Sunday, July 29, 2018

Observations and Sample of Recent Trades: AX.UN:CA, DEA, SLRC, T

Economy

U.S. economy accelerates to 4.1% real GDP rate in second quarter, fastest in almost 4 years - MarketWatch

The 4.1% number is an inflation adjusted number and represents the first estimate of 2nd quarter GDP growth. The estimate went over 4% due to a decline in the personal consumption inflation from the first quarter's 2.5% rate to 2.2%. Consumer spending accelerated to a 4% annual growth rate. The numbers will be revised two times over the coming weeks. News Release: Gross Domestic Product


The Atlanta Fed's GDP model estimates that the final number for the 2nd quarter will be +3.8%. GDPNow - Federal Reserve Bank of Atlanta


Trump: 'We're going to go a lot higher' than 4.1% GDP growth


Fact checking Trump’s victory lap after the second-quarter GDP report - MarketWatch


Calculated Risk: Top Twenty GDP Quarters since 2000 (prior to this release)


Existing-home sales slide for third-straight month in June, touch 5-month low as housing sputters - MarketWatch

Existing-Home Sales Subside 0.6 Percent in June | www.nar.realtor (2.2% below a year ago)


New-home sales slump in June as housing headwinds increase - MarketWatch




New Home Sales in June-Commerce Department.pdf

The U.S. Housing Market Looks Headed for Its Worst Slowdown in Years

I have predicting that home sales would likely trend down due to a number of headwinds, including prices, the rise in mortgage rates and the diminution of tax incentives as a result of "tax reform". 


Last April Trump declared that trade wars are easy to win. On 7/24, Donald echoed that sentiment with the following tweet, declaring that tariffs are just great even though they are in effect a tax on those who voted for Donald:




It is possible that Trump will succeed to some measurable decree in his tariff wars. The question is whether the longer term benefits will exceed the risks to the U.S. economy when and if there is a positive outcome for the U.S. 


At least the Trump meeting with the EU President Claude Juncker was a positive in that it did not blow up and both sides agreed to a cease fire for as long as negotiations are ongoing. I would call what happened a deal to avert an escalation of trade tensions-for the time being. 


Juncker came well prepared for the meeting with Doofus Don, with “more than a dozen colorful cue cards with simplified explainers” about complex trade topics. Juncker’s secret weapon in trade talks with Trump: color-coded flash cards - MarketWatch Each cue card had at most 3 figures on it so that Donald would not become bored reading the card. It does not look like Juncker wanted to insult the stable genius by bringing along a coloring book.  


We can probably thank the Secretary of the Treasury for restraining Donald's worst instincts, possibly by noting correctly that it would be idiotic politically to impose a 25% tariff on imported automobiles a few weeks before the November election. The EU promise to buy more soybeans and liquid natural gas will prove to be immaterial, since soybeans can be bought cheaper from non-U.S. sources and natural gas transported by pipeline is far cheaper than liquified natural gas transported by tanker across the Atlantic.  


Although Trump started the tariff war with China, which resulted in China retaliating, Donald blames China rather than himself for the tariffs on U.S. farm products: 




This kind of statement is for domestic purposes. Calling China "vicious" will resonate among many U.S. voters, but will not have any beneficial impact on U.S-China trade relations.  


Qualcomm-NXP merger killed by China


Made in China: Trump re-election flags may get burned by his tariffs


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Markets and Market Commentary

Here’s what Goldman sees as the real danger trade could have on stocks - MarketWatch

It is a virtual certainty that the FED will increase the federal funds rate by .25% in September and highly probable that another .25% increase will occur in December.


September 2018 at 92.6% for at least a .25% increase
December 2018: 67.7% for at least two .25 increases
Countdown to FOMC: CME FedWatch Tool

If there are two increases by year end, then the mid-point in the FF rate would be 2.375% on 12/19/18. Remember that the Federal Funds Rat is just for overnight lending. The 3 month T bill closed last Friday at a 2% yield. Daily Treasury Yield Curve Rates The investor can pick up most of 90.2% of the 2.96% ten year treasury yield in the 2.67% two year yield yield. The three year treasury yield of 2.76% is 93.24% of the ten year yield, or just another indication of a flattening yield curve.  


The consensus is that Trump is trying to jawbone the FED into limiting its interest rate increases with this tweet and other statements. 




I view the tweet as setting the stage for blaming others for a slowdown in the economy which is a possibility later this year. The high point in GDP growth will likely be the 2018 second quarter due in part to the tax cuts, consumers taking on more debt to fund personal consumption expenditures and increased purchases to avoid the tariffs. 


Trump and the republicans will not assume any responsibility for a rise in interest rates, even though their policies have contributed to the rise in inflation that is provoking the FED to act. The last CPI report showed that inflation increased by 2.9% over the past twelve months. 


The factors contributing to a rise in inflation include (1) Trump's tariffs which raise the price of imports and provided a price umbrella for domestic manufacturers to raise prices, (2) Trump's sanction on Iran that have contributed to a rise in crude oil prices, (3) the fiscal stimulus resulting from the tax cuts,  and (4) a continued fiscal stimulus due to no restraint on federal spending. 


David Rosenberg issues bubble warning: It will hit bull market: CNBC


ECB keeps rates unchanged amid heightened uncertainties for the global economy


UPDATE 2-Upbeat Roche bests rival Novartis as new drugs fuel growth


+++

Trump:

More GOP Efforts to Undermine the Rule of Law:  


In their ongoing efforts to stymie and discredit the Russia investigation, House GOP members have introduced a resolution to impeach the Deputy Attorney General Rod Rosenstein, a Republican appointed by Trump to this office. 


The impeachment effort is being led by Mark Meadows (R-NC 11th) and Jim Jordan (R-Ohio 4th)House Republicans introduce articles of impeachment against Rod Rosenstein - CBS News 


Other republicans joining this effort to interfere with the Russia investigation are the usual Trump sycophants: 


Andy Biggs of Arizona (5th), Scott Perry of Pennsylvania (4th), Paul Gosar of Arizona (4th)Jody Hice of Georgia (10th), Matt Gaetz of Florida (1st) and Scott DesJarlais of Tennessee (4th)


None of those republicans have to worry about a backlash from constituents.  


One of the impeachment counts involves Rosenstein signing off on the 4th Carter Page FISA warrant based on the bizarre and knowingly false contention that the 1st application, which Rosenstein did not sign, misled the FISA Court on the funding for the Steele memo. The baseless, shameful campaign to discredit Rod Rosenstein - The Washington Post (opinion article written by a retired federal district court judge) 


Rosenstein replied that these republicans "should understand by now, the Department of Justice is not going to be extorted."


Jim Jordan is running to replace Paul Ryan as the House Speaker:  Ohio Republican Rep. Jim Jordan announces bid for House Speaker He would be a good fit for the modern day GOP. Why Jim Jordan is surviving, and thriving, despite Ohio State sexual abuse scrutiny - The Washington Post


Paul Ryan, who is retiring, stated that he did not support the effort to impeach Rosenstein. Ryan opposes Rosenstein impeachment try, likely dooming it - ABC News 


The number three republican in the House, Steve Scalise, supports the effort. Scalise backs impeachment for Deputy Attorney General Rosenstein in fight over Mueller documents The DOJ has turned over more than 800,000 documents to the House republicans.


The democrats in a joint statement called this republican effort a “panicked and dangerous attempt to undermine an ongoing criminal investigation in an effort to protect President Trump as the walls are closing in around him and his associates.”  


+++


Important Omission in the Helsinki News Conference Transcript


White House fails to address omission in Trump-Putin transcript - CNN


The White House omitted from the official transcript of the Helsinki this question directed to Putin and his answer: 


Question: "President Putin, did you want President Trump to win the election?"


Putin Answer: "Yes, I did. Yes, I did. Because he talked about bringing the US-Russia relationship back to normal."


Putin's answer does not exist even though there is video recording it. 


+++


More Trump Attacks on the Press Cheered by the Trumpsters


Trump continued attacking the press in a speech before the Veterans of Foreign Wars national convention, which caused members to boo the press covering the event. 


The VFW later apologized for their members. VFW issues apology after members 'boo' the press after Trump attack 


Trump also made the following statement that is another attack on the press that is fundamentally Orwellian: 


Trump: “What you’re seeing and what you’re reading is not what’s happening. Just stick with us, don’t believe the crap you see from these people, the fake news.” 

People Are Comparing This Trump Quote to George Orwell | TimeTRUMP: 'Remember, what you're seeing and what you're reading is not what's happening' - YouTube

Quote from Orwell's 1984: "The Party told you to reject the evidence of your eyes and ears. It was their final, most essential command."


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Trump Constant Playing to His Base Rather Than Acting Like a President:


In a recent ABC poll, 51% of republicans approved of Donald casting doubt on the unanimous consensus of U.S. intelligence agencies that Russia interfered in the 2016 election. That poll may explain why Trump walked back his walk back on Russian interference. Trump has now walked back his walk-back on U.S. intelligence and Russia - The Washington Post 


Trump will play to his base even when that play serves no purpose other than to throw red meat in their direction and to cause a majority to question his leadership and whether he is even capable of being authentic and truthful. 


It just seems to be that Trump has become more unhinged and unmoored from reality than usual after his Helsinki news conference with Putin. 


Trump and Cohen


Cohen willing to tell Mueller that Trump knew of 2016 Russia meeting, source says: NBCCohen claims Trump knew in advance of 2016 Trump Tower meeting-CNN ("Cohen alleges that he was present, along with several others, when Trump was informed of the Russians' offer by Trump Jr.") 


Trump has denied knowing about the meeting in advance. Don Jr. testified under oath that Donald did not know. Trump repeated his denial last Friday: 




Trump disputes Cohen claim he knew of Trump Tower meeting


It is hard for me to imagine three people having less credibility.  Someone else with credibility will be needed other than Cohen to testify that Donald knew about the meeting beforehand and wanted his team to meet with the Russians. That testimony could come from someone else at the meeting whose credibility is not tainted or a person who was told about the discussion by one of the participants.


Showboat Rudy Giuliani called Cohen a liar who has been lying his entire life during an interview on 7/26. On 5/6/18, Showboat Rudy said that Cohen is "an honest, honorable lawyer". Rudy Giuliani Defends Donald Trump Against Michael Cohen's Trump Tower Meeting Allegations


So Cohen secretly recorded at least one conversation with Trump.      


Audio expert analyzes secret Trump-Cohen tape - CNN


Four important points that arise from the Trump-Cohen recording


How Michael Cohen’s Audio Clip Unraveled Trump’s False Statements


The recorded conversation that we know about now involved Donald reimbursing American Media Inc. for its $150,000 hush payment to playmate Karen McDougal who claimed to have a nearly year long affair with Cheating Don in 2006. Karen McDougal to Melania Trump: I’m sorry - YouTube


The affair allegedly started shortly after Melania gave birth to Barron Trump. The taped conversation occurred shortly before the 2016 election.


The Trump campaign has previously denied that Lying Don had any knowledge of the hush payment made by Trump's friend David Packer through AMI to McDougal. Donald Trump, the Playboy Model Karen McDougal, and a System for Concealing Infidelity | The New Yorker No payment was made by Donald to reimburse Packer. 


The "David" referenced in the recording is most likely David Packer. The reason for buying the rights to McDougal's story, as mentioned by Donald on the tape, was in case Packer died, "hit by a truck", and the new AMI owner decided to publicly release the story. Allen Weisselberg, the chief financial officer for the Trump organization, is also mentioned on the tape.  Weisselberg has reportedly been subpoenaed to testify in the Cohen probe. 
WSJ: Top Trump Organization official subpoenaed to testify in Michael Cohen probe - CNN 


Giuliani claimed before the tape was released that Trump said "don't pay with cash". Giuliani slams 'outrageous' Cohen-Trump tape leak, claims recording ends at key point Trump clearly said "pay with cash". An 
audio expert concluded that Trump said "I'll pay in cash" and Cohen quickly replied "no" several times. Giuliani now claims that if the tape had not ended, the remaining conversation would be exculpatory.  


When the dust clears, I believe the proof will show that no payment was made to AMI since Packer assured Cohen or Donald that he would kill the story and there was only two months left until the election. This raises a question, which is not answered by the tape, whether the AMI payment was a non-disclosed campaign contribution. 


Personally, I never doubted that Donald has repeatedly cheated on his wives and that he has lied repeatedly when denying the affairs. 


I had no doubt that Bill Clinton cheated on Hillary with multiple women and lied about it. 


It is not much of a stretch to find that a man who cheats will lie about it until caught with proof that can not be denied without looking preposterous. 


I would be shocked to find out that either Daddy Bush or Bush Jr cheated on their wives and even more shocked if Obama cheated on Michelle. That is just the way it is.


Cheating Don claims that Cohen may have broke the law when recording their conversations and once again accused the FBI of breaking into Cohen's office.



The FBI had a warrant to search Cohen's office. 

Trump had called the court approved search warrant "an attack on our country in a true sense" last April, which was when he first asserted  the knowingly false narrative that the FBI broke into the Cohen's office. 


Trump will repeat a knowingly false statement over and over again since repetition oddly makes the gullible and weak minded more likely to believe that the demonstrably false statement is true. 


New York requires only one party to a conversation to consent to a recording. New York Recording Law | Digital Media Law Project The WSJ reported that the conversation happened when both parties were in NY and in the same room. There would consequently be no basis for Trump claiming that the recording was illegal. 


In some states, and Tennessee would be one, a lawyer who taped a conversation without the client's consent could be disciplined but that may not be the case in NY. In other words, an act can be unethical for a lawyer without being illegal. Tennessee is also a one party consent state: Tennessee Recording Law | Digital Media Law Project.


The Special Master Barbara Jones, who reviewed the documents seized by the FBI from Cohen, had ruled that the tape was privileged. 


Trump, who is complaining about the recording, waived the attorney client privilege which allows the prosecutors now to review it and possibly use it in a public manner (at trial or as part of a pleading). Trump team waived 'privilege' to release Michael Cohen's tape: SourceTrump attorneys waive privilege on secret recording about ex-Playmate payment The waiver of the privilege for that conversation could also result in an implied waiver of any other conversation on the same issue (the at-issue exception to the attorney client privilege)  


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Donald and the Evangelicals


Donald is the candidate for white evangelicals. Trump's support among white evangelicals is currently at 77% and over 80% among Southern Baptists. 


Evangelicals will still support Trump no matter how many lies he tells or how many affairs that he had during his three marriages. They deal with those moral issues by (1) believing Donald is honest and the media is lying; (2) every woman who claims to have had an extramarital affair is lying as are all of the women who claimed that Donald sexually assaulted them; and/or (3) even if some of the foregoing claims are true, and all are viewed with suspicion since they are aimed at a fellow tribe member rather than a democrat, Donald is promoting Christian values which primarily means his effort to overturn Roe v. Wade.  


It can be disconcerting to listen to white Christian evangelicals voice their opinions, as they did to a reporter who wrote this article: 
Judgment days: In a small Alabama town, an evangelical congregation reckons with God, President Trump and the meaning of morality  


I am not referring to their opinions about abortion or voting against a candidate who is pro-choice. I understand that position and would not criticize it when sincerely held which is  almost invariably the case. Donald is not sincere about his current position. Pro-life voters are probably the largest single issue voters in U.S. elections.   


Instead, I am referring to thoughts like (1) "Obama was acting on the behest of the Islamic nation"; (2) Obama "carried a Koran and it was not for literary purposes"; (3) God picked Donald Trump to be President; (4) Obama and Hillary were sent by Satan to rule us; (5) the time of Rosa Parks (who refused to sit in the back of a bus) was a "scary time"; (6) "we are in a religious war"; (7) "it is about the survival of the Christian nation"; (8) "I think they are trying to frame" Trump; and (9) "we are moving toward the annihilations of Christians". Warped is a far too kind of a description for those sentiments, but they are deeply and sincerely held in large swaths of America. The persons interviewed were Southern Baptists. I suspect they were on their best behavior for a WP reporter, holding back some thoughts and beliefs. 


It is difficult for me to wrap my head around the idea that Donald is God's choice for President. 


I am also curious about this religious war against Christians which is apparently designed to annihilate them. 


When I leave my house, and drive down Franklin Road toward Brentwood, I pass 7 churches over about a 3 mile stretch and one of them looks like a small junior college. I can not see any war taking place there, but my eyes may be deceiving me. Concord Rd - Google Maps Donald did say that we can no longer believe what we see with our own eyes. 


What can you say to the assertion that Donald was selected by God to be President and Obama is both a Muslim and the Anti-Christ? 
Generally, when speaking or listening to Trumpsters, conclusions are stated as facts and the conclusions can not be questioned with facts but only reinforced with reality creations.   


Southern Baptists have a long history of being White Nationalists and Supremists. It was not until 2017 that they managed to pass a resolution denouncing White Supremacist ideology. A Resolution Against White Supremacy Causes Chaos at the Southern Baptist Convention - The AtlanticSouthern Baptist Convention Votes To Condemn White Supremacy : The Two-Way : NPR 


I am reading this book on SCRIBD: The Evangelicals: The Struggle to Shape America So far, I have not read anything that I did not already know. In the First Great Awakening, the preacher Jonathan Edwards had some sermons (e.g. Sinners in the Hands of an Angry God) that reminded me of Jim Bill, the first Church of Christ preacher that I can recall. Yes we are all going to hell, fire and brimstone coming out of the ying yang.  


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Trump and Iran


Trump threatened Iran in this all caps tirade that was in response to Iran's President saying that peace with Iran would be the mother of all peaces and a war with Iran would be the mother of all wars: 



This is the exact quote that precipitated Donald's response: “America should know that peace with Iran is the mother of all peace, and war with Iran is the mother of all wars.”

The Iranian Foreign Minister responded to Trump's tweet with this one: 


“COLOR US UNIMPRESSED: the world heard even harsher bluster a few months ago. And Iranians have heard them — albeit more civilized ones — for forty years. We’ve been around for millennia and seen fall of empires, including our own, which lasted more than the life of some countries. BE CAUTIOUS.”


The comment from Iran's President, when viewed in its entirety by a non-mentally deranged person, would be that Iran would fight back fiercely if the U.S. launched an Iraq style invasion.  


Iran warns of "countermeasures" in volley of threats after Donald Trump sends Twitter warning to Hassan Rouhani - CBS News


It looks like Donald's North Korea game plan is being applied to Iran. So what happens when another vague statement that Iran will fight if attack is made or when an actual threat is made against the U.S.? The consequences referenced by the Duck suggest nuclear annihilation would be the U.S. response.  


It is possible that Donald will initiate a military conflict with Iran and then blame Iran of course for starting it. 


One possible avenue for this conflict involves the ongoing U.S. effort to prevent other countries from buying Iran's oil. 


If successful then Iran may attempt to block tanker traffic in the Straight of Hormuz which would disrupt oil exports to the U.S. The U.S. would then react using force to bust the blockade. Iran plans to respond in kind if U.S. blocks oil exports | Reuters 


Iran responds to the military attack in a variety of non-conventional ways including terrorists attacks on U.S. soil, cyberattacks and/or other measures that do not involve a direct military confrontation with the U.S.. Who started the war in that scenario? 


+++


Trump- Just Turn Everything on Its Head




Well, what can you say other than this tweet represents a typical Trump effort to deflect deserved criticism leveled at him by making something up that has zero factual support. Lying works for Lying Don so there is no reason for him to stop. So no President has been tougher on Russia than Donald?     


++++++++


Trump administration officials dismissed benefits of national monuments - The Washington Post


Canadian pot investors are being banned from entering the U.S. - CBS News (even though the investments are legal)


Why Jeff Sessions said 'lock her up' -- and why it matters - CNN (the lock her up chant continues among the Trumpsters) The Trumpster chant of course refers to Hillary and can be heard at all of Donald's rallies. It is consistent with their deeply authoritarian cores. The GOP is not a conservative party but a reactionary one with trending authoritarian tendencies.  


Trump Wants to Delay Putin Meeting Until ‘After the Russia Witch Hunt’ The delay had nothing to do with the possible negative political repercussions of another meeting shortly before the November election. 


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1.  Equity REIT Common and Preferred Stock Basket Strategy:


A. Bought 100 AX.UN at C$12.9 (C$1 IB Commission):




Quote: Artis Real Estate Investment Trust (Canada: Toronto)


Closing Price Last Friday: C$12.64


Distribution: Monthly at C$.09 (C$1.08 annually)


Artis Real Estate Investment Trust Announces Monthly Cash Distribution


Yield at C$12.9 = 8.37%


Next Ex Dividend Date: 7/30/18


The same ordinary shares trade on the U.S. pink sheet exchange under the ARESF.


I recently bought 100 ARESF shares and have nothing to add to that prior discussion. Item # 1.A. $9.98 (7/9/18 Post) 


B. Bought 50 DEA at $19.2 and 10 at $18.87-Used Commission Free Trades



2 Year History This Account
My commission free trades in my Schwab account will run out in a few days, so I am buying some income generating stocks that have fallen back into my buy range. 

These two lots were bought in my Schwab account where my commission free trades will expire early next month. 


Quote: Easterly Government Properties Inc. (DEA)


Closing Price Last Friday: DEA $18.85 -$0.48 -2.48% 


Website: Easterly Government Properties, Inc.


Properties as of 3/31/18:




Properties Map


SEC Filings


10-Q for the Q/E 3/31/18 (debt listed at page 10)


Dividend: Quarterly at $.26 per share


Dividends | Easterly Government Properties, Inc.


Average Cost Per Share (60 shares) = $19.143


Dividend Yield at $19.143 = 5.438%%


Last Ex Dividend Date: 6/8/18


2017 Dividend Tax Characteristics:



The ROC component reduces the tax cost basis and is not taxed as a dividend. Since none of the dividend is classified as qualified, it is at least possible to turn the ROC dividend component into a long term capital gain which would be better than the highest marginal tax rate for ordinary income for higher income taxpayers. ROC classification is irrelevant in a U.S. retirement account. 

For an equity REIT's dividend, ROC is created by the dividend exceeding GAAP net income.   


Prior Trades


Item 1.D. Sold 10 DEA at $21.44-Used Commission Free Trade (5/17/18 Post)(profit snapshot = $22.59)-Item # 1.A. Bought 10 DEA at $19.18 (3/8/18 Post) 


Item 5. A. Sold 50 DEA at $21.59-Used Commission Free Trade (12/11/17 Post)(profit snapshot =$97.85)-Item # 3.A.  Bought 50 DEA $19.64 (8/19/17 Post)


This is small ball within the Equity REIT basket strategy.


Last Earnings ReportEasterly Government Properties Reports First Quarter 2018 Results


Unlike most equity REITs, DEA makes what I would consider a proper disclosure of  free cash flow. 


Personally, I view most reports as providing inadequate free cash flow numbers, meaning basically cash that is available for distribution.


Only a few REITs breakout routine maintenance expenditures as a deduction from FFO to arrive at FAD for example. Money spent to maintain the property is not cash available for distribution


DEA makes adjustments to funds from operation that provide a better picture of funds available for distribution ("FAD") compared to most other REITs. The result is that DEA's FAD number is not comparable to other REITs that fail to make those adjustments. 


DEA reported FFO per share at $.31 which appears to provide good coverage for the quarterly dividend. The company then adjusts that number down to a AFFO of $.26 per share. One of the adjustments is to remove non-cash revenue created by the straight line rent accounting convention. 


DEA then calculates cash available for distribution which comes to $.221 per share. Among the cash expenditures deducted from the AFFO number are "acquisition costs", "maintenance capital expenditures", "contractual tenant improvements" and "leasing related expenditures". 




For this quarter, the dividend is not covered by FAD but was covered by AFFO and FFO.  Some deductions from the AFFO calculation to arrive at FAD were materially larger in the 2018 first quarter compared to the 2017 first quarter. 


Debt







Sourced: Pages 23-24 10-Q for the Q/E 3/31/18


Recent News Since Last Discussion


Easterly Government Properties Completes Acquisition of 90,085 SF Department of Veterans Affairs Outpatient Facility in San Jose, California 


Easterly Government Properties Announces Pricing of Common Stock Offering (6/19/18 Press Release)(public offering price was at $19.25); Prospectus


Prior to that stock offering, DEA sold 4.3M shares, plus the greenshoe, at $19 back in March 2017: Prospectus


The initial public offering was in February 2015 at $15 per share. Prospectus 


Note that DEA also has an ATM program: Prospectus


C. Bought 10 DEA at $18.88-Used Fidelity Commission Free Trade




This starts a small ball buying program in this account. Each subsequent purchase has to be a the lowest price in the chain.  I have an abundance of free trades in this account that expire in 2020.  


2. Income Generation-BDCs

A. Bought 50 SLRC at $20.82-Used Commission Free Trade





Quote: Solar Capital Ltd. (SLRC)

Solar Capital Filings with the SEC

Closing Price Last Friday: SLRC $21.19 +$0.36 +1.73% 


Website: Home


2017 Annual Report Form 10-K (discussion of risk factors starts at page 24 and ends at page 52)


The simple goal for any BDC purchase is to collect some dividends and to escape with whatever profit is available.


SLRC Interactive Stock Chart:


Current Dividend: Quarterly at $.41 per share


The quarterly dividend was cut from $.6 to $.4 per share in 2013. This occurred after received $237M in proceeds after monetizing three investments. News Release


Dividend Yield at $20.82 = 7.877%


2017 Dividend Tax Treatment: No part of the dividend was characterized  as qualified: 




Prior Discussions


Item # 2 Bought 50 SLRC at $18.38 (11/24/14) 


I sold that lot for a $18.95 profit and then bought the lot back at $16.77: Item # 1 Update For Portfolio Positioning And Management As Of 10/1/15 - South Gent | Seeking Alpha


I discussed selling that lot for a $43.98 profit after receiving one quarterly dividend in this post: Update For Portfolio Positioning And Management As Of 3/13/16 - South Gent | Seeking Alpha I would have been better off keeping it. 


Net Asset Value Per Share History: Stable for a BDC


Sourced from 10-Q Filings


3/31/18: $21.87

9/30/17: $21.80
9/30/16: $21.72
9/30/15: $21.52
9/30/14: $22.34
9/30/13: $22.25
9/30/12: $22.7
9/30/11: $21.2
3/31/2010: $22.18 (first 10-Q)

Initial Public Offering February 2010: Prospectus (priced at $18.5 to the public and $17.205 to the underwriters)


Public Stock Offerings


In January 2013, the company priced a common stock offering to the public at $24.4 per share: Prospectus Supplement, see also discussion at pages 76-77 in 2017 Form 10-K.


I view it as a positive that this BDC has avoided a stock offering since January 2013. Most externally managed BDCs have repeatedly sold stock at below net asset value per share.


Earnings Report for the Q/E 3/31/18


Solar Capital Ltd. Announces Quarter Ended March 31, 2018 Financial Results; Net Investment Income Per Share of $0.45; Declares Quarterly Distribution of $0.41 Per Share for Q2, 2018  


"At March 31, 2018, 98.2% of the Company’s Comprehensive Investment Portfolio was invested in senior secured loans, comprised of 78.9% first lien senior secured loans and approximately 19.3% second lien senior secured loans. Year over year, second lien loan exposure of the Comprehensive Investment Portfolio declined by approximately 40%, as the Company has focused its origination efforts on underwriting first lien and stretch first lien loans to upper middle market sponsor-owned companies as well as commercial finance investments." (emphasis added)





Note that 80.5% of the investments are in floating rate loans. 

"As a reminder, the Company’s Board of Directors recently approved a voluntary 25 basis point permanent reduction in the investment advisor’s management fee, effective January 1, 2018."


SLRC Senior Unsecured Bonds:    


I have also traded a SLRC senior unsecured bond that was called early by the company at its $25 par value. South Gent's Comment Blog # 6: Bought 50 SLRA at $24.45. I allowed the issuer to redeem my position at par plus accrued and unpaid interest which occurred in 1 partial call and than a full call.  


Solar Capital Ltd. to Redeem Remaining $75 Million of 6.75% Senior Unsecured Notes due 2042; Increases Expected 2018 Net Investment Income by $0.04 Per ShareProspectus Supplement


That bond was replaced with a $1K par value 4.5% senior unsecured bond maturing in 2023: Solar Capital Ltd. Prices Public Offering of $75 Million 4.50% Notes Due 2023 

3. Short Term Bond/CD Ladder Basket Strategy

August 2018 Maturities

SU = Senior Unsecured Bond
MI = Monthly Interest Payments

2 Wells Fargo 1.4% CDs MI 8/1/18 (18 Month CD)
2 Southeast Bank 1.8% CDs 8/8/18 (2 month CD)
2 Live Oak 1.65% CDs MI 8/9 (6 Month CD)
1 Deere 1.75% SU 8/10 (bought 2/15/18)
2 Lakeside Bank 1.4% CDs MI 8/13 (10 Month CD)
2 Whitney Bank 1.7% CDs 8/14 (6 Month CD)
1 Treasury 1% 8/15
1 First N.A. 1.6% CD MI 8/15 (6 Month)
2 Homestreet 1.7% CDs MI 8/16 (3 Month)
2 Goldman Sachs BK 1.5% CDs 8/16 (1 Year CDs)
4 Wells Fargo 1.5% CDs MI 8/20 (1 Year CDs)
1 Bank of West 1.45% CD 8/21 (9 Month CD)
2 Seacoast Bank 1.45% CDs MI 8/23 (1 Year CDs) 
2 Compass Bank 1.45% CDs 9/24 (9 Month CDs)
1 Santander U.K. 2% SU 8/24 (bought December 2016)
2 Bank of Montreal 1.35% SU 8/28 (bought January 2018)
2 Pacific Premier 1.4% CDs MI 8/29 (9 Month CDs)
1 Goldman Sachs 1.45% CD 8/29 (9 month CD)
2 Bank of India 1.8% CDs 8/29 (1 month CD)
1 Compass BK 1.5% CD 8/30 (9 month CD)
2 Citizens BK 1.8% CDs 8/30 (3 month CDs)
2 Pinnacle BK  1.4% CDs MI 8/30/18 (1 Year CDs)
4 Treasury 1.5% 8/31 

Total = $43K

I am not sure how I am going to redeploy the proceeds from those maturing bonds and CDs. Pending a decision on redeployment, I have slowed down my purchases of short term fixed coupon securities. 


CD and treasury bill rates for the next 6 to 9 months are not attractive in light of rising inflation.


For 2019, I will reduce the average monthly dollar amounts received from maturing bonds and CDs from $40K to $50K to $30K to $40K 


For the maturing Schwab CDs, I am leaning toward buying short term corporate bonds in 10 bond lots. I have to buy 10 at that broker to receive a $1 per bond commission. 


Since my Schwab commission free trades will expire in a few days, I am not likely to buy commissionable stock exchange traded securities using that broker since I have an abundance of free trades at Fidelity and IB charges $1 for $100 shares vs. Schwab at $4.95. 


Schwab does offer a variety of commission free ETFs to all of its customers. 


A. Bought 2 Legg Mason 2.7% SU Bonds Maturing on 7/15/19:




This bond just made its semi-annual interest payment so the accrued interest payable to the seller was just $.75.


FINRA Page: Bond Detail (prospectus linked)


Issuer: Legg Mason Inc. (LM)


LM Analyst Estimates

LM SEC Filings
LM Annual Report
LM Earnings Report for the Q/E 3/31/18

Credit Ratings:




Bought at a Total Cost of 99.962

YTM at TC Then at 2.739%
Current Yield at TC = 2.701%

The one year treasury bill closed at on the day of purchase.  Daily Treasury Yield Curve Rates


B. Bought 1 Treasury 1.375% Coupon Maturing on 9/30/19:

YTM: 2.45%



C. Bought 1 BP Capital 2.237% SU Bond Maturing on 5/10/19




The market for BP Capital bonds frequently allows for 1 bond trades at either the best offer/ask price or close to it.  


Finra Page: Bond Detail (prospectus linked)


Credit Ratings: 

Moody's at A1
Fitch Affirms BP/BP Capital Markets at 'A'; Outlook Stable (5/24/18)

Issuer: Wholly owned subsidiary of BP PLC who guarantees the notes 



BP Analyst Estimates 

Bought at a Total Cost of 99.887

YTM at TC Then at 2.38%
Current Yield at TC =  2.2395%

Fidelity CD Rates With May 2018 Maturities as of 7/23/18:  


4. Small Ball


A. Sold 10 ONB at $19.66


Quote: Old National Bancorp (ONB)


Profit Snapshot: $29.18 




Item # 1.B. Bought 10 ONB at $16.75 (2/15/18 Post)


Closing Price Last Friday: ONB $19.475 -$0.275 -1.39% 


Dividend: Quarterly at $.13 per share


Old National Bank Dividend History


Dividend History: Viewed Negatively (the quarterly rate was slashed from $.23 to $.07 in 2009 and the raises since that time are still $.10 below the quarterly rate paid in the 2009 first quarter)


Last Earnings Report: Q/E 6/30/18


Old National reports 2nd quarter net income of $44.0 million, a 13.2% increase from a year ago


I discussed this earnings report in a prior comment.


ONB Trading Profits to Date: $786.29 


Prior Discussions:


Item 2.A. Eliminated ONB-Sold 50 Shares at $18.55 (2/27/17 Post)(profit snapshot=$312.97)


Item # 2. Averaged Down: Bought 50 ONB at $12.25-Update For Regional Bank Basket As Of 1/19/16 - South Gent | Seeking Alpha


Item # 2. Bought 50 ONB at $13.1: Update For Regional Bank Basket Strategy As Of 1/6/16 - South Gent | Seeking Alpha


Item # 5. Bought in Roth IRA: 50 ONB at $11.38:Update For Regional Bank Basket Strategy As Of 1/28/16 - South Gent | Seeking Alpha






Comparative Data Charts at St. Louis Federal Reserve


Net Percentage of Domestic Banks Tightening Standards for Commercial and Industrial Loans to Small Firms-St. Louis Fed

B. Bought 10 AT & T at $30.17-Used Commission Free Trade:




Closing Price Day of Trade (7/25/18): T $30.25 -1.43 -4.51% 


Closing Price Last Friday (7/27): T $31.08 +$0.73 +2.41% 


Investors reacted negatively to the earnings report released on 7/24 which is understandable though probably an overreaction. The non-Time Warner businesses, particularly the Direct TV entertainment division, are having issues. The stock established a new 52 week low at $30.13 on 7/24 with 96.358+M shares traded, well above the average volume of 44.144M shares. 


Current Position: 52 shares


Average Cost Per Share = $32.69


Purchase Restriction: Small Ball Rule (currently averaging down in 10 share lots; each purchase has to be at the lowest price in the chain)


Dividend Yield at Total Average Cost = 6.12%


AT&T Historical Dividends


Dividend Reinvestment: Yes at below $35


On the bright side, sort of, the next dividend payment which will occur on 8/1/18 will be at a low price.


Chart: Major Bear Pattern


Recent Substantive DiscussionItem # 1.B. Bought 5 AT & T at $31.14 (7/25/18 Post)


I have nothing further to add to that recent discussion. 

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

26 comments:

  1. "God picked Donald Trump to be President"

    Donald Trump is indeed President. If one believes in the omnipotence of God, it is therefore correct and true to say that "God picked Donald Trump to be President."

    I hope that you're not saying that all of us who believe in the omnipotence of God are "warped".

    ReplyDelete
    Replies
    1. David: If your comment is not dripping with sarcasm, and it hard for me to tell one way or the other, then I think that you have overlooked the doctrine of "free will". Omnipotence does not equal interference in human affairs.

      There is a line of Christian thought that has Americans and Israelis as the God's chosen people and our leaders being God's vessels.

      This is only the case when God chooses a republican.

      It is apparently not the case when God allows Satan to choose a Democrat. The odd thing about the Donald as God's vessel theory is that apparently some of the ten commandments do not apply.

      Another claim is that Donald was chosen by God as the modern day Cyrus, the ancient
      Persian king chosen by God to “navigate in chaos.”

      https://www.vox.com/identities/2018/3/5/16796892/trump-cyrus-christian-right-bible-cbn-evangelical-propaganda

      I suppose that makes some sense to many but it is hard for me to look at Donald as a navigator of chaos as opposed to a creator of chaos.

      Delete
  2. My comment contains no sarcasm at all, just a re-presentation of the "problem of evil" well known to students of theology.

    I haven't overlooked the doctrine of free will; however, your version of it assumes that when free will and God's omnipotence are opposed, free will somehow supervenes over God's omnipotence.

    That is indeed one of the traditional solutions in the Talmud, but far from being the only solution. Many Jews (including myself) reject it, as a theologically impossible limitation on God's omnipotence. From what I have incidentally heard, John Calvin and the pure Calvinists also rejected it, for the same reason. So did Rabbi Akiva among the founders of Rabbinic Judaism, and in a very different direction R. Hisdai Crescas among the medieval Jewish philosophers. And Spinoza later.

    In any case, the free-will solution solves only certain formulations of the problem. There is injustice and abstract (if not moral) evil in the world with no dependence on human activity. For example, when a child is born with a disease causing great and terrible suffering, a disease which could not have been foreseen, how can this be reconciled with a God who is both omnipotent and good? Or horrible suffering caused by unforeseeable natural disasters?

    It is this stronger formulation of the question which forms the basis of the Book of Job, for example, as you have undoubtedly noticed.

    And once one has accepted one of the solutions not dependent on free will, whether that of the Book of Job, or of R. Akiva, or Maimonides, or R. Hisdai Crescas, or Calvin, or another, Occam's Razor suggests that we go back and apply it even to the election of very faulted presidents.

    So indeed, according to at least Crescas' and Calvin's formulations, and probably Maimonides' formulation, Trump's election was indeed chosen by God, as is the birth of suffering children under circumstances when noone is at fault.

    ReplyDelete
    Replies
    1. David: You are certainly entitled of course to your opinion that God has chosen Donald to be President and I have no desire to argue with anyone who believes that is the case.

      I would just note that this issue of omnipotence and free will has resulted in Christians tying themselves up in knots for centuries which is summarized in part by your observation about reconciling God's omnipotence with the belief that God is good.

      I prefer to avoid theoretical and unnecessary knots that are contradicted by what I have observed over my life.

      Omnipotence doe not mean interference in human affairs.

      God's omnipotence does not mean that Donald's election was determined by God, rather than just known by God in advance which is a proposition that I would accept since time is applicable to humans rather than a Supreme Being.

      Rather than being determined by God, the decision to elect Donald was made by 62+ million Americans when casting a ballot.

      In my opinion, your view of omnipotence and that of the Southern Baptists referenced in my post subsumes and eliminates free will and is a convenient way to avoid individual responsibility for one's actions.

      Delete
    2. This conversation proves why we need to ABOLISH church from State. Stop the prayers before opening Congress is a good start!

      Delete
    3. The origins of separating the church and state can be traced to the founding fathers recognition that the state had been involved in establishing religious beliefs and practices (e.g. the Church of England). The Anglican church in America in the 1700s was an example.

      Evangelicals rebelled against the practice and supported the non-involvement of the state in defining religious beliefs and practices. That belief resulted in a a vast splintering of denominations in America throughout the 18th and 19th centuries which is continuing.

      It is only in recent times that many evangelicals started to beat down the separation of church and state, with the primary emphasis being religious instruction in the public schools rather than limiting that instruction to churches or other non-governmentally promoted and sanctioned gatherings. I would call that movement to be one more appropriate in a theocracy as practiced in Iran, the Taliban or in madrassas. I view this trend to be more of a modern phenomenon that is inconsistent with American traditions and evangelical beliefs in prior times.

      Delete
    4. We had a fringe radical faction of these assholes quietly take over the school board in Vista CA nearby, it wasn't noticed until they ordered their own brand of science books! google it. What a fiasco.

      Delete
    5. BTW, it's the same type cult that doesn't believe in immunizations. Look at California map of the locations of disease followed by localities where these quack doctors were pushing this agenda a few yrs back. (they don't even put mercury in them anymore)

      Delete
  3. AT & T is continuing its rally that started last Friday.

    AT&T Inc. (T)
    $32.03 +$0.95 (+3.04%)
    As of 10:00AM EDT
    https://www.marketwatch.com/investing/stock/t

    I mentioned in this post buying a 10 share lot at $30.17 (Item # 4.B), which was just above the 52 week low of $30.13 hit that same day (7/25/18).

    https://finance.yahoo.com/quote/T/history?p=T

    Suntrust cut its price target today to $33 from $35. I have not seen any other news.

    While the cause of the two day price rise is unknowable, the price rise is probably just a counter reaction to the steep drop, as short sellers cover their positions ( based on a perception of limited downside potential at $30) and bottom fishing by value investors.

    ReplyDelete
  4. Vodafone (VOD)
    $24.62 +0.805 +3.38%
    Last Updated: Jul 30, 2018 at 11:30 a.m. EDT

    https://www.bloomberg.com/news/articles/2018-07-30/vodafone-surges-on-report-activist-elliott-took-stake-in-carrier

    ++

    First Hawaiian Inc. (FHB)
    $28.14 +0.02 +0.07%
    Last Updated: Jul 30, 2018 at 11:31 a.m. EDT
    https://www.marketwatch.com/investing/stock/fhb

    FHB is reacting better today than the last time there was a public offering of FHB shares owned by BNP Paribas. BNP's ongoing reduction in its ownership position has been an overhang for FHB's stock price.

    Today, BNP sold 20M FHB shares at a public offering price of $27.9. Up to an additional 3 million shares can be bought by the underwriters. If that overallotment option is exercised in full, which I would expect, then BNP's ownership stake would be reduced to 31%.

    FHB bought $50M of this offering at the same price paid by the underwriters which would be at a discount to that $27.9 offering price.

    https://globenewswire.com/news-release/2018/07/30/1543959/0/en/First-Hawaiian-Inc-Announces-Pricing-of-Secondary-Common-Stock-Offering.html

    In a down market today, the regional bank ETF KRE is managing to hold onto a slight gain so far:

    SPDR S&P Regional Banking ETF
    $62.17 +$0.03 +0.05
    Last Updated: Jul 30, 2018 at 11:41 a.m. EDT
    https://www.marketwatch.com/investing/fund/kre

    The ten year treasury is continuing its uptrend today:
    2.971% +0.016%
    Last Updated: Jul 30, 2018 11:40 a.m. EDT
    https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx

    ReplyDelete
  5. In my Fidelity account, I received $4K in redemption proceeds from two maturing CDs. One of those was a Wells Fargo 13 month CD that paid monthly interest at 1.45%.

    After spending a few minutes looking at reinvestment options with 2019 maturities, I decided to pass on all of them and instead bought 1 KeyCorp 2.9% SU bond maturing on 9/15/2020 and 1 Wells Fargo 2.15% SU bond maturing on 1/30/2020.

    The KEY bond was bought at a total cost of 99.411 which produces a YTM of 3.188%.

    http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C713252&symbol=KEY4287458

    The two year treasury is currently trading around a 2.66% yield.
    https://www.marketwatch.com/investing/bond/tmubmusd02y?countrycode=bx

    The Wells Fargo bond maturing in January 2020 or about 9 months earlier than the KEY bond was bought at a total cost of 98.814 which creates a YTM of 2.966%. Based on the purchase price at 98.714, the YTM was 3.035%. Even a $1 commission cuts down the YTM noticeably when the maturity is that short.

    http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C624385&symbol=WFC4206227

    That is my third one bond purchase of that WFC bond and the purchase was an average down from my last purchase.

    ReplyDelete
    Replies
    1. Are the CD rates based on the week's Treasury auction? what day if so. Rates on 2-3 mo CDs are down .10 while 10-yr is up .15ish.

      Delete
    2. I think the banks are resisting matching the short term treasury bill rates since their NIMs are being squeezed by rising deposit costs. So in a loose sense, they will be based on the short term treasury bill rates but will generally be priced to yield below the comparable maturity treasury yields.

      In the secondary market, which will be very close to the auction today, the 3 month treasury bill is at 2% and the 6 month bill is at 2.2%.

      https://www.marketwatch.com/investing/bond/tmubmusd03m?countrycode=bx

      https://www.marketwatch.com/investing/bond/tmubmusd06m?countrycode=bx

      The three and six month treasury bills are auctioned on every Monday. Individual investors can buy them directly from the Treasury through a Treasury Direct account or through a broker. You will get a higher yield that way than trying to buy a small lot in the secondary market.

      When buying from the treasury at auction, a non-competitive bid is submitted and you receive whatever the high yield ends up being.

      The auction today produced a 2% yield for the 3 month.

      https://www.treasurydirect.gov/instit/annceresult/press/preanre/2018/R_20180730_1.pdf

      The difference between the price paid at auction and the par value is the interest which is taxed when the bond matures.

      https://www.treasurydirect.gov/indiv/products/prod_tbills_glance.htm

      At Fidelity, a CD maturing on 11/5/18 from BNY has a 1.85% coupon. So a buyer of that CD loses about .15% by buying that CD rather than participating in today's 3 month treasury bill auction.

      The 3 month treasury bill auctioned on 7/23/18 had a 1.97% yield.

      https://www.treasurydirect.gov/instit/annceresult/press/press_auctionresults.htm

      As the 3 month treasury bill has been inching up slightly over the past 4 weeks, the 3 month CD rates have been going down.

      As you move further out in CD maturities, you will start to find some CD yields higher than the treasury rates. The banks are in their self interest more willing to lock you into a slightly higher rate than the comparable treasury yield when you commit long term.

      Delete
    3. Thank you. I'm locked-in TDAmeritrade IRA (transfering funds is NOT WORTH IT)mostly and they don't let me online bid on TBills, from what I can see. I'm not calling a snot-nosed broker for anything.

      Delete
    4. I no longer have a TD Ameritrade account. It is my understanding that you can buy at auction using that broker:

      https://www.tdameritrade.com/investment-products/bonds-and-cds/new-issues.page

      However, the broker charges a $25 commission for those orders:

      https://www.tdameritrade.com/pricing.page

      Fidelity, Schwab and Vanguard charge no commissions for treasury auction orders.

      Delete
  6. My small cap biotech lottery tickets have been performing as of late in a less than desirable manner.

    Redhill for example declined 7.21% today after reporting that its drug for Crohn's disease met its primary and "key" secondary endpoints in a Phase 3 trial. Initially, the stock spiked up in press and then the sellers arrived in force.

    RedHill Biopharma Ltd. (RDHL)
    $8.75 -$0.68 (-7.21%)
    Day's Range 8.32 - 10.75
    Volume 3,285,171
    Avg. Volume 147,085

    https://finance.yahoo.com/quote/RDHL?ql=1&p=RDHL

    RDHL Press Release
    https://www.nasdaq.com/press-release/redhill-biopharma-announces-positive-topline-results-from-phase-iii-study-of-rhb104-in-crohns-20180730-00293

    So some investors found something problematic. There is a statement that further trials may be necessary before a NDA is submitted to the FDA. The company will be meeting with the FDA to discuss that pathway.

    Quote:
    "Additional clinical studies are most likely to be required to support a U.S. New Drug Application (NDA) for RHB-104, if filed. RedHill will meet with key opinion leaders and the U.S. Food and Drug Administration (FDA) to present the data package and discuss the development path to potential approval and will continue discussions with potential partners for RHB-104."

    I also own 50 shares of PGNX which received approval after the close today for Azedra to treat patients above the age of 12 who have either of the two tumors - pheochromocytoma or paraganglioma - and require anti-cancer therapy. The drug can be used for those patients whose tumor has spread beyond the original site. I have not seen a press release yet from PGNX. The preceding is taken from a Reuters article.

    There was a price spike shortly before the close today prior to the shares being halted.

    https://endpts.com/fda-approves-cancer-radiation-drug-azedra-sending-progenics-stock-north/


    Progenics Pharmaceuticals, Inc. (PGNX)
    $8.31 +$0.65 (+8.49%)
    At close: 3:02PM EDT

    I have not seen any after market close trades.

    A recently purchased 50 share position in NBRV has been smashed in large part due to a sizable share offering after my buy. While a $50M share offering would not be significant for a S & P 100 company, it is a big deal for a nano cap like NB

    Nabriva Therapeutics plc (NBRV)
    2.69+0.18 (+7.17%)
    https://finance.yahoo.com/quote/NBRV?p=NBRV

    https://globenewswire.com/news-release/2018/07/27/1543149/0/en/Nabriva-Therapeutics-Announces-Pricing-of-Public-Offering-of-Ordinary-Shares-of-Approximately-50-Million.html

    Unfortunately, dilutive share offerings are a fact of life among small clinical stage biotech stocks. Ultimately, the winners and losers are separated by the decree of success or failure of their drugs.

    I am not likely to average down on this one. Instead, if I average down on a company involved primarily in new antibiotics I would probably go with MLNT which has also fallen since my purchase.

    ReplyDelete
    Replies
    1. FDA press release on Azedra approval:

      https://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm615155.htm

      The shares are still halted, and there is still no press release from PGNX .

      Delete
    2. Progenics Pharmaceuticals, Inc. (PGNX)
      $7.70 -$0.61 (-7.34%)
      Volume 3,738,852
      Avg. Volume 1,084,053
      As of 10:20AM EDT.

      https://finance.yahoo.com/quote/PGNX?p=PGNX

      That is some strange price action after a small biotech receives FDA approval to market the key drug in its pipeline.

      One explanation is that the company will soon use the news to sell shares.

      Another is that many investors are not impressed with the drug. I have mentioned in the past that the trial results had made approval at least questionable. The FDA probably decided to give the drug a chance since it did help some patients with a rare kind of cancer and this was the first drug approved for treating those two cancers: Locally Advanced or Metastatic Pheochromocytoma or Paraganglioma.

      https://globenewswire.com/news-release/2018/07/31/1544259/0/en/Progenics-Pharmaceuticals-Announces-FDA-Approval-for-AZEDRA-iobenguane-I-131-to-Treat-Unresectable-Locally-Advanced-or-Metastatic-Pheochromocytoma-or-Paraganglioma.html

      Delete
    3. There are many good reasons why I invest immaterial amounts in small clinical stage biotech stocks. I have played blackjack hands using more money.

      One of the good reasons is the recent price declines in RDHL. I had an unrealized profit and now I am back in unrealized loss territory.

      RedHill Biopharma Ltd. (RDHL)
      7.50-1.25 (-14.26%)
      Volume 1,257,131
      Avg. Volume 196,156
      Market Cap 170.022M
      As of 12:08PM EDT

      The shares closed at $9.45 last Friday and started a slide after RDHL published a press release claiming that its drug RHB-104 for Crohn's disease met its primary endpoint and key secondary endpoints. I pointed out above that the company admitted that more trials would probably be necessary before the filing of a NDA. I initially thought that issue caused the initial drop. It was probably a cause but not the main cause.

      The main cause IMO is that the drug was losing its efficacy after 52 weeks of treatment:

      "At 52 weeks of treatment, remission in the RHB-104 arm continued to be favorable to placebo (27% vs. 20%, p= 0.155).

      An analysis of maintenance of remission at week 52 in subjects noted to be in remission at week 16 also demonstrated statistically significant benefit with RHB-104 over placebo (25% vs. 12%, p= 0.007)."

      That is down from the 26 week response rate:


      "Patients treated with RHB-104 also achieved a statistically significant greater response at week 26 (defined as a decrease of ≥100 in CDAI from baseline) compared to placebo (44% vs. 31%, p= 0.028).

      Patients treated with RHB-104 also experienced a statistically significant benefit in achieving early remission defined as remission at week 16 (42% vs. 29%, p= 0.019)."

      I would note also the response rates for those patients receiving a placebo.

      The problem relates also to market dynamics.

      RDHL is a nano cap stock with a small float and meaningful ownership by hedge funds:


      https://finance.yahoo.com/quote/RDHL/key-statistics?p=RDHL

      When some larger investors become disappointed and decide to sell based on some less than stellar news event, there are few buyers which requires the motivated sellers to offer shares at lower and lower prices.


      Delete
  7. Thanks to both you and David for the excellent philosophical discussion of free will, divine intervention, the Problem of Evil, and whether God got Trump elected.

    In my opinion you are correct, such beliefs are "a convenient way to avoid individual responsibility for one's actions." Well said.

    ReplyDelete
  8. South Gent,

    Hussman is predicting a major market correction (again). He was right in 2000 and in 2008. As a permabear he will be right again sometime. It’s just too bad that he has been wrong for at least the past 10 years. However, we have been very cautious (overweight in cash) for a long time since S&P 2600 (?). Not a very easy wait. I did take the advantage of the rate scare in the REIT sector by building a full position in KIM. I think you only take the small ball strategy with the REIT stocks. You used to like a REIT when its yield is over 8%. What are your criteria now?

    ReplyDelete
    Replies
    1. I recall having a discussion with a person who owned the Hussman Strategic Growth Fund (HSGFX). I wanted to know why he invested in a fund that loses money year after year.

      He replied that the fund was a hedge. He added that I did not understand the meaning of hedges.

      I replied Hussman's money management was a "a hedge against making money".

      The 3, 5 and 10 year annual average total returns of that fund are now at -8.92%, -8.76%, and -6.94% respectively.

      https://www.marketwatch.com/investing/fund/hsgfx

      Predicting that the market was going to have problems in 2000 and 2008 was not that prescient. I was completely out of stocks in 2000 and had substantially reduced my stock allocation in 2007.

      Will there be another market meltdown in my lifetime, meaning a catastrophic decline of more than 40%? That could happen and has already occurred three times in my life. The first time was in 1974.

      I do not see it happening based on what I know now. It is possible that events could occur that would change that opinion.

      I would not be surprised by a correction (10% to 20%) or a bear market decline of 20% to 25% starting within the next 18 months. October has been a good month for a scare.

      As to REITs, I tend to focus on higher yielding ones that are out of favor. I could buy Essex Property Trust, a high quality apartment REIT, but I own IRT and trade it. The current dividend yield on Essex is 3.18% based on yesterday's closing price.

      https://www.marketwatch.com/investing/stock/ess

      I am using a small ball strategy with REITs for as long as I have commission free trades. This is mostly a brain dead trading strategy that implements my capital preservation and income objectives.

      Most of the thought goes into the initial purchase price and then the approach is practically mechanical in its application. The result is that I do end up buying on major dips such as the declines earlier this year.

      I will buy only when the price falls below my last purchase price in the chain. I will consider selling the highest cost lots on a pop when I have a profit and then buy the shares back when there is a retreat below the lowest price in the chain.

      My criteria now is to be wary of REITs given their price spurt and likely negative reactions to a persistent increase in intermediate term rates.

      I have switched more into using the small ball strategy to buy BDCs who own a lot of floating rate loans and have higher yields than most equity REITs with a few exceptions. I generally have a negative view of externally managed BDCs but can stand to own some of them in small lot positions.

      I do have my eye on some possible REIT purchases.

      I recently sold my last OHI shares at $31.44:

      Item # 3.C.
      https://tennesseeindependent.blogspot.com/2018/06/observations-and-sample-of-recent_25.html

      I read a SA article by Brad Thomas who continues to have a strong buy on the stock. While I disagree with this bullishness, and vehemently would not be too strong of a word, I would consider restarting a position below $27. I want more of cushion to the downside, meaning a price closer to zero. The stock was ex dividend yesterday, so I would not be surprised to see a downdraft below that level. The stock traded below $27 between January through April this year.

      https://www.marketwatch.com/investing/stock/ohi/charts

      Delete
    2. Select Income REIT (SIR)
      $20.85 -1.03 (-4.71%)
      https://finance.yahoo.com/quote/SIR?p=SIR

      SIR is one of the perpetually out-of-favor, high yielding REITs that I attempt to trade. The goal is to escape at whatever profit is available after collecting one or more quarterly dividends.

      The quarterly dividend is $.51 per share so the yield at today's close is 9.78%.

      I sold all of my shares held in my Schwab account at $23.2 on 7/6/18:

      Item # 1.A.
      https://tennesseeindependent.blogspot.com/2018/07/observations-and-sample-of-recent_18.html

      I am also small ball buying, using commission free trades, in my Fidelity account where I currently own 20+ shares at an average cost of $19.17. The lowest price in that chain is $18.61.

      While today's drop was a response to the second quarter financial report, which was concerning (though that is more normal than an exception for this REIT), I will stay with that buying program in 10 share lots using the small ball buying restriction. I am reinvesting the dividend.

      The main problem with this REIT is that it is externally managed by RMR.

      One problem with the earnings report is that there are two many moving parts in it which requires the Old Geezer to think too much. I have discussed in the past the squirrelly accounting relating to its majority interest in the spinoff REIT Industrial Logistics Properties Trust (ILPT)

      I do not blame the REIT for the $.12 per share charge due to a tenant default. That is going to happen.

      The company said that the property was located in Naperville, Illinois. "with approximately 820,000 rentable square feet and an original lease expiration date of March 31, 2029. As of June 30, 2018, the annual rent due from the tenant under this lease was $15.2 million. Approximately 468,000 square feet of this property is occupied by subtenants of the tenant that defaulted, and these subtenants have received notices to pay rents under the applicable subleases directly to SIR as a result of this tenant default. Payments directly to SIR under the applicable subleases aggregated $10.0 million as of June 30, 2018 (or $5.2 million less than the rent due from the tenant that defaulted)." So that is a major default.

      When I see something like that, I will go to the annual report where I am likely to find the address which allows me to view the property using google maps.

      This property is located at 1415 West Diehl Road (the only property owned in Naperville):

      Page S-10
      https://www.sec.gov/Archives/edgar/data/1537667/000153766718000011/sir_123117x10kdocument.htm

      This is a large office complex and looks nice. So I would expect SIR will be able to release.
      https://www.google.com/maps/place/1415+W+Diehl+Rd,+Naperville,+IL+60563/@41.8020358,-88.1915282,3a,75y,90t/data=!3m6!1e1!3m4!1szoSx57Peuc7b0i0nZNZ7HQ!2e0!7i13312!8i6656!4m5!3m4!1s0x880ef8ebda0c2471:0x3c7c5416e8489beb!8m2!3d41.8031949!4d-88.1917799

      There is concern about the dividend payout ratio. A dividend cut would not be surprising. The stock just went ex dividend on 7/27. A combination of that event and the earnings report may cause further downside pressure on the stock.

      It is not like institutional investors are biting at the bit to buy this REIT. The leading mutual fund owners are index funds that have to own the stock:

      https://finance.yahoo.com/quote/SIR/holders?p=SIR

      REITs in general had a positive day as intermediate term interest rates declined a tad.

      Vanguard Real Estate ETF
      $81.94 $1.35 $1.68%
      https://www.marketwatch.com/investing/fund/vnq

      So SIR's decline was a fish out of water.

      Delete
  9. I have published a new post:


    https://tennesseeindependent.blogspot.com/2018/08/observations-and-sample-of-recent.html

    ReplyDelete
  10. South Gent,

    Thank you for the update on SIR.

    Your exit timing was impeccable. I bailed yesterday with a small profit and two dividends.

    ReplyDelete
    Replies
    1. There is something to be said about individuals just saying no to REITs like SIR, GOV, OHI and SNR.

      SIR may cut its dividend which just went over 10% due to the recent share price decline.

      I am not adverse to owning small positions in those REITs but I am certainly not going to marry any of them.

      Over the past five years through 7/31/18, the total annual average SIR total return was 3.17%.

      https://www.dividendchannel.com/drip-returns-calculator/

      When I look at that data and a chart, I see no good reason for a buy and hold strategy. If an investor owned SIR in a taxable account, the real total return after taxes over that five year period would be close to zero or even negative depending on the tax rate.

      I will stick with my game plan which restrains my next purchase to 10 shares at below $18.61 unless Right Brain takes control over the trading desk and buys 50 shares in the Schwab account after a further decline in price and before the commission free trades expire in that account.

      Delete