Economy:
Trump Said to Want $200 Billion in China Tariffs Despite Talks - Bloomberg; Trump 'likely' to announce new China tariffs as early as Monday: source | Reuters Assuming those new tariffs (better viewed as taxes) go into effect, the new GOP taxes will directly increase the costs of numerous products bought by U.S. consumers. It is important for U.S. consumers to understand that the GOP is taxing them through an indirect method. From a consumers perspective, a tariff is simply a hidden tax on the price of goods.
The inflation increase in August was slightly below expectations. The consensus estimate was for a seasonally adjusted .3% increase. The actual increase in the headline CPI number was .2%. On a non-seasonally adjusted basis, CPI was up 2.7% Y-O-Y, with the core CPI rising 2.2%.
Consumer Price Index Summary
Table 2 contains numbers by expenditure category. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category My favorite number in the detailed category is health insurance since the non-seasonally adjusted number appears to me to be so obviously fictional. The government claims that health insurance costs declined by .3% Y-O-Y. When I saw that number, I had to wonder whether there was a single person in the U.S. who saw their premiums decrease.
The headline CPI number is important, even though it may be an Alternate Reality number with no relevance to the inflation rate experienced by individuals. Social Security payments are increased by CPI as are certain items in the tax code. SS Cost-of-Living Adjustment (COLA); The Tax Law's New Way Of Measuring Inflation Could Take A Toll On Taxpayers-NPR The principal amount of treasury inflation protected bonds is changed by the inflation rate. Investing in Treasury Inflation Protected Securities Rents and other items in the real world are tied to CPI as well.
Trump Said to Want $200 Billion in China Tariffs Despite Talks - Bloomberg; Trump 'likely' to announce new China tariffs as early as Monday: source | Reuters Assuming those new tariffs (better viewed as taxes) go into effect, the new GOP taxes will directly increase the costs of numerous products bought by U.S. consumers. It is important for U.S. consumers to understand that the GOP is taxing them through an indirect method. From a consumers perspective, a tariff is simply a hidden tax on the price of goods.
The inflation increase in August was slightly below expectations. The consensus estimate was for a seasonally adjusted .3% increase. The actual increase in the headline CPI number was .2%. On a non-seasonally adjusted basis, CPI was up 2.7% Y-O-Y, with the core CPI rising 2.2%.
Consumer Price Index Summary
Table 2 contains numbers by expenditure category. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category My favorite number in the detailed category is health insurance since the non-seasonally adjusted number appears to me to be so obviously fictional. The government claims that health insurance costs declined by .3% Y-O-Y. When I saw that number, I had to wonder whether there was a single person in the U.S. who saw their premiums decrease.
The headline CPI number is important, even though it may be an Alternate Reality number with no relevance to the inflation rate experienced by individuals. Social Security payments are increased by CPI as are certain items in the tax code. SS Cost-of-Living Adjustment (COLA); The Tax Law's New Way Of Measuring Inflation Could Take A Toll On Taxpayers-NPR The principal amount of treasury inflation protected bonds is changed by the inflation rate. Investing in Treasury Inflation Protected Securities Rents and other items in the real world are tied to CPI as well.
The Fed - Beige Book - September 12, 2018: ("Labor markets continued to be characterized as tight throughout the country, with most Districts reporting widespread shortages. While construction workers, truck drivers, engineers, and other high-skill workers remained in short supply, a number of Districts also noted shortages of lower-skill workers at restaurants, retailers, and other types of firms.")
U.S. incomes rose but inequality widened in 2017: data | Reuters The data comes from the Census Bureau: Income, Poverty and Health Insurance Coverage in the U.S.: 2017
Yikes: Fed’s Brainard says an inverted yield curve won’t get in way of rate hikes - MarketWatch While that headline is an interpretation of what she said, I view it as a correct one.
Canada sees more NAFTA talks this week, much work remains: source | Reuters
Trade-war risks ramp up for stocks as companies start curtailing investment - MarketWatch
++++
Markets and Market Commentary:
EIA reports a more than 5 million-barrel weekly decline in U.S. crude supplies - MarketWatch (the inventory number was at 396.2 million barrels which is about 3% below the five year average)
This is just ridiculous: Canadian marijuana investors could face lifetime bans from entering U.S. - MarketWatch; Canadian cannabis workers targeted by U.S. border guards for lifetime bans | The Star
Roubini: 10 reasons why conditions will be ripe for a financial crisis by 2020 - MarketWatch
Roubini: 10 reasons why conditions will be ripe for a financial crisis by 2020 - MarketWatch
+++++++
Trump:
Analysis: Republicans lose ground in midterm polling in a place that should make Trump nervous
If Trump does implement next week new tariffs on $200B of China's exports to the U.S., then it could cost the GOP some House seats and may tilt one or more close Senate races to the Democrats.
Politically for the republicans, the best course would be to continue negotiations until after the election, assuming that the Democrats are clever enough to focus on tariffs being a tax on consumers which really is not being clever at all.
The GOP has a strong tendency to take away the financial crumbs that they throw to the middle class. You can see that in several provision in the "tax reform" law and in actual and proposed cuts to social programs. The biggest con run by the GOP is that their efforts are intended to benefit the middle class rather than the top 1% with some spillover into the top 10%.
Trump and Manafort:
Paul Manafort enters cooperation agreement with Justice Department - CNN Manafort would not be IMO a credible witness on any matter relating to the Russia investigation including possible collusion between the Trump campaign and Russian intelligence. To be credible, his verbal testimony would need to be corroborated by hard evidence such as tapes and contemporaneously prepared documents which he can authenticate as genuine.
Superseding criminal information against Paul J. Manafort - The Washington Post Reading this superseding indictment, the FEDs had the goods. Manafort should have secured a plea deal months ago rather than wasting his money on fighting the government's charges.
Manafort Plea Agreement: Cooperation Section:
One of the more interesting interactions may be between Manafort and his old buddy Roger Stone.
Reality Creations in TrumpWorld: Why Bother with the Truth?
In TrumpWorld, it is possible to create your own weather.
‘Never give an inch’: Trump keeps touting perceived failures as successes
Analysis: Republicans lose ground in midterm polling in a place that should make Trump nervous
If Trump does implement next week new tariffs on $200B of China's exports to the U.S., then it could cost the GOP some House seats and may tilt one or more close Senate races to the Democrats.
Politically for the republicans, the best course would be to continue negotiations until after the election, assuming that the Democrats are clever enough to focus on tariffs being a tax on consumers which really is not being clever at all.
The GOP has a strong tendency to take away the financial crumbs that they throw to the middle class. You can see that in several provision in the "tax reform" law and in actual and proposed cuts to social programs. The biggest con run by the GOP is that their efforts are intended to benefit the middle class rather than the top 1% with some spillover into the top 10%.
Trump and Manafort:
Paul Manafort enters cooperation agreement with Justice Department - CNN Manafort would not be IMO a credible witness on any matter relating to the Russia investigation including possible collusion between the Trump campaign and Russian intelligence. To be credible, his verbal testimony would need to be corroborated by hard evidence such as tapes and contemporaneously prepared documents which he can authenticate as genuine.
Superseding criminal information against Paul J. Manafort - The Washington Post Reading this superseding indictment, the FEDs had the goods. Manafort should have secured a plea deal months ago rather than wasting his money on fighting the government's charges.
Manafort Plea Agreement: Cooperation Section:
One of the more interesting interactions may be between Manafort and his old buddy Roger Stone.
Reality Creations in TrumpWorld: Why Bother with the Truth?
In TrumpWorld, it is possible to create your own weather.
‘Never give an inch’: Trump keeps touting perceived failures as successes
Donald claimed last Tuesday that the U.S. to Hurricane Maria "was one of the best jobs that's ever" and "an incredible, unsung success." Trump's claim of success in Puerto Rico hurricane response derided - BBC News
An estimated 2,975 Americans died as result of that hurricane. Ascertainment of the Estimated Excess Mortality from Hurricane Maria in Puerto Rico.pdf
Donald claimed last Thursday that the Democrats raised the death toll "in order to make me look as bad as possible":
The number of deaths was calculated as between 2,658 and 3,290, with a midpoint of 2,975, in the six months after the storm made landfall. This range was arrived at in a comprehensive study undertaken by the George Washington University's public health department. GW Researchers: 2,975 Excess Deaths Linked to Hurricane Maria-The George Washington University The GW researchers replied to Trump in this article: We calculated the deaths from Hurricane Maria. Politics played no role. - The Washington Post
The study did not include any elderly person who simply died as Donald claimed. If that number was included, the death toll would be 16,608.
People die as a result of a hurricane after it is over when the response is inadequate which was the case with FEMA's efforts in PR. People contract diseases from ingesting tainted water and food and die from medical issues due to a lack of proper care. Hospitals in PR had no power for a long time after the hurricane left, and there was insufficient medical supplies as well.
Puerto Rico’s Health Care Is in Dire Condition, Three Weeks After Maria - The New York Times;
Puerto Rico Hospitals' Power After Hurricane - The Atlantic;
Puerto Rico: Water bottles – possibly millions – meant for Hurricane Maria victims discovered piled on a tarmac days before Trump tweets 3,000 people didn't die from storm - CBS News;
FEMA admits failures in Puerto Rico disaster response, in after-action report - The Washington Post
GAO report criticizes FEMA's response to Hurricane Maria in Puerto Rico - CBS News
Fact Check: Trump Calls Puerto Rico Hurricane Response An 'Unsung Success' : NPR
Federal response slow-footed in Puerto Rico despite millions spent
How a slow response hurt Puerto Rico after Hurricane Maria | Miami Herald
Puerto Rico's new Hurricane Maria death toll demands an inquiry into why the truth is only coming out now
Here's What Life is Like in Puerto Rico 3 Months After Hurricane Maria
Trump's False Tweets on Hurricane Maria's Death Toll - FactCheck.org
The basic problems were in logistics and what I would call the nitty gritty of blocking and tackling necessary to avoid unnecessary fatalities after a hurricane. For example, there was an extremely slow effort made to clear streets from debris that was required to deliver food, medicine and water.
This is just another example of how Donald needlessly creates controversy and repels large numbers of voters by unnecessarily claiming that the response was magnificent, disputing the number of deaths, and basically asserting that he is the real victim of a Democrat conspiracy.
Shortly before hurricane season started this year, the Trump Administration moved almost $10 million out of FEMA's budget to Homeland Security to pay for the administration's zero tolerance policy that resulted in more immigrant incarcerations. Trump defunded $10 million from FEMA 'response and recovery' to spend on ICE detentions — just before hurricane season; FEMA head defends $10 million transfer to ICE, accuses Democrat of 'playing politics'; FEMA's budget cut by $10 million to support ICE, documents show
Trump also moved almost 29M from the Coast Guard, probably the most effective agency in hurricane disaster responses, to fund increased detentions. This was initially mentioned in a June 2018 WP article as a possibility. Trump administration plans to use Coast Guard money to pay for border enforcement - The Washington Post
DHS received altogether about $200M from other agencies to pay for the increased detentions.
Feds holding 12,800 migrant children in detention centers, report says - CBS News; Detention of Migrant Children Has Skyrocketed to Highest Levels Ever - The New York Times
Jamie Dimon claimed to be smarter than Doofus Don which drew the usual twitter slam by the Duck:
Dimon should know that no one in world history is smarter than the Stable Genius.
Are there any republican politicians who are not climate change science deniers? How climate change could be impacting hurricanes like Florence -CBS News I can name a few who will deny denying the science of climate change and then proceed to deny the science. The EPA's Website After a Year of Climate Change Censorship | Time I do believe it is fair now to tag the GOP as the pro-pollution party.
++++
There are growing anti-democratic and authoritarian political movements in Europe and of course the U.S.
EU Parliament denounces Hungary as ‘systemic threat to the rule of law’ - MarketWatch
Five takeaways about the Swedish election — and the far-right wave across Europe - The Washington Post
The greatest threat to western democracies probably comes from within. I certainly believe that is true also for the U.S.
An estimated 2,975 Americans died as result of that hurricane. Ascertainment of the Estimated Excess Mortality from Hurricane Maria in Puerto Rico.pdf
Donald claimed last Thursday that the Democrats raised the death toll "in order to make me look as bad as possible":
The number of deaths was calculated as between 2,658 and 3,290, with a midpoint of 2,975, in the six months after the storm made landfall. This range was arrived at in a comprehensive study undertaken by the George Washington University's public health department. GW Researchers: 2,975 Excess Deaths Linked to Hurricane Maria-The George Washington University The GW researchers replied to Trump in this article: We calculated the deaths from Hurricane Maria. Politics played no role. - The Washington Post
The study did not include any elderly person who simply died as Donald claimed. If that number was included, the death toll would be 16,608.
People die as a result of a hurricane after it is over when the response is inadequate which was the case with FEMA's efforts in PR. People contract diseases from ingesting tainted water and food and die from medical issues due to a lack of proper care. Hospitals in PR had no power for a long time after the hurricane left, and there was insufficient medical supplies as well.
Puerto Rico’s Health Care Is in Dire Condition, Three Weeks After Maria - The New York Times;
Puerto Rico Hospitals' Power After Hurricane - The Atlantic;
Puerto Rico: Water bottles – possibly millions – meant for Hurricane Maria victims discovered piled on a tarmac days before Trump tweets 3,000 people didn't die from storm - CBS News;
FEMA admits failures in Puerto Rico disaster response, in after-action report - The Washington Post
GAO report criticizes FEMA's response to Hurricane Maria in Puerto Rico - CBS News
Fact Check: Trump Calls Puerto Rico Hurricane Response An 'Unsung Success' : NPR
Federal response slow-footed in Puerto Rico despite millions spent
How a slow response hurt Puerto Rico after Hurricane Maria | Miami Herald
Puerto Rico's new Hurricane Maria death toll demands an inquiry into why the truth is only coming out now
Here's What Life is Like in Puerto Rico 3 Months After Hurricane Maria
Trump's False Tweets on Hurricane Maria's Death Toll - FactCheck.org
The basic problems were in logistics and what I would call the nitty gritty of blocking and tackling necessary to avoid unnecessary fatalities after a hurricane. For example, there was an extremely slow effort made to clear streets from debris that was required to deliver food, medicine and water.
This is just another example of how Donald needlessly creates controversy and repels large numbers of voters by unnecessarily claiming that the response was magnificent, disputing the number of deaths, and basically asserting that he is the real victim of a Democrat conspiracy.
Shortly before hurricane season started this year, the Trump Administration moved almost $10 million out of FEMA's budget to Homeland Security to pay for the administration's zero tolerance policy that resulted in more immigrant incarcerations. Trump defunded $10 million from FEMA 'response and recovery' to spend on ICE detentions — just before hurricane season; FEMA head defends $10 million transfer to ICE, accuses Democrat of 'playing politics'; FEMA's budget cut by $10 million to support ICE, documents show
Trump also moved almost 29M from the Coast Guard, probably the most effective agency in hurricane disaster responses, to fund increased detentions. This was initially mentioned in a June 2018 WP article as a possibility. Trump administration plans to use Coast Guard money to pay for border enforcement - The Washington Post
DHS received altogether about $200M from other agencies to pay for the increased detentions.
Feds holding 12,800 migrant children in detention centers, report says - CBS News; Detention of Migrant Children Has Skyrocketed to Highest Levels Ever - The New York Times
Jamie Dimon claimed to be smarter than Doofus Don which drew the usual twitter slam by the Duck:
Are there any republican politicians who are not climate change science deniers? How climate change could be impacting hurricanes like Florence -CBS News I can name a few who will deny denying the science of climate change and then proceed to deny the science. The EPA's Website After a Year of Climate Change Censorship | Time I do believe it is fair now to tag the GOP as the pro-pollution party.
++++
There are growing anti-democratic and authoritarian political movements in Europe and of course the U.S.
EU Parliament denounces Hungary as ‘systemic threat to the rule of law’ - MarketWatch
Five takeaways about the Swedish election — and the far-right wave across Europe - The Washington Post
The greatest threat to western democracies probably comes from within. I certainly believe that is true also for the U.S.
+++++++++
1. Small Ball-Income Generation:
A. Bought 50 TERP at $11.18-Used Schwab Commission Free Trade and 100 at $11.19 (and sold 50 of that 100 lot at $11.5)-Used Fidelity Commission Free Trades:
Closing Price Last Friday: TERP $11.83 0.00 0.00%
The 100 share lot bought in the Fidelity account was a mistake. I thought that I was in a family member's account. Consequently, I sold 50 of the 100 share lot at $11.5 after the ex dividend date.
Profit Snapshot: $15.75
Quote: TerraForm Power Inc. Cl A (TERP)
Website: TerraForm Power
TERP SEC Filings
2017 Annual Report
See discussion at TerraForm Power Inc. Continues to Prove Why It’s One of the Top Renewable Stocks to Buy -- The Motley Fool
This company owns 3,640 megawatts of solar and wind energy projects.
TerraForm Power Projects:
Orange: Solar Generation
Green: Wind Generation
Dividend: Quarterly at $.19 per share (prior dividends classified as ROC)
Since all dividend payments made to date have been classified as returns of capital, which are not taxable as dividends, I did not buy a tax event by purchasing the 150 shares the day before the ex dividend date.
The company has a lot of depreciation expense. As with REITs, cash flow is viewed as the dividend support.
Dividend Growth Targets: 5% to 8% annually
2018 2nd Quarter Supplemental Information
Ex Dividend: Day after purchase 8/30
The stock rose $.16 on the ex dividend date adjusted for the $.19 per share ex dividend.
Dividend Yield at a Total Cost of $11.19 = 6.79%
Recent Earnings Report: Q/E 6/30/18
TerraForm Power Reports Second Quarter 2018 Results
Saeta Yield, whose acquisition is reference in the previous quote, owned 1,028MW of solar and wind generation in Europe. The purchase was financed in part by Brookfield Energy Partners buying TERP shares that increased its ownership interest, along with related entities, to 65% from 51%. Brookfield Renewable Reports Second Quarter Results The private stock placement consisted of 60,975,609 shares and was priced at $10.66 per share. SEC Filing
Cash Available For Distribution Calculation:
SEC Filed Supplemental Report for the Q/E 6/30/18
Subsequent to my purchases, Goldman Sachs raised TERP from a sell to neutral. The price target remained unchanged at $11. TerraForm Power upgraded to Neutral from Sell at Goldman Sachs TERP - The Fly
B. Bought 5 VOD at $22-Used Commission Free Trade:
Quote: Vodafone Group PLC ADR (VOD)
Closing Price Last Friday: VOD $22.23 -$0.04 -0.18%
The stock declined on the day of purchase by 4.79% as Merrill Lynch downgraded VOD from a buy rating. Just another ML downgrade after a stock hits a 52 week low. Maybe it would have been better for ML customers to downgrade VOD near the 52 week high of $33.
Position: 71 Shares
Purchase Restriction: Small Ball Rule (next purchase has to be below $22)
Maximum Position: 100 shares
Average Cost Per Share: $24.82
Dividend: High yield
Vodafone Group Plc (VOD) Dividend Date & History - NASDAQ.com
Chart: Major Bear Trend Since 1/8/18
Last Substantive Buy Discussion: Item 1.B. Bought 20 VOD at $26.57 (5/24/18 Post)
Last Purchase: Item # 3.C. Bought 5 VOD at $22.88 (8/22/18 Post)
Last Sell Discussion: Item 1.A. Sold 51+ VOD at $30.21 (11/30/17 Post)
C. Bought 15 GDO at $16.27-Used Commission Free Trade:
Quote: Western Asset Global Corp Defined Opportunity Fund Inc. (GDO)
Closing Price Last Friday: GDO $16.33 -$0.01 -0.03%
Western Asset Global Corporate Defined Opportunity Fund Inc. Portfolio Composition as of June 30, 2018
Sponsor's Website: WA Global Corporate Defined Opportunity Fund Inc. | Legg Mason
Current Position: 118+ Shares
Average Cost Per Share: $16.73
Dividend: Monthly at $.101 per share
The penny rate is drifting down:
Dividend Yield at $16.73 TC Per Share: 7.24%
Last Ex Dividend Date: 8/23/18
Next Ex Dividend Date: 9/20/18
Purchase Restriction: Small Ball Rule
I have increased the purchase lot size to 15 shares from 10.
Western Asset Global Corporate Defined Opportunity Fund Inc. (GDO): Last SEC Filed Shareholder Report
Net Unrealized Appreciation as of 4/30/18 (Page 35): $7.2929M
Borrowing Cost as of 4/3/0/18: Variable rate at Libor + a spread
Deferred Capital Loss as of 4/30/18: -$14.609+M
Fund Data:
The duration number of 5.64 years provides material information on interest rate risk. Get to know your bond fund: Duration | Vanguard Generally speaking, a 1% rise in interest rates using the 5.64 duration number would cause about a 5.64% decline in net asset value per share and vice versa. The actual number will depend on credit risk issues that could exacerbate or cushion the decline caused by an increase in rates. This fund owns a number of bonds that I would never buy including sovereign bonds issued by Argentina, and a number of junk bonds that I would not buy at anywhere near their current yields.
Credit Ratings of Owned Bonds:
Maximum Position: 200 Shares
Highest Cost Lots in Current Chain: Item # 2 Bought 50 GDO at $17.01 and 10 at $16.82-Used Commission Free Trades (2/22/18 Post) Those lots will be sold using a commission free trade when and if the price exceeds $17.01.
Data Date of Trade (8/31/18):
Net Asset Value Per Share: $17.87
Market Price: $16.32
Discount to NAV = -8.67%
GDO Page at CEF Connect
Last Substantive Discussion: Item # 3.A. Bought 10 GDO at $16.39 (8/22/18 Post)
I have nothing further to add to that prior discussion.
A. Bought 50 TERP at $11.18-Used Schwab Commission Free Trade and 100 at $11.19 (and sold 50 of that 100 lot at $11.5)-Used Fidelity Commission Free Trades:
Closing Price Last Friday: TERP $11.83 0.00 0.00%
The 100 share lot bought in the Fidelity account was a mistake. I thought that I was in a family member's account. Consequently, I sold 50 of the 100 share lot at $11.5 after the ex dividend date.
Profit Snapshot: $15.75
Quote: TerraForm Power Inc. Cl A (TERP)
Website: TerraForm Power
TERP SEC Filings
2017 Annual Report
See discussion at TerraForm Power Inc. Continues to Prove Why It’s One of the Top Renewable Stocks to Buy -- The Motley Fool
This company owns 3,640 megawatts of solar and wind energy projects.
TerraForm Power Projects:
Orange: Solar Generation
Green: Wind Generation
Dividend: Quarterly at $.19 per share (prior dividends classified as ROC)
Since all dividend payments made to date have been classified as returns of capital, which are not taxable as dividends, I did not buy a tax event by purchasing the 150 shares the day before the ex dividend date.
The company has a lot of depreciation expense. As with REITs, cash flow is viewed as the dividend support.
Dividend Growth Targets: 5% to 8% annually
2018 2nd Quarter Supplemental Information
Ex Dividend: Day after purchase 8/30
The stock rose $.16 on the ex dividend date adjusted for the $.19 per share ex dividend.
Dividend Yield at a Total Cost of $11.19 = 6.79%
Recent Earnings Report: Q/E 6/30/18
TerraForm Power Reports Second Quarter 2018 Results
Saeta Yield, whose acquisition is reference in the previous quote, owned 1,028MW of solar and wind generation in Europe. The purchase was financed in part by Brookfield Energy Partners buying TERP shares that increased its ownership interest, along with related entities, to 65% from 51%. Brookfield Renewable Reports Second Quarter Results The private stock placement consisted of 60,975,609 shares and was priced at $10.66 per share. SEC Filing
Cash Available For Distribution Calculation:
SEC Filed Supplemental Report for the Q/E 6/30/18
Subsequent to my purchases, Goldman Sachs raised TERP from a sell to neutral. The price target remained unchanged at $11. TerraForm Power upgraded to Neutral from Sell at Goldman Sachs TERP - The Fly
B. Bought 5 VOD at $22-Used Commission Free Trade:
Quote: Vodafone Group PLC ADR (VOD)
Closing Price Last Friday: VOD $22.23 -$0.04 -0.18%
The stock declined on the day of purchase by 4.79% as Merrill Lynch downgraded VOD from a buy rating. Just another ML downgrade after a stock hits a 52 week low. Maybe it would have been better for ML customers to downgrade VOD near the 52 week high of $33.
Position: 71 Shares
Purchase Restriction: Small Ball Rule (next purchase has to be below $22)
Maximum Position: 100 shares
Average Cost Per Share: $24.82
Dividend: High yield
Vodafone Group Plc (VOD) Dividend Date & History - NASDAQ.com
Chart: Major Bear Trend Since 1/8/18
Last Substantive Buy Discussion: Item 1.B. Bought 20 VOD at $26.57 (5/24/18 Post)
Last Purchase: Item # 3.C. Bought 5 VOD at $22.88 (8/22/18 Post)
Last Sell Discussion: Item 1.A. Sold 51+ VOD at $30.21 (11/30/17 Post)
C. Bought 15 GDO at $16.27-Used Commission Free Trade:
Quote: Western Asset Global Corp Defined Opportunity Fund Inc. (GDO)
Closing Price Last Friday: GDO $16.33 -$0.01 -0.03%
Western Asset Global Corporate Defined Opportunity Fund Inc. Portfolio Composition as of June 30, 2018
Sponsor's Website: WA Global Corporate Defined Opportunity Fund Inc. | Legg Mason
Current Position: 118+ Shares
Average Cost Per Share: $16.73
Dividend: Monthly at $.101 per share
The penny rate is drifting down:
Dividend Yield at $16.73 TC Per Share: 7.24%
Last Ex Dividend Date: 8/23/18
Next Ex Dividend Date: 9/20/18
Purchase Restriction: Small Ball Rule
I have increased the purchase lot size to 15 shares from 10.
Western Asset Global Corporate Defined Opportunity Fund Inc. (GDO): Last SEC Filed Shareholder Report
Net Unrealized Appreciation as of 4/30/18 (Page 35): $7.2929M
Borrowing Cost as of 4/3/0/18: Variable rate at Libor + a spread
Deferred Capital Loss as of 4/30/18: -$14.609+M
Fund Data:
The duration number of 5.64 years provides material information on interest rate risk. Get to know your bond fund: Duration | Vanguard Generally speaking, a 1% rise in interest rates using the 5.64 duration number would cause about a 5.64% decline in net asset value per share and vice versa. The actual number will depend on credit risk issues that could exacerbate or cushion the decline caused by an increase in rates. This fund owns a number of bonds that I would never buy including sovereign bonds issued by Argentina, and a number of junk bonds that I would not buy at anywhere near their current yields.
Credit Ratings of Owned Bonds:
Highest Cost Lots in Current Chain: Item # 2 Bought 50 GDO at $17.01 and 10 at $16.82-Used Commission Free Trades (2/22/18 Post) Those lots will be sold using a commission free trade when and if the price exceeds $17.01.
Data Date of Trade (8/31/18):
Net Asset Value Per Share: $17.87
Market Price: $16.32
Discount to NAV = -8.67%
GDO Page at CEF Connect
Last Substantive Discussion: Item # 3.A. Bought 10 GDO at $16.39 (8/22/18 Post)
I have nothing further to add to that prior discussion.
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 1 Ventas LTD 2.7% SU Bond Maturing on 4/1/20 in a Roth IRA Account:
I now own 4 bonds with two of them owned in Roth IRA accounts.
In this Fidelity Roth IRA account, I will generally keep my cash allocation at less than $1K. I had 1 Bank of Hope 1.45% CD mature on 8/24/18 which had a 1 year term.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Operating Subsidiary of Ventas Inc. (VTR) who guarantees the bonds
Ventas Reports 2018 Second Quarter Results
Issuer: Operating Subsidiary of Ventas Inc. (VTR) who guarantees the bonds
Ventas Reports 2018 Second Quarter Results
Recent Bond Offering: Ventas Announces Pricing of Senior Notes Offering (8/6/18)
Credit Ratings:
Fitch Rates Ventas' Senior Unsecured Notes 'BBB+' (8/6/18)
Credit Ratings:
Fitch Rates Ventas' Senior Unsecured Notes 'BBB+' (8/6/18)
Bought at a Total Cost of 99.401
YTM at TC Then at 3.09%
Current Yield at TC = 2.7163%
B. Bought 1 Union Pacific 2.25% SU Bond Maturing on 6/19/20:
I now own two bonds.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Union Pacific Corp. (UNP)
UNP Analyst Estimates
Union Pacific Reports Record Second Quarter Results
UNP SEC Filings
UNP 2017 Annual Report
Credit Ratings:
Bought at a Total Cost of 98.814
YTM atT TC then at 2.933%
Current Yield at TC = 2.277%
This purchase redeployed $1K in proceeds from a maturing 9 month CD that paid 1.5%.
B. Bought 1 Union Pacific 2.25% SU Bond Maturing on 6/19/20:
I now own two bonds.
FINRA Page: Bond Detail (prospectus linked)
Issuer: Union Pacific Corp. (UNP)
UNP Analyst Estimates
Union Pacific Reports Record Second Quarter Results
UNP SEC Filings
UNP 2017 Annual Report
Credit Ratings:
Bought at a Total Cost of 98.814
YTM atT TC then at 2.933%
Current Yield at TC = 2.277%
This purchase redeployed $1K in proceeds from a maturing 9 month CD that paid 1.5%.
C. Bought 2 Huntington Bancshares 3.15% SU Bonds Maturing on 3/14/21:
FINRA Page: Bond Detail (prospectus not linked)
Prospectus
FINRA Page: Bond Detail (prospectus not linked)
Prospectus
Issuer: Huntington Bancshares Inc. (HBAN)
HBAN Analyst Estimates
2017 Annual Report
HBAN SEC Filings
Huntington Bancshares Incorporated Reports 2018 Second Quarter Earnings of $0.30 Per Common Share
Credit Ratings:
Bought at a Total Cost of 99.77
YTM at TC Then at 3.245%
Current Yield at TC = 3.1573%
My exposure to senior unsecured bonds maturing in 2021 is currently very light at $42K. I am looking to gradually acquire more with yields over 3%. At the time of purchase, the three year treasury note yield was at 2.73%: U.S. 3 Year Treasury Note The HBAN bond matures about 6 months sooner.
HBAN Analyst Estimates
2017 Annual Report
HBAN SEC Filings
Huntington Bancshares Incorporated Reports 2018 Second Quarter Earnings of $0.30 Per Common Share
Credit Ratings:
Bought at a Total Cost of 99.77
YTM at TC Then at 3.245%
Current Yield at TC = 3.1573%
My exposure to senior unsecured bonds maturing in 2021 is currently very light at $42K. I am looking to gradually acquire more with yields over 3%. At the time of purchase, the three year treasury note yield was at 2.73%: U.S. 3 Year Treasury Note The HBAN bond matures about 6 months sooner.
3. Long Term Bond Basket Strategy-First Mortgage Bonds:
A. Bought 30 EAE at $23.66-Used Commission Free Trade:
Quote: Entergy Arkansas Inc. First Mortgage Bonds 4.75% Series Due June 1, 2063 (EAE)
EAE is an exchange traded baby bond which trades flat on the stock exchange.
Prospectus
Credit Ratings: A2/A-
Security: First Lien on substantially all of issuer's assets
Par Value: $25
Coupon: 4.75% on a $25 par value
Yield at a TC of $23.66 = 5.019%
Interest Payments: Quarterly
Last Ex-Interest Date: 8/30/18 (the price has drifted down more the value of the dividend since the ex date)
Optional Call Date: On or after 6/1/18
Maturity: 6/1/63, unless redeemed early at the issuer's option
Asymmetric Interest Rate Risk: As with other exchange traded bonds, interest rate risk is asymmetric in favor of the issuer.
If interest rates decline so that it becomes advantageous for the issuer to redeem at par value, then the owner is left with the proceeds to reinvest at a lower coupon.
If interest rates rise, the issuer would be just pleased to let the owners hold the bond that is going down in value.
This bond, with its potentially long maturity date, has a ton of interest rate risk.
I am not currently concerned by the credit risk.
Other Owned Entergy Arkansas FM Bonds:
I have a 30 share position in another exchange traded Entergy Arkansas FM bond: Item # 4.A. Bought 30 EAI at $24.12 (5/24/18 Post)
I also own first mortgage bonds issued by this company maturing in 2023 that were bought in the bond market and have $1K par values.
3.05% Maturing on 6/1/23 (own 2 bonds)
3.5% Maturing on 4/1/26 (own 1 bond)
A. Bought 30 EAE at $23.66-Used Commission Free Trade:
Quote: Entergy Arkansas Inc. First Mortgage Bonds 4.75% Series Due June 1, 2063 (EAE)
EAE is an exchange traded baby bond which trades flat on the stock exchange.
Prospectus
Credit Ratings: A2/A-
Security: First Lien on substantially all of issuer's assets
Coupon: 4.75% on a $25 par value
Yield at a TC of $23.66 = 5.019%
Interest Payments: Quarterly
Last Ex-Interest Date: 8/30/18 (the price has drifted down more the value of the dividend since the ex date)
Optional Call Date: On or after 6/1/18
Maturity: 6/1/63, unless redeemed early at the issuer's option
Asymmetric Interest Rate Risk: As with other exchange traded bonds, interest rate risk is asymmetric in favor of the issuer.
If interest rates decline so that it becomes advantageous for the issuer to redeem at par value, then the owner is left with the proceeds to reinvest at a lower coupon.
If interest rates rise, the issuer would be just pleased to let the owners hold the bond that is going down in value.
This bond, with its potentially long maturity date, has a ton of interest rate risk.
I am not currently concerned by the credit risk.
Other Owned Entergy Arkansas FM Bonds:
I have a 30 share position in another exchange traded Entergy Arkansas FM bond: Item # 4.A. Bought 30 EAI at $24.12 (5/24/18 Post)
I also own first mortgage bonds issued by this company maturing in 2023 that were bought in the bond market and have $1K par values.
3.05% Maturing on 6/1/23 (own 2 bonds)
3.5% Maturing on 4/1/26 (own 1 bond)
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.
Government Properties Income Trust (GOV) announced that it was acquiring Select Income REIT (SIR). The transaction is complicated based on the information contained in the press release.
ReplyDeletehttps://www.businesswire.com/news/home/20180917005210/en/
GOV will be the surviving corporation. SIR shareholders will receive 1.04 GOV shares for each SIR share plus approximately .502 shares of Industrial Logistics Properties Trust (ILPT). For reasons that are not clear to me at the moment, GOV will sell the 24.9M SIR shares that it currently owns.
ILPT closed last Friday at $23.26.
https://www.marketwatch.com/investing/stock/ilpt
SIR is trading up in premarket trading:
$23.68 +3.62 +18.05%
Last Updated: Sep 17, 2018 at 8:14 a.m. EDT
https://www.marketwatch.com/investing/stock/sir
GOV is trading down: $15.01 -$1.88 -11.13%
https://www.marketwatch.com/investing/stock/gov
I recently pared my SIR position by selling 83+ shares at $23.2:
Item # 1.A.
https://tennesseeindependent.blogspot.com/2018/07/observations-and-sample-of-recent_18.html
I still own 20+ shares in my Fidelity account with an average cost of $19.17 per share and will sell that lot using a commission free trade.
I recently pared my GOV lottery ticket position down to 25 shares with an average cost per share at $12.43. I will keep that lot, but will not reinvest the dividend.
My only concern given the immaterial stock positions is Select Income SU bonds. I own several. I will be monitoring the price action over the coming weeks more closely to see how the Bond Ghouls respond to this news.
The 3 month treasury bill continued to tick up in today's auction compared to last Monday. The investment rate today was at 2.166%, up from 2.151%.
ReplyDeleteThe 4 week bill will be auctioned tomorrow and the investment rate is likely to be close to 2%.
2.01% +0.002%
Last Updated: Sep 17, 2018 at 12:35 p.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd01m?countrycode=bx
I will probably participate in that auction. I have bought some in every 3 month treasury bill auction for several weeks now.
Donald stated that the China tariffs were imminent and will apparently be announced later today. Kudlow said earlier today that the U.S. was ready to negotiate with China if China was ready for serious discussions. China made it clear that it will not negotiate if new tariffs are imposed by the U.S. "China is not going to negotiate with a gun pointed to its head," a senior Chinese official told the Wall Street Journal.
ReplyDeletehttps://www.bloomberg.com/news/articles/2018-09-17/trump-set-to-slap-10-tariff-on-200-billion-of-chinese-goods?srnd=premium
I did sell out of SIR at $23.15.
Shareholders punished GOV for its acquisition proposal:
Government Properties Income Trust (GOV)
$12.69 -$4.19 (-24.84%)
https://finance.yahoo.com/quote/GOV?p=GOV
The ten year treasury did cross over 3% earlier today but close a slither below that level.
2.991% -0.007%
Last Updated: Sep 17, 2018 4:18 p.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
As expected, Trump unleashed 10% tariffs on $200B in China's export, effective 9/24/18, and will increase the amount to 25% on 1/1/2019. 300 products including Apple watches were removed from the initial tariff list.
ReplyDeletehttps://www.cnbc.com/2018/09/17/trump-puts-new-tariffs-on-china-as-trade-war-escalates.html
If China retaliates, which is expected, Trump will pursue the last phase which will impose tariffs on the remaining products exported by China.
The majority view among the Stock Jocks is that Trump will win this trade war. That remains to be determined. I would question the assumption being made that China will take a knee and bow to Donald's demands.
What in your opinion is the "reason" (and I use the term loosely, given that Trump is the perpetrator) for this trade war? Is it supposed to somehow make America great again? Or to punish China for supposedly manipulating its currency, or for the climate change "hoax?" Or to make them stop being mean to us?
DeleteAs far as I can determine, what it mostly will do is increase the cost of a large number of goods sold to American consumers by American companies.
What, really, are Donald's demands, that the Chinese may or may not cave in to?
By whom, when, or how, will the "winner" of the trade war be determined?
Cathie: There appears to be a general consensus across the ideological spectrum that China steals American intellectual property. Part of that is widespread theft by persons and companies (crackdowns are superficial), and part is actually sanctioned by the government in forced technology transfers.
Deletehttps://www.bloomberg.com/news/articles/2018-08-15/five-sticking-points-keeping-xi-and-trump-from-a-trade-deal
The U.S. also wants China to buy more U.S. products and to open up its markets more for U.S. companies. That includes concrete changes in tariffs on certain imports like automobiles and removal of restrictions on auto and airplane imports.
https://www.reuters.com/article/us-usa-trade-china-explainer/key-sticking-points-in-the-u-s-china-trade-dispute-idUSKBN1I30WO
The market reaction so far is practically non-existent. Shanghai is up slightly with Hong Kong currently down just .65%. The majority view is that the U.S. will win this trade war. I am not convinced by any means that China will bow in submission to Donald, nor can its leaders be seen internally as taking a knee.
The next move is up to China. I expect China to levy tariffs on the remaining U.S. exports and to take other measures that makes life difficult for U.S. companies operating in China and to take measures to disrupt the global supply chains for U.S. companies.
In the NAFTA renegotiation with Mexico, Donald ended up with a deal that made little change in the existing agreement, and arguably made it worst for the U.S. Yet he declared victory. The only thing for certain is that any deal will be declared by the Duck as the biggest victory in the history of the universe since the Big Bang.
S&P 500 Index 2,907.14 +18.34 +0.63%
ReplyDeleteLast Updated: Sep 18, 2018 at 12:21 p.m. EDT
https://www.marketwatch.com/investing/index/spx
The Stock Jocks remain unperturbed about the accelerating trade war with China.
China did respond with tariffs on $60B in U.S. exports that will take effect on 9/24, the same day as the U.S. tariffs on $200B in China's exports.
https://www.reuters.com/article/us-usa-trade-china-response/china-hits-back-by-levying-tariffs-on-60-billion-of-u-s-goods-idUSKCN1LY22V
China will have tariffs on 100% of U.S. exports as of 9/24. The tariffs are lower than expected with some at 5% and others at 10%. It appears to me that China is attempting to weigh impacts on its own economy from tariffs imposed on U.S. exports.
Without any fear of being contradicted, the only conclusion possible at the moment is that the Stock Jocks are not concerned about the trade war with China or anyone else for that matter.
ReplyDeleteThe acceleration in the trade war is viewed as insignificant and unlikely to last long, with the U.S. coming out on top after a brief period of skirmishing and chest pounding. I do not subscribe to that view but I am admittedly in a minority too small to impact prices negatively.
The ten year treasury is going through the motions of wanting to break out of its yield trading range, closing today at near the top of the 2018 range:
U.S. 10 Year Treasury Note
3.062% +0.071%
Last Updated: Sep 18, 2018 at 4:51 p.m. EDT
Possibly this move up in yields is the one that keeps on trucking to higher range bound levels. According to the Treasury Department's data, the highest close this year, rounded to the nearest .01, was at 3.11%, hit on 5/17.
One small anomaly is that regional bank stocks retreated even though interest rates rose:
SPDR S&P Regional Banking ETF
$61.27 -$0.25 -0.41%
https://www.marketwatch.com/investing/fund/kre
The VIX movement was consistent with the up move in the S & P 500:
CBOE Volatility Index 12.79 -0.89 -6.51%
https://www.marketwatch.com/investing/index/vix
It would be a fair statement to say that GOV investors do not care for the merger proposal. The price closed at $16.89 on 9/14:
https://www.marketwatch.com/investing/stock/gov/charts
Government Properties Income Trust
$11.82 -$0.88 -6.93%
There are a number of rational reasons justifying this decline. GOV has been a much despised REIT for years due in large part to the actions undertaken by its external manager RMR. Turning SIR and GOV into an office REIT brings back bad memories of what happened to Commonwealth REIT which was an office REIT managed by RMR at one time. In an extraordinary and highly unusual action, shareholders got so fed up with RMR that they voted to terminate the management agreement.
Individuals are the ones playing the RMR managed REITS and many are attracted to the high dividend levels. I have tried to trade GOV for profits and to capture the dividend yield. That gig is played out now since the surviving entity in this merger (GOV) is going to slash the dividend rate by more than 60%:
"GOV and SIR expect that post-merger, OPI will pay an annual dividend of between $0.50 and $0.60 per share based upon a targeted 75% cash available for distribution, or CAD, dividend payout ratio."
Page 2
https://seekingalpha.com/article/4206766-government-properties-income-trust-gov-ceo-david-blackman-government-properties-income-trust?page=2
The current GOV dividend is $1.72 annually. A 60% cut to that rate would be to $.69 per share annually and a 70% cut would take the penny rate to $.516 or near the bottom of the anticipated .$5. to $.6 range. That will cause the moms and pops to abandon this poorly managed company likely for good. GOV is as I have said many times a deservedly hated REIT because of RMR and the actions taken by that company over the years in managing GOV and other REITs.
The purported premium cited by GOV for the SIR shares, which was given at $29+ in the press release, was illusory. SIR closed today at $20.52, about where it was trading in the days leading up to the merger announcement.
It is possible that a trading opportunity may emerge in SIR which will first require first a stabilization in both GOV's price and the stock price of Industrial Logistics (ILPT), with the later stock being relevant due to SIR shareholders receiving SIR's ILPT shares shortly before the consummation of the GOV-SIR merger.
https://www.marketwatch.com/investing/stock/ilpt
I doubt that I will try that trade. I am not sure where the bottom may be in GOV's price as individual investors continue to learn about the dividend slash and a return to RMR's model used in the Commonwealth REIT fiasco.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/09/observations-and-sample-of-recent_19.html