Market Commentary:
My VIX Allocation Model is currently in a Stable Vix Pattern (SVP), which is conducive to stock market gains.
The SVP formed out of an Unstable Vix Pattern in July 2016 and can only be terminated by a Trigger Event, a burst in the VIX to the high 20s lasting several days. While there is no set duration period for a SVP, most have lasted three years or longer but there have been exceptions.
The prior SVP formed in September 2012 and was terminated by a Trigger Event in late August 2015. A Trigger Event In The Vix Asset Allocation Model 8/31/15 - South Gent | Seeking Alpha
A reader asked me what was the meaning of my market commentary when it comes to asset allocations.
I am just pointing out positive and negative data. I frequently highlight that the Stock Jocks are not pricing any of the multiple possible risks that could result in a correction or bear market. Those risks will have to come into being before the Stock Jocks take notice.
Given my strong capital preservation objectives, the benefits of stocks generally speaking are currently outweighed by their downside risks. I have consequently lowered my exposure to stocks while selectively buying some stocks for income and/or trades. I have been for months a net seller of stocks.
I do not have to take any risks to meet my reasonably projected future expenses, and that is an important element in my decision making process now.
The biggest risk for most U.S. households, however, will likely be an unwillingness to take risks.
Long Term bull and bear markets in stocks come and go. Within those long term cycles, there will frequently be multiple smaller duration bull and bear cycles.
If an investor has to grow capital meaningfully to meet their financial objectives, then most of the bull cycles in major asset categories have to be captured or the financial plan may easily fail leaving the household with insufficient assets to meet their financial objectives. The probable inability to time market tops and bottoms has to be factored into the decision making process for those who have no choice but to assume risks.
A number of investors have bailed on this market early, as in four or five years ago, or never participated in it meaningfully after the 2008 Dark Period. I debated several of those individuals who were pessimistic in 2012 and 2013, arguing that they were premature in their outlook: (e.g. multiple comments to Sorry Bulls, But This Is Still A Secular Bear Market -SPDR S&P 500 Trust ETF (NYSEARCA:SPY) | Seeking Alpha; This Summer Slowdown Will Be Different Than The Previous 3 | Seeking Alpha; 4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice | Seeking Alpha; Why I Remain Bearish Despite The Cyclical Bull Rally | Seeking Alpha)
Many sold out of stocks at the worst possible time in October 2008 through March 2009, one of the more recent and best buying opportunities.
I really do not know how much higher stocks will go before the onset of a correction or bear market cycle, nor do I or anyone else know the full extent of any down move or its duration. A long term bear market in a major asset class is an entirely different animal than shorter term bear cycles within the context of a long term secular bull market. The worst long term bear market in stocks occurring in my lifetime started in 1966 and lasted about 16 years. The following two computations are adjusted for inflation and include reinvestment of dividends. Note the annual average negative real total returns:
The period between April 2000 through February 2009 provided a lot of excitement for traders, with two catastrophic events within a nine year period. The end result was worse for the S & P 500 index, but mercifully the time period was shorter than that earlier period:
The 1929 to 1941 period was market with significant periods of deflation that help the total return when adjusting for inflation.
With Inflation Adjustment:
Without Inflation Adjustment:
Dividend reinvestment would have been beneficial as well due to the extreme decline which was over 85% at one point. The Four Totally Bad Bear Recoveries: Where Is Today's Market? - dshort - Advisor Perspectives
There will be a bear market. The only way to make a good guess in real time as to whether a bear cycle will be short or long is to understand and identify the strong secular forces that cause and shape long term bull and bear markets.
An investor who bailed at SPX 1400 in the 2012 summer, fearing a 20% correction, has missed out on a 1000+ point gain. A 20% correction from SPX 2599 would take SPX to 2000 or almost 43% above the 1400 level when that investor bailed in 2012.
If I had to take risks now to grow my capital, I would probably wait to do significant reduction in my overall stock allocation until there is a Trigger Event in Vix Asset Allocation Model and the SPX falls more than 5% below its 200 day SMA line. Using a Yahoo Finance one year chart, that SMA line was at 2,362.5 last Friday. S&P 500 Chart The line has been moving up. 5% of that number would be about 2244.38. Based on my feel for the market, I may or may not wait to lighten up until the First Recovery Event after the Trigger Event which has always occurred in the past, when the VIX returns to movement below 20 for a brief period that would occur with the bulls making one last charge.
The best signal in the past decade given by that Model was the August 2007 Trigger Event with the First Recovery Period taking SPX to new highs by early October.
+++++++++++
Economic News:
The NY Fed GDP forecast currently predicts 2.2% GDP growth in the third quarter. FEDERAL RESERVE BANK of NEW YORK
The Atlanta FED's GDP Now model estimates third quarter GDP growth currently at 3.2%: GDPNow - Federal Reserve Bank of Atlanta As shown in a chart at the GDPNow website, the current consensus estimate is about 2.75%. I am expecting those numbers to decline as more data is received including the negative impacts from hurricane Harvey.
I am expecting the full year number to be in a 2% to 2.2% range.
The Fed Beige Book- September 6, 2017
European Central Bank leaves interest rates unchanged; investors await Draghi - MarketWatch (the ECB's extraordinarily abnormal monetary policies place downward pressure on U.S. interest rates. The ECB's benchmark deposit rate is at a negative .4%: Official interest rates; Deutsche Bank CEO urges ECB to end cheap money era - MarketWatch)
++++++
The GOP and the Dreamers:
As expected, Donald ended the program that allowed children, who were brought illegally by their parents into the U.S., to stay by applying for a two year work/school permit.
Trump administration announces end of immigration protection program for ‘dreamers’; How the decision to end DACA affects Dreamers - CBS News
Trump has the constitutional power to rescind Obama's Executive Order that established this program after the GOP repeatedly blocked any solution. Sessions in his letter rescinding this program acknowledged that Obama's EO was issued after Congress repeatedly failed to pass legislation. That failure was due to the GOP's opposition.
Since the GOP's core constituency favors deportation of anyone who is in the U.S. illegally including the Dreamers, viewing any other result as an unacceptable "amnesty", I would be surprised that a Congress with GOP majorities will be able to do anything in the future that would address this issue in anything resembling a compassionate and humane way.
Possibly they will try to hide their unwillingness to do anything by attaching a replacement bill to other legislation that would be anathema to Democrats (e.g. funding the entire border wall) and then dare the Democrats, who supported Obama's program, to vote against it.
The republicans are wrapping themselves in the Constitution as a justification for the rescission, which is correctly viewed IMO simply as an acceptable cover for their strong anti-immigrant beliefs.
I would agree that this GOP decision is cruel, particularly since Trump and Sessions have to know that the GOP politicians in Congress will not cooperate in sufficient number with the Democrats to arrive at a "humane" solution. Instead, the Dreamers will be deported when caught in immigration enforcement sweeps and sent back to their country of origin, but any serious forced deportation will probably be after the 2018 election. I hope that I am wrong in that assessment.
While a few GOP politicians will talk about humane treatment, and make meaningless pronouncements that children should not pay for their parents' action, that is just talk and should be dismissed as hypocritical and insincere.
Those voicing that emotion have in the past blocked Congress from resolving the issue, including Speaker Paul Ryan, and those politicians are not accustomed to stick their necks out for the Dreamers when they know that the GOP's base wants to deport them.
H.R. 5272 (113th): To prohibit certain actions with respect to deferred action for aliens not lawfully present in the United States- GovTrack.us
The GOP voted to end DACA in 2014. Republicans Vote to End DACA After Tense Floor Debate (Updated) (Video)(only 11 GOP congressman broke ranks and those are in swing districts; four Democrats voted with the GOP and only one is currently in Congress. Another John Barrow from Georgia was repeatedly targeted by Georgia's state GOP for defeat by gerrymandering his district twice until he was beaten by Rick W. Allen in 2014. Allen is probably most famous for arguing that GOP politicians 'Are Going to Hell' if they voted an anti-discrimination law for LGBT workers, citing a passage from the Bible.
So, as I understand it, the current GOP House members who in the aggregate are further to the right than the ones who voted to end DACA in 2014, will now have a change of heart and support a DACA program. I suspect this will become an election issue in 2018 and will make a very limited number of GOP congressman even more vulnerable to defeat. Far more GOP politicians would be in danger of losing their seat to a primary challenger further to the extreme right by voting for a DACA law.
Blackburn Acts to Block Obama’s Lawless Amnesty Program | U.S. Congressman Marsha Blackburn (Ms. Blackburn, a True Believer on steroids, represents my congressional district)
The DACA rescission order is consistent with the pardon of the former Maricopa County Sheriff who was of found guilty of criminal contempt due to a deliberate refusal to obey a court order in a racial profiling case. Why Joe Arpaio was found guilty-CNN Both decisions amount to pandering to the GOP's base.
Administration memo: DACA recipients should prepare to leave - CNN
Jeff Sessions thinly disguises his White Nationalism and racism which he made clear in his favorable comments about the 1924 Immigration Act. That legislation was blatantly racist: Sessions Gave Unqualified Praise for a 1924 Immigration Law-The Atlantic; Jeff Sessions’ praise of 1924 eugenics immigration law remains insane; Social Origins of Eugenics
The DACA rescission order will have adverse impacts on the economy.
U.S. GDP would take a hit from DACA deportations, report finds: CNBC
Ending DACA Will Impose Billions in Employer Compliance Costs | Cato @ Liberty; The Economic and Fiscal Impact of Repealing DACA | Cato @ Liberty
Ending DACA Dreamers Program Cost Cost 700,000 Jobs | Fortune.com
Trump administration surrogates, including the Treasury Secretary, assert that ending the program will create jobs for legal residents and will have no impact.
+++++
Trump Strikes Deal With the Democrats on Debt Limit:
Most of the GOP politicians in Washington will link their approval of a debt limit increase to some unrelated piece of legislation that is anathema to the Democrats. It is far easier for a GOP President to bring along a few sensible republican politicians and strike a deal with the Democrats in order to avoid a debt default and a government shutdown.
In this particular case, the Democrats agreed to approve an initial $7.5B in Harvey aid relief that will be hard for the Texas GOP congressman to vote against as they did when blue states were impacted by Sandy. Ted Cruz may even be hard pressed to delay matters in the Senate for the same reason.
The extension lasts until December 15, 2107. There is a FED meeting on 12/13. If this 3 month extension is passed, I doubt that the FED will increase the FF rate at that meeting unless a further extension is already in place. The odds of a .25% increase on or before that meeting are now at 31.9% as of 9/6. Countdown to FOMC: CME FedWatch Tool
One hour before Trump agreed to the proposal, Paul Ryan had called the Democrats' proposal “ridiculous and disgraceful.”
GOP representatives may balk.
GOP leaders 'shocked' following Trump deal with Democrats - CNN
Trump endorses short-term debt-limit increase backed by Democrats: USA Today
++++++
Russia and the Election:
Facebook sold ads to individuals linked to a Russian troll farm based in St. Petersburg known as the Internet Research Agency.
Facebook says it sold political ads to Russian company during 2016 election - The Washington Post ("Representatives of Facebook told congressional investigators Wednesday that the social network has discovered that it sold ads during the U.S. presidential campaign to a shadowy Russian company seeking to target voters, according to several people familiar with the company’s findings.")
This 2015 article published in the NYT exposes some of the known meddling by this Kremlin backed organization in U.S. internal affairs. The Agency - The New York Times
++++++++
Amazon and Price Gouging:
In the past I have noticed many items that were outrageously priced at Amazon. The problem generally involves third parties who use Amazon to fulfill orders. I have found instances, for example, where the products were 50% to 100% higher than the prices at Kroger. The most recent example was the pricing for Starbucks Iced Coffee that I recently bought at Krogers for about $1.25 a bottle. The same product is available at Amazon for $3.17 per bottle. Amazon.com : Starbucks Black Iced Coffee UnSweetened 11 oz Glass Bottles - Pack of 12 : Grocery & Gourmet Food The regular price at Krogers is about $2.2 as I recall. I found another internet retailer that charged $2 per bottle with free shipping. I drink that beverage when I am too lazy to brew some coffee. I get my buzz quicker as well since I can drink the iced coffee quickly, but the hot coffee has to be sipped slowly.
I read this article dealing with Amazon's price gouging on water. Ahead of Irma, Outrage Toward Sky-High Amazon Water Prices - NBC News
Eventually, customers will realize that a large number of products are cheaper at other retailers, either box and/or online retailers.
+++++++++++
1. Short Term Bond/CD Ladder Basket Strategy:
I am moving more money into short term CDs, roughly $10K every three trading days. The CD yields have started to drift down some which may cause me to ease up some.
A. Bought 2 Cathay Bank 1.6% CDs (monthly interest) Maturing on 3/7/19 (18 Month CD):
This bank has a 4 star rating from Bankrate: CATHAY BANK Review
Holding Company: CATY Stock Price - Cathay General Bancorp (U.S.: Nasdaq)
CATY Analyst Estimates
Cathay General Bancorp Announces Second Quarter 2017 Results
B. Bought 2 Pinnacle Bank 1.4% CDs (monthly interest) Maturing on 8/30/18 (1 Year CDs):
Holding Company: Pinnacle Financial Partners Inc. (PNFP) (based in Nashville TN.)
PNFP Analyst Estimates
C. Bought 2 Pacific Premier 1.45% CDs (monthly interest) Maturing on 12/10/18 (15 month CDs):
Holding Company: PPBI Stock Price - Pacific Premier Bancorp Inc. (U.S.: Nasdaq)
PPBI Analyst Estimates
Pacific Premier Bancorp, Inc. Announces Second Quarter 2017 Results (Unaudited)
D. Bought 2 Beal Bank USA 1.45% CDs Maturing on 7/11/18 (10 month CDs):
About Beal Bank, Beal Bank USA
Beal Bank USA is based in Nevada. Beal Bank is based in Texas. Both are controlled by Andrew Beal.
Bankrate rates the bank at 4 stars: BEAL BANK USA Review The financial data currently used in Bankrate's ratings ends in March 2016.
It is possible to obtain more current data for privately owned banking institutions at the FFIEC.GOV website: View or download data for individual institutions - FFIEC Central Data Repository's Public Data Distribution
To generate a report, you have to turn off the popup blocker.
E. Bought 2 Bank of Hope 1.6% CDs (monthly interest payments) Maturing on 3/22/19 (18 month CDs):
Holding Company: Hope Bancorp Inc. (HOPE)
$10K Inflow into Short Term Bond/CD Ladder Basket
My VIX Allocation Model is currently in a Stable Vix Pattern (SVP), which is conducive to stock market gains.
The SVP formed out of an Unstable Vix Pattern in July 2016 and can only be terminated by a Trigger Event, a burst in the VIX to the high 20s lasting several days. While there is no set duration period for a SVP, most have lasted three years or longer but there have been exceptions.
The prior SVP formed in September 2012 and was terminated by a Trigger Event in late August 2015. A Trigger Event In The Vix Asset Allocation Model 8/31/15 - South Gent | Seeking Alpha
A reader asked me what was the meaning of my market commentary when it comes to asset allocations.
I am just pointing out positive and negative data. I frequently highlight that the Stock Jocks are not pricing any of the multiple possible risks that could result in a correction or bear market. Those risks will have to come into being before the Stock Jocks take notice.
Given my strong capital preservation objectives, the benefits of stocks generally speaking are currently outweighed by their downside risks. I have consequently lowered my exposure to stocks while selectively buying some stocks for income and/or trades. I have been for months a net seller of stocks.
I do not have to take any risks to meet my reasonably projected future expenses, and that is an important element in my decision making process now.
The biggest risk for most U.S. households, however, will likely be an unwillingness to take risks.
Long Term bull and bear markets in stocks come and go. Within those long term cycles, there will frequently be multiple smaller duration bull and bear cycles.
If an investor has to grow capital meaningfully to meet their financial objectives, then most of the bull cycles in major asset categories have to be captured or the financial plan may easily fail leaving the household with insufficient assets to meet their financial objectives. The probable inability to time market tops and bottoms has to be factored into the decision making process for those who have no choice but to assume risks.
A number of investors have bailed on this market early, as in four or five years ago, or never participated in it meaningfully after the 2008 Dark Period. I debated several of those individuals who were pessimistic in 2012 and 2013, arguing that they were premature in their outlook: (e.g. multiple comments to Sorry Bulls, But This Is Still A Secular Bear Market -SPDR S&P 500 Trust ETF (NYSEARCA:SPY) | Seeking Alpha; This Summer Slowdown Will Be Different Than The Previous 3 | Seeking Alpha; 4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice | Seeking Alpha; Why I Remain Bearish Despite The Cyclical Bull Rally | Seeking Alpha)
Many sold out of stocks at the worst possible time in October 2008 through March 2009, one of the more recent and best buying opportunities.
I really do not know how much higher stocks will go before the onset of a correction or bear market cycle, nor do I or anyone else know the full extent of any down move or its duration. A long term bear market in a major asset class is an entirely different animal than shorter term bear cycles within the context of a long term secular bull market. The worst long term bear market in stocks occurring in my lifetime started in 1966 and lasted about 16 years. The following two computations are adjusted for inflation and include reinvestment of dividends. Note the annual average negative real total returns:
The period between April 2000 through February 2009 provided a lot of excitement for traders, with two catastrophic events within a nine year period. The end result was worse for the S & P 500 index, but mercifully the time period was shorter than that earlier period:
The 1929 to 1941 period was market with significant periods of deflation that help the total return when adjusting for inflation.
With Inflation Adjustment:
Without Inflation Adjustment:
Dividend reinvestment would have been beneficial as well due to the extreme decline which was over 85% at one point. The Four Totally Bad Bear Recoveries: Where Is Today's Market? - dshort - Advisor Perspectives
There will be a bear market. The only way to make a good guess in real time as to whether a bear cycle will be short or long is to understand and identify the strong secular forces that cause and shape long term bull and bear markets.
An investor who bailed at SPX 1400 in the 2012 summer, fearing a 20% correction, has missed out on a 1000+ point gain. A 20% correction from SPX 2599 would take SPX to 2000 or almost 43% above the 1400 level when that investor bailed in 2012.
If I had to take risks now to grow my capital, I would probably wait to do significant reduction in my overall stock allocation until there is a Trigger Event in Vix Asset Allocation Model and the SPX falls more than 5% below its 200 day SMA line. Using a Yahoo Finance one year chart, that SMA line was at 2,362.5 last Friday. S&P 500 Chart The line has been moving up. 5% of that number would be about 2244.38. Based on my feel for the market, I may or may not wait to lighten up until the First Recovery Event after the Trigger Event which has always occurred in the past, when the VIX returns to movement below 20 for a brief period that would occur with the bulls making one last charge.
The best signal in the past decade given by that Model was the August 2007 Trigger Event with the First Recovery Period taking SPX to new highs by early October.
+++++++++++
Economic News:
The NY Fed GDP forecast currently predicts 2.2% GDP growth in the third quarter. FEDERAL RESERVE BANK of NEW YORK
The Atlanta FED's GDP Now model estimates third quarter GDP growth currently at 3.2%: GDPNow - Federal Reserve Bank of Atlanta As shown in a chart at the GDPNow website, the current consensus estimate is about 2.75%. I am expecting those numbers to decline as more data is received including the negative impacts from hurricane Harvey.
I am expecting the full year number to be in a 2% to 2.2% range.
The Fed Beige Book- September 6, 2017
European Central Bank leaves interest rates unchanged; investors await Draghi - MarketWatch (the ECB's extraordinarily abnormal monetary policies place downward pressure on U.S. interest rates. The ECB's benchmark deposit rate is at a negative .4%: Official interest rates; Deutsche Bank CEO urges ECB to end cheap money era - MarketWatch)
++++++
The GOP and the Dreamers:
As expected, Donald ended the program that allowed children, who were brought illegally by their parents into the U.S., to stay by applying for a two year work/school permit.
Trump administration announces end of immigration protection program for ‘dreamers’; How the decision to end DACA affects Dreamers - CBS News
Trump has the constitutional power to rescind Obama's Executive Order that established this program after the GOP repeatedly blocked any solution. Sessions in his letter rescinding this program acknowledged that Obama's EO was issued after Congress repeatedly failed to pass legislation. That failure was due to the GOP's opposition.
Since the GOP's core constituency favors deportation of anyone who is in the U.S. illegally including the Dreamers, viewing any other result as an unacceptable "amnesty", I would be surprised that a Congress with GOP majorities will be able to do anything in the future that would address this issue in anything resembling a compassionate and humane way.
Possibly they will try to hide their unwillingness to do anything by attaching a replacement bill to other legislation that would be anathema to Democrats (e.g. funding the entire border wall) and then dare the Democrats, who supported Obama's program, to vote against it.
The republicans are wrapping themselves in the Constitution as a justification for the rescission, which is correctly viewed IMO simply as an acceptable cover for their strong anti-immigrant beliefs.
I would agree that this GOP decision is cruel, particularly since Trump and Sessions have to know that the GOP politicians in Congress will not cooperate in sufficient number with the Democrats to arrive at a "humane" solution. Instead, the Dreamers will be deported when caught in immigration enforcement sweeps and sent back to their country of origin, but any serious forced deportation will probably be after the 2018 election. I hope that I am wrong in that assessment.
While a few GOP politicians will talk about humane treatment, and make meaningless pronouncements that children should not pay for their parents' action, that is just talk and should be dismissed as hypocritical and insincere.
Those voicing that emotion have in the past blocked Congress from resolving the issue, including Speaker Paul Ryan, and those politicians are not accustomed to stick their necks out for the Dreamers when they know that the GOP's base wants to deport them.
H.R. 5272 (113th): To prohibit certain actions with respect to deferred action for aliens not lawfully present in the United States- GovTrack.us
The GOP voted to end DACA in 2014. Republicans Vote to End DACA After Tense Floor Debate (Updated) (Video)(only 11 GOP congressman broke ranks and those are in swing districts; four Democrats voted with the GOP and only one is currently in Congress. Another John Barrow from Georgia was repeatedly targeted by Georgia's state GOP for defeat by gerrymandering his district twice until he was beaten by Rick W. Allen in 2014. Allen is probably most famous for arguing that GOP politicians 'Are Going to Hell' if they voted an anti-discrimination law for LGBT workers, citing a passage from the Bible.
So, as I understand it, the current GOP House members who in the aggregate are further to the right than the ones who voted to end DACA in 2014, will now have a change of heart and support a DACA program. I suspect this will become an election issue in 2018 and will make a very limited number of GOP congressman even more vulnerable to defeat. Far more GOP politicians would be in danger of losing their seat to a primary challenger further to the extreme right by voting for a DACA law.
Blackburn Acts to Block Obama’s Lawless Amnesty Program | U.S. Congressman Marsha Blackburn (Ms. Blackburn, a True Believer on steroids, represents my congressional district)
The DACA rescission order is consistent with the pardon of the former Maricopa County Sheriff who was of found guilty of criminal contempt due to a deliberate refusal to obey a court order in a racial profiling case. Why Joe Arpaio was found guilty-CNN Both decisions amount to pandering to the GOP's base.
Administration memo: DACA recipients should prepare to leave - CNN
Jeff Sessions thinly disguises his White Nationalism and racism which he made clear in his favorable comments about the 1924 Immigration Act. That legislation was blatantly racist: Sessions Gave Unqualified Praise for a 1924 Immigration Law-The Atlantic; Jeff Sessions’ praise of 1924 eugenics immigration law remains insane; Social Origins of Eugenics
The DACA rescission order will have adverse impacts on the economy.
U.S. GDP would take a hit from DACA deportations, report finds: CNBC
Ending DACA Will Impose Billions in Employer Compliance Costs | Cato @ Liberty; The Economic and Fiscal Impact of Repealing DACA | Cato @ Liberty
Ending DACA Dreamers Program Cost Cost 700,000 Jobs | Fortune.com
Trump administration surrogates, including the Treasury Secretary, assert that ending the program will create jobs for legal residents and will have no impact.
+++++
Trump Strikes Deal With the Democrats on Debt Limit:
Most of the GOP politicians in Washington will link their approval of a debt limit increase to some unrelated piece of legislation that is anathema to the Democrats. It is far easier for a GOP President to bring along a few sensible republican politicians and strike a deal with the Democrats in order to avoid a debt default and a government shutdown.
In this particular case, the Democrats agreed to approve an initial $7.5B in Harvey aid relief that will be hard for the Texas GOP congressman to vote against as they did when blue states were impacted by Sandy. Ted Cruz may even be hard pressed to delay matters in the Senate for the same reason.
The extension lasts until December 15, 2107. There is a FED meeting on 12/13. If this 3 month extension is passed, I doubt that the FED will increase the FF rate at that meeting unless a further extension is already in place. The odds of a .25% increase on or before that meeting are now at 31.9% as of 9/6. Countdown to FOMC: CME FedWatch Tool
One hour before Trump agreed to the proposal, Paul Ryan had called the Democrats' proposal “ridiculous and disgraceful.”
GOP representatives may balk.
GOP leaders 'shocked' following Trump deal with Democrats - CNN
Trump endorses short-term debt-limit increase backed by Democrats: USA Today
++++++
Russia and the Election:
Facebook sold ads to individuals linked to a Russian troll farm based in St. Petersburg known as the Internet Research Agency.
Facebook says it sold political ads to Russian company during 2016 election - The Washington Post ("Representatives of Facebook told congressional investigators Wednesday that the social network has discovered that it sold ads during the U.S. presidential campaign to a shadowy Russian company seeking to target voters, according to several people familiar with the company’s findings.")
This 2015 article published in the NYT exposes some of the known meddling by this Kremlin backed organization in U.S. internal affairs. The Agency - The New York Times
++++++++
Amazon and Price Gouging:
In the past I have noticed many items that were outrageously priced at Amazon. The problem generally involves third parties who use Amazon to fulfill orders. I have found instances, for example, where the products were 50% to 100% higher than the prices at Kroger. The most recent example was the pricing for Starbucks Iced Coffee that I recently bought at Krogers for about $1.25 a bottle. The same product is available at Amazon for $3.17 per bottle. Amazon.com : Starbucks Black Iced Coffee UnSweetened 11 oz Glass Bottles - Pack of 12 : Grocery & Gourmet Food The regular price at Krogers is about $2.2 as I recall. I found another internet retailer that charged $2 per bottle with free shipping. I drink that beverage when I am too lazy to brew some coffee. I get my buzz quicker as well since I can drink the iced coffee quickly, but the hot coffee has to be sipped slowly.
I read this article dealing with Amazon's price gouging on water. Ahead of Irma, Outrage Toward Sky-High Amazon Water Prices - NBC News
Eventually, customers will realize that a large number of products are cheaper at other retailers, either box and/or online retailers.
+++++++++++
1. Short Term Bond/CD Ladder Basket Strategy:
I am moving more money into short term CDs, roughly $10K every three trading days. The CD yields have started to drift down some which may cause me to ease up some.
A. Bought 2 Cathay Bank 1.6% CDs (monthly interest) Maturing on 3/7/19 (18 Month CD):
This bank has a 4 star rating from Bankrate: CATHAY BANK Review
Holding Company: CATY Stock Price - Cathay General Bancorp (U.S.: Nasdaq)
CATY Analyst Estimates
Cathay General Bancorp Announces Second Quarter 2017 Results
B. Bought 2 Pinnacle Bank 1.4% CDs (monthly interest) Maturing on 8/30/18 (1 Year CDs):
Holding Company: Pinnacle Financial Partners Inc. (PNFP) (based in Nashville TN.)
PNFP Analyst Estimates
C. Bought 2 Pacific Premier 1.45% CDs (monthly interest) Maturing on 12/10/18 (15 month CDs):
Holding Company: PPBI Stock Price - Pacific Premier Bancorp Inc. (U.S.: Nasdaq)
PPBI Analyst Estimates
Pacific Premier Bancorp, Inc. Announces Second Quarter 2017 Results (Unaudited)
D. Bought 2 Beal Bank USA 1.45% CDs Maturing on 7/11/18 (10 month CDs):
About Beal Bank, Beal Bank USA
Beal Bank USA is based in Nevada. Beal Bank is based in Texas. Both are controlled by Andrew Beal.
Bankrate rates the bank at 4 stars: BEAL BANK USA Review The financial data currently used in Bankrate's ratings ends in March 2016.
It is possible to obtain more current data for privately owned banking institutions at the FFIEC.GOV website: View or download data for individual institutions - FFIEC Central Data Repository's Public Data Distribution
To generate a report, you have to turn off the popup blocker.
E. Bought 2 Bank of Hope 1.6% CDs (monthly interest payments) Maturing on 3/22/19 (18 month CDs):
Holding Company: Hope Bancorp Inc. (HOPE)
$10K Inflow into Short Term Bond/CD Ladder Basket
2. SOLD 50 AEB at $25.23-Used Commission Free Trade:
AEB is a hybrid security that pays quarterly "dividends" for a U.S. taxpayer at the greater of 4% or .875% above the 3 month Libor rate on a $25 par value.
This unusual security is a junior bond on the balance sheet and in effect an equity preferred stock for regulatory capital purposes. Its potential perpetual character makes it analogous to U.S. equity preferred stocks but it is superior in Aegon's capital structure to equity preferred stocks. The hybrids rank below all senior debt. Distributions have been treated as qualified dividends for U.S. taxpayers in the past, but would be classified as interest in European countries. Quantumonline still shows the qualified rate as still being applicable for U.S. taxpayers.
AEB AND JQC (10/8/2008 Post)
AEG may call at anytime at par value. The 3 month Libor rate has been trending up in yield, but is unlikely to surpass IMO 3.125% prior to 2019, the trigger point for increasing the coupon above the 4% minimum. 3-Month London Interbank Offered Rate (LIBOR) Chart-St. Louis Fed That rate will be higher than the federal funds rate set by the Federal Reserve: Effective Federal Funds Rate Chart-St. Louis Fed
Profit Snapshot: +$166.46
This purchase was at $21.9 and was discussed here in Comment Blog # 7.
Trading Profits To Date: $3,425.66 (all small lots)
Snapshots at Stocks, Bonds & Politics: Advantages and Disadvantages of Equity Preferred Floating Rate Securities
3. Precious Metal ETF Trades:
Gold and silver bullion are still IMO in a long term secular bear market which simply means that frequent and successful trading is the only way to generate returns.
Buying and holding gold when the price is $1,350 per ounce may work out short term, and is currently working. The risk of another downside move from current levels to near $1200 or lower is a risk.
Consequently, I am playing bullion ETFs within a defined and narrow range, and will trade them for small profits. I play the bullion in long cycles with my last transactions being sales in September 2011 and January 2012. Stocks, Bonds & Politics: Item # 8 Snapshots of Coin Sales In January 2012 Stocks, Bonds & Politics: Item # 1 Recent Gold and Silver Sales
A. Sold 50 SLV at $16.55:
Profit Snapshot: +$70.91
Quote: iShares Silver Trust (SLV)
B. Sold 100 CGL:CA at C$11.47 (C$1 Commision at IB):
Profit Snapshot: +C$50
Quote: iShares Gold Bullion ETF Hedged (CGL:CA)
Sponsor's Page: iShares Gold Bullion ETF-Hedged to the Canadian Dollar (expense ratio .5%, which is slightly higher than GLD which is at .4%.)
Stocks, Bonds & Politics: Item # 2.A. Bought Back 100 CGL:CA at C$10.95
This ETF did distribute a C$.38 per share capital gain in 2012, but normally a bullion ETF will not produce any income.
Report of Performance.pdf
Fact Sheet (annualized five year performance at -5.39%, as of 7/31/17, with gold bullion being in a bear market during that period)
4. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Sold 1 Anheuser Busch 2.5% SU Bond Maturing on 7/15/22-A ROTH IRA Account:
Profit Snapshot: +$11.91
Issuer: Anheuser-Busch InBev S.A. ADR
Sold at 100.822
YTM Then at 2.32%
Current Yield at 2.48%
Bought at a Total Cost of 99.431
Stocks, Bonds & Politics: Item # 1.D.
YTM Then at 2.616%
Current Yield at 2.51%
Semi-Annual Interest Payment for 1 Bond = $12.5
I will consider buying back this bond and other higher quality intermediate bonds previously sold when and if the price falls below my lowest prior purchase price, preferably by at least 1%. For this BUD bond, 1% below my lowest purchase price would equal 97.53.
The lowest price is not for the bond that was sold in the Roth IRA, but a 98.518 price paid for 1 bond still owned in the IB account. Stocks, Bonds & Politics: Item # 1.B.
With all bond purchases, I have the financial capability of holding until maturity which is a consideration relevant when deciding my bond exposure. I do not want to have any forced sales at inopportune prices to pay expenses.
B. Sold 1 Southern California Gas 2.6% FIRST MORTGAGE Bond Maturing on 6/15/26:
Profit Snapshot: +$5.83
FINRA Page: Bond Detail (prospectus linked)
Issuer: An indirect subsidiary of Sempra Energy
Sold at 98.329
YTM Then at 2.815%
Current Yield at 2.64%
Bought at a Total Cost of 97.656
Stocks, Bonds & Politics: Item # 1.E.
YTM Then at 2.893%
Current Yield at 2.66%
C. Sold 1 Union Pacific 2.75% SU Bond Maturing on 3/1/26:
Profit Snapshot: +$16.72
Finra Page: Bond Detail
Issuer: Union Pacific Corp. (UNP)
UNP Analyst Estimates
Sold at 100.2
YTM Then at 2.723%
Current Yield at 2.74%
Bought at a Total Cost of 98.428
Stocks, Bonds & Politics: ITEM # 1.D.
YTM Then at 2.952%
Current Yield at 2.79%
D. Sold 1 Public Service of Colorado 2.9% First Mortgage Bond Maturing on 5/15/25:
Profit Snapshot: $6.03
Finra Page: Bond Detail
Sold at 100.4
YTM Then AT 2.838%
Current Yield at 2.89%
Bought at a Total Cost of 99.697
Stocks, Bonds & Politics: Item # 1.C.
YTM Then at 2.942%
Current yield then at 2.91%
When and if I buy back this bond, it will be in a Roth IRA account when the total cost produces a current yield greater than 3%.
Picking up nickels and dimes wherever I can find them as I reduce the interest rate risk in my bond allocation.
$4K Outflow from Intermediate Term Bond/CD Ladder Basket
5. Sold 1000 Asaleo Care at A$1.58 (A$6 Commission at IB):
Quote: Asaleo Care Ltd. Stock Quote (AHY-AU)
Profit Snapshot: +A$218
This is my third round trip for this stock.
Closed Today at AHY.AX A$1.63 +0.03
I will receive the A$40 dividend payment that went ex on 8/29/17. I have managed to hold onto this stock long enough now to receive two semi-annual dividend payments.
Total Return: A$258 on A$1356 or 19.03% (holding period about 1 month)
This lot was bought at A$1.35 on 7/27/17: Stocks, Bonds & Politics: Item # 2. The proceeds will add to my AUD stash which is in unrealized profit territory. The AUD proceeds will be assigned a USD cost basis based on the then existing exchange rate. There will be a tax event when those AUDs are sold to buy USDs or to buy another Australian stock using AUDs to settle the trade.
Prior Trades:
 |
| 2016 AHY:AU 1000 Shares +A$148 |
 |
| 2016 AHY:AU 1000 Shares +USD$191.65 |
6. SOLD 200 GBLIZ:
Quote: Global Indemnity Ltd. 7.75% Subordinated Notes Due 2045 (GBLIZ)
Links to Prior Discussions:
Item 1 Bought 50 GBLIZ at $24.12-Update For Exchange Traded Bond And Equity Preferred Stock Basket Strategy As Of 10/7/15
Item # 4 Averaged Down Bought 50 GBLIZ at $23-Update For Exchange Traded Bond And Preferred Stock Basket As Of 12/18/15 - South Gent | Seeking Alpha
Item # 4 Added 50 GBLIZ at $23.75 Roth IRA-Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 3/19/16 - South Gent | Seeking Alpha
Item # 2 Sold 100 of 300 GBLIZ at $24.65-Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 4/26/16 - South Gent | Seeking Alpha (profit snapshot=$106.35)
GBLIZ is an exchange traded junior bond issued by insurance company Global Indemnity PLC Stock Price (GBLI) based in Ireland. The issuer has the option to call at the $25 par value on or after 8/15/2000.
"The Notes will be our subordinated unsecured obligations and will rank (NYSE:I) senior to our existing and future capital stock, (ii) senior in right of payment to any future junior subordinated debt, (NASDAQ:III) equally in right of payment with any unsecured, subordinated debt that we incur in the future that ranks equally with the Notes, and (iv) subordinate in right of payment to any of our existing and future senior debt. In addition, the Notes will be structurally subordinated to all existing and future indebtedness, liabilities and other obligations of our subsidiaries." (emphasis added). Prospectus at page S-5 (discussion of risk factors starts at page S-8)
A. Sold 100 GBLIZ at $25.67 (used commission free trade):
Profit Snapshot: +$171.06
History:
B. Sold 100 GBLIZ at $25.69-A Roth IRA Account:
Profit Snapshot: $136.94
History 100 Shares Roth IRA: The "corporate action" referenced in the history is to a reorganization into a Cayman Islands based company:
I am somewhat concerned about the impact of natural disasters since there is no way to know this firm's exposure until an announcement is made. In addition to credit risk, I am also concerned about interest rate risk and have a hair trigger on these potentially long term corporate bonds. I do hold this 200 position longer than most.
Total GBLIZ Trading Profits To Date = $414.35 (plus interest payments)
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.
SPDR S&P Regional Banking ETF (KRE)
ReplyDelete$49.43 -$1.51 (-2.96%)
As of 11:47AM EDT
iShares 7-10 Year Treasury Bond ETF (IEF)
$108.72 +$0.47 (+0.4298%)
As of 11:47AM EDT
Several regional bank stocks have come back into my consider to buy ranges.
It is possible that the natural disasters befalling the U.S. in September will contribute to inflationary pressures along with higher energy prices and hoped for gains in wages.
GE: I am starting to wonder whether the Stock Jocks have become too pessimistic about GE.
ReplyDeleteGeneral Electric Company (GE)
$23.87 -$1.05 (-4.23%)
As of 1:54PM EDT
JPM maintained its underweight rating and lowered its price target to $22. That analyst views $24 as a ceiling rather than a floor.
http://www.marketwatch.com/story/ges-stock-tumbles-to-2-year-low-after-jp-morgan-gets-more-bearish-2017-09-07
http://www.barrons.com/articles/general-electric-the-ceiling-not-the-floor-1504798738
Earlier this week, the MS analyst said the dividend is secure for now but the payout ratio is too high at close to 100% of free cash flow and 75% to 80% of earnings. The firm expects the dividend to be funded from further asset sales. MS also expects the current quarter could be a " classic kitchen sink" quarter (i.e. a lot of writedowns)
http://www.barrons.com/articles/ges-dividend-uncomfortably-high-but-still-secure-1504643872
GE declared its regular quarterly dividend of $.24 per share today:
http://www.marketwired.com/press-release/general-electric-company-dividend-declaration-2232943.htm
I own 124+ shares with a cost basis of $12.03 per share.
My last transaction was to sell 40 shares at $28.76:
Item # 3.A
TOTAL Trading GE Trading Profits 2007 To Date = $3,579.4
https://tennesseeindependent.blogspot.com/2017/07/observations-and-sample-of-recent_12.html
Earlier this year I sold 80 shares at $29.69:
Item # 3.A.
https://tennesseeindependent.blogspot.com/2017/04/observations-and-sample-of-recent_18.html
In that post, I noted that GE had "turned into an undesirable blue chip stock IMO."
I placed a chicken buy in a Roth IRA account, using a limit order $.1 below the current bid price, just to be contrary and as sort of "I don't care" at the current price statement which includes I don't care if the order is filled or not.
GE: I did buy 30 at $23.9 in a Roth IRA account today. That price represented about a 4% decline today which raised the dividend yield to 4% as well, assuming no cuts.
DeleteI do not expect GE to raise its dividend this year or in 2018.
This purchase lacked conviction.
I am bearish on GE's near term prospects as I have stated for over a year now.
The near term future, meaning the next 12 months, is not likely to produce much in the way of positive news.
I suspect that the market may have become too bearish looking at the intermediate term.
I have far more conviction that the price of $23.9 is too bearish for investors with a long term perspective and who are willing to reinvest the dividend. Analysts generally talk about the here and now and have a bad tendency of projected the present into the indefinite future as if nothing much changes when change happens all of the time.
GE is one of the many stocks now where the yield is higher than the bonds.
How far would I have to go in time to hit a 4% YTM with a GE SU bond? You really can't find one that is actively traded with that yield or higher.
For example, a GE 4.5% coupon SU bond maturing in 2044 closed on 9/6/17 at 111.79, creating a 3.791% YTM:
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C608201&symbol=GE4105158
That bond had two trades today at higher prices, with $60K in principal amount being the higher of the two with a 3.749%.
IRT (Own): IRT did a swan dive yesterday after announcing an acquisition and a share offering, but recovered some of that loss today which was encouraging:
ReplyDelete9/7/17 $9.99 +$.53 +5.65%
9/6/17 $9.46
9/5/2017 $10.39
This apartment REIT sold yesterday 12.5M shares plus up to an additional 1.875M shares at $9.25.
http://www.businesswire.com/news/home/20170906006811/en/
The proceeds will be used to fund in part a $228.1M acquisition of nine apartment complexes with a total of 2,353 units and a 95% occupancy rate as of 7/31/17. The average rent was $884 per month:
http://www.businesswire.com/news/home/20170905006472/en/
By trading I have reduced the average share cost of my IRT positions spread over 3 taxable accounts and 1 retirement account.
I last discussed this REIT in a SA Instablog published in July 2016 where I discussed several dispositions of higher cost lots at prices lower than the current price.
1. Sold 200 IRT at $8.69 (highest cost shares in Schwab Taxable Account):
2. Sold Highest Cost IRT Lot Roth IRA Accounts 200 Shares at $9.05
3. Sold Highest Cost IRT Lot Fidelity Roth IRA at $9.1:
https://seekingalpha.com/instablog/434935-south-gent/4900469-update-equity-reit-basket-strategy-7-28-16
I later sold another of my highest cost lots at $10.
Realized Gain 2013 to Date for IRT = $411.99
Snapshots at https://tennesseeindependent.blogspot.com/2014/10/gateway-post-equity-reit-common-and.html
At one time I may have owned close to or slightly over 1000 shares. The lowest average cost per share is probably in my IB account with an average cost per share of $6.6 and the lowest cost lot bought at $6.2.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2017/09/observations-and-sample-of-recent.html