Thursday, June 29, 2017

Observations and Sample of Recent Trades: (HTPRD, IDLV, SWASX)

Interests rates continue to trend up in early trading today.

U.S. 10 Year Treasury Note -MarketWatch

iShares 7-10 Year Treasury Bond ETF

The German ten year bond has spiked in yield this morning.  

While that spike is from one extremely abnormal level to a slightly less extremely abnormal one, the percentage move is huge at about +24.65% as of 8:00 A.M. C.S.T. compared to yesterday's close. Germany 10-Year Bond Historical Data -

Long-Term Government Bond Yields: 10-year: Main (Including Benchmark) for Germany© | FRED | St. Louis Fed

The data is pointing to a global synchronous growth cycle, mostly a no show since the Near Depression. The questions remains for how long and how powerful. U.S. stocks may have already been priced for a global growth trend. International stocks less so. Bond prices have not even considered the possibility that CB's may actually withdraw their extremely abnormal monetary policies as growth picks up, or that inflation will perk up with increasing demand.  

The government issued this morning a revised GDP report for the first quarter. The latest estimate shows a 1.4% annualized real GDP growth in that quarter. The first reading was at .7% and the second reading at 1.2%.

GDP 2017 1st Quarter.pdf



By Criticizing Obama, Trump Contradicts His Own Comments on Russian Meddling

I recently listened to a Trump supporter claim that the world respects Donald. Meet the "Front Row Joes," Trump supporters who camp out for rallies - CBS News  

That statement and countless others routinely made by Trump supporters instantly remind me of Daniel Patrick Moynihan's statement that "everyone is entitled to his own opinion but not to his own facts". An American Original | Vanity Fair

Poll shows U.S. tumbling in world’s regard under Trump - The Washington Post

Trump Unpopular Worldwide, American Image Suffers | Pew Research Center

Thomas Friedman recently toured New Zealand, Australia, South Korea, China, Taiwan and now Hong Kong, talking with business and political leaders. Those leaders have "taken Trump's measure" and concluded that — far from being a savvy negotiator — he’s a sucker who’s shrinking U.S. influence in this region and helping make China great again." Trump Is China’s Chump - The New York Times


Trump has decorated his golf clubs with a fake cover of Time magazine: A Time magazine with Trump on the cover hangs in his golf clubs. It’s fake. - The Washington Post


At least Donald has found a business where he can avoid losing hundreds of millions and to actually make a risk-free profit. Donald has found success in creating a brand, called Trump, and then licensing his name to others who take the financial risks. He has been superb in his successful, though thoroughly shameless, self-promotion about his alleged business acumen that was instrumental in the creation of the Trump brand. Donald Trump's Real Secret To Riches: Create A Brand And License It: Forbes; How Trump has made millions by selling his name - Washington Post 

Before Donald hit upon creating and licensing the brand "Trump", Donald was losing tons of money. Yep, Donald Trump's companies have declared bankruptcy...more than four times | PolitiFact; Trump's Huge Operating Loss Came From Mistakes And Gambles : NPR  

In one of Donald's recent tweets, how many false claims can you find? I think that he needs to try harder and make 4 false claims in a tweet.

Donald J. Trump (@realDonaldTrump) | Twitter

Donald Trump Attacks Amazon, Washington Post and Jeff Bezos |

Despite President Trump's tweet, Amazon already collects sales taxes: CNBC

I would note that Donald does not provide any facts to support his claim that the WP publishes fake news. Trump, on the other hand, creates Fake News virtually everyday and rarely tells the truth about anything. The Fact Checker’s tally of Trump’s false claims since becoming president - Washington Post


Ivanka and Her "Original" Shoe Designs

Do you think that Ivanka copied the Wild Thing shoe design made by an Italian company called Aquazzura? 

Judge: Ivanka Trump must answer questions in shoe design lawsuit - Jun. 24, 2017

Ivanka said she was too busy helping her Dad run the country to give a deposition in Aquazzura's lawsuit, but the judge disagreed.

You can buy the AQUAZZURA Wild Thing shoe for a mere $795. Just another tidbit, like Einstein's theory of relativity, that is and will remain forever beyond my comprehension.

Other Ivanka brands look similar to other Aquazzura shoes. Aquazzura's Shoe-Copying Lawsuit

China frees activists who probed factory that made Ivanka Trump shoes, group says - Jun. 28, 2017  


A. Bought 2 JPM 2.95% SU Bonds Maturing on 10/1/26

Finra Page: Bond Detail (prospectus not linked)
Credit Ratings: 
Moody's at A3

YTM at Total Cost (97.189) = 3.303
Current Yield: 3.04%

JPM Analyst Estimates 
1Q17 Earnings Press Release
10-Q for Q/E 3/31/17 
2016 Annual Report 
JPM SEC Filings

B. Sold 2 Shell International 2.25% SU Bonds Maturing on 1/6/23

Profit Snapshot: +$17.21

FINRA Page: Bond Detail

I sold at 98.816 or 98.716 after the $1 commission. The YTM at 98.716 was 2.498% as of 6/5/17. The current yield at that price is 2.28%. 

I bought this bond on 3/17/17 at a total cost of 96.995. As of that time and at that price, the YTM was 2.815% and the current yield is 2.319%. 

I discussed the purchase in Item # 1.C.

C. Sold 2 Verizon 1.75% SU Bonds Maturing on 8/15/21

Profit Snapshot: $21.88

Finra Page: Bond Detail

I discussed this purchase here: ITEM # 2.B. 

I bought these bonds at a total cost of 96.274 on 1/17/17. The current yield at that price is 1.817% with the YTM then at 2.62%

I sold at 97.468 or 97.368 adjusted for the $2 brokerage commission. The YTM at the net proceeds number was 2.415% as of 6/6. The current yield at 97.468 is 1.796%

I am using the proceeds to increase my current yield while capturing part of higher YTM number several years prior to maturity. In this particular case, the spread between the current yield and the YTM yield was .803% as of 1/17/17. I harvested .205% of that spread or 25.5% on 6/6/17. 

I will now look for an opportunity down the road to buy back these bonds when my current yield based on total cost is 2%+. 

Verizon 2017 First Quarter Report 

2016 Annual Report

D. Sold 2 Omega Healthcare 4.375% SU Bonds Maturing on 8/1/23-A Roth IRA Account

Trade Snapshot: 

Profit Snapshot: $33.16

FINRA Page: Bond Detail

Credit Ratings: 
Moody's at Baa3
Moody's upgrades Omega's senior debt rating to Baa3; stable outlook
S & P at BBB-
Fitch at BBB- Fitch Affirms Omega Healthcare Investors at 'BBB-'; Outlook Stable | Reuters

Credit Ratings – Omega Healthcare Investors, Inc.

I discussed this purchase in this post: 

Item # 5. Bought in Roth IRA 2 Omega Healthcare 4.375% Senior Unsecured Bonds Maturing on 8/1/2023 at 100.995 (101.195 with commission)Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 7/19/16 - South Gent | Seeking Alpha

The YTM at my net proceeds price (102.720) was 3.861%. The current yield at 102.920, the price paid by the purchaser, is 4.25%. 

I mentioned in a recent comment selling 107 of 188+ shares of OHI's common stock which reduced my average cost per share to $30.22. I will discuss that trade in a subsequent post. The profit snapshot can be found in my Gateway Post for the Equity REIT Common and Preferred Stock Basket Strategy.

E. Sold 2 Duke Power 1.8% SU Bonds Maturing on 9/1/21

Trade Snapshot ($2 Commission):

Profit Snapshot: +$23.91 

I discussed purchasing these bonds in Item # 1.C.

Finra Page:
Bond Detail

I sold these bonds at 98.23, netting 98.130 after a $2 brokerage commission. The YTM at 98.13 was 2.266% as of 6/6/17. The current yield at the net price is 1.83%.  

I bought these bonds at a total cost of 96.987. At that price, the YTM was 2.532% as of 2/22/17. The current yield at that total cost number is 1.86%.     


My thinking, as previously stated, was that the decline in bond yields was at or near the end when I started to lighten up some on intermediate term corporate bonds. 

Another factor was selling at a profit some low current yield bonds after quickly capturing some of the YTM excess over the current yield number. 

I will consider buying back when and if the price fall to more attractive levels.  

There may also be a trend reversal developing in intermediate term rates. The ten year treasury yield was in a downtrend, but appears to have bottomed near 2.14% (6/26/17) and is now moving back up. Daily Treasury Yield Curve Rates

It is still too early to call this recent movement a trend reversal IMO. The U.S. ten year yield will be influenced meaningfully by movements in 10 year debt issued by high quality sovereign issuers like Germany: Germany 10 Year Government Bond

The German 10 year closed at a .25% yield on 6/26/17 and at .37% yesterday. If European 10 year debt yields start to move up persistently, based on a perception that the ECB will at least start to take baby steps later this year to withdraw its extraordinarily abnormal monetary policies, then it will be like removing a lid holding down a pot of boiling water for comparable term U.S. debt.

A. Bought 2 State Bank of India 1.1% CDs Maturing on 9/18/17 (3 month CD):

I have a .75% Bank of China 6 month CD maturing on 9/15/17

B. Bought 3 Merchants Bank .9% CDs Maturing on 7/17/17 (one month CD)

I have two Merchants Bank .8% three month CDs maturing on 7/19/17. 

In my Fidelity and Schwab accounts, it still advantageous for me to buy short term CDs as an alternative to keeping funds in lower yielding brokerage sweep accounts.  

The Fidelity Government Money Market Fund (SPAXX) has a .42% expense ratio and a current yield of .41%.

Schwab is far worse at .05%.

3. Equity REIT Common and Preferred Stock Basket Strategy

I initially added 50 shares of HTPRD in two accounts. The price popped some after I purchases those two lots, possibly individuals buying shortly before the quarterly ex dividend date, and I sold my highest cost 50 share lots in both accounts where I had just made the purchases. 

HTPRD went ex dividend for its quarterly distribution of $.40625 per share on Wednesday (6/28/17).  

A. Bought 50 HTPRD in Roth IRA and Sold 50 in Same Account Thereafter

I bought  50 shares in my Roth IRA at $24.95, bringing temporarily my position up to 100 shares: 

I thereafter sold my highest cost 50 shares at $25.6: 

Profit: +$8.43

Transaction History Roth IRA Account: 

Just more small ball. 

B. Added 50 HTPRD in Taxable Account at $24.83 and Sold 50 Same Account at $25.65:  

I added 50 shares in my IB account, bringing the total up to 100 shares in that account.   

I then sold my highest cost 50 share lot at $25.65: 

Profit Snapshot: +$20.54

I now own 200 HTPRD shares in taxable accounts and 50 shares in a Roth IRA. 

The lowest cost lot is held in my Fidelity account, bought at a total cost per share of $22.88 (12/20/16). I discussed that purchase here.

Quote: Hersha Hospitality Trust 6.5% Cumulative Preferred Series D Stock (HTPRD)

The issuer is the REIT Hersha Hospitality Trust Cl A (HT)

HT's 2017 First Quarter Report and its 2016 Annual Report

Security Description: HTPRD is an equity preferred stock that pays cumulative and non-qualified dividends at the fixed coupon rate of 6.5% on a $25 par value. 
Final Prospectus Supplement

The issuer has the option to redeem at par value on or after 5/31/21.

The prospectus contains a typical Stopper Clause that prevents the issuer from deferring the preferred stock dividend while using cash to pay a common stock dividend or to buy common shares.

The Stopper Clause is the legal means by which the preferred stock's superior claim to cash is enforced against the common shareholders.

4. Continued to Pare Stock Allocation


Trade Snapshot: 

This ETF can be bought and sold commission free at Schwab. 

Profit Snapshot: $43.37

Quote  PowerShares S&P International Developed Low Volatility Portfolio ETF (IDLV)

This ETF is currently rated 3 stars by Morningstar.

Before I buy this one back, I will need a 20% correction. This ETF was sold due to underperformance since I bought my first lot. The ETF had outperformed the S & P 500 YTD through the date that I sold shares.

PowerShares S&P International Developed Low Volatility Portfolio (IDLV) Total Returns

YTD Through 6/7/17 = 14.61%
1 YR. 9.04%
3 Years Annual Average = 2.35%

SPDR® S&P 500 ETF (SPY) Total Returns

YTD Through 6/17/17 = 9.48%
1 Year = 17.49%
3 Years Annual Average = 9.96%

B. Eliminated SWASX:

Trade Snapshot:

Profit Snapshot: +$143.95

 SWASX Schwab Global Real Estate Fund Morningstar Page (4 stars)

The yield is too low for a real estate fund and the expense ratio is too high at 1.05%. I do own and have owned foreign REIT stocks bought on their local stock exchanges, avoiding the recurring expense ratio of a fund and receiving substantially higher yields particularly in Canada.

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. OMER: After hitting $27.09 recently (6/22/17), OMER has fallen about 23% over the past five days due to a short report published at Scribd, which can be read with a subscription.

    I have a subscription and read the report by someone who calls himself Art Doyle who argues that OMER is a fraud.

    A very brief and incomplete summary of Doyle's arguments can be found at

    OMER is going to sue Mr. Doyle for defamation.

    I do not have any expertise in medicine and consequently can not make an informed judgment about Doyle's claims.

    Some investors are apparently giving his report some credence based on OMER's pullback on higher than normal volume:

    Volume is really heavy this morning as the stock rebounds some:

    Omeros Corporation (OMER)
    $ 21.81 +$ 1.47 +7.23%
    Last Updated: June 29, 2017 at 9:58 a.m. EDT
    Day's Range 20.6001 - 22.2668
    52 Week Range 7.2000 - 27.0900
    Volume 4,571,035
    Avg. Volume 963,50

    The price is jumping around a lot.

    I discussed buying 30 shares at $9.03 in this post as part of my small cap biotech lottery ticket basket:

    I will keep those shares and will flip a coin latter today on whether to sell the 30 shares bought in my IB account at $9.35 (1/13/17).

  2. DOC, GMRE, GOV: I have no current positions. All three of these REIT stocks have declined in price this week after stock offerings.

    GOV, an externally managed REIT, declined the most after it agreed to acquire First Potomac (FPO) and launched a share offering to fund part of the purchase price. The external manager is not highly regarded and is compensated based on assets under management. Consequently, their interest is simply to increase assets under management through deals, which are frequently viewed by investors as contrary to the best interests of shareholders.

    The public offering shares were sold to the public at $18.5.

    GOV will receive less than $18.5 due to the underwriters discount, which has not been publicly disclosed yet and its internal expenses related to the offering that can generally run in the $500K area.

    For the trading day prior to the announcement, GOV closed at $21.9 (6/27/17), but the share price had been drifting down after closing at $22.89 (6/20/17).

    Government Properties Income Trust (GOV)
    Closed at $18.31 -$1.02 (-5.28%) on 6/29/17

    Although I detest this company and its external managers, the price can sink to a point where I will take a nibble as a trade.

    DOC announced $735M in acquisitions, selling 20M shares at a $20.5 offering price to the public.

    The expected unlevered yields from those acquisitions are pretty low:

    " the first year unlevered cash yield of such ROFR Properties is expected to be 4.7%"

    "Upon closing on the Baylor Cancer Center, the first year unlevered cash yield is expected to be 4.7%."

    I think that I would have sold those properties to DOC.

    The shares closed today below that offering price:

    Physicians Realty Trust (DOC)
    $19.79 -$1.58 (-7.39%)
    At close: 4:00PM EDT

    There was also a disclosure in the press release announcing the acquisitions, linked above, that the tenant of "the tenant of the Kennewick medical office building (the “Kennewick MOB”), a 161,885 rentable square foot medical office facility leased by Trios Healthcare in Kennewick, Washington, stopped paying rent and we believe future lease payments are not reasonably assured."

    When the real estate wheeler dealers have experienced a benign operating environment for several years, there is a tendency to start over paying for properties since prices have been rising for a long period. And, in recent years, overpaying is made easier by borrowing costs being abnormally low and REIT investors willing to buy stock to finance these kind of acquisitions at historically high AFFO multiples.

    I did buy DOC at $13.75 but have since sold the shares.

    2. Bought 100 DOC at $13.75

    I have no interest at the current price-to each his own I guess.

    As to GMRE, I sold again my small position at $10.01:

    Item 3.C.

    Closed today at $8.99

    GMRE sold shares at $9:

  3. South Gent,

    The brief of Art Doyle report is very damaging, which might have triggered the “shoot first” herd mentality.

    I don’t own OMER. Analysts’ estimates are all over the map from $15 to $75. I see that there are 4 Buy recommendations (WBB Securities , Maxim Group, Wedbush, and FBR Capital) and 1 Hold recommendation at Cantor Fitzgerald. Fidelity has a “Very Bearish” rating in its Equity Summary Score. Insiders have been selling at about half of the current price of $20.59. Institutions had redeced their holdings, down 7% during Q1, 2017. Meanwhile, the stock price has almost doubled in 9 sessions (as of 6/22) and its daily trading volumes has jumped significantly since 6/12/2017.

    I will stay away from this type of controversial stock. It is just hard to get to the bottom of the story.

  4. Y: The full report available at Scribd is damaging if the allegations are true. The most serious charge is that management is deliberately misleading the public about trial results for OMS721 which is OMER's key pipeline compound, particularly the success of that drug's long lasting subcutaneous delivery. The report is written in a juvenile kind of tone.

    I sold 30 of my 60 shares at $20.61 today. The gain was 120% in less than 6 months. I am keeping for now the 30 shares held in my Schwab account that were bought last January at $9.03. I will wait to read any detailed rebuttal given by OMER.

    At first, I thought the quick share price decline after a huge run up in price was the typical roman candle effect, meaning a big burst in price, followed by profit taking and short selling that drives the price back down. This report probably just added a lot of fuel to that natural progression after a parabolic price spike.

  5. South Gent,

    Re. GOV I see that you have a couple of profitable round trips since 2012. Impressive!

    GOV derives a high percentage of revenue from Government and has a larger percentage of floating rate debt, which are negative in a "smaller government" environment with rising interest rates.

    Not sure how the acquisition of FPO will play out, but do you think GOV's distribution is safe? GOV initiated the dividend in 2009 and stays at about the same level all these years.

  6. Y: When looking at the safety of a REIT's dividend, I want to use a payout ratio based on cash available for distribution ("CAD").

    GOV claims to have a normalized FFO of $.56 per share last quarter. The quarterly dividend is $.43. Based on the normalized FFO number, the payout ratio is 76.8%:

    Page 10:

    Some investors may look at that payout ratio and say the dividend is safe for now.

    GOV is spending a considerable sum in recurring capital expenditures. Offices require a lot of recurring capital expenditures as do apartments.

    Page 17 Recurring Capital Expenditures in 2016 =$37.066M

    The normalized FFO for 2016 was $167.84M. After subtracting $37.066, that leaves CAD at $130.784M. The company paid out $122.366M in dividends last year. I only excluding what the company calls recurring capital expenditures which generally would mean replacing obsolete equipment, making routine and necessary repairs and other types of recurring maintenance type expenditures. Cash would be used for other capital expenditures as well. So that explains IMO why GOV has not increased the dividend. It is tight on cash available for distribution and is not growing its CAD. Normalized FFO decreased in 2016 compared to 2015. The share count is increasing. When that occurs, each share of stock has a lower and lower claim on FFO and CAD as those numbers stagnant or even go down as the share count goes up. Eventually something has to give.

    GOV's external manager caused GOV to acquire a substantial stake in SIR. SIR's allocable FFO, which is not cash received, is excluded in GOV's normalized FFO computation. The reason for that share acquisition IMO was to solidify the external manager's control over SIR and to prevent another loss of management fees which had just occurred for Commonwealth REIT where the same external manager was fired by stock owners after a lengthly court battle. No internal manager would have bought the SIR stake and it was IMO clearly disadvantageous to existing GOV shareholders and contrary to their interests.

    " Government Properties Income Trust (NYSE: GOV) today announced that it has purchased 21,500,000 common shares of Select Income REIT (NYSE: SIR). The purchase price was equal to approximately $677.5 million, or $31.51 per share ($1.50 per share above SIR’s closing price on July 8, 2014)"

    "Government Properties Income Trust (NYSE: GOV) today announced that it has entered an agreement to purchase 3,418,421 common shares of Select Income REIT (NYSE: SIR) from a fund affiliated with Lakewood Capital Management, LP ("Lakewood"). The purchase price is approximately $95.2 million, or $27.85 per share. As a result of this purchase, GOV's ownership of SIR will increase from approximately 24.3% to approximately 28.2% of the total common shares of SIR."

    Select Income REIT
    $24.03 +$0.05 +0.21%
    Last Updated: June 30, 2017 4:00 p.m. EDT

    It would be fair to say that I detest the way GOV is being managed, but given the right price I will hold my nose.

  7. South Gent,

    Thank you for the detailed analysis. The SIR shares purchase in 2014 did not pan out as was promised. After going through the presentation slides for FPO acquisition and reading the SA article I can’t say there is confidence that FPO acquisition will fare any better.

  8. I have published a new post: