Observations and Sample of Recent Trades: AXPRI:CA, BHB, EAI, MNRPRC, RHHBY

Economy: 

CPI was unchanged in November on a seasonally adjusted basis. 

On a non-seasonally adjusted basis, both CPI and core CPI rose 2.2% Y-O-Y:

Consumer Price Index Summary

U.S. wholesale prices barely rise in November as inflationary pressures recede - MarketWatch

The decline in crude oil prices is starting to show up at the gas pumps. 

China's soybean purchase just a drop in the U.S. export bucket (500,000 Tons last Wednesday)

Outgoing GOP Governor Snyder (R-Michigan) signs bills that gut $12 per hour minimum wage, paid sick time laws 

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Markets and Market Commentary: 

Last Friday, SPX blew through the 2,632 support line, closing at 2,599.95: S&P 500 The next line is at 2,588. Below that support line is air until 2100 which would take us back to Donald's election. 5 year Chart-Yahoo Finance 

It is of course possible for SPX to pierce the 2,588 point to the downside and then form a new support level somewhere between 2,100 and 2,600. One candidate would be a line formation near 2532 which was the intra-day low on 2/9/18. 

I have no technical training. I am just offering my opinion based on my experience as an investor which goes back a few decades in time. 

The close at 2599.95 is 340.96 points below the 52 week high or 11.59%. 

The SPX 200 day SMA point is at 2,759.27. The close last Friday does take this index more than 5% below that line which is relevant to me. A Trigger Event In The Vix Asset Allocation Model 8/31/15 - South Gent | Seeking Alpha ("The Trigger Event signal for me needs to be coupled with a decline 5% below the break in SPX 200 day SMA line." The Unstable Vix Pattern created by that TE was unusually short)

A Trigger Event as defined by the Vix Model, however, has not yet formed and has not even had a close above 26 which is necessary to start the day count for the TE. VIX 21.63 0.98 4.75% The spike in volatility last February above 26 is too distant in the past to be relevant now.  

S&P 500 ETF (SPY) Total Return YTD: -1.12%

Vanguard Total Bond Market Index Fund ETF Shares (BND) Total Return YTD = -1.01% 

Investors flee U.S. stock funds at record pace: Lipper - MarketWatch

Asia stocks take a hit from economic data early Friday following 2 days of gains - MarketWatch

S&P chart could be forming another bearish pattern

Which Wall Street forecasters should you listen to now? Here’s who nailed it in 2018 (and who bombed) - MarketWatch

Bank of America sees oil gains in 2019 forecast

U.S. negotiator has 'very weak case' for China trade war: Economist

UK stocks to crash 25% if no Brexit deal agreed, says MSCI - Financial News

OPEC's oil output dips in Nov as Iranian plunge offsets Saudi surge

Gundlach says stocks are breaking down, bonds are overvalued and the Fed is on a suicide mission

Investors aren't paying attention to one of the biggest market risks (corporate debt refinancings) Except for some junk rated debt issuers, I would not anticipate major and potentially widespread problems in the investment grade refinancing universe until there is a recession. The problem will become acute when and if forced deleveraging turns another garden variety recession into another financial crisis.  About 2/3rds of U.S. corporate debt will need to be refinanced over the next five years. There could be a buyer's strike, particularly with sovereign debtors devouring more and more available cash to finance budget deficits and a recession colliding with one another.   

Why these bond investors suspect the 10-year Treasury yield has peaked - MarketWatch

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Tidbits: ABNC, AKBA

ABDC $7.00 +$0.39  +5.90% (12/12/18)

The market cap at that price is shown by YF at $94.62M

The apparent reason for this jump was an announcement that ABDC would continue buying back stock. 

Alcentra Capital Corporation Adopts Share Repurchase Plan (12/11/18 Press Release)("For the nine months ended September 30, 2018, the Company repurchased 705,711 shares of its outstanding common stock, or approximately 5.0% of the shares outstanding as of December 31, 2017.")

A $10M buyback would be a bid deal given the market cap. Given the hefty discount to net asset value per share, which was reported at $11.08 as of 9/30/18, the stock buyback will be accretive to existing shareholders assuming the net asset per share provided by the company is in the ballpark. 

The shares gave back all but 6 cents of the 12/12 gain on 12/13. There is not much difference in the 12/11 Press Release and an earlier one announcing a $10M share repurchase, where it is noted that the Board approved a repurchase program of up to $10M. Alcentra Capital Corporation Announces Third Quarter 2018 Financial Results (11/5/18) 

The change in the buyback authorization was placing a condition on the repurchase as the lesser of 5% of the outstanding stock or $10M. There is no obligation to actually buy the shares, though some confidence can be placed in carrying through given the existing share repurchases YTD. 

Last Discussed: Item # 1.B. Bought 50 ABDC at $5.65 (11/15/18 Post) 

Akebia Therapeutics and Keryx Biopharmaceuticals Complete Merger, Creating Fully Integrated Renal Company As discussed earlier, Keryx does have have an FDA approved product called Auryxia (ferric citrate). AKBA, the surviving corporation, has  product in global Phase 3 trials called Vadadustat.

Last Discussed: Item # 1.A. Bought 30 AKBA at $7.82-Used Commission Free Trade-Small Cap Biotech Lottery Ticket Basket Strategy  (8/26/18 Post) 

Independence Realty Trust (IRT) Announces Fourth Quarter 2018 Dividend 

Special Report: J&J knew for decades that asbestos lurked in its Baby Powder | Reuters; JNJ Statement on Reuters Talc Article  I do not own JNJ shares, but that stock is a holding in some stock funds that I own. The Reuter's story appears to be sourced from plaintiffs lawyers who are suing JNJ claiming that JNJ's baby powder caused their cancers. The tests results that apparently showed trace amounts of asbestos were dismissed by JNJ as "outlier results". I would not call any test result showing asbestos in baby powder as an outlier.  

Even with the Russell 2000 index in bear market territory, there has not been a spike in volatility into the 30s since the rout last February. RVX Chart CBOE Russell 2000 Volatility Index Thereafter the RVX returned to below 20 movement by April 2018 until October.  

RVX 1 Year Chart

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Trump: 

Trump again claims Mexico will pay for his wall. Democrats say it means Congress doesn't need to

I view this development as more damaging to Trump than Cohen's admission that he acted at the direction of Trump: Tabloid says it worked with Trump campaign to pay 2016 hush money: prosecutors | Reuters  Cohen is damaged goods. David Pecker is basically confirming Cohen's testimony on this subject. 

Justice Department Summary of AMI Non-Prosecution Agreement: 

Michael Cohen Sentenced To 3 Years In Prison | USAO-SDNY | Department of Justice

Excerpts from Statement of Admitted Facts:Statement of Admitted Facts

Best not to throw stones when living in a glass house.  

Why hush money Michael Cohen paid Stormy Daniels was an illegal campaign donation

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Back in 2012, the Duck  criticized Obama for having three years "Chief of Staffs" (sic "Staff") in three years. 

I would note that the republicans regained control over the House in 2010 and just about everything Obama proposed thereafter until the end of his Presidency was opposed by the republicans. Jesus could have been Obama Chief of Staff, and it would not have made any difference for the last 6 years of his Presidency.  

Donald will have 3 Chiefs of Staff in two years once General Kelly leaves by year end and is replaced by someone willing to suck up to the Duck. So, any day now, I expect the Duck to blame himself for have too many Chiefs of Staff.   

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US undermining 'last chance' climate talks, experts charge - CNN

Roger Stone-linked Jerome Corsi sues special counsel Robert Mueller for $350 million I seriously doubt that Corsi is paying his legal fees for this lawsuit. 

This kind of publicity stunt will likely backfire IMO. It will not stop Mueller from seeking an indictment against Corsi. If Corsi is convicted by a jury thereafter and loses his appeals, then no mercy will be shown to him at his sentencing hearing. Mueller’s Targets Are Blowing Up Their Deals. He’ll Make Them Pay-POLITICO Magazine Corsi could have accepted Mueller's plea deal and probably served no time.  

Documents Point to Illegal Campaign Coordination Between Trump and the NRA; Trump Campaign, NRA Illegally Coordinated Ads, Groups Allege - Bloomberg; FBI investigating whether Russia funneled cash to NRA to aid Trump's campaign | McClatchy Washington Bureau The NRA spent an unusually large sum ($30M) supporting the Demagogue Don's Presidential campaign.  

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How Democracies Die: 

Paul Krugman expressed some of the same thoughts that I have here in this opinion column. Opinion | The G.O.P. Goes Full Authoritarian - The New York Times I would not describe the GOP as currently at "Full Authoritarian" however, but just moving in that direction. 

They elected a demagogue as President who obviously has strong authoritarian tendencies and whose attacks on institutions necessary for a properly functioning Constitutional democracy, particularly voting rights, the judiciary and separation of powers, and the free press, are constant and impossible to ignore. 

Some republicans are at "Full Authoritarian", while others are simply moving at a quicker pace toward that mindset where democratic institutions and principles take a back seat to partisan ideology.   

Republicans will never accept that their current path is toward authoritarianism, even though the policies and practices advocated and implemented by them clearly support that conclusion. 

It is really just a question whether enough voters, who are not yet brainwashed by GOP propaganda, disseminated by Fox and other media outlets, come to that conclusion and are willing to defend the institutions and fundamental principles essential for a properly functioning democracy against republican efforts to undermine them that now occur regularly. 

This issue does not involve specific issues relating to taxes, wealth inequality, environmental protection, Iran, North Korea, border wall and immigration, entitlements, etc. The issue is American democracy itself. How Democracies Die by Steven Levitsky, Daniel Ziblatt @ Amazon.com.

Yes, Normal Republican Elites Are a Threat to Democracy

Wisconsin Gov. Walker signs lame-duck legislation to weaken incoming Democratic governor, attorney general - The Washington Post; Wisconsin’s Scott Walker Signs Bills Stripping Powers From Incoming Governor - The New York Times

A threat to democracy: Republicans' war on minority voters; Gerrymandering and minority rule, not populism, threatens democracy - Vox 

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1. REGIONAL BANK BASKET STRATEGY:

A. Bought 50 BHB at $24-Used Commission Free Trade: 

Quote:  Bar Harbor Bankshares (BHB)

Closing Price Last Friday: BHB $23.17 -$0.45 -1.93% 

Regional bank stocks are currently in a bear market of unknown duration. Factors contributing to the bear decline are increasing concerns of a recession and the recent decline in longer term interest rates as short term rates continue to trend up. The uptrend in short term rates flows through into increased deposit costs. The 2018 over 2017 Y-O-Y favorable earnings impact due to the reduction in federal income tax rates will not be present in 2019 compared to 2018. There is also probably tax loss selling into year end. 

It remains to be seen whether or not these newly formed concerns that developed over the summer are overblown. I doubt that the concern related to net interest margins is overblown. Every hope that NIM would start to meaningfully expand has been dashed starting with the interest rate spike in 2013.   

Since recession concerns are front and center at the moment, I went back in time to see how BHB performed during the last recession: 

2007-2011 Financial Data: 

The dividend and net income increased during that period. That at least provides a measure of comfort.  

Page 38 2011 Annual Report

The regional bank ETF KRE hit a new 52 week last Friday at $48.42, closing just about that level at $48.53. KRE $48.53 -$0.92 -1.85% 

Earlier this year, I eliminated my BHB position: Item # 1.A. Sold 100 BHB at $30.69-Used Commission Free Trade (7/15/18 Post)(profit snapshot = +$1,718.56) 

Links to Other Dispositions: Item # 1.A. Sold 50 BHB at $30.02 (5/21/18 Post) Item #3.A. Sold 100 BHB at $29.55 (4/26/18 Post); Item # 1. A. Sold 30 BHB at $29.42 (3/25/18 Post)(also contains snapshot of 2016 realized gain on 100 shares of $936.96) 

Earlier this year, I eliminated my regional bank stock positions where my profit exceeded $500. I expressed several concerns that included valuations and a continuation of stagnant net interest margins.

For Bar Harbor, I was also concerned about a prolonged period of topping action in the price, starting in November 2016, which is reflected on a five year chart.

Possible Double Bottom?

The end result of that topping pattern was a rapid decline in price that commenced in mid-September 2018. 

BHB's stock price skidded from $29+ to $24 over a two month period. 

The recent price decline brought the stock back into my fair value range.

When looking at this bank's earnings, it is important to keep in mind that the 2017 4th quarter included a $4M non-cash charge related to the revaluation of a net deferred tax assets which became less valuable to the reduction in corporate income rates. 

The trailing P/E using GAAP earnings is distorted due to that one time non-cash charge Earnings Release for the Q/E 12/31/18 GAAP earnings for that quarter was $.43 per share. I am using the non-GAAP number for that quarter which was $.58 per share or $.15 higher. The trailing twelve month E.P.S. with that revision was $2.21, which results in a TTM P/E of 10.86 at $24.

Dividend: Quarterly at $.2 per share

Bar Harbor Bankshares Declares Quarterly Cash Dividend

Dividend Yield at $24: 3.33%

Last Ex Dividend Date: 11/13/18 (before purchase)

Effective Tax Rate: "The third quarter effective tax rate decreased to 18.8% in 2018 compared with 29.3% in the same quarter of 2017, reflecting a lower federal statutory tax rate."

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

E.P.S. was reported at $.58, up from $.56 in the 2017 third quarter.

NIM is trending down, a major negative: "Net interest margin in the third quarter 2018 decreased to 2.81% from 3.06% in the prior year due to higher cost of funds driven by short-term interest rate hikes. That decrease included a lower contribution from tax-equivalency adjustments of six basis points over the prior year as a result of the lower federal statutory tax rate. The Company's loan to deposit ratio improved 3%."

Charge-Off Ratio = .04% (excellent)

Tangible Book Value Per Share = $16.11
Tangible Book Value Per Share (excluding security adjustments) = $17.22
"Securities adjustment, net of tax represents the total unrealized loss on available-for-sale securities recorded on the Company's consolidated balance sheets within total common shareholders' equity"

Efficiency Ratio: 57.88% (okay + )
NPL Ratio: .88% (slightly negative at this stage in the credit cycle, up Y-O-Y)
NPA Ratio: .61% (okay)
Risk Based Capital Ratio = 14% (okay)

During my prior ownership periods, there were two 3 for 2 stock splits. BHB Split History

Current Position: 50 Shares

Maximum Position: 200 Shares

Purchase Restriction: Small Ball Rule

I owned shares in Lake Sunapee Bank when BHB made an acquisition offer. I sold my shares, realizing a gain of $850.87, before the merger was completed in January 2017: Bar Harbor Bankshares and Lake Sunapee Bank Group Complete Merger; Bar Harbor Bankshares Expands Into New Hampshire and Vermont with Lake Sunapee Bank Group Merger ("Founded in 1868 as Newport Savings Bank, Lake Sunapee operates 35 branches in New Hampshire and Vermont and reported $1.2 billion in net loans and $1.1 billion in deposits as of March 31, 2016."); Item # 1 Sold 200 of 300 LSBG Update For Regional Bank Basket Strategy As Of 6/6/16 - South Gent | Seeking Alpha (profit snapshots = $223.85)

The largest gain was on a 100 share lot: 

LSBG 100 shares +$627.02

South Gent's Comment Blog # 6: Sold 100 LSBG

2. Short Term Bond/CD Ladder Basket Strategy:  

I am continuing to push out some the maturities in my short term bond/CD ladder, buying more securities maturing in 1 to 3 years. 

A. Bought 2 HCP 2.625% SU Bonds Maturing on 2/1/20: 

I now own 4 bonds with the other two owned in an IB taxable account.

FINRA Page: Bond Detail (prospectus linked)

Issuer: HCP Inc

HCP Reports Third Quarter 2018 Results
10-Q for the Q/E 9/30/18 (debt discussed starting at page 17)

Credit Ratings: 

HCP Upgraded by S&P Global Ratings to BBB+ with Stable Outlook

Bought at a Total Cost of 99.142 (with $2 brokerage commission)
YTM at TC Then at 3.383%
Current Yield at TC =  2.6477%

B. Bought 2 Analog Devices 2.85% SU Maturing on 3/12/20: 

FINRA Page:Bond Detail (prospectus linked)

Issuer: Analog Devices Inc. (ADI)
ADI Analyst Estimates

Analog Devices Reports Strong Fourth Quarter Results, Achieving Record Revenue and EPS; Full-Year Fiscal 2018 Revenue Surpasses $6 Billion

Credit Ratings: 

Bought at a Total Cost of 99.524
YTM at TC Then at 3.233%
Current Yield at TC =  2.8636%

C. Early Redemption 2 Black Hills 2.5% SU Bonds: 

The revised total for proceeds from bonds and CD maturities this month is now at $64K. 

Black Hills Corp.  (BKH) is an electric and utility with some mining operations. 10-Q for the Q/E 9/30/18. 

I still own a 3.95% BKH SU bond maturing on 1/15/26: FINRA Bond Detail

D. Bought 1 Treasury 1 Year Treasury at Auction Maturing on 12/6/19: 
IR = 2.726% 

3. Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:

A. Bought 50 AXPRI:CA at C$23 (C$ 1 Commission at IB):

Quote: Artis Real Estate Investment Trust Preferred Series I  (Canada: Toronto)

Closing Price Last Friday: AX-PI.TO C$23.30 +C$0.02 0.09%

Website: Artis REIT

Par Value: C$25
Category: Fixed-to-Floating Rate Equity Preferred Stock
Issuer: Artis Real Estate Investment Trust (Canada: Toronto)
Fixed Coupon: 6% through 4/30/23
Floating Rate: Greater of 6% or a 3.93% Spread to the Five Year Canadian Bond
Dividends: Cumulative
Current Dividend Yield at C$23 = 6.52%
Credit Rating: DBRS at Pfd3L  (possibly will be upgraded due to common dividend slash when Artis has another preferred share offering)

Pfd3L = BB- at S & P

Floating Rate Reset: Every 5 years unless redeemed by issuer
Issuer Redemption Option: On 4/30/23 and on 4/30 of every 5th year thereafter

Last Ex Dividend Date: 10/30/18  

Summary of Terms from Press Release: 

Stopper Clause: Yes

This clause enforces the preferred shareholders superior claim to cash vs. the common unit holders. The clause stops the issuer from paying any cash dividend to the common owners while deferring a cash dividend to the preferred stock owners. The preferred shareholders have to be paid in full as a long as any cash dividend is paid to the common unit owners.

The terms are better than U.S. fixed-to-floating preferred stocks in that there is a minimum floor of 6% when the security transitions to a floating rate. The 6% fixed rate coupon is higher than most U.S. fixed-to-floating rate preferred stocks.

The floating rate is different in that it is based on a five year Canadian government bond rather than a short term rate and resets only every five years rather than the normal quarterly resets for U.S. fixed-to-floating rate preferred stocks.

A spread to a five year bond will provide a higher yield than a spread over a three month rate but provides no protection from a significant rise in rates before the next reset in five years.

As with other fixed-to-floating rate securities, the issuer may elect to redeem rather than pay the floating rate when that transition is made, preferring instead to refinance at a fixed rate. That will depend on the then existing yield curve and and other factors that make the floating rate less advantageous for the issuer compared to one or more alternatives. 

Maximum Position: 100 shares

The remaining 50 shares will be purchased in the C$21 to C$22 range, if at all.

The credit profile of the preferred shares improved after Artis slashed its common share dividend by 50%. Artis Real Estate Investment Trust Releases Third Quarter Results and Announces New Initiatives to Deliver Improved Value to Unitholders

As shown in the preceding snapshot, Artis was paying the common shareholders more than it was receiving in cash flow prior to the dividend slash.

I have a small position in the common shares.

B. Bought 50 MNRPRC at $23.12:

Quote: Monmouth Real Estate Investment Corp. 6.125% Cumulative Preferred. Series C Stock

Closing Price Last Friday: MNR-PC $22.26 -$0.22 -0.98% 

I am merely attempting to raise my portfolio dividend yield some. 

Equity REIT preferred stocks continue their price declines even though the ten year treasury has fallen from a 3.24% yield on 11/8/18 to 2.9% last Friday. U.S. 10 Year Treasury Note Interactive Charts - MarketWatch   

At last Friday's close of $22.26, MNRPRC has a yield of about 6.88%  or a 3.98% spread to the ten year treasury yield. 

Issuer: Monmouth Real Estate Investment Corp. Cl A (MNR)

MNR SEC Filings

Annual Report for the F/Y Ending 9/30/17

MNRPRC Prospectus

Par Value: $25

Optional Call: At par + accrued and unpaid dividends at the issuer's option on or after 9/15/21

Stopper Clause: Yes at pages S-18-S-19  

Before MNR can defer paying the preferred dividend, MNR must cease paying cash dividends to the common shareholders.  

MNR.PC Stock Chart

Last Discussed: Item # 3.B. Bought 50 MNRPRC at $24 (7/12/18 Post)

If and when the price exceeds $24.25, I may elect to sell that higher cost lot. 

Current and Maximum Position: 100 shares

Average Total Cost Per Share = $23.61

Yield at TC  = 6.49%

Last Ex Dividend: 11/14/18

Previous Round-Trip: Item 5.A. Sold 100 MNRPRC at $24.85 (1/21/17 Post)(profit snapshot = $71.93)

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

Other News: Monmouth Real Estate Investment Corporation Announces Pricing of Common Stock Offering (8M shares at $15 + greenshoe)

Monmouth Real Estate Announces New Acquisition In Trenton, NJ

Monmouth Real Estate Reports Results For The Third Quarter Ended June 30, 2018; 10-Q 

4. Eliminations: 

A. Sold 75 RHHBY at $31.91+-Used Commission Free Trade: 

Quote: Roche Holding AG ADR (RHHBY)

Profit Snapshot: +$118.93

Closing Price Last Friday: RHHBY $31.12 -$0.78 -2.45% 

I received 1 annual dividend payment on most of those shares. 

Overall, this was a subpar investment. For several years now, it is has been difficult to generate a meaningful profit in Roche shares that have been under pressure due to actual and potential generic competition for major products. 

Some Prior Buy Discussions (all commission free trades):

Item # 1.A. Bought 5 RHHBY at $26.3-Used Commission Free Trade (6/28/18 Post); 

Item # 1.A. Added 5 RHHBY at $28.74 (4/2/19 Post);

Item #3.A. Bought 10 RHHBY at $28.85  (11/13/17 Post)

Last Sell Discussions: 

Item # 3.B. Sold 30 RHHBY  at $33.25 (6/7/17 Post);

Item # 3.A. Sold 100 RHHBY at $31.61 (4/8/17 Post)

Trading Profits 2015 to Date: $502.54  ($383.61 in prior trades)

5. Long Term Bond Basket Strategy-First Mortgage Bonds: 

A. Added 10 EAI at $21.73-Used Commission Free Trade:  

Quote: Entergy Arkansas LLC First Mortgage Bonds 4.875% due 2066 

Closing Price Last Friday: EAI 21.40 -$0.10 -0.47% 

Last Discussed: Item # 3 Bought 20 EAI at $23.68 (10/7/18 Post) 

That lot was bought prior to the last quarterly ex interest date. 

Prospectus

Next Ex Interest Date: 2/27/19

Interest Payments: Quarterly 

Yield at a TC of $21.73 = 5.61%

Par Value: $25 

Optional Call: At issuer's option on or after 9/1/21

Maturity Date: 9/1/66 unless redeemed at par value earlier at issuer's option (asymmetric interest rate risk in favor of issuer) 

Credit Ratings: Taken from Schwab Website 

1 Year Chart-Shows a Decline starting in August 2018 with no change in the credit risk:  

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.