Thursday, May 25, 2017

Observations and Sample of Recent Trades: (APLE, ENBPRP, SVNLY, )

FED Minutes of May Meeting:

Minutes of May 2-3, 2017 Meeting:

Nearly all policy members agreed to reduce the FED's bloated balance sheet as follows:

"Under the proposed approach, the Committee would announce a set of gradually increasing caps, or limits, on the dollar amounts of Treasury and agency securities that would be allowed to run off each month, and only the amounts of securities repayments that exceeded the caps would be reinvested each month. As the caps increased, reinvestments would decline, and the monthly reductions in the Federal Reserve's securities holdings would become larger. The caps would initially be set at low levels and then be raised every three months, over a set period of time, to their fully phased-in levels. The final values of the caps would then be maintained until the size of the balance sheet was normalized.
Nearly all policymakers expressed a favorable view of this general approach. Policymakers noted that preannouncing a schedule of gradually increasing caps to limit the amounts of securities that could run off in any given month was consistent with the Committee's intention to reduce the Federal Reserve's securities holdings in a gradual and predictable manner as stated in the Committee's Policy Normalization Principles and Plans. Limiting the magnitude of the monthly reductions in the Federal Reserve's securities holdings on an ongoing basis could help mitigate the risk of adverse effects on market functioning or outsized effects on interest rates. The approach would also likely be fairly straightforward to communicate."
 The FED's balance sheet currently stands at $4.233+ trillion. System Open Market Account Holdings - FEDERAL RESERVE BANK of NEW YORK


U.S. Dollar Index:

Black Line: 50 day SMA

Green Line 200 day SMA

97.17 as of 10:45 A.M E.S.T 5/25/17

U.S. Dollar Index (DXY) Interactive Chart 

A decline in the DXY occurs when the U.S. Dollar falls in value against 6 major currencies heavily weighted in the Euro. 

The DXY peaked at around 103 shortly after the U.S. election last year. The dominant trend in 2017 has been down, with a series of lower highs and lower lows. 

One reason why USD priced international funds are doing better than the SPY so far this year is due to USD weakness. International markets are generally cheaper than the U.S. using traditional valuation criteria.

Year-to Date Total Return Data Through 5/24/17 Based on Price:

SPDR® S&P 500 ETF (SPY) Total Returns = 8.11%

Vanguard FTSE Europe Index Fund ETF Shares (VGK) Total Returns = 18.24%
Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO) Total Returns = 14.23%
Vanguard FTSE Developed Markets Index Fund ETF Shares (VEA) Total Returns = 14.42%


Trump's 3% Real GDP Growth Projection

What 10 million simulations tell us about President Trump’s chances of achieving 3% economic growth - MarketWatch

Trump 3% GDP growth plan makes no sense - Business Insider

There is also the issue of how high interest rates would go with consistent 3% growth. A sufficiently high interest rate level will start to retard growth through economic activities sensitive to interest rates such as large ticket purchases financed with debt (homes, cares,etc.)    

How does the GOP sell large tax cuts for corporations and high earners to the high school educated working class? 

Corporations can not vote, and there are an insufficient number of voters in the top 10%. The GOP's pitch is their trickle down economic theory, where those tax cuts (along with regulation eliminations) unleash faster growth than the nation has experienced in 7 decades, which increases the number of jobs and pay for the average middle class and poor family. 

Will the tax cuts actually stimulate the economy in the way predicted? 

Tax cuts will generate more GDP growth, but the impact predicted by the GOP is way out-of-line with the historical evidence. 

Corporate tax cuts will be used in large part to increase dividends, to buy other companies and "rationalize" the workforce, and to buy back stock. None of those activities contribute to GDP growth. They do enhance the unspent wealth of the top 1% who are invested in risk assets. 

Trump's tax cut plan only pays for itself with growth in 'fairyland"- CNBC 

Trump Tax Plan’s Pass-Through Tax Break Would Provide Massive Windfall to the Wealthy | Center on Budget and Policy Priorities

Economists See Little Magic in Tax Cuts to Promote Growth - The New York Times

As I have pointed out in the past, large publicly traded companies promised to hire workers with repatriated foreign cash after Congress temporarily lowered the repatriation tax rate back in 2004. The result was that those companies used the cash to buy back stock and to increase dividends, and many had a net loss of jobs during an upswing in the economy. 

Senate report says repatriation tax holiday failed to create jobs in US | TheHill

Detailed Senate Report on 2004 Repatriation Holiday

Tax Analysts -- Effects of 2004 Int'l Tax Holiday, Recommendations Going Forward

Foreign profit tax break was costly bomb: report | Reuters

U.S. publicly traded companies will frequently see more benefits flowing from stock purchases and/or dividend increases than investments in new plant and equipment. The advantages relate to the generous options granted high level employees who benefit more from the buybacks and dividend increases.

President Trump's Budget Includes a $2 Trillion Math Mistake |


The three numbers you need to understand the CBO report on Republicans’ health-care bill - The Washington Post ("Republicans said their bill will make health insurance cheaper. Except, they'll have to figure out a way to explain why, under Obamacare, 64-year-olds making $26,500 a year are on track to pay $1,700 in annual premiums in 2026. And under the GOP bill, they would pay anywhere between $13,600 to $16,100.")

The preceding article can also be found at MSN currently: Analysis | The three numbers you need to understand the CBO report on Republicans’ health-care bill

CBO: Republican health care bill raises premiums for older, poor Americans by as much as 850%

As I pointed out in my last blog, the republican James Comer from Kentucky was asked by a constituent whether premiums would skyrocket for older Americans under Trumpcare. He started to say no and then claimed he did not know. A GOP congressman from Kentucky wonders: Is ‘this Trump thing’ sustainable? - The Washington Post (Quote from article: “What about people between 60 and 65?” a woman said, her tone sharp. “I’m hearing we’re going to get slammed” by higher health-care costs. Comer started off by saying costs would not rise but then backed off. “I don’t know the answer,” he said, “but I’m going to try to find that out.”)

Stocks, Bonds & Politics:  GOP's Plan To Bankrupt the Middle Class (7/15/11 Post)


Trump praises Duterte's deadly drug war in leaked transcript - CNNTrump praises Duterte for 'unbelievable job' cracking down on drugs in the Philippines - POLITICO

FULL TEXT: Leaked transcript of Trump-Duterte phone call

Trump tells Duterte of two U.S. nuclear subs in Korean waters: NYT | Reuters

May to confront Trump as UK police stop sharing attack information with U.S. | Reuters


GOP's Full Throttle Assault on the Free Press Turns Physical:  

Greg Gianforte, Montana G.O.P. Candidate, Is Charged in Attack on Reporter - The New York Times

Greg Gianforte: Fox News team witnesses GOP House candidate 'body slam' reporter | Fox News

I would not be surprised to see Gianforte win the congressional election today in Montana. Didn't that "libtard" reporter deserve to be attacked for asking Gianforte a question? Lock him up, lock him up, not Gianforte of course, but the reporter.  

The audio of the assault proves that the reporter committed a cardinal sin by asking this republican about the CBO report released yesterday. 

The GOP's candidate for Congress was charge with misdemeanor assault: MCA § 5-201. Assault.

Trump carried Montana with 56.2% of the vote (Final Tally Federal Election Commission.pdf:  279,240 votes out of 497,147)

Presidential election in Montana, 2016 - Ballotpedia (3 pivot counties that voted for Obama in 2012 went for Trump in 2016)

I do not view the modern republican party as a conservative one.

 WATCH: Trump security guard hits protester in face - NY Daily News

The Trump security guard who hit that protester is now one of Trump's closest WH advisors. Who is Keith Schiller, the man Trump sent to fire Comey? - CNN Schiller is now the WH Director of Operations.


1. Short Term Bond/CD Ladder Basket Strategy:

The market is currently forecasting an 83.1% chance that the FED will raise the federal funds rate by .25% next month. 

Countdown to FOMC: CME FedWatch Tool

The probability of two .25% increases on or before the December 2017 meeting is currently at 46.1%.

A. Added 2 USTs .625% Maturing on 9/30/17

YTM at Total Cost (99.886) = .891%

I now own 4. 

When my purchased T Bills mature, I may start buying in ten bond lots when and if I can receive at least a .1% or greater yield compared to a 1 to 9 bonds-more small ball. 

I could buy the fixed coupon treasury securities commission free in my Schwab, Fidelity and Vanguard accounts.   

B. Added 1 Caterpillar 1.3% Senior Unsecured Note Maturing 3/1/2018

Issuer:  Caterpillar Inc.  (CAT)

FINRA Page: Bond Detail (prospectus linked)
Moody's Downgrades Caterpillar ratings to A3/Prime-2; outlook is stable.
Credit Ratings: 
Moody's at A3

S & P at A

YTM at Total Cost (99.991) = 1.31%

On the date of purchase (4/25/17), the 1.31% YTM was at about a .27% spread to a UST maturing on 2/28/18.  

Without the $1 commission, the YTM would have been 1.433%.

Caterpillar reported better than expected earnings on my purchase date.

Closing Price 4/25/17:  CAT $104.42 $7.61 7.86%

Cat Financial Announces First-Quarter 2017 Results

CAT 2016 Annual Report

C. Bought 1 UST 1% Maturing on 12/31/17:

YTM at Total Cost (99.988) = 1.017%

2. Continued to Pare Stock Allocation

A. Sold 50 of 200 SVNLY at $7.05 ($1 Commission)

The purchase of this 50 share SVNLY lot was a test on how Interactive Brokers would handle the dividend withholding. The test failed in that 30% was withheld by Sweden from SVNLY's annual dividend payment. When the test fails for a broker, I will dump the shares bought to conduct the test.   

I received the annual dividend after a 30% Swedish withholding tax. The correct withholding rate is 15% under Article 10 of Sweden's tax treaty with the U.S. U.S-Sweden Tax Treaty.pdf

Profit Snapshot:  +$5.99

B. Sold 100  APLE at $19.43 ($1 Commission)

Profit Snapshot: +$24.85 (TRADE on 4/26/17) 

APLE Stock Price - Apple Hospitality REIT Inc.

Hotel Map - Apple Hospitality Reit

"Apple Hospitality REIT, Inc. (NYSE: APLE) is a publicly traded real estate investment trust (REIT) that owns one of the largest portfolios of upscale, select service hotels in the United States. The Company’s portfolio consists of 235 hotels, with approximately 30,000 guestrooms, diversified across the Hilton® and Marriott® families of brands with locations in urban, high-end suburban and developing markets throughout 33 states" 

In this kind of trade, I am simply attempting to lower my average cost per share and to manage my risk. 

After I sold the 100 shares, Apple reported 2017 first quarter results: 

C. Bought Back 50 APLE in a Roth IRA Account at $18.3:  

This trade is being discussed out of sequence. It occurred on 5/17/17, shortly after I sold the 100 share lot discussed above at $19.43: 

I sold 100+ shares in this IRA account last December at $19.75: 

These trades represent a typical pattern for me. I will consider buying another 50 shares when and if the stock falls below $17.75. 

APLE is currently paying a $.10 per share monthly dividend. Apple Hospitality REIT Announces May 2017 Distribution 

At that rate, the dividend yield is about 6.56% at a total cost of $18.3 per share. That would be tax free when the stock is held in a Roth IRA. 

Last year, APLE characterized 24% of its dividend payments as a return of capital that lowered the cost basis by $.29 per share. PDF The ROC designation has no relevance when the stock is held in a retirement account. 

When held in a taxable account by high marginal tax rate investors, the ROC classification does at least increase the after tax dividend yield until the stock is sold and provides the potential to convert the ROC component into a long term capital gain. The taxable portion of REIT dividends will ordinarily be taxed at ordinary income rates, though some minor portion of taxable income may be characterized as a qualified dividend.   

Closing Price 5/24/17: APLE  $19.05 +$.24

3. Pared Intermediate Term Bond Allocation in the Vanguard Taxable Account as the Vanguard Prime MM Fund Approached a 1% Yield

A. Sold 2 Equifax 2.3% Senior Unsecured Bonds Maturing on 6/1/21 and 2 Cisco 2.2% Senior Unsecured Bonds Maturing on 9/20/23

Profit Snapshots: +$22.6

I will probably buy these or similar bonds in my IB account ($1 per bond commission). I will want a decline below my last purchase price before repurchasing these bonds.  

The Cisco bond purchase was discussed in Item # 1.A.: Stocks, Bonds & Politics: Observations and Sample of Recent Trades-4/8/17 (RHHBY)

The Equifax bond purchase was discussed in Item # 1.B.: Stocks, Bonds & Politics: Observations and Sample of Recent Trades (SCHE,TPVG, ADX, PFK) 3/4/17/Trump's Conspiracy Theory Ladened Universe/

I am expecting at least one more FF increase this year. 

When and if the FF rate is raised, the Vanguard Prime MM fund will gradually rise in yield as maturing paper is replaced with higher yielding ones. 

Vanguard - Vanguard Prime Money Market Fund

That increase will reduce the yield spread difference further between the Vanguard Prime MM fund and these bonds, thereby making them less desirable in the Vanguard account due to their low coupons and maturities in 2021 and 2023.

4. Continued to Harvest Profits in Canadian Reset Equity Preferred Stocks:

A. Sold 200 ENBPRP at C$19.91 (C$2 Commission):

ENB.PR.P Stock Price - Enbridge Inc. Fixed-to-Floating Rate Cumulative Preferred  Series P Stock (Canada: Toronto)

Profit Snapshot: +C$963

This trade included two one hundred share purchases: 

Item # 5. Added 100 ENBPRP at C$14.54:Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 7/13/16 - South Gent | Seeking Alpha

The other 100 share lot was bought at C$15.61 and discussed in a Comment Blog. That link also contains a discussion of equity preferred floaters.

I previously sold 300 ENBPRP for a C$1,458.25 profit:

2017 ENBPRP 300 Shares +C$1,458.25 
Those shares were bought at C$12.39: Item # 1 Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 2/29/16 - South Gent | Seeking Alpha

I sold that 300 share lot at C$18.5 and discussed that transaction here.

Total ENBPRP Profits to Date: C$2,421.25

ENBPRP is an equity preferred stock issued by the Canadian energy infrastructure company Enbridge Inc. (NYSE:ENB) that pays initially a 4% cumulative dividend on a C$25 par value. Effective 3/1/19, the coupon will reset at a 2.5% spread to the 5 year Canadian government bond. The reset rate would remain in effect for five years whereupon it would be reset again. On 3/1/2019 and on March 1 "in every fifth year thereafter", Enbridge may redeem for $25 per share.

I have also bought and sold two Enbridge senior unsecured bonds: 

Item # 2. Bought 2 Enbridge 3.5% Senior Unsecured Bonds Maturing on 6/10/2024 at 93.658: Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 5/10/16 - South Gent | Seeking Alpha

Item # 2. Bought 2 Enbridge 4% Senior Unsecured Bonds Maturing in 2023Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 6/17/16 - South Gent | Seeking Alpha  

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. OHI: Omega got smacked today on heavier than normal volume.

    Omega Healthcare Investors Inc.
    $31.99 -$1.32 -3.96%
    Volume 5,512,821
    Avg. Volume 1,925,348

    Care Capital Properties, Inc. (CCP)
    $26.98 -$0.91 (-3.26%)

    Sabra Health Care REIT, Inc. (SBRA)
    $23.65 -$0.85 (-3.47%)

    Normally, there could be three causes. I have not been able to find one yet.

    I have ruled out the first two:

    (1) downgrade from a major brokerage of the entire sector;

    (2) big trouble brewing at a common major tenant that just popped up on the screen today;

    (3) something involving government reimbursement.

    I did not see any analyst action today for this sector.

    I looked at the leading loser list and did not see any nursing home operators which would be the case when one of them disclosed today something bad.



    Omega was #100 on the NYSE leading loser's list.

    Energy names were prominent in the leading loser's list today.

    That leaves #3 but I have not seen anything on that issue yet after doing a google advance search with a one day time period. Possible reimbursement changes are invariably potentially problematic.

    If I can identify the cause, then I assess whether I may start to consider buying back the 50 shares recently sold in the Roth IRA at a price lower than the close today.

    2. Equity REIT Common and Preferred Stock Basket Strategy:
    A. Sold 52+ OHI at $33.96-Eliminated Position in Roth IRA Account:

  2. Just published by the WP:

    Jared Kushner now a focus in Russia investigation:

    "Investigators are focusing on a series of meetings held by Jared Kushner, President Trump’s son-in-law and an influential White House adviser, as part of their probe into Russian meddling in the 2016 election and related matters, according to people familiar with the investigation."

    1. The Trump team wanted to use Russian communications facilities? To deal with Putin? Why a need "to cut out" State and CIA, et al? .....There is one possible answer in press reports that the FBI is investigating a Trump team offer of sanctions relief in exchange for loans to Trump enterprises:
      Then, too, it appears that Kushner and Russian connected indivuals cooperated on campaign data analytics, including a coordinated last minute Facebook onsluahgt, using the resources of RT and Sputnick. Jared forgot these as well as mentioning the campaigns 18 other undisclosed contacts with Russians with intelligence connections. Failure to report these on SF-86 by Sessions and Flynn fall under U.S. Criminal Code (title 18, section 1001) which penalties for knowingly falsifying or concealing a material fact. These are felonies with fines "and/or up to five years imprisonment." Federal routinely fire, and pull prior grants of security clearance, and disqualify individuals who "materially or deliberately falsify these forms" Q: So why lie? A: The Wanted to shield it from US intelligence.....----But the risk of prosecution is not small. Look at what happened last March to
      State Department employee, Candace Marie Claiborn, who was arrested and charged With concealing extensive contacts with foreign agent. It was on the basis of not responding truthfully on her SF-86! See- John Mclaughlin, former acting DCIA notes on MSNCB May 26th that had an American CIA officer -or any other kind of officer-- done this, they'd be up on espionage charges...The non-disclosure of this contact with a hostile power opens up liability under 1917 intelligence act...There's the long languishing Logan Act, as well. It's disuse, does not mean it is not applicable. Former Director Mueller will not want to nor would he be able to finesse this matter. I read, the NSA Director told staff of effort to impede Mueller. The cats out of the bag..

    2. This comment has been removed by the author.

    3. I needed to correct some typos so I had to edit my prior post which I then deleted.

      James: There is no legitimate reason to establish a back channel. If there was some legitimate need, Trump and Kushner could have waited a few weeks, until Trump became President, and then meet with theRussian Ambassador in a secure facility at the White House.

      We do know that the Department of Homeland Security and the Director of National Intelligence issued a joint statement on 10/6/16 that Russia had hacked the emails.

      If the information reported by the WP, NYT and other news outlets about Trump's efforts to interfere with the investigation are true, then there are multiple counts of criminal obstruction of justice which does not require that the interference succeed or that the investigation result in an indictment. The overt acts in furtherance of the interference, with the intent requirement, are sufficient.

      Trump's conduct and actions are not consistent with a man who has nothing to hide but are only consistent with someone who has something major to hide.

      Evidence of intent can be found in multiple press reports, including the report that Trump asked Sessions to exit the room during the dinner with Comey, whereupon Trump reportedly asked the FBI Director to stop the Flynn investigation.

      Trump's overt acts in furtherance of obstruction of justice are more numerous than just the smoking gun meeting where Nixon and Haldeman decided to use the CIA to stop the FBI investigation into Watergate.

      There is evidence that Kushner met with Putin's banker and that bank made a loan to a Trump associate. This is a summary of that story which was published in the WSJ which requires a subscription to read:

      I have not yet seen any firm evidence of a direct link between policy and money. The FBI is investigating the possible link between a removal of sanctions in exchange for loans by that Russian bank according to Reuter's story published late yesterday.

      The other area which you mention is also part of the investigation, which is exploring whether Trump's data analytics was used by the Russians to target particular voters with fake news. I have seen that being discussed, but have yet to see what I would call hard evidence.

      Trump will be shielded by republican politicians in Washington. Their agenda is more important to them than his fitness for office. There will be more efforts to impede the investigation. The attacks on anyone providing evidence will intensify. The Nixon resistance playbook is going to be followed in material ways over the coming months.

      I would not expect a single GOP member of the House Judiciary committee to request an inquiry into possible impeachment.

      Trump's approval rating has ticked up over the past several days and now stands at 41% using the Daily Gallup poll.

  3. Re: significant movements in stock prices absent analyst downgrades, published news of trouble brewing, accusations of CEO's ties to notorious fraudster in blog posts on Seeking Alpha, etc., consider

    (4) leaked information from someone with inside knowledge?

    Re: Kushner, tick tock.

    1. Cathie - meanwhile earnings are still increasing. The market may not care about the politics and focus only on the economy. I wouldn't be surprised to see a rally when this "story" on Trump finally breaks (if it does go there).


      I am finding it odd how much some stocks are moving. Best Buy 23% climb. Other stocks take 10% dives. Others move moderately and seemingly appropriately. But the bigger swings get attention and make me wonder if it signals anything underlying the market.

  4. Trump is doing his best to win friends and influence people in Europe. Possibly, he has read the book, his first since high school, "How To Win Friends and Influence People".

    Or maybe not. Perhaps someone can afford buying the paperback and mailing it to the White House:

    Just $9.49.

    We have seen him shove a P.M. and squeeze hands until the blood loss causes a PM to turn red.

    Now the German magazine is reporting that Donald had some pleasantries for the Germans:

    "The Germans are bad, very bad," Trump said, according to meeting participants. "See the millions of cars they are selling to the U.S. Terrible. We will stop this."

    My thinking about the election result in Montana is that the republican needed to beat that liberal reporter more which would have increased his margin of victory in our New Trump Nation.

  5. FYI, I know that some readers are interested in bonds and CDs offered by Fidelity.

    Bank of China has a FDIC insured 1.1% CD maturing on 9/7/17, and a 3.1% Verizon senior unsecured bond maturing on 6/1/2024 under its corporate notes program where the investor buys a new issue at par with no accrued interest paid to the seller.

  6. South Gent,

    I did buy that CD this morning as it has the highest coupon rate in that time range. However, I got cusip 06426WHK1, issued by Bank of China with a maturity date of 9/7/2017 and coupon rate of 1.05%. The coupon rate is slightly different, but I also noticed that the broker gets paid a fee of 0.15%. So maybe Fidelity split its fee with the clients?

    1. Y: I double checked my purchase and it was a 1.1% coupon maturing on 9/7/17 issued by the Bank of China.

      Cusip DSH5P7865

      I bought it at Fidelity so I can't explain why you got 1.05% unless Fidelity is giving me a slightly better deal.

      I checked at Schwab and they have the same 1.1% CD with a different CUSIP 06426WHB1.

    2. There is a new Bank of China CD with a 1.2% coupon maturing on 12/7/17

      Cusip 06426WHG0 at Schwab
      DSH5P7919 at Fidelity

    3. South Gent,

      It turns out that you have bought 06426WHB1 that was issued on 5/25/17 and I have bought 06426WHK1 on a "when-issued" basis with an issue date of 6/7/17. 06426WHK1 was not available at my broker this morning. Fidelity does not reveal the broker fee of individual CDs but except the coupon rate everything else appears identical .

  7. Nursing Home REITs: I looked around the internet today and could not find anything specific that would explain the recent weakness in nursing home REIT stocks which continued today.

    This is not something that is company specific as far as I can tell.

    All of the stocks are technically weak. OHI, for example, burst below its 50 and 200 day SMA lines on 5/25 and then volume accelerated. I used a Google Finance 1 year chart to make that determination.

    So the explanation may just be sellers piling on as OHI failed to break through overhead resistance.

    OHI Close Today 5/26:
    $31.56 -$0.43 (-1.34%)
    Volume 5,847,455
    Avg. Volume 1,982,292

    While SeekingAlpha authors sing the praises of this REIT, I have pointed out repeatedly that the serious money does not share their enthusiasm.

    When I see this kind of two day weakness, my general reaction is to wait before buying. That would mean waiting to see whether the downdraft continues next week. And, I will sell the OHI pops.

    Care Capital Properties, Inc. (CCP)
    $26.33-0.65 (-2.41%)
    Volume 1,218,764
    Avg. Volume 1,102,561

    CCP is being acquired by Sabra Healthcare in an all stock transaction so its price is basically reflecting the movement in SBRA.

    Sabra Health Care REIT, Inc. (SBRA)
    $23.33 -$0.32 (-1.35%)
    Volume 1,622,299
    Avg. Volume 870,766

  8. TEVA: A few readers have asked me in the past about TEVA, which I do not own. My general reply was to discuss potentially negative developments and conclude that the the balance of potential risks and rewards tilted in favor of the risks. The first inquiry came when the stock had just fallen into the low 50s and more questions were asked when the shares were in the 30s.

    Links to some of the more recent comments which were made in December 2016 and in January:

    I would not approach an analysis by simply saying investors are wrong about this stock; or the stock is cheap based on forward estimates; or the market is pricing a $26+B market cap company for bankruptcy which makes no sense.

    The two main problems are still present with potential generic competition for the 40mg dosage of Copaxone. This is no small matter. There is already a generic for the 20MG dose. This drug is probably the leading one to treat multiple sclerosis.

    For the Q/E 3/31/17, Copaxone sales declined 4% Y-O-Y but were still substantial at $970M out of a total revenue number of $5.6B or 17%. The entire specialty drug segment suffered a Y-O-Y decline of $132M or 6%.

    "Our global Azilect® revenues were $60 million, a decrease of 47% compared to the first quarter of 2016 following the introduction of generic competition to Azilect® in the United States in 2017." Specialty medicines saw a 12% profit decline.

    The second main problem is inherent in the generic business and involves a limited window of exclusivity at best and then a period of declining prices and cut throat competition.

    An investor can not assess a TEVA investment without looking at those risks.

    Then there are problems with management and a major price fixing case hanging over the company's head.

    Still, at a closing price of $28.5 today, a lot of risks are in that price so I am looking at it only. If I buy, it will be a few shares using commission free trades, possibly 10 or 20 shares and stopping at no more than 50 after averaging down. I do not like the company. The price decline has caused major technical damage and institutions still appear to be bailing on the stock.

    1. South Gent,

      Re. TEVA I would agree that " a closing price of $28.5 today, a lot of risks are in that price ...". However, one would wonder how a large cap pharma could have gone from over $72 to $28 in less than 2 years.

      Mizuho Securities analyst Irina Rivkind Koffler has an Underperform rating on Teva based on: 1) risky guidance, 2) expected business contraction, and 3) a significant debt overhang. She further expands on "contraction via further asset sales, generic pricing pressure, Copaxone LOE, and minimal pipeline contribution.”

      Also, maybe Allergan's (AGN) 12% stake has something to do with it. I think AGN is still the largest TEVA stockholder and it could be good and bad for TEVA's stock price.

    2. Y: That is a good point about AGN's stock position. That would be a far less important issue assuming TEVA was firing on all cylinders which is not the case.

      Allergan received 100.3M TEVA shares and $33.4M in cash for its generics business.

      The cash consideration itself is higher than Teva's current market capitalization which Marketwatch has at $29.33B at a $28.49 price.

      As I recall, TEVA could not sell any shares for 12 months after the closing which occurred around 8/2/16.

      A significant amount of low coupon debt is maturing 2018-2020 which will have to be refinanced at higher rates.

      For example, there is $1.5B in a 1.4% coupon issue that matures on 7/20/18:

      After that one, there is a $2B in principal amount bond with a 1.7% coupon maturing in 2019:

      Personally, I believe that TEVA needs to eliminate its dividend and to use the cash to pay down debt, along with some free cash flow, for at least the next five years. Long term debt was at $32.694B as of 3/31/17. Short term debt was then at $1.942B.

  9. "Russian ambassador told Moscow that Kushner wanted secret communications channel with Kremlin" Washington Post Just Published

    "Jared Kushner and Russia’s ambassador to Washington discussed the possibility of setting up a secret and secure communications channel between Trump’s transition team and the Kremlin, using Russian diplomatic facilities in an apparent move to shield their pre-inauguration discussions from monitoring" -sourced from "U.S. officials briefed on intelligence reports.

    According to the WP, Kushner made the proposal at a 12/1 or 12/2 meeting at Trump Tower that was attended by Flynn. The U.S. intercepted communications between the Russians about this meeting. This meeting was not initially disclosed by Kushner in his security clearance application. It was disclosed in March and played down by the WH only after press reports emerged disclosing its existence. The WP was alerted about the meeting last December through an anonymous letter.

    Another avenue of inquiry which may turn into something interesting is discussed in this TIME magazine and Newsweek articles:


    Nothing is proved yet. The level of smoke is growing.

    Trump supporters view this as a witch hunt by the news media viewed by Trump and his supporters as the Enemy of the People. If this involved the Clintons rather than the Trump/Kushner orbit, the chants of lock her up coming from the Trump Trolls would be deafening.

  10. "Exclusive: Trump son-in-law had undisclosed contacts with Russian envoy - sources" Reuters

    "U.S. President Donald Trump’s son-in-law and close adviser, Jared Kushner, had at least three previously undisclosed contacts with the Russian ambassador to the United States during and after the 2016 presidential campaign, seven current and former U.S. officials told Reuters."

  11. "I do not view the modern republican party as a conservative one. "

    This matched with a question I have. What would your view be of a conservative party & platform?

    This obviously isn't it. You've be a good person to ask what conservative looks like when it's not been hijacked by a ... I don't know if this is a fun question or annoying...


    Thanks for the Teva info. I'd been eyeing it and reading on it.

    1. LMH: The first question to ask is what are conservative values and then it becomes easier to assess whether the current republican party is a conservative one.

      Is telling the truth a conservative value? Is appealing to people's worse instincts a conservative value? Is attacking the free press and undermining confidence in voting rights conservative values? Is restricting access to voting by people who vote the wrong way a conservative value? Are the Bill of Rights embodied in the Constitution conservative values? Is tolerance a conservative value? Is learning a conservative value? etc. and so on into infinity.

    2. Well yes, decency is a conservative value. Is this party's actions and WH admin's actions decent? Well answer is already known.

      I've been playing with an idea in my head, and wondering how it sounds.

      Trump gets away with stuff that should take down anything. True since the beginning, one outrageous disrespect at other humans after another. When others try to talk back, it has always backfired with his responder looking bad. For instance he could call his co-candidates horrible names, but when one called him a name it nearly takes them down (such as Cruise or someone, and Clinton's deplorables)

      Is the teflon effect because he has no shame? Regular other people have shame, so even when they insult, they know it. Does his lack of ability to have shame, change how his disrespect comes across to some people so that he doesn't get taken down while being able to do one disrespectful thing after another.

      This wouldn't explain everything remotely. But is it part of what's happening?

  12. I have published a new post: