Observations and Sample of Recent Trades: CMFN, ELC, FIE:CA, HOPE

Economy: 

House price gains lurch to a 20-month low, Case-Shiller says - MarketWatch (the Y-O-Y increases has slowed) 

Why oil prices are plunging despite U.S. sanctions on Iran’s energy sector - MarketWatch

Here is the ‘true state’ of Americans’ financial lives - MarketWatch (42% of Americans have no retirement savings; 44% claim expenses exceed income)

US-China trade talks will 'go on for some time,' Nobel Prize winner says

Soybean exports to China have fallen 94% through mid-October compared to the same period last year. Silos are unable to hold the unsold soybeans so millions of bushels are being deposited on the ground and covered with tarps. The hope is that China will resume buying before the beans rot. Their Soybeans Piling Up, Farmers Hope Trade War Ends Before Beans Rot - The New York Times

Another .25% increase in the federal funds rates is likely in December: 

Countdown to FOMC: CME FedWatch Tool

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Markets and Market Commentary: 

Corporate profits are peaking, and that's been bad news for the stock market

REITS have outperformed stocks for the past 50 years - MarketWatch

Paul Tudor Jones: Not yet at bear market tipping point

JP Morgan: If the S&P 500 can stay above 2,700, the comeback is real

Here’s what the bear market in home construction stocks is trying to tell us - MarketWatch

David Stockman: Epic downturn is here, brace for 40% market plunge Stockman is a perma bear who has been predicting this kind of decline for years. 

Tariff payments up 50% in September on Trump trade war: Industry group ("U.S. businesses shelled out $4.4 billion in tariffs in September, a surge of more than 50 percent from the same month a year ago")

Pot stocks surge after another state OKs recreational use; sector heads for 7th-straight gain - MarketWatch; Michigan embraces recreational use of marijuana as Arkansas, Missouri back minimum-wage hikes - MarketWatch

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Election: 

The election turned out to be within expectations. 

Trump deserves the blame for GOP losses in the House. 

I do not foresee the results having a meaningful impact on the economy. The Stock Jocks are in agreement so far. There are a number of far more serious issues for the U.S. economy than control over the House. 

Gridlock on divisive issues will be the new normal until the 2020 election. The Democrats remain powerless to change any existing law without major republican support. The republicans will be powerless to enact further repeals of Obamacare provisions. Their attack on coverage for pre-existing conditions will continue in the courts. Fact check: Trump claims GOP is protecting people with pre-existing conditions. Evidence says otherwise.; Protections for pre-existing conditions are being threatened | TheHill

The House will now have the power investigate Trump and officials in his administration for abuses of power and possible crimes. The Trump Administration will generally be regarded as the most corrupt in U.S. history when historians look back in time. It is amusing to see so many Trumpsters still carrying those "Drain the Swamp" signs at his cult gatherings. 

To improve their chances in 2020, the Democrats need to take away the illegal immigration issue from the republicans who have been extremely successful in demagoguing it. That needs to be done before the new House members are sworn into office. 

The Democrats are probably close now to losing the maximum number of Senate seats. The GOP will have more vulnerable seats in 202o. The main vulnerable Democrat will likely be Doug Jones (AL). While a lot will depend on the candidates fielded against republican senate incumbents, I  currently have 7 republicans that are beatable with Susan Collins and Cori Gardner (CO) at the top.  

The Democrats picked up at least 7 governorships including one in Kansas.

Virginia is turning more blue. North Carolina is trending in that direction. The republicans lost 3 out of 4 republican held congressional seats in Iowa where a republican senator is up for reelection in 2020. Florida can go either way.  

The election validated Trumpism in rural areas and among less educated voters. 

Trumpism has been rejected in a large number of suburban congressional districts formerly regarded as safe for republicans and among college educated women. Two more years of Donald will only aggravate those trends.   

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Trump:


Donald thanked Fox "News" for everything that the "news" organization has done for him. Sean Hannity, just one of Donald's mouthpieces at Fox, stated that he "will not be on stage campaigning with the President". Shortly after making that representation, Hannity joined Donald on the campaign stage in southwest Missouri on Monday and berated the reporters attending the rally as "fake news" which delighted the Trumpsters who booed the reporters.  

‘Full Trumpism’: The president’s apocalyptic attacks reach a new level of falsity - The Washington Post  Trump claims that the Democrats want to "provide sanctuary to drug dealers, human traffickers and MS-13 killers." Demagogue Don warns his cult members that the Democrats "would destroy the economy, obliterate Medicare and unleash a wave of violent crime that endangers families everywhere," and "would transform the United States into Venezuela with socialism run amok." According to the Duck, the Democrats are evil and there is no heinous act that is off limits to them. At some future time, the Duck says he will unite the nation. Trump says he wants to unite the country 'eventually' | TheHill

Donald claimed that Stacy Abrams will take away Georgians' Second Amendment rights, but does not explain how a governor could change the constitution. Of course, it goes without saying that Donald can change the Constitution by executive order.  

Fox News Pulls Racist Trump Ad

I wonder how many republicans would view the caravan as a threat to U.S. national security without Demagogue Don fanning the flames non-stop:

At a recent Montana rally, Demagogue Don stated most earnestly that he is "the only one that tells you the facts.” Trumpsters at the rally were asked whether they agree, and all of those interviewed agreed that Donald is a "truth teller". 

As discussed in a prior post, there is evidence that Trump nixed the plan to build a new FBI building and to sell the existing one that is literally falling apart to a developer who would tear it down. By falling apart, I mean exactly that. A net had to be strung up around the building to protect pedestrians from falling debris. Trump intervenes in FBI headquarters project - The Washington Post; IG Confirms Trump’s Involvement in FBI Headquarters Project Across From His Hotel; Donald Trump more involved in stopping FBI HQ move than previously known, emails show - CNN

Donald did not like the idea that the developer was going to build a mixed use development that included a hotel across the street from Trump's hotel. Some new emails have surfaced on this topic: New Email Raises Questions About Cost of F.B.I. Building Project This will be the subject of a House investigation next year. 

U.S. judge refuses to delay suit against Trump over foreign payments | Reuters; Opinion.pdf

Cop killer in Trump video was released by republican Sheriff Joe Arpaio

Trump says rocks thrown at U.S. military by immigrants at border will be considered "a rifle" - CBS News

How Vilification of George Soros Moved From the Fringes to the Mainstream; Trump Still Enabling George Soros Conspiracy Theory After Bomb Threats, Synagogue Shooting 

Trump October 31, 2018 Outside the WH: 

Q. “Do you think somebody is funding the caravan? Do you think somebody is paying for the caravan?”

A. “I wouldn’t be surprised. I wouldn’t be surprised,”

Q. “George Soros? Who’s paying for it?”

A. “I don’t know who. But I wouldn’t be surprised. A lot of people say yes.”

This is typical Trump.

He says that he does not know but then quickly states that he would not be surprised to learn that Soros is paying for the caravan.

To finish it off, he states that a "lot of people say yes" which validates the conspiracy wingnuts who are fundamentally anti-Semitic.

A "lot of people" in Trump vernacular is less than "everybody knows" that is frequently used when he glibly passes off a demonstrably false statement.

In this particular case, a "lot of people" consists of few republican conspiracy wingnuts who are never embarrassed making false claims with no factual support and always look so earnest when doing so. Demagogue Don frequently validates conspiracy theories.

Gateway Pundit story alleging Robert Mueller sexually assaulted someone unravels - CNN; Jacob Wohl, 20, far-right conspiracy theorist, gets a moment in spotlight with Mueller plot; Mueller smear: Jacob Wohl and Jack Burkman are guilty of everything they accuse Democrats of doing.

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Brian Kemp: 

This guy is just a thoroughly repulsive Trumpster. He accused the Georgia Democrat party, without any proof, of trying to hack the state's voting records. He then authorized a robocall that accused Ms. Abrams of trying to steal the election with illegal immigrant votes. Kemp robocalls

Fake Oprah stars in racist robocall in Georgia in final days of Abrams-Kemp campaign - CBS News

So Conservative - YouTube What an idiot. 

Kemp is not the face that new south business leaders want to see. He is an argument against relocating a business to Georgia for many larger companies.    

Assuming that Ms. Abrams loses, which appears likely, after the GOP's most overt racial attacks since the civil rights era and their normal voter suppression efforts, she would be a formidable candidate for the Senate race against David Perdue in 2020. Georgia is moving closer to a Democrat winning a statewide race, but is not there yet. Georgia still has a large repository of rural Lester Maddox voters.   

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1. Added 100 FIE:CA at C$7.12+ (C$1 Commission at IB): 

Quote: iShares Canadian Financial Monthly Income ETF

This ETF owns Canadian banks, insurance companies and REITs. The two largest holdings, however, are two other ETFs as shown in the following snapshot: iShares S&P/TSX Canadian Preferred Share Index ETF (CPD) and iShares Canadian Corporate Bond Index ETF (XCB) Those two ETFs in effect create a balanced fund.

Top 10 Holdings: 

Last Discussed: Item # 1.A. Bought 100 FIE:CA at C7.28 (4/12/18 Post) 

Sponsor's Website: iShares Canadian Financial Monthly Income ETF

Dividend: Monthly at C$.04 per share (C$.48 annually) 

Dividend Yield at C$7.14 (approximate TC per share) = 6.27%

Last Ex Dividend Date: 10/25/18

Current Position: 200 shares

Maximum Position: 500 shares

Last Sell Discussions: 

Item # 5. Sold 300 FIE:CA at C$7.64 (11/26/17 Post) (profit snapshot C$160).

Item # 4.A. Sold 100 FIE:CA at C$7.57 (10/30/17 Post)(profit snapshot=C$35)(contains snapshots of prior round-trip trades= USD$391.32 for 1500 shares and USD$58.07 for 300 shares; C$166 for 200 shares)

2. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 1 Treasury 1.625% Coupon Maturing on 6/30/19:
YTM = 2.53%

I now own 2 bonds.

B. Bought 1 Southern Company 2.15% SU Bond Maturing on 9/1/19:

I now own 2 bonds.

FINRA Page: Bond Detail (prospectus linked)

Issuer: Southern Co.  (SO)
Southern Company reports third-quarter 2018 earnings

SO Analyst Estimates
SEC Filings
2017 Annual Report

Credit Ratings:

Bought at a Total Cost of 99.388
YTM at TC Then at 2.906%
Current Yield at  TC = 2.1632%

C. Bought 1 Ryder Systems 2.45% SU Maturing on 9/3/19-In a Roth IRA Account:

I now own 2 bonds with the other one held in a taxable account.

FINRA Page: Bond Detail (prospectus linked)

Issuer: Ryder System Inc. (R)
R Analyst Estimates
Ryder raises guidance on strong demand - MarketWatch
Ryder Reports Third Quarter 2018 Results

Last Bond Offering (10/18): 300M 3.875% SU Maturing 10/30/23

Credit Ratings:

Bought at a Total Cost of 99.656
YTM at TC Then at 2.883%
Current Yield at TC = 2.4585%

3. Small Ball- REGIONAL BANK BASKET STRATEGY:

A. Added 10 HOPE at $14.7 and 10 at $14-Used Commission Free Trades:

Quote: Hope Bancorp Inc. Stock Quote

HOPE Consensus Analyst E.P.S. Estimates (as of 10/22/18)
2018: $1.46
2019: $1.47
P/E at $14. price and $1.46 E.P.S. = 9.58

The 2019 estimate declined some after the last earnings report. The consensus E.P.S. Y-O-Y is now predicted to be about flat.

Current Position This Account: 100+ shares

Average Cost Per Share: $16.40

Maximum Position: 120 Shares (raised from 100 due to price decline, dividend yield and valuation)

Purchase Restriction: Small Ball Rule

HOPE 1 Year Chart: Bear Market Trend since December 2016 when the price exceeded $22 per share.

Dividend: $.14 per share ($.56 annually)

Dividend Yield at Total Cost of $16.4 per share = 3.41%
Dividend Yield at $14  = 4%

Last Ex Dividend Date: 10/25/18 (shortly after purchases)

Dividend Reinvestment: Yes at below $19 per share

Last Earnings Report: Q/E 6/30/18

The market reacted negatively to this report. E.P.S. of $.36 was in-line with the consensus estimate. I viewed the downdraft as unwarranted, but virtually all regional banks are now in a falling knife mode.

ROA, ROE, ROTE, NIM and Efficiency Ratio:

The efficiency ratio is good. ROE is slightly below the industry average. ROA is near the industry average. NIM is declining in significant part due to decreases in purchased loan accretions that provide a temporary boost to interest income:

Increases in deposit costs are also negatively impacting NIM:

"The weighted average cost of deposits for the 2018 third quarter increased to 1.24%, up 18 basis points from 1.06% in the 2018 second quarter and up 49 basis points from 0.75% in the year-ago third quarter." 

Importantly, the increase in deposit costs was higher than the increase in the average loan yield: "The weighted average yield on loans for the 2018 third quarter was flat with the preceding second quarter at 5.16% but increased 9 basis points from 5.07% in the year-ago third quarter." 

Regional banks generally have not experienced the long anticipated rise in NIM due to the yield curve compression. Deposit costs have generally increased at a higher percentage than loan yields.  

Since investors have been disappointed in the inability to grow net interest margins, notwithstanding the rise in rates, many are IMO throwing in the towel. Multiples have in many cases fallen into the high single digits as a result. There may also be a concern that the credit cycle has peaked, both in terms of loan growth and historically low charge-offs, with the next major move being stagnant loan growth and increasing non-performing loans and charge-offs.  

NPL and NPA Ratios: Okay

At this stage in the credit cycle, I would not call those ratios either good or bad. 

Capital ratios are okay IMO:

Income Tax Rate: The bank is a beneficiary of lower federal corporate tax rates: 

"The effective tax rate for the 2018 third quarter was 25.0%, compared with 25.9% in the preceding 2018 second quarter and 38.3% in the 2017 third quarter. The 2018 effective tax rates reflect the enactment of the Tax Cuts and Jobs Act on December 22, 2017, which lowered the corporate federal tax rate from 35% to 21% effective January 1, 2018." (emphasis added)

Hope Bancorp Reports 2018 Third Quarter Financial Results

Hope Bancorp, Inc. (HOPE) CEO Kevin Kim on Q3 2018 Results - Earnings Call Transcript | Seeking Alpha

4. Small Ball-Income Generation BDCs and MREITs:

A. Added 30 CMFN at $8.23-Used Schwab Commission Free Trade:

Quote: CM Finance Inc. 

SEC Filings

CM FINANCE INC: Annual Report for the F/Y ending on 6/30/18

CMFN is a nano cap BDC that is externally managed and is deservedly out-of-favor, as previously discussed in more detail.

Maximum Position in This Account: 80 Shares + shares purchased with dividends. I am currently at this maximum position and will only buy more shares with dividends. 

Discount Using $12.57 NAV per share (as of 6/30/18) and $8.23 price = -34.53%

Average Total Cost Per Share = $8.82

Previous Discussion: Stocks, Bonds & Politics: Item # 1.A. Bought 50 CMFN at $9.19-Used Schwab Commission Free Trade (9/19/18 Post)(received quarterly dividend for this lot)

Last Earnings Report: CM Finance Inc Reports Results for its Fiscal Fourth Quarter ended June 30, 2018 (discussed in prior linked post)

5 Year Operating History:

CM FINANCE  10-K for the Period Ending on 6/30/18 at page 70 (risk factor discussion starts at page 32 and ends at page 67)

Asset Quality Categories:

PAGE 79 10-K

Dividend: Quarterly $.25 per share

Last Ex Dividend: 9/17/18

Dividend Yield at $8.23 = 12.15%
Dividend Yield at Average Cost of $8.82 = 11.34%

CMFN is scheduled to release third quarter earnings after the close today. 

4. Long Term Bond Strategy-First Mortgage Bonds:

A. Added 20 ELC at $22.04-Used Fidelity Commission Free Trade:

Exchange Traded Baby Bonds
Baby Bonds - South Gent | Seeking Alpha

Quote: Entergy Louisiana LLC  First Mortgage Bonds 4.875% Series due 2066 Stock Quote

Issuer: Wholly owned subsidiary of Entergy Corp. (ETR)

Entergy 2017 Annual Report (Energy Louisiana operations are discussed starting at page 326)

Details:

PAR VALUE:  $25
Interest Payments: Quarterly at $.304688 per share
Yield at a $22.04 Total Cost Per Share = 5.53%   
Last Ex Interest Date: 8/30/18
Trades Flat 
Optional Call: On or after 9/1/2021 at par value plus accrued and unpaid interest
Maturity Date if Not Called: 9/1/2066 (OG will not be among the living)
Credit Ratings: A2/A
Prospectus 
Security: First Lien on substantially all Entergy Louisiana Assets 

Last Discussed ELC: Item # 5.A. (4/16/18 Post)

Current Position: 50 Shares

Maximum Position: 100 Shares

Purchase Restriction: Small Ball Rule

I also own first mortgage bonds issued by Entergy Louisiana that have $1K par values. I last discussed a purchase here: Item # 3.B. Bought 1 Entergy Louisiana 3.3% First Mortgage Bond Maturing on 12/1/2022  (4/23/18 Post)

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.