Economy:
BLS reported that the economy added 263,000 jobs last month, with the unemployed rate declining .2% to 3.6%. Employment Situation Summary
The decline in the unemployment rate was due to 490,000 individuals people leaving the workforce. That is a negative reason.
Two other negatives are the decline in the workweek by .1%, which is an important number when spread over the entire workforce, and the .2% decline in the labor participation rate to 62.8%.
Temporary hiring by U.S. Census Bureau for the 2020 Census will also skew the job creation numbers. The jobs report might be incredibly strong for an unusual reason - MarketWatch
The annual average increase in wages was reported at 3.2%, unchanged from the prior month and below the consensus estimate of 3.3%.
As usual, the Stock Jocks accentuated the positives and ignored the negatives.
Ac-Cent-Tchu-Ate the Positive - Paul McCartney (Lyrics) - YouTube
The report does decrease the likelihood of a recession within the next 12 months to less than 20% IMO, probably closer to 10%.
Manufacturers grow at slowest pace in April since Trump elected, ISM finds - MarketWatch The new orders component declined by 5.7 points to to 51.7%, which is the lowest reading on that future indicator since August 2016. I would caution that the ISM month-to-month numbers bounce around a lot. No conclusion about the future can be drawn from a significant monthly decline.
In early April 2009, I discussed how the significant upturn in new manufacturing orders was an indicator that the economy was exiting the recession. The ISM new manufacturing orders bottomed at 22.7 in December 2008, deep into contraction territory, and had just been reported at 41 for March 2009. So shifts in trends are important.
BLS reported that the economy added 263,000 jobs last month, with the unemployed rate declining .2% to 3.6%. Employment Situation Summary
The decline in the unemployment rate was due to 490,000 individuals people leaving the workforce. That is a negative reason.
Two other negatives are the decline in the workweek by .1%, which is an important number when spread over the entire workforce, and the .2% decline in the labor participation rate to 62.8%.
Temporary hiring by U.S. Census Bureau for the 2020 Census will also skew the job creation numbers. The jobs report might be incredibly strong for an unusual reason - MarketWatch
The annual average increase in wages was reported at 3.2%, unchanged from the prior month and below the consensus estimate of 3.3%.
As usual, the Stock Jocks accentuated the positives and ignored the negatives.
Ac-Cent-Tchu-Ate the Positive - Paul McCartney (Lyrics) - YouTube
The report does decrease the likelihood of a recession within the next 12 months to less than 20% IMO, probably closer to 10%.
Manufacturers grow at slowest pace in April since Trump elected, ISM finds - MarketWatch The new orders component declined by 5.7 points to to 51.7%, which is the lowest reading on that future indicator since August 2016. I would caution that the ISM month-to-month numbers bounce around a lot. No conclusion about the future can be drawn from a significant monthly decline.
In early April 2009, I discussed how the significant upturn in new manufacturing orders was an indicator that the economy was exiting the recession. The ISM new manufacturing orders bottomed at 22.7 in December 2008, deep into contraction territory, and had just been reported at 41 for March 2009. So shifts in trends are important.
Trump calls on the Fed to slash rates and increase stimulus Why does the economy need more stimulus when rates are already well below historical norms? What about the savers that the Duck pretended that he wanted to help with much higher rates when Obama was President?
Trade war and sagging prices push U.S. family farmers to leave the field - Reuters
US-China trade deal possible by next Friday
Trump 'firm' on China structural demands, tariffs part of enforcement: Pence - Reuters
US-China trade deal possible by next Friday
Trump 'firm' on China structural demands, tariffs part of enforcement: Pence - Reuters
+++++
Markets and Market Commentary:
Cramer: 'We've had a terrific run' — it's time to trim some positions
Abby Joseph Cohen says investors need to ‘get into their heads’ that time of ‘monetary policy providing nothing but stimulus is over’ - MarketWatch
Investors Should Move to Safer Assets Before ‘Rain Spoils the Picnic’ - Barron's The article mentions that Citi's "adjusted net corporate debt" has risen 41% since last year. Investment grade bond yields have declined to a 1.1% premium to treasuries from 1.6% as of 12/31/18. That narrowing spread has caused me to lighten up on investment grade corporate debt and to redirect proceeds into short term treasury bills.
"Safe asset" is a frequently misused phrase. A 1 year treasury bill is safe in the sense that I will receive my principal back plus about 2.4% in interest based on the current rate.
If I adjust that number by inflation and taxes, the real after tax return is near zero.
Is that safe?
It is only safe for someone who has no need to grow capital to meet their financial objectives. The motto for that person might be the "return of my money is more important than the return on my money".
Most credit risk free assets are not safe for households that require meaningful growth to meet their financial objectives before and after retirement.
For over a decade now, the safe credit and interest risk free investments, which includes short term treasury bills, CDs, and savings accounts, have provided either negative or barely positive real returns before taxes.
"Safe asset" is a frequently misused phrase. A 1 year treasury bill is safe in the sense that I will receive my principal back plus about 2.4% in interest based on the current rate.
If I adjust that number by inflation and taxes, the real after tax return is near zero.
Is that safe?
It is only safe for someone who has no need to grow capital to meet their financial objectives. The motto for that person might be the "return of my money is more important than the return on my money".
Most credit risk free assets are not safe for households that require meaningful growth to meet their financial objectives before and after retirement.
For over a decade now, the safe credit and interest risk free investments, which includes short term treasury bills, CDs, and savings accounts, have provided either negative or barely positive real returns before taxes.
Dow Theory fans see signs of trouble in a soft Dow Jones Transportation Average - MarketWatch; Dow Jones Transportation Average Interactive Chart
++++++
Trump:
It is not surprising that Barr is just another political partisan. ‘I don’t know’: Barr’s professed ignorance prompts calls for his resignation after Mueller letter William Barr testimony: Two weeks after Mueller confronted him, attorney general denied knowing whether Mueller supported his report summary - CBS News
His opinions are governed by his strong allegiance to Trump and the republican party and have no intrinsic value.
Ex-US North Korea envoy Joseph Yun says Trump approved signing of Warmbier pledge - CNNPolitics
It is not surprising that Barr is just another political partisan. ‘I don’t know’: Barr’s professed ignorance prompts calls for his resignation after Mueller letter William Barr testimony: Two weeks after Mueller confronted him, attorney general denied knowing whether Mueller supported his report summary - CBS News
His opinions are governed by his strong allegiance to Trump and the republican party and have no intrinsic value.
Ex-US North Korea envoy Joseph Yun says Trump approved signing of Warmbier pledge - CNNPolitics
Trump's Deceptive Arms Trade Treaty Argument - FactCheck.org Lying works so well only because tens of millions do not possess accurate information and have no desire to learn.
Would Trump change if the Trumpsters booed him at his campaign rallies whenever he made a demonstrably false statement rather than cheering him for lying to them?
If Donald had to convey only accurate information to the True Believers, would his campaign rally harangues last more than 30 seconds?
Emails show Trump admin had 'no way to link' separated migrant kids to parents When reversing it policy of separating children from their migrant parents, the Trump administration assured the public that it had records in a "central depository" that could reunite children with their parents.
It turns out that there was enough information to reconnect 60 parents with their children.
Trump has repeatedly claimed that Obama had the same policy which is demonstrably false, but the lie, like so many others oozing from the Duck, works on its intended recipients. FACT CHECK: Trump Wrongly Blames Obama For Child Separation Policy: NPR; Trump digs in on false claim that he stopped Obama’s family separation policy - The Washington Post; Fact-Checking Trump’s Family Separation Claim about Obama’s Policy - The New York Times; Did Obama administration have family separation? Trump Blames Obama for border child separation policy - CBS News
The most recent CNN poll showed that Donald had an 86% approval rating among republicans and 46% among independents. CNN Poll: With Mueller investigation over, Trump approval at 43% - CNN
Those who oppose Trump underestimate both the strong and growing reactionary forces in the U.S. and the fertile ground for an authoritarian demagogue, who is incapable of being truthful, to remain in power.
+++++
1. Short Term Bond/CD Ladder Basket Strategy:
$8K in adds
$8K in adds
A. Bought 2 Three Month Bills Maturing on 7/18/19:
IR = 2.434%
Auction Results: 91 day bill
B. Bought 2 Duke Energy Florida 1.8% First Mortgage Bonds Maturing on 1/15/20:
I now own 6 bonds.
Finra Page: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of Duke Energy Corp. (DUK)
"Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida’s service area covers approximately 13,000 square miles and supplies electric service to approximately 1.8 million residential, commercial and industrial customers."
DUK 2018 Annual Report page 60:
Credit Ratings:
Bought at a Total Cost of 99.35 (paid 99.25)
YTM at TC Then at 2.739%
C. Bought 1 Treasury 1.5% Coupon Maturing on 5/31/20:
YTM = 2.431%
D. Bought 1 Treasury 1.625% Coupon Maturing on 7/31/20:
YTM = 2.431%
I now own 5 bonds.
E. Bought 2 Six Month T Bills at Auction Maturing on 10/24/19:
IR = 2.47%
Auction Results:
2. Intermediate Term Bond Basket Strategy:
A. Sold 2 Conagra 3.2% SU Maturing 1/25/23:
Profit Snapshot: $45.22
Item # 3.C. Bought 2 CAG 3.2% SU Maturing on 1/25/23 at a TC of 98.089 (6/14/18 Post)
Finra Page: Bond Detail
Sold at 100.45
YTM at 100.45 = 3.064%
Proceeds at 100.35 (after $2 commission/$1 per bond)
Conagra bonds are rated at BBB-/Baa3 which is one notch above junk.
B. Sold 2 Verizon 3.125% SU Maturing on 3/16/22:
Profit Snapshot: $16.32
Item # 6.A. Bought 2 VZ 3.125% SU Maturing on 3/16/22 at a TC of 99.772 (3/19/18 Post)
FINRA Page: Bond Detail
Sold at 100.788
YTM at 100.788 = 2.84%
The proceeds will be deposited in a Vanguard MM fund that currently yield about .4% less than the 2.84% YTM.
3. Pares and Eliminations:
A. Pared OFS-Sold Highest Cost Lots in Schwab Account 50 shares at $12.27 and 50 at $12.47:
OFS History Schwab Account:
Given the commission rate at Schwab, where I no longer have commission free trades, I would have been no worse off by electing to sell 100 shares at $12.27. Since I am reducing my BDC allocation by selling into the rally, I decided to go ahead and lower my average cost per share in this account to $10.1 from $10.55.
When playing small ball, selling the pops and buying the dips is part of the program.
Any further OFS adds will be in my Fidelity account using the small ball purchase restriction. That would require the next purchase to be below $9.61. I own 84 shares in that account with an average cost per share of $10.73.
This is a typical small ball trade designed and intended primarily to reduce risk. It is not relevant how much profit is made by selling the highest cost lots into price pops, when I can (1) profitably exit a BDC position after capturing one or more dividends, (2) reduce my average cost per share for the remaining shares and (3) increase my dividend yield based on the revised lower cost number.The dividend yield was raised to 13.465% with these pares based on the current regular quarterly penny rate of $.34 per share.
Quote: OFS Capital Corp. (OFS)
Website: Homepage - OFS Capital
Investments - OFS Capital
Closing Price Last Friday: OFS $12.57 -$0.07 -0.55% (less than enthusiastic response to the 1st quarter earnings report released before the open)
OFS SEC Filings
2018 Annual Report (risk factor summary starts at page 25 and ends at page 51)
Last Reported Net Asset Value Per Share: $13.04 as of 3/31/19, down from $13.10 as of 12/31/18.
Profit Snapshots: +$4.38 and $65.17
Last Discussed: Item # 3B. Bought 10 OFS at $9.95 and 20 at $9.61 Using Fidelity Commission Free Trades (1/9/19 Post); Item # 4.B. Bought 10 OFS at $11.07 and 10 at $10.75 Used Fidelity Commission Free Trades (11/11/18 Post)
Dividend: Quarterly at $.34 per share ($1.36 annually)
Reduced Average Cost Per Share to $10.10 in this account; and
Increased the Dividend Yield to 13.465%
Last Earning Report: This report was released after I sold the shares.
NII was reported at $.36 per share, above the $.34 quarterly distribution.
"As of March 31, 2019, floating rate loans as a percentage of fair value comprised 88% of OFS Capital’s debt investment portfolio, with the remaining 12% in fixed rate loans."
OFS Capital Corporation Announces First Quarter 2019 Financial Results
B. Eliminated TransAlta Renewables-Sold 150 RNW:CA at C$13.97 and 100 TRSWF at US$10.36:
TRSWF is the USD priced ordinary shares of TransAlta Renewables (RNW:CA) that trades on the Toronto stock exchange.
TRSWF trades in the dark U.S. Grey Market where (1) bid/ask quotes are not displayed; (2) liquidity is extremely light to non-existent, and (3) some brokers charge non-standard commissions to execute orders.
I use Schwab to buy in Canadian stocks that trade in the GM since standard commission rates apply and the quote is displayed by using the CAD price and translating it into USDs.
Limit orders have to be used.
If the broker does not display the quote, then the investor has to acquire the CAD quote and manually convert it into USDs in order to know an appropriate limit order price.
Website: TransAlta Renewables
Facilities in Operation/Development | TransAlta Renewables
Dividends: Monthly at C$.0783 per share (C$.94 annually)
Dividend Information | TransAlta Renewables
TRSWF History-Schwab Account:
TRSWF Profit Snapshot: +US$75.74
Item # 2.B. Bought 100 TRSWF at US$9.55-Used Commission Schwab Free Trade (6/18/18 Post)
Sold 150 RNW:CA-IB Account (C$1.5 commission):
Profit 150 RNW:CA: C$163.5
Item # 2.A. Bought 100 RNW:CA at C$12.91 (6/18/18 Post); Item #2.A. Bought 50 RNW:C at C$12.45 (7/12/18 Post)
4. Small Ball ETF Purchases Using Commission Free ETFs:
The purchases of VEU and DGRO, discussed below conclude my "bookmarks" for ETFs. The purpose of a bookmark is to identify what may be bought during a market meltdown before it occurs.
I have now a sufficiently large selection and will not be adding more ETF bookmarks. Only ETFs that can be bought commission free are included in this list.
Subsequent purchases and sells are governed by the small ball trading rules.
The ETF bookmark list consists of the following:
Vanguard FTSE All-World ex-US ETF
Vanguard Total World Stock ETF
iShares Core MSCI Emerging Markets ETF
iShares S&P 100 ETF
Vanguard Mega Cap ETF
Schwab 1000 Index ETF
iShares Core Dividend Growth ETF
ProShares S&P 500 Dividend Aristocrats ETF
Vanguard Health Care ETF
Fidelity MSCI Health Care Index ETF
iShares Nasdaq Biotechnology ETF
iShares Edge MSCI Multifactor USA ETF
iShares MSCI Switzerland ETF Overview - MarketWatch
Global X MSCI Norway ETF
SPDR S&P International Small Cap ETF
WisdomTree U.S. SmallCap Dividend Fund
Fidelity Small-Mid Factor ETF
iShares International Select Dividend ETF
Fidelity High Dividend ETF
Fidelity Dividend ETF for Rising Rates
Fidelity MSCI Communication Services Index ETF
Fidelity MSCI Energy Index ETF
Columbia Emerging Markets Consumer ETF
The Vanguard and Fidelity health care ETFs are similar. I will be adding to those ETFs with the $13,510 in proceeds recently received from eliminating Vanguard Health Care Fund (VGHCX), see Item # 1.A.
This list may be far too long for other investors but the length reflects my mile wide and inch deep approach and focus on relative valuations and past performance measures, estimated opportunities for capital gains, and dividend yields and frequency of dividend payments.
And, if the stock market does another moonshot skyward, I will not be embarrassed to sell all or most of those ETFs, no matter how small the position. When the starting point is no risks have to be taken, the decisions become easier.
A. Bought 1 IBB at $103.86-Commission Free for Vanguard Customers:
Quote: iShares Nasdaq Biotechnology ETF Overview
Closing Price Last Friday: IBB $107.91 +$1.93 +1.82%
Current Position: 6 shares
Maximum Position: 20 shares
Purchase Restriction: Small ball rule (each future purchase has to be at the lowest price in the chain)
B. Bought 10 DGRO at $38.19 and 5 at $37.84-Commission Free for Fidelity Customers:
Quote: iShares Core Dividend Growth ETF Overview
Closing Price Last Friday: DGRO $38.11 $0.28 +0.74%
Sponsor's Page: iShares Core Dividend Growth ETF | DGRO (seeks to track an index consisting "of U.S. equities with a history of consistently growing dividends". The relevant index is the Morningstar U.S. Dividend Growth Index. To be included in this index, the company must pay qualified dividends (excludes pass through entities like REITs and BDCs), must have at least 5 years of dividend growth, and the earnings payout ratio must be less than 75%)
Expense Ratio: .08%
This is my first purchase of this ETF.
Some of the Top Holdings:
Purchase Restriction: Small Ball Rule
C. Bought 10 VEU at $51.75-Commission Free for Vanguard Customers:
Quote: Vanguard FTSE All-World ex-US ETF Overview
Closing Price Last Friday: VEU $51.74 +$ 0.54 +1.05%
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF (seeks to track the FTSE All World Ex-US Index)
Vanguard FTSE All-Wld ex-US ETF Analysis & Quote | Morningstar (rated at 4 stars)
Expense Ratio: .09%
Holdings: 2,821 stocks as of 3/31/19
Top 10 Holdings as of 3/31/19
Dividends: Quarterly
10 Year Historical Performance v. SPX: Substantially Underperformed
The worm may turn in favor of international stocks but that is just not happening yet. This has led many money managers to argue, based on the past, that U.S. investors just need to stay with U.S. stocks and gain international exposure through U.S. multinationals. That would be good advice looking at what has happened over the past 1, 3, 5 and 10 year periods, but then the past may not be prologue to the future.
VEU Total Annual Average Returns Compared to SPY-Through 5/1/19:
3 Years:
VEU: +8.29%
SPY: +14.47%
5 Years:
VEU: 2.95%
SPY: 11.34%
10 Years:
VEU: 7.73%
SPY: 15.05%
Sourced From:
Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) Total Returns
SPDR® S&P 500 ETF (SPY) Total Returns
+++
Transaction in non-leveraged ETFs are commission free for Vanguard customers.
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.
IR = 2.434%
Auction Results: 91 day bill
B. Bought 2 Duke Energy Florida 1.8% First Mortgage Bonds Maturing on 1/15/20:
Finra Page: Bond Detail (prospectus linked)
Issuer: Wholly owned subsidiary of Duke Energy Corp. (DUK)
"Duke Energy Florida is a regulated public utility primarily engaged in the generation, transmission, distribution and sale of electricity in portions of Florida. Duke Energy Florida’s service area covers approximately 13,000 square miles and supplies electric service to approximately 1.8 million residential, commercial and industrial customers."
DUK 2018 Annual Report page 60:
Credit Ratings:
Bought at a Total Cost of 99.35 (paid 99.25)
YTM at TC Then at 2.739%
C. Bought 1 Treasury 1.5% Coupon Maturing on 5/31/20:
YTM = 2.431%
D. Bought 1 Treasury 1.625% Coupon Maturing on 7/31/20:
YTM = 2.431%
I now own 5 bonds.
E. Bought 2 Six Month T Bills at Auction Maturing on 10/24/19:
IR = 2.47%
2. Intermediate Term Bond Basket Strategy:
A. Sold 2 Conagra 3.2% SU Maturing 1/25/23:
Profit Snapshot: $45.22
Item # 3.C. Bought 2 CAG 3.2% SU Maturing on 1/25/23 at a TC of 98.089 (6/14/18 Post)
Finra Page: Bond Detail
Sold at 100.45
YTM at 100.45 = 3.064%
Proceeds at 100.35 (after $2 commission/$1 per bond)
Conagra bonds are rated at BBB-/Baa3 which is one notch above junk.
B. Sold 2 Verizon 3.125% SU Maturing on 3/16/22:
FINRA Page: Bond Detail
Sold at 100.788
YTM at 100.788 = 2.84%
The proceeds will be deposited in a Vanguard MM fund that currently yield about .4% less than the 2.84% YTM.
3. Pares and Eliminations:
A. Pared OFS-Sold Highest Cost Lots in Schwab Account 50 shares at $12.27 and 50 at $12.47:
OFS History Schwab Account:
When playing small ball, selling the pops and buying the dips is part of the program.
Any further OFS adds will be in my Fidelity account using the small ball purchase restriction. That would require the next purchase to be below $9.61. I own 84 shares in that account with an average cost per share of $10.73.
This is a typical small ball trade designed and intended primarily to reduce risk. It is not relevant how much profit is made by selling the highest cost lots into price pops, when I can (1) profitably exit a BDC position after capturing one or more dividends, (2) reduce my average cost per share for the remaining shares and (3) increase my dividend yield based on the revised lower cost number.The dividend yield was raised to 13.465% with these pares based on the current regular quarterly penny rate of $.34 per share.
Quote: OFS Capital Corp. (OFS)
Website: Homepage - OFS Capital
Investments - OFS Capital
Closing Price Last Friday: OFS $12.57 -$0.07 -0.55% (less than enthusiastic response to the 1st quarter earnings report released before the open)
OFS SEC Filings
2018 Annual Report (risk factor summary starts at page 25 and ends at page 51)
Last Reported Net Asset Value Per Share: $13.04 as of 3/31/19, down from $13.10 as of 12/31/18.
Profit Snapshots: +$4.38 and $65.17
Last Discussed: Item # 3B. Bought 10 OFS at $9.95 and 20 at $9.61 Using Fidelity Commission Free Trades (1/9/19 Post); Item # 4.B. Bought 10 OFS at $11.07 and 10 at $10.75 Used Fidelity Commission Free Trades (11/11/18 Post)
Dividend: Quarterly at $.34 per share ($1.36 annually)
Reduced Average Cost Per Share to $10.10 in this account; and
Increased the Dividend Yield to 13.465%
Last Earning Report: This report was released after I sold the shares.
NII was reported at $.36 per share, above the $.34 quarterly distribution.
"As of March 31, 2019, floating rate loans as a percentage of fair value comprised 88% of OFS Capital’s debt investment portfolio, with the remaining 12% in fixed rate loans."
OFS Capital Corporation Announces First Quarter 2019 Financial Results
B. Eliminated TransAlta Renewables-Sold 150 RNW:CA at C$13.97 and 100 TRSWF at US$10.36:
TRSWF is the USD priced ordinary shares of TransAlta Renewables (RNW:CA) that trades on the Toronto stock exchange.
TRSWF trades in the dark U.S. Grey Market where (1) bid/ask quotes are not displayed; (2) liquidity is extremely light to non-existent, and (3) some brokers charge non-standard commissions to execute orders.
I use Schwab to buy in Canadian stocks that trade in the GM since standard commission rates apply and the quote is displayed by using the CAD price and translating it into USDs.
Limit orders have to be used.
If the broker does not display the quote, then the investor has to acquire the CAD quote and manually convert it into USDs in order to know an appropriate limit order price.
Website: TransAlta Renewables
Facilities in Operation/Development | TransAlta Renewables
Dividends: Monthly at C$.0783 per share (C$.94 annually)
Dividend Information | TransAlta Renewables
TRSWF History-Schwab Account:
TRSWF Profit Snapshot: +US$75.74
Item # 2.B. Bought 100 TRSWF at US$9.55-Used Commission Schwab Free Trade (6/18/18 Post)
Sold 150 RNW:CA-IB Account (C$1.5 commission):
Profit 150 RNW:CA: C$163.5
Item # 2.A. Bought 100 RNW:CA at C$12.91 (6/18/18 Post); Item #2.A. Bought 50 RNW:C at C$12.45 (7/12/18 Post)
4. Small Ball ETF Purchases Using Commission Free ETFs:
The purchases of VEU and DGRO, discussed below conclude my "bookmarks" for ETFs. The purpose of a bookmark is to identify what may be bought during a market meltdown before it occurs.
I have now a sufficiently large selection and will not be adding more ETF bookmarks. Only ETFs that can be bought commission free are included in this list.
Subsequent purchases and sells are governed by the small ball trading rules.
The ETF bookmark list consists of the following:
Vanguard FTSE All-World ex-US ETF
Vanguard Total World Stock ETF
iShares Core MSCI Emerging Markets ETF
iShares S&P 100 ETF
Vanguard Mega Cap ETF
Schwab 1000 Index ETF
iShares Core Dividend Growth ETF
ProShares S&P 500 Dividend Aristocrats ETF
Vanguard Health Care ETF
Fidelity MSCI Health Care Index ETF
iShares Nasdaq Biotechnology ETF
iShares Edge MSCI Multifactor USA ETF
iShares MSCI Switzerland ETF Overview - MarketWatch
Global X MSCI Norway ETF
SPDR S&P International Small Cap ETF
WisdomTree U.S. SmallCap Dividend Fund
Fidelity Small-Mid Factor ETF
iShares International Select Dividend ETF
Fidelity High Dividend ETF
Fidelity Dividend ETF for Rising Rates
Fidelity MSCI Communication Services Index ETF
Fidelity MSCI Energy Index ETF
Columbia Emerging Markets Consumer ETF
The Vanguard and Fidelity health care ETFs are similar. I will be adding to those ETFs with the $13,510 in proceeds recently received from eliminating Vanguard Health Care Fund (VGHCX), see Item # 1.A.
This list may be far too long for other investors but the length reflects my mile wide and inch deep approach and focus on relative valuations and past performance measures, estimated opportunities for capital gains, and dividend yields and frequency of dividend payments.
And, if the stock market does another moonshot skyward, I will not be embarrassed to sell all or most of those ETFs, no matter how small the position. When the starting point is no risks have to be taken, the decisions become easier.
A. Bought 1 IBB at $103.86-Commission Free for Vanguard Customers:
Quote: iShares Nasdaq Biotechnology ETF Overview
Closing Price Last Friday: IBB $107.91 +$1.93 +1.82%
Current Position: 6 shares
Maximum Position: 20 shares
Purchase Restriction: Small ball rule (each future purchase has to be at the lowest price in the chain)
B. Bought 10 DGRO at $38.19 and 5 at $37.84-Commission Free for Fidelity Customers:
Quote: iShares Core Dividend Growth ETF Overview
Closing Price Last Friday: DGRO $38.11 $0.28 +0.74%
Sponsor's Page: iShares Core Dividend Growth ETF | DGRO (seeks to track an index consisting "of U.S. equities with a history of consistently growing dividends". The relevant index is the Morningstar U.S. Dividend Growth Index. To be included in this index, the company must pay qualified dividends (excludes pass through entities like REITs and BDCs), must have at least 5 years of dividend growth, and the earnings payout ratio must be less than 75%)
Expense Ratio: .08%
This is my first purchase of this ETF.
Some of the Top Holdings:
Purchase Restriction: Small Ball Rule
C. Bought 10 VEU at $51.75-Commission Free for Vanguard Customers:
Quote: Vanguard FTSE All-World ex-US ETF Overview
Closing Price Last Friday: VEU $51.74 +$ 0.54 +1.05%
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF (seeks to track the FTSE All World Ex-US Index)
Vanguard FTSE All-Wld ex-US ETF Analysis & Quote | Morningstar (rated at 4 stars)
Expense Ratio: .09%
Holdings: 2,821 stocks as of 3/31/19
Top 10 Holdings as of 3/31/19
10 Year Historical Performance v. SPX: Substantially Underperformed
VEU Total Annual Average Returns Compared to SPY-Through 5/1/19:
3 Years:
VEU: +8.29%
SPY: +14.47%
5 Years:
VEU: 2.95%
SPY: 11.34%
10 Years:
VEU: 7.73%
SPY: 15.05%
Sourced From:
Vanguard FTSE All-World ex-US Index Fund ETF Shares (VEU) Total Returns
SPDR® S&P 500 ETF (SPY) Total Returns
+++
Transaction in non-leveraged ETFs are commission free for Vanguard customers.
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.
Donald tweeted about an hour ago that he will increase tariffs on $200B of China's exports to the U.S. from 10% tariffs to 25% next Friday. He claims that China is attempting to renegotiate. He also claims that the negotiations are going too slowly.
ReplyDeletehttps://twitter.com/realDonaldTrump?ref_src=twsrc%5Egoogle%7Ctwcamp%5Eserp%7Ctwgr%5Eauthor
https://www.cnbc.com/2019/05/05/trump-says-tariffs-on-200-billion-of-chinese-goods-will-increase-to-25percent-on-friday.html
Donald claims in the tweets that the tariffs are a plus for the U.S. economy, contributing to GDP growth, and that those tariffs "have had little impact on product cost".
Hard to say whether Donald will carry through with that threat or merely using it as last minute negotiating strategy.
As I have started here previously, there is an advantage to China IMO to string out the negotiations along for as long as possible and then put Trump in a no win position of accepting China's terms or restarting the tariff war 18 months before the 2020 election and much nearer the start of election season.
Trump already has high disapproval ratings that are likely to get worse, particularly in rural areas whose economies are tied to agricultural products, with an acceleration of the tariff wars.
I would add that Trump repeated his usual lie that "China" pays the U.S. tariffs on its exports.
ReplyDeleteThe Washington Post noted that Trump repeated his "mistaken" claim that 'China has been paying Tariffs to the USA' for 10 months.
Trump's statement: "For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods."
Using the word "mistaken" is being very generous to Donald. Given the obvious falsity of this contention, which has been repeated several times over the past year, and his motive for misleading the public on this issue, lie is the only appropriate characterization.
The motive is to persuade those amenable to his lies (which unfortunately number in the tens of millions) that the tariffs are not a tax on U.S. customers because China pays the tariffs, when he knows that U.S. importers pay the tariff and then try to pass all or whatever they can to U.S. consumers through price increases.
So much winning. So, so much.
Delete...Everything is costing more without raises.
Wonder who knew Trump would be making this announcement and bought/sold right in time.
I didn't hit notify. Hoping if I do now, I'll get notifications.
DeleteLand: Once the "Notify me" box is checked, an email is sent within seconds after I publish a comment.
DeleteI use the comment section to publish updates in between posts.
The Trump tweets on tariffs occurred shortly after I published this post, so I discussed them in the comment section rather than revising the post.
Based on pre-market activity, the reaction to Donald's tweets is extremely mild IMO and indicates that the Stock Jocks view them primarily as a negotiating tactic for this week's trade negotiation round in D.C..
E-Mini S&P 500 Future Jun 2019
2,900.00 -47.60 -1.61%
Last Updated: May 6, 2019 at 7:11 a.m. CDT
I would label a "dip" as more than a 5% decline.
This kind of move so far today could happen on a no news day.
You can see the "no worry" spin on this development in broker commentary:
https://www.cnbc.com/2019/05/06/strategists-react-to-the-latest-trade-war-news.html
While that spin may prove to be accurate, it is too early to draw that conclusion IMO. I also view it as meaningfully underestimating the total breakdown of negotiations scenario.
If I was in China's position, I would view Trump as a mercurial and frequently irrational leader who can never be trusted to keep a bargain once one is made.
There is also a decent possibility that Donald will push them too far as I have been discussing in prior posts.
That may be occurring, for example, in U.S. demands that tariffs remain in place as an enforcement mechanism and in return China has to purchase tens of billions more in U.S. products and agree to a multitude of changes that it would prefer to avoid.
Why would China agree to those terms with a U.S. President that only a dumb and ignorant fool would trust? Donald's entire life is proof that he can not be trusted.
As I mentioned in a prior post, I have quit selling my intermediate term corporate bonds, though several past trades will be discussed in subsequent posts. High quality bonds are likely to go up in price and down in yield.
U.S. 10 Year Treasury Note
2.485% -0.038%
Last Updated: May 6, 2019 8:23 a.m. EDT
As to stocks, I do not view the current decline reflected in less than a 2% drop in SPX as a buying opportunity given the uncertainties.
For stocks, my primary approach now is to buy commission free ETFs in extremely small amounts during downdrafts, and only pick up the pace after a significant decline. (see Item # 4 in this post)
I would broadly define "significant" as more than a 10% decline from current levels.
In other words, since I do not have to take risks, I see no reason to stick my neck out based on what we know now.
The market certainly thinks it's a negotiation tactic.
DeleteSo far Trump has stood by his agreements overseas. He did exactly what Russia asked for.
He makes them unfairly. Doesn't stand by the US's prior agreements. And enters into many with wushy washy unclarity so they aren't agreements. So China may trust an agreement. But they will play him when opportune, and not trust his "negotiation" style... otherwise known as erratic and bullying and untrustworthy.
I agree there is decent chance he will push them too far. Or negotiate the way he "Won" on the shutdown, getting less each time.
Unfortunately I do need to take risks or loose to inflation. But I appreciate your sense of how this looks!
Haven't bought here.
Russell has started to recover, interestingly. It's down the least the last couple times.
Land: The Stock Jocks are treating Trump's trade threats as a non-event. It is too early to make to reach that conclusion IMO. It is certainly one possible scenario.
DeleteI would not call the less than 1% SPX decline as a buying opportunity as some strategists are doing today.
E.G.:
https://www.marketwatch.com/story/stock-market-strategist-says-wall-street-should-shake-of-trump-trade-anxieties-and-buy-this-dip-2019-05-06
My only stock move so far today was to sell 101+ PBCT at $17.57.
I did participate in today's 6 month treasury auction, but participating in weekly treasury auctions is standard for me and I placed that order last Friday. I did buy 2 Treasuries in the secondary market market maturing on 4/15/19 since I am not yet over the $40K minimum in maturities for that month. The treasury yields start to slop back down starting in May-June 2020. The current 1 year T Bill is at 2.4% with the 2 year note at 2.3%.
The investment rate on the 6 month T Bill, auctioned earlier today, was 2.449%.
ReplyDeletehttps://www.treasurydirect.gov/instit/annceresult/press/preanre/2019/R_20190506_2.pdf
IR = equivalent coupon-issue yield
The treasury will auction the 4 and 8 week bills next Thursday. The actual day terms for those bills is usually 28 and 56 days.
If you had no idea about Trump's tariff tweets, and only knew about the closing numbers today, there would be no indication of anything happening in the real world that would concern investors.
ReplyDeleteThe small declines are consistent with normal market dynamics uninfluenced by negative external events. The closing numbers are not consistent with anything remotely approaching a major negative news event.
I would not assign an almost 100% probability that everything will just work out just fine in the China trade negotiations. That is IMO the percentage being assigned by the Stock Jocks and Wall Street talking heads.
There has been an advantage during bull markets to avoid obsessing about things that have not happened yet and may not happen, or to blow out of proportion the inevitable negative news items that always pop up during bull stock cycles while deemphasizing the long term positive factors that support the bull move.
The problem with the "no worry" attitude, just buy the dips mentality, is that it frequently leaves the investor with a deer in the headlights look when the inevitable bear market cycle starts. That first 20% decline is bought aggressively, for example, since that has been a buying opportunity over the past decade and who remembers 2008 or 2000-2002 anyway. Then rather than stopping at -20%, the market continues moving down with gusto. Fortunately, the youngsters have not had to navigate yet a 16 year bear market in stocks where SPX's total return (dividends reinvested) was an average annual -1.9% adjusted for inflation.
Since I do not share the Stock Stock's assessment of the risks that may soon materialize in the trade negotiations, I sold two recently bought stock CEFs, 100 shares of ADX and 100 RVT, near the close simply because I would not assign a zero risk to a major blowup.
That basically takes off the table the dollar amount invested late last week, and not yet discussed, in THQ and BIF.
I am already defensively positioned so my adjustments are likely to be small. I did not see any reason to buy today.
While some called the decline a buying opportunity, my brain would have to be totally rewired for me to even contemplate the possibility of categorizing a less than 1% SPX decline, given the market's current valuation, as a buying opportunity.
The PBCT sell was contemplated last week and had nothing to do with today's action or yesterday's news. I have been paring my regional bank allocation due to the flat yield curve being a non-temporary event.
Guess by today they've decided to rethink it as meaningful, but rather small impact to stocks. (Under 2% isn't a big move.)
DeleteWonder what created more worry than yesterday. Over night thinking?
If the market reaches that bear event, I'd expect VIX to indicate it on the first drop, and give opportunity to leave on the recovery event. One hopes. Though no guarantees of course.
Alcentra Capital Corp.
ReplyDelete$8.32 +$0.07 +0.85%
https://www.marketwatch.com/investing/stock/abdc
ABDC has been doing better.
After the close, this $106+M market capitalization BDC reported net investment income of $.22 per share, comfortably in excess of the regular quarterly dividend rate of $.18. Net asset value increased to $11.17 from $11.13 as of 12/31/18. The company declared its regular quarterly dividend of $.18 per share and a spillover special dividend of $.15 per share due to the company overearning the dividend paid out in 2018. Weighted average debt portfolio yield was approximately 11.2% as of 3/31/19.
https://www.prnewswire.com/news-releases/alcentra-capital-corporation-announces-first-quarter-2019-financial-results-300844675.html
Net asset value per share has been helped by a strong share buyback program that has retired "approximately 9.5% of shares outstanding since January 1, 2018. Those shares are being bought at a large discount to net asset value per share.
Based on today's closing price of $8.32 and the net asset value per share of $11.17, the discount would be 25.51%.
This BDC also has an ongoing strategic alternative review. It is possible that it will sell itself. If sold to another BDC I would expect a share exchange that would still value this BDC at a discount to its net asset value.
After selling some shares, I see no reason to do anything with the lot that I currently own, which is 50 shares bought at $5.65 plus reinvested dividends.
Item # 1.B. (11/25/18 Post)
https://tennesseeindependent.blogspot.com/2018/11/observations-and-sample-of-recent_25.html
Based just on the regular dividend, the yield at my current average cost number of 5.86 for 55+ shares is 12.29% and at 14.85% when factoring in the special dividend.
Land: Yesterday, the Stock Jocks had a 100% probability assigned to everything will be just fine and a trade deal will soon be signed after a minor hiccup. Today represents a minor reassessment, assigning some risk to the total breakdown scenario.
DeleteThe U.S. trade representative, who is viewed as a hawk, sounded hawkish in remarks made after the closing bell yesterday.
https://www.politico.com/story/2019/05/06/stock-market-trump-china-tariff-threats-1412031
It is probable that tariffs will increase from 10 to 25% on Friday even if trade negotiations are continuing.
There is a report published about 6 hours ago in the South China Post that China's state media outlets warned the U.S. to "not even think about" concessions from China and that China will not respond to Trump's threats with concessions. President Xi Jinping reportedly vetoed more concessions:
https://www.scmp.com/news/china/diplomacy/article/3009163/chinese-vice-premier-liu-he-go-washington-trade-talks
While this may be posturing, it is consistent with the scenario that Donald has tried to push them too far already.
When I game the scenarios from China's perspective, there is a point where they walk. The flash point could be the U.S. keeping all or part of the existing tariffs even after China makes major trade concessions from its point of view. The U.S. is apparently negotiating as if it has China over a barrel and can browbeat China's President for Life into taking a knee before the Duck, which is not the case. China has options available to it outside of its trade relationship with the U.S., including devaluing its currency, stimulating domestic demand, redirecting exports to other nations or ramping up production in countries that are not subject to the tariffs.
Today did not resolve the big issue whether the next major move is up or down.
ReplyDeleteThe Stock Jocks are not going to abandon their money machine based on what may happen in the trade negotiations.
They are still far from the making IMO the transition from "everything is just fine, going to get better and will never get worse" (current) to "everything is just bad, going to get worse, and will never get better" (e.g. 2008).
The transition to "I wish no one had told me about stocks" requires undeniable really bad news that undermines the bullish thesis and optimism about the future. I refer to it as an ocean of ice cold water pounding the Stock Jocks continuously as someone pounds their head with a sturdy piece of lumber while shouting "Wake Up Doofus, Things Have Changed".
Still, a total breakdown in the China trade negotiations could end up being the spark that lights the fuse. There will come a time when a 20% decline will not be a so hot buying opportunity based on what occurs thereafter.
I swung the big you know what today, first removing the computer and other items from my desk to avoid property damage, and bought 5 shares of DGRO at $37.17 when the DJIA crossed the -600 point mark.
As previously noted, I will buy commission free ETFs on down days and will increase the amounts based on the percentage declines.
I am seeing enough upside action with my bonds. I would not mind seeing a 50% decline in stocks.
I stuck what amounts to an investment pacifier in my mouth and placed an order to buy five 56 day treasury bills at the upcoming Thursday auction. I am recycling proceeds from maturing treasuries held in my Schwab account where almost nothing is paid on the Sweep Account balance.
The 2 month treasury bill currently has a 2.44% yield based on trading today compared to the ten year note at 2.45%. The yield inverts starting at the 6 month bill with its 2.46% yield through the 10 year treasury.
https://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
So the Bond Ghouls view of the future has not changed. Interest rates are expected to trend down starting in about 6 months.
The deservedly hated BDC CMFN reported another unsatisfactory quarter after the bell. For this one, progress is defined as being less bad than usual and maybe that is the appropriate characterization of this report:
https://www.globenewswire.com/news-release/2019/05/07/1818880/0/en/CM-Finance-Inc-Reports-Results-for-its-Fiscal-Third-Quarter-Ended-March-31-2019.html
At least CMFN reported $.25 in NII which is equal to its quarterly dividend. It could have been below the penny dividend rate.
Net asset value (“NAV”) per share decreased by 3.05% to $11.14, compared to $11.49 as of December 31, 2018. That number is still going the wrong way.
For a well managed BDC, where past performance indicates decent judgment and acceptable underwriting, a 10% discount to net asset value may be undervalued provided there is no recession brewing on the horizon.
For BDCs that are deservedly hated based on past performance showing a lack of good judgment and virtually non-stop asset incineration, a 30% discount may be insufficient for the risk.
Based on today's closing price of $7.28 and using the $11.14 NAV per share as of 3/31/19, the discount is at -34.65%. I would not call that undervalued given this BDC's history. It would be undervalued at that discount when and if the external managers produce positive growth in NII and net assets per share. And that is for another day.
The long decline in the price does make the dividend yield more attractive for a wrong reason. Assuming no further dividend cuts, which is an assumption that I would not make, the dividend yield at a total cost of $7.28 is 13.74% (quarterly at $.25 per share)
I did recently add to my lottery ticket position in CMFN.
""The transition to "I wish no one had told me about stocks" requires undeniable really bad news that undermines the bullish thesis and optimism about the future. I refer to it as an ocean of ice cold water pounding the Stock Jocks continuously as someone pounds their head with a sturdy piece of lumber while shouting "Wake Up Doofus, Things Have Changed". ""
ReplyDeleteI don't see anything that dire happening soon, that they'd recognize. So up seems to be the stock direction.
Amazingly Trump's taxes have come out....showing his ability to "negotiate" or whatever one does to lose a billion dollar when handed 4million or so. And futures are neutral.
It's a Wheaties market!!
Land: In today's dollars, Donald received $413M from his Daddy. He published his first self-promotion book, Art of the Deal, in 1987 when he losing money measured in tens of millions. In many years, he was at the top of the Biggest Losers in tax losses. He is a fraud. But, that was known before he was elected President, and the NYT article published this evening merely confirms what was already known generally. He did bankrupt 6 businesses after inheriting $413M from Daddy. It was only when he convinced millions that he was God's gift to successful entrepreneurs, when he was actually the Biggest Loser, that he created the brand Trump which he has made a fortune licensing to others who take the business risk. Takeaway Daddy's money or the gullibility of people in swallowing his claims of success, or even the $1+B in loss carryforwards generated when he tried to operate real businesses (which sheltered future income from taxes and created cash flow), and Trump would be selling clunkers to poor people for 5 times their value.
DeleteI have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/05/observations-and-sample-of-recent_8.html