Observations and Sample of Recent Trades: CPB, GE, SIR, VIAB

Economy: 

Goldman Sachs is predicting 4% real worldwide GDP growth in 2018. Goldman Sachs says 2017 was surprisingly good: CNBC 

This one chart sums up what’s happening to America’s ‘good’ jobs - MarketWatch

Goldman Sachs Sees Four 2018 Fed Rate Hikes as U.S. Growth Gains - Bloomberg

I am certainly positioned for four rate hikes in 2018. I doubt that there will be more than two. The Bond Bookies share that skepticism. The FED will increase the FF rate by .25% next month. That will create a new FF target range of 1.25% to 1.5%. 

As of 11/19/17, the following odds exist for hikes on or before 11/8/18.   

Countdown to FOMC: CME FedWatch Tool

As of last Friday, there was only a 83.6% chance of one rate increase next year. The probability of two increases was only 44.9%. 

Currently, I am predicting an 80%+ probability of two rate increases next year, which would take the range to 1.75% to 2% and a 30%-50% probability for 3. The odds of 4 would be less than 10% IMO. 
  
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Market Commentary: 

High-yield bond funds see 3rd largest weekly outflows on record- MarketWatch

Ed Yardeni: Commodities hold the key to where stocks are heading: CNBC

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Joint Committee on Taxation (JCT): Distribution Effects of GOP's Senate Tax Bill: 

The Secretary of the Treasury Mnuchin says the purpose of the tax cuts is to help the middle class. Republicans defend tax plan as a middle-class tax cut -The Washington Post 

Mnuchin and other republicans claim that the tax cuts for low and middle income taxpayers that are front loaded can be restored and enhanced several years from now when the U.S. deficits and debt are far worse than now. Deficits and the spiraling federal government debt only matter to republicans when the Democrats are in power. A House Republican explains why deficits don’t matter anymore-Vox; Republicans Rally Around Raising the Deficit-The Atlantic; Accounting ‘Gimmicks’ in G.O.P.’s Tax Overhaul Mask Higher Cost, Deficit Hawks Say-The New York Times; New Senate Tax Bill Hides Over $500 Billion of Gimmicks | Committee for a Responsible Federal Budget; The GOP’s New Tax Plan Proves Republicans Never Cared About the Federal Deficit 

The lower and middle income Trump supporters will never even contemplate the possibility that Donald is going to raise their taxes over time while initially giving them a token tax cut. The JCT estimates that just the inflation measure change will increase individual taxes by $134B through 2027. That change alone increases individual taxes by $.8B in 2018 but that amount accelerates every year thereafter to $31.5B by 2027. It is one of the stealth means used by republicans to increase individual taxes.    

JCT Estimates: Amended Senate Tax Bill Skewed to Top, Hurts Many Low- and Middle-Income Americans 

Who wins and who loses in the GOP Senate tax plan | PBS NewsHour

G.O.P. Senator Explodes at Colleague Who Says Tax Cuts Help the Rich | Vanity Fair (Senator Hatch lives in his own reality creations, unable to digest factual information inconsistent with the cliches that form his thoughts. This remarkable, angry exchange between senators unmasks the GOP’s tax-cut lies-The Washington Post)  

CBPP’s Analyses of the Senate Tax Plan 

Repealing The Estate Tax Could Allow Heirs Of The Very Wealthy To Avoid Tax On Capital Gains | Tax Policy Center

Distributional Analysis of the Tax Cuts and Jobs Act as Passed by the House Ways and Means Committee | Full Report | Tax Policy Center

The comments made by Senator Collins (R-Maine) over the weekend suggests that she is a no vote unless modifications are made to the Senate's "tax reform" bill. Collins Says Tax Plan Passed by Senate Committee Needs Work-Bloomberg Senator Johnson (R-WIS) has already stated that he is a no vote unless tax reductions for small businesses are increased in the bill. Republican Sen. Ron Johnson comes out against tax bill-CNN 

If the GOP manages to pass a tax bill similar to the ones now being considered in the Senate and passed in the House, then their plan is not going to last for long. The Democrats will repeal key parts of it that apply to wealthy individuals and to corporations when they return to power. 

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Trump: 

The WP has updated its compilation of false statements made by Trump since his inauguration. The number stands at 1,628 as of 11/13/17.  The Fact Checker’s tally of Trump’s false claims since becoming president - Washington Post

If the GOP is a conservative party as republicans claim, which is clearly not the case, then telling the truth and avoiding intentionally misleading statements are no longer conservative values.  

A Panama tower carries Trump's name and ties to organized crime-NBC News

Russian elite invested nearly $100 million in Trump buildings: Reuters

Trump to Lavar Ball: 'I should have left them in jail!'-CNN 

Roy Moore accuser speaks out on TODAY: He ‘seduced me’ at age 14 - TODAY.com

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1. GAVE UP ON GE:

Management and the Board of Directors have run this company into the ground. I do not any faith in their ability to turn the company back to a growth path. The new CEO has a plan, sort of, but then Jeff Immelt had plans too. 

At best, the shares are probably dead money with a current dividend insufficient to support the share price.  In my opinion, the shares are likely to drift lower as more investors abandon the stock after two major dividend slashes since 2008. Even after slashing the dividend by 50%, the payout ratio using free cash flow rather than earnings is high. The 2009 dividend slash was at 68%, going from a quarterly dividend of $.31 per share to $.10. GE Dividend History 

The shares could easily decline sufficiently in the next recession, and those will happen, that my realized profit on this last Fidelity lot would no longer exist if I had continued to hold this 124+ share lot.  

A. Sold Remaining 124+ Shares in Fidelity Account at $18.25-Used Commission Free Trade:

Profit Snapshot: +$774.4

The preceding snapshot includes two earlier transactions this year where I sold at higher prices. Stocks, Bonds & Politics: Item # 3.A. Sold 40 GE at $28.76 (7/12/17 Post); Stocks, Bonds & Politics: Item # 3.A. Sold 80 GE at $29.69 (4/18/17 Post) My instincts to sell GE shares proved to be right while my gut instinct to keep 124+ shares, my lowest cost shares, and to buy 30 more in a Roth IRA was less than optimal. 

The $774.4 number only includes those shares sold on 11/15/17 plus the fractional share liquidated on 11/17. 

I am keeping the 30 shares bought in a ROTH IRA account at $23.9: Stocks, Bonds & Politics: Item # 2 (9/25/17 Post) 

Trading Profits 2007 to Date: +$4,353.8 (see snapshots and links in prior linked post)


2. Sold 50 Viacom at $26.14-Used Commission Free Trade: 

This lot was recently purchased and declined shortly after my purchase by more than 10% before rising again to change a 10+% loss into a small gain. That is not the optimal result for a trade and at least suggests a lower entry point is achievable. 

The intra-day low on 11/16/17 was at $22.13. From that low to the next day's close, the shares appreciated 18.17%.   

I will likely try again with a lower entry point than my last purchase.

Closing Price Day of Trade (11/17/17): VIAB $26.15 +$2.46 10.38% 

Profit Snapshot: $39.52

Stocks, Bonds & Politics: Item # 7.A. Bought 50 VIAB at $25.35 (10/11/17 Post)

The pop last Friday in price was probably due to reports that both Disney and Verizon were interested in Fox's entertainment content assets. Viacom might be a default choice for one or both of those companies. 

However, there is no publicly available report, to my knowledge, indicating that Sumner Redstone is willing to sell Viacom. It may not be prudent to do so, given his poor physical and mental condition which raises competency and other issues, the estate tax rules now in place that includes the stepped up cost basis to the FMV at the DOD, and the possible increases in the exemption amounts starting next year.  

The market reacted negatively to the earnings report released after my purchase. Viacom Sinks 9%: Trouble Even ‘Teen Mom’ Can’t Fix - Barron's (11/16/17 Post, referring to the intra-day price of $22.4)

Viacom Reports Fourth Quarter and Full Year Growth

While adjusted E.P.S. was 9 cents below the consensus estimate of $.86, I was not expecting much and was not disappointed by the results. There were bright spots in the report. I was contemplating buying more shares after the earnings fueled decline on 11/16, but forgot about it. 

Revenues did increase by 3.2% to $3.32B, beating the consensus estimate of $3.23B. Adjusted E.P.S. did increase 12% over the prior year's fiscal 4th quarter. International revenues increased 24% to $593M and 20% on a constant currency basis. 

The problems include cord cutting and giving distributors lower rates in contract negotiations that lead to lower domestic revenues. Domestic advertising revenues were flat. Affiliate revenue decreased by 1%. 

Earnings Report Discussed at 

Viacom's profit and outlook disappoint, and its Paramount Pictures suffers another loss-LA Times

Viacom expects distributor revenue to drop in 2018; shares sink: Reuters

Viacom Sees Declining Fees from Cable Operators, Sinking Shares - TheStreet

Viacom Earnings: Three Reasons to Still Stay Tuned - Bloomberg

A negative development after I bought the 50 share lot was the collapse of a film financing agreement between Paramount and Huahua Media that resulted in  Viacom taking a $43M loss in the quarter. I would call Paramount a struggling film studio that needs significant financing assistance from third parties.

3.  Sold 50+ CPB at $49.73+ Using Commission Free Trade: 

History in this Account: 

Closing Price Day of Trade: CPB $49.72 +$1.40 +2.90% 

Profit Snapshot: +$43.21

I realized a loss on the first lot purchased at $51; and a profit on the 20 share lot purchased at $45.71+ and the fractional share bought in one dividend. 

Stocks, Bonds & Politics: Item # 6.A. Added 20 CPB at $45.72 (10/16/17 Post) 

Item #2: Bought Back 30 CPB at $51

The fractional share lot was purchased with a dividend within thirty days prior to selling. Even though the fractional share (.369) purchased with the dividend was sold profitably, the wash sale rule was nonetheless triggered, but only for that fractional share amount rather than the loss associated with the 30 share buy at $51. The result was to deny only a few cents of the loss connected to that 30 share lot.     

AAII: The American Association of Individual Investors (Wash Sale Rules)

I will probably try again when and if the price falls below my last purchase price which could happen with another poor earnings report. CPB is scheduled to report its fiscal 2018 first quarter results on 11/21/17. While it is certainly possible that CPB will report better than expected results, the odds are more in favor of another disappointing quarter. 

Why Campbell Soup’s Fiscal 1Q18 Earnings Could Fall - Market Realist

CPB is yet another falling knife that I am attempting to trade. 

The next ex dividend date is early in January 2018. Campbell Declares Quarterly Dividend 

On 11/9/17, UBS reduced its price target to $42 from $46 and maintained its sell rating.  

4. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Bought 1 Wells Fargo 2.4% CD (monthly interest) Maturing on 11/22/22 (5 year CD):

B. Bought 1 Capital One 2.15% CD (semi-annual interest) Maturing on 11/22/21 (4 year CD):

5. Short Term Bond/CD Ladder Basket Strategy: 

A. Bought 2 Pacific Premier Bank 1.4% CDs (monthly interest) Maturing on 8/29/18 (9 month CDs): 

Holding Company: Pacific Premier Bancorp Inc. (PPBI)

PPBI Analyst Estimates 

Pacific Premier Bancorp, Inc. Announces Third Quarter 2017 Results (Unaudited) 

B. Bought 1 Treasury 1.5% Coupon Maturing on 12/31/18: YTM at 1.52%

C. Bought 1 Wells Fargo 2% CD (monthly interest) Maturing on 11/23/2020 (3 year CD):

D. Bought 2 Treasury 1.5% Coupon Notes Maturing on 1/31/19: YTM = 1.525%

This bond was originally sold as a five year note back in January 2014. The purchase was made in a Vanguard account. That broker does not charge a commission for U.S. treasury trades.

E. Bought 1 Treasury 1% Coupon Maturing on 9/15/18-a Roth IRA Account: YTM =1.452%

F. Bought 1 Whitney Bank 1.2% CD Maturing on 2/14/18-A Roth IRA Account (3 month CD):

The source of funds for this purchase was my Vanguard settlement account which is the Vanguard Federal Money Market Fund that has a .11% expense ratio.

The SEC yield for that fund was 1.01% as of 11/8/17, slightly lower than the 1.14% rate paid by the Vanguard Prime Money Market Fund.

I will keep more funds available for trading in the later fund, but will infrequently move excess funds from the Federal MM fund to the Vanguard Prime MM fund just to receive an additional .13%.

I also own the Vanguard Tax-Exempt Money Market Fund that had a tax free yield of .82% as of 11/8/17 with a .15% expense ratio. At a 25% tax bracket, the Prime MM fund has a slightly higher after tax yield at a 1.14% taxable yield (.8625%) than the Vanguard Municipal MM fund at .82%.

While I do not pay a Tennessee tax on CD interest payments, I currently have to pay a 5% tax on MM fund distributions and at 4% next year. Interest payments from the treasury are not subject to state taxation, so a 1.5% current yield which is free from the Tennessee state tax would beat the 1.01% Vanguard Federal MM yield by .49% and by .53% on an after a Tennessee state tax adjustment at the 2018 tax rate of 4%.

G. Bought 1 Anheuser 1.9% SU Bond Maturing on 2/1/19- A Roth IRA Account:

I recently had 4 BUD SU bonds redeemed early by the issuer. Those bonds had a 1.25% coupon and a January 2018 maturity date. 

This 2019 BUD SU bond was bought in a Roth IRA.  

While I bought this 2019 BUD bond below par value, my $1 commission took the cost number 19 cents over par value. 

Finra Page: Bond Detail

Issuer:  Anheuser-Busch InBev S.A. ADR (BUD) 
Q3 2017  Earnings Call Transcript-Seeking Alpha
Anheuser-Busch InBev reports Third Quarter and Nine Months 2017 Results_EN.pdf

Credit Ratings: 

YTM at Total Cost of 100.019 = 1.883% (bought at 99.919)
Current yield at Total Cost: 1.9% 

For a bond maturing in about 13 months, a tax free yield of 1.88% is acceptable for me in a Roth IRA account where preservation of capital is the paramount objective.

The issuer may elect to redeem this bond early as well. The make whole provision allows for an optional redemption at par value plus accrued and unpaid interest, within three months of the maturity date.

6.  Equity REIT Common and Preferred Stock Basket Strategy:

A. Sold 50 SIR at $25.48-Used Commission Free Trade:

I received one quarterly dividend.

Profit Snapshot: +$126.48

Stocks, Bonds & Politics: Item # 6.A. Bought 50 SIR at $22.95  (9/11/17 Post)

As I discussed in that post, there are a lot things to dislike about this REIT, so any purchase is at the outset intended to be a trade and a dividend capture. The main attraction is the dividend yield. The current quarterly rate is $.51 per share. Select Income REIT (SIR) Dividend History

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.