Observations and Sample of Recent Trades: GOV, INTC, MACK , PNNT

Economy: 

The Fed raised the federal funds rate by .25% yesterday as expected. The new range is 1.5% to 1.75%. Seven Fed members believe that 4 quarter point hikes will be necessary this year whereas 8 are looking at 3 or less. I seriously doubt that the FED will increase the range by 1% in 2018. I am currently expecting a .25% hike in June and another one in December. That would bring the range up to 2% to 2.25% by year end. 

Quote From Fed's Statement: 

"Job gains have been strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings."  The Fed - Federal Reserve issues FOMC statement

Latest Fed Projections Released on 3/21/18:

Dot Plot For Future FF Rates:  

The Fed - March 21, 2018: FOMC Projections materials, accessible version

Fed Lifts Rates, Steepens Path Through 2020 For More Hikes - Bloomberg

Fed raises rates, signals confidence in strengthening economy: Reuters

The Stock Jocks are ignoring news about potential tariffs being levied on China's exports to the U.S. 

Trump Plans China IP Tariffs Announcement Thursday (3/22/18), Sources Say - Bloomberg

Mnuchin Takes Heat From Global Finance Chiefs Over Trade - Bloomberg

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Markets and Market Commentary: 

Neither the Stock Jocks nor the Bond Ghouls could make up their minds yesterday on how to respond to the FED. 

Stocks went up and bonds down in price shortly after the FED's monetary policy release. 

There was a  whipsaw up and down through the remainder of the afternoon, with the S & P 500 eventually closing down .18%. 

The ten year treasury yield, which hit 2.936% after the FED's release closed at 2.882% at 3:00 P.M. C.S.T., down fractionally in yield.  

U.S. 10 Year Treasury Note-MarketWatch

Basically, there was no fundamental change in the likelihood of 4 quarter point rate increases this year. The Bond Ghouls were equivocal on 3 increases this year before the meeting and had assigned low odds for 4. 

There was some movement in the odds yesterday but not by much. 

The three quarter point increases on or before the December meeting stood at 67.4% on Tuesday 3/20 and at 74.9 yesterday. I would not call that a meaningful change. The odds of 4 quarter point increases went down slightly. 

Odds On or Before December 2018 Meeting: 

Countdown to FOMC: CME FedWatch Tool

If I was going to key off anything in the statements made by the FED, it would be their observation that the growth in spending had moderated from the strong 4th quarter numbers. I would not consider that observation, by itself, to be news and is too mushy to provide much guidance. 
  

Oil prices end near 7-week high on surprise declines in U.S. crude supplies - MarketWatch (3/21/18 story)

The stock market meltup is over: Morgan Stanley - MarketWatch

Soaring U.S. Libor Trickles Into Funding Markets Worldwide-Bloomberg

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Trump: Porn Stars and Playmates: 

Wall Street Journal publishes polygraph results backing Stormy Daniels (the exam occurred on May 19, 2011). 

I do not recall Trump specifically denying a tryst with Stormy. I have heard his Press Secretary deny the affair which allegedly occurred shortly after Trump's son with Melania was born. Stormy was purportedly told by Donald, when she asked about Melania, "don't worry about her".  Stormy Daniels' Full Interview: Inside Her Affair With Donald Trump - In Touch Weekly Maybe Donald needs to be more worried about Melania throwing in the towel and unwilling to "Stand By Her Man". Tammy Wynette - Stand By Your Man !LIVE! - YouTube

Former Playboy Model Karen McDougal Sues to Break Silence on Trump; Complaint One of the stronger counts in Ms. McDougal's lawsuit against America Media ("AMI") is that her contract with AMI, even if it was not breached by AMI and was not secured by fraud as alleged in the Complaint, was an illegal contract and consequently unenforceable and void, since the sum paid to Ms. McDougal was an illegal campaign contribution made by the defendant AMI to Donald Trump. Karen has a bunch of lawyers representing her, and they appear to be serious ones.  

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Trump Attacks Mueller Again and Again:  

Relying on sources close to Donald, the NYT reported that Trump decided to start attacking Mueller last week, because he "ultimately trusts his own instincts". Trump is a person who will act on impulse rather than reasoned and informed judgment. 

Trump just hired Joseph E. diGenova, a flame throwing republican attorney and a male clone of Ann Coulter IMO. He is a fixture on Fox and a deep state conspiracy theorist. This guy will be making accusations on cable news channels that the FBI has fabricated a case against Donald. Trump just hired a deep-state conspiracy theorist as his lawyer. Here’s what Joe diGenova has said. - The Washington Post The diGenova  hire is designed to feed red meet to the republican base who are naturally inclined to believe non-factually based conspiracy theories (e.g. Obama is a Muslim born in Kenya). 

Mr. diGenova made the following statements on Fox last January: 

“There was a brazen plot to illegally exonerate Hillary Clinton and, if she didn’t win the election, to then frame Donald Trump with a falsely created crime. Make no mistake about it: A group of F.B.I. and D.O.J. people were trying to frame Donald Trump of a falsely created crime.” 

A far more competent and serious republican lawyer, Theodore Olson, refused Trump's offer to join his legal team. GOP attorney Theodore Olson won't join Trump legal team | TheHill

As the Mueller investigation enters its end game, Trump and other republicans will step up their attacks on Mueller, his team of prosecutors, the intelligence agencies and law enforcement. 

The attacks will be based on their own reality creations, demonstrably false information, innuendo, improper conclusions drawn from bit and pieces of accurate information, downplaying facts that can not be disputed (e.g. the Trump Tower meeting with the Russians to secure their Hillary dirt), and blowing small matters out-of-proportion and out-of-context.  

Trump's weekend attack on Mueller was filled with demonstrably false statements which is to be expected from Trump. Fact-checking Trump’s error-filled tweetstorm about the Mueller probe-The Washington Post For example, Trump states that the FBI secured a FISA warrant to monitor his campaign. The FBI secured a FISA warrant to monitor Carter Page after he left the campaign. 

Trump has the unique ability to make four false statements in one tweet. I have not yet seen one where he makes five false statements in just one.

If five separate false statements in one tweet was even possible, Trump would have already been the first person to hit that number. I never thought one person could lie as much as Donald who does so effortlessly. 

I am confident that slightly over 50% of U.S. adults have formed the now immutable opinion that Donald is a pathological liar. 

‘You Will Not Destroy America’: A Trump Battle Is No Longer One-Sided 

Carl Bernstein: Trump determined to stop Mueller


Most Republicans Silent in Face of Trump’s Attacks on Mueller-Bloomberg  

Most republican politicians will not do anything to protect Mueller from being fired IMO provided Trump engineers that result before the November elections.  

Senator Corker (R) explains why republican politicians embrace Trump so strongly: 

“The president is, as you know — you’ve seen his numbers among the Republican base — it’s very strong. It’s more than strong, it’s tribal in nature. People who tell me, who are out on trail, say, look, people don’t ask about issues anymore. They don’t care about issues. They want to know if you’re with Trump or not" Congressional Republicans hesitant to antagonize Trump over Russia probe: Washington Examiner

So the republican base is united behind Trump which is not news. The question in 2018 and 2020 is whether the country is willing to go along with the republican base.  

++++++

Facebook, Trump and Cambridge Analytica:  

The following revelations have negatively impacted Facebook's stock: 

Data Firm Tied to Trump Campaign Talked Business With Russians - The New York Times

Cambridge Analytica played key Trump campaign role, CEO says: UK TV

Cambridge Analytica, Trump-Tied Political Firm, Offered to Entrap Politicians - The New York Times

How Trump Consultants Exploited the Facebook Data of Millions-The New York Times

Cambridge Analytica whistleblower says company worked with Corey Lewandowski, Steve Bannon - TODAY.com

Facebook's Security Chief Alex Stamos was forced out months ago for advocating "more disclosure around Russian interference" which was "met with resistance by colleagues, said the current and former employees.. . .The security team generally pushed for more disclosure about how nation states had misused the site, but the legal and policy teams have prioritized business imperatives".  New York Times

I seriously doubt that Facebook and Twitter especially have come clean on what they know about Russia's use of their platforms during the 2016 election.    

+++++

The following link has a video contrasting how Fox covered Trump's offer to meet with the North Koreans compared to one made by Obama. 

NowThis on Twitter: "Everything wrong with Fox News in one video" ( a must watch video proving Fox's corruption)  

When Trump attacked Syria for using chemical weapons against their civilian population, 86% republicans voiced approval. However, when Obama considered a similar plan, only 22% of republicans supported a military attack in response to Syria using chemical weapons. GOP Voters Love Same Attack on Syria They Hated Under Obama Democrat support remained constant at 38% for Obama's plan and 37% in favor of Trump's response.  

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Kushner and Rent Controlled Apartments: 

Kushner Cos. is facing investigation for filing false building permits - MarketWatch ("HRI found that the Kushner Cos. filed at least 80 false applications for building permits in 34 buildings across New York City from 2013 to 2016, all saying they had no rent-regulated tenants, when tax documents showed there were more than 300 such units.')

AP Exclusive: Kushner Cos. filed false NYC housing paperwork

The allegation is that Kushner companies claimed to have no rent controlled apartments when tax records indicated there were several hundred rent controlled apartments. The financial  benefit for making false statements related to securing approval for rehabilitation and resell. 

I can understand why Donald will not release his tax returns and will do whatever he can to stop anyone from scratching below the surface of his varied business ventures. 

He was quick to settle the fraud lawsuits related to Trump University soon after the election. Federal court approves $25 million Trump University settlement Those kind of Trump dealings are out in the open and can not be swept under the rug. 

Saudi Crown Prince Boasted That Jared Kushner Was “In His Pocket”

Saudi prince boasts he got Jared Kushner to get Rex Tillerson fired | Daily Mail Online

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Ryan Zinke-Trump's Interior Secretary: 

Trump's Interior Secretary Ryan Zinke is proposing to increase the national park entrance fee to $70 per car. The reason for the increase was summarized by Zinke as follows: 

"When you give discounted or free passes to elderly, fourth graders, veterans, disabled, and you do it by the carload, there's not a whole lot of people who actually pay at our front door." TheHill (quoting Zinke's congressional testimony)

++++++

1. Pared INTC-Sold 50 Shares at $50.51: 

Position Before Pare: 

Profit Snapshot (50 shares):  +$1,723.48

This lot was bought during the October 2008 market meltdown. Stocks, Bonds & Politics: INTEL (10/14/2008 Post)

Position After Pare: 60.95 Shares With an Average Cost Per Share of $15.09 per share

I did not want to lose a meaningful part of the profit which existed before I made this pare. So I feel better now having harvested some of my unrealized gain. 

Intel Trading Gains Between 12/6/13 To Date: $2,613.3

Prior Sales: 

Item # 7 Pared Intel Again: Sold 40 Shares at $24.61(3/10/2014)(profit snapshot = $232.62)

Item # 6 Pare Intel Again-at $26.73 (1/20/14 Post)(profit snapshot =$298.35)

Item # 5 Pared Intel: Sold 42 at $23.64 and 45 at $25-Highest Cost Shared (12/10/13)(profit snapshot =$358.85)

There were no sales between 1/1/2007 to 12/6/13. I have traded Intel prior to 2007 but do not have snapshots of those round-trip trades. 

Dividend: Quarterly at $.3 per share 

Intel Corporation: Dividends & Buybacks

Last Earnings Report: Intel Reports Fourth-Quarter 2017 Financial Results

My pare decision was not based on this earnings report or any other fundamental factor. Instead, I decided to harvest a profit due in part to a feeling that further gains would be hard to come by. Moreover, I have no particular insight to Intel's product other than as a user of computers with Intel Inside. 

Possibly, Morningstar's analyst report had some impact on my decision to sell now. That service has a two star rating with a $41 fair value estimate. The S & P analyst has a 4 star rating and a 12 month price target of $55. Credit Suisse has a $55 price target as well, having recently raised that target price from $42. Argus has a buy rating and a $58 price target. I may hold onto my remaining shares until the price clears $60. 

Analyst Estimates: INTC Analyst Estimates 

I briefly own 2 Intel bonds. Generally, Intel's bonds have lower yields than similar rated bonds.

Item 3.A. Sold 2 Intel 2.6% SU Bonds Maturing on 5/19/26 at 97.823  (10/16/17 Post)(noting that my consider to repurchase price is less than 90); Bond Detail

2. Small Ball: Equity REITs, BDCs and MREITs:

A. Bought 10 GOV at $13.67:

Quote: Government Properties Income Trust (GOV)

Website: Government Properties Income Trust - Home

Properties Map

Chart: UGLY Government Properties Income Trust Interactive Chart

I am going to have an extensive discussion of this REIT to highlight some general problems about REIT financial reporting which I find as unsatisfactory for REITs who do not have triple net leases that require the tenant to pay routing capital expenditures and other operating expenses normally paid by the owner in non-triple net leases. 

About: As of 12/31/17, GOV "owned 108 properties (167 buildings) located in 30 states and the District of Columbia containing approximately 17.5 million consolidated rentable square feet and had a noncontrolling ownership interest in two properties (three buildings) containing approximately 0.4 million rentable square feet through two unconsolidated joint ventures in which we own 50% and 51% interests." Page 47 2017 Annual Report

Leasing By Tenant Type: 

2017 Annual Report (risk factor summary starts at page 27 and ends at page 47)

Deservedly Hated:

Any purchase of GOV shares is viewed as off the charts contrarian. 

This REIT is probably held in more disdain than any other by me, but the recent price decline brought the stock within my current consider to buy range which is considerably lower than my previous ranges.

The lowering of the price range was due in significant part to what I view as an inappropriate use of shareholder money to buy a large stake in Select Income (SIR).

RMR Group Inc. through its operating company, manages both SIR and GOV. The only purpose for GOV's purchase of SIR shares was IMO to entrench RMR as the external manager for SIR.

GOV purchased 3,418,421 SIR shares from Lakewood Capital Management for $27.85: Government Properties Income Trust Increases Investment in Select Income REIT (March 2015); Lakewood Capital Issues Letter to Select Income REIT Board of Trustees

GOV purchased 21.5M shares of SIR for $31.51 in July 2014: Government Properties Income Trust Purchases Shares of Select Income REIT That stock was purchased from Commonwealth REIT that was trying to oust RMR as SIR's manager. So RMR used GOV to buy out Commonwealth's stake in SIR. CommonWealth REIT Sells Entire Select Income REIT Stake to Government Properties Income Trust; GOV 8-K Filing 

RMR had just lost control over Commonwealth after shareholders overwhelmingly voted to oust that company as its external manager. Related and Corvex Win Shareholder Vote To Oust Commonwealth REIT Board: Forbes (3/19/2014); SEC Form 8 

As of 12/31/2017, GOV owned 24,918,421 SIR shares, representing about 27.8% of SIR's total outstanding common shares. Page 39 10-K 


There was no good reason for GOV to buy any SIR shares IMO-at least when one focuses on the interests of GOV's shareholders rather than RMR.

And the proof that GOV had no business buying such a large stake in SIR at the prices referenced above is demonstrated in the GOV and SIR share prices and their charts since May 2014:

What made the matter worse was that a clearly excessive price was paid for the SIR shares to a third parties to end challenges to RMR's management of SIR.

GOV is a deservedly hated REIT. 

Dividend: Quarterly dividend of $.43 per share or $1.72 annually (possible cut)

Government Properties Income Trust Announces Quarterly Dividend on Common Shares

The quarterly dividend has remained at $.43 per share starting with the 2013 first quarter when the dividend was raised from $.42.

Government Properties Income Trust-Distributions

Dividend Yield at a TC of $13.67 per share = 12.58% 

2017 Dividend Allocation: 49.35% Classified as ROC

First Potomac Realty Acquisition: GOV completed its acquisition of First Potomac Realty last October for approximately $1.4B which included "approximately $651.7 million in cash to FPO shareholders, the repayment of approximately $483.0 million of FPO corporate debt, the assumption of approximately$167.5 million of FPO mortgage debt." Page 1 2017 GOV Annual Report.

Many investors viewed the price as excessive. The external manager is compensated based on assets and consequently has no real incentive to buy at favorable prices but to just buy.

Another criticism is the acquisition diluted the exposure to government tenants. I would agree with that criticism and do not have an informed opinion on the fairness of the price paid. It has been a long term since I looked at First Potomac and my last exposure was to its equity preferred stock. Item # 2 Sold: 50 FPOPRA at $26.2 in Taxable Account (2/28/15 Post)(profit snapshot +$81.58)-Item # 1 Bought: 50 FPOPRA at $24.25 (1/6/14 Post)

Government Properties Income Trust Completes Acquisition of First Potomac Realty Trust

Last Earnings Report: Q/E 12/31/17

"Normalized FFO available for common shareholders for the year ended December 31, 2017 were $171.1 million, or $2.02 per diluted share, compared to Normalized FFO available for common shareholders for the year ended December 31, 2016 of $167.9 million, or $2.36 per diluted share."

GOV claims that normalized FFO was $.50 in the 2017 4th quarter which exceeds the $.43 quarterly dividend payout.

There are several entries relating to GOV's equity interest in SIR. Since SIR pays a quarterly dividend of $.51 per share, that would result in approximately a $12.708+M quarterly payment to GOV. I do not see that number in GOV's net income calculation which includes rental income and operating expenses. That is probably due to the accounting for GOV's significant ownership stake in SIR discussed below. 

There was a -$18.722M quarterly loss for the Q/E 12/31/17 before "equity earnings of investees" and income taxes. Then income taxes of $36K is subtracted and $767K of equity earnings in investees is added to arrive at a net loss of $17.991M. The final adjustment to the net loss number is to add $275K to arrive at a total quarterly GAAP loss of $18.266M for the quarter. The $18.266M number is then the starting point for the FFO adjustments shown in the preceding snapshot.  

There is apparently a different accounting method used when a corporation owns more than 25% but less than 50% of another corporation called the "investee". The method used would then depend on whether the corporation can exercise influence over the operating and financial decisions of the  "investee". The following linked source claims that dividends paid by an investee are treated as "returns of capital".  Equity Method Accounting

Note that $10.297M in FFO attributable to the SIR investment is added to net income to arrive at FFO, but then that same sum is subtracted to arrive at normalized FFO. Then GOV adds back a smaller FFO number ($9.680M) attributable to SIR's FFO to increase the GOV normalized FFO per share number by $.097738. 

This is GOV's explanation for those subtractions and additions which is not helpful to me: "GOV's calculation of Normalized FFO available for common shareholders differs from Nareit's definition of FFO available for common shareholders because GOV includes Select Income REIT's, or SIR's, Normalized FFO attributable to GOV's equity investment in SIR (net of FFO attributable to GOV's equity investment in SIR)". 

Without that addition of $9.68M attributable to GOV's non-controlling interest in SIR's FFO, the normalized FFO number would be $39.505M or $.398879 per share or 3+ cents per share lower than the quarterly dividend per share number. 

For the moment, I am assuming that the dividend paid by SIR  was excluded in GOV's net income through some sort of accounting convention and that GOV did not use the dividend to buy more SIR shares. If I add the dividend payment number back into net income and then eliminate the 9.68M addition to FFO attributable to SIR's FFO, then I arrive at $52.213 in "normalized FFO" or $.5272 per share. There would need to be then a subtraction for all or some of  the equity in earnings of investees that were included in net income. 

That is about as far as I can take this analysis since I have zero training in accounting. I would just emphasize that the accounting quirks adds a layer of uncertainty for individual investors, like myself, who have no expertise in corporate accounting methods.

Government Properties Income Trust Announces Fourth Quarter and Year End 2017 Results

Management on Q4 2017 Results - Earnings Call Transcript | Seeking Alpha (CEO says the Board is comfortable with the dividend payout at page 4 and he doesn't "anticipate that changing") Anticipate is a mushy word in that context. 

The market has reacted negatively to this report which was released before the market opened on 2/26/18.

Closing Prices:
2/23/18:  $14.81 (a Friday)
2/26        $14.00 (first trading day after release)
2/27:       $13.72   

Debt: 

Bond Ratings: 

2022 BondDetail
2019 Bond Detail 

Moody's affirms Government Properties' Baa3 rating; outlook revised to negative 

Capital Expenditures: 

Money spent on capital expenditures is not available for distribution to common shareholders. This presentation adds a layer of complexity for the individual investor who has no training in accounting which includes MOI. What cash expenditures listed in the preceding snapshot are expensed before arriving at net income?  I am not sure. Some items would likely be expensed in the year incurred while others would be depreciated over their useful life. 

Capital expenditures can be placed in two buckets. 

The first is routine and recurring expenditures. 

The second is capital expenditures that improve the value of the property. 

NAREIT clearly states that routine capital expenditures have to be deducted from FFO to arrive at AFFO which is that organization's cash available for distribution number. 

Glossary of REIT Terms | Nareit

For triple lease REITs, the tenant is generally responsible for these routine expenditures, so there is no problem in arriving at a NAREIT defined cash available for distribution. 

That is clearly not the case for owners of office buildings and apartments which are not governed by triple net leases. 

Most REITs, who own properties that are not subject to triple net leases, do not subtract recurring and routine capital expenditures from FFO to arrive at AFFO, which makes it difficult, if not impossible, to reliably figure out the CAD number using the NAREIT definition.  

I do recall one REIT that subtracts those expenditures as a line item. That REIT owns properties leased to governmental entities as well. I am referring to Easterly Government Properties (DEA): Item # 1.A. 

This is a snapshot from DEA's last earnings report: 

So several items that are mentioned separately by GOV are specifically identified and subtracted by DEA to arrive at CAD.  

I would consequently view DEA's number to be conformity with NAREIT's definition of CAD and I see no reason to say the same about GOV. 

The SEC needs to step into this area and require REITs to standardize their definitions of FFO and CAD. The situation now is that REITs come up with their flavors that make them look better on a free cash flow perspective. Even NAREIT's definition of CAD would allow the REIT wiggle room, classifying some recurring capital expenditures as improving the value. 

I am generally identifying problems here whether than providing my own accounting solution which I am not able to make for a variety of reasons, including lack of training and a lack of access to the underlying data.    

Trading Profits to Date: $375.31

Prior Trades:

Item # 2 Sold 50 GOV at $26 (3/5/13)(profit snapshot =$231.42)-Item # 2 Added 50 GOV at $21.22 (6/18/12)

Item # 4 Sold 50 of 100 GOV at $23.45 (7/19/12 Post)-Item # 3 Bought 50 GOV at $22.9-ROTH IRA (5/21/12 Post)

Item # 1: Sold 50  GOV at $24.5 at $24.5 Roth IRA (10/17/12 Post)(profit snapshots for 2 Roth IRA 2012 trades = $143.89)-Item # 4 Bought Back GOV at $21.78 Roth IRA (8/6/12 Post)

B. Added 10 PNNT at $6.99 (one day before quarterly ex dividend date) 10 at $6.8 after the ex dividend dateat -Used Commission Free Trades: 

Quote: PennantPark Investment Corp. (PNNT)

Position after Adds: $7.07 average cost per share

Dividend: Quarterly at $.18 per share

PennantPark Investment Corporation Announces Quarterly Distribution of $0.18 per Share 
I will reinvest the dividend for as long as the discount to net asset value per share is greater than 10%. 

Last Quarterly Ex Dividend Date:  3/16/18

Dividend Yield at $7.07: 10.18%

Last Discussed: Item # 1.B. (3/5/18 Post)


3. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 1 Citigroup 2.05% SU Bond Maturing on 12/7/18:

FINRA PAGE: Bond Detail (prospectus linked)

ISSUER: Citigroup Inc. (C)
C Analyst Estimates

CREDIT RATINGS:

Fitch Affirms Citigroup's Long-Term IDR at 'A'; Outlook Stable (9/28/17)

Bought at a Total Cost of 99.87
YTM at TC Then at 2.228%
Current Yield at TC = 2.0527%

B. Bought 1 Morgan Stanley 2.375% SU Bond Maturing on 7/23/19:

FINRA Page: Bond Detail (prospectus linked)

Issuer: Morgan Stanley (MS)
MS Analyst Estimates

Credit Ratings:

Fitch Affirms Morgan Stanley's Long-Term IDR at 'A'; Outlook Stable (9/28/17)

Bought at a Total Cost of 99.621
YTM at TC Then at 2.649%
Current Yield at TC  = 2.3927%

C. Added 1 Treasury .875% Coupon Maturing on 10/15/18-A Roth IRA Account: 
YTM = 1.877%

I now own 3 bonds. 

D. Added 1 Treasury .75% Coupon Maturing on  9/30/18:
YTM 1.862%

I now own 3 bonds. I also own 1 Treasury in a Roth IRA that matures on 9/30/18 with a 1.375% coupon. 

E. Bought 2 Mid-American Energy 2% SU Bonds Maturing on 11/15/18: 

FINRA PAGE: Bond Detail (prospectus linked): 

Issuer: Mid-American Energy is now one of the subsidiaries of the  Berkshire Hathaway Energy Company which is a wholly owned subsidiary of Berkshire Hathaway. 

"MidAmerican Energy's net income for 2017 was $605 million, an increase of $63 million, or 12%, compared to 2016, including $7 million of net expense as a result of the Tax Cuts and Jobs Act enacted on December 22, 2017 (the "2017 Tax Reform"). Excluding the net effect of the 2017 Tax Reform, adjusted net income for 2017 was $612 million, an increase of $70 million, or 13%, compared to 2016."

Berkshire Energy 2017 Annual Report at page 236 

Credit Ratings: 

Bought at a Total Cost of 99.931
YTM at TC Then at 
Current Yield at TC = 2.0014%

F. Bought 2 Ryder Systems 2.55% SU Bonds Maturing on 6/1/19: 

Finra Page: Bond Detail (prospectus linked)

Issuer: Ryder System Inc. (R)
R Analyst Estimates
Ryder Reports Fourth Quarter and Full-Year 2017 Results, and Provides 2018 Forecast 
Ryder SEC Filings
Ryder 2017 Annual Report (debt discussed starting at page 97)

Last February, Ryder sold $450M in a 3.4% SU bond maturing in March 2023. Prospectus

Last August, Ryder sold $300M in a 5 year SU bond with a 2.5% coupon.

Bought at a Total Cost of 99.8
YTM at TC Then at 2.717%
Current Yield at TC =  2.5551%

4. Intermediate Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 McDonalds 2.625% SU Bonds Maturing on 1/15/22: 

FINRA PAGE: Bond Detail

Issuer McDonald's Corp. (MCD)
MCD Analyst Estimates

Credit Ratings:

Fitch Affirms McDonald's at 'BBB'/'F2'; Outlook Stable (12/13/17)

Bought at a Total Cost of 98.470
YTM at TC Then at 3.048%
Current Yield at 2.6658%

B. Bought 2 Novartis Capital 2.4% SU Bonds Maturing on 5/17/22 - In a Roth IRA Account: 

FINRA Page: Bond Detail (prospectus linked) 

Issuer: Wholly Owned indirect subsidiary of who guarantees the bonds

Credit Ratings:
Moody's at Aa3  
S & P at AA-
Fitch at AA 
Fitch Revises Novartis' Outlook to Negative; 'AA' Affirmed (9/18/17)
Bought at a Total Cost of 97.657
YTM at TC Then at 3%
Current Yield at TC = 2.4576%

5. Small Cap Biotech Lottery Ticket Basket Strategy: 

A. Added 17 MACK at $10.42-Used Commission Free Trade: 

2 Year History in This Account: 

There are 3 noteworthy items in this snapshot. First, I did receive a special dividend of $105.52 paid on a 100 share lot. After the ex dividend date, I bought 30 more using a commission free trade at $1.82. The stock then did a 1 for 10 reverse split that turned my 130 shares into 13. 

I am now up to 30 shares with this 17 share lot buy with an average cost per share of $21.92 adjusted for that reverse split and will buy 10 more before quitting. There is a limit to my masochism. 

Prior to the share meltdown, I did  realized trading gains of $132.47 (100 shares) and $12.99 (50 shares). Added the dividend, I have a realized total return of $250.98 which is still below my current unrealized loss. 

The stock had a bad day on 3/12/18 when I bought this 17 share lot:

MACK $10.39 -$1.19 -10.28% 

The shares were volatile with an intra-day high of $11.38 and a low at $10.26. Volume was 276,681 shares compared to the average volume of 139,123. 

The company did release earnings before the market opened, but I did not see anything surprising in the results. Merrimack Provides Business Update and Reports 2017 Financial Results ("Merrimack continues to believe that its cash and cash equivalents of $93.4 million as of December 31, 2017 and potential net milestone payments anticipated from Shire will be sufficient to fund its planned operations into the second half of 2019.")

Trials in Progress:

On the same day, the company issued this press release that may have caused some investors to question the reasons given for expanding the number of patients from 80 to 100 in this trial. Merrimack Strengthens SHERLOC Study of MM-121 in Non-small Cell Lung Cancer The company said that the expansion was in "response to rapid enrollment and robust clinical interest". The company also stated that the results will not be delayed due to this enrollment increase. If true, those remarks appear positive to my ignorant brain. 

I understand almost nothing about this trial other than what MACK says about it. This trial is a "randomized Phase 2 SHERLOC study of its investigational drug candidate MM-121 in patients with heregulin-positive non-small cell lung cancer who have progressed after a platinum-containing regimen." I understand the the words Phase 2, non-small cell lung cancer and "platinum" treatment in this context. 

I have no idea what a "heregulin-positive" means. I did see where MACK was granted an orphan drug designation for MM-121 as a treatment option: Merrimack Receives Orphan Drug Designation for MM-121 for the Treatment of Heregulin Positive

So what is MM-121? "MM-121 (seribantumab) is a fully human monoclonal antibody designed to block tumor survival signals and enhance the anti-tumor effect of combination therapies by targeting the cell surface receptor HER3 (ErbB3) in patients with high expression of the biomarker heregulin." Sounds neat but I really do not have a clue. 

The drug is being investigated for two indications: 

The other MM-121 trial involves "MM-121 in combination with fulvestrant in patients with heregulin positive, hormone receptor positive, ErbB2 (HER2) negative, metastatic breast cancer."

The other compound in a Phase 2 trial is MM-141, "a fully human tetravalent bispecific antibody designed to block tumor survival signals by targeting receptor complexes containing the insulin-like growth factor 1, or IGF-1, receptor and ErbB3 (HER3) cell surface receptor". The trial is evaluating "MM-141 in combination with nab-paclitaxel and gemcitabine in patients with previously untreated metastatic pancreatic cancer with high serum levels of free IGF-1."

Pages 3-4 2017 Annual Report SEC Form 10-K 

There are several compounds in preclinical stages noted briefly at page 4 of the Annual Report. I seriously doubt that any of those compounds will be starting a trial anytime soon. MACK will stand or fall on MM-121 and/or MM-141 becoming approved for marketing compounds.  

I would just point out that the market cap at $10.39 is only $138+M. While I do not know the potential sales for those compounds when and if approved for marketing, I am assuming until I receive contrary concrete and reliable information that one approval would send this stock much higher. 

Since I am admittedly ignorant, I do not have a clue whether one or more compounds will be successful. Maybe more will be known later this year to permit an educated guess by someone who is educated on these matters which DOES NOT INCLUDE ME. 

A clinical success in a Phase 2 trial could also potentially result in an MACK being acquired by a larger company. 

Obviously, those who may know more than nothing have a different opinion. 

Closing Price 3/21/18: MACK $9.67 -$0.04 -0.41%

The stock continues to drift down in price. Historical Prices 

The five year chart is dreadful. In April 2015, the stock hit $134 on a split adjusted basis. 

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.