Economy:
I have been pointing out for several weeks now that negative economic numbers are coming in waves and have been largely ignored by the Stock Jocks who are True Believes in trickle down economics.
That economic theory, which can not be killed with facts, is viewed favorably by the Stock Jocks, mostly Trump True Believers, since they are generally at the top of the food chain and can allow whatever to trickle down to the bottom four quintiles.
There was a mild panic attack last Friday based on several negative news items coming out of Europe. Almost all of the data is pointing to a global slowdown of unknowable depth and duration.
The U.S. data is not pointing to an imminent recession but only to a first quarter slowdown in GDP growth which may crawl to the finish at around 1% or less. That is about all that can be said.
Europe may fall into a recession this year even without a messy Brexit.
Until last Friday, the Stock Jocks have dismissed the reasons for the FED's abrupt change in policy, which I equate to pushing on a string, and have focused instead on dubious economic theories that a 2.25% to 2.5% FF rate and a gradual drawdown of an extraordinarily bloated FED balance sheet was somehow strangling the real economy.
The odds of a rate cut have been going up:
Countdown to FOMC: CME FedWatch Tool
And those odds are being reflected in the short term yield curve. When and if the FED cuts the FF rate, will that really benefit the economy? Ask the BOJ, the ECB and the Swiss National Bank about how negative nominal benchmark rates have been the magic elixir for growth.
Perhaps, less attention needs to be paid to Trump's opinion, based apparently on the quack economic theories of Larry Kudlow and Stephen Moore (soon to be a Fed board member), that real U.S. GDP growth would be humming nicely now over 4% if only the dastardly FED had not raised the FF rate to an abnormally low level from zero.
All of that blabber from Trump, Kudlow and Moore proves IMO that they are nothing more than shills for the moneyed elite and have no qualms about depriving the average American household of a fair return on their savings provided the top 1% can continue reaping rewards through owning most of the individually owned risk assets.
More importantly, the garbage spewed by supply siders distracts from an analysis of the real factors that are behind slowdowns, the financial strains of most American households, and the recent spat of financial crises starting with the Asian Contagion.
So with the five year treasury at a 2.24% yield and the 30 year at 2.88% as of last Friday, we can now expect, or so the republicans tell me, a booming economy, generating at a minimum 4% real annual growth until the end of days; provided, of course, more tax cuts are given to corporations to buy back stock and increase dividends.
When the crap hits the fan, and it will eventually cover all of those in its way head to toe, I have the option to move to Switzerland, maybe buy a chalet in the Alps and learn to ski, just put some skis on my wheelchair in a few years.
But when that happens, the Arthur Laffer Larry Kudlow and Stephen Moore True Believers will still be saying, in a most earnest manner, that their voodoo economics would have worked and the tax cuts would have paid for themselves if only they had been larger and more generous to the "job creators". That was their response to what happened after the Bush tax cuts failing to do much other than create a larger gap between the "job creators" and 80% of American households.
I have been pointing out for several weeks now that negative economic numbers are coming in waves and have been largely ignored by the Stock Jocks who are True Believes in trickle down economics.
That economic theory, which can not be killed with facts, is viewed favorably by the Stock Jocks, mostly Trump True Believers, since they are generally at the top of the food chain and can allow whatever to trickle down to the bottom four quintiles.
There was a mild panic attack last Friday based on several negative news items coming out of Europe. Almost all of the data is pointing to a global slowdown of unknowable depth and duration.
The U.S. data is not pointing to an imminent recession but only to a first quarter slowdown in GDP growth which may crawl to the finish at around 1% or less. That is about all that can be said.
Europe may fall into a recession this year even without a messy Brexit.
Until last Friday, the Stock Jocks have dismissed the reasons for the FED's abrupt change in policy, which I equate to pushing on a string, and have focused instead on dubious economic theories that a 2.25% to 2.5% FF rate and a gradual drawdown of an extraordinarily bloated FED balance sheet was somehow strangling the real economy.
 |
| Federal Funds Rate |
And those odds are being reflected in the short term yield curve. When and if the FED cuts the FF rate, will that really benefit the economy? Ask the BOJ, the ECB and the Swiss National Bank about how negative nominal benchmark rates have been the magic elixir for growth.
Perhaps, less attention needs to be paid to Trump's opinion, based apparently on the quack economic theories of Larry Kudlow and Stephen Moore (soon to be a Fed board member), that real U.S. GDP growth would be humming nicely now over 4% if only the dastardly FED had not raised the FF rate to an abnormally low level from zero.
All of that blabber from Trump, Kudlow and Moore proves IMO that they are nothing more than shills for the moneyed elite and have no qualms about depriving the average American household of a fair return on their savings provided the top 1% can continue reaping rewards through owning most of the individually owned risk assets.
More importantly, the garbage spewed by supply siders distracts from an analysis of the real factors that are behind slowdowns, the financial strains of most American households, and the recent spat of financial crises starting with the Asian Contagion.
So with the five year treasury at a 2.24% yield and the 30 year at 2.88% as of last Friday, we can now expect, or so the republicans tell me, a booming economy, generating at a minimum 4% real annual growth until the end of days; provided, of course, more tax cuts are given to corporations to buy back stock and increase dividends.
When the crap hits the fan, and it will eventually cover all of those in its way head to toe, I have the option to move to Switzerland, maybe buy a chalet in the Alps and learn to ski, just put some skis on my wheelchair in a few years.
But when that happens, the Arthur Laffer Larry Kudlow and Stephen Moore True Believers will still be saying, in a most earnest manner, that their voodoo economics would have worked and the tax cuts would have paid for themselves if only they had been larger and more generous to the "job creators". That was their response to what happened after the Bush tax cuts failing to do much other than create a larger gap between the "job creators" and 80% of American households.
March 2019 Fed Interest Rate Decision: Fed Sees No 2019 Hikes - Bloomberg; Fed sees no rate hikes in 2019, sets end to asset runoff | Reuters
The FED has now done more than an abrupt turn in monetary policy and has put dovish and extremely abnormal monetary policy back on a heavy infusion of steroids.
Mortgage rates just fell, and they could go even lower
The FED has now done more than an abrupt turn in monetary policy and has put dovish and extremely abnormal monetary policy back on a heavy infusion of steroids.
Mortgage rates just fell, and they could go even lower
Trump Says Tariffs Will Stay Until China Complies With Deal - Bloomberg I do not see how that would induce China to make concessions now.
Cramer: China trade talks is now more about trust than the trade gap
Fed Chair Powell: China, Europe economies have slowed substantially
Wall Street’s most accurate recession indicator is closer to flashing red after the Fed’s ‘dovish double-down’ - MarketWatch I recently linked an article that 1/10 year treasury inversion is a better indicator than the 2/10.
A key recession indicator just did something that hasn't happened in 12 years (Mid-day 3/21/19: "The spread, or yield curve, between the three-month and 10-year Treasury notes just broke the longest streak ever of being above 10 basis points, or 0.1 percentage points. The two maturities were last below that level in September 2007, a run of 3,009 trading days, according to Bespoke Investment Group.")
U.S. budget deficit widens to $234 billion in February - MarketWatch
Government Debt in the United States - Debt Clock
Cramer: China trade talks is now more about trust than the trade gap
Fed Chair Powell: China, Europe economies have slowed substantially
Wall Street’s most accurate recession indicator is closer to flashing red after the Fed’s ‘dovish double-down’ - MarketWatch I recently linked an article that 1/10 year treasury inversion is a better indicator than the 2/10.
A key recession indicator just did something that hasn't happened in 12 years (Mid-day 3/21/19: "The spread, or yield curve, between the three-month and 10-year Treasury notes just broke the longest streak ever of being above 10 basis points, or 0.1 percentage points. The two maturities were last below that level in September 2007, a run of 3,009 trading days, according to Bespoke Investment Group.")
U.S. budget deficit widens to $234 billion in February - MarketWatch
Government Debt in the United States - Debt Clock
++++++
Markets and Market Commentary:
Federal Reserve policy makes this dividend-stock strategy even more important - MarketWatch This article prompted the Old Geezer to throw caution to the wind and to buy 5 shares of NOBL, see Item # 4 below. See also: 3 ETFs With Reliable Dividends - Barron's
German 10-year bond yield turns negative for the first time since October 2016 That will do the trick. The German economy was faltering when the 10 year bond was shooting over .1% to .15%. Now that it is back below a zero nominal yield, everything will now turn up so fast that the Germans will experience an extreme bout of motion sickness.
Why would a safety feature be sold as an optional item? The answer is to make more money. Doomed Boeing Jets Lacked 2 Safety Features That Company Sold Only as Extras - The New York Times
++++
Portfolio Management:
I did not add it up, and have no intention of doing so, but I reduced by stock allocation last week by somewhere north of $60K. I do not need to take any risks and I am not inclined to assume much now.
There was a buying panic in bond land last week that went parabolic last Friday. I am finding it difficult to find corporate bonds to buy.
My bond portfolio has been going gangbusters and performing far beyond my previous expectations. I will selectively and profitably sell some intermediate bonds into price rallies.
Since I am about 3 or 4 weeks behind in discussing bond purchases, there will be a number of future post discussing corporate bond buys made before today. The odds of buying more intermediate term bonds now are close to non-existent.
I will buy a short maturity when I can squeeze out more yield compared to a treasury bill purchase and have no concerns about credit risk for such short term bonds.
The yield curve looks horrible now.
What can you say when a 1 month treasury bill has a higher yield than any maturity from 1 month through the ten year treasury note:
Note the 1 basis point yield inversion for the 1 year bill and the ten year treasury note.
While it is true that the two year treasury yield has not inverted with the ten year, that is small consolation given the flat yield curve and several inversions along the 1 month to 7 year maturity spectrum.
Federal Reserve policy makes this dividend-stock strategy even more important - MarketWatch This article prompted the Old Geezer to throw caution to the wind and to buy 5 shares of NOBL, see Item # 4 below. See also: 3 ETFs With Reliable Dividends - Barron's
German 10-year bond yield turns negative for the first time since October 2016 That will do the trick. The German economy was faltering when the 10 year bond was shooting over .1% to .15%. Now that it is back below a zero nominal yield, everything will now turn up so fast that the Germans will experience an extreme bout of motion sickness.
Why would a safety feature be sold as an optional item? The answer is to make more money. Doomed Boeing Jets Lacked 2 Safety Features That Company Sold Only as Extras - The New York Times
++++
Portfolio Management:
I did not add it up, and have no intention of doing so, but I reduced by stock allocation last week by somewhere north of $60K. I do not need to take any risks and I am not inclined to assume much now.
There was a buying panic in bond land last week that went parabolic last Friday. I am finding it difficult to find corporate bonds to buy.
My bond portfolio has been going gangbusters and performing far beyond my previous expectations. I will selectively and profitably sell some intermediate bonds into price rallies.
Since I am about 3 or 4 weeks behind in discussing bond purchases, there will be a number of future post discussing corporate bond buys made before today. The odds of buying more intermediate term bonds now are close to non-existent.
I will buy a short maturity when I can squeeze out more yield compared to a treasury bill purchase and have no concerns about credit risk for such short term bonds.
The yield curve looks horrible now.
What can you say when a 1 month treasury bill has a higher yield than any maturity from 1 month through the ten year treasury note:
While it is true that the two year treasury yield has not inverted with the ten year, that is small consolation given the flat yield curve and several inversions along the 1 month to 7 year maturity spectrum.
++++++
Disgusting Don can not allow the dead to rest in peace: Trump goes after McCain over dossier for second straight day; Trump rips McCain on veterans: 'Didn't get the job done'
Only someone with serious mental illnesses would be slamming a recently deceased U.S. senator who fought in Vietnam, unlike Don the Con who avoided any military service through alleged "bone spurs" which apparently healed miraculously after the war ended, no doubt by an Act of God who appointed Donald as Our Dear Leader. Trump's Vietnam bone spur diagnosis made as 'favor' to father: report: USA Today As we all know now from his own words, Donald's service during that period was avoiding venereal diseases in the NYC party scene while McCain rotted in a North Vietnam prison cell.
The former Senator Bob Kerrey from Nebraska, a Navy Seal who lost part of his leg fighting in Vietnam, had an interesting thought about Donald's alleged bone spurs.
Since those do not go away unless removed by surgery, Donald needs to have an X-Ray performed now or produce a medical record that they were removed through surgery.
My thought is that the X-Ray procedure needs to be broadcast live on national TV with the results examined live by a bipartisan panel of highly regarded orthopedic doctors.
If the results show no bone spurs, well that will not convince the Trumpsters that Donald lied to avoid military service, which goes without saying, since the whole episode would be part of Fake News conspiracy that is perpetually trying to put brain cell eating worms in their heads. But, I would observe that those brain cell eating worms would die of starvation before doing much more damage.
I wonder whether there is a Trumpster who has grown weary of the Duck wallowing in his self created Victimhood.
‘Be Weak & Die!’ Seeking Clues Behind Trump’s Weekend Twitter Barrage This latest barrage is just more proof that Trump is off his rocker. It is not an arguable point.
That obvious conclusion has nothing to do with his party or ideology or whatever he may believe at the moment. It is simply an observation about his mental condition which is going from bad to really bad.
Parts of the Steele Dossier have been proven true and several statements so proven were not publicly known when the dossier was written. Tech Firm in Steele Dossier May Have Been Used by Russian Spies - The New York Times("Parts of the dossier have proved prescient. Its main assertion — that the Russian government was working to get Mr. Trump elected — was hardly an established fact when it was first laid out by Mr. Steele in June 2016. . . .The dossier’s talk of Russian efforts to cultivate some people in Mr. Trump’s orbit was similarly unknown when first detailed in one of Mr. Steele’s reports, but it has proved broadly accurate as well." Another part was proven to be true just recently in its major substantive allegation. Report released on one allegation in the Steele Dossier.pdf
While no proof has yet emerged on the golden shower allegation, that has not been disproven either. I doubt that it is true but it would not be surprising to me that Donald did something like that. He is crass with no moral fiber.
Trump's non-stop demagoguery on the Mueller investigation has worked on those susceptible to it, which I estimate to be the 25% to 35% range of the adult population. Poll: Trust in Mueller falls, half say Trump is victim of 'witch hunt' Some claim that the survey question itself was biased and poorly worded: Trump Touts Questionable Survey Results - FactCheck.org
FACT CHECK: Trump attacks Russia probe as biased
I would agree with David Leonhardt that Trump encourages violence. Opinion | It Isn’t Complicated: Trump Encourages Violence-The New York Times Trump is a white nationalist with strong and dominant authoritarian tendencies and personality traits who enjoys a 90+% approval rating among republicans.
Only someone with serious mental illnesses would be slamming a recently deceased U.S. senator who fought in Vietnam, unlike Don the Con who avoided any military service through alleged "bone spurs" which apparently healed miraculously after the war ended, no doubt by an Act of God who appointed Donald as Our Dear Leader. Trump's Vietnam bone spur diagnosis made as 'favor' to father: report: USA Today As we all know now from his own words, Donald's service during that period was avoiding venereal diseases in the NYC party scene while McCain rotted in a North Vietnam prison cell.
The former Senator Bob Kerrey from Nebraska, a Navy Seal who lost part of his leg fighting in Vietnam, had an interesting thought about Donald's alleged bone spurs.
Since those do not go away unless removed by surgery, Donald needs to have an X-Ray performed now or produce a medical record that they were removed through surgery.
My thought is that the X-Ray procedure needs to be broadcast live on national TV with the results examined live by a bipartisan panel of highly regarded orthopedic doctors.
If the results show no bone spurs, well that will not convince the Trumpsters that Donald lied to avoid military service, which goes without saying, since the whole episode would be part of Fake News conspiracy that is perpetually trying to put brain cell eating worms in their heads. But, I would observe that those brain cell eating worms would die of starvation before doing much more damage.
I wonder whether there is a Trumpster who has grown weary of the Duck wallowing in his self created Victimhood.
‘Be Weak & Die!’ Seeking Clues Behind Trump’s Weekend Twitter Barrage This latest barrage is just more proof that Trump is off his rocker. It is not an arguable point.
That obvious conclusion has nothing to do with his party or ideology or whatever he may believe at the moment. It is simply an observation about his mental condition which is going from bad to really bad.
Parts of the Steele Dossier have been proven true and several statements so proven were not publicly known when the dossier was written. Tech Firm in Steele Dossier May Have Been Used by Russian Spies - The New York Times("Parts of the dossier have proved prescient. Its main assertion — that the Russian government was working to get Mr. Trump elected — was hardly an established fact when it was first laid out by Mr. Steele in June 2016. . . .The dossier’s talk of Russian efforts to cultivate some people in Mr. Trump’s orbit was similarly unknown when first detailed in one of Mr. Steele’s reports, but it has proved broadly accurate as well." Another part was proven to be true just recently in its major substantive allegation. Report released on one allegation in the Steele Dossier.pdf
While no proof has yet emerged on the golden shower allegation, that has not been disproven either. I doubt that it is true but it would not be surprising to me that Donald did something like that. He is crass with no moral fiber.
Trump's non-stop demagoguery on the Mueller investigation has worked on those susceptible to it, which I estimate to be the 25% to 35% range of the adult population. Poll: Trust in Mueller falls, half say Trump is victim of 'witch hunt' Some claim that the survey question itself was biased and poorly worded: Trump Touts Questionable Survey Results - FactCheck.org
FACT CHECK: Trump attacks Russia probe as biased
I would agree with David Leonhardt that Trump encourages violence. Opinion | It Isn’t Complicated: Trump Encourages Violence-The New York Times Trump is a white nationalist with strong and dominant authoritarian tendencies and personality traits who enjoys a 90+% approval rating among republicans.
Trump rips Kellyanne Conway's husband, George: 'A total loser!'; Trump, in feud with Kellyanne Conway spouse, calls him 'whack job,' 'husband from hell' | Reuters
George Conway had linked an article in a tweet that explained the narcissistic personality disorder. George Conway (@gtconway3d) | Twitter I am surprised whenever any informed and intelligent person only recently discovers what has been known about Trump for well over a decade.
This tweet like a hundred or so similar ones from Our Dear Leader are taken directly out of the Joseph Goebbels' playbook:
The ugly history of ‘Lügenpresse,’ a Nazi slur shouted at a Trump rally - The Washington Post; Trump, Propaganda and the Destruction of the Free Press | At the Edge | US News; The Ways to Destroy Democracy | The Nation
 |
| 3/20/19 |
This tweet like a hundred or so similar ones from Our Dear Leader are taken directly out of the Joseph Goebbels' playbook:
 |
| 3/19/19 Tweet |
+++++
1. Canadian Reset Equity Preferred Stocks:
A. Bought 100 PPLPRC:CA at C$17.7:
Quote: PPL-PC.TO
Issuer: Pembina Pipeline
Pembina Pipeline Corporation Reports Record Annual Results in 2018
USD Priced Common Stock: Pembina Pipeline Corp. (U.S.: NYSE)
CAD Priced Common Stock: Pembina Pipeline Corp (Canada: Toronto)
This reset equity preferred stock recently reset for five years at a 2.6% spread to a 1.878% five year Canadian government bond.
The new coupon will be 4.478% to, but excluding March 1, 2024.
At that time, the issuer has the option to redeem at the C$25 par value. If that option is not exercised, then the coupon will reset again for 5 years at the same 2.6% spread to the then existing 5 year bond.
As with other reset preferred stocks that pay a spread over the 5 year bond, the owner has the option to convert into another preferred stock that pays the 2.6% spread over the 3 month Canadian treasury bill, subject to certain conditions.
While the Young Turks may scoff at a 4.478% coupon, I would simply note that the coupon is applied to a C$25 par value which produces an annual penny rate of $1.1195 per share and a 6.3249% dividend yield at a total cost of C$17.7. That is not looking so bad now.
Previous Round-Trip: +C$496
Stocks, Bonds & Politics: Item # 2.B. Sold 100 PPLPRC:CA-Item # 4 Bought 100 PPLPRC at C$16.66 Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 5/20/16 - South Gent | Seeking Alpha
Prospectus Excerpt:
Dividends: Paid quarterly and cumulative
Prior to the March 2019 reset, the coupon was at a 4.7% fixed rate.
The price decline since I sold this one back in 2017 is unrelated IMO to credit risk.
This kind of reset equity preferred stock trades in part based on the expectation of a coupon increase as the reset data approaches.
When the result is likely to be a coupon decrease, then the price will decline but may decline too much based on alternative yield investments available at the reduced coupon rate. IMO, that is the case with this reset, when priced at my C$17.7 purchase, given the current yields for alternative investments.
There is also the possibility that the shares can be sold profitably when expectations change of a coupon increase rise or investors view the current yield over the next five years to be too low given market conditions. The former price increase cause is not going to come into being for at least a few years, if at all, given that the new five year period has just started of course.
Canada 5 Year Government Bond-MarketWatch
This company issues several preferred stocks. The prospectuses can be accessed here.
Credit Rating: DBRS Confirms Pembina Pipeline Corporation at BBB and Pfd-3, Stable Trends-DBRS Pfd-3 is equivalent to an S & P rating of BB which is a junk rating. A Pfd-2L would be equivalent to a BBB-. See Page 7 Raymond James Report.pdf
1. Canadian Reset Equity Preferred Stocks:
A. Bought 100 PPLPRC:CA at C$17.7:
Quote: PPL-PC.TO
Issuer: Pembina Pipeline
Pembina Pipeline Corporation Reports Record Annual Results in 2018
USD Priced Common Stock: Pembina Pipeline Corp. (U.S.: NYSE)
CAD Priced Common Stock: Pembina Pipeline Corp (Canada: Toronto)
This reset equity preferred stock recently reset for five years at a 2.6% spread to a 1.878% five year Canadian government bond.
At that time, the issuer has the option to redeem at the C$25 par value. If that option is not exercised, then the coupon will reset again for 5 years at the same 2.6% spread to the then existing 5 year bond.
As with other reset preferred stocks that pay a spread over the 5 year bond, the owner has the option to convert into another preferred stock that pays the 2.6% spread over the 3 month Canadian treasury bill, subject to certain conditions.
While the Young Turks may scoff at a 4.478% coupon, I would simply note that the coupon is applied to a C$25 par value which produces an annual penny rate of $1.1195 per share and a 6.3249% dividend yield at a total cost of C$17.7. That is not looking so bad now.
Previous Round-Trip: +C$496
 |
| Sold 100 at C$21.64 (5/1/17) |
Prospectus Excerpt:
Prior to the March 2019 reset, the coupon was at a 4.7% fixed rate.
The price decline since I sold this one back in 2017 is unrelated IMO to credit risk.
This kind of reset equity preferred stock trades in part based on the expectation of a coupon increase as the reset data approaches.
When the result is likely to be a coupon decrease, then the price will decline but may decline too much based on alternative yield investments available at the reduced coupon rate. IMO, that is the case with this reset, when priced at my C$17.7 purchase, given the current yields for alternative investments.
There is also the possibility that the shares can be sold profitably when expectations change of a coupon increase rise or investors view the current yield over the next five years to be too low given market conditions. The former price increase cause is not going to come into being for at least a few years, if at all, given that the new five year period has just started of course.
Canada 5 Year Government Bond-MarketWatch
This company issues several preferred stocks. The prospectuses can be accessed here.
Credit Rating: DBRS Confirms Pembina Pipeline Corporation at BBB and Pfd-3, Stable Trends-DBRS Pfd-3 is equivalent to an S & P rating of BB which is a junk rating. A Pfd-2L would be equivalent to a BBB-. See Page 7 Raymond James Report.pdf
2. Eliminations:
A. Sold 50 VNOPRM at $22.95-Used Commission Free Trade:
I sold this equity preferred stock on the ex dividend date.
Quote: Vornado Realty Trust 5.25% Cumulative Preferred Series M Stock
Issuer: Vornado Realty Trust (VNO)
VNO SEC Filings
Profit Snapshot: +$56.68
Item 2.C. Bought 30 VNOPRM at $21.98 (5/21/18 Post) Item # 1.A. Bought 20 VNOPRM at $21.57 (12/5/18 Post)(used commission free trades)
Categories: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks; Equity REIT Common and Preferred Stock Basket Strategy
Prospectus
Par Value: $25
Dividends: Quarterly, cumulative and non-qualified as a pass through entity
A. Sold 50 VNOPRM at $22.95-Used Commission Free Trade:
I sold this equity preferred stock on the ex dividend date.
Quote: Vornado Realty Trust 5.25% Cumulative Preferred Series M Stock
Issuer: Vornado Realty Trust (VNO)
VNO SEC Filings
Profit Snapshot: +$56.68
Item 2.C. Bought 30 VNOPRM at $21.98 (5/21/18 Post) Item # 1.A. Bought 20 VNOPRM at $21.57 (12/5/18 Post)(used commission free trades)
Categories: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks; Equity REIT Common and Preferred Stock Basket Strategy
Prospectus
Par Value: $25
Dividends: Quarterly, cumulative and non-qualified as a pass through entity
Optional Call: On or after 12/13/2022 at par value plus accrued and unpaid dividends
Stopper Clause: Yes
B. Sold 102+ VRP at $24.58-Commission Free for Vanguard Brokerage Customers:
Quote: Invesco Variable Rate Preferred ETF Overview
Invesco - Product Detail
Quote: Invesco Variable Rate Preferred ETF Overview
Invesco - Product Detail
Profit Snapshot: +$42.67
Last Discussed: Item # 2.B. Added 5 VRP at $23.17 and 5 at $22.57 (1/16/19 Post)
Closing Price Last Friday: VRP $24.40 -$0.06 -0.25%
Rationale: Variable rate equity preferred stocks generally have lower coupons and current yields than fixed rate equity preferred stocks. The likelihood that the variable rate preferred stocks will increase their coupons have gone down.
As I have pointed out in the past, many of these securities have never paid a variable. Those securities generally fall into two categories: (1) securities that pay the greater higher of a fixed rate or a spread over a short term rate (e.g. MSPRA) and (2) fixed-to-floating rate securities that are sold by issuers with lower coupons than fixed rate coupons and are still paying the fixed rate.
I am going to refrain from buying this one again until the price falls below $22.5. By selling all of my shares in this chain, I get rid of my highest cost lot with a slight profit. Stocks, Bonds & Politics:Item # 2.B. Bought 50 VRP at $24.53-Commission for for Vanguard Brokerage Customers (10/24/18 Post)
Prior Sell Discussions: Item # 6 Sold 272 VRP at $24.88 Update For Exchange Traded Bond And Preferred Stock Basket As Of 7/7/17 - South Gent | Seeking Alpha (profit snapshot= +$132.73); Item # 2 Eliminated VRP Sold 100 at $25.2 Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As 7/29/2016 - South Gent | Seeking Alpha (profit snapshot = +$17.08)
Trading Profits: $192.48
3. Short Term Bond/CD Ladder Basket Strategy:
+$9K in adds
A. Bought 3 Six Month Treasury Bills Maturing on 9/5/19 at Auction:
IR = 2.532%
Auction Results:
The amount purchased is primarily tied to the proceeds recently received from maturing short term treasuries. So I am just rolling over proceeds from short term securities when and as received and available for redeployment.
B. Bought 2 General Motors Finance 2.35% SU Maturing on 10/4/19:
FINRA Page: Bond Detail (founded as AmeriCredit which was acquired by GM in 2010 and renamed General Motors Financial Company Inc.)
This is another link to a Finra page that has information about this bond and bonds in general. Bond Facts
Issuer: Wholly owned subsidiary of General Motors Co. (GM)
GM Analyst Estimates
Credit Ratings:
Fitch is currently at BBB for the senior unsecured debt. Fitch Rates General Motors' New Three-Year Revolver 'BBB' (1/14/19) The preferred shares issued by GM Financial are rated at BB+. Fitch Assigns Final Rating of 'BB+' to General Motors Financial's Preferred Issuance
This is the only GM or GM Finance bond that I own. I will not buy and have never bought a GM bond. When and if I buy a GM Finance bond, I will stick with maturities of less than 1 year. It was GM that stiffed its senior unsecured bond owners in its bankruptcy reorganization and that fact alone will prevent me from every owning its debt. GM's proposal would give bondholders next to nothing-ABC News (April 2009); Bondholder furious over GM bankruptcy
Bought at a Total Cost of 99.731
YTM at TC Then at 2.82%
Current Yield at TC = 2.3563%
C. Bought 1 Treasury 1.875% Coupon Maturin on 12/31/19:
YTM = 2.516%
I now own two bonds.
YTM = 2.516%
I now own two bonds.
D. Bought 1 Treasury 1% Coupon Maturing on 11/30/19:
YTM = 2.519%
YTM = 2.519%
4. Intermediate Term Bond Basket Strategy:
A. Bought 1 GATX 3.25% SU Maturing on 9/15/26:
FINRA Page: Bond Detail (prospectus not linked)
Issuer: GATX Corp. (GATX)
GATX Analyst Estimates
GATX Corporation Reports 2018 Fourth-Quarter and Full-Year Results
2018 Annual Report (debt discussed starting at page 83)
GATX Corporation Announces Quarterly Dividend Increase and $300 Million Stock Repurchase Authorization
Most Recent Debt Offering (1/19): $500M of 4.7% SU Notes Maturing in 2029
Credit Ratings:
Bought at a Total Cost of 93.722
YTM at TC Then at 4.225%
Current Yield at TC = 3.4677%
In this account, I have 2 GATX 2.5% SU bonds that mature on 7/30/19. I am rolling in advance of receiving those proceeds. GATX redeemed early another 2019 bond that I owned.
I previously sold this bond at 97.543: Item # 4.C. (12/26/17 Post) The YTM then was 3.579%.
The decline in this bond's price is not due to increased credit risks but to a rise in interest rates.
When I sold that bond on 12/7/17, the ten year treasury yield was at 2.37%. The 2026 GATX SU was then priced at a 1.209% spread to the ten year treasury yield which was IMO too low given the credit rating.
The ten year treasury was at 2.74% when I bought this GATX bond or at a 1.515% spread, and the time to maturity is shorter by about 15 months.
The ten year treasury closed at a 2.44% yield last Friday.
A. Bought 1 GATX 3.25% SU Maturing on 9/15/26:
FINRA Page: Bond Detail (prospectus not linked)
Issuer: GATX Corp. (GATX)
GATX Analyst Estimates
GATX Corporation Reports 2018 Fourth-Quarter and Full-Year Results
2018 Annual Report (debt discussed starting at page 83)
GATX Corporation Announces Quarterly Dividend Increase and $300 Million Stock Repurchase Authorization
Most Recent Debt Offering (1/19): $500M of 4.7% SU Notes Maturing in 2029
Credit Ratings:
Bought at a Total Cost of 93.722
YTM at TC Then at 4.225%
Current Yield at TC = 3.4677%
In this account, I have 2 GATX 2.5% SU bonds that mature on 7/30/19. I am rolling in advance of receiving those proceeds. GATX redeemed early another 2019 bond that I owned.
I previously sold this bond at 97.543: Item # 4.C. (12/26/17 Post) The YTM then was 3.579%.
The decline in this bond's price is not due to increased credit risks but to a rise in interest rates.
When I sold that bond on 12/7/17, the ten year treasury yield was at 2.37%. The 2026 GATX SU was then priced at a 1.209% spread to the ten year treasury yield which was IMO too low given the credit rating.
The ten year treasury was at 2.74% when I bought this GATX bond or at a 1.515% spread, and the time to maturity is shorter by about 15 months.
The ten year treasury closed at a 2.44% yield last Friday.
5. Income Generation Via Commission Free ETFs-Small Ball Strategy:
A. Bought 5 NOBL at $66.39-Commission Free for Vanguard Customers:
Quote: ProShares S&P 500 Dividend Aristocrats ETF Overview
Closing Price Last Friday: NOBL $66.12 -$1.11 -1.65%
Expense Ratio: .35%
Sponsor's Website: ProShares S&P 500 Dividend Aristocrats ETF (NOBL)("The only ETF that focuses exclusively on companies in the S&P 500 that have grown dividends for at least 25 consecutive years.")
While I will generally follow the small ball purchase restriction for this ETF, I will also buy, whenever the spirit moves me, five share lots even though the price is not the lowest in the chain. I have hacked my stock allocation and gaining back some exposure in dribs and drabs through low cost ETFs does not anything in my portfolio's totality.
In the recent periodic rebalancing of NOBL's holdings, the follow stocks were added: PBCT (already own), Caterpillar, Chubb and United Technologies.
Holdings.pdf
Current Position: 5 Shares
Maximum Position: 200 Shares
Closing Price Last Friday: NOBL $66.12 -$1.11 -1.65%
Expense Ratio: .35%
Sponsor's Website: ProShares S&P 500 Dividend Aristocrats ETF (NOBL)("The only ETF that focuses exclusively on companies in the S&P 500 that have grown dividends for at least 25 consecutive years.")
While I will generally follow the small ball purchase restriction for this ETF, I will also buy, whenever the spirit moves me, five share lots even though the price is not the lowest in the chain. I have hacked my stock allocation and gaining back some exposure in dribs and drabs through low cost ETFs does not anything in my portfolio's totality.
In the recent periodic rebalancing of NOBL's holdings, the follow stocks were added: PBCT (already own), Caterpillar, Chubb and United Technologies.
Holdings.pdf
Current Position: 5 Shares
Maximum Position: 200 Shares
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.
You've been saying that US data currently indicates a quarter or two slowdown, not a recession.
ReplyDeleteDid Friday change that calculus?
VIX not high enough to wince yet. Though not in the low 10's, 12's 13's that it is during very profitable steady times.
----
On Trump's deep diving last week, it says one thing. Barr is not in his pocket. If in pocket, Barr would have assured Trump the report had nothing, and also worked up the cover plan with him.
Instead Trump was clueless, and tweeting. Today he's not tweeting either. So he still is not feeling there's a good cover to depend on. Nor does he think the report exonerates him as much as the public is debating over.
Land: The negative news last Friday came out of Europe, not the U.S.
ReplyDeleteThe last Atlanta FED GDP estimate for the first quarter improved to +1.2%. It looks like the economy will crawl over 1% real GDP growth this quarter.
Trump has been talking about placing tariffs on European car imports. If that is done, it could be the trigger for a recession in Germany. The Markit report on Germany manufacturing released last Friday showed contraction with a reading at 44.7, a 79 month low. The Eurozone manufacturing PMI was reported at 47.6, which indicates contraction, and a 71 month low.
As usual, there are a number of future events that could contribute to a worldwide recession and a number that could reverse the slowdown. So it is just too early now to call the likely end result.
I missed the tariff news. I had cnbc on a bunch on friday. Guess not the right bunch.
ReplyDeleteSo current guess is that nothing's showing up as clear. Depends on various future factors. Thanks!
From the other blog, this seems like a good summary:
ReplyDelete"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. "
Looking at the rate ratios,
ReplyDeletehttps://fred.stlouisfed.org/series/T10Y2Y
do you remember the Dec 11-12 start of downturn, as in part a reaction to the ratio hitting that low that the chart shows on Dec 4?
Land: The concern that probably precipitated the 20% SPX decline was an increase in recession fears due in part to a belief that the FED would continue to raise interest rates. The last hike occurred at the December 2018 meeting.
Deletehttps://www.federalreserve.gov/newsevents/pressreleases/monetary20181219a.htm
So even with rates coming down, the market was afraid the Fed wouldn't notice and would raise into it.
DeleteYes, that does sounds familiar. It didn't stick because it didn't make sense then either.
More on the yield curve inversions:
ReplyDeletehttps://www.cnbc.com/2019/03/22/us-bonds-treasury-yields-move-lower-as-investors-await-economic-data.html
Waiting game...
ReplyDeleteThe report wait is over...
Mueller decided all of the questionable meetings mean nothing criminal.
And doesn't answer anything about all the smoke on obstruction or collusion.
Sigh. Well the market will be happy about it all.
The Mueller report is irrelevant to the U.S. economy and corporate profits. For the Stock Jocks, it might improve their mood some but I view the report as a non-event outside the political arena.
DeleteThere are a number of issues raised by Barr's letter that will need to be answered when he testifies before the House Judiciary Committee.
Mueller used the words "find" and "establish" when reaching his conclusion of no collusion.
That suggest to me that some kind of evidentiary standard was used by Mueller to arrive at his conclusion.
It is one thing to say that there was no evidence of collusion and another to say that there was some evidence which failed to surpass that evidentiary hurdle.
For example, it was recently revealed in Court that Manafort and Gates delivered to Russia Trump's polling data, while they were part of the campaign.
That would be evidence of collusion but possibly insufficient for reasons that are not known publicly. This kind of data could be used by Russia in its campaign to target voters.
There was also a meeting in August 2016 between Manafort and a former Russian intelligence officer which is suspicious. They claimed that the meeting involved a peace plan for the Ukraine rather than any campaign related matters which is suspicious given the earlier transfer of polling data to the same Russian, a former Russian intelligence officer.
However, from a prosecutor's point of view, without independent evidence from Manafort or others that the purpose was cooperation which Manafort may have denied and provided Mueller's team with alternative explanations, the evidence may fall short of the evidentiary standard being used.
There are a bunch of data point that need to be talked about publicly before any of this can be judged.
DeleteIt's frustrating to watch the Barr spin put to make it all neutral because it's not meeting a standard used to indict. ... even though Mueller didn't even interview Trump or some other family/staff members. And even though not indictable under criminal codes can still be a sell out to Russia deal.
To add to your datapoints, we still need to know what Flynn provided that was worth his getting off so lightly.
10 year to 2 year is only down 1 point today to a .13 gap vs the starting .14 gap. So it doesn't change anything in spite of the news talk.
ReplyDeleteI have the ratio chart, do you have a link to that chart that by day shows all the treasury rates by category (2year, 10year, 20year)?
Land: If you want all of the nominal rates, that information is provided daily by the Treasury in one table.
ReplyDeleteThis link is to daily treasury rates so far this year excluding today:
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019
More investors are focused now on the 3 month/10 year and the 1 year/10 year spreads as better indicators than the 2/10. I have linked two articles discussing which inversions are the most important, one is linked above where the following statement is made:
“I’d highlight that the 3-month to 10-year spread is important because the Fed has done a lot of research on which best predicts future recessions and it found that one to be preferable,” said BMO Capital Markets rates strategist Jon Hill.
This is a link to that article again:
https://www.cnbc.com/2019/03/22/us-bonds-treasury-yields-move-lower-as-investors-await-economic-data.html
If you want a chart of the 3 month/10 year spread, this is a link to one:
10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity
https://fred.stlouisfed.org/series/T10Y3M
(move left cursor all the way to the left)
I would emphasize that the inversion needs to be more than a few days if the past is a reliable guide.
Last Friday was the first day of the 3 month/10 year inversion.
The 3 month yield intra-day now is at 2.453% as of 2:56 p.m. EDT:
https://www.marketwatch.com/investing/bond/tmubmusd03m?countrycode=bx
U.S. 10 Year Treasury Note
2.412% -0.03
https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx
So the inversion is widening some today.
I would view the duration of the inversion to me more important than the depth.
The bond part of my portfolio is providing enough juice to satisfy my capital appreciation appetite so far. My Fidelity account, which is bond heavy, was up over $1.1K last Friday. I am not sure that it will last much longer so I have started to do more light selling into this monster bond rally.
The Stock Jocks seem to have recovered from their panic attack last Friday and have put on their happy face. Another line in the sand is being drawn but there is IMO a lack of conviction that it will hold. Perhaps a small breeze, meaning another negative economic report, will be sufficient to erase the line.
The treasury updates its daily treasury yield table late afternoon.
ReplyDeleteIf anyone wants to see a table of intra-day yields, they can be found here:
https://www.bloomberg.com/markets/rates-bonds/government-bonds/us
I noted in the prior comment that a yield curve inversion has occurred over several days or months in the past. Some would argue that a long period is required to give a valid signal. This kind of statement is supported by the historical evidence.
However, the chart of the 3 month/10 year indicates that once an inversion occurs, it will persist for days or months.
There was an example in February 2006 where there was a minor inversion, followed by a slight and temporary move above the line, and then a far more decisive break below the inversion line that lasted for several months through July 2007.
Another example from 1989 shows a brief move above the line before inverting again several months prior to the 1990 recession. And the period of time spent in inversion was shorter than the next two examples, which indicates that there is no magic number of days that are necessary before the inversion gives a valid recession forecast or the number of days between the inversion and the onset of the recession.
The 2001 recession started within a month or so after the inversion ended. There was about 6 months between the end of the inversion and the start of the December 2007-June 2009 recession, but the period of inversion was longer than prior to the 2001 recession.
The 2y to 10y went from .13 to a wider margin of .17 by end of day.
ReplyDeleteI'd want more info on the 3m to 10 year to verify that the Fed things it matters more and why. But with two referencing it, seems much more likely to be true.
I don't understand this from Kudlow "The spread is flatter, but it’s 100 basis points or so. It’s not 20 or 30.”"
I wonder if 3m to 10 is a sooner pickup on inversion and that's what makes it stronger?
If it's an indicator, what's the range of time until the market's peeked (by the time of recession doesn't matter for investing)? You've got some past numbers listed. Time to market top matters more than to recession?
So 3m/10y once it inverts in the past it's lasted a while. It's inverted now.
I'd expect a need for time in inversion for it to be predictive in the same way the VIX model uses a counter. Deeper mood or economic indicators are needed, i.e. time, rather than a sudden reaction to some factor.
If 3m/10y has stayed awhile once inverting, has the 2y/10y sometimes inverted but very briefly and in those cases, been less of an indicator?
Some questions. I don't have focus at the moment to dig for each answer. But even if I did, the real question is how will the yield rates behave over the next weeks, months?
I'm having a hard time believing it's inverted. It feels surreal.... like a famous indicator just came to be. It is just touching right now, so I wouldn't call it much of an inversion yet. Friday went from 5 to -2. Today went to -3.
My plan is to sell into the big rally that brings new highs or close to it. Including the poor fundamental losers at a loss. (I'll keep Ford for it's div, but it's 50% off and not super.)
That will still leave stocks owned. I'll add indices on dips.
Land: The yield curve inversion is a well known and accurate predictor of a future recession. It is not discussed much since actual inversions are rare. The last inversion of the 3 month/10 year was before the 2008 Near Depression. Since 1980, there have been 4 inversions including the current one in this spread. Every past one preceded a recession. Once there was an inversion, the recession followed and it remains to bee seen whether this time is different.
ReplyDeleteIt would be helpful to see daily rather than month data. You can download in the CSV format if you do not have excel. (see download button in the upper right corner)
When the 3 month/ten year data is downloaded, look at the various inversions occurring before recessions. A persistent though minor negative number started in July 2006, gradually accelerating to 40 to 60 basis point range by October 2006. Starting in April 2007, the numbers started to decline below 40 basis until going positive again on 5/30/17. By that point, the recession signal was firmly in place and the subsequent positive numbers before the Near Depression were irrelevant.
The New York FED model referenced by Kudlow does not use daily numbers but average monthly numbers which skews the results. That model was last updated with February 2019 data so the recent lower numbers for March will impact the results when the data is updated:
https://www.newyorkfed.org/medialibrary/media/research/capital_markets/Prob_Rec.pdf
Kudlow did give incorrect current data on the NY recession model based on the 3 month/10 year spreads, since his quoted comment made in the CNBC article apparently originated from May 2018.
DeleteBased on the data through February, the NY Fed model predicts a 24.62% of a recession by February 2020. That number will increase when the March numbers are added to the model.
One reason that the yield inversion models are given such credence is that they have actually worked for over 6 decades, which can not be said for other recession prediction models.
The Cleveland Fed has a model that uses 3 month and 10 year spread data and that one calculates a 29.7% recession probability within one year, but the risk has been moving up sharply since last December. The data goes through 2/22/19 so expect a worse number when everything is updated. The last update was published on 2/28/19.
https://www.clevelandfed.org/our-research/indicators-and-data/yield-curve-and-gdp-growth.aspx
Taking everything, and looking up in charts. This is what I found. (Assuming my calculations are correct.)
ReplyDeleteSummary
--------
I’m trying to spot when the inversions started. And when the market top happened 1st & 2nd time.
2000
----
April 2000 is brief inversion. July 2000 to Jan 2001 is bigger inversion.
Top April then Sept 2000 (2 months after 2nd in inversion starts)
2001 recession within month or so after inversion ENDED, market already topped.
***
*** So tops are same time as inversions appear. 2nd top is 6 months after 1st inversion.
Lots of volatility but not much climb (nothing notable)
--------
--------
1989
----
March 1989 is brief inversion. May 1989 bigger. Till Dec 1989 w/rate recovery in there.
Top July 1990. Double top happen? (it looks right on top of each other) Oct 89 1st top?
Inversion, brief recovery, invert again. Several months to 1990 recession.
***
*** So top is 16 months after 1st inversion. But a 1st similar top is 7 months after 1st inversion. Not much climb after 1st (double bottom could be used for climbing)
--------
--------
2007
----
Feb 2006 brief inversion. Invert again July 2006. Worse (& better) till May 2007.
Top July 2007 then Oct 2007. A LOT of climb after start of inversion.
Recession 6 more months after end of inversion.
***
*** So 1st top is 15 months after 1st inversion. 1st top is 12 months after 2nd inversion.
With a lot of climb after both inversions.
-------
-------
1987
----
Sept 1987 crash, no inversion happened
=========================
So tops are:
1989 ----- 0 & 6 months, not much climb after 1st inversion
2000 ----- 7 & 16 months, not much climb after 1st
2007 ----- 12 & 15 months, *much* climb after 1st inversion (happens after 2nd inversion.)
That doesn’t give a clear roadmap of when to get out because 2007. One year is a long time out, and it’s three months to get that big climb included.
I suppose next step would be to figure out how the VIX model's recovery period (during unstable) happened, to see if it clarifies it any.
The MA test confuses. Many bottoms touch the 200month Moving average.
However the 20 month (430 day) MA is well below the line for the whole stretch. Yet that's been a good indicator in 2000 and 2007. Is it just that MA changes as you stretch out the chart?
https://tinyurl.com/y6z4gwar
Land: I mentioned yesterday that the Stock Jocks were already over their Friday anxiety attack. Those attacks can last for a day or weeks.
DeleteExcerpt during those periods, the general tendency is to keep the pedal to the metal, ignore all the negative vibes when everything still likes fine (job and GDP growth), and act when conditions are unmistakably going from good to bad. That approach has served them well over the years but can catch them flatfooted at times.
NBER started the last recession in December 2007.
https://www.nber.org/cycles/cyclesmain.html
If you asked most informed stock investors then, they would have scoffed at that start date. The dating of recessions will occur a long time after they start and end based on a number of historical criteria:
https://www.nber.org/cycles/recessions_faq.html
For the last recession the start date was called around 11/28/2008, hardly helpful since it was obvious even to the most uninformed investor that the economy was in meltdown.
https://www.nber.org/cycles/dec2008.pdf
If an investor waits until someone call a recession, it is too late to make allocation adjustments to preserve capital and/or to redeploy capital raised by selling at higher prices.
In deciding what to do, a lot depends on each individuals need to grow capital, their age, risk tolerances and unique situational risks.
I keep emphasizing here that my decisions are based on no situational risks provided I do not lose a lot of capital. So I am highly tilted toward a conservative portfolio.
Others have to decide what to do based on their own individual circumstances.
Using the last recession as an example, the VIX Model gave a good sell signal in August 2007. There were thereafter three major confirmation events (November 2007; January 2008; March 2008) to get out of dodge before the real damage started. I have suggested in the past using some combination of technical indicators such as the VIX Model and a greater than 5% decline below the 200 day SPX SMA using a 1 year chart. Even when both conditions occur, some investors may want to ride it out and simply increase their purchases during the downdraft. No matter what I believe about the market, I will at a minimum invest cash flow into stocks when there is a major decline.
I do recall the months after the market topped in October 2017. The economic catastrophe that was about to occur was unavoidable in October 2007. We just missed going into another Great Depression type period.
Yet, if you looked at the major stock indexes, the Stock Jocks were hardly stressed except for panic attacks occurring for a few days or weeks until the bottom fell out in September 2008. An investor could have sold in mid-May 2008 during this last and very brief rally effort, as I recall, without suffering much of loss from the October 2007 highs.
I intentionally ignored recession completely. It is irrelevant to investing since it happens after the need has already happened to get out.
DeleteSo I focused on inversion and time until tops, 1 and 2.
On VIX so August 2007 is 1st signal. Major confirmation events follow (November 2007; January 2008; March 2008)
.
Top July 2007 then Oct 2007. A LOT of climb after start of inversion.
So following the VIX triggers would have narrowed down the extended time after inversion of 12 months, to selling during that 2nd peek. It'd be very hard to know when to sell during that 2nd peek. When the VIX spikes back up over 20 I imagine.
So question is whether using the VIX on the other two ... would provide the same clue... in a timely way in that case CLOSER to the inversion (since it's closer to the top by a year.)
""greater than 5% decline below the 200 day SPX SMA using a 1 year chart.""
That certainly helps give a picture to assess.
In the chart, what's confusing is the 20MONTH MA that Fear&Greed uses, is so far below everything. I must not be using the right calculations.
Whether to sell, or trim, or balance differently, or wait it out, depends on one's goals & portfolio. For getting into the market now (for me) it helps to have a sense of the risk factors and possible timing before the market mood (trend) changes. Helps alleviate anxiety too to have some guess factors, even when just holding.
Land: If you wait until NBER calls a recession (December 2008 e.g.) or two quarters of negative GDP growth, your head has already been chopped off.
DeleteThe conundrum that can not be answered with the kind of certainty and comfort level desired by investors is when to make a major shift out of stocks.
Since that is so difficult to ascertain, one option is to ignore the question. Just use low cost ETFs, rebalance among asset categories from time to time, and ignore everything.
Unfortunately, it is difficult to be a buy and hold investor since the pain the market is capable of inflicting is enormous, and one does not have to have a good memory to know that is true.
That causes people to sell at the worst times (e.g. October 2008) and then avoid buying when the opportunities are the greatest (e.g. February-March 2009)
When looking at past history and SPX moving average lines, I would suggest using a one year YF chart and then enter a custom time period. I have preset 50, 100 and 200 day lines, using different dates to see how that impacts the results during a relevant period leading up to a recession.
The VIX Model is designed to avoid false signals with its Trigger Event definition, so its bias is to keep you in the market after the formation of the Stable Vix Pattern. Combining that with 5% below the SPX 200 SMA adds another safety valve to a too early exit.
As you add criteria to avoid an early exit, you increase the decline percentage before an exit point is hit. I have not figured out a way to avoid that.
The problem with using preset criteria, designed to keep you in the market, is that the investor will be selling at prices less advantageous than those prevailing at or near the top. The VIX Model alone would have had you selling in October 2007, the best possible time. The VIX Model + 5% below the SPX 200 day SMA line would have occur sometime in June 2008 near 1,250 as I recall. The top in October was near 1550 with the bottom eventually being 666 in March 2009.
Even for investors with more of a buy and hold strategy and capable of withstanding blood in the streets scenarios, it is still a good idea to try and raise cash at some point in a bull cycle for redeployment at lower prices during one of the periodic catastrophic events defined as 45%+ declines from a recent high (3 in my lifetime)
In the last 20% drop, one of the two conditions, the VIX Model, that I have outlined was not satisfied for a sell signal but just barely. The S & P 500 crashed below the 5% 200 day SMA line like it was not even there. That was consistent with panic induced selling but would also be consistent with what happens when the worm turns on a non-temporary basis against the bulls.
That seems to summarize the whole situation well.
DeleteThe VIX model's biggest asset when indicating a sell or even a drop that's not a sell, is it's past record of identifying a 2nd rise maybe to top maybe not, but to not sell during the first panic itself.
I am wishing that I'd used the VIX to verify when it just missed sell signal, to buy with that raised cash. Buy solid stuff not risky junk, but to buy.
So if those are your signals, how does inversion fit in? How do you use that? I think you've said, but maybe I'm missing that.
Aldeyra Therapeutics Inc. (ALDX) was my bungee jumper today:
ReplyDelete$9.71 +$2.57 +35.99%
DAY RANGE $ 9.35 to $12.79
52 WEEK RANGE $6.75 to $16.70
VOLUME: 21.7M
SHORT INTEREST 679.36K 02/28/19
https://www.marketwatch.com/investing/stock/aldx/charts
The ALDX drug reproxalap met both primary endpoints in a Phase 3 trial for the treatment of allergic conjunctivitis, discussed more fully in this article:
https://www.fiercebiotech.com/biotech/aldeyra-s-anti-allergy-eyedrop-sails-through-first-phase-3-trial-boosting-stock-price-by
Prior to today's price rise, the market cap was around $196M.
I own 70 shares with an average cost per share of $5.78. The shares are part of my small cap biotech lottery ticket basket with the emphasis on "lottery ticket".
The last bungee jump, which did not last long, occurred in September 2018 which took the price from $7.85 or so to its 52 week high over $16. ALDX used the opportunity, which is almost a 100% guarantee to happen, to sell stock which knocked the wind out of the move.
Part of the 9/18 bungee jump was this announcement:
http://ir.aldeyra.com/news-releases/news-release-details/aldeyra-therapeutics-announces-positive-mesothelioma
It is hard for me to generate a buzz off a pre-Phase 1/2 trial result. Yet it is a cancer drug.
On the next day, the company issued another press release that fed into the buying frenzy:
http://ir.aldeyra.com/news-releases/news-release-details/aldeyra-therapeutics-announces-positive-results-phase-2b-dry-eye
This was a phase 2b clinical trial results release for reproxalap, except this trial was for the treatment of dry eye disease.
Reproxalap is also in a trial for the treatment of " noninfectious anterior uveitis, a severe inflammatory ocular disease. Often occurring in conjunction with other autoimmune diseases."
https://www.aldeyra.com/development-status/
And the drug has received positive results for treating Sjögren-Larsson Syndrome (SLS):
https://www.aldeyra.com/sjogren-larsson-syndrome-sls/
One major problem with a really small clinical stage biotech is that it may be successful in securing marketing approval from the FDA but flop big time when it tries to become a real drug company, lacking the resources and talent to manufacture, distribute and sell the product. This company needs to sell itself or enter into a licensing agreement with a major pharmaceutical company try. Allergan would be a natural fit.
Hello SG, it is hard for me to believe these analysts think the worst iS over for Europe; the auto tariffs have not been removed. Economic stimuli has been going on for quite a while and now it is supposed to be working. Improvement in China is supposed to be a boon for Europe; I think its too close to call. I wondered what you thought.
Deletethanks
https://www.bloomberg.com/news/articles/2019-03-18/time-for-optimism-on-europe-goldman-and-morgan-stanley-think-so
https://www.bloomberg.com/news/articles/2019-03-25/stocks-in-asia-look-mixed-as-yields-extend-decline-markets-wrap
G: The Stock Jocks are not going to sweat the details. The industrial production number reported by the EU in mid-March was for January 2019 while the Markit data on industrial production is more recent and ominous.
Deletehttps://ec.europa.eu/eurostat/documents/2995521/9649466/4-13032019-AP-EN.pdf/1d86924d-dbb8-40d2-9e3c-cf35e6e6f46b
https://www.markiteconomics.com/Survey/PressRelease.mvc/4cefa382ccdb442abacb89f63243a682
I do not see those green shoots in the EU, but I am sitting at a desk in Tennessee.
The Stock Jocks are not going to sweat the details on these kind of daily economic numbers. Interest rates and inflation are both benign and supportive and U.S. GDP growth, while slowing in the first quarter, is not yet showing signs of derailment this year.
So when the Stock Jocks have been rewarded for just chilling out, never fighting with the FED, connecting themselves to an IV of chill juice during their frequent panic attacks, and waiting for a 2 by 4 them on the side of their heads, then it pays to go with the flow and not be a party pooper or a Cassandra. That is what has worked since March 2009. Sure, they will stay too late, many will have their heads chopped off, but it was better to live and die with optimism about the future than being scared to get out of bed because the sky might fall on you.
There will be data that will be released soon, including the jobs report, and certain events (China trade deal or more tariff wars) that will shape the near future for markets. The odds of a U.S. recession are creeping up but I doubt they will surge over 40% when the next estimates are published by the NY and Cleveland Federal Reserve Banks.
I am just happy that my bond portfolio, the largest segment, is doing so well, at least for now.
When I start to my asset allocations process, a continuous process, the first and overriding guiding principle is that I do not have to take any risks. Then I ask how can I generate some alpha to improve total returns, consistent with a capital preservation objective, above the risk free rate (short term CDs insured by the FDIC and T Bills). The process then becomes really detailed and complicated with lots and lots of trading rules developed by Left Brain.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/03/observations-and-sample-of-recent_27.html