Economy:
U.S. adds 201,000 jobs as wage growth accelerates to nine-year high - MarketWatch
The unemployment rate remained at 3.9% in August. The average work week was unchanged at 34.5 hours. Average hourly earnings for private sector employees rose $.10 to $27.16. Over the past year, average hourly earnings have increased by 2.9%. The U-6 rate declined .1% to 7.4%. Table A-15. Alternative measures of labor underutilization
Sourced from the BLS Employment Situation Summary
The Bond Ghouls had an anxiety attack in response to better than expected jobs report, particularly the gain in wages:
TLT $119.13 -$1.02 -0.85%: iShares 20+ Year Treasury Bond ETF
IEF $101.91 -$0.46 -0.45%: iShares 7-10 Year Treasury Bond ETF
Most of the ten year treasury yield can be picked up with a one year treasury bill which will be auctioned next Tuesday. The one year bill closed last Friday at 2.53% vs. the 10 year at 2.94%.
Daily Treasury Yield Curve Rates
++
U.S. adds 201,000 jobs as wage growth accelerates to nine-year high - MarketWatch
The unemployment rate remained at 3.9% in August. The average work week was unchanged at 34.5 hours. Average hourly earnings for private sector employees rose $.10 to $27.16. Over the past year, average hourly earnings have increased by 2.9%. The U-6 rate declined .1% to 7.4%. Table A-15. Alternative measures of labor underutilization
Sourced from the BLS Employment Situation Summary
The Bond Ghouls had an anxiety attack in response to better than expected jobs report, particularly the gain in wages:
TLT $119.13 -$1.02 -0.85%: iShares 20+ Year Treasury Bond ETF
IEF $101.91 -$0.46 -0.45%: iShares 7-10 Year Treasury Bond ETF
Most of the ten year treasury yield can be picked up with a one year treasury bill which will be auctioned next Tuesday. The one year bill closed last Friday at 2.53% vs. the 10 year at 2.94%.
Daily Treasury Yield Curve Rates
++
U.S. trade deficit soars nearly 10% on record imports - MarketWatch
July U.S. International Trade.pdf
The strengthening U.S. dollar makes U.S. exports less competitive and U.S. imports more competitive for U.S. purchasers compared to products made or services rendered by U.S. based firms.
Another reason for declining U.S. exports, which will show up later this year, are retaliatory tariffs imposed by Canada, the EU and China. The July export number was most likely positively impacted by exports orders made in advance of tariffs.
July U.S. International Trade.pdf
The strengthening U.S. dollar makes U.S. exports less competitive and U.S. imports more competitive for U.S. purchasers compared to products made or services rendered by U.S. based firms.
Another reason for declining U.S. exports, which will show up later this year, are retaliatory tariffs imposed by Canada, the EU and China. The July export number was most likely positively impacted by exports orders made in advance of tariffs.
Australia's economy storms ahead to best growth in six years | Reuters
China eases economic pressure on North Korea, undercutting the Trump admin
China eases economic pressure on North Korea, undercutting the Trump admin
+++++++
Markets and Market Commentary:
The Stock Jocks generally just read a headline on their Bloomberg terminals until they become bored about half way through.
They were jolted momentarily last Friday after Donald claimed to have tariffs ready to go on $247B of China's exports after he imposes tariffs on the $200B which are now waiting for the Duck's signature and can be implemented at anytime now. Trump ups ante on China, threatens duties on nearly all its imports | Reuters; Trump Threatens Tariffs on $267 Billion More of China Goods - Bloomberg
The media personality Larry Kudlow, who doubles as Donald's chief economic advisor, told the Stock Jocks in another headline that the $200B in additional tariffs were ready to go, but the Trump Administration wanted to give due deference to the comments before imposing them.
It is hard to predict how the SJs will react when and if Trump accelerates the trade war with China and/or trade talks fail with Canada.
Some talking heads believe the S & P 500 will fall by 5% when tariffs on imposed on $200B in China's exports to the U.S.
China will retaliate in ways that go beyond tit-for-tat tariffs on U.S. exports since they are running out of U.S. products to "tax".
The Stock Jocks are not worried about much of anything, confident of, and comfortable with their rosy projections. Maybe they will have an anxiety attack when the reality of a more serious trade war sinks into their consciousness however fleeting that may turn out to be.
A stock-market bear signal is at a more-than-4-decade high, says Goldman - MarketWatch (based on the bull-bear indicator)
The Stock Jocks generally just read a headline on their Bloomberg terminals until they become bored about half way through.
They were jolted momentarily last Friday after Donald claimed to have tariffs ready to go on $247B of China's exports after he imposes tariffs on the $200B which are now waiting for the Duck's signature and can be implemented at anytime now. Trump ups ante on China, threatens duties on nearly all its imports | Reuters; Trump Threatens Tariffs on $267 Billion More of China Goods - Bloomberg
The media personality Larry Kudlow, who doubles as Donald's chief economic advisor, told the Stock Jocks in another headline that the $200B in additional tariffs were ready to go, but the Trump Administration wanted to give due deference to the comments before imposing them.
It is hard to predict how the SJs will react when and if Trump accelerates the trade war with China and/or trade talks fail with Canada.
Some talking heads believe the S & P 500 will fall by 5% when tariffs on imposed on $200B in China's exports to the U.S.
China will retaliate in ways that go beyond tit-for-tat tariffs on U.S. exports since they are running out of U.S. products to "tax".
The Stock Jocks are not worried about much of anything, confident of, and comfortable with their rosy projections. Maybe they will have an anxiety attack when the reality of a more serious trade war sinks into their consciousness however fleeting that may turn out to be.
A stock-market bear signal is at a more-than-4-decade high, says Goldman - MarketWatch (based on the bull-bear indicator)
Little Relief in Sight as Emerging Stocks Slide Near Bear Market - Bloomberg
The emerging-markets crisis might just be getting started - MarketWatch
FBI investigating American Express forex pricing
The emerging-markets crisis might just be getting started - MarketWatch
FBI investigating American Express forex pricing
+++
Trump:
The Anonymous NYT Op-ED:
I do not recall a similar article being published in American history: I Am Part of the Resistance Inside the Trump Administration (NYT anonymous Op-ED written by a "senior official" in the Trump Administration and republished at MSN):
"From the White House to executive branch departments and agencies, senior officials will privately admit their daily disbelief at the commander in chief’s comments and actions. Most are working to insulate their operations from his whims. Meetings with him veer off topic and off the rails, he engages in repetitive rants, and his impulsiveness results in half-baked, ill-informed and occasionally reckless decisions that have to be walked back."
"In addition to his mass-marketing of the notion that the press is the “enemy of the people,” President Trump’s impulses are generally anti-trade and anti-democratic." That is not news.
The author contends that the successes of Trump's presidency "have come despite — not because of — the president’s leadership style, which is impetuous, adversarial, petty and ineffective." The successes are defined by the author as the passage of "tax reform", the deregulation initiatives, and more robust defense spending.
The "senior" official also called Trump "amoral". I would say "amoral" or "immoral" depending on the specific conduct or statement under review.
When asked about this op-ed piece, Senator Bob Corker (R) said that this "is what all of us have understood to be the situation from day one." It is obvious.
Will the republicans hold hearings to determine whether there is a five alarm fire in the Oval Office? Of course not. They will instead shoot the messengers and become indignant.
This article is consistent with other "insider" reports including Bob Woodward's book.
The remedy for an unhinged President is the 25th Amendment, not for unelected officials to basically undermine the President irrespective of their good intentions as the last line of defense when republicans in Congress fail to do their constitutional duty.
The problem is that no republican will take a baby step in that direction, like holding hearings and calling witnesses, let alone follow the procedure outlined in section 4 of that 25th Amendment:
Really, will Pence and a majority of the cabinet send a written declaration to the Senate and House stating that Trump is unable to discharge his duties as President.
To even contemplate that such measures will actually be undertaken is pure fantasy. And that certification by Pence and a majority of the cabinet just starts the ball rolling since Trump would deny that such a disability exists.
When Trump disagrees, which would happen in this scenario, then two-thirds of the House and Senate would have to find Trump unfit. Given the GOP's majorities in both chambers, there would likely be no republicans to so find even if Trump did what I call multiple Ricky Bobbys.
There is no reason for anyone to have the slightest concerns. Donald has assured everyone that his administration was running smoothly.
“We have a really well-run, smooth-running White House. It’s a well-oiled machine. It is running beautifully.” Trump downplays NYT op-ed, says the White House is running like a well-oiled machine
+++
Trump and the First Amendment:
The Anonymous NYT Op-ED:
I do not recall a similar article being published in American history: I Am Part of the Resistance Inside the Trump Administration (NYT anonymous Op-ED written by a "senior official" in the Trump Administration and republished at MSN):
"From the White House to executive branch departments and agencies, senior officials will privately admit their daily disbelief at the commander in chief’s comments and actions. Most are working to insulate their operations from his whims. Meetings with him veer off topic and off the rails, he engages in repetitive rants, and his impulsiveness results in half-baked, ill-informed and occasionally reckless decisions that have to be walked back."
"In addition to his mass-marketing of the notion that the press is the “enemy of the people,” President Trump’s impulses are generally anti-trade and anti-democratic." That is not news.
The author contends that the successes of Trump's presidency "have come despite — not because of — the president’s leadership style, which is impetuous, adversarial, petty and ineffective." The successes are defined by the author as the passage of "tax reform", the deregulation initiatives, and more robust defense spending.
The "senior" official also called Trump "amoral". I would say "amoral" or "immoral" depending on the specific conduct or statement under review.
When asked about this op-ed piece, Senator Bob Corker (R) said that this "is what all of us have understood to be the situation from day one." It is obvious.
Will the republicans hold hearings to determine whether there is a five alarm fire in the Oval Office? Of course not. They will instead shoot the messengers and become indignant.
This article is consistent with other "insider" reports including Bob Woodward's book.
The remedy for an unhinged President is the 25th Amendment, not for unelected officials to basically undermine the President irrespective of their good intentions as the last line of defense when republicans in Congress fail to do their constitutional duty.
The problem is that no republican will take a baby step in that direction, like holding hearings and calling witnesses, let alone follow the procedure outlined in section 4 of that 25th Amendment:
To even contemplate that such measures will actually be undertaken is pure fantasy. And that certification by Pence and a majority of the cabinet just starts the ball rolling since Trump would deny that such a disability exists.
When Trump disagrees, which would happen in this scenario, then two-thirds of the House and Senate would have to find Trump unfit. Given the GOP's majorities in both chambers, there would likely be no republicans to so find even if Trump did what I call multiple Ricky Bobbys.
There is no reason for anyone to have the slightest concerns. Donald has assured everyone that his administration was running smoothly.
“We have a really well-run, smooth-running White House. It’s a well-oiled machine. It is running beautifully.” Trump downplays NYT op-ed, says the White House is running like a well-oiled machine
+++
Trump and the First Amendment:
Donald rarely goes a day without attacking the free press. While republicans have been doing that for decades, Donald's diatribes and rants are far more frequent and acerbic. Donalds "Fake News" criticisms are frequently based on his own false reality creations that respond to demonstrably true facts circulated by the media which he calls fake.
This particular tweet indicates that he would like to yank NBC's broadcast license:
During a rally last Thursday, Demagogue Don accused the New York Times of treason for publishing the Op-Ed: Trump accuses New York Times of treason at rally
Donald also said that he was considering legal action against the NYT. That would not be Donald's first baseless legal claim.
Donald and Nike:
Donald claimed that Nike's common stock has gone "WAY DOWN" in response to its ad featuring Colin Kaepernick and several other athletes.
Just more Fake News from Lying Don. Nike's stock is up over 50% just in the past year. Nike Inc. Cl B (NKE) Demagogue Don is obviously manipulating his easily manipulated base with constant harangues about some NFL players taking a knee.
Nike’s online sales jumped 31% after company unveiled Kaepernick campaign - MarketWatch
Donald and Bob Woodward:
Trump claims that Bob Woodward invented stories about him, asserting that Woodward has committed a big con and fraud and is working for the democrats. That sounds like libel against Woodward:
Given what Trump has already said about Sessions publicly, it is hardly a stretch to find out that Donald has called him "mentally retarded" and a "dumb southerner." The bite to Trump has nothing to do with the comments about Sessions, but his use of the generic phrase "dumb southerners" which could have some political repercussions for republican politicians.
Woodward has earned a ton of credibility over the years.
I have no problem believing that Woodward has tapes and documents supporting every substantive statement and quote in his book. White House actively discussing replacements for Defense Secretary James Mattis: Washington Post
Trump has what I call negative credibility which is that a statement has to be considered false until proven true using reliable evidence.
As to the denials made by Generals Kelly and Mattis, put them under oath and cross examine them. Then bring in rebuttal witnesses. Secretary Mattis fires back at claims in Woodward's book - Axios; Bob Woodward book: Kelly denies 'idiot' comment; Trump fumes on Twitter Their limited denials will likely continue until they are back in public life. Then, I would expect one or both of them will unload on the unmoored Rageaholic.
Gary Cohn appears to be a major Woodward source and he has not issued a denial.
There are people working in the Trump administration who view it to be in the national interest to publicly deny privately made statements attributed to them.
Most dramatic quotes from Bob Woodward's new book about Trump
I like the one where Kelly reportedly told Gary Cohn to stick his resignation up Donald's ass.
Prior to Woodward's book about the Duck, Trump published complimentary remarks about Woodward such as this one from 2013:
In any event, this kind of book is not going to change any minds.
The Trumpsters will dismiss it as a bunch of lies by left wing partisans.
For those opposed to Trump, the revelations contained in Woodward's book and other recent ones simply confirm, or are viewed as consistent with what they already know about the Teflon Don. (e.g. Fear and Loathing in Woodward's Tale of Trump White House - Bloomberg)
A substantial basis for the strong negative opinions about Donald originate from his undeniable and publicly known actions and statements including a massive number of his tweets and speeches. Millions view him as a repulsive human being and a pathological liar with zero credibility.
I would add a few more comments about Teflon Don's tweets reproduced above.
First, Donald denied unequivocally that he had ever called anyone mentally retarded. He has done so frequently on tape: Donald Trump Has Called People 'Mentally Retarded' Multiple Times on Tape, Despite Claiming He's Never Said It
He has also used the phrase "dumb southerner". ‘I Don’t Talk’ That Way, Trump Says. Except When He Does. Trump is a fountain of bull shit.
Contradicting Donald with his own statements and correcting his demonstrably false statements with facts constitutes TREASON and FAKE NEWS in TrumpsterWorld. Those are Donald's characterizations.
Second, the Duck wants Congress to change the libel law so that he can win his first case after countless efforts.
If Demagogue Don was not ignorant about almost everything, he would already know that the libel laws are part of each state's common law and rarely even find codification in a state statute passed by a state legislature. The Duck has been told about his error over and over by the "mainstream" media to no avail. (e.g. Trump wants to change libel law. Experts say there's nothing he can do)
The Supreme Court of the United States has consistently held that the scope of libel laws have to be consistent with the exercise of First Amendment constitutional rights. New York Times Co. v. Sullivan (1964) That is why libel suits are hard to win. Donald J. Trump Is A Libel Bully But Also A Libel Loser
In practice, Trump has used libel lawsuits to financially punish and suppress the exercise of constitutionally protected speech.
Authoritarian demagogues like Trump are never going to champion the conservatives values embodied in the Bill of Rights, other than the Second Amendment, and will do whatever they can to diminish and even punish the exercise of First Amendment rights. The Trumpsters cheer him on, viewing his strong authoritarian and anti-democratic tendencies as positive traits of a "strong" leader.
The republicans in Congress are exercising zero restraint on Donald's worst instincts and are actually enabling them. The only effective check on Donald now is the courts and those "so-called" judges. However, reactionaries are now being appointed in the appellate courts at a rapid pace, and soon there will be a reactionary majority of Supreme Court justices.
Elections do matter. I have argued in the past that the reactionary forces in America are far stronger than the liberal ones. In fact, true conservatives and moderates are classified IMO as liberals now by a slim majority of Americans likely to vote.
This particular tweet indicates that he would like to yank NBC's broadcast license:
During a rally last Thursday, Demagogue Don accused the New York Times of treason for publishing the Op-Ed: Trump accuses New York Times of treason at rally
Donald also said that he was considering legal action against the NYT. That would not be Donald's first baseless legal claim.
Donald and Nike:
Donald claimed that Nike's common stock has gone "WAY DOWN" in response to its ad featuring Colin Kaepernick and several other athletes.
Nike’s online sales jumped 31% after company unveiled Kaepernick campaign - MarketWatch
Donald and Bob Woodward:
Trump claims that Bob Woodward invented stories about him, asserting that Woodward has committed a big con and fraud and is working for the democrats. That sounds like libel against Woodward:
Given what Trump has already said about Sessions publicly, it is hardly a stretch to find out that Donald has called him "mentally retarded" and a "dumb southerner." The bite to Trump has nothing to do with the comments about Sessions, but his use of the generic phrase "dumb southerners" which could have some political repercussions for republican politicians.
Woodward has earned a ton of credibility over the years.
I have no problem believing that Woodward has tapes and documents supporting every substantive statement and quote in his book. White House actively discussing replacements for Defense Secretary James Mattis: Washington Post
Trump has what I call negative credibility which is that a statement has to be considered false until proven true using reliable evidence.
As to the denials made by Generals Kelly and Mattis, put them under oath and cross examine them. Then bring in rebuttal witnesses. Secretary Mattis fires back at claims in Woodward's book - Axios; Bob Woodward book: Kelly denies 'idiot' comment; Trump fumes on Twitter Their limited denials will likely continue until they are back in public life. Then, I would expect one or both of them will unload on the unmoored Rageaholic.
Gary Cohn appears to be a major Woodward source and he has not issued a denial.
There are people working in the Trump administration who view it to be in the national interest to publicly deny privately made statements attributed to them.
Most dramatic quotes from Bob Woodward's new book about Trump
I like the one where Kelly reportedly told Gary Cohn to stick his resignation up Donald's ass.
Prior to Woodward's book about the Duck, Trump published complimentary remarks about Woodward such as this one from 2013:
In any event, this kind of book is not going to change any minds.
The Trumpsters will dismiss it as a bunch of lies by left wing partisans.
For those opposed to Trump, the revelations contained in Woodward's book and other recent ones simply confirm, or are viewed as consistent with what they already know about the Teflon Don. (e.g. Fear and Loathing in Woodward's Tale of Trump White House - Bloomberg)
A substantial basis for the strong negative opinions about Donald originate from his undeniable and publicly known actions and statements including a massive number of his tweets and speeches. Millions view him as a repulsive human being and a pathological liar with zero credibility.
I would add a few more comments about Teflon Don's tweets reproduced above.
First, Donald denied unequivocally that he had ever called anyone mentally retarded. He has done so frequently on tape: Donald Trump Has Called People 'Mentally Retarded' Multiple Times on Tape, Despite Claiming He's Never Said It
He has also used the phrase "dumb southerner". ‘I Don’t Talk’ That Way, Trump Says. Except When He Does. Trump is a fountain of bull shit.
Contradicting Donald with his own statements and correcting his demonstrably false statements with facts constitutes TREASON and FAKE NEWS in TrumpsterWorld. Those are Donald's characterizations.
Second, the Duck wants Congress to change the libel law so that he can win his first case after countless efforts.
If Demagogue Don was not ignorant about almost everything, he would already know that the libel laws are part of each state's common law and rarely even find codification in a state statute passed by a state legislature. The Duck has been told about his error over and over by the "mainstream" media to no avail. (e.g. Trump wants to change libel law. Experts say there's nothing he can do)
The Supreme Court of the United States has consistently held that the scope of libel laws have to be consistent with the exercise of First Amendment constitutional rights. New York Times Co. v. Sullivan (1964) That is why libel suits are hard to win. Donald J. Trump Is A Libel Bully But Also A Libel Loser
In practice, Trump has used libel lawsuits to financially punish and suppress the exercise of constitutionally protected speech.
Authoritarian demagogues like Trump are never going to champion the conservatives values embodied in the Bill of Rights, other than the Second Amendment, and will do whatever they can to diminish and even punish the exercise of First Amendment rights. The Trumpsters cheer him on, viewing his strong authoritarian and anti-democratic tendencies as positive traits of a "strong" leader.
The republicans in Congress are exercising zero restraint on Donald's worst instincts and are actually enabling them. The only effective check on Donald now is the courts and those "so-called" judges. However, reactionaries are now being appointed in the appellate courts at a rapid pace, and soon there will be a reactionary majority of Supreme Court justices.
Elections do matter. I have argued in the past that the reactionary forces in America are far stronger than the liberal ones. In fact, true conservatives and moderates are classified IMO as liberals now by a slim majority of Americans likely to vote.
++++
1. Small Ball-Income Generation:
A. Bought 30 SUNS at $16.62-Used Commission Free Trade:
Quote: Solar Senior Capital Ltd. (SUNS)
Closing Price Last Friday: SUNS $16.71 -$0.04 -0.24%
This purchase starts a "small ball buying program" in my Fidelity account.
Last Buy Discussion-Schwab Account: Item # 3.A. (8/1/2018 Post)
Since that recent last discussion, SUNS reported 2nd quarter earnings.
Dividends: Monthly at $.1175 per share
Dividend Yield at a Total Cost of $16.62 per share = 8.48%
Last Ex Dividend Date: 8/22/18
Dividend Reinvestment: Not in this account until the discount to net asset value exceeds 5%
Recent Earnings Report: Solar Senior Capital Ltd. Announces Quarter Ended June 30, 2018 Financial Results; Declares Monthly Distribution of $0.1175 Per Share for August 2018
Net Asset Value Per Share as of 6/30/18 = $16.83
Net Investment Income at $.35 per share
Quarterly Dividends at $.3525
"At June 30, 2018, 1.7% of Solar Senior’s portfolio at cost and 1.5% at fair value was on non-accrual status."
"On August 2, 2018, our Board approved a reduction in the minimum asset coverage ratio from 200% to 150%. This reduction will automatically apply to the Company effective as of August 2, 2019, unless approved earlier by the Company’s stockholders."
Floating Rate and First Lien Investments at 93.8% and 98.1% Respectively:
B. Bought 50 BIZD at $17.23-Commission Free for Vanguard Brokerage Customers:
Quote: VanEck Vectors BDC Income ETF Overview
Sponsor's Website: VanEck Vectors BDC Income ETF
Closing Price Last Friday: BIZD $17.18 -$0.13 -0.75%
This is a non-levered ETF that owns BDCs.
Holdings as of 8/27/18:
Dividend History: Paid Quarterly with the last ex dividend date on 7/2.
Based on the prior 12 months in dividends, the dividend yield is good at close to 8.9% at $17.23.
Several of the BDCs owned by this fund have cut their dividends since this BDC was launched in 2013 (e.g. PSEC)
BIZD Chart: Bear Trend Since November 2013, shortly after IPO
The problem with BDC index funds is that they include lower quality BDCs that have a long history of asset incineration and dividend cuts.
There have been peaks and valleys in the dominant bear trend as shown in the chart. This ETF started to slide in late 2013 and bottomed near $14 in February 2016. There was then a rally off that low to $19+ in March 2017. Then there was another persistent slide to a bottom near $15.8 last February. The trend has been up since that last bottom.
Morningstar gives this ETF a two star rating. Based on its trading history, I view this ETF as a trading vehicle rather than a long term hold.
As of 8/27/18, Morningstar calculated the YTD total return at 9.01% and at 8.92% over the past year.
The three year annualized average total return was better at 10.4%, but the five year was poor at 5.69%. The later number indicates that the value of the dividend was partially destroyed by share price appreciation since the total return number includes reinvestment of the dividend.
If the short term Libor rates continue to trend up, BDCs with heavy exposure to floating rate loans will have additional interest income to support their existing payouts or to raise the dividend.
The BDCs may also be successful in generating more income through increases in leverage. BDCs move to boost leverage | Reuters When discussing leverage, I would also emphasize that it can work both ways. Buying assets with more borrowed money will not be a good idea when the assets declines in value or becomes worthless while the debt used to buy those assets remains and has to be serviced.
As a personal matter, I have no debt and have never used margin to buy a security.
The economy is currently in good shape which should limit defaults that will likely become ugly during a recession.
A. Bought 30 SUNS at $16.62-Used Commission Free Trade:
Quote: Solar Senior Capital Ltd. (SUNS)
Closing Price Last Friday: SUNS $16.71 -$0.04 -0.24%
This purchase starts a "small ball buying program" in my Fidelity account.
Last Buy Discussion-Schwab Account: Item # 3.A. (8/1/2018 Post)
Since that recent last discussion, SUNS reported 2nd quarter earnings.
Dividends: Monthly at $.1175 per share
Dividend Yield at a Total Cost of $16.62 per share = 8.48%
Last Ex Dividend Date: 8/22/18
Dividend Reinvestment: Not in this account until the discount to net asset value exceeds 5%
Recent Earnings Report: Solar Senior Capital Ltd. Announces Quarter Ended June 30, 2018 Financial Results; Declares Monthly Distribution of $0.1175 Per Share for August 2018
Net Asset Value Per Share as of 6/30/18 = $16.83
Net Investment Income at $.35 per share
Quarterly Dividends at $.3525
"At June 30, 2018, 1.7% of Solar Senior’s portfolio at cost and 1.5% at fair value was on non-accrual status."
"On August 2, 2018, our Board approved a reduction in the minimum asset coverage ratio from 200% to 150%. This reduction will automatically apply to the Company effective as of August 2, 2019, unless approved earlier by the Company’s stockholders."
Floating Rate and First Lien Investments at 93.8% and 98.1% Respectively:
B. Bought 50 BIZD at $17.23-Commission Free for Vanguard Brokerage Customers:
Sponsor's Website: VanEck Vectors BDC Income ETF
Closing Price Last Friday: BIZD $17.18 -$0.13 -0.75%
This is a non-levered ETF that owns BDCs.
Holdings as of 8/27/18:
Dividend History: Paid Quarterly with the last ex dividend date on 7/2.
Based on the prior 12 months in dividends, the dividend yield is good at close to 8.9% at $17.23.
Several of the BDCs owned by this fund have cut their dividends since this BDC was launched in 2013 (e.g. PSEC)
BIZD Chart: Bear Trend Since November 2013, shortly after IPO
The problem with BDC index funds is that they include lower quality BDCs that have a long history of asset incineration and dividend cuts.
There have been peaks and valleys in the dominant bear trend as shown in the chart. This ETF started to slide in late 2013 and bottomed near $14 in February 2016. There was then a rally off that low to $19+ in March 2017. Then there was another persistent slide to a bottom near $15.8 last February. The trend has been up since that last bottom.
Morningstar gives this ETF a two star rating. Based on its trading history, I view this ETF as a trading vehicle rather than a long term hold.
As of 8/27/18, Morningstar calculated the YTD total return at 9.01% and at 8.92% over the past year.
The three year annualized average total return was better at 10.4%, but the five year was poor at 5.69%. The later number indicates that the value of the dividend was partially destroyed by share price appreciation since the total return number includes reinvestment of the dividend.
If the short term Libor rates continue to trend up, BDCs with heavy exposure to floating rate loans will have additional interest income to support their existing payouts or to raise the dividend.
The BDCs may also be successful in generating more income through increases in leverage. BDCs move to boost leverage | Reuters When discussing leverage, I would also emphasize that it can work both ways. Buying assets with more borrowed money will not be a good idea when the assets declines in value or becomes worthless while the debt used to buy those assets remains and has to be serviced.
As a personal matter, I have no debt and have never used margin to buy a security.
The economy is currently in good shape which should limit defaults that will likely become ugly during a recession.
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 2 Church and Dwight 2.45% SU Bonds Maturing on 12/15/19:
Finra Page: Bond Detail (Prospectus linked)
Issuer: Church & Dwight Co. (CHD)
2017 Annual Report (debt listed at page 42)
Credit Ratings:
Bought at a Total Cost of 99.659
YTM At TC Then at 2.725%
Current yield at TC = 2.4584%
B. Bought 2 Wells Fargo 2.8% CDs Maturing on 8/31/20:
C. Bought 1 Wisconsin Energy 2.45% SU Bond Maturing on 6/15/20:
I now own 2 bonds. The first one was bought in March 2018.
FINRA Page: Bond Detail
Issuer: Issuer's new name is the WEC Energy Group Inc. (WEC)
WEC Energy Group, Inc. (WEC) is a diversified energy holding company with electricity and natural gas operations. It holds, directly or indirectly, ownership-stakes in several utility subsidiaries including Wisconsin Electric Power (rated at A2); Wisconsin Gas LLC (rated A2); the holding company, Integrys Holdings which owns Wisconsin Public Service Corporation (rated at A2) and several natural gas distribution companies including The Peoples Gas Light and Coke Company (rated at A2) and the North Shore Gas Company ( rated at A2). WEC also holds an indirect 60% economic interest in American Transmission Company LLC (rated at A2 stable). It is not unusual for the utility holding company to have lower ratings than its operating subsidiaries.
WEC Analyst Estimates
WEC Energy Group posts strong second-quarter and first-half results
WEC SEC Filings
2017 Annual Report (debt of WEC and subsidiaries are listed starting at page 80)
Credit Ratings:
Moody's downgraded WEC senior unsecured debt to Baa1 from A3 last month: "The downgrade of WEC, WECC, and the Integrys entities reflects our expectation that the negative cash flow impact of tax reform, along with incremental debt to fund capital expenditures, will cause a deterioration in consolidated metrics"
Bought at a Total Cost of 99.1
YTM at TC Then at 2.966%
Current Yield at TC = 2.4723%
C. Bought 1 Wisconsin Energy 2.45% SU Bond Maturing on 6/15/20:
I now own 2 bonds. The first one was bought in March 2018.
FINRA Page: Bond Detail
Issuer: Issuer's new name is the WEC Energy Group Inc. (WEC)
WEC Energy Group, Inc. (WEC) is a diversified energy holding company with electricity and natural gas operations. It holds, directly or indirectly, ownership-stakes in several utility subsidiaries including Wisconsin Electric Power (rated at A2); Wisconsin Gas LLC (rated A2); the holding company, Integrys Holdings which owns Wisconsin Public Service Corporation (rated at A2) and several natural gas distribution companies including The Peoples Gas Light and Coke Company (rated at A2) and the North Shore Gas Company ( rated at A2). WEC also holds an indirect 60% economic interest in American Transmission Company LLC (rated at A2 stable). It is not unusual for the utility holding company to have lower ratings than its operating subsidiaries.
WEC Analyst Estimates
WEC Energy Group posts strong second-quarter and first-half results
WEC SEC Filings
2017 Annual Report (debt of WEC and subsidiaries are listed starting at page 80)
Credit Ratings:
Moody's downgraded WEC senior unsecured debt to Baa1 from A3 last month: "The downgrade of WEC, WECC, and the Integrys entities reflects our expectation that the negative cash flow impact of tax reform, along with incremental debt to fund capital expenditures, will cause a deterioration in consolidated metrics"
Bought at a Total Cost of 99.1
YTM at TC Then at 2.966%
Current Yield at TC = 2.4723%
3. Small Ball-Small Cap Biotech Lottery Ticket Basket:
A. Bought 40 ARDX at $4.39-Used Commission Free Trade:
Quote: Ardelyx Inc. (ARDX)
MARKET CAP: About $273M at $4.39
SEC Filings
2017 Annual Report SEC Form10-K (risk factor summary starts at page 22)
Website: Ardelyx
Closing Price Last Friday: ARDX $3.875 -$0.025 -0.64%
I may buy another 20 shares somewhere below $3.5.
Biotech stocks were generally weak last week. iShares Nasdaq Biotechnology Index ETF (IBB) History
At the time of my purchase, Marketwatch calculated the YTD performance at -33.33% and +10% over a one month period. So, this is another bungee jumper.
Part of the decline can be attributed to a large capital raise. In May 2018, the company sold 12.5M shares, plus the standard greenshoe which brought the total up to 14.375M shares, at $4 per share. Prospectus
The company also has an ATM program: Prospectus
"As of June 30, 2018, Ardelyx had total capital resources including cash, cash equivalents and short-term investments of $212.7 million." The company does not expect to need additional capital until mid-2020.
Part of the existing cash position was generated through debt: Ardelyx Raises $50 Million in Loan Agreement with Solar Capital and Bridge Bank and see page 12 in the 10-Q for the Q/E 6/30/18
Pipeline:
Ardelyx Successfully Completes T3MPO-3 Safety Extension Study of Tenapanor for IBS-C (January 2018)
Existing Licensing Agreements for Lead Drug Candidate Tenapanor: Canada, China and Japan
Ardelyx and Knight Collaborate to Bring Tenapanor to Patients in Canada
Ardelyx Announces License Agreement with Shanghai Fosun Pharmaceutical Industrial Development Company Limited for Tenapanor in China
Ardelyx and Kyowa Hakko Kirin Announce License Agreement for Tenapanor for Cardiorenal Diseases in Japan
Most Recent Earnings Report: Q/E 6/30/18
A. Bought 40 ARDX at $4.39-Used Commission Free Trade:
Quote: Ardelyx Inc. (ARDX)
MARKET CAP: About $273M at $4.39
SEC Filings
2017 Annual Report SEC Form10-K (risk factor summary starts at page 22)
Website: Ardelyx
Closing Price Last Friday: ARDX $3.875 -$0.025 -0.64%
I may buy another 20 shares somewhere below $3.5.
Biotech stocks were generally weak last week. iShares Nasdaq Biotechnology Index ETF (IBB) History
At the time of my purchase, Marketwatch calculated the YTD performance at -33.33% and +10% over a one month period. So, this is another bungee jumper.
Part of the decline can be attributed to a large capital raise. In May 2018, the company sold 12.5M shares, plus the standard greenshoe which brought the total up to 14.375M shares, at $4 per share. Prospectus
The company also has an ATM program: Prospectus
"As of June 30, 2018, Ardelyx had total capital resources including cash, cash equivalents and short-term investments of $212.7 million." The company does not expect to need additional capital until mid-2020.
Part of the existing cash position was generated through debt: Ardelyx Raises $50 Million in Loan Agreement with Solar Capital and Bridge Bank and see page 12 in the 10-Q for the Q/E 6/30/18
Pipeline:
Ardelyx Successfully Completes T3MPO-3 Safety Extension Study of Tenapanor for IBS-C (January 2018)
Existing Licensing Agreements for Lead Drug Candidate Tenapanor: Canada, China and Japan
Ardelyx and Knight Collaborate to Bring Tenapanor to Patients in Canada
Ardelyx Announces License Agreement with Shanghai Fosun Pharmaceutical Industrial Development Company Limited for Tenapanor in China
Ardelyx and Kyowa Hakko Kirin Announce License Agreement for Tenapanor for Cardiorenal Diseases in Japan
Most Recent Earnings Report: Q/E 6/30/18
The near term catalyst is the potential FDA approval of Tenapanor, the leading pipeline drug, for "irritable bowel syndrome with constipation (IBS-C)." An NDA application is currently anticipated early in the 2018 4th quarter.
A small company like ADLX has no business IMO trying to sell a mass market type drug like Tenapanor. It would just cost too much money to build a sales force from scratch and competitors have far more resources and advertising dollars. Over the past several years, the FDA has approved drugs for IBS with constipation.
I had this stock on my small cap biotech monitor list. What moved me off my derrière is a buy rating from Jeffries with a $7 price target. Ardelyx initiated with a Buy at Jefferies-The Fly
Ardelyx Announces Science Translational Medicine Publication Detailing Tenapanor's Unique Mechanism of Action Inhibiting Paracellular Phosphate Absorption (8/29/18, released after purchase)
4. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Sold 1 Brunswick 7.375% SU Bond Maturing on 9/1/23:
Profit Snapshot: $175.37
Item # 1 Bought 1 Brunswick 7.375% Senior Bond Maturing 9/1/2023 at 94.2 (8/4/11 Post)
Complicated Tax Accounting Issue:
(note that I have never taken an accounting course and have no expertise in that field)
Last year, $226+ was so classified from bond trades.
This is a difficult tax accounting concept that comes into play when a taxpayer sells a bond bought at a discount prior to maturity. Tax Treatment of Market Discount Bonds
The government's rationale appears to be that it simply does not want the taxpayer to include the entire amount as a long term capital gain which would be taxed at a lower rate for most taxpayers than interest income. Yet the same calculation would have to be done when the gain is short term taxable at the same rate as interest income.
The result is a morass of difficult calculations that probably produces insignificant additional revenue for the IRS for the trouble and can result in double taxation of the amount classified as realized accrued market discount since the broker will not adjust the basis used to calculate the capital gain by the amount also classified as interest income (see page 14 2017 Publication 550)
Since most of my realized accrued market discounts are in the low single digits ($.01 to $5), and I suspect that Fidelity is not adjusting the tax cost basis for the amount so characterized based on my spot checks, I am probably being taxed twice on these small amounts, once as either a short or long term capital gain and then again as interest income.
If I adjusted the tax cost basis on my tax return, I would then have to explain it since the cost basis would be different than the amount reported by the broker in the 1099. Since that would be time consuming and burdensome, and would probably cause confusion for anyone looking at my return, I prefer to pay twice on the same income. For those with large amounts being double taxed, a competent CPA needs to look at it IMO.
Finra Page: Bond Detail
As shown in the price chart, this bond collapsed to almost 25 during the Near Depression. It was rated in junk territory when I start to buy it. This was my last lot.
Issuer: Brunswick Corp. (BC)
Sold at 112.637
YTM at 112.637 = 4.517%
Proceeds at 112.537
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.
The 3 month treasury bill was auctioned at 99.466639 which creates an investment rate of 2.151%:
ReplyDeletehttps://www.treasurydirect.gov/instit/annceresult/press/preanre/2018/R_20180910_1.pdf
The prior auction last Tuesday produced an investment rate of 2.135%:
https://www.treasurydirect.gov/instit/annceresult/press/preanre/2018/R_20180904_1.pdf
The short term bills have been ticking up due to the FED increases its FF rate.
The odds of a .25% hike in the FF rate next week is currently at 98.4%. The probability of a .5% increase on or before the December 2018 meeting is at 79.1%.
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
The most likely scenario for a .5% increase before year end is a .25% increase next week and another .25% increase in December.
If the FF is increased by .5% from the current level, the range will then be 2.25% to 2.5% with the midpoint at 2.375%.
The 3 month treasury bill is currently trading near the mid-point of the anticipated range between 2% and 2.25% that will become effective next week.
The move up in the ten year treasury yield is continuing today:
ReplyDeleteU.S. 10 Year Treasury Note
2.969% +0.033%
Last Updated: Sep 11, 2018 11:42 a.m. EDT
The 10 year treasury yield was at 2.82% on 8/24/18.
One of these days, the yield will move above 3% and just keep on trucking up and away from the range bound yields between 2.8% and 3.05% which has been in effect since early February 2018.
For now, the movement is consistent with the up and down movement in that range.
The 1 year treasury bill was auctioned today at a 2.547% investment rate.
https://www.treasurydirect.gov/instit/annceresult/press/preanre/2018/R_20180911_1.pdf
On 9/11/17, the one year yield was at 1.24%, so the yield has more than doubled in one year.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2017
The 52 week treasury bill is auctioned once a month. I am now buying 1 or 2 at every auction.
The August 1 year T Bill auction produced an investment rate of 2.442%.
Foamix Pharmaceuticals Ltd. (FOMX)
ReplyDeleteAFTER HOURS $8.92 +3.00 +50.68%
Last Updated: Sep 11, 2018 at 5:45 p.m. EDT
https://www.marketwatch.com/investing/stock/fomx
I bought a 30 share lottery ticket at $5.66 and will discuss that purchase in about a week.
The stock's move in after hours trading is based on its key drug meeting both primary endpoints in a phase 3 trial for the treatment of moderate to severe acne.
https://www.nasdaq.com/press-release/foamix-announces-positive-topline-results-from-third-phase-3-trial-study-fx201722-evaluating-fmx10-20180911-00923
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/09/observations-and-sample-of-recent_12.html