Observations and Sample of Recent Trades: ABDC, BIF, IDV, SCM

Economy: 

U.S. durable-goods orders sink 4.4% in October and business investment is flat - MarketWatch Stripping out the volatile transportation sector (e.g. airplanes) which declined 12.2% in October, the core durable goods orders decline .1%. Total orders were still up 6.7% over the past year and +4.4% excluding transportation. 

Home builder confidence tumbles the most since 2014 as housing headwinds catch up - MarketWatch

Housing starts rebound in October but single-family drought lingers- MarketWatch (housing starts were still 2.9% below October 2017)

On Thanksgiving, Trump threatens to shut down the border - CBS News

Oil plunges about 8 percent to lowest level in more than a year (11/23)

Trump's quest to drive down oil prices turns the screws on US drillers (and their lenders)

U.S. report says climate change will batter economy, in clash with Trump (Trump in effect buried this report by releasing it on Black Friday)

Major Trump administration climate report says damage is ‘intensifying across the country’ - The Washington Post

Black Friday pulled in a record $6.22 billion in online sales: Adobe

++++

Markets and Market Commentary: 

The Vanguard Total Stock Market Index Fund ETF (VTI) has a total return year-to-date of -.24. The S&P 500 ETF (SPY) has a total return YTD of -.06%. One of the worst performing sectors is energy. The Energy Select Sector Fund (XLE), which owns the energy stocks in the S & P 500, has a total return YTD of -9.71%.

Amazon, Apple, Facebook, Google and Netflix have lost a combined $1.1 trillion from their respective highs. 

More wealthy investors see the end of the bull market coming

JP Morgan sees a slowdown coming, with economy growing at less than 2 percent in 2019

Goldman Sachs believes the US economy will slow to a crawl next year GS is predicting a gradual slowdown in real GDP growth next year, going from +2.5% in the first quarter to 1.6% in the 4th. If there is an acceleration of the trade war with China starting on 1/1/19, then I would "guess", and everyone is guessing, that the first two quarter will be less than 2%. 

Bank of America sees market decline next year: 'There is now an alternative to stocks'

+++

Trump:

I gave thanks on Thanksgiving day that Donald has not yet called me to man the barricades on the Mexican border as America's last line of defense against the invasion. 

Apparently, some sensible person in the Duck's administration has worked out a temporary solution that allows migrants to remain in Mexico as their applications for asylum are processed in the U.S.: Exclusive: Deal with Mexico paves way for asylum overhaul at U.S. border However, Mexico is denying that an agreement exists. Contradicting Trump, Incoming Mexico Gov't Denies Making Deal To Host Asylum Seekers The difference in the two versions may be that Mexico does not consider the agreement as a permanent solution but only as a temporary one.   

With the mid-term election being thankfully over, there may be some respite from Donald and other republicans engaging in mostly fact free demagoguery on this issue. E.G. Caravan | Marsha Blackburn for US Senate - YouTube  

AP Fact Check: On break, no break by Trump in twisting facts

More Donald Attacks on the Judiciary: 

In TrumpWorld, a good judge is one that allows Donald to do whatever he wants. 

Donald was upset with a federal district court decision that temporarily blocked him from changing a law passed by Congress through executive action. He called the judge "an Obama judge". 

Donald ordered that immigrants can only apply for asylum when they enter a designated point of entry. 

The law passed by Congress and signed by the President, the one consistent with how laws are made in America's democracy, clearly provides that anyone entering the U.S. can apply for asylum even when they do not enter at a designated point of entry. 8 U.S. Code § 1158 - Asylum

Our Dear and Great Leader added the following: "You go to the Ninth Circuit and it's a disgrace, and I'm going to put in a major complaint. You cannot win if you’re us, a case in the Ninth Circuit, and I think it’s a disgrace when people file, every case gets filed in the Ninth Circuit. That’s not law." Trump rails against Ninth Circuit Court of Appeals after asylum ruling | TheHill It is not clear who is going to receive Donald's complaint. Of course, it was not the 9th Circuit that even issued the opinion blocking Donald's effort to repeal by executive fiat a law passed by Congress. 

This latest Trump attack on the judiciary was too much for Chief Justice Roberts who gave a rare rebuke to a President, who is after all attempting to undermine the separation of powers and the foundations of democracy. In rare rebuke, Chief Justice Roberts slams Trump for comment about 'Obama judge' The Duck will not tolerate any criticism, a common characteristic among authoritarian leaders, and his hostility to criticism becomes particularly vehement when it is clearly justified. 

Trump fires off tweet criticizing Supreme Court Chief Justice John Roberts 

The Trump Myth and Illusion:

Why would anyone buy into Donald's narrative of being a successful businessman who is both honest and extremely smart?

Even now, I hear republicans saying that Donald is the smartest guy in the room and actually believe that he has successfully operated businesses bearing his name. 

They will frequently name a business that has the Trump name, claiming that Trump made the business a success, when the business was clearly a fraud (e.g. Trump University), went bankrupt, or is or was a mere licensee of the Trump name.

Donald Trump's companies have declared bankruptcy...more than four times | PolitiFact (lists and discusses 6 bankruptcies)

What Donald Trump’s Plaza Deal Reveals About His White House Bid - The New York Times

Trump University: It’s Worse Than You Think | The New Yorker; Federal court approves $25 million Trump University settlement

Republicans gloss over the fact that Donald inherited over $400M in today's dollars from his Daddy, and most of those funds were part of gift tax dodges and potentially illegal schemes. 

Trump's $413 million inheritance doesn't explain his mysterious cash spending — Quartz

Trump Even Inherited His Father's Self-Made Myth - Bloomberg

11 Takeaways From The Times’s Investigation Into Trump’s Wealth - The New York Times

Other facts, which are dismissed by republicans, is that Don the Con bankrupted 6 businesses that he tried to operate. U.S. banks refused to lend to him after seeing his money incineration first hand.

What is the Duck's Midas touch?

Donald is a success at shameless self-promotion that created a myth. Upon that self created myth, Lying Don built the brand Trump. 

Donald Trump's Real Secret To Riches: Create A Brand And License It

How Trump has made millions by selling his name - Washington Post

Whatever happened to Trump neckties? They’re over. So is most of Trump’s merchandising empire. - The Washington Post


Trump Attacks Admiral McRaven:

'Patently ridiculous': Former top intel officials hit back at Trump after criticism of bin Laden raid; 

Since Admiral McRaven, who oversaw the operation that killed Osama bin Laden, criticized the Duck, Donald dismissed the criticism and the Admiral by claiming that he was a Hillary supporter. In TrumpWorld, replying to a factually based criticism by using words and phrases like "liberal", "Hillary fan" and Fake News is viewed as the winning argument, no further discussion is necessary. Thinking beyond a few token phrases and cliches is not allowed. 

Architect of bin Laden raid: Trump 'threatens the Constitution' when he attacks the media (Admiral McRaven: "I did not back Hillary Clinton or anyone else." McRaven stood by his comment that "the President's attack on the media is the greatest threat to our democracy in my lifetime... When you undermine the people's right to a free press and freedom of speech and expression, then you threaten the Constitution and all for which it stands.") 

The Trumpsters are not conservatives. I do believe it is important to cease humoring them with that label.   

Trump suggests venerated Navy SEAL commander should have found bin Laden faster 

Trump’s pattern of insulting war heroes continues with commander of bin Laden raid - The Washington Post

Donald was too busy to attend a Veteran's Day ceremony, but he claims to love the military. Donald:  "I was extremely busy on calls for the country."

++

Senator Hyde-Smith (R-MISS) pushed resolution praising Confederate soldier's effort to 'defend his homeland' - CNN 

Trump attacks Schiff as 'little Adam Schitt' on Twitter Just the kind of language that I would expect from a five year old brat who has never been disciplined by over-indulgent parents.   

‘He’s evolving’: Once a sunny conservative, Rubio goes all-in on Trumpism

Ivanka Trump used personal email for government business: report - MarketWatch When do the Trumpsters start their "Lock Her Up" chant?

Poll Question on Trump Honesty: 

National (US) Poll - November 20, 2018 - U.S. Voters Give Trump Highest | Quinnipiac University Connecticut  

Anyone who believes Trump is honest or more honest than other Presidents is not reachable with accurate information, which in most cases is probably due to their willful ignorance. 

Saudis use Trump's Khashoggi statement to cast doubt on CIA assessment - CBS News 

Stone associate Jerome Corsi is in plea negotiations with special counsel

+++++

1. Small Ball-Income Generation: 

A. Bought 10 IDV at $30.82 (commission free for Vanguard Brokerage customers): 

Quote iShares International Select Dividend ETF Overview

Closing Price Last Friday:  IDV $30.60 -$0.25 -0.81% 

International ETFs have not been worthwhile investments compared to U.S. broad based stock ETFs over the past several years.

This ETF has been hurt by its weightings in energy and financial stocks.

Top 30 Holdings:

Dividends: Quarterly at a variable rate

The last 4 quarterly payments came to $1.61+ per share. There are many variables that enter into that number, including dividend raises or cuts, exchange rates into USDs and foreign dividend taxes. If I assumed that rate as a constant, which is not an accurate one, the dividend yield at a TC of $30.82 per share would be about 4.19%.

Last Sell Discussion: Item # 5 Sold 51+ IDV at $33.58 (2/15/18 Post)(profit snapshot = $242.33) To achieve a profit, I had to average down.

Sponsor's Website: iShares International Select Dividend ETF | IDV (expense ratio .5%)

Maximum Position: 100 Shares

Current Position: 10 Shares

Purchase Restriction: Small Ball Rule

IDV iShares International Select Div ETF ETF IDV (rated 3 stars by Morningstar at the time of purchase)

Through 11/23/18 Total Annual Average Returns Based on Price:
3 Year:   +6.03%
5 Year:   +  .66%
10 Year: +11.07%

YTD at -6.02%

Over the same periods of time, IDV has performed somewhat better than the broad international index ETF VEU that has a lower expense ratio except for the 5 year return number:  Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) Total Returns

3   YR  +4.74%
5   YR  +1.79%
10 YR  +8.68%

YTD = -11.52%

B. Added 50 ABDC at $5.65:

Quote: Alcentra Capital Corp. (ABDC)

Website: Home - Alcentra Capital Corporation

Closing Price Last Friday: ABDC $6.42 

Last Discussed: Item # 1.B. Bought 50 ABDC at $6.24 (10/10/18 Post)

I am cutting back on individual stock purchases in my Schwab account since I have run out of commission free trades. I will be rounding up some odd lots to 100 shares in the coming weeks, and ABDC is one of them.

This nano cap BDC is, as I stated in the previously linked post, deservedly hated and has been in the business of incinerating shareholder capital.

I am investing a small amount of money hoping that the asset destruction is mostly over, but that remains to be seen longer term.

The discount to net asset value per share is huge, and the dividend yield is over 12% at a $5.65 price, assuming no further dividend cuts. I am not aware of another BDC selling at a greater discount to its last reported net asset value per share that is paying a dividend.

Maximum Position: 100 shares + Shares Purchased with Dividends (now at that limit)

Current Position: 101+ shares

Average Total Cost Per Share: $6

Last Dividend: Quarterly at $.18

Last Ex Date: 9/28 (shortly after first 50 share purchase)

Dividend Yield at Total Cost Per Share = 12% (assumes no change in the dividend which is not an assumption that I would make)

Dividend Reinvestment: Yes

Last Reported Net Asset Value Per Share (as of 9/30/18): $11.08

That is an increase from $11.01 as of 6/30/18  and stable with the $11.09 number as of 12/31/17. 2017 Annual Report (risk summary starts at page 26)

Discount to NAV Per Share at $6 TC per share  = -45.85%

Last Earnings Report: Q/E 9/30/18

This report was released after this last purchase.

Alcentra Capital Corporation Announces Third Quarter 2018 Financial Results - Nov 5, 2018

NII = $.22 per share

Quarterly Dividend: $.18 per share

The Board authorized a buyback of up to $10M in stock and declared a quarterly dividend of $.18 per share payable 1/3/19 to shareholders of record on 12/31/18.

"As of September 30, 2018, Alcentra had four debt investments, Black Diamond Rentals, Show Media, Inc., Southern Technical Institute, Inc. and Xpress Global Systems, LLC on non-accrual status."  

The Show Media and Southern Technical Institute loans had been written down to zero before I bought the first 50 share lot. 

Xpress Global was listed as a new non-performing loan during the third quarter. The original loan amount was $7.208+M and had been written down to $4.6478+M as of 6/30/18: 

Xpress $4.6478+M as of 6/30/18

The Xpress loan was written down to $3.064+M as of 9/30/18:   

Xpress $3.064+M as of 9/30/18

The Black Diamond loans were  listed as non-performing during the 2018 second quarter, but the senior secured loans had not been written down much as of 9/30/18: 

A junior loan has taken a hit: 

The company will not answer any questions about this borrower, but will merely say that Black Diamond is pursuing its options including a restructuring. Pages 4 and 8: Earnings Call Transcript | Seeking Alpha

The recent decline in oil prices is not helping. 

Black Diamond Oil Rentals | Rental Tools | Drill Pipe | Tubing | Collars; Black Diamond - Alcentra Capital Corporation 

For this small BDC, the Black Diamond loans are major. The total loan amount is $16,412360 and has been written down to $9,725,499 as of 9/30/18. 

Note the PIK interest component in the Black Diamond loans. I would prefer never to see any PIK interest since the interest may never actually be received in cash. A large PIK component in the interest also indicates to me a borrower who is already under stress to make cash interest payments.    

I have no idea what will happen. In a restructuring, the lenders might take a cut in the principal amount and a lower interest rate plus an equity interest.  

Subsequent Events:

Rating Summary:

Alcentra Capital Corporation 2018 Q3-Earnings Call Slides-Seeking Alpha

C. Bought 10 SCM at $12.74-Used Commission Free Trade:

Stellus is a nano cap externally managed BDC.

Closing Price Last Friday: SCM $13.63 +$0.21 +1.56% 

Risk Summary: SEC Form 10-K pages 29-56!

Quote: Stellus Capital Investment Corp. (SCM)

Current Position: 31+ shares

Maximum Position: 150 shares

Purchase Restriction: None, removed from small ball rule restriction

Total Cost Per Share: $11.79

Last Sell Discussions: Item # 1.A. Sold Highest Cost Lot-50 Shares at $12.63 (5/3/18 Post)(profit snapshot = $34.24); Item 2.B. Sold 100 SCM at $14.23 (2/27/17 Post)(profit snapshot=$285.96); Item # 2 Sold 100 SCM at $13.02 (1/12/17 Post)(profit snapshot= $141.96)

Trading Profits to Date: $462.15

For a BDC, any share profit is viewed as acceptable given the dividend yields.

Dividend: Monthly at $.1133 per share ($1.36 annually-rounded)

Stellus Capital Investment Corporation Declares Fourth Quarter 2018 Regular Dividend of $0.34 Per Share

Dividend Yield at TC Per Share of $11.79 = 11.53%

Last Earnings Report: Q/E 9/30/18

Stellus Capital Investment Corporation Reports Results for its third fiscal quarter ended September 30, 2018

"We had a strong third quarter, generating core net investment income of $0.39 per share and a realized gain of $0.17per share.  In addition, net asset value increased $0.22 per share to $14.29." (emphasis added)

"As of September 30, 2018, our portfolio included approximately 54% of first lien debt, 34% of second lien debt, 5% of unsecured debt and 7% of equity investments at fair value.  Our debt portfolio consisted of 90% floating rate investments (subject to interest rate floors) and 10% fixed rate investments." (emphasis added) I am concerned about the level of second lien and unsecured debt. 

Stellus does have an exchange traded senior unsecured bond outstanding: Stellus Capital Investment Corp. 5.75% Notes due 2022 (SCA); Prospectus for 2022 Note

2. Short Term Bond-CD Ladder Basket Strategy:

A. Bought 3 Three Month Treasury Bills at Auction Maturing on 2/21/18:
IR = 2.392%

Auction Results:

B. Bought 1 Treasury 2.5% Coupon Maturing on 6/30/20:
YTM: 2.815%

I now own 2 bonds.

C. Bought 3 Six Month Treasury Bills at Auction Maturing on 5/23/19:
IR = 2.455%

Auction:

3. Bought 100 BIF at $10.73-Used Commission Free Trade:

Quote: Boulder Growth & Income Fund  (BIF)

Closing Price Last Friday: BIF $10.62 -$0.05 -0.47% 

Sponsor's website: Boulder Funds - The Fund

Holdings as of 9/30/18 (highly concentrated)

The weighting in Berkshire Hathaway was at 33.51% as of 9/30/18.

Excluding treasury bills and money market funds, and counting the "A" and "B" Berkshire shares as one stock, BIF then owned 20 common stocks, a small investment in a hedge fund and 1 CEF (UTF Cohen & Steers Infrastructure, CEF Connect)

DATA as of Date of Trade (11/5/18)
Market Price: $10.81
Net Asset Value Per Share = $13.07
Discount: -17.29%
Discount at $10.73 Price = 17.9%
Average Discounts
1 YR  -15.55%
3 YR  -18.09%
5 YR  -18.89%

NAV per share increased $.28 per share on 11/15/18.

Sourced: BIF Boulder Growth & Income CEF Connect

This fund is noteworthy for its huge weighting in Berkshire Hathaway:

33.06% as of 8/31/18 Value at $462.5+M

Dividends: At the time of my purchase, the fund paid a monthly dividend at $.034 per share (NO ROC with some support sourced from long term capital gains)

Subsequent to my purchase, the fund changed the distribution to quarterly payments, starting in 2019. The penny rate for the first quarterly dividend is $.102 per share. Boulder Growth & Income Fund, Inc. Announces Change in Distribution Frequency and Declares Initial 2019 Quarterly Distribution

Next Ex Dividend Date: Quarterly on 1/23/19

Dividend Yield at $10.73 = 3.8%

SEC Form N-Q Period Ending 8/31/18 (cost then at $641.5+M with a market value at $1.402+B)

Berkshire Hathaway Inc. 3rd Quarter News Release

BRK shares responded positively to this report: 

Closing Prices 11/15/18: 

BRK-B $216.24 +$9.67 +4.68%: Berkshire Hathaway Inc. 
BRK-A $323,935.00 +$15,524.00 +5.03% 

With stocks remaining under pressure last week, BRK-B closed last Friday at $207.7. 

Berkshire bought back $928M in stock during the third quarter: Page 43 10-Q for the Q/E 9/30/18

The fund had a significant position at that time in treasury bills and a money market fund:

I do not mind that the fund manager wants to keep some powder dry now.

There is an alternative school of thought that stock fund managers need to be close to fully invested at all times since that is what they are being paid to do. In that viewpoint, the argument is that the management fee absorbs a good chunk of the income from short term investments and consequently the investors are not earning much return on almost $167M in assets owned by this fund. Implicit in the argument is that stock fund managers should not be timing the market by holding onto excessive amounts of cash.

My criticism to that $167M being in cash is that some of that pile would be better utilized buying back stock when the discount is over $15% rather than earning a low single digit yield in short term treasury bills and money market funds. 

Last Sell Discussion: Item # 3.B. Eliminated BIF: Sold 116+ (2/16/17 Post)(contains snapshots of prior round-trips)

BIF Trading Profits to Date: $421.44

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.