Observations and Sample of Recent Trades: ENBPRP:CA, VLY

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

U.S. factory orders barely rise; shipments fall further | Reuters

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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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.   

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. 

Bulls looking for repeat of 2016 stock-market rally will be disappointed: Morgan Stanley - MarketWatch

Fund managers dump stocks, buy into ‘secular stagnation’ theory: BofA Merrill Lynch - MarketWatch

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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

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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

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%

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)

Prospectus

Issuer: Wholly owned subsidiary of Entergy Corp. (ETR) 

Entergy SEC Form 10-K: Annual Report for 2018 

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)

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%

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

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:

Basic Terms

Option to Convert Every 5 years 

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. 

5 Year Canadian Bond: 1980-2018 

At a more normal 5% yield on a reset date, the coupon would become 7.5% which then produces a 11.36% yield at a total cost per share of $16.5.

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.