Observations and Sample of Recent Trades: ADX, GDO, GOOD, PGX

Economy: 

More evidence of an ongoing slowdown was released after my last post. 

End of the Trump bump? ISM manufacturing joins host of indicators that are at lowest level since election - MarketWatch; Manufacturers grow at slowest pace since Trump’s election, ISM finds - MarketWatch The ISM manufacturing numbers are still positive however.

Limiting state and local tax deductions to hurt 11 million taxpayers, government report shows - MarketWatch 

In the coming years, more middle class taxpayers will be hurt by the tax increase legerdemain engineered by republicans that changed how inflation adjustments to brackets and other items are calculated in a manner detrimental to taxpayers. IRS inflation adjustments will diminish tax cuts | Accounting Today; The Way Tax Reform Changed the Inflation Calculation - TaxAct Blog 

While the tax cuts will be nominal for most households that currently benefit from the GOP's tax reform legislation, the GOP takes away that nominal benefit over time through this kind of subterfuge. Trump’s fake middle-class tax cuts are dead - Vox  

One recent estimate is that close to 40% of middle income households will fall near or below poverty level during their retirement years. 

Downward_Mobility_in_Retirement .pdf

Chicago Fed National Activity Index (CFNAI)-Federal Reserve Bank of Chicago  ("The Chicago Fed National Activity Index (CFNAI) was –0.43 in January, down from +0.05 in December. a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend.") 

Trade Rep Lighthizer says deal must not be just China purchases but enforcement  

U.S. trade chief sees long-term China challenges, continued tariff threat | Reuters

Larry Kudlow says US-China trade deal talks made 'fantastic' progress last week

Powell warns of headwinds, says Fed prepared to 'adjust' balance sheet

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Markets and Market Commentary: 

Fed's Kaplan says it will take time to see how much U.S. economy is slowing | Reuters I discussed this issue in my last post. 

This Stock Market Rally Has Everything, Except Investors - The New York Times (Companies bought $240B of their own shares last quarter. Goldman Sachs estimates that $700B in cash will be used this year to buyback shares)

Warren Buffett says 'prices are sky-high' in Berkshire annual letter Warren may not want to do another Kraft-Heinz type deal with an overrated hedge fund. I would note that Buffett's partner in the Kraft deal, an outfit called 3G Capital, sold 20.6 million Kraft shares at $59.85 last August. Kraft Heinz shares fall after 3G Capital trims stake

Buffett Berkshire Hathaway 'overpaid' for Kraft Hardly a news item. 

Inflation would accelerate if Chinese tariffs went to 25%, new Fed study finds - MarketWatch That is another obvious point. 

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Trump: 

Janet Yellen: Trump has 'lack of understanding' of Fed and economy

Demagogue Don thought that the following comment from Spike Lee was racist: “The 2020 presidential election is around the corner. Let’s all mobilize. Let’s all be on the right side of history. Make the moral choice between love versus hate.”

The stock market did not react, nor should it have to Cohen's testimony. Michael Cohen Accuses Trump of Expansive Pattern of Lies and Criminality Cohen's testimony will not change anyone's opinions about Trump.  

The fact that Trump is a thoroughly repulsive person, a liar, a racist and a con artist is not news to those who have not been brainwashed and conditioned to ignore accurate information. 

The Trumpsters are just incensed that Cohen was even allowed to testify before Congress about Trump and apoplectic that Cohen was scheduled to testify on the day of Donald's photo op summit with Kim. Trump and Kim abruptly cut short summit after failing to reach nuclear deal; North Korea rejects Donald Trump's explanation of Kim Jong Un summit collapse, says no demand for "entirety" of sanctions to lift - CBS News 

That summit occurred even though Trump had no path to resolving the standoff, believing instead that he could charm Kim into giving up his nuclear arsenal. 

Kim did receive in the prior summit a cessation of U.S. military exercises with the South Koreans and wanted to see how much he could get from Donald without actually doing anything that was strategically important and verifiable.  

Cohen did not produce documents to corroborate key parts of his testimony, though there were several checks produced showing Cohen being reimbursed for the Stormy Daniels hush money payment that directly implicates Donald in a campaign reporting violation.  

Cohen testified that he was present when Roger Stone called and informed Trump that Stone had just talked to Julian Assange about the email dump about to occur. There is no publicly known corroboration to that Cohen testimony. 

If true, and that is a big if, it would suggest that Trump was using Stone as the go between with Wikileaks who was the Russian funnel for the stolen emails that were released shortly before the election in Russia's effort to swing the election to Trump. 

The main question for the Stock Jocks is not what happens to Donald.   

The issue for them is whether Donald will take down the republican party in 2020, causing the GOP to lose the presidency, the Senate and the House. Currently, that outcome is not being priced into stock prices. 

Then, if that in fact happens, there would be nothing stopping the Democrats from passing their own "tax reform" package in the same manner as Mitch McConnell used to bypass the Senate's filibuster rules. The movers and shakers in the stock market will not like the result. 

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1. Eliminations and Pares:

A. Eliminated PGX-Commission Free for Schwab Customers:

Quote: PGX Fund - Invesco Preferred ETF Overview
Sponsor's Website: Invesco
Dividends: Monthly

Includes Prior Elimination

Profit Snapshot: $45.46

Last Sell Discussions: Item # 2  Sold 100 PGX at $13.65 (9/14/13 Post); Item # 5 Sold: 200 PGX at $14.38 (11/12/2010) (note the prices which highlights the problem)

Closing Price Yesterday: PGX $14.43 +$0.07 +0.49% 

I view this ETF as a temporary repository of cash earning almost nothing in my Schwab account. 

B. Eliminated GDO-Sold 224+ at $16.47-Used Commission Free Trade:

Quote: Western Asset Global Corp Defined Opportunity Fund Inc.  (GDO)- A leveraged global closed end bond fund

Closing Price Yesterday: GDO $16.65 +$0.02 +$0.12% 

Profit Snapshot: +$79.28

Note the disallowance of a $.33 loss triggered by selling the shares bought with the last monthly dividend payment at loss which is just another example of a ridiculous tax rule.

Recent Buy Discussions (all purchases were commission free):  Item # 4.A. Bought 10 GDO at $14.83  (1/23/19 Post); Item # 1.B. Bought 15 GDO at $15.17 and 15 at $14.99(12/12/18 Post); Item # 4 Bought 10 GDO at $15.44 and 10 at $15.29 (11/11/18 Post);  Item # 1.A. Bought 15 GDO at $15.89 and 10 at $15.64 (10/21/18 Post); Item # 1.B. Added 15 GDO at $16.25  (9/30/18 Post); Item # 1.C. Bought 15 GDO at $16.27-Used Fidelity Commission Free Trade (9/16/18 Post); Item # 3.A. Bought 10 GDO at $16.39 (8/22/19 Post).

This series of average downs was caused by a re-entry price that turned out to be too high based on subsequent events. Item # 2 Bought 50 GDO at $17.01 and 10 at $16.82-Used Commission Free Trades (2/22/18 Post) Those lots were sold at a loss.

Sponsor's Website: WA Global Corporate Defined Opportunity Fund Inc. | Legg Mason

Data Date of Sell (12/19/19):
Closing Net Asset Value Per Share = $17.59
Closing Market Price = $16.54
Discount: -5.97%
Average Discounts:
1 YR  -9.17%
3 YR  -7.9%
5 YR  -9.1%

Sourced: GDO- CEF Connect

One trading guideline is to consider buying when the discount is greater than those averages and to consider selling when the discount is lower, provided the shares can be sold profitably and several dividends were received.

SEC Filed Shareholder Report for the Period Ending 9/30/18

Dividends: Monthly at $.101 per share (currently)

Legg Mason Partners Fund Advisor, LLC Announces Distributions for the Months of December 2018, January and February 2019

It is not unusual for me to sell some GDO shares at a loss when eliminating the position:

2017 Fidelity Elimination +$90.97

2012 Fidelity Elimination +$310.24

Other Round-Trips:

2017 Taxable-Schwab Elimination:

2017 GDO 287+ Shares $75.19

IRA Accounts:

2011 Roth IRA 250 shares +$65.78

2013 ROTH IRA 120 Shares +$340.33

Rationale: Basically, I did not like the steep decline after I decided to restart a position. The recent uptrend is due to a decline in interest rates and a removal for now the concern about rising short term borrowing costs.

Overall, I decided that I disliked an unleveraged stock CEF less than a leveraged bond CEF and used part of the proceeds to buy 100 ADX discussed below. 

C. Pared GOOD First by Eliminating Position in Schwab Account:

History this Account:

Quote: Gladstone Commercial Corp. (GOOD)

Closing Price Last Friday: GOOD $20.43 -$0.21 -1.02% 

Profit Snapshot: +$93.59

Item # 3.A. Bought 50 GOOD at $19.4-Used Schwab Commission Free Trade  (8/8/2018)

My highest cost lot was in this account. After I decided to sell it, there was no reason to keep the shares bought with the dividends so they were sold as well.

5 Year Chart as of 2/19/19 (date of sell)

Dividends: Monthly at $.125

Gladstone Commercial Corporation Announces Monthly Cash Distributions for January, February and March 2019

Sold on monthly ex dividend date (2/19): Gladstone Commercial Corporation (GOOD) Dividend Date & History - Nasdaq

Next Ex Dividend Date: 3/19/19

Last Buy Discussions: Item # 4.B. Added 10 GOOD at $17.7-Used Commission Free Trade (1/9/19 Post); Item # 4.A. Bought 10 GOOD at $18.35 and 10 at $18.15-Used Fidelity Commission Free Trades (10/24/18 Post) I still own those shares

D. Sold Highest Cost GOOD Lot in Fidelity Account-30 Shares at $21.36 (used commission free trade):

Quote: Gladstone Commercial Corp. (GOOD)

Profit Snapshot: +$71.74

GOOD Position Before Pare: Average Cost per share = $18.42

GOOD Position After Pare: Average Cost per share = $17.9

Website: Gladstone Commercial | Monthly Dividend REIT

Dividends: Monthly at $.125 per share ($1.5 annually)

Dividend Yield at Remaining TC per share = 8.38%

Last Ex Dividend Date: 2/19/18
Next Ex Dividend Date: 3/19/18

Gladstone Commercial Corporation (GOOD) Dividend Date & History - Nasdaq

Purchase Restriction: Small Ball Rule

Lowest Purchase Price in Chain (excluding shares purchased with dividends) = $17.7 (10 shares bought on 12/19/18: Item # 4.B)

Dividend Reinvestment: Stopped with the last dividend based on price. Will consider restarting when the price is less than $18. 

Current Position this Account: 31+ shares

Maximum Position: 100 shares

Last Earnings Report:

Gladstone Commercial Corporation Reports Results for the Fourth Quarter and Year Ended December 31, 2018

Gladstone Commercial Corporation (GOOD) CEO David Gladstone on Q4 2018 Results - Earnings Call Transcript | Seeking Alpha

Gladstone Commercial Corporation 2018 Q4 - Results - Earnings Call Slides - Gladstone Commercial Corporation (NASDAQ:GOOD) | Seeking Alpha

2. Short Term Bond/CD Ladder Basket Strategy:  

A. Bought 3 Six Month Treasury Bills at Auction:  

IR= 2.527%

Auction Results:

B. Bought 1 Treasury 1% Coupon Maturing on 9/30/19:
YTM = 2.49%

I now own 8 treasuries that mature on 9/30/19. This is the only one with a 1% coupon. I view the YTM as the only important yield number when the maturity is relatively close. 

3. Intermediate Term Bond/CD Ladder Basket Strategy:

I exchanged 2 Vodafone 2022 SU bonds for 2 W. P. Carey 2026 bonds that have a higher YTM and current yield. Shortly after selling the VOD bonds, Moody's downgraded the debt one notch to Baa2. Moody's downgrades Vodafone to Baa2; negative outlook 

A. Sold 2 Vodafone 2.5% SU Maturing on 9/26/22: 

Profit Snapshot: +$28.42

Item Item # 5.A. Bought 1 VOD 2.5% SU at 95.094 (12/19/18 Post)

FINRA Page: Bond Detail (prospectus linked)

Issuer: Vodafone Group PLC ADR (VOD)
VOD Analyst Estimates
Investors

Credit Ratings: Baa2 Moody's; S & P BBB+
Fitch Affirms Vodafone at 'BBB+'/Stable on Announced Liberty Global Transaction

Proceeds at 98 (after $2 commission; sold at 98.1)
YTM at 98 = 3.092%
Current Yield at 98 = 2.551%

I still own 2 VOD 2.95% SU bonds maturing in 2023. Item # 4 B. Bought 1 VOD 2.95% SU at 97.605 TC (4/19/18 Post); Item # 1.B. Bought 1 VOD 2.95% SU at 98.253 TC(3/13/17 Post)

B. Bought 2 W P Carey 4.25% SU Bonds Maturing on 10/1/26:

Finra Page: Bond Detail (prospectus not linked)

Issuer:  W. P. Carey Inc. (WPC)

WPC SEC Filings
10-Q for the Q/E 9/30/18

Last Bond Offering (10/18): Prospectus (2.25% SU-€500M)

Credit Ratings:

Bought at a Total Cost of 99.682
YTM at TC Then at 4.299%
Current Yield at TC = 4.2636%

I prefer to high the YTM and current yield close together when buying bonds with longer durations.

I own two WPC bonds maturing in 2025. Item # 4.A. Bought 2 WPC 4% SU Bonds at 98.477 (4/19/18 Post)

I sold 2 WPC bonds maturing in 2024: Item # 4.D. Sold 2 WPC 4.6% SU Bonds Maturing on 4/1/24 at 105.382 (10/2/2017 Post)(profit snapshot = $62.15); Bond Detail

I also still own 30 shares of the common bought at $59.45. South Gent's Comment Blog # 7: Bought 30 WPC at $59.45 (12/10/16 comment); W. P. Carey Inc. Increases Quarterly Dividend to $1.03 per Share

4. Bought 100 ADX at $14.12-Used Commission Free Trade:

Quote  Adams Diversified Equity Fund Inc. (ADX)-A CEF
Fund Sponsor's Webpage: Adams Funds

Closing Price Last Friday: ADX $14.22 +$0.09 +0.64% 

Top Ten Holdings as of 12/31/18:

Expense Ratio: .56%

Portfolio Value as of 9/30/18 = $1.958+ B
Cost as of 9/30/18 = $1.257+B

Not Leveraged

Data Day of Trade (2/20/19):
Closing Net Asset Value Per Share: $16.51
Closing Market Price: $14.1
Discount: -14.6%
Average Discounts:
1 YR -14.31%
3 YR -15.12%
5 YR -14.85%

Distributions: This fund will pay out a quarterly dividend of $.05 per share and then will meet or exceed its 6% managed distribution level through a year end capital gains distribution.

Sourced from: Adams Diversified Equity-CEF Connect (formerly known as Adams Express)

The discount remains stubbornly in the 14% to 16% range.

While many explanations can be offered, the two main ones IMO are the lack of an aggressive buyback strategy when the discount exceeds 10% and an unusually large unrealized capital gain number which new purchasers tend to discount as a potential tax liability since their ownership postdates the stock acquisitions that created the unrealized capital gains. The latter consideration seems misplace to me since ADX only nibbles at harvesting those gains to support its managed distribution policy each year.

I am playing with the house's money on this buy taking into account only the stock profits and excluding the capital gain distributions and dividends received over the years since 1984 when I first purchased shares.

Adams Express was one of the few CEFs that survived the 1929 stock market crash and the Great Depression. The leveraged ones were gone by 1932 when the DJIA had fallen over 80% from its 1929 peak. Some of that history is recounted in The Great Crash 1929 by John Kenneth Galbraith which is a book that I recommend reading.

Last Elimination: Item # 2.C. (3/4/17 Post)

Trading Gain 2/1/14 to Date: +$3,060.14

The largest recent realized gains were these pares:

Item # 4 Sold 116 ADX at $13.61 (6/14/14 Post); Item # 4 Pared ADX Again-Sold 143 Shares at $13.97 (8/19/14 Post); Update On Closed End Fund Basket Strategy As Of 7/28/15 - South Gent | Seeking Alpha ($1,983.24 profit snapshot, scroll to "Deletion/Reductions Since Last Update)

Since I sold my the 467+ share position in May 2015 at $14.01, I have traded 100 share lots. The total return over the past 3+ years since May 2015 has been tied almost entirely to the year end capital gain distributions paid in 2015-2018 ($4.48 per share), secondarily to the income distributions and a slither to share price appreciation.  

When buying this stock CEF now, success is defined as harvesting a year end capital gain distribution and exiting the position at a profit.  

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.