Observations and Sample of Recent Trades: EMP, ORKLY

Donald and North Korea: 

Donald threatened to obliterate North Korea when that nation threatens the U.S. or its allies. No President has gone so far as signalling the deaths of civilians in addition to military bases and regime installations. Trump Bluntly Threatens to Wipe Out North Korea in UN Debut - Bloomberg 

Prior Presidents have not made a statement this broad and strong relating to N.K. 

“The United States has great strength and patience, but if it is forced to defend itself or its allies, we will have no choice but to totally destroy North Korea. Rocket Man is on a suicide mission for himself and for his regime.” 

He called the N.K. regime a "band of criminals" and "depraved".  

Donald also intimated strongly that he will pull the U.S. out of the Iran nuclear accord. He called that agreement “one of the worst and most one-sided transactions the United States has ever entered into.”

He also singled out Russia and China: "We must reject threats to sovereignty from the Ukraine to the South China Sea". The criticism continued later in the speech: "It is an outrage that some nations would not only trade with such a regime, but would arm, supply and financially support a country that imperils the world with nuclear conflict."

Trump Threatens North Korea in UN Speech Transcript | Time.com

The stock market just shrugged it off.  I view that as being too nonchalant. 

It has always been understood that the U.S. would use nuclear weapons in response to a N.K. nuclear attack.

+++++++

Federal Reserve's Balance Sheet: 

As expected, the FED announced yesterday that it will not be reinvesting the proceeds from maturing securities starting in October. Fed approves October reversal of historic stimulus, leaves rates unchanged: CNBC

The dot plot indicates that a majority of FED members view one more .25% increase in the Federal Funds rate as likely this year (12 to 4), with three likely next year. 

Dot Plot: 

The Fed - September 20, 2017: FOMC Projections materials

I believe that the Bond Ghouls have been underestimating for several months the likelihood of an increase next December. The odds have increased over the past month and closed yesterday at 73.4%, up 57.7% the prior day. I would put the odds at close to 90%. 

Intermediate term interest rates ticked up slightly yesterday but the yield is still well below the 2017 high of 2.62% last hit on 3/13/17. 2017 Daily Treasury Yield Curve Rates

IEF $106.94 -$0.21 -0.20% : iShares 7-10 Year Treasury Bond ETF 

TLT managed to gain: TLT $125.91 +$0.09 0.07% : iShares 20+ Year Treasury Bond ETF 

I suspect that the Bond Ghouls are also underestimating the potential for an intermediate and longer term interest rate spike within the next 6 to 12 months. Possibly one can be avoided in that timeframe, provided the ECB continues its abnormal monetary policies through yearend. The German 10 year is still stuck below .5% and that is going to keep downward pressure on the U.S. 10 year. Germany 10 Year Government Bond

Spain's 10 year government bond closed yesterday at 1.56%%.

Japan's 10 year barely clears zero.

Switzerland's 10 year closed yesterday at a negative number.

The BOJ, ECB and the Swiss National Bank are all pursuing extremely abnormal monetary policies.  Several central banks continue to have their benchmark short term rates in negative territory. 

+++++

Economic Reports: 

The New York Federal Reserve and the Atlanta Federal Reserve have competing models to predict GDP. 

As of  9/15/17, the NY FED model projects only a 1.34% GDP growth rate this quarter. FEDERAL RESERVE BANK of NEW YORK

The  Atlanta Federal Reserve Bank forecast had been much higher but has been falling off a cliff recently. The projection as of 9/19/17 was 2.2%: 

There are some troubling signs in automobile and housing sales.

Auto Sales - Markets Data Center 

Ford to cut production at 5 plants as demand slips - MarketWatch

New Home Sales for July 2017.pdf (down 9.4% from June 2017 and 8.9% below July 2016)

Existing-Home Sales Slide 1.3 Percent in July | nar.realtor

Existing-Home Sales Decline 1.7 Percent in August | nar.realtor (declines in 4 of the last 5 months)

New Residential Construction Starts August 2017.pdf (.8% below July and up 1.4% from July 2016)

The consumer spending numbers have generally been just okay, but the personal savings rate is falling.

Personal Saving Rate-St. Louis Fed

++++

1. Short Term Bond/CD Ladder Basket Strategy: 

A. Bought 2 Bank of China 1.5% CDs Maturing on 9/20/18 (1 year CD): 

B. Bought 2 Bank West San Francisco 1.4% CDs Maturing on 6/18/18 (9 month CDs): 

This bank is currently rated 4 stars by Bankrate: BANK OF THE WEST Review Bank of the West has more than 600 banking offices. History

The holding company for this bank, Bankwest Corporation, is a wholly owned subsidiary of BNP Paribas S.A. Stock Quote (France: BNP)

C. Bought 3 First National Bank (Maine) 1.15% CDs (monthly interest) Maturing on 12/28/17 (3 month CDs): 

Holding Company: First Bancorp Inc.  (FNLC) 
The First Bancorp Reports Record Quarterly Results

Bankrate currently has a 4 star rating: FIRST NATIONAL BANK Review 

I have bought and sold the common shares several times as part of my REGIONAL BANK BASKET, and do not currently have a position.  


D. Bought 2 Bank of China 1.15% CDs Maturing on 11/28/17 (2 month CDs): 

E. Bought 1 American Express Bank 2.3% CD (semiannual interest) Maturing on 9/19/22 (5 year CD): 

$10K Inflow into Short Term Bond/CD Ladder Basket 

2. Eliminated the First Mortgage Exchange Traded Bond EMP: 

A. Sold 50 EMP at $24.97-Used Commission Free Trade:

Profit Snapshot: +$102.92

Stocks, Bonds & Politics: Item # 2.A. Bought 50 EMP at $22.91 (purchased 4/11/17)

1 Year Chart: 

There was a small interest rate spike after the election. 

Quote: Entergy Mississippi Inc. 4.9% First Mortgage Bonds Due 2066 (EMP)

Last Discussed a Sell: Stocks, Bonds & Politics: Item # 2 Sold 50 EMP at $24.47

Par Value: $25
Maturity on 10/1/2066
Issuer Optional Call Date: on or after 10/1/21
Long Maturity and Optional Call Right creates serious asymmetric risk that favors the issuer.
Prospectus

B. Sold 30 EMP at $24.96: 

Profit Snapshot: +$64.6

Bought at $22.77 on April 19, 2017. 

3. Eliminated JPMPRG: 

A. Sold 50 JPMPRG at $27.06-Used Commission Free Trade: 

Profit Snapshot: $107.01

Update For Bond And Equity Preferred Stock Basket Strategy As Of 7/31/15 - South Gent | Seeking Alpha-Bought 50 at $24.76 

I paid the regular commission for the purchase. 

Quote: JPMorgan Chase & Co. 6.1% Non-Cumulative Preferred Series AA (JPM.PG)

Par Value: $25
Coupon: 6.1%
Maturity: Potentially Perpetual
Dividends: Qualified and Non-Cumulative
Optional Call Date: At Par Value plus accrued and unpaid dividends on or after 9/1/2020
Prospectus
Capital Structure: Junior to all bonds and senior only to common stock

The quarterly dividend payment on 50 shares is $19.06. I received 8 payments totalling $152.48 bringing the total return to $259.49 on a $1,245.95 outlay or 20.83%. The profit added about 4% per year to the 6.1% coupon. 

This is the kind of preferred stock that I would consider buying back after an interest rate spike in intermediate and long term interest rates similar to what happened in 2013.  

Interest rate risk, which includes the risk of lost opportunity, volatility risk and credit risk for equity preferred stocks is discussed in the Appendix section in my Update On Bond And Equity Preferred Stock Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha.

B. Sold 50 JPMPRG at $27.11-Used Commission Free Trade: 

Profit Snapshot: +$108.57

The total return numbers are similar to the previous lot. 

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

I am increasing my allocation to Tennessee Municipal Bonds in case my interest rate outlook proves to be wrong. My tax free yield on these long duration bonds is generally higher than my taxable yield from the corporate bonds that have been sold.  

A. Bought 5 City of Knoxville 3% Electric Revenue Bonds Maturing on 7/1/42: 

EMMA Page

This bond is a new issue and was sold at an offering price of 95.598.  

Bought at a Total Cost of 95.892
Current Tax Free Yield = 3.1285%
YTM = 3.242%

Credit Ratings: 
Moody's at Aa2
S & P at AA+

Optional Call Date: At Par Value on or after 7/1/2025

Security: 

Tax Matters: 

5. Bought Back 100 ORKLY at $10.05: 

Orkla website

Quotes: 

USD Priced ADR:  Orkla ASA ADR (U.S.: OTC)
Ordinary Shares Priced in Norwegian Krone: Orkla ASA (Norway: Oslo)
1 ADR = 1 Ordinary Share 

Orkla is based in Norway. The company is primarily a consumer products company that sells food, confectionery & snacks and personal care items.

Closing Price in NOKs = KR 79.35 up KR 1.15%

Currency Chart. Norwegian Krone to US Dollar Rates

Dividend Tax Issues: 

I sold 150 shares held in my Interactive Brokers ("IB") account after receiving the annual dividend payment and noticing that IB refused to make any effort to claim my right tax treaty right to a 15% withholding rate. Stocks, Bonds & Politics: Item # 3.A. That problem is commonplace among U.S. brokers. 

As a U.S. citizen, I am entitled to a 15% tax rate under article 8 of the U.S. tax treaty with Norway. An author of the following linked article incorrectly claims that there is no tax treaty between Norway and the U.S. Orkla Sells Aluminum Division And Offers Special Dividend - Orkla ASA ADR (OTCMKTS:ORKLY) | Seeking Alpha Possibly that author uses IB or some other broker that does not bother to claim the treaty tax rate for their U.S. citizen customers.

Through IB's inaction, Norway treated me like a stateless person and withheld 25%.  I had similar failures to claim treaty rights for other stocks held in mt, and all were subsequently sold since I will not tolerate that unwillingness to perform that simple task for customers. I decided that I would no longer use IB for purchases of non-Canadian ADRs where the host country levies a dividend tax. 

In the past Fidelity has claimed tax treaty rights for dividends paid by Orkla, so I bought this 100 share lot in this account. Orkla is one of the foreign ADRs that I will periodically buy, harvest the annual dividend and hopefully sell for a profit thereafter. 

Dividend History 

Prior Trades:

Sold 100 ORKLY-Update On Portfolio Positioning And Management - South Gent | Seeking Alpha August 2015 (+$51.08)- Bought Back 100 Orkla (ORKLY) At $7.285 - South Gent | Seeking Alpha December 2014

Item # 4  Sold 100 ORKLY at $9 (9/6/14 Post)(profit snapshot $122.48)-Item # 2. Bought 100 ORKLY at $7.61 (1/13/14 Post) 

Total ORKLY Trading Profit: $239.01 

Last Earnings Report: 

Continued growth for Orkla

Sourced: Page 9.pdf

Rationale: 

I mentioned above that Orka was primarily a consumer products company. An issue is that the company is also a conglomerate that owns interest in unrelated businesses that has probably contributed to a conglomerate discount in the share price. 

One of those businesses is a 50% interest in SAPA. a leading producer of extruded aluminum profiles. The other 50% owner is Norsk Hydro. I view it as a positive development that Orkla has agreed to sell its interest to Norsk Hydro for NOK 27 billion subject to adjustments based on SAPA's financial position on the closing date. Orkla will pay a special dividend of 5 NOKs upon completion. Orkla to sell its interest in Sapa to Hydro 

The other businesses include a 42.5% interest in a paint company called Jotun, Orkla Real Estate, a power plant in Sarpsfoss and an 85% interest in the Saudefaldene hydro plants, and other financial investments. Orkla Investments

Sourced Page 13-14: 2016 Annual Report.pdf

6. Intermediate Term Bond/CD Ladder Basket Strategy:

Continued to pare.

A. Sold 2 Northeast Utilities 2.8% SU Bonds Maturing on 5/1/23-ROTH IRA:

I have been building up my cash allocation in this Vanguard Roth IRA account, hoping to redeploy within six months in better total return securities. One consideration underlying this cash raise is that Vanguard's Prime fund was then yielding 1.11%, so I am not sacrificing that much in current yield by eliminating into strength some low coupon bonds. 

Profit Snapshot: +$17.82

Northeast Utilities is now known as Eversource. 
Eversource Energy (ES)
ES Analyst Estimates

FINRA Page: Bond Detail

Sold at 101.047
YTM Then at 2.69%
Current Yield at 2.77%

Bought at a Total Cost of 99.852
Stocks, Bonds & Politics: Item 1.D. 
YTM Then at 2.808%
Current Yield at 2.8042%

B. Sold 1 McDonalds 2.2% SU Bond Maturing on 5/26/20-Roth IRA: 

Profit Snapshot: +$7.57

FINRA PAGE: Bond Detail

Sold at 100.918
YTM Then at 1.838%
Current Yield at 2.18%

Bought at a Total Cost of 99.961
Stocks, Bonds & Politics: Item # 1.D. 
YTM Then at 2.213%
Current Yield at 2.2%

I will consider buying this bond back at less than 99.  

$3K Outflow from Intermediate Term Bond/CD Ladder Basket

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.