Economy:
Company payrolls up 183,000, but Moody's says jobs may have peaked
The BLS reported that the economy added only 20K last month: Employment Situation Summary Over the past 12 months through February, average hourly earnings increased by 3.4%.
‘Don’t hit panic’ — economists find the jobs report wasn’t as bad as 20,000 headline suggests - MarketWatch
Job growth in January was unusually strong and suspect at 311K:
Bureau of Labor Statistics Data
It is just too early to draw any future predictions about job growth from this 20K add last month. That far lower than expected number could be a harbinger of things to come, or just a quirk in the data, or a temporary slowdown in hiring after a robust gain in January.
I would just note that the clear preponderance of economic data is pointing toward a worldwide slowdown of currently unknowable duration and depth.
The BLS reported that the economy added only 20K last month: Employment Situation Summary Over the past 12 months through February, average hourly earnings increased by 3.4%.
‘Don’t hit panic’ — economists find the jobs report wasn’t as bad as 20,000 headline suggests - MarketWatch
Job growth in January was unusually strong and suspect at 311K:
It is just too early to draw any future predictions about job growth from this 20K add last month. That far lower than expected number could be a harbinger of things to come, or just a quirk in the data, or a temporary slowdown in hiring after a robust gain in January.
I would just note that the clear preponderance of economic data is pointing toward a worldwide slowdown of currently unknowable duration and depth.
Trade deficit soars to 10-year high in 2018, foiling Trump White House effort to rein it in - MarketWatch; U.S. posted record-breaking $891 billion goods trade deficit in 2018, despite Trump’s ‘America First’ policies - The Washington Post
Fed’s Beige Book report finds ‘slight’ growth in many regions as government shutdown depressed activity - MarketWatch;
Federal Reserve Board - Beige Book
The European Central Bank Just Reversed Course With New Stimulus Measures
ECB’s Coeure Says Euro-Zone ‘Risks Have Moved to the Downside’
ECB's Draghi slashes growth forecasts
Global debt yields slide as ECB acknowledges 'sick' European economy
China February trade (USD denominated exports fell 20.7% in February Y-O-Y (consensus estimate was a 4.8% decline)
Larry Kudlow says tariffs give Trump an edge in China trade talks
German manufacturing orders plunge in January - MarketWatch The seasonally adjusted orders declined 2.6% month-on-month and -3.9% Y-O-Y. The Y-O-Y decline in December was revised from -7.% to -4.5%. The numbers were worse than expected.
++++
Fed’s Beige Book report finds ‘slight’ growth in many regions as government shutdown depressed activity - MarketWatch;
The European Central Bank Just Reversed Course With New Stimulus Measures
ECB’s Coeure Says Euro-Zone ‘Risks Have Moved to the Downside’
ECB's Draghi slashes growth forecasts
Global debt yields slide as ECB acknowledges 'sick' European economy
China February trade (USD denominated exports fell 20.7% in February Y-O-Y (consensus estimate was a 4.8% decline)
Larry Kudlow says tariffs give Trump an edge in China trade talks
German manufacturing orders plunge in January - MarketWatch The seasonally adjusted orders declined 2.6% month-on-month and -3.9% Y-O-Y. The Y-O-Y decline in December was revised from -7.% to -4.5%. The numbers were worse than expected.
++++
Markets and Market Commentary:
Don’t write off stocks just yet — the market is poised to hit new heights, says JPMorgan strategist - MarketWatch
Mosaic to cut phosphate production by 300,000 tons - MarketWatch
The Dow Transports continue to signal some economic weakness. This 135-year-old stock index just logged its longest skid in about 50 years - MarketWatch (down 11 consecutive days)
Portfolio Management:
For all practical purposes, I am in a holding pattern for new stock buys and will continue to sell into rallies.
I downloaded into Turbo Tax my 2018 capital gains and was surprised at the result. I had net realized capital gains of $46+K in 2018, similar to 2017, and well above my current goal of $15K to $25K.
I have substantially deemphasized capital gains as a portfolio management goal and view that objective now as a mere annual supplement to interest and dividend income generation.
The capital gains generated over the last two years and the gains realized overall since 2008, given my strong capital preservation focus, make it even less likely that I will stick my neck out this year.
Capital gain distributions from my T. Rowe Price mutual funds contributed over 20% of last year's capital gains.
I eliminated some of my smaller T.Rowe Price fund positions last year (PRMSX, PRISX, & RPGAX) before the year end distributions. I also eliminated a material single position in a Vanguard mutual fund (VEIRX), while paring others.
I am not inclined to ignore the data that supports the economic slowdown thesis; or the possible upcoming recession signals being flashed by the flat yield curve and the yield inversions along the 1 to 7 year maturity spectrum.
While it is true that the 2 year treasury yield is still providing a yield below the 10 year, the spread closed last Friday at only 17 basis points. Daily Treasury Yield Curve Rates The 1 year treasury bill closed at a 2 basis point premium to the 7 year treasury note yield and 8 basis points over the 2 year note yield.
No recession risk is currently priced into U.S. stocks IMO.
The Stock Jocks continue to focus more on the FED's change in monetary policy as being supportive of stocks rather than on the reasons for that change.
With the recent decline in interest rates, bonds have become less attractive, and that will tend to support a risk on trade among many investors.
The German 10 year yield is now hovering barely above a zero percent yield. Germany 10 Year Government Bond Overview - MarketWatch
Mosaic to cut phosphate production by 300,000 tons - MarketWatch
Portfolio Management:
For all practical purposes, I am in a holding pattern for new stock buys and will continue to sell into rallies.
I downloaded into Turbo Tax my 2018 capital gains and was surprised at the result. I had net realized capital gains of $46+K in 2018, similar to 2017, and well above my current goal of $15K to $25K.
I have substantially deemphasized capital gains as a portfolio management goal and view that objective now as a mere annual supplement to interest and dividend income generation.
The capital gains generated over the last two years and the gains realized overall since 2008, given my strong capital preservation focus, make it even less likely that I will stick my neck out this year.
Capital gain distributions from my T. Rowe Price mutual funds contributed over 20% of last year's capital gains.
I eliminated some of my smaller T.Rowe Price fund positions last year (PRMSX, PRISX, & RPGAX) before the year end distributions. I also eliminated a material single position in a Vanguard mutual fund (VEIRX), while paring others.
I am not inclined to ignore the data that supports the economic slowdown thesis; or the possible upcoming recession signals being flashed by the flat yield curve and the yield inversions along the 1 to 7 year maturity spectrum.
While it is true that the 2 year treasury yield is still providing a yield below the 10 year, the spread closed last Friday at only 17 basis points. Daily Treasury Yield Curve Rates The 1 year treasury bill closed at a 2 basis point premium to the 7 year treasury note yield and 8 basis points over the 2 year note yield.
No recession risk is currently priced into U.S. stocks IMO.
The Stock Jocks continue to focus more on the FED's change in monetary policy as being supportive of stocks rather than on the reasons for that change.
With the recent decline in interest rates, bonds have become less attractive, and that will tend to support a risk on trade among many investors.
The German 10 year yield is now hovering barely above a zero percent yield. Germany 10 Year Government Bond Overview - MarketWatch
+++++
Trump:
New York authorities subpoena Trump Organization's insurer That may prove to be a productive inquiry.
‘Grab that record’: How Trump’s high school transcript was hidden When Donald was demanding that Obama release his academic records, calling him a "terrible student", Trump made sure that his alleged "stellar" academic record would never be released publicly. Just another example of Trump being a fraud and a hypocrite.
Trump has claimed that he graduated #1 from the Wharton School of Business (suggesting that he received an MBA when he was only an undergraduate), but he managed to do that without even appearing on the Dean's List. The commencement program in the Duck's graduation year shows him with no honors at all. Penn student newspaper debunks Trump’s reported claims of graduating top of his class | PhillyVoice
Was Trump really a top student at Wharton? His classmates say not so much | The Daily Pennsylvanian
Donald transferred to Wharton's undergraduate program after spending two years at Fordham. Five myths Donald Trump tells about Donald Trump - The Washington Post As noted in that article, there is reason to believe that Doofus Don was admitted to Fordham, currently ranked at #70 of the best colleges, because of who he was, not on what he had done in high school. Fordham University - Profile, Rankings and Data | US News Best Colleges
Obama, on the other hand, graduated magna cum laude from Harvard Law School (grading is anonymous) and was Editor of the Harvard Law Review. About the Harvard Law Review (discusses how members are selected)
Obama Left Mark on HLS | News | The Harvard Crimson
Contrary to Trump's statement that no one knew Obama, a reporter for the conservative Weekly Standard found that virtually everyone in Obama's Harvard Law School class knew Obama and had nothing negative to say about him. The Real Obama Obama was not initially accepted to Columbia University, but attended Occidental College for two years before being allowed to transfer to Columbia (1981-1983).
Fact check: Eight Years of Trolling Obama A lot of that has to do with Obama being the first black President.
++
North Korea restoring part of launch site it promised Trump to dismantle | Reuters
New York authorities subpoena Trump Organization's insurer That may prove to be a productive inquiry.
‘Grab that record’: How Trump’s high school transcript was hidden When Donald was demanding that Obama release his academic records, calling him a "terrible student", Trump made sure that his alleged "stellar" academic record would never be released publicly. Just another example of Trump being a fraud and a hypocrite.
Trump has claimed that he graduated #1 from the Wharton School of Business (suggesting that he received an MBA when he was only an undergraduate), but he managed to do that without even appearing on the Dean's List. The commencement program in the Duck's graduation year shows him with no honors at all. Penn student newspaper debunks Trump’s reported claims of graduating top of his class | PhillyVoice
Was Trump really a top student at Wharton? His classmates say not so much | The Daily Pennsylvanian
Donald transferred to Wharton's undergraduate program after spending two years at Fordham. Five myths Donald Trump tells about Donald Trump - The Washington Post As noted in that article, there is reason to believe that Doofus Don was admitted to Fordham, currently ranked at #70 of the best colleges, because of who he was, not on what he had done in high school. Fordham University - Profile, Rankings and Data | US News Best Colleges
Obama, on the other hand, graduated magna cum laude from Harvard Law School (grading is anonymous) and was Editor of the Harvard Law Review. About the Harvard Law Review (discusses how members are selected)
Obama Left Mark on HLS | News | The Harvard Crimson
Contrary to Trump's statement that no one knew Obama, a reporter for the conservative Weekly Standard found that virtually everyone in Obama's Harvard Law School class knew Obama and had nothing negative to say about him. The Real Obama Obama was not initially accepted to Columbia University, but attended Occidental College for two years before being allowed to transfer to Columbia (1981-1983).
Fact check: Eight Years of Trolling Obama A lot of that has to do with Obama being the first black President.
++
North Korea restoring part of launch site it promised Trump to dismantle | Reuters
Donald Trump's epic 2-hour CPAC speech: The 67 most stunning lines from - CNN The republican party is nowhere close to being a conservative one.
Warner: Trump has 'consistently been willing to override the advice' of intel community - CNN
Trump will believe what Kim, Putin or any other authoritarians tell him rather than giving any credence to actual intelligence or reliable information. Regarding North Korea's murder of the American citizen Otto Warmbier, Trump recently declared that Kim "tells me that he didn't know about it and I will take him at his word." Trump accepts Kim Jong Un's word, same with Putin, Mohammed bin Salman - Business Insider; Is Donald Trump an authoritarian? Experts examine telltale signs
Man charged with setting fire to Planned Parenthood clinic in Missouri - CBS News
Warner: Trump has 'consistently been willing to override the advice' of intel community - CNN
Trump will believe what Kim, Putin or any other authoritarians tell him rather than giving any credence to actual intelligence or reliable information. Regarding North Korea's murder of the American citizen Otto Warmbier, Trump recently declared that Kim "tells me that he didn't know about it and I will take him at his word." Trump accepts Kim Jong Un's word, same with Putin, Mohammed bin Salman - Business Insider; Is Donald Trump an authoritarian? Experts examine telltale signs
Man charged with setting fire to Planned Parenthood clinic in Missouri - CBS News
+++++++
1. Pares and Eliminations:
A. Pared NYCB by Eliminating Position in Fidelity Account-Sold 46+ shares at $12.31 Using Commission Free Trade:
Quote: New York Community Bancorp Inc. (NYCB)
New York Community Bancorp, Inc. - Home
Profit Snapshot: $61.7
Last Earnings Report:
New York Community Bancorp, Inc. Reports Fourth Quarter And Full Year 2018 Diluted Earnings Per Common Share Of $0.19 And $0.79
The Stock Jocks reacted positively to the last earnings report released before the market opened on 1/30/19. UBS upgraded the stock to buy with a $15 price target:
I viewed the report as more of the same with some positive vibes.
The company did repurchase 16.8M shares during the 4th quarter at an average cost per share of $9.57. While that is a positive given the weighted average cost per share, I would hope that the bank quit buying shares at the current price.
The main problems with NYCB has been and continue to be its net interest margin and low returns on capital and assets:
"For the twelve months ended December 31, 2018, the NIM was 2.25% down 34 basis points compared to the 2.59% recorded for the twelve months ended December 31, 2017. Prepayment income added 11 basis points to this year's NIM, compared to 13 basis points in 2017." (emphasis added)
Excellent ratios include the following:
Non-Performing Loans to Total Loans: .11%
Non-Performing Assets to Total Assets: .11%
Coverage Ratio: 351.21%
Charge-Offs (annualized) to Total Loans: .01%
Efficiency Ratio: 49.92%
The bank claims that it will benefit from a redefinition of SIFI referring to the 2018 passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act: "Among other things, the Act re-defines the manner by which banks are designated as a SIFI, by increasing the asset threshold to $250 billion from $50 billion. This is key for the Company as it allows us to resume our balance sheet growth and reduce operating expenses, especially those related to regulatory compliance for SIFI institutions."
Dividend: When I first purchased NYCB shares (the symbol then being NYB), the quarterly dividend rate was $.25 per share but the payout ratio was generally over 90%.
The company cut its dividend rate to $.17 per share, effective for the first quarter of 2016. Dividend History
As I recall, the dividend cut occurred in connection with NYCB's proposed acquisition of Astoria Financial that was eventually abandoned due to regulatory opposition.
While that proposed acquisition may have provided the cover for a dividend cut, it was necessary to slash the dividend given the lack of earnings growth and dividend payout ratio.
Previous Round-Trips:
The time period for making money fairly easily in this stock ended in 2004.
A parabola price spike took the price from around $5 in 2000 to $35 in 2004.
The next major upward spike started at around $8 (March 2009) and ended at near $19 (December 2015) before commencing another dominant downtrend.
The most recent reversal trend continued through 12/24/18 when the price closed at $8.64.
The trend since December 2015 consists of lower highs and lower lows.
To break that downtrend, the shares will need to bust convincingly over $15 per share IMO.
Otherwise, the dominant downtrend is still in operation and I am more inclined now to sell the rally rather than to buy.
Update For Regional Bank Basket Strategy As Of 10/19/15 - South Gent | Seeking Alpha: Item # 1 Sold 150 NYCB at $18.57 (profit snapshot= $999.66)-Item # 1 Added 50 NYB at $12.79 (2/7/2012 Post); Item # 2 Bought 50 NYB at $11.3 (10/15/2009 Post); Item # 2 Added 50 NYB at $10.90 (10/27/2009 Post);
Stocks, Bonds & Politics: Item # 7 Sold 50 NYCB at $17.51 in a Regular IRA Account (7/28/2010 Post)-Item # 4 Bought 50 NYCB at $10.57 in Regular IRA Account (11/4/2009 Post)
Stocks, Bonds & Politics: Item 2.D. Sold 50 NYCB at $14.25 (3/25/13 Post)-Bought 50 NYCB at $12.94-Regular IRA (12/12/2009 Post)
South Gent's Comment Blog # 5: Sold 50 NYCB at $15.58 in Roth IRA Account (11/16/16 Comment)
Trading Profits to Date: $1,495.65 ($1,433.95 in prior round-trips)
Remaining Shares: My next NYCB disposition will be the 111+ shares held in a Roth IRA account where I am currently down about $100 on the shares but slightly above break-even on a total return basis.
I am reinvesting the dividend in that account which has added over 10 shares to the position.
I will likely sell that entire lot when and if the price exceeds $14.
NYCB is a possible a takeover target given its NYC presence and its strong lending position in "multi-family loans on non-luxury, rent-regulated apartment buildings in New York City."
Even after the dividend slash, the dividend yield is still good, based on the current price, and the yield has kept me in the stock.
A. Pared NYCB by Eliminating Position in Fidelity Account-Sold 46+ shares at $12.31 Using Commission Free Trade:
Quote: New York Community Bancorp Inc. (NYCB)
New York Community Bancorp, Inc. - Home
Profit Snapshot: $61.7
Last Earnings Report:
New York Community Bancorp, Inc. Reports Fourth Quarter And Full Year 2018 Diluted Earnings Per Common Share Of $0.19 And $0.79
The Stock Jocks reacted positively to the last earnings report released before the market opened on 1/30/19. UBS upgraded the stock to buy with a $15 price target:
I viewed the report as more of the same with some positive vibes.
The company did repurchase 16.8M shares during the 4th quarter at an average cost per share of $9.57. While that is a positive given the weighted average cost per share, I would hope that the bank quit buying shares at the current price.
The main problems with NYCB has been and continue to be its net interest margin and low returns on capital and assets:
 |
| Q/E 12/31/18 |
Excellent ratios include the following:
Non-Performing Loans to Total Loans: .11%
Non-Performing Assets to Total Assets: .11%
Coverage Ratio: 351.21%
Charge-Offs (annualized) to Total Loans: .01%
Efficiency Ratio: 49.92%
The bank claims that it will benefit from a redefinition of SIFI referring to the 2018 passage of the Economic Growth, Regulatory Relief, and Consumer Protection Act: "Among other things, the Act re-defines the manner by which banks are designated as a SIFI, by increasing the asset threshold to $250 billion from $50 billion. This is key for the Company as it allows us to resume our balance sheet growth and reduce operating expenses, especially those related to regulatory compliance for SIFI institutions."
Dividend: When I first purchased NYCB shares (the symbol then being NYB), the quarterly dividend rate was $.25 per share but the payout ratio was generally over 90%.
The company cut its dividend rate to $.17 per share, effective for the first quarter of 2016. Dividend History
As I recall, the dividend cut occurred in connection with NYCB's proposed acquisition of Astoria Financial that was eventually abandoned due to regulatory opposition.
While that proposed acquisition may have provided the cover for a dividend cut, it was necessary to slash the dividend given the lack of earnings growth and dividend payout ratio.
Previous Round-Trips:
The time period for making money fairly easily in this stock ended in 2004.
A parabola price spike took the price from around $5 in 2000 to $35 in 2004.
The next major upward spike started at around $8 (March 2009) and ended at near $19 (December 2015) before commencing another dominant downtrend.
The most recent reversal trend continued through 12/24/18 when the price closed at $8.64.
The trend since December 2015 consists of lower highs and lower lows.
To break that downtrend, the shares will need to bust convincingly over $15 per share IMO.
Otherwise, the dominant downtrend is still in operation and I am more inclined now to sell the rally rather than to buy.
Update For Regional Bank Basket Strategy As Of 10/19/15 - South Gent | Seeking Alpha: Item # 1 Sold 150 NYCB at $18.57 (profit snapshot= $999.66)-Item # 1 Added 50 NYB at $12.79 (2/7/2012 Post); Item # 2 Bought 50 NYB at $11.3 (10/15/2009 Post); Item # 2 Added 50 NYB at $10.90 (10/27/2009 Post);
Stocks, Bonds & Politics: Item # 7 Sold 50 NYCB at $17.51 in a Regular IRA Account (7/28/2010 Post)-Item # 4 Bought 50 NYCB at $10.57 in Regular IRA Account (11/4/2009 Post)
Stocks, Bonds & Politics: Item 2.D. Sold 50 NYCB at $14.25 (3/25/13 Post)-Bought 50 NYCB at $12.94-Regular IRA (12/12/2009 Post)
South Gent's Comment Blog # 5: Sold 50 NYCB at $15.58 in Roth IRA Account (11/16/16 Comment)
Trading Profits to Date: $1,495.65 ($1,433.95 in prior round-trips)
Remaining Shares: My next NYCB disposition will be the 111+ shares held in a Roth IRA account where I am currently down about $100 on the shares but slightly above break-even on a total return basis.
I am reinvesting the dividend in that account which has added over 10 shares to the position.
I will likely sell that entire lot when and if the price exceeds $14.
NYCB is a possible a takeover target given its NYC presence and its strong lending position in "multi-family loans on non-luxury, rent-regulated apartment buildings in New York City."
Even after the dividend slash, the dividend yield is still good, based on the current price, and the yield has kept me in the stock.
B. Eliminations-Sold 100 CGL:CA at C$11.44:
Quote: CGL Fund - iShares Gold Bullion ETF Hedged Overview
Profit Snapshot: +C$10
Item # 1.D. Bought 100 CGL:CA at C$11.32 (5/7/18 Post)(snapshots of prior trading profits = $C78)
Gold and silver bullion remain in a long term bear market. I am finding it too difficult to catch a countertrend rally. Nonetheless, I will probably try again with this security at a lower price than my last entry point.
C. Eliminated IMDZ-Sold 50 at $5.82:
This stock was bought pursuant to my small cap biotech lottery ticket basket strategy. After a 300%+ one day jump in the price, I was able to escape with a profit.
History:
The stock plunged after its key pipeline drug came up short in a clinical trial. The pop occurred after Merck agreed to acquire IMDZ for $5.85 in cash. Merck to Acquire Immune Design
If I had kept the 30 shares sold in 2016, Merck's offer would have been a take under.
2. Short Term Bond/CD Ladder Basket Strategy:
If I had kept the 30 shares sold in 2016, Merck's offer would have been a take under.
 |
| 2016 IMDZ 30 shares +$41.49 |
A. Bought 1 Laboratory Corporation of America 2.625% SU Maturing on 2/1/20:
 |
| IB Account $1 Commission |
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings:
Bought at a Total Cost of 99.833
YTM at TC Then at 2.804%
Current Yield at TC = 2.656%
I had $4K in bond maturities on 2/15/19 in this account and this purchase redeploys 1/4th of the proceeds.
B. Bought 5 One Year Treasury Bills at Auction Maturing on 2/27/20:
IR = 2.559%
Auction Results (2/26/18):
C. Bought 1 Treasury 1.625% Coupon Maturing on 3/15/20:
YTM = 2.511%
I now own 2 bonds. The other one was bought on 12/14 and had a YTM of 2.743%.
This is a filler in the short term ladder basket strategy.
D. Bought 2 Wells Fargo 2.5% CDs (monthly interest payments) Maturing on 3/27/20:
This is the first CD that I have purchased in several weeks. Comparable maturity treasuries have come down in yield. This CD has about the same YTM as the treasury discussed above in Item C and pays interest monthly rather than semi-annually.
The CD also fills a gap in maturities between 3/20 and 3/30. The design of the short term bond/CD basket is to generate a weekly cash flow through redemption proceeds and interest payments.
IR = 2.559%
C. Bought 1 Treasury 1.625% Coupon Maturing on 3/15/20:
YTM = 2.511%
This is a filler in the short term ladder basket strategy.
D. Bought 2 Wells Fargo 2.5% CDs (monthly interest payments) Maturing on 3/27/20:
This is the first CD that I have purchased in several weeks. Comparable maturity treasuries have come down in yield. This CD has about the same YTM as the treasury discussed above in Item C and pays interest monthly rather than semi-annually.
The CD also fills a gap in maturities between 3/20 and 3/30. The design of the short term bond/CD basket is to generate a weekly cash flow through redemption proceeds and interest payments.
3. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Bought 1 Post Apartments LP 3.375% SU Maturing on 12/1/22-In a Roth IRA Account:
FINRA Page: Bond Detail (prospectus linked)
Issuer: Post Apartments LP was the operating entity for Post Properties which was acquired in December 2016 by Mid-America Apartment Communities Inc. (MAA), a member of the S & P 500.
The Post Apartments LP debt is now an obligation of MAA's operating entity. The Post bond has the same credit rating at the MAA LP bonds.
MAA and Post complete merger
MAA SEC Filings
Website: Mid America Apartments - Corporate Profile
Credit Ratings:
Bought at a Total Cost of 99.798 (with $2 Commission)
YTM at TC Then at 3.431%
Current Yield at TC = 3.3818%
I basically swapped 1 of the Thermo Fisher bonds discussed below for this MAA SU bond that has a higher credit rating and yield.
B. Bought 1 Post Apartments L.P. 3.375% SU Maturing on 12/1/22-In a Taxable Account:
This is the same bond as discussed in the previous section. I had some short term corporate bonds mature in my IB account and I am currently redeployment some of the proceeds. IB charges a $1 per bond commission.
Bought at a TC of 99.605
YTM at TC Then at 3.487%
Current Yield at TC = 3.3884%
C. Sold 2 Thermo Fischer 3.15% SU Bonds Maturing on 1/15/23:
FINRA PAGE: Bond Detail (prospectus linked)
Profit Snapshot: +$19.24
YTM Then at 99.8 Sell Price = 3.205%
Current Yield at 99.8 = 3.1563%
Issuer: Thermo Fisher Scientific Inc. (TMO)
TMO Analyst Estimates
Credit Ratings:
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.
Hi
ReplyDeleteSG, I read your Sunday Update w interest. It does look like from the data that we are seeing a world slow down, even with a trade deal.
What I wondered with great interest your take on the fed talking up permenant QE as a tool to keep the economy and market from falling apart.
There is a new article on Seeking Alpha which talks up QE in a positive manner.
https://seekingalpha.com/article/4246932-feds-important-strategic-change-can-help-asset-prices
I wondered if you could look at the article and give me your take on it?
Can this really really heal the economy and keep the markets up without a debt catastrophe?
https://seekingalpha.com/article/4165511-science-japanification
thanks
G: I do not accept the premise that the Fed was the cause of an economic slowdown with it prior monetary policy.
DeleteInterest rates are still abnormally low, and the real economy has more than enough money to grow.
If monetary policy changes could solve the growth conundrum for developed economies, then Japan and Europe would not be in long periods of economic stagnation.
Abnormally low interest rates do create a number of growth headwinds, including a misallocation of capital to paper investments and away from research, development and other activities that actually produce jobs and create growth in the real economy.
Money has frequently been borrowed over the past several years, for example, to buy back stock rather than to grow the business. Tax savings are being used to buy back stock and to increase dividends. Some tax savings are used to fund buyouts of other companies that generally results in layoffs at the acquired company.
Those activities do not result in GDP growth but simply an appreciation of paper assets held by a minority of U.S. households. The vast majority of U.S. households are still in a pinch and are having to borrow more money to meet expenses.
The past decade has also deprived most Americans of income from their savings that previously existed in other economic growth cycles. For all practical purposes, income from savings was non-existent between 2008 to 2016 and even now is well below normal after the modest raises in the FF rate to the current abnormally low level. Think of what a 4% average rate on FDIC insured savings accounts and short term CDs would mean for household disposable income compared to what has been paid for over a decade now, taking into account that almost $12 trillion is tied up in those types of risk free investments.
The recent change in the FED's policy has had far more impact on financial assets than the real economy and is probably largely responsible for stock market's rally since Christmas Eve.
But that does not mean that the outlook for the economy has changed over the period covering the 20% decline and the subsequent rally. I would say there has been no meaningful change in the economic outlook for 2019-2020 notwithstanding those gyrations.
I do not see the recent changes in monetary policy as causing or reversing the fundamental factors that are now causing a slowdown.
That makes sense of things in my mind. The slow down feels like it's out of left field without explanation. (It could be anticipated but it wasn't getting talked about as coming.) And that the market isn't very serious about it at all. The market is focused on the Fed's actions & trade deals.
DeleteLand: The Stock Jocks are far more focused on low interest rates and inflation than on monthly economic data pointing to a slowdown of unknowable depth and duration. Investors are also aware that the the first quarter has been the weakest in the recent past with the economy bouncing back in the next 3 quarters.
DeleteToday's BLS release showing a 1.5% annual rate for CPI through February 2019 is supportive of elevated P/E multiples as is the recent decline in interest rates.
Sure low rates do support higher multiples. But we have those already. The slow down in unusual in that it's not just in numbers coming in for 1st quarter. But also projections which haven't been low, now are.
DeleteLand: Sounds like you do not put much faith in Donald's 2019 real GDP growth forecast of 3.2%:
Deletehttps://www.cnbc.com/2019/03/10/trumps-budget-will-project-3percent-gdp-growth-over-the-next-few-years-defying-consensus.html
As noted in that article, CBO predicts 2.7%.
The first quarter estimates have been trending down:
https://www.frbatlanta.org/cqer/research/gdpnow.aspx
I consider defying consensus's to believe a person with nearly 10k lies... to be unnecessary in life. Call me unstable and a wild one.
DeleteMy mute button is broken. I need a new TV remote.
It's gone from SAs list now. There was an improvement in earnings influencing data today? That changes the picture? I can't remember what it was though.
The German 10 year bond closed last Friday at a .071% yield.
ReplyDeletehttps://www.marketwatch.com/investing/bond/tmbmkde-10y?countrycode=bx
Is that rate helping or hurting the German economy? That is a legitimate question to ask. Japan's citizens could have asked the same question for well over a decade.
Will the near zero ten year yield, and negative yields for shorter maturities, stop the German economy from entering a recession this year or will it actually contribute to causing the recession?
Last January, the German government revised its 2019 GDP growth forecast from an anemic 1.8% GDP growth down to 1%.
https://www.reuters.com/article/us-germany-economy/germany-revises-2019-gdp-growth-forecast-to-1-0-percent-handelsblatt-idUSKCN1PI2N0
No one should be surprised to see soon another downward revision or a recession in Europe's largest economy this year. The negative ECB benchmark rate of -.4% and negative nominal and real debt yields will not be the spark that ignites economic growth in Germany or elsewhere in Europe.
Another useful data set. Thanks.
DeleteIt seems like the creation of the EU was to stop another world war but has economically caused a crazy quilt of economic inequality and Europe would be better off like it was before ;
ReplyDeleteThis is coupled with the near Depression that by saving the country punished the savers and rewarded the rich;
and now we have what looks like a political US firestorm brewing because of this; I have no idea how this works out socially and economically;
Most of my middle class friends who lead busy lives are not informed re debt or politics and i wonder if you have had thoughts on how all this turns out probabilisticly after the next election? thanks again
The Stock Jocks thought long and hard over the weekend and apparently concluded that there was no reason for concern emanating from the recent negative economic data. Back to boundless optimism about the future at least for now.
ReplyDeleteI did not see anything newsworthy that would cause the rally today. And there was bad news for the DJIA component Boeing.
I would note that stocks are back to being the only game left for those seeking a meaningful total return in excess of the inflation rate. The question is when will that game turn into the Big Ugly. The Stock Jocks answered that question today with a resounding "not now", maybe much later or at least far beyond their time horizon for contemplation.
***
Power Corporation and Power Financial, two Canadian based companies, announced the terms of their respective Dutch tender offers. I discussed their share buyback plans in an earlier post. I own both stocks.
Power Financial Announces Terms of its Substantial Issuer Bid to Repurchase up to $1.65 billion of its Common Shares
https://www.powerfinancial.com/en/news/press-releases/2019/power-financial-announces-terms-of-its-substantial-issuer-bid-to-repurchase-up-to-165-billion-of-its-common-shares-122586/
" The PFC Offer is being made by way of a "modified Dutch auction", which will allow shareholders who choose to participate in the PFC Offer to individually select the price, within a price range of not less than $29.00 per Share and not more than $34.00 per Share (in increments of $0.10 per Share), at which they are willing to sell their Shares. Upon expiry of the PFC Offer, the Corporation will determine the lowest purchase price (which will not be more than $34.00 per Share and not less than $29.00 per Share) that will allow it to purchase the maximum number of Shares properly tendered to the PFC Offer, and not properly withdrawn, having an aggregate purchase price not exceeding $1.65 billion."
I am not going to participate since I only own 100 Power Financial shares. I may however elect to sell 50 of my highest cost before the tender period ends.
Power Financial Corp. C$30.36 +C$0.57 +1.91%
https://www.marketwatch.com/investing/stock/pwf?countrycode=ca
The ordinary shares priced in USDs trade on the U.S. pink sheet under the POFNF symbol. Symbols ending in "F" denote the ordinary shares priced in USDs rather than an ADR.
Power Corporation has a similar offer. I own 100 shares.
https://www.powercorporation.com/en/news/press-releases/2019/power-corporation-announces-terms-of-its-substantial-issuer-bid-to-repurchase-up-to-135-billion-of-its-subordinate-voting-shares-122582/
+++
One of the most interesting earnings call transcripts that I have read recently involves the deservedly hated BDC TCRD.
Two participants in that conference call were money managers, Leon Cooperman and David Miyazaki who were not pleased with the external manager's asset incineration occurring since the IPO and let their displeasure be known in unequivocal terms.
https://seekingalpha.com/article/4247126-thl-credit-inc-tcrd-ceo-christopher-flynn-q4-2018-results-earnings-call-transcript
Apparently that is the assessment - all's well.
DeleteI bought some QQQ the other day. Not remotely at the bottom. But it's now green & I'm letting it run. Helps with the FOMO but boy do I wish I'd just jump in more.
Market did move below 200 day MA with the recent retrace. Does that have significance?
Land: I do not view the temporary and small decline below the 200 day SMA line as important. The VIX movement at below 15 is bullish IMO. For how long, no one can answer that question.
DeleteCBOE Volatility Index (^VIX)
13.80-0.53 (-3.70%)
As of 12:11PM EDT.
QQQ is one of those high beta ETFs that will perform better than the SPX when a market is in an upswing mode led by technology names. The top 5 names are MSFT, FB, GOOG, AAPL and AMZN accounting for almost 39% of the weighting.
https://portfolios.morningstar.com/fund/holdings?t=XNAS:QQQ®ion=usa&culture=en-US&cur=
You can buy that ETF commission free in your Vanguard brokerage account.
The standard deviation over the past 5 years is 14.14 compared to 11.18 for SPY. QQQ will be more volatile.
Alcentra Capital (ABDC) continued to make progress in its turnaround effort, reported $.27 per share in net investment income for the 2018 4th quarter which was 5 cents about the consensus estimate.
ReplyDeletehttps://www.prnewswire.com/news-releases/alcentra-capital-corporation-announces-fourth-quarter-and-fiscal-year-2018-financial-results-300810483.html
Net asset value per share was reported at $11.13 as of 12/31/18, up from the $11.09 as of 12/31/177.
At the closing price of $7.46 today, the discount to net asset value as of 12/31/18 was -32.97%.
In 2018 through 3/11/19, the company bought back about 9.5% of its outstanding shares at a deep discount to net asset value which is a positive for the remaining shareholders.
At least this BDC has made significant progress in taking itself out of the deservedly hated category.
I still own a few shares after selling my highest cost lot.
The Board announced its regular quarterly dividend of $.18 per share.
On the Trump topic, do you have thoughts or info of interest on whether the special council info is coming out soon?
ReplyDeleteI think it's not so. It's apparently based on seeing some employees of SC leaving their offices with apparently cleaning out. And others calling their former employers to return.
Land: Parts of the Mueller investigation may have concluded while others are still in a work in progress.
DeleteWe do know that a foreign linked company owned by a foreign country is resisting a grand jury subpoena and has not yet turned over documents believed to have been requested by Mueller's team. The company has lost its fight until now and has incurred over $2.25M in fines for its failure to comply. The company has appealed to the Supreme Court which has not yet decided whether to hear the case.
https://www.politico.com/blogs/under-the-radar/2019/02/28/firm-mueller-investigation-1196756
That's right - he doesn't have that company's concrete evidence yet. Can't do indictments without it.
DeleteThat's a good way to look at it, that parts may have concluded.
I do think Mueller is smart enough to release in stages if that makes sense to do.
I hardly pay any attention to my small cap biotech lottery tickets. I generally notice them only when I open an account page and note the largest gainers and losers which are usually those stocks. Nothing else that I own fluctuates more on a daily percentage basis.
ReplyDeleteToday I noticed that a 30 share lot of AKBA was my leading gainer in my Fidelity account.
Akebia Therapeutics Inc. $8.72 +$1.375 +18.73%
Last Updated: Mar 12, 2019 at 10:25 a.m. EDT
https://www.marketwatch.com/investing/stock/akba
This gain brings me back into profit territory.
AKBA's key pipeline drug met its endpoints in a key Phase 3 trial. That trial was conducted in Japan.
https://www.businesswire.com/news/home/20190312005287/en/
Based on today's closing treasury yields, the highest yield for maturities from 1 month to 7 years is the 6 month bill. The 1 year bill has inverted with the 6 month.
ReplyDeletehttps://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
The yield curve indicates a consensus prediction that the FED will reduce the FF rate by .25% within 12 months.
BREXIT turmoil may contribute to a flight to safety trade. It does look like a hard BREXIT will happen. IEF is rising slightly in after hours trading:
iShares 7-10 Year Treasury Bond ETF
Closing Price: $104.95 +$0.29 +0.28%
AFTER HOURS +104.99 +$0.04 +0.04%
Last Updated: Mar 12, 2019 4:29 p.m. EDT
https://www.marketwatch.com/investing/fund/ief
When looking at investment grade corporate bonds maturing in 2021-2022, it is not unusual to find one maturing in 2022 with a lower current yield and YTM than a comparable one maturing a year or earlier, sometimes at a higher credit rating.
Never mind. I now know what you mean. The inversion of 1yr and 6mons indicates that that in a short time (the year), the rate will be less than it was... the most reasonable reason to think so, is to expect the FED will be lowering rates as a result of the economic environment.
DeleteDid other recessions start like this... with no real solid indicators but these little indications that slow down is coming?
Importantly, have there been periods like this, with indicators like this, but it didn't result in a slowdown or recession in the end?
Land:
DeleteThis chart compares the 5 year treasury over the federal funds rate which is really close to inversion at one basis point as of 3/12/19.
https://fred.stlouisfed.org/series/T5YFF
While that chart shows reversions before recessions, there are too many that occur too far in time from a recession's start.
Wells Fargo asserted last year that the inversion of the 1-10 year is the best recession indicator:
https://www.bloomberg.com/news/articles/2018-07-30/treasury-1-to-10-year-spread-is-best-recession-tool-wells-fargo
I do not have a chart of this spread or spreads between the 1 year and other rates like the 5 or 7 year.
I do not see a 1 -10 inversion in this year's yield curve The spread as of yesterday was 8 basis points, ten year over the 1 year.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/03/observations-and-sample-of-recent_13.html
How do you get a prediction for FED behavior from the rates? Or it is in the article (which I haven't read yet.)
ReplyDeleteIf the FED reduces rates, i will buy stocks with the surge. That is the market's behavior every time. But will be watching for a VIX event.