Observations and Sample of Recent Trades: FNB, NMFC, PNNT

Economy: 

The most important news since my last post was Trump's statement that he intended to impose U.S. tariffs on aluminum and steel imports. 

The proposal is for a 25% tariff on steel and 10% on aluminum. The details will be announced this week. Trump says U.S. to impose steep tariffs on steel, aluminum imports: Reuters 

This news was announced last Thursday and immediately caused stocks to tank and interest rates to fall. 

Peter Navarro, who is Trump's advisor on trade, left open the possibly that companies could apply for specific product exemptions from the tariffs, but there would be no country exemptions. 

Navarro did not specify the process by which specific company exemptions could be acquired or the standards utilized for granting any exemption.Trump trade adviser sees business exemptions for new tariffs: Reuters A skeptic may argue that the specific exemptions will be based on the amount contributed to Trump's re-election campaign. 

2002 Bush Steel Tariffs- Bloomberg

See Exhibit 8 for 2017 Dollar Value of Imports by Product (total value of aluminum and steel products around $47B all in)

Trump steel tariffs to hit these 8 countries the hardest (China is not one of them) - MarketWatch;

Trump tweets: 'Trade wars are good, and easy to win': Reuters; Trump Says Trade Wars Are ‘Good, and Easy to Win’ - Bloomberg; Trump tariff decision takes White House by surprise - CBS News

Trump threatened Europe with more tariffs over the weekend: 

Trump threatens to tax European cars - Mar. 3, 2018; 

Trump threatens to slap retaliatory tax on European cars as trade war talk heats up: CNBC

Other countries have made it clear to Trump that they will retaliate. The preceding tweet may indicate that Trump will retaliate to any retaliation which is how trade wars gain momentum. 

EU Threatens Iconic U.S. Brands After Trump Opens Door to Trade War - Bloomberg (blue jeans, Harley-Davidson bikes, and whiskey) 

Trump’s Tariffs Prompt Global Threats of Retaliation - The New York Times

Perhaps Donald arrived at that conclusion after watching Fox and Friends. One-third of Trump’s tweets in the past week appear inspired by Fox News-The Washington Post

Or, possibly Trump reached the conclusion that trade wars are good and winnable after an in depth study of economic history, reading boatloads of dense economic history texts on the subject, talking with non-partisan experts, and thinking about this issue in depth. 

Or, possibly he just threw a hissy fit, became "unglued", and went rogue again. Trump was angry and 'unglued' when he started a trade war, officials say - NBC News

‘Pure madness’: Dark days inside the White House as Trump shocks and rages

If someone in his Administration had the nerve to ask Donald about the Smoot–Hawley Tariff Act, do you think that he would have a clue?  

Closing Prices Thursday 3/1/18: 

DJIA 24,608.98 -420.22 -1.68% 
S & P 500  2,677.67 -36.16 -1.33% 
IEF $102.45 +$0.60 +0.59%: iShares 7-10 Year Treasury Bond ETF 
MUB $108.70 +0.31  +0.29%: iShares National Muni Bond ETF 
BAB $29.70 +$ 0.16 +0.54% : PowerShares Taxable Municipal Bond ETF 
VIX 22.47 +2.62 +13.20% 

Trade wars have been conducted for years by central banks implementing extremely abnormal monetary policies designed to torpedo their currencies. Those policies are aimed at improving the competitive positions of exporters by lowering the cost of their products and services. I call that a "cold trade war". There is at least a arguable rationale for such policies besides purposeful currency devaluation. The "hot trade war" involves tariffs or tariff like tax on imports (e.g. the border tax). 

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New unemployment claims fell 10K to 210,000 for the week ending 2/24, the lowest level since 1969. The total number of continuing claims for unemployment benefits rose 57K to 1.93M. News Release

Real personal consumption expenditures in January declined by .1% and were up just .2% on a nominal basis. Disposable personal income surged:

Note that PCE inflation was up .4% in January, with the core rate rising .3%. The annual rate remained stable at +1.7%. The core PCE price index remained flat as well with a 1.5% Y-O-Y rise.

News Release: Personal Income and Outlays

Consumer spending slows in January but income growth and inflation speed up - MarketWatch

On an annual basis, real disposable personal income rose 1.2% in 2017 compared to +1.4% in 2016.

Construction spending remains strong in January - MarketWatch

Commerce Department Monthly Construction Spending for January 2018.pdf

ISM's February 2018 manufacturing PMI rose to 60.8 from 59.1 in January. Prices rose to 74.2 from 72.7. Remember that numbers over 50 indicate expansion. The employment component surged to 59.7 from 54.2. The New Orders component fell slightly to 64.2 from 65.4.

Overall, these reports point to a strong economy with potential danger signals being flashed in consumer spending and inflation.   

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Market Commentary and Markets:

Powell plays down wage pressures - MarketWatch

Hedge fund boss Paul Tudor Jones, who predicted the 1987 stock crash, warns of a selloff in bonds - MarketWatch

Buying Treasuries on Stocks Slump? That's a ‘Pavlovian’ Response - Bloomberg

Fed Officials Blast Trade Protectionism - Bloomberg

While the stock market is still in a Stable Vix Pattern, as defined by my Vix Asset Allocation Model, the risk is not clearly at elevated levels. 

The VIX has started what I call a whipsaw pattern that is a hallmark characteristic of an Unstable Vix Pattern. 

The whipsaw pattern, where the VIX shoots above 20 and then below 20 and then back up again, indicates that there has been a fundamental change in how investors view risk in the market.  

Tariffs will be the dominant issue impacting market for the next several days and possibly far longer. 

Other risks are gaining steam as well, including a rise in interest rates and a gradual return to more normal and less supportive CB monetary policies. The acceleration of risks is occurring at a time when stock market valuations are high by historical standards and do not reflect the possibility of a recession. The Shiller P/E, for example, is at its second highest level in history, only surpassed by the levels reached in late 1999-early 2000. Shiller PE Ratio; Is the Stock Market Cheap? - dshort - Advisor Perspectives As of last Friday (3/2/18), the TTM P/E for the S & P 500 was at 25.23 using GAAP accounting. P/Es & Yields on Major Indexes - Markets Data Center - WSJ.com

The U.S. has already started a trade war with Canada by imposing tariffs on soft Canadian wood imports, used primarily in home building. US sets final tariffs on softwood lumber from Canada - BBC News

Since Canada is also the top steel and aluminum exporter to the U.S., the imposition of tariffs on those products would be IMO a hostile act intended primarily to cause Canada to accept Trump's terms for a new NAFTA agreement. Canada is the #1 importer of U.S. products. Foreign Trade - U.S. Trade with (2017); Foreign Trade - U.S. Trade with (2016).

Trump has expressly linked the U.S. tariffs on Canadian products to a new NAFTA agreement on Trump's terms: 

I would not assume that bludgeoning Canada into submission is going to work for Trump. There is not a large trade deficit with Canada and Canada can do a lot of harm to the U.S. by imposing retaliatory tariffs on specific U.S. exports. 

U.S. Exports to Canada by Product- Canada

Currency valuations can also impact exports/imports. XE: CAD / USD Currency Chart. Canadian Dollar to US Dollar Rates 

++++++

Trump:

Trump on China's Xi consolidating power: 'Maybe we'll give that a shot some day.' - CNN Yes, maybe Barron Trump will become the first U.S. Emperor. King Barron has a ring to it.  

Mueller’s Focus on Adviser to United Arab Emirates Indicates Widening of Inquiry (was campaign money funneled to Donald from the UAB and other Gulf States? That would clearly be illegal if proven)  

The Washington Post has had to hire more fact checkers to keep up with Trump's lies. He is averaging 6 false or misleading claims per day.  

Tracking the 2,436 false or misleading claims made by President Trump in 406 days as President - Washington Post

Questions linger about how Melania Trump, a Slovenian model, scored ‘the Einstein visa’

White House furious at embarrassing stories about HUD Secretary Ben Carson

After Trump tensions, McMaster likely to exit White House McMaster probably wants to get away from Trump, but feels an obligation to stay until fired. 

National Security Adviser H.R. McMaster's job is in jeopardy - CBS News

Alec Baldwin - IMDb (list of roles before Baldwin started to impersonate Donald on SNL, far from a "dying mediocre career")

What kind of President would take time out of his day to slam an actor and to do so with a knowingly false statement? And was it previously even imaginable that any U.S. President would feel compelled to publicly slam an actor at 6:00 A.M. in the morning. 

Trump's most ridiculous celebrity twitter rants, ranked 

John Kelly's comment about God punishing him with chief of staff job aggravated Trump - CBS News

Trump met with the NRA — and now we’re back to not knowing what he wants on guns: CNBC (it did not take long for the NRA to set Donald straight after his rambling unscripted gun control meeting with lawmakers) 

Trump regularly lambasted Obama for playing golf. A Presidential Milestone: Trump has spent 100 days in office at one of his golf clubs 

Ex-CIA chief: Trump ‘unstable, inept, inexperienced, and also unethical’

+++++++

Georgia lawmakers OK big tax hit on Delta Air Lines over its NRA stand - CBS News

Delta Airlines NRA dispute: Only 13 passengers ever bought ticket using the NRA discounts I think Delta needs to move its headquarters to another state. Atlanta will need to be kept as a hub of course. Let Georgia republicans wallow in their AR-15s. I hope that those voters do not complain about a lack of necessary retirement funds due in significant part to expenditures on an arsenal of  military grade weapons to defend their liberties when the liberals come to take their incandescent light bulbs away. 

Will Amazon now take Atlanta off its list of potential sites for its new headquarters? I would be shocked if the socially progressive Bezos has not already scrubbed that city due to the republicans punishing Delta. What a bunch of idiots. The Lester Maddox voters in Georgia are still around. Lester Maddox Video with Ax Handle in Hand Pushing African Americans Back Who Were Trying to Enter his Restaurant 

Jared Kushner's shady business dealings evoke the nepotism and corruption of America's Gilded Age; Mueller team asking if Kushner foreign business ties influenced Trump policy - NBC News

NYT: Kushner's business got $500M in loans after White House meetings - CNN; Kushner’s Family Business Received Loans After White House Meetings - The New York Times

On March 13, there will be a special election in Pennsylvania's 18th Congressional District. The former incumbent, Thomas Murphy (R), resigned after allegations that he had asked his mistress to have abortion. Mr. Murphy was a family value's republican who ran unopposed in 2017. This district went for Trump by 20 points in 2016. The Democrats have a candidate this time, Conor Lamb, a photogenic ex-marine and federal prosecutor. Roll Call now rates the district a toss up. Rating Change: Special Election for Pennsylvania’s 18th Moves to Toss-Up; Pennsylvania's 18th Congressional District special election, 2018 - Ballotpedia 

When the general election rolls around later this year, however, Lamb will have to run in the 14th district, which has more Democrats. He would be running against the GOP incumbent Keith Rothfus. A victory for Lamb in the old 18th would send shock waves through the GOP's establishment since there would be no reason for such a victory other than growing revulsion against that party and their leader.  
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1. SMALL BALL-BDCs:

A. Bought 50 NMFC at $12.84-Used Commission Free Trade:

Quote: New Mountain Finance Corp.  (NMFC)
Website: New Mountain Finance Corporation


NMFC is an externally managed BDC that focuses  on lending to middle market companies in "defensive growth" industries.  

2017 Annual Report (risk factor summary starts at page 23 and ends on page 46) 

Lists of Investments: Starts at page 62 and at page 90

Investment and Industry Classifications at page 102:

For externally managed BDCs, the goal is now and has always been for me to harvest a few dividend payments and to escape by selling the shares at whatever profit may be available, no matter how small.

Net Asset Value Per Share: 13.63 as of 12/31/17

Discount to NAV at TC of $12.84 per share: -5.8%

Dividends: Quarterly at $.34 or $1.36 annually

Dividend Yield at $12.85 TC per share: 10.59%

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

This report was released after my purchase. The market responded favorably to it.

Net investment income for the quarter was $.35 per share. The Board also declared a $.34 per share quarter dividend. There were 85 portfolio companies at year end, "with a weighted average YTM at Cost of approximately 10.9%." 

Given the rally in NMFC's price since this earnings release, I doubt there is much upside left in price until book value expands meaningfully from current levels and that would be an anomaly.  

Closing NMFC Stock Prices:

3/2/18        $13.15
3/1/18         $13.2 (earnings release generated gain from 2/28 close)
2/28/18      $12.65

Historical NAV Per Share Information: 10-Qs

12/31/17 $13.63
9/30/17   $13.61
12/31/16 $13.46
9/30/15   $13.73
12/31/14 $13.83
9/30/14   $14.33
12/31/13 $14.38
6/30/13   $14.32
12/31/12 $14.06

Overall, those numbers are relatively stable with a slight downside bias since 2014. Relatively stable is better than moving gradually down to zero. In prior posts, I discussed some reasons why NAV per share declined in 2014. The reason invariably has to do with investments going sour.   

IPO Price: $13.75 Prospectus (filed 5/23/11)

Total Average Annual Return Since IPO: 10.8% (with $9.61 in dividends reinvested to buy additional shares and 8.6% when taking dividends in cash)- DRIP Returns Calculator | Dividend Channel

Recent Share Offerings:

5M Shares at $14.6 April 2017 Prospectus

5M Shares at $13.5 October 2016 Prospectus

$35M Convertible Notes due 2019 September 2016  Prospectus

5M Shares at $14.14 September 2015 Prospectus

I would anticipate another share offering when the price sufficiently recovers that the offering could be priced to the public at over $13. 

I do not view an offering priced below net asset value per share favorably. 

NMFC has plenty of money and needs to focus on doing better with what they now have until shares can be sold at a premium to net asset value per share. I still expect an offering priced below NAV per share.

Other Recent News: 

New Mountain Finance Corporation Closes Private Placement of $90 Million of 4.87% Senior Notes due 2023 

New Mountain Finance Corporation Extends Share Repurchase Program (up to $50M but only $2.9 spent on repurchases)  

I do believe BDC's should repurchase stock, rather than to issue more, when the discount to net asset value per share is significant. The current discount is not significant.    

Prior Trades:

In my prior trades, I did escape with a slender profit.

Item # 8 Sold Highest Cost NMFC Lot at $15.37 (9/14/2014 Post)($2.99 profit on the shares + 7 quarterly dividend payments/sold lot on 9/11/14)-Item # 4 Bought 50 NMFC at $15.03 in the Roth IRA (5/29/13 Post)

Other Prior Discussions:

SOLD 100 of 150 NMFC at $14.4773 ($3.79 profit on the shares + 7 dividend payments)

Item # 1 Sold Remaining 50 Shares of NMFC at $14.63 ($5.88 profit on the shares)

Item # 5 Bought 100 NMFC at $14.28-Taxable Account (6/22/13 Post)

Item # 3 Added 50 NMFC at $14.2-Roth IRA (4/26/14 Post)


B. Bought 50 PNNT at $7.15-Used Commission Free Trade:

Quote: PennantPark Investment Corp. (PNNT)
WEBSITE: PennantPark – PNNT

Management: External

10-K Annual Report (risk factor summary starts at page 14 and ends at page 29)

Dividends: Quarterly at $.18 per share or $.72 annually

PennantPark Investment Corporation Announces Quarterly Distribution of $0.18 per Share

The $.18 rate was reduced from $.28 per share effective for the 2017 second quarter which was this BDC's first reduction. PennantPark-Dividends and Distributions .

Dividend Yield at $7.15 Total Cost: 10.07%

Chart: PNNT has one awful long term chart, but is looking a tad better since early 2016. The stock crashed and burned during the Near Depression.

PNNT Interactive Stock Chart

Net Asset Value Per Share: $9.1 as of 12/31/17

Discount to NAV at $7.15 TC Per Share= -21.43% using 12/31/17 data

Historical Net Asset Values Per Share: Sourced 10-Qs

12/31/17  $ 9.1
12/31/16  $ 9.11
12/31/15  $ 9.02
9/30/15    $ 9.82
12/31/14  $10.43
9/20/14    $11.03
12/31/13  $10.8
12/31/12  $10.38
12/31/10  $11.14
9/30/10    $10.69
12/31/09  $11.86
12/31/08  $10.24
12//31/07 $12.07
9/30/07    $12.83

IPO at $15 Prospectus April 2007

I would make a few points about this data. 

There were two major events that caused declines in NAV per share. 

The first was the Near Depression occurring shortly after this BDC came into being and the second was over exposure to oil and gas companies in 2014-2015.  

Another major point is that the manager's of this BDC are not earning IMO their generous compensation as shown by the NAV per share declines starting in 2010 until 2016 when there was economic growth and no recessionary period.

Last Earnings Report-Q/E 12/31/17:  SEC Filed Press Release

List of Investments Pages 8-13 10-Q for the Q/E 12/31/17

Investment and Industry Classifications: Page 17 in 10-Q

Prior Trades: Net at +$83.19

If I net all the trades, I have a profit, but I did sell 100 shares at a loss.

2013 ROTH IRA 50 SHARES +$71.98

2015 ROTH IRA 100 Shares Held for less than 1 month +$ 58.52

2015 Taxable 150 Shares -$47.31 {100 Share lot -$104.7 Netted with 50 Share Lot +$57.39}

Sold Roth IRA: 100 PNNT at $9.535 (2/17/15 Post)

Item # 5 Sold 50 PNNT at $11.92 (12/17/13 Post)

Item # 1 Added 50 PNNT at $8.2-Taxable Account (1/24/15 Post)(noting that PNNT was getting shellacked then due to its E & P exposure)

Let's just say that I am skeptical of this BDC's ability to produce satisfactory results.

2. Small Ball-REGIONAL BANK BASKET STRATEGY GATEWAY POST:

A. Eliminated FNB Again-Sold 60+ Shares at $14.59: 

Profit Snapshot: +$66.17

Item # 1.C Added 10 FNB-Used Commission Free Trade (11/30/17 Post) 
Item # 4.B. Bought Back 50 FNB at $13.59-Used Commission Free Trade (10/23/17 Post)

Quote: F.N.B. Corp. (FNB) 

FNB Analyst Estimates 

Last Sell Discussed: 

Item # 4.A. Sold 100 FNB at $13.94-Satellite Taxable Account (10/23/17 Post)-Item # 1.A. Bought 100 FNB at $12.43 (9/14/17 Post)

My current preference is to buy below $13, collect a dividend or two, and then sell at over $14.  Most of my profits are concentrated in odd lots bought below $10. 

Recent Earnings Report: 

F.N.B. Corporation Reports Fourth Quarter and Full Year 2017 Earnings

"Fourth quarter operating net income per diluted common share (non-GAAP) was $0.24, which excludes the after-tax impact of merger-related expenses of $0.7 million and the impact of a reduction in the valuation of net deferred tax assets of $54.0 million due to the enactment of the Tax Cuts and Jobs Act during the quarter. Comparatively, third quarter operating net income per diluted common share (non-GAAP) was $0.24, excluding the after-tax impact of $0.9 million of merger-related expenses, and fourth quarter of 2016 operating net income per diluted common share (non-GAAP) was $0.24, excluding the after-tax impact of $1.3 million of merger-related expenses."  

I would use the Non-GAAP E.P.S. numbers for FNB which showed no growth Y-O-Y. 

NIM 3.49% (not as good as it looks with $2.5M in purchase accounting accretion included, which declines fairly quickly and is not a core NIM item)

Efficiency Ratio 53.1% (good)

Charge Off Ratio: .22% (better than average)

Charge-Off Rate on All Loans, All Commercial Banks-St. Louis Fed

NPL Ratio .81% (about average at this stage of the economic cycle)

Loan-To-Deposit Ratio: 93.7% (not dependent on brokered deposits)

Tangible Common Equity to Tangible Assets: 6.74% (6.87% on 9/30/17/below average for banks in my basket) 

I keep my finger on the trigger whenever I meander into a FNB position. As discussed many times here, this bank slashed it quarterly dividend rate by 50% to $.12 per share in 2009 and has not raised it since that slash. 

Sample of Other Prior Trades:

Item 3.A. Sold 50 FNB at $15.53 (3/16/17 Post);

Item # 1 Sold 50 FNB-Recently Bought in a Roth IRA Account at $13.27: Update For Regional Bank Basket Strategy As Of 3/17/16 - South Gent | Seeking Alpha;

Item # 5 Bought 50 FNB at $11.13: Update For Regional Bank Basket Strategy As Of 1/28/16 - South Gent | Seeking Alpha

Item # 5 Added 50 FNB at $7.8 (7/20/2010 Post)

Item # 4 Bought 50 FNB at $8.42 (5/7/2010 Post) 

Item # 4 Bought 50 FNB at $9.36 (4/27/10 Post) 

Realized  FNB Profit to Date: +$1,092.15  (prior trades: $1,025.98)

Realized Gain Regional Bank Basket Strategy (start date Spring 2009)=$41,991.32 + dividends

Closing Price 3/2/18: FNB $14.14 +$0.27 +1.95% 

3. Small Ball-Equity REIT Common and Preferred Stock Basket Strategy:

A. Added 5 GPT at $21.88-Used Commission Free Trades:

QUOTE: Gramercy Property Trust (GPT)
Gramercy Property Trust

2017 Annual Report (debt listed at page 63 and discussed between pages 61-63. There is a considerable amount of variable rate debt primarily in term loans and one credit facility)

Page 71: Impact of Libor Increases on Net Income

Average Total Cost Per Share (40 shares) = $23.95
Dividend: Quarterly at $.375 per share or $1.5 per share annually
Yield at TC = 6.26%

Closing Price 3/2/18: GPT $22.00 +$0.57 +2.66% 

I am working my way up to 50 shares by buying 5 share lots at lower prices. I started my "buying program" too early as shown by subsequent events even though my first purchase was on 1/25/18. 

The impact of rising interest rates on GPT's share price is shown by looking at historical prices since early September 2017. GPT closed at $30.92 on 9/15/17 and at $21.43 on 3/1/18, a decline of 30.69%.  

Recent Earnings Report: 

Gramercy Property Trust Reports 2017 Full Year and Fourth Quarter Financial Results 

I discussed this earnings report here. My main takeaway is that cash available for distribution is not growing.  

Last Substantive Discussion: Item 1.A.  (2/3/18 Post)

Trading Profits to Date = $984.68

4. Short Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 Nextera Energy Capital 2.4% SU Bond Maturing on 9/14/19: 

Finra Page: Bond Detail (prospectus linked)

Issuer: Wholly Owned Subsidiary of NextEra Energy Inc. (NEE) who guarantees the bond

NEE Analyst Estimates 

NextEra Energy, Inc. Company Information NextEra Energy, Inc. (NYSE: NEE) is a "leading clean energy company with consolidated revenues of approximately $16.2 billion, approximately 45,900 megawatts of generating capacity, which includes megawatts associated with noncontrolling interests related to NextEra Energy Partners, LP (NYSE: NEP).... principal subsidiaries are Florida Power & Light Company, which serves approximately 5 million customer accounts in Florida and is one of the largest rate-regulated electric utilities in the United States, and NextEra Energy Resources, LLC, which, together with its affiliated entities, is the world's largest generator of renewable energy from the wind and sun."

Credit Ratings: 

Bought at a Total Cost of 99.808

YTM at TC Then at 2.525%

Current Yield at TC = 2.4046%

Total Cost numbers for bond purchases include the commission cost. This bond was bought at 99.708. Fidelity's $1 commission takes the total cost up .1 to 99.808. 

B. Bought 1 Nextera Energy Capital 2.3% SU Bond Maturing on 4/1/19: 

FINRA PAGE: Bond Detail

Bought at a Total Cost of 99.851  

YTM at TC Then at 2.435%

Current Yield at TC = 2.3034%

C. Bought 1 Deere Capital 1.75% SU Bond Maturing on 8/10/18: 

Finra Page: Bond Detail (prospectus linked)

Issuer: Wholly Owned Subsidiary of Deere & Co. 

Credit Ratings: 

Fitch Assigns Ratings of 'A' to Deere & Company and John Deere Capital; Outlook Stable

Bought at a Total Cost of 99.947

YTM at TC Then at 1.862%

Current Yield at TC = 1.7509%

D. Bought 1 Wells Fargo 2.15% SU Bond Maturing on 1/30/20 -In a Roth IRA Account:

FINRA Page: Bond Detail (prospectus linked)

Issuer: Wells Fargo & Co. (WFC)
WFC Analyst Estimates

Credit Ratings:

Bought at a Total Cost of  99.051 (includes Vanguard's $2 commission)
YTM at TC Then at 2.654%
Current Yield at TC = 2.1706%

Paid to Seller 98.851-YTM at that price = 2.761% (just to illustrate the impact of commission cost on yield)

I now own two bonds.

On my day of purchase, the five year treasury closed at a 2.65% yield.

I now own 2 bonds in this Roth IRA account and 1 bond in a taxable account.

E. Bought 1 Morgan Stanley 2.65% SU Bond Maturing on 1/27/20:

FINRA Page: Bond Detail

Issuer: Morgan Stanley (MS)
MS Analyst Estimates 
Morgan Stanley Reports Fourth Quarter and Full Year 2017 
Credit Ratings:

Fitch Affirms Morgan Stanley's Long-Term IDR at 'A'; Outlook Stable (9/28/17-Reuters)
Bought at a Total Cost of 99.885
YTM at TC Then at 2.711%
Current Yield at TC = 2.6531%

F. Bought 1 BP Capital 2.521% SU Bond Maturing on 1/15/20:

FINRA Page: Bond Detail

Issuer: Wholly Owned Subsidiary of who guarantees the notes (see pages S-5)

Bought at a Total Cost of 99.845
YTM at TC Then at 2.604%
Current Yield at 2.5249%


G. Bought 1 Treasury .75% Coupon Maturing on 7/31/18:
YTM = 1.625%

4. Intermediate Term Bond/CD Ladder Basket Strategy: 

A. Added 1 Entergy Mississippi 3.1% First Mortgage Bond Maturing on 7/1/23-In a Roth IRA Account:

FINRA Page: Bond Detail (prospectus linked)

I now own 3 bonds. 

I own several first mortgage bonds issued by electric utilities in this Roth IRA account.

Issuer: Entergy Mississippi is a wholly owned subsidiary of Entergy Corp. (ETF)

Its operations and results are included in ETR's SEC filings.

ETR 10-Q for the Q/E 9/30/17 starting at page 126

The first mortgage covers substantially all of Entergy Mississippi's physical assets with certain exceptions described in the prospectus (pages 4-5).

Credit Ratings:

Bought at a Total Cost of 99.869 (with $2 brokerage commission)
YTM at TC Then at 3.128%
Current Yield at TC = 3.104%


Security: Secured by substantially all physical assets with certain exceptions:  

Make Whole Provision: 

Additional Bonds: There will generally be a number for first mortgage bonds issued under the same indenture. There are limits to the amount based on the value of the secured property and on an earnings test, as more fully explained in this prospectus excerpt: 

I have a long history buying and selling first mortgage bonds issued by Entergy subsidiaries (Entergy Mississippi, Entergy Louisiana, and Entergy Arkansas). This includes both $1K par value bonds traded in the bond market and $25 par value stock exchange traded bonds (traded like a common stock on the stock exchange). 

The exchange traded First Mortgage bonds have much longer maturities and consequently have a far greater interest rate risk than this 2023 $1K par value bond. 

The interest rate risk for the exchange traded mortgage bonds is asymmetric in favor of the issuer since the bond may be called generally within five years after the IPO at par value. If interest rates fall, and it is cost effective for the issuer to redeem, then the investor is left with the par value proceeds and less desirable options given the interest rate decline. On the other hand, if interest rates rise, the issuer can allow the owners to suffer until the bond matures. The bond owners have two bad choices then. Sell at a loss; or keep the bond and forego the additional income generated by higher yielding bonds then available.   

The $1K par value bonds are protected by make whole provisions that make optional calls unlikely outside of a narrow window shortly before maturity when the issuer can redeem at par value.  

Exchange Traded  Entergy Mississippi First Mortgage Bond: 

Entergy Mississippi Inc. 4.9% First Mortgage Bonds Due 10/1/2066 (EMP); Prospectus (optional call on or after 10/1/21) 

Sample of Bond Market Traded Entergy Mississippi First Mortgage Bonds: 

2.85% 6/1/28 
3.75% 7/1/2024 

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.