Monday, January 8, 2018

Observations and Sample of Recent Trades: DJP, FNSR, OCLR

Economy:

The BLS reported that the economy added 148K jobs last month. The consensus estimate was for 198K. Average hourly wages increased by $.65 or 2.5% since December 2016. The BLS trimmed its prior estimates for October and November by 9K. Employment Situation Summary


ADP reported last Thursday a 250K increase in private sector jobs last month.  ADP National Employment Report | December 2017


U.S. trade deficit swells in November to largest since January 2012 at $50.5B- MarketWatch

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Market Commentary and Markets

For 2018, GS warns about cryptocurrencies and predicts 4 FED rate hikes, with core inflation and wages accelerating, real GDP growth of 2.6% and a decline in unemployment to 3.5%. Goldman Sees Crypto, Credit Shadowing Robust 2018 U.S. Economy - Bloomberg

Higher than expected inflation and interest rates remain an important risk to stock market valuations at current levels.  


A bitcoin crash, a burst housing bubble-brace for these 30 risks, says giant bank - MarketWatch I would agree with Josh Brown who is quoted in that article as saying the key is “managing portfolios that offer an answer to multitudes of potential outcomes” rather than preparing lists of what can go right or wrong. 


It is important to recognize factors that can undermine either a bull or bear case. Besides geopolitical risks that are hard to predict, my current list would be (1) trade wars; (2) higher than expected inflation and interest rates and (3) slower than expected growth this year with recession odds increasing for 2019.  


As of 12/29/17, the GAAP TTM P/E for the S & P 500 was at 21.82 and 26.62 for the Nasdaq 100. The Russell 2000 index was at 131.96 using the past 12 month's GAAP earnings. It is only by excluding a large number of stocks with no earnings that the Russell 2000 P/E falls close to earth. The S & P P/E based on non-GAAP estimates for the next 12 months was then at 20.02. 

When looking at an ETF for the Russell 2000, the sponsor claims a P/E of 21.44 as of 12/28/17 which sounds a lot better than 131.96. 





iShares Russell 2000 ETF | IWM 


I would recommend clicking the "i" letter next to the P/E ratio number  which states that negative P/E ratios are excluded from that number. Here is the fun part. Almost 1/3rd of Russell 2000 companies have negative P/Es, or put another way, are losing money. Here’s the shocking truth about the Russell 2000’s P/E ratio - MarketWatch 


Since 12/29/17, the P/E ratios for the major indexes have increased some.  The TTM P/E for the S & P 500 was 22.09 as of last Friday with the 12 month forward P/E based on estimated non-GAAP earnings was 19.25.


The Bond Ghouls are forecasting that a .25% increase in the federal funds rate is more likely than not in March. Countdown to FOMC: CME FedWatch Tool

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Home Prices


The following chart suggests that trouble may be developing in the U.S. housing market again. 


Home Price to Income Ratio: 




Sourced: Bracing Yourself for a Possible Near Term Melt Up.pdf by Jeremy Grantham

When I add that ratio to other actual or potential negative developments, including a rise in mortgage interest rates and the recent changes in tax laws, there is a dangerous mix of factors coalescing for new home construction and existing home prices. 
  
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Trump and the Stock Market:

Trump claims that the stock market would have fallen 50% if Crooked Hillary had won. That kind of statement will work only on the True Believers:  


2017 S & P 500 Total Return Measured by the ETF SPY =  21.7%


SPY's Most Recent Total Returns in Excess of the 2017 Number: 


2009 = +26.37%

2013 = +32.31%

Returns During 8 Year Term Presidents Since WWII (includes Truman at about 7 years which includes the remainder of FDR's 4th term)


Obama (D): 233.71% 

Eisenhower (R): 217.25%
Truman (D): 207.98%
Reagan (R): 207.83%
Clinton (D): +163.25%
Nixon (R) -3.5%
Bush Jr. (R) -26.75%

If Trump ends up being a 1 term President, then the comparisons would be with the following: 

Lyndon Johnson (D) 73.17%   (includes remainder of Kennedy's term)

Daddy Bush (R): 73.13% 
Carter (D): 59.33%
Ford (R): 42.53%
Kennedy (D):  30.42%  (less than 4 years)

While Donald is taking the credit for a good year in the market, I seriously doubt that he will take any responsibility whatsoever for a bad one. That will certainly be someone else's fault. Bush Jr. had some good years too, but ended down 26.75%. 


Sourced Forbes


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Trump and Obstruction of Justice: 

More evidence has emerged that Trump attempted to interfere with the FBI's Russian investigation. Trump had several people, including the White House counsel, try to persuade Sessions to remain in charge of that investigation. Trump wanted someone in that position who would protect him.

Obstruction Inquiry Shows Trump’s Struggle to Keep Grip on Russia Investigation - The New York Times


Trump virtually admitted as much in a recent NYT interview. 

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Trump's Routine Misuse of Libel Suits as a Hammer to Punish Criticism:

Donald's lawyers sent cease and desist letters to Michael Wolff and his publisher claiming that Wolff's new book, Fire and Fury defames the President and his family. I read that book over the weekend. Wolff's main source appears to be Steve Bannon.  

It would be extreme folly for Donald to sue the author and open himself up for cross examination and a possible perjury charge flowing therefrom. It would also mean that a number of depositions would be taken of Administration personnel asking them questions under oath that would confirm what Wolff wrote.

Donald has a long history of misusing litigation to browbeat people into submission.

He has constantly threatened to initiate libel lawsuits as a tactic to silence criticism:

Donald J. Trump Is A Libel Bully But Also A Libel Loser;

Why Donald Trump Has Never Won a Libel Case | Vanity Fair;

Fearing Trump, Bar Association Stifles Report Calling Him a ‘Libel Bully’ - The New York Times;

Donald Trump as Litigation Bully | Cato @ Liberty;

That Time Donald Trump Tried to Sue a Tribune Architecture Critic Into Oblivion | Chicago magazine

USA TODAY Network: Dive into Donald Trump's thousands of lawsuits - USA TODAY

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Trump as a Man/Child:

Several people close to Trump have referred to him as a child or child like. That is one of the underlying factual themes in Wolff's new book. Trump seen as a child by staff, says Fire and Fury author Michael Wolff - BBC News

Putting aside your ideology and views about Trump, how would you characterize his tweets, assuming that you did not know who wrote them?

I would  characterize the author as barely literate, a bitter and mean spirited brat, a cyber bully, vindictive and frequently cruel, an extreme narcissist and liar (sociopath), blatantly manipulative and ignorant. 

Note that I did not use the word "idiot", though many who have known Trump have described him as one. 

I would not view the tweets as coming from a mature and well-balanced adult, but from an ill-mannered child or adolescent with serious psychological issues. If I was that child's father, I would regard myself as a parental failure.

Donald claims, however, that he is a stable genius:



Donald has been successful as a reality TV star and promoting himself as a successful businessman notwithstanding 6 bankruptcies and almost a $916 million loss taken on his 1995 tax return.

Rather than being a smart and successful businessman, Donald's real success derives from inheriting money and property from his Dad, blowing through other peoples' money, and creating a brand of being successful through repetitive braggadocio and shtick. The brand of "Trump" has allowed Donald to make a great deal of money, through licensing deals and the Apprentice reality TV program, without taking the financial risks that led to so many bankruptcies when he actually tried to operate a business. 

This is How Donald Trump Actually Got Rich | Investopedia

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

The Fact Checker’s tally of Trump’s false claims since becoming president - Washington Post (1,950 false statements in the first 347 days as President)

Why doesn't he release his tax returns? One possible reason is that the information contained therein would blow up his claim of being a billionaire ten times over. Other reasons probably include information that link him to unsavory characters, possible money laundering through real estate transactions, and a lack of charitable giving. In short, he is hiding information that would hurt him if and when it is subjected to public scrutiny.  

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1. Small Ball: The only kind of ball that I am playing now. The securities discussed in this section do not pay dividends.    


A. Bought 10 DJP at $24.11-Used Commission Free Trade:



DJP is a senior unsecured bond issued by Barclays that attempts to track before fees and expenses the Bloomberg Commodity Total Return Index.

This index had the following weightings:


iPath Exchange-Traded Notes (ETNs)


Commodities have been in a bear market, and the performance of this ETN has been horrific:




The past may not be prologue to the future.   


Th prospectus describes the risks starting at page PS-13; and some of those are readily apparent from the past performance. The sponsor's website also summarizes the risks. 


One risk is inherent in the term Exchange Traded Note ("ETN"). If the issuer goes bankrupt, the owner of DJP is nothing more or less than an unsecured creditor of Barclays and that is not a good place to be.   


I may average down in 10 share lots but will not average up. 


I have not owned this security in the past. I did flip some similar ETNs called Elements several years ago, including RJA (agricultural commodities); RJZ (metals) and RJI (broad commodity ETN).


ELEMENTS ETN Products


Links to discussions can be found in the symbol list to the right.


I chose DJP rather than the iShares S&P GSCI Commodity-Indexed Trust (GSG) since DJP has a lower weighting in energy. I just doubt that crude oil prices have much more upside from current levels.   


GSG Weightings: 




Some investors might prefer a commodity fund that does not utilize the ETN legal structure which adds a layer of risk. 


GSG is an ETF, though not a standard one. It is organized as a Delaware statutory trust which is taxed as a partnership: 


Prospectus 

iShares S&P GSCI Commodity-Indexed Trust | GSG


Another alternative is the PowerShares DB Commodity Index Tracking Fund (DBC)(Top Portfolio Holdings)Sponsor's Site I do not buy DBC since it issues a K-1: PowerShares DB ETF Tax Reporting K-1 Flyer (PDF). I believe that is the case for any fund organized organized as a Delaware statutory trust which is treated as a partnership for tax reporting purposes. The ETN structure avoids that issue. 


Commodity prices likely to rise further in 2018: World BankCopper, boosted by Chinese imports, hits 3.5-year high: CNBCKitco - Spot Aluminum Historical Charts and Graphs   


Commodities Are on Their Longest Winning Streak in History - Bloomberg


It is too early IMO to reach a conclusion on whether commodity prices are in a sustained uptrend that will last more than a few months. 

I will average down only in 10 share lots. 


B. Bought 30 OCLR at $6.88-Used Commission Free Trade:  



Quote: Oclaro Inc.  (OCLR)


OCLR Analyst Estimates (NON-GAAP AT $.57 in 2017 and $.63 in 2008)


Balance Sheet: No debt and $279+M in cash and short term investments as of 9/30/17 10-Q at page 3 (risk factors discussed starting at page 31)


Recent Earnings Report




Sourced: SEC Filed Press Release


Needham Downgrade and Negative Reaction to Guidance: A somewhat downbeat forecast made by management during the earnings call caused Needham to downgrade the stock. 


How Oclaro Inc. Shares Fell 24% Today -- The Motley Fool


Oclaro Falls Off A Cliff - Oclaro, Inc. (NASDAQ:OCLR) | Seeking Alpha


When buying a lottery ticket, falling off a price cliff, described by me as a waterfall type decline, is what perks my interest. 


Needham Calls Lumentum (NASDAQ:LITE) Its 'Single Best Idea' For 2018 In Optical, Networking | Benzinga


Oclaro's (OCLR) CEO Greg Dougherty on Q1 2018 Results - Earnings Call Transcript | Seeking Alpha


I am aware of this company only because I owned shares in Opnext, formerly traded under the symbol OPXT, as a Lottery Ticket; and OCLR acquired OPXT in 2012: Oclaro and Opnext Complete Merger


No one should pay any attention to what I have to say about Oclaro since I have a zero comprehension of their products. The same was true for Opnext, as I made clear several times when discussing that stock:


Sold LT Opnext at $3.1-Bought 50 OPXT at $1.91

Sold 100 OPXT at $2.47-Bought 100 OPXT at $1.89
Sold 100 of the LT OPXT @ $3.15-Bought 100 OPXT @ $1.6

Of those trades the largest gain was in 2011 at $138.29:




In my mind's eye, I am funding this purchase with the profits harvested in three OPXT trades. The total realized gains from OPXT Lotto trades was $220.69.


Why Oclaro, Inc. Could Be a Gold Mine for Value Investors -- The Motley Fool


I am not likely to buy more. 

Closing Price Last Friday (1/5/18): OCLR $7.21 +$0.04 +0.56% 

C. BOUGHT 10 Finisar at $20.38-Used Commission Free Trade: This is another hated optical stock judging from its recent price action. 




Quote: Finisar Corp


Welcome to Finisar | Finisar Corporation


This company has been mentioned as a possible acquirer of Oclaro: 


Should Finisar Buy Oclaro? | Light Reading (12/6/2017 article);


Jefferies Is Bullish On Opticals, Oclaro A Natural Target For Finisar | Benzinga (3/15/17 article); 


The sold reason for this nibble is contained in this recent news item: 


Apple awards Finisar $390 million from its Advanced Manufacturing Fund - Apple ("The award will enable Finisar to exponentially increase its R&D spending and high-volume production of vertical-cavity surface-emitting lasers (VCSELs). VCSELs power some of Apple’s most popular new features, including Face ID, Animoji and Portrait mode selfies made possible with the iPhone X TrueDepth camera, as well as the proximity-sensing capabilities of AirPods.")


Discussed at:


Finisar deal helps Apple block rivals' path to AR features: Reuters


Confusion Over Finisar And Apple Agreement Provides Buying Opportunity-Seeking Alpha

Apple-Finisar Deal: Don’t Count Out Lumentum, Says Raymond James - Barron's

Why Apple Awarded $390 Million To Finisar-Seeking Alpha

Business Overview:




Finisar SEC Filings


FNSR Analyst E.P.S. Estimates at the time of purchase: $1.13 F/Y Ending 4/30/17 and and $1.46 for next F/Y


Chart: Awful. This maker of thingamajigs was selling at close to $400, adjusted for subsequent reverse stock splits, during the Crazy Period. A one year chart reveals a price collapse starting in early March 2017 when the stock price was over $35 that bottomed near $20 per share one month later. FNSR Chart


Annual Report for the F/Y Ending 4/30/17 (risks summarized starting at page 9)


The GAAP and NON-GAAP numbers reproduced below explain, at least in some significant measure, the poor stock performance.


GAAP Net Income:


Sourced from 10-Q for the Q/E Ending 10/29/17


Non-GAAP Net Income:



Sourced: SEC Filed Press Release

Earnings Call Slides


Debt:


In December 2016, FNSR sold $575M in .5% senior convertible notes due in 2036.


Back in 2013, the company sold $258.8M in .5% senior convertible notes due in 2033. 


As of 10/29/17, cash and short term investments totaled $1.23+ billion.


Finisar is top pick for 2018 by Northland Capital analyst-Seeking Alpha



Finisar Struggling Short-Term, But Longer-Term Outlook Intact-Seeking Alpha

This Motley Fool article suggests that FNSR may be acquired at some point by a larger company like Corning or Broadcom. I would expect industry consolidation in this sector, but the timing and targets are far too indefinite to support a purchase decision IMO.  


I will consider averaging down in 10 share lots until I own 30 shares. The next average down price would be below $20.  

Closing Price Last Friday (1/5/18): FNSR $21.51 -$0.03 -0.14% 

2. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Sold 1 Boston Properties 3.125% SU Bond Maturing on 9/1/23:




Profit Snapshot: $18.12




FINRA Page: Bond Detail (prospectus linked)


Issuer: Wholly Owned Operating Subsidiary of Boston Properties Inc. (BXP)-a REIT



Sold at 101
YTM Then at 2.925%
Current Yield at 3.0941%

Bought at a TC of 99.088

Item # 1.F. (3/28/17 Post) 
YTM at TC Then at 3.283%
Current Yield at 3.1538%

This is another bond that I will buy back at less than my previous purchase price when and if that occurs in 2019 or later.


3. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 AstraZeneca 1.95% SU Bonds Maturing on 9/18/19


Finra Page: Bond  Detail (prospectus linked)


Credit Ratings: 


Bought at a Total Cost of 99.623 (with $2 commission)
YTM at TC = 2.168%
Current Yield at TC = 1.957%
Price Paid = 99.523

B. Bought 2 Amgen SU 1.9% Bonds Maturing on 5/10/19:


FINRA PAGE: Bond Detail (prospectus linked)

Issuer: AMGN Stock Price 

Credit Ratings: 



Bought at a Total Cost of 99.881
YTM at TC = 1.985%
Current Yield at TC = 1.902%
Price Paid = 99.781

I have rented the stock on occasion. My last transaction was to sell 20 shares at $170.72. AMGEN - South Gent | Seeking Alpha


I sold 2 Amgen 2.125% SU bonds maturing on 5/1/2020 at 100.568 last August: Item # 2.D. The YTM was then at 1.904% of that bond. 

C. Bought 1 BP Capital 1.676% SU Bond Maturing on 5/3/19:



FINRA Page: Bond Detail (prospectus linked)


Bought at a Total Cost of  99.626 (with $1 IB Commission)

YTM Then at 1.949%
Current Yield at TC =  1.6823%
Paid 99.526

I now own 2 bonds in two separate accounts. I am particularly flushed with excess cash  in my IB account so I am buying some duplicative bond positions in that account that have been previously bought in other accounts.


D. Bought Back 2 Berkshire Hathaway 1.7% SU Bonds Maturing on 3/15/19:




Finra Page: Bond Detail




Bought a TC of 99.850

YTM THEN at TC = 1.82%
Current Yield at TC = 1.703%

E. Bought Back 2 Westpac Bank 1.65% SU Bonds Maturing on 5/13/19:




FINRA PAGE: Bond Detail (prospectus linked)


Credit Ratings:




Issuer:  Westpac Banking Corp. ADR (WBK)

WBK Analyst Estimates

I have bought and sold this bond previously. I last sold 2 bonds at 99.8, having bought this lot at a TC of 99.317. Item # 2.A. Sold on 5/23/17 (realized gain $7.66); Item # 2.C. Bought on 1/18/17 


I am now about seven months closer to maturity and was still able to buy the bond back at about the same price as in January 2017. 


When I sold this bond in May, I was moving out of 2019 maturities into 2023-2026 maturities to pick up more yield. 


I have largely now reverse that process by selling the longer maturities and buying back several bond previously sold that mature in 2019. 


I am more concerned now than in May about a potential pop in intermediate term rates.


Bought at a Total Cost of 99.499 (Bought at 99.399)

YTM THEN at TC = 2.009%
Current Yield at TC = 1.6853%

F. Bought 1 Parkway Bank 1.75% CD (monthly interest) Maturing on 12/21/18 (1 year CD):




G. Bought 1 First Virginia Bank 1.45% CD Maturing on 5/29/18 (5 month CD):




H. Added 2 Comerica 2.125% SU Bonds Maturing on 5/13/19:




Finra Page: Bond Detail (prospectus linked)


Issuer: Comerica Inc. (CMA)

CMA Analyst Estimates
Comerica Reports 2017 Mid-Year Company-Run Stress Test Results
Comerica Reports Third Quarter 2017 Earnings Results

Credit Ratings:




Bought at a Total Cost of 99.934

YTM Then at TC = 2.171
Current Yield at  = 2.1264%

I now own 4 bonds. The prior two bond purchase was made on 1/3/17 at about the same total cost number shown above (99.976). As a result of short term rates rising in the interim, I am almost one year closer to the 5/13/19 maturity and did not have to pay more for the bond, with both orders completed at a total cost below par value.


I. Added 2 American Express 1.55% SU Bonds Maturing on 5/22/18:




I now own 4 bonds. The first two bond lot was bought in December 2016 at about the same price, a slither under par value on a total cost basis.


FINRA Page: Bond Detail (Prospectus linked)


Issuer:  American Express Co. (AXP)

AXP Analyst Estimates
American Express Reports Third Quarter EPS of $1.50, Up 25%

Credit Ratings:




Bought at a Total Cost of 99.985

YTM at Total Cost Then at 1.584%
Current Yield at TC = 1.5%

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

11 comments:

  1. "and open himself up for cross examination"

    No, he would claim executive privilege. Remember Jefferson and the Aaron Burr murder trial? Trump would then lose his lawsuit, but that's not the question.

    "It would also mean that a number of depositions would be taken of Administration personnel"

    He would also claim privilege for those still working for the executive branch. Nixon did it, though I don't remember the details right now.

    ReplyDelete
    Replies
    1. David: I would think that the filing of a libel suit would constitute a waiver of executive privilege on any matter raised in the lawsuit.

      Most of the material that Trump would find objectionable do not relate to his conversations with advisors or even actions taken by him. Instead, they involve characterizations of him by campaign or administration employees. The use of the word "idiot" to describe Trump's mental acuity is not a matter subject to an executive privilege claim. Nor are statements that he reads nothing, has a short attention span, has a volatile temper, frequently acts like a child, and other statements relating to his personal characteristics are not shielded by executive privilege even if that privilege was not waived by filing a libel suit.

      For example, Trump assets that the claims allegedly made by cabinet members that he is an idiot and a moron are libelous and false. Tillerson is sworn and is asked under oath "did you call Donald a moron". Yes or no. Objection executive privilege. Overruled.

      A number of people reportedly called Donald an idiot. McMaster called him a "dope". Gary Cohn compared Trump's intelligence to excrement. Both Priebus and Mnuchin reportedly called Donald an "idiot".


      Everyone in Trumpworld Knows He’s an Idiot
      https://www.nytimes.com/2018/01/04/opinion/fire-fury-wolff-trump-book.html?_r=0

      It would be folly to claim libel and then have witnesses deposed who may confirm that the statement was indeed made or that Wolff had them on tape.

      Executive privilege would not apply to matters occurring prior to Trump's inauguration or to matters that are potentially criminal in scope like obstruction of justice and money laundering.

      The interesting claims of executive privilege will arise when Mueller attempts to depose Trump. The discussions of the parameters of that interview are now being discussed with Trump's attorneys.

      It is noteworthy that none of the questions are likely to touch on national security concerns which is the main area where executive privilege is most likely to be upheld by the court.

      If Trump refuses to cooperate, Mueller might subpoena him to testify before the Grand Jury which would mean where he would not have any lawyer present. That would be huge. Clinton testified before a grand jury in 1998:

      https://www.c-span.org/video/?111990-1/presidential-grand-jury-testimony

      Delete
  2. The ten year treasury yield is moving up today and has crossed the 2.5% barrier.

    U.S. 10 Year Treasury Note
    2.526% + 0.046
    Last Updated: Jan 9, 2018 at 10:21 a.m. EST
    https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx

    The rise in yields is causing for now a retreat in bond like common stocks including REITs.

    Vanguard REIT ETF (VNQ)
    $81.02 -$0.45 -0.55%
    Last Updated: Jan 9, 2018 at 10:22 a.m. EST

    Regional bank stocks are moving up:

    SPDR S&P Regional Banking ETF (KRE)
    $60.58 +$ 0.8769 +1.47%
    Last Updated: Jan 9, 2018 at 10:23 a.m. EST
    https://www.marketwatch.com/investing/fund/kre

    BBT is my largest dollar position in my regional bank basket:

    BB&T Corp.
    $52.26 +$0.77 +1.50%
    Last Updated: Jan 9, 2018 at 10:25 a.m. EST
    https://www.marketwatch.com/investing/stock/bbt

    BBT was upgraded today by Raymond James to outperform from market perform.

    I am not a buyer at current price levels and have been mulling the thought of selling some shares into the current strength.

    ReplyDelete
  3. South Gent,

    I have been receiving notices of voluntary corporate action regarding bankruptcy/rights offering. The latest example was one from Breitburn on my 2020 8.625% bonds.

    Reading from the notice it is for accredited investors only. Is this just a wrestling among large institutional creditors to take a bigger chunk of the new reorganized entity? My basket of depressed Energy E&P bonds did not pan out for me. Several of them did not survive the oil price downturn.

    ReplyDelete
    Replies
    1. Y:

      It is not unusual for a bankrupt company to be recapitalized through a rights offering to bond owners. The common units existing prior to the BK would be eliminated and the new shares would represent equity ownership of the reorganized company.

      It is possible that your bonds will be exchanged for equity; and this press release suggests that outcome for a non eligible participants:

      https://www.businesswire.com/news/home/20171128006378/en/Breitburn-Energy-Partners-LP-Reaches-Agreement-Principle

      Note that the plan grants to senior unsecured creditors, who not eligible to participate in the rights offering, stock valued at 4.5% of their claim (i.e. $1K par value bond) or cash in that amount with a limit on the amount of cash that can be claimed in this way.

      The rights offering may be limited to qualified institutional investors since I do not believe that a prospectus is filed with the SEC in connection with the offering. Instead, the offering is made through the auspices of the bankruptcy court. In that respect, it is like a section 144 offering that would be limited to qualified institutional borrowers.

      Your broker may be able to answer your questions.

      Delete
  4. Pure Industrial REIT:

    I own 200 shares (100 of the USD priced PDTRF traded in the U.S. and 100 of the CAD price shares traded in Toronto).

    See Item # 3.A. and #3.B
    https://tennesseeindependent.blogspot.com/2017/09/observations-and-sample-of-recent_14.html

    This REIT has agreed to be acquired by Blackstone for C$8.1 per unit.

    http://www.piret.ca/investor-info/news-releases/pure-industrial-real-estate-trust-enters-definitive-agreement-be

    This acquisition is causing Dream Industrial to rise as well. I own 1000 units of that one.

    C$9.15 +C$0.27 +3.04%
    https://www.marketwatch.com/investing/stock/dir.un?countrycode=ca


    Pure Industrial Real Estate Trust (CA:AAR-UN):
    $8.09 +C$ 1.37 +20.31%
    https://www.marketwatch.com/investing/stock/aar.un?countrycode=ca


    I went ahead and sold the 100 PDTRF at U.S.$6.48 using a Schwab commission free trade AND THE 100 units traded in Toronto at C$8.08.

    ReplyDelete
  5. Bill Gross seems to think that bonds have entered a bear market after breaking a 25 year trend line.

    https://www.marketwatch.com/story/bill-gross-says-bond-bear-market-confirmed-amid-treasurys-selloff-2018-01-09

    Maybe that will prove to be right in retrospect but I would not draw that conclusion based on recent interest rate movements.

    If there is a decisive break in the ten year treasury yield above 2.6%, followed by another decisive and strong move above the high of 3.04% from 12/31/13, then the carnage in bond land may be well underway.

    I could argue with some justification that the long term secular bull market in bonds that started in 1981-1982 came to an end already in July 2012 when the ten year closed at a 1.43% yield (7/25/12), a level that was tested again in July 2016 with the 10 year closing at 1.37% on 7/5/16 before moving back up.

    https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2016

    So the end was arguably confirmed in July 2016. The problem in drawing conclusions is that there is so much manipulation of interest rates by central banks that it is hard to know how much, if any, input the Bond Ghouls really have in setting intermediate and longer term interest rates. I don't believe the market is setting rates yet.

    Given the trillions tied up in negative yielding bonds and several more trillion in nominal yields that produce negative real yields, I do anticipate carnage in Bond Land throughout the developed world-blood flowing in the streets kind of action-sooner or later.

    My current thinking is that the carnage in bonds will start before the "reversion to the mean" in stocks and may be a contributing cause for that reversion after the Stock Jocks get tired of their Happy Dance over the remains of the Bond Ghouls.

    We are now IMO in a stock parabola which never ends well. Those kind of melt ups eventually collapse upon themselves.

    The problem with parabolas is that you never really know how high is up until the elevator starts to move down at a far faster rate than the move up.

    Japan's stock market back in the 1980s had one of the longest and strongest stock parabolas. The peak was in 1989 and the index has not come close to that level since then.

    http://www.macrotrends.net/2593/nikkei-225-index-historical-chart-data

    U.S. stocks entered into a similar parabola in the mid-1990s. I would date the start date in the 1994 summer looking back and around 1996 in real time.

    http://www.macrotrends.net/2324/sp-500-historical-chart-data

    While it is just an opinion, I suspect that the current U.S. stock parabola started around mid-2017.

    I will continue to sell into the rallies and engage in a number of small trades to boost income.

    I want short term interest rates to rise; and that is how I am positioned with an extreme overweight in high quality short term fixed coupon securities, both CDs and bonds, using a ladder strategy where there are multiple maturities every week.

    I intend to start transitioning slowly back into intermediate term bonds when the YTM's for high quality corporates exceed 4%. I will probably want to emphasize the 3 to 6 year maturities rather than buying in the 7 to 10 year range.

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  6. VALLEY NATIONAL (VLY): This bank has been out-of-favor with analysts for a long time and deservedly so IMO. Given that history, it is noteworthy that two analysts have upgraded VLY to buy within the past 30 days.

    RBC raised its rating to outperform with a $14 price target on 12/21/17.

    Piper Jaffray upgraded the stock to overweight from neutral on 1/5/18.

    I do not have access to those analyst reports. I am simply reading the information on Fidelity's news feed for this stock.

    I last discussed this stock in Item # 1.B.:

    https://tennesseeindependent.blogspot.com/2017/12/observations-and-sample-of-recent_7.html

    Valley National Bancorp (VLY)
    $11.93 +$0.29 +2.49%
    Last Updated: Jan 10, 2018 at 10:37 a.m. EST
    https://www.marketwatch.com/investing/stock/vly

    I also noticed that GS placed a sell rating on another recently purchased regional bank, First Hawaiian (FHB), and the stock has risen some since that announcement. That was announced on 1/4/2018 according to my Fidelity feed for FHB. I do not have access to the report.

    First Hawaiian Inc.
    $30.89 +$ 0.55 1.81%
    Last Updated: Jan 10, 2018 at 10:37 a.m. EST
    https://www.marketwatch.com/investing/stock/fhb

    The price closed at $29.91 on 1/4/18.

    ReplyDelete
  7. "Exclusive: Canada convinced Trump will soon pull plug on NAFTA - sources"

    https://www.reuters.com/article/us-trade-nafta-canada-exclusive/exclusive-canada-convinced-trump-will-soon-pull-plug-on-nafta-sources-idUSKBN1EZ2K4

    ReplyDelete
  8. National Holdings Corporation (NHLD)
    $5.30+2.09 (+65.11%)
    At close: 4:00PM EST

    $4.48 -0.82 (-15.47%)
    After hours: 7:59PM EST

    Regular Session:
    Volume 2,617,567
    Avg. Volume 64,388

    I recently discussed this stock in connection with my Lotto purchase of FBIO.

    Item # 5.A.
    https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent.html

    I own 100 NHLD shares and 100 FBIO shares as part of my Lottery Ticket Basket Strategy. I am no longer tracking my results in this basket, having stopped in 2015 with a blowout of my losers.

    When I quit doing so, I had a net realized gain of over $14K but I had a large number of losses too which is to be expected since I am dumpster diving in this strategy. Most of my current Lottos are in the small cap clinical biotech sector, and I have updated my results in that sector twice starting in January 2017.

    I I have raised my limit for Lottos from $300 to $1K.

    https://tennesseeindependent.blogspot.com/2011/10/lottery-ticket-strategy-new-gateway-post.html

    I did not see any news to account for today's action. It really comes down to whether you believe that the $1 E.P.S. for the last fiscal year is repeatable to any significant decree. I doubt it but I really do not know one way or the other.

    ReplyDelete
  9. I have published a new post:

    https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent_11.html

    ReplyDelete