Observations and Sample of Recent Trades: HOPE, M, STWD, SZEVY, WMT

Economy:

The New York Fed's real GDP forecasting model estimates 3.97% growth in the 2017 4th quarter and 3.4% for the 2018 first quarter as of 1/5/18. Nowcasting Report - FEDERAL RESERVE BANK of NEW YORK

As of 1/10/18, the Atlanta Fed's GDP forecasting model estimates real GDP growth of 2.8% in the 4th quarter. GDPNow - Federal Reserve Bank of Atlanta

Calculated Risk: Update: Framing Lumber Prices Up Sharply Year-over-year

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Market Commentary and Markets: 

There were a couple of potentially worrisome developments yesterday. I say "potentially" since neither has yet occurred and may not occur anytime soon. 

Bloomberg reported that China was weighing slowing down or halting its purchase of U.S. treasuries. If that occurs, the ostensible reason given by China may be that U.S. treasuries are less attractive than other assets. The real purpose may be a push back on Trump's trade demands. Yes, I know that Ivanka claimed that the tax cuts would create a U.S. budget surplus, but I am not going to allocate my money based on that prediction. The U.S. budget deficits will soar in the coming years; and China will be needed to help finance the parabolic rise in U.S. debt. 

Today, China's foreign exchange regulator pushed back on that story: China regulator says report country wants to pare U.S. bonds may be ‘fake news’ - MarketWatch 

Major Foreign Holders of U.S. Treasuries 

Report Chinese could stop Treasury buying seen as political but hits raw nerve: CNBC 

Both Bloomberg and Reuters reported yesterday that Canada believes that Trump is about to terminate the NAFTA agreement. The chaos monkey will more likely than not IMO make an attempt to terminate, which will be challenged in court. The treaty states that the United States may terminate. While Donald believes he is the United States as our Supreme and Dear Leader, that is still not the case currently. Congress approved the treaty and arguably will have to join the President in seeking its termination. 

The story about China cutting back on Treasury purchases added to bond woes early yesterday, but the news about NAFTA being potentially terminated by Donald likely caused bonds to rise off their lows as part of a flight to safety trade. The ten year treasury yield touched 2.6% in early trading and closed basically unchanged at a 2.555% yield.  

Bill Gross says bond bear market ‘confirmed’ amid Treasurys selloff - MarketWatch

Jeff Gundlach predicts the stock market’s 9-year winning streak will end in 2018 - MarketWatch

Dimon thinks even his own economist at J.P. Morgan is dead wrong about GDP, predicts 4% U.S. growth - MarketWatch

Retail investor exposure to stock market is at an all-time high: TD Ameritrade - MarketWatch

Stock optimism swells as S&P 500 hits most overbought level in 22 years - MarketWatch

Investors should be pessimistic about the rise in stock-market optimism - MarketWatch

Warren Buffett says cryptocurrencies headed for a 'bad ending' - MarketWatch

Euro spikes higher as ECB minutes suggest possible hawkish shift toward monetary policy - MarketWatch; Euro - EURUSD 

A retreat by the ECB in its extremely abnormal monetary policies will likely cause IMO interest rates to rise in the U.S. The German 10 year bond is rising in yield today:  Germany 10 Year Government Bond 

The USD remains in a downtrend: DXY: U.S. Dollar Index (DXY); BUXX - WSJ Dollar Index; Bloomberg Dollar Spot Index - Bloomberg Markets

The Bloomberg spot dollar index has a far lower weighting in the Euro than the DXY and includes more currencies. 

Sourced: Currency | Bloomberg Indices | Bloomberg Finance LP

DXY Weightings: 

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Trump: 

In his recent NYT interview, Trump made the following statement: "I have absolute right to do what I want to do with the Justice Department."

I found it interesting watching Donald's negotiating "skills" in action last Tuesday. To be charitable, his statements were a jumbled mess of inconsistencies and had to frustrate both Republicans and Democrats who had to listen to his ramblings. Trump Deals on DACA With the Cameras On - The Atlantic    

White House transcript fails to include line from Trump on clean DACA bill | TheHill (Trump probably does not even know what is meant by a "clean DACA bill")

The GOP got what they really wanted with the tax cuts. It was only necessary to have a republican president, anyone would do, to sign the bill rather than to veto it which would have happened with Hillary as President. 

Donald's capacity for chaos and mischief is still omnipresent and remains a major potential risk for the stock market and the economy this year.    

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1. Small Ball-Profit Taking:

A. Sold 25 Macy's at $25.93-Used Commission Free Trades:

Profit: $201.89

Quote: Macy's Inc. (M)
M Analyst Estimates

Department store stocks are not viewed here at HQ as worthy of any investment approach other than as a short term trade with meagre dollar amounts put at risk.

Macy's holiday sales stronger, but not enough to ward off dismal 2017: CNBC

Closing Price 1/10/18: M $25.60 +$0.91 +3.69% : Macy's Inc 

B. SOLD 10 WMT at $99.75-Used Commission Free Trade:

Profit Snapshot: $208.27

Closing Price Day of Trade (1/3/18):  WMT $99.45  +$0.86 0.87%
WMT Analyst Estimates

I am just surprised that this stock performed so well since my purchase. Since I have zero interest adding to the position anywhere near current price levels, and my free trades expire in a few months, I decided to harvest a decent percentage gain in this mega cap stock.

C. Bought 10 STWD at $21.19 and 10 at $20.91-Used Commission Free Trades:

Last Discussed: Stocks, Bonds & Politics: Item 3.A. (8/13/17 Post)

Quote: Starwood Property Trust Inc.  (STWD)

Website: Starwood Property Trust-Providing Innovative Financial Solutions

Dividend: Quarterly at $.48 per share Dividends Investor | Starwood Property Trust

Dividend Yield at a Total Cost of $21.05 per share = 9.12%

Last Ex Dividend Date: 12/28/17 (bought this lot shortly thereafter)

Recent Earnings Report: Starwood Property Trust Reports Results for the Quarter Ended September 30, 2017

STWD recently sold $500M of 4.75% senior notes maturing in 2025. Starwood Property Trust Prices Private Offering of Unsecured Senior Notes STWD's senior unsecured debt is rated in junk territory by both Moody's and S & P: Credit Ratings Investor | Starwood Property Trust

Moody's rates Starwood Property Trust's senior notes Ba3

I will average down in 10 share lots until I own 50 shares in this account. I suspect that this stock's recent weakness is related to the  interest rate rise.

2. REGIONAL BANK BASKET STRATEGY:

A. Bought Back 50 HOPE at $18.04-Used Commission Free Trade:

Quote: Hope Bancorp Inc. (HOPE)
Consensus Analyst E.P.S. Estimates day of trade:
2017: $1.21
2018: $1.43
P/E at $18.05-2018 Estimate = 12.62
E.P.S. Estimated Growth Rate Y-O-Y = 18.18%
HOPE Analyst Estimates

Last Discussed Item 1.A. Sold  50 HOPE at $19 (11/4/17 Post)(profit snapshot=$169.97)-Item 1.B. Bough 50 HOPE at $15.6 (9/14/17 Post) 

I discussed HOPE's third quarter earnings report here.

Hope Bancorp Reports Record Net Income of $44.6 Million, or $0.33 EPS, for 2017 Third Quarter

I would just add some material about taxes to those prior discussions:

The balance sheet also shows a deferred tax asset of $83.2+M that will need to be revalued down due to the slash in the federal corporate income tax rate.

Closing Price 1/10/18: HOPE $18.54 +$0.23 +1.26%: Hope Bancorp, Inc. 

3. Added 100 Suez ADR at $8.73 (SZEVY): The general idea is to harvest the annual dividend and to make a 5% to 10% profit on the shares.  This one is not working for me yet. 

Position after Add:

Last Discussed: Item # 6.A. Bought 100 at $9.08 (10/26/17) 

Last Sold: Sold SZEVY at $9.23 (6/7/17 Post)-Item # 5 Bought 50 SZEVY at $7.24 (1/15/17 Post)

USD Priced ADR: Suez S.A. ADR (pink sheet exchange)
Euro Priced Ordinary Shares Traded in Paris: Suez S.A. (France) 

EUR / USD Currency Chart

1 ADR = .5 Ordinary Share

Dividend: Annual at €.6 per share for ordinary shares and €.325 for each ADR share (past history)  Dividends

I did not find any significant news since I last discussed this company.

Closing Price 1/10/18: SZEVY $8.41 -$0.23 -2.66%: SUEZ 

4. Short Term Bond/CD Ladder Basket Strategy: 

With the short term bonds that I am buying, a rise in short term rates, which is expected, will cause these bonds to go down slightly in price. 

The loss in value will be short term and will be gained back as the bond approaches maturity. 

In the meantime, I receive a higher yield than available in money market funds and have no concerns about credit risk for these issuers. 

I will be able to take advantage of a continuous rise in short term rates by redeploying proceeds from maturing securities. I will have multiple maturities each week-most of the time. 

I am also experiencing some early redemptions as well. For example, Charles Schwab called its 1.5% SU bond maturing on 3/10/18 for redemption on 2/8. The bond prospectus allows for a redemption on or after 2/8 at par value plus accrued and unpaid interest.    

A. Added 1 Anheuser Busch 1.9% SU Bond Maturing on 2/1/2019: 

I now own 5 bonds. 

FINRA Page: Bond Detail

Bought at a Total Cost of 99.944

YTM at TC Then at 1.95%

Current Yield at 1.901% 

Bought at 89.844 (YTM at 2.039%)

B. Bought 2 J P Morgan 1.85% SU Bonds Maturing on 3/22/19-A Roth IRA Account: 

FINRA Page: Bond Detail

Issuer: JPMorgan Chase & Co.  (JPM) 

JPM Analyst Estimates 

Credit Ratings: 

Bought at a Total Cost of 99.97

YTM at TC Then at 1.873%

Current Yield at TC = 1.8506%

A 1.873% YTM for a high quality bond maturing in about 15 months, which becomes tax free when owned in the Roth IRA, is viewed as satisfactory given my strong capital preservation objectives for my Roth IRA accounts. I do not anticipate ever withdrawing any money from them since they will be the very last source to pay expenses. All other assets will have to be  exhausted before drawing any money out of the Roth IRAs. They are my last line of defense. If I reach the point where I need those funds, viewed as exceedingly unlikely now, then the money needs to be there rather than in money heaven. 

C. Bought 2 Chevron 1.686% SU Bonds Maturing on 2/28/19:

FINRA Page: Bond  Detail (prospectus linked)

Issuer: Chevron Corp. (CVX)
CVX Analyst Estimates
Chevron Announces $18.3 Billion Capital and Exploratory Budget for 2018
Chevron Reports Third Quarter Net Income of $2.0 Billion

Credit Ratings:

Bought at a Total Cost of 99.863
YTM at TC Then at 1.801%
Current Yield at 1.6883%

D. Bought 2 Cathay Bank 1.45% CDs (monthly interest payments) Maturing on 3/28/18:

Holding Company: Cathay General Bancorp (CATY)
CATY Analyst Estimates
Cathay General Bancorp Announces Third Quarter 2017 Results

Cathay has a five star rating from Bankrate: Cathay Bank Bank Reviews and Ratings - Bankrate.com

E.  Bought 2 Kroger 2% SU Bonds Maturing on 1/15/19:

FINRA Page: Bond Detail

Credit Ratings:

Issuer:  Kroger Co. (KR)
KR Analyst Estimates
Kroger Reports Third Quarter Results

Bought at a Total Cost of 100
YTM at TC Then at 2%
Current Yield at 2%

F. Bought 1 Caterpillar 1.8% SU Bond Maturing on 11/13/18: 

Finra Page: Bond Detail (prospectus linked)

Credit Ratings:

Fitch Rates Caterpillar Financial Services Limited 'A'

Issuer: Caterpillar Financial Services

Bought at a Total Cost of 99.9
YTM at TC Then at  1.911%
Current Yield = 1.8018%

G. BOUGHT 1 More Caterpillar 1.8% SU Bond Maturing on 11/13/18:

This is the same bond discussed in Item F above.

I will frequently buy the same bond in a different account when I am reinvesting proceeds from maturing securities received in that account.

This CAT bond was bought in my Fidelity account where I pay a $1 per bond commission. The same bond discussed in Item F was bought in my IB account, where I also pay a $1 per bond commission, and where I recently received proceeds from 2 BB&T 1.45% SU bonds called one month early by the issuer.

I paid slightly more for the CAT bond bought in the Fidelity account which had a .095% negative impact on YTM and a -.0015% on current yield: 

Bought at a TC of 99.985
YTM at TC Then at 1.816%
Current Yield at TC = 1.8003%

H. Added 2 Autozone 1.625% SU Bonds Maturing on 4/21/19:

FINRA Page: Bond Detail (prospectus linked):

Credit Ratings:

Fitch Affirms AutoZone, Inc.'s IDR at 'BBB'; Outlook Stable

Issuer: AutoZone Inc. (AZO)
AZO Analyst Estimates
AutoZone 4th Quarter Same Store Sales Increase 1.0%; 4th Quarter EPS Increases 6.8% to $15.27; Fiscal 2017 Sales of $10.9 Billion; Fiscal 2017 EPS Increases 8.3% to $44.07

Bought at a Total Cost of 99.382
YTM at TC Then at 2.094%
Current Yield at TC = 1.6351%

I now own 4 bonds.

The first two bond lot was bought at a slightly lower price in December 2016.

Even though the purchase prices was lower, the YTM was lower at 1.943% than the purchase made about 1 year later since the bond is closer to maturity and the price paid was only slightly higher than my first purchase.

I also had to pay $2 more in Commission for this earlier purchase:

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.