Observations and Sample of Recent Trades: ECON, FHLC, PSILX, SRET, VHT

Economy:

Personal income consumer spending February 2019 (estimates due to government shutdown)

Mortgage rates see biggest weekly drop in a decade

Since my last post, the economic reports have been favorable other than the retail sales report which was well below expectations at -.2. Retail sales February 2019 But, the January number was revised higher to +.7% from the previously reported +.2%. The Stock Jocks ignored that -.2% number for February, probably due to January being revised up +.5% and knowing that the .-2% number will be revised in the next report. 

New homes sales in February increased to a seasonally adjusted rate of 667K. The median sales price was $315.3K. New Home Sales: Census Department Release.pdf 

China economy: March Caixin manufacturing Purchasing Managers Index

U.S. manufacturing rebounds in March, ISM index shows - MarketWatch 

Construction spending off to sizzling start this year after tough times at end of 2018 - MarketWatch; ISM manufacturing index hits 55.3 in March, construction spending up 1% in February I would not use the word "sizzle" to describe the construction spending increase.  

GDPNow - Federal Reserve Bank of Atlanta (1st quarter real GDP revised up to +2.1 % as o 4/2/19  from the previous estimate of  +1.7%) 

Bank of Canada says low rates still merited but growth should improve | Reuters

+++++++

Markets and Market Commentary: 

Why the world’s biggest bond investor is dismissing the recession warning of the yield curve - MarketWatch (worth a read) 

Ed Yardeni: This is the real reason why the U.S. economy isn’t in recession danger now - MarketWatch  

Morgan Stanley sticks by 2019 bear call, sees profits disappointing

+++++

Portfolio Management:

The Vanguard Health Care Fund (VGHCX) is one of my holdings that has been throwing off cash as of late, but that fund's performance has fallen short of the Vanguard Health Care Index Fund ETF (VHT) over the past  1, 3, 5 and 10 year time frame. 

Dividends: Vanguard Health 68+ Shares

This fund has paid me $1,447.28 in cash dividend since 12/18/18 of which $250 has been redirected back into buying shares. I will not be buying more shares, but did start a position in VHT with a 5 share purchase discussed below. 

Fidelity has a similar low cost ETF that can be bought commission free by their customers, and I bought 10 shares as a starter position in that account. FHLC: Fidelity ETF Snapshot

Since this fund is held in a taxable account, the tax events being created by the fund manager detract from after tax returns compared to VHT, increasing the performance gap in favor of VHT after taxes. Throwing off more cash is not a substitute for subpar total returns before or after taxes. 

The 10 year annual average return remains excellent at 15.97% through 3/31/19, but still falls short of VHT's number of 17.03%. 

Part of the problem is that the manager, Ed Owens, who produced the superior returns retired in 2013 and was replaced by Jean Hynes. Meet the best investor you’ve never heard of - MarketWatch Since Ms. Hynes took over, investors would have been better off buying VHT.  

1 Year
VGHTX  = 8.92%
VHT = =14.29% 

3 Years Annual Average Total Returns: 
VGHCX = 9.15%
VHT = 13.51%   
  

5 Years
VGHCX = 9.88%
VHT = 11.59%

I may eliminate this fund soon due its continuing and persistent failure to outperform a low cost health sector ETF. 

++ 

I am continuing to hollow out my intermediate term corporate bond allocation by selling into the bond rally. 

Some of those funds have moved to the short term bond/CD allocation. 

No $1K bond positions have been added to my long term bond allocation for over a year. Most of my weighting in that duration consists of Tennessee municipal bonds that would be hard to sell. 

I have been selling off some exchange traded bonds with potentially long durations, primarily first mortgage bonds, and equity preferred stocks that have no maturity dates. 

All of the forgoing repositionings are based on an opinion that yields have fallen too fast and too far based on what can reasonably be predicted now. More positive economic data accelerated the selling.  

++ 

Schwab Account Cash Flow 4/1/19: 

In my last post, I included snapshots of cash flow into my Fidelity taxable account on 4/1. Schwab did not credit the cash flow into my taxable account until 4/2, so the amounts would not be available for trading purposes on the day Schwab received those funds. 

++++++

Trump:

This story needed to be written before the election. How Donald Trump used unusual financial documents to exaggerate his wealth and hide some of his debts - Washington Post The documents reproduced in that article clearly show that Trump is no stranger to lying and fraud. Disclosure would not have changed the election results anymore than the obvious fraud that Trump committed in connection with Trump University which was recent history before the election.   

Trump could repurpose $4.9 billion the Air Force ‘desperately’ needs for his border wall - MarketWatch

Camp Lejeune is still a mess 6 months after Hurricane Florence. Where's the money for repairs?

Air Force Needs Almost $5 Billion To Recover Bases From Hurricane, Flood Damage : NPR

Trump is accusing those who participated in launching the Mueller "witch hunt" as "traitors" who committed "treason" and must pay a price for their treason. He has even gone so far to claim that those who have pled guilty to various felonies were "framed" by a rouge DOJ and FBI.

The Trumpsters chanted "Lock Them Up". Trump Rally in Grand Rapids: CBS News

Trump made it clear that those people would soon have "big problems". Among those who may face the guillotine is Congressman Adam Schiff that Donald called a "criminal". The former CIA Director may be left alone since he is "potentially mentally ill" according to Donald: Fox News

Trump Accuses FBI Officials Who Investigated Him of Treason - Bloomberg;

Mueller probe was 'attempted takeover of our government,' says some committed 'major, major treason' - CNN

Donald further claim that the Mueller investigation was a conspiracy launched by the Democrats and the Deep State to take away the results of the election.

Think about that assertion for more than a second. 

Thinking for a second would cause the Trumpsters' heads to explode so I am recommending that they do not try it. I would not want to be accused in mass tort class actions of causing this result shown at the end of this video clip:

So be careful out there. Never ask a Trumpster to think for a second.

Trump:  “They wanted an insurance policy against me. And what we were playing out until just recently was the insurance policy. They wanted to do a subversion. It was treason. It was really treason.  If the Republican party had done this to the Democrats, if we had done this to President Obama you’d have a hundred people in jail right now, it’d be treason"

Trump later said that “people out there” had done “treasonous things against our country” and called for an investigation into their actions, arguing  we can never allow these treasonous acts happen to another president.”

How would the Mueller investigation overturn the election results?

Trump can be removed from office through impeachment or by utilizing the 25th Amendment to the Constitution, the later option is no option at all for anyone who has actually read it. Trump could start running naked down Pennsylvania Avenue and his cabinet and VP would not make a finding that he is unfit. And, that only starts the ball rolling.

Trump could could be impeached of course if the Mueller investigation found overwhelming evidence that he had committed impeachable offenses so severe that the House would vote out Articles of Impeachment and the Senate would convict with a 2/3rds majority, requiring a substantial number of republican senators to vote guilty. IMO, that would as a practical matter require incontrovertible proof that he was a Russian asset selling secrets to his buddy Vlad or something close to that.

Even if a sufficient number of GOP senators voted to impeach, the results would not put Hillary in office, which is what the Duck is suggesting, but his duly elected republican V-P Mike Pence. But then that would require the Trumpster to think for a second.    

Trump can not be classified as anything other than a lying demagogue with strong authoritarian tendencies and character traits and the unquestioned spokesman for, and leader of the modern day GOP.  

+++++

Russia is, of course, targeting Ukrainian citizens in assassinations. Russia Ordered a Killing That Made No Sense. Then the Assassin Started Talking. - The New York Times  ('In 2006, Russian President Vladimir V. Putin signed a law legalizing targeted killings abroad.")

++ 


Stephen Miller, Trump's nominee for the Federal Reserve, is upset about media reports about facts relating to his tax lien and failures to make payments owed in a divorce. 

As one should expect, Miller calls the reporting of his actions sleazy but does not dispute the accuracy of the reports. 

The tax lien arose when Miller tried to deduct child support payments and alimony, claiming it was just a mistake that the child support payments were deducted. Really and who out there believes that child support payments were deductible other than Miller? Federal Reserve nominee Stephen Moore was in contempt of court 

Note that the GOP's "tax reform", alimony payments made in 2019 and thereafter, pursuant to post 2018 divorce decrees, will no longer be deductible, which incidentally is a tax increase for those subject to that change. New tax law eliminates alimony deductions-but not for everybody -MarketWatch 

The GOP lawmakers voted for a variety of tax increases in their bill which was, as they say, all about helping the middle class.  

++

GOP's Bob and Weave Going Nowhere on Health Care: 

Trump Retreats on Health Care, Saying Republican Plan Will Appear Only After the 2020 Election - The New York Times This is a recognition that too many voters will see through their transparent attempt to take away health insurance from millions. 

Despite no GOP replacement plan, acting White House chief of staff claims Americans won’t lose health care if 'Obamacare' is struck down - ABC News Mulvaney brazenly claimed that no one will lose their healthcare, including coverage for pre-existing conditions, when if the republicans are successful in their court challenge seeking to end coverage for pre-existing conditions.

If that is the case, why have the republicans made every conceivable effort imaginable to take away the existing coverage for pre-existing conditions, premium support payments and the extension of Medicaid? 

After successfully terminating the individual mandate, why do the republicans refuse to work with Democrats to improve Obamacare rather than trying to eliminate it altogether? 

Those questions would be impossible for Mulvaney to answer truthfully since it would expose what the republicans are actually doing rather than what they claim to be doing with an alternative program. 

Some common sense is required when judging Mulvaney's honesty and that of other republicans who want to eliminate existing coverage and promise to replace it with something that is "better and cheaper". 

The end result will be a loss over health coverage for millions. I would submit that is also the intended result.   

Instead of being truthful, Mealy Mouthed Mulvaney misrepresented, as usual, the GOP's actual plan which they were unable to pass when they controlled both the Senate and the House. 

Mick Mulvaney’s nonsensical math on Obamacare - The Washington Post

The GOP plan only purported to provide coverage for pre-existing conditions. Their bill provided an out for insurance companies to deny certain coverages if "it will not have the capacity to deliver services adequately." You could pass an army through that loophole .

The GOP plan also gave insurance broad leeway to set premiums, including no limitation on how much more the insurance company could charge a old person compared to a young one. Pre-existing conditions: Does any GOP proposal match the ACA? | PolitiFact In short, their plan was a pretend coverage bill where the republicans give with one hand and then took away through unaffordable premiums and allowed for coverage denials. It is all about subterfuge and misdirection or what magicians call legerdemain. I am not even addressing here how coverage can be denied through the GOP's use of inadequate block grants given to the states.   

Say one thing and do something entirely different. That works for the republicans provided the speakers do not break out in laughter. 

The most basic question to ask republican politicians is why are they fighting so hard to get rid of existing coverages, premium supports, and the Medicaid expansion. They abolished the individual mandate, the fine for failure to participate, and the Medicaid expansion is non-mandatory on the states. So what is their problem now?  

The answer will be a false representation designed to mislead the public. The truth is that their donors do not want to contribute through taxes paying for the government's contributions in the those areas. 

Republicans Say They Will Protect Pre-existing Conditions. Their Records Say Something Else. - The New York Times 

++++++

Conway's Spin on Trump's 'Obstructive Conduct' - FactCheck.org "White House counselor Kellyanne Conway falsely claimed that special counsel Robert Mueller’s report concluded that President Donald Trump engaged in “no — quote — ‘obstructive conduct'” during the Russia investigation. Mueller’s report said it “does not exonerate” Trump of obstruction of justice.")  

Saudis hacked Jeff Bezos and leaked racy texts, investigator claims - MarketWatch  I am going to try and stay on the Crown Prince's good side. But, I have to say this. It will be a glorious day for the U.S. when we can tell the Saudis to go to hell. 

+++++++

1. Eliminations and Pares:

A. Sold 1,215.563 shares of the T. Rowe Price Spectrum International Fund:

Sponsor's Webpage: Spectrum International Fund (PSILX-T. Rowe Price

PSILX is another fund of funds:

Owned T. Rowe Price Mutual Funds as of 12/31/18 

This was my position on the day prior to the elimination when the price closed at $13.11:

Position 3/18

Profit Snapshot: +$3,118.68

I price rose by 1 cent on 3/19.

I will not be buying this fund back. I will use lower cost ETFs for foreign stock exposure. 

I will gradually use part of those funds to buy low cost ETFs that own foreign stocks. By gradually, I mean barely a tip toe in the water. 

B. Sold 50 Shares SRET at $14.79-In a Roth IRA Account (commission free transaction for Vanguard brokerage customers):

Quote: Global X SuperDividend REIT ETF

Profit Snapshot: +$45.49 

SuperDividend® REIT ETF (expense ratio .58%)

This fund was launched in 2015.

Dividends: Monthly

This eliminates my position in this Roth IRA  account but I still own 52+ shares in a taxable account. Item # 1.B. Bought 50 SRET at $14.8 Used Commission Free Trade (5/17/18 Post)

Global X SuperDividend® REIT ETF (SRET) Total Returns (rated 5 stars by Morningstar as of 3/22/19) The 3 year annual average total return through 3/22/19 was 11.51% and most of that would have come from the dividend. This is a fund for dividend hogs.

Over the same period, the average annual total return for SPY was 13.12%.

The VanEck Vectors Mortgage REIT Income ETF (MORT) had a 13.98% annual average total return while the iShares Mortgage Real Estate Capped ETF (REM) had the best number of the preceding listed ETFs at 14.01% over the same three year period. The five year annual average total return for REM was 7.7% compared to 10.62% for SPY.

The MREIT stocks have struggled for several years, though treading water as to price has been the theme more recently. Some of the high yielding equity REITs have been losers while others have done well up to now. I will consequently trade the ETF to harvest a total return in excess of the dividend yield.

The benefit from my point of view is that I am starting out with a 8+% annual total  return provided I do not lose money on the shares. A small trading profit could take that number up to 10%.  

2. Short Term Bond/CD Ladder Basket Strategy:

Adds:  $7K

A. Bought 2 Exelon 2.45% SU Maturing on 4/15/21: 

Finra Page: Bond  Detail (prospectus not linked)

Prospectus 

Issuer: Exelon Corp. (EXC) 

EXC Analyst Estimates 

2018 Annual Report

Website: Exelon Corporation 

Exelon Reports Fourth Quarter and Full Year 2018 Results and Initiates 2019 Financial Outlook 

Credit Ratings: 

Subsequent to this purchase, Fitch upgraded the debt to BBB+ from BBB. Fitch Upgrades Exelon and Select Subsidiaries' Ratings; Affirms Other Subsidiaries

Bought at a Total Cost of 98.6

YTM at TC Then at 3.145%

Current Yield at TC = 2.4848%

B. Bought 1 Treasury 1.5% Coupon Maturing on 6/15/20:
YTM = 2.504%

C.  Bought 2 AstraZeneca 2.375% SU Maturing on 11/16/20:

As noted in the snapshot, I redeployed the proceeds from 2 maturing AT & T SU bonds into 2 AZN bonds.

I am also replacing in advance 2 AstraZeneca 1.85% SU bonds that mature on 9/18/19.

For short term bonds, I am engaged in a constant roll.

I decided not to roll the proceeds into another AT & T bond. 

FINRA Page: Bond Detail (prospectus linked)

Issuer AstraZeneca PLC ADR (AZN)
AZN Analyst Estimates
Full-Year_2018_Results.pdf

Credit Ratings:

Bought at a Total Cost of 99.229 (includes $2 commission)
YTM at TC Then at 2.848%
Current Yield at TC = 2.3835%

D. Bought 2 Treasury 1.5% Coupon Maturing on 11/30/19:
YTM = 2.507%

3. Intermediate Bond Basket Strategy:

A. Sold 2 Anheuser Busch 2.5% SU Maturing on 7/15/22:

Profit Snapshot: +$24.26

Item # 3.C. Bought 1 BUD 2022 SU at 96.95 TC  (5/17/2018 Post)
Item # 4.C. Bought 1 BUD 2022 SU at 97.824 (4/19/18 Post)

I still own 1 bond in another account that was purchased in February 2017.

FINRA Page: Bonds Detail

Sold at 98.7
Proceeds at 98.6
YTM at 98.6 = 2.943%
Current Yield at 98.6 = 2.536%

I was selecting some 2022 maturities to sell where the current yield is near 2.5% and was replacing those bonds with similarly rated ones that had higher current yields and yields to maturity that mature sooner. That was possible due to the current yield curve where I could shorten the maturity and increase the yield for similarly rated bonds since investors feared that rates will come back down.

I was doing that until the Fed's monetary policy announcement made on 3/20/18 which caused me quit doing it and to buy one 2022 bond that had a 3+% YTM but a current yield near 2.5% (see below)

In this approach, I would keep the 3.3% BUD SU that matures on 2/1/23 bought at a TC of 99.364 and the BUD 3.625% SU maturing in 2026 bought at a 98.613 TC for two basic reasons.

First, I need to address the current rational concerns that intermediate term rates will decline further.

Second, both of those bonds have higher current yields than the 2022 bond that I sold and consequently are better contributors to current income generation. I will keep to maturity the 2.625% BUD SU maturing on 2/1/21 since that one matures in less than 2 years and was bought at a 99.026 TC. As noted in that last linked post, I lost to an early redemption in April 2018 eight BUD bonds that would have matured last month.

I previously sold the 2022 BUD bond at 100.822 back in August 2017: Item # 4.A. The YTM then was at 2.32%.

It is certainly possible that I will buy the 2022 bond again at some point closer to maturity and at a lower price. I do a fair amount of bond trading in the 3 to 10 year maturity period.  

B. Bought 1 Centerpoint Energy 2.5% SU Maturing on 9/1/22:

FINRA Page: Bond Detail (prospectus not linked)

Prospectus

Issuer: CenterPoint Energy Inc. (CNP)
CNP Analyst Estimates

CenterPoint Energy reports full-year 2018 earnings of $0.74 per diluted share; $1.60 earnings per diluted share on a guidance basis, excluding impacts associated with the merger

2018 Annual Report

For some reason, electric and gas utility companies want to refer to themselves as "energy" companies which apparently sounds more growthy or sexy than simply as staid electric & gas utilities.

CenterPoint Energy and Vectren complete merger | CenterPoint Energy, Inc., (Vectren was a large electric and gas utility company providing natural gas to more than 1 million customers in Ohio and Indiana and electricity to more than 145,000 customers in Indiana. CenterPoint Energy and Vectren to Merge | CenterPoint Energy, Inc.,

Centerpoint also issues first mortgage bonds that are more highly rated than the senior unsecured. I own a few of them. The last issuance of those bonds was in January: CenterPoint Energy subsidiary closes on $700 million of general mortgage bonds | CenterPoint Energy, Inc.,

Credit Ratings:

S & P recently downgraded the SU debt to BBB from BBB+, but kept the senior secured rating at A.  S & P credit reports can be accessed at many brokers including Fidelity where I bought this bond.

Bought at a TC of 97.59 (includes $1 Commission)
YTM at TC Then at 3.245%
Current Yield at TC = 2.5617%

4. Bought 50 ECON at $22.24-Commission Free for Vanguard Customers:

Quote: Columbia Emerging Markets Consumer ETF Overview
Sponsor's Page: Columbia Markets Consumer ETF - ECON
Expense Ratio = .59%
Holdings: 62 stocks as of 3/27/19

Closing Price Yesterday: ECON $22.83 -$0.04 -0.17% 

This is a new ETF for me. It recently decided to abandon the index that it was tracking from the "Dow Jones Emerging Markets Consumer Titans TR 30 Index to Dow Jones Emerging Markets Consumer Titans Index," which has more stocks and different weightings. The change was effective on 3/18/19. So I decided to give it a try. 

Top 30 Holdings as of 3/27/19: 

ECON Holdings.pdf

This one has been a stinker, though the concept makes sense.

Emerging market consumer demand will be source for most worldwide GDP growth. Insights—Where We Are Finding Growth: The Rise of Emerging Markets Consumers

There is some dividend support.

Morningstar currently gives this ETF a 1 star rating. It does not go any lower. At least I did not buy an ETF that has had the Big Mo or is currently en vogue. That is a fair rating based on past performance. Columbia Emerging Markets Consumer ETF (ECON) Total Returns

Through the day of purchase, the 1 year total return was -13.35%, with the 3 and 5 year total annual average returns at +1.07% and -2.49% respectively. The past may not be prologue to the future.
  
I am basically substituting this ETF for the narrower one,  Global X MSCI China Consumer Discretionary ETF  (CHIQ), that I recently sold.

Item 1.D. Sold 71+ CHIQ at $16.04 (3/13/19 Post) 


5. Health Care ETFs-Commission free ETFs as indicated below: 

I will be adding to both VHT and FHLC but the purchases will be in 5 and 10 share lots, with at least 50% of the purchases subject to the small ball purchase restriction. The VHT purchases may be funded by eliminating the VGHCX which has underperformed the ETF over the past 1, 3, 5 and 10 year periods. So much for active management.  

A. Bought 5 VHT at $173-Commission Free for Vanguard Customers: 

Quote: Vanguard Health Care ETF Overview

Closing Price Yesterday: VHT $172.52 -$0.20 -0.12%

I discussed this ETF in my Portfolio Management section above. 

Sponsor's website: VHT - Vanguard Health Care ETF | Vanguard

Expense Ratio: .1%

Top 20 Holdings: 

Morningstar VHT-Currently rated 4 stars.  


B. Bought 10 FHLC at $44.59-Commission Free for Fidelity Customers:

Quote: Fidelity MSCI Health Care Index ETF Overview

Sponsor's Webpage: FHLC | ETF Snapshot - Fidelity

Closing Price Yesterday: FHLC $44.51 -$0.05 -0.11% 

Expense Ratio: .08%

Some Top Holdings:

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.