Thursday, October 19, 2017

Observations and Sample of Recent Trades: APLE, BRGPRA, MDT, NKTR, TANNZ


Mexico and Canada Reject U.S. Nafta Demands - Bloomberg

Japan is doing better: Japan’s Trade Recovery Powers Ahead With Strong September Growth - Bloomberg

China's statistical agency claimed that GDP had increased by 6.8% in the third quarter, compared to the 2016 third quarter. Credit grew faster than the economy. 

There is nothing exciting about U.S. new home starts in September. Housing starts fell 4.7% compared to August but is still 6.1% above the September 2016 number. Release.pdf

I can not form an opinion yet whether the recent downturn in housing starts portends a slide that will have a meaningful negative impact on the economy or just a temporary downturn: 

Housing Starts: Total: New Privately Owned Housing Units Started-St. Louis Fed

There is always a lot of chop in the numbers as shown in preceding chart. I would still characterize the dominant trends as up. A fall below the annualized annual rate for September 2016 would be of concern to me. 

Genuine Parts (GPC) earnings fall short in 'disappointing' quarter - MarketWatch

GPC is one of many companies that I follow, primarily to gauge GDP growth that is independent of the government's number. The Atlanta Fed is predicting 2.7% GDP growth for the third quarter as of 10/18/17. If that number is achieved, I would view it as solid particularly given the negative impacts caused by the hurricanes. At the moment, I am more than a little bit skeptical that this number represents a prescient forecast. 

My reading of the tea leaves causes me to lean more in favor of the 1.7% estimate made by the New York Fed as of 10/13/17. FEDERAL RESERVE BANK of NEW YORK


Market Commentary

Robert Shiller: "Earnings growth was almost 20% in the year before the 1929 peak. Also, 1929 was a year of high earnings growth and somewhat low volatility, and it didn’t make any difference."

Shiller PE Ratio 

S&P 500 Earnings Yield

This is an interesting article that highlights one reason why bond yields remain so low. A $4 Trillion Hole in the Bond Market May Start Filling in 2018 - Bloomberg Two events since 2007 have caused a massive decrease in the supply of investment grade securities. The first is well known and involves massive bond buying by central banks. The other, which is frequently ignored, is the massive shrinkage in bonds issued by financial companies due to "a regulatory crackdown, and due to a contraction in supply of mortgages that were regularly securitized into asset-backed bonds."  

The ECB's extremely abnormal policy, which involves both QE and negative short term rates, will continue to restrain U.S. rates into 2018. 

The German 10 year is currently hovering below .4%. Germany Generic Govt 10Y Yield Analysis-Bloomberg Markets The September 2017 CPI rate was 1.76% in Germany Y-O-Y: Current inflation Germany – CPI inflation Germany

The Swiss National Bank has set an even more absurd -.7% negative benchmark rate. The Swiss 10 year has frequently been in negative nominal territory and is so now. Switzerland Govt Bonds 10 Year Note Generic Bid Yield Analysis-Bloomberg Markets

No wonder that the U.S. 10 year looks good to many institutional investors in this manipulated interest rate environment, even with a 2.2% annual CPI rate through last September. 


Trump and McCain

Trump warns John McCain: 'Be careful ... I fight back' - CNN-John McCain warns against 'spurious nationalism' in Liberty Medal speech - CNN 

I seriously doubt that Senator McCain will lose any sleep over Trump trying to bully him into submission. McCain is not going to grovel and kiss Donald's ring, like virtually all other republican politicians with a few other exceptions that can be counted by the fingers on one hand with one or two left over. 


Trump Enjoys Lying and Creating Needless Controversy

I am about to describe a series of events that no respectable President would even consider starting. 

Trump made the following statement about Obama's contacts with the families of fallen soldiers.

"If you look at President Obama and other presidents, most of them didn’t make calls — a lot of them didn't make calls — I like to make calls when it's appropriate.,"

Obama Reply through a Spokesman: "President Trump’s claim is wrong. President Obama engaged families of the fallen and wounded warriors throughout his presidency through calls, letters, visits to Section 60 at Arlington, visits to Walter Reed, visits to Dover, and regular meetings with Gold Star Families at the White House and across the country."

When the press called him out, Trump  said that he really did not know about President Obama's contacts. Maybe he did, maybe he didn't. 

Trump just made it up, as he normally does since it sounded good to him. 

He then defended his reality creation by claiming that someone, always unidentified, gave him the information. 

Then, as usual, he slips into another line of attack. In this case, he suggested that Obama did not talk to General Kelly after his son died, as if one example proves that his broad statement was true. General Kelly refused to answer press questions about the matter. Trump exploits John Kelly’s dead son to back up his Obama falsehoods -

I do not know whether Obama called General Kelly. I do know that Obama hosted a Memorial Day breakfast in 2011 attended by Gold Star families including General Kelly and his wife who were seated at the same table as Michelle. Obama gave this speech on 5/30/11: "Honor the Sacrifice of Those We've Lost" |

Trump did call the families of the four Green Beret soldiers killed in Niger, shortly after being asked by the press whether he had made those calls. Twelve days of silence, then a swipe at Obama: How Trump handled four dead soldiers - The Washington Post (the silence was during the period he was castigating Obama for failing to make contacts). 

Trump managed to offend the wife of one fallen Green Beret soldier 

Trump told slain soldier's widow that he "knew what he was getting into" 

Trump called that statement Fake News: Trump Denies Telling Army Widow Her Husband ‘Knew What He Signed Up For’ - The New York Times (the widow also claimed that Trump did not remember her husband's name)  

The widow's mother confirmed to the WP that Trump made those statements, notwithstanding Trump's denial:  Trump’s alleged ‘knew what he signed up for’ comment to widow is worth caution, but fits a clear pattern - The Washington PostFallen soldier’s mother: ‘Trump did disrespect my son’

While Trump supporters believe that he has empathy, he has none of course other than for himself when he is criticized. 

Trump's False Claim About Obama and Fallen Soldiers - NBC News

‘Disrespectful lie’: Anger grows over Trump’s claims about past presidents and fallen troops - The Washington Post

The foregoing is just another example of Trump praising himself, when self praise reflects only his own narcissism, and tearing down others based on false claims to reinforce his own self-esteem. This episode is just another example of Trump's mental issues. 


An Almost Baby Step on BiPartisan Fixes for Obamacare:   

Senator Alexander (R-TN) and Senator Murray (D-WASH) reached what I would call an agreement in principle to continue the CSR payments for 2 years, to restore $100M in funding for the Obamacare outreach program (or more broadly what Senator Schumer called an anti-Trump sabotage provision); and a provision, not yet written, that will make it easier for states to obtain waivers. (E.G. Alaska and Minnesota want to use federal funds to buy reinsurance that they claim will lower premiums)      

Bipartisan senators reach deal on health care subsidies - CNN 

I seriously doubt that the House will agree to anything resembling this agreement. House Speaker Paul Ryan opposes proposed short-term Obamacare fix It was the House republicans who refused to fund the CSR payments since Ryan became Speaker and who sued the government to stop the Obama administration for making them as required by law. Stopping the CSR payments has been for years part of the GOP strategy to sabotage Obamacare. 

The House republicans seem content in raising Obamacare premiums and consequently the federal debt which flows from cutting off those payments. 

Instead of acting responsibly, the republicans prefer to engage in demagoguery, their primary contribution to political thought, by claiming that the CSR payments are insurance company bailouts and those companies are already making billions off those enrolled in the Obamacare health insurance plans. 

If anyone listening to their gibberish had common sense, a question would naturally arise. If the insurance companies were making billions, why are they leaving the Obamacare exchanges in droves? That is a hard question for the True Believers to answer, assuming it has occurred to them and it hasn't.  

Now if the GOP wanted to actually bail out the insurance companies, perhaps Congress could mail a check to Blue Cross-Blue Shield of Tennessee that lost over $400 million over three years or $1B lost by UnitedHealth (UNH) just in 2015 and 2016. (yes, mail that $400+M check to Blue Cross of Tennessee on the condition that it solely use the funds to lower premiums for those who purchase Medigap policies). 

UnitedHealth expects to lose nearly $1 billion on Obamacare - Jan. 19, 2016

BlueCross BlueShield to rescue Obamacare in Knoxville, Tennessee - May. 9, 2017

The Democrats made a tactical political mistake by using CSR payments to insurance companies as the means to lower out-of-pocket expenses for lower and middle income families purchasing the silver plan. It created an opportunity for the GOP to engage in demagoguery and to coin a phrase, which they do so well, that causes a negative reaction in those souls who are both uninformed and easily manipulated by them. In this case, the phrase was "insurance company bailouts". The better political approach would have been to increase the refundable tax credits. 


The Danger of President Pence | The New Yorker (he does have that devotional religious type gaze when looking at Donald as if Donald was the Holy Spirit incarnate; the article also details Ivanka's role in getting Flynn the National Security advisor job over Christie's objection: "A participant at the meeting said, “It was like Princess Ivanka had laid the sword on Flynn’s shoulders and said, ‘Rise and go forth.’ ” Flynn had been loyal to Donald, which ended all objections

Rex Tillerson and the Unraveling of the State Department - The New York Times


Trump and Tom Marino:  

It was generally known that Tom Marino was the opioid's industry go to guy in Congress. Yet Trump appointed him as the new drug czar Secretary, and then had to force him to withdraw after the public was informed about this well known history:  

Tom Marino out as Trump's drug czar nominee after "60 Minutes" report - live updates - CBS News-The government’s shameful role in the opioid crisis - The Washington Post

The Tom Marino nomination is certainly consistent with Trump's overriding theme to appoint industry lapdogs as cabinet secretaries. Is Marino really any different than Scott Pruitt at EPA, Rick Perry at Energy and Ryan Zinke at Interior? I would say he is less conflicted than those other gentleman who could easily be characterized as industry lobbyists. Scott Pruitt is clearly an anti-Environmental Protection Director of the EPA. 

Eleven Trump nominees have withdrawn from consideration for administration jobs - CNN 

Richard Branson says he met Trump only once, in 1990s, and it was ugly (Branson "alleged that Trump spent the meeting talking about how to destroy people who refused to lend him money when one of his companies went bankrupt.")


1. Sold 30 TANNZ at $24.37

Profit Snapshot: +$211.47

Par Value: $25
Coupon: 8%
Optional Call: At par on or after 10/15/18
Capital Structure: Senior Unsecured Bond
Distributions: Quarterly Interest Payments

I received one quarterly interest payment.

2. Bought 10 MDT at $77.99 -Used Commission Free Trade

Quote: Medtronic PLC  (MDT) 

I will average down in 10 share lots but will not average up. The average down ranges are $73-$75 and below $70. I will be using only commission free trades. This is the same process that I used earlier to acquire 30 shares of Gilead which I have now sold. 

The MDT price has been drifting down some since closing over $89 per share during June 2017: MDT Stock Charts The $11 decline to $78 creates a negative technical picture, but improves the valuation.  

At the time of purchase, the average analyst target price was $91.71. 

The current F/Y ends in April 2017 and the consensus E.P.S. estimates were at that time $4.78 and $5.2 for the F/Y ending in April 2019. MDT Analyst Estimates The $78 price results in a 15 P/E using the F/Y 2019 estimate with an estimated Y-O-Y E.P.S. growth rate of 8.79%.  

MDT is one of many stocks that I periodically trade. Since 2007, I have netted $1,797.98 in realized gains, owning a total of 269 shares, but have not owned the stock since 2014. 

2011: 239+ Shares +$883.93

2014:  30 Shares +$914.05

I do frequently realize significant percentage gains on very small odd lots. 

MDT will take a hit in the current quarter due to it having manufacturing facilities in Puerto Rico. Medtronic Provides Update on Impact from Hurricane Maria ("Medtronic estimates an impact to both revenue and non-GAAP net earnings up to $250 million dollars in the fiscal 2018 second quarter, which closes on October 27, 2017.") Its facilities are currently only partially operating on back-up generators. This will be a multi-month problem for MDT. 

In July, MDT sold its patient care, deep vein thrombosis and nutritional businesses to Cardinal Health (CAH) for $6.1B and used $3 of that amount to reduce debt. Cardinal Health Completes Acquisition of Medtronic’s Patient Recovery Business

Medtronic completed an acquisition of Coviden for cash and stock valued at approximately $49.9B. This was a tax inversion deal that allowed MDT to significantly lower its taxes by establishing its HQ in Ireland. Medtronic Avoids U.S. Taxes While Saddling Shareholders With a Hefty Tax Bill - TheStreet

MDT is now organized into four business lines that are outlined in its last earnings report:

Medtronic Reports First Quarter Financial Results

Time To Buy Medtronic? Watch Diabetes Segment Transformation - Medtronic plc (NYSE:MDT) | Seeking Alpha

Dividend Taxation: Opportunities to Obtain Irish Dividend Withholding Tax (DWT) Exemption| Investors | Medtronic

The Morningstar Report dated 8/22/17 rates the stock 4 stars, with a fair value estimate of $97.

The S & P report, dated 9/24/17, has a 4 star rating on the stock and a $100 twelve month price target.

3. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 Franklin Synergy 1.3% CDs (monthly interest) Maturing on 5/30/18 (7 month CDs):

B. Bought 2 The First N.A. 1.25% CDs (monthly interest) Maturing on 3/27/18 (5 month CDs):

C. Bought 2 Wells Fargo 1.45% CDs (monthly interest) Maturing on 11/27/18 (13 month CDs):

D. Bought 3 Beal Bank 1% CDs Maturing on 11/19/17 (1 month CD)

 I have decided to leave almost no cash in Schwab's sweep account, which pays .05% and instead rely more on short term CDs that mature continuously as a potential source of cash for reallocation into other assets.  

$9K inflow into Short Term Bond/CD Ladder Basket

4. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Sold 1 Shell 2.25% SU Bond Maturing 11/10/2020-A Roth IRA Account:

FINRA PAGE: Bond Detail

Profit Snapshot: +$8.86

Sold at 100.775
YTM Then at 1.989%
Current Yield at 2.23%

B. SOLD 2 Kimberly Clark 2.65% SU Bonds Maturing on 3/1/25:

Profit Snapshot: +$19.33

FINRA Page: Bond Detail

Issuer: Kimberly-Clark Corp.

KMB Analyst Estimates

Sold at 99.09

YTM Then at 2.787%
Current Yield at 2.764%

Bought at a total cost of 97.791

Stocks, Bonds & Politics: Item # 1.B.  YTM THEN at 2.965%
Current Yield at  2.71%

My consider to repurchase price is below 93. 

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

When referencing "outflow" or "inflow", I mean the principal amount of the bond or CD. 

5. Long Term Bond Strategy: TIPs in Roth IRA:

A. Bought Back 1 TIP .625% Maturing 2043 at 93.875:

I do not pay a brokerage commission for TIP transactions in this account:

Confirmation Excerpt:  

Stocks, Bonds & Politics: TIP Trading in the Secondary Market

Update On Buying TIPs In The Secondary Market - South Gent | Seeking Alpha

The Mechanics Of Purchasing A TIP In The Secondary Market - South Gent | Seeking Alpha

Stocks, Bonds & Politics: Advantages and Disadvantages of Treasury Inflation Protected Securities (9/25/2009 Post)

Inflation Factor Computations:

The TIP starts out with a lower coupon than the nominal treasury. Unlike the nominal treasury where there is no change in the $1K principal amount per bond, the TIP's principal amount will be adjusted by CPI. The coupon is then applied to the principal amount as adjusted by inflation both up and down. Individual - TIPS In Depth 

This note was originally sold in February 2013. The reference CPI number was 229.911: TIP 2043 .625% Coupons The CPI number refers to the BLS Non-Seasonally Adjusted Consumer Price Index for All Urban Customers laggged by 3 months. Consumer Price Index for All Urban Consumers: All Items | FRED | St. Louis Fed (data can be downloaded from that website into Excel). The index number is released monthly by the BLS. Consumer Price Index  (look under "Not seasonally adjusted CPI measures")

The CPI reference number on my settlement date was 245.0461. CPI had increased by 15.1351 since issuance through my settlement date or 6.583%. Compare that number to the inflation factor number in bold type below.  

The treasury provides the CPI reference number and the inflation factor number for the settlement date. (Scroll to Page 6: CPI_20170914.pdf; general reference site link is Institutional - TIPS/CPI Query Results)

As noted in the confirmation, the inflation factor was 1.06583. That number reflects the accretion to principal since issuance caused by the increase in CPI. The adjusted principal amount is consequently $1,000 (original par amount) x. the inflation factor of 1.06583 = $1,065.83. 

I paid less than that amount since I purchased the bond at 93.875 due to a decline in the bonds value

However,  I did not pay $938.75 for this bond but $1,000.55.

938.75 x. Inflation Factor of 1.06583 = $1,000.5479 rounded up to $1,000.55

I also had to pay $1.05 in accrued interest to the seller.

Except for the $.55 paid over the original par value amount, I basically got the accretion to principal for free.   

On 9/8/17, I sold this TIP at 96.48:

I have now bought back 1 of the 5 TIPs sold on 9/8/17. See Item # 6 Roth IRA TIP Dispositions on 9/8/17: Stocks, Bonds & Politics (9/25/17 Post) I am in no hurry to buy the other 4. 

Nominal 20 to 30 year Treasury yields trended up between 9/8 and 10/11 which caused the price of this TIP to decline some. 2017 Daily Treasury Yield Curve Rates (30 year treasury at 2.67% on 9/8 and at 2.88% on 10/10/17)

The uptrend in nominal yields make the coupon yield of this TIP less valuable. 2017 Daily Treasury Real Yield Curve Rates (.79% on 9/8/17 to .94% on 10/10/17 coupon yields plus inflation adjustment to principal) The only way for a vintage TIP bought with a .79% effective coupon yield to adjust to a .94% current rate is to go down in price until it hits .94% which is what happened to the price of this TIP between those dates.

2017 Trading Profits for this TIP: +$66.34

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

A. Eliminated BRGPRA-Sold 50 at $26.58:

Profit Snapshot: +$93.28

I recently discussed this security and have nothing to add to my prior discussion: Stocks, Bonds & Politics: Item # 4 Sold 50 BRGPRA at $26.26 (10/11/17 Post)

B. Pared APLE Schwab Account: Sold Highest Cost Lot at $19.22 (Used Commission Free Trade)

History This Account-2 Years: 

The other 50 share in this account was acquired at $17.92 (8/24/17), using a commission free trade, and was discussed in Item # 2.B. That post and the next 3 linked posts contain substantive discussions about this hotel REIT. 

Profit Snapshot: $32.47

2017 APLE 50 Shares +$32.47

Stocks, Bonds & Politics: Item # 3.A. (4/1/17 Post) 

I currently own shares 50 shares in my IB account, with my last purchase made at $18.15 and discussed in Item # 1.B. (7/31/17 Post) 

In a Roth IRA, I  bought 50 shares at $18.3. Stocks, Bonds & Politics: Item 2.C.  (5/25/17 Post) I still own those shares and have been reinvesting the dividend. 

I also bought and still own 50 shares in my Fidelity account and apparently did not discuss that purchase. The shares were bought at $18.22 on 7/20/17. I am currently reinvesting the dividend in that account.  

I previously sold 100 shares at $19.43: Stocks, Bonds & Politics: Item 2.B. (5/25/17 Post) 

I am just starting to get a trading feel for this REIT. My first purchases were at too high of a price, based in part on subsequent trading ranges, and those shares have been sold for slight profits. My current consider to buy range is between $17.5 to $18.5 with a strong preference to buy below $18.25 and to consider selling my highest cost lot(s) held in any taxable account at over $19. 

Currently, my highest cost lot is the 50 shares bought in my Vanguard Roth IRA at $18.3. The consider to sell price would be over $19.5. 

I am reinvesting the APLE dividends paid into my Schwab, Fidelity and Vanguard Roth IRA accounts. I do not reinvest dividends in my IB trading account.  

APLE SEC Filings 

APLE Hurricane Irma Update 

10-Q for the Q/E 6/30/17 

2016 Annual Report 

7. Small Cap Biotech Lottery Ticket Basket

A. Sold 20 NKTR at $23.89:

Profit Snapshot: +$191.82

This lot was bought at a total cost of $14.25 (10/16/18), so the gain just turned into a long term capital one.  

I previously sold 50 shares at $22.53, harvesting a $335.4 profit. Stocks, Bonds & Politics: Item 5.A.

Total NKTR 2017 Realized Gain (70 shares) = $527.22

The stock spiked after NKTR issued this press release: NKTR-181 Meets Primary and Secondary Endpoints in Phase 3 SUMMIT-07 Study in Chronic PainNektar Opioid Drug Does Well In Study-Investopedia

Maybe the word Opioid is not such a popular word now. 

NKTR had about a $3.75B at the #23.89 price which has to include  financial success on at least one, probably two, clinical compounds. 

Nektar | Pipeline | R&D Pipeline

8. Portfolio Management Progress Report for 2017:

As part of my portfolio management, I engage in frequent short term trading to supplement my annual dividend and interest income. The general goal is to harvest net SHORT TERM TRADING profits of between $15K to $25K every year and to increase the total dividend and interest payments by at least 5% each year. I do take losses from time to time on less than optimal purchases. The realized gain objective has already been exceeded this year by over $10K and the income/dividend amount has exceeded the minimum of 5%. Next year will be more difficult on the later goal unless short and intermediate term bond rates move up meaningfully. It helps that my pile that generates income is materially increasing. I have been helped this year by moving funds out of low and nominal yielding MM sweep accounts into bonds and CDs.  

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. 


  1. Bonds: After a one day, mild anxiety attack, the Bond Ghouls are happy again and completely unperturbed by the naysayers who claim that they have lost their marbles.

    It is probably futile to select a reason for today's rise in prices. If I had to guess, it is just another flight to perceived safety due to the flare up in Spain's problem with Catalonia.

    This may not hold for long. The U.S. Dollar Index is currently down for the day:

    U.S. Dollar Index (DXY)
    93.13 -0.29 -0.31%
    Last Updated: Oct 19, 2017 at 11:51 a.m. EDT

    And the Euro is up against the USD:
    0.8446 -0.0038 -0.45%
    Last Updated: Oct 19, 2017 at 12:02 p.m. EDT

    CurrencyShares Euro Trust (FXE)
    $114.2975 + 0.4775 0.42%
    Shows Euro Strength vs USD with a gain
    Last Updated: Oct 19, 2017 at 11:47 a.m. EDT


    IMDZ: Well my 100% gain in a 60 share lot has gone poof this week, though I still have a small profit, apparently based on a downgrade from one broker and the announcement that a phase 3 trial for a cancer vaccine had the FDA's blessing. I noted earlier that capital raises will be necessary and investors may have been displeased with the mid-2018 start date of the trial with data due in two years after the first patient is dosed.

    I have noticed this week what I would characterize as a reversal in investor enthusiasm about biotechs in general and small clinical stage companies in particular.

    1. IMDZ: No Profit No More-Now at Break-Even

      Immune Design Corp. (IMDZ)
      $5.50 -$1.05 (-16.03%)
      Day's Range 5.40 - 6.55
      52 Week Range 4.50 - 13.05
      Volume 1,678,531
      Avg. Volume 222,847
      Market Cap 140.91M

      If the price goes below $5.3, I will dip into my gambling hoard and round my lot up to 100 shares. I did buy an odd lot in a family member's account today at $5.4.

      The only new news today was positive:

  2. FNB: I am always at least a week behind discussing my common stock trades.

    I discussed buying a 100 FNB shares at $12.43:

    Item # 1.A.

    I will discuss selling that position in my next post. The snapshot of my profit will usually proceed my discussion of a trade. Snapshots of regional bank stock profits/losses can be found here:

    I owned the lot for about a month and harvested at $137.21 gain.

    I do not like this bank for the reasons previously given on multiple occasions. Like many others, I will consider a purchase when the price falls within what I view as a reasonable price range given the pluses and minuses.

    FNB reported this morning and investors are not happy:

    F.N.B. Corporation (FNB)
    $13.28 -$0.67 (-4.80%)
    As of 12:18PM EDT.

    At first glance, I did not see anything out of the ordinary for this bank's earnings reports:

    Slow E.P.S. growth, relatively low capital ratios, a good efficiency ratio and below average charge-offs.

    The NIM would have fallen when adjusting for the benefit of purchase accounting and $4.3 in cash recoveries and that may be the issue today:

    "The net interest margin (FTE) (non-GAAP) expanded two basis points to 3.44% and included $2.2 million of incremental purchase accounting accretion and $4.3 million of cash recoveries, compared to $0.5 million and $1.1 million, respectively, in the prior quarter."

    I would disagree with this SA summary which claims that FNB missed by $.01 at $.23 per share:

    The relevant number is $.24 which excludes merger related expenses.

    "Third quarter operating net income per diluted common share (non-GAAP) was $0.24, which excludes the after-tax impact of merger-related expenses of $0.9 million."

    While I do not have specific knowledge whether FNB analysts excluded those expenses in their estimates, it would generally be the case since analysts forecast operating earnings rather than GAAP earnings.

    I will consider now whether I will repurchase the lot and to hold at least until the dividend is harvested.

  3. Concert Pharmaceuticals, Inc. (CNCE)
    $16.50 +$2.54 (+18.19%)

    I own this one as part of my small cap biotech lottery ticket basket.

    The price spurt started shortly before noon E.S.T today.

    This was the news:

    "Concert Pharmaceuticals, Inc. (NASDAQ: CNCE) today announced that the Patent Trials and Appeal Board (PTAB) of the U.S. Patent and Trademark Office has denied Incyte’s petition to institute inter partes review (IPR) of U.S. Patent No. 9,249,149 (the ‘149 patent). The denial of Incyte’s IPR petition upholds the validity of the ‘149 patent that includes claims covering CTP-543, the Company’s investigational compound for the treatment of alopecia areata."

    I reckon some investors were concerned about this challenge.

  4. Bar Harbor (BHB): I own 225 shares with an average cost per share of $16.69. I am not reinvesting the dividend and book already about $1K in profits.

    For my remaining shares, I have been content to hold and the earnings report, released after the close today, supports that decision.

    "Bar Harbor Bankshares (NYSE American: BHB) reported third quarter GAAP earnings of $8.6 million, or 56 cents per share. Core earnings totaled $8.8 million or 57 cents per share representing a 10% increase over the prior quarter."

    Net charge-offs (current quarter annualized)/average loans 0.01%

    Total non-accruing loans/total loans 0.28%

    Total non-performing assets/total assets 0.20%

    Efficiency ratio 53.59%

    All of the preceding numbers are of course excellent.

    Net interest margin, fully taxable equivalent (FTE) 3.06% (still constrained)

    Core return on tangible equity 14.51%

    22% annualized commercial loan growth

    1.01% core return on assets (non-GAAP measure)

    Allowance for loan losses/non-accruing loans 175% (coverage ratio)

    Regional banks would generally benefit some by a lowering of the corporate tax rate to 25%:

    "The effective tax rate was 29.3% in the third quarter as compared to 31.6% in the second quarter"


  6. General Electric laid an egg big time this morning. A dividend slash is definitely on the table:

    The CEO said their were no longer any sacred cows. Peltz, whose Triad Partners received a Board seat recently, said "everything is on the table."

    GE, once a centerpiece in the U.S. economy, has fallen into the abyss with no clear path forward other than slashing the dividend and costs and selling businesses.

    The future will not look kindly on Immelt's stewardship.

    The Board allowed this massive slide to happen. Of course, all of them need to be fired and replaced by shareholders which will never happen unfortunately.

    While this report has the feel of a housecleaning quarter, which frequently occurs after a CEO transition, that is not an explanation for the serious downdraft in operating earnings from continuing operations.

  7. "There’s talk of capping 401(k) contributions at $2,400 per year"

    I have been reading about this GOP plan for a few days now. It is part of their effort to help pay for the corporate taxes.

    A related GOP idea is to cap the deductibility of regular IRA contributions which then forces individuals to contribute funds for retirement into a Roth IRA. The government increases tax revenue due to the substantially lower current deductions from taxable income.

    1. "Republicans Consider Sharp Cut in 401(k) Contribution Limits"

    2. Wonderful. And then in 20 or 30 years the rules will get changed for Roths so that they can be taxed.

      Back to the drawing board since I'd already mapped out how to retire in twenty years of which the 401k savings was a major factor.

      I wonder if the TSP contributions are going to be included as well?


    3. User: The GOP is keeping their "tax reform"
      plan under wraps, with only a few chosen ones given access to the latest draft.

      Their plan is to spring the final draft on the public and then call for a vote before opposition can change the course of events, which did not turn out as planned on their Obamacare repeal and replace plan.

      It is unclear at the moment whether a maximum cap would apply to traditional IRAs or even whether any cap on deductible contributions will survive to the final draft.

      I suspect that this alternative is being considered as a revenue raising item now since there is too much GOP opposition to eliminating the deduction for state tax payments. A significant number of GOP representatives can be found in high state tax states like NY, NJ, CA, and ILL.

      I am retired and never had a 401(K) plan. Instead, I contributed to a regular IRA when that first became available around 1980 and continued thereafter. The same year deductions were not necessary for me, but were beneficial and contributed my willingness to contribute even when I was in my 20s and I was in a high tax bracket.

      I converted the regular into a Roth IRA when stocks collapsed in the October 2008 to March 2009 time frame. The tax obligation was lower due to the collapse in prices.

      I was mostly retired then and thought that period would most likely be the best possible time to make the conversion.

      My older brother, who is still working, did go ahead and make his Keogh contributions this year just in case.

      It is too early to tell what will ultimately happen.

      However, if they make this kind of change, they will make others down the road, when they become even more desperate for revenue, that will disrupt retirement plans made based on prior law.

  8. CAD/USD:

    The USD gained strength against major foreign currencies yesterday as interest rates rose.

    I discussed in a recent post exchanging CADs for USDs to lock in a currency profit, when I thought the CAD/USD had topped out-again-near .8.

    Item # 1.A. E.G.
    A. Bought USD$15K Using C$18,747.15 ($2 IB conversion fee built into rate):

    The CAD has continued to weaken some including on last Friday. You can see the CAD starting to weaken around 9/11/17 when U.S. interest rates started to rise.

    It is hard to say whether the CAD will continue to fall. The Bank of Canada did recently raise its benchmark rate by .25% but that is meaningless given the rate of increase by the U.S. FED. Oil prices have recovered some but have stagnated in the low $50s for WTI.

    I am mentioning this currency movement since it is negatively impacting my Canadian stocks that are priced in USDs.

    I will not be discussing in a blog my purchase yesterday of 10 ENB shares at $39.52 using a commission free trade and adopting the same buying strategy as my recent WMT and MDT purchases (ordinary shares price in CADs/ENB is priced in USDs). The price continued to slide after that purchase:

    Closing Price 10/20/17:
    $39.31-1.02 (-2.53%)

    Part of that decline was due to the CAD weakening in value. The other, somewhat higher, cause was a decline in the ordinary share price-or what I call the Double Whammy for vintage ENB owners:

    Enbridge Inc. (ENB.TO)
    C$49.62 -C$0.74 (-1.47%)
    At close: October 20

    The crude oil price rose yesterday. That was not the problem for this energy infrastructure company. There was no specific news that I could find yesterday that would explain the downdraft.

    Instead, I believe the weakness in several North American energy stocks was due to a warning made by Schlumberger and Baker Hughes that there was a slowdown in NA production investment.

    That may help crude oil prices near term as NA shale production moderates which could later lead to more production due to a higher price as supply/demand come more into balance.

    I did notice Friday that the BH rig count report did decline last week, but remains well up from year ago levels:

    There was a recent major weekly drop in U.S. production:

  9. I have published a new post: