Economy:
U.S. housing starts fizzle at end of 2017 - MarketWatch
Mortgage rates spike to 8-month high as inflation heats up - MarketWatch
Consumer sentiment falls to six-month low on concern over prices, uncertain tax-cut benefit - MarketWatch
New home starts and sales will be important statistics in the coming months.
The question for the economy is whether a rise in mortgage rates, the rise in home prices since the Near Depression and the disincentives to home ownership contained in the GOP's tax legislation will combine to turn both starts and sales into a persistent Y-O-Y decline. My best guess is that this will happen.
A decline in new home construction, and everything that goes with it, would be a major negative for the economy.
S&P/Experian Bankcard Default Index - S&P Dow Jones Indices
S&P/Experian Auto Default Index - S&P Dow Jones Indices
Subprime Auto Defaults Are Soaring, and PE Firms Have No Way Out - Bloomberg
+++++
Mortgage rates spike to 8-month high as inflation heats up - MarketWatch
Consumer sentiment falls to six-month low on concern over prices, uncertain tax-cut benefit - MarketWatch
New home starts and sales will be important statistics in the coming months.
The question for the economy is whether a rise in mortgage rates, the rise in home prices since the Near Depression and the disincentives to home ownership contained in the GOP's tax legislation will combine to turn both starts and sales into a persistent Y-O-Y decline. My best guess is that this will happen.
A decline in new home construction, and everything that goes with it, would be a major negative for the economy.
S&P/Experian Bankcard Default Index - S&P Dow Jones Indices
S&P/Experian Auto Default Index - S&P Dow Jones Indices
Subprime Auto Defaults Are Soaring, and PE Firms Have No Way Out - Bloomberg
+++++
Market Commentary and Markets:
Dollar marks fifth weekly loss in a row-MarketWatch
The weakness in the U.S.D. and a synchronized global recovery could provide the backdrop for a bull market in commodities. The last cyclical commodity bull market ended when the rise in crude oil sputtered and then turned down in 2008.
Dollar marks fifth weekly loss in a row-MarketWatch
The weakness in the U.S.D. and a synchronized global recovery could provide the backdrop for a bull market in commodities. The last cyclical commodity bull market ended when the rise in crude oil sputtered and then turned down in 2008.
Chart: Crude Oil Prices: West Texas Intermediate (WTI)-Cushing, Oklahoma-St. Louis Fed
The move to $133 per barrel was a parabolic one that collapsed upon itself, as such moves are prone to do.
Chart: Global Price Index of All Commodities-St. Louis Fed
In the Barron's Roundtable discussion, Jeffrey Grundlach mentioned commodities as an investment theme for the next several years. Jeffrey Gundlach: Bullish on Commodities and Bank Loans - Barron's He did not want to recommend one of the commodity ETNs or Delaware Trusts, but instead recommended the closed end fund Tortoise Energy Infrastructure Corp. (TYG) that is leveraged near 32% with short term borrowings.
TYG Tortoise Energy Infrastructure, closed-end fund summary-CEF Connect
Personally, I am not interested in CEFs that use leverage at the moment given what I view as a likely rise in short term interest rates.
Grundlach also recommended buying the ETF PowerShares Senior Loan Portfolio (BKLN). That one can be bought by Schwab customers commission free, and I do own some shares in my Schwab brokerage account.
I currently own almost 102 shares and have been reinvesting the dividend:
Stocks, Bonds & Politics:Item # 6 Added 50 BKLN at $23.04 (9/28/17 Post)
I have reservations about senior bank loans due in part to the recently passed tax legislation that may limit the deductibility of interest payments, as explained in my last post in Item # 4: Stocks, Bonds & Politics. The more serious tax issue starts in 2022, so maybe most of them have some breathing room. Conference Report Limits on Interest Deductions - Tax Foundation
I am consequently no longer a buyer of this ETF; and my next move will be to eliminate the position.
Veteran investor Mark Grant sees ‘giant opportunity’ in natural gas partnerships - MarketWatch
+++++++
Portfolio Management:
The ten year treasury burst above the 2.6%-2.62% yield last Friday. According to several technicians, a break above that resistance level will result in move up to the next resistance level that is between 3% to 3.05% where the interest rate spike ended in late December 2013.
The spike above 2.62% also broke a long term trend-line that goes back to the bond bull market's starting point in the early 1980s. Bond yields at a critical level means more than meets the eye: CNBC
Bill Gross is one bond manager who has concluded that the long term secular bull market in bonds is kaput. Bill Gross Calls a Bond Bear Market After Treasury Yield Surges - Bloomberg He is saying that the 25 year trend lines for both the five and ten year treasuries have been broken.
A somewhat different trend-line chart, which goes back further in time, shows a break-out progressing above the trend-line for the ten year treasury starting with the June 12, 2007 high at 5.26%. Treasury Snapshot: 10-Year Yield at 2.64% The longer term trend-line, starting with the 9/30/81 high yield of 15.84%, has not yet been broken. Though I can not be exact given the lack of lines between 2% and 4% on that graph, it appears that a break above 3.05% would currently break that long term trend-line.
The danger is that both inflation and interest rates will rise and cause significant inflation adjusted losses in longer duration bonds given their low nominal or even negative yields.
I will allow the market to tell me about the response to Washington's dysfunction. I personally view the obvious dysfunction, the likely continued parabolic increases in U.S. government debt and the likely increase in the average weighted yield on that debt to be a negative for U.S.D. denominated bonds and the U.S.D.
For now, I am going to postpone buying any Tennessee Municipal bonds until the ten year treasury crosses the 3% yield threshold. I have more confidence in high quality Tennessee municipal bonds than I do in the U.S. government's debt.
My current allocation to Tennessee Municipal Bonds is $270K in principal amount, with the total cost cost number at $268.45K. The current weighted tax free yield at 3%. The earliest maturities are in 2026-2027.
On the yield curve, I am extremely overweighted in short term bond and CDs and substantially underweighted in intermediate term corporate bonds.
If the ten year treasury spikes to 3% over the next several weeks or months, I would anticipate that equity REIT common stocks and equity preferred stocks to react much in the same way as they did in 2013. I do not know that as a fact but view that opinion as a reasonable one based on prior history.
I have jettisoned all of my REIT equity preferred stocks. My last transaction was to sell HTPRD and DLRPRI. Items 1.A and 1.C (10/9/17 Post) Prices for equity preferred stocks are still well above where they were when the ten year treasury yield had moved from 1.66% to 2.64% in 2013.
For example, over two months after the ten year treasury yield had started to move down from its 12/31/13 high of 3.04%, I bought 100 shares of DLRPRG at $19.95 that had been sold to the public at $25 in April 2013. The closing low was hit at $18.13 on 12/30/13. The ten year yield that year hit 2.63% on 11/4 and then closed at 2.69% on 11/5. The DLRPRG closing price was $19.15 on 11/4. The price closed last Friday at $25.05. Digital Realty Trust Inc. 5.875% Cum. Redeem. Pfd. Series G Interactive Chart (use five year chart, daily prices)
I am monitoring several REIT preferred stocks for potential purchases but will wait and see whether the ten year treasury makes a serious move toward 3% before considering a nibble. When and if that occurs, I will still need much lower prices then now to even nibble.
I am starting, however, to nibble on some high yielding and generally disfavored equity REIT stocks. I discuss one nibble in Item numbers 1A., 1B and 3.B below.
++++++++
Trump and Government Shutdowns:
Former RNC chair: 'This shutdown rests at the feet of the GOP'
White House budget director: 'Kind of cool' to be in charge of government shutdown - CNN
Graham: Stephen Miller makes immigration deal impossible | TheHill (contains video interview with Senator Graham (R-SC)(I disagree with Graham that a short term continuing resolution to 2/8/18 with a commitment to vote on a comprehensive plan by that time is likely to produce any other result than the one generated to date after months of negotiation. That result is no agreement with the republicans refusing to agree to a bipartisan plan hashed out by Durbin-Graham and a few other senators. Even if a plan passes the Senate, which is questionable, it will likely die in the House, just like the immigration plan adopted by the Senate in 2013)
The fact that Stephen Miller has even been allowed in the White House reflects bad judgment, let alone listening to what he has to say on immigration or any other topic.
The current short term continuing resolution proposed by the GOP is the 4th one since the start of the federal government's new fiscal year.
In 2013, Trump supported the GOP's effort to shut the government down unless the Democrats agreed to defund Obamacare:
The republicans contended then that the Democrats were responsible for the 2013 shutdown since they would not agree to defund Obamacare.
Conditioning a deal on a matter that is toxic to the other party is designed to cause no deal. It demonstrates bad faith by the party demanding what the other side will never accept.
Donald Trump's Government Shutdown Tweets Contradict Stance | Time;
Donald Trump on government shutdowns: 2013 vs. now: USA Today
Earlier this year, Trump stated that the U.S. needs a "good" government shutdown. Trump: US ‘needs a good shutdown’ | TheHill
When Obama was President, Trump stated that it was the President's fault whenever the government had to shutdown: 2013 Trump: President responsible for shutdown
Portfolio Management:
The ten year treasury burst above the 2.6%-2.62% yield last Friday. According to several technicians, a break above that resistance level will result in move up to the next resistance level that is between 3% to 3.05% where the interest rate spike ended in late December 2013.
The spike above 2.62% also broke a long term trend-line that goes back to the bond bull market's starting point in the early 1980s. Bond yields at a critical level means more than meets the eye: CNBC
Bill Gross is one bond manager who has concluded that the long term secular bull market in bonds is kaput. Bill Gross Calls a Bond Bear Market After Treasury Yield Surges - Bloomberg He is saying that the 25 year trend lines for both the five and ten year treasuries have been broken.
A somewhat different trend-line chart, which goes back further in time, shows a break-out progressing above the trend-line for the ten year treasury starting with the June 12, 2007 high at 5.26%. Treasury Snapshot: 10-Year Yield at 2.64% The longer term trend-line, starting with the 9/30/81 high yield of 15.84%, has not yet been broken. Though I can not be exact given the lack of lines between 2% and 4% on that graph, it appears that a break above 3.05% would currently break that long term trend-line.
The danger is that both inflation and interest rates will rise and cause significant inflation adjusted losses in longer duration bonds given their low nominal or even negative yields.
I will allow the market to tell me about the response to Washington's dysfunction. I personally view the obvious dysfunction, the likely continued parabolic increases in U.S. government debt and the likely increase in the average weighted yield on that debt to be a negative for U.S.D. denominated bonds and the U.S.D.
For now, I am going to postpone buying any Tennessee Municipal bonds until the ten year treasury crosses the 3% yield threshold. I have more confidence in high quality Tennessee municipal bonds than I do in the U.S. government's debt.
My current allocation to Tennessee Municipal Bonds is $270K in principal amount, with the total cost cost number at $268.45K. The current weighted tax free yield at 3%. The earliest maturities are in 2026-2027.
On the yield curve, I am extremely overweighted in short term bond and CDs and substantially underweighted in intermediate term corporate bonds.
If the ten year treasury spikes to 3% over the next several weeks or months, I would anticipate that equity REIT common stocks and equity preferred stocks to react much in the same way as they did in 2013. I do not know that as a fact but view that opinion as a reasonable one based on prior history.
I have jettisoned all of my REIT equity preferred stocks. My last transaction was to sell HTPRD and DLRPRI. Items 1.A and 1.C (10/9/17 Post) Prices for equity preferred stocks are still well above where they were when the ten year treasury yield had moved from 1.66% to 2.64% in 2013.
For example, over two months after the ten year treasury yield had started to move down from its 12/31/13 high of 3.04%, I bought 100 shares of DLRPRG at $19.95 that had been sold to the public at $25 in April 2013. The closing low was hit at $18.13 on 12/30/13. The ten year yield that year hit 2.63% on 11/4 and then closed at 2.69% on 11/5. The DLRPRG closing price was $19.15 on 11/4. The price closed last Friday at $25.05. Digital Realty Trust Inc. 5.875% Cum. Redeem. Pfd. Series G Interactive Chart (use five year chart, daily prices)
I am monitoring several REIT preferred stocks for potential purchases but will wait and see whether the ten year treasury makes a serious move toward 3% before considering a nibble. When and if that occurs, I will still need much lower prices then now to even nibble.
I am starting, however, to nibble on some high yielding and generally disfavored equity REIT stocks. I discuss one nibble in Item numbers 1A., 1B and 3.B below.
++++++++
Trump and Government Shutdowns:
Former RNC chair: 'This shutdown rests at the feet of the GOP'
White House budget director: 'Kind of cool' to be in charge of government shutdown - CNN
Graham: Stephen Miller makes immigration deal impossible | TheHill (contains video interview with Senator Graham (R-SC)(I disagree with Graham that a short term continuing resolution to 2/8/18 with a commitment to vote on a comprehensive plan by that time is likely to produce any other result than the one generated to date after months of negotiation. That result is no agreement with the republicans refusing to agree to a bipartisan plan hashed out by Durbin-Graham and a few other senators. Even if a plan passes the Senate, which is questionable, it will likely die in the House, just like the immigration plan adopted by the Senate in 2013)
The fact that Stephen Miller has even been allowed in the White House reflects bad judgment, let alone listening to what he has to say on immigration or any other topic.
The current short term continuing resolution proposed by the GOP is the 4th one since the start of the federal government's new fiscal year.
In 2013, Trump supported the GOP's effort to shut the government down unless the Democrats agreed to defund Obamacare:
The republicans contended then that the Democrats were responsible for the 2013 shutdown since they would not agree to defund Obamacare.
Conditioning a deal on a matter that is toxic to the other party is designed to cause no deal. It demonstrates bad faith by the party demanding what the other side will never accept.
Donald Trump's Government Shutdown Tweets Contradict Stance | Time;
Donald Trump on government shutdowns: 2013 vs. now: USA Today
Earlier this year, Trump stated that the U.S. needs a "good" government shutdown. Trump: US ‘needs a good shutdown’ | TheHill
When Obama was President, Trump stated that it was the President's fault whenever the government had to shutdown: 2013 Trump: President responsible for shutdown
“Well, if you say who gets fired it always has to be the top. I mean, problems start from the top and they have to get solved from the top and the president’s the leader. And he’s got to get everybody in a room and he’s got to lead. . . when they talk about the government shutdown, they’re going to be talking about the president of the United States, who the president was at that time.” Trump's comments blaming Obama for 2013 government shutdown resurface | TheHill
That was then. Now is different according to Donald because Donald rather than Obama is President and Donald wishes to wipe his hands clean of the mess that he IMO help to create.
That was then. Now is different according to Donald because Donald rather than Obama is President and Donald wishes to wipe his hands clean of the mess that he IMO help to create.
At the urging of General Kelly, Stephen Miller and Senators Cotton and Perdue, Trump blew up a bipartisan deal to avert a shutdown.
The problems arose when (1) the GOP refused to finance, other than on a temporary basis, the CHIP program unless the Democrats agreed to cut Medicare and Obamacare funding and (2) Trump rescinded the DACA protections by an Executive Order while claiming that he really wanted to protect those who came to the U.S. illegally as children.
Speaker Ryan caved to demands from GOP extremists that the CHIP program had to be funded by cutting Medicare and Obamacare funding which was of course toxic to the Democrats. Government shutdown: Children’s health insurance is a political hostage - Vox So far Ryan has been unwilling to reach across the isle to pass legislation in the House. Compromise is never achieved by giving toxic conditions for an agreement (e.g. defund Obamacare or we will shut the government down).
The basic problem, as I see it, is that House republicans will not pass a law restoring DACA protections. If McConnell allowed a vote on a bipartisan deal that passed the Senate which included DACA protections, it would be voted down in the House with only a handful of republicans supporting the Senate plan. Then, most voters would see the problem clearly.
The basic problem, as I see it, is that House republicans will not pass a law restoring DACA protections. If McConnell allowed a vote on a bipartisan deal that passed the Senate which included DACA protections, it would be voted down in the House with only a handful of republicans supporting the Senate plan. Then, most voters would see the problem clearly.
The terms of the deal are relatively simple and would provide (1) long term funding for CHIP; (2) a path to citizenship for the DACA children; and (3) funding for most of Trump's wall and increased spending on border patrols.
If all Senate Democrats had voted against the bill, it would not have passed the Senate by a majority vote since 4 GOP senators also voted against it. Five Democrats voted for the bill. Under the Senate's filibuster rule, 60 votes are needed to close off debate so that a vote can take place (a vote on whether to vote on a substantive matter)
Trump has suggested to the Senate republicans that they abolish the filibuster rule.
That is beyond idiotic. Once that rule is abolished, the Democrats could do the same when and if they control the Senate. With a Democrat President and the Democrats in control over the House, which will happen, there would be no way for the GOP to stop or even change the implementation of the Democrats' agenda.
Trump has suggested to the Senate republicans that they abolish the filibuster rule.
That is beyond idiotic. Once that rule is abolished, the Democrats could do the same when and if they control the Senate. With a Democrat President and the Democrats in control over the House, which will happen, there would be no way for the GOP to stop or even change the implementation of the Democrats' agenda.
Government shutdown: How the Trump-Schumer negotiations played out - CBS News
There are many Americans who believe that Donald is a good negotiator. I would not even call him a competent one. His history as President reinforces my conclusion that he is worse than merely an incompetent negotiator. He deliberately makes inflammatory comments that make compromise far more difficult.
Donald did enjoy success in negotiating with NYC politicians that bestowed massive benefits on him. I would simply express suspicion on whether that was due to his negotiating skills or something else.
How Donald Trump Learned to Give Money for Political Access | Fortune
Inside a Donald Trump audit: Missing books and unusual accounting - CBS News
Trump is also successful in using litigation to avoid paying what he owes people who provided labor and materials on his construction projects. USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills
And most importantly, he has managed to convince millions that he is a successful businessman, notwithstanding 6 bankruptcies, that allowed him to create the brand Trump and to make hundreds of millions licensing his name for products and properties.
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 Brand | Licensing Agreements Donald Trump;
From Manila to Hawaii, Meet The Licensing Partners Who Paid Trump The Most: Forbes
++++++++
Trump/NRA/Russians:
There are many Americans who believe that Donald is a good negotiator. I would not even call him a competent one. His history as President reinforces my conclusion that he is worse than merely an incompetent negotiator. He deliberately makes inflammatory comments that make compromise far more difficult.
Donald did enjoy success in negotiating with NYC politicians that bestowed massive benefits on him. I would simply express suspicion on whether that was due to his negotiating skills or something else.
How Donald Trump Learned to Give Money for Political Access | Fortune
Inside a Donald Trump audit: Missing books and unusual accounting - CBS News
Trump is also successful in using litigation to avoid paying what he owes people who provided labor and materials on his construction projects. USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills
And most importantly, he has managed to convince millions that he is a successful businessman, notwithstanding 6 bankruptcies, that allowed him to create the brand Trump and to make hundreds of millions licensing his name for products and properties.
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 Brand | Licensing Agreements Donald Trump;
From Manila to Hawaii, Meet The Licensing Partners Who Paid Trump The Most: Forbes
++++++++
Trump/NRA/Russians:
Russia researcher testifies that Trump had ‘pattern’ of Kremlin-connected money laundering
FBI investigating whether Russia funneled cash to NRA to aid Trump's campaign | McClatchy Washington Bureau
The NRA Is Part of the Trump–Russia Scandal Now
I would say those NRA-Russian-Trump connections are more "areas of inquiry" as opposed to facts or even allegations at the moment. There may be a money trail capable of being followed by Mueller's team that connects those three dots together.
Investigators Are Scrutinizing Newly Uncovered Payments By The Russian Embassy
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Trumpocracy: Lying Works--Constantly Repeating Lies Works Even Better
George Washington stated the President can not in any way "demean himself in his public character" and must always act "in such a manner as to to maintain the dignity of office". George Washington: Foundation of Presidential Leadership and Character - Google Books
So how is Donald following George's guidance, particularly in his tweets?
American democracy is on a break. Welcome to ‘Trumpocracy.’ - The Washington Post
Trumpocracy: The Corruption of the American Republic by David Frum (Frum was a speechwriter for George W. Bush, a conservative, and lifelong republican)
How Democracies Die-by Steven Levitsky, Daniel Ziblatt @ Amazon.com.
Donald will take a few errors made by the "mainstream media", which are quickly corrected, and then conclude that virtually all reports presenting reliable information are per se false when they contradict his obvious reality creations. Fact-checking President Trump's 'Fake News awards'; Trump's Fake News Awards were just another front in his fraudulent war on truth
A false statistical conclusion is derived from an extremely small sample taken from billions of accurate information bits. This Trump argument is basically designed to convince people to ignore reliable information and to rely solely on his reality creations and those made by his apparatchiks including Fox and Friends, Sean Hannity and Rush Limbaugh.
This false generalization approach has been developed into an art form by republicans, starting with Nixon back in the 1960s, and is part of their ongoing effort to undermine a free press and other institutions necessary for a properly functioning democracy. The purpose of these efforts is to acquire and maintain power.
Just by way of example, Woodward and Bernstein made an insignificant error in their Watergate reporting. They reported that Hugh Sloan made a statement to a grand jury when he only had made that statement to them. The republicans pounced on that one error to argue that all of reporting dealing with Watergate was false or what Donald and his True Believer mob call "Fake News".
It did not matter to the republicans that Woodward and Bernstein corrected the error, the mistake was minor and the gist was true, and none of the other reporting was even suspect.
How a reporting mistake nearly derailed the Watergate investigation-and how journalists recovered-The Washington Post ("Although the main point of the story was true, Nixon’s aides jumped on the mistake: Bernstein and Woodward wrote that former Nixon campaign treasurer Hugh Sloan Jr. had testified before a grand jury about Haldeman’s control of the fund. Sloan had indeed told Bernstein and Woodward about Haldeman’s role, but he had not told the grand jury.")
I been watching the GOP do this legerdemain for decades and am not surprised that it works so well for them. Why stop when false and misleading statements actually work so well for them?
Devon Nunes efforts to discredit the FBI in order to protect Donald are a more recent example.
++++++
Trump and Kelly on Immigration:
Kelly calls some of Trump's campaign pledges on immigration, wall 'uninformed,' meeting attendees say
Trump response to his Chief of Staff:
So Mexico is going to pay for the Wall and Kelly is wrong in saying Donald is uninformed. The Trumpsters believe that Mexico will pay for the wall.
Contradicting Kelly, Trump says views on Mexico wall have 'never changed' - NBC News
++++
Trump Ad Claims That Democrats Are Responsible for Every Murder Committed by an Illegal Immigrant:
DEMOCRATS “COMPLICIT” IN ALL MURDERS BY ILLEGAL IMMIGRANTS | Donald J Trump
Dreamers are viewed by republicans as illegal immigrants, even though they were only children when their parents brought them to the U.S. They were not, as the republicans frequently assert, making a decision to flout the immigration laws. Over the years, they have been integrated into U.S. society.
If one Dreamer murders anyone, this republican ad claims that the Democrats are responsible for the murder.
That is about what I would expect Donald and the Forever Trumpsters to say. It is vile, vicious, baseless and deliberately inflammatory or just more of the same from the President of the U.S.
It demonstrates that Donald is more interested in throwing red meat to his xenophobic and racist supporters than to work responsibly on compromise legislation.
It has been my observation that republican politicians, knowing their core supporters are, with a few exceptions, opposed to giving the Dreamers a path to citizenship and really just want to send them back to their country of origin. That is why Trump rescinded the DACA protections and the republicans in Congress blocked all efforts to pass legislation to that end. The Democrats are right to draw that conclusion. Maybe I will be proven wrong.
++++++
Trump’s 24-year-old drug policy appointee was let go at law firm after he ‘just didn’t show’ - The Washington Post (this guy, Taylor Weyeneth, is Trump's deputy chief of staff for the Office of National Drug Control Policy. His qualification for that position is that he worked in Trump's campaign)
Poll: More than half of Americans strongly disapprove of Trump - NBC News (this could contribute, along with other causes, to the GOP losing control in the House. Two other causes are the vulnerability of GOP representatives in high state tax states and the significant number of retiring GOP incumbents)
Canadian prime minister to bypass Trump in visit to U.S. to rally support for NAFTA - MarketWatch
Trump admin. moves to bar Haitians from agricultural, seasonal worker visas - NBC News
Exclusive: Trump considers big 'fine' over China intellectual property theft: Reuters
Donald Trump's Long History With Hush Money - The Atlantic
Adult Film Star Says That She Could Describe Trump's "Junk Perfectly" And That He Did Not Use Protection
Stormy Daniels has a started a tour to be called "Making America Horny Again".
Is the allegation about the "golden shower" by Russian hookers provided by Russian intelligence, contained in the Russian dossier, really outlandish or does it ring true given Donald's character? My initial reaction was to discount the story as mere gossip that was probably untrue. Who could be that stupid? I now would not be surprised to learn that the Russians have a tape of the act.
++++
Congressman Patrick Meehan (R-PA), a member of the House Ethics Committee, reportedly settled a sexual misconduct claim made by an aide from his congressional office fund. Congressman Combating Harassment Settled His Own Misconduct Case-The New York Times Meehan represents Pennsylvania's 7th congressional district, one that has been ridiculously drawn by the Republican legislature. Meehan is nonetheless vulnerable in 2018.
+++++
Hope Bancorp:
I am highlighting here a common issue for regional banks that arises from the recently passed tax legislation.
Most of these banks have deferred tax assets.
Understanding Deferred-Tax Assets -The Motley Fool
When the top corporate rate was lowered to 21% from 35%, those deferred tax assets became less valuable and consequently have to revalued using the lower tax rate. The result is a non-cash charge to earnings and a reduction in tangible book value since an asset is being revalued lower.
I do not view this issue as important. This is a one-time non-cash charge to earnings while the bank will realize cash savings due to the lower corporate tax rate.
Hope Bancorp will take a $.19 per share charge and will recover that amount by the end of the third quarter through lower quarterly tax expenses.
SEC Form 8-K
I recently bought back 50 shares at Item # 2.A. Bought 50 HOPE at $18.04 (1/11/18 Post)
+++++++++
1. Equity REIT Common and Preferred Stock Basket Strategy:
A. Added 50 IRT at $9.35-A Roth IRA Account:
Quote: Independence Realty Trust Inc. (IRT)
I have to pay a $4.95 commission in this account.
List of Owned Apartment Buildings
This purchase was made in a Roth IRA account.
Current Position in this Roth IRA Account:
Fidelity is my only broker that assigns a zero cost basis to shares purchased with dividends, but that is done only in a retirement account where cost basis is an irrelevant consideration. I have started and stopped reinvesting dividends in this account. I am currently buying more shares with the dividend.
Other Currently Owned Positions:
I currently own shares in other accounts. The average cost per share for 150 shares owned in my IB account, where I am not reinvesting the dividend, is $6.61. I also own 119+ shares in my Schwab account, where I stopped reinvesting dividends in April 2016 and have just decided to reinvest for awhile again. My average cost per share in that account is $7.54. I have a slight loss in a 177 share IRT position held in a satellite taxable account where I am reinvesting the dividend. My average cost per share in that account is $9.46. Lastly I have a 100 share position held in another Roth IRA account that is currently near break-even.
Overall, the current position is 707+ shares.
Realized Gains To Date = $411.81
Dividend: Prior to the 2018 first quarter, IRT paid monthly dividends at $.06 per share or $.72 annually. The company announced that it was going to transition to quarterly dividend payments for the 2018 first quarter. The quarterly dividend rate has not yet been announced by IRT.
Dividend History-IRT
Dividend Yield: 7.7% at a total cost per share of $9.35 (assuming an $.18 per share quarterly rate, same as the prior $.06 paid monthly)
Last Discussed Buys:
Item # 1. Averaged Down: Bought 50 IRT at $6.18: Update For The Equity REIT Basket Strategy As Of 2/22/16 - South Gent | Seeking Alpha
Item # 2. Added 100 IRT at $6.8 as a Trade-IB Account: Update For EQUITY REIT Basket Strategy As Of 1/29/16 - South Gent | Seeking Alpha
Last Discussed Sells: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha (Items 1, 2 and 3)
Recent Portfolio Activity:
Independence Realty Trust, Inc. Completes 2017 Investment Activity | Business Wire
Recent Stock Offering: IRT sold 14.375M shares at $9.25. The proceeds were used to purchase the apartment buildings referenced in the previous snapshot. Stock Offering Prospectus
Management Internalization: This REIT underwent a management internalization late in 2016, which is discussed here: South Gent's Comment Blog # 3: IRT Management Internalization
Recent Results: Independence Realty Trust Announces Third Quarter 2017 Financial Results
I would just make some observations about the foregoing data which are not meant to be comprehensive.
My major concern is that the dividend is bumping up against core FFO.
I am not clear how recurring and value add capital expenditures are treated in arriving at net income and the FFO numbers. I would assume that the value added capital expenditures are depreciated over their useful lives and would show up in the depreciation addition to net income. The recurring capital expenditures may be depreciated and/or expensed.
By value added, the company is referring to a belief that the capital expenditure will add to the value of the property. I only know for sure that the company guided full year depreciation and amortization expense at $.47 per share which is added back to net income in the FFO calculation.
Bottom line. I am concerned about whether cash used for capital expenditures ends up causing the dividend to exceed free cash flow consistently. I am concerned because I do not know the answer and have that question.
The occupancy rate at 94.9% is good for an apartment REIT.
The gain on the sale of assets ($.24 per share) is properly excluded from net income to arrive at FFO.
1. Equity REIT Common and Preferred Stock Basket Strategy:
A. Added 50 IRT at $9.35-A Roth IRA Account:
Quote: Independence Realty Trust Inc. (IRT)
I have to pay a $4.95 commission in this account.
List of Owned Apartment Buildings
This purchase was made in a Roth IRA account.
Current Position in this Roth IRA Account:
Fidelity is my only broker that assigns a zero cost basis to shares purchased with dividends, but that is done only in a retirement account where cost basis is an irrelevant consideration. I have started and stopped reinvesting dividends in this account. I am currently buying more shares with the dividend.
Other Currently Owned Positions:
I currently own shares in other accounts. The average cost per share for 150 shares owned in my IB account, where I am not reinvesting the dividend, is $6.61. I also own 119+ shares in my Schwab account, where I stopped reinvesting dividends in April 2016 and have just decided to reinvest for awhile again. My average cost per share in that account is $7.54. I have a slight loss in a 177 share IRT position held in a satellite taxable account where I am reinvesting the dividend. My average cost per share in that account is $9.46. Lastly I have a 100 share position held in another Roth IRA account that is currently near break-even.
Overall, the current position is 707+ shares.
Realized Gains To Date = $411.81
Dividend: Prior to the 2018 first quarter, IRT paid monthly dividends at $.06 per share or $.72 annually. The company announced that it was going to transition to quarterly dividend payments for the 2018 first quarter. The quarterly dividend rate has not yet been announced by IRT.
Dividend History-IRT
Dividend Yield: 7.7% at a total cost per share of $9.35 (assuming an $.18 per share quarterly rate, same as the prior $.06 paid monthly)
Last Discussed Buys:
Item # 1. Averaged Down: Bought 50 IRT at $6.18: Update For The Equity REIT Basket Strategy As Of 2/22/16 - South Gent | Seeking Alpha
Item # 2. Added 100 IRT at $6.8 as a Trade-IB Account: Update For EQUITY REIT Basket Strategy As Of 1/29/16 - South Gent | Seeking Alpha
Recent Portfolio Activity:
Independence Realty Trust, Inc. Completes 2017 Investment Activity | Business Wire
Recent Stock Offering: IRT sold 14.375M shares at $9.25. The proceeds were used to purchase the apartment buildings referenced in the previous snapshot. Stock Offering Prospectus
Management Internalization: This REIT underwent a management internalization late in 2016, which is discussed here: South Gent's Comment Blog # 3: IRT Management Internalization
Recent Results: Independence Realty Trust Announces Third Quarter 2017 Financial Results
I would just make some observations about the foregoing data which are not meant to be comprehensive.
My major concern is that the dividend is bumping up against core FFO.
I am not clear how recurring and value add capital expenditures are treated in arriving at net income and the FFO numbers. I would assume that the value added capital expenditures are depreciated over their useful lives and would show up in the depreciation addition to net income. The recurring capital expenditures may be depreciated and/or expensed.
By value added, the company is referring to a belief that the capital expenditure will add to the value of the property. I only know for sure that the company guided full year depreciation and amortization expense at $.47 per share which is added back to net income in the FFO calculation.
Bottom line. I am concerned about whether cash used for capital expenditures ends up causing the dividend to exceed free cash flow consistently. I am concerned because I do not know the answer and have that question.
The occupancy rate at 94.9% is good for an apartment REIT.
The gain on the sale of assets ($.24 per share) is properly excluded from net income to arrive at FFO.
2016 Annual Report (Risk factors are discussed starting at page 8. Debt is discussed starting at page 66.
++++
B. Bought Back 50 SIR at $23.1 as a Potential Dividend Harvest Trade-Used Schwab Commission Free Trade Again:
Quote: Select Income REIT (SIR)
Closing Price Day of Trade (1/12/18): $23.09 -$.36 -1.54%
Schwab History: As shown in this history, I did manage to harvest the last quarterly dividend payment and then exist the position at a profit. w
Last Round-Trip: Item 6.A. Sold 50 SIR at $25.28 (11/20/17 Post)-Item # 6.A. Bought 50 SIR at $22.95 (9/11/17 Post)
Dividend: Quarterly at $.51 per share
Select Income REIT Announces Quarterly Dividend on Common Shares
Dividend Yield at $23.1 TC = 8.83%
Dividend Harvest: This dividend is not a qualified one. My holding period for a short term trade consequently does not have to consider the holding period requirement to earn that classification.
For me, the key factors in a dividend harvest attempt are as follows: (1) a high dividend yield; (2) a price decline into the ex dividend date that is probably not based on company fundamentals/operations; (3) a purchase price within my fair value range; and (4) a willingness to own the security longer term given the dividend yield in the event I am unable to exit the position profitably within 2 months after purchase.
The last dividend harvest captured one quarterly dividend and a $126.48 profit on the shares. The holding period was slightly more than 2 months so that part of the trade was not in total compliance with the trade's objective. The annualized total return was 13.25%.
SIR Viewed Unfavorably: This is a disfavored common stock for me given the identify of SIR's external managers. I have only bought this stock as part of a dividend harvest strategy which has so far been successful. However, this last purchase was only my third attempt.
First Attempt Item # 5 Sold 50 SIR at $25.17 (8/4/12 Post)(profit snapshot=$149.58)
Creation and IPO of Industrial Logistics Properties Trust (ILPT) at $24 per share:
SIR's industrial properties were transferred to this new formed company and shares were sold to the public at $24. Prospectus
Quote from ILPT Prospectus: Industrial Logistics owns "266 properties with a total of approximately 28.5 million square feet. Our portfolio includes 16.8 million square feet of primarily industrial lands in Hawaii, or our Hawaii Properties, and approximately 11.7 million square feet of industrial and logistics properties in 24 other states, or our Mainland Properties. We refer to our Hawaii Properties and our Mainland Properties collectively as our Initial Properties. As of September 30, 2017, our Initial Properties were approximately 99.9% leased to 240 tenants with a weighted average remaining lease term of approximately 11.4 years. As of September 30, 2017, our Hawaii Properties provided 60.0% of our annualized rental revenues and our Mainland Properties provided 40.0% of our annualized rental revenues. Substantially all of our Initial Properties are industrial properties that are primarily used for manufacturing or logistics purposes, and approximately 72.6% of our annualized rental revenues as of September 30, 2017 were from logistics properties. We intend to expand our portfolio by acquiring additional industrial and logistics properties throughout the country."
SIR retains 45M share or a 69.2% ownership stake and received $750M.
SIR used the $750M to pay down its revolver and to redeem its 2018 2.85% senior unsecured notes: SEC Form 8-K
Select Income REIT Announces Early Redemption of its $350 Million of Outstanding 2.85% Senior Notes
Last Earnings Report: Select Income REIT Announces Third Quarter 2017 Results
"Net income attributed to SIR per diluted share for the nine months ended September 30, 2017 includes a write-off of straight line rents receivable of $12.5 million, or $0.14 per diluted share, and a loss on asset impairment of $4.0 million, or $0.05 per diluted share, both of which resulted from a tenant bankruptcy, as well as estimated business management incentive fees of $3.3 million, or $0.04 per diluted share. Two of SIR's properties are impacted by this tenant bankruptcy; one of those properties is substantially vacant and the other is occupied by a subtenant of the former tenant who is now contractually obligated to pay SIR rent in an amount equal to the rent under the former tenant's lease."
10-Q for the Q/E 9/30/17 (debt discussed starting at page 9 though page 11)
Q3 2017 Results - Earnings Call Transcript | Seeking Alpha
Select Income Senior Unsecured Bonds:
I have traded SIR's SU bonds. Item 3.A. Sold 2 Select Income 4.5% SU Bonds at 102 Maturing on 2/1/25 (9/11/17 Post)- Item # 1 Bought at 98.139: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha
I currently own 2 Select Income 4.25% SU bonds maturing on 5/1/2024 that were bought at 99.941 Stocks, Bonds & Politics: Item # 1.A. That bond has been drifting down some in price after trading over 102 last October. I do not believe that the price decline is due to SIR's credit risk, but instead to a rise in intermediate term interest rates. Bond Detail
++++
B. Bought Back 50 SIR at $23.1 as a Potential Dividend Harvest Trade-Used Schwab Commission Free Trade Again:
Quote: Select Income REIT (SIR)
Closing Price Day of Trade (1/12/18): $23.09 -$.36 -1.54%
Schwab History: As shown in this history, I did manage to harvest the last quarterly dividend payment and then exist the position at a profit. w
Last Round-Trip: Item 6.A. Sold 50 SIR at $25.28 (11/20/17 Post)-Item # 6.A. Bought 50 SIR at $22.95 (9/11/17 Post)
Dividend: Quarterly at $.51 per share
Select Income REIT Announces Quarterly Dividend on Common Shares
Dividend Yield at $23.1 TC = 8.83%
Dividend Harvest: This dividend is not a qualified one. My holding period for a short term trade consequently does not have to consider the holding period requirement to earn that classification.
For me, the key factors in a dividend harvest attempt are as follows: (1) a high dividend yield; (2) a price decline into the ex dividend date that is probably not based on company fundamentals/operations; (3) a purchase price within my fair value range; and (4) a willingness to own the security longer term given the dividend yield in the event I am unable to exit the position profitably within 2 months after purchase.
The last dividend harvest captured one quarterly dividend and a $126.48 profit on the shares. The holding period was slightly more than 2 months so that part of the trade was not in total compliance with the trade's objective. The annualized total return was 13.25%.
SIR Viewed Unfavorably: This is a disfavored common stock for me given the identify of SIR's external managers. I have only bought this stock as part of a dividend harvest strategy which has so far been successful. However, this last purchase was only my third attempt.
First Attempt Item # 5 Sold 50 SIR at $25.17 (8/4/12 Post)(profit snapshot=$149.58)
Creation and IPO of Industrial Logistics Properties Trust (ILPT) at $24 per share:
SIR's industrial properties were transferred to this new formed company and shares were sold to the public at $24. Prospectus
Quote from ILPT Prospectus: Industrial Logistics owns "266 properties with a total of approximately 28.5 million square feet. Our portfolio includes 16.8 million square feet of primarily industrial lands in Hawaii, or our Hawaii Properties, and approximately 11.7 million square feet of industrial and logistics properties in 24 other states, or our Mainland Properties. We refer to our Hawaii Properties and our Mainland Properties collectively as our Initial Properties. As of September 30, 2017, our Initial Properties were approximately 99.9% leased to 240 tenants with a weighted average remaining lease term of approximately 11.4 years. As of September 30, 2017, our Hawaii Properties provided 60.0% of our annualized rental revenues and our Mainland Properties provided 40.0% of our annualized rental revenues. Substantially all of our Initial Properties are industrial properties that are primarily used for manufacturing or logistics purposes, and approximately 72.6% of our annualized rental revenues as of September 30, 2017 were from logistics properties. We intend to expand our portfolio by acquiring additional industrial and logistics properties throughout the country."
SIR retains 45M share or a 69.2% ownership stake and received $750M.
Select Income REIT Announces Early Redemption of its $350 Million of Outstanding 2.85% Senior Notes
Last Earnings Report: Select Income REIT Announces Third Quarter 2017 Results
"Net income attributed to SIR per diluted share for the nine months ended September 30, 2017 includes a write-off of straight line rents receivable of $12.5 million, or $0.14 per diluted share, and a loss on asset impairment of $4.0 million, or $0.05 per diluted share, both of which resulted from a tenant bankruptcy, as well as estimated business management incentive fees of $3.3 million, or $0.04 per diluted share. Two of SIR's properties are impacted by this tenant bankruptcy; one of those properties is substantially vacant and the other is occupied by a subtenant of the former tenant who is now contractually obligated to pay SIR rent in an amount equal to the rent under the former tenant's lease."
10-Q for the Q/E 9/30/17 (debt discussed starting at page 9 though page 11)
Q3 2017 Results - Earnings Call Transcript | Seeking Alpha
Select Income Senior Unsecured Bonds:
I have traded SIR's SU bonds. Item 3.A. Sold 2 Select Income 4.5% SU Bonds at 102 Maturing on 2/1/25 (9/11/17 Post)- Item # 1 Bought at 98.139: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha
I currently own 2 Select Income 4.25% SU bonds maturing on 5/1/2024 that were bought at 99.941 Stocks, Bonds & Politics: Item # 1.A. That bond has been drifting down some in price after trading over 102 last October. I do not believe that the price decline is due to SIR's credit risk, but instead to a rise in intermediate term interest rates. Bond Detail
2. Short Term Bond/CD Ladder Basket Strategy:
A. Added 1 Public Service Electric & Gas 2% First Mortgage Bond Maturing on 8/15/19:
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Wholly Owned Subsidiary of Public Service Enterprise Group (PEG)
Credit Ratings:
(the first mortgage bonds of Public Service Electric & Gas, a subsidiary of PSEG, are rated Aa3 while this PSEG subsidiary's SU bonds are rated at A2)
Bought at a Total Cost of 99.894
YTM at TC Then at 2.065%
Current Yield at 2.002%
Paid 99.794
I now own 2 bonds.
B. Added 1 McDonalds 1.875% SU Bond Maturing on 5/29/19:
FINRA Page: Bond Detail (prospectus linked)
Bought at a Total Cost of 99.740
YTM at TC Then at 2.059%
Current Yield at 1.88%
I now own 5 bonds.
C. Bought 1 Bar Harbor 2% CD (monthly interest payments) Maturing on 12/30/19 (2 year CD):
Holding Company: Bar Harbor Bankshares (BHB)
D. ADDED 2 Northeast Utilities 1.45% SU Bonds Maturing on 5/1/18:
On 9/13/17, I sold 2 Northeast Utilities 2.8% SU bonds at 101.047 maturing on 5/1/23. Item # 6.A. When the 1.45% SU bond matures on 5/1/18, I may redirect the proceeds back into the 2023 bond depending on the then existing YTM and current yield. The price would have to be at a minimum below 97. Judging from the FINRA price chart for the 2023 SU bond, this has not occurred since 2015. However, during the 2013 interest rate spike, the price fell to a slither above 90 at one point.
FINRA Page: Bond Detail
Issuer: Eversource Energy (ES)(Name Changed from Northeast Utilities to ES)
ES Analyst Estimates
Eversource Energy Reports Third Quarter 2017 Results
Credit Ratings:
Fitch Rates Eversource Energy's Senior Notes 'BBB+' Bought at a Total Cost of 99.931
YTM at TC Then at 1.64%
Current Yield at 1.451%
I now own 4 bonds.
When I bought this bond, the best CD rate. for a similar maturity was 1.4% so I am picking up some additional yield with the bond.
E. BOUGHT 2 EXXON 1.819% SU Bonds Maturing on 3/15/19:
FINRA Page: Bond Detail (Prospectus linked)
Credit Ratings:
Issuer: Exxon Mobil Corp.
XOM Analyst Estimates
Bought at a Total Cost of 99.966
YTM at TC Then at 1.846%
Current Yield at 1.8196%
F. Bought 2 Banc of California 1.5% CDs Maturing on 3/29/18 (3 month CDs):
Holding Company: Banc of California Inc. (BANC)
BANC Analyst Estimates
G. Bought 2 Dominion Resources 1.875% SU Bonds Maturing on 1/15/19:
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Fitch Affirms Dominion Resources & Subs; Dominion Gas Holdings' Outlook Revised to Negative
Issuer: Dominion Energy Inc. (D) (renamed from Dominion Resources)
D Analyst Estimates
Bought at a Total Cost of 99.912
YTM at TC Then at 1.959%
Current Yield at 1.8757%
H. Added 1 Nextera 1.649% SU Bond Maturing on 9/1/18:
I now own 6 bonds.
Finra Page: Bonds Detail (prospectus linked)
Credit Ratings:
Fitch Rates Nextera Energy Capital Holdings' Debentures 'A-'; Outlook Stable
Issuer: Next Energy Capital Guaranteed by NextEra Energy Inc (NEE)
NEE Analyst Estimates
Bought at a Total Cost of 99.898
YTM at TC Then at 1.799%
Current Yield at 1.6507%
This is a bond that I may keep buying in one bond lots when and if the total cost is less than 99.9. A YTM of about 1.8% will look better with less time to maturity.
3. Small Ball:
A. Sold 20 IPG at $21.575-Used Commission Free Trade:
Profit Snapshot: +$55.94
Stocks, Bonds & Politics: Item 2.B. Bought 20 IPG at an Average Cost Per Share of $18.73 (11/9/17 Post)
I stated in that post that I was building a "non-trading position in my Fidelity account". I forgot that I was not supposed to trade this 20 share lot. But, even if I remembered, I am in a sell mood.
Quote: Interpublic Group of Cos. (IPG)
I sold 50 shares on 12/4/17 at $20.77: Item # 4.A. (profit snapshot $81.29).
Better than a loss, which is about all that I can say.
B. Bought 10 SBRA at $17.9-Used Commission Free Trade:
QUOTE: Sabra Healthcare REIT Inc. (SBRA)
Sabra Health Care REIT, Inc.-Home
Sabra SEC Filings
Nursing home REITs are not safe or blue chip investments.
This REIT owns both nursing homes and senior living properties.
The general idea is to average down in 10 shares lots as long as I have commission free trades.
Chart: Significant Bear Trend.
Sabra Acquires Care Capital Properties:
Sabra and Care Capital Properties Complete
Sabra Health Care and Care Capital Properties to Combine in $7.4 Billion Transaction to Create a Premier Healthcare REIT
Portfolio Acquisitions Since Care Capital:
Sabra Enters into Agreements to Acquire 49% Equity Interest in Senior Housing Joint Ventures Managed by Enlivant-Places Sabra on Path to 100% Ownership of Portfolio ("Sabra has entered into definitive agreements to acquire a 49% equity interest in entities that collectively own 183 senior housing communities managed by Enlivant (the “Enlivant Joint Ventures”). The transaction values the portfolio at $1.62 billion and Sabra’s 49% minority interest investment at $371.0 million. . . . Sabra is making this investment with the expectation that, subject to the performance of the joint ventures, Sabra would ultimately own the entire 183 asset portfolio, and accordingly the joint venture agreements include an option for Sabra to acquire the remaining majority interest in the Enlivant Joint Ventures over the next three years.')
The company raised funds with a 16M share offering sold to the public at at $21 per share. Prospectus (see "Use of Proceeds" at page S-12) The underwriters exercised their over allotment option and sold an additional 2.4M at $21. SEC Form 8-K
Sabra Quickly Moves Through Sabra 2.0 With the CCP Acquisition to Sabra 3.0; Follows Up Announcement of $371 Million Investment in Enlivant Joint Ventures With (1) $430 Million Sale/Leaseback Transaction With a Premier SNF Operator and (2) a Divestiture Plan for Entire Genesis Portfolio in 2018; Reaffirms 2017 Outlook and Updates 2018 Outlook
Dividend: Quarterly at $.45 (raised from $.43 for the last quarterly payment)
There was a dividend proration relating to the acquisition of Care Capital Properties as described here:
Dividend Yield: About 10.06% Based on the Existing Dividend Rate and a Total Cost per share of $17.9.
Last Earnings Report: Sabra Reports Third Quarter 2017 Results and Improved Balance Sheet With Leverage Lowered to 4.79x; Increases Quarterly Common Stock Dividend by 5%; Reports Smooth Integration of CCP and Subsequent Investments; Reaffirms 2017 and 2018 Guidance
FFO Reconciliation:
This REIT does reduce FFO by the non-revenues created by the accounting professions straight line rent adjustments. There is a major expense item for merger and acquisition costs that is added back to FFO to arrive at AFFO. In one sense, the AFFO number is not a funds available for distribution number for this quarter due to that add back. Cash expenses relating to an acquisition are not available for distribution to shareholders. However, it appears that most of the add backs are related to the CCP acquisition and are not recurring.
The normalized AFFO of $.60 is probably close to FAD after excluding one time cash expenses relating to the CCP acquisition.
Top Ten Tenants as of 9/30/17:
Note that SBRA has Signature as a tenant. The Genesis Healthcare exposure is being reduced and SBRA hope to eliminate its exposure this year.
Sabra Health Care Vs. Omega Healthcare: Side-By-Side - Omega Healthcare Investors, Inc (NYSE:OHI) | Seeking Alpha
Pro Forma Tenant Coverages:
Debt:
10-Q for the Q/E 9/30/17 (debt discussed starting at page 17)
Other Recent News Releases:
Sabra Health Care REIT, Inc. Completes the Sale of 20 Facilities Leased to Genesis (1/2/18 Press Release)("20 facilities leased to Genesis Healthcare, Inc. (“Genesis”) located in Kentucky, Ohio and Indiana for $103.3 million, as expected. .. Under the terms of the memoranda of understanding, Genesis’s annual rent obligations to Sabra will be reduced by $9.3 million as a result of the sale of these facilities. Sabra expects to use the proceeds from the sale to repay borrowings under its revolving credit facility.")
Sabra Provides Update on Genesis Exodus; Reaffirms 2017 and 2018 Guidance (11/13/17)
Fitch Issues Report Highlighting Sabra Health Care REIT, Inc. and the BBB- Rating Affirmed on September 26, 2017; Fitch Affirms Sabra Health Care REIT at 'BBB-'; Outlook Stable
Given the heightened risks, I will average down but not up. I will buy only 10 share lots until I reach 50 shares. I will reinvest the dividend for now.
4. Sold 24.977 Shares of the Vanguard Capital Opportunity Fund at $71.16 (up 1.17% day of trade):
Quote: Vanguard Capital Opportunity Fund; Investor (VHCOX)
Morningstar Page: Rated 4 Stars
Profit Snapshot-Used Specific Identification Cost Basis Method: +$562.11
I am in a paring mood.
The return YTD through 1/17/18 was 7.01% with an average annual total return of 20.46% over the past 5 years through the same date.
I kept the 78.023 shares purchased for $3K in 2013:
Stocks, Bonds & Politics: Item # 5 Initiated Position in VHCOX (4/9/13 Post)
Total Realized Gains for this Fund (2017-2018) = $1,307.32
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.
C. Bought 1 Bar Harbor 2% CD (monthly interest payments) Maturing on 12/30/19 (2 year CD):
Holding Company: Bar Harbor Bankshares (BHB)
D. ADDED 2 Northeast Utilities 1.45% SU Bonds Maturing on 5/1/18:
On 9/13/17, I sold 2 Northeast Utilities 2.8% SU bonds at 101.047 maturing on 5/1/23. Item # 6.A. When the 1.45% SU bond matures on 5/1/18, I may redirect the proceeds back into the 2023 bond depending on the then existing YTM and current yield. The price would have to be at a minimum below 97. Judging from the FINRA price chart for the 2023 SU bond, this has not occurred since 2015. However, during the 2013 interest rate spike, the price fell to a slither above 90 at one point.
FINRA Page: Bond Detail
Issuer: Eversource Energy (ES)(Name Changed from Northeast Utilities to ES)
ES Analyst Estimates
Eversource Energy Reports Third Quarter 2017 Results
Credit Ratings:
Fitch Rates Eversource Energy's Senior Notes 'BBB+' Bought at a Total Cost of 99.931
YTM at TC Then at 1.64%
Current Yield at 1.451%
I now own 4 bonds.
When I bought this bond, the best CD rate. for a similar maturity was 1.4% so I am picking up some additional yield with the bond.
E. BOUGHT 2 EXXON 1.819% SU Bonds Maturing on 3/15/19:
FINRA Page: Bond Detail (Prospectus linked)
Credit Ratings:
Issuer: Exxon Mobil Corp.
XOM Analyst Estimates
Bought at a Total Cost of 99.966
YTM at TC Then at 1.846%
Current Yield at 1.8196%
F. Bought 2 Banc of California 1.5% CDs Maturing on 3/29/18 (3 month CDs):
Holding Company: Banc of California Inc. (BANC)
BANC Analyst Estimates
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Fitch Affirms Dominion Resources & Subs; Dominion Gas Holdings' Outlook Revised to Negative
Issuer: Dominion Energy Inc. (D) (renamed from Dominion Resources)
D Analyst Estimates
Bought at a Total Cost of 99.912
YTM at TC Then at 1.959%
Current Yield at 1.8757%
H. Added 1 Nextera 1.649% SU Bond Maturing on 9/1/18:
I now own 6 bonds.
Finra Page: Bonds Detail (prospectus linked)
Credit Ratings:
Fitch Rates Nextera Energy Capital Holdings' Debentures 'A-'; Outlook Stable
Issuer: Next Energy Capital Guaranteed by NextEra Energy Inc (NEE)
NEE Analyst Estimates
Bought at a Total Cost of 99.898
YTM at TC Then at 1.799%
Current Yield at 1.6507%
This is a bond that I may keep buying in one bond lots when and if the total cost is less than 99.9. A YTM of about 1.8% will look better with less time to maturity.
3. Small Ball:
A. Sold 20 IPG at $21.575-Used Commission Free Trade:
Profit Snapshot: +$55.94
Stocks, Bonds & Politics: Item 2.B. Bought 20 IPG at an Average Cost Per Share of $18.73 (11/9/17 Post)
I stated in that post that I was building a "non-trading position in my Fidelity account". I forgot that I was not supposed to trade this 20 share lot. But, even if I remembered, I am in a sell mood.
Quote: Interpublic Group of Cos. (IPG)
I sold 50 shares on 12/4/17 at $20.77: Item # 4.A. (profit snapshot $81.29).
Better than a loss, which is about all that I can say.
B. Bought 10 SBRA at $17.9-Used Commission Free Trade:
QUOTE: Sabra Healthcare REIT Inc. (SBRA)
Sabra Health Care REIT, Inc.-Home
Sabra SEC Filings
Nursing home REITs are not safe or blue chip investments.
This REIT owns both nursing homes and senior living properties.
The general idea is to average down in 10 shares lots as long as I have commission free trades.
Chart: Significant Bear Trend.
Sabra Acquires Care Capital Properties:
Sabra and Care Capital Properties Complete
Sabra Health Care and Care Capital Properties to Combine in $7.4 Billion Transaction to Create a Premier Healthcare REIT
Portfolio Acquisitions Since Care Capital:
Sabra Enters into Agreements to Acquire 49% Equity Interest in Senior Housing Joint Ventures Managed by Enlivant-Places Sabra on Path to 100% Ownership of Portfolio ("Sabra has entered into definitive agreements to acquire a 49% equity interest in entities that collectively own 183 senior housing communities managed by Enlivant (the “Enlivant Joint Ventures”). The transaction values the portfolio at $1.62 billion and Sabra’s 49% minority interest investment at $371.0 million. . . . Sabra is making this investment with the expectation that, subject to the performance of the joint ventures, Sabra would ultimately own the entire 183 asset portfolio, and accordingly the joint venture agreements include an option for Sabra to acquire the remaining majority interest in the Enlivant Joint Ventures over the next three years.')
The company raised funds with a 16M share offering sold to the public at at $21 per share. Prospectus (see "Use of Proceeds" at page S-12) The underwriters exercised their over allotment option and sold an additional 2.4M at $21. SEC Form 8-K
Sabra Quickly Moves Through Sabra 2.0 With the CCP Acquisition to Sabra 3.0; Follows Up Announcement of $371 Million Investment in Enlivant Joint Ventures With (1) $430 Million Sale/Leaseback Transaction With a Premier SNF Operator and (2) a Divestiture Plan for Entire Genesis Portfolio in 2018; Reaffirms 2017 Outlook and Updates 2018 Outlook
Dividend: Quarterly at $.45 (raised from $.43 for the last quarterly payment)
There was a dividend proration relating to the acquisition of Care Capital Properties as described here:
Dividend Yield: About 10.06% Based on the Existing Dividend Rate and a Total Cost per share of $17.9.
Last Earnings Report: Sabra Reports Third Quarter 2017 Results and Improved Balance Sheet With Leverage Lowered to 4.79x; Increases Quarterly Common Stock Dividend by 5%; Reports Smooth Integration of CCP and Subsequent Investments; Reaffirms 2017 and 2018 Guidance
FFO Reconciliation:
This REIT does reduce FFO by the non-revenues created by the accounting professions straight line rent adjustments. There is a major expense item for merger and acquisition costs that is added back to FFO to arrive at AFFO. In one sense, the AFFO number is not a funds available for distribution number for this quarter due to that add back. Cash expenses relating to an acquisition are not available for distribution to shareholders. However, it appears that most of the add backs are related to the CCP acquisition and are not recurring.
The normalized AFFO of $.60 is probably close to FAD after excluding one time cash expenses relating to the CCP acquisition.
Top Ten Tenants as of 9/30/17:
Note that SBRA has Signature as a tenant. The Genesis Healthcare exposure is being reduced and SBRA hope to eliminate its exposure this year.
Sabra Health Care Vs. Omega Healthcare: Side-By-Side - Omega Healthcare Investors, Inc (NYSE:OHI) | Seeking Alpha
Pro Forma Tenant Coverages:
10-Q for the Q/E 9/30/17 (debt discussed starting at page 17)
Other Recent News Releases:
Sabra Health Care REIT, Inc. Completes the Sale of 20 Facilities Leased to Genesis (1/2/18 Press Release)("20 facilities leased to Genesis Healthcare, Inc. (“Genesis”) located in Kentucky, Ohio and Indiana for $103.3 million, as expected. .. Under the terms of the memoranda of understanding, Genesis’s annual rent obligations to Sabra will be reduced by $9.3 million as a result of the sale of these facilities. Sabra expects to use the proceeds from the sale to repay borrowings under its revolving credit facility.")
Fitch Issues Report Highlighting Sabra Health Care REIT, Inc. and the BBB- Rating Affirmed on September 26, 2017; Fitch Affirms Sabra Health Care REIT at 'BBB-'; Outlook Stable
Given the heightened risks, I will average down but not up. I will buy only 10 share lots until I reach 50 shares. I will reinvest the dividend for now.
4. Sold 24.977 Shares of the Vanguard Capital Opportunity Fund at $71.16 (up 1.17% day of trade):
Quote: Vanguard Capital Opportunity Fund; Investor (VHCOX)
Morningstar Page: Rated 4 Stars
Profit Snapshot-Used Specific Identification Cost Basis Method: +$562.11
The return YTD through 1/17/18 was 7.01% with an average annual total return of 20.46% over the past 5 years through the same date.
I kept the 78.023 shares purchased for $3K in 2013:
Stocks, Bonds & Politics: Item # 5 Initiated Position in VHCOX (4/9/13 Post)
Total Realized Gains for this Fund (2017-2018) = $1,307.32
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.
Trustco (TRST), a recent addition to my regional bank basket strategy, reported after the close:
ReplyDeletehttp://globenewswire.com/news-release/2018/01/22/1298756/0/en/TrustCo-Announces-Fourth-Quarter-and-Full-Year-2017-Results-Net-Income-Before-Taxes-Up-12-9-Over-Prior-Year-Quarter.html
The report contains what will be a normal noise item in earnings reports for the 2017 4th quarter.
Due to the corporate income tax reduction, TRST had to revalue its deferred tax asset. This revaluation resulted in a non-cash charge of $5.1M that was classified as an additional income tax expense even though no additional taxes are paid.
That charge reduces net income and lowers other financial metrics connected to income like return on assets and return on equity. All of the foregoing is explained in the press release.
Before that non-cash charge, pre-tax income rose 12.9% for the quarter to $19.7M.
NIM: 3.29%, up 16 basis points
Efficiency Ratio: 53.13%
Nonperforming assets (NPAs) fell by $1.7 million compared to December 31, 2016, with the NPA ratio at .56%
Charge-Off Ratio: 0.02% of average loans on an annualized basis
Coverage Ratio = 181.2%
Average loans were up $202.6 million or 5.9%
"For 2018 the Company is expecting its combined effective tax rate to be approximately 23.5%, based on currently known information"
That effective tax rate includes state taxes. The effective tax rate for the 2017 3rd quarter was 36.9%.
Page 56
https://www.sec.gov/Archives/edgar/data/357301/000114036117041354/form10q.htm
Last Discussed:
Item # 6 Bought 50 TRST at $8.9
https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent.html
That post simply refers to another:
Item 2.A. Bought 50 TRST at $9.2-Used Commission Free Trade
https://tennesseeindependent.blogspot.com/2017/12/observations-and-sample-of-recent_30.html
Closed at $9.2 today:
https://www.marketwatch.com/investing/stock/trst
The ten year treasury yield break out above 2.62% has not been convincing so far. The yield has declined back to 2.618% in early morning trading today (as of 10:09 E.S.T.)
ReplyDeletehttps://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
That decline is giving equity REITs a lift.
Vanguard REIT ETF
$79.83 +$0.40 +0.50%
Last Updated: Jan 23, 2018 at 10:10 a.m. EST
https://www.marketwatch.com/investing/fund/vnq
An index ETF that frequently has negative correlation to VNQ is KRE:
SPDR S&P Regional Banking ETF
$62.97 -$0.23 -0.36%
Last Updated: Jan 23, 2018 at 10:11 a.m. EST
https://www.marketwatch.com/investing/fund/kre
If I had to pinpoint a reason, I would just refer to the decline in the German 10 year yield today.
Another possible explanation is a flight to safety. Trump's imposition of tariffs on solar equipment and washing machines move the U.S. closer to a potential trade war. There will be a tipping point, but it is really impossible to say when the line will be crossed that results in various acts of retaliation. China's response may leak into a withdrawal of treasury purchases which would tend to increase rates. U.S. tariffs on imports will contribute some to inflation.
The Procter & Gamble Company (PG)
ReplyDelete$88.72 -$3.17 (-3.44%)
As of 1:19PM EST.
PG is dragging the DJIA down some today.
On the surface, it appears that PG beat the consensus estimate by $.05 per share. Several financial websites are reporting that beat without mentioning that the entire $.05 was due to a favorable one-time tax benefit caused by the recently passed tax legislation that was not included in analyst estimates. More importantly, margins declined by 1%. Reuters mentions those items:
https://www.reuters.com/article/us-procter-gamble-co-results/pg-second-quarter-beats-but-margins-worry-investors-idUSKBN1FC1JT
I did sell my 10 shares of PG at $91.59 yesterday, believing that margin pressure in the shaving business would be under pressure. I based that simply on other companies offering as good or better blades at cheaper prices than Gillette. I mentioned using blades manufactured by a Korean firm when I last discussed that pressure. Others mention the Dollar Shave club, recently acquired by Unilever, but I have not tried those blades.
I am entertaining myself with these 10 shares buys using commission free trades.
I will consider buying back my 10 share lot when and if the price falls below my last purchase price.
I did hold the shares long enough to receive the quarterly dividend which I may use as a downpayment for 1 seconds at the nursing home.
Monday, October 30, 2017
B. Bought 10 of PG at $86.99-Used Commission Free Trade:
https://tennesseeindependent.blogspot.com/2017/10/observations-and-sample-of-recent_30.html
Huntington Bancshares Inc. (HBAN)
ReplyDeleteClosed at $16.04 +.01
https://www.marketwatch.com/investing/stock/hban
Huntington reported 2017 4th quarter earnings today.
https://www.prnewswire.com/news-releases/huntington-bancshares-incorporated-reports-record-quarterly-and-annual-earnings-300586572.html
When I read the first sentence that net income was up 81% to $432M compared to the 2016 4th quarter, I knew without reading more that HBAN had to revalue a "deferred tax liability" due to the recently passed tax legislation. That added what I would call an accountant's creation of approximately $123M in income or about 11 cents per share. That number will screw up ROA, ROE, tangible book value, and the TTM P/E.
For my purposes, I will use $.98 as the E.P.S. for 2017 which excludes that item and merger expenses related to the First Merit acquisition.
That number gives me a TTM P/E of 16.37 based on today's $16.04 closing price, which I regard as high but not in nose bleed territory for a super regional.
I recently bought a 100 share lot:
Thursday, December 7, 2017
Item 1.A. Bought 100 HBAN at $13.58-Used Commission Free Trade:
https://tennesseeindependent.blogspot.com/2017/12/observations-and-sample-of-recent_7.html
Other recently purchased regional bank, FNB, reported today and had to take a $54M charge since it had a "deferred tax asset".
"Fourth quarter operating net income per diluted common share (non-GAAP) was $0.24, which excludes the after-tax impact of merger-related expenses of $0.7 million and the impact of a reduction in the valuation of net deferred tax assets of $54.0 million due to the enactment of the Tax Cuts and Jobs Act during the quarter."
https://www.prnewswire.com/news-releases/fnb-corporation-reports-fourth-quarter-and-full-year-2017-earnings-300586370.html
Novartis is trading up in Switzerland after reporting earnings.
ReplyDeleteNovartis AG (NOVN)
CHF 86.26 +CHF2.66 +3.18%
https://www.marketwatch.com/investing/Stock/NOVN?countrycode=CH
I own about 135 shares of NVS which is priced in USDs.
The earnings report is summarized here:
https://www.zacks.com/stock/news/289845/novartis-nvs-q4-earnings-amp-sales-top-on-cosentyx-entresto
Importantly, revenues in its Alcon division rose 6%.
Earnings Release PDF:
https://www.novartis.com/sites/www.novartis.com/files/q4-2017-media-release-en.pdf
On 1/22/18, NVS reported positive trial results on its migraine drug:
https://www.novartis.com/news/media-releases/novartis-reports-erenumab-met-all-primary-and-secondary-endpoints-unique-phase-iiib-study-episodic-migraine-patients-who-have-failed-multiple-prior-preventive
The U.S. Treasury Secretary is trying to talk down the dollar which is working at the moment:
https://www.marketwatch.com/investing/index/dxy
The NVS price is dependent on the CHF price converted into USDs. The CHF has been in an uptrend since about 12/26/17:
https://www.marketwatch.com/investing/currency/chfusd/charts
I would want to see a convincing breakout above the double top shown in a one year chart which is just south of 1.06 (i.e. 1 CHF buying more than U.S.$1.06) Currently the exchange rate is 1.0533 up .86% as of 9:00 E.S.T.
Suez: One of my recent buys that is not going to work anytime soon, or what I would call a less than optimal buy:
ReplyDeletehttps://www.bloomberg.com/news/articles/2018-01-24/suez-has-record-decline-after-warning-profit-will-miss-estimates
There is another burst higher in interest rates today that looks more convincing to me than the last break-out above 2.62%:
ReplyDeleteU.S. 10 Year Treasury Note
2.658% + 0.043%
Last Updated: Jan 24, 2018 at 10:57 a.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
The German 10 year has made a large percentage move up in yield:
Germany 10 Year Government Bond
0.597% + 0.095%
https://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
The decline in the USD is giving the precious metals a boost.
Gold Apr 2018
1,358.80 +17.10 +1.27%
https://www.marketwatch.com/investing/future/gold
SPDR Gold Shares
$128.44 +$ 1.15 +0.90%
Last Updated: Jan 24, 2018 at 10:59 a.m. EST
Oil continues to burst up in price:
Crude Oil Mar 2018
$65.10 +$0.63
https://www.marketwatch.com/investing/future/crude%20oil%20-%20electronic
A broad commodity index, which I recently discussed, is rising as well:
iPath Bloomberg Commodity Index Total Return ETN
$25.16 +$ 0.29 +1.17%
Last Updated: Jan 24, 2018 at 11:01 a.m. EST
https://www.marketwatch.com/investing/stock/djp
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent_25.html