Economy:
Chinese state media hits out at 'fabricated' U.S. tech claims - Reuters Sure does not sound like China is expressing its fervent desire to take a knee on this issue.
China blamed the U.S. for trying to "achieve unreasonable interests through extreme pressure" and for harboring "extravagant expectations". U.S., China bicker over 'extravagant expectations' on trade deal - Reuters
China sees "no rush" to continue trade talks: China in 'no rush' to restart trade talks
China Faces New ‘Long March’ as Trade War Intensifies, Xi Jinping Says - The New York Times While China will suffer more economically than the U.S. from an all out trade war, China's citizens can withstand more pain for longer.
Trump Administration Could Blacklist China’s Hikvision, a Surveillance Firm - The New York Times
Toyota says Trump tariff threat shows investments in US 'not welcomed'
Trump’s trade war with China will hit TVs, dishwashers, toys, lithium batteries, iPhones — even Silly Putty - MarketWatch
Japan's strong Q1 growth surprises economists - MarketWatch (2.1% annualized with most economists predicting flat to slightly negative)
Tensions with Iran have risen steadily since Donald pulled the U.S. out of nuclear deal and imposed sanctions on Iran and countries who purchase Iranian oil. Threats to the Middle East oil supply are increasing as well.
Trump administration announces all countries importing Iranian oil will be subject to US sanctions - CNN;
Saudi Oil Infrastructure at Risk as Small Attacks Raise Potential for Big Disruption - The New York Times
Oil prices gain as Middle East tensions flare up - MarketWatch; Bomb-carrying drone from Yemen rebels targets Saudi airport - MarketWatch
Except for an occasional impact on oil prices, the growing tensions in the Middle East are not having an impact on other markets. The "flare up" in tensions is just another outlier risk assigned a zero percent chance of becoming material. One problem with oil infrastructure facilities is that they are vulnerable to destruction.
++++
Markets and Market Commentary:
Morgan Stanley: More tariffs on China could trigger a global recession (in this scenario, MS predicts that the FF rate will be back to zero by the Spring of 2020).
Cramer: Make sure your stock portfolio has little exposure to China
Bank of America predicts a 20% to 30% S&P 500 decline if the White House imposes 25% tariffs on the rest of Chinese goods. (cited in The Trade War and Tariffs Will Make the Stock Market Scary. Don’t Panic.-Barron's) The S & P 500 just experienced a 20% decline when there were no headline concerns about a trade war. The concern in the 2018 4th quarter was that the FED would keep hiking interest rates for no good reason and precipitate a recession.
There is no shortage of estimates of how an all out trade war will impact the U.S. economy and corporate earnings.
Most of the estimates have the U.S. GDP declining anywhere from .3% to .6% as a result.
That range is a reasonable estimate, but everyone is guessing.
No one knows since even a mild negative reaction is dependent on U.S. consumers continuing to increase their spending, which may turn out to be erroneous. Would you pay $150 more for a discretionary purchase of a new Iphone due to the tariffs or wait? A Morgan Stanley analyst estimates the cost of the $999 list price of the XS Max will rise by $16o. Will iPhones Cost More With Trump's Tariffs? - Bloomberg Sure, the American importer could eat part of the cost but then that will sink profits and margins.
J.P. Morgan's strategists predict a $9 hit to S & P 500 earnings resulting from an all out trade war. (cited in Applied Materials, Charles Schwab, and More Cheap Stocks for the Trade War - Barron's) That is another guess.
Morgan Stanley: More tariffs on China could trigger a global recession (in this scenario, MS predicts that the FF rate will be back to zero by the Spring of 2020).
Cramer: Make sure your stock portfolio has little exposure to China
Bank of America predicts a 20% to 30% S&P 500 decline if the White House imposes 25% tariffs on the rest of Chinese goods. (cited in The Trade War and Tariffs Will Make the Stock Market Scary. Don’t Panic.-Barron's) The S & P 500 just experienced a 20% decline when there were no headline concerns about a trade war. The concern in the 2018 4th quarter was that the FED would keep hiking interest rates for no good reason and precipitate a recession.
There is no shortage of estimates of how an all out trade war will impact the U.S. economy and corporate earnings.
Most of the estimates have the U.S. GDP declining anywhere from .3% to .6% as a result.
That range is a reasonable estimate, but everyone is guessing.
No one knows since even a mild negative reaction is dependent on U.S. consumers continuing to increase their spending, which may turn out to be erroneous. Would you pay $150 more for a discretionary purchase of a new Iphone due to the tariffs or wait? A Morgan Stanley analyst estimates the cost of the $999 list price of the XS Max will rise by $16o. Will iPhones Cost More With Trump's Tariffs? - Bloomberg Sure, the American importer could eat part of the cost but then that will sink profits and margins.
J.P. Morgan's strategists predict a $9 hit to S & P 500 earnings resulting from an all out trade war. (cited in Applied Materials, Charles Schwab, and More Cheap Stocks for the Trade War - Barron's) That is another guess.
China's currency is a strong barometer on US-China trade (since Donald tweeted about increasing the 15% tariffs to 25%, the Yuan has lost about 3% of its value against the USD; USD / CNY Currency Chart. US Dollar to Chinese Yuan Renminbi Rates )
US multinationals will help market rally to all-time highs: Yardeni
Bulls like Ed Yardeni have a multitude of ways to justify their bullishness irrespective of the news about the China trade negotiations stalling.
One category is the belief that a total breakdown in the negotiations will not happen since both sides will act rationally and compromise where needed to conclude a deal.
The new hope is that Donald and President Xi Jinping will reach some kind of accommodation when they meet at the next G-20 meeting, scheduled for 6/28-29/2019, notwithstanding the hardening of positions on both sides and the failure to reach an agreement after one year of tedious negotiations.
It would be in China's interest to do just enough to cause Donald to postpone the new 25% tariffs on $300B+ of exports and then dare him to impose them when negotiations break down closer to the 2020 election.
The next general category is that an all out trade war will not last long because both sides want and need a deal.
The third category is that even an all out trade war will have a minor impact on the U.S. economy. So don't worry, be happy. Picture of Stock Jock on Chill Juice: 😎
One theory that is relevant to that third category is that U.S. multinationals, who now manufacture products in China, will find a way to reconfigure their supply chains to avoid the tariffs. That will happen to some extent when the company has a number of manufacturing plants outside of China.
This supply chain reconfiguration does not mean that a new plant will be built in the U.S. to make sneakers or TVs, for example, but only that products manufactured in China and normally sold to U.S. customers will be sold elsewhere where there are no tariffs. In some cases, the production in China would be too large and/or too costly for that redirection.
When components are manufactured in China that are incorporated into a product, then changing suppliers may prove to be difficult, time consuming and/or expensive, and production capacity outside of China may not even be available to meet demand.
My major concern is that an all out trade war will hit just as the U.S. economy is weakening due to other factors.
The Atlanta FED's estimate of second quarter real GDP growth now stands at 1.2%. GDPNow-Federal Reserve Bank of Atlanta It needs to remembered that the first estimate for the 1st quarter would have been more than 50% lower when excluding items likely to soon reverse (e.g. big buildup in inventory)
The primary wild card is what will U.S. consumers do when an all out trade war hits home with the 25% tariffs levied on all of China's exports.
Other potential adverse developments would include China banning the sale of some U.S. products: Apple's EPS at risk of 29% hit if its products are banned in China, Goldman says - MarketWatch Will China take that kind of action? No one really knows.
Personally, I think that sales of about 1/5th of consumer discretionary items will plunge in response to the all out tariff war once U.S. customers realize that Donald has not told them the truth about who pays for the tariffs. A stock market correction or bear market could sap consumer confidence as would some anemic GDP numbers for the last three quarters and a reversal in job gains to losses.
Currently, the S & P 500 is moving within a trading range between 2800 to 2945. Investors are currently in a news vacuum about whether or not the China trade negotiations will successfully conclude with an agreement. While it is possible that the recent rhetoric is posturing, the more likely scenario is that the U.S. and China are on the verge of an all out trade war. If Donald slaps 25% tariffs on the remaining $300B or so in imports, that will be difficult for the Stock Jocks to ignore.
US multinationals will help market rally to all-time highs: Yardeni
Bulls like Ed Yardeni have a multitude of ways to justify their bullishness irrespective of the news about the China trade negotiations stalling.
One category is the belief that a total breakdown in the negotiations will not happen since both sides will act rationally and compromise where needed to conclude a deal.
The new hope is that Donald and President Xi Jinping will reach some kind of accommodation when they meet at the next G-20 meeting, scheduled for 6/28-29/2019, notwithstanding the hardening of positions on both sides and the failure to reach an agreement after one year of tedious negotiations.
It would be in China's interest to do just enough to cause Donald to postpone the new 25% tariffs on $300B+ of exports and then dare him to impose them when negotiations break down closer to the 2020 election.
The next general category is that an all out trade war will not last long because both sides want and need a deal.
The third category is that even an all out trade war will have a minor impact on the U.S. economy. So don't worry, be happy. Picture of Stock Jock on Chill Juice: 😎
One theory that is relevant to that third category is that U.S. multinationals, who now manufacture products in China, will find a way to reconfigure their supply chains to avoid the tariffs. That will happen to some extent when the company has a number of manufacturing plants outside of China.
This supply chain reconfiguration does not mean that a new plant will be built in the U.S. to make sneakers or TVs, for example, but only that products manufactured in China and normally sold to U.S. customers will be sold elsewhere where there are no tariffs. In some cases, the production in China would be too large and/or too costly for that redirection.
When components are manufactured in China that are incorporated into a product, then changing suppliers may prove to be difficult, time consuming and/or expensive, and production capacity outside of China may not even be available to meet demand.
My major concern is that an all out trade war will hit just as the U.S. economy is weakening due to other factors.
The Atlanta FED's estimate of second quarter real GDP growth now stands at 1.2%. GDPNow-Federal Reserve Bank of Atlanta It needs to remembered that the first estimate for the 1st quarter would have been more than 50% lower when excluding items likely to soon reverse (e.g. big buildup in inventory)
The primary wild card is what will U.S. consumers do when an all out trade war hits home with the 25% tariffs levied on all of China's exports.
Other potential adverse developments would include China banning the sale of some U.S. products: Apple's EPS at risk of 29% hit if its products are banned in China, Goldman says - MarketWatch Will China take that kind of action? No one really knows.
Personally, I think that sales of about 1/5th of consumer discretionary items will plunge in response to the all out tariff war once U.S. customers realize that Donald has not told them the truth about who pays for the tariffs. A stock market correction or bear market could sap consumer confidence as would some anemic GDP numbers for the last three quarters and a reversal in job gains to losses.
Currently, the S & P 500 is moving within a trading range between 2800 to 2945. Investors are currently in a news vacuum about whether or not the China trade negotiations will successfully conclude with an agreement. While it is possible that the recent rhetoric is posturing, the more likely scenario is that the U.S. and China are on the verge of an all out trade war. If Donald slaps 25% tariffs on the remaining $300B or so in imports, that will be difficult for the Stock Jocks to ignore.
+++++
Trump:
White House directs former counsel Don McGahn not to testify before House panel-CNN Barr claims that he is only trying to protect future Presidents rather than Donald through preventing McGahn's compliance with the subpoena.
Barr is a proponent of the Imperial Presidency legal doctrine which basically places the President above the law and free of checks or balances from the legislative or judicial branches of government.
In Barr's version of the Imperial Presidency, McGahn can not be asked questions about his testimony given to Mueller that has now been published for anyone to read who cares to spend the time. The Mueller report is available from booksellers. The Mueller Report: The Final Report of the Special Counsel into Donald Trump, Russia, and Collusion: Robert S. Mueller III, Special Counsel's Office U.S. Department of Justice ($1.99 for a download)
The primary legal argument advanced by Barr is that senior Presidential advisors can not be compelled to testify before Congress under the DOJ's newly created for Donald expansion of the "separation of powers" doctrine.
This immunity from testimony created by Barr for Donald has no constitutional basis and would apply even when the senior advisor has already given public testimony on the same matter and the testimony is clearly relevant to whether the President has committed a crime.
The only federal court presented with a similar argument shot it down Federal judge rules against Miers, White House on subpoenas - POLITICO; Committee on the Judiciary, U.S. House of Representatives v. Harriet Miers et. al. (2008) Another federal court has held that even a properly asserted claim of executive privilege can be waived when the executive branch has "already publicly revealed the sum and substance of the very material it is now seeking to withhold". Committee on Oversight and Government Reform, U.S. House of Representatives v. Loretta e. Lynch (2016) Then there is the crime/fraud exception to the assertion of any privilege. Trump stonewalls, and a court slaps him down - The Washington Post
Donald has distanced himself from the DOJ's ongoing and multiple obstruction efforts which he wants to pin on Barr as if he had nothing to do with it. (Trump: "As I understand it they're doing that for the office of the presidency for future presidents. As I understand it it's a very important precedent." )
The Department of Justice and Donald simply do not want McGahn repeating his Mueller testimony on TV which will reach millions more voters than the written excerpts of his testimony contained in the dense Mueller report that few have read. That is the reason why the AG and the U.S. Department of Justice are active participants in legally frivolous delay and deny tactics.
Trump administration tells judge Congress did not deny border wall funds when it declined to appropriate money for it - The Washington Post The Alternate Reality inhabited by Trumpsters now includes lawyers at the Department of Justice.
White House directs former counsel Don McGahn not to testify before House panel-CNN Barr claims that he is only trying to protect future Presidents rather than Donald through preventing McGahn's compliance with the subpoena.
Barr is a proponent of the Imperial Presidency legal doctrine which basically places the President above the law and free of checks or balances from the legislative or judicial branches of government.
In Barr's version of the Imperial Presidency, McGahn can not be asked questions about his testimony given to Mueller that has now been published for anyone to read who cares to spend the time. The Mueller report is available from booksellers. The Mueller Report: The Final Report of the Special Counsel into Donald Trump, Russia, and Collusion: Robert S. Mueller III, Special Counsel's Office U.S. Department of Justice ($1.99 for a download)
The primary legal argument advanced by Barr is that senior Presidential advisors can not be compelled to testify before Congress under the DOJ's newly created for Donald expansion of the "separation of powers" doctrine.
This immunity from testimony created by Barr for Donald has no constitutional basis and would apply even when the senior advisor has already given public testimony on the same matter and the testimony is clearly relevant to whether the President has committed a crime.
The only federal court presented with a similar argument shot it down Federal judge rules against Miers, White House on subpoenas - POLITICO; Committee on the Judiciary, U.S. House of Representatives v. Harriet Miers et. al. (2008) Another federal court has held that even a properly asserted claim of executive privilege can be waived when the executive branch has "already publicly revealed the sum and substance of the very material it is now seeking to withhold". Committee on Oversight and Government Reform, U.S. House of Representatives v. Loretta e. Lynch (2016) Then there is the crime/fraud exception to the assertion of any privilege. Trump stonewalls, and a court slaps him down - The Washington Post
Donald has distanced himself from the DOJ's ongoing and multiple obstruction efforts which he wants to pin on Barr as if he had nothing to do with it. (Trump: "As I understand it they're doing that for the office of the presidency for future presidents. As I understand it it's a very important precedent." )
The Department of Justice and Donald simply do not want McGahn repeating his Mueller testimony on TV which will reach millions more voters than the written excerpts of his testimony contained in the dense Mueller report that few have read. That is the reason why the AG and the U.S. Department of Justice are active participants in legally frivolous delay and deny tactics.
Trump judicial nominees decline to endorse Brown v. Board under Senate questioning - The Washington Post; Trump judicial picks dodge law, values on Brown v. Board of Education: USA Today
The Brown v. Board of Education of Topeka: 347 U.S. 483 (1954) decision is no longer settled law in Trump's America.
Trump pick for SF-based Ninth Circuit Kenneth Lee (some of Lee's previous statements: “whenever minorities do not succeed, they cry racism”; “charges of sexism often amount to nothing but irrelevant pouting” and Lee refused to say whether he agreed with Brown v. Board of Education, just one of 27 Trump nominees who refused to endorse that historic decision on school desegregation);
Republican Senators Confirm Judge Who Said Planned Parenthood ‘Kills Over 150,000 Females A Year’
Apparently, a law decree is all that prevents Donald from nominating Rush Limbaugh and Sean Hannity as judges.
++
Michael Flynn: Trump blames Obama for not warning him. Which Obama did. - Vox
Trump says he was not warned about Flynn. The Mueller report disagrees. - The Washington Post
Donald engages in revisionist history in real time.
Flynn told Mueller that people tied to Trump and Congress tried to obstruct probe
The Brown v. Board of Education of Topeka: 347 U.S. 483 (1954) decision is no longer settled law in Trump's America.
Trump pick for SF-based Ninth Circuit Kenneth Lee (some of Lee's previous statements: “whenever minorities do not succeed, they cry racism”; “charges of sexism often amount to nothing but irrelevant pouting” and Lee refused to say whether he agreed with Brown v. Board of Education, just one of 27 Trump nominees who refused to endorse that historic decision on school desegregation);
Republican Senators Confirm Judge Who Said Planned Parenthood ‘Kills Over 150,000 Females A Year’
Apparently, a law decree is all that prevents Donald from nominating Rush Limbaugh and Sean Hannity as judges.
++
Michael Flynn: Trump blames Obama for not warning him. Which Obama did. - Vox
Trump says he was not warned about Flynn. The Mueller report disagrees. - The Washington Post
Donald engages in revisionist history in real time.
Flynn told Mueller that people tied to Trump and Congress tried to obstruct probe
+++++
1. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 2 Kroger 2.6% SU Maturing on 2/1/21:
Profit Snapshot: $19.2
Finra Page: Bond Detail
Sold at 99.653
YTM at 99.653 = 2.808%
Proceeds at 99.543
I am keeping the 2 Kroger 3.3% bonds that mature in 2021: Item # 2.B. (12/19/18 Post); Bond Detail
2. Short Term Bond/CD Ladder Basket Strategy:
$10K in adds
-$2K Early Redemption
A. Bought 2 General Motors Finance 2.65% SU Maturing on 4/13/20:
FINRA Page: Bond Detail (prospectus linked)
GM 2018 Annual Report
GM Earnings for the Q/E 3/31/19
GM Financial 10-Q for the Q/E 3/31/19
Credit Ratings:
Fitch at BBB for General Motors Financial's Senior Unsecured Debt (same as GM rating; Fitch Affirms GM and GM Financial at 'BBB'; Outlook Stable)
Bought at a Total Cost of 99.910
YTM At Total Cost Then at 2.747%
Current Yield at TC = 2.6524%
I am rolling in advance the expected proceeds from a GM Financial SU maturing next October.
B. Bought 1 Banco Santander UK Group Holding PLC 2.875% SU Maturing on 10/16/20:
Finra Page: Bond Detail (prospectus not linked)
Issuer: This issuer is a holding company for Banco Santander's U.K banking operations, Santander UK PLC, which has an "A" rating from S & P.
Credit Ratings: Moody's at Baa1 (see Finra page linked above)
Bought at a Total Cost of 99.882
YTM at TC Then at 2.958%
Current Yield at TC = 2.878%
C. Bought 2 Treasury 1.5% Coupon Maturing on 4/15/20:
YTM = 2.384%
I now own 4 bonds.
D. Bought 5 56 Day Treasury Bills Maturing on 7/9/19 at Auction:
IR = 2.429%
Auction Results:
E. DuPont Early Redemption of Early Redemption of 2.2% SU Maturing on 5/1/20:
This bond made just made its semi-annual interest payment, so there was not much accrued interest to pay upon redemption.
Profit Snapshot: +$21.82
Item # 2.A. Bought 2 Dupont 2.2% SU at a Total Cost of 98.909 (9/2/18 Post)
3. Eliminations:
I mentioned selling the following stocks in a comment posted on 5/6/19.
A. Eliminated PBCT-Sold 101+ at $17.57:
Quote: People's United Financial Inc (PBCT)
PBCT Consensus Analyst E.P.S. Estimates
Closing Price Yesterday: PBCT $16.39 +$0.14 +0.86%
Category: Regional Bank Basket Strategy
History This Account:
Profit Snapshot: +$182.26 (order filled with multiple odd lots)
Item # 3.A. Bought 100 PBCT at $15.65(11/28/18 Post)
Dividend: Quarterly at $.1775 per share
Last Ex Dividend Date: 4/30/19
Recent Earnings Report (Q/E 3/31/19):
People's United Financial Reports First Quarter Net Income of $114.6 Million, or $0.30 per Common Share
I would call this report okay "under the circumstances".
Operating diluted E.P.S. was reported at $.33 per share and at $.3 using GAAP. The adjustment to operating was a net after tax $11.9M merger related expense. The GAAP E.P.S. number in the 2018 first quarter was also $.3.
The net charge off to average loans ratio remains excellent at .06% annualized.
Return on average assets is meaningfully below average at .96%. Return on Average Assets for all U.S. Banks-St. Louis Fed
The return on average tangible equity was reported at 13% which is okay, but below what I would like to see. The 7% return on average equity is well below the national average. Return on Average Equity for all U.S. Banks-St. Louis Fed
The total risk based capital ratio of 12.4% is below what I would like to see.
The efficiency ratio was reported at 57.3%, which is viewed as acceptable since it is below 60%. I prefer a number closer to 50%.
The common dividend payout ratio was at 58.6% using GAAP earnings and at 53% using operating earnings, which I view as modestly high and a likely restraint on future dividend increases.
The NPA ratios is okay at .54%, but not stellar for this stage in the credit cycle.
NIM was okay under the circumstances at 3.2%.
Last Round-Trip: Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)-Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
I have been a net seller of my already insignificant regional bank stock basket due to the persistent flat yield curve which is likely to continue.
B. Sold 100 ADX at $15.24-Used Commission Free Trade:
Quote: Adams Diversified Equity Fund Inc. (ADX)
Sponsor's Website: Adams Funds
Closing Price Yesterday: ADX $14.98 +$0.09 +0.60%
Profit Snapshot = +$112.32
Item # 4 Bought 100 ADX at $14.12-Used Commission Free Trade (3/3/19 Post)(snapshots of largest realized profits + some links to prior posts)
Data Date of Trade (5/6/19)
Closing Net Asset Value Per Share = $17.6
Closing Market Price = $15.26
Discount = -13.3%
Average Discounts:
3 Years -15.02%
5 Years -14.85%
Sourced: ADX Adams Diversified Equity CEF Connect
Last Elimination: Item # 2.C. (3/4/17 Post)
Realized Profits 2014 to Date: $3,172.46
Since I sold a 467+ share position in 2015, I have been buying and selling 100 share lots. The total return for those 100 shares lots has been generated mostly from capital gain distributions paid in December that totaled $4.48 per share (2015-2018) My realized profit numbers do not include dividends and capital gains distributions but only the profit from selling the shares.
C. Sold 100 RVT at $14.51-Used Commission Free Trade:
Profit Snapshot: +$87.61
Item # 1 Bought 100 RVT at $13.63-Used Commission Free Trade (3/31/19 Post)
I may buy this one back with a price decline below the last $13.63 purchase price.
Last Quarterly Dividend: $.29 per share
Royce Value Trust, Inc. (RVT) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 3/8/19
Closing Price Yesterday: RVT $13.78 +$0.19 +1.40%
Last Elimination: Item # 1 Sold 505+ RVT at $15.89 (8/3/13 Post)
Data Day of Trade (5/6/19):
Closing Net Asset Value Per Share: $16.22
Closing Market Price = $14.51
Discount: -10.54
Average Discounts:
3 Years -11.33%
5 Years -12.01%
Source: RVT Royce Value Trust-CEF Connect
4. Bought 50 of the Deservedly Hated BDC GARS at $6.93-Used Commission Free Trade (Category: Small Ball-Income Generation):
Quote: GARS-Garrison Capital Inc.
SEC Filings
2018 Annual Report (risk factor discussion starts at page 31 and ends at page 60)
Closing Price Yesterday: GARS $6.89 -$0.03 -0.43%
Management: External
Current Position: 130 Shares
Dividend: Quarterly at $.23 (recently reduced from $.28 which was reduced from $.35 per share effective for the 2016 4th quarter)
Garrison Capital BDC - Investor Relations - Dividends & Distributions
Average Cost Per Share = $7.2
Dividend yield at average total cost = 12.78% (assumes no dividend cut which I now view as more likely than not within 12 months)
Next Ex Dividend Date: 6/6/19
Highest Cost Lot: 50 at $7.77 (11/13/18)-Item # 1.A. Bought 50 GARS at $7.7-Used Commission Free Trade (12/2/18 Post)
Last Discussed: Item #4.A. Bought 10 GARS at $7.13 and 15 at $6.3-Used Commission Free Trades (1/2/19 Post)
Last Earnings Report Prior to Purchase (Q/E 12/31/18): Not comforting
Subsequent to this last purchase, GARS reported reported results for the 2019 first quarter. I viewed this report as unsatisfactory but not as bad as some others. 10-Q for the Q/E 3/31/19
The Board declared a $.23 per share quarterly dividend.
Net asset value per share continued to decline, but only by 8 cents to $10.44 compared to the Q/E 12/31/18. For this deservedly hated BDC, that is what passes for progress.
NII per share was reported at $.2, unchanged from the prior quarter, and below the quarterly dividend of $.23 per share. The dividend may soon have to be cut again without an increase in net income per share.
The company reported a realized loss of $7.133M which is unacceptable given its long string of realized losses.
The company identified the primary culprit in its 10-Q: "The net realized loss on investments for the three months ended March 31, 2019 was primarily comprised of a $6.9 million loss incurred upon the sale of our investment in Profusion Industries, LLC.", at page 53.
The 2018 Annual Report identifies that $9.188M at cost loan as non-performing than valued at $2.33M, Page 91. As of 12/31/17, GARS valued the loan at $8.621M, page 86. I do not see the loan in the 2016 Annual report, but noted that it was valued above its par value in the 10-Q for the Q/E 3/31/17. I consequently estimate that the loan went on non-accrual within two years after made.
BDCs will have loan losses but GARS has too many and too much IMO indicating to me poor underwriting and bad judgment. It needs to be emphasized that the economy has been good during the period that GARS has been a public company.
I will not buy more shares except through dividend reinvestment. I will start dividend reinvestment with the next payment. The hope is that I will be able to sell the highest cost lot profitably at some point.
When speculating in deservedly hated BDCs, positions will always be immaterial and a return in excess of the dividend yield problematic.
The key to earning a return in excess of the dividend is to catch a period when the BDC stops incinerating assets and reports some minor improvement in net investment income and net asset value per share.
This may then create a ray of light that will allow harvesting of a capital gain. Averaging down some, using commission free trades, is frequently required to improve the chances of a successful exit.
5 Year Operating History: Disgusting IMO
Page 63: 2018 Annual Report filed with the SEC
Assuming my addition is correct, the external manager was paid $44.23 million over this five year period (base and incentive fees). My question is why is anyone paid anything for this performance.
5. Small Ball-Commission Free ETFs:
A. Bought 10 IEUR at $46.16:
Quote: iShares Core MSCI Europe ETF Overview
Closing Price Yesterday: IEUR $46.26 +$0.37 +0.81%
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Top Ten Holdings as of 5/5/19:
Recent Dividend History: Semi-annual (larger payment in June)
Purchase Restriction: Small Ball Rule
Maximum Position: 50 shares
Current Position: 10 Shares
Rated 3 Stars by Morningstar
I was looking around for an ETF that had performed poorly over the past several years compared to the S & P 500 and naturally thought about European stock ETFs.
I have avoided European ETFs altogether for over 3 years or so.
I mentioned buying IEUR in a January 2016 where I was sprinkling money in a variety of stocks and stock ETF on major down days. Update For Portfolio Positioning And Management As Of 1/12/2016 - South Gent | Seeking Alpha I was buying into a volatility spike. That is something that I do now. I eliminated the position in 2017.
Through 5/15/19, the annual average total return was 7.34% over the past three years. After posting slightly negative total returns in 2015 and 2016, the fund did produce a +26.75% total return in 2017 before losing 14.85% last year. iShares Core MSCI Europe ETF (IEUR) Total Returns European stock ETFs have just been a hard place to make money, but the severe underperformance of those ETFs compared to SPY at least sets up the possibility of outperformance over the next several years.
IEUR was launched in 2014. Just to highlight how poor USD price European stock ETFs have fared over the past 5 and 10 years compared to SPY, I would point to VGK: Vanguard FTSE Europe Index Fund ETF Shares (VGK) Total Returns
Through 5/15/19, the total annual average 5 year total return for VGK was .99% and 7.58% compared to 10.93% and 14.67% respectively for SPY. SPDR® S&P 500 ETF (SPY) Total Returns
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.
2. Short Term Bond/CD Ladder Basket Strategy:
$10K in adds
-$2K Early Redemption
A. Bought 2 General Motors Finance 2.65% SU Maturing on 4/13/20:
FINRA Page: Bond Detail (prospectus linked)
GM 2018 Annual Report
GM Earnings for the Q/E 3/31/19
GM Financial 10-Q for the Q/E 3/31/19
Credit Ratings:
Fitch at BBB for General Motors Financial's Senior Unsecured Debt (same as GM rating; Fitch Affirms GM and GM Financial at 'BBB'; Outlook Stable)
Bought at a Total Cost of 99.910
YTM At Total Cost Then at 2.747%
Current Yield at TC = 2.6524%
I am rolling in advance the expected proceeds from a GM Financial SU maturing next October.
B. Bought 1 Banco Santander UK Group Holding PLC 2.875% SU Maturing on 10/16/20:
Issuer: This issuer is a holding company for Banco Santander's U.K banking operations, Santander UK PLC, which has an "A" rating from S & P.
Credit Ratings: Moody's at Baa1 (see Finra page linked above)
Bought at a Total Cost of 99.882
YTM at TC Then at 2.958%
Current Yield at TC = 2.878%
C. Bought 2 Treasury 1.5% Coupon Maturing on 4/15/20:
YTM = 2.384%
D. Bought 5 56 Day Treasury Bills Maturing on 7/9/19 at Auction:
IR = 2.429%
Auction Results:
E. DuPont Early Redemption of Early Redemption of 2.2% SU Maturing on 5/1/20:
Profit Snapshot: +$21.82
Item # 2.A. Bought 2 Dupont 2.2% SU at a Total Cost of 98.909 (9/2/18 Post)
3. Eliminations:
I mentioned selling the following stocks in a comment posted on 5/6/19.
A. Eliminated PBCT-Sold 101+ at $17.57:
Quote: People's United Financial Inc (PBCT)
PBCT Consensus Analyst E.P.S. Estimates
Closing Price Yesterday: PBCT $16.39 +$0.14 +0.86%
Category: Regional Bank Basket Strategy
History This Account:
Profit Snapshot: +$182.26 (order filled with multiple odd lots)
Item # 3.A. Bought 100 PBCT at $15.65(11/28/18 Post)
Dividend: Quarterly at $.1775 per share
Last Ex Dividend Date: 4/30/19
Recent Earnings Report (Q/E 3/31/19):
People's United Financial Reports First Quarter Net Income of $114.6 Million, or $0.30 per Common Share
I would call this report okay "under the circumstances".
Operating diluted E.P.S. was reported at $.33 per share and at $.3 using GAAP. The adjustment to operating was a net after tax $11.9M merger related expense. The GAAP E.P.S. number in the 2018 first quarter was also $.3.
The net charge off to average loans ratio remains excellent at .06% annualized.
Return on average assets is meaningfully below average at .96%. Return on Average Assets for all U.S. Banks-St. Louis Fed
The return on average tangible equity was reported at 13% which is okay, but below what I would like to see. The 7% return on average equity is well below the national average. Return on Average Equity for all U.S. Banks-St. Louis Fed
The total risk based capital ratio of 12.4% is below what I would like to see.
The efficiency ratio was reported at 57.3%, which is viewed as acceptable since it is below 60%. I prefer a number closer to 50%.
The common dividend payout ratio was at 58.6% using GAAP earnings and at 53% using operating earnings, which I view as modestly high and a likely restraint on future dividend increases.
The NPA ratios is okay at .54%, but not stellar for this stage in the credit cycle.
NIM was okay under the circumstances at 3.2%.
Last Round-Trip: Item # 4 Sold 100 PBCT at $14.61 (9/21/13 Post)-Item # 1 Bought 100 PBCT at $11.47 (6/14/12 Post)
I have been a net seller of my already insignificant regional bank stock basket due to the persistent flat yield curve which is likely to continue.
B. Sold 100 ADX at $15.24-Used Commission Free Trade:
Quote: Adams Diversified Equity Fund Inc. (ADX)
Sponsor's Website: Adams Funds
Closing Price Yesterday: ADX $14.98 +$0.09 +0.60%
Profit Snapshot = +$112.32
Item # 4 Bought 100 ADX at $14.12-Used Commission Free Trade (3/3/19 Post)(snapshots of largest realized profits + some links to prior posts)
Data Date of Trade (5/6/19)
Closing Net Asset Value Per Share = $17.6
Closing Market Price = $15.26
Discount = -13.3%
Average Discounts:
3 Years -15.02%
5 Years -14.85%
Sourced: ADX Adams Diversified Equity CEF Connect
Last Elimination: Item # 2.C. (3/4/17 Post)
Realized Profits 2014 to Date: $3,172.46
Since I sold a 467+ share position in 2015, I have been buying and selling 100 share lots. The total return for those 100 shares lots has been generated mostly from capital gain distributions paid in December that totaled $4.48 per share (2015-2018) My realized profit numbers do not include dividends and capital gains distributions but only the profit from selling the shares.
C. Sold 100 RVT at $14.51-Used Commission Free Trade:
Profit Snapshot: +$87.61
Item # 1 Bought 100 RVT at $13.63-Used Commission Free Trade (3/31/19 Post)
I may buy this one back with a price decline below the last $13.63 purchase price.
Last Quarterly Dividend: $.29 per share
Royce Value Trust, Inc. (RVT) Dividend Date & History - Nasdaq
Last Ex Dividend Date: 3/8/19
Closing Price Yesterday: RVT $13.78 +$0.19 +1.40%
Last Elimination: Item # 1 Sold 505+ RVT at $15.89 (8/3/13 Post)
Data Day of Trade (5/6/19):
Closing Net Asset Value Per Share: $16.22
Closing Market Price = $14.51
Discount: -10.54
Average Discounts:
3 Years -11.33%
5 Years -12.01%
Source: RVT Royce Value Trust-CEF Connect
4. Bought 50 of the Deservedly Hated BDC GARS at $6.93-Used Commission Free Trade (Category: Small Ball-Income Generation):
Quote: GARS-Garrison Capital Inc.
SEC Filings
2018 Annual Report (risk factor discussion starts at page 31 and ends at page 60)
Closing Price Yesterday: GARS $6.89 -$0.03 -0.43%
Management: External
Current Position: 130 Shares
Dividend: Quarterly at $.23 (recently reduced from $.28 which was reduced from $.35 per share effective for the 2016 4th quarter)
Garrison Capital BDC - Investor Relations - Dividends & Distributions
Average Cost Per Share = $7.2
Dividend yield at average total cost = 12.78% (assumes no dividend cut which I now view as more likely than not within 12 months)
Next Ex Dividend Date: 6/6/19
Highest Cost Lot: 50 at $7.77 (11/13/18)-Item # 1.A. Bought 50 GARS at $7.7-Used Commission Free Trade (12/2/18 Post)
Last Discussed: Item #4.A. Bought 10 GARS at $7.13 and 15 at $6.3-Used Commission Free Trades (1/2/19 Post)
Last Earnings Report Prior to Purchase (Q/E 12/31/18): Not comforting
Subsequent to this last purchase, GARS reported reported results for the 2019 first quarter. I viewed this report as unsatisfactory but not as bad as some others. 10-Q for the Q/E 3/31/19
The Board declared a $.23 per share quarterly dividend.
Net asset value per share continued to decline, but only by 8 cents to $10.44 compared to the Q/E 12/31/18. For this deservedly hated BDC, that is what passes for progress.
NII per share was reported at $.2, unchanged from the prior quarter, and below the quarterly dividend of $.23 per share. The dividend may soon have to be cut again without an increase in net income per share.
The company reported a realized loss of $7.133M which is unacceptable given its long string of realized losses.
The company identified the primary culprit in its 10-Q: "The net realized loss on investments for the three months ended March 31, 2019 was primarily comprised of a $6.9 million loss incurred upon the sale of our investment in Profusion Industries, LLC.", at page 53.
The 2018 Annual Report identifies that $9.188M at cost loan as non-performing than valued at $2.33M, Page 91. As of 12/31/17, GARS valued the loan at $8.621M, page 86. I do not see the loan in the 2016 Annual report, but noted that it was valued above its par value in the 10-Q for the Q/E 3/31/17. I consequently estimate that the loan went on non-accrual within two years after made.
BDCs will have loan losses but GARS has too many and too much IMO indicating to me poor underwriting and bad judgment. It needs to be emphasized that the economy has been good during the period that GARS has been a public company.
I will not buy more shares except through dividend reinvestment. I will start dividend reinvestment with the next payment. The hope is that I will be able to sell the highest cost lot profitably at some point.
When speculating in deservedly hated BDCs, positions will always be immaterial and a return in excess of the dividend yield problematic.
The key to earning a return in excess of the dividend is to catch a period when the BDC stops incinerating assets and reports some minor improvement in net investment income and net asset value per share.
This may then create a ray of light that will allow harvesting of a capital gain. Averaging down some, using commission free trades, is frequently required to improve the chances of a successful exit.
5 Year Operating History: Disgusting IMO
 |
| Net Asset Values Per Share: $15.58 on 12/31/14 and $10.52 on 12/31/18 |
Assuming my addition is correct, the external manager was paid $44.23 million over this five year period (base and incentive fees). My question is why is anyone paid anything for this performance.
5. Small Ball-Commission Free ETFs:
A. Bought 10 IEUR at $46.16:
Quote: iShares Core MSCI Europe ETF Overview
Closing Price Yesterday: IEUR $46.26 +$0.37 +0.81%
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Top Ten Holdings as of 5/5/19:
Recent Dividend History: Semi-annual (larger payment in June)
Purchase Restriction: Small Ball Rule
Maximum Position: 50 shares
Current Position: 10 Shares
Rated 3 Stars by Morningstar
I was looking around for an ETF that had performed poorly over the past several years compared to the S & P 500 and naturally thought about European stock ETFs.
I have avoided European ETFs altogether for over 3 years or so.
I mentioned buying IEUR in a January 2016 where I was sprinkling money in a variety of stocks and stock ETF on major down days. Update For Portfolio Positioning And Management As Of 1/12/2016 - South Gent | Seeking Alpha I was buying into a volatility spike. That is something that I do now. I eliminated the position in 2017.
Through 5/15/19, the annual average total return was 7.34% over the past three years. After posting slightly negative total returns in 2015 and 2016, the fund did produce a +26.75% total return in 2017 before losing 14.85% last year. iShares Core MSCI Europe ETF (IEUR) Total Returns European stock ETFs have just been a hard place to make money, but the severe underperformance of those ETFs compared to SPY at least sets up the possibility of outperformance over the next several years.
IEUR was launched in 2014. Just to highlight how poor USD price European stock ETFs have fared over the past 5 and 10 years compared to SPY, I would point to VGK: Vanguard FTSE Europe Index Fund ETF Shares (VGK) Total Returns
Through 5/15/19, the total annual average 5 year total return for VGK was .99% and 7.58% compared to 10.93% and 14.67% respectively for SPY. SPDR® S&P 500 ETF (SPY) Total Returns
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.
Hello SG
ReplyDeleteAny thoughts on this opinion?
thanks
https://www.bloomberg.com/opinion/articles/2019-05-18/china-miscalculated-trump-and-markets-opinion-jvtgmbmu
G: A lot of opinions are being expressed about the China trade negotiations. That opinion article published in Bloomberg fits more into the consensus opinion that both sides are posturing and grandstanding now and will come to an agreement before causing any long term or meaningful damage to their respective economies. Both sides may have miscalculated on the others willingness to compromise on main issues. The general thrust of the consensus opinion is that rational persons will not throw gasoline on each other and then throw a match.
DeleteChina does not want to see U.S. firms moving their supply chains to foreign countries. While Huawei and other Chinese firms are still highly dependent on U.S. component suppliers, pushing China too far may just end up spurring the development of high end products by China or more dependable suppliers outside of the U.S., where American companies now enjoy near monopoly status. China could also deny American firms access to rare minerals needed in a wide variety of technology devices including smartphones, batteries, screens, turbines, drones, missiles, advanced weapons sensors, radars, stealth technology, lasers, electromagnetic guns and jamming technology. China's President just made a highly unusual visit to a rare mineral plant in China.
https://www.trtworld.com/magazine/china-s-control-of-rare-minerals-has-the-power-to-disrupt-the-us-economy-26845
I am skeptical of the everything will turn out for the best scenario. It looks to me like both sides are willing to inflict pain on each other. The more that Donald tries to strong arm China now, the more China will resist and retaliate in ways that go far beyond imposing more and higher tariffs.
American businesses are already reporting that their China business is suffering because of this conflict.
https://www.cnbc.com/2019/05/22/trump-tariff-increases-hurting-us-businesses-in-china-survey-says.html
The world economy was already weakening for non-trade war reasons. An all out trade war between China and the U.S. could light the fuse for the next recession which is my main concern.
The author is also surprised that the US stock market behaved so differently from the rest of the world and expected an up and down market post 08-09.
DeleteRates were lowered around the world. So why do u think that the US market reacted so differently>
thanks for the above.
G: The U.S. stock market has outperformed the rest of the world since 2008, which can be seen comparing the total return of VTI and VEU.
Delete10 Year Annual Average Total Returns:
Vanguard Total Stock Market ETF (VTI) +14.87%
Vanguard All-World ex-US Index ETF +6.53%
Conjuring up rational reasons may explain the differences. The U.S. has a unique ability to generate innovation and to provide abundant capital for new ideas. The U.S. is more a practitioner of wild west capitalism with a far greater risk tolerance than elsewhere. If you had to name the top 10 technology stocks in the world, how many would be based outside the U.S. and what would be the average age since founding of those companies.
The U.S. also cleaned up its banking system faster and is far more likely to practice survival of the fittest capitalism or "creative destruction". Consequently, failures are quickly eliminated rather than nursed along to provide employment, incinerate capital, and generate endless losses.
There are also cyclical forces at work. Money tends to go to what is working and European stocks have substantially underperformed U.S. stocks over the past 10 years. That kind of long term out performance can reverse due to a number of factors, such as the U.S. market becoming unattractive from a valuation standpoint compared to Europe, Japan and/or emerging markets.
I did not find this Bloomberg opinion article particularly useful. One reason is that the author had Donald playing some kind of world champion chess which is laughable.
E.G.
Why is Donald imposing tariffs on China's exports?
Author: "By raising tariffs he puts pressure on China to stimulate its economy. That, in turn, will tend to lead to a recovery in U.S. share prices."
His intricate chess game is to create uncertainty to "put pressure on the Fed to cut rates". In this author's opinion, Donald is a Chess Master like no other.
"Consequently, failures are quickly eliminated rather than nursed along to provide employment, incinerate capital, and generate endless losses."
ReplyDeleteWith the possible exception of the biotechnology sector. :)
The Stock Jocks woke up this morning to a realization that all may not be going so good with the China trade negotiations. Reading headlines published at Reuters and Bloomberg would have alerted them to that fact over the past two weeks or so.
ReplyDeleteIt is just too hard, at least for today, to spin this statement from China's Ministry of Commerce into the everything will be okay scenario: “If the U.S. would like to keep on negotiating it should, with sincerity, adjust its wrong actions. Only then can talks continue."
So when will the Duck throw his next hissy fit when China fails to submit to him. Since the last hissy fit occurred yesterday, I would not expect another public one for at least a few more hours from now, perhaps longer if someone takes his phone away.
In TrumpWorld, there are only two options: (1) praise Donald effusively and never criticize him no matter how justified and (2) give him what he wants or he will hurt you. I just described a narcissistic bully which is what Donald has been and always will be.
++
Toronto-Dominion Bank (TD)
$55.86 +0.89 +1.62%
Last Updated: May 23, 2019 at 1:17 p.m. EDT
https://www.marketwatch.com/investing/stock/td
TD is bucking the downtrend today based on investor response to its earnings report released earlier today.
https://www.newswire.ca/news-releases/td-bank-group-reports-second-quarter-2019-results-801055698.html
The ten year treasury yield has now fallen below 2.3%, down 8+ basis points for the day so far.
The yield curve inversion that starts after the 6 month treasury bill through the 10 year treasury note makes intermediate term bonds unattractive to me. I am not even looking at what is available knowing without looking that the yields suck.
I have been buying some CDs that mature in May and June 2020 that have higher yields than treasuries. I am not impacted by a state
income tax issue in Tennessee that could cause a higher yielding CDs to provide a lower after state tax yield than a comparable maturity treasury.
I characterized today's stock market action as an extremely mild reaction to the negative news items, indicating that the Stock Jocks' blue skies scenario is still firmly in place though with a fleeting question mark.
ReplyDeleteBesides China giving Donald the index finger, which apparently the Stock Jocks view as probably more posturing, the Markit PMI for manufacturing slumped to a near ten year low. The May reading was 50.6:
https://www.cnbc.com/2019/05/23/us-manufacturing-activity-dives-to-more-than-9-year-low-on-trade-war-worries-survey-shows.html
The Markit PMI for services fell to 50.9, a 39 month low and down from 53 in April.
Markit press releases can be found here:
https://www.markiteconomics.com/Public/Release/PressReleases
Most of the retail earnings that have been released over the past week have been bad. I have noted several 10% daily declines in several retail stocks.
I am hoping for a blood in the streets scenario for stocks but the Stock Jocks seem most reluctant to provide me with that opportunity.
I did not do anything today other than buy a few CDs. If there is another down day tomorrow, I may do some money sprinkling in my small ball ETF basket strategy.
There remains a blind faith in an interest rate cut spurring economic activity when the most likely outcome is a negative one with pushing on a string the next most likely outcome. The negative impact of declining interest rates is less disposal income for the masses who need that income to partially fund their spending needs. Borrowing money to fund spending is ultimately a no win game for the economy. U.S. consumer spending on durable goods has already turned down, starting last November.
Perhaps the late day rally was due to Donald saying it is "possible" that Huawei could be included in some kind of trade deal. How so, when the U.S. is claiming that the Chinese government is using Huawei to spy and U.S. sanctions were imposed for national security purposes.
Donald was quoted making the following statements about the China trade negotiations that calmed the Stock Jocks:
ReplyDelete“It’s happening, it’s happening fast and I think things probably are going to happen with China fast because I cannot imagine that they can be thrilled with thousands of companies leaving their shores for other places.”
https://www.reuters.com/article/us-usa-trade-china-aid-farmers/trump-predicts-fast-trade-deal-with-china-idUSKCN1ST2KI?il=0
Is that what did it. The day was mild compared to the usual reaction to such events.
DeleteOne thing can be said with certainity, Trump holds grudges. So in the negotiations, he will remember "bad" treatment of himself, and act back.
Land: IMO, Donald's remarks about Huawei and the trade deal happening fast were made to calm investors and reverse a stock market slide.
DeleteFinancial news writers described his comments about Huawei as indicating Donald's flexibility to ease up on restrictions.
https://www.marketwatch.com/story/us-stock-futures-rise-on-signs-trump-administration-could-soften-huawei-stance-2019-05-24?mod=mw_theo_homepage
That was a liberal interpretation of what he actually said.
Trump: "Huawei is something that’s very dangerous. You look at what they’ve done from a security standpoint, from a military standpoint, it’s very dangerous. So it’s possible that Huawei even would be included in some kind of a trade deal. If we made a deal, I could imagine Huawei being possibly included in some form, some part of a trade deal."
I just imagined that it was possible that I could play shortstop for the New York Yankees.
Today the sky is green again...
ReplyDeleteI suppose that quote from Trump is what cheered many up.
With him around, every day is like guessing the latest black swan move.
On El-Erian - I wasn't trying to say I agreed with him. Only that in the past I remember noting that he was sensible, on an opinion I'd listened to.
My estimate is up in the air. We are always in a trade war. It's a question of direction and degree it changes the GDP. I like reading your thoughts on that. I don't personally have a guess I'm committed to; too many factors. Several of which are personalities.
I'd guess yesterday as partly or largely a reaction to the brexit May news.
Even if he were to ease up on Huawei restrictions... or play shortshop... what else will he implement? With logic that I can't follow?
ReplyDeleteLand: Either Huawei is a threat to U.S. national security or it isn't. The only way to ease up on that company would be to acknowledge that the U.S. had no good reason to make the national security claim in the first place. That admission would hurt U.S. credibility.
DeleteChina of course claims that the U.S. is lying about Huawei's ties to the Chinese government.
https://www.reuters.com/article/us-usa-trade-china-ministry/china-denounces-u-s-rumors-and-lies-about-huawei-ties-to-beijing-idUSKCN1SU0K1
There is a Chinese law that would require Huawei to cooperate with the government when asked. No law is necessary for that to happen anyway.
As to May's resignation, she has been toast for some time. Those who favored Brexit never had a clue about how to extricate the U.K. from the EU without causing substantial harm to the economy. If there is someone else that can avoid a hard Brexit, their existence is a well kept secret.
* already in trade war (not always in)
ReplyDeleteDid IWM really climb .94% for SA & Finviz's .37,.14 & .11%
ReplyDeleteLand: The iShares Russell 2000 ETF (IWM) rose .94% yesterday, slightly better than the Russell 2000 index. I am not sure where you are getting the other numbers. SA has IWM up .94% as does Marketwatch.
Deletehttps://www.marketwatch.com/investing/fund/iwm
https://seekingalpha.com/symbol/IWM?s=iwm
The Russell 2000 index has a lot of garbage in it. Generally, about 30% to .40% of the companies are unprofitable.
Ishares says the IWM P/E ratio was at 17.08 as of 5/23/19:
https://www.ishares.com/us/products/239710/
If you click the "i" next to P/E, you will see that this P/E ratio is phony since it excludes all companies with "negative P/E ratios".
In the small cap stock fund sector, I have a meaningful exposure to the T.Rowe Price Small-Cap Stock Fund (OTCFX).
http://performance.morningstar.com/fund/performance-return.action?t=OTCFX®ion=usa&culture=en_US
Total Annual Average Returns:
3 Years 15.85%
5 Years 10.36%
10 Years 16.62%
IWM
3 Years 11.61%
5 Years 7.6%
10 Years 13.78%
http://performance.morningstar.com/funds/etf/total-returns.action?t=IWM®ion=USA&culture=en_US
In the small cap space, active management can consistently outperform a broad index fund like IWM.
In a bull market, the money losing companies which would include a wide array of money losing clinical stage biotechs can generate positive returns in the aggregate.
In the secular long term bull market that started back in March 2009, IWM has performed broadly in line with a small cap ETF that excludes unprofitable companies.
The WisdomTree U.S. SmallCap Earnings ETF (EES) has outperformed IWM over the past ten years, but IWM is still slightly ahead over the 3 and 5 year periods.
http://performance.morningstar.com/funds/etf/total-returns.action?t=EES®ion=USA&culture=en_US
YTD through 5/24, EES has a total return of 18.03% vs. IWM at 18.54%.
In 2018, which was a loser for both ETFs, IWM declined 11.11% vs. EES at -10.1%.
The other numbers were the other indices. I edited my original post into something incoherent.
DeleteI was surprised to see .94 on small caps, with such low numbers on the major indices. That's what I was posting/asking about.
17.08 PE, that's much lower PE than a few years ago when I was hesitating to buy because of 75's PE on small cap.
DeleteThat's aside from the problem of neg PEs not being included in the calculations.
I used to buy a different small-mid cap, that did very well. I'll post the name when I find it. It's still offered in my 401k, but the ticker stopped working in broker listings. It's bound to have the same non-performing stock problem. But may have been better than IWM (from what I remember from when I checked a few years ago.)
Land: When looking at the Russell 2000 P/E, the number will always be high when those with negative P/Es are included.
DeleteSo the 75 P/E number would incorporate companies with the negative earnings while the 17.08 number excludes those companies. They are not comparable in other words.
Then you have the problem whether a particular calculation is based on the past 12 month's GAAP numbers or the estimated non-GAAP numbers for the next 12 months.
Birinyi Associates at least makes clear when it is using GAAP and non-GAAP.
http://www.wsj.com/mdc/public/page/2_3021-peyield.html
The current trailing 12 month GAAP P/E for the Russell 2000 according to that firm is 37.63. That is a major improvement from 89.75 a year ago.
The 12 month forward P/E uses non-GAAP estimates and is currently at 23.85. It is not clear to me whether Birinyi incorporates negative non-GAAP E.P.S. estimates in that calculation but I suspect that he does. In many cases, when resorting to non-GAAP measures, losses can magically turn into profits.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/05/observations-and-sample-of-recent_26.html