Observations and Sample of Recent Trades: IRT, MSPRA, PWCDF,

Economy: 

Morgan Stanley says economy on 'recession watch' amid bond warning; Falling interest rates are sending a warning signal to the stock market: CNBC 

I would say that the Bond Ghouls are becoming more confident in their recession prediction based on both treasury yields and the yield curve. 

Daily Treasury Yield Curve Rates

Probabilities on or before January 2020 Meeting

Countdown to FOMC: CME FedWatch Tool

The Stock Jocks are either not buying into that recession prediction or are arguing that stocks can rise for several months based on what happened in several prior yield inversions. 'No way' we're headed for recession—experts talk bond market warning The Stock Jocks are expressing less confidence in their nothing but blue skies ahead scenario however.  

In a joint news conference with Japan's Prime Minister last Sunday, Donald claimed that the U.S. "will have a deal with China sometime into the future". 

Why? 

Trump: “I don’t believe that China can continue to pay these really hundreds of billions of dollars in tariffs.” (emphasis added) Trump says ‘not bothered’ by N. Korea missile test, upbeat on China trade deal - MarketWatch There are two false statements in that last quote which is  scary on this topic. 

The first false statement is his claim that China pays the U.S. tariffs and the second one is that the U.S. tariffs paid by China are in the "hundreds of billions". Donald has made as many as four false statements in a tweet. Two false statements from the Extremely Stable Genius in one sentence is just normal. He is just trying to get his daily average above 30. 

Trump also said that the U.S. was "not ready to make a deal" and U.S. tariffs on China's exports "could go up very, very substantially, very easily". U.S. `Not Ready' to Make a Trade Deal With China, Trump Says - Bloomberg

While is not unusual for the Extremely Stable Genius to contradict himself before finishing a sentence, the statements above are not contradictory in claiming there will be a trade deal and the U.S. is not ready to make a deal. 

Donald the Great is basically saying that China has no choice but to kneel before him; and consequently there will be a trade deal on Donald's terms. China's President will soon be crawling to Donald, wearing a Make America Great Again hat, while alternatively singing odes to Donald and God Bless America.  

In Donald's mind, China will bend to his will, just keeping twisting harder and harder until China squeals like a stuck pig or as Donald would if he had been sent to Vietnam for jungle combat during that war. His patriotic service during that war was avoiding venereal disease in the NYC party scene.  

China is digging in its heels on protecting a state-run economy

China ready to hit back at U.S. with rare earths: newspapers - Reuters

Poof! Trump investment boom is gone - MarketWatch I would not call the increase starting with Trump's inauguration a "Trump bump" but simply a continuation of the trajectory that was under way during the last months of the Obama administration, as shown in the chart reproduced in that article.  

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Markets and Market Commentary: 


Ned Davis Research claims that the S & P 500 would now be 19% lower without share buybacks that have occurred between 2011 and the 2019 first quarter. The stock market would be much lower if it weren't for companies buying back their own shares While that is a relevant consideration, the most critical issue is whether companies are spending enough free cash flow to generate future earnings growth. The other two issues are whether the company is using debt to buy back stock and the P/E multiples paid for the shares. It is not difficult to rattle off a bunch of companies who wasted shareholder money buying back shares.  

Why one stock-market bull thinks investors are overreacting to trade-war rhetoric - MarketWatch

Investors and voters will continually be drenched daily in Trump's B.S.: Trump claims stock market would be 10,000 points higher if Fed didn't raise interest rates 

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Trump: 

Trump tries to steer border wall deal to GOP Donor firm - The Washington Post ("President Trump has personally and repeatedly urged the head of the U.S. Army Corps of Engineers to award a border wall contract to a North Dakota construction firm whose top executive is a GOP donor and frequent guest on Fox News, according to four administration officials.") 

Donald, I have a question. When will you start draining the D.C. swamp? 

Faked Pelosi videos, slowed to make her appear drunk, spread across social media The Trumpsters specialize in spreading Fake News. That is their main forte. The Russians can learn a lot from them. Showboat Rudi and Demagogue Don retweeted the altered Pelosi video. 

It is not surprising that the Fake News President retweeted the doctored Pelosi video and then claimed that he knew nothing about it.  

Trump denies knowledge of fake videos-TheHill

In latest attack, Trump tweets edited video of Pelosi tripping over words; 

Trump and His Supporters Are Hyping a Doctored Video of Nancy Pelosi Appearing Drunk – VICE; 

Facebook refuses to delete fake Pelosi video spread by Trump supporters (if the fake Pelosi video was deleted, that would indicate in TrumpWorld that social media giants were trying to stifle "conservative" speech); Facebook won't block faked Pelosi video-The Washington Post  

The Fake News President could give lessons to Vlad and like minded authoritarians about how to create a society where true is false and false is true. The U.S. already has one foot in that world, as the Fake News President, his True Believers and media apparatchiks move the nation deeper into a Fact Free Zone.  

Trump HUD Official, Lynne Patton, Says She Doesn't Care If She Broke the Law Ms. Patton, a former Trump party planner, was handpicked by Donald to lead HUD's operations in NY and NJ. Lynne Patton - Wikipedia

Everyone knows that Donald The Magnificent hires only the best people for high level posts in his administration. Donald himself has instructed us many time on that point.

"Everyone knows" is one of Our Great Leader's favorite sayings, which normally precedes a demonstrably false representation made by the Duck. All of the things that ‘everybody knows,’ according to Trump - The Washington Post  

Of course, everyone knows excludes the dwindling number of Americans who still view truth and facts as important and do not view a constant stream of reality creations by a U.S. President as entertaining. 

"Conservatives" call those people Liptards or, when in a more charitable frame of mind, Losers. Those misguided individuals, who assert that Ms. Patton has no qualifications for her office, are just in need of some reindoctrination by Trump's party (e.g. 2 + 2 = 5 if Trump's party says so; George Orwell - 1984 - Part 3, Chapter 2) 

I hereby nominate Congresswoman Liz Cheney, a chip off the old block, to lead that re-education effort. Her dad is the quintessential chickenhawk (5 deferments during the Vietnam War-How Dick Cheney dodged the draft.)

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1. Bought Back 100 PWCDF at U.S.$20.83:

History this Account:

Quotes:

USD Priced Shares (pink sheet exchange): Power Corp. of Canada (PWCDF)

CAD Priced Shares (Toronto exchange): Power Corp. of Canada Stock Quote (Canada: Toronto)

Closing Price Yesterday: PWCDF $21.28 -$0.25 -1.18% 

I last sold PWCDF at $23.41 (3/21/19) and received the 2019 first quarter dividend. Item # 1.A. Sold 100 PWCDF at $23.41 (4/7/19 Post)(profit snapshot = $41.1)

With this re-entry purchase, I will receive the second quarter dividend and have established a significantly lower average cost per share compared to the 100 share lot sold last March. Item # 2 Added 50 PWCDF at $22.58  (7/5/18 Post); Item # 2 Bought 50 PWCDF at $23.31 (5/31/18)

The foregoing is viewed as a victory when playing small ball. 

I thought that the stock price would decline after completion of Power Corporation's modified Dutch tender offer. Power Corporation of Canada | March 8, 2019 - Power Corporation Announces Terms of its Substantial Issuer Bid to Repurchase up to $1.35 billion of its Subordinate Voting Shares (3/8/19 Press Release) 

The final result was announced on 4/17/19. The company purchased and cancelled  40,909,041 shares at a purchase price of C$33 per share. Power Corporation of Canada | April 17, 2019 - Power Corporation Announces Final Results of Substantial Issuer Bid 

This buyback bid was funded by Power Corporation selling Power Financial shares back to that company in response to its dutch tender offer. 

The Power Financial tender offer was financed by the tender offer made by its subsidiary Great-West Lifeco for its share. Great-West Lifeco announces final results of substantial issuer bid 

This train of events started with Great-West selling substantially all of its U.S. individual life and annuity business. All of these corporations are connected through share ownership: 

Power Corporation of Canada | Organization Chart

Another decline started with the first quarter earnings report released on 5/14/19. 

I pared my position in Power Financial by selling my highest cost 50 share lot. Item # 2.A. Sold 50 PWF:CA at C$30.99 (3/31/19 Post)-Item # 4.A. Bought 50 PWF:CA at C$27.73 (12/23/18 Post) I kept the lowest cost lot bought at C$25.5: Item  #5.A. Bought 50 PWF:CA at C$25.5 (1/23/2019 Post)

Last Power Corporation Ex Dividend Date: 3/7/19

Next Ex Dividend Date: 6/6/19

Dividend: Quarterly at C$.405 (C$1.62 annually), increased by 6% effective for the current quarter.  

When held in a U.S. citizens taxable account, a 15% Canadian withholding tax will be withheld. The Canadian dollar amount will be converted into USDs for the PWCDF owners. The dividend yield will depend on the conversion rate. A rise in the CAD's value against the USD after purchase has the effect of a dividend increase while a loss in value operates as a dividend cut. 

If I calculate the dividend yield using the 5/18/19 closing price in Toronto (C$28.03), the dividend yield would be 5.78%. 

Last Earnings Report: 

Power Corporation of Canada | May 14, 2019 - Power Corporation Reports First Quarter 2019 Financial Results and Dividend Increase - Press Releases

I would not pay much attention to the Y-O-Y profit decline realized by Sagard Investments and other investment subsidiaries. The far higher profit in the 2018 first quarter resulted from Sagard Europe selling some investments.

The negative reaction by investors to this profit report is probably due to the Power Financial profit decline. Power Financial Corporation | May 13, 2019-Power Financial Reports First Quarter 2019 Financial Results

Prior Discussions:

Item # 4.A. Sold 100 PWCDF at $23.56 (7/22/17)-Item # 3.A. Bought 100 PWDCF at $22.14 (5/28/17 Post) 

Item # 1. Sold 400 POW:TO at C$31.05: Update For Portfolio Positioning And Management As Of 4/29/16 - South Gent | Seeking Alpha (USD Profit = $360.45)

Item # 2 Sold 100 PWCDF at $28.07 (11/22/14 Post) (profit snapshot=+$210.03)-Bought Back Power Corporation Of Canada At $25.81 

Item # 5 SOLD Taxable Accounts: 100 PWCDF at $28.83 (8/2/14 Post)(profit snapshot+$138.71)-Item # 4 Bought 100 PWCDF at $27.29 (7/12/14 Post)

Trading Profits to Date All Accounts: $1,129.14  

2. Short Term Bond/CD Ladder Basket Strategy:

June 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

2 Time Warner 2.1% SU 6/1 (bought in January 2018)
2 Ryder Systems 2.55% SU 6/1 (bought March 2018)
2 Oncor 2.15% SU 6/1 (bought in June 2018)
2 Treasury 2.429% IR 56 day bill 6/4 (bought at auction)
3 Treasury  2.562%% IR 6 Month T Bills 6/6 (bought at auction)
2 Citigroup 2.05% SU 6/7 (bought12/17 and 1/18)
2 Mylan 2.5% SU 6/7 (bought April 2018)
1 Caterpillar 2.1% SU 6/9 (bought July 2018)
5 Treasury 2.429%%IR 28 Day Bill 6/11 (bought at auction)
3 Treasury 2.424% IR 56 Day 6/11 (bought at auction)
2 Guaranty Trust 1.6% CDs MI 6/13 (21 Month CDs)
3 Treasury 2.546% IR 6 Month T Bills 6/13/18
2 Cardinal Health 1.948% 6/14 (bought December 2017) 

2 Bank of Nova Scotia 1.65% SU 6/14 (bought December 2017)
1 Treasury .875% 6/15 (secondary market)
4 Emera 2.15% SU 6/15 (bought 1/18 & 7/18)
3 Treasury 56 day bills  2.429% IR (bought at auction)
3 Treasury  2.552%  IR 6 Month T Bill 6/20 (bought at auction)

2 Wells Fargo 1.85% CDs MI 6/24 (18 month CDs)
2 Target 2.3% SU 6/26 (bought July 2018)
2 Sonabank 2.3% CDs MI 6/28  (1 Year CDs)
3 Treasury 1.625% 6/30/19 (secondary market purchases)

$53K in maturities

$8K in adds:

A.  Bought 3 New York Community Bank 2.45% CDs Maturing on 5/22/19:

B. Bought 2 East West 2.4% CDs Maturing on 2/22/20:

Issuer: Operating bank of East West Bancorp Inc.
EWBC Analyst Estimates

C. Bought 2 Live Oak 2.4% CDs (monthly interest payments) Maturing on 5/29/20:

Issuer: Operating bank of Live Oak Bancshares Inc. (LOB)
LOB Analyst Estimates

D. Bought 1 Treasury 1.375% Coupon Maturing on 2/15/20:
YTM = 2.37%

I now own 2 bonds.

The CDs mentioned above have a slightly better yield. The state income tax issue does not exist for me. If a state did tax the CD interest, the after tax yield would be less than the treasury yield when held in a non-retirement account. For example, a 5% state tax on the 2.4% CD interest payment would reduce the after tax yield to 2.28%, making the lower yielding treasury maturing on 2/15/20 a better after tax option than the East West CD.

3. Pares and Eliminations:

A. Pared IRT- Sold 127 IRT Shares at $10.52-Used Commission Free Trade:

Profit Snapshot: +$362.17

Closing Price Yesterday: IRT $10.96 -$0.08 -0.72% 

It looks like I turned the dividend reinvestment option on and off several times and may have sold some higher cost lots previously. IRT was paying monthly dividends until it switched recently to quarterly distributions.

Quote: Independence Realty Trust Inc. (IRT)
SEC Filings
IRT Apartment Map
2018 Annual Report
10-Q for the Q/E 3/31/19

Property Portfolio as of 3/31/19:

Dividends: Quarterly at $.18 ($.72 annually)

Dividend History

Last Ex Dividend Date: 3/28/19

This transaction eliminates my IRT position held in the Fidelity taxable account.

I still own lower cost shares in my Schwab and IB accounts

Remaining Positions:

Schwab Account: 121+ Shares with an average cost per share of $7.36
Yield at Average Cost = 9.78%

Interactive Brokers ("IB"): 150 Shares with an average cost per share of $6.51
Yield at Average Cost = 11.06%

I have quit reinvesting the dividends based on valuation which I regard as high for this REIT. I do not reinvest the dividend for positions held in the IB account. 

Last Purchase Discussions: Item # 1.A. Added 50 IRT at $9.35-Roth IRA Account (1/21/18 Post); Item # 1 Bought 50 IRT at $6.18 Update For The Equity REIT Basket Strategy As Of 2/22/16 - South Gent | Seeking Alpha; Item # 2 Added 100 IRT at $6.8 Update For EQUITY REIT Basket Strategy As Of 1/29/16 - South Gent | Seeking Alpha

Last Sell Discussions: Item # 1.A. Sold 57+ IRT at $10.27 in a Roth IRA Account  and Item #1 B. Sold 50 IRT at $10.38-Used Commission Free Trade (9/26/18 Post)(profit snapshots =$328.25); Item 1.C. Sold 50 IRT at $10.09 (6/21/18 Post); Items 1, 2, 3 Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha

IRT Trading Profits to Date: $1,138.32 (+$776.15 in prior trades)

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy (contains trade snapshots)

Last Earnings Report: Q/E 3/31/19

This report contains the same problems that I have noted in the past including stagnant FFO, inadequate dividend coverage, and IRT's failure to report AFFO in accordance with the NAREIT definition which would include a deduction for routine maintenance expense from FFO. 

Funds used for routine maintenance of apartments are not available for distribution to shareholders.

This excerpt highlights the problems:

The CORE FFO is equal to the quarterly dividend rate, but there is no adjustment to the cash flow number to account for routine maintenance expenditures which are high for apartments. 

IRT does reveal in its press release the amount spent per apartment in "recurring capital expenditures". 

For the 1st quarter, that number was $1.8 million or $115 per apartment. 

An annual average maintenance expenditure of $300 to $500 per apartment would be a normal range. If I deduct $1.8M from IRT's quarterly Core FFO of $15.974M, the AFFO per share number would be $.1577 or well below the quarterly dividend rate.

The question to ask is what is the more accurate free cash flow number that provides the coverage for the dividend.

B. Eliminated MSPRA-Sold 100 at $20.38:

Quote: Morgan Stanley Non-Cumulative Series A Preferred Stock

Profit Snapshot: +$56.26

I sold 50 of the 100 shares at a slight loss. Item # 4 Bought 50 MSPRA at $18.89. (1/5/19 Post); Item # 2.A. Bought 50 MSPRA at $20.7 (12/2/18 Post)

MSPRA Trading Profits to Date: $2,178.01 ($2,121.75 in prior trades, small lots)

Category: Advantages and Disadvantages of Equity Preferred Floating Rate Securities

MSPRA is an equity preferred stock that pays non-cumulative and qualified dividends at the greater of 4% or .7% above the 3 month Libor rate on a $25 par value. Prospectus 

The dividends are qualified and non-cumulative.  

This kind of security would become worthless in a bankruptcy.  

I have given up hope that the coupon will be increased over the 4%  base rate. 

Short term rates are likely to remain low for longer than I previously expected. 

Unless the price dives below $18, I am not coming back to this one. 

One issue, which remains unclear to me, is what will happen when the Libor rates are no longer in existence. 

Currently, it does not matter since a .7% spread over the 3 month Libor is less than the base minimum coupon of 4%. 

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.