Thursday, August 3, 2017

Observations and Sample of Recent Trades: (GMTA, MPW, RMT)

Economic Reports:

A. Automobile Sales: Trending Down:

U.S. car sales continue to skid, drop 5.7% in July - LA Times

AutoNation earnings slide 21% as sales slow - MarketWatch

July 2017 Auto Sales: A Slow Slide, As Expected | Automobile Magazine

B. ADP July Private Sector Jobs Report:

+178K vs. 173K Consensus

June Revised to 191K from 158K

ADP-NATIONAL-EMPLOYMENT-REPORT-July2017-Final-Press-Release.pdf
Private-sector continues to see strong job gains in July, ADP says - MarketWatch

C. Personal Consumption Expenditures ("PCE") for June 2017:

The government's Personal Income and Outlays Report for June reinforced the downward trend in consumer expenditures compared to 2016. PCE increased .1 in June. Real PCE was flat with the prior month.

The numbers for the first six months of this year are materially weaker than the comparable period in 2016 and the last six months of 2016.

% Change from Preceding Period
Table 13, Line 17 News Release.pdf

REAL PCE

June-December 2016

+.4%, +.2%, +.1%, +.5%, +.1% +.3%, +.4%

January-June 2017

-.1%, 0, .7%, .1%, .2%, 0

D. ISM Services PMI: Marked Slowdown in July:

The ISM's non-manufacturing index fell to a reading of 53.9 last month, the lowest since August 2016, from 57.4 in June. ISM - ISM Report - July 2017 Non-Manufacturing ISM® Report On Business®

The new orders component decline to 55.1 from 60.5.  The employment component declined from 55.8 to 53.6.

E.  S & P/Experian Consumer Composite Default Index Drops to 1 year Low in June

The Bond Ghouls and Currency Dopers do not see a robust economy but a weakening one.

U.S. 10 Year Treasury Note -MarketWatch
DXY Charts - U.S. Dollar Index (DXY) Interactive Chart
BBDXY Quote - Bloomberg Dollar Spot Index - Bloomberg Markets

++++++

Trump dictated son’s misleading statement on meeting with Russian lawyer - The Washington Post


According to that report, Trump deliberately tried to mislead the public about the reasons for that meeting that was called specifically to receive damaging information about Hillary from the Russians.


Since Don Jr.'s emails were released by him, I have listened to a number of Trump voters claim there was no proof of collusion between Russia and the Trump campaign.


The emails show an unmistakable intent to collude.


Quote From First Email Sent to Donald Trump Jr.:



Good morning
Emin just called and asked me to contact you with something very interesting.
The Crown prosecutor of Russia met with his father Aras this morning and in their meeting offered to provide the Trump campaign with some official documents and information that would incriminate Hillary and her dealings with Russia and would be very useful to your father.
This is obviously very high level and sensitive information but is part of Russia and its government's support for Mr. Trump - helped along by Aras and Emin.
What do you think is the best way to handle this information and would you be able to speak to Emin about it directly?
I can also send this info to your father via Rhona, but it is ultra sensitive so wanted to send to you first.
Best
Rob Goldstone   (emphasis added)

Donald Trump's Reply:




Translation: I can't wait to get Russia's help in the election, so my Daddy can defeat Crooked Hillary. 


Read the Emails on Donald Trump Jr.’s Russia Meeting - The New York Times


In the President's Alternate Reality Universe, the subject of the meeting was "not a campaign issue" even though that is explicitly why the meeting was called: 




Prior to the publication of this WP article, Trump's personal attorney, Jay Sekulow, made the following statements: 


"CHUCK TODD: You were very careful to say the president didn’t draft the statement. That isn’t what I asked. Did the president get a heads-up on the statement? Did he sign off on the statement? Was he asked to read the statement before it was given to the New York Times on Air Force One?



SEKULOW: No, I mean, I can’t say whether the president was told the statement was going to be coming from his son on that. I didn’t have that conversation and let me say this — but I do want to be clear — that the president was not involved in the drafting of the statement and did not issue the statement. It came from Donald Trump Jr. So that’s what I can tell you because that’s what we know. And Donald Trump Jr. has said the same thing. That it was, in fact, from him and I believe it was his lawyer was in consultation — I’m sure his lawyer was in consultation."(emphasis added)

Sekulow claimed that the WP story was inaccurate but would not answer specific questions presented by the WP: “Apart from being of no consequence, the characterizations are misinformed, inaccurate, and not pertinent.” 

Trump's new Press Secretary had a different take than Mr. Sekulow:  Trump 'weighed in' on Don Jr.'s statement about meeting Russian lawyer, Sanders says - MarketWatch There is no way to reconcile Mr. Sekulow's comment that the "president was not involved in the drafting of the statement" with either the Post story or the White House's admission that Trump "weighed in".  


++++
The Heavy Weight Champion of Chaos-The One and Only Mr. Donald Trump, President of the United States:
What will historians say in a 100 years?    

The Mooch lasted 10 days as Trump's Communications Director, the shortest stint in U.S. history, but that is not unusual in Trump's first few months as President. Trump denies there is chaos.   


It looks like the Mooch's talents, whatever they may be other than mooching of course, were not fully appreciated by John Kelly, the newly installed Chief of Staff and a retired 4 star Marine general. Or maybe, the Mooch did not tell Donald that he loved him more than fifty times. 


Kelly probably saw little humor in the Mooch's off-color remarks including his somewhat dubious claim about an anatomically impossible task.   


Anthony Scaramucci out as WH communications director - CNN 

Harvard accidentally lists Scaramucci as dead in alumni directory - CBS News


I looked at Mooch's hedge fund performance. His fund is known as Skybridge Multi-Advisor HF Portfolios G. Mooch just selected other hedge funds to own in his fund. He is attempting to sell his hedge fund to a Chinese company called HNA Group, a mysterious private company: The Conglomerate That Troubles China - Bloomberg

The five year total return through 7/31/17 was 36.81%. Barron's Market Lab Table - Barrons.com The five year total return of SPY through 7/31/17 was 98.72%. DRIP Returns Calculator | Dividend Channel The Vanguard Star Fund (VGSTX), a fund of funds which includes a significant allocation to bond funds, had an annualized total return of 9.61% over the same period which handily beats the 36.81% total return for that Skybridge fund. Vanguard Star Fund Investor Shares (VGSTX) Fund Performance and Returns


Apparently, General Kelly did not agree with Trump's decision to fire Comey who Trump called a nut job when conversing about the matter with the Russians.


The House Republicans want the Justice Department to hire a special prosecutor to investigate Comey who provided unfavorable testimony about the GOP's Leader. The GOP and their apparatchiks will go after anyone providing damaging testimony about President Donald. 


Kelly called Comey to express anger over firing, sources say - CNN 


Maybe the General will be able to damp down some on the lunacy and chaos that have been the dominant traits that blast out of the Trump White House daily.   


Trump's approval rating slumps to new low - CBS News


National (US) Poll - August 2, 2017 - Trump Drops To New Low, Close | Quinnipiac University Connecticut (62% say Trump is not honest; so SAD that the number is not 100%) 


Who plays more golf: Donald Trump or Barack Obama? | PolitiFact


Trump Says U.S. 'Losing' Afghan War in Tense Meeting With Generals - NBC News ("Over nearly two hours in the situation room, Trump complained about NATO allies, inquired about the United States getting a piece of Afghan’s mineral wealth and repeatedly said the top U.S. general there should be fired. . . . The focus on the minerals was reminiscent of Trump's comments early into his presidency when he lamented that the U.S. didn't take Iraq's oil when the majority of forces departed the country in 2011.")  


Sanders forced to revise Trump's claim about conversations with heads of Boy Scouts, Mexico - CBS News


Transcript shows Trump asked Pena Nieto to stop saying Mexico wouldn’t pay for wall - MarketWatch (WHY, so Trump could keep telling the True Believers that Mexico would pay for the wall)


++++++++

More Than Disgusting If True: 


Lawsuit: Fox News concocted Seth Rich story with oversight from White House - Aug. 1, 2017


Suit alleges Trump reviewed draft of Fox story about murdered DNC aide Seth Rich - MarketWatch


Seth Rich Case: Fox News Made Fake News to Protect Trump, Lawsuit Alleges - NBC News

DNC Staffer's Murder Draws Fresh Conspiracy Theories - NBC News

A copy of the complaint is available at Scribd: Fox Lawsuit 


Cuomo grills Butowsky over retracted story

Fox concocted a story that a DNC staffer leaked their emails to Wiki and was - thereafter-  murdered by the Democrats to shut him up. The purpose of this particular Fox reality creation was to come up with an alternative to the consensus opinion formed by the intelligence agencies that Russia interfered in the U.S. election to help Donald.

++++++++


1. Short Term Bond/CD Ladder Basket Strategy

A. Bought 3 Fidelity National 1.15% CDs (monthly interest) Maturing on 10/27/17 (3 month CD):


B. Bought 2 Washington Federal Bank 1.3% CDs (monthly interest) Maturing on 2/12/18 (6 month CD)


C. Bought 2 Blue Hills 1.2% CDs Maturing on 11/30/17 (4 month CD):




D. Bought 2 Merrick Bank 1.45% CDs (monthly interest) Maturing on 7/27/18 (1 Year CD):




E. Bought 3 Peoples National Bank 1.05% CDs Maturing 9/11/2017 (one month CDs)





$12K Inflow into Short Term Bond/CD Basket


Hopefully short term rates will continue to meander up. 


2. Long Term Bond Basket Strategy


A. Sold 50 GMTA at $26.69 (used Commission Free Trade):




Profit Snapshot: +$222.84




This lot was purchased at $22.23 (11/14/2016).


Quote: GATX Corp. 5.625% Senior Notes due 2066 (GMTA)


GMTA is an exchange traded senior baby bond that matures in 2066 unless redeemed earlier at the issuer's option. The issuer may call on or after 5/30/21 Prospectus The optional redemption right and the potentially very long duration creates asymmetric interest rate that disfavors the bond owner and is lopsidedly in the issuer's favor.


Stocks, Bonds & Politics: Exchange Traded Baby Bonds

Baby Bonds - South Gent | Seeking Alpha
Stocks, Bonds & Politics: Exchange Traded Bonds: New Gateway Post

My last transaction was to sell 40 shares at $25.53: Stocks, Bonds & Politics: Item # 2.A.  (profit snapshot of $124.75). Prior to that sell, I sold 20 shares using a commission free trade at $25.13 that had been purchased at $22.95: Stocks, Bonds & Politics: Item # 3.A.


I no longer have a position and will simply wait for a significant price downdraft before considering a new purchase.


3. Continued to Pare Stock Allocation:


A. Sold 274+ Shares of RMT at $8.9:





Profit Snapshot: +$45.41





Quote: Royce Micro-Cap Trust Inc. (RMT)


I took a loss of $49.21 on a 200 share lot purchased on 7/15/15 and a $64.48 profit on a 50 share bought at $7.61 total cost per share. I realized also a gain on all shares purchased with reinvested dividends but did not reinvest the quarterly dividends paid in March and June of this year and the $.61 per share distribution made in December 2015.




Royce Micro-Cap Trust (RMT)


This transaction eliminates RMT from my portfolio. I will consider buying back shares when and if the discount to net asset value per share is greater than 15% and after a 20% correction in the Russell 2000.


Closing Data Date of Trade: 

Closing Net Asset Value Per Share:  $9.91
Closing Market Price: $8.9
Discount:  -10.64
Average Discounts: 
1 Year: -13.84%
3 Years: -13.4%
5 Years: -12.85%

This fund was frequently trading at over a 15% discount in the 2016 4th quarter and occasionally over 16%. 


RMT Royce Micro Cap Trust, closed-end fund summary - CEF Connect 


RMT Trading Profits to Date: $2,461.36


Last Sell Transaction:  Stocks, Bonds & Politics: Item 3.A. 


2016 Annual Report 

RMT Royce Micro Cap Trust CEF Page at Morningstar 
SEC Filings for Royce Micro-Cap Trust


Item # 2 Sold 433+ RMT at $12.76-Average Cost Per Share $7.91 (snapshot of profit=+$2,057.88 including profits for all shares bought with reinvested dividends)
Earlier in 2014, I sold 126 RMT shares bought with dividends and realized a $149.91 profit on those shares. Item # 6 Sold Taxable Account: 126 RMT at $12.6 (7/12/14 Post)
I will frequently harvest profits in shares bought with dividends in order to improve the dividend yield of those distributions. Many investors may prefer to leave matters alone.
Snapshots of RMT round-trip prior to 7/28/15 can be found in the Appendix section to this post: Update On Closed End Fund Basket Strategy As Of 7/28/15 - South Gent | Seeking Alpha
Links to Some Prior Discussions: 
Item # 1. Averaged Down-Added 100 RMT at $7.71: Update For CEF Basket Strategy As Of 11/18/15 - South Gent | Seeking Alpha
RMT Total Returns with Dividends Reinvested: Feast and Famine
10/9/2007 to 3/9/2009: -69.33%
3/10/2009 to 12/31/14: +348.38% or an average annualized total return of 29.45%
1/1/15 to 12/30/15:  -16.64%
1/1/16 to 7/21/17: +40.49%
3. Intermediate Bond/CD Ladder Basket Strategy: 

A. Bought 2 WFC 1.85% CDs (monthly interest) Maturing on 7/28/20 (3 year CDs)




This CD was at the tail end of my three year period for the short term ladder.



4. Stocks, Bonds & Politics: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy


On a net basis, I am significantly reducing my exposure to equity REITs and have adopted a more aggressive trading posture. 


The primary concerns are (1) valuations for most of them; (2) a potential downdraft in major stock indexes which will take REIT stocks down as well; and/or (3) a significant move up in interest rates. I have also trimmed Canadian REITs recently, partly due due to the rise in the CAD/USD that allowed me to sell some position in my Fidelity account profitably and to immediately convert the proceeds into USDs as I transition away from Fidelity. 


A. Reinitiated Position in MPW with a 50 Share Buy at $12.85 (used commission free trade):




Closing Price Day of Purchase (7/24/17): MPW $12.88 -$0.22 -1.68% 


MPW Stock Price - Medical Properties Trust Inc. 

Medical Properties Trust Website

Medical Properties Trust, Inc. Reports First Quarter Results:





Note the significant non-cash revenue item included in normalized FFO. At least MPW correctly makes the straight line rent adjustment to FFO in order to arrive at AFFO which is more than I can say for Omega Healthcare (OHI).

The current quarterly dividend is $.24 per share. At that rate, the dividend yield is about 7.47%.


My last transaction was to sell 50 shares at $13.93: Stocks, Bonds & Politics: Item # 3 (5/15/17 Post) That post contains several links to prior discussions. 


Since I exited my position, MPW's underwriters sold to the public $43+M shares at $13.25, with the proceeds going to fund the cash portion of MPW's acquisitions of eight hospitals from Steward Health Care Systems, 2 hospitals from Alecto Healthcare, and 2 hospitals from RCCH Healthcare. ProspectusMedical Properties Trust Announces Pricing of Public Offering of Common Stock  


Medical Properties Trust, Inc. to Invest $1.4 Billion in Ten Acute Care Hospitals and One Behavioral Health Facility (MPW "has signed definitive agreements to acquire the real estate interests of ten acute care hospitals and one behavioral health facility currently operated by IASIS Healthcare (“IASIS”) and to be operated by Steward Health Care System LLC (“Steward”) when the transaction is completed. The $1.4 billion real estate transaction will be immediately accretive to normalized FFO per share by approximately $0.10 (and to net income by $0.05 per share) in 2018 assuming all debt financing. Steward and IASIS separately announced a simultaneous merger transaction, completion of which is a condition of MPT’s investment.")


The company ran into some problems with one of its tenants as described in this press release: Medical Properties Trust, Inc. Describes Plans for Restructuring of Adeptus Health, Inc. Leases 


MPW is a serial acquirer and its management and Board can be properly classified as empire builders. One problem with that approach is that MPW will often do a big deal when the stock is doing well; and the subsequent common stock offering stops the rally in its tracks and causes a sharp decline in the stock price. MPW also incurs more and more debt with these acquisitions that will have to be refinanced and refinanced, potentially at much higher rates than now. 


There is also an abundance of risks associated with government reimbursements to MPW's tenants. While those risks may not materialize over the near term, they will materialize.  


Trading Profits to Date: $1,334.83 (snapshots in Stocks, Bonds & Politics: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy)


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.

11 comments:

  1. TEVA: A few readers have asked me about TEVA. My replies pointed out multiple problems including an overall unfavorable view that I have of the generics business. A generic operation like Sandoz is fine as part of a much larger enterprise like Novartis but there is far too much pricing pressure in generics to form the central core of a business IMO.

    I have also pointed out other potential serious problems, including a price fixing lawsuit, overall poor management as shown by a cascade of problems, and the possible loss of exclusivity for the 40MG dosage of Copaxone, a key patented drug for TEVA.

    See my previous comments:

    " I recall someone asking me about TEVA when it was over $50 as I recall and that was a few weeks ago. There would be a number of drug stocks that I would buy before getting around to TEVA. I told whoever asked me that I was not interested but maybe I need to look at it again since it closed today at $37. As I recall, I mentioned two important negatives. One deals with the generic business itself where there is at most a brief period of exclusivity and then there is competition on price which drives everyone's profit down. The second issue is the loss of patent protection for its main branded product, Copaxone, though TEVA has managed through litigation to hold onto a 40MG formulation for now. The 20MG dose is already generic. This drug accounted for about 1/3d of Teva's operating profit as I recall. That is a major risk which the average investor can not adequately forecast.

    https://seekingalpha.com/instablog/434935-south-gent/4935893-update-portfolio-positioning-management-2016-4th-quarter#comment-73843223

    https://seekingalpha.com/instablog/434935-south-gent/4935893-update-portfolio-positioning-management-2016-4th-quarter#comment-73863093



    https://seekingalpha.com/instablog/434935-south-gent/4935893-update-portfolio-positioning-management-2016-4th-quarter#comment-73862031


    Teva Pharmaceutical Industries Limited (TEVA)
    $23.80 -$7.45 (-23.84%)
    As of 3:21PM EDT. 8/3/17

    TEVA released earnings today, guided lower and cut its dividend:

    http://www.businesswire.com/news/home/20170803005523/en/Teva-Reports-Quarter-2017-Financial-Results

    Note also the Copaxone sales and that the revised outlook does not assume a loss of exclusivity for the 40MG dosage:

    "Global revenues of Copaxone® (20 mg/mL and 40 mg/mL), the leading multiple sclerosis therapy in the U.S. and globally, were $1.0 billion, a decrease of 10% compared to the second quarter of 2016. ... .. The revised guidance ranges assume no generic competition to Copaxone® 40mg in the United Stated in 2017."

    "On July 31, 2017, the Board of Directors declared a cash dividend of $0.085 per ordinary share for the second quarter of 2017. "

    The prior dividend was $.289 per share.

    ++++

    EMR: Yesterday I eliminated EMR which I characterized as a failed investment. I owned close to 200 shares and managed to harvest about a $50 net profit plus dividends.

    I will take another look at the stock when and if the price falls below $55. I am somewhat antsy about EMR increasing its exposure to the oil and gas industry through its recent acquisition of Pentair's valves and controls business:

    http://www.emerson.com/en-us/news/corporate/emerson-completes-pentair-valves-controls-acquisition

    3rd fiscal quarter report: Q/E 6/30/17
    http://www.emerson.com/en-us/news/corporate/emerson-reports-third-quarter-2017-results

    ReplyDelete
  2. South Gent,

    Jeremy Grantham explains "Why Are Stock Market Prices So High?" and he does not see it will end any time soon.

    https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=44

    https://www.ft.com/content/cd516726-46d8-11e7-8d27-59b4dd6296b8

    “The market can stay irrational longer than you can stay solvent.” - John Maynard Keynes

    Well, I guess we will continue to roll the short term Bond/CD ladder for a while.

    ReplyDelete
    Replies
    1. Y: I would agree with Grantham that the market is not efficient and is influenced meaningfully by psychological factors including a feeling of "comfort" which is in essence captured by the VIX movement and my Vix Asset Allocation Model which is flashing green.

      Investors do not like heightened volatility since it takes them out of their comfort zone and feeds their fear emotion rather than nurturing the greed side.

      I would also agree that the stock market likes stable economic numbers, preferring a repetitive series of 1.5% to 2% inflation and about a 2% annual average GDP growth.

      Worries start to creep into the outlook when GDP falls into negative territory or accelerates rapidly over 3%. The FED may then raise rates to chill the enthusiasm but there are also negative real repercussions associated with pulling too much future demand into the present and then just burning out.

      Long recoveries nurtured by low interest rates and inflation are preferable to relatively short cycles of boom and then bust.

      The Stock Jocks like the low inflation, low interest rates and stable real GDP growth. It is an optimal environment for stocks and resembles more the period from 1950 to 1966 except for real GDP growth numbers which are much lower now.

      The stock market is not pricing into stock multiples and earnings the risks that remain nascent including a persistent pickup in inflation and a U.S. recession.

      Some U.S. economic numbers, particularly those relating to consumer spending, are moving toward major concern and need to be watched closely.

      The likelihood of a bear market and a recession that kicks of with a stock market reversion to to multiples closer to historical averages, are increasing.

      I am increasing my allocation now to short term bonds and CDs as a holding pond for money that can be redeployed into risk assets when and if they become more rationally priced and when I feel like the risk/reward balance is clearly in favor of reward.

      The ladder strategy brings in redemption proceeds most every week and I consequently have the flexibility to reallocate when securities mature.

      For now, I am simply reinvesting the proceeds into like instruments at higher rates.

      I am also extending the CD ladder now into 2019 just in case rates remain low for longer than I currently expect.

      Delete
  3. Northwest Healthcare Properties: In my last post, I discussed selling 1000 units in my Fidelity account as part of transitioning to Interactive Brokers for international trades.

    Yesterday, I bought back 100 at C$10.62 in my IB account, bringing my total there to 300 units. The commission is usually C$1 for a 100 share lot at IB, but no commission was charged for some reason for that trade.

    I will sell the 100 ordinary units priced in USDs and traded in the U.S. Grey Market when there is another pop in CAD/USD exchange rate and a rise in the ordinary units priced in CADs or what I call a Twofer.

    NWHUF is the symbol for the USD priced units.
    http://www.marketwatch.com/investing/stock/nwhuf

    The 100 NWHUF was bought at USD$7.72:

    Item 5.A.
    https://tennesseeindependent.blogspot.com/2017/01/observations-ruminations-and-sample-of.html

    Since early May 2017, the USD priced units have outperformed the CAD priced units traded in Toronto due to the CAD increasing in value against the USD.

    http://www.marketwatch.com/investing/currency/cadusd/charts

    Since the CAD/USD had last topped out near .80, I decided to harvest some profits in USD priced Canadian stocks and CAD priced Canadian stocks where I wanted to convert the proceeds into USDs when the exchange rate approached .8.

    See CAD/USD Chart Linked Above
    April 2016
    May 2015

    ReplyDelete
    Replies
    1. Hello southgent,

      I wanted to get your take on this article on whether or not you think the Fed is being too aggressive. As you will see in the article, it states that if there is a recession or deflation than the Trump administration and I guess even if Pentz is President, then they will abruptly lower rates as the Trump administration has the power to add six new Fed members next year.

      But I specifically wanted to know as best as you understand it is if you think the Fed is being too aggressive and shrinking its balance sheet and raising rates?



      The other major question is why is the consumer starting to spend less your opinion?

      Thanks


      https://www.forbes.com/sites/johnmauldin/2017/07/31/the-feds-monetary-tantrum-will-push-the-economy-into-outright-deflation/2/#7649687b721a

      Delete
    2. S: I would agree with Mauldin, the author of that Forbes article, that the economic assumptions made by investors after Trump's election are not supported by current facts yet. Those assumptions were based on an expected fiscal stimulus originating from substantial tax cuts and massive infrastructure spending.

      I would not rule out a tax cut or more infrastructure spending, but the magnitude will not have a major economic impact, particularly if consumer spending continues to be anemic.

      The GOP's tax cuts will not have the stimulus that investors, mostly highly partisan republicans, believe for the reasons that I have discussed previously. Possibly the most recent discussion can be found here:

      https://tennesseeindependent.blogspot.com/2017/02/trump-and-upcoming-phenomenal-tax-cut.html

      The issue is whether trickle down economics puts more disposable income (DPI) into the hands of those who actually have to spend their DPI rather than the top 20% who save and invest in risk assets.

      There is also the distinct possibility that the GOP will cut or eliminate programs that benefit the poor (and the middle class to a lesser extent) that will hurt demand.

      As to the FED, the actual economic impacts flowing from gradual .25% increases, with the starting point being zero, is not meaningful IMO. There can be an impact on those investors psychologically inclined to place importance on an increase from one historically absurd level to another. The balance sheet is bloated to over $4.2 trillion and needs to be run off gradually as securities mature. While the FED denies it, the effect of QE and its longevity has been to monetize the debt.


      I do not agree with Mauldin that this gradual run off will have meaningful real economic consequences.



      The long term problem remains that the government's debt will continue to grow exponentially to a point where interest payments on that debt will exceed $1 trillion per year. That trend will increase the likelihood of failed treasury auctions occurring possibly in a 15 to 25 year time period from now, probably increasing each year in that time period.

      Consumer spending trends are worrisome but it is still too early to draw a downward trendline. Spending may pick up in the last six months. Why? Hard to say. Worry about the future-Democrats in particular. Satiated after multiple years of solid growth in spending.

      There are more Democrats than Republicans and the Democrats are not enthused about the direction of the country or have faith in the GOP's efforts to stimulate growth through warmed over versions of trickle down economics.

      "Boom or Bust: Stark Partisan Divide on How Consumers View Economy"

      https://www.nytimes.com/2017/04/08/business/economy/the-picture-of-our-economy-looks-a-lot-like-a-rorschach-test.html?_r=0

      “If one-third of the population cut their consumer spending by 5 percent, you get a recession,” said Alan Blinder, a Princeton economist

      Delete
  4. BRG: I am down to owning only 50 shares of this apartment REIT and still have over a $100 unrealized profit even after today's action.

    Bluerock Residential Growth REIT, Inc. (BRG)
    $11.85 -$1.70 (-12.52%)
    As of 11:53AM EDT

    The problem is that this REIT released the terms of its management internalization.

    http://www.prnewswire.com/news-releases/bluerock-residential-growth-reit-brg-announces-agreement-to-internalize-management-300499750.html

    The cost will be between $41M-$42M and the external management company will take 99.9% of that consideration in stock. So there is going to be dilution without the benefit of receiving cash from selling shares in a public offering and then investing the net proceeds.

    The REIT also said that management is going to review the dividend policy which means to me a dividend cut.

    That is not surprising since the payout has not been covered by FAD and the situation is getting worse with the additional shares created to pay the external manager.

    The benefits from internalization are set forth in the press release but those will be slow to realize compared to the instant dilution caused by the shares created to pay off the external manager.

    My 50 share lot was bought on 2/16/16 at $9.36:
    https://seekingalpha.com/instablog/434935-south-gent/4802806-update-equity-reit-basket-strategy-2-22-16

    My trading profits total $813.12.

    Snapshots at

    https://tennesseeindependent.blogspot.com/2014/10/gateway-post-equity-reit-common-and.html

    I am not interested in buying now. Possibly I may start to nibble again at lower prices but I will wait until after the dividend is cut.

    ReplyDelete
  5. OMER

    I still own 30 shares bought at $9.03 last January:
    Item # 1:
    https://tennesseeindependent.blogspot.com/2017/01/observations-ruminations-and-sample.html


    Omeros Corporation (OMER)
    $21.92 +$1.42 (+6.93%)

    OMER's compound OMS-721 is being tested in several indications and received today an "orphan drug designation from the U.S. Food and Drug Administration (FDA) for the treatment of Immunoglobulin A (IgA) nephropathy."

    http://www.businesswire.com/news/home/20170804005502/en/

    I sold my other 30 share lot at $20.61 realizing a +$335.81 profit.

    Item # 2.E.
    https://tennesseeindependent.blogspot.com/2017/07/observations-and-sample-of-recent.html

    In my mind, the company still has issues as discussed in the last linked post.

    ReplyDelete
  6. Hello southgent,

    I do not think I have ever seen your opinion on Amazon written anywhere. I realize it's growth has been unbelievable. With its cloud business etc., But I wondered given its puny profit margins and my belief that eventually the algorithms that foster rapid delivery will become a commodity, [for those companies left standing] what will be the final valuation for Amazon.

    Using routine metrics it's P/E ratio etc. is astronomical. I wondered if you thought it would eventually be an end to this when other companies figure out how to master online rapid delivery, i.e. Walmart, maybe target, and direct to consumer like VFC.

    Thanks for your opinion.

    ReplyDelete
    Replies
    1. G. Are you a cancer doctor?

      Amazon is not the kind of company that I will own individually given my reliance on traditional valuation criteria and income focus.

      The P/E based on GAAP earnings is other worldly and no dividend is being paid or will likely be paid within the next decade, probably within my lifetime. If I was going to buy some shares now, I would buy 10 or 20 at the most.

      Eventually, investors will ask where is the beef.

      When? Hard to say but the fall would likely be a magnificent dive when enough investors get tired of waiting for the promised land to arrive.

      Both the cloud and online retail businesses have major actual and potential competitors that will cut into everyone's profitability.

      In the last analysis, it will still be all about profits rather than the hope of profits sufficient to justify the valuation at some distant period in time which never seems to be now or in the foreseeable future.

      WMT certainly has the financial heft to challenge AMZN's dominance in online retail. I have bought online from WMT, received the same two day service without have to pay a membership fee, and the prices were cheaper than Amazon that relies too much on third party sellers who jack up the prices.

      I have bought ETFs that have AMZN as a major holding.

      I only started to nibble on FDIS, a low cost Fidelity ETF that can be bought commission free by their customers. The expense ratio is just .084% and AMZN is weighted currently at 12.29%:

      https://screener.fidelity.com/ftgw/etf/goto/snapshot/snapshot.jhtml?symbols=FDIS&type=o-NavBar

      I have bought and have already sold SKYY which is a cloud computing ETF. The weighting is only 4.33%.

      http://www.ftportfolios.com/Retail/Etf/EtfHoldings.aspx?Ticker=SKYY

      Delete
  7. I have published a new post:

    https://tennesseeindependent.blogspot.com/2017/08/observations-and-sample-of-recent_7.html

    ReplyDelete