Observations and Sample of Recent Trades: GOOD, HOPE, ORIT, TWOPRC

Economy: 

U.S. trade deficit remains on track for 10-year high after climbing 7% in June - MarketWatch

BEA: News Release: U.S. International Trade in Goods and Services

Housing demand in June sees biggest drop in more than 2 years

Economic adviser Kudlow, asked about negative effects of Trump tariffs on U.S. business: ‘Don’t class warfare me’ - MarketWatch So a question about the negative impacts of Trump's tariffs is now classified by Trump's economic advisor, the media personality Larry Kudlow, as a class warfare type question. After thinking about that for almost one second, I came to a conclusion that Larry does not know what class warfare means. Kudlow graduated with a B.A. in history from the University of Rochester. He does not have a decree in economics but talks on TV like he knows something which can be summed up as follows: (1) lower taxes are good  (2) regulations are bad; and (3) trade wars are bad but are no longer bad after Larry became Trump's economic advisor. What more do you need to know?   

U.S. moves to restore some Iran sanctions lifted under nuclear deal

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Markets and Market Commentary: 

Bull market in stocks could be in ‘last innings’ as bears set sights on strongest sectors - MarketWatch

The 10-year yield cracked 3%. Technician says 4% is next

The S & P 500 will soon have its longest run ever in a bull market mode. Six factors to watch as the bull market pushes itself toward an endurance record - MarketWatch I would note that the S & P 500 came very close to a 20% decline in the 2011 summer. 

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Trump: 

Don the Demagogue continued his attacks on the free press and the Russia investigation last Sunday: 

It is impossible to read these tweets (and thousands of other statements made by Donald) and come to any conclusion other than Donald is unfit to be President within the meaning of the 25th Amendment to the Constitution. That conclusion has absolutely nothing to do with his party affiliation or ideology. What the 25th Amendment Means for Donald Trump's Presidency | Time 

Donald also repeated his false statement that China pays the U.S. tariff tax which in fact is paid by the U.S. "importer of record":

In practice, U.S. consumers and businesses will pay for Trump tariffs. I will be waiting for Donald to acknowledge that fact in a tweet, though I will not be holding my breath in anticipation. 

Layoffs from Trump tariffs are piling up. So are calls for more bailouts. - The Washington Post

Trump: I ‘destroy' careers of Republicans who say bad things about me

Donald is of course one of the smartest persons who has ever lived which is proven by his six bankruptcies and his ability to lose $926 million in one year. 

How do we know that Donald is smarter than everyone? 

Donald says it is so over and over.   

At last week's pep rally in Ohio, Donald made this statement: "The elite -- they're more elite than me? I am better than everything they have, including this," (pointing to his head.) "And I became president and they didn't, meaning you became president. And it's driving them crazy." Trump says supporters are the "real elite" at campaign rally in Ohio - CBS News 

Donald is proof that shameless and unjustified self-promotion unfortunately works on millions. Trump University is an example of how Donald actually made money. Trump University: It’s Worse Than You Think | The New Yorker 

Donald is frustrated with the "so called" judges who are preventing him from doing what he wants. Federal judge says Trump must fully restore DACA

Crowds, Stoked by Trump’s Rhetoric, Increase Their Ire Toward the Press

Trump Will Have Blood on His Hands (Trumpster death threats to reporters are becoming commonplace) 

Under Trump, a red carpet for Dinesh D’Souza, who claims Hitler was a liberal in new documentary - The Washington Post

Dan Rather Unloads On Donald Trump Over 'Racist' Attack On LeBron James

What is the QAnon conspiracy theory? - CBS News

Russia's disinformation "toolkit" going global, experts say - CBS News (perhaps Trump's disinformation toolkit can merge with his benefactors)

Trump associate socialized with alleged Russian agent Maria Butina in final weeks of 2016 campaign

Trump Jr.: Democratic Party platform similar to Nazis' - CNN (Don Jr. made that comparison in an interview with Jack Posobiec "who  supported the Pizzagate hoax".How Jack Posobiec Became the King of Fake News – Philadelphia Magazine )

More examples of what is considered Fake News In Trump's America:  

Trump’s Inaccurate Claims About Highways, Immigration and Beyoncé From a Pennsylvania Rally

No, U.S. Steel is not opening six new mills as Donald Trump said | PolitiFact

Donald Trump falsely says new Carter Page documents show Steele dossier launched Russia probe | PolitiFact

No, Donald Trump's poll numbers do not beat Lincoln, all other GOP presidents | PolitiFact ( I did not recall higher numbers for Bush Junior and Eisenhower at the same time after their first term inauguration)

Donald Trump says collusion is not a crime. That's not right. | PolitiFact

Trump's Specious Trade Tweets - FactCheck.org

Trump says collusion isn’t a crime. He’s right. It’s actually many crimes. - The Washington Post

The very act of comparing a factual assertion made by Donald to an actual fact is Fake News in TrumpWorld.  

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White Nationalists Love Corey Stewart, the GOP's Senate Nominee in Virginia, He Keeps Them Close. - The New York Times

Trump's fraudulent voting fraud commission: ‘The most bizarre thing I’ve ever been a part of’: Trump panel found no voter fraud, ex-member says

North Korea, U.S. trade blows over nuclear deal at Singapore reunion | Reuters

Accountant of ex-Trump aide Manafort testifies she helped falsify documents | Reuters

Trump aims tweet at LeBron James, questions his intelligence | Reuters Compared to the Stable Genius, everyone is an idiot. 

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Saudi Arabia: 

Someday, hopefully within the next 20 years, a U.S. President will be able to tell the Saudis to go to hell. I hope to be around and above ground when that day arrives. 

If I lived in Saudi Arabia, one of the handful of countries that Donald appreciates since there is no uppity press and the mildest of protests are met with draconian state measures, it would be best to leave my political commentary in my head. The Saudi Arabia-Canada diplomatic feud, explained - Vox; Saudi Arabia Is Accusing Canada of Interference - The Atlantic 

Canada issued a mild protest about SA arresting human rights activists protesting that nation's abysmal treatment of women. Saudi replied by ejecting the Canadian ambassador as persona non grata, froze all new trade deals with Canada, canceled all educational exchange programs, issued an order for all 16,000 Saudi students in Canada to leave immediately, suspended airplane flights to Canada, etc. Saudi group posts photo of plane about to hit Toronto's CN tower amid spat | World news | The Guardian  

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Manafort and Gates: 

Unless someone has forgotten, I would simply note that Manafort was Donald campaign manager for a brief period in 2016; and Rick Gates was the Duck's deputy campaign manager even after Manafort left. 

Manafort started working in Trump's campaign in February 2016.   

Manafort was promoted to Donald's campaign manager on 6/30/16 after the Duck fired Corey Lewandowski. 

Donald recently blamed the federal government for his decision to hire Manafort. 

Shortly after it was disclosed that Manafort allegedly received $12M from the recently deposed and pro-Russian president of Ukraine, Donald let Manafort go on 8/17/16. 

Gates testified this week that he and Manafort committed an array of felonies. Gates admits to affair, says Manafort approved shifting money through offshore accounts - CNN; Rick Gates: Six bombshells in his Paul Manafort trial testimony: USA Today; Manafort trial Day 6: Gates says Manafort avoided U.S taxes after Ukraine business went south - POLITICO

This is the first of two criminal trials involving Manafort. The current trial involves 32 criminal counts and is being tried in the federal district court for the Eastern District of Virginia. Read: Mueller’s new indictment of Paul Manafort and Rick Gates - Vox  

It looks to me like Manafort is toast, but juries sometimes return verdicts that are inconsistent with the evidence. Two of my favorite examples are the jury verdicts in these criminal trials: Did the preacher's wife snap? - Dateline NBC - Crime reports - The Preacher's Wife | NBC News (the shotgun went off accidentally and discharged into her husbands back. She  unplugged the telephone, since he was not dead yet,  and then took her children on vacation); How did Robert Durst chop up a body and not get convicted for murder? In both cases, the evidence supported convictions for first decree murder IMO. 

The important question is whether Manafort becomes a canary when he is convicted and facing a potential life sentence in a federal penitentiary given his current age which is 69. He is married and has two children. 

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1. Bought 50 TWOPRC at $24.4-Used Commission Free Trade: 

Quote: Two Harbors Investment Corp. 7.25% Cumulative Preferred Series C Stock

Prospectus 

TWOPRC is a fixed-to-floating rate equity preferred stock issued by the mortgage REIT that pays cumulative dividends and non-qualified dividends. 

I have discussed this hybrid equity preferred in several posts. 

There is an ETF that invests in fixed-to-floating rate securities. Item # 1 Bought 100 VRP at $24.89 (11/11/14 Post)(expanded version at Income And Risk Assessment Balancing-Bought 100 Of The ETF VRP - South Gent | Seeking Alpha) 

I no longer own that ETF but that post does contain an extended discussion of this kind of preferred stock. {quote: Invesco Variable Rate Preferred ETF Overview; sponsor's page Invesco - Product Detail} If I want to invest in this type of security, I will buy individual securities. 

Item # 2 Added 100 VRP at $24.21 Update For Exchange Traded Bond And Preferred Stock Basket As Of 12/31/15 - South Gent | Seeking Alpha

Item # 6 Sold 272 VRP at $24.88 Update For Exchange Traded Bond And Preferred Stock Basket As Of 7/7/17 - South Gent | Seeking Alpha

Item # 2 Eliminated VRP Sold 100 at $25.2 Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As 7/29/2016 - South Gent | Seeking Alpha 

Trading Profits VRP = $149.81 

Some investors believe that floating rate feature protects them against a rise in interest rates. I call it a gimmick when used by U.S. companies. The transition from a fixed coupon to a floating rate one generally occurs after the issuer pays the fixed rate for several years. 

On the transition date, the issuer has the option to redeem at par value and would do so provided it is advantageous to it. 

When so redeemed at the end of the fixed coupon period, the investor never receives the floating rate coupon. 

The redemption would occur when the spread to the short term rate is just too high and better financing alternatives are available. 

The redemption would not occur when the floating rate coupon is so low that the issuer views it advantageous to keep it. An example would be a floating rate below the fixed rate with the issuer unable to sell a fixed rate coupon preferred at a lower yield.  

Par Value: $25

Optional Redemption: This stock can not be redeemed prior to 1/27/25 "except under circumstances where it is necessary to preserve our qualification as a REIT for U.S. federal income tax purposes and except . . .  upon the occurrence of a Change of Control" as defined in the prospectus. 

Dividends: Paid quarterly, cumulative and non-qualified (pass through entity/can't avoid taxation at the corporate level and have the dividend treated as qualified). 

Fixed Coupon: 7.25% to but excluding 1/27/25

Last Ex Dividend Date: 7/11/18


Floating Rate-Spread over the Three Month Libor Rate: If not redeemed by the issuer,  from and including 1/27/25 at a floating rate equal to the three month Libor rate plus a spread of 5.011%. 

Libor Rate: This benchmark rate will no longer exist in 2021 and is scheduled to be phased out. Update: SONIA set to replace Libor by 2021; Smooth transition from scandal-hit Libor in 2021 'highly unlikely', banks warned

This is what happens if and when this security transition to a floating rate coupon and there is no 3 month Libor rate in existence: 

There is some risk that the transition to an alternate rate will not be smooth. But the fixed coupon remains in effect for about four years after Libor ceases to exist.     

Stopper Clause: Yes. The stopper clause enforces the superior claim of a preferred shareholder vs. the common shareholder to cash: 

The only way to defer the preferred dividend is to eliminate the cash dividend on common stock first. In order to maintain its REIT tax status, the company has to pay a cash dividend to common shareholders when it has net income available for distribution. For example, if the REIT had to cut the common share cash dividend to $.01 per share annually, and had to pay that dividend since it had net income, then the preferred shareholder would have to be paid in full.   

Two Harbors reported better than expected results for the second quarter yesterday. Two Harbors Investment Corp. Reports Second Quarter 2018 Financial Results 

I also own 100 shares of TWOPRD, a 7.75% equity preferred stock that was originally issued by CYS that is now a Two Harbors obligation. The prior ticker symbol was CYSPRA. 

Two Harbors Investment Corp. 7.75% Cumulative Preferred Series D Stock 

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2. Small Ball-REGIONAL BANK BASKET STRATEGY:

In this section, I will be discussing small lot orders made in my Schwab account where my commission free trades are about to expire.

A. Bought 20 ORIT at $16.24 and 10 at $15.84-Used Commission Free Trades:

The ten share purchase was made after the ex dividend date date while the 20 share purchase was made shortly before that date. 

Quote: Oritani Financial Corp. (ORIT)

ORIT Analyst Estimates

Closing Price Yesterday: ORIT $15.75 -$0.20 -1.25% 

"The Bank currently operates its main office and 25 full service branches in the New Jersey Counties of Bergen, Hudson, Essex and Passaic."

The consensus E.P.S. estimate is $1.14 this year and $1.15 next year. The bank will need to generate better Y-O-Y growth than that 2019 estimate.

I bought back the 20 shares sold at $16.91: Item 1.E. Sold 20 ORIT at $16.91(6/28/18 Post)

Position This Account: 132+ shares

Highest Cost Lot:  Item # 1.A. Bought 50 ORIT at $16.73 (12/26/17 Post)

That lot will be sold at $17.5 or higher. I doubt that the price will reach that level without a buyout within the next 12 months.

Last Purchase Discussions: Item # 3.A. Bought 20 ORIT at $15.14 -Used Commission Free Trade in Schwab Account (5/19/18 Post); Item # 5.A. Bought 20 ORIT at $15.88 in Schwab Account (2/22/18 Post)

Average Cost Per Share in this Account: $16.09

Reinvestment: Yes at less than $17

Dividend: Quarterly at $.25 per share

Oritani Bank : Dividends

Dividend Yield: 6.215% at average total cost per share of $16.09

Last Ex Dividend Date:  8/2/18 (this last purchase was made before that date)

Position in Another Account: 81+ shares at an average total cost of $15.51 (dividend yield at that total cost number  = 6.45%)

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

Oritani Financial Corp. Reports Annual Earnings and Dividend 
10-Q for the Q/E 6/30/18 

ORIT "reported net income of $13.5 million, or $0.30 per basic and diluted common share, for the three months ended June 30, 2018."

Capital Ratios are good: 

Charge Offs to Average Loans : (.01%) or a net recovery

Nonaccrual loans to total loans = .22% Nonperforming Assets to total assets: .23%

Effective Tax Rate: 27.9%

I thought that the last earnings report, which beat the consensus estimate, was fine. This bank stock is not going to be a home run since earnings growth will be restrained by competition, NIM stagnation which is normal among regional banks, its conservative lending practices and the type of bread and butter loans it makes as a small regional bank.    

B. Bought 10 HOPE at $16.75-Used Commission Free Trade:

Quote: Hope Bancorp Inc.  (HOPE)
HOPE Analyst Estimates

Closing Price Yesterday: HOPE $17.14 +$0.06 +0.35% 

Last Substantive Discussion: Item # 2.A. (7/22/18 Post)

Last Earnings Report: Hope Bancorp Reports 2018 Second Quarter Financial Results

I have nothing to add to my recent discussion other than to note that the stock went ex dividend for its $.14 per share quarterly distribution on 7/26/18. 

This last purchase will probably be my last one in my Schwab account.  

I have a small lot "buying program" in my Fidelity account which is ongoing with the lowest cost lot bought at $16.8. 

2. Short Term Bond/CD Ladder Basket Strategy: 

This ladder is defined as including any bond or CD maturing in less than 3 years from the date of purchase. 

A. Bought 1 Keycorp 2.9% SU Bond Maturing on 9/15/20: 

FINRA Page: Bond Detail (prospectus not linked)

Prospectus 

Issuer: KeyCorp  (KEY) 

KEY Analyst Estimates 

KEY SEC FILINGS 

2017 Annual Report 

10-Q for the Q/E 3/31/18 

Credit Ratings: 

Bought at a Total Cost of 99.411

YTM at TC Then at 3.188%

Current Yield at TC = 2.9172%

B. Bought 1 Treasury 1.75% Coupon Maturing on 9/30/19:
YTM = 2.467%

C. Bought 1 Southern 2.15% SU Maturing on 9/1/2019:

FINRA Page: Bond Detail (prospectus linked)

Issuer: Southern Co (SO)
SO Analyst Estimates

Credit Ratings:

Bought at a Total Cost of 99.37
YTM at TC Then at 2.745%
Current Yield at TC = 2.1636%

At the time of purchase, the highest CD rate for a September 2019 maturity was 2.45%.

If I wanted to buy a U.S. treasury in a 1 bond lot maturing on 8/31/19, the YTM would have been then about 2.45%:

My current yield for the Southern bond would be higher than this treasury which I do not view as relevant given the semi-annual interest payments and the short period to maturity.

I do not have any current concerns about Southern's credit risk.

This buy replaces one of the three Southern bonds that were redeemed earlier this year at maturity:

3. SMALL BALL- Equity REIT Common and Preferred Stock Basket Strategy:

A. Bought 50 GOOD at $19.4-Used Commission Free Trade:

Quote: Gladstone Commercial Corp. (GOOD)

Website: Gladstone Commercial | Monthly Dividend REIT

Closing Price Yesterday: GOOD $19.94 +$0.02 +0.10% 

2017 Annual Report (risk summary starts at page 14; a list of properties owned  as of 12/31/17 can be found at pages 89-92)

5 Year Operating History:

GOOD is an externally managed REIT that owns office and industrial properties.

Dividend: Monthly at $.125 per share ($1.5 annually)

Distribution History | Gladstone Commercial Corporation

Dividend Yield at $19.4: 7.73%

Last Ex Dividend Date: 7/19/18

Gladstone Commercial Corp. Interactive Chart

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

Financial Position:

Gladstone Commercial Corporation Reports Results for the Quarter Ended June 30, 2018

CEO David Gladstone on Q2 2018 Results - Earnings Call Transcript | Seeking Alpha

This REIT has a number of equity preferred stocks: Preferred Stock Information

Gladstone Commercial Corp. 7% Cumulative Preferred Stock. Series D
Gladstone Commercial Corp. 7.5% Series B Cumulative Preferred Stock 
Gladstone Commercial Corp. 7.75% Cumulative Preferred Series A Stock 

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.