Saturday, November 4, 2017

Observations and Sample of Recent Trades: HOPE, GJP, TD/ Tennessee Municipal Bonds Allocation as of 11/2/17


FOMC Statement 11/1/17: 

"Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions. Although the hurricanes caused a drop in payroll employment in September, the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters"

The Fed - Federal Reserve issues FOMC statement

Regional Fed Manufacturing Overview: October Update | Seeking Alpha

Fed more upbeat on economy as it holds rates steady - MarketWatch

ADP Private Sector Jobs Report for October = +235,000:

ADP National Employment Report | October 2017

ADP says 235,000 private-sector jobs added in October - MarketWatch

BLS Jobs Report for October= +261K; 4.1% unemployment rate:

U.S. adds 261,000 jobs in October in hurricane-inflated gain - MarketWatch 

The consensus expectation was for +325K. The BLS revised September from a -33K to +18K. Combining the revised September and October numbers the average monthly gain over that two month period was +139.5K. Average hourly earnings declined by $.01 after rising 12 cents in September. Over the past 12 months average hourly earnings have increased by 2.4%. 

The decline in the unemployment rate was caused primarily by a 765K plunge in the labor force that reduced the participation rate from 63.1% in September to 62.7% in October. 

The ISM Services PMI for October rose to 60.1%, a twelve year high. 

That is markedly higher number than the one from Markit which was reported at 55.3: ISM services index improves to 12-year high in October - 

Awaiting Trump's coal comeback, miners reject retraining: Reuters

Market Commentary

The U.S. Isn’t Prepared for the Next Recession - The Atlantic

Healthcare costs could spur the next recession - Business Insider (sapping consumer spending power on other items)

'Bumps' could be ahead for rally, but Nuveen reiterates bull case

Euphoria creeping into the market, that’s giving me déjà vu: Trader

The last recession officially ended in June 2009. The average age of an expansion cycle since WWII is 58.4 months or 4.87 years. 

I do not currently anticipate a recession starting before the 2018 second half. There are increasing signs of consumer distress, but nothing yet that suggests that a major pullback in consumer spending is just around the corner. (e.g. Total Household Debt Increases, Driven by Mortgage, Auto and Credit Card Debt - FEDERAL RESERVE BANK of NEW YORK


GOP's Tax Bill:

There will be major changes in this bill before it is put to a vote.  The Chairman of the House Ways and Mean Committee, 
Kevin Brady (R-TX), stated last Friday that he intends to offer substantive amendments.

The first such amendment was released on Saturday that reduces the meager value of the individual tax cuts by $89B over ten years. That money will be used next week to lower other taxes requested by Republican house members. 

"Rep. Kevin Brady, R-Texas, released a revised version of the bill that would impose a new, lower-inflation "chained CPI" adjustment for tax brackets immediately instead of in 2023. That means more income would be taxed at higher rates over time-and less generous tax cuts for individuals and families." House GOP quietly revises tax bill to tax income at higher rates over time - CBS News

One of the sneaky ways that the GOP's plan raises taxes for the middle class over time is to change the inflation measure from regular CPI to chained CPI which grows at a slower rate. In 2017 Some Tax Benefits Increase Slightly Due to Inflation Adjustments Others Are Unchanged | Internal Revenue Service That will escape the attention of your average Trump voter, probably all of them in fact. 

The bill will be marked up in that Committee over a four day period, where the members will vote on changes, and no further amendments will be allowed after the bill emerges from the Committee. I expect corporate interest groups will cause changes. It will be important to watch how the Committee raises revenues when agreeing to changes that lose tax revenue. We have already seen one good example. Raise individual tax obligations.   

I do not anticipate that this plan, when adopted, will have a long term material positive impact on the real economy. Any positive change will evaporate over time as certain provisions expire, interest rates rise, the federal debt obligation explodes, and cutbacks to social programs occur due to rapidly expanding government debt. This bill is not designed to help lower and middle class households who are the bedrock of a consumer led economy. 

The problem with the economy is NOT that rich people need even more money to trickle down to the middle class.

If I could make just two changes in this bill that would have an impact on the real economy, I would extend the $300 tax credit to 10 years from five ($600 for married couples filing jointly) and leave the estate tax law in its current form. Only the super rich pay any federal estate tax under current law given the huge exemptions. Estate Tax Exemption Projected To Top $11 Million Per Couple In 2018 Trump told an assemblage of True Believers in Indianapolis  that the abolition of the "death tax", intended for his benefit and numerous large GOP contributors who have paid good money for its elimination, was to save millions from paying this tax. Donald Trump's Pants on Fire claim about the estate tax, small businesses and farms | PolitiFact He was cheered profusely by the crowd, none of whom would likely ever have estates exceeding the exemption amount which is increased by the inflation rate. How many people pay the estate tax? | Tax Policy Center    

My next three changes would be to make no changes in inflation indexing, to index the child care credit to the currently used inflation measure, and to pay for the foregoing by repealing more corporate tax loopholes including the carried interest deduction that allows hedge fund managers to covert ordinary income into long term capital gains taxed at a lower rate. Those changes would stimulate the economy by helping the middle class keep more of their disposable income that can be spent, saved for later spending and/or pay down high cost debt.  Consequently, those modest changes will never pass muster with the republican politicians. 

The corporate tax cuts are not likely to produce anywhere near the wage gains claimed by the republicans. That is not how the system works in practice. 

I would call the GOP's tax plan as the GOP equivalent of Obama's poorly designed stimulus package that left the nation with a lot more debt in exchange for a short term stimulus and nothing permanent to show for the increase. American Recovery and Reinvestment Act of 2009 - Wikipedia That is what happens when a President allows Nancy Pelosi to draft the bill. 

The Democrats forgot in 2009 about what needed to be done to stimulate the economy. Many of the projects financed by FDR's New Deal are still in use (to locate structures in your geographic area, go to  Living New Deal | Still Working For America 

In other words, if the politicians are going to drastically increase the nation's debt, as the Democrats did in 2009 and the GOP wants to do now, the money needs to be directed toward infrastructure builds occurring over a long period that are necessary now and to put more money into the pockets of those who will spend the money. 

Tax reform that is neutral on tax revenues is also desirable, but the GOP's plan is likely to increase the debt by over $2 trillion in just ten years when taking into account added interest and others costs. 

Elimination of corporate loopholes while reducing corporate tax rates is also a laudable goal. The GOP's plan does eliminate a number of corporate welfare provisions.     

The GOP's bill is designed to front load some benefits in Trump's first term that will cram some future GDP growth into the next five years. The economy inherited by his successor will pay the price.  

Those provisions include the $300 tax credit and the immediate expensing of machinery and equipment, both of which expire at the end of five years. Temporary Expensing is a Budget Gimmick and a Bad Idea | Committee for a Responsible Federal Budget ("temporary expensing would likely accelerate economic growth in the first five years but slow growth in subsequent years."); Economic and Budgetary Impact of Temporary Expensing - Tax Foundation 

If temporary expensing is continued for another five years, the nation's debt would increase another $600B.

When the $300 credit expires in five years, and inflation indexing is changed to a slower rate than under current law, the typical family lucky enough to initially have a tax reduction will see a tax increase in the 5 to 10 year out window. 

The elimination of the estate tax alone will be more beneficial to the super rich than all of the provisions relating to lower and middle income households when looking at this bill over a 5 to 15 year period.  Paul Ryan's poster family for middle-class tax cuts would ultimately get a tax hike (increase of $500 by 2027 which assumed no change in inflation indexing until 2023 which was changed over the weekend to use starting in 2018 which will accelerate that projection); The sneaky ways Republicans would raise taxes on the middle class

I summarized the key provisions for individuals in a prior comment that can be found here.

Nine Things to Know about the House GOP Tax Plan | Tax Policy Center

The GOP's plan would add at least $1.5 trillion dollars to the budget deficit over 10 years, probably over $2 trillion when other costs are taken into account including an increase in interest expense, thereby making an increasingly bad fiscal situation far worse House Tax Plan May Add Over $2 Trillion to the Debt | Committee for a Responsible Federal Budget

Over time, and left unchanged, these changes will accelerate cuts to social programs that benefit lower and middle income taxpayers including Medicare. 

Trump and the GOP have made it plain in their budget proposals that they want to drastically cut social program spending while increasing defense spending. 

In no time, it will not matter what anyone wants, since deep cuts will have to be made. 

Letter Opposing the Senate Fiscal Year 2018 Budget Resolution: National Committe to Preserve Medicare and Social Security

House GOP Budget Cuts Programs Aiding Low- and Moderate-Income People by $2.9 Trillion Over Decade | Center on Budget and Policy Priorities

8 Ways the House Republicans’ Budget Will Harm Working Families

Trump releases budget hitting his own voters hardest - POLITICO 

House Tax Bill Delivers Tax Hike on Homeowners | (the National Association of Realtors estimates that 7 million homeowners in California would lose part of their mortgage interest deduction and that would cause a housing recession there and in other localized parts of the country as well. It is this organization that estimates that housing prices will sink 10% in the aggregate. $1M in SF might get you 650 square feet, where only 20% of the homes sold since July 2016 were priced at less than $1M)  

Republican tax reform plan slams middle class: National Association of Homebuilders

A crucial line in Trump's new tax plan will have a huge impact on the way you buy a home

Alimony tax break killed in GOP tax plan - Nov. 2, 2017

Under Trump’s tax plan, divorces are about to get a lot nastier - MarketWatch

Divorce penalty? Tax reform could shrink alimony for ex-spouses: USA Today

Republicans Propose Big Tax Cuts, But Target Popular Deductions : NPR

Republicans propose getting rid of tax break for student loan borrowers - MarketWatch

House Tax Bill Would Kill Medical Deductions - NBC News

How the GOP tax bill will impact middle-class and wealthy taxpayers: Morningstar 

The House Republican tax bill, explained - Vox

Trump, GOP tax-reform bill text: changes to individual brackets, deductions, corporate rate - Business Insider

Here Are the Big Tax Changes House Republicans Are Proposing - Bloomberg

Surprise! Trump Could Save Millions From GOP Tax Plan - Bloomberg

The National Federation of Independent Business Unable to Support Tax Bill in Current Form (“This bill leaves too many small businesses behind. We are concerned that the pass-through provision does not help most small businesses." (italics supplied) The pass through provision proposal does lower taxes for large real estate developers like Trump)

Taxpayers could lose out if these popular deductions disappear

Muni market blindsided by bond provisions in House GOP tax plan | Bond Buyer (the issue involves termination of tax free status for private activity and advance refundable municipal bonds issued after this year.) I currently own $10K in municipal bonds issued by a Nashville municipal agency, where the proceeds were then loaned to Vanderbilt University. Stocks, Bonds & Politics: Item # 1.F.  I would not venture a guess now on whether those bonds were still pay tax exempt interest when issued after the effective date of this provision. As noted in the tax matters section of that bond's prospectus, bond counsel opined that the interest paid by that bond would be tax free and not subject to the AMT rules under "current" law.

I would view the GOP's plan as benefiting mostly corporate executives whose compensation will rise and extend the pay gap with the corporation's workers, the super wealthy and their heirs, and well off individuals that own a lot of publicly traded stocks. 

There will be a positive jobs boost in 2018 according to several economists, but that could easily be negated by other factors that impact job growth including a recession that causes both business investment and consumer spending to slow down resulting in layoffs and higher unemployment. The debt would then skyrocket beyond current estimates as the government receives far less revenue due in part to the GOP's tax changes while spending on social safety net program accelerates.  


Rick Perry: The Relationship Between Rape and Fossil Fuels

Rick is our Energy Secretary. 

For those who did not understand on how the use of fossil fuels will cut down on rapes, let Rick elucidate on the issue:  

“But also from the standpoint of sexual assault when the lights are on, where you have light that shines, the righteousness, if you will, on those types of acts. So from the standpoint of how you really affect people’s lives, fossil fuel is going to play a role in that.”

Rick Perry claims fossil fuels can prevent rape in Africa | New York Post

I am learning a great deal about rape from the GOP's leaders. I learned from their Missouri Senate candidate, for example, that a woman's body can block pregnancy when the rape is legitimate. I am not sure that I entirely understood what Todd Aiken (R-MO) was saying here:  “If it’s a legitimate rape, the female body has ways to try to shut that whole thing down."

And, to learn about evolution, rather than looking at those nasty fossils and other scientific endeavors, we can all learn what really happened by visiting Kentucky's Creation Museum and see for ourselves Adam and Eve walking along side the dinosaurs. A. A. Gill on Kentucky's Creation Museum | Vanity FairCreation Museum-The New York TimesPaleontology and Creationism Meet but Don’t Mesh -

And, it goes without saying that climate science is a hoax perpetrated by China to hurt U.S. manufacturing. Let's give Donald a big cheer for helping us understand that one.  


Trump: Lying Works-Repeating Lies Works Even Better

Trump administration releases report finding 'no convincing alternative explanation' for climate change ("report affirms that climate change is driven almost entirely by human action, warns of potential sea level rise as high as 8 feet by the year 2100, and enumerates myriad climate-related damages across the United States that are already occurring due to 1.8 degrees Fahrenheit of global warming since 1900."); FullReport.pdf (477 pages) 

In a recent poll, only 8% of Trump voters believe that the numerous sexual misconduct allegations made against Trump are credible, notwithstanding Trump's admitting to such conduct on tape. Twelve women have come forward to make charges of sexual assault and sexual misconduct against Trump.  Full tape with lewd Donald Trump remarks (Access Hollywood) - YouTube 

Trump’s Lawyers Say Calling Women Liars Over Sexual Harassment Was Politics - Bloomberg

Trump called all of the women making sexual misconduct claims against him liars and one of them has sued Trump for defamation. Trump's lawyer, Marc Kasowitz, stated that Trump was well within his rights to call the women liars since his comments were “part of the expected fiery rhetoric, hyperbole and opinion that is squarely protected by the First Amendment.”

Facebook, Twitter, Google testify before Congress - Oct. 31, 2017 ("Twitter disclosed that it has identified 2,752 accounts linked to the Internet Research Agency. It found a total of 36,746 accounts that appeared to be associated with Russia, though not necessarily with the Internet Research Agency, which generated automated, election-related content.")

Facebook estimates 126 million people were served content from Russia-linked pages - Oct. 30, 2017

Sam Clovis’s really bad excuse for greenlighting a Trump campaign meeting with Russians - The Washington Post (Sam was Trump's National Campaign Co-Chairman. He had been nominated by Trump to be the chief scientist at the Agriculture, even though he was not a scientist. He had to withdraw after Mueller disclosed his involvement with Papadopoulous urging him on to contact the Russians regarding the stolen Hillary emails). 

Trump agriculture nominee Sam Clovis confirms he has no hard-science credentials, withdraws over ties to Russia probe - The Washington Post (The 2008 farm bill specifies that appointees to the position should be chosen “from among distinguished scientists with specialized training or significant experience in agricultural research, education, and economics,” given that the official is “responsible for the coordination of the research, education, and extension activities of the Department.” Clovis did have experience as a right wing radio talk show host in Iowa which qualifies him as a learned and experienced scientist among GOP partisans)

Timeline: George Papadopoulos tried to link Trump campaign with Russia: USA Today

Papadopoulos Repeatedly Represented Trump Campaign, Record Shows - NBC News

Trump Sang Russia’s Praises While Papadopoulos Sought Contacts: Bloomberg

How important was George Papadopoulos on Donald Trump's foreign-policy team? | PolitiFact

The repeated, incorrect claim that Russia obtained ‘20 percent of our uranium’ - The Washington Post

San Juan Mayor Carmen Yulin Cruz to Trump: You Can't Handle the Truth - NBC News

Hate Rising: White supremacy's rise in the U.S. - CBS News

False Statements on Russia -

Trump and Sessions Denied Knowing About Russian Contacts. Records Suggest Otherwise. - The New York Times

Trump wrongly says Manafort crimes came years before he joined the campaign | PolitiFact

Trump is of course unable to tell the truth about anything. 

He is without question the most dishonest President that the U.S. has ever had and is probably the most dishonest politician in our nation's history. 

Unfortunately for the nation's future, his success proves that lying works for U.S. politicians and being honest with the voters is just for saps and losers.  

Stocks, Bonds & Politics: The Road to Political Power: Lying Works/Recent Gold and Silver Sales (9/15/11 Post)


Trump and Senator Schumer (D-NY):

Schumer and the Diversity Visa Lottery -  

The Diversity Visa Lottery law was signed by Daddy Bush in 1990 and had bipartisan support

Schumer was a sponsor of the House version, along with several other Democrats and 7 Republicans: Final Vote Results for Roll Call 406 

Schumer was then in the House rather than the Senate. Trump blames Chuck Schumer for diversity visa program - CBS News ("Schumer voted in favor of the bill in the House, which passed 264-118 and passed the Senate overwhelmingly in a 89-8 vote.")

Initially, the purpose of the diversity visa program was to "help distant Irish and Italian relatives of those immigrants come to the United States and live permanently and legally." Is diversity visa program a 'Schumer beauty,' as Donald Trump says? | PolitiFact

Schumer tried to repeal this law in 2013, but was rebuffed by the republicans. 

Trump blamed Schumer and the Democrats for this law in 3 tweets, suggesting that they were responsible for the recent terrorist attack in NYC: 

(1) "The terrorist came into our country through what is called the "Diversity Visa Lottery Program," a Chuck Schumer beauty. I want merit based." 

(2) "Senator Chuck Schumer helping to import Europes problems" said Col.Tony Shaffer. We will stop this craziness!"; and 

(3) "We are fighting hard for Merit Based immigration, no more Democrat Lottery Systems. We must get MUCH tougher (and smarter)." 

Trump turned the NYC tragedy into own brand of political and partisan demagoguery. 

Trump said it was inappropriate after the Las Vegas shootings to discuss policy matters related to bump stocks that allowed the shooter to kill more people (59 dead and 546 wounded). 

The stunning difference between Trump's reaction to the Las Vegas shooting and the NYC attack: CNN

Trump's response to NYC attack in sharp contrast to Vegas massacre reaction - CBS News 

Trump could not stop talking about the diversity visa program after the NYC terror attack. 


Trumps Dislikes an Independent Judiciary with a Passion

Why? An independent judiciary stands a check to his authoritarian impulses. 

Like minded totalitarian leaders, whose mindset is on the same wavelength as Donald, will appreciate those statements and will likely use them in their propaganda directed at the U.S.  

Saipov has already been arraigned in court and will be convicted of multiple counts of first decree murder. What does Donald want to with him? Waterboard him on national TV or just hang him now on the White House lawn? 

Related: Experts: Trump Tweets Could Sabotage Prosecutors in Truck Attack - NBC News

Trump had this to say about the verdict handed down in the Sargeant Bowe Bergdahl desertion case: 

Trump has repeatedly stated that this individual needed to be shot. While Trump as an individual can express his opinions about verdicts, and I as a private citizen would criticize the lack of jail time, no decent and respectable President in a free society, subject to checks and balances, would publicly voice such opinions. His attacks on judges are and will be seen as attempts to influence the outcome of a trial and is consistent only with what authoritarian leaders do. 

In several recent tweets and statements, Trump demanded that the Justice Department investigate Hillary, his former opponent, for taking over the DNC which was clearly legal and the Uranium One transactions that Trump lies about repeatedly in order to distract attention away from his own problems. That is what an authoritarian leader would do as well. 

Statement Made by Trump 11/3/17: 

“I’m really not involved with the Justice Department. I’d like to let it run itself, but honestly, they should be looking at the Democrats. They should be looking at [John] Podesta and all of that dishonesty. They should be looking at a lot of things. And a lot of people are disappointed in the Justice Department, including me.”

Some of the tweets on this subject are as follows: 

I personally regard Trump's statements and actions outlined above to be even more evidence, when none is needed, that he is unfit to be President. Together with his firing of Comey, this kind of evidence, coming from Trump's own mouth, is relevant to an impeachment charge that Trump has violated his Oath of Office.  

When and if the Democrats gain control over the House in 2018, this subject area may be just a very small part of Articles of Impeachment that will be voted out of the Judiciary Committee which will inflame passions even more. 

Trump has and will continue to make disparaging comments about judges ("so called judge") and to make ad hominem attacks against judges based on false information and their ethnicity. Read this: How Trump defended criticism of judge for being 'Mexican' - CNN Donald much prefers to needlessly inflame passions and prejudices through demagoguery based on lies than to act in anything remotely resembling a responsible President. 

‘Very Frustrated’ Trump Becomes Top Critic of Law Enforcement - The New York Times: (Senator Corker (R-TN) “President Trump’s pressuring of the Justice Department and F.B.I. to pursue cases against his adversaries and calling for punishment before trials take place are totally inappropriate and not only undermine our justice system but erode the American people’s confidence in our institutions.”). I view Senator Corker's comment to be obvious and indisputable. 

Most republicans IMO see nothing wrong with Trump's comments. Some of that opinion is based on comments made by republicans when asked about the appropriateness of Trumps meddling in the judicial system.  


General Kelly Has Now Completed his Transition into a Trump Enabler and Clone

Notwithstanding a video that proved Kelly lied about what Congresswoman Wilson actually said at a FBI building dedication, Kelly stated that he stood by his comments, including calling Ms. Kelly an "empty barrel". 

Asked whether he would apologize for lying, Kelly said:  "Oh, no. No. Never. Well, I'll apologize if I need to. But for something like that, absolutely not. I stand by my comments." Kelly says he'll 'never' apologize for comments about Rep. Frederica Wilson - CNN  

John Kelly has finally made the transition to a Trump Clone with his remarks about the civil war and Robert E. Lee: Historians respond to John F. Kelly’s Civil War remarks: ‘Strange,’ ‘sad,’ ‘wrong’ - The Washington PostHistorians say John Kelly has the Civil War wrong - CNN 

Kelly praised Robert E. Lee and maintained that civil war could have been avoided if both sides had been willing to compromise. 

"I would tell you that Robert E. Lee was an honorable man. He was a man that gave up his country to fight for his state, which 150 years ago was more important than country. It was always loyalty to state first back in those days. Now it's different today. But the lack of an ability to compromise led to the Civil War, and men and women of good faith on both sides made their stand where their conscience had made them stand." (emphasis added)

Apparently, Mr. Kelly does not understand that the war was fought to end slavery. The declarations for secession made it clear that the reason was to continue slavery. 

Lincoln wanted to stop the expansion of slavery into the western territories, but General Kelly thinks that was something the North needed to allow in some way. 

What compromise could there be when the issue was the South's desire to not only continue slavery but to expand its territorial scope. 

There were historically several attempts to reach a compromise, starting with a provision in the Constitution, and none worked since the South wanted to keep and to expand slavery.  

Treating slaves as "Three-Fifths" of a person was a compromise, as were the Missouri Compromise and the Kansas–Nebraska Act

The Three-Fifths Compromise is found in Article 1, Section 2, Paragraph 3 of the U.S. Constitution: 

"Representatives and direct Taxes shall be apportioned among the several States which may be included within this Union, according to their respective Numbers, which shall be determined by adding to the whole Number of free Persons, including those bound to Service for a Term of Years, and excluding Indians not taxed, three fifths of all other Persons."

Article I Section 2

{That language was repealed by 14th Amendment, section 2, that was passed after the south was defeated. 

It is also a historical fallacy that loyalty to state came first in the Civil War era. 

Sure, it was for many southerners, but those who held that view had never adjusted to the fact that there was a United States of America governed by a Constitution that was the Supreme Law of the land, preferring instead to commit treason against the U.S. to defend slavery. 

It is interesting and now predictable to see General Kelly elevate the supporters of slavery and "states rights" to something that they never were, then or now.  

John Kelly Thinks The Civil War Was About 'Compromise' - YouTube



A. Sold 50 HOPE at $19-Used Commission Free Trade:

Profit Snapshot: +$169.97

Stocks, Bonds & Politics: ITEM 1.B. Bough 50 HOPE at $15.6

Quote: Hope Bancorp Inc.

HOPE Analyst Estimates

I discussed the third quarter earnings report in a recent comment that can be found here. 

2. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Bank of Baroda 1.2% CDs Maturing on 1/31/18 (3 month CD):

B. Bought 2 Bank of Asia 1.2% CDs Maturing on 2/13/18 (3 month CD):

C. Bought 2 Mainsource Bank 1.6% CDs (monthly interest) Maturing on 5/9/19:

3. Sold 100 of 150 GJP in Schwab Account at $22.95-Used Commission Free Trade:

GJP Position Before Pare:

I sold my highest cost lot using FIFO accounting.


Profit Snapshot: $114.28

I currently own 100 shares with the other 50 share lot held in my taxable IB account. I bought that lot at $20 and discussed the purchase in this SA Instablog:

Item # 4 Bought 50 Back Back 50 GJP at $20-Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of April 1, 2016 - South Gent | Seeking Alpha

That post contains a more detailed explanation of this security.

Quote: Synthetic Fixed-Income Securities Inc. for Dominion Resources Inc. Securities Series 2005-6 Floating Rate STRATS

Last Discussed: Stocks, Bonds & Politics: Item # 2.A. Bought 50 GJP at $21.35

GJP is a Synthetic Floater in the Trust Certificate legal form of ownership.

The owners of GJP are entitled to receive monthly interest payments at the greater of 3% or 1.15% over the U.S. 3 month T Bill rate on a $25 par value. This security has a maximum coupon of 8%. Prospectus The underlying security is a senior unsecured bond issued by Dominion Resources that matures in June 2035.  

Interest payments are made monthly.  

The 3% minimum coupon is increased when the three month T. Bill rate exceeds 1.85%. 

GJP Trading Profits To Date: +$824

Since the synthetic floaters are in the trust certificate form of legal ownership, I include round trip snapshots in this post: Stocks, Bonds & Politics: Trust Certificates: New Gateway Post

Trust Certificate Trading Profits to Date = +$30,142.43.

Most trust certificates are no longer traded, having been called by the owners of the call warrants that are attached to the TCs at their originations. 

4. Pared Toronto-Dominion

A. Sold Highest Cost 54 Shares at $56.97+ Used Commission Free Trade:

Profit Snapshot: +$718.78

Dividend Growth And Large Cap Valuation Strategies: Bought Toronto Dominion Bank (TD) - South Gent | Seeking Alpha (2/11/15 Post)

I sold my higher cost dividend shares in addition to a 50 share lot purchased in February 2015.

As a result, my average cost per share for the remaining 51+ shares was reduced to $40.99. 

I am continuing to reduce my allocation to stocks as the market bolts higher and higher.  

The recent decline in the CAD/USD exchange rate has caused the USD priced TD shares to underperform the ordinary shares traded in Toronto. 

TD Bank Group Reports Third Quarter 2017 Results

I recently received the quarterly dividend: 

15% of the dividend amount was withheld by Canada.  

The rules regarding the foreign dividend tax are complex. Generally, I will be able to recover the foreign dividend taxes withheld from my dividend payments through a dollar-for-dollar foreign tax credit. 

Claiming Foreign Taxes: Credit or Deduction? | Charles Schwab

Foreign Tax Credit | Internal Revenue Service

5. Long Term Bond Strategy- Tennessee Municipal Bonds

A. Bought 5 Maury County 2.25% GO Bonds  Maturing on 4/1/33


Credit Ratings:

Moody's at AA2 

Bought at a Total Cost of 87.84 (with $5 Brokerage Commission)

Current Tax Free Yield 2.56%
YTM at 3.259%

Optional Call at Par on or after 4/1/24

B. Bought 5 City of Knoxville 3% Water Revenue Bonds Maturing on 3/1/39


Credit Ratings:

Moody's at Aa1
S & P at AAA

Bought at a Total Cost of 95.777 (includes $10 brokerage commission)

Current Tax Free Yield at 3.13%
YTM at 3.276

Optional Call at Par on or After 7/1/2023


Tax Matters:  

C. Bought 5 Nashville/Davidson County 2.5% GO Bonds Maturing on 1/1/29


Bought at a Total Cost of 98.7 (includes $10 Schwab Commission)

Current Tax Free Yield at 2.533%
YTM at 2.635%

Optional Redemption: At Par on or after 1/1/2026


Tax Matters:


Tennessee Municipal Bond Allocation as of  11/2/17

Par Value Totals/ Cost Numbers / Estimated Annual Tax Free Income

Fidelity: $130K/$129.218K/ $3,712
Schwab:  $105K / $104.21K /$3,297
Vanguard: $30K /$28.833K / $900

Total Principal Amount: $265K

Total Cost: $262.26K
Total Tax Free Income: $7,909 (does not include the net profit of $2.74K realized by holding to maturity/double tax free for me until the Tennessee tax on dividends and interest is phased out completely after 2021)
Current Tax Free Yield Based on Cost = 3.016%

DisclaimerI am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.


  1. W. P. Carey Inc. (WPC) (own)
    $70.34 +$1.79 (+2.61%)
    At close: November 3

    Last Friday's pop was due to a better than expected third quarter earnings report.

    "AFFO of $148.2 million, or $1.37 per diluted share

    2017 AFFO guidance range raised and narrowed to $5.25 to $5.35 per diluted share

    As of September 30, 2017, the Company's Owned Real Estate portfolio consisted of 890 net lease properties, comprising 85.9 million square feet leased to 211 tenants, and two hotel operating properties. As of that date, the weighted-average lease term of the net lease portfolio was 9.5 years and the occupancy rate was 99.8%."

    I own just 30 shares bought at $59.45 last December:

  2. Hello southgent,

    I read with interest your thinking that in late 2018 there may well be a recession. You also noted some stress in the economy beginning. I was listening to Bloomberg radio this morning and a gentleman from Credit Suisse said that they had some type of recession dashboard with seven items that they looked at.

    I look for that online but was unable to find it. I did find from LPL research a recession watching index or dashboard

    I wondered what you thought were the major components to look for for an incipient recession, since the market anticipates these past several months. I understand this anticipation is is a blunt and unweildy predictor , but I wondered what your major points of interest would be pointing toward recession

    This may well be in your blog somewhere but I have been unable to find it.

    Thank you, Sam

    1. Sam: I only have an opinion now that I do not anticipate a recession starting between now through the first half of 2018. "I do not currently anticipate a recession starting before the 2018 second half."

      Economic cycles have not been repealed by GOP policies. The length of the expansion cycle is one factor in assessing the odds. The unusually slow recovery since the last recession ended and the low interest rates may have served to increase the length of the current expansion but downturns still remain inevitable. The possible severity of downturns is increasing due to the vast increases in debt worldwide. Debt has been the center of major economic disruptions since the 1997 Asian contagion.

      The problem with those historical recession prediction indicators is that interest rates, including a possible yield inversion, are no longer signaling the market's consensus view about economic activity due to CB intervention and manipulation.

      In the past a yield curve inversion would generally precede a recession. You could look at several long term charts comparing short term rates with the 10 year treasury. The lag between the inversion and the recession has been historically a variable item.

      Move the Left cursor all the way to the left
      Any number below zero indicates a yield curve inversion

      10-Year Treasury Constant Maturity Minus 2-Year Treasury

      10-Year Treasury Constant Maturity Minus 3-Month Treasury

      For the U.S., it is important to always keep in mind that our economy is consumer led, so looking at a variety of consumer data is important to reach a judgment.

      Consumer spending has been okay, but the increased spending has also been accompanied by a falling savings rate and increases in consumer debt.

      Wage gains have been muted. Debt levels are rising. Auto sales have stagnated. Delinquencies are rising.

      For me the negative trends have not yet reached the danger level but I view those indicators to be moving in the wrong direction in unison.

  3. TherapeuticsMD, Inc. (TXMD)
    $6.65 +$2.30 +52.87%

    I had a loss and now I have an unrealized gain on my Lotto ticket position of 30 shares.

    When I bought this Lotto Ticket, I discussed that an upcoming meeting on 11/3 with the FDA was going to be key. Would additional data be necessary for a NDA.

    Item # 7.A. A. Bought 30 TXMD at $5.19 ($1 Commission-IB Trading Account):

    The answer is no.

  4. Packaged Foods: The rally in this sector that started when Kellogg released better than expected earnings has ended and many of the stocks are now below where they were just prior to Kellogg's release. Kellogg's share price is still above:

    General Mills, Inc. (GIS)
    $50.23 -$1.11 (-2.16%)
    As of 1:59PM EST

    Campbell Soup Company (CPB)
    $ 45.41 -$1.07 (-2.30%)
    As of 1:59PM EST

    Kellogg Company (K)
    $60.25 -$1.71 (-2.76%)

    The price slope has been down all day and has accelerated some in the past hour.

    I have about 500 commission free trades that expire next August. I will use some of them to nibble as these stocks decline further. By nibble, I am referring to a series of 5 and 10 share buys using commission free shares. So it does not matter what I do at those share buys.


    VZ and T are getting it today due to Sprint and T Mobile abandoning their merger. The thinking is that price wars will accelerate without the merger. Price wars for wireless are going to continue regardless of whether there are 3 or 4 major players.

    AT&T Inc. (T)
    $32.725 -$0.575 (-1.727%)
    As of 2:06PM EST

    AT & T is already on my list for the small ball buys.

    Verizon Communications Inc. (VZ)
    As of 2:07PM EST.

    I own senior unsecured bonds issued by both VZ and T. I do not own VZ and my current position in T is miniscule.

    1. Hello southgent, I see that you are using free trades to slowly average down in the consumer Staples area. I never got your take on whether this is an attempt to trade these stocks because are so oversold or you are thinking that there will be consolidation and or a rise in price which you will hold on to.

      Certainly any stock can become a buggy whip company, but like I have said in the past, I can't understand why Pepsi has an above average price earnings ratio and sells the same type food as say Smuckers. I look at Smuckers and see their debt, but I also say they have moved into the petfood area which is 1/3 of their business now and I just can't see them not responding in a decent way to price pressure. I can't imagine these iconic brands disappearing.

      So I'm asking if this is just to trade or you think the stocks are truly undervalued

      Thanks a lot, Sam

    2. Sam: At the moment, I am only reasonably certain that I will continue to buy in 5 and 10 share lots, possibly more depending on how far the prices fall. I do not yet know whether the purchases are trades or longer term investments. My inclination is to say trades since only my Tennessee Municipal bond purchases are currently viewed as long term holdings. One reason is that they are hard to sell, and the other is that I am satisfied long term with the credit quality and tax free income.

      Like the box retailers, the market has become convinced that packaged food companies are moving toward fossil status.

      Many of them now have relatively low market caps and the ones who are not controlled by the descendants of the founder could be acquired now by hedge funds or larger companies.

      In the past, I would view a forward P/E of around 15 as a buy entry point for many of them. But the problem now is that even that ratio was dependent on solid and predictable 3% to 7% growth in both up and down economies. The predictability of steady positive earnings, even in the low single digits, now appears to be subject to reconsideration. And that is the problem when steady and predictable was the reason to pay up for slow growers.

      As to Smucker, I have not owned the stock for a long time (over 10+ years).

      While the P/E is low, you need to ask yourself why?

      The $152+ price from August 2016 was clearly too high, but a buyer at $34 in early 2009 might not care that much about the decline over the past year either.

      I noted that GS has a sell rating:

      I just glanced at this SA article (note the Y-O-Y sales decrease):

      Declining sales will lead over time to declining profits, though the E.P.S. number can continue to go higher through financial engineering for a time (e.g. borrow money and use the funds to buy back stock).

      Is that last report a harbinger of things to come?

      The J. M. Smucker Company Announces Fiscal 2018 First Quarter Results

  5. DISCA and VIAB: There was a small recovery in price today for these two stocks based on a report that Disney was or had been recently in talks to acquire most of Fox.

    The assets would have to exclude the Fox Network and its sports channels due to antitrust considerations. Disney owns ABC and ESPN.

    Twenty-First Century Fox, Inc. (FOXA)
    $27.45+2.48 (+9.93%)

    Discovery Communications, Inc. (DISCA)
    $17.10+0.58 (+3.51%)

    Viacom, Inc. (VIAB)
    $24.18 +0.91 (+3.91%)

    I own 50 VIAB, recently purchased at $25.35 (10/10) and have only been contemplating a similar or smaller $$ purchase of DISCA after its shellacking.

    Sumner Redstone, who is 92, controls Viacom.

    Eventually, I would anticipate that Discovery and Viacom will be sold to a larger media company (e.g. Disney or Comcast and possibly one of the new behemoths like Google, Facebook, Apple) There is no telling when that might happen. Viacom has the worst major studio in Paramount. Fox is doing well with 20th Century Fox.

  6. CVS Health Corporation (CVS)
    $66.80 -$2.45 (-3.54%)
    At close: November 6

    When asked about CVS in the past, usually by Sam, I have expressed a negative opinion.

    I view the company to be a high cost box retailer. Just compare prices with WMT, Kroger or online at Amazon.

    The pharmacy business is highly competitive and is primarily a high cost distribution business.

    Revenues in both of those business segments decreased Y-O-Y.

    The PBM business was the positive revenue generator but I have a negative opinion about the viability of that high cost distribution structure that IMO unnecessarily drives up prescription drug costs. Note the frequent use of the phrase "high cost".

    Amazon is a looming threat that will likely drive down costs and margins over time when and if it decides to enter the drug distribution business in a big way. It is conceivable that the entry will initially be through an acquisition.

    I do not own the stock. The current CVS price might be tempting as a short term trade, but my problem is that I have no feel yet for a temporary price bottom. The stock closed at $83.31 on 9/18/17 and has been in a pronounced downtrend since then.

    If you look at a five year chart, the price peaked in July 2015 at over $112.

    A decline from $112+ to $66+ over about 28 months, with the stock market and the economy doing just fine, certainly suggests some long term fundamental problems which are not getting better.

    Earnings Report:

  7. Dear South,
    Just to try to understand the rationale:

    Why would I prefer to buy a 1.6% CD maturing in 5/19 (like the mainsource cd you bot),
    when I can buy a treasure with the same maturity at >1.55%? Because of the 0.05% difference in yield (that's only 50 cents per $1000)? Because of the commissions (-- you can trade treasuries practically with no commission with some brokers)?

    Besides the difference in quality, if you pay state taxes, with the treasury you save these. Further, the treasury is more liquid, so you can easily sell it if you need to.

    So should I consider the CD or should I chose the treasury?


    1. The state tax issue is relevant to what I would buy. In my state, there is no tax on interest paid by CDs or treasuries. No state can tax interest on U.S. treasuries.

      The Mainsource Bank CD pays monthly which adds a slither to the YTM compared to treasuries that pay semi-annually. I prefer monthly interest.

      I do own a variety of short term treasuries but the CDs have been providing me with more interest income.

      The Fidelity bond book shows a 5/15/19 Treasury with a .875% coupon that can be bought for 99 in a two bond lot.

      CUSIP 912828R44

      That instrument was originally a 3 year note sold in May 2016. The yield at that price is 1.544% but that is YTM. The current yield is .884%. So the CD does have a higher current yield and pays more often but has no profit at maturity.

      The liquidity issue may be important to some investors but not to me given the short term nature of the CD purchases and the fact that I have multiple maturities most weeks.

      I have not been looking at treasuries for awhile. Since I was at that page, I bought 1 maturing in August 2018 that has a 1.4% yield. Treasury trades are commission free for all Fidelity customers.

      CUSIP 912828K82
      Description UNITED STATES TREAS NTS NOTE 1.00000% 08/15/2018
      Price Limit at 99.695
      Effective Yield 1.399564%
      Accrued Interest 2.31

      The banks are not keeping up as I mentioned in several earlier comments.

      The highest CD rate offered at Fidelity with a maturity in August 2018 is the Bank of China at 1.4% with interest paid at maturity.

  8. ... and if choosing a CD why not a higher yield gsbank cd:

    12 Month 1.64%
    18 Month 1.69%

    is gsbank too risky?

  9. The GS Bank is still FDIC insured. I would see no reason to go out another 6 months to capture .05% unless I am building a ladder and giving some weighting to 18 month CD while still preferring less than 12 months. The interest rate outlook comes into play in a non-ladder build portfolio. Are short terms rates going up next year; what is the yield spread between source of funds and the CD rate (material for me when looking at Schwab's MM rate of .1%) and how much time before rates are likely to be raise while earning the return of MM fund and forgoing the higher CD rate. I am talking about the interest rate risk issue that I call risk of lost opportunity.

    The ladder approach minimizes some of those issues.

    One tool for evaluating is the CME FED Watch tool.

    The Bond Ghouls see a 99% chance of at least a .25% hike in the FF rate this December. Of that amount there is an estimated 8.5% chance of a .5% hike currently:

    Once there is a hike of .25% to a 125-150 basis point range in December, the better than 50% odds predict only one .25% hike next year on or before the September 2018 meeting. At the moment, the odds on a rise to 150 to 175 is at 76.3% on or before 9/18. The market is predicting a slower move up than the FED's dot plot which sees 3 hikes next year.

  10. While short term interest rates continue to trend up, intermediate term rates started to trend back down starting on 10/30/17. The ten year treasury closed at a 2.46% yield on 10/26/17.

    The ten year is currently hovering near 2.31% and is down slightly in yield after rising in the morning.

    The contraction in the yield curve is a negative for regional banks and some of the air has been let out in the regional bank rally over the past few days.

    SPDR S&P Regional Banking ETF
    $55.585 -$1.405 -2.47%
    Last Updated: Nov 7, 2017 1:16 p.m. EST

    The packaged food companies started out weak again shortly after the bell. I noted, for example, that GIS broke $50 to the downside. Buyers emerged and that sector is one of the stronger ones today at the moment. I did add some GIS shares in my 5 or 10 lot buying spree bringing me up to 25 shares.

    General Mills Inc.
    $51.00 +$ 0.895 1.79%
    Last Updated: Nov 7, 2017 at 1:20 p.m. EST
    Day's range: $49.6500 - $50.99

  11. Macy's reports earnings tomorrow.

    This stock was over $45 around this time last year and sports over a 8% yield at the current price. Investors do not anticipate a continuation of the current rate. The price movement over the past several days suggest that the herd is expecting a disaster.

    Macy's, Inc. (M)
    $17.58-0.58 (-3.19%)
    As of 1:50PM EST

    This one was on my dumpster diving list so I am buying a few shares, currently at 25 shares with a 10 share bid outstanding below the price shown above, hoping that the pessimism is overdone and the results will be less disastrous than feared.

    I would note that KORS jumped yesterday on better than expected earnings:

    1. I have the report date wrong. Macy's reports before the bell on 11/9/17:

      A new 52 week low was set earlier today at $17.52 and there is no sign yet that there is going to be a bounce today off that low, rather than just a new lower 52 week low being set.

  12. RedHill Biopharma (RDHL):
    $5.42 -$2.08 (-27.73%)
    As of 9:46AM EST

    RDHL sold 4,090,909 ADR shares at $5.5:

    In this case, there is strong circumstantial evidence IMO that information related to this offering leaked prior to its public disclosure, judging by the price swoon and trade volume increase shortly before the announcement. The announcement was made after the 11/7 close.

    Nov 07, 2017 $7.50 332,700
    Nov 06, 2017 $8.30 183,200
    Nov 03, 2017 $8.79 21,100

    The foregoing strongly suggests trading on material, non-publicly available information about the share offering.

    I own 50 shares as part of Lotto Ticket basket strategy for small biotech stocks.

  13. Apple Hospitality REIT, Inc. (APLE)
    $19.25+0.19 (+1.00%)
    Day's Range 19.08 - 19.29
    52 Week Range 17.320 - 20.680
    As of 11:58AM EST

    So far at least, the market has responded favorable to APLE's third quarter report which was after the close on 11/6/17:

    The shares rose $.15 share yesterday on heavier than normal volume of 1.713M shares. Average volume is about 1M shares.

    I have small APLE positions in three accounts with my last trade being to sell 50 shares at $19.22:

    Item # 6.B.

    This REIT did manage RevPar growth of 1.3% during the quarter notwithstanding the two hurricanes that impacted some of its properties.

  14. I have published a new post: