Wednesday, July 5, 2017

Observations and Sample of Recent Trades: (AMU)

Economic Reports

The ISM June 2017 manufacturing PMI rose to 57.8 from 54.9 in May. The new orders component had a robust move up to 63.5 from 59.5. 

Construction spending, however, was unchanged in May with spending on private projects declining .6% from April. Spending on public projects increased some and was up 4.5% Y-O-Y. 


Donald disagrees with the Fake News Media and others that his tweets are not presidential: 

He may be right when referring to a substantial part of the "Modern Day" U.S.. The replies to the preceding Trump tweet are interesting and provided some entertainment to the Old Geezer.

Trump Unpopular Worldwide, American Image Suffers | Pew Research Center

More people have confidence in Putin (27%) than in Trump (22%). 

It is certainly reasonable to attribute the USD's weakness since December 2016 to a an increasingly negative opinion about Donald worldwide. 

DXY Charts - U.S. Dollar Index (DXY) Interactive Chart 

The recent weakness in the USD against the Euro and other major currencies will benefit GAAP earnings reported by U.S. multinationals, assuming that the USD weakness persists.    


1. Intermediate Term Bond/CD Ladder Basket Strategy

I am still way behind in discussing bond trades in particular. The following trades were part of the strategy to increase my current yields slightly by exchanging shorter maturities for slightly longer ones. I had $3K in low coupon short term bonds that were redeemed early the by issuer (see item # 2 below)  

I went into reverse when I detected a potential shift from declining intermediate term rates to increasing yields. That shift has already caused bonds to decline in price starting on 6/26/17.   

A. Bought 1 Verizon 3.4% SU Bond Maturing on 6/15/27:  

This bond was bought at par value, with no accrued interest owed to the seller, under Fidelity's Corporate Notes program. 

B. Bought 1 Citigroup 3.4% SU Bond Maturing on 5/1/26:


FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Moody's at Baa1
S &P at BBB+
Citigroup Credit Ratings

YTM at Total Cost (99.698) = 3.439%

Current Yield at 3.41%

C. Bought 1 Dow Chemical 3.9% SU Bond Maturing on 7/15/25:

FINRA Page: Bond  Detail
Credit Ratings:
Moody's at Baa2
S & P at BBB

Current Yield at Total Cost (100.109) = 3.9%

This bond may be called at par value plus accrued and unpaid interest at anytime:

2. Short Term Bond/CD Ladder Basket Strategy-Early Redemptions by Issuers:  

A. Costco 1.125% SU Bond Maturing on 12/15/17 Redeemed Early By Issuer:

My realized gain was less than $1.

While the optional redemption was subject to a make whole provision, the $1K par value amount was slightly greater than the $1K par value discounted to present value. Only one interest payment was remaining prior to maturity. The discount rate used was the 6 month treasury bill, the remaining term of the note, plus 7 basis points. The 6 month treasury bill yield was at 1.2%. The $5.63 interest payment shown in the preceding snapshot was for the prior six months at the 1.125% coupon rate on $1K.  

B. Verizon Redeems Early 1.1% SU Maturing on 11/1/17:

In this case, the make whole provision generated an additional $.06 in principal amount. 

I bought 2 bonds at 99.904 (1/12/17). The current yield at that total cost number was 1.101% with the YTM at 1.222% on the date of purchase.  

C. Bought 2 Bank of East Asia 1% CDs Maturing on 7/28/17

3. Long Term Bond Basket Strategy-Tennessee Municipal Bonds:

A. Bought 10 Sumner County 3.125% GO Bonds Maturing on 12/1/34:

Credit Ratings:
S & P at AA+

YTM at Total Cost (100.35) = 3.071%

Current Tax Free Yield at 3.11%

Tax Equivalent Yield Calculator

Sumner County - Google Maps

Bond Information:

I discussed buying 5 Sumner County Tennessee 3% GO bonds maturing on 12/1/33 at  Item # 3.B.

4. Bought Back 50 AMU at $17.58:

The recent downdraft in this ETN's price seemed to be too much, too fast. 

AMU Historical Prices 

The downdraft coincided with an abrupt decline in crude oil prices.  

My general thinking is to add to my energy stock exposure when WTI sinks close to $40 or below. Those adds are trades. The following two charts highlight the fact that the energy stock sector has been in a bear market since the 2014 summer.   

Crude Oil Prices: West Texas Intermediate (WTI) - Cushing, Oklahoma-St. Louis Fed

EIA: Cushing, OK WTI Spot Price FOB (Dollars per Barrel)

XLE (blue line) v. SPY (green line) 3 year chart:

XLE Fund - Energy Select Sector SPDR ETF 
SPY Fund - SPDR S&P 500 ETF Trust 

Crude is falling in price today, and taking the energy infrastructure stocks with it, based on this story: Oil Tumbles After Russia Said to Oppose Deeper Production Curbs - Bloomberg

Trade Snapshot:

Quote:  ETRACS Alerian MLP Index ETN (AMU)

AMU is an Exchange Traded Senior Note issued by UBS that tracks before costs the Alerian MLP Index. AMU | ETRACS Alerian MLP Index ETN (click "key considerations" for sponsor's summary of risks)

The Alerian MLP Index consists of MLPs involved in various aspects of the energy business, including pipelines, production, storage, gathering and processing.

I downloaded the constituents of that index here. The weightings are as of 6/16/17:

Largest Weightings Per Preceding Snapshot:

19.77%  EPD-Enterprise Products Partners L.P.

Distribution Payments | Enterprise Products
10.86%  ETP-Energy Transfer Partners L.P. History
  8.39%  MMP-Magellan Midstream Partners L.P
Magellan Midstream Partners Distributions
  5.51%  PAA-Plains All American Pipeline L.P.
Quarterly Distributions
  5.12%  WPZ-Williams Partners L.P.
Williams Partners L.P. Cash Distribution History 
  4.76%  BPL-Buckeye Partners L.P. 
Distribution History
  4.54%  MPLX-MPLX L.P. 
MPLX - Distributions
  4.53%   OKS-ONEOK Partners L.P. 
Distribution History – ONEOK Partners


The general idea with this security is to collect several quarterly distributions and dump the shares at a profit. 

I generally keep my exposure to ETNs limited, since that form of ownership exposes me to the issuer's credit risk, in addition to the numerous risks associated with the index being tracked by the ETN as well as other risks relating to this kind of product. "Exchange-Traded Notes Avoid Unpleasant Surprises- FINRANYSE Publication: "What You Should Know about Exchange Traded Notes.pdf.
I eliminated most of my AMU position last February by selling 209+ shares at $21.27: Item # 4 A. (profit snapshot=$267.66)
I last discussed a purchase in March 2016: Item # 3. Bought 50 AMU at $15.73: Update For Portfolio Positioning And Management As Of 3/3/16 - South Gent | Seeking Alpha

I also discussed in that post buying 30 AMJ at $25 which also tracks the Alerian MLP Index. The AMJ ETN is a senior unsecured bond issued by JPM. 

As discussed previously, the energy infrastructure MLPs generally have a small or no direct exposure to energy prices. However, those companies have high fixed costs and their cash flow is dependent on the volume of product that needs to be transported, stored or processed. A decline in energy prices can negatively impact production from several fields and consequently result in lower toll collections as fixed costs, including maintenance expenditures and debt servicing costs, continue going up. 

DisclaimerI 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. Tahoe Resources (TAHO): I have a small position in this gold mining company which has lost about 1/3rd of its value so far today.

    Tahoe Resources Inc. (TAHO)
    $5.60 -$2.70 (-32.53%)
    As of 9:44AM EDT.

    The issue highlights country risk.

    " Guatemalan Lower Court Issues Ruling On Tahoe's Mining License"

    The "provisional ruling" by the lower court suspending the Escobal mining license appears ridiculous to me but ridiculous has a way of winning in Central and South American countries.

    My last action was to sell 100 shares on the Toronto exchange at C$12.32:

    Item 2.C.

  2. The German 10 year bond has risen almost 20% in yield this morning. The current yield is about .565%

    That rise is pulling up the ten year U.S. treasury yield:

    The last two yield spikes in the ten year treasury stalled at around 2.6%. Those peaks occurred last December and again in March.

    The current yield is about 2.38%.

    "U.S. stocks fall as central banks signal QE end"

    1. "Gundlach Sees More Pain for Bond Bulls as Hedge Funds Make Exit"

      Surge in German Bond Yields Triggers Fresh Rout in Global Debt

      There was also a disappointing auction of France's 30 year government bond.

  3. CAD/USD: The CAD has been rising against the USD since closing at .727 on 5/4. The current exchange rate is about .772.

    This rise has benefited Canadian stocks that are priced in USDs.

    For example, I own Toronto Dominion (TD), which is priced in USDs. The stock is ex dividend today and is currently trading at $50.57 (1 P.M.). TD closed at $46.02 on 5/4 and has risen in price about 9.89%.

    The CAD priced shares are now at C$65.38, up from the closing price of C$63.29. The percentage rise is 3.3%.

  4. I have published a new post: