Economy:
Fed points to more rate hikes amid criticism from Trump; Federal Reserve minutes indicate interest rates will have to rise high enough to slow down the economy - MarketWatch
While I anticipate the FED will hike next December the federal funds rate by .25%, the FED may grow more cautious when the tariff war with China escalates on 1/1/19.
The probability of that December hike now stands at 83.9%:
Countdown to FOMC: CME FedWatch Tool
US trade talks with China on 'hiatus,' Commerce Secretary Ross says On 1/1/19, the 10% tariff on $250B of China's exports will increase to 25%, and I expect that to happen.
Kudlow: China 'has not responded positively to any of our asks' in US trade talks
The first increase in the FF rate next year is anticipated to occur at the March 2019 meeting. If the trade war is ongoing at that time, with clearly negative economic impacts, the FED could delay raising interest rates at that meeting and continue delaying any increase until it has more clarity on the impacts.
China Q3 GDP: China posts economic data amid trade war with US (+6.5% Y-O-Y vs. expectation of +6.6%; the Duck does not have them over a barrel as he believes)
Fed points to more rate hikes amid criticism from Trump; Federal Reserve minutes indicate interest rates will have to rise high enough to slow down the economy - MarketWatch
While I anticipate the FED will hike next December the federal funds rate by .25%, the FED may grow more cautious when the tariff war with China escalates on 1/1/19.
The probability of that December hike now stands at 83.9%:
Countdown to FOMC: CME FedWatch Tool
US trade talks with China on 'hiatus,' Commerce Secretary Ross says On 1/1/19, the 10% tariff on $250B of China's exports will increase to 25%, and I expect that to happen.
Kudlow: China 'has not responded positively to any of our asks' in US trade talks
The first increase in the FF rate next year is anticipated to occur at the March 2019 meeting. If the trade war is ongoing at that time, with clearly negative economic impacts, the FED could delay raising interest rates at that meeting and continue delaying any increase until it has more clarity on the impacts.
China Q3 GDP: China posts economic data amid trade war with US (+6.5% Y-O-Y vs. expectation of +6.6%; the Duck does not have them over a barrel as he believes)
Retail sales rose .1% in September vs. the .6% consensus estimate. U.S. retail sales are soft for the second month in a row - MarketWatch
Housing starts tick down in another weak month for residential construction - MarketWatch Housing starts declined by 5.3% compared to August. US housing starts fall more than expected in September
+++++++
+++++++
Markets and Market Commentary:
The S & P 500 closed last Friday at 2,767.78, down 173.13 points or 5.89% from its intra-day and all time high of 2,940.91 (9/21/18). In the scheme of things that is an immaterial drop and barely qualifies as a "dip" using standard definitions: A Field Guide to Stock Market Corrections I generally use the word "catastrophic" to define a 45%+ decline,
For example, between 1986 and 2001, there were 2 dips (-5% to -10%), 1 bear market (-20 to -45%%), 1 catastrophic event (-45+%), and 5 corrections (-10 to -20%): See Figure 3 Market Briefing: S&P 500 Bull & Bear Markets & Corrections Between 2008 to the present, there has been 1 catastrophic event, 5 corrections and 7 dips (Figure 1, most recent dip not shown)
As to the recent market action, I would describe the downside moves as more powerful than the rallies.
Goldman CEO Solomon says part of October's market sell-off driven by programmatic trading
The stock market is overdue for a one-day 5% or 10% plunge - MarketWatch
The S & P 500 closed last Friday at 2,767.78, down 173.13 points or 5.89% from its intra-day and all time high of 2,940.91 (9/21/18). In the scheme of things that is an immaterial drop and barely qualifies as a "dip" using standard definitions: A Field Guide to Stock Market Corrections I generally use the word "catastrophic" to define a 45%+ decline,
For example, between 1986 and 2001, there were 2 dips (-5% to -10%), 1 bear market (-20 to -45%%), 1 catastrophic event (-45+%), and 5 corrections (-10 to -20%): See Figure 3 Market Briefing: S&P 500 Bull & Bear Markets & Corrections Between 2008 to the present, there has been 1 catastrophic event, 5 corrections and 7 dips (Figure 1, most recent dip not shown)
As to the recent market action, I would describe the downside moves as more powerful than the rallies.
Goldman CEO Solomon says part of October's market sell-off driven by programmatic trading
The stock market is overdue for a one-day 5% or 10% plunge - MarketWatch
Trump says Fed is his 'biggest threat' because it is raising rates too fast The Federal Funds rate is rising at a snail's pace and is currently well below what anyone would have thought possible nine years into an economic recovery with unemployment hitting multi-decade lows and real GDP popping over 3%.
Market sell-off nearly over and will be reversed by buybacks, JPM says
U.S. stocks are vulnerable when China stocks fall hard
As previously discussed, I would add that a significant decline in regional bank and small cap stocks will often precede a major decline in the major market averages. The rationale is that those stocks are more economically sensitive to U.S. growth and favorable economic conditions. KRE topped out near $66 in June 2018. IWM topped out in August 2018.
I would add my usual caveat that the Stocks Jocks may be seeing things again that are not there.
DowDuPont reports $4.6 billion impairment charge; SEC Form 8-K
As previously noted, I expect profit margins to be under pressure next year compared to 2018. A number of factors squeezing margins are already starting to pop up in earnings warnings. If the GOP increases the tariffs on China's imports to 25% as of 1/1/19, which I expect to happen, that increase will negatively impact profit margins. Other factors include other rising cost inputs such as wage and benefit, interest, commodity, and distribution costs.
I suspect that the Stock Jocks are at least starting to contemplate 2019 which will not have the Y-O-Y earnings benefit generated by the lower federal income rates.
Sealed Air warned last Thursday about costs squeezing margins SEC Filed Press Release ("Our third quarter profitability was adversely affected by currency headwinds and higher than expected raw material and freight costs."); Closing Price 10/18: SEE $32.35 -$2.93 -8.30%
Shipping costs using trucks has risen in part due to a rise in gasoline prices and to a shortage of truck drivers that drives up spot rates.
Gap's stock sinks after J.P. Morgan turns bearish, citing sales weakness and margin pressure
Procter & Gamble shares jump on earnings beat I have an ongoing "small ball buying program" in PG shares. The last purchase price was at $70.89: Item # 1.C. (5/7/18 Post)
U.S. stocks are vulnerable when China stocks fall hard
As previously discussed, I would add that a significant decline in regional bank and small cap stocks will often precede a major decline in the major market averages. The rationale is that those stocks are more economically sensitive to U.S. growth and favorable economic conditions. KRE topped out near $66 in June 2018. IWM topped out in August 2018.
I would add my usual caveat that the Stocks Jocks may be seeing things again that are not there.
DowDuPont reports $4.6 billion impairment charge; SEC Form 8-K
As previously noted, I expect profit margins to be under pressure next year compared to 2018. A number of factors squeezing margins are already starting to pop up in earnings warnings. If the GOP increases the tariffs on China's imports to 25% as of 1/1/19, which I expect to happen, that increase will negatively impact profit margins. Other factors include other rising cost inputs such as wage and benefit, interest, commodity, and distribution costs.
I suspect that the Stock Jocks are at least starting to contemplate 2019 which will not have the Y-O-Y earnings benefit generated by the lower federal income rates.
Sealed Air warned last Thursday about costs squeezing margins SEC Filed Press Release ("Our third quarter profitability was adversely affected by currency headwinds and higher than expected raw material and freight costs."); Closing Price 10/18: SEE $32.35 -$2.93 -8.30%
Shipping costs using trucks has risen in part due to a rise in gasoline prices and to a shortage of truck drivers that drives up spot rates.
Gap's stock sinks after J.P. Morgan turns bearish, citing sales weakness and margin pressure
Procter & Gamble shares jump on earnings beat I have an ongoing "small ball buying program" in PG shares. The last purchase price was at $70.89: Item # 1.C. (5/7/18 Post)
++++++
Trump:
It will be helpful to the republicans in the upcoming election that Donald's popularity is surging according to latest Gallup polls.
The weekly poll had the Duck at a 38% approval rating on 9/16.
The last weekly poll had his approval rating at 44%. Trump Job Approval (Weekly)
House Democrats’ hope for wave election diminishes as Republicans rebound
Trump tops $100 million raised for his 2020 re-election campaign
The "conservative" majority opined in the Citizens United v. Federal Election Commission, 558 U.S. 310 (2010) that there was no connection between campaign money and policy decisions. So let the money flow from the super rich who form PACs with reassuring names like the Koch Brothers Super PAC "Americans for Prosperity", a Super Crock of Bull Shit.
Given the amount of money spent in campaigns, you would think that citizens were at least getting the best government that money could buy, but sadly that is not the case.
In another meaningless photo op with his cabinet, Trump ordered them to cut 5% out of their budgets without providing any guidance on how that could be done. The various agencies do not pass legislation and appropriation bills, but administer appropriations made by Congress. If Trump wants to cut 5% from each Department's budget, he needs to identify himself what programs will be cut. Mitch McConnell has made it clear that the cuts will come in Medicare, Social Security and Medicaid. Mitch McConnell says it out loud: Republicans are gunning for Social Security, Medicare and Obamacare next The republicans in tight races are singing a different tune until the election.
It will be helpful to the republicans in the upcoming election that Donald's popularity is surging according to latest Gallup polls.
The weekly poll had the Duck at a 38% approval rating on 9/16.
The last weekly poll had his approval rating at 44%. Trump Job Approval (Weekly)
House Democrats’ hope for wave election diminishes as Republicans rebound
Trump tops $100 million raised for his 2020 re-election campaign
The "conservative" majority opined in the Citizens United v. Federal Election Commission, 558 U.S. 310 (2010) that there was no connection between campaign money and policy decisions. So let the money flow from the super rich who form PACs with reassuring names like the Koch Brothers Super PAC "Americans for Prosperity", a Super Crock of Bull Shit.
Given the amount of money spent in campaigns, you would think that citizens were at least getting the best government that money could buy, but sadly that is not the case.
In another meaningless photo op with his cabinet, Trump ordered them to cut 5% out of their budgets without providing any guidance on how that could be done. The various agencies do not pass legislation and appropriation bills, but administer appropriations made by Congress. If Trump wants to cut 5% from each Department's budget, he needs to identify himself what programs will be cut. Mitch McConnell has made it clear that the cuts will come in Medicare, Social Security and Medicaid. Mitch McConnell says it out loud: Republicans are gunning for Social Security, Medicare and Obamacare next The republicans in tight races are singing a different tune until the election.
This may be a new low in the GOP's child separation policy: The Five-Year-Old Who Was Detained at the Border and Persuaded to Sign Away Her Rights | The New Yorker
Trump's Fanciful, Falsehood Filled AP interview transcript, annotated - The Washington Post; Donald Trump's AP interview: The 40 most outrageous lines - CNN
Saudi Arabia, Donald and Khashoggi:
Trump's Fanciful, Falsehood Filled AP interview transcript, annotated - The Washington Post; Donald Trump's AP interview: The 40 most outrageous lines - CNN
Saudi Arabia, Donald and Khashoggi:
Trump compares condemnation of Saudis over missing journalist to Kavanaugh hearing - MarketWatch
The Duck wants to compare Kavanaugh's denials about the alleged sexual assaults with Saudi Arabia's denials over a 17 day period that anything untoward happen to Mr. Khashoggi during his visit to the consulate.
Perhaps, the Donald may want to think about that equivalence some more before uttering more gibberish along those lines.
Those who believed Ms. Ford would gladly take that comparison.
The Duck wants to compare Kavanaugh's denials about the alleged sexual assaults with Saudi Arabia's denials over a 17 day period that anything untoward happen to Mr. Khashoggi during his visit to the consulate.
Perhaps, the Donald may want to think about that equivalence some more before uttering more gibberish along those lines.
Those who believed Ms. Ford would gladly take that comparison.
The evidence includes a purported audio of the torture and murder; the claim that one member of the "alleged hit squad" (a leading Saudi forensic scientist) entered the building with a bone saw; the video evidence of Khashoggi entering the consulate and never leaving; the video and photographic evidence of the "alleged" hit squad arriving shortly before Khashoggi (with no innocent explanation as to the timing of their entry and exit); the evidence that several members of the "hit squad" were from the Crown Prince' Mohammed bin Salman's security detail; and copies of their passports and other documents showing their links to the Crown Prince.
The WP has pictures of those purportedly involved in the Saudi "interrogation". What we know about the 15 Saudis-Washington Post Reminds me of the Saudi 9/11 hijackers.
Suspects in Khashoggi Case Had Ties to Saudi Crown Prince
Aide to Saudi Crown Prince, Suspect in Khashoggi Case, Is Shown Walking into Consulate - The New York Times
Audio Offers Gruesome Details of Jamal Khashoggi Killing, Turkish Official Says - The New York Times (cut off his fingers, his head, etc.)
Mike Pompeo in Turkey as newspaper claims audio proves Saudi missing journalist Jamal Khashoggi killed by Saudi Arabia - CBS News
The WP has pictures of those purportedly involved in the Saudi "interrogation". What we know about the 15 Saudis-Washington Post Reminds me of the Saudi 9/11 hijackers.
Suspects in Khashoggi Case Had Ties to Saudi Crown Prince
Aide to Saudi Crown Prince, Suspect in Khashoggi Case, Is Shown Walking into Consulate - The New York Times
Audio Offers Gruesome Details of Jamal Khashoggi Killing, Turkish Official Says - The New York Times (cut off his fingers, his head, etc.)
Mike Pompeo in Turkey as newspaper claims audio proves Saudi missing journalist Jamal Khashoggi killed by Saudi Arabia - CBS News
Jamal Khashoggi: Body of missing Saudi journalist was cut into pieces, Turkish official says - CNN;
Jamal Khashoggi: Turkey releases passport scans of alleged hit squad - The Washington Post;
After claiming for 17 days that Khashoggi left the embassy and they knew nothing about what happened to him, Saudi Arabia now claims that he was killed in a fight inside the consulate rather than intentionally tortured, murdered and dismembered. Saudi Arabia admits Khashoggi died in consulate, fires two senior officials The evidence was simply too overwhelming to continue denying that nothing happened to Khashoggi while he was in the consulate.
So, let me get this straight. Khashoggi saw 15 or so younger men who were in far better physical condition and decided to start a fist fight. He allegedly died in that fight. Saudi Arabia then decided to dismember his body and dispose of it in an undisclosed location. Why was a bone saw brought into the consulate before Khashoggi arrived and why was their a forensic scientist including in the "meet and greet"?
While Saudi Arabia's current story is not credible, that has not stopped Trump from declaring it to be credible.
Saudi claims that 15 people were flown from SA to Turkey simply to talk with Khashoggi since he had allegedly expressed an interest in returning to Saudi Arabia. The purpose of Khashoggi's visit was to secure the necessary document for a wedding rather than to talk about returning to SA.
Jamal Khashoggi: Turkey releases passport scans of alleged hit squad - The Washington Post;
After claiming for 17 days that Khashoggi left the embassy and they knew nothing about what happened to him, Saudi Arabia now claims that he was killed in a fight inside the consulate rather than intentionally tortured, murdered and dismembered. Saudi Arabia admits Khashoggi died in consulate, fires two senior officials The evidence was simply too overwhelming to continue denying that nothing happened to Khashoggi while he was in the consulate.
So, let me get this straight. Khashoggi saw 15 or so younger men who were in far better physical condition and decided to start a fist fight. He allegedly died in that fight. Saudi Arabia then decided to dismember his body and dispose of it in an undisclosed location. Why was a bone saw brought into the consulate before Khashoggi arrived and why was their a forensic scientist including in the "meet and greet"?
While Saudi Arabia's current story is not credible, that has not stopped Trump from declaring it to be credible.
Saudi claims that 15 people were flown from SA to Turkey simply to talk with Khashoggi since he had allegedly expressed an interest in returning to Saudi Arabia. The purpose of Khashoggi's visit was to secure the necessary document for a wedding rather than to talk about returning to SA.
There has been a concerted effort by SA to lure dissidents back with promises of money and safety. Khashoggi received such an offer and refused it knowing full well what would happen to him. Saudis tried to silence associate of Jamal Khashoggi, recordings show-The Washington Post U.S. intelligence agencies were aware of SA efforts to capture Jamal Khashoggi and force a rendition back to SA before he entered the SA consulate in Turkey and did nothing.
Saudi just transferred $100M to the U.S. to help with Syria. I can almost hear Donald saying "where is my money".
Donald is quoted in The Fifth Risk, a new book from Michael Lewis, making the following statements about money being spent to prepare his administration for a transition to power which is required by a federal law:
"Stable Genius": “You’re stealing my money! You’re stealing my fucking money! “Fuck the law. I don’t give a fuck about the law. I want my fucking money.” (pages 20-21 Kindle Edition) The preceding passes for deep thought and intelligent conversation in TrumpWorld.
It looks like SA is also pumping more oil to bring down gas prices before the U.S. election.
Jamal Khashoggi: Saudi Arabia transfers $100 million to U.S. amid crisis over journalist - The Washington Post
Trump Inflates Saudi Arms Deal But Stays Silent On Saudi Cash In His Own Pocket
There is certainly no natural constituency of U.S. voters that support the Saudi regime. Most U.S. citizens IMO would really like to tell them to go to hell.
Saudi just transferred $100M to the U.S. to help with Syria. I can almost hear Donald saying "where is my money".
Donald is quoted in The Fifth Risk, a new book from Michael Lewis, making the following statements about money being spent to prepare his administration for a transition to power which is required by a federal law:
"Stable Genius": “You’re stealing my money! You’re stealing my fucking money! “Fuck the law. I don’t give a fuck about the law. I want my fucking money.” (pages 20-21 Kindle Edition) The preceding passes for deep thought and intelligent conversation in TrumpWorld.
It looks like SA is also pumping more oil to bring down gas prices before the U.S. election.
Jamal Khashoggi: Saudi Arabia transfers $100 million to U.S. amid crisis over journalist - The Washington Post
Trump Inflates Saudi Arms Deal But Stays Silent On Saudi Cash In His Own Pocket
There is certainly no natural constituency of U.S. voters that support the Saudi regime. Most U.S. citizens IMO would really like to tell them to go to hell.
+++++
Minnesota GOP Senate Contender Compared Michelle Obama To A 'Chimp' On Facebook
Dozens of black voters ordered off bus bound for polls in Georgia amid razor-thin governor race - CBS News
Minnesota GOP Senate Contender Compared Michelle Obama To A 'Chimp' On Facebook
Dozens of black voters ordered off bus bound for polls in Georgia amid razor-thin governor race - CBS News
++++
1. Small Ball-Income Generation:
A. Bought 15 GDO at $15.89 and 10 at $15.64-Used Commission Free Trades:
Sponsor's Website: WA Global Corporate Defined Opportunity Fund Inc. | Legg Mason
I am catching a falling knife with this leveraged bond CEF.
GDO is a term CEF. The assets will be sold in 2024, with the proceeds returned to GDO's shareholders on or about 12/2/2024.
I am playing a long game with this CEF since I anticipate there will be at least one recession prior to 2024 that will cause the FED to reduce interest rates. Bond prices would then likely go up. The discount to net asset value will narrow as the fund approaches the liquidation date.
Closing Price Last Friday: GDO $15.57 -$0.01 -0.06%
GDO is a term CEF. The assets will be sold in 2024, with the proceeds returned to GDO's shareholders on or about 12/2/2024.
I am playing a long game with this CEF since I anticipate there will be at least one recession prior to 2024 that will cause the FED to reduce interest rates. Bond prices would then likely go up. The discount to net asset value will narrow as the fund approaches the liquidation date.
Closing Price Last Friday: GDO $15.57 -$0.01 -0.06%
Current Position: 149+ shares
Highest Cost Lot in Current Chain: 50 Shares at $17.01 (will be sold when and if I can do so profitably)-Item # 2 (2/22/18 Post)(contains snapshot of GDO liquidation, selling 624+ shares in June 2017 at $18.19)
Highest Cost Lot in Current Chain: 50 Shares at $17.01 (will be sold when and if I can do so profitably)-Item # 2 (2/22/18 Post)(contains snapshot of GDO liquidation, selling 624+ shares in June 2017 at $18.19)
Maximum Position: 300 Shares
Average Cost Per Share = $16.53
Dividend: Monthly at $.101 per share ($1.21 per share annually)
Last Ex Dividend Date: 10/18/18 (shortly after purchases)
Last Ex Dividend Date: 10/18/18 (shortly after purchases)
Dividend Yield at Total Cost Per Share = 7.32% (assumes continuation of the same penny rate which is viewed as an unlikely assumption)
Reinvestment of Dividend: Yes at greater than a 5% discount to net asset value per share
Purchase Restriction: Small Ball Rule (now averaging down in 10 share lots, reduced from 15 shares)
Last Discussed: Item # 1.B. (9/30/18 Post)
Last Substantive Discussion: Item # 1.C. Bought 15 GDO at $16.27-Used Fidelity Commission Free Trade (9/16/18 Post)
Data Date of 15 Share Trade (10/4/18)
Closing Market Price: $15.88
Closing NAV Per Share: $17.77
Discount: -10.64
Average 1 Year Discount = -7.47%
Data Date of 10 Share Trade (10/11/8)
Closing Market Price: $15.59
Closing NAV Per Share: $17.7
Discount: -11.92%
Average 1 Year Discount = 7.63%
Western Asset Global Corporate Defined Opportunity Fund Inc. (GDO): Form N-Q (holdings as of 7/31/18; cost at $343.948+M/value at $350.249+M) I suspect that there is now a net unrealized loss.
Data Date of 10 Share Trade (10/11/8)
Closing Market Price: $15.59
Closing NAV Per Share: $17.7
Discount: -11.92%
Average 1 Year Discount = 7.63%
Western Asset Global Corporate Defined Opportunity Fund Inc. (GDO): Form N-Q (holdings as of 7/31/18; cost at $343.948+M/value at $350.249+M) I suspect that there is now a net unrealized loss.
B. Bought 10 CGBD at $16.2 and 10 at $15.7-Used Commission Free Trades:
Quote: TCG BDC Inc. (CGBD)
Closing Price Last Friday: CGBD $15.96 +$0.06 +0.38%
CGBD is an externally managed BDC.
Maximum Position in this Account: 50 Shares
Current Position: 40 Shares
Average Cost Per Share This Account: $16.41
Dividend: Quarterly at $.37 ($1.48 annually)
Dividend Yield at TC Per Share = 9.02%
Dividend: Quarterly at $.37 ($1.48 annually)
Dividend Yield at TC Per Share = 9.02%
Last Discussed: Item # 1.A. (10/3/18 Post) I have nothing to add to that recent discussion.
Last Ex Dividend Date: 9/27/18 (only 10 shares bought in this account before then)
C. Added 10 OFS at $11.3-Used Commission Free Trade:
Quote: OFS Capital Corp. (OFS)
OFS is a lightly traded, externally managed BDC. Volume last Friday was 25,360 shares with a trading range between $11.25 and $11.55. Relatively small orders can jerk the price up or down meaningfully.
Closing Price Last Friday: OFS $11.25 -$0.31 -2.68%
Current Position in This Account: 30 Shares
Average Cost Per Share = $11.57
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Dividend: Quarterly, currently at $.34 per share ($1.36 per share annually)
Dividend Yield at Average Total Cost Per Share = 11.75%
Last Ex Dividend Date: 9/13/18
I discussed this nano cap BDC in my last post and have nothing further to add: Item # 3.B. Bought 20 OFS at $11.7 (10/17/18 Post)
Last Ex Dividend Date: 9/27/18 (only 10 shares bought in this account before then)
C. Added 10 OFS at $11.3-Used Commission Free Trade:
Quote: OFS Capital Corp. (OFS)
OFS is a lightly traded, externally managed BDC. Volume last Friday was 25,360 shares with a trading range between $11.25 and $11.55. Relatively small orders can jerk the price up or down meaningfully.
Closing Price Last Friday: OFS $11.25 -$0.31 -2.68%
Current Position in This Account: 30 Shares
Average Cost Per Share = $11.57
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
Dividend: Quarterly, currently at $.34 per share ($1.36 per share annually)
Dividend Yield at Average Total Cost Per Share = 11.75%
Last Ex Dividend Date: 9/13/18
I discussed this nano cap BDC in my last post and have nothing further to add: Item # 3.B. Bought 20 OFS at $11.7 (10/17/18 Post)
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 1 Merrick BK 2.9% CD (monthly interest payments) Maturing on 9/21/20 (23 month CD):
B. Bought 1 Treasury 2.625% Coupon Maturing on 8/15/20:
YTM at 2.889%
At the moment, I am weighting my new purchases in short term treasuries bought at auction or in the secondary market.
The two year treasury note hit a 10 year last week. The yield was at 2.92% last Friday. Daily Treasury Yield Curve Rates The spread between the 2 and 10 year treasury notes was then at .28%.
This security was bought in the secondary market. For Schwab customers, no brokerage commission is paid:
C. Bought 3 Three Month Treasury Bills at Auction Maturing on 1/17/18:
IR = 2.315%
Interest = $17.21
Interest for treasury bills is reflected in the dollar difference between par value and the amount paid at auction.
Auction Results:
10/15/18 Auction.pdf
D. Bought 1 Wells Fargo 2.65% CD (monthly interest) Maturing on 11/26/19:
3. Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:
YTM at 2.889%
At the moment, I am weighting my new purchases in short term treasuries bought at auction or in the secondary market.
The two year treasury note hit a 10 year last week. The yield was at 2.92% last Friday. Daily Treasury Yield Curve Rates The spread between the 2 and 10 year treasury notes was then at .28%.
This security was bought in the secondary market. For Schwab customers, no brokerage commission is paid:
C. Bought 3 Three Month Treasury Bills at Auction Maturing on 1/17/18:
IR = 2.315%
Interest = $17.21
Interest for treasury bills is reflected in the dollar difference between par value and the amount paid at auction.
Auction Results:
10/15/18 Auction.pdf
D. Bought 1 Wells Fargo 2.65% CD (monthly interest) Maturing on 11/26/19:
3. Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:
A. Sold Remaining 50 Shares of EPRPRC at $27.49-Used Commission Free Trade:
Quote: EPR Properties 5.75% Cumulative Convertible Preferred Series C Stock
Profit Snapshot: +$178.51
Item # 1 Bought 50 EPRPRC at $23.78-Used Commission Free Trade (4/23/18 Post)
Security: This is a convertible preferred stock issued by EPR Properties. The initial conversion rate was at $71.34, which rate has been adjusted down to $63.97 as of 6/30/18: Terms.PDF The company discloses the adjusted conversion price every quarter, and the most recent number can be found by clicking "Summary of Series C Preferred Shares" here: Preferred Shares Summary of Terms
Prospectus
With an uptick in interest rates, I am concerned that the common shares will go down and take this convertible preferred down as well.
EPR Properties Interactive Chart
I will look for another entry point in the $24 to $24.5 range.
Par Value: $25
Last Ex Dividend Date: 9/27/18 (will receive that dividend)
EPRPRC Trading Profits To Date: $563.21
Last Discussed: Item # 1.B. Sold 50 EPRPRC at $28.48 (9/12/18 Post)
B. Bought 10 APLE at $16.97 and 10 at $16.41-Used Fidelity Commission Free Trade:
Quote: Apple Hospitality REIT Inc. (APLE)
Website: Apple Hospitality REIT
Hotel Map: Hotel Map
APLE SEC Filings
Closing Price Last Friday: APLE $16.37 -$0.03 -0.18%
Current Position in This Account: 94+ shares
Maximum Position in This Account: 120 Shares (raised from previous 100 share limit in this account due to price decline, valuation and dividend yield) + Shares purchased with dividends
Average Cost Per Share this Account: $17.72
Highest Cost Lot in Current Chain: 50 Shares at a TC of $18.19 per share (7/20/17)(will be sold when and if I can do so profitably)
I will sell that lot when and if the price exceeds $19 per share.
The price last exceeded that price in May 2018. APLE Chart
The stock has been in a bear trend since that time.
Total APLE Position All Accounts: 414+ shares
Purchase Restriction: Small Ball Rule
Dividend: Monthly at $.1 per share ($1.2 per share annually)
Apple Hospitality REIT Announces November 2018 Distribution
Dividend Yield at Total Average Cost Per Share of $17.72 = 6.77%
Dividend Yield at Last Purchase Price of $16.41 = 7.31%
Last Ex Dividend Date: 10/2/18
Dividend Reinvestment: Yes
Last Substantive Discussion: Item # 3.B. (8/12/18 Post)
I discussed the second quarter earnings report in that post.
Previous Sell Discussions:
Item # 5.A. Sold 50 APLE at $19.6 (12/18/17 Post)
Item # 6.B. Sold Highest Cost Lot in Schwab at $19.22 (10/19/17 Post)
Item 2.B. Sold 100 APLE at $19.43(5/25/17 Post)
Last Earnings Report: Apple Hospitality REIT Reports Results of Operations for Second Quarter 2018; CEO Justin Knight on Q2 2018 Results - Earnings Call Transcript | Seeking Alpha
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.
South Gent,
ReplyDeleteI bought some APLE last week as well. It is actively traded, but not widely followed by the analyst community. I like that the insiders hold large shares and keep on buying on its way down.
Btw I received a nice SWZ dividend on Friday. I chose to reinvest the dividends.
Y: I no longer own SWZ which was sold as part of my overall stock allocation reduction. I am down to about a 10% stock allocation of my investable assets housed in brokerage accounts. I have started to deploy a small amount of cash in the Matthews China Dividend mutual fund, just $300 so far. Schwab allows for small purchases.
DeleteI did notice that large SWZ dividend. The fund announced back in September that it was going to pay that dividend and to conduct a tender offer for up to 65% of the shares at a price equal to 98% of net asset value per share. That has shrunk the discount to -3.67% from a five year average of -11.26%.
https://www.schroders.com/en/sysglobalassets/digital/us/swz/sc1-4737921-ver3-press-release-the-swiss-helvetia-fund.pdf
SWZ Website:
https://www.schroders.com/en/us/swz-fund/
I used the proceeds from EPRPRC, mentioned in this blog, to buy a higher yielding HTPRD at $22.3, bringing my position in that cumulative preferred stock up to 100 shares. This preferred stock yields about 7.297% at that all-in price. It went ex dividend in late September. I will receive that dividend on the previously bought 50 share lot.
South Gent,
DeleteIt is time to average down on HTPRD. Maybe we can get some shares at its all time low.
Y: The common shares (H) were shellacked yesterday in response to an earnings report which has probably contributed to the HTPRD weakness. Part of the problem has to due with hurricane damage and business interruption therefrom.
Deletehttp://www.snl.com/irweblinkx/file.aspx?IID=4019891&FID=395447283
Apple Hospitality announced that its two hotels in Panama City received significant damage and will likely be close for the remainder of the year. There is insurance for the damages and business interruption but there is a "less than" $1M windstorm deductible:
https://ir.applehospitalityreit.com/file/Index?KeyFile=395463795
My maximum position is 150 HTPRD shares, a risk limit more related to interest rate than credit risk. My next purchase will be in a Roth IRA. I will have to wait for a $4K T Bill to mature on 11/1 to buy in my Fidelity IRA, though I have sufficient funds now in the Vanguard Roth but the commission is higher. I would prefer to wait for a better bid/ask spread which is currently at $21.35-21.7 before placing a limit order on a 50 share lot which could result in a partial fill. In other words, I would probably buy when I can place a limit order at the ask price when that price is below $21.5.
China's stock market index rose 4.09% which is setting a better tone for U.S. stocks this morning.
ReplyDeleteShanghai Composite Index 2,654.88 +104.41 +4.09%
https://www.marketwatch.com/investing/index/shcomp?countrycode=cn
Hang Seng Index (Hong Kong) 26,153.15 +591.75 +2.32%
https://www.marketwatch.com/investing/index/hsi?countrycode=hk
I mentioned in a prior comment restarting a very tiny position in the Matthews China Dividend mutual fund.
https://www.marketwatch.com/investing/fund/mcdfx
I will not be discussing in a blog post buying 50 shares of the Global X China Consumer ETF (CHIQ):
https://www.marketwatch.com/investing/fund/chiq
Sponsor's Page:
https://www.globalxfunds.com/funds/chiq/
Another option for exposure, which I do not currently own, is the China Fund (CHN) which is a CEF. I have bought and sold that one many times in the past.
https://www.cefconnect.com/fund/CHN
I do view China's stock market as both risky and highly volatile and there are a lot of good reasons to be cautious to negative.
So much for the better tone set pre-market by the gains in China's stock market. As I noted in this post, the bears have been more in control than the bulls this month.
ReplyDeleteS&P 500 Index 2,759.10 -8.68 -0.31%
Last Updated: Oct 22, 2018 at 10:01 a.m. EDT
It is almost invariably a bad sign to see the CEO resign to "pursue other opportunities" just a few days prior to a quarterly report.
https://www.nasdaq.com/press-release/melinta-therapeutics-announces-appointment-of-john-h-johnson-as-interim-chief-executive-officer-20181022-00490
Melinta Therapeutics Inc.
$ 3.28 -$0.5137 -13.59%
Last Updated: Oct 22, 2018 at 10:02 a.m. EDT
The resignation indicates to me that another bad quarter is about to be reported. I own 50 shares as a Lotto Ticket. I am in a hold pattern and may buy a few more shares (30 shares tops) after reviewing the quarterly report at a price lower than the current one.
Regional bank stocks are in the crapper:
ReplyDeleteSPDR S&P Regional Banking ETF (KRE)
$53.00 -$1.71 (-3.13%)
https://finance.yahoo.com/quote/KRE?p=KRE
The KRE 52 week high was at $66.04, hit on 6/7/18.
The decline from that high to today's close is -19.75%. Where it stops nobody knows, but I do expect that ETF to enter into bear market territory soon, possibly tomorrow.
I did pare my regional bank allocation to less than $5K a few months, selling positions throughout 2017 and through July of this year. The total was over $100K at its peak.
I am now building the regional bank allocation back up very slowly and cautiously using small ball trades and the small ball purchase restriction. I am doing sprinkle purchases at close to $500 per week now, mostly 5 or 10 share lot purchases using commission free trades.
I am not having to wait long for a lower price. Many of the higher quality regionals are hitting new 52 week lows.
I suspect that many investors have just run out of patience waiting for NIM expansion which is still a no show. Loan growth is anemic.
At least a significant faction of Stock Jocks may be signaling that all is not going to be as strong in the economy next year as investors have been anticipating until recently.
That belief is also consistent with the recent downdraft in BDCs that will be very sensitive to a major downshift in the business cycle.
Still, as I noted in a recent posts, dividend yields for many of the regionals are over 4% due to the price drop and forward P/E ratios are less than 10 or slightly over. The lower quality BDCs which I have been buying at yielding generally in the 11.5% to 12.5% range.
There is a lot of internal weakness in the stock market now.
ReplyDeleteFor example, on the NYSE, 20 securities made new 52 week highs today while 289 made new 52 week lows.
http://www.wsj.com/mdc/public/page/2_3021-newhinyse-newhighs.html?mod=topnav_2_3022
Advance/Decline Charts:
https://www.marketinout.com/chart/market.php?breadth=advance-decline-line
41.46% of the S & P 500 stocks are below their 200 day SMA lines:
https://www.barchart.com/stocks/indices/sp/sp500
The S & P 500 index pierced its 200 day SMA line today using a 1 year Yahoo Finance chart. That chart has the 200 day line now at 2,768.3. The close today was at 2,755.88 down-11.90 or-0.43%.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/10/observations-and-sample-of-recent_24.html