Economy:
As expected, the Federal Reserve raised the federal funds rate by .25% yesterday. Eight FED officials predicted a 1% increase in the FF rate this year while 7 are at a .+.75% increase, so it is still a toss up between 2 more .25% hikes or just one more this year.
The new FF range is 1.75% to 2%. The FED anticipates that the FF rate will end 2018 at 2.4% and will rise to 3.1% during 2019 and 3.4% by 2020.
The Fed - Federal Reserve issues FOMC statement
The projections are based on the "dot plot": The Fed - June 13, 2018: FOMC Projections materials, accessible version
Banks have already increased their prime rates to 5% from 4.75%. (e.g.Huntington Bancshares Incorporated (HBAN) Increases Its Prime Rate To 5 Percent; I own 60 shares as part of my regional bank basket strategy)
The next FED meeting is scheduled for August 1st. The Bond Ghouls currently believe it is a virtual certainty that the FF rate will not change at that meeting. The odds of a .25% increase at the September meeting was at 83.2% earlier this morning:
Countdown to FOMC: CME FedWatch Tool
The .25% increase yesterday was already priced into the treasury bill rates:
The Vanguard Prime Money Market fund currently has a 1.96% yield. VMMXX - Vanguard Prime Money Market Fund | Vanguard
CPI increased on a seasonally adjusted basis .2% last month. Over the 12 month period ending in May, the non-seasonally adjusted increase was 2.8%. Consumer Price Index Summary
Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category (health insurance cost up .5% Y-O-Y)
Consumer inflation rising at fastest pace in 6 years, CPI shows - MarketWatch
The Cleveland Fed's median CPI index also increased .2% in May or at an annualized rate of 2.8%. The Sticky-Price CPI rose 2.5% Y-O-Y. The flexible price CPI index has increased 3.4% Y-O-Y through May.
As expected, the Federal Reserve raised the federal funds rate by .25% yesterday. Eight FED officials predicted a 1% increase in the FF rate this year while 7 are at a .+.75% increase, so it is still a toss up between 2 more .25% hikes or just one more this year.
The new FF range is 1.75% to 2%. The FED anticipates that the FF rate will end 2018 at 2.4% and will rise to 3.1% during 2019 and 3.4% by 2020.
The Fed - Federal Reserve issues FOMC statement
The projections are based on the "dot plot": The Fed - June 13, 2018: FOMC Projections materials, accessible version
Banks have already increased their prime rates to 5% from 4.75%. (e.g.Huntington Bancshares Incorporated (HBAN) Increases Its Prime Rate To 5 Percent; I own 60 shares as part of my regional bank basket strategy)
The next FED meeting is scheduled for August 1st. The Bond Ghouls currently believe it is a virtual certainty that the FF rate will not change at that meeting. The odds of a .25% increase at the September meeting was at 83.2% earlier this morning:
Countdown to FOMC: CME FedWatch Tool
The .25% increase yesterday was already priced into the treasury bill rates:
CPI increased on a seasonally adjusted basis .2% last month. Over the 12 month period ending in May, the non-seasonally adjusted increase was 2.8%. Consumer Price Index Summary
Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category (health insurance cost up .5% Y-O-Y)
Consumer inflation rising at fastest pace in 6 years, CPI shows - MarketWatch
The Cleveland Fed's median CPI index also increased .2% in May or at an annualized rate of 2.8%. The Sticky-Price CPI rose 2.5% Y-O-Y. The flexible price CPI index has increased 3.4% Y-O-Y through May.
Small-business optimism jumps to 34-year high, NFIB says- MarketWatch; Small Business Economic Trends | NFIB
Canada parliament condemns Trump's attacks on Trudeau and tariffs - CBS News (the vote was unanimous)
How Trump's lumber tariffs may have helped increase new home prices
U.K. factory output falls the most since 2012 - MarketWatch
Rents are still growing much faster than wages, even as growth cools slightly - MarketWatch This is an important issue for an economy that depends on consumer discretionary spending. Think about the squeeze on millennials from rising rents and student loan servicing costs on top of other costs increasing at 3%+.
U.S. government posts $147 billion deficit in May | Reuters (an increase of 66% from May 2017 due to lower federal tax revenues and higher spending)
The most important news today is the ECB decision to end its QE program: ECB plans to bring its bond-buying program to a close in December - MarketWatch The ECB will continue buying €30B through September and then €15B through December 2018.
The ECB kept its extremely abnormal benchmark rate at -.4%. Monetary policy decisions
++++
Markets and Market Commentary:
Paul Tudor Jones says stock market has ability to go a lot higher: CNBC (a melt up from current levels is a possibility and would be sold by me)
David Stockman predicts 50% stock market plunge: CNBC (Stockman has been predicting Armageddon for a few years. A substantial decline is a reasonable outcome with a recession made worse by a trade war)
Gundlach Says Rising Rates and Deficits Like ‘Suicide Mission’ - Bloomberg (of course)
George Soros: ‘Everything that could go wrong has gone wrong. Trump is willing to destroy the world’ - MarketWatch
'No solution in sight' to trade dispute with Trump, German minister says | Reuters
Time Warner says DOJ suit was motivated by politics; Toobin: Suspicions about Trump DOJ's motives - CNN Video (it is more likely than not that Trump's well known hostility toward CNN was the motivation for the DOJ's attempt to block the AT & T-Time Warner vertical merger); The Daily 202: Seven reasons to be suspicious of the DOJ lawsuit to stop AT&T from buying CNN - The Washington Post
Time Warner says DOJ suit was motivated by politics; Toobin: Suspicions about Trump DOJ's motives - CNN Video (it is more likely than not that Trump's well known hostility toward CNN was the motivation for the DOJ's attempt to block the AT & T-Time Warner vertical merger); The Daily 202: Seven reasons to be suspicious of the DOJ lawsuit to stop AT&T from buying CNN - The Washington Post
+++++
Trump:
Donald blamed Obama rather than Putin for Russia's annexation of Crimea. Trump again calls for readmitting Russia to G7, blames Obama for Crimea's annexation - CNN Donald has been implementing a Russia First in U.S. foreign policy.
"U.S. exports to the European Union enjoy an average tariff of just three percent." Import Tariffs | export.gov
"The United States has tariffs that are slightly higher, on average, across all its imported products than Canada or Japan and exactly equivalent to the four European nations in the G-7." Trump’s claims of unfair tariffs ring hollow to U.S. trading partners | The Seattle Times
Each trading bloc has exceptions to low tariffs. The U.S. for example imposes a 25% tariff on light trucks., The Big Three's Shameful Secret | Cato Institute U.S. slaps a 163% tariff on imported peanuts; 350% on tobacco, and 25% on sugar.
Sure, Canada has a 270% tariff on imported milk to keep the U.S. from flooding the market. The U.S. over produces milk, with dairy farmers in Wisconsin producing almost as much milk as all of the dairy farmers in Canada.
Trump harps on Canada's milk tariff but neglects to mention the high U.S. tariffs in his continuing effort to deliberately mislead U.S. voters and to dismantle the global trade order that the U.S. built.
Trump’s ‘Bully’ Attack on Trudeau Outrages Canadians - The New York Times (In my life, I have never seen anything remotely similar to this attack by a U.S. President and his underlings. Just another disgraceful act by Donald)
Trump continued attacking Trudeau while he was in Singapore. Trump's tweets slam Canada and Trudeau anew from Singapore
Canada parliament condemns U.S. attack on Trudeau, country simmers | Reuters (the vote was unanimous in the Canada’s House of Commons)
Donald Trump Criticizes Trade With Canada — Top U.S. Partner | Time
As Trump threatens decades of U.S. trade policy, Republicans are largely silent (Trump is the republican party.)
Trump is making it increasingly unlikely that Canada could politically offer the U.S. major trade concessions. Trump again scolds Trudeau, says his criticism will cost Canada ‘a lot of money’ - The Washington Post (Trump: “When I got on to the plane, I think that Justin probably didn’t know that Air Force One has about 20 televisions." Trump took offense at Trudeau saying that Canada will not be pushed around by the U.S., which is exactly of course what Trump is attempting to do)
Since Russia is our new best friend, a far closer ally than those Canadians who are so mean to Donald in refusing to repeatedly kiss his ass and rollover on command, I thought that I would watch over the weekend the movie "Death of Stalin".
The favorable review by the NYT refers to the movie as "slapstick horror", but the slapstick works since the movie is largely grounded in facts with some exceptions (e.g. While the Russian pianist Maria Yudina despised Stalin and may have recorded a Mozart concerto for Stalin, that recording was made several years prior to Stalin's death rather than shortly before his death.) Review: The Slapstick Horror of ‘The Death of Stalin’ - The New York Times; The Death of Stalin Movie Review (2018) | Roger Ebert
I can understand why Donald refused to sign the G-7 statement. After all, there was a call for "Russia to cease its destabilizing behavior to undermine democratic systems” and to condemn Russia's "illegal annexation of Crimea” which was after all Obama's fault. The document was also rife with "socialist" ideas and objectionable references such as “a clean environment,” “a healthy, prosperous, sustainable and fair future for all,” and “quality work environments.” Peter Navarro says 'there's a special place in hell' for Justin Trudeau-CNN (Navarro referred to the the statement as a "socialist communique")
The $1.4 trillion U.S. 'surplus' that Trump's not talking about
+++++++
Trump Trusts Kim:
As a precursor to the following comments, I would emphasize that I much prefer diplomacy and dialogue to the war mongering and threats that have been the norm in NK-U.S. relations. Perhaps something positive and concrete will happen.
However, I would agree with Nicholas Kristof that Trump was "outfoxed" by Kim:
"Trump made a huge concession — the suspension of military exercises with South Korea. That’s on top of the broader concession of the summit meeting itself, security guarantees he gave North Korea and the legitimacy that the summit provides his counterpart, Kim Jong-un." Opinion | Trump Was Outfoxed in Singapore - The New York Times In exchange for those concrete and meaningful U.S. concessions, NK reaffirmed its nebulous commitment, which it has repeated since 1992, to a denuclearization of the "Korean Peninsula" which includes the concrete commitment that the U.S. would withdraw its nuclear umbrella over SK. NK has never bothered to adhere to that commitment and has repeatedly violated it.
North Korea summit: Trump says he "trusts" Kim Jong Un to denuclearize - CBS News-Atrocities Under Kim Jong-un: Indoctrination, Prison Gulags, Executions - The New York Times; UN Report on North Korea's Serious and Pervasive Human Rights Violations
According to Donald, "Kim "loves his people". Trump says accused human rights abuser Kim Jong Un 'loves his people' - CNN I would question whether any sane person could make that statement. At a minimum, that love did not include his uncle, who was used for artillery practice, his step-brother who was recently murdered, the hundreds of thousands in NK gulags and the millions who have starved to death over the years.
Before the meeting, Trump emphasized that he could size Kim up within one minute. Trump says he’ll size up Kim Jong Un ‘within the first minute’ of Singapore summit - The Washington Post If Trump actually believes that he can assess trustworthiness in less than one minute, then that is just another example of delusional thinking.
Trump praises Kim Jong Un as 'strong,' 'funny,' 'smart' and a 'great negotiator' in Hannity interview The leaders of Western democracies are the very bad people in TrumpWorld.
Trump ordered an end to joint U.S-SK military exercises. Trump calls halt to U.S.-South Korea war games - MarketWatch ("The Pentagon has long argued that the maneuvers are necessary to maintain the readiness of American forces to defend South Korea."); Trump to Suspend Military Exercises on Korean Peninsula-The New York Times
Trump called those exercises "provocative" which is exactly what NK wants a U.S. President to say.
Trump's pledge to stop 'provocative' military exercises provokes alarm and confusion in Seoul and Washington - CNN;
Trump contradicts U.S. military stance on Korea war games - Chicago Tribune;
Trump called South Korea military exercises 'provocative,' the same way North Korea described them | The Independent
Trump Pledge to Halt Military Exercises Surprises Pentagon and Seoul - The New York Times
Trump move to halt joint exercises in South Korea upends decades of military doctrine: CNBC
U.S.-South Korea military drills are 'vital': Japan's defense chief
From G-7 to Kim summit, 'a bad week for American strength around the world'
No details were provided on verification of North Korea's promise to work toward denuclearization. Nothing was mentioned about NK freezing plutonium and uranium production. No promise was made by NK to allow inspectors to visit suspected nuclear sites. No statement was made relating to a timetable. Nothing was said about NK destroying its ICBMs. Trump did promise the American people that the dismantling of North Korea's nuclear arsenal will occur "very quickly".
Trump Showed Kim a Faux Movie Trailer About a Transformed North Korea - The New York Times
Compared with Trump, previous presidents extracted more concessions from N. Korea, experts say - The Washington Post
North Korea plays up U.S. concessions after summit - MarketWatch; N.Korea frames summit with U.S. as a win, dubs it "meeting of the century": Reuters
Road to N. Korea's denuclearization is littered with failure - ABC News
Trump Praises North Korea's Kim as ‘Very Honorable’ - Bloomberg
If anyone voices any of the previous criticisms, which have a reasonable and factual support when looking at the 4 corners of the accord and Donald's statements, Donald views any such critic as being traitorous and an enemy. And, not just any enemy of the people, but the "biggest enemy". The only acceptable response for Donald is to lavish effusive praise on whatever he does or says and to clap as loudly as humanly possible. This sentiment was expressed by Our Dear Leader in this tweet from yesterday:
If Obama had signed the same pact with North Korea, which can be found here, the republicans would be screaming vociferously for his head. Their shrill decibel level would likely persist for years as Americans go tone death by the millions listening to their complaints about Obama's betrayal. I know that my eardrums would have already burst listening to them.
Instead, many republicans are nominating Trump for a Nobel Peace prize. Hypocrisy and inconsistent thinking are rampant and normal in some quarters. GOP Voters Love Same Attack on Syria They Hated Under Obama
Fox News Everything wrong with in one video - YouTube
The stock market has not been reacting to NK related news and last Tuesday was no exception:
S & P 500 6/12/18 Close: 2,786.85 +4.85 +0.17%
++++
Your kitchen towels could give you food poisoning, study suggests (I will generally wash kitchen towels after one use).
Trump administration moves to block victims of gang violence and domestic abuse from claiming asylum
Supreme Court Upholds Ohio’s Purge of Voting Rolls - The New York Times (5 to 4 decision in Husted v. A. Philip Randolph Institute (6/11/2018)
Mitch McConnell: "In my view, the last 16 months have been the single best period for conservative values since I came to Washington . . . in 1985. And this is not hyperbole.” The GOP is not a conservative party, though its tribe members prefer to be called conservatives rather than the more appropriate terms. True Conservatives, like George Will, are leaving the modern day GOP, remade in Trump's image, to become independents. True Conservatives no longer have a political party to join.
It's Trump's way or the highway in today's Republican Party
And that has to be case since republican politicians know that Trump has an 85% approval rating among republican voters, with most of those viewing Donald as a role model for their children).
Trump's job approval ticks up – CBS News poll - CBS News
+++
Tennessee Elections in 2018:
I am seeing the leading republican candidates in Tennessee wrapping themselves so tightly around Trump that they have become indistinguishable from him. Some kind of mind meld-body double kind of thing.
I will vote for Beth Harwell in the upcoming GOP primary, giving Diane Black and Randy Boyd, two right wing reactionaries and pretend conservatives, the big thumb down. Harwell is simply the best of the bad choices. I do not view her as crazy and she is intelligent. Since the republicans will win the governor's race, I will vote in the republican primary.
Since Boyd or Black will win the GOP primary with Harwell in third place I will vote for the democrat Karl Dean, the former mayor of Nashville and a centrist Democrat, in the general election.
I voted for the current republican governor, Bill Haslam, in the 2010 and 2014 general elections and for the centrist Democrat Phil Bredesen in 2002 and 2006. Bredesen is running for the Senate in 2018, and he will be receiving my vote rather than the republican right wing reactionary, Know Nothing Marsha Blackburn. I do not respond well to candidates viewed by me as extremists, either left or right wing.
"U.S. exports to the European Union enjoy an average tariff of just three percent." Import Tariffs | export.gov
"The United States has tariffs that are slightly higher, on average, across all its imported products than Canada or Japan and exactly equivalent to the four European nations in the G-7." Trump’s claims of unfair tariffs ring hollow to U.S. trading partners | The Seattle Times
Each trading bloc has exceptions to low tariffs. The U.S. for example imposes a 25% tariff on light trucks., The Big Three's Shameful Secret | Cato Institute U.S. slaps a 163% tariff on imported peanuts; 350% on tobacco, and 25% on sugar.
Sure, Canada has a 270% tariff on imported milk to keep the U.S. from flooding the market. The U.S. over produces milk, with dairy farmers in Wisconsin producing almost as much milk as all of the dairy farmers in Canada.
Trump harps on Canada's milk tariff but neglects to mention the high U.S. tariffs in his continuing effort to deliberately mislead U.S. voters and to dismantle the global trade order that the U.S. built.
Trump’s ‘Bully’ Attack on Trudeau Outrages Canadians - The New York Times (In my life, I have never seen anything remotely similar to this attack by a U.S. President and his underlings. Just another disgraceful act by Donald)
Trump continued attacking Trudeau while he was in Singapore. Trump's tweets slam Canada and Trudeau anew from Singapore
Canada parliament condemns U.S. attack on Trudeau, country simmers | Reuters (the vote was unanimous in the Canada’s House of Commons)
Donald Trump Criticizes Trade With Canada — Top U.S. Partner | Time
As Trump threatens decades of U.S. trade policy, Republicans are largely silent (Trump is the republican party.)
Trump is making it increasingly unlikely that Canada could politically offer the U.S. major trade concessions. Trump again scolds Trudeau, says his criticism will cost Canada ‘a lot of money’ - The Washington Post (Trump: “When I got on to the plane, I think that Justin probably didn’t know that Air Force One has about 20 televisions." Trump took offense at Trudeau saying that Canada will not be pushed around by the U.S., which is exactly of course what Trump is attempting to do)
Since Russia is our new best friend, a far closer ally than those Canadians who are so mean to Donald in refusing to repeatedly kiss his ass and rollover on command, I thought that I would watch over the weekend the movie "Death of Stalin".
The favorable review by the NYT refers to the movie as "slapstick horror", but the slapstick works since the movie is largely grounded in facts with some exceptions (e.g. While the Russian pianist Maria Yudina despised Stalin and may have recorded a Mozart concerto for Stalin, that recording was made several years prior to Stalin's death rather than shortly before his death.) Review: The Slapstick Horror of ‘The Death of Stalin’ - The New York Times; The Death of Stalin Movie Review (2018) | Roger Ebert
I can understand why Donald refused to sign the G-7 statement. After all, there was a call for "Russia to cease its destabilizing behavior to undermine democratic systems” and to condemn Russia's "illegal annexation of Crimea” which was after all Obama's fault. The document was also rife with "socialist" ideas and objectionable references such as “a clean environment,” “a healthy, prosperous, sustainable and fair future for all,” and “quality work environments.” Peter Navarro says 'there's a special place in hell' for Justin Trudeau-CNN (Navarro referred to the the statement as a "socialist communique")
The $1.4 trillion U.S. 'surplus' that Trump's not talking about
+++++++
Trump Trusts Kim:
As a precursor to the following comments, I would emphasize that I much prefer diplomacy and dialogue to the war mongering and threats that have been the norm in NK-U.S. relations. Perhaps something positive and concrete will happen.
However, I would agree with Nicholas Kristof that Trump was "outfoxed" by Kim:
"Trump made a huge concession — the suspension of military exercises with South Korea. That’s on top of the broader concession of the summit meeting itself, security guarantees he gave North Korea and the legitimacy that the summit provides his counterpart, Kim Jong-un." Opinion | Trump Was Outfoxed in Singapore - The New York Times In exchange for those concrete and meaningful U.S. concessions, NK reaffirmed its nebulous commitment, which it has repeated since 1992, to a denuclearization of the "Korean Peninsula" which includes the concrete commitment that the U.S. would withdraw its nuclear umbrella over SK. NK has never bothered to adhere to that commitment and has repeatedly violated it.
North Korea summit: Trump says he "trusts" Kim Jong Un to denuclearize - CBS News-Atrocities Under Kim Jong-un: Indoctrination, Prison Gulags, Executions - The New York Times; UN Report on North Korea's Serious and Pervasive Human Rights Violations
According to Donald, "Kim "loves his people". Trump says accused human rights abuser Kim Jong Un 'loves his people' - CNN I would question whether any sane person could make that statement. At a minimum, that love did not include his uncle, who was used for artillery practice, his step-brother who was recently murdered, the hundreds of thousands in NK gulags and the millions who have starved to death over the years.
Before the meeting, Trump emphasized that he could size Kim up within one minute. Trump says he’ll size up Kim Jong Un ‘within the first minute’ of Singapore summit - The Washington Post If Trump actually believes that he can assess trustworthiness in less than one minute, then that is just another example of delusional thinking.
Trump praises Kim Jong Un as 'strong,' 'funny,' 'smart' and a 'great negotiator' in Hannity interview The leaders of Western democracies are the very bad people in TrumpWorld.
Trump ordered an end to joint U.S-SK military exercises. Trump calls halt to U.S.-South Korea war games - MarketWatch ("The Pentagon has long argued that the maneuvers are necessary to maintain the readiness of American forces to defend South Korea."); Trump to Suspend Military Exercises on Korean Peninsula-The New York Times
Trump called those exercises "provocative" which is exactly what NK wants a U.S. President to say.
Trump's pledge to stop 'provocative' military exercises provokes alarm and confusion in Seoul and Washington - CNN;
Trump contradicts U.S. military stance on Korea war games - Chicago Tribune;
Trump called South Korea military exercises 'provocative,' the same way North Korea described them | The Independent
Trump Pledge to Halt Military Exercises Surprises Pentagon and Seoul - The New York Times
Trump move to halt joint exercises in South Korea upends decades of military doctrine: CNBC
U.S.-South Korea military drills are 'vital': Japan's defense chief
From G-7 to Kim summit, 'a bad week for American strength around the world'
No details were provided on verification of North Korea's promise to work toward denuclearization. Nothing was mentioned about NK freezing plutonium and uranium production. No promise was made by NK to allow inspectors to visit suspected nuclear sites. No statement was made relating to a timetable. Nothing was said about NK destroying its ICBMs. Trump did promise the American people that the dismantling of North Korea's nuclear arsenal will occur "very quickly".
Trump Showed Kim a Faux Movie Trailer About a Transformed North Korea - The New York Times
Compared with Trump, previous presidents extracted more concessions from N. Korea, experts say - The Washington Post
North Korea plays up U.S. concessions after summit - MarketWatch; N.Korea frames summit with U.S. as a win, dubs it "meeting of the century": Reuters
Road to N. Korea's denuclearization is littered with failure - ABC News
Trump Praises North Korea's Kim as ‘Very Honorable’ - Bloomberg
If anyone voices any of the previous criticisms, which have a reasonable and factual support when looking at the 4 corners of the accord and Donald's statements, Donald views any such critic as being traitorous and an enemy. And, not just any enemy of the people, but the "biggest enemy". The only acceptable response for Donald is to lavish effusive praise on whatever he does or says and to clap as loudly as humanly possible. This sentiment was expressed by Our Dear Leader in this tweet from yesterday:
If Obama had signed the same pact with North Korea, which can be found here, the republicans would be screaming vociferously for his head. Their shrill decibel level would likely persist for years as Americans go tone death by the millions listening to their complaints about Obama's betrayal. I know that my eardrums would have already burst listening to them.
Instead, many republicans are nominating Trump for a Nobel Peace prize. Hypocrisy and inconsistent thinking are rampant and normal in some quarters. GOP Voters Love Same Attack on Syria They Hated Under Obama
Fox News Everything wrong with in one video - YouTube
The stock market has not been reacting to NK related news and last Tuesday was no exception:
S & P 500 6/12/18 Close: 2,786.85 +4.85 +0.17%
++++
Trump administration moves to block victims of gang violence and domestic abuse from claiming asylum
Supreme Court Upholds Ohio’s Purge of Voting Rolls - The New York Times (5 to 4 decision in Husted v. A. Philip Randolph Institute (6/11/2018)
Mitch McConnell: "In my view, the last 16 months have been the single best period for conservative values since I came to Washington . . . in 1985. And this is not hyperbole.” The GOP is not a conservative party, though its tribe members prefer to be called conservatives rather than the more appropriate terms. True Conservatives, like George Will, are leaving the modern day GOP, remade in Trump's image, to become independents. True Conservatives no longer have a political party to join.
It's Trump's way or the highway in today's Republican Party
And that has to be case since republican politicians know that Trump has an 85% approval rating among republican voters, with most of those viewing Donald as a role model for their children).
Trump's job approval ticks up – CBS News poll - CBS News
+++
Tennessee Elections in 2018:
I am seeing the leading republican candidates in Tennessee wrapping themselves so tightly around Trump that they have become indistinguishable from him. Some kind of mind meld-body double kind of thing.
I will vote for Beth Harwell in the upcoming GOP primary, giving Diane Black and Randy Boyd, two right wing reactionaries and pretend conservatives, the big thumb down. Harwell is simply the best of the bad choices. I do not view her as crazy and she is intelligent. Since the republicans will win the governor's race, I will vote in the republican primary.
Since Boyd or Black will win the GOP primary with Harwell in third place I will vote for the democrat Karl Dean, the former mayor of Nashville and a centrist Democrat, in the general election.
I voted for the current republican governor, Bill Haslam, in the 2010 and 2014 general elections and for the centrist Democrat Phil Bredesen in 2002 and 2006. Bredesen is running for the Senate in 2018, and he will be receiving my vote rather than the republican right wing reactionary, Know Nothing Marsha Blackburn. I do not respond well to candidates viewed by me as extremists, either left or right wing.
++++++
1. Small Ball:
A. Sold 40 MDRX at $12.72-Used Commission Free Trade:
A. Sold 40 MDRX at $12.72-Used Commission Free Trade:
MDRX Analyst Estimates
Profit Snapshot: $45.69
Last Substantive Discussion: Item # 1.A. Bought 30 MDRX at $11.69 and 10 at $11.28 (5/10/18 Post)
Rationale: On a down day for the market, I decided to use the proceeds from selling MDRX, which does not pay a dividend, to buy 4 dividend paying stocks:
All of this is of course small ball. I mentioned the IBM, NVS, and VOD purchases in my last post. Those adds using commission free trades were bought using small ball rules. The 4th stock, Nordea Bank, is a new addition to the small ball buying program and is discussed below.
Prior MDRX Round-Trips:
Profit Snapshot: $45.69
Last Substantive Discussion: Item # 1.A. Bought 30 MDRX at $11.69 and 10 at $11.28 (5/10/18 Post)
Rationale: On a down day for the market, I decided to use the proceeds from selling MDRX, which does not pay a dividend, to buy 4 dividend paying stocks:
All of this is of course small ball. I mentioned the IBM, NVS, and VOD purchases in my last post. Those adds using commission free trades were bought using small ball rules. The 4th stock, Nordea Bank, is a new addition to the small ball buying program and is discussed below.
Prior MDRX Round-Trips:
Item 2.B. Sold 50 MDRX at $14.18 (12/11/17 Post)(profit snapshot=$69.48)-Item # 3,B, Bought 50 MDRX at $12.75 (11/13/17 Post)
Item # 2 Sold 50 MDRX at $14.32 (10/16/17 Post)(profit snapshot= $49.58)-Item # 2 Bought 50 MDRX at $13.28 Update For The Healthcare Basket Strategy As Of 5/9/16 - South Gent | Seeking Alpha
SOLD MDRX at $11.82 (4/20/19 Post)(profit snapshot=$152.48)-BUY of 50 MDRX at $8.45 (2/3/2009 Post)-
MDRX Trading Profits to Date: $317.23
B. Bought 20 Nordea Bank ADR at $9.52-Used Commission Free Trade:
This ADR is traded at the U.S. pink sheet exchange. Volume and liquidity are generally good for small orders. The Bid/Ask spread was $.02 when I place this trade.
The ordinary shares are priced in Swedish Krone. Nordea Bank AB (Sweden: Stockholm)
1 ADR - 1 Ordinary Share
SEK / USD Currency Chart Swedish Krona to US Dollar Rates (SEK's value has been in dominant declining trend against the USD since 2/1/18)
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Key Financial Data:
Fact sheet | nordea.com
Last Earnings Report: Q/E 3/31/18
This data is self-explanatory.
The capital ratios are superb. Loan losses are very low as is the net interest margin.
Interim Management Statement First Quarter 2018.pdf
Credit Ratings:
Current rating | nordea.com
Prior Trade Discussions: The last disposition was triggered by a poor earnings report. The decline from that $12.39 disposition price to my purchase at $9.52 was 23.16%, but part of that decline was due to the annual dividend going ex dividend.
Item # 4 Sold 100 NRBAY at $12.39 (2/1/2018)(profit snapshot=$74.97)-Item # 1 Bought Back 100 NRBAY at $11.54 (12/11/17 Post)
Normally, I would keep NRBAY through the annual ex dividend date.
In 2018, however, I thought that selling the shares while I still had a profit was the better option. The recent price decline seems to adjust for most of the recent negative news items. But maybe there is more room to the downside, including declines precipitated by a continued decline in the SEK/USD exchange rate.
I sold 100 shares on the annual ex dividend date in 2017. Item # 2.A. (profit snapshot= $72.17). The USD dividend amount per share was $.69+.
Item # 2 Bought Back 100 NRBAY at $11.56 (12/24/14 Post)- Sold on 5/20/15: Update On Portfolio Positioning And Management - South Gent | Seeking Alpha (profit snapshot=$145.07)
Item # 6 Sold 100 NRBAY at $11.265 (2/6/13 Post)(profit snapshot=$175.06)-Item # 2 BOUGHT 100 of the ADR NRBAY at $9.36 (10/10/12 Post)
Trading Profits to Date: $467.27
The reasons for listing prior trade discussions are that I do not want to continually repeat the same discussions about a company and to highlight my criteria for making short term decisions which is at its best an imperfect process.
Dividend: Annually
By virtue of Article 10 in Sweden's tax treaty with the U.S., Sweden will withhold a dividend tax of 15%, but the investor's broker has to claim U.S. citizenship tax treaty rights. Fidelity has in the past successfully asserted my right to a 15% withholding rate. (see snapshot of 2015 annual dividend payment under "Recent Developments") The filing that has to be made to secure the 15% rate is called "relief at source".
Last Ex Dividend Date: 3/16/18
Dividend | nordea.com
C. Bought 50 FDUS at $14.43-Used Commission Free Trade:
Quote: Fidus Investment Corp.
10-Q for the Q/E 3/31/18 (investments listed starting at page 5)
10-K for 2017 (risk summary starts at page 33 and ends at page 59)
Company Website: Fidus
SEC FILINGS
I am about to run out of commission free trades in my Schwab account, and I do not intend to acquire more by moving money or assets to that broker. I am using the few remaining trades to add some higher yielding securities. I still have almost 400 free trades left in my Fidelity account.
FDUS is a micro cap BDC that is externally managed.
Unlike the other BDCs that I have bought recently, FDUS invests primarily in fixed coupon loans rather than floating rate ones. This is my first purchase.
The investments are concentrated in second lien and subordinated debt:
The main reason for owning a BDC is to harvest the dividend. That goal for me will never change. The hope is to exit the position at whatever profit is available after collecting several dividends, thereby creating a total return in excess of the dividend yield. Easier said than done.
Dividend: Quarterly at $.39 per share ($1.56 annually)
The company has added for the last several years an additional $.04 per share as a special dividend. Fidus Investment Corporation (FDUS) Dividend Date & History - NASDAQ.com If that extra payment is made, it will probably come in the 4th quarter.
Last Ex Dividend Date: 6/7/18 (shortly after my purchase); PAY DATE 6/22/18
Dividend Yield at $14.43: 10.81%
Reinvestment: No
Historical Net Asset Value Per Share (highly unusual increases):
3/30/18 $16.28
12/31/17 $16.05
12/31/16 $15.76
12/31/15 $15.17
12/31/14 $15.16
12/31/13 $15.35
12/21/12 $15.32
IPO at $15 June 2011
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Last Earnings Report:
Fidus Investment Corporation Announces Fourth Quarter and Full Year 2017 Financial Results
The company did not earn its dividend in the last quarter, but has undistributed spillover income available to support the dividend as noted near the end of the preceding snapshot.
Fidus Investment Corporation Announces Exercise and Closing of Underwriters’ Overallotment Option to Purchase Additional 5.875% Notes Due 2023
The previous link references a $25 par value bond that is traded in the stock market like a stock: Fidus Investment Corp. 5.875% Notes due 2023 Stock Quote (FDUSL)
D. Sold 10 of the ETF VNQ at $79.89 and 10 at $80.6 (commission free at Vanguard):
Quote: Vanguard Real Estate ETF Overview
Closing Price Yesterday (6/13/18): VNQ $78.99 -$1.57 -1.95%
It will be difficult for equity REITs to buck a persistent uptrend in intermediate term interest rates.
Sponsor's Webpage: Vanguard (.12% expense ratio)
I sold my highest cost 20 shares using FIFO accounting:
Profit Snapshot: +$52.2
Current Position: 10.28 shares
Total Average Cost per share Remaining Shares = $73.10
Trading Restrictions: Small Ball Trading Rules (the next open market purchase has to be below $72.4)
Dividend Reinvestment: Yes
Last Purchase Discussion: Item # 2.D. Added 5 VNQ at $72.4 (2/15/18 Post)
Prior Sell Discussions: Item # 3 Sold at $83.36 Update For Equity REIT Basket Strategy As Of 3/21/16 - South Gent | Seeking Alpha; Item # 3 Sold 10 VNQ at $80.74: Update For Equity REIT Basket Strategy As Of 11/5/15 - South Gent | Seeking Alpha
The dividend yield is low for this REIT ETF. I prefer buying individual REITs, focusing on higher yielding and out-of-favor stocks. I have been paring those positions into the recent REIT rally.
Item # 2 Sold 50 MDRX at $14.32 (10/16/17 Post)(profit snapshot= $49.58)-Item # 2 Bought 50 MDRX at $13.28 Update For The Healthcare Basket Strategy As Of 5/9/16 - South Gent | Seeking Alpha
SOLD MDRX at $11.82 (4/20/19 Post)(profit snapshot=$152.48)-BUY of 50 MDRX at $8.45 (2/3/2009 Post)-
MDRX Trading Profits to Date: $317.23
B. Bought 20 Nordea Bank ADR at $9.52-Used Commission Free Trade:
This ADR is traded at the U.S. pink sheet exchange. Volume and liquidity are generally good for small orders. The Bid/Ask spread was $.02 when I place this trade.
The ordinary shares are priced in Swedish Krone. Nordea Bank AB (Sweden: Stockholm)
1 ADR - 1 Ordinary Share
SEK / USD Currency Chart Swedish Krona to US Dollar Rates (SEK's value has been in dominant declining trend against the USD since 2/1/18)
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Key Financial Data:
Fact sheet | nordea.com
Last Earnings Report: Q/E 3/31/18
This data is self-explanatory.
Interim Management Statement First Quarter 2018.pdf
Credit Ratings:
Prior Trade Discussions: The last disposition was triggered by a poor earnings report. The decline from that $12.39 disposition price to my purchase at $9.52 was 23.16%, but part of that decline was due to the annual dividend going ex dividend.
Item # 4 Sold 100 NRBAY at $12.39 (2/1/2018)(profit snapshot=$74.97)-Item # 1 Bought Back 100 NRBAY at $11.54 (12/11/17 Post)
Normally, I would keep NRBAY through the annual ex dividend date.
In 2018, however, I thought that selling the shares while I still had a profit was the better option. The recent price decline seems to adjust for most of the recent negative news items. But maybe there is more room to the downside, including declines precipitated by a continued decline in the SEK/USD exchange rate.
I sold 100 shares on the annual ex dividend date in 2017. Item # 2.A. (profit snapshot= $72.17). The USD dividend amount per share was $.69+.
Item # 2 Bought Back 100 NRBAY at $11.56 (12/24/14 Post)- Sold on 5/20/15: Update On Portfolio Positioning And Management - South Gent | Seeking Alpha (profit snapshot=$145.07)
Item # 6 Sold 100 NRBAY at $11.265 (2/6/13 Post)(profit snapshot=$175.06)-Item # 2 BOUGHT 100 of the ADR NRBAY at $9.36 (10/10/12 Post)
Trading Profits to Date: $467.27
The reasons for listing prior trade discussions are that I do not want to continually repeat the same discussions about a company and to highlight my criteria for making short term decisions which is at its best an imperfect process.
Dividend: Annually
By virtue of Article 10 in Sweden's tax treaty with the U.S., Sweden will withhold a dividend tax of 15%, but the investor's broker has to claim U.S. citizenship tax treaty rights. Fidelity has in the past successfully asserted my right to a 15% withholding rate. (see snapshot of 2015 annual dividend payment under "Recent Developments") The filing that has to be made to secure the 15% rate is called "relief at source".
Last Ex Dividend Date: 3/16/18
Dividend | nordea.com
C. Bought 50 FDUS at $14.43-Used Commission Free Trade:
Quote: Fidus Investment Corp.
10-Q for the Q/E 3/31/18 (investments listed starting at page 5)
10-K for 2017 (risk summary starts at page 33 and ends at page 59)
Company Website: Fidus
SEC FILINGS
I am about to run out of commission free trades in my Schwab account, and I do not intend to acquire more by moving money or assets to that broker. I am using the few remaining trades to add some higher yielding securities. I still have almost 400 free trades left in my Fidelity account.
FDUS is a micro cap BDC that is externally managed.
Unlike the other BDCs that I have bought recently, FDUS invests primarily in fixed coupon loans rather than floating rate ones. This is my first purchase.
The investments are concentrated in second lien and subordinated debt:
"As of December 31, 2017, the Company had active investments in 60 portfolio companies and residual investments in three portfolio companies that have sold their underlying operations. The aggregate fair value of the total portfolio was $596,308 and the weighted average effective yield on the Company’s debt investments was 13.0% as of such date. As of December 31, 2017, the Company held equity investments in 87.3% of its portfolio companies and the average fully diluted equity ownership in those portfolio companies was 7.7%."
The main reason for owning a BDC is to harvest the dividend. That goal for me will never change. The hope is to exit the position at whatever profit is available after collecting several dividends, thereby creating a total return in excess of the dividend yield. Easier said than done.
Dividend: Quarterly at $.39 per share ($1.56 annually)
The company has added for the last several years an additional $.04 per share as a special dividend. Fidus Investment Corporation (FDUS) Dividend Date & History - NASDAQ.com If that extra payment is made, it will probably come in the 4th quarter.
Last Ex Dividend Date: 6/7/18 (shortly after my purchase); PAY DATE 6/22/18
Dividend Yield at $14.43: 10.81%
Reinvestment: No
Historical Net Asset Value Per Share (highly unusual increases):
3/30/18 $16.28
12/31/17 $16.05
12/31/16 $15.76
12/31/15 $15.17
12/31/14 $15.16
12/31/13 $15.35
12/21/12 $15.32
IPO at $15 June 2011
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Last Earnings Report:
Fidus Investment Corporation Announces Fourth Quarter and Full Year 2017 Financial Results
The company did not earn its dividend in the last quarter, but has undistributed spillover income available to support the dividend as noted near the end of the preceding snapshot.
Fidus Investment Corporation Announces Exercise and Closing of Underwriters’ Overallotment Option to Purchase Additional 5.875% Notes Due 2023
The previous link references a $25 par value bond that is traded in the stock market like a stock: Fidus Investment Corp. 5.875% Notes due 2023 Stock Quote (FDUSL)
D. Sold 10 of the ETF VNQ at $79.89 and 10 at $80.6 (commission free at Vanguard):
Quote: Vanguard Real Estate ETF Overview
Closing Price Yesterday (6/13/18): VNQ $78.99 -$1.57 -1.95%
It will be difficult for equity REITs to buck a persistent uptrend in intermediate term interest rates.
Sponsor's Webpage: Vanguard (.12% expense ratio)
I sold my highest cost 20 shares using FIFO accounting:
Profit Snapshot: +$52.2
Current Position: 10.28 shares
Total Average Cost per share Remaining Shares = $73.10
Trading Restrictions: Small Ball Trading Rules (the next open market purchase has to be below $72.4)
Dividend Reinvestment: Yes
Last Purchase Discussion: Item # 2.D. Added 5 VNQ at $72.4 (2/15/18 Post)
Prior Sell Discussions: Item # 3 Sold at $83.36 Update For Equity REIT Basket Strategy As Of 3/21/16 - South Gent | Seeking Alpha; Item # 3 Sold 10 VNQ at $80.74: Update For Equity REIT Basket Strategy As Of 11/5/15 - South Gent | Seeking Alpha
The dividend yield is low for this REIT ETF. I prefer buying individual REITs, focusing on higher yielding and out-of-favor stocks. I have been paring those positions into the recent REIT rally.
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 1 BP Capital 2.521% SU Bond Maturing on 1/15/20:
This bond is actively traded and generally trades in a narrow spread. The best ask price frequently allows for a 1 bond purchase, which was the case when I bought this bond. I now own 2.
FINRA Page: Bond Detail
Issuer: BP Capital, a wholly owned subsidiary of BP PLC who guarantees the notes
Credit Ratings:
Moody's at A1
Fitch Affirms BP at 'A', Outlook Stable (4/21/17)
BP Capital has the same credit rating as BP PLC.
A. Bought 1 BP Capital 2.521% SU Bond Maturing on 1/15/20:
This bond is actively traded and generally trades in a narrow spread. The best ask price frequently allows for a 1 bond purchase, which was the case when I bought this bond. I now own 2.
FINRA Page: Bond Detail
Issuer: BP Capital, a wholly owned subsidiary of BP PLC who guarantees the notes
Moody's at A1
Fitch Affirms BP at 'A', Outlook Stable (4/21/17)
BP Capital has the same credit rating as BP PLC.
Bought at a Total Cost of 99.479
YTM at TC Then at 2.848%
Current Yield at TC = 2.5342%
B. Bought 1 Morgan Stanley 2.65% SU Bond Maturing on 1/27/19:
I now own 2 bonds.
Finra Page: Bond Detail (prospectus linked)
Issuer: Morgan Stanley (MS)
MS Analyst Estimates
Credit Ratings:
Bought at a Total Cost of 99.645
YTM at TC Then at 2.869%
Current Yield at TC = 2.6594%
C. Bought 1 Wells Fargo 2.6% SU Bond Maturing on 7/22/20:
YTM at TC Then at 2.848%
Current Yield at TC = 2.5342%
B. Bought 1 Morgan Stanley 2.65% SU Bond Maturing on 1/27/19:
Finra Page: Bond Detail (prospectus linked)
Issuer: Morgan Stanley (MS)
MS Analyst Estimates
Credit Ratings:
Bought at a Total Cost of 99.645
YTM at TC Then at 2.869%
Current Yield at TC = 2.6594%
C. Bought 1 Wells Fargo 2.6% SU Bond Maturing on 7/22/20:
Finra Page: Bond Detail (prospectus linked)
Issuer: Wells Fargo & Co. (WFC)
WFC Analyst Estimates
Credit Ratings:
YTM at TC Then at 3.089%
Current Yield at TC = 2.6265%
D. Bought 1 Stifel Bank 2.7% CD (monthly interest payments) Maturing on 5/29/20 (2 Year CD):
E. Bought 1 Ventas 2.7% SU Maturing on 4/1/20:
Finra Page: Bond Detail (prospectus linked)
Issuer: Operating entity for Ventas Inc. (VTR) who guarantees the notes
Ventas Reports 2018 First Quarter Results; 10-Q for the Q/E 3/31/18
2017 Annual Report (debt listed starting at page 110)
Last Bond Offering: $650M 4% SU bonds maturing in 2028 last February
Credit Ratings:
YTM at TC Then at 3.168%
Current Yield at TC = 2.7224%
I now own 2.
3. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Bought 1 Virginia Electric Power 2.95% SU Bond Maturing on 1/15/22-In A Roth IRA Account:
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Wholly owned operating subsidiary of Dominion Energy (D)
Credit Ratings:
Bought at a Total Cost of 98.759
YTM at TC Then at 3.254%
Current Yield at TC = 2.9871%
B. Bought 2 Kraft Heinz 3.5% SU Bonds Maturing on 7/15/22:
I have one Kraft bond maturing on 7/2/18.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Kraft Heinz Co. (KHC ) - MarketWatch
KHC Analyst Estimates
Kraft Heinz Reports First Quarter 2018 Results ("Net sales were$6.3 billion , down 0.3 percent versus the year-ago period, including a 1.2 percentage point benefit from currency. Organic Net Sales decreased 1.5 percent versus the year-ago period. Pricing increased 1.0 percentage points, driven by price increases in the United States and Rest of World markets. Volume/mix decreased 2.5 percentage points, primarily driven by lower shipments in the United States and Rest of World markets that more than offset solid retail growth in Canada and EMEA as well as foodservice gains in the United States and EMEA.")
2017 Annual Report (debt discussed starting at page 92, currently at too high levels IMO particularly given the anemic organic revenue growth)
Credit Ratings:
Fitch Affirms The Kraft Heinz Company's IDR at 'BBB-'; Outlook Stable (8/22/17)
Bought at a Total Cost of 99.231 (includes $4 Vanguard Commission)
YTM at TC Then at 3.701%
Current Yield at TC = 3.5271%
C. Bought 2 Conagra 3.2% SU Bonds Maturing on 1/25/23:
FINRA Page: Bond Detail (Prospectus linked)
Issuer: Conagra Brands Inc. (CAG)
CAG Analyst Estimates
Conagra Brands Reports Net Sales And EPS Growth In Its Third Fiscal Quarter
10-Q for the Q/E 2/25/18
Last Bond Offering: $500M of Floating Rate Notes due in 2020 (3 month Libor +.5% per annum)
Credit Ratings:
Fitch Rates Conagra Brands, Inc.'s Approximately $500MM Debt Issuance 'BBB'; Outlook Stable (10/10/17)
Bought at a Total Cost of 98.089
YTM at TC Then at 3.651%
Current Yield at TC = 3.2623%
I have not bought any intermediate term bonds since the purchases discussed above. I have enough in my bond ladder now after selling into the bond rally last summer. I will resume some light buying when the ten year treasury yield exceeds its 2018 high.
I would still want more of a yield spread between 5-9 year maturities and 1-3 years. I want more yield for the duration risk even in notes maturing in 2022-2023, the time period for the bonds discussed above which have YTMs between 3.2% and 3.7%.
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.
B. Bought 2 Kraft Heinz 3.5% SU Bonds Maturing on 7/15/22:
I have one Kraft bond maturing on 7/2/18.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Kraft Heinz Co. (KHC ) - MarketWatch
KHC Analyst Estimates
Kraft Heinz Reports First Quarter 2018 Results ("Net sales were
2017 Annual Report (debt discussed starting at page 92, currently at too high levels IMO particularly given the anemic organic revenue growth)
Credit Ratings:
Fitch Affirms The Kraft Heinz Company's IDR at 'BBB-'; Outlook Stable (8/22/17)
Bought at a Total Cost of 99.231 (includes $4 Vanguard Commission)
YTM at TC Then at 3.701%
Current Yield at TC = 3.5271%
C. Bought 2 Conagra 3.2% SU Bonds Maturing on 1/25/23:
FINRA Page: Bond Detail (Prospectus linked)
Issuer: Conagra Brands Inc. (CAG)
CAG Analyst Estimates
Conagra Brands Reports Net Sales And EPS Growth In Its Third Fiscal Quarter
10-Q for the Q/E 2/25/18
Last Bond Offering: $500M of Floating Rate Notes due in 2020 (3 month Libor +.5% per annum)
Credit Ratings:
Fitch Rates Conagra Brands, Inc.'s Approximately $500MM Debt Issuance 'BBB'; Outlook Stable (10/10/17)
Bought at a Total Cost of 98.089
YTM at TC Then at 3.651%
Current Yield at TC = 3.2623%
I have not bought any intermediate term bonds since the purchases discussed above. I have enough in my bond ladder now after selling into the bond rally last summer. I will resume some light buying when the ten year treasury yield exceeds its 2018 high.
I would still want more of a yield spread between 5-9 year maturities and 1-3 years. I want more yield for the duration risk even in notes maturing in 2022-2023, the time period for the bonds discussed above which have YTMs between 3.2% and 3.7%.
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.
One of my pet peeves with Fidelity is that this broker does not make a price adjustment on the ex dividend date. For example, I am looking at my account page now and TCPC is shown being down 1.36% at $14.49. TCPC is ex dividend today and is up +1.18% with the ex dividend price adjustment.
ReplyDeletehttps://www.marketwatch.com/investing/stock/tcpc
https://finance.yahoo.com/quote/TCPC?p=TCPC
I have to ask why Marketwatch and Yahoo Finance can make that price adjustment and Fidelity is unable or unwilling to do so.
The third party pricing of bonds is another annoyance since the price is generally anywhere between 1% to 3% below the last trade and rarely above it.
++
I am slightly surprised that U.S. interest rates are declining after the ECB served notice that its QE program was coming to an end.
Shares 7-10 Year Treasury Bond ETF (IEF)
$101.64 +$0.21 (+0.21%)
As of 10:27AM EDT
https://finance.yahoo.com/quote/IEF?p=IEF
More surprising to me at least is the decline in the German 10 year bond:
Germany 10 Year Government Bond 0.43% -0.054%
https://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
I wonder what price you would get if you tried to buy or sell TCPC today at Fidelity using a market order.
DeleteCathie: The real time quote provided by Fidelity would be accurate. So if you plugged the TCPC symbol into a quote box, the information would show the correct daily change number adjusted for the ex dividend. The problem is that the list of owned securities shown under "Positions" is not adjusted so I don't have accurate information when I scroll down that long list of owned securities when the security is ex dividend.
DeleteTCPC generally grades in a penny spread between the bid and ask price. If I wanted to buy, and I can not under my small ball purchase restriction, I would enter at a limit order at the current ask price of $8.16, bid at $8.15.
I have several stocks that are ex dividend today in my Fidelity account and none of the stocks are correctly reported on the day change number in my "position" list. (e.g. Fidelity shows IRM down 2.11% in the portfolio section but the stock is ex dividend today and is actually down .42% if I enter the symbol in a quote box)
I made some typos and one mistake in the prior comment trying to do two things at once. I was referring to TCRD (THL Credit) rather than TCPC (TCP Capital). TCPC is also ex dividend today and the quote shows that the stock is up 1.07% at $14.48. My position page shows my 50 share lot to be down $.21 or -1.43%. TCPC like TCRD frequently has a narrow bid/ask spread of 1 cent and that spread is currently at $14.48-$14.49. I can not buy any shares at the current price since that security is under the small ball purchase restriction. which requires that the next purchase be below $13.95. If I was going to buy, and I am not, I would enter a limit order at the ask price.
DeleteThe issue happens for preferred stocks and exchange traded bonds.
For example, VNOPRM is ex dividend today. My 50 share position is shown down 1.29% at $24.975 on my position page. The quote shows that the position is down 1 cent or ,05%.
I understand. I have accounts at both Fidelity and TDAmeritrade, and they both have this issue when looking at positions on ex-dividend dates.
DeleteI don't believe that the intermediate and longer term interest rate decline today was the correct response to the ECB's announcement. The fact that the German 10 year bond declined in yield may have provided a non-fundamental reason for a decline in longer term U.S. treasury rates. But why did the German 10 year decline in yield?
ReplyDeleteIt is also possible that today was in part a flight to safety as the U.S. decision on imposing $50B in new tariffs on China's exports is due on Friday. There is a report that Trump's advisors have given a green light. This is one such report published yesterday:
https://www.marketwatch.com/story/us-may-impose-tariffs-against-china-as-soon-as-friday-2018-06-13
China will retaliate in kind and will likely take other measures adverse to U.S. interests. Soybean sales to China, a major U.S. market, has already pretty much stopped.
https://ca.reuters.com/article/businessNews/idCAKBN1HR03Z-OCABS
https://www.cargill.com/fedbytrade/the-us-and-china-linked-by-trade
Farmers voted for Trump and now he is rewarding them for their fervent support.
The Bond Ghouls are far more worried about a trade war than the Stock Jocks who assign a zero per cent chance to a serious one developing IMO.
And, the Bond Ghouls see the economy weakening into 2019 as the stimulus impacts from the tax cuts wears off and will have more of a lasting negative impact on the budget deficits which are out of control than on the real economy anyway.
The tax savings are mostly being used by public corporations to buy back stock, increase dividends and acquire other companies using cash in part their tax savings which will results in layoffs in corporate "restructurings" down the road. That is pretty clear cut from the data so far. There may be some tickle down into higher wages which is sporadic, but it is impossible to separate other causes for an uptick in wages including a tight labor supply and job jumping.
Interest rates are moving down again this morning. The declines yesterday and today in intermediate and long term interest rates is most likely due to Donald's tariff decision.
DeleteU.S. 10 Year Treasury Note
2.897 -0.041
Last Updated: Jun 15, 2018 at 9:57 a.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
S&P 500 Index
2,772.71 -9.78 -0.35%
The Stock Jocks are sanguine about the outcome and possibly that lack of concern will prove to be warranted.
One consensus view is that the U.S. acceleration in the tariff wars, reminiscent of what happened in 1930, is merely a negotiating tactic.
Cooler heads, like the U.S. trade advisor Peter Navarro, who recently said there was a special place in hell reserved for Justin Trudeau, will work everything out just fine.
In that consensus view among the Stock Jocks, Donald is not a hot head; and his strong arm tactics and negotiating skills, evidenced by his successful 6 bankruptcies, will deliver economic nirvana to U.S. economy as our trading partners roll over and knell before him.
Donald has approved $50B in additional tariffs on China's exports to the U.S. The White House said that the tariffs will be imposed shortly after they are published tomorrow.
ReplyDeletehttps://www.bloomberg.com/news/articles/2018-06-14/trump-has-made-decision-on-china-tariffs-sanders-says
https://www.marketwatch.com/story/trump-oks-around-50-billion-in-tariffs-on-chinese-goods-2018-06-14?mod=bnbh
Mexico is studying $4B in tariffs on U.S. corn and soybean imports.
https://www.reuters.com/article/us-usa-trade-mexico-exclusive/exclusive-mexico-studies-tariffs-on-billions-of-dollars-of-u-s-corn-soy-idUSKBN1JA353
Regarding the selloff in AT&T on Wednesday after the merger decision, there is an article at Seeking Alpha that offers an interesting explanation.
ReplyDelete"Shareholders of TWX will receive $53.75 in cash and approximately $53.75 in stock. According to the press release, "shareholders will receive 1.437 AT&T shares if AT&T's average stock price is below $37.411 at closing and 1.3 AT&T shares if AT&T's average stock price is above $41.349 at closing ("AT&T to Acquire Time Warner)." With T trading around $32.20 per share, this implies that shareholders will receive about $100.02 in value. Shares of TWX have recently traded hands around $98, showing that the spread has significantly narrowed for arbitrageurs. The pricing here clearly explains the rather abnormal volatility seen in the shares of T, as arbitrageurs have simultaneously bought shares of TWX while going short shares of T."
https://seekingalpha.com/article/4181573-ridiculous-sell-and-t-made-bear-finally-turn-bullish
Does this make sense to you? What do you think of the other points made in the article (some of which you have also made here, regarding the debt load)?
Thanks as always for your time and thoughts.
The deal has been completed, as the DOJ said it would not appeal now.
Deletehttp://money.cnn.com/2018/06/14/media/att-time-warner-deal/index.html
I do not engage in arbitrage but it is my understanding that trade frequently involves selling short the acquirer's stock short and buying the target's stock. To unwind that trade when the spread narrows, the arbitrage player would be buying AT & T stock to cover the short and selling TWX.
The arbitrage may have had something to do with the recent price decline, but not going forward. The short sellers would be buying T-not selling.
I would attribute most of the recent decline, which started in earnest after an earnings report released in January, to be based on fundamentals rather than market dynamics. The stock was over $39 in late January. As I recall, the initial response was positive but that turned on a dime.
https://www.marketwatch.com/investing/stock/t/charts
One of the fundamental factors going forward is the sheer size of the debt load which was heavy before the TWX acquisition.
I will be looking to add to my position, currently at 37 shares, using small ball purchase restrictions.
A decline below $30 may precipitate a 50 share purchase and a change to a dividend harvest strategy where I would be looking to sell the entire position in one trade probably at >$35. I would anticipate that this would not occur before receiving at least two more quarterly dividends at a minimum and would require a decent earnings report to change the downward momentum IMO.
It is possible now that a meaningful market downdraft will happen in response to the accelerating tariff war, as it should IMO. That kind of market selloff would take most stocks down, particularly those with weightings in several major indexes like AT & T. At the moment, the Stock Jocks could care less about the imposition of $50B in tariffs on China's exports to the U.S. and the certain retaliation that would follow:
E-Mini S&P 500 Future Sep 2018
2,787.00 -1.50 -0.05%
Last Updated: Jun 14, 2018 at 7:36 p.m. CDT
https://www.marketwatch.com/investing/future/sp%20500%20futures
AT & T is bucking the slight market downdraft today:
DeleteAT&T Inc.
$32.93 +$ 0.415 +1.28%
https://www.marketwatch.com/investing/stock/t
The tendency among some investors would be to attribute the rise to arbitrage selling being off the table since AT & T has now completed the acquisition. There may be some AT & T buying to cover short positions, but it also possible that many short AT & T positions that are part of an arbitrage play are being or will be closed by the receipt of AT & T shares in exchange for the long TWX positions.
Other variables could be influencing the price today including the decline in interest rates which makes bond like stocks more attractive to traders. Another variable is market dynamics that include a multitude of decisions being made on a minute by minute basis that creates supply and demand imbalances causing prices to rise or fall for no fundamental or discoverable reason.
Frequently, people assign one cause to an event when there are multiple causes with no clear cut way to assign relative impacts. That is particularly true among political tribe members when assigning credit or blame to a particular President for economic developments.
For some reason, consumer staple stocks have been outperforming the market for several days now and most of the well know one are showing gains today.
One reason may be the decline in interest rates as dividend yields start to look attractive to more investors.
Another variable could be the decline in crude oil prices that will reduce transportation costs. Or, most of the upward movement in price could be short covering and/or other non-fundamental market dynamics.
Some investors flock to these stocks as part of a flight to safety trade.
General Mills Inc.
$45.16 +$ 0.65 +1.46%
https://www.marketwatch.com/investing/stock/gis
PepsiCo Inc.
$106.26 +$1.125 +1.07%
https://www.marketwatch.com/investing/stock/pep
Fidelity MSCI Consumer Staples Index ETF
$30.98 +0.178 +0.58%
https://www.marketwatch.com/investing/fund/fsta
Moody's did downgrade AT & T's senior unsecured debt to Baa2 from Baa1. In the report, Moody's noted that the debt related to the TWX acquisition, both new debt used to fund the acquisition and the assumption of TWX's existing debt, would bring T's total debt load to over $180B, " making it the most indebted non-government controlled, non-financial rated corporate issuer."
DeleteI do own some AT & T bonds and will not be adding any to my current positions. Of the $6K in principal amount held in my Fidelity account, the first maturity is the 2.3% SU bond on 3/11/2019, then the 2.45% SU bond on 6/30/20 and lastly a 3% SU bond maturing on 2/15/22. I am not currently concerned about AT & T paying off at maturity. However, given my emphasis on capital preservation and the sheer size of the debt load, my current assessment is that I will allow the currently owned bonds to mature without redeploying the proceeds into other AT & T bonds. And if I develop a whiff of reasonable concerns about credit risk, I will lighten up on what I now own.
S & P has also downgraded AT & T senior unsecured debt to BBB from BBB+.
DeleteVerastem, Inc. (VSTM)
ReplyDelete$6.53 +$0.95 (+17.02%)
As of 10:18AM ED
The only public news that I could find is that Verastem sold 7,166,666 shares at $6 per share to funds managed by Consonance Capital. That would be at a premium to yesterday's closing price and probably relieves funding worries for now.
https://www.businesswire.com/news/home/20180614006177/en/
Monday, May 28, 2018
Item # 1.A. Bought 50 VSTM at $4.73 (small cap biotech lottery ticket basket):
https://tennesseeindependent.blogspot.com/2018/05/observations-and-sample-of-recent_28.html
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/06/observations-and-sample-of-recent_18.html