Sunday, August 13, 2017

Observations and Sample of Recent Trades: NWH.UN:CA, PFE, STWD

Market Commentary:

Dalio urges investors to buy gold to hedge against possible war with North Korea - MarketWatch


"Savita Subramanian, Bank of America Merrill Lynch’s equity and quantitative strategist, ... noted that shares haven’t been reacting positively when earnings beat expectations during the current reporting season—something that hasn’t happened since 2000." The Curse of 2017: Stocks May Be Headed for a Fall - Barron's

Pimco warns of ‘rich’ valuations in risky assets, joining chorus of caution - MarketWatch

Market cracking with 200 S&P 500 stocks already in correction: CNBC 

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Trump and North Korea:


Trump on North Korea Feud: 'Fire and Fury' not Tough Enough - NBC NewsPresident Trump: My 'FIRE, FURY' Statement 'WAS NOT TOUGH ENOUGH' for North Korea, 'WE'LL SEE' - YouTube  


Trump later linked an aggressive U.S. response to any N.K threat directed at the U.S. which N.K. routinely does:  


"If he utters one threat in the form of an overt threat — which by the way he's been uttering for years, and his family has been uttering for years — or if he does anything with respect to Guam, or American territory or an American ally, he will truly regret it and he will regret it fast." Trump Warns North Korea Leader 'Will Not Get Away With What He's Doing' - NBC News I doubt that NK will launch missiles in the direction of Guam and it never had any intention of doing so. NK has made similar threats about attacking Guam in the past.  


North Korea's reply issued last Friday:  “We consider the U.S. no more than a lump which we can beat to a jelly any time.”

62.984+M voters gave Trump the nuclear trigger. Now that is scary since Trump is so obviously unfit to be President. (A former GOP senator called Trump "sick of mind, impetuous, belligerent and dangerous")



If Trump wants a nuclear attack against North Korea, his military advisers have few other options - The Washington Post (President can initiate a nuclear strike without authorization or approval. A failure to carry out the order would lead to a court martial. The only option for military personnel tasked with carrying out the order to fire would be to resign until one carries out the order issued by the Commander-In-Chief; Former Trump adviser who called for Clinton to be shot attends White House bill signing | TheHill)

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Trump and China Trade with North Korea:  

Trump's China trade crackdown coming Monday - POLITICO;

Trump to ramp up trade pressure on China with call for probe on Monday: Reuters


Trump Cautious on China Inquiry Over Intellectual Property Theft - The New York Times

The end result of a trade investigation could be the imposition of stiff trade tariffs on China's exports to the U.S. and that would of course start a trade war. These are all potential and serious risks for the world's stock markets and economies. The Stock Jocks will probably pretend that the risks do not exist until they can no longer be ignored.   



Trump is basically threatening to disrupt China's trade relationship with the U.S. unless China does more to stop North Korea's nuclear program. Trump May Roll Out Probe Into China and Intellectual Property Theft, Sources Say - NBC News

Trump Quote: "Look, we have trade with China. We lose hundreds of billions of dollars a year on trade with China. They know how I feel. It's not going to continue like that. But if China helps us, I feel a lot differently toward trade, a lot differently toward trade."    

China was probably given some assurances on trade issues in exchange for its recent Yes vote on U.N. sanctions. 


Summary Excerpt:  





FACT SHEET: Resolution 2371 (2017) Strengthening Sanctions on North Korea | usun.state.gov


If that did in fact occur, China would feel that Donald has already double crossed them within a week after that vote. 

Since China has undoubtedly examined Donald's entire business career, that nation would have concluded or should have concluded by now that Donald is completely untrustworthy and that is an understatement. The Many Scandals of Donald Trump: A Cheat Sheet - The Atlantic

One example is how Donald tried to double crossed NYC in a hotel deal. This is interesting episode in Donald's sordid business history. 


Inside a Donald Trump audit: Missing books and unusual accounting - CBS News


‘Extraordinary flim-flammery’;  


A Trump Empire Built on Inside Connections and $885 Million in Tax Breaks - The New York Times (the tax abatements ended up being $359.3M with 4 years to go on the abatement after 2016). 

In exchange for what was claimed to be a $160M cut in property taxes for a NYC hotel at the time, which is highly questionable as to how that happened, Donald gave the city a percentage of the profits. When the profit number plummeted, and the city received far less than expected, NYC tried to conduct an audit. "What followed was a two-year-long saga in which city auditors said they were met with stonewalling, disorganization and obfuscation at every turn". Inside a Donald Trump audit: Missing books and unusual accounting - CBS News

What the auditors discovered after herculean efforts was that Donald had ordered the creation of two sets of books. Auditors "discovered that the hotel maintained “two capitalization policies in the same year,” allowing its accountants -- a soon-to-be bankrupt firm named Laventhol and Horwath -- to produce an in-house estimate of profits that was drastically different than what the city was given." CBS NewsBurstein to Koch Memo Nov 14 1989 Re Grand Hyatt Audit Koch Box 7 Folder 8


One set showed the actual profits and the other set was intended to deprive NYC of its fair profit share.  

As one would expect, a large number of records disappeared when NYC started its audit.  

The NYC auditor completed the audit in 1989, piecing together records and finding some of the "lost records". The audit concluded that Donald had cheated the city. NYC demanded payment and then the hotel partners then sued the city in 1990. 

No progress was made in that lawsuit until after Donald sold the property in 1996. 

Part of the delay was due to the bankruptcy of the hotel's accounting firm, which resulted in a stay of the lawsuit since the accounting firm was named as a defendant in its counterclaim against the hotel. 


After the bankruptcy was finished, the city allegedly forgot about the case and it went dormant for about a decade when the city allegedly discovered that nothing was being done. The suit was then settled 4 years later in 2004 for a reported $850K. 

In 1996, Trump sold his interest in the hotel for $140M.  

The financial success that Donald has managed to achieve, other than creating a brand called Trump and then licensing his name, would not have occurred in a city with more or less honest government. Donald oozes sleaze from every pore. 

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Trump vs. Domestic Enemies (just about everybody who is not a Trump supporter):

With Bank Subpoenas, Mueller Turns Up the Heat on Manafort - Bloomberg

Mueller Is Said to Seek Interviews With West Wing in Russia Case - The New York Times

Trump Escalates Attacks on McConnell With Suggestion His Job Is at Risk - NBC News 


Trump-backed immigration bill would eliminate more than 1 million jobs, study finds - MarketWatch
The RAISE Act: Effect on Economic Growth and Jobs — Penn Wharton Budget Model (Reactionary White Nationalists like Trump, Bannon and Stephen Miller want to restrict legal immigration even though population growth in the U.S. is  so low that it already retards GDP growth) 


Future immigration will change the face of America by 2065 | Pew Research Center ("new immigrants and their descendants will drive most U.S. population growth in the coming 50 years, as they have for the past half-century.") 


This is what immigration means to the U.S. economy in two charts: CNBC


Even after a White Nationalist murdered one person last Saturday with his vehicle and injured many others, some severely, Trump could not bring himself to condemn them by name. Trump needed the White Nationalists to be elected and will need them again in 2020. And, he has several working as key advisors in the WH.

Alleged driver of car that plowed into Charlottesville crowd was a Nazi sympathizer, former teacher says


Trump Takes Heat for Blaming Charlottesville Violence on 'Many Sides' - NBC News

Trump -- once again -- fails to condemn the alt-right - CNN 

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Republicans and the Constitution:


Analysis | In a new poll, half of Republicans say they would support postponing the 2020 election if Trump proposed it

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Trump vs. Venezuela:


Trump quote:


"We have many options for Venezuela. And by the way, I am not going to rule out a military option," Trump said. "We have many options for Venezuela. This is our neighbor. You know, we are all over the world and we have troops all over the world in places that are very, very far away. Venezuela is not very far away and the people are suffering, and they are dying. We have many options for Venezuela, including a possible military option if necessary."


Maybe Canada will be next. I have heard that Canada may have some weapons of mass destruction that will reign down on D.C. unless Donald gives the Canucks what they want on Nafta.   


Venezuelan government uses Trump’s threat to boost anti-American sentiment - The Washington Post


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Economic Reports


The government reported that seasonally adjusted CPI increased .1% in July. For the 12 months ending in July, both CPI and core CPI increased 1.7% without seasonal adjustments. Consumer Price Index Summary




The Cleveland Fed's median CPI number for July rose .2% and 2% on an annual basis. Median CPI: Latest News Release

The Atlanta Fed's stick CPI index rose at an annualized rate of 2.1%.Sticky-Price CPI - Federal Reserve Bank of Atlanta That index has been trending down since August 2016 when it was reported at 2.7%.


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1. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Merrick Bank 1.6% CDs (monthly interest) Maturing on 2/11/19 (18 month CDs)



This bank has a five star rating from Bankrate: MERRICK BANK CORPORATION Review 


B.  Bought 2 American Express Centurion Bank 1.55% CDs (semi-annual interest) Maturing on 11/8/18 (15 month CDs):




This bank has a five star rating from Bankrate: AMERICAN EXPRESS CENTURION BANK Review

C. Bought 2 Capital One Bank 1.7% CDs (semi-annual interest) Maturing on 8/9/19 (two year CDs):




This bank has a five star rating from Bankrate: CAPITAL ONE BANK (USA), NATIONAL ASSOCIATION Review


D. Bought 2 MB Financial Financial 1.65% CDs (monthly interest) Maturing on 8/9/19 (two year CDs):




This bank has a 4 star rating from Bankrate: MB FINANCIAL BANK, NATIONAL ASSOCIATION Review


MB Financial Inc. (MBFI) (holding company)
MBFI Analyst Estimates
2017 Second Quarter Earnings

E. Bought 2 Morgan Stanley Bank 1.2% CDs Maturing on 11/10/17 (3 month CD):




$10K inflow into Short Term Bond/CD Basket


2. Intermediate Bond/CD Ladder Basket Strategy:

I am jettisoning a few low yielding bonds maturing in 2019-2021, realizing small gains. The general idea is to plow the proceeds into shorter term CDs. I am anticipating that the total return for the CDs , with anywhere from 1 to 4 rollovers, will exceed the YTMs of the bonds that I am selling which will not be hard to do with a slight uptrend in short term rates given the bond YTMs as noted below in Items 1.B through 1.E.  

A. Bought 2 Valero 3.4% SU Bonds Maturing on 9/15/26:


Finra Page: Bond Detail (prospectus not linked)


Credit Ratings: 
Moody's at Baa2
S & P at BBB

YTM at Total Cost (99.981)= 3.402%

2016 Annual Report (debt discussed starting at page 87)

B. Sold 2 Bank of Montreal 1.9% SU Bonds Maturing on 8/27/2021:



Profit Snapshot: +$25.3




FINRA Page: Bond Detail

Issuer: Bank of Montreal (BMO)
BMO Analyst Estimates

Sold at 99.4

YTM Then at 2.055%
Current Yield at 1.91%
Net at 99.3 ($2 commission)

Bought at a Total Cost of 98.035

Stocks, Bonds & Politics: ITEM # 1.A.
YTM Then at 2.374%
Current Yield at 1.94%

C. Sold 1 Royal Bank of Canada 1.5% SU Bonds Maturing on 7/29/19:




Profit Snapshot: +$5.1




Issuer: Royal Bank of Canada (RY)

RY Analyst Estimates

FINRA Page: Bond Detail


Sold at 99.516

YTM Then at 1.751%
Current Yield at 1.51%
Net at 99.416 ($1 Commission)

Bought at a Total Cost of 98.906

Stocks, Bonds & Politics: Item # 1.B.
YTM Then at 1.977%

The next two low coupon bonds were sold at a premium to par value. 


D. Sold 2 Amgen 2.125% SU Bonds Maturing on 5/1/20:



Profit Snapshot: +$18.26



Issuer: Amgen Inc.  (AMGN)

AMGN Analyst Estimates
2017 Second Quarter Earnings

FINRA Page: Bond Detail


Sold at 100.568

YTM Then at 1.904%
Current Yield at 2.11%
Net at 100.468 ($2 Commission)

Bought at a Total Cost of 99.555

Stocks, Bonds & Politics: Item # 1.C.
YTM Then at 2.273%

E. Sold 1 Morgan Stanley 2.5% SU Bond Maturing on 4/21/2021:




Profit Snapshot: +$10.68




ISSUER: Morgan Stanley (MS)
MS Analyst Estimates

FINRA Page:  Bond Detail


Sold at 100.489

YTM Then at 2.361%
Current Yield at 2.49%
Net at 100.389 ($1 Commission)

Bought at a Total Cost of 99.321

Stocks, Bonds & Politics: Item # 1.C.
YTM Then At 2.671%

I will keep the MS 2.625% SU bond maturing in 2021: Stocks, Bonds & Politics: Item # 1.B. 


$4K Outflow from Intermediate Term Basket


3. Income Replacement for Low Yield Bonds Strategy: Small Purchases of Risky and Higher Yielding Securities:


A. Bought 50 STWD at $21.93:





Quote: Starwood Property Trust Inc (STWD)-A REIT
Business – Starwood Property Trust

Credit Ratings: Moody's at Ba3 for Senior Unsecured.


The current quarterly dividend is $.48 per share. At that rate, the dividend yield is about 8.76%.  


With this investment, the goal is simple. Try to harvest a 10% annual return in whatever way that is possible. 


Brad Thomas published an article about this company in June: Are The Stars Lining Up For Starwood Property Trust? - Starwood Property Trust, Inc.-Seeking Alpha


Starwood's "core business focuses on originating, acquiring, financing and managing commercial mortgage loans and other commercial real estate debt and equity investments. Through its subsidiary LNR Property, LLC, Starwood Property Trust also operates as the largest commercial mortgage special servicer in the United States."  


The company has three different business segments: 




Sourced Page 4 of the 2016 10-K


Subsequent to my purchase, STWD reported second quarter earnings. GAAP net income was reported at $117.4M or $.44 per share with core earnings at $.52 per share. 





Starwood Property Trust Reports Results for the Quarter Ended June 30, 2017




4. Continued to Pare Stock Allocation:

A. Sold Remaining Pfizer Shares at $33.84 after Reviewing Second Quarter Report:




The shares went ex dividend for the quarterly dividend a few days before I sold this remaining lot using a commission free trade.


Profit Snapshot: +$90.67 (33+ shares)





I sold 100 shares held in this account a few weeks ago at $34.03:  Stocks, Bonds & Politics: Item # 3.A. Earlier this year, I sold a 100 share lot at $34.65, realizing a $235.86 gain. Stocks, Bonds & Politics: Item # 3.A.


2017 PFE Trading Profits: $469.95 plus dividends


When looking at the earnings report, I always spend a few minutes looking at the following tables that break down revenues by product: 






Sourced: SEC Filed Earnings Release for the Q/E 6/30/17 


What is concerning is the prevalence of Y-O-Y declines in worldwide revenues.  For major products, the drugs showing growth are Ibrance, Lyrica, Xeljanz, Chantix, and  Eliquis.


Pfizer shares downgraded because Viagra patent is expiring: CNBC (Viagra and Lyrica over the next 18 months according to the Credit Suisse analyst) Lyrica is Pfizer's largest seller at the present time. Lyrica to Lose Patent Protection in the US in 2018 - Market Realist


I also believe that two minor drugs, Relpax and Somavert, will suffer patent expiration this year. Drug patent expiration list for 2017-LowestMed (Somavert expired in March and Relpax's patent expires this month)


Recent and expensive acquisitions have not helped matters. I am referring to both the Medivation and Anacor acquisitions (totalling almost $20B)  


I do not like PFE as an investment and have had that opinion for the past 15 years or so. I have seen nothing yet to change my unfavorable opinion about this company. To compensate for its own poor internal drug discovery, Pfizer has compensated by overpaying for acquisitions in order to acquire drugs invented elsewhere. The total amounts paid for those acquisitions since 1999 significantly exceed PFE's current market capitalization. That is the smell of failure.  


A more positive take can be found in this DoctoRX article: Pfizer: Why The Stock May Get Interesting Again-Seeking Alpha I would agree more with this article that argues that PFE is a bond substitute in a low yield world. Pfizer Likely To Remain A Bond Surrogate Until 2020-Seeking Alpha


There was one recent positive news item: FDA Advisory Committee Votes in Favor of XELJANZ® (tofacitinib citrate) for the Treatment of Active Psoriatic Arthritis


I would have to say that Pfizer has been slow IMO in securing additional indications for Xeljanz which is hard to understand. In November 2012, the FDA approved Xeljanz "to treat adults with moderately to severely active rheumatoid arthritis who have had an inadequate response to, or who are intolerant of, methotrexate." FDA Approval Letter.pdf


I will certainly consider buying back up to 150 shares, probably in small increments, at lower prices. My preference is wait for a break below $30. I view that as far more likely than a break above $40.


5. Platinum ETF Trades: Sold 20 Shares:

These shares were sold prior to the latest flare up involving NK.  


Profit Snapshots (commission free trades, Schwab, and $1 IB Commission trades: +$77.84






6. Northwest Healthcare Properties


NWH.UN Stock Price - Northwest Healthcare Properties Real Estate Investment Trust Stock Quote (Canada: Toronto) 


I recently sold 1000 shares in my Fidelity account and converted the CAD proceeds into USDs. I waited for a rally in the CAD/USD to initiate that transaction. Stocks, Bonds & Politics: Observations and Sample of Recent Trades: APLE, HTPRD, NWH.UN:CA, XRE:CA


Subsequent to that disposition, Northwest released second quarter earnings: NorthWest Healthcare Properties Real Estate Investment Trust Releases Second Quarter 2017 Results



Subsequent to 6/30/17, Northwest completed its acquisition of Generation Healthcare, based in Australia, and now owns that REIT's 16 properties. There was an equity offering in April.  

I added 100 shares bought in Toronto using CADs at C$10.62, paying Interactive Brokers a C$1 commission. This REIT makes monthly distributions at C$.06667 per unit or C$.8 per year.  Assuming a continuation at that penny rate, the yield is about 7.53% at a total cost of C$10.62.  


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.

3 comments:

  1. The market has gotten over the anxiety attack caused by a war of words flare up involving N.K. last week.

    Nothing has change in U.S. relations with N.K. or that regime's desire to further its nuclear program. As I noted earlier, the most likely outcome will be an accelerated N.K. nuclear program and N.K. becoming a nuclear power.

    The rapid advancement in ICBM distance may be due to a company in the Ukraine, KB Yuzhnoye, selling powerful engines to the North Koreans according to a NYT article published today relying in part on this study:

    http://www.iiss.org/en/iiss%20voices/blogsections/iiss-voices-2017-adeb/august-2b48/north-korea-icbm-success-3abb

    The other company who could have sold the new engines being used in N.K.'s ICBMs is based in Russia. It is possible that the engines were acquired illegally.


    The Stock Jocks do not care about the announced investigation to see whether there needs to be an investigation relating to China's theft of U.S. intellectual property under Article 301 of the Trade Act of 1974.

    The market ignored China's warning on the issue today:

    http://www.cbsnews.com/news/china-warns-trump-of-trade-war-if-he-orders-tech-theft-probe/

    Any concrete action on that matter is so far in the future that the market is unlikely to take much if any notice this year.

    The result of the pre-investigation will be a decision to investigate China's theft since everyone in the U.S. familiar with this issue, regardless of party, know that the theft is in fact occurring on a very large scale.

    About 70% of software developed by U.S. firms has been pirated for use in China for example which is higher than India at 58%. Major and widespread theft of U.S. intellectual property is not a problem unique to China. The entire world steals U.S. intellectual property. The only question is decree.

    Pages 12 and 17:
    http://www.bsa.org/~/media/Files/Policy/Trade/BSA2017Special301.pdf


    See also:

    http://money.cnn.com/2017/08/14/news/economy/trump-china-trade-intellectual-property/

    ReplyDelete
  2. The stock market did not respond positively to the better than expected retail sales numbers.

    https://www.reuters.com/article/us-usa-economy-retail-idUSKCN1AV1BZ

    There is still a focus on the FED and whether good economic numbers will cause the FED to hike rates.

    The probability assigned to a .25% hike on or before 12/29/17 jump today from last Friday. Today's forecast assigns a 54.7% probability. Last Friday, the probability was at 37.4.%

    http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html/?redirect=/trading/interest-rates/fed-funds.html

    +++++

    The Police Version of what happened in Charlottesville is diametrically opposed to what Trump claimed were the facts today:

    "Charlottesville Police Chief Al S. Thomas Jr. said the rallygoers went back on a plan that would have kept them separated from the counterprotesters. Instead of coming in at one entrance, he said, they came in from all sides. Headlong into the counterprotesters.

    A few minutes before 11 a.m., a swelling group of white nationalists carrying large shields and long wooden clubs approached the park on Market Street. About two dozen counterprotesters formed a line across the street, blocking their path. With a roar, the marchers charged through the line, swinging sticks, punching and spraying chemicals.

    Counterprotesters fought back, also swinging sticks, punching and spraying chemicals."

    ReplyDelete
  3. I have published a new post:

    https://tennesseeindependent.blogspot.com/2017/08/observations-and-sample-of-recent_16.html

    ReplyDelete