Market Commentary:
Warren Buffett holds on selling winning stocks in anticipation of tax cut - MarketWatch (he is referring to corporate taxes)
Some investors see signs stock market ‘on verge’ of a melt-up - MarketWatch
House vote should keep the Trump trade on the front burner for markets: CNBC
Amazon.com: The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google (9780735213654): Scott Galloway: Books
The rise in the 10 year treasury yield has stalled in the 2.31%-2.34% range since 9/27/17.
+++++
Economy:
ISM September 2017 manufacturing PMI was reported at 60.8, a 13 month high. The new orders component rose to 64.6 from 60.3. New export orders rose to 57.5 from 55.5. Perhaps U.S. manufacturers received a lift due to the USD's decline against the EURO and other major currencies. The U.S. Dollar Index (DXY) has been in a persistent decline since the start of this year. A bottom may have been established on 9/8/2017 with a close at 91.35. The turn up since that time coincides with a rise in U.S. interest rates. U.S. 10 Year Treasury Note Interactive Chart
Oil dips on record U.S. exports, but OPEC-led supply cuts lend support: Reuters
++++++++++
WalMart and Amazon: Taxes and Consumer Discretionary ETFs:
As noted in this recent Bloomberg article, WalMart has paid $64B in corporate incomes taxes since 2008 while Amazon has paid $1.4B. That article has a chart that contains effective tax rates for several large U.S. companies. It is noteworthy that retailers and banks are among those who have effective rates significantly higher than the 20% cap proposed by the GOP.
While many other factors will come into play when valuing individual stocks, particularly the box retailers, those sectors are likely to be major beneficiaries when and if the GOP succeeds in slashing the top rate from 35% to 20%.
One way to play that theme is with Consumer Discretionary ETFs.
I recently bought Fidelity's version, just a small odd lot position since I am not excited about buying stocks at the moment. The Fidelity MSCI Consumer Discretionary Index ETF (FDIS) can be bought commission free by their customers and has a near rock bottom expense ratio of .08%. This ETF has a heavy weighting in Amazon which makes me nervous at the moment:
Quote: Fidelity MSCI Consumer Discretionary Index ETF
Amazon is starting to receive some blowback from its efforts to circumvent the tax man. EU orders Luxembourg to recoup $294 million from Amazon in back taxes - MarketWatch While Amazon uses several techniques to reduce its tax obligation, the main technique is the perpetual spending of very large sums to grow its business.
The SPDR Select SPDR for Consumer Discretionary is probably the oldest and owns the sector stocks that are part of the S & P 500 (83 stocks) which is a smaller universe than FDIS (358 stocks).
Sponsor's Page: XLY Snapshot - The Consumer Discretionary Select Sector SPDR Fund (expense ratio of .14%)
The narrower focus results in XLY have larger weighting to the big capitalization stocks:
The Vanguard version is similar to Fidelity and can be bought by their customers commission free.
Vanguard Consumer Discretionary ETF (VCR)(.1% expense ratio and 374 holdings)
+++++
Guns Galore and the GOP:
More Americans Killed by Guns Since 1968 Than in All U.S. Wars — Combined - NBC News
So what do Americans actually do with respect to gun ownership when there is a Las Vegas type massacre. They go out and buy more guns. And, after the latest incident, they want to get their hands on bump stocks that allowed the mass killings and woundings in Las Vegas to occur.
After Vegas shooting, 'bump stock' is hot at gun stores: CNBC; Gun stocks higher after Las Vegas shooting | Fox Business
The carnage will continue of course and will likely accelerate to levels even more hideous than the the 1.53M killed in firearm related deaths since 1968. There is a pervading sickness whose spread can not be controlled or even slowed by well meaning and sensible individuals. Those are the facts.
When the GOP gained control over Tennessee's government a few years ago, the first order of business was to pass legislation permitting guns in bar and guns in state parks.
Paul Ryan was getting ready to move a bill that permitted individuals to buy silencers which has now been put on hold after the Las Vegas shooting. Ryan punts on scheduling gun silencer legislation | TheHill Bad optics to allow that kind of legislation to pass at the moment. The NRA will get what it wants from the republicans next year. The sponsor of the bill is Representative Jeff Duncan (R-SC), who represents South Carolina's 3rd congressional district.
The GOP is also unlikely to take any action on the legality of bumper stocks that allowed Stephen Paddock to turn single shot rifles into machine guns so he could kill more people. Bump stock: The device found on Las Vegas shooter's guns - CNN Those devices can be bought legally now. Sure, a few GOP senators and House representatives dodged the issue by saying that the issue needs to considered, but that does not mean that any of them will vote for a ban. Instead, the GOP's approach is succinctly expressed by Senator Shelby (R-Ala.): "I’m a Second Amendment man. I’m not for any gun control." NRA Silent After Las Vegas Shooting but GOP on Notice over Gun Laws - NBC News
The Fake News Media, a term that I use to describe the Alt-Right media outlets favored by Donald, identified the shooter as Geary Danley, who was once married to Marilou Danley, the girlfriend of the actual shooter Stephen Paddock.
Those people spread their Fake News across the internet, providing pictures of Mr. Danley for their fellow True Believers. Mr. Danley of course received death threats from the wingnuts who never need facts before forming an opinion.
Why did those disgusting creatures spread their lies?
Mr. Danley, who had absolutely nothing to do with the murders committed by Stephen Paddock, was allegedly an Obama supporter, which was sufficient in their diseased minds to connect him with the murders. In wake of Las Vegas shooting, fake news on social media takes personal toll - CBS News; Far-right trolls are falsely naming Geary Danley as the Las Vegas shooter - The Washington Post
I would just note my legal opinion regarding the Supreme Court's decision that created a constitutional right that was not present in the Second Amendment's language, recognizing as usual that my opinion does not matter and will not change anything.
I view the Supreme Court's majority decision in DISTRICT OF COLUMBIA v. HELLER (2008) to represent an extreme level of judicial activism by the "conservative "majority." The preceding link is to the majority opinion in a 5-4 decision. The decision is the law of the land and that is not likely to change at least for several decades.
The Court's decision and the GOP's willingness to push the envelope on eliminating sensible regulations will result in a great deal of innocent blood being spilled in Las Vegas type of events, but none of those people will ever accept any responsibility.
Excerpt from the Dissent of Justice Stevens Joined by Justices Souter, Ginsburg and Breyer:
Dissent of Justice Breyer Joined by Justices Stevens, Souter, Ginsburg and Breyer
More decisions overturning long-standing precedents in other areas can reasonably expected by the current SC. This will accelerate if Trump replaces one of the elderly "liberal" justices with someone like the reactionaries Alito, Thomas or Gorsuch and their fellow traveler, Justice Roberts, who is not quite 100% aboard that train barreling to the nation's distant past.
Kids and Guns: Shootings Now Third Leading Cause of Death for U.S. Children: Newsweek
There have been at least 1,518 mass shootings in the U.S. since the Sandy Hook Elementary School shooting in 2012, viewed by the True Believer Alex Jones, a Trump favorite, as a staged event designed by liberals to take away our guns.
Alex Jones: Deep State Behind Las Vegas Attack; Hillary Clinton correct that Austin's Alex Jones said no one died at Sandy Hook Elementary
Hospital costs for those with gun injuries approach $100,000 per patient - MarketWatch
The Vet Whose 'Bump Stock' Makes a Gun Fire Like a Machine Gun - NBC News
Warren Buffett holds on selling winning stocks in anticipation of tax cut - MarketWatch (he is referring to corporate taxes)
Some investors see signs stock market ‘on verge’ of a melt-up - MarketWatch
House vote should keep the Trump trade on the front burner for markets: CNBC
Amazon.com: The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google (9780735213654): Scott Galloway: Books
The rise in the 10 year treasury yield has stalled in the 2.31%-2.34% range since 9/27/17.
+++++
Economy:
ISM September 2017 manufacturing PMI was reported at 60.8, a 13 month high. The new orders component rose to 64.6 from 60.3. New export orders rose to 57.5 from 55.5. Perhaps U.S. manufacturers received a lift due to the USD's decline against the EURO and other major currencies. The U.S. Dollar Index (DXY) has been in a persistent decline since the start of this year. A bottom may have been established on 9/8/2017 with a close at 91.35. The turn up since that time coincides with a rise in U.S. interest rates. U.S. 10 Year Treasury Note Interactive Chart
Oil dips on record U.S. exports, but OPEC-led supply cuts lend support: Reuters
++++++++++
WalMart and Amazon: Taxes and Consumer Discretionary ETFs:
As noted in this recent Bloomberg article, WalMart has paid $64B in corporate incomes taxes since 2008 while Amazon has paid $1.4B. That article has a chart that contains effective tax rates for several large U.S. companies. It is noteworthy that retailers and banks are among those who have effective rates significantly higher than the 20% cap proposed by the GOP.
While many other factors will come into play when valuing individual stocks, particularly the box retailers, those sectors are likely to be major beneficiaries when and if the GOP succeeds in slashing the top rate from 35% to 20%.
One way to play that theme is with Consumer Discretionary ETFs.
I recently bought Fidelity's version, just a small odd lot position since I am not excited about buying stocks at the moment. The Fidelity MSCI Consumer Discretionary Index ETF (FDIS) can be bought commission free by their customers and has a near rock bottom expense ratio of .08%. This ETF has a heavy weighting in Amazon which makes me nervous at the moment:
Quote: Fidelity MSCI Consumer Discretionary Index ETF
Amazon is starting to receive some blowback from its efforts to circumvent the tax man. EU orders Luxembourg to recoup $294 million from Amazon in back taxes - MarketWatch While Amazon uses several techniques to reduce its tax obligation, the main technique is the perpetual spending of very large sums to grow its business.
The SPDR Select SPDR for Consumer Discretionary is probably the oldest and owns the sector stocks that are part of the S & P 500 (83 stocks) which is a smaller universe than FDIS (358 stocks).
Sponsor's Page: XLY Snapshot - The Consumer Discretionary Select Sector SPDR Fund (expense ratio of .14%)
The narrower focus results in XLY have larger weighting to the big capitalization stocks:
The Vanguard version is similar to Fidelity and can be bought by their customers commission free.
Vanguard Consumer Discretionary ETF (VCR)(.1% expense ratio and 374 holdings)
+++++
Guns Galore and the GOP:
So what do Americans actually do with respect to gun ownership when there is a Las Vegas type massacre. They go out and buy more guns. And, after the latest incident, they want to get their hands on bump stocks that allowed the mass killings and woundings in Las Vegas to occur.
After Vegas shooting, 'bump stock' is hot at gun stores: CNBC; Gun stocks higher after Las Vegas shooting | Fox Business
The carnage will continue of course and will likely accelerate to levels even more hideous than the the 1.53M killed in firearm related deaths since 1968. There is a pervading sickness whose spread can not be controlled or even slowed by well meaning and sensible individuals. Those are the facts.
When the GOP gained control over Tennessee's government a few years ago, the first order of business was to pass legislation permitting guns in bar and guns in state parks.
Paul Ryan was getting ready to move a bill that permitted individuals to buy silencers which has now been put on hold after the Las Vegas shooting. Ryan punts on scheduling gun silencer legislation | TheHill Bad optics to allow that kind of legislation to pass at the moment. The NRA will get what it wants from the republicans next year. The sponsor of the bill is Representative Jeff Duncan (R-SC), who represents South Carolina's 3rd congressional district.
The GOP is also unlikely to take any action on the legality of bumper stocks that allowed Stephen Paddock to turn single shot rifles into machine guns so he could kill more people. Bump stock: The device found on Las Vegas shooter's guns - CNN Those devices can be bought legally now. Sure, a few GOP senators and House representatives dodged the issue by saying that the issue needs to considered, but that does not mean that any of them will vote for a ban. Instead, the GOP's approach is succinctly expressed by Senator Shelby (R-Ala.): "I’m a Second Amendment man. I’m not for any gun control." NRA Silent After Las Vegas Shooting but GOP on Notice over Gun Laws - NBC News
The Fake News Media, a term that I use to describe the Alt-Right media outlets favored by Donald, identified the shooter as Geary Danley, who was once married to Marilou Danley, the girlfriend of the actual shooter Stephen Paddock.
Those people spread their Fake News across the internet, providing pictures of Mr. Danley for their fellow True Believers. Mr. Danley of course received death threats from the wingnuts who never need facts before forming an opinion.
Why did those disgusting creatures spread their lies?
Mr. Danley, who had absolutely nothing to do with the murders committed by Stephen Paddock, was allegedly an Obama supporter, which was sufficient in their diseased minds to connect him with the murders. In wake of Las Vegas shooting, fake news on social media takes personal toll - CBS News; Far-right trolls are falsely naming Geary Danley as the Las Vegas shooter - The Washington Post
I would just note my legal opinion regarding the Supreme Court's decision that created a constitutional right that was not present in the Second Amendment's language, recognizing as usual that my opinion does not matter and will not change anything.
I view the Supreme Court's majority decision in DISTRICT OF COLUMBIA v. HELLER (2008) to represent an extreme level of judicial activism by the "conservative "majority." The preceding link is to the majority opinion in a 5-4 decision. The decision is the law of the land and that is not likely to change at least for several decades.
The Court's decision and the GOP's willingness to push the envelope on eliminating sensible regulations will result in a great deal of innocent blood being spilled in Las Vegas type of events, but none of those people will ever accept any responsibility.
Excerpt from the Dissent of Justice Stevens Joined by Justices Souter, Ginsburg and Breyer:
Dissent of Justice Breyer Joined by Justices Stevens, Souter, Ginsburg and Breyer
More decisions overturning long-standing precedents in other areas can reasonably expected by the current SC. This will accelerate if Trump replaces one of the elderly "liberal" justices with someone like the reactionaries Alito, Thomas or Gorsuch and their fellow traveler, Justice Roberts, who is not quite 100% aboard that train barreling to the nation's distant past.
Kids and Guns: Shootings Now Third Leading Cause of Death for U.S. Children: Newsweek
There have been at least 1,518 mass shootings in the U.S. since the Sandy Hook Elementary School shooting in 2012, viewed by the True Believer Alex Jones, a Trump favorite, as a staged event designed by liberals to take away our guns.
Alex Jones: Deep State Behind Las Vegas Attack; Hillary Clinton correct that Austin's Alex Jones said no one died at Sandy Hook Elementary
Hospital costs for those with gun injuries approach $100,000 per patient - MarketWatch
The Vet Whose 'Bump Stock' Makes a Gun Fire Like a Machine Gun - NBC News
+++++
How America Went Haywire - The Atlantic
Special Report: HP Enterprise let Russia scrutinize cyber defense system used by Pentagon: Reuters
White House again rejects talks with North Korea on nuclear issue: Reuters
U.S. Interior Dept. watchdog launches probe into Zinke's travel: Reuters; Zinke took $12,000 charter flight home in oil executive’s plane, documents show - The Washington Post
Ivanka and Donald Trump Jr. Were Close to Being Charged with Felony Fraud-ProPublica (Trump's lawyer Marc Kasowitz made a $25K political contribution to the D.A. Cyrus Vance Jr., and then met him on 5/6/12 to discuss the criminal fraud case against Don Jr. and Ivanka. Just before the meeting, the D.A. returned the $25K. The D.A. then allegedly overruled his prosecutors and then gave the D.A. a greater sum than $25K and raised altogether more than $50K for this D.A. After being confronted recently about the subsequent donations, Vance said he would give that money back over 4 years after keeping the "campaign contribution".)
Trump administration moves to roll back Obama-era carbon emissions rules - MarketWatch
Bristol Bay: EPA's Scott Pruitt met with mining CEO - CNN ("Within hours of meeting with a mining company CEO, the new head of the US Environmental Protection Agency directed his staff to withdraw a plan to protect the watershed of Bristol Bay, Alaska, one of the most valuable wild salmon fisheries on Earth, according to interviews and government emails obtained by CNN.")
Energy secretary took charter flight day before Price resigned: Reuters
+++++++
How America Went Haywire - The Atlantic
Special Report: HP Enterprise let Russia scrutinize cyber defense system used by Pentagon: Reuters
White House again rejects talks with North Korea on nuclear issue: Reuters
U.S. Interior Dept. watchdog launches probe into Zinke's travel: Reuters; Zinke took $12,000 charter flight home in oil executive’s plane, documents show - The Washington Post
Ivanka and Donald Trump Jr. Were Close to Being Charged with Felony Fraud-ProPublica (Trump's lawyer Marc Kasowitz made a $25K political contribution to the D.A. Cyrus Vance Jr., and then met him on 5/6/12 to discuss the criminal fraud case against Don Jr. and Ivanka. Just before the meeting, the D.A. returned the $25K. The D.A. then allegedly overruled his prosecutors and then gave the D.A. a greater sum than $25K and raised altogether more than $50K for this D.A. After being confronted recently about the subsequent donations, Vance said he would give that money back over 4 years after keeping the "campaign contribution".)
Trump administration moves to roll back Obama-era carbon emissions rules - MarketWatch
Bristol Bay: EPA's Scott Pruitt met with mining CEO - CNN ("Within hours of meeting with a mining company CEO, the new head of the US Environmental Protection Agency directed his staff to withdraw a plan to protect the watershed of Bristol Bay, Alaska, one of the most valuable wild salmon fisheries on Earth, according to interviews and government emails obtained by CNN.")
Energy secretary took charter flight day before Price resigned: Reuters
+++++++
1. Intermediate Term Bond/CD Ladder Basket Strategy:
Continued to Reduce Allocation
A. Sold 2 Kellogg 2.65% SU Bonds Maturing on 12/1/23:
Profit Snapshot: +$26.78
FINRA Page: Bond Detail
Issuer: Kellogg Co. (K)
K Analyst Estimates - Kellogg Co.
Sold at 99.7
YTM Then at 2.703%
Current Yield at 2.658%
Bought at a Total Cost of 98.261
Stocks, Bonds & Politics: Item 1.A.
YTM Then at 2.935%
Current at 2.697%
My consider to repurchase price is below 95.
B. Sold 1 Boston Properties 2.75% SU Bond Maturing on 10/1/26:
Profit Snapshot: +$13.56
Issuer: Boston Properties Inc. (BXP)-A REIT
Sold at 95.276
YTM Then at 3.361%
Current Yield at 2.886%
Bought at a Total Cost of 93.469
Stocks, Bonds & Politics: 1.A.
YTM Then at 3.57%
Current Yield at 2.94%
My target for a potential repurchase would be less than 90.
C. Sold 1 Citigroup 3.875% Junior Bond Maturing on 3/26/25:
Profit Snapshot: $25.24
FINRA Page: Bond Detail
Sold at 101.943
YTM Then at 3.578%
Current Yield at 3.8%
Bought at a Total Cost of 99.319
Stocks, Bonds & Politics: Item # 1.A.
YTM then at 3.975%
Current Yield at 3.9%
Potential Repurchase Target at less than 95 with a one bond limit.
D. Sold 2 Pepsico 2.85% SU Bonds Maturing on 2/24/2026:
Profit Snapshot: $12.26
FINRA Page: Bond Detail
Sold at 100.14
YTM THEN AT 2.831%
Current Yield at 2.846%
Bought at a Total Cost of 99.331
Stocks, Bonds & Politics: Item # 1.C.
YTM Then at 2.937%
Current Yield at 2.87%
The consider to repurchase target is less than 96.
I am less inclined to hold this low current yield intermediate term bonds in my Vanguard account given the yield paid by the Vanguard Prime Money Market fund compared to money market fund yields at other brokerage accounts that is much less.
Vanguard Prime Money Market Fund
$8K Outflow from Intermediate Term Bond/CD Ladder Basket
2. Eliminated AEH:
A. Sold 30 at $25.91-Used Commission Free Trade:
Profit Snapshot: +$32.98
South Gent's Comment Blog # 6: Bought 30 AEH at $24.81
2 Year History in This Account:
5 Year Chart: Note the precipitous decline in 2013
Quote: AEGON N.V. 6.375% Hybrid
This European hybrid has characteristics of both a bond and equity capital. While the security is a junior bond in the capital structure, it has equity preferred stock characteristics as well in that it is potentially perpetual unlike a bond. Up until the present, distributions to U.S. citizens have been classified as qualified dividends.
Par Value $25
Coupon: 6.375%
Optional Call: At Par Value at any time
Maturity: Potentially Perpetual
Classification: Stocks, Bonds & Politics: Aegon Hybrids: Gateway Post
Capital Structure: Junior Bond Senior to Common Stock and Preferred Stock
Dividends: Currently Classified as Qualified
Prospectus
My first buy was a 30 share lot bought in an IRA account that was sold for a $537.83:
Stocks, Bonds & Politics: Buy of AEH in IRA at $4.63 (noting that this purchase took me down to $29 in that account or I would have bought more)(3/12/2009 Post)
My consider to repurchase price would be below $24.5.
3. Pared HTGX:
A. Sold 50 of 100 Shares at $25.59 ($1 Commission):
Profit Snapshot: $31.52
Item #4. Added 50 HTGX at $24.92: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 5/16/16 - South Gent | Seeking Alpha
Quote: Hercules Capital Inc. 6.25% Notes due 2024
Issuer: Hercules Capital Inc. Stock Quote (HTGC)-A BDC
The remaining 100 shares are owned in a Roth IRA Account where I turn the taxable interest into tax free distributions. Item # 3 Bought 100 HTGX at $24.98-Roth IRA: Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 5/10/16 - South Gent | Seeking Alpha
Par Value $25
Optional Call: At Par Value on or after 7/30/17
Coupon 6.25%
Capital Structure Senior Unsecured Bond
Classification: Stocks, Bonds & Politics: Exchange Traded Baby Bonds
Prospectus
4. Eliminated JMPC:
A. Sold 50 at $25.52-Used Commission Free Trade:
Profit Snapshot: $214.96
Item # 3. Bought 50 JMPC at $21.06-Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 1/28/16 - South Gent | Seeking Alpha
Quote: JMP Group Corp. 7.25% Senior Notes due 2021
Issuer: JMP Group LLC (JMP)
JMP Analyst Estimates
JMP has also issued an 8% senior note maturing in 2023: JMP Group Corp. 8% Sr. Notes due 2023 Stock Quote (JMPB); Prospectus (optional call at any time)
Par Value: $25
Coupon: 7.25%
Last Ex Interest Date: 6/28/17
Optional Call: AT PAR VALUE ON OR AFTER 1/15/17 (at anytime now)
MATURITY: 1/15/21 (unless issuer elects to redeem early)
Classification: Stocks, Bonds & Politics: Exchange Traded Baby Bonds
Capital Structure: Senior Unsecured Bond
Prospectus
I do not have a consider to repurchase price on this one. I will probably quit while I am ahead.
5. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 2 Sterling Bank 1.4% CDs Maturing on 3/29/18 (6 month CDs):
B. Bought 2 Bank of China 1.4% CDs Maturing on 3/28/18 (six month CDs):
C. Bought 2 Bank West SF 1.45% CDs Maturing on 6/25/18 (nine month CD):
D. Bought 2 Mainsource Bank 1.45% CDs (monthly interest) Maturing on 9/28/18 (1 Year CD):
Holding Company: MainSource Financial Group (MSFG)
MSFG Analyst Estimates
Mainsource has agreed to be acquired by First Financial Bancorp (Ohio)(FFBC)
Top-Performing Midwest Community Banking Organizations Announce Agreement to Merge
I have owned both MSFG and FFBC in my REGIONAL BANK BASKET STRATEGY.
E. Bought 2 Connectone 1.7% CDs (monthly interest) Maturing on 9/27/18 (2 year CD):
Holding Company: ConnectOne Bancorp Inc. (CNOB)
CNOB Analyst Estimates
ConnectOne Bancorp, Inc. Reports Second Quarter 2017 Results
$10K into Short Term Bond/CD ladder basket
6. Pared Omega Healthcare:
I last pared this position in July:
Item # 5.A. Sold 107 out of 188+ Shares at $34.55+: Stocks, Bonds & Politics: Observations and Recent Trades: BGEPRB, COFPRC, OHI, PFE, THGA
I elected to sell shares with a cost basis higher than $30.
Remaining Shares Before Pare:
Sold 39 shares at $32.56-Used Commission Free Trade:
Profit Snapshot: +$63.24
Quote: Omega Healthcare Investors Inc.
Selling shares bought with the dividend effectively increases the dividend yield.
Position After Pare (The "F" letter in the following snapshot is Schwab's equity rating)
Average Cost Per Share = $29.394
Quote: AEGON N.V. 6.375% Hybrid
This European hybrid has characteristics of both a bond and equity capital. While the security is a junior bond in the capital structure, it has equity preferred stock characteristics as well in that it is potentially perpetual unlike a bond. Up until the present, distributions to U.S. citizens have been classified as qualified dividends.
Par Value $25
Coupon: 6.375%
Optional Call: At Par Value at any time
Maturity: Potentially Perpetual
Classification: Stocks, Bonds & Politics: Aegon Hybrids: Gateway Post
Capital Structure: Junior Bond Senior to Common Stock and Preferred Stock
Dividends: Currently Classified as Qualified
Prospectus
My first buy was a 30 share lot bought in an IRA account that was sold for a $537.83:
Stocks, Bonds & Politics: Buy of AEH in IRA at $4.63 (noting that this purchase took me down to $29 in that account or I would have bought more)(3/12/2009 Post)
My consider to repurchase price would be below $24.5.
3. Pared HTGX:
A. Sold 50 of 100 Shares at $25.59 ($1 Commission):
Profit Snapshot: $31.52
Item #4. Added 50 HTGX at $24.92: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 5/16/16 - South Gent | Seeking Alpha
Quote: Hercules Capital Inc. 6.25% Notes due 2024
Issuer: Hercules Capital Inc. Stock Quote (HTGC)-A BDC
The remaining 100 shares are owned in a Roth IRA Account where I turn the taxable interest into tax free distributions. Item # 3 Bought 100 HTGX at $24.98-Roth IRA: Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 5/10/16 - South Gent | Seeking Alpha
Par Value $25
Optional Call: At Par Value on or after 7/30/17
Coupon 6.25%
Capital Structure Senior Unsecured Bond
Classification: Stocks, Bonds & Politics: Exchange Traded Baby Bonds
Prospectus
4. Eliminated JMPC:
A. Sold 50 at $25.52-Used Commission Free Trade:
Profit Snapshot: $214.96
Item # 3. Bought 50 JMPC at $21.06-Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 1/28/16 - South Gent | Seeking Alpha
Quote: JMP Group Corp. 7.25% Senior Notes due 2021
Issuer: JMP Group LLC (JMP)
JMP Analyst Estimates
JMP has also issued an 8% senior note maturing in 2023: JMP Group Corp. 8% Sr. Notes due 2023 Stock Quote (JMPB); Prospectus (optional call at any time)
Par Value: $25
Coupon: 7.25%
Last Ex Interest Date: 6/28/17
Optional Call: AT PAR VALUE ON OR AFTER 1/15/17 (at anytime now)
MATURITY: 1/15/21 (unless issuer elects to redeem early)
Classification: Stocks, Bonds & Politics: Exchange Traded Baby Bonds
Capital Structure: Senior Unsecured Bond
Prospectus
I do not have a consider to repurchase price on this one. I will probably quit while I am ahead.
5. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 2 Sterling Bank 1.4% CDs Maturing on 3/29/18 (6 month CDs):
B. Bought 2 Bank of China 1.4% CDs Maturing on 3/28/18 (six month CDs):
C. Bought 2 Bank West SF 1.45% CDs Maturing on 6/25/18 (nine month CD):
D. Bought 2 Mainsource Bank 1.45% CDs (monthly interest) Maturing on 9/28/18 (1 Year CD):
Holding Company: MainSource Financial Group (MSFG)
MSFG Analyst Estimates
Mainsource has agreed to be acquired by First Financial Bancorp (Ohio)(FFBC)
Top-Performing Midwest Community Banking Organizations Announce Agreement to Merge
I have owned both MSFG and FFBC in my REGIONAL BANK BASKET STRATEGY.
E. Bought 2 Connectone 1.7% CDs (monthly interest) Maturing on 9/27/18 (2 year CD):
Holding Company: ConnectOne Bancorp Inc. (CNOB)
CNOB Analyst Estimates
ConnectOne Bancorp, Inc. Reports Second Quarter 2017 Results
$10K into Short Term Bond/CD ladder basket
6. Pared Omega Healthcare:
I last pared this position in July:
Item # 5.A. Sold 107 out of 188+ Shares at $34.55+: Stocks, Bonds & Politics: Observations and Recent Trades: BGEPRB, COFPRC, OHI, PFE, THGA
I elected to sell shares with a cost basis higher than $30.
Remaining Shares Before Pare:
Sold 39 shares at $32.56-Used Commission Free Trade:
Profit Snapshot: +$63.24
Quote: Omega Healthcare Investors Inc.
Selling shares bought with the dividend effectively increases the dividend yield.
Position After Pare (The "F" letter in the following snapshot is Schwab's equity rating)
Average Cost Per Share = $29.394
Trading Profits: $1,346.79
Snapshots at Equity REIT Common and Preferred Stock Basket Strategy (basket started in September 2013-no OHI trades prior to then-no realized losses yet)
I am not going to be a long term holder of this stock.
Prior Blog Discussion: Stocks, Bonds & Politics: Omega Healthcare (OHI)(1/14/17 Post)
As explained in a prior comment, I lowered my potential consider to sell range after OHI disclosed during its second quarter earnings call that two of its top ten tenants were late in rent payments and three of the top tenents were under investigation for improper billing. Omega Healthcare Investors' (OHI) CEO Taylor Pickett on Q2 2017 Results - Earnings Call Transcript | Seeking Alpha (7/27/17) One of those tenants had EBITDAR coverage of less than 1 for the trailing 12 months ending on 3/31/17.
Where is that disclosed in this earlier investor presentation that suggests the tenants are in fine shape:
June 2017 Investor Presentation.pdf
It depends on the story that the company wants to tell using numbers. I did not care for the story being pitched in that investor presentation given that those tenants were having trouble meeting their rent obligations.
The general thrust of articles published at SeekingAlpha is to minimize or ignore OHI's actual or potential problems and to sing its praises as an investment opportunity for Moms and Pops. OHI Analysis-Seeking Alpha
A significant change in the reimbursement rates will cause many tenants to crash and burn into bankruptcy. OHI has yet to restore its dividend to the highest level hit before the last crash and burn, which was $.70 per share paid in the 2009 4th quarter, a period where the company had to eliminate its dividend for 3 years and the stock sank into the low single digits.
Dividends – Omega Healthcare Investors, Inc.
While individual investors are giddy about this stock, institutional and professional investors have caused the stock to substantially underperform the REIT index over the past three years.
Total Average Annual Return Over 5 Years Through 9/21/17 (date that I sold 39 shares)
Vanguard REIT Index Fund ETF Shares (VNQ) Total Returns = 9.13%
OHI Total Return = 4.2% (less than the dividend yield with dividends reinvested to buy additional shares)
And over 20% of the float is shorted which is at a minimum a warning that individuals are focused too much on the shining object-current dividend yield.
OHI Statistics (lower right hand side of page)
In this taxable account, I will consider nibbling again at less than $29, assuming no further material adverse news. I will reinvest the dividend to buy additional shares until the price tops $35.
I will consider buying an odd lot in a Roth IRA again below $31 if OHI's announces a dividend increase. If no dividend increase is announced later this month, then I will take that as a sign that there is at a minimum no improvement in problematic tenants. I would view it as material if one or both tenants, who were late on rental payments, fell further behind. OHI may or may not release that information. If it fails to do so, I would consider it a violation of its duty to disclose material information.
7. Small Cap Biotech Lottery Ticket Basket Strategy:
A. Bought 30 TXMD at $5.19 ($1 Commission-IB Trading Account):
Closing Price Day of Trade (10/2/17) TXMD $5.16 -$0.13 -2.46%: TherapeuticsMD, Inc.
52 Week Range: $3.5 to $8.3
For this company, I am only sure of one thing. My purchase price was lower than the recent offering price for 12.4M shares. The offering price was $5.65 per share.
TherapeuticsMD Announces Pricing of Common Stock Offering (9/25/17)
TherapeuticsMD Announces Closing of Common Stock Offering (9/28/17)
This company does have some branded and generic prescription prenatal vitamin products.
Revenues for those products were $8.235M for the six months ending 6/20/17, down from $ $9.33+M in the first six months of 2016. TherapeuticsMD Announces Second Quarter 2017 Financial Results
Those products are not sufficient to support the current price, let alone a significant increase.
TXMD's future prospects will depend on its late stage pipeline consisting of TX-004 and TX-001:
"TX-004HR is an investigational 17β-estradiol vaginal drug product candidate being studied for the treatment of vulvar and vaginal atrophy (VVA) in postmenopausal women. TX-004HR utilizes a unique VagiCap™ softgel capsule technology that may provide easy delivery."
"TX-001HR is a novel combination of 17ß-estradiol and progesterone using SYMBODA technology, under investigation for treating vasomotor symptoms (VMS) related to menopause. TX-001HR is believed to be the first and only combination drug product candidate designed to replace the 17ß-estradiol and progesterone hormones the ovary has nearly stopped producing."
Investors will know more when the company meets with the FDA regarding its filing for TX-004 on 11/3/17. TherapeuticsMD Announces Submission of Additional Endometrial Safety Information to the New Drug Application for TX-004HR
If the FDA wants more data, the stock will go down meaningfully.
If the FDA says you are good to go with what you have now, then the shares should pop which is my best guess at the moment.
This problem started around 4/10/17 when the FDA notified the company of certain deficiencies in its NDA application: TherapeuticsMD Provides TX-004HR Regulatory Update Then in May the company received what is called a complete response letter from the FDA:
The shares closed at $8.09 on 4/6/17 and it has been downhill before the FDA program came up, so at least some of the possible adverse ramifications from an unfavorable decision is in the current stock price and arguably none of the positive ramifications if the FDA accepts the NDA without further trials. It is also important that I bought after the secondary and at a lower price. Those funds are intended in part to launch the two new drugs, assuming marketing approval is received from the FDA.
Prospectus for Stock Offering Use of Proceeds Section at page S-10
8. Precious Metal ("PM") ETFs:
As readers are aware, I buy small lots of PM ETFs as trades, sort of an alternative to playing blackjack. Both SLV and PPLT fell back into my consider to buy ranges due to the recent slump in PM prices.
I am merely amusing myself with these trades, and I am apparently easily amused.
A. Bought 50 SLV at $15.68-Commission Free Trade:
Quote: iShares Silver Trust (SLV)
Last Sold at $16.55
Stocks, Bonds & Politics: Item # 4.A. (9/7/17 Post)
Last Bought at $15.14 (7/5/17)
The decline in silver's price coincides with the rise in the USD and interest rates.
SLV Chart
U.S. Dollar Index (DXY) Interactive Chart
U.S. 10 Year Treasury Note Interactive Chart
B. Bought 10 PPLT at $87.63 ($1 Commission-IB Trading Account):
Quote: ETFS Physical Platinum Shares (PPLT)
Last Sold at $92.18
Stocks, Bonds & Politics: Item # 5 (8/13/17 Post)
Last Bought at $87.45 (5/11/17)
C. Bought 100 CGL:CA at C$11.05 (C$1 commission):
This is a gold bullion ETF hedged to the Canadian Dollar that trades on the Toronto exchange.
Quote: iShares Gold Bullion ETF Hedged to the CAD
Last Sold at C$11.47
Stocks, Bonds & Politics: Item # 3B. (9/7/17 Post)
Precious metal prices are still in a long term bear market IMO that started in 2011.
While this activity is irrelevant to me, I do recognize that there are an abundance of potential catalysts for a rise in PM prices, though it is probably impossible to predict when or if those events will actually occur.
Again, I trade the PM ETFs and hold the bullion long term. My last purchases were well over 10 years ago, and my last sales occurred in September 2011 and January 2012.
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.
Snapshots at Equity REIT Common and Preferred Stock Basket Strategy (basket started in September 2013-no OHI trades prior to then-no realized losses yet)
I am not going to be a long term holder of this stock.
Prior Blog Discussion: Stocks, Bonds & Politics: Omega Healthcare (OHI)(1/14/17 Post)
As explained in a prior comment, I lowered my potential consider to sell range after OHI disclosed during its second quarter earnings call that two of its top ten tenants were late in rent payments and three of the top tenents were under investigation for improper billing. Omega Healthcare Investors' (OHI) CEO Taylor Pickett on Q2 2017 Results - Earnings Call Transcript | Seeking Alpha (7/27/17) One of those tenants had EBITDAR coverage of less than 1 for the trailing 12 months ending on 3/31/17.
Where is that disclosed in this earlier investor presentation that suggests the tenants are in fine shape:
It depends on the story that the company wants to tell using numbers. I did not care for the story being pitched in that investor presentation given that those tenants were having trouble meeting their rent obligations.
The general thrust of articles published at SeekingAlpha is to minimize or ignore OHI's actual or potential problems and to sing its praises as an investment opportunity for Moms and Pops. OHI Analysis-Seeking Alpha
A significant change in the reimbursement rates will cause many tenants to crash and burn into bankruptcy. OHI has yet to restore its dividend to the highest level hit before the last crash and burn, which was $.70 per share paid in the 2009 4th quarter, a period where the company had to eliminate its dividend for 3 years and the stock sank into the low single digits.
Dividends – Omega Healthcare Investors, Inc.
While individual investors are giddy about this stock, institutional and professional investors have caused the stock to substantially underperform the REIT index over the past three years.
Total Average Annual Return Over 5 Years Through 9/21/17 (date that I sold 39 shares)
Vanguard REIT Index Fund ETF Shares (VNQ) Total Returns = 9.13%
OHI Total Return = 4.2% (less than the dividend yield with dividends reinvested to buy additional shares)
And over 20% of the float is shorted which is at a minimum a warning that individuals are focused too much on the shining object-current dividend yield.
OHI Statistics (lower right hand side of page)
In this taxable account, I will consider nibbling again at less than $29, assuming no further material adverse news. I will reinvest the dividend to buy additional shares until the price tops $35.
I will consider buying an odd lot in a Roth IRA again below $31 if OHI's announces a dividend increase. If no dividend increase is announced later this month, then I will take that as a sign that there is at a minimum no improvement in problematic tenants. I would view it as material if one or both tenants, who were late on rental payments, fell further behind. OHI may or may not release that information. If it fails to do so, I would consider it a violation of its duty to disclose material information.
7. Small Cap Biotech Lottery Ticket Basket Strategy:
A. Bought 30 TXMD at $5.19 ($1 Commission-IB Trading Account):
Closing Price Day of Trade (10/2/17) TXMD $5.16 -$0.13 -2.46%: TherapeuticsMD, Inc.
52 Week Range: $3.5 to $8.3
For this company, I am only sure of one thing. My purchase price was lower than the recent offering price for 12.4M shares. The offering price was $5.65 per share.
TherapeuticsMD Announces Pricing of Common Stock Offering (9/25/17)
TherapeuticsMD Announces Closing of Common Stock Offering (9/28/17)
This company does have some branded and generic prescription prenatal vitamin products.
Revenues for those products were $8.235M for the six months ending 6/20/17, down from $ $9.33+M in the first six months of 2016. TherapeuticsMD Announces Second Quarter 2017 Financial Results
Those products are not sufficient to support the current price, let alone a significant increase.
TXMD's future prospects will depend on its late stage pipeline consisting of TX-004 and TX-001:
"TX-004HR is an investigational 17β-estradiol vaginal drug product candidate being studied for the treatment of vulvar and vaginal atrophy (VVA) in postmenopausal women. TX-004HR utilizes a unique VagiCap™ softgel capsule technology that may provide easy delivery."
"TX-001HR is a novel combination of 17ß-estradiol and progesterone using SYMBODA technology, under investigation for treating vasomotor symptoms (VMS) related to menopause. TX-001HR is believed to be the first and only combination drug product candidate designed to replace the 17ß-estradiol and progesterone hormones the ovary has nearly stopped producing."
Investors will know more when the company meets with the FDA regarding its filing for TX-004 on 11/3/17. TherapeuticsMD Announces Submission of Additional Endometrial Safety Information to the New Drug Application for TX-004HR
If the FDA wants more data, the stock will go down meaningfully.
If the FDA says you are good to go with what you have now, then the shares should pop which is my best guess at the moment.
This problem started around 4/10/17 when the FDA notified the company of certain deficiencies in its NDA application: TherapeuticsMD Provides TX-004HR Regulatory Update Then in May the company received what is called a complete response letter from the FDA:
"In the CRL, the only approvability concern raised by the FDA was the lack of long-term endometrial safety data for TX-004HR beyond the 12-weeks studied in the pivotal phase 3 Rejoice Trial. No cases of endometrial hyperplasia were observed in the Rejoice Trial at the end of week 12 for all the doses studied and included in the NDA.
The CRL did not identify any issues related to the efficacy of TX-004HR and did not identify any approvability issues related to chemistry, manufacturing, and controls."
This is not an issue where I have an opinion about the end result. I am just placing an extremely insignificant bet that the 11/3/17 meeting may be a positive one. The shares closed at $8.09 on 4/6/17 and it has been downhill before the FDA program came up, so at least some of the possible adverse ramifications from an unfavorable decision is in the current stock price and arguably none of the positive ramifications if the FDA accepts the NDA without further trials. It is also important that I bought after the secondary and at a lower price. Those funds are intended in part to launch the two new drugs, assuming marketing approval is received from the FDA.
8. Precious Metal ("PM") ETFs:
As readers are aware, I buy small lots of PM ETFs as trades, sort of an alternative to playing blackjack. Both SLV and PPLT fell back into my consider to buy ranges due to the recent slump in PM prices.
I am merely amusing myself with these trades, and I am apparently easily amused.
A. Bought 50 SLV at $15.68-Commission Free Trade:
Quote: iShares Silver Trust (SLV)
Last Sold at $16.55
Stocks, Bonds & Politics: Item # 4.A. (9/7/17 Post)
Last Bought at $15.14 (7/5/17)
The decline in silver's price coincides with the rise in the USD and interest rates.
SLV Chart
U.S. Dollar Index (DXY) Interactive Chart
U.S. 10 Year Treasury Note Interactive Chart
B. Bought 10 PPLT at $87.63 ($1 Commission-IB Trading Account):
Quote: ETFS Physical Platinum Shares (PPLT)
Last Sold at $92.18
Stocks, Bonds & Politics: Item # 5 (8/13/17 Post)
Last Bought at $87.45 (5/11/17)
C. Bought 100 CGL:CA at C$11.05 (C$1 commission):
This is a gold bullion ETF hedged to the Canadian Dollar that trades on the Toronto exchange.
Quote: iShares Gold Bullion ETF Hedged to the CAD
Last Sold at C$11.47
Stocks, Bonds & Politics: Item # 3B. (9/7/17 Post)
Precious metal prices are still in a long term bear market IMO that started in 2011.
While this activity is irrelevant to me, I do recognize that there are an abundance of potential catalysts for a rise in PM prices, though it is probably impossible to predict when or if those events will actually occur.
Again, I trade the PM ETFs and hold the bullion long term. My last purchases were well over 10 years ago, and my last sales occurred in September 2011 and January 2012.
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.
No sooner than I identified a range bound trade for the 10 year treasury (2.31% to 2.34%), the yield started to spike up this morning and is now at 2.35%.
ReplyDelete2.351% +0.026
Last Updated: Oct 5, 2017 12:05 p.m. EDT
http://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
SPDR S&P Regional Banking ETF
$56.915 +0.805 +1.43%
Last Updated: Oct 5, 2017 at 12:05 p.m. EDT
iShares 20+ Year Treasury Bond ETF
$123.82 -$0.59 -0.47%
http://www.marketwatch.com/investing/fund/tlt
+++
I did find another 50 share lot of WBSPRE this morning, lurking in my Vanguard taxable account, and will hold onto that position just in case WBS does not elect to redeem at par value in December.
I mentioned in an earlier post that my goal now was to realized anywhere between $15K and $25K in short term trading profits each year as a supplement to my dividend and interest income.
ReplyDeletehttps://tennesseeindependent.blogspot.com/2017/08/observations-and-sample-of-recent_25.html
I added up my YTD profits, mostly short term, and came up with close to $37K. I decided to harvest a loss in one of my Canadian REITs, Dream Office, that brought the running total down to $35.2K.
The USD loss was $1,641.3. That loss reduced my net realized gain in the REIT basket to $16.488K. The main value of this position was its use to lower my tax bill since I harvested too much in gains this year.
https://tennesseeindependent.blogspot.com/2014/10/gateway-post-equity-reit-common-and.html
Dream Office has cut its monthly dividend twice since January 2016.
http://www.dream.ca/office/investors/#distribution-history
Consequently this REIT was the most ideal candidate remaining in my stock portfolio to reduce my capital gains tax obligation this year. The problems started the 2014 crash in crude prices and this REIT's significant exposure in the Alberta province.
SA article about Dream Office:
https://seekingalpha.com/article/4084154-dream-office-fool-twice-time-new-c-suite
I immediately converted the proceeds into USDs, since this security was owned in my Fidelity account where I am no longer buying international stocks due to cost factors compared to IB.
I was also concerned about getting ahead even more of what looks like a change in direction in the CAD's value against the USD which IMO is being caused by a rise in U.S. interest rates.
https://www.xe.com/currencycharts/?from=CAD&to=USD&view=1Y
I eliminated today another one of my "F" letter Canadian stocks today for that reason. See my discussion about EBGUF in my last post.
ImmunoGen, Inc. (IMGN)
ReplyDelete$7.03 -$0.80 (-10.22%)
At close: 4:00PM
I am down to my lowest cost IMGN lot as part of my small cap biotech lottery ticket basket strategy, a mere 50 share purchase at a total cost per share of $1.79 (IB account on 12/12/16). My realized gains exceed after tax my total out-of-pocket exposure which is less than $90.
The decline today was caused by a secondary stock offering. The offering was announced prior to the opening today. The company announced that it wanted to sell $13M shares plus the standard greenshoe underwriters' option to buy up to additional 15% of that number.
http://www.businesswire.com/news/home/20171004006295/en/ImmunoGen-Announces-Proposed-Public-Offering-Common-Stock
After the close, IMMU announced that it had upsized the offering to 14.5M plus the greenshoe on that higher number. The public offering price was $6.5.
http://www.businesswire.com/news/home/20171005006454/en/
Pipeline:
http://www.immunogen.com/pipeline
10-Q for the Q/E 6/30/17:
https://www.sec.gov/Archives/edgar/data/855654/000155837017005987/imgn-20170630x10q.htm
I would certainly prefer that the company raise that much cash at 6.5 compared to selling shares at $2 to arrive at the same sum. It is to be expected that clinical biotech companies will raise cash after a positive trial result or after a stock price recovery. The stock was certainly in the dumps late last year. And, even after arising out of the ash heap, the longer term chart hardly bellows "buy me".
http://www.marketwatch.com/investing/stock/imgn/charts
A positive correlation between a rise in interest rates and other asset categories, which started in earnest on 9/8/17 is continuing today.
ReplyDeleteThe ten year treasury yield has broken decisively to the upside. Precious metal prices expressed in USDs are declining again. The USD is gaining strength as measured by the U.S. Dollar Index and the Bloomberg Spot Dollar Index.
As of 9:00 A.M. C.S.T., the ten year treasury yield has pierced 2.39%, up from a 2.05% closing yield on 9/7/17, or a 16.59+% increase in less than a month.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2017
10 Year Treasury:
https://www.bloomberg.com/quote/USGG10YR:IND
U.S. Dollar Index (rise indicates USD strength against a basket of currencies weighted in the Euro)
http://www.marketwatch.com/investing/index/dxy
Bloomberg Spot Dollar Index (has more currencies than DXY and a lower weighting in the Euro)
https://www.bloomberg.com/quote/BBDXY:IND
GLD:
http://www.marketwatch.com/investing/fund/gld
There is also a large percentage increase in the German 10 year yield.
http://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
The latest trigger was the better than expected 2.9% increase in average wage Y-O-Y and the unemployment rate drop to 4.2% reported by the BLS this morning. The job losses were predictably bad due to the hurricanes.
https://www.bls.gov/news.release/empsit.nr0.htm
New Senior Investment Group Inc. (SNR):
ReplyDelete$ 9.13-0.11 (-1.15%)
As of 12:27PM EST
https://finance.yahoo.com/quote/SNR?p=SNR
I still own some shares after actively trading my position. I have been expecting a dividend cut that may allow me to buy somewhere below $9 per share as discussed here:
"SNR is a speculative REIT that has a very high dividend yield, but has a host of issues. I view the dividend as likely to be cut within the next 12 months. My strategy has been to buy the dips and sell the pops. My last sell was at $10.44 which indicates that my sell range has been lowered from $11 to $12.50 to $10 to $10.5. I will consider buying 50 shares at less than $9."
Item # 5.A.
A. Sold 100 SNR at $10.44- Highest Cost Lot Fidelity Taxable Account
https://tennesseeindependent.blogspot.com/2017/08/observations-and-sample-of-recent_7.html
I now view a dividend cut as almost certain based on today's press release:
http://www.businesswire.com/news/home/20171005006391/en/
The company announced that " it expects to complete $296 million of asset sales (the “Transactions”) during the fourth quarter of 2017. The Transactions include (i) a $186.0 million sale of six triple net leased properties, as well as termination of the related lease with LCS (the “Leased Portfolio Sale”) and (ii) a $109.5 million sale of nine properties managed by Holiday Retirement (the “Managed Portfolio Sale”)."
The company is going to use the proceeds in part to repay debt:
"In connection with the Transactions, the Company expects to repay approximately $178 million of existing debt with a weighted average interest rate of approximately 4.6%. After debt repayment, the net proceeds from the Transactions will be approximately $117.5 million (before fees and expenses). The Company intends to use the net proceeds for general corporate purposes, which may include new investments, debt prepayment and/or repurchases of common stock, depending on market conditions."
The quarterly dividend of $.26 per share was barely covered by AFFO prior to selling these properties and the dividend rate was above funds available for distribution in the second quarter:
http://ir.newseniorinv.com/file.aspx?IID=4544851&FID=389751718
I simply do not see how the current dividend can be maintained after these property dispositions are completed this quarter. While it is just my opinion, the quarterly rate needs to be cut from $.26 per share to at least $.2. Assuming a $.8 per share annual dividend and a total cost per share of $9, the yield would be reduced to 8.89% from 11.56% at the current $.26 per share rate.
The company calculates in its press release the slightly positive impacts on EBITDARM Coverage, net operating margin, and occupancy percentages resulting from these disposition, but not the potential negative impact on AFFO and FAD, nor does it make any statement about the dividend. If there is a cut announced soon, it may go deeper than $.06 per share.
The last dividend announcement was made on 8/1/17.
http://ir.newseniorinv.com/divs.aspx?iid=4544851
Thank you for your continuous updates, SG!
ReplyDeleteI had some questions in mind for you that I hope you don't mind answering.
First is what are your thoughts on the supposed nominations for the next FED chair? Bloomberg has this list of names as the strongest contenders for the spot: https://www.bloomberg.com/news/articles/2017-10-05/trump-s-short-list-for-fed-chair-features-these-hawks-and-doves.
Another one can be found here: https://www.predictit.org/Market/3306/Who-will-be-Senate-confirmed-Fed-Chair-on-February-4%2C-2018
Do you think we are going to see a policy shift under the new FED chair (accomodative vs. not-as-accomodative stance on monetary policy)? Will there be a shift in how they take decisions (forward guidance vs. formula based decisions)? It has been bugging me for close to a year now what happens if the next FED chair decides to attempt to adopt the Taylor rule or some form of it. Former FED chair Ben Bernanke had an interesting take on this: https://www.brookings.edu/blog/ben-bernanke/2015/04/28/the-taylor-rule-a-benchmark-for-monetary-policy/ .
My next question is - is there a difference between Capital Securities (DDT, CFC-B, JPM-C) and Trust Preferred Securities (MER-K-P, SCE-L-G-J-H-K, SIVBO, DTK, DKT etc.)? If yes - what is it?
Link to the Trust Preferred Security List at Quantum Online: http://www.quantumonline.com/pfdtable.cfm?Type=TrustPfds&SortColumn=Company&SortOrder=ASC
And last, but not of least importance, do you think DDT is eligible for inclusion to the S&P U.S. Preferred Stock Index as per their methodology that can be downloaded here: http://us.spindices.com/indices/fixed-income/sp-us-preferred-stock-index ?
My research so far suggests that DDT, just like CFC-B the very least, has its place in this index provided that the trading volume criteria is met.
DS: I have owned DDT in the past. My first purchase was at $5.2 and the next purchase was at
DeleteI discussed those purchases here:
Item # 1
https://tennesseeindependent.blogspot.com/2010/02/bought-50-ddt-at-1842new-long-short.html
Item # 2
https://tennesseeindependent.blogspot.com/2009/03/fed-buying-up-to-300-billion-in.html
D: As I use the phrase, a trust preferred security is created when the issuer forms a Delaware Trust and has that trust buy bonds issued by it. The proceeds for that purchase are raised by selling the trust preferred stocks to the public. Each TP represents an undivided beneficial interest in the bond owned by the trust. The distributions will be taxed as interest. The bond owned by the trust is typically junior in the capital structure and permits a deferral of interest payments, usually for 5 years and sometimes longer, provided no cash is used to pay a distribution on a security more junior in the capital structure. The only securities more junior would be common and equity preferred stocks.
ReplyDeleteIf you review the prospectus of DDT, you will see that it is a trust preferred security. There is no direct ownership of the bond. Instead, the bond is owned by the trust with the DDT owners have a beneficial interest only. The trust does have an obligation to collect interest payments and to distribute those payments to the owners.
https://www.sec.gov/Archives/edgar/data/1066225/0000930661-98-001661.txt
Note the word "subordinated" to describe the bond. That tells you that the bond owned by the trust is a junior one. There is a 20 quarter deferral right with the standard "stopper" clause. The issuer can call the bond at anytime now. The Delaware Trust form of ownership allows the issuer to break down what would normally be a $1K par value bond into $25 par value bonds that can then trade flat on the stock exchange.
The SIVBO and MERPRK Delaware Trusts own junior bonds as well. You need to review the prospectuses to determine what kind of security is owned by the trust. If Quantumonline identifies the payment as non-qualified under the heading "15% tax rate", the reason will generally will be that the trust owns a bond rather than an equity preferred stock.
The SCEPRJ is not a trust preferred security. It is an equity preferred stock that pays dividends, rather than interest, and is junior in the capital structure to all bonds.
https://www.sec.gov/Archives/edgar/data/92103/000119312515294690/d50832d424b2.htm
In this case, Southern California Edison formed a Delaware Trust that bought an equity preferred security rather than a bond. Unlike the bond trust preferred securities, the equity preferred stock owned by this trust have no maturity date but there is an optional redemption date reserved to the issuer. Unlike most equity preferred stocks, SCEPRJ does pay cumulative dividends. Unlike a DDT, SCEPRJ's distributions would be classified as "qualified" for U.S. taxpayers and consequently subject to a cap on the tax rate.
My view about economists is that they cause a lot of trouble. Irrespective of who is nominated to be the next FED chair, the U.S. FED and the ECB need to quit their extremely abnormal monetary policies and return to something approaching normality. The current policies are distorting the markets and are causing misallocations of capital that may create chaotic and adverse conditions down the road.
WMT: My commission free trades run out next August, and I have several hundred of them remaining.
ReplyDeleteThere are some stocks that are not IMO outside of a fair valuation range.
WMT is one of them.
Since I have an abundance of free trades left that I am not using, having turned my attention mostly to bonds and CDs, and since I am skeptical about the stock market continuing its upward burst for much longer, I decided to nibble in 10 share lots in a few stocks.
I will average down but not up. This is the same pattern that I used in acquiring a mere 30 shares of GILD in 10 share lots.
I bought 10 shares of WMT yesterday at $79.93. The next 10 share add would be between $75-$77 and then another at $70-$72. I will not be discussing these purchases in a blog post.
I have bought and sold WMT in the past profitably.
While it is just an opinion, I am expecting WMT to gain an increasing share of online sales, partly at AMZN's expense. I have mentioned earlier that WMT offers free shipping on orders over $35 and the customer does not have to pay an annual fee. Many of the items that I purchase are are more expensive at AMZN and consequently I have been increasing my purchases from WMT online.
WMT is featured positively in a Barron's article published today, which highlights its growing traction in online sales and changes being made at the retail store level that will make the company more competitive:
"Analysts say it has been taking market share in groceries at an accelerated rate this year, thanks in part to its online ordering service, which has added more than 400 stores for pickup just this year, bringing the total to more than 1,000. The company, which has stores within 10 minutes of 90% of the U.S. population, is also testing grocery delivery."
Subscription Publication:
http://www.barrons.com/articles/wal-mart-gets-back-on-the-growth-track-1507350434
WMT would also be a play on wages continue to grow at a faster rate than inflation.
http://www.marketwatch.com/investing/stock/wmt/analystestimates
http://stock.walmart.com/investors/stock-information/dividend-history/default.aspx
++++++
On another topic, a reader asked me about CVS a few weeks ago. I gave several reasons why I was not interested. One reason was the possibility that Amazon would delve into prescription business.
There was talk yesterday that Amazon was exploring an expansion into that business.
https://www.cnbc.com/2017/10/06/amazon-considering-selling-online-prescriptions-decision-coming-soon.html
CVS Health Corporation (CVS)
$76.92 -$3.98 (-4.92%)
Walgreens Boots Alliance, Inc. (WBA)
$73.20 -$3.75 (-4.87%)
Thank you for the answers, SG.
ReplyDeleteMost probably it will be interesting to see what happens down the road when and if CB's decide to wind down their balance sheets to more normal levels.
Also sorry for redirecting you to the S&P indices website without additional information. The aforementioned eligibility criteria part of the methodology is a single page of the whole document, page 5 to be exact. But perhaps there was a previous version of the methodology that made the S&P's preferred index include CFC-B, JPM-C, MER-K back in the day and with the new methodology DDT is not eligible. It will be understandable if you decided not to bother with this issue though.
DS: I do not know why DDT would be excluded from the S & P Preferred Stock Index.
DeleteI have stated in the past that ETFs like PFF and PGX can confuse individual investors with their overly broad definition of "preferred stocks". The indexes that those ETFs track include junior and senior exchange traded bonds in addition to equity preferred stocks. Those type of securities are senior in the capital structure to preferred stocks and make interest rather than dividend payments.
E.G:
4. Bought 25 of the ETF PFF at $39.55-Commission Free at Fidelity
https://seekingalpha.com/instablog/434935-south-gent/3642736-increasing-cash-flow-in-a-world-without-risk-free-yield-bought-the-etf-pff
3. Preferred Stock ETFs/Bought 200 PGX at $13.528
https://tennesseeindependent.blogspot.com/2010/06/claymore-canadian-bond-etfspreferred.html
I no longer have a position in those ETFs.
If you look at the recent changes to the S & P Preferred Stock Index, one exchange traded senior bond, AGIIL, was dropped even though it is still traded. An equity preferred stock, TCBIP, was also dropped.
https://www.spice-indices.com/idpfiles/spice-assets/resources/public/documents/550553_spuspreferred-20170707.pdf?force_download=true
It is possible that the reason was that the trading volume was below the threshold.
I don't think that it would make much of a difference to DDT's price whether or not it was included in an index.
The main impediment to price appreciation would be that Dillards may now cal at the $25 par price. The shares closed last Friday at $25.94.
Dillards has a senior unsecured bond with a 7.75% or .25% higher than DDT that matures in 2027. That bond last traded at 117.62 with a YTM of 5.374%.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C54916&symbol=DDS3673366
In short, I think that you are focusing on the wrong issue. The issue is what do you pay for a 7.5% junior bond issued by a box retailer that can be called at $25 at anytime and where interest payments can be deferred for up to 20 quarters provided the stopper clause is not activated.
Note on the FINRA price chart for the 2027 DDS SU bond that the price fell to 28 in 2/2009. That is a $1,000 par value bond. If I had bought 1 bond at 28, the cost would be $280 plus the brokerage commission and accrued interest paid to the seller. DDT is an exchange trade junior bond that trades flat, which simply means that the buyer does not pay accrued interest to the seller.
SG:
DeleteI fully agree on your sentiment that buying DDT above $25 + accrued dividend bears a considerable call risk here provided that the company stays healthy and nothing out of the ordinary happens to activate the 20 quarter deferral.
But I think you misunderstood what I was wondering about. DDT is currently not in the index and I am pondering whether it is eligible for inclusion provided that the trading volume is sufficient.
DDT is currently not in it while CFC-B and MER-K are. Which made no sense as CFC-B and MER-K look the same as DDT to me. If this definition has been always used by the index, then DDT, just as CFC-B and MER-K, should be eligible for inclusion:
"Eligibility Factors
Exchange Listing. Preferred stocks trading on the major U.S. stock exchanges are eligible. Over-the-counter, bulletin board and unregistered (144[A]) securities are excluded.
Type of Issuance. Preferred stocks issued by a company to meet its capital or financing requirements are eligible. These include floating, variable, and fixed rate preferreds, cumulative and non-cumulative preferreds, preferred stocks with a callable or conversion feature, and trust preferreds.
Some trust preferreds issued by a company to meet its capital requirements carry a brand name or moniker – these are included. However, structured products and brand name products issued by financial institutions that are packaged securities linked to indices, baskets of stocks or another company’s stock are ineligible. Special ventures, such as toll roads or dam operators, may issue preferred-like securities; these special ventures are ineligible.
Exchange Traded Debt securities are ineligible.1 Exchange Traded Debt can be classified as securities whose income component is considered interest rather than a dividend. The issuer can deduct the interest payments from its taxable income, as it can with bond interest. The exception to this is rule is the Trust Preferred conduit structure mentioned above, which are eligible. Examples of such non-standard structure of these securities include hybrids and “baby bonds” or senior notes.
For the purposes of index membership, S&P Dow Jones Indices applies the inclusion and exclusion criteria separately as detailed below.
Inclusion Criteria
Maturity or Conversion Schedule. Preferred stocks that do not have a mandatory conversion or scheduled maturity within the next 12 months are eligible.
Market Capitalization. Preferred stocks with total market capitalization of more than US$ 100 million are eligible.
Volume. Preferred stocks that have traded more than 250,000 shares per month over each of the previous six months are eligible for inclusion. Issues with fewer than six months of trading history are evaluated over the available period and may be included should size and available trading history infer the issue will satisfy this requirement. Monthly volume is determined using reference dates of five business days prior to the first Friday of each of the previous six months. The volume range is taken from the reference date back to the business day following the prior month's reference date.
Indicated Yield. Preferred stocks for which S&P Dow Jones Indices cannot determine an indicated dividend yield are not eligible.
1 As of July 2013, issuances classified as ‘exchange traded debt’ are no longer considered for inclusion in the index. Existing debt components will remain in the index provided they continue to meet all other inclusion criteria."
The most plausible explanation might be that the index operated with different methodology at the time of inclusion of CFC-B and MER-K which is more than understandable.
But if this same methodology was the one that has always been used then DDT should be a part of it as well.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2017/10/observations-and-sample-of-recent_9.html