Economy:
The BLS reported that the economy added 200K new jobs last month. The job gain for November was cut by 36K, while the number for December was revised higher by 12K to 160K. Employment Situation Summary
The U-6 number increased to 8.2% from 8.1% in December. Table A-15. Alternative measures of labor underutilization
Worker pay increased by 2.9% for the 12 month period ending in January. It will be important to watch how this gain holds up in the coming months. The labor market is tight and wage gains are to be expected as employers have to ante up to keep existing employees from bolting to other jobs.
Big pay gains in January favor high-income workers over minimum-wage workers - MarketWatch
The work week declined .02 hours in January to 34.2, partly due to the weather.
Job Creation Numbers By Month: Compare 1st Year of Trump's Administration with Last 5 Years Under Obama:
2012 2.151M
2013 2.301M
2014 3.005M
2015 2.712M
2016 2.344M
2017 2.173M
Sourced: Bureau of Labor Statistics Data
Yes, I know from listening to Fox "News" and to Trump that Donald inherited one big mess; and job growth has surged during his first year in office compared to Obama's last five years.
Among those of us who remain grounded in reality rather than reality creations, a rapidly diminishing part of the population, U.S. job growth is slowing down. And, without question, job growth in Trump's first year was substantially below the recent 2014 and 2015 peak years.
++++++++
Market and Market Commentary:
J P Morgan Guide To The Markets as of 12/31/17 (contains an abundance of useful information) If that link does not work properly, the latest JPM report can be downloaded here: Guide to the Markets - J.P. Morgan Asset Management
The DJIA declined 665.76 points last Friday. Perhaps, we can take some solace in that the decline was not 666. For those stock market historicans, the bull market started after the SPX hit an intra-day low of 666 in March 2009. In This Devil of a Market, Could 666 Be the Bottom? | Seeking Alpha (published 3/9/2009).
Junk-bond market getting riled up over potential crash into a ‘maturity wall’ - MarketWatch (Moody's estimates that $104B in junk bonds will mature in 2019, up from about $36B this year)
A junk bond ETF has only a 5.31% yield according to Marketwatch: SPDR Bloomberg Barclays High Yield Bond ETF (JNK)
Bank of America: Sell signal triggered for stocks - MarketWatch (too much greed and not enough fear)
Bond fund manager who called dollar’s slide says ‘it’s not too late to move out of U.S. bonds’-MarketWatch
It is certainly possible that bonds have entered into a long term secular bear market already. However, that conclusion can not be drawn with any certainty yet since there have been many false starts.
If the bond market has started one, meaning a long term secular bear market lasting for decades rather than just a correction or cyclical bear market, then the start may turn out to be similar to how the 32 year bear market started around 1950 that ended in 1981-1982.
In the prior long term bond bear market, the Federal Reserve had successfully pegged the 10 year treasury yield in a 2.25% to 2.5% range between 1945 to 1951, when a market rate would have been far higher without FED manipulation based on inflation trends. Before the Accord: U.S. Monetary-Financial Policy, 1945-51
10 Year Treasury Rate by Year
FED Manipulated Rates:
FED Non-Manipulated Rates:
CPI Annual: Consumer Price Index, 1913- | Federal Reserve Bank of Minneapolis
Between 1946-1951, the annual average CPI was 6.43%. The average annual yield on the ten year treasury was 2.28%. I would not dig too deep into how that happened since the most obvious explanation, Federal Reserve manipulation to an abnormally low level, is plain to see in the data and is the only explanation that makes any sense.
When the FED quit manipulating the yield curve, the ten year treasury yield rose from the artificially created 2.25%-2.5% range to a free market set range that gradually moved to 4.7+% by 1960, even though the inflation numbers between 1952 through 1960 were much lower than during the 1946-1951 period.
The bond bear market started soon after the FED ceased to manipulate rates, but the blood letting was more like torture by thousands of paper cuts, rather than a sudden coups de grâce, which would come later in that 32 year secular bond bear market.
10-Year US Treasury Note Yield Since 1790 - Business Insider
+++
Apple Forecast Falls Short After iPhone Sales Miss Estimates-Bloomberg; Downgraded Apple faces ‘saturated market’ for iPhones- analysts react to earnings - MarketWatch
+++++
Portfolio Management:
I am currently focused on purchasing high dividend paying stocks that are being shellacked due to the rise in interest rates. All purchases are what I call small ball odd lots using commission free trades.
There are several reasons for tip toeing here.
First, I am catching falling knifes and have no good idea when the knife will stop falling. As long as the slide continues, I am at least lowering my average cost per share and increasing my dividend yield.
Second, I still have an abundance of commission free trades, so it is cost effective to buy small lots using them.
Fidelity Account as of 2/3/18:
The overall goal is to sell the positions so acquired at whatever profit may be available after collecting several dividend payments. The twist may be to sell the highest cost lots when I can do so profitably and then to keep longer term the lower cost shares.
For the first time in several weeks, possibly months, I went two consecutive days without buying a CD or bond last week. I am going to allow the proceeds from maturing securities to pile up into cash for awhile.
Last Friday, I looked for the first time in weeks at investment grade bonds maturing in 2024-2026. I may start to nibble in those maturities soon, spacing out purchases over time. My first trade may not occur until the 10 year treasury yield hits 3%.
My gut informs me that rates can only go up so far, at least as long as the ECB other other central banks maintain their extraordinarily abnormal monetary policies. I would include the FED in that list of other central banks since its monetary policy remains extremely accommodative given current U.S. economic conditions, inflation numbers and inflation expectations.
If I had my entire at risk portfolio invested in high quality corporate bonds maturing in equal dollars amounts each year between 2019-2028, with a weighted average interest rate somewhere close to 3.5%, I would achieve my financial objectives comfortably and would be able to invest most of that cash flow into more of the same or into other asset classes including stocks.
I slashed my exposure to bonds maturing in 2022 through 2026 last year, primarily during the second half.
I can not now achieve the 3.5% weighted average interest rate, though construction of a bond portfolio equally weighted in maturities between 2023-2028 could easily hit that 3.5% weighted average bogey. Its the 2019-2022 period that would drag down the composite yield below 3.5%.
++++
Interest Rates:
As I discussed in a recent comment, the Stock Jocks were not concerned at all about the rise in interest rates until recently.
The ten year treasury yield started its latest move higher in early September 2017. 2017 Daily Treasury Yield Curve Rates The closing yield on 9/7/17 was 2.05%. The S & P 500 closed that day at 2465.10.
On 1/26/18, the S & P 500 closed at 2,872.87 with the ten year treasury yield then at 2.66%. Between 9/7/17 and 1/26/18, the S & P 500 was up 16.54% and the ten year treasury yield had increased by 29.76%.
Yesterday, the closing yield was near 2.84%, and the SPX closed at 2762.13.
While the madness of crowds is not susceptible to rational explanation, the Stock Jock herd may have decided to reverse course last week based more on the uncertainty about the future course of interest rates rather than the actual increase since 1/26/18.
I have previously discussed that there was resistance in the 2.6-2.62% range. On two prior occasions, the ten year yield ended its uptrend after hitting that resistance level and then started to move back down.
10-Year Treasury Constant Maturity Rate-St. Louis Fed
There was also a break in the trend-line when rates broke above that resistance level. Bill Gross: 2.6% 10-year yield is the key to everything this year (20 year trend-line starting in 1987)
So the question now is how much higher will rates go and that creates uncertainty about stock valuations at the current elevated P/E levels.
In a free market where investors set intermediate and longer term interest rates without the heavy hand of Central Bank manipulation, the U.S. ten year treasury yield would generally be around 2-2.5% over the anticipated average annual CPI rate over the same ten year period.
Using the break-even inflation rate numbers, the current anticipated annual average CPI prediction for the next ten years is 2.09% and that estimate has been moving up.
Take the 2.84% nominal yield as of 2/2/18: Daily Treasury Yield Curve Rates
And Then Subtract the .75 real yield Daily Treasury Real Yield Curve Rates
At just a 2% spread to that inflation rate, the ten year treasury would be at 4.09% at the current time. The actual nominal number is 2.84%.
The central banks, both in the U.S. and other developed countries, are still in the rate manipulation business however. And we have seen this picture of rate spikes several times already prove to be only temporary. But this time may be the real deal too.
The 2013 rate spike ended since the CBs were still aggressively manipulating interest rates to abnormally low levels.
There are some key differences between the rate spike now and the one in 2013 which I viewed then as the market's first effort to move to normalized interest rates.
First, the FED had not yet changed its zero interest rate policy in 2013. Short term rates were near zero. Short term rates are now moving up with the 2 year treasury note crossing 2% for the first time since the Near Depression.
2-Year Treasury Constant Maturity Rate- St. Louis Fed
Second, the FED has quit buying treasuries and mortgage backed securities and is now reducing the size of its balance sheet. This is occurring at a time that the federal government will have to increase its borrowings due budget deficits and the rise in its interest costs.
Third, the ECB is near the end of its QE program.
Fourth, the world is now in a synchronized global economy recovery with inflation and inflation expectations starting to rise. During the 2013 rate spike, inflation remained about the same and inflation expectations actually went down a notch.
++++
Trump:
Normally, I would be concerned at the present time about a substantial increase in infrastructure spending adding to inflation pressures.
Trump talked about a $1.5 trillion infrastructure plan during his State of the Union speech. I never watch those speeches, viewing them as B.S. and the GOP's infrastructure plan falls well within that B.S. category.
I am not concerned about Trump's plan adding to inflation since the "plan" is bogus.
Trump’s new infrastructure “plan,” explained - Vox
Trump’s infrastructure plan is a private, expensive bridge to nowhere | TheHill;
Trump’s $1.5 Trillion Infrastructure Plan Is Light on Federal Funds, and Details - The New York Times;
State of the Union: President Trump's infrastructure plan - CBS News
Trump's "plan" calls for the federal government to spend only $200 billion over the next decade. The rest of the money would have to come from private businesses (think toll roads here) and local governments. Why Trump’s Infrastructure Plan Should Scare the Crap Out of You | Vanity Fair The general idea is to give private companies tax incentives to build and then charge the public for using the project. This plan is DOA and does not come anywhere close to what is needed.
In Tennessee, toll roads are forbidden and any attempt to change the law would likely result in a legislators losing their re-election bids and possibly tarred and feathered as well. Does Trump's infrastructure plan go far enough to help states like Tennessee? - CBS News
American Society of Civil Engineers 2017 Report Card on America's Infrastructure:
America's Grades | ASCE's 2017 Infrastructure Report Card
Back in early 2009, when the Democrats controlled all branches, I was extremely critical of their stimulus program that had minimal infrastructure expenditures. American Recovery and Reinvestment Act of 2009 - Wikipedia
The Democrats had forgotten the lesson taught by FDR. If the federal government is going to engage in significant deficit spending to stimulate a severely weakened economy, the money needs to spent on infrastructure projects over a multi-year time frame.
Even today, about 85 years after FDR became President in January 1933, the projects built with borrowed money back in the 1930s are still in use. Living New Deal | Still Working For America What exactly did the nation build with the 2009 stimulus which my GOP friends derisively call "Obama Bucks"? I don't think that you could now point to anything substantial. Even the tax cuts provided in that stimulus bill were mostly of very short duration. And, without question, the entire 2009 stimulus cost was needed to repair and build U.S. infrastructure.
++
Trump enjoys lying and misleading voters. It is unfortunate that millions are so easily misled and manipulated by a person who is obviously a Demagogue.
I am unaware of anyone, living or dead, who has publicly lied as much as Trump, though I can not assess the period before words were written for posterity. He takes great pride in his ability to manipulate people with palpably untrue and deliberately misleading statements.
My rough estimation is that about 50% of the U.S. voting age population have come to the only conclusion about Trump that is rationally possible. He is completely untrustworthy. I doubt that the percentage who hold that opinion will ever go down, since Trump will reinforce that irrefutable conclusion daily throughout his Presidential term.
The large percentage of the population who view Trump as a role model for their children and trustworthy live in their own reality creations and are permanently immunized against facts. I am going to prepare a curriculum for the children of those Trump acolytes, that will of course include a 60 minute weekly mandatory viewing of selected videos including the Access Hollywood tape and many more, plus many written course materials delving into Trump's lawsuits, his stiffing of bond owners and contractors, his bankruptcies, the creation of the brand Trump based on false information, and his frequent nefarious adventures like Trump University. Trump University: Yes, It Was a Massive Scam | National Review (a conservative magazine founded by William F. Buckley Jr.)
Trump falsely claims his address was the most viewed of all time - Feb. 1, 2018;
Donald Trump’s misleading claims about immigration in State of the Union address | PolitiFact;
Donald Trump's misleading claim about chain migration, unlimited sponsorship of distant relatives | PolitiFact;
Ice Caps at Record Low, Not High - FactCheck.org
FactChecking Trump's State of the Union - FactCheck.org
‘Art of the Deal’ Ghostwriter: Trump is ‘Deeply Disturbed’ and ‘Utterly Untrustworthy’
Trump has not yet taken credit for the market's decline last week. What gives?
He has certainly been quick to credit himself with the rise since his election.
I am wondering who he will blame when and if the market retraces all or most of the post-election rally which it could do before his first term ends. George Junior had a powerful stock market rally between September 2002 and early October 2007, moving from around 800 to 1550, but the S & P 500 ended up declining by 26.75% during his 8 year term. Forbes Everything looked great until it didn't.
Still, I do not expect a bull market killing recession prior to 2019. The last recession ended in June 2009.
A one decade expansion is one long economic recovery. nber.org/cycles
Two reasons IMO for the current expansion's longevity are the subdued nature of GDP growth and Central Banks keeping for an extended period of time short and intermediate term interest rates at negative nominal and negative real levels, depending on the maturity.
The average expansion since 1900 averages 47 months, though there have been 3 expansions since WWII greater than 100 months and none before then. (see page 17 JPM Guide to the Markets).
+++++
Joe Arpaio seems to me to embody the values of the modern day GOP: Joe Arpaio Needs More Information Before He'll Condemn A Paper That Denies The Holocaust
Another republican from Arizona, Paul Gosar, demanded the Capitol Police arrest the Dreamers who attended the State of the Union speech. Gosar Asks Capitol Police, DOJ to Arrest ‘Illegal Aliens’ at State of the Union.
Gosar (R-AZ) also wants top FBI and DOJ officials to be arrested for treason. GOP lawmaker calls for FBI, DOJ officials to face 'treason' charges - POLITICO
+++++++++
1. Small Ball:
A. Bought 20 Gramercy Property-Used Commission Free Trade (2 ten lot trades at $25.65 and at $24.45):
Quote: Gramercy Property Trust (GPT)
Website: Gramercy Property Trust
Our Portfolio | Explore Our Markets | Gramercy Property Trust
This 10 share "buying program" will stop at 50 shares and I will only average down with any additional purchases.
I have never bought GPT shares prior to these two ten lot purchases.
I did own Chambers Property. Gramercy merged into Chambers and then the combined entity changed its name to Gramercy Property Trust. The monthly dividend paid by Chambers was changed into a quarterly one and was reduced initially by 13.73%. Gramercy thereafter underwent a 1 for 3 reverse stock split. Gramercy Property Trust Announces 1-for-3 Reverse Share Split
Prior to the reverse stock split, I sold all of my GPT shares:
Item # 2. Sold 122+ GPT at $8.424-Roth IRA: Update For Equity REIT Basket Strategy As Of 4/12/16 - South Gent | Seeking Alpha;
Item # 1. Sold 699+ Gramercy REIT (NYSE:GPT) in Two Accounts: Update For Equity REIT Basket Strategy As Of 3/21/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2: Sold Remaining 396+ GPT Shares at $9.09
GPT Realized Trading Gains: +$984.68
On a split adjusted basis, the last disposition at $9.09 was at a split adjusted price of $27.27. The shares thereafter went up, forming a double top last year near $31 per share and started a persistent decline after the second top last October. Gramercy Property Trust Interactive Chart
IMO, the stock was overvalued at $27 and was significantly overvalued as it moved higher into its first top last June.
I am not enthusiastic about the prices paid for the two 10 share lots, which is expressed in the fact that I have only bought 20 shares and those shares were bought in 10 share lots.
A major part of my concern now is the potential for a persistent rise in interest rates that will negatively impact stock prices for all equity REITs. (Scroll to "Interest Rate Movements and REIT Stocks: Update For REIT Basket Strategy As Of 8/11/15-South Gent | Seeking Alpha)
Dividends: Quarterly at $.375 per share ($1.5 annually)
Last Ex Dividend Date 12/28/17
Gramercy Property Trust Declares Fourth Quarter 2017 Dividends
Dividend Yield at a Total Cost Per Share of $25.065 = 5.98%
Last Dividend Raise: $.33 to $.375 effective for 2017 1st Quarter Payment
2017 Third Quarter Results:
Gramercy Property Trust Reports Third Quarter 2017 Financial Results
I am not impressed.
Note that core FFO and AFFO per share numbers have gone down for the 9 month period ending in 9/30/17 compared to the same period in 2016, while the share count has gone way up. I am not surprised that the stock has retreated from $31 to below $26 when I bought this 10 share lot at $25.68.
The problem with REITs in an empire building mode is that there is a persistent shuffling of the property portfolio. Maybe it will work but there is such a large cloud of dust that is hard to know one way or the other. Current results do not suggest that the asset shuffling is working out to benefit shareholders.
Properties that do not work out so well become non-core for that reason, though another is given in the press release that generally is grounded on some change in strategy. Then another intense round of buying and selling occurs in pursuit of a different strategy.
Portfolio Acquisitions: Third Quarter 2017:
Gramercy Property Trust Agrees to Purchase $331 Million, 9-Property Industrial Portfolio (8/30/17)"Over 80% of the NOI for the Portfolio is concentrated in four markets (Atlanta, Boston, Chicago and the Inland Empire) and nearly 90% of the rent from the Portfolio comes from a single, market-leading tenant. At closing, which is expected to occur by the end of the third quarter of 2017, the Company will assume $137 million of in-place debt, and will issue $133 million in OP Units to fund the acquisition. The OP Unit price will be based on a 30-day VWAP as of August 29, 2017, or $29.56 per share. The Company is acquiring the Portfolio at a 6.3% cash capitalization rate.")
Gramercy Property Trust Agrees to Purchase $479 Million Core Logistics Portfolio (8/22/17) ("entered into an agreement to acquire a 41-property, 7.8 million square foot portfolio of modern warehouse industrial buildings (the “Portfolio”) for $479 million. The Portfolio is 93% leased with a weighted average remaining lease term of 4.1 years; near term lease roll is concentrated in properties that have contract rents which are either at or below market rent levels. The Portfolio is 100% located in six key logistics markets throughout the United States which include Atlanta, Chicago, Columbus, Dallas, Houston and Memphis. The Company will acquire the Portfolio free and clear of any debt at a 6.2% capitalization rate on estimated stabilized NOI.")
For each large purchase, there is a seller willing to part with the part at the price offered. I would probably be selling to Gramercy.
Third Quarter Ongoing Build to Suit Projects:
Share Issuances:
Third Quarter
A. Sold 30 out of 135 NVS at $93.85-Highest Cost Lot:
Profit Snapshot: +$184.26
Quote: Novartis AG ADR (NVS)
Closing Price Last Friday (2/2/18): NVS $88.39 -$2.16 -2.39%
My existing position is in another account (reinvesting the dividend):
Novartis Annual Report 2017
Dividends: NVS pays an annual dividend in Swiss Francs that will be converted in USDs for the ADR owners. Both Fidelity and Vanguard will asset my treaty right to no more than a 15% withholding tax. (see Article 10.2: TAX CONVENTION WITH SWISS CONFEDERATION)
Many brokers will fail to do so resulting in a 35% Swiss tax on the dividend.
Novartis increased its annual dividend by 2% from the preceding year. The new dividend is CHF2.8. Dividend Information | Novartis
Last Earnings Report: NVS popped in price after releasing this report which is what caused me to sell my highest cost lot at $93.85.
Importantly, the Alcon division grew sales by 4% and core operating income by 5%. Free cash flow grew 10% to $10.4 in 2017.
Growth Drivers in the 4th Quarter:
New Approvals and Regulatory Opinions in the 4th Quarter:
Alcon Strategic Review:
3. REGIONAL BANK BASKET STRATEGY:
A. SOLD 100 HBAN at $16.12 (used commission free trade):
Profit Snapshot: +$254.75
Item # 1.A. Bought 100 HBAN at $13.58 (12/7/17 Post)
As discussed in that post, HBAN deservedly crashed and burned during the Near Depression which is reflected in a long term chart:
Quote: Huntington Bancshares Inc. (HBAN)
HBAN Analyst Estimates
Huntington Bancshares Incorporated Reports Record Quarterly and Annual Earnings (2017 E.P.S. ex-items= $.98)
This sell was based primarily on profit taking.
The surge in HBAN's price since my purchase did take the valuation to the upper end of my fair value range.
Other reasons include the following. HBAN is not a major beneficiary of the tax rate change given its already low effective tax rate. Net charge offs at .25% of average loans and non-performing loans are already at historical lows.
Closing Price Last Friday (2/2/18): HBAN $16.08 -$0.26 -$1.59%
4. Short Term Bond/CD Ladder Basket Strategy:
The BLS reported that the economy added 200K new jobs last month. The job gain for November was cut by 36K, while the number for December was revised higher by 12K to 160K. Employment Situation Summary
The U-6 number increased to 8.2% from 8.1% in December. Table A-15. Alternative measures of labor underutilization
Worker pay increased by 2.9% for the 12 month period ending in January. It will be important to watch how this gain holds up in the coming months. The labor market is tight and wage gains are to be expected as employers have to ante up to keep existing employees from bolting to other jobs.
Big pay gains in January favor high-income workers over minimum-wage workers - MarketWatch
The work week declined .02 hours in January to 34.2, partly due to the weather.
Job Creation Numbers By Month: Compare 1st Year of Trump's Administration with Last 5 Years Under Obama:
2012 2.151M
2013 2.301M
2014 3.005M
2015 2.712M
2016 2.344M
2017 2.173M
Sourced: Bureau of Labor Statistics Data
Yes, I know from listening to Fox "News" and to Trump that Donald inherited one big mess; and job growth has surged during his first year in office compared to Obama's last five years.
Among those of us who remain grounded in reality rather than reality creations, a rapidly diminishing part of the population, U.S. job growth is slowing down. And, without question, job growth in Trump's first year was substantially below the recent 2014 and 2015 peak years.
++++++++
Market and Market Commentary:
J P Morgan Guide To The Markets as of 12/31/17 (contains an abundance of useful information) If that link does not work properly, the latest JPM report can be downloaded here: Guide to the Markets - J.P. Morgan Asset Management
The DJIA declined 665.76 points last Friday. Perhaps, we can take some solace in that the decline was not 666. For those stock market historicans, the bull market started after the SPX hit an intra-day low of 666 in March 2009. In This Devil of a Market, Could 666 Be the Bottom? | Seeking Alpha (published 3/9/2009).
Junk-bond market getting riled up over potential crash into a ‘maturity wall’ - MarketWatch (Moody's estimates that $104B in junk bonds will mature in 2019, up from about $36B this year)
A junk bond ETF has only a 5.31% yield according to Marketwatch: SPDR Bloomberg Barclays High Yield Bond ETF (JNK)
Bank of America: Sell signal triggered for stocks - MarketWatch (too much greed and not enough fear)
Bond fund manager who called dollar’s slide says ‘it’s not too late to move out of U.S. bonds’-MarketWatch
It is certainly possible that bonds have entered into a long term secular bear market already. However, that conclusion can not be drawn with any certainty yet since there have been many false starts.
If the bond market has started one, meaning a long term secular bear market lasting for decades rather than just a correction or cyclical bear market, then the start may turn out to be similar to how the 32 year bear market started around 1950 that ended in 1981-1982.
In the prior long term bond bear market, the Federal Reserve had successfully pegged the 10 year treasury yield in a 2.25% to 2.5% range between 1945 to 1951, when a market rate would have been far higher without FED manipulation based on inflation trends. Before the Accord: U.S. Monetary-Financial Policy, 1945-51
10 Year Treasury Rate by Year
FED Manipulated Rates:
FED Non-Manipulated Rates:
CPI Annual: Consumer Price Index, 1913- | Federal Reserve Bank of Minneapolis
Between 1946-1951, the annual average CPI was 6.43%. The average annual yield on the ten year treasury was 2.28%. I would not dig too deep into how that happened since the most obvious explanation, Federal Reserve manipulation to an abnormally low level, is plain to see in the data and is the only explanation that makes any sense.
When the FED quit manipulating the yield curve, the ten year treasury yield rose from the artificially created 2.25%-2.5% range to a free market set range that gradually moved to 4.7+% by 1960, even though the inflation numbers between 1952 through 1960 were much lower than during the 1946-1951 period.
The bond bear market started soon after the FED ceased to manipulate rates, but the blood letting was more like torture by thousands of paper cuts, rather than a sudden coups de grâce, which would come later in that 32 year secular bond bear market.
10-Year US Treasury Note Yield Since 1790 - Business Insider
+++
Apple Forecast Falls Short After iPhone Sales Miss Estimates-Bloomberg; Downgraded Apple faces ‘saturated market’ for iPhones- analysts react to earnings - MarketWatch
+++++
Portfolio Management:
I am currently focused on purchasing high dividend paying stocks that are being shellacked due to the rise in interest rates. All purchases are what I call small ball odd lots using commission free trades.
There are several reasons for tip toeing here.
First, I am catching falling knifes and have no good idea when the knife will stop falling. As long as the slide continues, I am at least lowering my average cost per share and increasing my dividend yield.
Second, I still have an abundance of commission free trades, so it is cost effective to buy small lots using them.
Fidelity Account as of 2/3/18:
For the first time in several weeks, possibly months, I went two consecutive days without buying a CD or bond last week. I am going to allow the proceeds from maturing securities to pile up into cash for awhile.
Last Friday, I looked for the first time in weeks at investment grade bonds maturing in 2024-2026. I may start to nibble in those maturities soon, spacing out purchases over time. My first trade may not occur until the 10 year treasury yield hits 3%.
My gut informs me that rates can only go up so far, at least as long as the ECB other other central banks maintain their extraordinarily abnormal monetary policies. I would include the FED in that list of other central banks since its monetary policy remains extremely accommodative given current U.S. economic conditions, inflation numbers and inflation expectations.
If I had my entire at risk portfolio invested in high quality corporate bonds maturing in equal dollars amounts each year between 2019-2028, with a weighted average interest rate somewhere close to 3.5%, I would achieve my financial objectives comfortably and would be able to invest most of that cash flow into more of the same or into other asset classes including stocks.
I slashed my exposure to bonds maturing in 2022 through 2026 last year, primarily during the second half.
I can not now achieve the 3.5% weighted average interest rate, though construction of a bond portfolio equally weighted in maturities between 2023-2028 could easily hit that 3.5% weighted average bogey. Its the 2019-2022 period that would drag down the composite yield below 3.5%.
++++
Interest Rates:
As I discussed in a recent comment, the Stock Jocks were not concerned at all about the rise in interest rates until recently.
The ten year treasury yield started its latest move higher in early September 2017. 2017 Daily Treasury Yield Curve Rates The closing yield on 9/7/17 was 2.05%. The S & P 500 closed that day at 2465.10.
On 1/26/18, the S & P 500 closed at 2,872.87 with the ten year treasury yield then at 2.66%. Between 9/7/17 and 1/26/18, the S & P 500 was up 16.54% and the ten year treasury yield had increased by 29.76%.
Yesterday, the closing yield was near 2.84%, and the SPX closed at 2762.13.
While the madness of crowds is not susceptible to rational explanation, the Stock Jock herd may have decided to reverse course last week based more on the uncertainty about the future course of interest rates rather than the actual increase since 1/26/18.
I have previously discussed that there was resistance in the 2.6-2.62% range. On two prior occasions, the ten year yield ended its uptrend after hitting that resistance level and then started to move back down.
There was also a break in the trend-line when rates broke above that resistance level. Bill Gross: 2.6% 10-year yield is the key to everything this year (20 year trend-line starting in 1987)
So the question now is how much higher will rates go and that creates uncertainty about stock valuations at the current elevated P/E levels.
In a free market where investors set intermediate and longer term interest rates without the heavy hand of Central Bank manipulation, the U.S. ten year treasury yield would generally be around 2-2.5% over the anticipated average annual CPI rate over the same ten year period.
Using the break-even inflation rate numbers, the current anticipated annual average CPI prediction for the next ten years is 2.09% and that estimate has been moving up.
Take the 2.84% nominal yield as of 2/2/18: Daily Treasury Yield Curve Rates
And Then Subtract the .75 real yield Daily Treasury Real Yield Curve Rates
At just a 2% spread to that inflation rate, the ten year treasury would be at 4.09% at the current time. The actual nominal number is 2.84%.
The central banks, both in the U.S. and other developed countries, are still in the rate manipulation business however. And we have seen this picture of rate spikes several times already prove to be only temporary. But this time may be the real deal too.
The 2013 rate spike ended since the CBs were still aggressively manipulating interest rates to abnormally low levels.
There are some key differences between the rate spike now and the one in 2013 which I viewed then as the market's first effort to move to normalized interest rates.
First, the FED had not yet changed its zero interest rate policy in 2013. Short term rates were near zero. Short term rates are now moving up with the 2 year treasury note crossing 2% for the first time since the Near Depression.
2-Year Treasury Constant Maturity Rate- St. Louis Fed
Second, the FED has quit buying treasuries and mortgage backed securities and is now reducing the size of its balance sheet. This is occurring at a time that the federal government will have to increase its borrowings due budget deficits and the rise in its interest costs.
Third, the ECB is near the end of its QE program.
Fourth, the world is now in a synchronized global economy recovery with inflation and inflation expectations starting to rise. During the 2013 rate spike, inflation remained about the same and inflation expectations actually went down a notch.
++++
Trump:
Normally, I would be concerned at the present time about a substantial increase in infrastructure spending adding to inflation pressures.
Trump talked about a $1.5 trillion infrastructure plan during his State of the Union speech. I never watch those speeches, viewing them as B.S. and the GOP's infrastructure plan falls well within that B.S. category.
I am not concerned about Trump's plan adding to inflation since the "plan" is bogus.
Trump’s new infrastructure “plan,” explained - Vox
Trump’s infrastructure plan is a private, expensive bridge to nowhere | TheHill;
Trump’s $1.5 Trillion Infrastructure Plan Is Light on Federal Funds, and Details - The New York Times;
State of the Union: President Trump's infrastructure plan - CBS News
Trump's "plan" calls for the federal government to spend only $200 billion over the next decade. The rest of the money would have to come from private businesses (think toll roads here) and local governments. Why Trump’s Infrastructure Plan Should Scare the Crap Out of You | Vanity Fair The general idea is to give private companies tax incentives to build and then charge the public for using the project. This plan is DOA and does not come anywhere close to what is needed.
In Tennessee, toll roads are forbidden and any attempt to change the law would likely result in a legislators losing their re-election bids and possibly tarred and feathered as well. Does Trump's infrastructure plan go far enough to help states like Tennessee? - CBS News
American Society of Civil Engineers 2017 Report Card on America's Infrastructure:
America's Grades | ASCE's 2017 Infrastructure Report Card
Back in early 2009, when the Democrats controlled all branches, I was extremely critical of their stimulus program that had minimal infrastructure expenditures. American Recovery and Reinvestment Act of 2009 - Wikipedia
The Democrats had forgotten the lesson taught by FDR. If the federal government is going to engage in significant deficit spending to stimulate a severely weakened economy, the money needs to spent on infrastructure projects over a multi-year time frame.
Even today, about 85 years after FDR became President in January 1933, the projects built with borrowed money back in the 1930s are still in use. Living New Deal | Still Working For America What exactly did the nation build with the 2009 stimulus which my GOP friends derisively call "Obama Bucks"? I don't think that you could now point to anything substantial. Even the tax cuts provided in that stimulus bill were mostly of very short duration. And, without question, the entire 2009 stimulus cost was needed to repair and build U.S. infrastructure.
++
Trump enjoys lying and misleading voters. It is unfortunate that millions are so easily misled and manipulated by a person who is obviously a Demagogue.
I am unaware of anyone, living or dead, who has publicly lied as much as Trump, though I can not assess the period before words were written for posterity. He takes great pride in his ability to manipulate people with palpably untrue and deliberately misleading statements.
My rough estimation is that about 50% of the U.S. voting age population have come to the only conclusion about Trump that is rationally possible. He is completely untrustworthy. I doubt that the percentage who hold that opinion will ever go down, since Trump will reinforce that irrefutable conclusion daily throughout his Presidential term.
The large percentage of the population who view Trump as a role model for their children and trustworthy live in their own reality creations and are permanently immunized against facts. I am going to prepare a curriculum for the children of those Trump acolytes, that will of course include a 60 minute weekly mandatory viewing of selected videos including the Access Hollywood tape and many more, plus many written course materials delving into Trump's lawsuits, his stiffing of bond owners and contractors, his bankruptcies, the creation of the brand Trump based on false information, and his frequent nefarious adventures like Trump University. Trump University: Yes, It Was a Massive Scam | National Review (a conservative magazine founded by William F. Buckley Jr.)
Trump falsely claims his address was the most viewed of all time - Feb. 1, 2018;
Donald Trump’s misleading claims about immigration in State of the Union address | PolitiFact;
Donald Trump's misleading claim about chain migration, unlimited sponsorship of distant relatives | PolitiFact;
Ice Caps at Record Low, Not High - FactCheck.org
FactChecking Trump's State of the Union - FactCheck.org
‘Art of the Deal’ Ghostwriter: Trump is ‘Deeply Disturbed’ and ‘Utterly Untrustworthy’
Trump has not yet taken credit for the market's decline last week. What gives?
He has certainly been quick to credit himself with the rise since his election.
I am wondering who he will blame when and if the market retraces all or most of the post-election rally which it could do before his first term ends. George Junior had a powerful stock market rally between September 2002 and early October 2007, moving from around 800 to 1550, but the S & P 500 ended up declining by 26.75% during his 8 year term. Forbes Everything looked great until it didn't.
Still, I do not expect a bull market killing recession prior to 2019. The last recession ended in June 2009.
A one decade expansion is one long economic recovery. nber.org/cycles
Two reasons IMO for the current expansion's longevity are the subdued nature of GDP growth and Central Banks keeping for an extended period of time short and intermediate term interest rates at negative nominal and negative real levels, depending on the maturity.
The average expansion since 1900 averages 47 months, though there have been 3 expansions since WWII greater than 100 months and none before then. (see page 17 JPM Guide to the Markets).
+++++
Joe Arpaio seems to me to embody the values of the modern day GOP: Joe Arpaio Needs More Information Before He'll Condemn A Paper That Denies The Holocaust
Another republican from Arizona, Paul Gosar, demanded the Capitol Police arrest the Dreamers who attended the State of the Union speech. Gosar Asks Capitol Police, DOJ to Arrest ‘Illegal Aliens’ at State of the Union.
Gosar (R-AZ) also wants top FBI and DOJ officials to be arrested for treason. GOP lawmaker calls for FBI, DOJ officials to face 'treason' charges - POLITICO
+++++++++
1. Small Ball:
A. Bought 20 Gramercy Property-Used Commission Free Trade (2 ten lot trades at $25.65 and at $24.45):
Quote: Gramercy Property Trust (GPT)
Website: Gramercy Property Trust
Our Portfolio | Explore Our Markets | Gramercy Property Trust
This 10 share "buying program" will stop at 50 shares and I will only average down with any additional purchases.
I have never bought GPT shares prior to these two ten lot purchases.
I did own Chambers Property. Gramercy merged into Chambers and then the combined entity changed its name to Gramercy Property Trust. The monthly dividend paid by Chambers was changed into a quarterly one and was reduced initially by 13.73%. Gramercy thereafter underwent a 1 for 3 reverse stock split. Gramercy Property Trust Announces 1-for-3 Reverse Share Split
Prior to the reverse stock split, I sold all of my GPT shares:
Item # 2. Sold 122+ GPT at $8.424-Roth IRA: Update For Equity REIT Basket Strategy As Of 4/12/16 - South Gent | Seeking Alpha;
Item # 1. Sold 699+ Gramercy REIT (NYSE:GPT) in Two Accounts: Update For Equity REIT Basket Strategy As Of 3/21/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2: Sold Remaining 396+ GPT Shares at $9.09
GPT Realized Trading Gains: +$984.68
On a split adjusted basis, the last disposition at $9.09 was at a split adjusted price of $27.27. The shares thereafter went up, forming a double top last year near $31 per share and started a persistent decline after the second top last October. Gramercy Property Trust Interactive Chart
IMO, the stock was overvalued at $27 and was significantly overvalued as it moved higher into its first top last June.
I am not enthusiastic about the prices paid for the two 10 share lots, which is expressed in the fact that I have only bought 20 shares and those shares were bought in 10 share lots.
A major part of my concern now is the potential for a persistent rise in interest rates that will negatively impact stock prices for all equity REITs. (Scroll to "Interest Rate Movements and REIT Stocks: Update For REIT Basket Strategy As Of 8/11/15-South Gent | Seeking Alpha)
Dividends: Quarterly at $.375 per share ($1.5 annually)
Last Ex Dividend Date 12/28/17
Gramercy Property Trust Declares Fourth Quarter 2017 Dividends
Dividend Yield at a Total Cost Per Share of $25.065 = 5.98%
Last Dividend Raise: $.33 to $.375 effective for 2017 1st Quarter Payment
2017 Third Quarter Results:
Gramercy Property Trust Reports Third Quarter 2017 Financial Results
I am not impressed.
Note that core FFO and AFFO per share numbers have gone down for the 9 month period ending in 9/30/17 compared to the same period in 2016, while the share count has gone way up. I am not surprised that the stock has retreated from $31 to below $26 when I bought this 10 share lot at $25.68.
The problem with REITs in an empire building mode is that there is a persistent shuffling of the property portfolio. Maybe it will work but there is such a large cloud of dust that is hard to know one way or the other. Current results do not suggest that the asset shuffling is working out to benefit shareholders.
Properties that do not work out so well become non-core for that reason, though another is given in the press release that generally is grounded on some change in strategy. Then another intense round of buying and selling occurs in pursuit of a different strategy.
Portfolio Acquisitions: Third Quarter 2017:
Gramercy Property Trust Agrees to Purchase $331 Million, 9-Property Industrial Portfolio (8/30/17)"Over 80% of the NOI for the Portfolio is concentrated in four markets (Atlanta, Boston, Chicago and the Inland Empire) and nearly 90% of the rent from the Portfolio comes from a single, market-leading tenant. At closing, which is expected to occur by the end of the third quarter of 2017, the Company will assume $137 million of in-place debt, and will issue $133 million in OP Units to fund the acquisition. The OP Unit price will be based on a 30-day VWAP as of August 29, 2017, or $29.56 per share. The Company is acquiring the Portfolio at a 6.3% cash capitalization rate.")
Gramercy Property Trust Agrees to Purchase $479 Million Core Logistics Portfolio (8/22/17) ("entered into an agreement to acquire a 41-property, 7.8 million square foot portfolio of modern warehouse industrial buildings (the “Portfolio”) for $479 million. The Portfolio is 93% leased with a weighted average remaining lease term of 4.1 years; near term lease roll is concentrated in properties that have contract rents which are either at or below market rent levels. The Portfolio is 100% located in six key logistics markets throughout the United States which include Atlanta, Chicago, Columbus, Dallas, Houston and Memphis. The Company will acquire the Portfolio free and clear of any debt at a 6.2% capitalization rate on estimated stabilized NOI.")
For each large purchase, there is a seller willing to part with the part at the price offered. I would probably be selling to Gramercy.
Third Quarter Ongoing Build to Suit Projects:
Share Issuances:
Third Quarter
Earlier in 2017:
Third Quarter U.S. Property Dispositions:
Europe Property Dispositions:
Gramercy Property Trust Closes Previously Announced Sale of Gramercy Europe Assets to a Consortium of Clients Managed by AXA Investment Managers – Real Assets (7/18/17)
I think that it is best for management to just focus on the U.S.
How can you tell how the company is doing and more importantly will do with all of that shuffling compared to doing far less?
Will the results be clear on an AFFO basis in a few quarters or will there continue to be a cloud of dust?
Are the managers creating long term value and decent growth in future AFFO with all of this activity?
I do not know; and I doubt that anyone really has a good handle on the whether shareholders are better or even worse off. Now is probably a pretty good time for GPT to just focus on what it owns and to do only bolt on acquisitions and build-to-suit projects in core existing markets.
B. ADDED 5 VNQ at $78.12 and 5 at $76.82 :
Closing Price Friday 2/2/18: VNQ $77.11 -0.63 -0.81%
The 52 week high is currently at $86.14, a price hit intra-day on 12/18/17.
This brings me up to 15 shares. This ETF can be bought and sold by Vanguard brokerage customers commission free which is where I am buying these small lots.
Quote: Vanguard REIT ETF
I restarted a position a few days ago with a 5 share purchase at $79.62. Item 1.F. (1/28/18 Post)
I will continue buying in 5 share lots provided the price continues to decline. The price did move up some in late trading last Friday.
Will the results be clear on an AFFO basis in a few quarters or will there continue to be a cloud of dust?
Are the managers creating long term value and decent growth in future AFFO with all of this activity?
I do not know; and I doubt that anyone really has a good handle on the whether shareholders are better or even worse off. Now is probably a pretty good time for GPT to just focus on what it owns and to do only bolt on acquisitions and build-to-suit projects in core existing markets.
B. ADDED 5 VNQ at $78.12 and 5 at $76.82 :
Closing Price Friday 2/2/18: VNQ $77.11 -0.63 -0.81%
The 52 week high is currently at $86.14, a price hit intra-day on 12/18/17.
This brings me up to 15 shares. This ETF can be bought and sold by Vanguard brokerage customers commission free which is where I am buying these small lots.
Quote: Vanguard REIT ETF
I restarted a position a few days ago with a 5 share purchase at $79.62. Item 1.F. (1/28/18 Post)
I will continue buying in 5 share lots provided the price continues to decline. The price did move up some in late trading last Friday.
C. Added 10 ENB at $36.56 (used commission free trade):
USD Priced Quote: Enbridge Inc. (ENB)
CAD Priced Quote: Enbridge Inc. (Canada: Toronto)
Home - Enbridge Inc.
This brings me back up to 40+ shares in this Fidelity account.
I last sold 10 ENB shares in that account at $40.14: Introduction Section 1/4/18 Post
Prior to that transaction, I sold 50 ENB shares in my IB account at $39.03. Item # 3 (12/21/17 Post)
Dividend: Since my last discussion, the quarterly dividend was raised to C$.671 per share from C$.61. Enbridge Dividend History
I am reinvesting the dividend in this account. The next ex dividend date is 2/14/18. The dividend amount for ENB will be paid in USDs after conversion from Canadian Dollars so the amount will vary from quarter to quarter. Generally speaking, even when there is no change in the dividend penny rate, a rise in the CAD/USD after purchase would result in a dividend increase while a decline would operate as a dividend cut.
I will buy 10 more shares in this account, using a commission free trade, when and if the price falls below $34. I would then sell my highest cost lot at over $40 assuming I still had a commission free trade.
Closing Price Last Friday (2/2/18):
USD Priced ADR ENB $34.70 -$1.16 -3.23%
CAD Priced Shares Traded in Toronto: ENB.TO C$43.11 -C$0.88 -2.00%
(CAD fell in value against the USD)
If I took the C$43.11 price and the current quarterly CAD dividend rate of C$.671 per share, I come up with a dividend yield near 6.23%. The actual penny amount and yield for the ADR owner will depend on the currency conversion rate.
ENB is currently a falling knife. ENB Chart YF
2. Healthcare Basket Strategy:
USD Priced Quote: Enbridge Inc. (ENB)
CAD Priced Quote: Enbridge Inc. (Canada: Toronto)
Home - Enbridge Inc.
This brings me back up to 40+ shares in this Fidelity account.
I last sold 10 ENB shares in that account at $40.14: Introduction Section 1/4/18 Post
Prior to that transaction, I sold 50 ENB shares in my IB account at $39.03. Item # 3 (12/21/17 Post)
Dividend: Since my last discussion, the quarterly dividend was raised to C$.671 per share from C$.61. Enbridge Dividend History
I will buy 10 more shares in this account, using a commission free trade, when and if the price falls below $34. I would then sell my highest cost lot at over $40 assuming I still had a commission free trade.
Closing Price Last Friday (2/2/18):
USD Priced ADR ENB $34.70 -$1.16 -3.23%
CAD Priced Shares Traded in Toronto: ENB.TO C$43.11 -C$0.88 -2.00%
(CAD fell in value against the USD)
If I took the C$43.11 price and the current quarterly CAD dividend rate of C$.671 per share, I come up with a dividend yield near 6.23%. The actual penny amount and yield for the ADR owner will depend on the currency conversion rate.
ENB is currently a falling knife. ENB Chart YF
2. Healthcare Basket Strategy:
A. Sold 30 out of 135 NVS at $93.85-Highest Cost Lot:
Profit Snapshot: +$184.26
Quote: Novartis AG ADR (NVS)
Closing Price Last Friday (2/2/18): NVS $88.39 -$2.16 -2.39%
My existing position is in another account (reinvesting the dividend):
Novartis Annual Report 2017
Dividends: NVS pays an annual dividend in Swiss Francs that will be converted in USDs for the ADR owners. Both Fidelity and Vanguard will asset my treaty right to no more than a 15% withholding tax. (see Article 10.2: TAX CONVENTION WITH SWISS CONFEDERATION)
Many brokers will fail to do so resulting in a 35% Swiss tax on the dividend.
Novartis increased its annual dividend by 2% from the preceding year. The new dividend is CHF2.8. Dividend Information | Novartis
Last Earnings Report: NVS popped in price after releasing this report which is what caused me to sell my highest cost lot at $93.85.
Importantly, the Alcon division grew sales by 4% and core operating income by 5%. Free cash flow grew 10% to $10.4 in 2017.
Growth Drivers in the 4th Quarter:
New Approvals and Regulatory Opinions in the 4th Quarter:
Alcon Strategic Review:
3. REGIONAL BANK BASKET STRATEGY:
A. SOLD 100 HBAN at $16.12 (used commission free trade):
Profit Snapshot: +$254.75
Item # 1.A. Bought 100 HBAN at $13.58 (12/7/17 Post)
As discussed in that post, HBAN deservedly crashed and burned during the Near Depression which is reflected in a long term chart:
Quote: Huntington Bancshares Inc. (HBAN)
HBAN Analyst Estimates
Huntington Bancshares Incorporated Reports Record Quarterly and Annual Earnings (2017 E.P.S. ex-items= $.98)
This sell was based primarily on profit taking.
The surge in HBAN's price since my purchase did take the valuation to the upper end of my fair value range.
Other reasons include the following. HBAN is not a major beneficiary of the tax rate change given its already low effective tax rate. Net charge offs at .25% of average loans and non-performing loans are already at historical lows.
Closing Price Last Friday (2/2/18): HBAN $16.08 -$0.26 -$1.59%
4. Short Term Bond/CD Ladder Basket Strategy:
Issuer: Apple Inc. (AAPL)
Credit Ratings:
Bought at a Total Cost of 99.802
Bought at a Total Cost of 99.802
YTM at TC Then at 1.879%
Current Yield at TC = 1.7034%
B. Bought 2 Bank of China 1.5% CDs Maturing on 4/16/18 (3 MONTH CDs):
C. Bought 2 First N.A. 1.6% CDs (monthly interest payments) Maturing on 7/25/18 (6 MONTH CD):
Holding Company: First Bancorp Inc. (FNLC)
D. Bought 1 Shell International 1.625% SU Bond Maturing on 11/10/18:
C. Bought 2 First N.A. 1.6% CDs (monthly interest payments) Maturing on 7/25/18 (6 MONTH CD):
Holding Company: First Bancorp Inc. (FNLC)
D. Bought 1 Shell International 1.625% SU Bond Maturing on 11/10/18:
Finra Page: Bond Detail
Fitch Affirms Shell at 'AA-'; Maintains Negative Outlook
Bought at a Total Cost of 99.852
YTM at TC Then at 1.804%
Current Yield at TC = 1.6274%
E. Bought 1 Whitney Bank 1.6% CD Maturing on 7/12/18 (6 MONTH CD):
Holding Company: Hancock Holding Co. (HBHC)
HBHC Analyst Estimates
F. Added 1 Nextera Energy Capital 1.649% SU Bond Maturing on 9/1/18:
I now own 7 bonds. This quality bond is simply viewed as an alternative to cash in a MM fund.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Wholly Owned Subsidiary of NextEra Energy Inc. (NEE) who guarantees the bonds unconditionally.
NEE Analyst Estimates
Credit Ratings:
Fitch Rates Nextera Energy Capital Holdings' Debentures 'A-'; Outlook Stable
Bought at a Total Cost of 99.868
YTM at TC Then at 1.858%
Current Yield at 1.6512%
G. Bought 2 Compass 1.5% CDs Maturing on 4/19/18 (3 month CDs):
In this account, I had a 1.2% three month CD mature on the day that I bought this 1.5% three month CD.
H. Bought 2 Kimberly Clark 1.85% SU Bonds Maturing on 3/1/2020:
Finra Page: Bond Detail (prospectus linked)
Credit Ratings:
Issuer: Kimberly-Clark Corp. (KMB)
KMB Analyst Estimates
Bought at a Total Cost of 99.356
YTM at TC Then at 2.161%
Current Yield at TC = 1.862%
I. BOUGHT 2 mBank 1.8% CDs (monthly interest payments) Maturing on 1/24/18:
Holding Company: Mackinac Financial Corp. (MFNC)
Mackinac Financial Corporation Announces Third Quarter 2017 Results
J. BOUGHT 2 Cardinal Health 1.95% SU Bonds Maturing on 6/15/18:
FINRA Page: Bond Detail
Issuer: Cardinal Health Inc. (CAH)
Bought at a Total Cost of 100
YTM and Current Yield= 1.95%
At the time of this purchase, the 3 month treasury bill was trading at 1.486%.
I am discussing this trade early to highlight one area where I am focusing some attention.
For whatever reason, I am able to buy some bonds at below par value that are about to mature; and the yields are at least slightly out-of-line with similarly rated paper maturing at about the same time.
This trade is consistent with three primary objectives: (1) preservation of capital; (2) income generation in excess of money market rates; and (3) creating a short term bond/CD ladder with multiple maturities every week.
The third objective is predicated on a belief that short term rates will increase steadily throughout the year. I had an underweight in June 2018 maturities based on lack of availability.
As to income generation, I will be earning 1.95% for more than four months, compared to slightly more than the .98% currently paid by Fidelity's Government MM fund. SPAXX - Fidelity ® Government Money Market Fund (the highest yielding MM fund offered by Fidelity now to individual investors as their sweep account)
As to capital preservation, I have no concerns about Cardinal Health defaulting prior to the 6/15/18 maturity.
The emphasis on short term bonds and CDs purchase is primarily based on a belief that interest rates would continue to rise. There is a balance that needs to be struck between that anticipated movement and the low yields from money market funds used as a source of funds for those purchases.
The Schwab sweep account pays .1% and Fidelity's MM fund is almost up to 1%. IB pays nothing or close to it. While the dollar value of these purchases may go down some due to the rise in rates, they can not go down much, given their short maturities, and will start to move back up as the maturity date moves closer. Since I am buying short term bonds at below par value, I will have a profit on the bonds upon maturity, while the CDs will be redeemed in their principal amount with no loss of capital.
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.
The most important news from last week was the U.S. Treasury announcement that its 2018 borrowings would increase by almost 84% for the F/Y ending 9/30/18. Total borrowings for the current fiscal year are currently estimated at $955B compared to $519B that was borrowed in the F/Y ending 9/30/17.
ReplyDeleteI would note that the cost of borrowing in the 2018 F/Y will substantially increase as well compared to prior fiscal years.
The negative impact of tax cuts on federal revenues will end up being significantly more negative than currently predicted by Trump's treasury department IMO. The CBO has already informed the treasury that will be the case.
https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53514-debtlimit.pdf
The treasury will not be able to pretend for much longer when the cold hard facts of incoming and outgoing cash (including interest payments) contradicts their assumptions about future debt borrowings.
The substantial upturn in borrowings and interest costs are occurring at a time when the Federal Reserve is no longer a buyer and is reducing its treasury holdings.
U.S. interest rates have stabilized today, possibly due to a decline in the German 10 year bond and other European sovereign bonds:
ReplyDeleteGermany 10 Year Government Bond
.734% -0.032
https://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
U.K. 10 Year Gilt
1.555% -0.025%
Last Updated: Feb 5, 2018 at 2:56 p.m. GMT
VNQ is consequently up for the day so far:
Vanguard Real Estate ETF
$77.33 +$0.25 + 0.32%
Last Updated: Feb 5, 2018 at 9:57 a.m. EST
https://www.marketwatch.com/investing/fund/vnq
Thanks for putting ENB back on my radar over the weekend. My alerts hit this morning and I bought a few shares. I was trying to scale out over 40, but got caught holding 50shares. May try scaling out over 38 next time
ReplyDeletePaul: The recent weakness in ENB is probably due to a rise in interest rates. ENB is certainly debt heavy and investors are suffering an anxiety attack about how high interest rates will go.
DeleteBond like common stocks have also been hit due to the uptick in rates.
While the ten year treasury dipped in yield earlier today, it is now rising and up slightly in yield for the day after forming a double bottom near 2.825%:
U.S. 10 Year Treasury Note
2.858% +0.016%
Last Updated: Feb 5, 2018 at 11:29 a.m. EST
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
I am using commission free trades to buy ENB and will probably continue to average down in 10 share lots. My target price is <$34.
Another negative factor for ENB is that the CAD is currently losing value against the USD.
CAD/USD
$0.801 -0.0035 -0.44%
I have been selling the CAD to buy USDs when the CAD/USD goes over .8.
Enbridge Inc.
C$ 43.42 +C0.31 +0.72%
Last Updated: Feb 5, 2018 at 11:23 a.m. EST
https://www.marketwatch.com/investing/stock/enb?countrycode=ca
Enbridge Inc.
U.S. $34.69 -0.015 -0.04%
Last Updated: Feb 5, 2018 at 11:39 a.m. EST
https://www.marketwatch.com/investing/stock/enb
https://www.marketwatch.com/investing/currency/cadusd/charts
The Morgan Stanley equity strategist has warned investors not to buy the dip for the reasons summarized in this Marketwatch note:
ReplyDeletehttps://www.marketwatch.com/story/morgan-stanleys-wilson-warns-investors-not-to-buy-the-dip-2018-02-05
The ten year treasury yield is falling some now.
iShares 7-10 Year Treasury Bond ETF
$102.52 +$0.295 0.29%
Last Updated: Feb 5, 2018 at 2:37 p.m. EST
https://www.marketwatch.com/investing/fund/ief
That may in part be a flight to quality since the intermediate term investment grade corporate bond ETF is down fractionally, though trending higher:
iShares Investment Grade Corporate Bond ETF (LQD)
$118.52 $ -0.0899 -0.08%
Last Updated: Feb 5, 2018 at 2:39 p.m. EST
https://www.marketwatch.com/investing/fund/lqd
As I recall, those two ETFs have similar durations.
At least my heavy bond portfolio will work today to cushion the blow from the stock decline which it did not do last week.
Equity REITS are getting hammered notwithstanding the better tone in bonds. Bond like common stocks are not going to hold up in this kind of decline irrespective of whether interest rates are moving down some.
Vanguard Real Estate ETF
$75.63 -$1.4467 -1.88%
https://www.marketwatch.com/investing/fund/vnq
That is a similar decline to the S & P 500 at the moment.
S&P 500 Index
2,708.86 -53.27 -1.93%
Last Updated: Feb 5, 2018 at 2:43 p.m. EST
https://www.marketwatch.com/investing/index/spx
I am digesting microscopic stock crumbs today. I am no longer going to call 10 share buys using commission free trades nibbles.
The machines took over today. No news could explain what happened in the stock market.
ReplyDeleteInterest rates went down.
iShares 20+ Year Treasury Bond ETF
$120.71 +$1.13 +0.94%
https://www.marketwatch.com/investing/fund/tlt
iShares 7-10 Year Treasury Bond ETF
$103.06 +$0.84 +0.82%
https://www.marketwatch.com/investing/fund/ief
iShares Investment Grade Corporate Bond ETF
$118.68 +$0.07 +0.06%
https://www.marketwatch.com/investing/fund/lqd
Junk bonds fell in price and rose in yield.
https://www.marketwatch.com/investing/fund/jnk
Taken together, there was a flight to the highest quality bonds, though LQD did enjoy a bounce when stocks started to dive into a black hole near 3:00 P.M. E.S.T.
There was also no high profile earnings disappointments like there were last Friday.
I bought several odd lots today, using commission free trades and spending roughly $1,200 in cash. Most of the lots were just 5 and 10 shares. I focused primarily on equity REITs yielding over 8%.
Using a one year Yahoo Finance chart, the S & P 500 broke decisively through its 50 day SMA line which was at 2716.15 and was a few points above its 100 day SMA of 2634.
S&P 500
2,648.94-113.19 (-4.10%)
At close 2/5/18
The 200 day SMA line is currently near 2534.
The VIX closed at 37.32 up 20.01 or 115.6%.
https://finance.yahoo.com/quote/%5EVIX?p=%5EVIX
That VIX burst is Day 1 in my now ongoing Trigger Event count.
In my Vix Asset Allocation, a Trigger Event terminates the Stable Vix Pattern, a cyclical bullish indicator, and ushers into being the Unstable Vix Pattern, a cyclical bearish indicator.
I am certainly bond heavy now, primarily short term investment grade corporates and high quality long term Tennessee municipal bonds that would have gone up the most today. Possibly, in two brokerage accounts that are bond heavy, I may have a net gain when the brokers provide the third party derived prices which are invariably below the last trades. I did see an uptrend during the day in investment grade corporate bond prices.
I will not need to be concerned about paring again my Vanguard Equity Income (VEIRX) fund by a $1K anytime soon. The last pare was at $81.57 on 1/25/18.
Item #5
https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent_28.html
If tomorrow is another down day, I will just do something similar to what I did today. I am not looking to buy bonds at the moment. I may start looking for something to sell if the bond rally continues since nothing has really changed IMO:
U.S. 10 Year Treasury Note 2.706% Down .136%
https://www.marketwatch.com/investing/bond/tmubmusd10y/charts?countrycode=bx
The DJIA futures at the moment are down another 1000 points or so.
ReplyDeleteAs of Feb 5, 2018 at 9:41 p.m. CST, the DJIA futures are currently at 23,387.
The DJIA closed today at 24,345.75, down -1,175.21 or -4.60%.
I suspect that some sideline money will appear after the open or during the day with that kind of decline in place.
I will do what I did today even if the decline turns out to be far worse than currently shown in the major index futures which is bad. That would entail sprinkling about $1K to $1.5K into several high yielding battered securities or possibly into some other shellacked stock if those high yielders are holding up rather than diving as they did today.
The Fidelity website is down so I was not able to buy 10 more ENB when it went below $34.
ReplyDeleteBuyers did emerge to bring the SPX and the DJIA into positive territory after an opening swoon. It is important IMO to see whether that reversal will be sold.
Dow Jones Industrial Average
24,673.63
+ 327.88 +1.35%
Last Updated: Feb 6, 2018 at 9:56 a.m. EST
DAY RANGE
23,778.74 - 24,712.86
The rally was sold and the market market indexes are now down.
ReplyDeleteDow Jones Industrial Average
24,285.75 -60.00 -0.25%
The Stock Jocks are not going to go down with a flicker of a feather by the bears.
++++
Oclaro, Inc. (OCLR)
$ 6.84 +$1.19 (+21.06%)
As of 10:12AM EST.
This 21+% gain almost brings me back to even for my Lotto Ticket purchase at $6.88 which is my TC number as well:
Item # 1.B.
https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent_8.html
The earnings report, released earlier today, was apparently not as bad as expected, beating the consensus non-GAAP E.P.S. estimate by 1 or 2 cents depending on the service who compiled the estimates.
The CEO did say the following in the press release: "While we project March quarter revenue to be down sequentially, we anticipate another quarter of solid operating income. As the headwinds facing the industry begin to subside, and we ramp new products, our revenue is expected to resume growth in the June quarter."
Non-GAAP earnings per diluted share for the second quarter of fiscal 2018 were $0.14. This compares with non-GAAP earnings per diluted share of $0.20 in the first quarter of fiscal 2018, and non-GAAP earnings per diluted share of $0.21 in the second quarter of fiscal 2017. Cash, cash equivalents, and short-term investments were $290.1 million at December 30, 2017. This company has no debt. Cash per share is about $1.7.
https://www.prnewswire.com/news-releases/oclaro-announces-second-quarter-fiscal-year-2018-financial-results-300593565.html
Today was pretty weird. After being whipsawed up and down all day, the path of least resistance by day's end proved to be up.
ReplyDeleteI don't think today resolved anything however. Nothing changed in the economy over the past several trading days. If a rise in interest rates was one precipitating cause in the selloff, then that issue is still with us IMO.
Importantly, high quality bonds barely saw an up move in price yesterday and were down today.
iShares 7-10 Year Treasury Bond ETF
$102.61 -$0.45 -0.44%
https://www.marketwatch.com/investing/fund/ief
IEF lost today more than it gain yesterday and yesterday was an anemic move up considering what was happening in Stock Land.
This suggests to me that interest rates are more likely to continue moving up.
The Vanguard Real Estate ETF (VNQ) closed up $.01 at $74.8 vs. SPX at +1.74%. While that penny share price increase was an improvement off the intra-day low of $73.09, which was a new 52 week low for VNQ, the upturn was obviously restrained by something, and that had to be the rise in interest rates.
I pretty much stuck to my game plan, though I did go over my dollar allotment of $1.2K to $1.5.
I was not planning on buying MRK today, but saw the price near $54.55 while I was in my IB account. A quickie decision led me to buy back the 10 shares at $54.53 that I just sold at $61.2:
Item 1.A.
https://tennesseeindependent.blogspot.com/2018/01/observations-and-sample-of-recent_28.html
Hello southgent,
ReplyDeleteI was trying to find your article on a "trigger event in the Vix." I believe it was written sometime at the end of 2016. When I looked on Seeking Alpha I was very surprised to see that there is some charge for your articles now a monthly fee I believe of $75 per month which to the average retiree to look back at articles seems awfully expensive to me.
In any case I wondered if you could find the article for me and tell me where it is perhaps it's in your blog. I believe the blog is still free. I wanted to review your thinking on elevated Vix levels. And wanted to review that before I asked you any questions. I'm not exactly sure what happened on Monday and Tuesday but I know a lot of the short Vix trade got wiped out something that seems like playing with dynamite.
I don't know if there's any way you could republish this in your personal blog which I read very frequently.
Thank you,
SAM Atman
Sam: I am not being paid by SA. I believe that most articles now require a subscription. All of my "articles" were republished without any monetary consideration paid to me from SA Instablogs which are still available for free.
ReplyDeleteThe last Trigger Event was in August 2015 and I discussed that event here:
https://seekingalpha.com/instablog/434935-south-gent/4308586-trigger-event-vix-asset-allocation-model-8-31-15
The Unstable Vix Pattern formed with that Trigger Event but that was terminated fairly quickly for a UVP by the formation of a Stable Vix Pattern by July 2016.
Yesterday was the second day in the Trigger Event count.
The market is having trouble holding onto gains this morning.
The problem as I see it is a very mild pop in interest rates caused by news of a massive new spending bill approved by a bipartisan coalition in the Senate. Basically, the republicans get more money for defense and the Democrats more more for social programs. Everybody is happy now except for those who are concerned about $1 trillion budget deficits in a rising rate environment.
https://www.cnn.com/2018/02/07/politics/senate-announces-deal-budget-caps-agreement/index.html
So here we have more spending that will require more debt at a time when interest rates are rising. And federal revenues will be lower due to the tax cuts.
U.S. 10 Year Treasury Note
2.837 0.034%
Last Updated: Feb 7, 2018 1:31 p.m. EST
That is too tame IMO.
Hello southgent,
ReplyDeleteThank you for your link to your blog on the trigger event in the Vix. I just read the article and the comments and perhaps a missed the note about how many days one needs for a valid trigger event with the Vix over 26, at least historically.
I was unable to find the parameters historically from the previous trigger events.
If you could refresh my memory on that I would be very helpful. Thanks
I also noted on CNBC they were complaining about needed regulations for leveraged ETN's that reflect the Vix complex. They had someone on who suggested there was manipulation on one of the Vix instruments which was not named but I believe was XIV which is the one to one inverse Vix ETN.
It is amusing to me that while this product was going up due to decreased volatility, no one asked for more regulation.
The prospectus may be difficult to read, but even me the average investor saw that with I believe a 70% write down, the ETN has the right to close.
It's also clear that these ETN's do not stop trading at 4 o'clock since they reflect the puts and calls of S&P options which take some time to be closed out.
This is not rocket science. I personally would not touch anything like that with a 10 foot pole and it angers me that now there were complaints because people were greedy and sloppy and they blame it on the ETN.
SAM
Sam: I would just say no to the VIX products.
Deletehttps://www.bloomberg.com/news/articles/2018-02-06/credit-suisse-is-said-to-consider-redemption-of-volatility-note
Sometimes, there is no doubt about the Trigger Event since there is a long period where the VIX closes above 26.
You can see the 1997 data in that post. It just goes on and on and on.
The same is true for the April-May 1987 Trigger Event. Data is in that post.
The August 1987 Trigger Event was shorter at 8 days. There were 10 VIX reading between 20-25 before the Trigger Event period. There were two readings over 30. There were also multiple confirmation events as noted in that post that bolstered the initial sell call.
The August 2015 Trigger Event was 7 days with 3 readings over 30 and one over 40.
If I get at least two readings over 30 and at least 5 other days between 26-30, that is sufficient as is 2 readings over 30, 1 reading over 40 and 4 days between 26-30.
The readings need to be grouped together relatively close in time.
An individual can change these requirements based on their own analysis of the historical data. Someone else may want to count, for example, the 29.98 close on 2/6/18 where the intra-day high was 50.3 as an over 30 day.
My model is more mechanical and requires the close to be over 30. That 30+ number is relevant on the number of days required.
We know have 3 days with 1 close over 30. I would follow the same format as noted above.
If there is only 1 close above 30, I would want 8 days between 26-30 or 9 days total.
After every Trigger Event, there has been a Recovery Period where the investor could lighten up at better prices, but the next time may be different. The Model only suggests that possibility based on prior history.
After the August 2015 TE, the VIX was below 20 movement starting on 10/5/15.
After the August 2007 TE, the market resumed its climb and the VIX temporary fell below 20 as the SPX hit new highs in October 2007. There was a recovery period after the 1987 TE before the crash.
Personally, I have been selling for a long time now. I have used the spike in volatility to add some common stocks, though in immaterial amounts for me. If there is a Trigger Event and then a Recovery Period, I may be able to sell some of them at higher price during the RP.
Today was day three in the ongoing Trigger Event count:
ReplyDeleteCBOE Volatility Index (^VIX)
27.73-2.25 (-7.51%)
At close: 4:14PM EST
For most of the day, it looked like the VIX would close below 26 which would have excluded the day from the count.
Day's Range 21.17 - 31.64
I use closing prices in the count. I would note that the recent intra-day highs:
2/7 31.64
2/6 50.30
2/5 38.80
Friday 2/2 Low: 13.64 and Close: 17.31 (wide swing)
The worst one day burst in volatility, where there is a measurement, occurred on Black Monday October 19, 1987. That was a crash day when the DJIA fell about 22% in one day.
While we do not have VIX numbers for that day, CBOE does have the S & P 100 volatility closing number which was 150.19, barely off its intra-day high of 152.08. On Tuesday 10/20/1987, the opening was at 171.32 with a close at 140.
If you go forward 21 years, the VIX did not match those numbers during the worst days in 2008.
VXO hit an intra-day high of 103.41 on 10/10/08, one of the worst days, but closed at 85.99 which was the highest close that month.
The S & P 100 is slightly less volatile index over time than the S & P 100 and its volatility index is reflecting that now:
CBOE S&P 100 Volatility Index
21.00 -3.93 -15.76%
https://www.marketwatch.com/investing/index/vxo?countrycode=xx
++
Politicians and most Americans think about the here and now. The federal government's future debt problems are out-of-sight and out-of-mind.
Today's agreement in the Senate to spend a lot more money is part of mind set:
" The measure, negotiated between Senate Majority Leader Mitch McConnell and Senate Democratic Leader Chuck Schumer, increases domestic and military spending by $300 billion, the most significant increase in spending since before mandatory budget caps, known as sequestration, went into effect in 2011. Additionally it would provide more than $70 billion in disaster relief, increasing spending by nearly $400 billion over the next two years."
https://www.nbcnews.com/politics/congress/senate-leaders-strike-budget-deal-ahead-government-shutdown-deadline-n845491
I do not believe the Bond Ghouls are fully awake yet to the implications of increased interest costs, increased spending and decreased revenues resulting from the tax cuts.
thank you!!
Deletesam
South Gent,
DeleteThank you for your answer
I was a little confused by one point
You wrote "If I get at least two readings over 30 and at least 5 other days between 26-30, that is sufficient as is 2 readings over 30, 1 reading over 40 and 4 days between 26-30. " In the second part of your discussion here since a reading over 30 could be over 40 does that only mean you need six days total instead of seven to consider this a trigger event?
The second point is the 200 day moving average.. Presently, it looks like the S&P 200 day moving average is around 2537 or so. Would you use 5% below that as confirmation or is seven days of the above readings enough to make you start thinking about selling during the recovery. Should it happen.
As you said something has changed in the market. It's kind of surprising to me that this did not start last year. At least at the end of last year. It's clear the Fed has stopped QE and will be raising rates and Europe will follow. So it's amazing that it did not happen at the end of last year to me.
In any case, all this was known and as you said something drastic has changed in the market so do you think it's just the rise of long-term rates, or under the surface inflation which is not picked up by Fed numbers at present.?
It seems like with the tax giveaway to corporations [and the rich] that companies will be able to not only decrease share can with buybacks but also if they wanted to increase Capacity expansion, so a booming economy usually means more money in the pockets of workers whose wages have risen and more consumer spending.
So it's very confusing unlike 2007 or 2000, at least confusing to me that the market is only acting like it sees bad news.
Your opinion on what you think is happening would be extremely enlightening.
Although it's clear that no one actually knows.
In any case, the Vix asset allocation model is fascinating and has historically so far proved to be extremely useful.
Thank you for that!
Sam
The VIX numbers are only relevant to the Vix Asset Allocation Model.
DeleteThe decline of 5% below the 200 day SMA is simply another sell indicator that can be used, with or without modification by the individual investor, as a confirmation of the Trigger Event sell signal.
The VIX movement can confirm the Trigger Event as it did multiple times after the August 2007 TE.
If the investor sold after the August 2007 Trigger Event during the late September and early October 2007 Recovery Period, then the investor could use the 200 SMA line indicator to start buying back stocks. In that case, the index would have to cross above the line. As I recall, that occurred sometime in late Spring in 2009. It would be important that the VIX be declining as well but not necessary for the SVP to form prior to redeploying some of the stock proceeds back into the market.
I started to do so in late February 2009 and accelerated in March 2009 based on other factors that were primarily fundamental. Those included a simpleton conclusion that the FED and governments around the world had taken Financial Armageddon off the table and were performing actions that would jump start the U.S. economy. I also talked about the blog in March 2009 about what happened to stocks when the FED launched a QE program in early 1933. There was a robust rally in stocks in 1933 through 1936. There was also an upturn in the new orders component of the ISM manufacturing index that has in the past signaled a resurgence in manufacturing activity. All of those events were contemporaneously discussed here.
The 200 day SMA line is just another indicator used in timing models.
Many investors may prefer to just ride out the ups and downs.
But they may be younger than I am now and did not live through a 18 year bear market in stocks as I did either where the average annual total return (dividends reinvested) for the S & P 500 adjusted for inflation was almost -2%.
The overall impact of CB actions is to restrain rates, even now. The ECB is still engaged in QE and has kept its benchmark rate at a negative .4%. Other European CBs are maintaining negative nominal rates as well.
So the upward movement in intermediate and long term rates is still being restrained significantly by CBs.
A 2.85% 10 year treasury rate is abnormally low by U.S. historical standards. I can recall as an adult when the rate went over 15%.
I am not that concerned about the level of interest rates now, but their long term direction.
Investors are more focused on the here and now and are not taking into account what will happen over the next decade that will cause rates to start rising to problematic levels.
Those events will probably have to occur and be undeniable before investors make the appropriate adjustments in long term rates.
Back in 1984, inflation had fallen to the low single digits, yet you could have bought a 30 year treasury bond yielding 14%+. The average annual real rate of return of that bond would have been close to 11%.
Bond investors took several years to adjust their pricing from a problematic inflation scenario continuing for many years and even decades to a declining inflation/low inflation scenario that was already underway.
In Item # 2.A. of this post, I discussed selling 30 NVS at $93.85.
ReplyDeleteI bought back 10 of those shares at $85 today.
The annual ex dividend date will be soon.
https://www.novartis.com/investors/share-data-analysis/dividend-information
The CHF amount is 2.8 per share. One ADR equals 1 ordinary share. I do not have the dividend amount in USDs yet. The CHF/USD conversion rate is currently 1.0608. (1 CHF buys US$1.0608)
https://www.marketwatch.com/investing/currency/chfusd
I will buy back that 30 share lot provided the price continues to sink.
Closing Price Today:
$84.82 -1.41 (-1.64%)
Closing Price Today in Switzerland:
Novartis AG (NOVN.VX)
80.20+1.16 (+1.47%)
At close: 5:31PM CET
https://finance.yahoo.com/quote/NOVN.VX?p=NOVN.VX
The Swiss Market closes several hours before the NYSE.
Central European Time is currently at 11:38 P.M. The day is about to change to the 8th.
Hello southgent thank you for your answer above.
ReplyDeleteIt seems clear that other Vix spike events especially true trigger events, that evidence is clear that something is out of whack in the market. In 2000, one sees the mania of no earnings and an Internet bubble. In 2007 to 8 you have mentioned clear signals and discussion prior to the Vix movement of disastrous sub prime loan problem.
To me this present event appears extremely conflicted. On one hand, there may be accelerated inflation and the Fed may be forced to move too quickly and long rates may spike with the 10 year bond over three. As you say however the rates remain low. Debt is piling up. Valuations are high.
On the other hand, reported earnings are extremely good and increasing [however the quality of the earnings may be argued], companies are becoming flush with cash i.e. Apple Microsoft with a lower tax rate and the ability to get overseas money back to the US. Although consumer debt as you pointed out is rising, it doesn't seem to be at dangerous levels and no recession is in sight.
So I am confused as to what is causing this possible unstable pattern. I wanted to get your thoughts. I Understand this is just an opinion and no one really knows. As you said in your last note, there is no problematic rise in rates for the foreseeable future.
This is my last question,
thanks a lot
Sam
Sam: I currently doubt that a Trigger Event will occur. The problems are more in the future than the present.
DeleteThe spike in volatility is probably an anxiety attack. After breathing into a paper bag for a few days, the Stock Jocks may see blue skies into infinity again.
I will go into an examination of what may have caused the TE after the TE happens.
Humans have an innate tendency to assume that the future will be like the present and that the next decade or so will be like the last decade. It requires a lot of contrary evidence to convince them otherwise.
The assumption being made now is that low inflation and interest rates will continue indefinitely because those conditions have existed for a long time.
Eventually, there will be sufficient evidence, which can not be explained away or ignored, that creates a consensus opinion that those conditions have changed.
The problem then will be far more than a persistent rise in rates and inflation, but how those increases impact a world that is far more awash in debt than prior to the Near Depression.
Over the past 24 hours or so, I have had some difficulty connecting with my blog. I click a bookmark in my Google Chrome toolbar and get an Oops page, recommending that I clear my browser cache which does not work. If I click the bookmark again, a connection is made.
ReplyDeleteThe problem is either at Google's blogger or Google's Chrome. I did not have the same problem when I tested Safari and Firefox. I do not have Internet Explorer on my IMAC.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/02/observations-and-sample-of-recent_8.html