Economy:
The unemployment rate declined to 3.7% in September. Total nonfarm payroll rose by 134K, less than expected, but the prior two months were revised up by 87K. Average hourly wages increased by 8 cents. The Y-O-Y increase in average hourly wages was 2.8%, close to the inflation rate. Employment Situation Summary
The unemployment rate has been trending down since hitting 10% in October 2009:
Chart Civilian Unemployment Rate | FRED | St. Louis Fed
The Fed Chairman Jerome Powell asserted that the U.S. economy was in the midst of a "remarkably positive" period that is unprecedented in modern U.S. history. “This historically rare pairing of steady, low inflation and very low unemployment is a testament to the fact we remain in extraordinary times,” Powell added. Fed's Powell sees 'remarkably positive outlook' for economy
The unemployment rate declined to 3.7% in September. Total nonfarm payroll rose by 134K, less than expected, but the prior two months were revised up by 87K. Average hourly wages increased by 8 cents. The Y-O-Y increase in average hourly wages was 2.8%, close to the inflation rate. Employment Situation Summary
The unemployment rate has been trending down since hitting 10% in October 2009:
Chart Civilian Unemployment Rate | FRED | St. Louis Fed
The Fed Chairman Jerome Powell asserted that the U.S. economy was in the midst of a "remarkably positive" period that is unprecedented in modern U.S. history. “This historically rare pairing of steady, low inflation and very low unemployment is a testament to the fact we remain in extraordinary times,” Powell added. Fed's Powell sees 'remarkably positive outlook' for economy
Another key barometer of U.S. economy hits post-recession high: ISM service index rises - MarketWatch
The September ISM non-manufacturing index rose to 61.6 in September from 58.5. The new orders component rose 1.2 to 61.6. The employment component rose 5.7 to 62.4. All of those numbers are reflective of robust economic conditions.
US weekly jobless claims total 207,000 (a 49 year low) vs 213,000 expected
The September ISM non-manufacturing index rose to 61.6 in September from 58.5. The new orders component rose 1.2 to 61.6. The employment component rose 5.7 to 62.4. All of those numbers are reflective of robust economic conditions.
US weekly jobless claims total 207,000 (a 49 year low) vs 213,000 expected
Amazon giveth and taketh away. Amazon raises minimum wage to $15 for all US employees; Amazon hourly workers lose monthly bonuses, stock awards
++++++
Markets and Market Commentary:
JP Morgan downgrades China stocks, predicts 'full-blown trade war' with US
Last Wednesday, the ten year treasury yield broke decisively out of its recent trading range, moving up .12% to close at 3.185%. Rates above the levels Bond King Gundlach called 'game changer'; DoubleLine's Gundlach: 30-year US Treasury signals significantly higher bond yields ahead
Rates continued to careen up on Thursday and Friday. The ten year yield closed at 2.82% on 8/24/18 and at 3.23% last Friday. That translates into a 14.54% rise in less than 2 months. The main problem as I see it now is that no one really knows what the new trading range will be. I suspect that the ten year treasury yield will try to find a range bound movement between 3.25% to 3.5%.
Daily Treasury Yield Curve Rates
The break-even inflation rate for the 10 year TIP, an estimate of the annual average CPI rate, closed last Friday at 2.16%. In a world free of central bank manipulation, which has not been our world since 2007, that anticipated annual rate of inflation would normally result in a non-inflation protected 10 year yield of between 4% to 4.25%.
The ten year break-even inflation rate has been trending up since February 2016.
10-Year Breakeven Inflation Rate | FRED | St. Louis Fed
If inflation expectations continue to rise as central banks back away from extremely abnormal monetary policies, the ten year treasury yield could gradually work its way to a normal level which I would call 4% to 5%. The current trend in interest rates will cause a spike in the federal government's interest costs, made far worse by a rapidly expanding debt load. Government - Interest Expense on the Debt Outstanding; Debt to the Penny (Daily History Search Application)
The probability of a .25% hike in the FF rate on or before the Fed's December 2018 meeting closed last Friday at 82.1%:
Countdown to FOMC: CME FedWatch Tool
The probability of at least a .75% increase on or before the July 2019 meeting closed at 44.5%:
There is a growing supply/demand imbalance in U.S. treasuries. The treasury will need to sell about $1.3 trillion in debt over the next 12 months as the Federal Reserve reduces its holdings of treasury paper.
Since I anticipate that budget deficits will be around $1 trillion per year over the next several years, that imbalance is expected to significantly increase, contributing to a rise in U.S. interest rates which only aggravates the deficit problem.
Abnormally low sovereign bond yields elsewhere will restrain the rise in longer duration U.S. treasury yields:
10 Year Government Bond Yields:
Germany .57%
Netherlands .67%
Switzerland .03%
Japan .15%
France .9%
U.K. 1.72%
Spain 1.57%
Sweden .707%
Rates & Bonds - Bloomberg
A downturn in housing is a major risk to the economy IMO: A red flashing light in housing market could be trouble for economy Median new home prices are already too high or a stretch for many median income household without any increases in mortgage costs or after tax costs due to "tax reform". As of August 2018, the median price of a new home was $320,200, up from $205,100 in March 2009: Median Sales Price for New Houses Sold in the United States | FRED | St. Louis Fed
Bond-market bloodbath likely to hit mortgage rates soon — another test for the housing market - MarketWatch
JP Morgan downgrades China stocks, predicts 'full-blown trade war' with US
Last Wednesday, the ten year treasury yield broke decisively out of its recent trading range, moving up .12% to close at 3.185%. Rates above the levels Bond King Gundlach called 'game changer'; DoubleLine's Gundlach: 30-year US Treasury signals significantly higher bond yields ahead
Rates continued to careen up on Thursday and Friday. The ten year yield closed at 2.82% on 8/24/18 and at 3.23% last Friday. That translates into a 14.54% rise in less than 2 months. The main problem as I see it now is that no one really knows what the new trading range will be. I suspect that the ten year treasury yield will try to find a range bound movement between 3.25% to 3.5%.
The break-even inflation rate for the 10 year TIP, an estimate of the annual average CPI rate, closed last Friday at 2.16%. In a world free of central bank manipulation, which has not been our world since 2007, that anticipated annual rate of inflation would normally result in a non-inflation protected 10 year yield of between 4% to 4.25%.
The ten year break-even inflation rate has been trending up since February 2016.
10-Year Breakeven Inflation Rate | FRED | St. Louis Fed
If inflation expectations continue to rise as central banks back away from extremely abnormal monetary policies, the ten year treasury yield could gradually work its way to a normal level which I would call 4% to 5%. The current trend in interest rates will cause a spike in the federal government's interest costs, made far worse by a rapidly expanding debt load. Government - Interest Expense on the Debt Outstanding; Debt to the Penny (Daily History Search Application)
The probability of a .25% hike in the FF rate on or before the Fed's December 2018 meeting closed last Friday at 82.1%:
The probability of at least a .75% increase on or before the July 2019 meeting closed at 44.5%:
There is a growing supply/demand imbalance in U.S. treasuries. The treasury will need to sell about $1.3 trillion in debt over the next 12 months as the Federal Reserve reduces its holdings of treasury paper.
Since I anticipate that budget deficits will be around $1 trillion per year over the next several years, that imbalance is expected to significantly increase, contributing to a rise in U.S. interest rates which only aggravates the deficit problem.
Abnormally low sovereign bond yields elsewhere will restrain the rise in longer duration U.S. treasury yields:
10 Year Government Bond Yields:
Germany .57%
Netherlands .67%
Switzerland .03%
Japan .15%
France .9%
U.K. 1.72%
Spain 1.57%
Sweden .707%
Rates & Bonds - Bloomberg
A downturn in housing is a major risk to the economy IMO: A red flashing light in housing market could be trouble for economy Median new home prices are already too high or a stretch for many median income household without any increases in mortgage costs or after tax costs due to "tax reform". As of August 2018, the median price of a new home was $320,200, up from $205,100 in March 2009: Median Sales Price for New Houses Sold in the United States | FRED | St. Louis Fed
Bond-market bloodbath likely to hit mortgage rates soon — another test for the housing market - MarketWatch
Fed Leads Rich Nations Out of Era of Near-Zero Interest Rates - Bloomberg
Natural gas prices have surged over the last month — here's why
Natural gas prices have surged over the last month — here's why
Chinese spy chips are found in hardware used by Apple, Amazon, Bloomberg says; Apple says no way
Einhorn dumps Apple: Fear of 'Chinese retaliation against' US tariffs
IBM profits are in an 'irreversible structural decline,' analyst says
Einhorn dumps Apple: Fear of 'Chinese retaliation against' US tariffs
IBM profits are in an 'irreversible structural decline,' analyst says
++++
Trump:
Donald claimed that those protesting Kavanaugh's nomination are paid protestors financed by George Soros:
Donald claimed that those protesting Kavanaugh's nomination are paid protestors financed by George Soros:
Trump is the poster child for tribalism in American politics.
So Donald is reportedly a tax cheat? Who could have known? New York state tax department reviewing fraud allegations involving Trump in NYT article
So Donald is reportedly a tax cheat? Who could have known? New York state tax department reviewing fraud allegations involving Trump in NYT article
The surest way for an IRS employee to commit career suicide would be to recommend an enforcement action against Donald.
New York is looking into the claims. Fraud will have to be shown to support a recovery given the age of the claims.
For Donald, one issue would be whether he owes any gift tax, normally paid by the donor. I would not venture an opinion on whether NY can recover gift taxes from the recipient of the gift when the donor is proven to have committed fraud by undervaluing the gifted assets and is no longer available to pay the tax (deceased for a person or no longer in existence for an entity).
In today's dollars, Donald's gifts from Daddy Trump were over $400M. Donald Trump and the Self-Made Sham-The New York Times
11 Takeaways From The Times’s Investigation Into Trump’s Wealth - The New York Times;
Trump's lawyer calls the NYT statements about the reported tax fraud 100% false and "highly defamatory" but has not apparently identified any false statement in the article. Trump calls New York Times investigation on tax fraud a hit piece Trump's Press Secretary called the report boring and noted that she was not going to point out any falsehoods.
Yes of course, facts are boring, and a lot of facts are really, really boring. These posts of mine are really boring too. It is much easier to create reality capable of being communicated in a tweet.
Trump Engaged in Suspect Tax Schemes as He Reaped Riches From His Father - The New York Times (this article took a good chunk out of my morning just to read)
Donald is not someone who could withstand any detailed scrutiny of his past.
If the Democrats win control over the House, these tax evasion schemes will likely be part of new investigations into Trump's activities.
Anyone interested in Don the Con's capacity for fraud before the election could have looked into his activities involving Trump University. What Donald Trump’s University Reveals About His Nature | Time; Big Hair on Campus: Did Donald Trump Defraud Thousands of Real-Estate Students? | Vanity Fair; The Many Scandals of Donald Trump: A Cheat Sheet - The Atlantic
Trumpsters could care less. Any justified criticism of Trump is Fake News and is a personal attack on them as well.
++
Shortly after Donald mocked Ms. Ford and strongly suggested that she was a liar, with no other reasonable interpretation possible, Kellyanne Conway asserted with a straight face that Ms. Ford had been treated by the Duck as a precious "Faberge egg". In TrumpWorld, just about everything is turned upside down: True is False, False is True.
Nothing has changed. If a woman comes forward and claims that an old republican white guy committed a sexual assault, the republican men and women will trash and mock her endlessly. Kavanaugh Accuser Deborah Ramirez Says Senate Chose to 'Look the Other Way' on Supreme Court Nominee
Donald says he is in love with Kim. Trump: Kim Jong Un and I fell in love I wish that I had made that up.
Trump Directed Action to Enforce Stormy Daniels's Hush Agreement
Trump has now threatened Saudi Arabia: Donald Trump says Saudi Arabia's King Salman wouldn't last 2 weeks without US military support - CBS News
++++
Kavanaugh:
This post will be my last discussion about Kavanaugh until there is a thorough investigation that goes beyond the sham one conducted by the FBI designed only to provide cover for the republicans. The FBI Director was a college classmate of Kavanaugh.
The GOP has sent Kavanaugh to the Supreme Court probably for several decades, solidifying a 5 to 4 reactionary Supreme Court likely to overrule a large number of prior decisions. If one of the 4 left of center Justices passes away with the republicans still in control, then the court will tilt even further to the far right.
This is set in stone now. If anyone objects to the future course from here, and failed to vote in one of the swing states, then they can blame themselves. Protests will have as much an impact as banging one's head into the wall.
Only three republican senators may pay a price for a yes vote. Only one is up for election this November. Dean Heller (R), the incumbent senator from Nevada, is being challenged by Jacky Rosen, who currently has a slight lead in the polls. RealClearPolitics - Election 2018 - Nevada Senate - Heller vs. Rosen
The second is the incumbent republican senator from Colorado, Cory Gardner, whose term ends in 2020. He narrowly beat Mark Udall in 2014. Gardner's vote was never in doubt, though he created a pretense of being concerned about the allegations for political reasons since he will always be vulnerable in that state. Colorado's Cory Gardner undecided on Brett Kavanaugh
The must vulnerable republican senator in the 2020 election may be the pretend moderate Susan Collins from Maine. So far, she has voted with Trump about 80% of the time. Tracking Congress In The Age Of Trump | FiveThirtyEight The divergence is mostly on unimportant issues. I would label Collins a 90% pure Trumpster. I believe that her fake facade and factually unsupportable efforts to create a meaningful distance from Trump is gradually being torn away by the moderate Maine voters who voted for her in past elections.
Ron Johnson (R-WIS) will be vulnerable for other reasons when he has to run again in 2022.
Collins' vote was never really in doubt IMO, nor was the vote of Cory Gardner.
She was used to put a feminine face on decisions made by the old white guys. Where Two Men Normally Sit, Two Women Flank Sen. Susan Collins During Kavanaugh Speech
The old white guy Senator Grassley (R-Iowa), who is 85 and the Chairman of the Senate's Judiciary Committee, was asked last Friday why there are not more women senators on the committee. This was his response: “It’s a lot of work — maybe they don’t want to do it.” Grassley: Workload may keep women off committee - CNN
Donald is the natural leader for the modern day GOP which includes Ms. Collins as one of his dutiful servants.
The main question is whether the House will pass to the Democrat's control after the November mid-term election. We will soon know the answer to that question.
If that happens, then a comprehensive investigation of Kavanaugh's prior conduct and truthfulness under oath will be likely, as witnesses deliberately ignored by the FBI are called before the House Judiciary Committee to give live sworn testimony.
I say likely since the Democrats' leadership may not want to start that ball rolling and could corral the firebrands. My advice to them would be to forget about impeachment since it would go nowhere in the Senate and may cost them seats in the 2020 election. An investigation and a detailed report would be fine. Several complaints of judicial misconduct stemming from Kavanaugh's testimony have already been filed with the U.S. D.C. Court of Appeals and have been forwarded to Chief Justice Roberts for review. D.C. Circuit sent complaints about Kavanaugh’s testimony to Chief Justice Roberts - The Washington Post
Even if the House voted out multiple articles of impeachment against Kavanaugh, there will not be a conviction in the Senate which requires a two thirds majority.
50 republican senators voted for Kavanaugh knowing about his lack of judicial temperament (already subject to republican revisionist history at odds with what can be seen and heard on tape), his hyper and naked partisanship (his inner Trump has been exposed), multiple counts of lying under oath, and credible evidence of two sexual assaults while inebriated. Until all of the material evidence becomes public, I would reserve judgment on whether it is more likely than not that Kavanaugh committed one or more sexual assaults.
Since the republicans would never support an impeachment, the end result of the Democrats following that path will be an increase in an already disturbing decree of tribalism, nurtured and enhanced by the Duck, with Kavanaugh remaining a Supreme Court Justice for decades.
The evidence dismissed by the 50 republican senators was substantial and credible.
We were Brett Kavanaugh’s drinking buddies. We don’t think he should be confirmed; Yale roommate: Kavanaugh lied about drinking TheHill Four individuals who knew Kavanaugh at Yale have stated unequivocally that he lied under oath about his drinking based on their personal observations. All of these individuals are credible witnesses.
Yale roommate says Kavanaugh lied under oath about drinking and yearbook - CNN (Kavanaugh was a "heavy drinker") Trump and the republican senators do not view this person's personal knowledge as relevant.
The F.B.I. Ignores Testimonies from Kavanaugh’s Former Classmates | The New Yorker One of the witnesses deliberately ignored is Kenneth G. Appold who received a Ph.D in religious studies at Yale and is currently employed as a professor at Princeton. Appold was told about Kavanaugh's alleged sexual assault of Deborah Ramirez by an eyewitness, either on the day of the assault or within two days thereafter. He does not know Ramirez and has never talked to her. Appold discussed what he heard with his roommate, Michael Wetstone, who confirmed that he remembered that discussion: “It stood out in our minds because it was a shocking story of transgression.” Trump and the republican senators do not view their testimony as relevant to the investigation.
This is extraordinary: The Senate Should Not Confirm Kavanaugh. Signed, 2,400+ Law Professors. - The New York Times ("We regret that we feel compelled to write to you, our Senators, to provide our views that at the Senate hearings on Sept. 27, Judge Brett Kavanaugh displayed a lack of judicial temperament that would be disqualifying for any court, and certainly for elevation to the highest court of this land.')
The FBI investigation, as expected, was simply a transparent cover up orchestrated by the White House and republican senators with the FBI's cooperation.
FBI has not contacted dozens of potential sources in Kavanaugh investigation;
Some witnesses say they called FBI in vain as end of Kavanaugh probe looms;
As FBI background check of Kavanaugh nears its end, probe appears to have been highly curtailed - The Washington Post
The White House counsel, Don McGahn who is a personal friend of Kavanaugh, was successful in preventing an adequate investigation. The GOP wanted the investigation primary limited to Kavanaugh's close friends who would either back him up about the Ford and Ramirez sexual assault claims (e.g. Mark Judge) or claim to have no memory. Other witnesses that would pierce this narrative were ignored by the FBI.
McGahn’s last stand: The White House counsel has been working feverishly to get Kavanaugh confirmed - The Washington Post
A substantive and real investigation will occur only when the Democrats gain control over the House.
The White House prevented the FBI from interviewing either Kavanaugh or Ms. Ford for understandable tactical reasons that had nothing to do with getting to the truth.
If Trump had permitted the FBI to interview Ms. Ford, it would have been impossible to provide a cogent reason why Kavanaugh was not subjected to the same exhaustive interview where he would not be allowed to dodge and weave and throw questions back at the questioners. Only bad things could happen in an FBI interview of Kavanaugh, so the decision was made to exclude both from an FBI interview.
The FBI was prevented by Trump, acting through Don McGahn, from interviewing a large number of witnesses that would have been supportive of Kavanaugh's two main accusers.
Rather than permitting a fair FBI investigation, the GOP's gambit was instead to question the testimony of the accusers with statements that would originate from people who would be excluded from the FBI's interview process. Christine Blasey Ford’s Credibility Under New Attack by Senate Republicans - The New York Times
One such method was to dig deep into Ms. Ford's past to find a boyfriend who submitted an affidavit that she had not talked about Kavanaugh when they dated in the early 1990s.
The republicans claimed that Ms. Ford's failure to report and discuss was proof that the assault did not happen, a constant theme made in their attacks on her. Ms. Ford testified that she did not tell anyone until 2012. While keeping silent is a well known common reaction among rape and attempted rape victims, republicans have nonetheless consistently ignored that fact and have instead claimed that Ms. Ford's failure to come forward earlier proves that nothing really happened to her.
This "gentleman" signing the affidavit, identified as Brian Merrick by the NYT, also claimed that Ms. Ford coached a friend, Monica Mclean, on how to pass a polygraph test. During her cross examination by the republican's attorney, she was asked whether she had ever prepped anyone for a polygraph test, a setup question, and she replied no.
Both Ms. Ford and the friend denied that aspect of Mr. Merrick's testimony. Ms. Mclean, a retired FBI agent, issued this reply to Mr. Merrick: “I have never had Christine Blasey Ford, or anybody else, prepare me, or provide any other type of assistance whatsoever in connection with any polygraph exam I have taken at any time.” Attempt to smear Dr. Ford by way of Ex-BF has now been refuted.
Two former Yale Law School classmates withdraw support for Kavanaugh (they correctly observed that Kavanaugh's demeanor during his testimony was inconsistent with what is required from a Supreme Court Justice. I view his temperament to be unsuitable for a judge at any level.)
Trump supporter, 53, is charged after 'making threats to kill' Democrat senators and 'weak' Republicans if they vote against Brett Kavanaugh
++++++
Trump has now threatened Saudi Arabia: Donald Trump says Saudi Arabia's King Salman wouldn't last 2 weeks without US military support - CBS News
++++
Kavanaugh:
This post will be my last discussion about Kavanaugh until there is a thorough investigation that goes beyond the sham one conducted by the FBI designed only to provide cover for the republicans. The FBI Director was a college classmate of Kavanaugh.
The GOP has sent Kavanaugh to the Supreme Court probably for several decades, solidifying a 5 to 4 reactionary Supreme Court likely to overrule a large number of prior decisions. If one of the 4 left of center Justices passes away with the republicans still in control, then the court will tilt even further to the far right.
This is set in stone now. If anyone objects to the future course from here, and failed to vote in one of the swing states, then they can blame themselves. Protests will have as much an impact as banging one's head into the wall.
Only three republican senators may pay a price for a yes vote. Only one is up for election this November. Dean Heller (R), the incumbent senator from Nevada, is being challenged by Jacky Rosen, who currently has a slight lead in the polls. RealClearPolitics - Election 2018 - Nevada Senate - Heller vs. Rosen
The second is the incumbent republican senator from Colorado, Cory Gardner, whose term ends in 2020. He narrowly beat Mark Udall in 2014. Gardner's vote was never in doubt, though he created a pretense of being concerned about the allegations for political reasons since he will always be vulnerable in that state. Colorado's Cory Gardner undecided on Brett Kavanaugh
The must vulnerable republican senator in the 2020 election may be the pretend moderate Susan Collins from Maine. So far, she has voted with Trump about 80% of the time. Tracking Congress In The Age Of Trump | FiveThirtyEight The divergence is mostly on unimportant issues. I would label Collins a 90% pure Trumpster. I believe that her fake facade and factually unsupportable efforts to create a meaningful distance from Trump is gradually being torn away by the moderate Maine voters who voted for her in past elections.
Ron Johnson (R-WIS) will be vulnerable for other reasons when he has to run again in 2022.
Collins' vote was never really in doubt IMO, nor was the vote of Cory Gardner.
She was used to put a feminine face on decisions made by the old white guys. Where Two Men Normally Sit, Two Women Flank Sen. Susan Collins During Kavanaugh Speech
The old white guy Senator Grassley (R-Iowa), who is 85 and the Chairman of the Senate's Judiciary Committee, was asked last Friday why there are not more women senators on the committee. This was his response: “It’s a lot of work — maybe they don’t want to do it.” Grassley: Workload may keep women off committee - CNN
Donald is the natural leader for the modern day GOP which includes Ms. Collins as one of his dutiful servants.
The main question is whether the House will pass to the Democrat's control after the November mid-term election. We will soon know the answer to that question.
If that happens, then a comprehensive investigation of Kavanaugh's prior conduct and truthfulness under oath will be likely, as witnesses deliberately ignored by the FBI are called before the House Judiciary Committee to give live sworn testimony.
I say likely since the Democrats' leadership may not want to start that ball rolling and could corral the firebrands. My advice to them would be to forget about impeachment since it would go nowhere in the Senate and may cost them seats in the 2020 election. An investigation and a detailed report would be fine. Several complaints of judicial misconduct stemming from Kavanaugh's testimony have already been filed with the U.S. D.C. Court of Appeals and have been forwarded to Chief Justice Roberts for review. D.C. Circuit sent complaints about Kavanaugh’s testimony to Chief Justice Roberts - The Washington Post
Even if the House voted out multiple articles of impeachment against Kavanaugh, there will not be a conviction in the Senate which requires a two thirds majority.
50 republican senators voted for Kavanaugh knowing about his lack of judicial temperament (already subject to republican revisionist history at odds with what can be seen and heard on tape), his hyper and naked partisanship (his inner Trump has been exposed), multiple counts of lying under oath, and credible evidence of two sexual assaults while inebriated. Until all of the material evidence becomes public, I would reserve judgment on whether it is more likely than not that Kavanaugh committed one or more sexual assaults.
Since the republicans would never support an impeachment, the end result of the Democrats following that path will be an increase in an already disturbing decree of tribalism, nurtured and enhanced by the Duck, with Kavanaugh remaining a Supreme Court Justice for decades.
The evidence dismissed by the 50 republican senators was substantial and credible.
We were Brett Kavanaugh’s drinking buddies. We don’t think he should be confirmed; Yale roommate: Kavanaugh lied about drinking TheHill Four individuals who knew Kavanaugh at Yale have stated unequivocally that he lied under oath about his drinking based on their personal observations. All of these individuals are credible witnesses.
Yale roommate says Kavanaugh lied under oath about drinking and yearbook - CNN (Kavanaugh was a "heavy drinker") Trump and the republican senators do not view this person's personal knowledge as relevant.
The F.B.I. Ignores Testimonies from Kavanaugh’s Former Classmates | The New Yorker One of the witnesses deliberately ignored is Kenneth G. Appold who received a Ph.D in religious studies at Yale and is currently employed as a professor at Princeton. Appold was told about Kavanaugh's alleged sexual assault of Deborah Ramirez by an eyewitness, either on the day of the assault or within two days thereafter. He does not know Ramirez and has never talked to her. Appold discussed what he heard with his roommate, Michael Wetstone, who confirmed that he remembered that discussion: “It stood out in our minds because it was a shocking story of transgression.” Trump and the republican senators do not view their testimony as relevant to the investigation.
This is extraordinary: The Senate Should Not Confirm Kavanaugh. Signed, 2,400+ Law Professors. - The New York Times ("We regret that we feel compelled to write to you, our Senators, to provide our views that at the Senate hearings on Sept. 27, Judge Brett Kavanaugh displayed a lack of judicial temperament that would be disqualifying for any court, and certainly for elevation to the highest court of this land.')
The FBI investigation, as expected, was simply a transparent cover up orchestrated by the White House and republican senators with the FBI's cooperation.
FBI has not contacted dozens of potential sources in Kavanaugh investigation;
Some witnesses say they called FBI in vain as end of Kavanaugh probe looms;
As FBI background check of Kavanaugh nears its end, probe appears to have been highly curtailed - The Washington Post
The White House counsel, Don McGahn who is a personal friend of Kavanaugh, was successful in preventing an adequate investigation. The GOP wanted the investigation primary limited to Kavanaugh's close friends who would either back him up about the Ford and Ramirez sexual assault claims (e.g. Mark Judge) or claim to have no memory. Other witnesses that would pierce this narrative were ignored by the FBI.
McGahn’s last stand: The White House counsel has been working feverishly to get Kavanaugh confirmed - The Washington Post
A substantive and real investigation will occur only when the Democrats gain control over the House.
The White House prevented the FBI from interviewing either Kavanaugh or Ms. Ford for understandable tactical reasons that had nothing to do with getting to the truth.
If Trump had permitted the FBI to interview Ms. Ford, it would have been impossible to provide a cogent reason why Kavanaugh was not subjected to the same exhaustive interview where he would not be allowed to dodge and weave and throw questions back at the questioners. Only bad things could happen in an FBI interview of Kavanaugh, so the decision was made to exclude both from an FBI interview.
The FBI was prevented by Trump, acting through Don McGahn, from interviewing a large number of witnesses that would have been supportive of Kavanaugh's two main accusers.
Rather than permitting a fair FBI investigation, the GOP's gambit was instead to question the testimony of the accusers with statements that would originate from people who would be excluded from the FBI's interview process. Christine Blasey Ford’s Credibility Under New Attack by Senate Republicans - The New York Times
One such method was to dig deep into Ms. Ford's past to find a boyfriend who submitted an affidavit that she had not talked about Kavanaugh when they dated in the early 1990s.
The republicans claimed that Ms. Ford's failure to report and discuss was proof that the assault did not happen, a constant theme made in their attacks on her. Ms. Ford testified that she did not tell anyone until 2012. While keeping silent is a well known common reaction among rape and attempted rape victims, republicans have nonetheless consistently ignored that fact and have instead claimed that Ms. Ford's failure to come forward earlier proves that nothing really happened to her.
This "gentleman" signing the affidavit, identified as Brian Merrick by the NYT, also claimed that Ms. Ford coached a friend, Monica Mclean, on how to pass a polygraph test. During her cross examination by the republican's attorney, she was asked whether she had ever prepped anyone for a polygraph test, a setup question, and she replied no.
Both Ms. Ford and the friend denied that aspect of Mr. Merrick's testimony. Ms. Mclean, a retired FBI agent, issued this reply to Mr. Merrick: “I have never had Christine Blasey Ford, or anybody else, prepare me, or provide any other type of assistance whatsoever in connection with any polygraph exam I have taken at any time.” Attempt to smear Dr. Ford by way of Ex-BF has now been refuted.
Two former Yale Law School classmates withdraw support for Kavanaugh (they correctly observed that Kavanaugh's demeanor during his testimony was inconsistent with what is required from a Supreme Court Justice. I view his temperament to be unsuitable for a judge at any level.)
Trump supporter, 53, is charged after 'making threats to kill' Democrat senators and 'weak' Republicans if they vote against Brett Kavanaugh
++++++
1. REGIONAL BANK BASKET STRATEGY:
A. Bought 100 TRST at $8.55 and 25 at $8.26-Used Commission Free Trades:
Quote: Trustco Bank Corp.
TRST Analyst Estimates (only 1 analyst)
Closing Price Last Friday: TRST $8.20 -$0.11 -1.32%
TRST is a savings and loan that operates 148 offices through its subsidiary Trustco Bank in Albany, Columbia, Dutchess, Greene, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren, Washington and Westchester counties of New York; Hillborough, Lake, Orange, Polk, Sarasota, Seminole, and Volusia counties in Florida; Berkshire County, Massachusetts; Bennington County, Vermont; and Bergen County, New Jersey.
Current Position: 125 Shares
Average Cost Per Share = $8.49
Maximum Position: 300 Shares
Purchase Restriction: Small Ball Rule
Last Sell Discussion: Item # 1.B. Sold 161+ TRST at $9.2+ (7/2/18 Post)
Last Purchase Discussion: Item # 2.A. Bought 50 TRST at $8.65 (1/28/18 Post)
TRST Trading Profits to Date: $985.36
Dividends: The quarterly rate had been stuck at $.065625 per share since the 2009 third quarter. The dividend was reduced to that level from $.11 per share. Effective for the 2018 third quarter, the penny rate was raised to $0.068125 per share, or $0.2725 per share on an annualized basis. TrustCo Declares 3.8% Increase in Cash Dividend
Dividend Yield at TC of $8.49 TC = 3.21%
Main Problem-NIM Stagnation: My main complaint about TRST has been stagnant E.P.S. growth as shown in the following five year table:
Sourced from Page 31 of the TRST 2017 Annual Report
Part of the problem is due to stagnant NIM which is understandable and practically unavoidable to any meaningful decree. Yield curve compression has been an ongoing problem for regional banks over the past five years.
There will be earnings growth attributable to a lower tax rate. It remains to be seen whether there will be NIM expansion as a contributor to E.P.S. growth.
A. Bought 100 TRST at $8.55 and 25 at $8.26-Used Commission Free Trades:
TRST Analyst Estimates (only 1 analyst)
Closing Price Last Friday: TRST $8.20 -$0.11 -1.32%
TRST is a savings and loan that operates 148 offices through its subsidiary Trustco Bank in Albany, Columbia, Dutchess, Greene, Orange, Putnam, Rensselaer, Rockland, Saratoga, Schenectady, Schoharie, Ulster, Warren, Washington and Westchester counties of New York; Hillborough, Lake, Orange, Polk, Sarasota, Seminole, and Volusia counties in Florida; Berkshire County, Massachusetts; Bennington County, Vermont; and Bergen County, New Jersey.
Current Position: 125 Shares
Average Cost Per Share = $8.49
Maximum Position: 300 Shares
Purchase Restriction: Small Ball Rule
Last Sell Discussion: Item # 1.B. Sold 161+ TRST at $9.2+ (7/2/18 Post)
Last Purchase Discussion: Item # 2.A. Bought 50 TRST at $8.65 (1/28/18 Post)
TRST Trading Profits to Date: $985.36
Dividends: The quarterly rate had been stuck at $.065625 per share since the 2009 third quarter. The dividend was reduced to that level from $.11 per share. Effective for the 2018 third quarter, the penny rate was raised to $0.068125 per share, or $0.2725 per share on an annualized basis. TrustCo Declares 3.8% Increase in Cash Dividend
Dividend Yield at TC of $8.49 TC = 3.21%
Main Problem-NIM Stagnation: My main complaint about TRST has been stagnant E.P.S. growth as shown in the following five year table:
Part of the problem is due to stagnant NIM which is understandable and practically unavoidable to any meaningful decree. Yield curve compression has been an ongoing problem for regional banks over the past five years.
There will be earnings growth attributable to a lower tax rate. It remains to be seen whether there will be NIM expansion as a contributor to E.P.S. growth.
Last Earnings Report: Q/E 6/30/18
TrustCo Announces Second Quarter 2018 Net Income of $15.4 Million
A number of ratios are better than average: NPL, NPA, Coverage, Efficiency, ROA, ROE, Charge Offs at 0.02%, and Tangible Equity to Tangible Assets
TRST is a major beneficiary of the tax law change: "The effective tax rate was 23.8% in the second quarter of 2018, compared to 37.5% in the year ago period, reflecting the Tax Cuts and Jobs Act."
B. Bought 50 ORIT at $15.8-In a Roth IRA Account:
Quote: Oritani Financial Corp. (ORIT)
Closing Price Last Friday: ORIT $15.55 -$0.03 -0.19%
ORIT Analyst Estimates
Annual Report F/Y Ending on 6/30/18
Dividend: ORIT is one of the highest yielding regional bank stocks. After corporate tax rates were reduced, ORIT increased its regular dividend from $.175 to $.25 per share. The company also paid out a non-recurring special dividend of $.45 per share last December.
Oritani Bank-Dividends; Oritani Financial Corp. Announces Increased Dividend and 2nd Quarter Results
As discussed in previous posts, ORIT is a major beneficiary of the federal corporate income tax reduction to 21%.
Dividend Yield at $15.8 = 6.32%
Last Quarterly Ex Dividend Date: 8/2/18
Dividend Reinvestment: Yes and likely to continue when the reinvestment price is less than $17
Last Sell Discussion: Item 1.E. Sold 20 ORIT at $16.91(6/28/18 Post)
Last Purchase Discussions: Item # 2.A. Bought 20 ORIT at $16.24 and 10 at $15.85-Used Commission Free Trades (8/8/18 Post); Item # 3.A. Bought 20 ORIT at $15.14 -Used Commission Free Trade in Schwab Account (5/19/18 Post); Item # 5.A. Bought 20 ORIT at $15.88 in Schwab Account (2/22/18 Post)
Current Position in this Account: 102+
I have an ongoing "small ball buying program" in my Fidelity account. The current position in that account is 82+ shares with an average cost per share of $15.52. The lowest price paid in that chain is currently at $15.19.
Last Earnings Report: Q/E 6/30/18, F/Y Ends on 6/30
Oritani Financial Corp. Reports Annual Earnings and Dividend
E.P.S. $.3
NIM 2.81% with prepayment penalties (low)
Charge Off Ratio: -.01% Excellent with negative number meaning a net recovery
Coverage Ratio: .85%
Non-Accrual Loans to Total Loans (NPL Ratio): .22% Excellent
Non-Performing Assets to Total Assets (NPA Ratio): .23% Excellent
" The average balance of deposits increased $198.3 million, or 7.2%, for the quarter ended June 30, 2018 versus the comparable 2017 period." Costs of deposits increased 10 basis points.
As with many regional banks, the trailing 12 month E.P.S. contains a non-cash charge for the revaluation of the deferred tax asset which became less valuable when the top corporate tax rate was reduced to 21%. This resulted in a non-cash net charge of $8.9M in the 2017 4th quarter. For this bank, there was also a balance sheet restructure that in the Q/E 6/30/17 with an after tax cost of $13.9 million.
Capital Ratios for Holding Company as of 6/30/18: Good
10-Q at page 94
C. Added 5 FHB at $26.68-Used Commission Free Trade:
Quote: First Hawaiian Inc. (FHB)
FHB Analyst Estimates
Closing Price Last Friday: FHB $26.95 -$0.30 -1.10%
Position this Account: 35+ Shares
Average Cost Per Share This Account: $28.1
Maximum Position This Account: 100 shares + Shares Purchased with Dividends
Dividend: Quarterly at $.24 per share
Dividend Yield at TC of $28.21 = 3.42%
Dividend Yield at TC of $26.68 = 3.6%
Last Ex Dividend Date: 8/24/18
Dividend Reinvestment: Yes at below $30
Last Discussed: Item 4.A (9/30/18 Post)
I have nothing to add to that recent discussion.
TrustCo Announces Second Quarter 2018 Net Income of $15.4 Million
A number of ratios are better than average: NPL, NPA, Coverage, Efficiency, ROA, ROE, Charge Offs at 0.02%, and Tangible Equity to Tangible Assets
TRST is a major beneficiary of the tax law change: "The effective tax rate was 23.8% in the second quarter of 2018, compared to 37.5% in the year ago period, reflecting the Tax Cuts and Jobs Act."
Closing Price Last Friday: ORIT $15.55 -$0.03 -0.19%
ORIT Analyst Estimates
Annual Report F/Y Ending on 6/30/18
Dividend: ORIT is one of the highest yielding regional bank stocks. After corporate tax rates were reduced, ORIT increased its regular dividend from $.175 to $.25 per share. The company also paid out a non-recurring special dividend of $.45 per share last December.
Oritani Bank-Dividends; Oritani Financial Corp. Announces Increased Dividend and 2nd Quarter Results
As discussed in previous posts, ORIT is a major beneficiary of the federal corporate income tax reduction to 21%.
Dividend Yield at $15.8 = 6.32%
Last Quarterly Ex Dividend Date: 8/2/18
Dividend Reinvestment: Yes and likely to continue when the reinvestment price is less than $17
Last Sell Discussion: Item 1.E. Sold 20 ORIT at $16.91(6/28/18 Post)
Last Purchase Discussions: Item # 2.A. Bought 20 ORIT at $16.24 and 10 at $15.85-Used Commission Free Trades (8/8/18 Post); Item # 3.A. Bought 20 ORIT at $15.14 -Used Commission Free Trade in Schwab Account (5/19/18 Post); Item # 5.A. Bought 20 ORIT at $15.88 in Schwab Account (2/22/18 Post)
Current Position in this Account: 102+
I have an ongoing "small ball buying program" in my Fidelity account. The current position in that account is 82+ shares with an average cost per share of $15.52. The lowest price paid in that chain is currently at $15.19.
Last Earnings Report: Q/E 6/30/18, F/Y Ends on 6/30
Oritani Financial Corp. Reports Annual Earnings and Dividend
E.P.S. $.3
NIM 2.81% with prepayment penalties (low)
Charge Off Ratio: -.01% Excellent with negative number meaning a net recovery
Coverage Ratio: .85%
Non-Accrual Loans to Total Loans (NPL Ratio): .22% Excellent
Non-Performing Assets to Total Assets (NPA Ratio): .23% Excellent
" The average balance of deposits increased $198.3 million, or 7.2%, for the quarter ended June 30, 2018 versus the comparable 2017 period." Costs of deposits increased 10 basis points.
As with many regional banks, the trailing 12 month E.P.S. contains a non-cash charge for the revaluation of the deferred tax asset which became less valuable when the top corporate tax rate was reduced to 21%. This resulted in a non-cash net charge of $8.9M in the 2017 4th quarter. For this bank, there was also a balance sheet restructure that in the Q/E 6/30/17 with an after tax cost of $13.9 million.
Capital Ratios for Holding Company as of 6/30/18: Good
10-Q at page 94
C. Added 5 FHB at $26.68-Used Commission Free Trade:
Quote: First Hawaiian Inc. (FHB)
FHB Analyst Estimates
Closing Price Last Friday: FHB $26.95 -$0.30 -1.10%
Position this Account: 35+ Shares
Average Cost Per Share This Account: $28.1
Maximum Position This Account: 100 shares + Shares Purchased with Dividends
Dividend: Quarterly at $.24 per share
Dividend Yield at TC of $28.21 = 3.42%
Dividend Yield at TC of $26.68 = 3.6%
Last Ex Dividend Date: 8/24/18
Dividend Reinvestment: Yes at below $30
Last Discussed: Item 4.A (9/30/18 Post)
I have nothing to add to that recent discussion.
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 2 Lockheed Martin 2.5% SU Bonds Maturing on 11/23/20:
FINRA Page: Bond Detail (prospectus is not linked)
Frequently, FINRA does not provide a link to the prospectus when there are multiple bonds included in the same offering. In this prospectus. LMT offered $7B in senior unsecured debt with 6 different maturities.
Issuer: Lockheed Martin Corp. (LMT)
2017 Annual Report (debt listed at page 86)
Credit Ratings:
Bought at a Total Cost of 98.934 (includes $4 Vanguard Commission)
YTM at TC Then at 3%
Current Yield at TC = 2.5269%
The difference between a $2 and $4 commission rate for this 2 bond purchase is .05%.
I am redeploying the proceeds that I will receive from a 1.85% LMT SU bond maturing on 11/23/18: Bond Detail
B. Bought 2 Humana 2.625% SU Bonds Maturing on 10/1/19:
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Humana Inc. (HUM)
HUM Analyst Estimates
Humana Reports Second Quarter 2018 Financial Results; Raises Full Year 2018 Adjusted EPS Guidance
2017 Annual Report (debt listed at page 118)
HUM SEC Filings
Credit Ratings:
Bought at a Total Cost of 99.875
YTM at TC Then at 2.748%
Current Yield at TC = 2.6283%
C. Bought Three 4 Week Treasury Bills at Auction Maturing on 10/18/18:
Investment Rate: 2.051%
I used the proceeds from 3 treasuries that matured on 9/15/18.
Auction Results:
4 week T Bill Auction 9/18/18.pdf
I am placing non-competitive bids through brokers who do not charge a commission. The non-competitive bids receive the same price as the accepted competitive bids.
D. Bought 1 Treasury 2.625% Coupon Maturing on 7/31/20:
YTM = 2.785%
If short term rates continue to rise, I will likely average down.
E. Bought 1 Statoil 2.9% SU Bond Maturing on 11/8/20:
FINRA Page: Bond Detail (prospectus linked)
Issuer: Statoil, renamed to Equinor ASA ADR (EQNR)
EQNR Analyst Estimates
Credit Ratings: Our debt and credit ratings - equinor.com
Bought at a Total Cost of 99.698
YTM at TC Then at 3.046%
Current Yield at TC = 2.9088%
With the persistent rise in short term interest rates, I am holding onto some proceeds from maturing securities. On the day of this bond purchase, I received $2K in CD proceeds and used 1/2 of that amount to buy this bond.
I will hold onto the other $1K for a week or so before reinvesting.
I am now participating in every weekly auction of treasury bills. The auctions next week will occur on Tuesday due to Monday being a federal holiday. I decided to buy the 6 month T Bill which closed last Friday at 2.42%: U.S. 6 Month Treasury Bill Overview-MarketWatch
B. Bought 2 Humana 2.625% SU Bonds Maturing on 10/1/19:
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Humana Inc. (HUM)
HUM Analyst Estimates
Humana Reports Second Quarter 2018 Financial Results; Raises Full Year 2018 Adjusted EPS Guidance
2017 Annual Report (debt listed at page 118)
HUM SEC Filings
Credit Ratings:
Bought at a Total Cost of 99.875
YTM at TC Then at 2.748%
Current Yield at TC = 2.6283%
C. Bought Three 4 Week Treasury Bills at Auction Maturing on 10/18/18:
Investment Rate: 2.051%
I used the proceeds from 3 treasuries that matured on 9/15/18.
Auction Results:
I am placing non-competitive bids through brokers who do not charge a commission. The non-competitive bids receive the same price as the accepted competitive bids.
D. Bought 1 Treasury 2.625% Coupon Maturing on 7/31/20:
YTM = 2.785%
If short term rates continue to rise, I will likely average down.
E. Bought 1 Statoil 2.9% SU Bond Maturing on 11/8/20:
Issuer: Statoil, renamed to Equinor ASA ADR (EQNR)
EQNR Analyst Estimates
Credit Ratings: Our debt and credit ratings - equinor.com
YTM at TC Then at 3.046%
Current Yield at TC = 2.9088%
With the persistent rise in short term interest rates, I am holding onto some proceeds from maturing securities. On the day of this bond purchase, I received $2K in CD proceeds and used 1/2 of that amount to buy this bond.
I will hold onto the other $1K for a week or so before reinvesting.
I am now participating in every weekly auction of treasury bills. The auctions next week will occur on Tuesday due to Monday being a federal holiday. I decided to buy the 6 month T Bill which closed last Friday at 2.42%: U.S. 6 Month Treasury Bill Overview-MarketWatch
3. Long Term Bond Basket Strategy-First Mortgage Bonds:
A. Added 20 EAI at $23.68-Used Commission Free Trade:
Quote: Entergy Corp. 1st Mortgage Bonds 4.875% due 2066 (EAI)
Long duration first mortgage bonds have recently dived in price due to the spike in longer term rates.
EAI is an exchange traded baby bond which trades flat on the stock exchange.
Last Discussed: Item # 4.A. Bought 30 EAI at $24.12 (5/24/18 Post)
Prospectus
A. Added 20 EAI at $23.68-Used Commission Free Trade:
Quote: Entergy Corp. 1st Mortgage Bonds 4.875% due 2066 (EAI)
Long duration first mortgage bonds have recently dived in price due to the spike in longer term rates.
EAI is an exchange traded baby bond which trades flat on the stock exchange.
Prospectus
Par Value: $25
Credit Ratings:
Last Ex-Interest Date: 8/30/18 at $.304688 per share (I received that interest payment on the first 30 shares that were bought)
Annually at $1.22
Security: First Lien on substantially all of issuer's assets
Current Position: 50 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule
Average Cost per share = $23.92
Yield at Total Cost = 5.1%
Optional Redemption by Issuer: 9/1/21
Maturity Date: 9/1/66, unless redeemed early at issuer's option
4. Recent Cash Flow into Vanguard Taxable Account (1 of 3):
Vanguard recently started commission free trading in every ETF other than the leveraged ones.
I have decided to buy ETFs with 80% to 100% of my cash flow, received in this account, using my small ball purchase restriction.
Between 9/28/18 and 10/1/18, I received $422.02 in interest and dividend payments.
ETF Purchases 9/28/18 through 10/2/18 = $229.45
Credit Ratings:
Last Ex-Interest Date: 8/30/18 at $.304688 per share (I received that interest payment on the first 30 shares that were bought)
Annually at $1.22
Security: First Lien on substantially all of issuer's assets
Current Position: 50 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule
Average Cost per share = $23.92
Yield at Total Cost = 5.1%
Optional Redemption by Issuer: 9/1/21
Maturity Date: 9/1/66, unless redeemed early at issuer's option
4. Recent Cash Flow into Vanguard Taxable Account (1 of 3):
Vanguard recently started commission free trading in every ETF other than the leveraged ones.
I have decided to buy ETFs with 80% to 100% of my cash flow, received in this account, using my small ball purchase restriction.
Between 9/28/18 and 10/1/18, I received $422.02 in interest and dividend payments.
ETF Purchases 9/28/18 through 10/2/18 = $229.45
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.
With the bond market closed today, the stock market is at least free from the downward pressure caused by rising interest rates.
ReplyDeleteThe iShares 7-10 Year Treasury Bond ETF (IEF) is up slightly:
$99.75 +$0.03 +0.03%
Last Updated: Oct 8, 2018 at 10:06 a.m. EDT
https://www.marketwatch.com/investing/fund/ief
Buyers of bond ETFs are just guessing what the values may be tomorrow. The German 10 year bond yield has declined about .037% to .541%.
Germany 10 Year Government Bond
https://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
I noticed last Friday that equity REITs stabilized and many were positive by the close. The trend up has accelerated this morning so far:
Vanguard Real Estate ETF
$79.07 +$0.87 +1.11%
Last Updated: Oct 8, 2018 at 10:11 a.m. EDT
https://www.marketwatch.com/investing/fund/vnq
Reading the tea leaves, and with the caveat that the Bond Ghouls are absent from the playing field, the suggestion being made now is that the rout in bonds will enter a time out period.
My wife reads more politics than I do & she says the Koch Bros don't really care about Roe, but really want gerrymandering- to guarantee Repub rule for evermore.(fwiw (.02))
ReplyDeleteWhat the Koch brothers want is to vastly increase their personal wealth by reducing their taxes and regulations, particularly environmental ones, that raise their cost of doing business. They want to be able to pollute the air and water more than they now do.
DeleteBut how do the Koch's use their PAC, deceptively called "Americans for Prosperity" to convince ordinary Americans to support policies that help the Koch brothers become richer?
The political ads can not say, of course, that the objective is to increase the Koch brothers' wealth and billionaires similarly situated.
Instead, the Kochs run deceptive political ads in support of republican candidates, who will do what they are told to do, that claim that the benefits flow to the middle class when the net effect will be harm most members of the bottom three quintiles over time.
I hope the tea leaves are correct. My GDO position is suffering slow death by a thousand paper cuts, as is FTBFX. Dividends being reinvested in both. In a rising interest rate environment, is there any light at the end of the tunnel?
ReplyDeleteCathie: All leveraged bond CEFs are suffering the same fate. Discounts to net asset value per share have been expanding as the net asset value per share declines and the cost of short term borrowing goes up.
DeleteThe duration of GDO is at 5.64 years, as of 6/30/18, which provides a rough approximation of how sensitive the portfolio is to a rise in interest rates. With a 2% rise in interest rates for a bond fund with that duration, I would anticipate about a 11% to 11.5% loss in net asset value per share.
There will probably be some benefit from rising rates in that proceeds from maturing bonds may be reinvested at higher yields-to-maturity when purchasing the same quality bonds. That may be able to offset some the narrowing yield spread between the short term cost of borrowed money and the yields of bonds bought with that money. This may consequently reduce cuts in the monthly dividend that would otherwise occur with the narrowing spread yields. GDO has not historically supported the dividend with return of capital and has earned whatever it has paid out in dividends.
GDO also has the advantage of being a term bond fund which is better than one that is open ended in a rising rate environment. Eventually, the discount to net asset value, whatever it may be in the future, will narrow as the 12/2/2024 liquidation date approaches and then occurs.
My best guess is that the recent interest rate spike will take a rest but will work slightly higher to a new trading range. The last trading range in the ten year treasury was generally between 2.8% to 3% and lasted about 8 months.
I am currently anticipating that the new range will be 3.25% to 3.5% in the ten year treasury and the movement into that range will be in slow mo with a lot of chop. If that proves prescient, then the Bond Ghouls can quit breathing into a paper bag until there is a sharp and decisive break out of that new range which may occur as early as the 2019 first quarter.
The current directional move up in rates started in September 2017. GDO's net asset value was then around $19.25 per share and is now near $17.85. The decline is NAV per share is about 7.27%, unadjusted for dividends, which is in the ballpark of what I would expect given the rise in interest rates.
Thank you. The decline in share price has eaten up more than a year's worth of dividends. If this (or worse) is the expectation going forward, I see no reason to hold onto GDO when I can buy Treasuries earning 2-3%. I'm thinking the same about the Fidelity Total Bond Fund, just move into Treasuries and breathe easier.
DeleteLike you, I am in capital preservation mode. Unlike you, I don't have time or knowledge to succeed as a trader. I always appreciate your comments.
Cathie: You can download the treasury auction schedule at the Treasury Direct website:
Deletehttps://www.treasurydirect.gov/instit/annceresult/annceresult.htm
This is the PDF:
https://www.treasury.gov/resource-center/data-chart-center/quarterly-refunding/Documents/auctions.pdf
When participating in an auction using Fidelity, there will be no brokerage commission. The minimum order is for 1 bond with a $1K par value and in increments of $1K.
You can find the order page in the bond section under new issues.
I am currently nibbling on GDO using my small ball strategy and commission free trades. I have not had to wait long for a lower price.
Interest rates are stable in earning morning trading. The ten year treasury did move above 3.26% before U.S. trading began and is now back down to 3.22% as of 9:00 A.M. CST.
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
There is a website where those upset with Senator Susan Collins can contribute now to a PAC which will use the money to support her opponent in 2020.
ReplyDeleteThe total pledged is now over $3.6 million.
https://www.crowdpac.com/campaigns/387413/fund-susan-collins-future-opponent
This is not a pledge of money to be paid in the future but real and current money now.
Collins claimed that the organizers were trying to bully her or buy her vote. She does not have the same view when people donate to her campaign. There are obviously a lot of people who upset with her. Those people who do not agree with her Kavanaugh vote are in GOP's parlance a "mob".
What I find unacceptable is not that people are funding now her opponent's campaign. There were republican men in swing states that cast the same vote as Collins and there is no campaign yet to raise money for their opponent. Some of those republicans are likely to be as vulnerable or more so than Collins.
There is no reason just to pick on Susan Collins for those who are upset. Cory Gardner (R) of Colorado, like Collins, is up for reelection in 2020. Other male republican senators up for reelection include the raging zealot Tom Cotton (ARK), Steve Danes (MONT), Tom Tillis (NC), Dan Sullivan (Alaska) and Mike Rounds (SD).
Sullivan narrowly defeated Mark Begich in 2014.
Tillis defeated Kay Hagan by about 1% in 2014.
Bill Cassidy beat the incumbent Democrat Mary Landrieu.
Bonds managed to hold a rally into the close. While ten year treasury did cross above 3.25%, it did not stay long above that level and retreated to close down at 3.20+%.
ReplyDeleteU.S. 10 Year Treasury Note 3.20% -0.03%
Last Updated: Oct 9, 2018 at 4:02 p.m. EDT
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
The treasury bill auctions are producing slightly higher yields every week. I participated today in the 6 month T Bill auction that resulted in an investment rate of 2.442%, up from 2.392% in the prior week's auction.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2018/10/observations-and-sample-of-recent_10.html