Saturday, April 27, 2019

Observations and Sample of Recent Trades: DIR:UN:CA, FDVV, TERP

Economy

The government's first estimate of real GDP growth in the 2019 first quarter was reported at a much better than expected 3.2%: Economy grows 3.2% in first quarter, GDP shows, much stronger than anticipated - MarketWatch 


Gross Domestic Product, First Quarter 2019 (Advance Estimate) | U.S. Bureau of Economic Analysis (BEA)


However, when drilling down into the report, the rise in GDP was partly attributable to a 3.7% decrease in imports which is a potential sign of "a deceleration in American spending" and a $218.4B annualized buildup in unsold inventory. In the government's math, imports count as a negative in GDP accounting, so a decline in imports actually makes growth appear stronger. Inventories contributed .65% to GDP, and the smaller trade deficit due partly to a decline in imports added 1.03%. Without those items, which are expected to reverse, GDP increased by 1.52%. US Treasury yields fall despite stronger GDP printTrade, inventories power U.S. economy to 3.2 percent growth in first quarter - Reuters 


Domestic demand only increased at a 1.3% rate, the slowest increase since the 2013 second quarter. Growth in consumer spending declined to 1.2% from 2.5% in the prior quarter.  Residential construction fell 2.8%, which is the 4th straight decline. The economy was helped by a 2.4% increase in government spending. 

The personal consumption inflation number used in the GDP also decelerated from the prior quarter, falling to .6% annualized rate compared to 1.5% in the 2018 4th quarter. Excluding food and energy, the PCE price index declined to 1.3% from 1.8% annualized rate. 


The first estimate of first quarter real GDP growth will be revised in subsequent reports. 


So the report was better than expected for the wrong reasons IMO. Sort of like unemployment falling because unemployed individuals were so discouraged about finding a job that they left the labor force. 


Nonetheless, the important points are that real GDP is still growing at a rate that is neither too fast nor too slow and inflation remains subdued. 

As I mentioned earlier, those models are guesses. Even the final GDP estimate provided by the government is a guess, though it does constitute the best guess. Measuring economic activity in the huge and complex U.S. economy will never be precise, but a reasonable range estimate can be made after all the data becomes available.  

Uneven housing recovery with some markets behind pre-recession peak


New single family home sales increased 4.5 percent in March


The Bond Ghouls see no chance of a rate hike on or before the January 2020 FED meeting and a 68.6% probability that the FF rate will be cut at least .25%



Countdown to FOMC: CME FedWatch Tool

That probability assessment is reflected in the yield curve. Note how the yield slides from the 6 month bill to the 2 year treasury note. 


Daily Treasury Yield Curve Rates

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Portfolio Management

The recent better than expected economic numbers has caused me to sell some intermediate corporate bonds and to reallocate the proceeds into shorter maturities. The intermediate term definition that I use is 3 to 10 years from the current date. 


While I have significantly pared the intermediate term corporate bond allocation down to about $200K as of today, that number is still a meaningful allocation for me. I simply started with a large inventory. 

When I reach an inflection point where I do not want to buy, the natural next question is what can I sell. I reached that point with intermediate term corporate bonds over a month ago. 


I have referenced this relatively minor allocation change in previous posts. 


As usual, I am not making any sudden major allocation changes. 


Instead, I have been spacing the intermediate term corporate bond sells over time. Discussions about those transactions will continue for at least another month. I am currently way behind in discussing trades that have already occurred. I will now adopt and wait and see mode.  

The bond rally that took the 10 year treasury yield from 3.24% (11/8/18) to 2.39% (3/28/19) appeared to predicated IMO on a recession prediction that is unlikely to occur within the time frame contemplated by the Bond Ghouls. 


I would emphasize that predicting directional changes in interest rates is at best dicey. In this recent change, where I first quit buying intermediate term bonds given their yields and shifted to selling them, I am motivated in part by the narrow yield spreads between short and intermediate bonds, which is a current fact that does not require a future forecast. The yield curve is flat. 


So I am not giving up much by buying a 1 year treasury bill at auction and selling an intermediate corporate bond maturing in the 2023-2026 range. 


I still have a significant allocation to longer term Tennessee Municipal bonds that will continue rising in price if rates decline further. I do not presently anticipate a decline to new lows, but recognize that my future forecast of higher rates may be wrong. 


The Bond Ghouls thought that the GDP report was a buy signal for longer dated treasuries: 


Friday's Close (4/26): TLT $123.81 +$0.42 0.34%: iShares 20+ Year Treasury Bond 


That is not an irrational response given the low PCE inflation numbers and the problems lurking beneath the surface of that report. This GDP report has caused me to pause paring my intermediate term corporate bond allocation.   

The process of coping with the inevitable uncertainty about the future will often lead to allocations which are contradictory, with each component in the allocation addressing different possible future scenarios weighted based on my current "best guesses". 


All of my portfolio allocations have as their starting point capital preservation followed by income generation. Capital appreciations is the third and least important objective given my financial circumstances.  


The income generation component does require some measured risk taking where risk is controlled and mitigated through a variety of trading rules formulated by Left Brain.    


++++  


Markets and Market Commentary:  
3m earnings Q1 2019 (Closing Price Day of Report: MMM $190.72 -$28.36 -12.95%

Intel stock plummets on disappointing earnings outlook as new CEO describes ‘more cautious’ trend - MarketWatch


Popular Heart Drugs Tainted With Carcinogens Face a Wave of Lawsuits This article discusses generic high blood pressure drugs manufactured by a Chinese company. 


While the Stock Jocks expressed some concern about the weaker than expected earnings reports from Intel and MMM, their concerns quickly evaporated into ignoring those reports and focusing instead on the more positive reports from MSFT and AMZN.   

+++++++

Trump:

Trump’s Fed pick Moore irks senator for calling Cleveland and Cincinnati ‘armpits of America’ - MarketWatch


Apparently, Donald sees no contradiction in calling the Mueller report a "total vindication", which is obviously false, or a "total hit job". 


House oversight chairman cites 'massive' obstruction by Trump, Barr - Reuters (“Both President Trump and Attorney General Barr are now openly ordering federal employees to ignore congressional subpoenas and simply not show up - without any assertion of a valid legal privilege,” according to U.S. Representative Elijah Cummings) While that is a true statement, Barr and Trump will nonetheless be successful in obstructing House investigations. Barr will be Trump's active co-conspirator in efforts to prevent testimony from federal employees and to ignore valid subpoenas. 


Donald does not even want to hear any discussion about how to secure the 2020 election from Russian interference. It is a taboo topic for him. In Push for 2020 Election Security, Top Official Was Warned: Don’t Tell Trump


If Trump loses in 2020, he will not go quietly. He will instead use his twitter megaphone to claim that the election was rigged and millions were allowed to vote illegally. The only way to prevent Donald from making those claims is to beat him decisively with nothing even approaching a close call in battleground states. 

Trumps obstruction efforts have now shifted into high gear: Trump: 'We're fighting all the subpoenas' from House Democrats 

Listening to republicans, and I not making this stuff up, the Russia investigation was a partisan witch hunt concocted by the loser democrats in concert with the liberal Fake news media to overturn the results of the 2016 election.  


Their view is also that the money spent on the the investigation was wasted, while insisting that the 2½ year investigation into the Benghazi embassy attack, which was an effort to tag Hillary with a security lapse at one embassy, was worth every penny.  


The republicans spent more time investigating the embassy attack on Benghazi than Congress spent on investigating the 9/11 attacks. Congress spent more time investigating Benghazi than it did 9/11 


And, it goes without saying that it is impossible to have a fact based conversation with the Trumpsters on the contents contained in the Mueller report or anything else. It is not worth the effort to even try. Facts do not matter and facts that are inconsistent with their opinions are per se false anyway. 


Trump thinks that the 5 republican Supreme Court Justices will stop any effort by Congress to impeach him. Contradicting Constitution, Trump vows Supreme Court fight over impeachment - Reuters
 Trump Says He'd Seek Supreme Court Help to Deter Impeachment 


While those Justices will do whatever they can to implement reactionary republican ideology, taking the U.S. gradually back to 19th century jurisprudence while bending over backwards to support the Imperial Presidency doctrine which is tailor made for Donald doing whatever he wants, it may be a bridge too far for them to delete the impeachment clause in the U.S. Constitution. 

Trump could care less about the conservative values expressed in the U.S. Constitution except of course for a liberal interpretation of the Second Amendment. After all, he has his guys on the Supreme Court and is well underway in refashioning the federal appellate and district courts in his image, having already succeeded in that task with the party formerly known as republicans.  


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1. Intermediate Term Bond/CD Ladder Basket Strategy:

A. Sold 1 AT & T 3% SU Maturing on 2/15/22:



Profit Snapshot: +$9.98




Item # 3 (1/18/17 Post)


Finra Page: Bond Detail


Sold at 100.4

YTM at 100.4 Then at 2.852%
Current Yield at 100.4 = 2.988%
Proceeds at 100.3 (after $2 Commission/YTM at 2.889%)

This bond needed to be sold during the 2017 bond rally and then bought back when interest rates spiked higher last year.


As noted previously, I did sell a majority of immediate term corporate bonds into the 2017 rally. Snapshot of 2017 Short Term Bond Trading Profits Fidelity Account only


B. Sold 1 Vodafone 2.95% SU Maturing on 2/19/23



Profit Snapshot: +$28.42




Item # 4.B. Bought 1 VOD 2.95% SU Maturing on 2/19/23 at a TC of 97.605 (4/19/18 Post)


FINRA Page: Bond  Detail (prospectus linked)


Sold at 99.3

YTM at 99.3 = 3.144%
Current Yield at 99.3 = 2.97%
Proceeds at 99.2

I am keeping one bond.


I know that a 2.97% current yield for a Baa2 rated bond maturing in almost 4 years is unattractive to me.


But, I have to deal with the way things are and play the hand that I am dealt even if the cards are bad.


So far I have been successful in trading intermediate term bonds by buying when interest rates pop and then selling during a significant decline in rates. That trading strategy has provided  me with actual yields in excess of their respective YTMs when the bonds were originally purchased.


Profits are of course small given the 1 and 2 bond lots but the percentage returns on invested capital have been acceptable for a bond. 


Link to Last VOD Bond Sell: Item # 3.A.  (3/3/19 Post)

  
2. Short Term Bond/CD Ladder Basket Strategy:

May 2019 Maturities: 

SU = Senior Unsecured Bond ($1K par value per bond)
CD = Certificate of Deposit ($1K par value per CD)-FDIC Insured
MI = Monthly Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
IR: Investment Rate for Treasury Bills Bought at Auction

7 Treasury 3 Month Bills 2.423% IR 5/2/19 (bought at auction)
2 BP Capital 1.676% SU Bonds 5/3/19 (bought 11/17 and 12/17)
5 Treasury 2.434% IR 28 Day Bill 5/7 (bought at auction)
2 Mainsource BK 1.6% CDs MI 5/9 (18 month CD)
1 Shell 1.375% SU 5/10 (bought 12/17)
1 BP Capital 2.237% SU 5/10 (bought 7/18)
2 Amgen 1.9% SU 5/10 (bought 12/17)
2 Westpac BK 1.65% SU 5/13 (bought 12/17)
2 Boston Private BK 1.6% CDs MI 5/14 (18 month CDs)
2 Celgene 2.25% SU 5/15 (bought 1/18)
1 Treasury .875% 5/15 (secondary market)
1 Bank NY 2.2% SU 5/15 (bought 7/18)
2 Amgen 2.2% SU 5/22 (bought 4/18)
4 Comerica 2.125% SU 5/23 (bought 1/17 and 12/17)
3 Treasury 2.455% IR 6 Month T Bills 5/23 (bought at auction)
5 Treasury Day Bills  2.434% IR 5/28 (bought at auction)
5 McDonalds 1.875% SU 5/29 (various)
2 Disney 1.85% SU 5/30 (bought 12/17)
3 Treasury 1.5% 5/31/ (various)

$52K


A. Bought at  Auction 5 One Year Treasury Bills Maturing on 4/23/20:

IR = 2.443%

Auction Results:




I am probably going to keep buying 5 one year T Bills at auction until I have 5 maturing each month.


B. Bought 1 Treasury 1.5% Coupon Maturing on 5/15/20:

YTM = 2.39763%



I now own 3 bonds.


C. Bought 1 Treasury Maturing on 10/3/19:

YTM = 2.45%


This is a zero coupon treasury bought in the secondary market rather than at auction.

D. Bought 5 Treasury 28 Day Bills at Auction Maturing on 5/28/19:

IR= 2.434

Auction Results: 28 Days


Schwab does not charge a commission for treasury auction purchases. 

3. Eliminations and Pares:

A. Sold 100 DIR.UN:CA at C$11.92 (C$1 commission):




Profit Snapshot: +C$215




Item # 4.A. Bought 100 DIR.UN:CA at C$7.95 (12/12/18 Post)


Quotes:


CAD Priced Units: DIR.UN

USD Priced Units: DREUF (Grey Market-Dark with no bid/ask quotes and some brokers charge special fees to execute orders)

Closing Price Last Friday: DIR-UN.TO C$11.51  +C$0.02  +0.17% 


The Canadian REITs sell "units" rather than "shares". 


WebsiteDream Industrial REIT


Portfolio | Dream Industrial REIT (223 properties with 20.2M square feet of gross leasable space)


Distributions: Monthly at C$.05833 (C$.7 per unit annually)


Dream Industrial REIT March 2019 Monthly Distribution


Last Earnings ReportDream Industrial REIT Reports Solid 2018 Financial Results


Recent Press Releases


Dream Industrial REIT Provides Acquisitions Update and is Added to the S&P/TSX Composite Index Toronto Stock Exchange


Dream Industrial REIT Completes $144 Million Equity Offering at C$10.45Dream Industrial REIT Announces Acquisition of CAD$235 Million (US$179 Million) Logistics Portfolio in Five Cities Across the Midwest U.S. and $125 Million Equity Offering


B. Pared TERP-Sold 51+ at $13.63:



History This Account:



Quote: TerraForm Power Inc. Cl  A (TERP)
Website: TerraForm Power
TERP SEC Filings
TerraForm Power  Projects

2018 Annual Report


Closing Price Last Friday: TERP $13.55 -$0.03 -0.22% 


Profit Snapshot: +$138.51




This was an elimination for this account. 


Item # 1.A. Bought 50 TERP at $11.18-Used Schwab Commission Free Trade (9/16/2018 Post) The shares went ex dividend on the day after my purchase.


I still own shares in my Fidelity account where I am reinvesting the dividend. The following link is to the same post: 
Item 1.A. Bought 100 TERP at $11.19 and Sold 50 at $11.5)-Used Fidelity Commission Free Trades I mentioned in that post that the purchase of 100 shares was a mistake. I thought that I was in a family's member's account who did not own any shares. My maximum limit established by Left Brain's cast in concrete rules was and is 100 shares plus shares purchased with dividends.  


Shortly after my purchase, Goldman Sachs upgraded TERP to neutral from sell and downgraded the stock back down to sell in early April. I do not have access to that report but would emphasize that GS went quickly from a sell to just a neutral rating and then back to sell after a brief price spurt. 


I view TERP as a bond substitute with a greater risk to the income stream than a senior bond, but also with the potential for increasing the "coupon" and providing a better yield than a senior unsecured bond in today's low yield environment. 

  
Dividends: Increased 6% effective for the 2019 first quarter. The new annual rate is  $0.8056 

Last Ex Dividend Date:  3/21/19 (before sell)


Last Earnings Report (Q/E 12/31/18): 


SEC Filed Press Release or 
TerraForm Power Reports Fourth Quarter and Full Year 2018 Results | Business Wire


The market reacted favorably to this earnings release. 


TERP Trading Profits to Date (100 shares total) = $154.26


My remaining position is 51+ shares at an average total cost per share of $10.86. The average cost number would indicate, without looking it up, a slight ROC adjustment to the tax cost basis for the dividend paid in 2018 4th quarter, the first one received for this lot. 


I then looked it up and found that all of the TERP dividends paid, starting in 2014, were classified 100% ROC. TerraForm Power | Investors | Distribution Information  

The tax is postponed rather than forgiven and may be recouped in its entirety as taxable income when the shares are eliminated profitably.   

4. Small Ball-Commission Free ETFs:


The purpose of ETF "bookmarks" is to identify, prior to a meltdown, ETFs that I will consider buying during a selloff period.


By using commission free ETFs, I can average down cost effectively and may consider selling the highest cost lot or lots after averaging down when I can do so profitably, a standard risk control trading strategy designed for market volatility and a potential bear market in stocks.


The following purchase is an example of a bookmark. 


A. Bought 10 FDVV at $30.2-Commission Free for Fidelity Customers:




Quote: Fidelity High Dividend ETF Overview


Closing Price Last Friday: FDVV $30.41 +$0.11 +0.36% 


Sponsor's webpageFDVV | ETF Snapshot - Fidelity


Expense Ratio: .29%


Objective: To track the Fidelity Core Dividend Index before fees and expenses. That index "is designed to reflect the performance of stocks of large and mid-capitalization dividend-paying companies that are expected to continue to pay and grow their dividends."


Holdings: 122 stocks as of 4/9/19


Some Top Holdings




Purchase Restriction: Small Ball Rule


Maximum Position: 500 shares


Current Position: 10 shares  (cautious on steroids)

DisclaimerI 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.

Wednesday, April 24, 2019

Observations and Sample of Recent Trades: CIOPRA, CMFN, DX, GMREPRA

Economy

Existing home sales declined a seasonally adjusted 4.9% last month. Existing-Home Sales Slide 4.9% in March | www.nar.realtor

U.S. to end waivers for countries buying Iranian oil imports-MarketWatch The rise in energy costs will contribute to inflationary pressures. Consumers will also have less money to spend on discretionary purchases without increasing their debt.  

Trump’s Washing Machine Tariffs Stung Consumers While Lifting Corporate Profits - The New York TimesThe Production, Relocation, and Price Effects of US Trade Policy: The Case of Washing Machines | BFI 

The GOP's tariffs are a tax on U.S. consumers. It remains to be seen whether their use as a bludgeon for trade concessions will be successful. I do believe that it is probable that a trade deal with China will be concluded within 90 days. The Trump Administration has certainly led everyone to believe that a deal is certain. 


The New York Fed's GDP model currently estimates first quarter real GDP growth at 1.4% and at 1.9% for the second quarter. Nowcasting Report The Atlanta Fed's model is currently predicting 2.8% real GDP growth for the first quarter. GDPNow It is a guessing game. The important point IMO is that the economy remains in an expansion mode that is neither too slow nor too fast. 


First quarter earnings reports have been mostly positive so far with some notable exceptions. I would note that a number of earnings beats were due to low expectations. Moreover, GAAP E.P.S. could be down from the 2018 first quarter, which was the case for United Technologies, but investors were nonetheless enthusiastic about the non-GAAP earnings beat and an increase in the estimated 2019 non-GAAP E.P.S. range from $7.7 to $8 to $7.8 to $8. UTK 1st Quarter Report  


The Bond Ghouls are not impressed and are taking interest rates back down. U.S. 10 Year Treasury Note The German 10 year bond yield is currently at zero percent. GDBR10 Quote - German Government Bonds 10 Yr: Bloomberg Markets

+++++++

Markets and Market Commentary

A rise in the USD is pressuring precious metals. Dollar edges toward 22-month high as Swiss franc and Aussie dollar tumble - MarketWatchDXY - U.S. Dollar Index (DXY) - MarketWatch (a rise in DXY indicates USD strength against a basket of 6 currencies weighted in the Euro). 


The rise in energy prices is not helping currencies that were previously viewed as based on or at least linked to commodity prices, which includes the Australian Dollar (AUD), the Canadian Dollar (CAD), and the Norwegian Krone (NOK)

I do not view Medicare for All as likely to pass in my lifetime. This plan would not receive a single republican vote. Many democrats would balk based on the price tag. Disagreements about the plan details are widespread among Democrats who support some version, making it less likely that even the supporters can come to an agreement. ‘Medicare-for-all’ is no longer purely theoretical. Democrats are coming to terms with thatMedicare-for-all: Where Democrats stand on health-care issues - Washington Post

‘Medicare for All’ Could Cost Hospitals Billions of Dollars Since private insurers generally pay more than Medicare, hospitals would be deprived of revenues that now receive. The Costs of a National Single-Payer Healthcare System


Nonetheless, until yesterday, investors have been selling healthcare stocks recently based on the fear that this kind of legislation will actually pass. Health care suffers worst week of 2019, and technician sees more pain


Closing Price Yesterday: FHLC $42.41 +$0.68 +1.63% : Fidelity MSCI Health Care Index I have been adding to this ETF, which can be brought commission free by Fidelity customers, during the recent downdraft.  


4 New Ideas From the Wide-Moat Focus Index


+++++++

Trump

Trump says: 'Nobody disobeys me' - Reuters Trump is an authoritarian. That statement could just as easily been made by Putin or his soul brother Stalin. 


Trump sues to block subpoena from House Democrats seeking information on his finances There are likely multiple reasons why Donald wants to keep his tax returns private, and I doubt that any of them are related to ongoing IRS audits. 


Trump unleashes on the media in morning tweetstorm - POLITICO


This is a sample of Donald's Easter tweets: 


(1) The New York Times "will have to get down on their knees & beg for forgiveness-they are truly the Enemy of the People!"


(2) "Morning Psycho (Joe), who helped get me elected in 2016 by having me on (free) all the time, has nosedived, too Angry Dumb and Sick." 


He is referring to the former republican congressman from Florida's panhandle region Joe Scarborough. 


Trump further claimed in his Easter tweet that the Morning Joe program on CNBC was a "really bad show with low ratings -and will only get worse". The show recently received its highest ratings, up 10% Y-O-Y. Joe Scarborough Claps Back at Trump for Calling Him 'Morning Psycho' 


{Disgusting Don tagged Scarborough's wife Mika Brzezinski with his "low I-Q" label, claiming further that she was bleeding badly from an alleged face-lift. Donald Trump Twitter Rant Targets Mika Brzezinski's Looks | Time}



(3) "The Radical Left Democrats, together with their leaders in the Fake News Media, have gone totally insane". The Stable Genius has spoken, so carve that sentence on Mount Rushmore next to George Washington.  

(4) In another tweet, Donald lashed out at Paul Krugman, calling him "stupid", "obsessed with hatred" and as having lost "all credibility, as has the Times itself, with his false and highly inaccurate writings on me."  

No examples of the alleged "false and highly inaccurate writings" were provided by the Duck. In Trumpworld, an accusation unsupported by facts is equivalent to stating a fact that can not be disputed which leads to numerous accusations being made that are contradicted by facts. 


Krugman is not a NYT reporter, but writes an opinion column published in the NYT. He graduated summa cum laude from Yale University and received a PhD in economics from MIT. He was awarded a Nobel Prize in Economics. 


His last opinion piece was titled The Great Republican Abdication - The New York Times. In that column, Krugman argued that the republicans no longer believe in American values: "The simple fact is that one of our two major parties — the one that likes to wrap itself in the flag-no longer believes in American values. And it’s very much up in the air whether America as we know it will survive." A growing number of Americans share that opinion. 


(5) Trump claimed that he was cleared of all wrongdoing and it was the Democrats who were the criminals. Trump: Democrats committed crimes 

So it was good to see Donald imbued with the Christian spirit over the Easter holiday. 


While Mueller laid out a persuasive obstruction of justice case against Donald, far more convincing IMO than the obstruction case developed against Nixon, I recognize that any effort to impeach Trump would be an exercise in futility since no republican would ever cast a vote in favor based on what can be proven now. 


Barr's opinion on obstruction is worthless partisan banter from a Trump sycophant. Trump could be indicted now for obstruction of justice, if he was not the President, and possibly convicted based on the material contained in the Mueller report. Political partisans from all sides would need to be excluded from the jury.  


Consequently, without substantial new and irrefutable evidence that Trump committed other serious felonies, it would be unnecessarily divisive to launch an impeachment proceeding in the House Judiciary Committee. I previously agreed with Pelosi that impeachment efforts need to be "bipartisan". Stocks, Bonds & Politics (3/13/19 Post)(scroll to "Nancy Pelosi on Impeaching" Trump)  That opinion has not changed. 


Investigations can continue, but Trump will stonewall every single one of them. Trump says he is opposed to White House aides testifying to Congress, deepening power struggle with Hill - The Washington Post  


Congressional oversight over the executive branch was part of the House's constitutional responsibility when the GOP controlled the House, but is now unconstitutional with the Democrats in control. 


Trump's obstruction efforts will now shift to making frivolous legal arguments to stymie each and every investigative effort. 


Claiming executive privilege when the facts clearly show a waiver, even if the privilege claim is well founded, is just one frivolous argument. 


Needless to say, the now public testimony relating to Trump's obstruction efforts would not be privileged even without a waiver which was clearly given. 


It is hard to claim a privilege for asking aides to lie in Trump's obstruction of justice effort when it is the President who has the constitutional duty to uphold the law rather than to make attempts to violate it and then claim a privilege to prevent questioning about those acts and statements.   


The intended and actual impact will be to delay the investigations for an extended period of time, possibly into the 2020 election season. 

If the republican regain control over the House, they will just stop every investigation before one can cause any further damage to Trump which would otherwise occur through unfavorable factual revelations that show him for what he is. 


The Mueller Report, as Mitt Romney noted, paints Trump in a most unfavorable light since it shows him for what he is.   


Newt Gingrich was once asked why the republicans wanted to impeach Clinton for lying about having sex with Monica. 

His reply was predicable. 


The republicans wanted to impeach Clinton "because we can", meaning simply that the GOP then had more than enough republican votes in the House to approve articles of impeachment against Clinton. The republicans then had a majority in the Senate (55 to 45) which was well short of the 2/3rds necessary to convict.  


That effort made the republican base happy and demagogues will always pander to their base rather than to act in the nation's interest. The effort was irresponsible and a waste of time and money since the republicans knew there was no chance whatsoever to convict in the Senate, where a two-thirds majority is required.  How the senators voted on impeachment -- February 12, 1999 


Some republican senators voted not guilty on both counts. The end result was never in doubt. The republicans will do it again when they have the power to do so. The democrats need to show restraint and act more responsibly than Trump's party.  


+++++

1. Eliminations:

A. Sold 50 CIOPRA at $24.77-Used Commission Free Trade:




Profit Snapshot: +$155.22 (last 50 share lot only)




Item # 4.A. Bought 50 CIOPRA at $21.67-Used Commission Free Trade  (1/13/19 Post)


Quote: City Office REIT Inc. 6.625% Cumulative Preferred Series A Stock

CIO.PA Stock Chart

Security Description:


Category: Equity REIT Cumulative Equity Preferred Stocks 

Par Value: $25
Optional Redemption: On or after 10/4/21 at par value plus accrued and unpaid dividends
Dividend Stopper Clause = Yes (page S-22 of the prospectus)
Change of Control Provision: Yes
Last Ex Dividend: 4/10/19 (after sell)

Last Sell DiscussionsItem # 4.A. Sold 50 CIOPRA at $24.14-Used Commission Free Trade (3/17/19 Post)Item 3.A. Sold 50 CIOPRA at $25.21 (1/27/17 Post)(profit snapshot= $146.97


B. Sold 70 GMREPRA at $25.87:




Quote: Global Medical REIT Inc. 7.5% Cumulative Preferred Series A Stock  (GMREPRA)

Prospectus
Par Value: $25
Dividends: Cumulative, Non-Qualified and Paid Quarterly  
Issuer Optional Call: On or after 9/15/22 
Last Ex Dividend:  4/12/19  (after sell)

Last Sell Discussions: Item # 1.A. (2/20/19 Post)


C. Sold 103 DX at $6.18-Used Commission Free Trade:




Quote: Dynex Capital Inc.-MarketWatch


Profit Snapshot: $13.2 (ROC adjustment for 50 share lot bought last year of $8.52)




I took 1 quarterly dividend in cash that was paid last year and the remaining dividends were used to buy additional shares.


I suspect that many individual investors believe that they are doing better than they actually are when owning MREIT common stocks. There is a tendency to double count the dividend payments, first in the amount of the dividend payment and second in the profit generated by the reduction in the cost basis.


In my small DX lot, I received $43.47 in dividends and realized a gain of $13.2. While that looks like a total return of $43.47, a correct calculation would subtract the ROC adjustment from either the dividend amount received or the profit. When that is done, the actual total return for my lot was $34.95. In my case, I did earn a total return in excess of the dividend payments, but I had to spend several minutes figuring that out.


When there are meaningful ROC adjustments to the tax cost basis,  it would be difficult to know whether the investment is producing an acceptable return or the amount of the total return.


There will be an additional profit amount reported when DX classifies its dividends paid in 2019 which will probably be mostly or entirely treated as ROC. That adjustment will not impact my total return but only how the return is allocated between a short term capital gain and ordinary dividend income.


Last DiscussedItem # 4.A. Bought 50 DX at $6-Used Commission Free Trade  (3/27/19 Post)


I still own a Dynex equity preferred stock that pays cumulative and non-qualified dividends. Item # 4 Bought 50 DXPRB at $23.77-Used Commission Free Trade (2/2/19 Post)Dynex Capital Inc. 7.625% Cumulative Preferred Series B Stock


2. Short Term Bond/CD Ladder Basket Strategy:

Adds: +$8K

A.  Bought 3 Treasury 3 Month Bills at Auction Maturing on 7/11/19:
IR = 2.429%



Auction Results: 91 Day T Bill




B. Bought 2 Wells Fargo 2.45% CDs (monthly interest payments) Maturing on 4/12/21




C. Bought 3 Treasury Bills Maturing on 6/11/19 at Auction: 56 Day Bills
IR = 2.424%



Just another punt with recently received proceeds from maturing securities.


Auction Results: 56 Day T Bill




3. Intermediate Term Bond/CD Ladder Basket Strategy

A. Sold 1 Boston Properties L.P. 3.125% SU Maturing on 9/1/23


Finra Page: Bond Detail

Profit Snapshot: +$11.89 



Sold at 100.322
YTM at 100.322 = 3.043%
Current Yield at 100.322 = 3.115%
Proceeds at 100.222 (YTM at 3.069%

I kept the 2 bonds owned in a Roth IRA where the interest payments are tax free: 


Issuer: Operating subsidiary of Boston Properties Inc. (BXP) who guarantees the note

B. Sold 2 Kraft Heinz 3.5% SU Maturing on 7/15/22:




The short term bond classification that I use ends at 3 years from the transaction date.


Profit Snapshot: +$28.75




Item # 4.B. Bought at a Total Cost of 99.231 (6/14/18 Post)


FINRA Page: Bond Detail


Issuer:  Kraft Heinz Co. (KHC )

KHC Analyst Estimates

Sold at 100.869

YTM at 100.869 Then at = 3.204%
Current Yield at 100.869 = 3.47%
Proceeds at 100.669 (after $4 commission)

I decided that a Kraft Heinz bond maturing in more than 3 years was not worth the risks given the price and yield, particularly when I had a profit in the bond. The $28.75 profit amount is close to the $35 semi-annual interest payment for this 2 bond lot. After selling this bond, I did buy a Kraft Heinz 2.8% SU bond maturing on 7/2/20 which I will discuss in a subsequent post. 

4. Added 50 of the Deservedly Hated BDC CMFN at $7.31-Used Fidelity Commission Free Trade:




Quote: CM Finance Inc

SEC Filings

Closing Price Yesterday: CMFN $7.26 -$0.04 -0.55% 


CM Finance 10-Q for the Q/E 12/31/18 (investments listed starting at page 7)


I do not yet have any realized gains or losses in this BDC stock. Currently, it looks like a total return in excess of the dividend yield will be difficult to achieve.  


I noticed a recent 13G filing made by the Caxton Corporation claiming it owned 7.5% of the common stock. The filing was signed by Bruce S. Kovner. A fund called Cyrus Capital Partners owned 28.05% of the outstanding shares as of 12/31/2018. If those investors want to own so many shares, maybe I could dig down deep, find a pair, and buy another 50 shares. 


Current and Maximum Position in this Account: 125 shares plus shares purchased with dividends (now at 130+ with dividend purchases)


Average Cost Per Share in this Account: $7.61


Regular Dividend: Quarterly at $.25 per share 


The quarterly penny rate was reduced to $.25 from $.3516 effective for the 2017 first quarter payment. CM Finance Inc (CMFN) Dividend Date & History - Nasdaq


Dividend Yield at $7.61 = 13.14%


Last Ex Dividend Date: 3/14/19


Dividend Reinvestment: Yes given the current discount


Net Asset Value Per Share History:

Q/E 12/31/18: $11.49
Q/E 6/30/18:  $12.57 
Q/E 3/31/18:   $12.55
Q/E 12/31/17:  $12.5
Q/E  6/30/17:  $12.41
Q/E  6/30/16:  $11.9
Q/E  6/30/15:  $14.41 
IPO at $15 with net proceeds at $14.55 February 2014 

I mentioned in a recent discussion that the risk associated with some BDCs may not adequately be addressed by a 30% price discount to the last reported net asset value per share. 


CMFN would fall in that category based on its history. 


At a $7.31 purchase price, the discount to the $11.49 net asset value per share as of 12/31/18 would be -36.38%. 


Chart: Ugly

CMFN 5 Year Chart


Using a 1 year chart, the stock was selling below its 50, 100 and 200 SMA lines on the day of purchase.


Five Year Annual Average Total Return through 4/23/19 = -.55%


DRIP Returns Calculator | Dividend Channel Last Earnings Report:  


"Mr. Michael C. Mauer, the Company’s Chief Executive Officer, said, “While the fair value of the portfolio declined during the quarter, we believe that we take a prudent and conservative approach to both investing and valuing our portfolio and we see significant opportunity as we look forward in 2019.  We have fully written down our positions in Trident USA Health Services, LLC, and have no other positions on non-accrual today. 


As of December 31, 2018, the Company’s investment portfolio consisted of investments in 29 portfolio companies, of which 63.7% were first lien investments, 31.7% were second lien investments, 4.1% were unitranche loans, and 0.5% were in equities, warrants and other positions.  The Company’s debt portfolio consisted of 94.4% floating rate investments and 5.2% fixed rate investments."


CM Finance Inc Reports Results for its Fiscal Second Quarter Ended December 31, 2018 


Asset Categories as of 12/31/18




Asset Quality Measures Per Management as of 12/31/18




CMFN would be undervalued at the current price provided the external managers cease incinerating assets with bad loans. 


The current large discount to net asset value per share would be insufficient with the past being prologue for the future. 


On the other hand, a positive surprise in net investment income for the first quarter with a nice bump up in net asset value per share, could send the shares much higher. 


The problem is that it is difficult to have much confidence in the latter alternative coming to fruition given the historical performance.  


CM Finance Annual Report (risk factor summary starts at page 32 and ends at page 67)


I also own 87+ shares in my Schwab account with an average cost per share of $8.68 The last purchase in that account was discussed here: Item #4.A. Bought 30 CMFN at $8.23-Used Schwab Commission Free Trade (11/7/18 Post) 


I view the CMFN position as deservedly hated and highly speculative. A continuation of an average annual total return of -.55% is not going to pay for my nursing home expenses. And, if one adjusts that number for inflation and taxes, the performance only becomes more pathetic. 


DisclaimerI 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.