Economy:
China's 2018 trade surplus with U.S. highest on record going back to 2006
Germany's slowdown fans fears China woes spreading - MarketWatch
Empire State Manufacturing Survey for January (fell 8 points to 3.9, the lowest level in over one year)
Source: White House believes shutdown will be twice as costly
Fed's Kashkari says nothing in data justifies raising interest rates further - MarketWatch (not a voting member until 2020)
Fed’s George, often hawkish, says it might be good time for interest-rate pause - MarketWatch (she is a voting member in 2019)
Calculated Risk: Fed: Q3 2018 Household Debt Service Ratio at Series Low;
Household Debt Service and Financial Obligations Ratios;
Chart: Household Debt Service Payments as a Percent of Disposable Personal Income -St. Louis Fed I have viewed this information as a major positive for the U.S. economy. It is not just the level of debt that is important. The cost of servicing that debt and the percentage of disposable income necessary to service it is critical. One of the major long term positive secular forces is the tsunami of long term mortgage refinancings at historically low yields, which frees up capital that can be used by American households to pay down high cost debt, to spend without borrowing and/or to save.
Germany's slowdown fans fears China woes spreading - MarketWatch
Empire State Manufacturing Survey for January (fell 8 points to 3.9, the lowest level in over one year)
Source: White House believes shutdown will be twice as costly
Fed's Kashkari says nothing in data justifies raising interest rates further - MarketWatch (not a voting member until 2020)
Fed’s George, often hawkish, says it might be good time for interest-rate pause - MarketWatch (she is a voting member in 2019)
Calculated Risk: Fed: Q3 2018 Household Debt Service Ratio at Series Low;
Household Debt Service and Financial Obligations Ratios;
Chart: Household Debt Service Payments as a Percent of Disposable Personal Income -St. Louis Fed I have viewed this information as a major positive for the U.S. economy. It is not just the level of debt that is important. The cost of servicing that debt and the percentage of disposable income necessary to service it is critical. One of the major long term positive secular forces is the tsunami of long term mortgage refinancings at historically low yields, which frees up capital that can be used by American households to pay down high cost debt, to spend without borrowing and/or to save.
+++++
Apple iPhone: Retailers are slashing prices across China
It comes as no surprise that those who voted for Brexit had no clue then, nor now, about the terms capable of being negotiated on an exit plan. They were bamboozled by the English versions of Donald Trump. UK leader Theresa May suffers resounding defeat on her Brexit divorce deal
It comes as no surprise that those who voted for Brexit had no clue then, nor now, about the terms capable of being negotiated on an exit plan. They were bamboozled by the English versions of Donald Trump. UK leader Theresa May suffers resounding defeat on her Brexit divorce deal
+++
Portfolio Management- Cash Flow into Fidelity Taxable Account 1/15/18:
Most of the redemption proceeds, interest and dividend payments are received on the 1st, 15th and last day of each month. There is a smaller flow on other days.
This snapshot shows the cash flow into this account today:
In a recent comment, I mentioned that I will be moving up the bond rating quality ladder over the next several years. Since I own no junk rated $1K par value bonds, and my average credit quality is in the A- neighborhood, I will be gradually replacing the lower investment grade bonds with higher grade ones. That will largely be accomplished by gradually reinvesting proceeds from BBB/Baa2 and BBB/Baa1 rated bonds into A- or higher rated bonds.
There are several reasons for this nip and tuck move. The most important and central one is preservation of capital. As I become older, I will have less time to recover from a financial crisis and may lack the mental ability to do so. And, as I have discussed here many times, I am expecting that the next financial crisis to be far worse than the last one, with the options for preservation of capital being harder to identify. I made that point as recently as 1/10/19 in this comment.
I have started to think about will be relatively safe. A highly rated municipal bond that is secured by water revenue would probably be an option. Another would be bonds issued by major U.S. universities with massive endowments.
I would view it as unlikely that Vanderbilt University would default on its debt, and I already own some federally tax free bonds from that issuer which are rated AAA by Fitch, AA1 by Moody's and AA+ by S & P. (see bond page at Municipal Securities-Emma) I will be buying more.
++++
Portfolio Management- Cash Flow into Fidelity Taxable Account 1/15/18:
Most of the redemption proceeds, interest and dividend payments are received on the 1st, 15th and last day of each month. There is a smaller flow on other days.
This snapshot shows the cash flow into this account today:
In a recent comment, I mentioned that I will be moving up the bond rating quality ladder over the next several years. Since I own no junk rated $1K par value bonds, and my average credit quality is in the A- neighborhood, I will be gradually replacing the lower investment grade bonds with higher grade ones. That will largely be accomplished by gradually reinvesting proceeds from BBB/Baa2 and BBB/Baa1 rated bonds into A- or higher rated bonds.
There are several reasons for this nip and tuck move. The most important and central one is preservation of capital. As I become older, I will have less time to recover from a financial crisis and may lack the mental ability to do so. And, as I have discussed here many times, I am expecting that the next financial crisis to be far worse than the last one, with the options for preservation of capital being harder to identify. I made that point as recently as 1/10/19 in this comment.
I have started to think about will be relatively safe. A highly rated municipal bond that is secured by water revenue would probably be an option. Another would be bonds issued by major U.S. universities with massive endowments.
I would view it as unlikely that Vanderbilt University would default on its debt, and I already own some federally tax free bonds from that issuer which are rated AAA by Fitch, AA1 by Moody's and AA+ by S & P. (see bond page at Municipal Securities-Emma) I will be buying more.
++++
Trump:
Wall Street Journal: White House requested plans last year from Pentagon to attack Iran
Donald's ignorance, malice, vindictiveness, and demagoguery know no limits. As his new Chief of Staff once said, Trump is a "terrible person". Mick Mulvaney calls Trump 'terrible human being' in video from 2016 - CNN He has no positive attributes, unless one believes that lying and other previously disdained personal qualities are virtues.
Trump's opinions are based on his own reality creations. As with his followers, Trump can not be convinced to change an opinion when confronted with accurate information that undermines the reality creation. And, importantly IMO, it is futile to have a fact based discussion with them.
Patrick Moynihan made the accurate observation back in 2003 that everyone is entitled to their own opinions but not their own facts. Daniel Patrick Moynihan Quotes The GOP now personifies that problem on steroids.
One recent example is this tweet:
Wall Street Journal: White House requested plans last year from Pentagon to attack Iran
Donald's ignorance, malice, vindictiveness, and demagoguery know no limits. As his new Chief of Staff once said, Trump is a "terrible person". Mick Mulvaney calls Trump 'terrible human being' in video from 2016 - CNN He has no positive attributes, unless one believes that lying and other previously disdained personal qualities are virtues.
Trump's opinions are based on his own reality creations. As with his followers, Trump can not be convinced to change an opinion when confronted with accurate information that undermines the reality creation. And, importantly IMO, it is futile to have a fact based discussion with them.
Patrick Moynihan made the accurate observation back in 2003 that everyone is entitled to their own opinions but not their own facts. Daniel Patrick Moynihan Quotes The GOP now personifies that problem on steroids.
One recent example is this tweet:
Trump again threatens to stop federal funding for California wildfire aid - MarketWatch;
Trump threatens to cut off FEMA aid to California for forest fires - The Washington Post;
Trump threat to cut off California fire relief draws bipartisan rebukes - SFGate
Demagogue Don is backtracking on his oft repeated claim that Mexico will pay for his wall. Trump claims he never said Mexico would cut a check for the wall. Let’s go to the tape-The Washington Post It is clear from the record that Demagogue Don is lying now about what he actually said in the past, part of his now standard revisions to the historical record whenever it suits him.
Donald Trump Complete - Search Tweets, Speeches, Policies | Factbase
Trump falsely asserts he never promised to make Mexico pay directly for the border wall - The Washington Post
Trump and Pompeo Embrace Autocrats and Disparage Opponents at Home - The New York Times
Trump falsely asserts he never promised to make Mexico pay directly for the border wall - The Washington Post
Trump and Pompeo Embrace Autocrats and Disparage Opponents at Home - The New York Times
The 29 most outrageous lines from Donald Trump's wild, impromptu news conference on the White House lawn
Donald has repeatedly threatened to declare a national emergency as a means to bypass congressional funding authorization for the wall. His tentative plan was to raid money intended for disaster relief in Puerto Rico and elsewhere before the money can spent for those intended purposes.
He does claim to have the absolute right to declare that emergency, with no one able to question his categorization as a political sham including the judiciary, and to usurp the constitutional powers of Congress in his role as President.
This is just one more example of how the so-called individual freedom party is drifting into authoritarianism with an Imperial Presidency that knows no effective boundaries to the assertion of executive power. In short, Trump is describing the actions of a dictator. Escape from Freedom - Kindle edition by Erich Fromm It is time for everyone to come to a realization that the modern day GOP is not a conservative party. The statements and actions of Trump make true conservatives cringe with disgust.
And, when a liberal Democrat becomes President, what then would stop him or her from declaring climate change a national emergency, a far better factual case for that claim than the illegal immigration issue? Could that President implement stringent environmental regulations by executive order? Why not if Trump could do it for immigration?
If Trump does declare a national emergency and appropriates money that Congress has authorized for other projects to build the wall, I wonder whether there will any push back from the republicans in Congress. Maybe there will be a rumble or two, but none of them want to rile the Trumpsters before the next election so silence is viewed as necessary for political survival rather than exercising their constitutional duties as members of the legislative branch.
++++
Judge rejects citizenship question for 2020 U.S. census
Why Republican baby boomers are more likely to share #fakenews on Facebook - MarketWatch
++++++++
Donald has repeatedly threatened to declare a national emergency as a means to bypass congressional funding authorization for the wall. His tentative plan was to raid money intended for disaster relief in Puerto Rico and elsewhere before the money can spent for those intended purposes.
He does claim to have the absolute right to declare that emergency, with no one able to question his categorization as a political sham including the judiciary, and to usurp the constitutional powers of Congress in his role as President.
This is just one more example of how the so-called individual freedom party is drifting into authoritarianism with an Imperial Presidency that knows no effective boundaries to the assertion of executive power. In short, Trump is describing the actions of a dictator. Escape from Freedom - Kindle edition by Erich Fromm It is time for everyone to come to a realization that the modern day GOP is not a conservative party. The statements and actions of Trump make true conservatives cringe with disgust.
And, when a liberal Democrat becomes President, what then would stop him or her from declaring climate change a national emergency, a far better factual case for that claim than the illegal immigration issue? Could that President implement stringent environmental regulations by executive order? Why not if Trump could do it for immigration?
If Trump does declare a national emergency and appropriates money that Congress has authorized for other projects to build the wall, I wonder whether there will any push back from the republicans in Congress. Maybe there will be a rumble or two, but none of them want to rile the Trumpsters before the next election so silence is viewed as necessary for political survival rather than exercising their constitutional duties as members of the legislative branch.
++++
Judge rejects citizenship question for 2020 U.S. census
Why Republican baby boomers are more likely to share #fakenews on Facebook - MarketWatch
++++++++
1 REGIONAL BANK BASKET STRATEGY:
A. BOUGHT 100 UMPQ at $16.64:
Closing Price Yesterday: UMPQ $17.75 $0.03 +0.17%
Quote: Umpqua Holdings Corp. (UMPQ)
UMPQ SEC Filings
2017 Annual Report
UMPQ Consensus Analyst E.P.S. Estimates (as of date of purchase)
2018: $1.46
2019: $1.66
Estimated Consensus E.P.S. Increase = 13.7%
P/E on $1.66 at $16.64 = 10.02
Dividend: Quarterly and recently raised to $.21 per share ($.84 annually)
Dividend Yield at $16.64 = 5.05%
Last Ex Dividend Date: 12/28/18 (shortly after purchase)
1 Year Chart at Time of Purchase: Bear Market
Recent Earnings Report: Q/E 9/30/18
SEC Filed Press Release
2018 3rd Quarter
E.P.S.: $.41
NIM: 4.09%
Efficiency Ratio Bank: 54.7%
ROA: 1.36%
ROE: 9%
ROTE: 16.42%
NPL Ratio: .44%
NPA Ratio: .37%
Charge Off Ratio: .25%
Tangible Equity to Tangible Assets: 8.83%
UMPQ Realized Gains: +$534.
Last Sell Discussion: Item # 2 Eliminated UMPQ Sold 50+ $19.09 (2/9/17 Post)(profit snapshot = $194.75))-Bought Near $15 South Gent's Comment Blog # 4
Current and Maximum Position: 100 Shares + Shares purchased with dividends
Likely Sell Range: $18 to $20
2. Small Ball-Income Generation Through Commission Free ETFs:
A. Added 10 PGX at $13.48;;10 at $13.32 and 10 at $13.15-Commission Free for Schwab Customers:
Quote: PGX Fund - Invesco Preferred ETF Overview
Closing Price Yesterday: PGX $13.99 +$0.02 +0.14%
Sponsor's Website: Invesco
Last Discussed: Item 1.B. (11/28/18 Post)
Current Position: 90 Shares
Maximum Position: 100 Shares
Dividends: Monthly at a variable rate Dividends
I will start to reinvest the dividend after I reach 100 shares.
Last Ex Dividend Date: 12/24/18
B. Added 5 VRP at $23.17 AND 5 at $22.57-Commission Free for Vanguard Customers:
Quote: Invesco Variable Rate Preferred ETF Overview
Closing Price Yesterday: VRP $23.71 +$0.08 +0.34%
Sponsor's Website: Invesco - Product Detail
Last Substantive Discussion: Item # 1.B. (10/24/18 Post) I have nothing to add to that discussion.
Dividends: Monthly at a Variable Rate
Dividend Reinvestment: Yes
Prior Sell Discussions: Item # 6 Sold 272 VRP at $24.88 Update For Exchange Traded Bond And Preferred Stock Basket As Of 7/7/17 - South Gent | Seeking Alpha; Item # 2 Eliminated VRP Sold 100 at $25.2 Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As 7/29/2016 - South Gent | Seeking Alpha
Current and Maximum Position: 100 Shares + Shares purchased with dividends
This completes my small ball "purchase program" in this ETF.
Closing Price Yesterday: VRP $23.71 +$0.08 +0.34%
Sponsor's Website: Invesco - Product Detail
Last Substantive Discussion: Item # 1.B. (10/24/18 Post) I have nothing to add to that discussion.
Dividends: Monthly at a Variable Rate
Prior Sell Discussions: Item # 6 Sold 272 VRP at $24.88 Update For Exchange Traded Bond And Preferred Stock Basket As Of 7/7/17 - South Gent | Seeking Alpha; Item # 2 Eliminated VRP Sold 100 at $25.2 Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As 7/29/2016 - South Gent | Seeking Alpha
Current and Maximum Position: 100 Shares + Shares purchased with dividends
This completes my small ball "purchase program" in this ETF.
C. Added 10 SDIV at $17.8-Used Fidelity Commission Free Trade:
Quote: SDIV Fund - Global X SuperDividend ETF Overview
Closing Price Yesterday: SDIV $18.42 +$0.03 +0.16%
Sponsor's Website: ETF
Last Discussed: Item # 2.B. (11/18/18 Post)
Current and Maximum Position This Account: 50 Shares + shares purchase with dividends
I am switching my small ball "buying program" for SDIV to a Vanguard brokerage account where I can buy it commission free. I do not want to use up my Fidelity commission free trades buying ETFs that can be bought commission free by Vanguard brokerage customers.
Top Ten Holdings as of 1/14/18:
Dividends: Monthly at a Variable Rate:
Prior Elimination: Item # 2 Sold 105+ SDIV at $22.54 (8/3/13 Post)
D. Added 5 BKLN at $22.24 and 5 at $21.86-Commission Free for Vanguard Customers:
Quote: Invesco Senior Loan ETF Overview
Closing Price Yesterday: BKLN $22.41 -$0.01 -0.04%
Sponsor's Website: Invesco
Closing Price Yesterday: SDIV $18.42 +$0.03 +0.16%
Sponsor's Website: ETF
Last Discussed: Item # 2.B. (11/18/18 Post)
Current and Maximum Position This Account: 50 Shares + shares purchase with dividends
I am switching my small ball "buying program" for SDIV to a Vanguard brokerage account where I can buy it commission free. I do not want to use up my Fidelity commission free trades buying ETFs that can be bought commission free by Vanguard brokerage customers.
Top Ten Holdings as of 1/14/18:
Dividends: Monthly at a Variable Rate:
D. Added 5 BKLN at $22.24 and 5 at $21.86-Commission Free for Vanguard Customers:
Quote: Invesco Senior Loan ETF Overview
Closing Price Yesterday: BKLN $22.41 -$0.01 -0.04%
Sponsor's Website: Invesco
Last Substantive Discussion: Item # 1.A Bought 50 BKLN at $23.17 (10/10/18)
Current Position: 70+ Shares
Maximum Position: 200 Shares + Shares purchased with Dividends
Purchase Restriction: Small Ball using commission free trades
Dividends: Monthly at a Variable Rate
Dividend Reinvestment: Yes.
Current Position: 70+ Shares
Maximum Position: 200 Shares + Shares purchased with Dividends
Purchase Restriction: Small Ball using commission free trades
Dividends: Monthly at a Variable Rate
3. Short Term Bond/CD Ladder Basket Strategy:
Purchases = $5K
Purchases = $5K
A. Bought 1 Treasury .75% Coupon Maturing 9/15/19:
YTM = 2.53%
YTM = 2.53%
B. Bought 3 Six Month Treasury Bills at Auction Maturing on 7/11/19:
IR = 2.536%
Auction Results:
IR = 2.536%
Auction Results:
C. Bought 1 Citigroup 2.5% SU Bond Maturing on 7/29/18:
I now own 2. I mentioned buying 1 in my last post. I decided to add 1 after seeing the 6 month treasury bill auction results from 1/7/19. I am also trying to fill up my July 2019 which are currently short of the minimum $40K.
FINRA Page: Bond Detail (prospectus not linked)
Issuer: Citigroup Inc. (C)
C Analyst Estimates
Credit Ratings:
Moody's at Baa1
S & P at BBB+
Bought at a Total Cost of 99.885
YTM at TC Then at 2.708%
Current Yield at TC = 2.503%
I now own 2. I mentioned buying 1 in my last post. I decided to add 1 after seeing the 6 month treasury bill auction results from 1/7/19. I am also trying to fill up my July 2019 which are currently short of the minimum $40K.
FINRA Page: Bond Detail (prospectus not linked)
Issuer: Citigroup Inc. (C)
C Analyst Estimates
Credit Ratings:
Moody's at Baa1
S & P at BBB+
Bought at a Total Cost of 99.885
YTM at TC Then at 2.708%
Current Yield at TC = 2.503%
4. Small Ball Adds-Income Generation:
A. Bought 5 AT & T at $27.7 and 10 at $26.95-Used Commission Free Trades:
Quote: AT&T Inc. (T)
Closing Price Yesterday: T $30.60 -$0.02 -0.07%
Last Substantive Discussions: Item # 1.C. Bought 3 AT & T at $29.23-Used Commission Free Trade (11/18/18 Post) I discussed the third quarter earnings report in that post and have nothing to add; Item # 1.B. Bought 5 AT & T at $31.14 (7/25/18 Post)
I have had for several years a negative opinion about AT &T as a total return vehicle which has been repeatedly expressed in prior post. My opinion has been proven correct looking at the past five years.
I simply view the stock now as a bond substitute which pays me more than AT & T senior unsecured bonds. I own a few of those.
The trick is to figure out a way to add about a 4%-5% annual average total return to the dividend yield. The 5 year annual total return (which includes reinvestment of the dividends) was 2.99% through yesterday. For most households, that kind of total return is not going to take them to the promised land.
DRIP Returns Calculator | Dividend Channel
It is important to keep in mind that the high yield stock, what I call the shiny object, may be, and often is a poor total return vehicle.
5 Year Chart
Current Position: 71+ shares
Maximum Position: 100 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $31.36
Highest Cost Lot in Chain: 10 shares at $35.42 (will be sold when and if I can do so so at whatever profit may be available)
Dividends: $.51 per share ($2.04 annually)
As expected, AT & T raised its quarterly dividend rate by 1 cent per share effective for the 2019 first quarter. AT&T Increases Quarterly Dividend
Dividend Yield at $31.36 = 6.5%
Last Ex Dividend Date: 1/9/19 (shortly after purchases, all shares participated)
Dividend Reinvestment: Yes at below $35.
Citi: Buy AT&T stock as the telecom giant turns things around
B. ADDED 10 STWD AT $19.4-USED Commission Free Trade:
Quote:Starwood Property Trust Inc. (STWD)
Website: Starwood Property Trust
Closing Price Yesterday: STWD $20.96 +$0.05 +0.24%
Last Buy Discussions: Item 1.A. Added 5 STWD at $19.96-Used Commission Free Trade (2/19/18 Post); Item # 1.C. Bought 10 STWD at $21.19 and 10 at $20.9 (1/11/18 Post)
Last Sell Discussion: Item # 2.B. Sold 50 STWD at $22.31 (7/15/18 Post)
Dividend: Quarterly at $.48
STARWOOD PROPERTY TRUST, INC. (STWD) Dividend Date & History - Nasdaq
Last Ex Dividend: 12/28/18 (shortly after purchase)
Dividend Reinvestment: Yes
Dividend Tax Classification: Starwood Property Trust Announces Tax Reporting Information for 2017 Dividends
Current Position: 37+ shares
Maximum Position: 50 Shares + Shares Purchased with Dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $20.48
Dividend Yield at Total Cost = 9.38%
Credit Ratings Investor | Starwood Property Trust
Moody's rates Starwood Property Trust's senior notes Ba3
Last Earnings Report: Q/E 9/30/18
"The Company's third quarter 2018 GAAP net income was $84.5 million, or $0.31 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.4 million, or $0.53 per diluted share. This includes $6.9 million, or $0.03 per diluted share, and $3.0 million, or $0.01 per diluted share, of acquisition costs associated with the infrastructure finance platform and portfolio for GAAP and Core Earnings, respectively."
Starwood Property Trust Reports Results for the Quarter Ended September 30, 2018
A. Bought 5 AT & T at $27.7 and 10 at $26.95-Used Commission Free Trades:
Quote: AT&T Inc. (T)
Closing Price Yesterday: T $30.60 -$0.02 -0.07%
Last Substantive Discussions: Item # 1.C. Bought 3 AT & T at $29.23-Used Commission Free Trade (11/18/18 Post) I discussed the third quarter earnings report in that post and have nothing to add; Item # 1.B. Bought 5 AT & T at $31.14 (7/25/18 Post)
I have had for several years a negative opinion about AT &T as a total return vehicle which has been repeatedly expressed in prior post. My opinion has been proven correct looking at the past five years.
I simply view the stock now as a bond substitute which pays me more than AT & T senior unsecured bonds. I own a few of those.
The trick is to figure out a way to add about a 4%-5% annual average total return to the dividend yield. The 5 year annual total return (which includes reinvestment of the dividends) was 2.99% through yesterday. For most households, that kind of total return is not going to take them to the promised land.
DRIP Returns Calculator | Dividend Channel
It is important to keep in mind that the high yield stock, what I call the shiny object, may be, and often is a poor total return vehicle.
5 Year Chart
Maximum Position: 100 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $31.36
Highest Cost Lot in Chain: 10 shares at $35.42 (will be sold when and if I can do so so at whatever profit may be available)
Dividends: $.51 per share ($2.04 annually)
As expected, AT & T raised its quarterly dividend rate by 1 cent per share effective for the 2019 first quarter. AT&T Increases Quarterly Dividend
Dividend Yield at $31.36 = 6.5%
Last Ex Dividend Date: 1/9/19 (shortly after purchases, all shares participated)
Dividend Reinvestment: Yes at below $35.
Citi: Buy AT&T stock as the telecom giant turns things around
B. ADDED 10 STWD AT $19.4-USED Commission Free Trade:
Quote:Starwood Property Trust Inc. (STWD)
Website: Starwood Property Trust
Closing Price Yesterday: STWD $20.96 +$0.05 +0.24%
Last Buy Discussions: Item 1.A. Added 5 STWD at $19.96-Used Commission Free Trade (2/19/18 Post); Item # 1.C. Bought 10 STWD at $21.19 and 10 at $20.9 (1/11/18 Post)
Last Sell Discussion: Item # 2.B. Sold 50 STWD at $22.31 (7/15/18 Post)
Dividend: Quarterly at $.48
STARWOOD PROPERTY TRUST, INC. (STWD) Dividend Date & History - Nasdaq
Last Ex Dividend: 12/28/18 (shortly after purchase)
Dividend Reinvestment: Yes
Dividend Tax Classification: Starwood Property Trust Announces Tax Reporting Information for 2017 Dividends
Current Position: 37+ shares
Maximum Position: 50 Shares + Shares Purchased with Dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $20.48
Dividend Yield at Total Cost = 9.38%
Credit Ratings Investor | Starwood Property Trust
Moody's rates Starwood Property Trust's senior notes Ba3
Last Earnings Report: Q/E 9/30/18
"The Company's third quarter 2018 GAAP net income was $84.5 million, or $0.31 per diluted share, and Core Earnings (a non-GAAP financial measure) was $148.4 million, or $0.53 per diluted share. This includes $6.9 million, or $0.03 per diluted share, and $3.0 million, or $0.01 per diluted share, of acquisition costs associated with the infrastructure finance platform and portfolio for GAAP and Core Earnings, respectively."
Starwood Property Trust Reports Results for the Quarter Ended September 30, 2018
The supplemental report provides far more important than the earnings release:
Supplemental Reporting Information for the Q/E 9/30/18
Supplemental Reporting Information for the Q/E 9/30/18
5. Small Ball: Income Generation Through Leveraged Bond CEFs:
A. Added 20 BTZ at $11.35 and 30 at $11.16-Used Commission Free Trades:
Quote: BlackRock Credit Allocation Income Trust (BTZ)
Closing Price Yesterday: BTZ $11.70 +$0.02 +0.17%
BTZ is a leveraged closed end bond fund that has a significant weighting in junk rated securities:
Leverage will generally run at 30% to 33% and will consist of short term borrowings.
Last Discussed: Item # 1.C. Bought 50 BTZ at $11.58 (12/9/18 Post)
Dividends: Monthly at $.067 ($.804 per share annually)
BlackRock Credit Allocation Income Trust (BTZ) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 12/28/18
Dividend Reinvestment: Yes for as long as the discount to net asset value per share is greater than 10%.
Fund Sponsor's Website: BlackRock Credit Allocation Income Trust | BTZ
Effective Duration (as of 11/30/18) = 5.06 years
Get to know your bond fund: Duration | Vanguard
Holdings: 847 securities
Data Date of 12/18/18 Purchase:
Closing Market Price: $11.33
Closing Net Asset Value Per Share: $13.36
Discount: -15.19%
Date Date of 1/2/19 Purchase:
Closing Market Price: $11.28
Net Asset Value Per Share: $13.13
Discount: -14.09%
Average Discounts:
1 YR -12.75%
3 YR -11.02%
5 YR -11.66%
Sourced: BTZ BlackRock Credit Alloc Income- CEF Connect
Last SEC Filed Report for the Period Ending 7/31/18: BLACKROCK CREDIT ALLOCATION INCOME TRUST
Last Elimination: Sold 103+ at $13.4+ Roth IRA (5/8/17 Post)
Current Position: 100+ Shares
Maximum Position: 200 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $11.41
Dividend Yield at Total Cost Per Share (using current penny rate): 7.05%
Leveraged Bond CEF Risks: Scroll to General Risk Discussion for Leveraged Bond CEFs: Update For Closed End Fund Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha
BTZ BlackRock Credit Allocation Inc CEF Quote | Morningstar (rated 4 stars at time of purchase)
A. Added 20 BTZ at $11.35 and 30 at $11.16-Used Commission Free Trades:
Quote: BlackRock Credit Allocation Income Trust (BTZ)
Closing Price Yesterday: BTZ $11.70 +$0.02 +0.17%
BTZ is a leveraged closed end bond fund that has a significant weighting in junk rated securities:
Leverage will generally run at 30% to 33% and will consist of short term borrowings.
Last Discussed: Item # 1.C. Bought 50 BTZ at $11.58 (12/9/18 Post)
Dividends: Monthly at $.067 ($.804 per share annually)
BlackRock Credit Allocation Income Trust (BTZ) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 12/28/18
Dividend Reinvestment: Yes for as long as the discount to net asset value per share is greater than 10%.
Fund Sponsor's Website: BlackRock Credit Allocation Income Trust | BTZ
Effective Duration (as of 11/30/18) = 5.06 years
Get to know your bond fund: Duration | Vanguard
Holdings: 847 securities
Data Date of 12/18/18 Purchase:
Closing Market Price: $11.33
Closing Net Asset Value Per Share: $13.36
Discount: -15.19%
Date Date of 1/2/19 Purchase:
Closing Market Price: $11.28
Net Asset Value Per Share: $13.13
Discount: -14.09%
Average Discounts:
1 YR -12.75%
3 YR -11.02%
5 YR -11.66%
Sourced: BTZ BlackRock Credit Alloc Income- CEF Connect
Last SEC Filed Report for the Period Ending 7/31/18: BLACKROCK CREDIT ALLOCATION INCOME TRUST
Last Elimination: Sold 103+ at $13.4+ Roth IRA (5/8/17 Post)
Current Position: 100+ Shares
Maximum Position: 200 Shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Average Cost Per Share: $11.41
Dividend Yield at Total Cost Per Share (using current penny rate): 7.05%
Leveraged Bond CEF Risks: Scroll to General Risk Discussion for Leveraged Bond CEFs: Update For Closed End Fund Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha
BTZ BlackRock Credit Allocation Inc CEF Quote | Morningstar (rated 4 stars at time of purchase)
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.
I had two Consolidated Edison (ED)senior unsecured bonds mature yesterday, as noted in the snapshot contained in this post.
ReplyDeleteEarlier today, I look at a possible replacement this morning from the same issuer and bought 1 Consolidated Edison 2% SU bond maturing on 5/15/2021 paying 97.086. Before making that purchase, I looked at the Treasury yields for bonds maturing on the same day. For a 1 bond purchase, the YTM was 2.544. The best yields for treasuries maturing all around that date was close to 2.55% or barely above the last investment rate for the 6 month T Bill auction.
The ED 5/15/21 bond at my total cost had a yield to maturity of 3.266%. The investment grade credit ratings from Moody's and S & P are at the same level: Baa1/BBB+.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C653311&symbol=ED4363009
The yield differential with a treasury was sufficient for me, not looking in isolation at a 1 bond purchase, but on a total portfolio average weighted yield basis that follows strict rules on each addition creating that average weighted yield.
Why not buy the common stock which I have owned in the past.
Consolidated Edison Inc.
https://www.marketwatch.com/investing/stock/ed
I really do not pick up that much yield, with the current price generating only a 3.79% dividend yield. While I would have an equity interest in the business with the common stock, I also have the risk of that ownership. The common stock dividend can be cut or eliminated while the interest payments on SU debt have to be made for as long as the company wants to remain out of bankruptcy and would have priority over less junior securities in the BK.
Importantly, the common stock does not promise a total return. The 2021 SU bond has a promise to pay par value at maturity and interest in a timely manner. The total return can be calculated to the penny, whereas the common stock may be worth substantially less (or more) in May 2021, making a computation of a total return speculative.
The question then becomes what is the objective. My objective is preservation of capital with an income component. Someone younger and in a capital accumulation phase would have different objectives and needs that will not be realized over time buying 2% to 4% YTM senior unsecured debt.
Financials are doing better today after GS and BAC earnings reports.
Bank of America Corp.
$28.25 $1.695 $6.38%
Last Updated: Jan 16, 2019 at 10:21 a.m. EST
https://www.marketwatch.com/investing/stock/bac
Goldman Sachs Group Inc.
$191.02 +$11.11 +6.18%
https://www.marketwatch.com/investing/stock/gs
There is some trickle down to regional banks due to improving sentiment in the banking sector:
SPDR S&P Regional Banking ETF
$51.34 +$0.78 +1.54%
Last Updated: Jan 16, 2019 at 10:23 a.m. EST
https://www.marketwatch.com/investing/fund/kre
Hello SG,
ReplyDeleteI think your foray into the past is very interesting and someday when i have time, I may give it a shot!! I was wondering if there is is some way to quantify the risks of recession; I may have missed your remarks on this; i have been following Brexit, Germany's economy and QT, plus the govt shutdown, China; the " comments" on TV say no recession, but it looks like the quandary over Brexit and how business will handle this and the waiting, plus trade, Europe slowing and now Jamie Dimon"s remarks, make it look to me like a world wide recession is possible.
I know some people say China is just in a slow growth period and not anywhere near a recession.
thanks
https://www.businessinsider.com/government-shutdown-trump-democrats-standoff-damaging-us-economy-2019-1?utm_source=notification&utm_medium=referral
G: There was a discussion about recession odds in this week's Roundtable in Barron's.
DeleteThe general consensus is that one can be avoided this year; and that is my view which is subject to change based on future developments.
My opinion is based on a judgment formed after reviewing an array of economic data.
4% nominal GDP growth this year is a reasonable estimate with 2% real GDP growth. That assumes no major damage to economy caused by avoidable events that are created as a matter of policy or political ideology.
I am anticipating a slowdown in earnings growth in 2019 compared to last year.
Certain events, such as the ones you mention, could cause one to develop later this year.
I do not think you can handicap the odds with any certainty. If the tariff war heats back up and the government shutdown extends into February, then the odds will go up substantially and there would probably be a meaningful risk off move in the stock market.
On the other hand, a resolution of the trade disputes on terms viewed as favorable to the U.S., and a deal to end the shutdown before month's end, could cause a major stock rally.
Based on what I know at the current moment in time, my guess is that the odds of a recession this year are around 10% to 20% which would rise significantly with material risks actually happening.
The problem is that anyone who believes they know what will happen is at some stage of self delusion.
The Barron's Roundtable panelist also place far more emphasis on the FED's "quantitative tightening" than I do. The concern is the FED is reducing its bloated balance sheet by about $50B per month. So far, that supply is being absorbed and there is no shortage of money floating around.
https://www.brookings.edu/blog/up-front/2018/12/03/quantitative-easing-lowered-interest-rates-why-isnt-quantitative-tightening-lifting-them-more/
I do not see BREXIT causing a major problem yet. There is a chance that something will be worked out.
The yield curve still points to a likely recession within 12 to 18 months with the next move by the Fed being a rate decrease.
People's United Financial Inc. (PBCT) reported better than expected earnings after the close and the shares are up .94 in after hours trading:
ReplyDelete$16.94 +$0.94 +5.88%
Last Updated: Jan 17, 2019 6:14 p.m. EST
After Hours Volume: 100.2K
https://www.marketwatch.com/investing/stock/pbct
Earnings Report:
https://www.prnewswire.com/news-releases/peoples-united-financial-reports-fourth-quarter-net-income-of-132-9-million-or-0-35-per-common-share-300780338.html
I discussed buying 100 shares in this post:
Wednesday, November 28, 2018
Item 3.A. Bought 100 PBCT at $15.65
SPX did manage to close over 2,632 yesterday without any difficulty and is gaining in pre-market trading.
ReplyDeleteI am surprised that this hurdle was cleared so easily since the macro events have turned slightly more negative IMO including the Brexit issue and the government shutdown.
It is irresponsible for any President to shutdown the government unless the opposition party agrees to the President's demands.
And what if the next Democrat President shuts the government down unless the republicans agree to Medicare for all or far stricter environmental rules. What would the Trumpsters say to that I wonder?
A democracy can not be governed in such a manner.
The republican party owns Trump. There is no meaningful daylight between republican politicians and Trump. If a republican politician was inclined to mildly criticize him or his policies, the option was to make those comments and then decline to run for reelection (e.g. Corker and Flake).
Possibly a few will run to cover and find their courage with more hard evidence of impeachable offenses and a potential loss in 2020 to a Democrat. That list would include republican Senators Cory Scott (Colorado), Susan Collins (Maine) and Thom Tillis (North Carolina) and a few GOP House members who barely won in 2018. Carolina) Tillis won by 48.82% to 47.26% against Kay Hagan in 2014. Tillis is a far right politician in a state that is more moderate.
https://www.federalreserve.gov/releases/housedebt/default.htm
ReplyDeletehello South Gent, I see above your very powerful argument for consumer consumption with less debt.
In looking at the data carefully. The financial obligation ratio since 2015 each quarter by quarter, while consumer disposable income ratio is actually increased a little bit or bounced around if I'm reading this correctly. It appears that the mortgage disposable personal income ratio, has decreased a little bit.
I guess what I'm really asking is how to clearly read this information. It seems like a powerful force for a rising stock market since as you said before that the heavy lifting is done by home buying and then consumer spending.
if you could explain the data a little bit it would be helpful.
My other question would be whether you consider this a leading indicator or a coincident indicator or even lagging.
Thank you, any help would be appreciated
G: I do not consider it to be an argument but a statement of fact that I have been making for over 6 years now.
DeleteThe major decline in debt service payments as a percentage of disposable income is largely based on mortgage refinancings at historically low levels. The data on those refinancings and the rates support the FED's calculations.
The problem with the data, which I have pointed out in the past, is that it does not segregate out the Indebted Class from what I call the Saving Class. Over the past ten years, the Census data, supported by private company data collections during the intervening periods, show that about 1/3rd of households own their own homes free and clear of a mortgage. Those households are concentrated among those over 65 who generally spend less on consumer items.
The economy needs is more supported by the indebted class and it is their balance sheet improvement that has lowered these financial service ratios.
Since we do not have a chart that excludes the Saving Class, we can only guess what the chart for the Indebted looks like without the mortgage debt free households who probably have little or no other debt either.
I can only say that a chart showing debt service as a percentage of disposable income, excluding the Saving Class altogether, would have looked extremely ominous prior to 2008. And, that would have been true also for the chart showing household debt as a percentage of disposable income which peaked at close to 130%. I can only guess, but my estimate is that ratio would have been over 200% in 2007 excluding the Saving Class.
Another important caveat is that student debt and debt service payments for the youngsters is a major headwind.
There are several prior discussions on this topic that are linked under the title "DSR Ratio" (right side of blog). DSR stands for Debt Service Ratio. Most of the discussions are in comments left at SeekingAlpha to articles. Those comments are only accessible if you have subscription to get behind the pay wall.
DeleteOne of the earliest discussions here can be found in a 9/7/2011 blog:
Item # 1 https://tennesseeindependent.blogspot.com/2011/09/ism-services-indexswiss-francfor-and.html
As mortgage interest rates continued to decline and refinancings accelerated, I started to emphasize the link to the mortgage refinancing tsunami and to note the growing importance as a long term secular driver for the U.S. economy.
I frequently discussed in many comments relating to the DSR both here and at SA the HARP program which was helping households who were under water to refinance. In that connection, I referred to reports like this one:
https://www.fhfa.gov/AboutUs/Reports/ReportDocuments/RefinanceReport_1Q2016.pdf
The stock market's jump today is based on news reports that China has made a substantive offer to reduce the trade imbalance.
ReplyDeletehttps://www.bloomberg.com/news/articles/2019-01-18/china-is-said-to-offer-path-to-eliminate-u-s-trade-imbalance?srnd=premium
https://www.cnbc.com/2019/01/18/china-to-offer-path-to-eliminate-trade-imbalance-with-us-report.html
Citizens Financial Group (CFG) is another regional bank that beat earnings expectations. I mentioned that one in my last post.
ReplyDeleteDiscussion of Report:
https://seekingalpha.com/news/3424233-citizens-financial-plus-4_7-percent-q4-beats-boosts-rotce-goal
Report:
https://investor.citizensbank.com/about-us/newsroom/latest-news/2018/2018-01-19-113118317.aspx
Citizens Financial Group $35.20 +$1.29 +3.81%
Last Updated: Jan 18, 2019 at 3:22 p.m. EST
https://www.marketwatch.com/investing/stock/cfg
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/01/observations-and-sample-of-recent_20.html