Economy:
This is the herd's consensus that is reflected in stock prices. Headwinds might turn into tailwinds soon for U.S. economy after shaky start to new year - MarketWatch
FedEx Q3 Earnings 2019 (FedEx missed the consensus estimate and reduced guidance for the second time this year, citing a global slowdown); FedEx Corp. Reports Third Quarter Results
API data reportedly show a more than 2 million-barrel decline in U.S. crude supplies - MarketWatch
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API data reportedly show a more than 2 million-barrel decline in U.S. crude supplies - MarketWatch
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Markets and Market Commentary:
The market lost momentum yesterday after reports that China was pushing back on U.S. trade demands. U.S. Said to See China Trade Pushback as Trump Touts Talks - Bloomberg
Donald responded that the negotiations were going "very well."
One option for China is to just string out the negotiations for as long as Donald will let them without concluding a deal.
Then dare the Duck to increase tariffs to 25% on most of China's exports, angering segments of the GOP's base so close to the 2020 election.
Even better for China would be to watch Donald squirm with U.S. stocks going off a cliff, as investors postulate that a slowdown will turn into a U.S. recession. China can offset the loss of U.S. exports by stimulating domestic demand. Then China can deal with a new President in 2020 or conclude one with Donald more on their terms. Donald believes that he has China over a barrel and their leader for life will grovel before him.
I believe that the stock market has already priced in a trade deal that will be slightly positive to the U.S., particularly in the avoidance of further tariffs and the removal of those in place now.
The market lost momentum yesterday after reports that China was pushing back on U.S. trade demands. U.S. Said to See China Trade Pushback as Trump Touts Talks - Bloomberg
Donald responded that the negotiations were going "very well."
One option for China is to just string out the negotiations for as long as Donald will let them without concluding a deal.
Then dare the Duck to increase tariffs to 25% on most of China's exports, angering segments of the GOP's base so close to the 2020 election.
Even better for China would be to watch Donald squirm with U.S. stocks going off a cliff, as investors postulate that a slowdown will turn into a U.S. recession. China can offset the loss of U.S. exports by stimulating domestic demand. Then China can deal with a new President in 2020 or conclude one with Donald more on their terms. Donald believes that he has China over a barrel and their leader for life will grovel before him.
I believe that the stock market has already priced in a trade deal that will be slightly positive to the U.S., particularly in the avoidance of further tariffs and the removal of those in place now.
Goldman says boost from tax cut 'behind us' so buy these companies that can grow on their own I will not be buying their recommendations.
US economic growth is set to slow sharply this year and next, according to CNBC's Fed survey The consensus forecast is currently at +2.3% real GDP growth. I would not use the adverb "sharply" to describe the slower growth anticipated this year compared to 2018. My estimate is for 1.75% to 2.25%.
The longevity of the current economic cycle is due in part to modest annual GDP growth rather than the rocket economy coming out of a recession that soon burns out of fuel. Interest rates and inflation have been supportive of a continued economic expansion. The most important factor, spending borrowed money measured in trillions of dollars, is both a fuel for the expansion and the seed for its destruction and eventually the next major financial crisis. The Stock Jocks are not concerned about those later events until they see it unfold unmistakably before them.
The longevity of the current economic cycle is due in part to modest annual GDP growth rather than the rocket economy coming out of a recession that soon burns out of fuel. Interest rates and inflation have been supportive of a continued economic expansion. The most important factor, spending borrowed money measured in trillions of dollars, is both a fuel for the expansion and the seed for its destruction and eventually the next major financial crisis. The Stock Jocks are not concerned about those later events until they see it unfold unmistakably before them.
Trump:
Tough talk from Demagogue Don: “I can tell you I have the support of the police, the support of the military, the support of the Bikers for Trump — I have the tough people, but they don’t play it tough — until they go to a certain point, and then it would be very bad, very bad.” Exclusive—Trump: Paul Ryan Blocked Subpoenas of Democrats (emphasis added)
So watch out Uppity Liptards, if you go too far the Trumpsters will have no choice but to fill you with lead from their AR-15s. Fox News host: Now would be a good time to go buy another AR-15 rifle So when their guns get too hot to handle, they will have a spare or two or three or four, and so on.
Trump has somewhere between a 90% to 93% approval rating among republicans. He just claimed 93% yesterday:
George Conway Lights Up Trump in Epic Tweetstorm: ‘A Serious Inquiry’ is Needed on His ‘Condition of Mind’ Conway is referring to Donald's "Tim Apple" episode. Donald referred to Tim Cook, Apple's CEO, as "Tim Apple". So we all get tongue tied and misspeak on occasion. When the media pointed out the mistake, Donald first denied making it even though the slip was on tape. He then made this asinine claim rather than just leaving the matter alone:
Conway had the temerity to claim that Don the Con suffered from narcissistic personality disorder. That is an obvious diagnosis since Donald checks all of the symptom boxes. Narcissistic Personality Disorder | Psychology Today
++
The Trumpster Fox Anchor Tucker Carlson is so upset that anyone would publicly release words spoken by him over the radio.
I feel bad for Tucker and can understand why he is the victim when someone plays back his own words.
I started to channel Trumpster thinking you see before the election.
Yes, Tucker is a victim of his own words. Tucker Carlson says he’s the victim of a powerful bully. Meet the 24-year-old who found the tapes.
Who could find fault, other than the Liptards of course and their socialist Jewish conspirators in the Fake News media, with Tucker saying women are “like dogs” because “they hate weakness” and “they’re extremely primitive, they’re basic.” Tucker Carlson says awful things about women in newly unearthed radio clips.
Tucker also believes that it is pure authoritarianism for anyone to play tapes of him talking publicly and expressing those sentiments that smash his veneer of respectability.
I can understand why Tucker is so popular on Trump TV. His comments after all explain how he became a Fox anchor on an hour long prime time program in the first place: Tucker Carlson's Terrible Apology For 'Naughty' Comments - YouTube; Sam Donaldson on Tucker Carlson: "This Is Vulgarity, This Is Hate Speech, This Is Homophobic Speech" | Video | RealClearPolitics Tucker's ratings have gone up in response to these disclosures, as one would expect. He certainly knows how to play to the choir.
Trump Tweets Support for Embattled Fox News Host Tucker Carlson and Jeanine Pirro For Donald and his Trumpsters, it is the reporting of what Tucker Carlson said, rather than what he said, that deserves condemnation:
Most of them probably agree with what Carlson and Pirro said anyway.
Trump also references Jeanine Pirro who has a 10 approval rating from the Duck. The ratings are based on a 1 to 10 loyalty scale. A real journalist is given a 1 rating by Donald, meaning no lap dog loyalty to him, but no one at Fox has been assigned anything lower than a 6 as far as we know.
Fox News pulls Judge Jeanine show after Pirro’s Islamophobic remarks - Vox Her comments were mild compared to what Donald has said in the past. This Fox Anchor suggested that wearing a hijab indicates a desire to substitute sharia law for the U.S. constitution.
In other words, "Judge" Jeanine stated in essence that muslim Americans are not true Americans, want to change fundamental American values by turning the U.S. into an Islamic state, and are un-American in their beliefs, which are not new positions for the White Nationalists and their leader.
I suspect that Pirro will be back before long spouting her nonsense and throwing red meat to the Trumpsters, an easy way to make tens of millions in today's America and to become President apparently.
Just dumb everything down to silly cliches; intentionally mislead people with false statements and narratives repeated over and over again (false = true); treat facts from the "Fake News" media as lies (True=False); and repeat what Donald says about those who oppose him including the true conservatives and those who actually believe in the Constitution which of course excludes Donald and his Trumpsters who are no longer able to absorb accurate information.
It is hardly surprising that Disgusting Don spent more time defending Tucker and Pirro than denouncing the white nationalist who murdered 50 Muslims at two Mosques in New Zealand. Trump response to New Zealand massacre highlights his combative history with Muslims - The Washington Post
Tough talk from Demagogue Don: “I can tell you I have the support of the police, the support of the military, the support of the Bikers for Trump — I have the tough people, but they don’t play it tough — until they go to a certain point, and then it would be very bad, very bad.” Exclusive—Trump: Paul Ryan Blocked Subpoenas of Democrats (emphasis added)
So watch out Uppity Liptards, if you go too far the Trumpsters will have no choice but to fill you with lead from their AR-15s. Fox News host: Now would be a good time to go buy another AR-15 rifle So when their guns get too hot to handle, they will have a spare or two or three or four, and so on.
Trump has somewhere between a 90% to 93% approval rating among republicans. He just claimed 93% yesterday:
Conway had the temerity to claim that Don the Con suffered from narcissistic personality disorder. That is an obvious diagnosis since Donald checks all of the symptom boxes. Narcissistic Personality Disorder | Psychology Today
++
The Trumpster Fox Anchor Tucker Carlson is so upset that anyone would publicly release words spoken by him over the radio.
I feel bad for Tucker and can understand why he is the victim when someone plays back his own words.
I started to channel Trumpster thinking you see before the election.
Yes, Tucker is a victim of his own words. Tucker Carlson says he’s the victim of a powerful bully. Meet the 24-year-old who found the tapes.
Who could find fault, other than the Liptards of course and their socialist Jewish conspirators in the Fake News media, with Tucker saying women are “like dogs” because “they hate weakness” and “they’re extremely primitive, they’re basic.” Tucker Carlson says awful things about women in newly unearthed radio clips.
Tucker also believes that it is pure authoritarianism for anyone to play tapes of him talking publicly and expressing those sentiments that smash his veneer of respectability.
I can understand why Tucker is so popular on Trump TV. His comments after all explain how he became a Fox anchor on an hour long prime time program in the first place: Tucker Carlson's Terrible Apology For 'Naughty' Comments - YouTube; Sam Donaldson on Tucker Carlson: "This Is Vulgarity, This Is Hate Speech, This Is Homophobic Speech" | Video | RealClearPolitics Tucker's ratings have gone up in response to these disclosures, as one would expect. He certainly knows how to play to the choir.
Trump Tweets Support for Embattled Fox News Host Tucker Carlson and Jeanine Pirro For Donald and his Trumpsters, it is the reporting of what Tucker Carlson said, rather than what he said, that deserves condemnation:
Most of them probably agree with what Carlson and Pirro said anyway.
Trump also references Jeanine Pirro who has a 10 approval rating from the Duck. The ratings are based on a 1 to 10 loyalty scale. A real journalist is given a 1 rating by Donald, meaning no lap dog loyalty to him, but no one at Fox has been assigned anything lower than a 6 as far as we know.
Fox News pulls Judge Jeanine show after Pirro’s Islamophobic remarks - Vox Her comments were mild compared to what Donald has said in the past. This Fox Anchor suggested that wearing a hijab indicates a desire to substitute sharia law for the U.S. constitution.
In other words, "Judge" Jeanine stated in essence that muslim Americans are not true Americans, want to change fundamental American values by turning the U.S. into an Islamic state, and are un-American in their beliefs, which are not new positions for the White Nationalists and their leader.
I suspect that Pirro will be back before long spouting her nonsense and throwing red meat to the Trumpsters, an easy way to make tens of millions in today's America and to become President apparently.
Just dumb everything down to silly cliches; intentionally mislead people with false statements and narratives repeated over and over again (false = true); treat facts from the "Fake News" media as lies (True=False); and repeat what Donald says about those who oppose him including the true conservatives and those who actually believe in the Constitution which of course excludes Donald and his Trumpsters who are no longer able to absorb accurate information.
It is hardly surprising that Disgusting Don spent more time defending Tucker and Pirro than denouncing the white nationalist who murdered 50 Muslims at two Mosques in New Zealand. Trump response to New Zealand massacre highlights his combative history with Muslims - The Washington Post
Opinion | The Real Theft of American Democracy - The New York Times (article written by Carol Anderson, author of Amazon.com: One Person, No Vote: How Voter Suppression Is Destroying Our Democracy)
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1. Bought 80 VLY at $10.38-Used Commission Free Trade:
Quote: Valley National Bancorp (VLY)
Investment Category: Regional Bank Basket Strategy
Closing Price Yesterday: VLY $10.13 -$0.25 -2.41%
Regional banks fell more than SPX: KRE $54.22 -$1.39 -2.50%-SPDR S&P Regional Banking ETF
S & P 500 2,832.57 -0.37 -0.01%
VLY Analyst Estimates
Consensus E.P.S. for 2019 (as of 3/11/19) = $.95
P/E at $10.38 with $.95 E.P.S. = 10.93
Consensus E.P.S. for 2020 = $1.05
P/E at $10.38 with $1.05 E.P.S. = 9.89
"Valley National Bancorp (Nasdaq: VLY) is a regional bank holding company headquartered in Wayne, New Jersey with approximately $30 billion in assets. Its principal subsidiary, Valley National Bank, currently operates over 230 branch locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn, Queens and Long Island, Florida and Alabama." Valley National Bank- Corporate Profile
I had started a small ball buying program with a 20 share purchase at $9.45. Item 3.B. (11/11/18 Post) I discussed the 2018 third quarter earnings report in that post.
I decided to bag that approach and round the lot up to 100 shares. I will reinvest the dividend up to $14 per share.
I will not buy more shares in this account except through dividend reinvestment.
Last Earnings Report: Q/E 12/31/18
"Loans increased $924.2 million, or 15.3 percent on an annualized basis, to approximately $25.0 billion at December 31, 2018 from September 30, 2018 largely due to solid organic loan growth within most loan categories."
Annualized ratio of total net charge-offs to average loans = .02%
Total non-accrual loans as a % of loans = .35%
"As previously disclosed, Valley embarked on a continued strategy to overhaul its retail network in the second half of 2018. As a result, we identified several branches within New Jersey and New York that did not meet certain internal performance measures. Of those identified, we have closed 11 branches to date and expect to consolidate 9 additional branches by the end of the first quarter 2019. The estimated annual operating expense savings from the 20 branch closures is expected to be approximately $9 million."
Valley National Bancorp Reports 15 Percent Annualized Loan Growth and Fourth Quarter Net Income
Dividend: Quarterly at $.11
I do not anticipate a dividend hike in 2019 and view one in 2020 as unlikely. The quarterly dividend has been at $.11 per share since the 2013 4th quarter.
For several yields, VLY's payout ratio was far too high. With the lack of earnings growth, the only option available to the Board was to slash the quarterly penny rate from $.1625 per share to the current $.11 which occurred in 2013. My opinion is that a regional bank should not have a payout ratio in excess of 50%.
Valley National Bancorp Declares Its Regular Quarterly Preferred and Common Stock Dividends
Dividend Yield at $10.38 = 4.24%
Average Cost for 100 Shares = $10.19
Dividend Yield at Total Cost = 4.32%
Dividend History: Unfavorable
Valley National Bank- Stock Splits & Dividends
Prior to 2013, there were several 5% stock dividends. The dividend amounts shown prior to 2013 have been adjusted to reflect those stock dividends.
Last Ex Dividend Date: 3/14/19 (shortly after purchase)
Valley National Bancorp Interactive Chart: Awful
Last Sell Discussions: Item # 2.A. Eliminated VLY Sold 51+ VLY at $12.76 (7/25/18 Post); Item # 2.B. Sold 60 VLY at $12.52 (1/28/18 Post)
VLY would justifiably fall into the hated stock category based on its operating metrics over the past five years which included the 2013 dividend cut and no dividend increases since that slash. This purchase is consequently a low expectation buy, with a goal of an annual average total return of 3% to 4% above the dividend yield.
Page 29 Annual Report As shown in those numbers, the ROA and ROE ratios are significantly below the national average, and that is a major negative IMO.
Return on Average Equity for all U.S. Banks-St. Louis Fed (11.96% as of the 2018 4th quarter)
Return on Average Assets for all U.S. Banks-St. Louis Fed (1.35% as of the 2018 4th quarter)
On the positive side, the 2018 numbers did represent an improvement over 2017 and the analysts are predicting a continuation of positive E.P.S. growth this year and in 2020.
The current price does have some valuation and dividend support and limited downside risk until there is a recession.
Recent News: Valley Announces Sale and Leaseback Transaction and Corporate Cost Savings ("Valley National Bank, announced it has entered into an agreement for sale-leaseback of 29 of its currently owned properties. The properties, consisting of 1 corporate location and 28 branches, will be sold for an aggregate cash purchase price of approximately $107 million. The Company expects to realize a pre-tax gain of approximately $81 million (after transaction-related expenses). The transaction is expected to close in the first or second quarter of 2019 and is subject to due diligence on the identified properties." emphasis added)
It is difficult to know the value of bank owned real estate. It is certainly far beyond the kind of research that I am set up to perform.
In the annual reports, there is a brief reference to owned real estate.
Valley National owned 120 banking and other operating properties as of 12/31/18:
Page 26
Quote: Valley National Bancorp (VLY)
Investment Category: Regional Bank Basket Strategy
Closing Price Yesterday: VLY $10.13 -$0.25 -2.41%
Regional banks fell more than SPX: KRE $54.22 -$1.39 -2.50%-SPDR S&P Regional Banking ETF
S & P 500 2,832.57 -0.37 -0.01%
VLY Analyst Estimates
Consensus E.P.S. for 2019 (as of 3/11/19) = $.95
P/E at $10.38 with $.95 E.P.S. = 10.93
Consensus E.P.S. for 2020 = $1.05
P/E at $10.38 with $1.05 E.P.S. = 9.89
"Valley National Bancorp (Nasdaq: VLY) is a regional bank holding company headquartered in Wayne, New Jersey with approximately $30 billion in assets. Its principal subsidiary, Valley National Bank, currently operates over 230 branch locations in northern and central New Jersey, the New York City boroughs of Manhattan, Brooklyn, Queens and Long Island, Florida and Alabama." Valley National Bank- Corporate Profile
I had started a small ball buying program with a 20 share purchase at $9.45. Item 3.B. (11/11/18 Post) I discussed the 2018 third quarter earnings report in that post.
I decided to bag that approach and round the lot up to 100 shares. I will reinvest the dividend up to $14 per share.
I will not buy more shares in this account except through dividend reinvestment.
Last Earnings Report: Q/E 12/31/18
"Loans increased $924.2 million, or 15.3 percent on an annualized basis, to approximately $25.0 billion at December 31, 2018 from September 30, 2018 largely due to solid organic loan growth within most loan categories."
Annualized ratio of total net charge-offs to average loans = .02%
Total non-accrual loans as a % of loans = .35%
"As previously disclosed, Valley embarked on a continued strategy to overhaul its retail network in the second half of 2018. As a result, we identified several branches within New Jersey and New York that did not meet certain internal performance measures. Of those identified, we have closed 11 branches to date and expect to consolidate 9 additional branches by the end of the first quarter 2019. The estimated annual operating expense savings from the 20 branch closures is expected to be approximately $9 million."
Dividend: Quarterly at $.11
I do not anticipate a dividend hike in 2019 and view one in 2020 as unlikely. The quarterly dividend has been at $.11 per share since the 2013 4th quarter.
For several yields, VLY's payout ratio was far too high. With the lack of earnings growth, the only option available to the Board was to slash the quarterly penny rate from $.1625 per share to the current $.11 which occurred in 2013. My opinion is that a regional bank should not have a payout ratio in excess of 50%.
Valley National Bancorp Declares Its Regular Quarterly Preferred and Common Stock Dividends
Dividend Yield at $10.38 = 4.24%
Average Cost for 100 Shares = $10.19
Dividend Yield at Total Cost = 4.32%
Dividend History: Unfavorable
Valley National Bank- Stock Splits & Dividends
Prior to 2013, there were several 5% stock dividends. The dividend amounts shown prior to 2013 have been adjusted to reflect those stock dividends.
Last Ex Dividend Date: 3/14/19 (shortly after purchase)
Valley National Bancorp Interactive Chart: Awful
Last Sell Discussions: Item # 2.A. Eliminated VLY Sold 51+ VLY at $12.76 (7/25/18 Post); Item # 2.B. Sold 60 VLY at $12.52 (1/28/18 Post)
VLY would justifiably fall into the hated stock category based on its operating metrics over the past five years which included the 2013 dividend cut and no dividend increases since that slash. This purchase is consequently a low expectation buy, with a goal of an annual average total return of 3% to 4% above the dividend yield.
Page 29 Annual Report As shown in those numbers, the ROA and ROE ratios are significantly below the national average, and that is a major negative IMO.
Return on Average Equity for all U.S. Banks-St. Louis Fed (11.96% as of the 2018 4th quarter)
Return on Average Assets for all U.S. Banks-St. Louis Fed (1.35% as of the 2018 4th quarter)
On the positive side, the 2018 numbers did represent an improvement over 2017 and the analysts are predicting a continuation of positive E.P.S. growth this year and in 2020.
The current price does have some valuation and dividend support and limited downside risk until there is a recession.
Recent News: Valley Announces Sale and Leaseback Transaction and Corporate Cost Savings ("Valley National Bank, announced it has entered into an agreement for sale-leaseback of 29 of its currently owned properties. The properties, consisting of 1 corporate location and 28 branches, will be sold for an aggregate cash purchase price of approximately $107 million. The Company expects to realize a pre-tax gain of approximately $81 million (after transaction-related expenses). The transaction is expected to close in the first or second quarter of 2019 and is subject to due diligence on the identified properties." emphasis added)
It is difficult to know the value of bank owned real estate. It is certainly far beyond the kind of research that I am set up to perform.
In the annual reports, there is a brief reference to owned real estate.
Valley National owned 120 banking and other operating properties as of 12/31/18:
2. Short Term Bond/CD Ladder Basket Strategy:
A. Bought 3 FEDEX 2.3% SU Bonds Maturing on 2/1/20:
I now own 5 bonds.
Finra Page: Bond Detail (prospectus linked)
Issuer: FedEx Corp (FDX)
FDX Analyst Estimates
Credit Ratings:
Bought at a Total Cost of 99.598
YTM at TC Then at 2.75%
Current Yield at TC = 2.3093%
B. Bought 2 Georgia Power 2% SU Bonds Maturing on 3/30/20:
The bond is tagged as being issued by the Southern Company which is not correct. All of the bonds issuer by Southern and its subsidiaries are grouped under the Southern label at Finra. This bond is not an obligation of Southern.
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of the Southern Co. (SO)
Credit Ratings:
Moody's recently downgraded Georgia Power's SU debt rating to Baa1 based on matters relating to the ongoing cost overruns of two nuclear plants under construction. Moody's confirms Georgia Power's Baa1 rating; affirms Southern at Baa2 and Alabama Power at A1, outlooks are stable Georgia Power still has one notch higher rating than its parent.
That is not an issue IMO that will have any impact on these two short term bonds maturing in about a year. It may become an issue for Georgia Power bonds maturing in a few years.
I had previously bought and sold a 3.25% Georgia Power bond maturing in April 2026:
I would not go that far out now due to potential credit and interest rate risk issues taking into account that bond's current yield.
Bought at a Total Cost 99.131
YTM at TC Then at 2.828%
Current Yield at TC = 2.0175%
A. Bought 3 FEDEX 2.3% SU Bonds Maturing on 2/1/20:
I now own 5 bonds.
Finra Page: Bond Detail (prospectus linked)
Issuer: FedEx Corp (FDX)
FDX Analyst Estimates
Credit Ratings:
Bought at a Total Cost of 99.598
YTM at TC Then at 2.75%
Current Yield at TC = 2.3093%
B. Bought 2 Georgia Power 2% SU Bonds Maturing on 3/30/20:
The bond is tagged as being issued by the Southern Company which is not correct. All of the bonds issuer by Southern and its subsidiaries are grouped under the Southern label at Finra. This bond is not an obligation of Southern.
FINRA PAGE: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of the Southern Co. (SO)
Credit Ratings:
Moody's recently downgraded Georgia Power's SU debt rating to Baa1 based on matters relating to the ongoing cost overruns of two nuclear plants under construction. Moody's confirms Georgia Power's Baa1 rating; affirms Southern at Baa2 and Alabama Power at A1, outlooks are stable Georgia Power still has one notch higher rating than its parent.
That is not an issue IMO that will have any impact on these two short term bonds maturing in about a year. It may become an issue for Georgia Power bonds maturing in a few years.
I had previously bought and sold a 3.25% Georgia Power bond maturing in April 2026:
I would not go that far out now due to potential credit and interest rate risk issues taking into account that bond's current yield.
Bought at a Total Cost 99.131
YTM at TC Then at 2.828%
Current Yield at TC = 2.0175%
3. Intermediate Term Bond/CD Ladder Basket Strategy:
A. Bought 1 Entergy Mississippi 3.25% First Mortgage Bond Maturing on 12/1/27:
FINRA Page: Bond Detail (prospectus is not linked)
Issuer: Wholly owned subsidiary of Entergy Corp. (ETR)
See Recent Discussion of Entergy Mississippi First Mortgage Bonds at Item # 3.A. Bought 3 Entergy Mississippi 3.15% First Mortgage Bonds Maturing on 7/1/23 (2/13/19 Post)
Credit Ratings:
Bought at a Total Cost of 96.53
YTM at TC Then at 3.718%
Current Yield at TC = 3.3668%
B. Bought 2 Highwoods Property L.P. 3.625% SU Maturing on 1/15/23-In a Roth IRA Account:
FINRA Page: Bond Detail (prospectus linked)
FINRA Page: Bond Detail (prospectus linked)
Issuer: Wholly owned operating subsidiary of Highwoods Properties Inc. (HIW)
Issuer Website: Highwoods Properties
SEC Filings
2018 Annual Report:
Credit Ratings: Baa2/BBB (see trade snapshot)
Bought at a Total Cost of 99.635 (includes $4 Vanguard commission)
YTM at TC Then at 3.726%
Current Yield at TC= 3.6383%
Issuer Website: Highwoods Properties
SEC Filings
2018 Annual Report:
Credit Ratings: Baa2/BBB (see trade snapshot)
Bought at a Total Cost of 99.635 (includes $4 Vanguard commission)
YTM at TC Then at 3.726%
Current Yield at TC= 3.6383%
I previously bought 1 in a taxable account bought on 3/28/18.
C. Sold 1 Caterpillar Financial Services 2.85% SU Maturing on 6/1/22:
Finra Page: Bond Detail
Profit: +$14.69
Item 3.A. Bought at a TC of 98.631 (5/21/2018 Post)
Sold at 100.2
YTM at 100.2 = 2.784%
Proceeds at 100.1
D. Baltimore Gas and Electric Fitch Upgrades to "A":
Fitch Upgrades Exelon and Select Subsidiaries' Ratings; Affirms Other Subsidiaries
The previous Fitch rating was A-: Fitch Rates Baltimore Gas and Electric Notes 'A-'; Outlook Positive
C. Sold 1 Caterpillar Financial Services 2.85% SU Maturing on 6/1/22:
Finra Page: Bond Detail
Profit: +$14.69
Sold at 100.2
YTM at 100.2 = 2.784%
Proceeds at 100.1
D. Baltimore Gas and Electric Fitch Upgrades to "A":
Fitch Upgrades Exelon and Select Subsidiaries' Ratings; Affirms Other Subsidiaries
The previous Fitch rating was A-: Fitch Rates Baltimore Gas and Electric Notes 'A-'; Outlook Positive
4. Canadian Dollar Income Strategy:
I will move into and out of Canadian preferred stocks to generate income on my CAD stash.
A. Bought 100 ENBPRP:CA at C$16.5: (C$1 commission):
Quote: Enbridge Inc. Preferred Series P Stock (Canada: Toronto)
Yesterday's Closing Price: ENB-PP.TO C$16.52 +C$0.09 +0.55%
This Canadian equity preferred stock just reset its coupon for five years at 4.35%, which is higher than the 4% coupon paid during the five year fixed coupon period. The reset is based on a 2.5% spread to 5 year Canadian government bond. Enbridge Provides Notice of Series P Preferred Shares Conversion Right and Announces Reset Dividend Rates The 4.35% coupon will last to, but excluding 3/1/24. At that time, Enbridge can redeem at par value plus accrued and unpaid dividends. If ENB does not redeem, then the coupon will reset a 2.5% spread to the then existing 5 year Canadian bond. This kind of provision provides a rolling five year call protection for the owners.
Current Yield at C$16.5 = 6.59%
Par Value: C$25
Dividends: Paid Quarterly and Cumulative
Last Ex Dividend: 2/14/19 (using the prior 4% fixed rate)
Prospectus Excerpts:
The prospectus can be found here: Preferred Shares and Hybrid Securities - Enbridge Inc.
Previous Round-Trips: Item # 4.A. Sold 200 ENBPRP at C(3/25/17 Post)(realized gain snapshot= C$963). That post also contains a snapshot of a 300 share round-trip that netted U.S.$1,458.25. Fidelity converts the CAD profit into USDs while I have to wait for IB to send out a 1099 showing the reportable USD profit.
USD ENBPRP Realized Gain to Date: US$2,064.32
Rational: I am playing with the house's money on this one.
The current yield is juiced by the discounted price to par value. The current yield is acceptable to me.
In part, this purchase is a play on interest rates being higher than now in 2024. If rates are moving meaningfully higher close to the reset date, this preferred stock will likely move up significantly in price provided there is no material change in the credit risk.
There is some potential capital gain potential given the discount to par value.
The price has trended down since I last exited a position. ENB.PR.P Stock Chart
The reason is that it became increasingly apparent that the March 2019 reset would be based on a historically low 5 year Canadian bond rate.
I will move into and out of Canadian preferred stocks to generate income on my CAD stash.
A. Bought 100 ENBPRP:CA at C$16.5: (C$1 commission):
Quote: Enbridge Inc. Preferred Series P Stock (Canada: Toronto)
Yesterday's Closing Price: ENB-PP.TO C$16.52 +C$0.09 +0.55%
This Canadian equity preferred stock just reset its coupon for five years at 4.35%, which is higher than the 4% coupon paid during the five year fixed coupon period. The reset is based on a 2.5% spread to 5 year Canadian government bond. Enbridge Provides Notice of Series P Preferred Shares Conversion Right and Announces Reset Dividend Rates The 4.35% coupon will last to, but excluding 3/1/24. At that time, Enbridge can redeem at par value plus accrued and unpaid dividends. If ENB does not redeem, then the coupon will reset a 2.5% spread to the then existing 5 year Canadian bond. This kind of provision provides a rolling five year call protection for the owners.
Current Yield at C$16.5 = 6.59%
Par Value: C$25
Dividends: Paid Quarterly and Cumulative
Last Ex Dividend: 2/14/19 (using the prior 4% fixed rate)
Prospectus Excerpts:
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| Basic Terms |
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| Option to Convert Every 5 years |
Previous Round-Trips: Item # 4.A. Sold 200 ENBPRP at C(3/25/17 Post)(realized gain snapshot= C$963). That post also contains a snapshot of a 300 share round-trip that netted U.S.$1,458.25. Fidelity converts the CAD profit into USDs while I have to wait for IB to send out a 1099 showing the reportable USD profit.
USD ENBPRP Realized Gain to Date: US$2,064.32
Rational: I am playing with the house's money on this one.
The current yield is juiced by the discounted price to par value. The current yield is acceptable to me.
In part, this purchase is a play on interest rates being higher than now in 2024. If rates are moving meaningfully higher close to the reset date, this preferred stock will likely move up significantly in price provided there is no material change in the credit risk.
There is some potential capital gain potential given the discount to par value.
The price has trended down since I last exited a position. ENB.PR.P Stock Chart
The reason is that it became increasingly apparent that the March 2019 reset would be based on a historically low 5 year Canadian bond rate.
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| 5 Year Canadian Bond: 1980-2018 |
It is also possible that the issuer would redeem rather than allowing the preferred stock to reset for 5 years, when the reset coupon would be undesirable from its point of view.
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.
General Mills (GIS)
ReplyDelete$49.13 +$1.89 +3.98%
Last Updated: Mar 20, 2019 at 11:43 a.m. EDT
GIS is bucking the downtrend today with a better than expected earnings report, which is discussed in this Reuters article:
https://www.reuters.com/article/us-general-mills-results/price-hikes-drive-general-mills-profit-beat-forecast-raise-idUSKCN1R118A
I own a few shares (56+) bought using the small ball purchase restriction with the last buy being made at $36.75 on 12/17/18.
My average cost per share is $43.91 with the highest cost in the chain being 10 shares bought at $51.5 (10/26/17) and 5 shares at $50.36 (11/6/17).
The small ball trading strategy is primarily a preservation of capital and risk reduction technique which requires buying the dips (averaging down in small lots using commission free trades) sand selling the rips (disposing of the highest cost shares profitably). The highest cost 15 shares will be sold when and if the price moves into $52-$53 range.
"Power Financial Reports Fourth Quarter and 2018 Financial Results and Dividend Increase"
ReplyDeletehttps://www.newswire.ca/news-releases/power-financial-reports-fourth-quarter-and-2018-financial-results-and-dividend-increase-874570192.html
The new quarterly rate is C$.4555 per share.
I sold my highest cost PWF:CA lot yesterday at C$30.99 (C$1 IB Commission) and kept the 50 shares bought at C$25.5.
Wednesday, January 23, 2019
Item # 5.A.
https://tennesseeindependent.blogspot.com/2019/01/observations-and-sample-of-recent_23.html
The dividend yield on that lot is now at 7.15%.
I am somewhere over $40K in stock dispositions on 3/18-19.
The USD priced ordinary shares can be bought on the U.S. pink sheet exchange.
https://www.otcmarkets.com/stock/POFNF/quote
Corrects errors from now deleted previous comment:
ReplyDeleteI have now stamped the current FED monetary policy as extraordinarily dovish plus, up from merely dovish plus.
The FED, expressing mild concerns about the ongoing economic slowdown and no concerns about problematic or worrisome inflation, indicated that it will be unlikely to raise interest rates throughout 2019-2020 and maybe once through 2021. The FED will also slow down its monthly reductions in treasuries from a $30B cap to $15B per month starting in May and will end it in September provided the economy evolves as expected.
If that happens, a form of QE would restart by repurchasing treasuries with the proceeds of maturing mortgage backed securities starting in October using a $20B per month cap.
https://www.bloomberg.com/news/articles/2019-03-20/fed-sees-no-2019-hikes-plans-september-end-to-asset-drawdown?srnd=premium
The probability of a rate cut on before January 2020 has been steadily rising and is now close to 50/50:
https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html
Regional bank stocks were mauled given the flattening yield curve flattening even more. The Stock Jocks were temporarily confused about what to do.
Normally, you would think that concerns about a economic slowdown, which is driving Fed's abrupt change in monetary policy, would cause them at least some measure of trepidation.
However, their focus has been on stocks as the only game in town which has become more so after today. Far more weight is given to the extremely dovish FED policy rather than the reasons for it.
The Bond Ghouls were not confused. Interest rates surged lower with the ten year closing at 2.54% or 7 basis points above the 1 year bill and 5 basis points higher than the 6 month T Bill.
The curve has inverted along the 6 month to 7 year maturity range.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
iShares 7-10 Year Treasury Bond ETF
$105.61 +$0.73 +0.70%
YIELD 2.26%
https://www.marketwatch.com/investing/fund/ief
iShares 20+ Year Treasury Bond ETF
$122.68 +$1.27 +1.05%
YIELD 2.48%
https://www.marketwatch.com/investing/fund/tlt
Before the FED announcement, which I expected to dovish on steroids, I decided to move out to 2026 and 2027 with some investment grade corporate bond purchases.
You expect an actual rate cut is possible? I didn't realize that was even in the pundit discussion.
DeleteRegardless of the whys (which are slowing economy & less inflation)... for 10 years the market has consistently rallied on QE and related. And it's pulled back on reductions.
It may not be a crazy idea. The slowdown isn't to reverse and recession. It's just less heat. We've had slow growth for a long time now. Positive buying on QE behavior, which has thing stimulated enough. Not stimulated so much as to make the economy seem normal. But enough to keep slow growth instead of recession happening.
The difference now is foreign economies. Will they add a tanking effect to US economy, so QE is just ineffective?
Or will this be more of the same slowgrowth in the world, using QE type tools .... until our grandchildren think 2% is a high interest rate?
If that is the case, then buying on QE is the best move... even if one doesnt' believe in QE... because for 10 years, it's the way to play this market.
From you post below, these add to the reason why QE type behavior would be a buy:
Delete"with interests rates at historically low levels, inflation remaining non-problematic, and corporate tax cuts fueling share buybacks and dividend increases. "
Land: A rate cut within 9 to 15 months is being forecasted by the Bond Ghouls and is manifested in the federal funds futures and the short term yield inversion. There is no reason why a 1 year treasury bill will generate a lower yield than the 1 month unless bond investors expected a .25% cut in the federal funds rate relatively soon.
DeleteLower interest rates do encourage more borrowing and spending. In that sense, lower rates encourage more economic activity but I doubt that it will work now.
A cut in the FF rate by .25% or .5% is meaningless to the real economy as is the possible modest return to QE next October through buying treasuries with proceeds from maturing mortgage backed securities. The use of tax savings to buy back stock and increase dividend will make stocks more attractive, particularly as bond yield fall, but that use of cash adds nothing to the real economy. It does not create jobs, nor increase revenues and net income. In that sense companies that use cash for those purposes and who use debt to finance ill-advised purchases, will become in time a worse investment. Look at what has happened to IBM and GE for example.
And when the worm turns, a lot of projects financed with debt will prove to be ill-advised which was the case in 2008.
The next recession could easily take the annual budget deficit over $1.5 trillion as federal revenues collapse with more spending on safety net type programs.
So, I would not confuse the stock market with the real economy when look at over months or even a few years.
I did discuss in a March 2009 post that the adoption of a QE was likely to cause stocks to surge. That was based on economic history when stocks surged after the FED's first QE program started in 1933. That monetary stimulus was accompanied by a substantial fiscal stimulus that resulted in one of the largest rallies in history on a percentage basis, but then that move occurred after a 80%+ decline.
Now, while earlier QE programs did energize the stock market and the economy to some decree, those events can not be isolated as to effect from other fiscal stimulus measures and other factors that boosted economic growth.
I am not expecting that a more dovish FED monetary policy will have much, if any, impact on the real economy now. The problems run far deeper and are not being addressed. One negative factor flowing from lower rates is that households who rely on "safe" investments like CDs, T Bills, savings accounts, etc, will have significantly lower disposable income generated by interest rates which will significantly sap on an aggregate basis their spending using disposable income and will rely more on debt to meet expenses. That does not work long term.
So you see QE as tending to drive up the market... but at this stage in economy, to not be very helpful.
DeleteI imagine that's because liquidity isn't the big problem that needs to be solved. That's what QE is so good at addressing post-recessions.
Since my goal is market gains, it'd make sense to take QE as a big positive. Even though the economy is slowing. And to buy with even confidence.
When a VIX model change happens, it will be time to leave the party (during recovery phase.)
So Friday's so-called-big decline was due to Fed announcements and not to the SCO report coming out? The report made it to media at 5pm, but surely there were assumptions and leaks of it's arrival before that.
Google has not so wisely stopped filling in the notify me button. I forgot to click in on the last postings. So not email notice. I'll have to go find them instead. And remember to click it!
Hello SG,
ReplyDeleteNow it seems like stocks have become the only "game in town"; it looks like a take out out of the previous S&P highs are coming; I personally have lightened up alot on stocks, but the crowd has been piling on;
The Fed must be very afraid of recession in Europe /slow growth in China in order to do this.
Does this in your opinion, with a probability of lower rates this year and a high p/e market actually speed up the day of reckoning or atleast a market stumble and a worse recession?
thanks
G: A garden variety recession within two years is currently assigned a zero possibility in stock prices. If that proves to be an incorrect prediction, then there will be a steep adjustment in prices.
DeleteYour can have a valuation correction in stock prices without causing a recession.
It is more difficult for a valuation reset to occur on a non-temporary basis when stocks are the only game in town, with interests rates at historically low levels, inflation remaining non-problematic, and corporate tax cuts fueling share buybacks and dividend increases.
So stocks may climb even higher in that kind of environment, creating even more distance from fair value, and will consequently fall harder when a recession finally happens compared to say churning for a few years in the 2300 to 2900 SPX range, similar to what happened in the 1987 valuation reset.
I use the phrase Day of Reckoning to describe a financial crisis, similar to or far worse than 2008, where debt fueled growth comes to an abrupt end and massive, forced deleveraging and debt defaults occurs. The U.S. treasury experiences multiple failed auctions as the Fed has to buy newly issued debt to keep the nation from defaulting. It will be a debt bomb explosion far greater than the last one simply because of the parabolic rise in worldwide debt obligations since 2008. The consequence will be a depression and a stock market crash unlike anything seen by those who are now alive.
That event would be much different that a recession induced bear market in stocks. What speeds up the Day of Reckoning is continued parabolic increases in debt and debt service costs or what can be generally described as irresponsible fiscal policies by governments and by individuals borrowing and spending beyond their means to service their debt payments. A major recession can also accelerate the debt implosion that will cause the Day of Reckoning.
This is not a near term prediction but one that will continue to grow until there is no escape from the consequences.
Twenty years from now would be my maximum time limit with less than 10 years being unlikely but possible with a major world wide recession that causes massive debt defaults as great or greater than experienced in 2008. So call it somewhere in between 10 and 20 years as more probable than not.
That is dire. I suppose good governance could make a difference. Maybe that will magically appear.
DeleteLand: I have seen no evidence suggesting an inclination to address those issues by either political tribe. They will IMO continue make matters worse, each in their own way, until there is no options or alternatives left to avoid disaster.
DeleteI mention this forecast since it provides an outline and framework for what might happen that investors need to monitor as it develops. At some point, if I am right, action will need to be taken by each household to cushion the blows.
Definitely storing the whole scenario. So if down the road (your guess 10 to 20 years) I've seen no handle grabbed by politics on the debt, I can consider protective actions are needed.
DeleteIt's possible we'll get another Clinton-type at getting debt under control. (As long as we skip the rest of the drama.)
One major difference between investing in a bonds or stock issued by a company is illustrated today by what is happening to Biogen (BIIB).
ReplyDeleteI do not own the common shares but do own 4 senior unsecured bonds that mature on 9/15/20 now trading slightly over the $1K par value.
You would not know that anything untoward had happened to BIIB today just looking at the recent trades for that bond. The last trade yesterday was at 100.098 and the last one today before publishing this comment was at 100.060.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639713&symbol=BIIB4288325
Biogen Inc.
$232.79 -$87.80 -27.39%
Last Updated: Mar 21, 2019 at 10:21 a.m. EDT
https://www.marketwatch.com/investing/stock/biib
Problem discussed at
https://www.marketwatch.com/story/biogen-and-eisai-to-discontinue-phase-3-trial-of-alzheimers-treatment-2019-03-21-791833?mod=mw_quote_news
BIIB abandoned aducanumab, a drug to treat Alzheimer's disease, after it failed to meet the primary goal in a Phase 3 trial.
That is important to the Stock Jocks, but the Bond Ghouls hit the snooze button since it means less cash being used to fund the trial and launch which probably would not occur anyway for over a year even if the drug had succeeded in the late stage trial.
The bond ghouls may develop concerns about BIIB bonds maturing much later than 2020 due to losing a potential revenue source to pay bond obligations.
There is some slight downward price movement in 2025 and 2045 BIIB bonds today:
2025 Maturity 4.050 % Last Trade near 102
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639717
2045 Maturity 5.2% Last Trade Near 103.5
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C639719&symbol=BIIB4288320
Today's treasury auction results:
ReplyDelete56 Day Bill = 2.47% IR
28 Day Bill = 2.516% IR
Note the inversion.
Nike dropped so much on a beat with slower guidance.
DeleteEvery pundit seems to like their fundamentals and leadership in their field.
I bought it for a short (year) turn around based on their Kappernacke ad.
It's still green by 2%. I'm waiting for another rally to sell into.
Do you have any info/opinions on Nike?
Land: The short answer is no. Given the meagre dividend yield, and my focus on capital preservation and income generation, Nike is not on my possible buy list and I have not looked at the company for years.
DeleteOkay, thanks. I bought for trade after their ad. Dick's stopped carrying assault rifles and their store visits skyrocketed. Nike staff said the same after the ad. So I thought I'd experiment. It's not a year yet, which was my projected time period.
DeleteWhat's the 56 and 28 day's importance? (Or is that in comments above I haven't gotten through yet?)
ReplyDeleteThere's an idea that we're going to see tailwinds? I can see a great rally. The market does that. But economic tailwinds?
Good data listed. Thanks!
So sharply seems too much, but slower seems about right.
My plan has been to wait for a rally, and sell off the weaker stocks, including BDCs at loses if need be. (Hang on well to long term with decent divs and fundamentals.) I have enough powder not to. But it's time to start getting cautious. And to at least get in at lower points. I don't know if I missed the moment, but I expect to challenge new highs again before any major crash. So plenty of time.
VIX is still in stable.
I can't guess... whether the weekend will bring a rally from here... or more red.
The New Zealand murders are so horrible. How can anyone be so devoid inside?
---
So the report is out. And we still know nothing. It looks like there's nothing on Russia probe at all. But there's so many loose ends. I was under impression that at least some of Eric, Jr, Ivanka, Jared, Prince & a few others, hadn't been interviewed yet. Media hasn't mentioned that. But how does this wrap up without talking to them?
I noted in the post that I just published that there is now an inversion along the 1 month to ten year maturity spectrum, with the 1 month treasury bill providing a higher yield than the ten year treasury note.
DeleteThis kind of yield inversion is, at a minimum IMO, a flashing caution light about putting new money into the stock market. The signal being sent is that recession odds are higher now than at anytime since the last one which ended in June 2009.
The signal is not IMO that a U.S. recession is imminent but may develop within 12 to 24 months. That time frame could be moved up based on subsequent data and events.
The only conclusion that can be reached now is that there is an ongoing slowdown of unknowable depth and duration. I believe that real GDP growth will be positive in the first quarter and there are factors that could lift the economy up in the last three quarters. But there are factors that could take us down.
The next important economic release will be the jobs report. If that turns negative or prints another number barely above zero job creations, then the longer slowdown thesis should be given more weight than a quick recovery in the second quarter.
The next important macro development will be Brexit which looks like it is headed for a messy divorce that would have negative repercussion in the already struggling European economies, possibly tilting several of the EU countries, particularly Germany, into recessions.
I see. I was picturing inversion as a warning that usually takes a year even 2 before the market crash. So picturing time to get in for a last climb.
DeleteYou're data assessment is that the recession could be as short as a year. Which isn't a lot of time for taking changes on last climbs.
I'll check back in to see the jobs report thoughts!
A factor I've wondered about is expecations about the inversion. It's a known single. So will it by itself start a run from the market? Or will others assume it's too far out before recessions to be a useful single?
The yield inversion is an indicator of an economic slowdown. Investors can be finicky. Many may not want to see their profits evaporate and may start to sell to get out in front of other sellers which can have a snowball kind of effect. The stock market can start to decline before a recession is called by NBER. Generally speaking, when one is unmistakably happening, the market would have already started to adjust prices down.
DeleteThe stock market topped out in October 2007 but NBER called the recession as starting in December 2007 in retrospect. There is no magic number as to how long it will take for a recession to happen after a yield inversion or how far stocks will decline before NBER declares the recessions start date.
https://www.nber.org/cycles.html
My overall impression is that the Stock Jocks are not yet ready to throw in the towel, but a series of bad events and economic data like a really poor jobs report could change that quickly.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/03/observations-and-sample-of-recent_23.html