly below its peak price hit in 1980.
I mentioned in several comments that I have eliminated my gold and silver bullion ETFs, which I trade, and will be looking for another spot for re-entry. The last round-trip in GLD was barely profitable at $177 which is better than a loss.
I also mentioned in a recent comment selling my highest cost, CAD priced Tahoe Resources shares, barely making a profit:
Item # 5.A - Bought 100 Tahoe Resources at C$11.93 and Another 100 at USD$9.03 JANUARY 18, 2016
Tahoe did have a good first quarter earnings report: TAHOE REPORTS RECORD RESULTS IN FIRST QUARTER 2017 I am keeping 40 THO:CA shares and 150 of the USD price TAHO.
SPDR Gold Trust (GLD) Transactions:
Commission Free Trades:
$1 Commission Trades
Total: $148.91
I last sold SLV at $17 (2/10/17). Those shares were bought at $15.23 (12/19/16)
I also sold out of a Canadian bullion ETF whose purchase was discussed in Item # 4.A. The profit on that transaction is included in the aforementioned $177 total.
I find gold and silver hard to trade since there is no discernible fair value range and consequently prices are not moored by anything concrete. Stocks, Bonds & Politics: What is Gold's "Fair Value"? (4/23/13 Post).
This make emotional trading more dominant, marked by frequent up and down moves that are hard or impossible to predict in advance. I am not sure why I bother other than I enjoy trading the PM ETFs.
I trade the bullion only based on my opinions about the long cycles. I last sold gold and silver bullion in September 2011, when gold was over $1900 and silver was over $40, and at slightly lower prices in January 2012.
Stocks, Bonds & Politics: The Road to Political Power: Lying Works/Recent Gold and Silver Sales (9/15/11 Post);
Item # 8: Stocks, Bonds & Politics: Snapshots of Coin Sales In January 2012 (1/31/12 Post)
3. Short Term Bond/CD Basket Strategy:
A. Added 2 USTs .625% Coupon Maturing on 7/31/17:
I am anticipating a .25% increase in the FF rate in either June or July, probably in June. I do not pay a commission on fixed coupon treasury bonds bought in my Schwab account.
B. Bought 1 Baylor, Scott White 1.947% Secured Bond Maturing on 11/15/21:
I can not find a prospectus for this bond, but am reasonably confident that it is a secured bond as described in this 3/17/16 Moody's Press Release: Moody's assigns Aa3 to Baylor Scott & White Health's (TX) Ser. 2016 and 2016A; outlook stable
Fidelity Information:
There are a number of bonds from this issuer with different maturity dates and coupons. The $50M in principal amount for this 2021 bond will make it illiquid and will result in infrequent transactions.
Finra Page: Bond Detail
Credit Ratings:
Moody's at Aa3
S & P at AA-
YTM at Total Cost (97.1) = 2.62%
C. Bought 2 Norfolk Southern 2.9% Senior Unsecured Bonds Maturing on 6/15/26:
Issuer: Norfolk Southern Corp. (NSC:NYSE)
Finra Page: Bond Detail (prospectus linked)
NSC Norfolk Southern Corp Page at Morningstar
Credit Ratings:
Moody's at Baa1
Moody's affirms Norfolk Southern's Baa1 senior unsecured rating; outlook stable
S & P at BBB+
YTM at Total Cost (97.280) = 3.245%
2017 1st Quarter Earnings Report
10-Q for Q/E 3/31/17
2016 Annual Report
NSC Analyst Estimates
D. Bought 2 Cigna 3.25% Senior Unsecured Bonds Maturing on 4/15/25:
CI Cigna Corp Page at Morningstar
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Moody's at Baa1
Moody's confirms Anthem's and Cigna's ratings following DOJ lawsuit
S & P at A
Fitch at BBB+
Financial Rating | Debt Ratings | Cigna
YTM at Total Cost (99.457) = 3.328%
2016 4th Quarter Results
2016 Annual Report
CI Analyst Estimates
CI SEC Filings
Anthem-Cigna Drama Shifts to $15 Billion Spat Over Merger - Bloomberg
E. Bought 1 HCP 3.15% Senior Unsecured Bond Maturing on 8/1/22:
Issuer: HCP- A REIT
Finra Page: Bond Detail (prospectus linked)
HCP Inc Page at Morningstar
Credit Ratings:
Moody's at Baa2
Moody's downgrades HCP's ratings to Baa2; outlook stable
S & P at BBB
Fitch at BBB
Fitch Removes HCP from Rating Watch Negative; Affirms 'BBB' IDR
Fitch Downgrades HCP to 'BBB' on HCR Spin-off; Places Ratings on Negative Watch
YTM at Total Cost (99.865) = 3.177%
2017 First Quarter Report 2016 4th Quarter Report
HCP 2016 Annual Report
HCP Analyst Estimates
HCP Completes Sale of a Portfolio of 64 Brookdale Communities for $1.125 Billion
2. Continued to Pare Non-REIT Stock Allocation:
A. Sold 50 Canadian Natural Resources at $33.22:
Profit Snapshot: +66.02
CNQ Canadian Natural Resources Page at Morningstar
Canadian Natural Resources - Home
Canadian Natural Resources Limited Announces the Acquisition of Working Interest in the Athabasca Oil Sands Project and Other Oil Sands Assets
I am hoping to buy back these shares at less than $27. Oil prices have started to slide again. U.S. crude production is ramping up. Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day)
Another problem is that the CAD continues to weaken against the USD. CNQ is priced in USDs. XE: CAD / USD Currency Chart A decline in the CAD/USD exchange rate flows into the USD priced shares traded on the NYSE.
B. Eliminated OB: Sold 101 + at $18.23+ (used commission free trade):
OB Stock Price - OneBeacon Insurance Group Ltd. Cl A
Profit Snapshot: +$442.97
I discussed this purchase here: Item # C.1 1. Bought 100 OB at $13.83: Update For Portfolio Positioning And Management As Of 8/21/16 - South Gent | Seeking Alpha
OB agreed to be acquired for $18.1 per share in cash. Intact Financial Corporation to Acquire US Specialty Insurer OneBeacon Insurance Group, Ltd. for US $1.7 billion
C. Gold:
My long view about gold and silver is that they are in a long term secular bear market that started in 2011. The last long term bear market lasted from 1980 to 2001, bottoming near $260 in February 2001. Gold Prices - 100 Year Historical Chart | MacroTrends (uncheck "inflation adjusted" to get nominal prices) The long term chart does not adequately reflect the top out in early 1980, which was at $850 per ounce. That is the price based on the London fix on 1/21/1980. On an inflation adjusted basis, gold is currently significantly below its peak price hit in 1980.
I mentioned in several comments that I have eliminated my gold and silver bullion ETFs, which I trade, and will be looking for another spot for re-entry. The last round-trip in GLD was barely profitable at $177 which is better than a loss.
I also mentioned in a recent comment selling my highest cost, CAD priced Tahoe Resources shares, barely making a profit:
 |
| 2017 THO:CA 100 Shares +C$37 |
Tahoe did have a good first quarter earnings report: TAHOE REPORTS RECORD RESULTS IN FIRST QUARTER 2017 I am keeping 40 THO:CA shares and 150 of the USD price TAHO.
SPDR Gold Trust (GLD) Transactions:
Commission Free Trades:
 |
| 15 Shares +$75.96 |
 |
| 10 Shares +$34.12 |
 |
| 25 Shares +$38.83 |
Total: $148.91
I last sold SLV at $17 (2/10/17). Those shares were bought at $15.23 (12/19/16)
I also sold out of a Canadian bullion ETF whose purchase was discussed in Item # 4.A. The profit on that transaction is included in the aforementioned $177 total.
I find gold and silver hard to trade since there is no discernible fair value range and consequently prices are not moored by anything concrete. Stocks, Bonds & Politics: What is Gold's "Fair Value"? (4/23/13 Post).
This make emotional trading more dominant, marked by frequent up and down moves that are hard or impossible to predict in advance. I am not sure why I bother other than I enjoy trading the PM ETFs.
I trade the bullion only based on my opinions about the long cycles. I last sold gold and silver bullion in September 2011, when gold was over $1900 and silver was over $40, and at slightly lower prices in January 2012.
Stocks, Bonds & Politics: The Road to Political Power: Lying Works/Recent Gold and Silver Sales (9/15/11 Post);
Item # 8: Stocks, Bonds & Politics: Snapshots of Coin Sales In January 2012 (1/31/12 Post)
3. Short Term Bond/CD Basket Strategy:
A. Added 2 USTs .625% Coupon Maturing on 7/31/17:
I am anticipating a .25% increase in the FF rate in either June or July, probably in June. I do not pay a commission on fixed coupon treasury bonds bought in my Schwab account.
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.
Jobs: The government reported this morning that 211K were added last month which was better than the consensus estimate.
ReplyDeleteThe March number was revised down to 79K from 98K. I would just average the two months together which comes to 145K per month. The February number was revised up to 232K from 219. "Over the past 3 months, job gains have averaged 174,000."
https://www.bls.gov/news.release/empsit.nr0.htm
"In April, average hourly earnings for all employees on private nonfarm payrolls rose by 7 cents to $26.19. Over the year, average hourly earnings have risen by 65 cents,
or 2.5 percent." The workweek for the private sector increased by .1% which is also important given the size of the labor force.
The last CPI report showed inflation rising 2.4% Y-O-Y through March 2017 so real wage growth is back to non-existent or immaterial. That is important as well.
The U-6 number declined to 8.6% from 8.9% on a seasonally adjusted basis:
https://www.bls.gov/news.release/empsit.t15.htm
The unemployment rate was 4.4%.
The FED will hike the FF rate in June.
The CME FedWatch Tool has a 78.5% probability at the moment for a .25 increase next month.
http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
South Gent,
ReplyDeleteI just bought 4 bonds (046265AF1) that I believe to be mis-priced. It has 2.008% YTM. This bond matures on 6/19/2017 and I think all the potential lawsuits and the pending merger with Sterling Bancorp should have no bearing whatsoever. But I also wonder why some institutions want to sell.
Y: The pending merger will have no impact on Astoria paying off that 5% coupon bond on 6/19/17. On a total return basis, you are clipping 45 days of 5% interest minus the .319 per bond total cost premium to par value. While my calculation may be incorrect since I did it in about five seconds, it looks like the net will be $25.
ReplyDeleteSouth Gent,
ReplyDeleteYour calculation is on the mark. I focus primarily on YTM when buying short term bonds, which is what I will receive on maturity when everything (accrued interest, mark-up/commission ...etc.) is considered.
For four bonds (046265AF1) my total cash outlet is -$4,091.09. At the bond's maturity I will receive $4100 (incl. a semi annual dividend), which translates to about 1.8% yield. That is high yielding for a 45-day bond, which I get paid $8.91 for my time and efforts.
Bob Johnson of Morningstar noted some negatives in the jobs report.
ReplyDeletehttp://news.morningstar.com/cover/videocenter.aspx?id=807532
55K jobs were added in the low wage leisure & hospitality industry which normally adds an average 22K. The governments added 17K jobs.
+++++
The EUR/USD rose over 1.1 today before sliding slightly below that level. That exchange rate was near 1.06 in early April. That rise in the Euro is a positive for USD price funds that owns stocks whose ordinary shares are priced in Euros.
Through 5/4/17, the Vanguard FTSE Europe Index Fund ETF (VGK) has generated a 2017 total return of 15.1%:
http://performance.morningstar.com/funds/etf/total-returns.action?t=VGK®ion=USA&culture=en_US
I own somewhere over 100 shares. The Vanguard ETFs can be bought commission free in Vanguard brokerage accounts.
The S & P 500 ETF (SPY) was up 7.28% for the same period.
http://performance.morningstar.com/funds/etf/total-returns.action?t=SPY
Cooper prices dived late last week:
ReplyDeletehttp://www.macrotrends.net/1476/copper-prices-historical-chart-data
Iron ore prices tumbled more:
http://markets.businessinsider.com/commodities/iron-ore-price
The issue again is China's spending on infrastructure:
http://www.foxbusiness.com/features/2017/05/04/chinese-metal-prices-tumble-update.html
http://www.marketwatch.com/story/this-commodity-has-been-getting-hammered-even-harder-than-oil-2017-05-05
China's April Manufacturing PMI fell to 50.3 in April, down from 51.2 in March. Manufacturers continued to reduce workforce numbers.
https://www.markiteconomics.com/Survey/PressRelease.mvc/a52d06ff96f14cd1a469abdb6acb75f1
Care Capital Properties (CCP) has agreed to be acquired by Sabra Health Care (SBRA):
ReplyDeletehttp://www.businesswire.com/news/home/20170507005058/en/Sabra-Health-Care-Care-Capital-Properties-Combine
I currently own 62+ CCP shares as part of my REIT basket.
"Under the terms of the agreement, CCP shareholders will receive 1.123 shares of Sabra common stock for each share of CCP common stock they own."
The transactions is expected to close in the third quarter.
Care Capital Properties, Inc. (CCP)
$28.35 +1.56 (5.82%)
Pre-Market: 8:53AM EDT
Since CCP's acquisition is in SBRA stock, the acquisition price will depend on how SBRA performs until closing. I do not yet see any pre-market opening action in SBRA.
http://www.marketwatch.com/investing/stock/sbra
I will probably take the Sabra shares rather than selling that odd lot CCP position.
Nursing home REITs have not participated in the REIT rally that started in early 2014. While individual investors are enthralled by their dividend yields, the money that counts does not view them favorably.
The Vanguard REIT ETF (VNQ) closed at $82.33 last Friday and at $64.92 on 12/31/13.
OHI closed last Friday at $32.16, up $.48, and at $29.8 on 12/31/13.
I have briefly discussed CCP when I bought a 30 share lot in my Roth IRA:
2. Bought 30 CCP at $25.6-ROTH IRA:
https://seekingalpha.com/instablog/434935-south-gent/4879961-update-equity-reit-basket-strategy-5-19-16
I sold that lot at $31.47 (9/7/16) for a $162.08 profit:
https://tennesseeindependent.blogspot.com/2014/10/gateway-post-equity-reit-common-and.html
On 12/13/16, I used a Schwab commission free trade to buy 10 shares at $24.97, which brought me up to 62+ in a taxable account with the last two quarterly dividends used to buy additional shares (at $26.81 and $25.38). I have now turned dividend reinvestment off.
I doubt the CCP share price with be at $31.47 the day before its acquisition is consummated.
That stock proved to be an unsatisfactory total return vehicle since it was spun off from Ventas back in 2015.
The total return (dividends reinvested) from the start date through 5/5/17 was -1.59%. The total return for significantly lower yielding index ETF VNQ over the same period was 11.7%. During that period, REITs have generally lagged behind the S & P index ETF SPY which had a total return of 18.77%.
CCP is yet another example of a high dividend stock that proved to be a poor total return one unless the investor managed to trade it successfully.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2017/05/observations-and-sample-of-recent_8.html