Observations and Sample of Recent Trades: AGNC, APLE, ARESF, EBGUF, VOD

Economy: 

The BLS reported that 213K jobs were added last month. Employment Situation Summary Job gains for the prior two months were combined up by 37K. Average hourly earnings rose by 5 cents per hour. Over the past year through June 2018, average hourly earnings have increased by $.72 or 2.7%. The U-6 number increased to 7.8% from 7.6%: Table A-15. Alternative measures of labor underutilization The unemployment rate ticked up to 4% from 3.8%. 

Private sector adds 177,000 jobs in June-MarketWatch (the May estimate was revised up to 189K from 178K)

It is important to keep in mind that job gains and unemployment will generally look good until just prior to a recession's onset. Real GDP growth can look okay in the last quarter before a recession.   

Real GDP and job gains were healthy in 2007 for example. 

Civilian unemployment rate:

The rate of job growth did start to slow down in the 2007 summer, but those dips are common even during a healthy expansion: 

Bureau of Labor Statistics Data

Note in the preceding table that the jobs data was relatively strong through December 2000. The recession started in March 2001: nber.org/cycles 

In the third quarter of 2007, real GDP growth was clocked at a 4.9% annual rate: Gross Domestic Product A slowdown could be reasonably expected from that kind of spurt, so the slower numbers in the 2007 4th quarter (+.6%) and 2008 1st quarter (+1%) would not set off an alarm bell.  

The June ISM services PMI increased to 59.1% from 58.6% in May. The new orders component increased to 63.2 from 60.5 while the employment component decreased slightly to 53.6 from 54.1.

U.S. companies in China think the government is already messing with them​ - The Washington Post

Trump’s trade war with China is finally here — and it won’t be pretty, analysts say - The Washington Post {"“Don’t expect the ‘war’ to be out in the open in some imaginary tit-for-tat tariff battlefield,” said James Zimmerman, a partner in the Beijing office of international law firm Perkins Coie LLP. “The real battle will be on the flanks” — in the form of unnecessary inspections, product quarantines and heightened regulatory scrutiny."}

Donald's trade representative, the wingnut Peter Navarro, assured America that no foreign country would dare retaliate: Peter Navarro on tariffs: I don't believe any country will retaliate | Fox Business Video

The initial tariff wave is $34B on China's exports to the U.S. with another $16B expected in about two weeks. China will of course match those amounts on U.S. exports. China fires back after Trump launches $34 billion trade war

Trump: China could face more than $500 billion in US tariffs: CNBC; Trump threatens massive escalation as U.S., China tariffs take effect - MarketWatch

China says Trump’s tariff spree can only backfire on U.S. - MarketWatch

How Trump’s Policy Decisions Undermine the Industries He Pledged to Help - The New York Times

Stock Jocks Reaction to Tariff Wars: 👍 😛 🏄‍♂️

So an acceleration of a tariff/trade war is a positive development based on how the Stock Jocks have reacted so far. 

Who really knows the future?  

I can only say that it is impossible for me to view a tariff war as a risk on event, a time when caution can be thrown into the wind and the pedal pushed to the floor.  

I would note that the upward move in stocks in response to that acceleration is sending the wrong signal to Donald, who is now more likely to view it as an affirmation of what he has done and an encouragement to do far more. 

So more tariffs is the direction that he may pursue with that affirmation until the U.S. trading partners beg for mercy and agree to pretty much whatever Donald wants at the moment. Of course, once that happens and a deal is signed, the Duck will be slinging fireballs in a few months threatening more. 

Donald will renege on any agreement that he signs. Special Report: Trump's art of the deal - Dispute your bills | Reuters; USA TODAY exclusive: Hundreds allege Donald Trump doesn’t pay his bills; Donald Trump Has a History of Not Paying His Bills. That Offers Some Insights Into His Personality.

There is only one way to deal with a bully who is 100% untrustworthy -meet pain with pain until the bully's demands fall into a zone of reasonableness based on objective assessments made by those trading partners. 

If this continues for a few months, I would also expect foreign consumers to organize massive boycotts of U.S. products including those manufactured and/or sold in the host foreign country.  

++++++

Markets and Market Commentary: 

Investment Grade Corporate Bond ETF (LQD) Total Return YTD = -3.59%

S&P 500 ETF (SPY) Total Return YTD = +4.09%

Fed increasingly worried about spillovers from trade but showed no sign of pausing rate hikes - MarketWatch; The Fed - Minutes of the Federal Open Market Committee, June 12-13, 2018

Goldman Says Buy Commodities as Clock Ticks Toward Trade War - Bloomberg

3 ways Trump undermines himself on trade - MarketWatch

Jobs report is ‘perfect’ for the Fed’s interest-rate plans- MarketWatch Another .25% hike in the FF rate is close to being certain. Countdown to FOMC: CME FedWatch Tool (click the September 2018 tab). The odds of two more hikes this year is slightly more than 50% (December 2018 tab). A lot will depend on whether the tariff wars and other factors cause a GDP decline that flirts with near zero, or even negative, growth prior to the December meeting. I doubt that the FED would keep up the short term hikes with the economy arguably entering into a recession.  

Whiskey wars: Trade tariffs hit hard in Trump country: CNBC

Red states will lose the most in trade war with China: Citigroup (as it should be) That would also be the case with major policy changes advocated by the GOP, including massive budget cuts for rural social programs and their efforts to turn Medicare into a voucher system for the purchase of private insurance.  

There are reports that Donald has threatened to withdraw U.S. military protection for Saudi Arabia unless that nation agrees to increase crude production. One reason that oil prices have risen is the Duck's sanctions against Iran that went into effect after he terminated the Iran nuclear deal. The Duck prefers to blame OPEC who recently agreed to increase production rather than himself for higher gas prices. Iranian oil minister calls Trump's order to OPEC insulting: CBNC; Trump blames OPEC for high gas costs; analysts point to Iran sanctions: CNBC  

++++++++

Trump: 

Reality has a way of throwing cold water on show biz photo ops and superficial image creations. N. Korea calls U.S. attitude toward talks ‘gangster-like’ and ‘cancerous,’ rejecting Pompeo’s takeaway

North Korea Criticizes ‘Gangster-Like’ U.S. Attitude After Talks With Mike Pompeo - The New York Times

North Korea shatters Trump's boastful assurances of an easy path to denuclearization

I need to be careful about what I say here, since Donald has clearly stated that it is "almost treason" for any American to criticize his statements or actions with accurate information. I would just say that I heard someone say that Bull Shit is the Duck's essence and is held in such overflowing abundance that it oozes in a constant stream from every pore in his body. I did not say that. Just in case someone from the thought police reads this blog, I am 100% in agreement with 90% of republicans that Donald is one honest straight shooter who tells it like it is.  

While Donald views Kim as an honest and honorable person, I do have to wonder about NK's sincerity when it continues to hold the remains of soldiers killed almost 70 years ago as hostages in a negotiation. Trump claimed that the remains have been returned, which was just another demonstrably false statement that the Duck enjoys making, and was quickly corrected by the State Department. A meeting will be held on 7/12 to discuss further the return of those remains. 

There is a growing movement in several western democracies toward authoritarianism. One method used in that quest is to end the judiciary's independence. Poland Purges Supreme Court, and Protesters Take to Streets - The New York Times

Trump’s Mar-a-Lago Club in Florida seeks to hire 40 foreign workers - The Washington Post; Filing with Labor Department ($12.68 per hour)-Chinese company producing Trump 2020 flags 

Maxine Waters has become the Duck's favorite punching bag: Trump says Rep. Maxine Waters has IQ in "mid-60s" 

Gretchen Carlson Condemns Trump's Appointment of Former Boss, Fox News Executive Bill Shine (Shine resigned from Fox after several women accused him of covering up claims of sexual harassment made against Roger Ailes and Bill O'Reilly); Bill Shine, ex-Fox News executive, to be White House communications director - Vox What can you say other than birds of a feather flock together. 

+++++

The pollution industry controlled the Environmental Protection Agency when Scott Pruitt was the EPA Head. Scott Pruitt resigns: Trump's EPA head out amid ethics investigations That control will continue under the new acting head, Andrew Wheeler, who was  a coal lobbyist before joining the EPA. Wheeler is a well known climate change denier. The Scott Pruitt saga was an example of Donald adding to the swamp rather than making any attempt to drain it.  

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1. Equity REIT Common and Preferred Stock Basket Strategy:

The two purchases discussed in this section are dividend harvest trades, broadly defined as a going in intent to sell at whatever profit is available after collecting one or more monthly dividend payments. If necessary to exit the position profitably, I will not mind holding for multiple dividend payments given the prices paid for the shares and their dividend yields.

A. Bought 100 ARESF at $9.98-Used Commission Free Trade: 

Quotes:

USD Priced Shares: ARESF (pink sheet exchange)

CAD Priced Shares: Artis Real Estate Investment Trust (Canada: Toronto)

CAD/USD Conversion Day of Trade:

On the day of my trade, the CAD priced shares closed at C$13.25.

XE: Convert CAD/USD. Canada Dollar to United States Dollar

If 1 USD bought 1 CAD, the price for ARESF would have been that day approximately US$13.25 or about 33% higher than US$9.96 just from the currency exchange change. Such is the impact of currency exchange on the price of Canadian stocks priced in USDs.

Artis is a Canadian REIT with a growing presence in the U.S. Artis REIT

Portfolio Map 236 properties

Page 5 Investor Presentation

Page 8

Dividends: Monthly at C$.09 per unit/share

Purpose: Trade-Dividend Harvest

Last Discussed:  Item # 6.A. Sold 100 ARESF at $10.78 (10/11/17 Post)

Other Discussions:

Item # 3.C. Sold 100 of 300 ARESF at $10.4-Highest Cost Lot  (7/19/17 Post)

Item # 1 SOLD 300 AX-UN:CA at C$15.71 (9/26/14 Post)

Item # 3.A. Pared Artis REIT: Sold 200 AX-UN.CA at C$12.94 (3/8/17 Post)

Recent Earnings Report: FFO declined Y-O-Y due to several property dispositions. Artis has reduced its exposure to Alberta. Net asset value per share was reported at C$15.03 as of 3/31/18, up from C$14.86 as of 12/31/17.

Artis Real Estate Investment Trust Releases First Quarter Results

The purchaser of ARESF using USDs wants the CAD/USD exchange rate to move up after purchase. 

The dividends become more valuable when the CAD buys more USDs. 

More importantly, the ARESF share price is determined by converting the price of the shares traded in Toronto, the primary exchange for this stock, into USDs. If the CAD rises in value after the purchase, the USD priced shares will outperform the shares traded in Toronto. The ideal situation is then for both the CAD/USD exchange rate and the Toronto listed shares to rise, creating for the ARESF a Twofer. The Double Whammy is the reverse of the Twofer.  

Artis recently issued a fixed to floating rate equity preferred stocks. Artis Real Estate Investment Trust Preferred Series I (Canada: Toronto) This preferred stock has a $25 par value. The initial coupon is 6% per annum, paid quarterly through 4/30/23. If not redeemed by the issuer, the rate will reset then for five years, and every five years thereafter, at the greater of 6% or the sum of 3.93% and the 5 year Canadian government bond yield.  

I own several Canadian "reset" equity preferred stocks and have sold far more than I currently own. The price for this Artis preferred stock is currently too high for me to consider buying. 

B.  Bought 50 APLE at $17.92-A Roth IRA Account:

Quote: Apple Hospitality REIT Inc.
Website: Apple Hospitality REIT
Hotel Map

APLE SEC Filings

Dividend: Monthly at $.10 per share

Last Ex Dividend Date: 6/29/18

Apple Hospitality REIT Announces July 2018 Distribution

Reinvestment: Yes since September 2017 (likely continuing when the price is less than $19)

Current Position in This IRA Account: 102+ shares

Average Cost Per Share This Account: $18.26

Total APLE Position: 350+ shares

Last Buy Discussions: I have been buying shares using commission free trades in both my Schwab and Fidelity taxable accounts. Those purchases are using the small ball purchase requirement.

Item # 1.C Bought 10 APLE at $16.97-Used Commission Free Trade (4/5/18 Post)

Item # 1.C. Added 10 APLE at $17.54 and 5 at $17.1 (3/8/18 Post)

Sell Discussions:

Item # 5.A. Sold 50 APLE at $19.6 (12/18/17 Post)

Item # 6.B. Sold Highest Cost Lot in Schwab at $19.22 (10/19/17 Post)

Item 2.B.  Sold 100 APLE at $19.43(5/25/17 Post)

Trading Profits: $233.48

Last Earnings Report: Q/E 3/31/18

Apple Hospitality REIT Reports Results of Operations for First Quarter 2018; 10-Q for the Q/E 3/31/18 (debt discussed starting at page 9)

"As of March 31, 2018, Apple Hospitality had approximately $1.3 billion of total outstanding indebtedness with a current combined weighted-average interest rate of approximately 3.7 percent for the remainder of 2018. Excluding unamortized debt issuance costs and fair value adjustments, the Company’s total outstanding indebtedness is comprised of approximately $499 million in property-level debt secured by 31 hotels and $831 million outstanding on its unsecured credit facilities. Apple Hospitality’s undrawn capacity on its unsecured credit facilities at March 31, 2018, was approximately $369 million. The Company’s total debt to total capitalization at March 31, 2018, was approximately 25 percent, which provides Apple Hospitality with financial flexibility to fund capital requirements and pursue opportunities in the marketplace."

ADR = Average Daily Rate
RevPar = Revenue Per Available Room
MFFO = Modified Funds From Operations

2. Small Ball:

A. Bought 50 AGNC at $18.64-Used Commission Free Trade:

Quote: AGNC Investment Corp.-A Mortgage REIT

The stock went ex dividend on the next day. The decline on the trade day was greater than the value of the dividend: AGNC Investment Corp. (AGNC) Ex-Dividend Date Scheduled for June 28, 2018 - Nasdaq.com

Closing Price Day of Trade: AGNC $18.62 -$0.19 -1.01%

Dividend: Monthly at $.18 per share ($2.16 annually)

The dividend has been trending down in recent years. Further cuts can be reasonably expected for as long as the net interest margin continues to shrink.

Dividend Yield at $18.64: 11.59%

History This Account:

Last Sold: Item 1.B. Sold 71+ AGNC at $19.03 (5/3/18 Post)

Rationale: Trade and Dividend Harvesting

Being successful on a profitable exit requires IMO selling the pops and waiting for a lower re-entry price.

I have no particular insight into mortgage REITs. They use a high decree of leverage to squeeze out income:

As shown in the  trading history snapshot, I am not a buy and hold investor. My objective is to earn a return in excess of the dividend yield, not lower than the dividend yield. The trading snapshot also shows that I am lowering my exit price as net asset value per share declines.

Financial Report Q/E 3/31/18:  SEC Filed Press Release

Prior Buy Trade Discussions:

Item 1.B. Bought 10 AGNC at $18.15 (3/15/18 Post)

Item 1.D. Added 10 AGNC at $18.57 (2/26/18 Post)

Item # 6 Bought 50 AGNC at $18.72-Used Commission Free Trade (2/1/18 Post)

Prior Sell Trade Discussions:

Item 3.A. Sold 54+ AGNC at $20.71- Vanguard Roth IRA Account and Item 3.B. Sold 53+ AGNC at $20.71-Schwab Taxable Account (5/23/17 Post)

Item # 5.B. Sold 50 AGNC at $19.94 Vanguard IRA Account  and Item # 3.C. Sold 50 AGNC at $20.01 Schwab Taxable Account (4/14/17 Post)

Item # 4 Sold AGNC at $30.14 (2/15/12 Post)

AGNC Realized Gains: +$311.59 (view as successful given the dividend yield)

Tangible Asset Value Per Share History (excludes goodwill and other intangible assets)

3/31/18: $18.63 AGNC Investment Corp. Announces First Quarter 2018 Financial Results
12/31/17: $19.69
12/31/16: $19.5

Net Book Value Per Share:

3/31/18     $20.04
12/31/17   $21.09
12/31/16   $21.17
12/31/15   $22.59
12/31/14   $25.74
12/31/13   $23.93 2017 Annual Report at page 27
12/31/12:  $31.64
12/31/11   $27.11
12/31/10:  $24.24
12/31/09   $22.48
12/31/08   $17.2 AGNC 10K 12/31/12 (page 36)

One message that I glean from the net book value history is that a declining interest rate environment is better than a rising one. Rates popped in 2013 and there was a serious decline in that number. The dominant trend in 2008-2012 and 2014 was lower interest rates and net book value rose. Rates have been trending up recently and net book has been trending down.

I would go with the tangible net asset value now given the meaningful percentage difference between that number and net book value per share.

5 Year Total Annual Average Total Return (with dividend reinvestment) Through Date of Purchase: 8.82% DRIP Returns Calculator | Dividend Channel  Part of the dividend yield is obviously being overset by a decline in the share price.

AGNC recently sold 34.5M shares: Prospectus; AGNC Investment Corp. Announces Closing of Public Offering of Common Stock (5/29/18). So at least that is out of the way for the time being. I do not approve of stock offerings at a price below net asset value per share however. This one appeared to be priced at $18.6 which is okay as being just 3 cents below the reported net asset value per share as of 3/31/18.

B. Bought 10 MFC at $$17.85-Used Commission Free Trade:

Quote: Manulife Financial Corp. (MFC)
MFC Analyst Estimates

Manulife Investor Day 2018 - A bold and exciting future (MFC Press Release dated 627/18)

MFC is a Canadian company whose shares trade in Toronto. The USD priced MFC shares will reflect the CAD priced shares converted into USDs. The decline in the CAD/USD exchange rate will cause the USD priced shares to underperform the same shares priced in CADs. The dividend yield will also depend on the CAD/USD exchange rate.

If the CAD rises in value against the USD after purchase, the USD priced shares will outperform the CAD priced shares and the dividend yield will increase since CADs buy more USDs.

The CAD has been weak lately due to the Duck's trade war with Canada.  XE: CAD / USD Currency Chart

Prior to that problem, the CAD started to sink in value due to the collapse in crude prices starting in the 2014 summer. The recent rise in crude prices have not helped the CAD due IMO to the Duck's trade war.

Dividend: C$.22 per share

Dividend Rates

Current Position: 30 Shares

Average Cost Per Share: $18.22

Maximum Position: 100 Shares

Last Substantive Discussion: Item # 2.A. (4/12/18 Post)

Last Earnings Report: Q/E 3/31/18

Manulife reports 1Q18 net income of $1.4 billion, core earnings of $1.3 billion and a LICAT capital ratio of 129%

Q1 2018 Results - Earnings Call Transcript | Seeking Alpha

"Manulife today announced net income attributed to shareholders of $1,372 million for the first quarter of 2018 ("1Q18"), fully diluted earnings per common share of $0.67 and return on common shareholders' equity ("ROE") of 14.1%, compared with $1,350 million, $0.66 and 13.7%, respectively, for the first quarter of 2017 ("1Q17"). . .  For 1Q18, Manulife generated core earnings of $1,303 million, fully diluted core earnings per common share of $0.64 and core return on common shareholders' equity ("core ROE") of 13.4%, compared with $1,101 million, $0.53 and 11.1%, respectively, for 1Q17".

C. Bought 5 VOD at $24.2-Used Commission Free Trade:

Quote: Vodafone Group PLC ADR

Current Position: 45 Shares

Average Cost Per Share: $25.83

Purchase Restriction: Small Ball Rule

Maximum Position: 100 Shares

VOD Stock Chart: Bear Trend Since January 2018

Dividend Reinvestment: Yes

Last Dividend: $1.22+ per share

Last Ex Dividend Date (semi-annual): 6/7/18

Vodafone Group Plc (VOD) Dividend Date & History - NASDAQ.com

Vodafone pays a dividend semi-annually. The last dividend will be the larger of the two.

Last Substantive Discussion: Item 1.B. Bought 20 VOD at $26.57 (5/24/18 Post)

Highest Cost Lot: 20 shares at $26.57

Last Sell: Item 1.A. Sold 51+ VOD at $30.21 (11/30/17 Post)

3. Sold 100 EBGUF at $24.4-Used Commission Free Trade:

Quotes:

USD Priced Shares: Enbridge Income Fund Holdings Inc. (EBGUF)
CAD Priced Shares: Enbridge Income Fund Holdings Inc. (Canada: Toronto)
CAD / USD Currency Chart

Overview - Enbridge Income Fund
Credit Ratings - Enbridge Income Fund

Enbridge (ENB) is attempting to acquire the Enbridge Income Fund shares that it does not currently own. Enbridge Announces Simplification of Corporate Structure with Proposals to Acquire All of the Outstanding Sponsored Vehicle Equity Securities (5/17/18)("ENF shareholders will receive 0.7029 common shares of Enbridge per ENF share")

Closing Prices Day of Trade: EBGUF $24.58 +$1.81 +7.95%; ENB $35.69 +$2.58 +7.79%

The shares popped due to the Minnesota PUC decision approving the Enbridge line 3 replacement which had been in doubt. Enbridge’s Line 3 Replacement Project Approved by Minnesota Public Utilities Commission

History This Account:

Profit Snapshot: +$97.51

Item # 1 Bought Back 100 EBGUF at $23.43 (11/13/17 Post)

Dividend: Monthly at C$.1711

Historical Distributions - Enbridge Income Fund

I still own 100 ENF:CA.

Last Earnings Report: Enbridge Income Fund Holdings Inc. Reports 2018 First Quarter Results

4. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 Citizens Bank 2.1% CDs Maturing on 12/20/18:

Holding Company: Citizens Financial Group Inc.  (CFG)

B. Bought 1 DTE Energy 2.5% SU Maturing on 12/1/19:

FINRA PAGE:  Bond Detail (prospectus linked)

Issuer: DTE Energy Co. (DTE)
DTE Energy reports strong first quarter 2018 results
2017 Annual Report

Credit Ratings:

Fitch Affirms DTE and Subs; Outlook Remains Negative (4/6/18)

Bought at a Total Cost of 99.112
YTM at TC Then at 3.037%
Current Yield at TC = 2.4215%

I prefer to have the current yield closer to the YTM but will accept having a significant percentage of the yield tied to the realized gain at maturity.

DTE also issues mortgage bonds that would have priority over the senior unsecured debt. The mortgage debt is rated Aa3/A.

C. Bought 1 Treasury .875% Coupon Maturing on 4/15/19:
YTM = 2.247%

D. Bought 2 Walgreens 2.7% SU Bonds Maturing on 11/18/19:

This was a mistake since I thought that I was in a family members account when I placed the order. Instead, I was in my account. I now own 4 bonds. The mistake is arguably understandable given the number of accounts that I manage and my occasional and growing brain malfunctions.

FINRA Page: Bond Detail (prospectus linked)

Issuer: Walgreens Boots Alliance Inc. (WBA) 

WBA Analyst Estimates
Results for the Q/E 2/28/18

Walgreens replacing GE on the Dow

Credit Ratings:

Fitch Affirms Walgreens Boots Alliance at 'BBB' Following Revised Rite Aid Corp Transaction

Bought at a Total Cost of 99.772
YTM at TC Then at 2.867%
Current Yield at TC = 2.7062%

E. Bought 1 Public Service 2% First Mortgage Bond Maturing on 8/15/19:

FINRA Page: Bond Detail

Issuer: Wholly Owned Subsidiary of Public Service Enterprise Group (PEG)
PEG Analyst Estimates

I now own 3 bonds.

Credit Ratings:

Bought at a Total Cost of 99.156
YTM at TC Then at 2.758%
Current Yield at TC = 2.017%

F. Bought 2 BOFI 2.3% CDs (monthly interest payments) Maturing on 3/28/19:

Holding Company BofI Holding Inc (BOFI)
BOFI Analyst Estimates
BofI Holding, Inc. Reports Record Third Quarter 2018 Net Income (FISCAL YEAR Q/E 3/31/18)

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.