Thursday, November 30, 2017

Observations and Sample of Recent Trades: COTY, DIR.UN:CA, FNB, VEIRX, VOD

Economy:

4th quarter Real GDP Forecasts


GDPNow - Federal Reserve Bank of Atlanta at 3.4% as of 11/22/17


FEDERAL RESERVE BANK of NEW YORK at 3.7% as of 11/24/17


3rd Quarter GDP


Third-quarter GDP raised to 3.3% to mark fastest U.S. economic growth in three years - MarketWatch


Markit continues to report lower numbers in its U.S. PMI indexes for services and manufacturing compared to the ISM reports. The flash estimates for November show declines from October. The services PMI declined to 54.7 from 55.3 in October. The manufacturing PMI declined to 53.8 from 54.6. 


Fed’s Beige Book says inflation pressures have strengthened-MarketWatch


The Fed Beige Book- November 29, 2017 ("Price pressures have strengthened since the last report. Most Districts reported modest to moderate growth in selling prices and moderate increases in non-labor input costs. In particular, construction-material costs rose in most regions, with many Districts citing increased lumber costs and/or increases in demand for materials due to hurricane rebuilding efforts. Residential real estate prices generally increased as well. There were also reports of increases in costs in the transportation sector. Additionally, several Districts noted input cost increases in manufacturing. In many cases, these increases in transportation and manufacturing were passed through to consumers. Fuel prices also rose, with multiple Districts reporting upward pressure on oil and natural gas prices. However, agricultural price pressures remain mixed.")


The Fed - The Potential Increase in Corporate Debt Interest Rate Payments from Changes in the Federal Funds Rate


FRB: Charge-Off and Delinquency Rates on Loans and Leases at Commercial Banks


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Commentary


Goldman says highest valuations since 1900 leave investors in for a world of hurt - MarketWatch
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Infamous Stringdusters Band:


My oldest nephew is a member.  Their album "Laws of Gravity" is up for a 2018 Grammy: 




Infamous Stringdusters - Laws of Gravity - Amazon.com Music

The Infamous Stringdusters | "Gravity" | Laws Of Gravity - YouTube

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Trump


Senate GOP tax bill hurts the poor more than originally thought, CBO finds - The Washington PostSenate GOP tax bill would hit lower-income Americans most: CBO report: CNBC ("In 2019, all income groups under $30,000 would have a bigger burden under the bill, the CBO projected."); 
Poor Americans would lose billions under Senate GOP tax bill - Nov. 27, 2017


Reconciliation Recommendations of the Senate Committee on Finance | Congressional Budget Office


Senators Scramble to Advance Tax Bill That Increasingly Rewards Wealthy - The New York Times


Trump: "I feel I'm an honest person" - CBS News


Trump Says Access Hollywood Tape Where President Boasts of Grabbing Women 'By the Pussy' Is Fake: Newsweek-'Access Hollywood' fires back at Trump: 'The tape is very real'


I have concluded beyond any reasonable doubt that Trump enjoys lying as a means of  manipulating those who are easily manipulated with false statements and outright lies.  


Of course Donald is supporting Roy Moore, two peas from the same pod. Why Trump Stands by Roy Moore, Even as It Fractures His Party-The New York Times  

Vietnamese Blogger Gets 7 Years in Jail for Reporting on Toxic Spill - The New York Times (the reports were accurate) Another blogger was sentenced to 10 years for accurately reporting facts about the fish kill associated with the toxic spill.  Donald would like to see the same results IMO for those who dare challenge his reality creations. He only needs the authoritarian power that he so craves. 

Trump calls Warren 'Pocahontas' at event honoring Native Americans - NBC News (Just another example of Trump acting in an inappropriate manner. He just had to slam Senator Warren at a ceremony honoring Navajo indians who serve in WWII as code talkers); Families of Navajo Code Talkers decry Trump's "Pocahontas" jab - CBS NewsLaura Ingraham plays racist ‘war whoops’ to defend Trump’s ‘Pocahontas’ slur and insult Navajo Code Talkers 


It is also noteworthy that the ceremony occurred with a portrait of President Andrew Jackson glaring down out the Navajos, a President remembered for the Indian Removal Act of 1830 that resulted in the Trail of Tears.




In just another example of previously unimaginable and pathetic leadership by a U.S. President, Trump went out of his way to slam Schumer and Pelosi with false statements a few hours prior to a scheduled meeting to avoid the looming government shutdown: 



Schumer and Pelosi canceled the meeting. Pelosi and Schumer pull out of meeting Why inflame needlessly the Democrats that may be needed to pass legislation? What a jerk. 

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More Trump Attacks on the Media


Trump spent most of his speech at Phoenix claiming that news organizations, other than Fox and Friends, were dishonest. He also regurgitated an edited and distorted version of his remarks about the Charlottesville Nazi March. Trump’s 2017 Phoenix, Arizona Rally Full Speech Transcript | Time (the crowd cheered "CNN Suck, CNN Sucks, CNN Sucks" and booed of course when Trump launched into an attack on the NYT). 


Any news organization that contradicts Trump's lies with facts is spreading Fake News in Donald's warped worldview. Those who voted for Donald overwhelming believe that he is telling the truth when he rarely does so. They inhabit the reality creation bubble that Donald has created for them, a world filled with cliches and alternate facts and where accurate information is never allowed entry.


After returning from the Thanksgiving holiday, Donald published two tweets last Monday about the Lying Press or Lugenpresse, a term used by the Nazi's for any media outlet who criticized Hitler: The ugly history of ‘Lügenpresse,’ a Nazi slur shouted at a Trump rally - The Washington Post




Donald continued his assault on the Free Press yesterday: 







"Check out Andy Lack's past" says Donald, shortly after mentioning the firing of Matt Lauer for alleged inappropriate sexual conduct. Is he accusing Andrew Lack, who is the Chairman of NBC and MSNBC news, of sexual misconduct without offering any information to support that accusation?  


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Trump Suggests that Joe Scarborough May Have Murdered a Staffer:


In one of the tweets above, Donald asks whether NBC will terminate Joe Scarborough, a former GOP Congressman who has a morning talk program on CNBC, based on the unsolved mystery that took place in Florida years ago which in Trump's view needs to be investigated. 


Donald Trump, Joe Scarborough and the 'unsolved mystery' that isn't - The Washington Post (the death was investigated and the authorities concluded that the staffer suffered an irregular heart rhythm that caused a fall)


Trump has called Scarborough, a former GOP congressman, "Psycho Joe" and his soon to be wife "low IQ Crazy Mike" who bleeds from her facial lift. 


Donald J. Trump on Twitter: "I heard poorly rated @Morning_Joe speaks badly of me (don't watch anymore). Then how come low I.Q. Crazy Mika, along with Psycho Joe, came.."


Donald J. Trump on Twitter: "...to Mar-a-Lago 3 nights in a row around New Year's Eve, and insisted on joining me. She was bleeding badly from a face-lift. I said no!" 


Brzezinski: Trump's Scarborough tweet 'crossed another deeply disturbing line' | TheHill


Scarborough's real crime is that he has criticized Donald.  


Donald Trump is a madman - NY Daily News


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Trump Repeats Lie That He Will Lose a Fortune When the GOP Passes "Tax Reform"


Trump repeated his lie yesterday that he will not benefit from the GOP's tax plan tailored made to benefit him: “This is going to cost me a fortune, this thing, believe me This is not good for me." Trump wrongly says he won't benefit from GOP tax plan - NBC News


Donald could release his tax returns for examination, like other Presidential candidates, but he has something to hide. 


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Possibly the Koch brothers can buy CNN and make it into a beacon of the Gospel According To Trump. Can Time Inc. Survive the Kochs? | The New Yorker


Collusion: Secret Meetings, Dirty Money, and How Russia Helped Donald Trump Win-Amazon.com: Books


FreedomWatch sues to remove Mueller (run by Larry Klayman who is profiled here: Larry Klayman | Southern Poverty Law Center)


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Trump Re-Tweets Inflammatory Videos about Muslims:


The videos were originally posted by Jayda Fransen, the deputy leader of Britain First, a far right and ultra-nationalist group. Fransen was found guilty in November 2016 of aggravated harassment of a woman wearing a hijab who 
was simply walking with her children. 



Donald Trump retweets Britain First: What is the truth behind anti-Islam tweets shared by the President? | The Independent 

Fact check: Anti-Muslim videos retweeted by Trump misrepresent what happened - Chicago Tribune 


WH defends Trump: Doesn't matter if anti-Muslim videos are real - YouTube That's right, it does not matter to Donald whether they are real, or have been taken out of context or misrepresented by a Muslim hating far right White Nationalist group. What matters to Donald is that he stoking hatred of Muslims and needlessly stoking divisions among the American people, while keeping himself at the center of everyone's attention.  


Who is Britain First's Jayda Fransen, the U.K. Far-Right Anti-Islam Leader Trump Retweeted?: Newsweek


Trump Shares Inflammatory Anti-Muslim Videos, and Britain’s Leader Condemns Them - The New York Times


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Trump Settled Lawsuit for $1.4M That Charged Him with Hiring Undocumented Workers


Trump had hired a group of 200 undocumented Polish workers to demolish a building to make way for what is now known as Trump Tower. Those workers were paid less than 1/2 of the union wage (if they got paid at all), worked 12 hour shifts, and were given inadequate safety equipment.  


Donald Trump Paid $1.4 Million Over Undocumented Workers | Time


The settlement was put under seal by the court, but Time Magazine convinced the court to unseal the settlement documents in the public interest. Trump opposed the request. The settlement documents are reproduced in the Time article. 


Trump Paid Over $1 Million in Labor Settlement, Documents Reveal - The New York Times


Trump has a history of refusing to pay those who have provided labor and materials for his real estate projects. USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills: USA Today His approach is to use litigation to brow beat workers in accepting less than what is owed by him. 


Exclusive: Trump's 3,500 lawsuits unprecedented for a presidential nominee: USA Today 


After six Trump companies declared bankruptcy, stiffing bondholders and other lenders, Trump created his own reality of a successful businessman and then sold that creation to a gullible public. His business morphed into one where he licenses his name for large sums of money and consequently avoids the risks that resulted in six bankruptcies. 


Yep, Donald Trump's companies have declared bankruptcy...more than four times | PolitiFact


Donald Trump's Real Secret To Riches: Create A Brand And License It: Forbes


How Trump has made millions by selling his name - Washington Post


Donald Trump's Name is Everywhere -- But What Does He Actually Own? -- The Motley Fool


Donald has no redeeming positive personality traits, only clearly identifiable and major negative ones.


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Macy's


Macy's has offered to purchase up to $400M of its higher cost debt. 


Macy’s, Inc. Announces Debt Tender Offer  


Included in the tender, at priority level 2, is the 7.75% SU bond that I own which was originally issued by May Department stores. 




FINRA Page: Bonds Detail

Prospectus
Item # 2 Bought 1 Macy's Bond Maturing in 2030 @ 99.5

There is currently only $18.2+M in principal amount outstanding out of the original $200M. The offer is $1,128.22 for $1,000 in principal amount. 


I will not tender and will simply wait for Macy's to redeem whatever is left under the make whole provision in the prospectus:   


I recently bought a few shares of common stock and have already sold my highest cost lot. Item #2.C. Bought 35 shares of Macy's at average cost per share of $18.15 (11/9/17 Post)Item # 3.C. Sold 10 M at $20.3 (11/13/17 Post)

Closing M Price Yesterday: M $23.98 +$1.81 8.16% : Macy's Inc 


Macy's Effective Tax Rates: 


2017 Third Quarter: 10-Q at page 23 



2016 and 2015 Effective Tax Rates: 2016 10-K at page 26 

Generally, a corporate tax cut from 35% to 20% will significantly benefit most U.S. retailers and banks. The effective tax rates can be found in the 10-K and 10-Q filings.  


Tax Rates by Sectors


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EPR Properties: Preferred Stocks:


EPR Properties (EPR) recently sold a 5.75% cumulative equity preferred stock. Prospectus The proceeds will be used "to redeem all of its outstanding 6.625% Series F preferred shares (liquidation preference of $25.00 per share) at an aggregate redemption price equal to the aggregate liquidation preference of $125 million, plus all accrued and unpaid dividends on the Series F Preferred Shares, up to, but not including, the redemption date."


A notice of redemption has been sent by EPR, with an effective date of 12/21/17: EPR Properties Announces Redemption of 6.625% Series F Cumulative Redeemable Preferred Shares ("The Series F Preferred Shares will be redeemed at a redemption price of $25.00 per share, plus $0.299045 per share, the amount equal to all accumulated and unpaid dividends up to, but not including, the Redemption Date.")

I currently own 50 shares. South Gent's Comment Blog # 7: Bought 50 EPRPRF at $24.95 (12/12/16 Comment) 


I previously sold in 50 shares that had been bought at $22.5Item # 7 Sold ROTH IRA: 50 EPRPRF at $24.65, (6/28/2014 Post) 


I also own 1 EPR 4.5% SU bond maturing on 4/1/25: Stocks, Bonds & Politics: Item # 1.B. 


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1. Small Ball

A.  Sold 51+ VOD at $30.21:


Profit Snapshot: +$40.75


Stocks, Bonds & Politics: Item 1.A. Bought 50 VOD at $29.13 (6/17/17 Post)

Vodafone Group PLC ADR  (VOD)

Vodafone Group PLC Stock Quote (U.K.: London) 

This was a successful dividend capture.


The stock went ex dividend shortly after my purchase. The dividend rate was $1.12336 per share.


History:



The U.K. did not withhold a dividend tax, which is normal. I did have to pay the ADR custodian a $1 fee out of the dividend however. 

I made a slight profit on the 1.93 shares bought with the dividend, which is always a plus, since it raises my effective dividend yield.


Note that the round trip commission was $14. This trade occurred in my Vanguard taxable account which is currently my highest cost brokerage account.


Given the higher brokerage commission charged by Vanguard, I am going to use that account more for bond, Vanguard Mutual Fund and Vanguard ETF purchases, and less for individual stock purchases. 


Treasuries, Vanguard Mutual Funds, and Vanguard ETFs can be bought commission free. Corporate and municipal bond purchases are $2 per bond or $1 higher than charged by Fidelity and IB.


I am not likely to be buying stock funds anytime soon.


I may start trading again the Vanguard stock ETFs, but would like to see a major downdraft in prices even before buying small lots.


Vodafone did report better than expected earnings for the third quarter. Vodafone announces results for the six months ended 30 September 2017


I own several VOD senior unsecured bonds.  


1.5% Maturing on 2/19/18

2.5% Maturing on 9/26/22
2.95% Maturing on 2/19/23

B. Bought 10 COTY shares at $16.94 and 10 at $16.78:




Quote: Coty Inc. Cl A (COTY) 

COTY Analyst Estimates (E.P.S. Consensus at $.68 this F/Y and $.95 for the next F/Y)
Company Website: Coty | A Global Beauty Leader
Our Brands | Coty

COTY manufactures beauty and skin care products, fragrances and color cosmetics. The company is headquartered in NYC. 


The stock is currently out-of-favor. A three year stock chart has a downtrend starting in June 2015 when the stock price was over $32 per share. Coty Interactive Chart I do not see anything in that 3 year chart that suggests-yet-that the downtrend has run its course. There has been a mild bounce starting in late October 2017 from the $14.3 area. 


The last earnings report gave the stock a lift. Coty's stock soars after profit beats and revenue rises in line with expectations-MarketWatch


Coty Inc. Reports First Quarter Fiscal 2018 Results

10-Q for the Q/E 9/30/17

There is some dividend support. COTY is currently paying a quarterly dividend of $.125 per share or $.5 annually. Coty Inc. Declares Quarterly Dividend. At a TC per share of $16.94, the dividend yield is about 2.95%.


The ex dividend date was yesterday (11/29/17), shortly after my two 10 lot purchases.  


COTY joined the S & P 500 last September.


Last October, COTY acquired Procter and Gamble's "global fine fragrances, salon professional, cosmetics and retail hair color businesses, along with select hair styling brands". Procter & Gamble Completes Transfer of Specialty Beauty Business to Coty


Consideration for Purchase:




Sourced from Page 10 of 10-Q


Coty Inc. Announces 82% Dividend Increase and Transition to Quarterly Dividend Payout (11/9/16 Press Release)


CODY SEC Filings


I will average down in 10-20 share lots up to 50 shares using commission free trades, but will not average up.


C. Added 10 FNB at $13.04-Used Commission Free Trade


REGIONAL BANK BASKET STRATEGY GATEWAY POST




The stock is ex dividend today (11/30/17). FNB Stock Price


This purchase was an average down from my recent 50 share purchase: Stocks, Bonds & Politics: Item # 4.B. Bought Back 50 FNB at $13.59-Used Commission Free Trade In Item # 4.A. to the same post, I discussed selling 100 FNB at $13.94 in another taxable account, realizing a $137.21 gain. I do not have any commission free trades in that satellite taxable account.


FNB's Effective Tax Rate Information: 

Sourced Page 72 10-Q 

Annual Effective Tax Information: Page 56 Form 10-K




FNB Trading Profits to Date: $1,025.98 

I have nothing further to add to my recent discussion linked above.


2. Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:


A. Added 100 Units DIR.UN:CA at C$8.75 (averaged up in IB account)




Quote: Dream Industrial Real Estate Investment Trust (Canada: Toronto)


Website: Dream Industrial REIT


I currently own 1000 units. The proper terms are units rather than shares and distributions rather than dividends. 


USD Priced Grey Market Shares: Dream Industrial Real Estate Investment Trust  (DREUF)(limit orders, set after converting ordinary shares priced in CADs into USD,  have to be used. The U.S. Grey Market is dark and liquidity is thin. Schwab is my best broker to use for Grey Market purchases of Canadian stocks since the price displayed is already converted into USDs and there are no extra fees/commissions associated with the trade).


Dividends: As with other Canadian REITs, this one makes monthly distributions. 


The current penny rate is C$.05833 or C$.70 annually. At that rate, the yield is about 8% at a TC of C$8.75 per share. Distributions 


Properties: As of 9/30/2017, the company owns 212 light industrial properties located in Canada (with one exception) containing 16.1M square feet of leasable area. Occupancy was at 96.7%.  


The company recently completed its first acquisition in the U.S., a "717,000 sq. ft. Nissan distribution center in Nashville, Tennessee for $60.9 million. This represents a going in capitalization rate of 6.3% and an average capitalization rate of 6.5% over the remaining lease term of 8.5 years. "


Nashville is strategically located as a distribution hub, both geographically and with multiple transportation links including interstates, rail and waterways. Nashville - Google Maps (multiple interstate highway convergences in all directions; Cumberland River; CSX railroad hub as noted in this post: Bought:  100 CSX at $26.33-Item # 5 11/23/13 Post)   


Dream Industrial REIT Announces First U.S. Asset Acquisition and Updates Strategy to Increase Unitholder Value With Acquisitions and Developments of Unique Properties (7/24/17 Release)


Property ListDream.pdf


Recent Earnings Report:  


Dream Industrial REIT Delivers Strong Q3 2017 Results, 96.7% Occupancy and 81.8% Tenant Retention Ratio



3. Intermediate Term Bond/CD Ladder Basket Strategy:


A. Added 1 Dominion Energy 2.75% SU Bond Maturing on 9/15/22:


This brings me up to 3 bonds.


Issuer: Dominion Energy Inc. (D)

D Analyst Estimates
2017 Third Quarter Earnings Release
10-Q for the Q/E 9/30/17

FINRA Page: Bonds Detail (prospectus linked)




Fitch at BBB+ Fitch Rates Dominion Resources Senior Notes 'BBB+'


Bought at a Total Cost of 99.974

YTM at Total Cost: 2.755%
Current Yield at TC: 2.7507%

4.  Short Term Bond/CD Ladder Basket Strategy

A. Bought 1 Bridgewater Bank 1.75% CD (monthly interest) Maturing on 5/15/2020 (30 month CD)


This is a small privately owned bank headquartered in Bloomington, Minnesota.  

FDIC financial information: 


I do not see anything that would currently cause me concerns. 

As of 6/30/17, Bridgewater had a 5 star rating from Bankrate: Bridgewater Bank Bank Reviews and Ratings - Bankrate.com


B. Added 2 Stanley, Black & Decker 1.622% Junior Bonds Maturing on 11/17/18:

I now own 4 bonds. Each purchase was a 1 bond lot. The first bond was bought last January and the second in June 2017. All 4 bonds have been bought at a total cost per bond at below par value.


Issuer:  Stanley Black & Decker Inc. (SWK)

SWK Analyst Estimates

FINRA Page: Bond Detail


Credit Ratings:

Moody's at Baa2
Moody's assigns Baa2 rating to Stanley Black & Decker's subordinated notes
S & P at A -

Bought 1 in IB Account:




Bought at a Total Cost of 99.786

YTM Then at 1.838%
Current Yield at 1.6255%

Bought 1 in Fidelity Account:




Bought at a Total Cost of 99.754

YTM then at 1.87%
Current yield at 1.6255%

Fidelity had a slightly better price.


C.  Bought 1 Bank West SF 1.45% CD Maturing on 8/21/18 (9 month CD):




D. Bought 1 ConnectOne Bank 2% CD (monthly interest) Maturing on 11/30/20 (3 year CD):




Holding Company: ConnectOne Bancorp Inc. (CNOB) 

This bank has a 4 star rating from Bankrate based on date through 6/30/17: ConnectOne Bank Bank Reviews and Ratings 

E. Bought 2 Compass Bank 1.45% CDs Maturing on 8/24/18 (9 month CDs)


As of 6/30/17, this bank has a 3 star rating from Bankrate: Compass Bank Bank Reviews and Ratings 

The holding company for Compass Bank is wholly owned by Banco Bilbao Vizcaya Argentaria S.A. 

I own 1 Compass Bank junior bond with a $1K par value: 


5. Sold $1,000 of the Vanguard Equity Income Fund-Admiral Class (VEIRX) at $77.81 Yesterday:  


I am selling $1k of this fund whenever the value goes over $51K. 

I last discussed selling $1K here: Item # 8 (10/11/2017 Post) 

I am no longer reinvesting the dividend. 

The fund is currently ranked at 5 stars by Morningstar: VEIRX Vanguard Equity-Income Admiral Fund 

I started this controlled burn last year with $3K redemptions that were not tied to increases in the fund's value. In February, I started $1K withdrawals that required a $1+K increase in value:   

2016: 


2017:    

Current Position: 

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. 

16 comments:

  1. The Stock Jocks are now certain that "tax reform" will be enacted into law.

    I elected to sell my shares bought with dividends in my Vanguard Capital Opportunity Fund since I first made an investment in 2013. The total number acquired in that manner was only $13+ shares. The shares closed at $68.46 yesterday. It looks like a close above $70 is reasonable based on the action so far today.

    Dow Jones Industrial Average
    24,279.23+338.55 (+1.41%)
    As of 12:59PM EST.

    S&P 500
    2,653.26+27.19 (+1.04%)
    As of 12:59PM EST


    Depending on the closing price today, those shares will generate somewhere close to a $300 profit. I will have a snapshot in my next post.

    I am keeping my initial $3K purchase made at $38.45 on 4/5/13 and 4 subsequent $250 purchases with the last two of those buys made on 2/19/16 at $46.22 and at $48.44 on 1/7/16.

    This fund is closed to new investors so I am probably done harvesting profits. I am no longer reinvesting the dividend which is a way to harvest profits in addition to selling shares.

    Vanguard Capital Opportunity Fund Investor Shares (VHCOX)
    https://personal.vanguard.com/us/funds/snapshot?FundId=0111&FundIntExt=INT&ps_disable_redirect=true#tab=1

    ReplyDelete
  2. The Senate "tax reform" bill will not be voted on this evening, but possibly tomorrow at the earliest.

    McConnell is still trying to win over a few reluctant Senators including Corker who said today that the individual side of the bill needs to be scraped.

    The GOP is falsely selling this bill as a middle class tax cut and many middle class voters will accept that the entire purpose of this bill is to help them which is of course a crock.

    Three holdouts are the last remaining republican Senators who are concerned about the budget deficits: Lankford (OK); Corker (R-TN) and Flake (R-AZ).

    Trump and the Senate's leadership have no pull with Corker and Flake who both announced that they will not seek reelection in 2018.

    Two Senator, Johnson (R-WIS) and Daines (R-Montana), wants better tax breaks for small business. They are more likely to be won over with concessions IMO.

    Lastly, Collins (R-MA) is unhappy about several provisions including the Senate's complete repeal of the entire state tax deduction including both income and property taxes.

    https://www.politico.com/story/2017/11/30/mccain-to-vote-for-gop-tax-bill-270511

    https://www.theatlantic.com/politics/archive/2017/11/a-last-minute-threat-to-the-republican-tax-bill/547220/

    No Democrat, either in the House or the Senate, is likely to vote for the legislation since their consensus view is that the GOP is just pandering to their wealthy donors.

    The Stock Jocks may wish to reconsider tomorrow their 100% odds of passage.

    https://www.bloomberg.com/news/articles/2017-11-30/republicans-grapple-over-trigger-provision-tax-debate-update

    Today's rotation was out of sectors that benefited the most from yesterday's rally and into the sectors that declined yesterday.

    Regional bank stocks notably declined today. Perhaps that is based on concerns about the tax legislation reaching Trump's desk. The pullback in KRE was modest taken in context:

    SPDR S&P Regional Banking ETF (KRE)
    $59.33 -$0.51 (-0.85%)
    Day's Range 59.22 - 60.59
    52 Week Range 49.31 - 60.59
    Volume 12,385,100
    Avg. Volume 6,098,540

    The pullback from the intra-day high started around 1:00 E.S.T. when there was news of a few emerging problems in the tax bill.

    That ETF closed at $56.02 on 11/27.

    https://www.cnbc.com/2017/11/29/as-regional-bank-stocks-rally-analyst-voices-concerns.html

    Another wildcard is the Senate election in Alabama to be held on 12/12. It is possible that Ray Moore will lose to the Democrat and that would create more problems for the GOP's tax bill.

    Even if the Senate can pass the legislation soon, the differences between the House and Senate versions which are material have to worked out into a final bill which would then have to be put to a vote in both chambers. That may not occur until the winner in Alabama's special election is sworn in as a Senator.

    Moore is playing the abortion card heavily now and that will probably turn the election back to him. The latest poll shows Moore leading by 5 points.

    http://www.al.com/news/index.ssf/2017/11/roy_moore_vs_doug_jones_alabam.html

    I expect Moore to win since the large evangelical vote in that state would support an alleged pedophile over a Democrat. Sad but true. They will simply rationalize voting for Moore by saying that all of the women are lying or simply rationalize a vote for Moore on the grounds that the charges are not proven or are in doubt.

    I lived in Alabama for several years. Hopefully, Roy will lead a successful succession effort.

    The Democrats will eventually win with Moore serving in the Senate and Donald continuing to be who he is, provided they can find candidates who can talk the talk and appeal to middle class working men and women which use to be their bailiwick.

    ReplyDelete
    Replies
    1. Apparently, Senators Daines and Johnson were given a better deal for small businesses and are now on board. I mentioned in my prior comment that they would be the easiest holdouts to please.

      That leaves the three deficit hawks and Senator Collins. Of those 4, the GOP can lose only two.

      Trump's insistence on a 20% tax rate is holding up a deal with the remaining holdouts. One way to get a deal with them would be to reduce the corporate rate to 25% rather than 20% or to phase in the reduction over a ten year period to 20%. Either choice may not be acceptable to the House republicans.

      Delete
    2. Hello southgent,

      I'm having a little trouble understanding the rationale of the tax cuts. I understand that supposedly this would be good for small business and large businesses in terms of profitability, and GDP by paying less taxes, but these other little perks and cuts really seem to be blatantly against the middle class.

      It was my understanding this was a middle class tax cut. But I see that these cuts to be revenue neutral or lease not exceed the 1.5 trillion threshold, will disappear around 2027.

      I can't really understand why the middle class is not up in arms over this event.

      I also find that the change in educational taxation of stipends which will impact postdoctoral candidates in all fields and especially in my view computer science, mathematics, artificial intelligence to be extremely damaging to the future of this country.

      Similarly, as a member of AARP, I'm very disappointed that I have not seen a concerted effort by them to speak up in Medicare cuts.

      As an independent, I'm really dissappointed SAM

      Delete
    3. SAM: The AARP is against passage for the reasons that you mention.

      https://www.aarp.org/politics-society/advocacy/info-2017/senate-letter-tax-fd.html?intcmp=AE-HP-FLXSLDR-SLIDE1

      The Senate's version still appears to be in a state of flux.

      At the moment, it looks like Corker and Flake will vote against it due to deficit concerns and Corker was no happy with what the GOP was doing to the middle class.

      "Mr. Corker and Mr. Flake have pushed to scale back the tax cuts in the Senate bill by as much as one-third, in the wake of a report from the congressional Joint Committee on Taxation that projected the bill would add $1 trillion to deficits over the course of a decade, even after accounting for economic growth. Their insistence has angered many Republican colleagues who do not want to reduce the $1.4 trillion tax cut package."

      https://www.nytimes.com/2017/12/01/us/politics/senate-tax-bill-debate-vote.html

      Corker is the only Senate republican to my knowledge who has voiced opposition to what the GOP is doing to the middle class. He looks like a definite no vote.

      Lankford has been won over apparently which leaves Collins who appears to be holding out for a better child tax credit and a deduction for property taxes similar to the House bill. The Senate's version repeals the deduction for all state taxes.

      With Pence being able to break a tie vote, the GOP now appears to need to sway only Collins to a Yes vote.

      After Senator Cornyn said the GOP had 50 votes for passage, Senator Collins quickly replied as follows:

      “I don’t know how Senator Cornyn can speak for me, I speak for myself.”

      I suspect that she will be given enough to vote yes. She will then become vulnerable in her re-election bid in 2020. Maine trends blue anyway and the republicans are more fiscal conservatives than social ones. Since this bill will add to the deficits, and will be hard to defend to informed middle class voters who are not evangelicals, she may lose in 2020 or see the handwriting on the wall and just retire.

      The GOP will claim that the tax cuts for individuals will eventually be made permanent even though they sunset at various times It is my understanding that the Senate's current sunset for individual taxes in 2025. If not extended, most taxpayers with taxable incomes less than $75K will pay more taxes in 2026 than now. About 10% of middle class taxpayers would pay more no later than 2019. According to the Joint Committee on Taxation 38% of taxpayers will see less than a $100 reduction or will pay more by 2019. The GOP's bill is intended to benefit the rich, not the middle class, and is more trickle down rather than trickle up.

      Since I expect the bill to add more than currently predicted to the deficit, probably closer to $2 trillion over ten years rather than the $1 trillion estimated by the JCT, I seriously doubt that this future promise will be kept unless corporate taxes are raised significantly at that time.

      https://www.cbpp.org/research/federal-tax/jct-estimates-amended-senate-tax-bill-skewed-to-top-hurts-many-low-and-middle

      The GOP's middle class supporters actually believe that the republicans are trying to help them. They even believed that when the GOP tried in 2011 to change Medicare to a voucher system that would double their premiums compared to traditional medicare with major cuts given to the wealthy.

      Politically, if the GOP is successful in passing this tax bill, their support will not wane in rural areas meaningfully even if they are also successful in cutting social programs that benefit those living there. Those who benefit from those programs, directly and indirectly through increased spending by the beneficiaries, often have no idea that they are beneficiaries.

      I suspect that crunch time for the GOP will come in higher income suburbs in states with a meaningful state income tax and marginal supporters wanting a change after 4 years of Trump and a GOP led government.

      Delete
    4. I see now that Flake is a Yes vote and switched to supporting the bill based on nothing given to him of substance.



      That leaves Collins and Corker and the GOP does not need either of them now. So it looks like the bill will clear the Senate. There was a last minute change made in the bill that keeps up to a $10K deduction for state property taxes which aligns the Senate's bill with the House's version on that issue.

      https://www.bloomberg.com/news/articles/2017-12-01/senate-republicans-work-to-salvage-tax-bill-tax-debate-update


      https://www.cbsnews.com/news/tax-bill-mitch-mcconnell-senate-gop-has-enough-votes-pass-tax-reform-plan/

      These developments have taken away some of the sting related to Flynn's guilty plea. Flynn is saying that a senior member of Trump's transition team, unidentified yet to my knowledge, requested that he initiate contact with the Russian ambassador. He is pleading guilty to lying to the FBI about that contact.

      Delete
  3. After writing my previous comment, I looked at the market averages and saw a reversal to the downside underway.

    DJIA
    24,068.05 -204.30 -0.84%

    Last Updated: Dec 1, 2017 at 11:53 a.m. EST
    The reason is that Flynn reached a plea deal that appears to involve giving testimony about Trump. He will plead guilty to lying to the FBI. Flynn was in a position to know about any collusion efforts with the Russians.

    https://www.bloomberg.com/news/articles/2017-12-01/michael-flynn-is-charged-as-mueller-intensifies-russia-probe

    ReplyDelete
    Replies
    1. ABC is reporting that Flynn will testify that Trump told him to contact the Russians.

      https://www.cnbc.com/2017/12/01/flynn-to-testify-trump-ordered-him-to-contact-russians-reports.html

      I expect Trump to lie about just about everything.

      If that report is true, and assuming one believes Flynn, then Donald lied repeatedly when he denied contacts between his campaign and the Russians prior to his inauguration. He was the instigator of those contacts according to these media reports concerning Flynn's testimony.

      I would not call that news since I have assumed all along that he was lying. After all, he has made close to 2000 demonstrably false statements since his inauguration. He is probably the most untruthful politician to ever hold high office in a western Democracy. 80+% of republicans, which equals about 30% of voters, believe him to be a honest fellow.

      Recent Poll:
      "When asked if they viewed Trump as “not honest and trustworthy,” 53 percent agreed with that assessment, while 30 percent disagreed."

      https://www.rollcall.com/news/politics/republicans-stand-trump-majority-opposes-re-election

      Delete
    2. Alas, ABC suspended the reporter who filed the story on Trump telling Flynn to cozy up to the Russians. This was a reporter whop has been casual with the facts before.

      Delete
    3. The reporter did not have proof when he wrote the story that Donald directed Flynn to contact the Russians.

      The evidence that we have now is Flynn's admission that he was directed by a senior transition official to contact the Russians and that he reported back to a senior official when Trump was at his Florida resort.

      This does not mean that the ABC story was false about Trump directing Flynn to make the contact. It just means that he did not have evidence when the story was published.

      "Sources" are claiming that it was Kushner who told Flynn to make the contacts (rather than Donald directly), and it was McFarland who purportedly received Flynn's report about the contact while at the resort.

      The NYT times got hold of one of McFarland's emails where she made the following statement:


      “If there is a tit-for-tat escalation Trump will have difficulty improving relations with Russia, which has just thrown U.S.A. election to him”

      That email was sent on 12/29 to 6 officials including Flynn, ,Priebus, Bannon and Sean Spicer

      The facts will eventually show that Kushner (or some other senior official) directed Flynn with Trump's knowledge or at Trump's direction, or Kushner directed Flynn without Trump's knowledge either prior to or after the contacts. This is relevant evidence primarily because Trump and others have frequently denied having such contacts. Why have so many been so forgettable about their Russian contacts before Trump's inauguration?

      Mueller would have certainly asked Kushner about it during his recent interview. So the FBI in all likelihood already knows the answer.

      The threat to Trump, based on what we know now, is primarily multiple counts of obstruction of justice, which does not require that the obstruction to be successful or that the obstruction relate to an actual crime.

      One count of obstruction against Nixon that was voted out of the House involved the tape where he instructed an aide to use the CIA to interfere with the FBI's investigation, which did not work.

      The email sent by Trump yesterday and purportedly written by his lawyer says that Trump knew that Flynn lied to the FBI about the meeting with the Russian Ambassador when he was fired. That is a stupid admission to make publicly now.

      Flynn was interviewed by the FBI on 1/24. Sally Yates met with the WH counsel on 1/26/17 and walked him through the wiretaps that captured Flynn's conversations with the Russian Ambassador where he did talk about sanctions. The VP had just categorically denied that Flynn had talked about sanctions.

      According to White House press secretary Sean Spicer, McGahn briefed Trump immediately following his meeting with Yates.

      Flynn was fired on 2/13 allegedly based solely on his lying to the VP on this matter.

      On the next day (2/14) Trump has a dinner meeting with Comey and, according to Comey's testimony, Trump asked him to go easy on Flynn, which suggests that he knew that the FBI was investigating Flynn. That makes sense given the preceding chain of events.

      Why would the Justice Department choose that one event among many for Flynn to enter a plea of guilty? Because it directly relates to the obstruction investigation of Trump.

      Trump later admitted in an interview that he was thinking about the Russian investigation when he fired Comey. That is evidence as well.

      Will the Democrats be successful in impeaching Trump? No, they would first have to capture control of the House. Even if they gained control in 2018 and had enough votes to approve articles of impeachment by a simple majority, the Senate will not convict by a 2/3 vote given the number of GOP senators.

      Will Trump be charged by Mueller criminally? I suspect that he would want a slam dunk case and then he might try.

      Delete
  4. Enbridge Income Fund Holdings: I recently bought back 100 shares of the USD priced ordinary shares that trade on the U.S. Grey Market:

    1. Bought Back 100 EBGUF at USD$23.43-Used Commission Free Trade:
    https://tennesseeindependent.blogspot.com/2017/11/observations-and-sample-of-recent_13.html

    Those shares closed today at $23.55.

    This company pays a monthly dividend in Canadian Dollars. When I last bought the shares, the monthly rate was C$0.1711 per common share The monthly dividend was recently raised to C$0.1883 per share effective for the distribution to be paid in February.

    http://www.marketwired.com/press-release/enbridge-income-fund-holdings-inc-releases-2018-guidance-long-term-financial-outlook-2242252.htm

    The ordinary shares traded in Canada declined by C$.02 while the USD priced shares rose 2.17%. The difference today was caused by an upward spike in the CAD's value against the USD.

    The shares recently dipped after the company offered 17,986,000 common share at a price of C$27.80 per share earlier this week.

    http://www.marketwired.com/press-release/enbridge-income-fund-holdings-inc-announces-500-million-common-share-offering-2242253.htm

    The CAD priced shares closed today at C$29.84 so that is a good sign so soon after a large offering.

    https://www.marketwatch.com/investing/stock/enf?countrycode=ca

    ReplyDelete
  5. Over the past ten days or so, I am focused my attention on researching the effective tax rates of several publicly traded companies. The purpose was to identify companies that are paying now close to the 35% statutory rate. The odds are pretty good now that the GOP will be successful in cutting the corporate rate to 20%, though the Senate version delays the implementation to 2019.

    http://money.cnn.com/2017/12/02/pf/taxes/senate-tax-bill-passed/index.html

    This inquiry led me to add or to initiate positions in several stocks.

    For example, I added 50 NYCB in my Roth IRA at $12.8 (11/24/17).

    This bank is not like by investors as shown by its one year price chart.

    https://www.marketwatch.com/investing/stock/nycb/charts

    However, the bank has stated that a reduction in its federal tax rate to 20% would be 23% accretive to earnings:

    Page 12
    https://www.sec.gov/Archives/edgar/data/910073/000119312517350261/d499498dex991.htm

    As previously stated and explained, the bipartisan compromise reached in the Senate Banking Committee would remove NYCB from the SIFI rules. That will be beneficial as well for that bank and several others with assets between $50B to $250B as noted in a Barron's column published today (subscription publication):

    https://www.barrons.com/articles/lifting-the-lid-on-regional-banks-share-prices-1512187357





    ReplyDelete
    Replies
    1. I see that I screwed up my verb tense in the first sentence to this last comment. Brain malfunction.

      I do believe it is important to ascertain the effective tax rate before buying a stock now and to focus research on companies with relatively high tax rates.

      I mentioned NYCB above as one beneficiary assuming the tax bill becomes law with a reduction in the top rate to 20% which appears likely now.

      This is how I quickly find the effective tax rate without having to subscribe to an expensive service that provides that information. One such expensive service is YCharts. I view $200 per month as expensive.

      The number can be easily calculated from an earnings press release, but I will go to the 10-Q and 10-K filings which provides me with slightly more information.

      A 10-Q will contain that information for the quarter and YTD and/or the current quarter compared to same quarter in the prior year. The 10-K will usually contain information about the current year and the prior one. I will not look back beyond two years to save time.

      By pressing the print button when I have the relevant document open, I can then create a searchable PDF version of the document using the search phrase "effective tax". That is how I found the effective tax rate for FNB discussed in this post. I added information about FNB to this blog post from the 2016 Annual Report (10-K) at page 56:

      https://www.sec.gov/Archives/edgar/data/37808/000119312517053369/d280128d10k.htm

      It is my understanding that the effective tax rate would include state, local and federal income taxes, but the state and local taxes are deducted as expenses when computing the federal tax rate. I am positive about the later point about deductibility, but I am not sure that the reported effective tax rate shown in the financial statements includes anything other than federal income taxes.

      While I am not 100% positive yet, I do not believe the tax bills take away a non-pass through corporations right to deduct state and local income tax payments as business expenses. Only individual taxpayers lose that deduction. The applicability of that deduction for pass through entities appears to be beyond the clear comprehension of those writing the bills:

      http://www.businessinsider.com/trump-tax-plan-state-and-local-tax-deduction-pass-through-business-2017-11

      https://www.cbsnews.com/news/corporations-to-keep-tax-break-lost-by-millions-of-americans-president-trump-tax-reform/

      Delete
  6. There are some considerations to take into account when assessing stock purchases based in part on lower effective tax rates.

    One important consideration may be the most difficult to ascertain.

    How much of the increased profits is already baked into the current price already?

    That is a tough one to answer.

    I have tried to circumvent the issue, as much as possible, by buying stocks like NYCB whose prices have declined in part due to lackluster earnings under existing tax law.

    Bank/Financial stocks and consumer discretionary stocks like retailers are generally the biggest sector winners. But there are meaningful variations for companies in those sectors which requires the investor to look before leaping.

    Another consideration is how long will the tax cuts last?

    The GOP's tax bills have no support from Democrats.

    It is possible that the Democrats will regain control over the Presidency and both Houses in 2020 and the odds increase as more time passes.

    The Democrats will take back some of those corporate tax cuts. The tax rate would almost certainly be raised higher, with an increase from 20% to at least 25% being likely IMO.

    When there is no longer any compromises, it is hard to make future profit predictions based on current tax law and that will impact valuations.

    If a bank was going to have 23% higher earnings every year for the next ten years due to cutting the highest marginal rate to 20%, then I would place a higher multiple on those anticipated juiced earnings.

    But, I do not know that now.

    It is uncertain now whether that estimate of higher earnings caused solely by the tax cut will last more than 3 more years. And, the Senate's bill delays the corporate tax cut until 2019. If the conference committee agrees to that deferral, then 3 certain years is reduced to just 2.

    ReplyDelete
  7. The futures are pointing to a rally at the open tomorrow:

    E-Mini Dow Dec 2017
    24,466 +228 +0.94%
    Last Updated: Dec 3, 2017 at 8:33 p.m. CST

    My game plan tomorrow will be focused on small stock purchases where the (1) stock has been beaten down this year (so the stock has not only failed to participate in the rally this year but is down significantly in price); (2) there is at least some turnaround potential in operations; and (3) earnings will accelerate significantly based solely on a change from a 35% corporate tax rate to 20%. That last criteria generally means an effective current tax rate in the 30% to 35% range.

    ReplyDelete
  8. I have published a new post:

    https://tennesseeindependent.blogspot.com/2017/12/observations-and-sample-of-recent.html

    ReplyDelete