Observations and Sample of Recent Trades: APLE, BHK, BHRPRD, GNL, NBB, NWH.UN:CA

Economy: 

SPX cleared the 2,632 hurdle with gusto last Thursday and Friday. 

Better than expected earnings from large financial institutions set a more positive tone prior to Friday when there was a news report that China had made a substantive offer to reduce its trade imbalance: China Offers a Path to Eliminate US Trade Imbalance: Sources - Bloomberg  

China has been offering throughout the negotiations to increase its purchases. The difference in this latest offer appears to be a promise to eliminate the trade imbalance altogether by 2024. If that proposal was in fact made, the question then becomes how to enforce it.     

There is a lot of hand wringing about the FED reducing its excessively bloated balance sheet by $50B per month. The bond market is not concerned as the new supply has been absorbed and intermediate and longer term interest rates have come down and remain benign for the real economy. 

Quantitative easing lowered interest rates. Why isn’t quantitative tightening lifting them more? Short term rates have gone up due to the FED raising the FF rate from zero to the current 2.25 to 2.5% over the time period reflected in the preceding chart. 

December home sales and price report for California (existing single family home sales declined 2.4% from November and were down 11.6% Y-O-Y) The statewide median home price was $557,600 in December. When median family households can not afford a median price home, the remedy is for prices to decline).  

In my area, this is what you can buy by hitting the ask price, for $589K: 4 Bedrooms, 3 Baths, 3150 square feet, $3,192 property tax in 2017 The actual negotiated price would be lower. 

Here is one listed for $415K: 6601 N Creekwood Dr, Brentwood, TN 37027 

The bonds issued by the City of Brentwood  and Tennessee have AAA credit ratings. 

Brentwood is located in Williamson County which also has a AAA credit rating as does the county seat Franklin, Tn. 

So it is possible to have low property taxes and the highest credit ratings possible.  

This is a picture of the clan's home near Nunnelly Tennessee in 1900 which would be cheaper if it was still standing:

I am not sure whether the house fell or burned down. My grandfather is second from left and the clan's first stock investor is far left. Fortunately, my grandfather elected to leave Nunnelly during the Great Depression and move the tribe to Nashville based in large part on a realization that 100 years in that area had not led to prosperity. 
  

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Markets and Market Commentary: 

Head of world’s largest asset manager says stock market has hit a bottom — but this would make it surge - MarketWatch

Why mortgage lending at Wells Fargo, Chase and Citi plunged - MarketWatch

What’s Next for the Stock Market and the Economy - Barron's (subscription publication) The panelists were concerned about what they call quantitative tightening, though the real world evidence does not support those concerns.  

Stock Market and Economic Themes to Watch, According to Investment Pros - Barron's

Fed’s Beige Book says contacts in ‘many’ districts have become less optimistic - MarketWatch

Druckenmiller pushes into cloud stocks, saying they’re disruptive and defensive at the same time - MarketWatch

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Trump:

This sounds like something Putin asked Donald to do for him: Trump Discussed Pulling U.S. From NATO, Aides Say Amid New Concerns Over Russia

‘They screwed this whole thing up’: Inside the attempt to derail Trump’s erratic Syria withdrawal

Analysis: Why the FBI might’ve thought Trump could be working for Russia

F.B.I. Opened Inquiry Into Whether Trump Was Secretly Working on Behalf of Russia; Trump Laces Into F.B.I. Over Inquiry Into Whether He Aided Russia, making a series of false claims-The New York Times

Revelations about Manafort’s 2016 interactions with Russian associate show special counsel’s intense focus on Russia contacts - The Washington Post

Trump’s Efforts to Hide Details of Putin Talks May Set Up Fight With Congress - The New York Times; 

Trump has concealed details of his face-to-face encounters with Putin from senior officials in administration - The Washington Post

Sanders Described FBI Probe Critics as Losers Just another hypocrite. 

Here are 18 reasons Trump could be a Russian asset - The Washington Post (opinion article by former republican Max Boot)

Trump administration calling nearly 50,000 back to work, unpaid, as shutdown drags on - The Washington Post

McConnell (R) blocks bill to reopen most of government

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1. Equity REIT Common and Preferred Stock Basket Strategy:

A. Bought 50 BHRPRD at $20.02: 

Quote: Braemar Hotels & Resorts Inc. 8.25% Preferred Series D Stock

Closing Price Last Friday: BHR-PD $23.74 +$0.36 +1.55% 

Issuer:  Braemar Hotels & Resorts Inc. (BHR)

Website: Real Estate Investment Trust specializing in full service luxury hotels and resorts 

Portfolio Map: Braemar Hotels & Resorts Properties 

SEC Filings

Management: External

BHRPRD is a recently issued equity preferred stock that had slid 16.5% from the $25 IPO price when I made this purchase. The IPO was in mid-November. Braemar Hotels & Resorts Prices Public Offering Of Preferred Stock  

Last Ex Dividend Date: 12/28/18 (shortly after purchase on 12/21/18)

This was the first dividend payment but will be a pro-rata for the number of days this stock was outstanding in the last quarter. The pro rate amount was $0.234896 per share. Press Release

Dividend Yield at a TC of $20.02 = 10.3%

Current and Maximum Position: 50 shares (viewed as risky) 

Description of Preferred Stock

Prospectus 

Par Value= $25
Classification: Equity Preferred Stock
Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks
Capital Structure Placement: Senior only to common stock
Stopper Clause: Yes
Dividend: Quarterly, Cumulative and Non-Qualified
Issuer Optional Call: On or after 11/20/23

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

Braemar Hotels & Resorts Reports Third Quarter 2018 Results
10-Q for the Q/E 9/30/18 

SEC Filed Investor Presentation

10-Q for the Q/E 9/30/18 (debt discussed at pages 19-20-mortgage loans priced at spreads to Libor)  

Recent News: 

Braemar Announces Closing Of The Ritz-Carlton Lake Tahoe Acquisition Utilizing An Enhanced Return Funding Program With Ashford Inc.

Tentative Trading Plan: Given the price paid for the shares and the yield, I am inclined to hold onto this lot until I become more concerned about credit and interest rate risks.  

B. Bought 100 NWH.UN:CA at C$9.67  (IB C$1 commission): 

Quote: Northwest Healthcare Properties Real Estate Investment Trust (Canada: Toronto)

Closing Price Last Friday: NWH-UN.TO C$10.54 +C$0.07 +0.67% 

U.S. Grey Market: NWHUF 

Website: NorthWest Healthcare Properties

"The REIT provides investors with access to a portfolio of high quality international healthcare real estate infrastructure comprised of interests in a diversified portfolio of 153 income-producing properties and 10.8 million square feet of gross leasable area located throughout major markets in Canada, Brazil, Europe, Australia and New Zealand. The REIT's portfolio of medical office buildings, clinics, and hospitals is characterized by long term indexed leases and stable occupancies." 

Property Map

Dividend (more appropriately called "distributions"): Monthly at C$.06667 per unit or C$.8 annually)

Distributions are normally made mid-month with the ex distribution date late in the prior month.  

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

NorthWest Healthcare Properties Real Estate Investment Trust Releases Strong Third Quarter 2018 Results and Continued Execution on Strategic Priorities

Financial Information for the Quarter:

NorthWest Healthcare Properties REIT Announces Successful Completion of $125 Million Offering of Convertible Debentures (12/20/18)

Average Total Cost Per Share: C$10.03

Dividend Yield at Total Cost: 7.98%

Current Position: 500 units 

Maximum Position: 1000 units

Purchase Restriction: None 

Last Buy Discussion: Item #1.A (3/12/18 Post);

Last Sell Discussion: Item # 1.B. Sold 100 NWHUF at US$8.79  (8/21/17 Post)

Realized Gains to Date: U.S.$713.29

When buying and selling shares priced in CADs, the IRS does not want the broker to report gains and losses in Canadian dollars or the value of the dividends either. So all of those values have to be converted into USDs for tax reporting purposes. To accomplish that task, a USD value has to be established for every share when purchased or sold. The broker does that computation. For a buyer of NWHUF, which is the same ordinary share but priced in USDs, the conversion is not necessary since the prices were never in CADs. 

The largest gain was on a 1000 share lot: Item # 1. A. Sold 1000 at C$10.68 (/7/31/17)(profit snapshot = US$606.31)

I would emphasize again that "distributions" paid by Canadian REITs, which are not taxed as income in Canada, will be taxed when paid into a U.S. citizens retirement account in contrast to dividends paid by Canadian corporations whose income is taxed at the corporate level. Since a tax withheld from a dividend payment made into a U.S. retirement account is not recoverable as a credit or deduction, I would never own a Canadian REIT in my Roth IRA. I have been able to recover foreign dividend taxes as credits off my federal income taxes when those payments are made into a taxable account.  

C. Added 10 GNL at $17.28-Used Commission Free Trade: 

Quote: Global Net Lease (GNL)

Closing Price Last Friday: GNL $20.21 -$0.21 -1.03% 

Last Discussed: Item # 1.B. (12/19/18 Post) I have nothing substantively to add to that recent post. I discussed the last earnings report in that post:  

Website: Global Net Lease

GNL SEC Filings; 2017 Annual Report

Dividend: Monthly at $.1775 per share  ($2.13 annually)

Global Net Lease, Inc. (GNL) Dividend Date & History - Nasdaq

Last Ex Dividend Date: 1/14/19 (all shares participated) 

Average Total Cost Per Share = $19.63

Dividend Yield at Average Total Cost = 10.85%

Dividend Reinvestment: Yes starting with the last monthly dividend payment

Current Position: 70+ shares

I may elect to sell the highest cost 50 share lot (bought at $20.13) and restart a buying program at less than than $17.28. I am in no hurry to sell that 50 shares and may wait until the price approaches or exceeds $21. 

Maximum Position: 150 shares 

Purchase Restriction: Small Ball Rule 

Last Earnings Report: Global Net Lease Announces Operating Results For Third Quarter 2018

D. Bought 10 APLE at $13.88-Used Commission Free Trade: 

Quote: Apple Hospitality REIT Inc. (APLE)

Closing Price Last Friday: APLE $15.77 +$0.05 +0.32% 

Website: Apple Hospitality REIT
Hotel Map: Hotel Map
APLE SEC Filings

"Apple Hospitality REIT, Inc. (NYSE: APLE) owns one of the largest portfolios of upscale, select-service hotels in the United States. Our national, geographically diverse portfolio consists of 241 Hilton and Marriott branded hotels located across 34 states, serving some of the country’s top markets for business and leisure travelers." Corporate Overview - Apple Hospitality REIT

Last Substantive Discussion: Item # 1.B. (12/5/18 Post) I discussed the third quarter earnings report in that post and have nothing to add to that discussion. 

Last Earnings Report: Apple Hospitality REIT Reports Results of Operations for Third Quarter 2018

Dividend: Monthly at $.1 per share

Last Ex Dividend Date:  12/31/18

Apple Hospitality REIT, Inc. (APLE) Dividend Date & History - Nasdaq

Dividend Reinvestment: Yes. 

Average Cost Per Share: $17.18

Dividend Yield at Average Total Cost: 6.98%

APLE 1 Year Chart: Bear Trend Starting in January 2018 

Maximum Position This Account: 120 shares + Shares purchased with dividends (10 shares left)

Current Position This Account: 116+

Trading Restriction: Small Ball Rule 

Sell Discussions: 

Item # 5.A. Sold 50 APLE at $19.6 (12/18/17 Post)

Item # 6.B. Sold Highest Cost Lot in Schwab at $19.22 (10/19/17 Post)

Item 2.B.  Sold 100 APLE at $19.43(5/25/17 Post)

2. Short Term Bond/CD Ladder Basket Strategy: 

Purchases = $5K

A.  Bought 1 Southern Co 2.15% SU Bond Maturing on 9/1/19: 

I now own 3 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: 

Fitch Rates Southern Company's Floating Rate Senior Notes 'BBB+'; Ratings on Negative Watch (8/15/18)

Bought at a Total Cost of 99.45
YTM at TC Then at 3.019%
Current Yield at TC = 2.1619%

B. Bought 1 Dominion Gas 2.5% SU Bond Maturing on 12/15/19: 

I now own 2 bonds. 

FINRA Page: FINRA Page: Bond Detail (prospectus linked)

Issuer: Wholly owned subsidiary of Dominion Energy Inc. (D)
D Analyst Estimates
Dominion Energy SEC Filings
10-Q for the Q/E 9/30/18

10-K Dominion Energy 2017 Annual Report (Dominion Gas is consolidated with Dominion Energy but the annual report does break out its results separately in the Annual Report starting at page 84) 

The credit ratings for Dominion Energy Gas are higher than the holding company Dominion Energy. That is also the case with Virginia Electric Power.

Credit Ratings: 

Fitch Affirms Dominion Energy and Subsidiaries; Outlook Stable (10/5/18)(Dominion Gas reaffirmed at A-, higher than its parent's rating of BBB+) 

Bought at a Total Cost of 99.52
YTM at TC Then at 3.026%
Current Yield at TC = 2.5121%  

C. Bought 1 BP Capital 2.315% SU Maturing on 2/13/20: 

FINRA Page: Bond Detail (prospectus linked)

Issuer: Wholly owned subsidiary of BP PLC who guarantees the notes 

BP Analyst Estimates - BP PLC ADR

Credit Ratings: 

Moody's changes BP's outlook to stable, affirms A1 ratings - Moody's (10/8/18)
Fitch Affirms BP at 'A'; Outlook Stable (5/24/18)

Bought at a Total Cost of 99.252
YTM at TC then at 3.017%
Current Yield at TC = 2.333%

At the time of purchase, I could have bought one 1.375% treasury maturing  on 2/15/20 at a 2.584% YTM and a 1.39% current yield: 

D. Bought 2 Smucker 2.5% SU Maturing on 3/15/20:

FINRA Page: Bond Detail (prospectus not linked)

Prospectus

Issuer: J.M. Smucker Co. (SJM)
SJM Analyst Estimates

The J. M. Smucker Company Announces Fiscal 2019 Second Quarter Results

The J. M. Smucker Company Completes the Divestiture of its U.S. Baking Business (SJM sold for $370M its U.S. brands Martha White, Pillsbury, Hungry Jack, White Lilly and Jim Dandy)

Smucker Brands - The J.M. Smucker Company

Credit Ratings: 

Bought at a Total Cost of 99.27
YTM at TC Then at 3.139%
Current Yield at TC = 2.5184% 

3. Eliminations: 

A. Sold 100 BHK at $12.74-Used Commission Free Trade: 

Quote: BlackRock Core Bond Trust (BHK)

Closing Price Last Friday: BHK $12.62 -$0.09 -0.71% 

Profit Snapshot = +$63

Item # 1.A. Bought 100 BHK at $12.11 (12/12/18 Post)(contains links to prior buy and sell discussions)

BHK Trading Profits = $381.68

After the most recent bond rally, I thought that I needed to sell something so I chose two recently purchased leveraged bond CEFs-BHK and NBB discussed in Item 5.B. I mentioned selling those CEFs in a recent comment. 

I am struggling with the risks of  leveraged CEFs with duration risk given the yields compared to safer individual bond purchases. 

I would emphasize that an open end bond does not promise to pay your principal back on a date certain. Even a term bond fund does not make that commitment.    

And, there are events which could change the herd's consensus about the future course of interest rates and whether the FED will in fact remain on hold throughout 2019.  

Data on Date of Purchase (11/20/18):
Closing Market Price: $12.11
Closing Net Asset Value Per Share: $13.43
Discount: -9.83%

Data on Date of Elimination (1/8/19):
Closing Market Price: $12.67
Closing Net Asset Value Per Share: $ 13.63
Discount: -7.04%


Sourced: BHK BlackRock Core Bond, closed-end fund CEF Connect

I received one monthly dividend. 

Scroll to General Risk Discussion for Leverage Closed End Bond Funds: Update For Closed End Fund Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha

Fund Sponsor Website: Core Bond Trust | BHK

Dividend: Monthly at $.065 per share ($.78 annually)

Dividend Yield at $12.11 = 6.441%

Dividend Yield at $12.74 = 6.12%

Last Ex Dividend Date: Today 12/12/18 (after purchase)

B. Sold 40+NBB at $19.84-Used Commission Free Trade: 

Quote: NBB - Nuveen Build America Bond Fund

Closing Price Last Friday: NBB $19.72 -$0.05 -0.25% 

Profit Snapshot: +$35.33

Item # 1.B. Bought 30 NBB at $19.03 and 10 at $18.76 (12/2/18 Post) 

Data Date of 30 Share Trade (11/13/18):
Net Asset Value Per Share: $20.75
Market Price Per Share: $19.04
Discount: -8.24%

Data Date of 10 Share Trade (11/21/18):
Net Asset Value Per Share = $20.73
Market Price = $18.71

Discount: -9.74%

Data Date of Elimination (1/8/19): 
Net Asset Value Per Share = $20.83
Market Price: $19.85
Discount: -4.7%

Sourced: NBB Nuveen Build America Bond- CEF Connect

Last SEC Filed Shareholder Report: Nuveen Build America Bond Fund for the period ending 6/30/18

Credit Quality: about 87% in A or better

Average Effective Duration: 10.09 years as of 10/31/18

For a bond fund with that duration, the rule of thumb is that a 1% rise in interest rates would cause about a 10% loss in value. Similarly, a 1% decline would result in a 10% rise in value. Get to know your bond fund: Duration | Vanguard 

The primary risk is interest rate risk due to the long duration. A 10% loss in value would wipe out almost two years of dividend payments.

NBB Trading Gains:  $516.12 (see prior trading gain snapshots at  Item # 1.B

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.