Monday, June 5, 2017

Observations and Sample of Recent Trades (THQ)

Trump: Ignorance Is Bliss and Lying Works in American Politics: 

Trump has announced his intention to withdraw the U.S. from the Paris Climate Agreement. 

The U.S. joins only two other nations, Syria and Nicaragua, who have already rejected that agreement. Trump pulls out of climate deal - CBS News 

To be fair to Nicaragua, that country refused to adopt the Paris agreement because it did not go far enough. So that leaves Assad's Syria and the TrumpNation. 

As a practical matter, the U.S. is still a party to the Paris Climate Agreement. The withdrawal process will take four years which means that this issue will be resurrected in 2020 elections. 
What Did Trump Just Do? The Paris Climate Withdrawal Explained - Bloomberg

Steve Bannon and Scott Pruitt collected the "facts" that Donald relied upon to make his decision. Bannon and Pruitt are ideologues. Their combination of zealotry and ignorance will never produce information for a rational, fact-based decision. 

Fact-checking President Trump’s claims on the Paris climate change deal - The Washington Post (Trump's usual assortment of false and misleading statements)

Paris climate agreement: Fact-checking Donald Trump's speech: USA Today

Fact-checking Trump's speech on the Paris Accord - ABC News

Climate change science is a hoax according to Donald, an opinion that he has stated as a fact many times. It would be fair to say that Donald was predisposed to join Assad in rejecting the Paris Agreement. Perhaps Assad was just preoccupied with the Syrian civil war which leaves TrumpNation by its lonesome. 

Donald Trump has tweeted climate change skepticism 115 times. Here's all of it.

Donald did say he was willing to negotiate a new voluntary climate agreement to his liking.  

"So we're getting out, but we will start to negotiate and we will see if we can make a deal that's fair. And if we can, that's great, and if we can't, that's fine." 

So the rest of the world must negotiate a new agreement with Donald that will allow the U.S. to pollute more. The world will give Donald and the U.S. the finger which is what Trump and his followers want. They are proud that world leaders think the U.S. has become more than a little bit crazy. Irreparable damage to the nation's reputation is already well in motion.   

Germany and Italy issued a joint statement immediately after Donald's announcement rejecting any possibility of a renegotiation. World leadership is shifting away from the U.S., a process that is likely to accelerate over the next four years. As Trump Exits Paris Agreement, Other Nations Are Defiant - The New York Times 

A senior WH officials said that upsetting the Europeans was a "secondary benefit" to the withdrawal. Inside Trump’s climate decision: After fiery debate, he ‘stayed where he’s always been’ - The Washington Post Sounds like Bannon or Miller who are the heart and soul of the Modern Day GOP along with Ann Coulter, Sean Hannity, Alex Jones and Rush Limbaugh.   

What Happens If U.S. Quits Climate Deal? | The Weather Channel

Will U.S. exit from Paris agreement spur job growth? - CBS News ("Most experts think not. Indeed, shifting to a clean-energy economy has greater potential to boost employment, economists say")

Trump's pro-pollution EPA Director, the climate science denier 
Scott Pruitt (formerly Oklahoma's Attorney General), and Trump are in favor of significantly more pollution. Their actions will primarily benefit a few corporations that donate heavily to the GOP and will of course appeal to the GOP's base who believe, like Trump, that climate change science is a hoax promulgated by "liberals", "elitists", "globalists" and China of course, which goes without saying. It is far easier to be ignorant than informed.  

'A big box of crazy': Trump aides struggle under climate change questioning

Coal bows to natural gas, as consumption falls to lowest since 1984 - MarketWatch

Coal industry jobs are in a long term secular decline due to automation and electric plants replacing aging coal fired generation with cost effective gas fired turbines in newly constructed combined cycle generating plants that produce less greenhouse gases. 

Combined Cycle Projects in the U.S..pdf

Average utilization for natural gas combined-cycle plants exceeded coal plants in 2015 - Today in Energy - U.S. Energy Information Administration (EIA)

Combined-Cycle Power Plant – How it Works | GE Power Generation

Trump’s Executive Order Won’t Save Coal Mining Jobs - Bloomberg

Increased automation guarantees a bleak outlook for Trump’s promises to coal miners | Brookings Institution

Coal Mining Jobs Trump Would Bring Back No Longer Exist - The New York Times

Coal Mining - May 2016 OES Industry-Specific Occupational Employment and Wage Estimates (53,420 jobs)

U.S. Solar Jobs Rose 24.5% to Surpass Fossil Fuel Power Plant Workers | (250,277 jobs); US Energy and Jobs Report.pdf

Even without Paris climate agreement, U.S. reducing dependence on fossil fuels: USA Today

Trump's promises to bring back coal mining jobs will prove to be empty. Perhaps a few more jobs will be created by permitting substantially more greenhouse gas emissions and other pollutants. 

The GOP quickly reversed an Obama era rule that protected the waterways from debris contamination caused by surface mining, which is fine with those republican politicians since they do not have have to drink the contaminated water. (see my prior discussion: The GOP and The Coal Industry and Congressional Research Report on Stream Protection Rule.pdf) Many of the folks who will be drinking contaminated water are in geographic areas that voted heavily for the GOP and other republican politicians.

How America Stacks Up When It Comes to Greenhouse Gas Emissions | Smart News | Smithsonian

Climate Change: Vital Signs of the Planet:Evidence: NASA;

Twelve economic facts on energy and climate change | Brookings Institution;

NOAA | science & information for a climate-smart nation

On the positive side, the trends toward burning less coal, developing more fuel efficient vehicles, utilizing more renewable energy resources, and other measures, all of which contribute to less greenhouse emissions, will continue in spite of the GOP. Will it be enough?  No. The light bulb may go off for some Trump voters a few moments before being burned to a crisp or suffocating due to a lack of oxygen.      

The GOP is in a full climate denial mode, Climate Change as Fake Science - The New York Times. An unwillingness to embrace facts and science is part of the GOP's DNA. It is certainly consistent with their desire to teach creationism and religion in America's schools, turning the U.S. school system into an Americanized Madrassa with annual pilgrimages to Kentucky's Creation Museum to witness Adam and Eve walking with the dinosaurs-a slight exaggeration.   

A. A. Gill on Kentucky's Creation Museum | Vanity Fair;

Creation Museum - Religion - The New York Times (Adam & Eve in the Land of Dinosaurs-no joke)

Paleontology and Creationism Meet but Don’t Mesh -

The GOP's strong anti-science tilt is also reflected in the massive cuts contained in Trump's budget for scientific research including a slashing in funding for medical research. A grim budget day for U.S. science: analysis and reaction to Trump's plan | Science | AAASTrump budget makes heavy cuts to science research | TheHill

As China pulls trade from North Korea, Russia gets cozy with Kim Jong Un: USA Today (6/5/17) 


Trump and Carter Page

Carter Page dodges questions on Russian meddling but maintains innocence - CBS News

Typically, Page dodges specific questions while denying that he colluded with the Russians. 

See, e.g., Carter Page: ‘I don’t deny’ meeting with Russian ambassador | MSNBC

The Senate Intelligence Committee will put this guy under oath and grill him when they have more documents relevant to his examination. That is the only conclusion that a sane person could draw. 

A few days ago, Page complained to the Senate Intelligence committee that his testimony had been postponed, and he wanted so much to clear his name. 

Well, he was not scheduled to testify yet but had been working on a time and the details: Trump tweets misleading claim on Carter Page's testimony - Business Inside 

Page's letter was picked up by the "journalists" at Fox. 

Since Fox "News" is where our Commander-In-Chief receives his "intelligence" briefings, Donald was watching when this subject came up. He went ballistic and immediately launch another Twitter Tantrum:

Trump defends Carter Page, whom he is not supposed to know | MSNBC

Notably, Trump accused the former FBI and CIA Directors of criminal perjury, but provided no proof as usual, nor did he bother to provide any specifics. The republican politicians said nothing in response to that accusation. 

If Trump was referring to the testimony involving Russia's interference in the election, he will need to coordinate better with the TrumpLand's best friend Putin. 

Putin admitted the day after Trump's Twitter Tantrum that maybe there were some patriotic Russians who were responsible for helping Trump win the election,  but Vlad had nothing to do with it. Patriotic Russians may have staged cyber attacks on own initiative: Putin | Reuters  Those patriots may have felt compelled to conduct a "justified fight against those speaking ill of Russia" according to Vlad. That would not include Donald, of course, who regularly sings Putin's praises. Vlad soon retreated from his admission by stating that the U.S. was trying to frame Russia. It difficult for me to see a credibility gap between Putin and Trump.   

Vlad controls nothing in Russia, assuming I understand what Vlad is saying. He just rides horses without a shirt, hang glides with 
Siberian Cranes, and plays hockey with the boys (scoring mucho unassisted goals). The Nashville Predators are in the Stanley Cup finals this year and maybe they need to draft Putin.  

And Vlad and Donald both enjoy their reality creations.    

One of my favorite Vlad moments was when he gave an award to the air force pilot who shot down Korean Air Lines Flight 007, probably in international air space, murdering 269 civilian passengers including a U.S. Congressman from Georgia and 22 children under the age of 12. Unless we forget, the death toll from shooting down MH17 over the Ukraine was 298.  

Because of Democrats, Trump Has 55 Percent Chance in 2020, Michael Bloomberg Says 

I would agree with Michael Bloomberg that Hillary had a huge and obvious message problem. Her message, as far as I could tell, was that Trump was really bad. And she was a woman, more qualified than Donald who was clearly unfit to be President, would fix Obamacare in some way, and favored persons who identified themselves as transgender using the bathroom of their choice. 


Devin Nunes the Toad

Devin Nunes (R-Calif.) is Trump's lackey. Nunes-led House Intelligence Committee asked for ‘unmaskings’ of Americans (republished from WP)

"In contrast to the committee’s handful of unmasking requests, officials said the tally showed that Rice requested a single unmasking related to Trump’s activities between June and January." 

I am being kind to Nunes when I call him Trump's lackey since other descriptions, more degrading, are appropriate.  

Original WP Article: Nunes-led House Intelligence Committee asked for ‘unmaskings’ of Americans - The Washington Post

Nunes May Have Violated His Recusal From Russia Probe - The Atlantic

Nunes represents California's 22nd congressional district, mostly a Rush Limbaugh type district. Nunes carried that district with 68.2%. The House Majority leader, Kevin McCarthy, won in the 23rd congressional district with 70% of the vote. California Election Results 2016 (Darryl Issa may be the most vulnerable GOP CA. representative winning by just 2%.)


Multi-Generational Disability

One family. Four generations of disability benefits. Will it continue?: Republication of WP Story

Story As Published in the WP: One family. Four generations of disability benefits. Will it continue?The number of homes with multiple recipients has risen, especially among the poor. | The Washington Post

Will it continue? The answer to that question is yes. It would take much effort and an unusual person to be able to break the disability and dependence cycle. 

In many cases, the multi-generational claims for disability are caused by addiction to drugs, both legal and illegal, and depression or other mental disorders.     

As noted in the WP article, and in J.D. Vance's book Hillbilly Elegy, the rural areas are far more likely than urban areas to have multiple generations claiming disability benefits and/or other government benefits including welfare, food stamps and Medicaid. 

Review: In ‘Hillbilly Elegy,’ a Tough Love Analysis of the Poor Who Back Trump - The New York TimesThe Lives of Poor White People - The New Yorker

Disabled, or just desperate? Rural Americans turn to disability as jobs dry up | The Washington Post

And, if the government cut off or even cut back on the disability payments flowing to virtually everyone in an extended family, the family would become homeless fairly quickly and no one would find or keep a steady job. 

The cuts to a major disability program in Trump's budget - CBS News

Trump's Budget Cuts to SNAP and Social Security Would Hit His Rust Belt Voters Hard - The Atlantic

I would note that the family portrayed in the WP article was clearly living in poverty, but still paid  "$300 for cellphones",  "$98 for cable television", and "$35 for Internet service". Actually, the government's disability payments paid for those items.  

Understanding the Epidemic | Drug Overdose | CDC Injury Center ("From 2000 to 2015 more than half a million people died from drug overdoses. 91 Americans die every day from an opioid overdose.")

Current Rural Drug Use in the US Midwest

Cash Flow Schwab Taxable Account 6/1/17

The preceding snapshot reflects my investment strategy. I received dividend and interest payments from a variety of securities: 

Sumner County: Tennessee Municipal Bond 

Western Asset (GDO): BOND CEF Monthly Dividend Payments 
Albertsons: Two $1K Par Value Bond (cost basis $1,470-junk bond) Bond Detail
COFPRH:  Fixed Coupon Equity Preferred Stock 
TCFPRC: Fixed Coupon Equity Preferred Stock
JPMPRG: Fixed Coupon Equity Preferred Stock
ELC: Exchange Traded First Mortgage Bond
KWK: Exchange Traded Senior Unsecured Bond 
GJT: Synthetic Floater
BKLN: Senior Loan ETF
PFE: Common Stock
PEO: Common Stock CEF 
Wells Fargo CD (monthly interest)

The receipt of dividends and interest payments occur throughout the month. Each payment is insignificant in isolation and becomes material for me only when aggregated with all other payments. Cash flow is not spent but aggregated to buy more income generating securities, creating a compounding effect over time. 


1. Long Term Bond Basket Strategy

I have been increasing my long term bond allocation over the past several weeks, primarily by adding Tennessee municipal bonds whose maturity dates are more than 10 years into the future. Depending on the level of interest rates when the optional call right comes into being, it is possible that the issuer may redeem early, which will shorten the actual maturity number to less than 10 years. 

The bond discussed below will mature in 2031, but the issuer may redeem on or after 2/1/23.  

The purchase of the Rutherford County and Montgomery County municipal bonds, discussed below were funded with the expected proceeds from the following short term bond/CD maturities: 

Short Term Bond/CD Basket Maturities:

1 Bank of China .9% CD 7/27/17

5 USTs .65% 7/31/17
5 USTs .5% 7/31/17
1 Bank of North Carolina  .7% CD 7/31/17
1 Bank of China .8% CD 7/31/17
2 Bank of India .85% CD 8/2/17
1 First Merchants .65% CD 8/3/17
2 Compass Bank .85% CDs 8/3/17
1 Peoples Bank .65% CD 8/8/17
3 Enterprise Bank .6% CDs 8/9/17
2 Huntington Bank .8% CDs 8/15/17
1 Southern Co SU 1.3% 8/15/17

Total = $25K

A. Bought 10 Rutherford County Tennessee 3.125% Water Revenue Bonds Maturing in 2031

YTM at Total Cost (101.151) = 3.022%  (price includes a $10 commission paid to Schwab)
Yield to Worst = 2.905% (assumes optional call at the earliest date)

Credit Rating:
S & P at AAA

Rutherford County - Google Maps



Optional Redemption: At Par at Issuer's Option on or after 2/1/23

A. Bought 15 Montgomery County Tennessee 3% General Obligation Bonds Maturing on 4/1/27

This bond's maturity date just squeezes under the ten year limit for intermediate term bonds. 


YTM at Total Cost (102.874) = 2.373% (price includes a $15 commission paid to Fidelity)
Current Tax Free Yield = 2.92%

This YTM is close to a ten year treasury which closed at 2.36% on my purchase date. Daily Treasury Yield Curve Rates

My after tax yield will be meaningfully greater with the AA+ rated municipal bond compared to a U.S. treasury that pays taxable interest. I will also avoid the 5% Tennessee Hall Income tax on dividends and interest this year. That tax is scheduled to be cut by 1% each year until eliminated in 2022.


Optional Redemption: At par value on or after 4/1/22

Offering Statement.pdf

2. Short Term Bond/CD Ladder Basket Strategy:

A. Added 2 USTs .75% Maturing on 10/31/17:

YTM at Total Cost = .999% (no commission is charged for Treasury purchases)

I now own 6.

3. Continued to Pare Stock Allocation:

A. Pared the CEF THQ-Sold 160+ at $17.41:

Profit Snapshot: +$208.77

I initially sold 100 shares last February and then eliminated THQ in this account on 5/8/17. I still own shares in other accounts.

Quote: Tekla Healthcare Opportunities Fund (THQ)

Data Date of Trade (5/8/17)

Closing Net Asset Value Per Share: $18.87
Closing Market Price: $17.43
Discount: -7.63%
THQ-CEF Connect (leveraged CEF)

SEC Form N-Q (portfolio holdings as of 12/31/16)

Last SEC Filed Shareholder Report (period ending 9/30/16)

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. Gold and bonds are doing well today:

    SPDR Gold Trust (GLD)
    $123.16 +$1.43 +1.17%
    June 6, 2017 at 1:13 p.m. EDT

    iShares 7-10 Year Treasury Bond ETF (IEF)
    $107.8075 $0.4175 +0.39%
    June 6, 2017 at 1:13 p.m. EDT

    The 10 year treasury is down to a 2.14% yield.

    My gut is telling me that the recent surge in bond prices is too far, too fast, so I am lightening up some now by selling at profits some low current yield bonds that have risen in price.

    An example would be selling my 2 Verizon 1.75% SU bonds maturing 8/15/21:

    The Stock Jocks are not worried about anything,see no danger on the far horizon, and still believe Trump and the GOP will deliver on meaningful tax cuts. And, what is strange to me at least, they still view the Trump presidency as a positive for the U.S. economy.

    I suspect that their exuberance will prove to be delusional, but it may take a river of cold water being splashed on them before they even take notice that their euphoria about the near term future is not grounded in reality. In other words, contrary facts will have to pile up to a virtual mountain before the bullish thesis will be questioned.

    On point, I am surprised that KRE, the regional bank ETF, is holding up so well.

    SPDR S&P Regional Banking ETF
    $51.91 -$0.48 -$0.92%
    Jun 6, 2017 at 12:55 p.m. EDT

    Sure, that price is down from $59+ in early March but is still up considerably from its closing price of $43.97 on 11/8.

    The entire premise for the major move from $48 to $59 was that net interest margins would expand since Trump's policies would cause more inflation and that there would be major changes to Dodd-Frank.

    I discussed those issues on 11/9:

    At the time those predictions seemed at a minimum plausible, but then Donald actually became President and had to translate policies into law which is not his strong suit to say the least.

    The current reality is that changes to Dodd-Frank need 60 votes in the Senate which is not likely to happen now.

    And, more importantly, the Stock Jocks are gradually waking up to the reality that NIM has been contracting this year rather than expanding, directly contradicting the bullish thesis that I outlined on 11/9/16.

  2. Through my Treasury Direct account, I am participating on a bi-monthly basis in the 4 week treasury bill auctions.

    The 4 week T-Bill auction today produced a .84% yield:

    The 13 week T Bill was auctioned yesterday at a .98% yield.

    The yields are moving up. The 3 month bill closed at a .53% yield on 1/3/17:

    As the short term rates have risen in yield, the intermediate term notes have come down in year. The 10 year treasury, for example, was at 2.45% on 1/3/17 and closed today at 2.14%.

    The probability of a .25% increase in the FF rate on 6/14 is now at 95.8%.

    The 3 month Libor rate is currently at 1.22%:

    That rate is relevant to a number of instruments such as secured junky loans and other instruments whose coupons will rise with the Libor rate. Investors call those junky secured loans "leveraged loans" which sounds better than junk loans.

    The 3 month Libor rate is high enough now that most Libor floors will no longer restrain increases in the coupon.

    I did buy back 50 shares of the leveraged loan ETF BKLN last February.

    Sponsor's Page:

    Many of those first and second lien Libor floating rate junk loans are owned by BDCs which enjoyed a rally this year but have pulled back in price over the past several weeks.

    VanEck Vectors BDC Income ETF

    I sold all of my BDCs into the rally. I view those stocks as a disfavored asset category, particularly those that are externally managed. Consequently, I will trade them, attempting to simply harvest a total return in excess of the dividend yield.

    I am upgrading the quality of my bond portfolio so my exposure to junky loans will be kept at a level well below de minimis.

  3. WP Article Just Published:

    "The nation’s top intelligence official told associates in March that President Trump asked him if he could intervene with then-FBI Director James B. Comey to get the bureau to back off its focus on former national security adviser Michael Flynn in its Russia probe, according to officials."

    The article refers to a 3/22 meeting that Trump had with the CIA Director and Dan Coats Director of National Intelligence Daniel Coats. It was Coats, a former GOP Senator from Indiana, who told others about this conversation with Donald.

    " The interaction with Coats indicates that Trump aimed to enlist top officials to have Comey curtail the bureau’s probe."

    Coats refused to answer direct questions on this matter when he last testified before Congress.

    He needs to answer the questions tomorrow when he appears before Congress. If he confirms that report, that would be another overt act by the President to obstruct justice which even the republican politicians, who are doing their best to shield Trump, can no longer sweep under the table.

    Richard Burr (R.NC) appears to me to be the only republican Senator who is actually assisting the investigation. Burr only received 51.1% of the vote last November against a former ACLU lawyer Deborah Ross, a political unknown and someone who was clearly a liberal.

    Virginia has turned a light shade of blue and N.C. is next. Providing cover for Trump would be toxic to Burr's re-election efforts.

  4. I have published a new post: