Economy:
The Fake News President tweeted that "the word TARIFF is a beautiful word indeed!"
Corporate profits fall again as GDP in first quarter trimmed to 3.1% from 3.2% in the first estimate - MarketWatch (consumer spending rose 1.4% as durable good purchases fell 4.6%, the most in 10 years)
Gross Domestic Product, 1st quarter 2019 (second estimate); Corporate Profits, 1st quarter 2019 (preliminary estimate)("Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $65.4 billion in the first quarter, compared with a decrease of $9.7 billion in the fourth quarter.")
Again, over 50% of the 3.1% estimated rise in real GDP was due to factors that are likely to reverse in the current quarter. I would just take the average of the first and second quarter GDP numbers.
This article offers some interesting insights about U.S. GDP numbers: It’s not a recession — it’s a reversion (to the mean) - MarketWatch
"In 2018, gross domestic product (GDP) grew at 2.9%, about the Congressional Budget Office's (CBO's) projected rate published in 2017 before the tax cut." (emphasis added) The Economic Effects of the 2017 Tax Revision: Preliminary Observations (published by the Congressional Research Service, which is Congresses bipartisan think tank). In other words, the tax cuts have not contributed much yet to GDP growth.
China issued its "White Paper" on the trade negotiations earlier today. China releases official document ("White Paper") that blames America for the trade war; China says U.S. can't use pressure to force trade deal - Reuters; China lays out official stance on trade talks with U.S. | TechCrunch I view China's "White Paper" as primarily a rehash of what it has been saying for several weeks now.
There were some new assertions. China publicly blamed the U.S. for the trade war and claimed the U.S. was substantially overestimating the trade deficit number. When "processing" trade is excluded, China asserted that the trade deficit was close to $150B rather than the $410B claimed by the U.S.
Processing probably refers mostly to assembling parts manufactured elsewhere and then shipping the product to the U.S. China also called the U.S. unreliable. Stock Jocks may become enthusiastic about China's desire to continue trade talks while ignoring the important qualifier "on equal terms".
The Fake News President tweeted that "the word TARIFF is a beautiful word indeed!"
Corporate profits fall again as GDP in first quarter trimmed to 3.1% from 3.2% in the first estimate - MarketWatch (consumer spending rose 1.4% as durable good purchases fell 4.6%, the most in 10 years)
Gross Domestic Product, 1st quarter 2019 (second estimate); Corporate Profits, 1st quarter 2019 (preliminary estimate)("Profits from current production (corporate profits with inventory valuation and capital consumption adjustments) decreased $65.4 billion in the first quarter, compared with a decrease of $9.7 billion in the fourth quarter.")
Again, over 50% of the 3.1% estimated rise in real GDP was due to factors that are likely to reverse in the current quarter. I would just take the average of the first and second quarter GDP numbers.
This article offers some interesting insights about U.S. GDP numbers: It’s not a recession — it’s a reversion (to the mean) - MarketWatch
"In 2018, gross domestic product (GDP) grew at 2.9%, about the Congressional Budget Office's (CBO's) projected rate published in 2017 before the tax cut." (emphasis added) The Economic Effects of the 2017 Tax Revision: Preliminary Observations (published by the Congressional Research Service, which is Congresses bipartisan think tank). In other words, the tax cuts have not contributed much yet to GDP growth.
China issued its "White Paper" on the trade negotiations earlier today. China releases official document ("White Paper") that blames America for the trade war; China says U.S. can't use pressure to force trade deal - Reuters; China lays out official stance on trade talks with U.S. | TechCrunch I view China's "White Paper" as primarily a rehash of what it has been saying for several weeks now.
There were some new assertions. China publicly blamed the U.S. for the trade war and claimed the U.S. was substantially overestimating the trade deficit number. When "processing" trade is excluded, China asserted that the trade deficit was close to $150B rather than the $410B claimed by the U.S.
Processing probably refers mostly to assembling parts manufactured elsewhere and then shipping the product to the U.S. China also called the U.S. unreliable. Stock Jocks may become enthusiastic about China's desire to continue trade talks while ignoring the important qualifier "on equal terms".
China Puts US Soy Purchases on Hold as Trade War Escalates - Bloomberg;
China makes veiled threat about withholding rare earth minerals
China makes veiled threat about withholding rare earth minerals
'Don't say we didn't warn you' - A phrase from China signals the trade war could get even worse (the article does not reference the warning given by China before it entered the Korean War-Catastrophe on the Yalu: America’s intelligence failure in Korea)
China says US trade provocations are 'naked economic terrorism': CNBC
China's tariff hikes on US goods come into force on 6/1 - BBC
The official China manufacturing PMI for May fell into contraction territory: Official manufacturing PMI for May; China's manufacturing activity declines in May - MarketWatch
Last Thursday, Donald reiterated his claim that China is paying for the tariffs.
The market is too pessimistic about prospects for a trade deal, says a long-time China watcher-MarketWatch
The market is not "too pessimistic" about a trade deal.
The Stock Jocks are still believers that one will happen relatively soon and this is what is currently reflected in major market index levels.
The minor decline in the S & P 500 after hitting an all time high is more reflective of an opinion that a trade deal will happen relatively soon but will take longer than previously expected by the Stock Jocks. The longer delay will have in this consensus scenario some adverse impacts that would not have happened but for the delay.
Moreover, the current SPX level does not reflect an adjustment for a longer term all out trade war with China lasting at least six months. That would need IMO a 20% to 30% decline from SPX 2,945 to be realistic. (2061 to 2356). I am not including in that range estimate an acceleration of the trade wars with other major trading partners including Mexico, which may already be underway, and the EU.
SPX closed at 2351.10 (12/24/18) when investors were optimistic about a trade deal with China, but believed the FED might keep raising interest rates until it caused a recession which was an unjustified fear.
Economic damage flowing from a trade war is not something which may happen but is happening now and is likely IMO to get worse. So there is real damage now as opposed to a fear of damage that may occur.
There are dangers that tariff wars with other countries will accelerate: Trump: US will impose 5% tariff on all Mexican imports from June 10 I discussed the new tariffs on Mexico's exports in this comment.
The new tariff on all of Mexico's exports will start at 5% effective June 10 and will gradually rise in 5% increments before reaching the maximum 25% on October 1, 2019,
Those tariffs, if implemented, will represent yet another major tax imposed by the republicans on U.S. consumers and businesses. Trump Mexico import tariffs could hurt consumers
How Mexico tariffs could hurt $600 billion in cross-border trade — and the U.S. economy - MarketWatch
The Extremely Stable Genius is sending a loud and clear message to foreign countries that the U.S. has weaponized tariffs and will use them to coerce foreign governments to change internal policies unrelated to trade.
With the new tariffs on Mexico, Trump had made it clear to everyone that the U.S. is not a reliable trading partner. The New Tariffs Against Mexico Signal the U.S. Isn’t a Reliable Negotiating Partner - The New York Times
I would go further and add that Trump has also made the U.S. an unreliable ally as well. Several of our allies and a majority of their citizens as reflected in polling data have already reached that conclusion.
U.S. foreign relations with most countries will be in tatters when the nation votes in November 2020.
Mexico probably thought that it had satisfied Donald after making concessions to secure the NAFTA 1.1 agreement that is waiting now for legislative approval in Canada, Mexico and the U.S.
That was clearly wrong. No nation can ever count on trade peace with Donald even after granting concessions and finalizing a trade agreement with him. I am confident that China has received that message as have other countries.
Before the new trade treaty with Mexico and Canada could be approved by the legislative bodies, Donald decided to use the tariff weapon again against Mexico in a manner that will severely damage its economy and raise taxes on U.S. consumers. Tariffs are properly viewed as taxes on U.S. businesses and consumers.
When and if Mexico retaliates, American exporters will be hurt to the extent Mexico can source the products from other countries. It would probably be in Mexico's long term interest to replace American exports with a more reliable source wherever economically possible.
Mexico is a major buyer of U.S. products. The value of U.S. exports is more than the combined total of exports to China, Japan and South Korea.
Foreign Trade - U.S. Trade with Mexico; Mexico | United States Trade Representative ("U.S. goods and services trade with Mexico totaled an estimated $671.0 billion in 2018. Exports were $299.1 billion; imports were $371.9 billion. The U.S. goods and services trade deficit with Mexico was $72.7 billion in 2018.')
Since Donald decided to threaten the imposition of more tariffs on Mexico's exports, I have heard or read several opinions that everything will be okay, since Donald will reach a trade deal with China and resolve the tariff-immigration issues with Mexico before summer's end.
Some market gurus suggested that Donald was not really serious about imposing new tariffs on Mexico and will reach an agreement with Mexico's representatives before June 10th.
Cramer: The market thinks Mexico tariffs won't be imposed I would agree with that assessment about the market's message but have no confidence in it. If the market thought now that Trump would impose those tariffs, a far greater decline would have happened last Friday. S & P 500 Close on 5/21/19: 2,752.06 -36.80 -1.32%
Donald does not sound like he is going to play nice with Mexico:
Note the emphasis on using tariffs as a weapon to force U.S. manufacturers to move production from Mexico back to the U.S.. I believe that the last tweet is the first time the Fake News President has called tariffs taxes.
Trump's Mexico tariffs risk pricing some Americans out of buying a car
If the U.S. is engaged in an all out tariff war with both China and Mexico starting this June or July, the U.S. economy will likely be in a recession before year end. I have a reasonable confidence in that prediction. The FED would be unable to do anything to avert it. Interest rates are already extremely low. Daily Treasury Yield Curve Rates The five year treasury note closed last Friday at a 1.93% yield. The 10 year note closed at 2.14%.
0% probability of any increase
96.5% probability of a .25% cut
76.2% probability of a .5% cut
43.8% probability of a .75% cut
Countdown to FOMC: CME FedWatch Tool
Trump Bets the U.S. Economy on Tariffs - The New York Times
For the U.S. and China, it’s not a trade war anymore — it’s something worse - Los Angeles Times
China says US trade provocations are 'naked economic terrorism': CNBC
China's tariff hikes on US goods come into force on 6/1 - BBC
The official China manufacturing PMI for May fell into contraction territory: Official manufacturing PMI for May; China's manufacturing activity declines in May - MarketWatch
Last Thursday, Donald reiterated his claim that China is paying for the tariffs.
The market is too pessimistic about prospects for a trade deal, says a long-time China watcher-MarketWatch
The market is not "too pessimistic" about a trade deal.
The Stock Jocks are still believers that one will happen relatively soon and this is what is currently reflected in major market index levels.
The minor decline in the S & P 500 after hitting an all time high is more reflective of an opinion that a trade deal will happen relatively soon but will take longer than previously expected by the Stock Jocks. The longer delay will have in this consensus scenario some adverse impacts that would not have happened but for the delay.
Moreover, the current SPX level does not reflect an adjustment for a longer term all out trade war with China lasting at least six months. That would need IMO a 20% to 30% decline from SPX 2,945 to be realistic. (2061 to 2356). I am not including in that range estimate an acceleration of the trade wars with other major trading partners including Mexico, which may already be underway, and the EU.
SPX closed at 2351.10 (12/24/18) when investors were optimistic about a trade deal with China, but believed the FED might keep raising interest rates until it caused a recession which was an unjustified fear.
Economic damage flowing from a trade war is not something which may happen but is happening now and is likely IMO to get worse. So there is real damage now as opposed to a fear of damage that may occur.
There are dangers that tariff wars with other countries will accelerate: Trump: US will impose 5% tariff on all Mexican imports from June 10 I discussed the new tariffs on Mexico's exports in this comment.
The new tariff on all of Mexico's exports will start at 5% effective June 10 and will gradually rise in 5% increments before reaching the maximum 25% on October 1, 2019,
Those tariffs, if implemented, will represent yet another major tax imposed by the republicans on U.S. consumers and businesses. Trump Mexico import tariffs could hurt consumers
How Mexico tariffs could hurt $600 billion in cross-border trade — and the U.S. economy - MarketWatch
The Extremely Stable Genius is sending a loud and clear message to foreign countries that the U.S. has weaponized tariffs and will use them to coerce foreign governments to change internal policies unrelated to trade.
With the new tariffs on Mexico, Trump had made it clear to everyone that the U.S. is not a reliable trading partner. The New Tariffs Against Mexico Signal the U.S. Isn’t a Reliable Negotiating Partner - The New York Times
I would go further and add that Trump has also made the U.S. an unreliable ally as well. Several of our allies and a majority of their citizens as reflected in polling data have already reached that conclusion.
U.S. foreign relations with most countries will be in tatters when the nation votes in November 2020.
Mexico probably thought that it had satisfied Donald after making concessions to secure the NAFTA 1.1 agreement that is waiting now for legislative approval in Canada, Mexico and the U.S.
That was clearly wrong. No nation can ever count on trade peace with Donald even after granting concessions and finalizing a trade agreement with him. I am confident that China has received that message as have other countries.
Before the new trade treaty with Mexico and Canada could be approved by the legislative bodies, Donald decided to use the tariff weapon again against Mexico in a manner that will severely damage its economy and raise taxes on U.S. consumers. Tariffs are properly viewed as taxes on U.S. businesses and consumers.
When and if Mexico retaliates, American exporters will be hurt to the extent Mexico can source the products from other countries. It would probably be in Mexico's long term interest to replace American exports with a more reliable source wherever economically possible.
Mexico is a major buyer of U.S. products. The value of U.S. exports is more than the combined total of exports to China, Japan and South Korea.
Foreign Trade - U.S. Trade with Mexico; Mexico | United States Trade Representative ("U.S. goods and services trade with Mexico totaled an estimated $671.0 billion in 2018. Exports were $299.1 billion; imports were $371.9 billion. The U.S. goods and services trade deficit with Mexico was $72.7 billion in 2018.')
Since Donald decided to threaten the imposition of more tariffs on Mexico's exports, I have heard or read several opinions that everything will be okay, since Donald will reach a trade deal with China and resolve the tariff-immigration issues with Mexico before summer's end.
Some market gurus suggested that Donald was not really serious about imposing new tariffs on Mexico and will reach an agreement with Mexico's representatives before June 10th.
Cramer: The market thinks Mexico tariffs won't be imposed I would agree with that assessment about the market's message but have no confidence in it. If the market thought now that Trump would impose those tariffs, a far greater decline would have happened last Friday. S & P 500 Close on 5/21/19: 2,752.06 -36.80 -1.32%
Donald does not sound like he is going to play nice with Mexico:
Note the emphasis on using tariffs as a weapon to force U.S. manufacturers to move production from Mexico back to the U.S.. I believe that the last tweet is the first time the Fake News President has called tariffs taxes.
Trump's Mexico tariffs risk pricing some Americans out of buying a car
If the U.S. is engaged in an all out tariff war with both China and Mexico starting this June or July, the U.S. economy will likely be in a recession before year end. I have a reasonable confidence in that prediction. The FED would be unable to do anything to avert it. Interest rates are already extremely low. Daily Treasury Yield Curve Rates The five year treasury note closed last Friday at a 1.93% yield. The 10 year note closed at 2.14%.
 |
| FF Range Probabilities on or before January 2020 Meeting |
96.5% probability of a .25% cut
76.2% probability of a .5% cut
43.8% probability of a .75% cut
Countdown to FOMC: CME FedWatch Tool
Trump Bets the U.S. Economy on Tariffs - The New York Times
For the U.S. and China, it’s not a trade war anymore — it’s something worse - Los Angeles Times
++++
Markets and Market Commentary:
Scary pattern forming in stock chart may be sign of another move lower (according to a technical analyst, SPX formed a head and shoulders pattern and then broke the neckline).
Stock market on track for ‘key’ monthly reversal that ‘presages deeper declines’, technician says - MarketWatch
One of Wall St.’s premier investors says S&P 500 may tumble 16% by summer’s end because markets never ‘had a trade war like this’ - MarketWatch I think you would have to go back to the U.S. passage of the Smoot Hawley Tariff Act passed in 1930 to find something close what Trump is doing. Smoot-Hawley Tariff Act: A Classic Economics Horror Story : NPR
Scary pattern forming in stock chart may be sign of another move lower (according to a technical analyst, SPX formed a head and shoulders pattern and then broke the neckline).
Stock market on track for ‘key’ monthly reversal that ‘presages deeper declines’, technician says - MarketWatch
One of Wall St.’s premier investors says S&P 500 may tumble 16% by summer’s end because markets never ‘had a trade war like this’ - MarketWatch I think you would have to go back to the U.S. passage of the Smoot Hawley Tariff Act passed in 1930 to find something close what Trump is doing. Smoot-Hawley Tariff Act: A Classic Economics Horror Story : NPR
With China today as with Japan in 1980s the U.S. is in denial about source of deficits-MarketWatch (The economist Steven Roach calls Trump and his trade representative Robert Lighthizer "clueless" on the reasons for trade deficits. Roach also cites data from the the OECD and the World Trade Organization that about 35% to 40% of the U.S.-China bilateral trade deficit reflects inputs made outside of China and assembled and shipped from China.)
Jim Cramer: It's time to start buying amid market weakness I don't believe this kind of advice has general applicability. Each investor has their own situational risks and risk tolerances.
SPX closed below its 200 day SMA line last Friday. The multiple bearish technical signals do not provide adequate guidance on how low the stock market will go before bottoming.
The decline in interest rates coupled with stock price declines make dividend paying stocks more attractive.
SPX closed below its 200 day SMA line last Friday. The multiple bearish technical signals do not provide adequate guidance on how low the stock market will go before bottoming.
The decline in interest rates coupled with stock price declines make dividend paying stocks more attractive.
+++++
Trump:
Trump's approval rating hits highest point in two years | TheHill
I rarely turn on TV during the day. I did watch Mueller give his statement about the special counsel's report.
The clear takeaway was that Mueller was referring the investigation of Trump to Congress since a sitting President can not be indicted for crimes but can only be impeached by Congress.
Mueller did not clear Trump of obstruction of justice. If he was confident that Trump was innocent, he would have said so, but he did not say either that Trump was guilty. If it were clear president committed no crime, "we would have said so" - CBS News; Special counsel says accusing Trump of a crime ‘not an option’ under DOJ guidelines-The Washington Post; Mueller, in First Comments on Russia Inquiry, Declines to Clear Trump - The New York Times
Mueller found "insufficient evidence" of a criminal conspiracy (as defined in criminal law) between the Trump campaign and Russia. Barr turned that finding into "no evidence".
The burden for a decision to file criminal charges, when using DOJ guidelines, is the prosecutor's belief that the evidence warrants a guilty verdict beyond a reasonable doubt. If no charges are brought, that does not mean that the actors are "innocent". Even a not guilty verdict in a criminal trial is not tantamount to a finding of innocence but only that the prosecution failed to prove guilt beyond a reasonable doubt.
The evidence on obstruction is sufficient IMO to indict Trump on obstruction of justice charges if he was not a sitting President.
Barr is acting as Trump's defense counsel; and the DOJ is now actively aiding and abetting Trump's obstruction efforts.
Barr's opinion on any matter related to Trump is dictated only by political considerations and his strong fidelity to the republican party. Barr also deliberately misled the public about the Mueller report. Mueller remarks put Barr back into harsh spotlight - POLITICO; GOP Congressman Slams Attorney General Barr for Misleading Congress and the Public to Support Trump
The obstruction evidence is not sufficient to convince republicans to vote for impeachment with one Michigan congressman being a possible exception.
Multiple other serious felonies would need to be proven beyond any doubt for a republican senator to convict Trump.
So the question for the Democrats is why start that process when the result will be a failure to convict in the republican controlled Senate where a 2/3rds majority is required.
Trump Administration Hardens Its Attack on Climate Science - The New York Times
Trump climate adviser compared ‘demonization’ of carbon dioxide to Jews’ treatment under Hitler - MarketWatch
Trump's approval rating hits highest point in two years | TheHill
I rarely turn on TV during the day. I did watch Mueller give his statement about the special counsel's report.
The clear takeaway was that Mueller was referring the investigation of Trump to Congress since a sitting President can not be indicted for crimes but can only be impeached by Congress.
Mueller did not clear Trump of obstruction of justice. If he was confident that Trump was innocent, he would have said so, but he did not say either that Trump was guilty. If it were clear president committed no crime, "we would have said so" - CBS News; Special counsel says accusing Trump of a crime ‘not an option’ under DOJ guidelines-The Washington Post; Mueller, in First Comments on Russia Inquiry, Declines to Clear Trump - The New York Times
Mueller found "insufficient evidence" of a criminal conspiracy (as defined in criminal law) between the Trump campaign and Russia. Barr turned that finding into "no evidence".
The burden for a decision to file criminal charges, when using DOJ guidelines, is the prosecutor's belief that the evidence warrants a guilty verdict beyond a reasonable doubt. If no charges are brought, that does not mean that the actors are "innocent". Even a not guilty verdict in a criminal trial is not tantamount to a finding of innocence but only that the prosecution failed to prove guilt beyond a reasonable doubt.
The evidence on obstruction is sufficient IMO to indict Trump on obstruction of justice charges if he was not a sitting President.
Barr is acting as Trump's defense counsel; and the DOJ is now actively aiding and abetting Trump's obstruction efforts.
Barr's opinion on any matter related to Trump is dictated only by political considerations and his strong fidelity to the republican party. Barr also deliberately misled the public about the Mueller report. Mueller remarks put Barr back into harsh spotlight - POLITICO; GOP Congressman Slams Attorney General Barr for Misleading Congress and the Public to Support Trump
The obstruction evidence is not sufficient to convince republicans to vote for impeachment with one Michigan congressman being a possible exception.
Multiple other serious felonies would need to be proven beyond any doubt for a republican senator to convict Trump.
So the question for the Democrats is why start that process when the result will be a failure to convict in the republican controlled Senate where a 2/3rds majority is required.
Trump Administration Hardens Its Attack on Climate Science - The New York Times
Trump climate adviser compared ‘demonization’ of carbon dioxide to Jews’ treatment under Hitler - MarketWatch
Senator Lindsey Graham (R-SC) is an obvious hypocrite, as shown in his recent interview with Chris Wallace: Fox's Chris Wallace challenges Graham over past comments on ignoring subpoenas | TheHill Graham likes to see himself on TV, but made a mistake in agreeing to answer questions from Chris Wallace, the only person at Fox willing to ask Trump and his sycophants at least one tough question that may make them squirm a little.
Senator Mitch McConnell is even a bigger hypocrite than Graham. Mitch McConnell says he would seek to fill Supreme Court vacancy in 2020
Senator Mitch McConnell is even a bigger hypocrite than Graham. Mitch McConnell says he would seek to fill Supreme Court vacancy in 2020
+++
1. Small Ball ETF Buys-All Commission Free:
I have nothing to add to recent discussions. I am simply following a small ball strategy with these purchases. Each ETF purchase has to be at the lowest price in the chain. Consideration will be given to selling the highest cost lot or lots when I can do so profitably.
Purchases will accelerate as a market decline steepens. Currently, I am not near a starter position in any of these ETFs. I have only taken baby steps to implement it.
Purchases continue until I hit the maximum number of shares for each ETF. I doubt that will happen with most of the targeted stock ETFs unless SPX has declined 45% from its recent all time high.
This is a snapshot of the ETFs subject to this small ball purchase restriction and the lowest price paid for each purchase to date:
A. Bought 5 FDVV at $28.6:
Quote: Fidelity High Dividend ETF Overview
Last Discussed: Item # 4.B.(5/15/19 Post); Item # 4.A. (4/27/19 Post)
Sponsor's Webpage: FDVV | ETF Snapshot - Fidelity
Expense Ratio: .29%
Current Position: 15 Shares
Maximum Position: 500 Shares
B. Bought 2 IEUR at $45:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussed: Item # 5.A. (5/22/19 Post)
Current Position: 12 Shares
Maximum Position: 50 Shares
C. Bought 1 MGC at $95.78:
Quote: MGC Fund - Vanguard Mega Cap ETF Overview
Sponsor's Page: MGC - Vanguard Mega Cap ETF | Vanguard
Expense Ratio = .07%
Dividends: Quarterly
Last Substantive Discussion Item # 4.A. (4/14/19 Post)
Last Discussed: Item # 4.C. (5/15/19 Post)
Current Position: 8 shares
Maximum Position: 50 Shares
I have nothing to add to recent discussions. I am simply following a small ball strategy with these purchases. Each ETF purchase has to be at the lowest price in the chain. Consideration will be given to selling the highest cost lot or lots when I can do so profitably.
Purchases will accelerate as a market decline steepens. Currently, I am not near a starter position in any of these ETFs. I have only taken baby steps to implement it.
Purchases continue until I hit the maximum number of shares for each ETF. I doubt that will happen with most of the targeted stock ETFs unless SPX has declined 45% from its recent all time high.
This is a snapshot of the ETFs subject to this small ball purchase restriction and the lowest price paid for each purchase to date:
Quote: Fidelity High Dividend ETF Overview
Last Discussed: Item # 4.B.(5/15/19 Post); Item # 4.A. (4/27/19 Post)
Sponsor's Webpage: FDVV | ETF Snapshot - Fidelity
Expense Ratio: .29%
Current Position: 15 Shares
Maximum Position: 500 Shares
B. Bought 2 IEUR at $45:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussed: Item # 5.A. (5/22/19 Post)
Current Position: 12 Shares
Maximum Position: 50 Shares
C. Bought 1 MGC at $95.78:
Quote: MGC Fund - Vanguard Mega Cap ETF Overview
Sponsor's Page: MGC - Vanguard Mega Cap ETF | Vanguard
Expense Ratio = .07%
Dividends: Quarterly
Last Substantive Discussion Item # 4.A. (4/14/19 Post)
Last Discussed: Item # 4.C. (5/15/19 Post)
Current Position: 8 shares
Maximum Position: 50 Shares
2. Short Term Bond/CD Ladder Basket Strategy:
$8K in Adds
$8K in Adds
A. Bought 1 Dominion Energy 2.579% SU Maturing on 7/1/20:
I now own 5 bonds.
FINRA Page: Bond Detail (prospectus is not linked)
Issuer: Dominion Energy Inc. (D)
Credit Ratings:
Bought at a Total Cost of 99.742
YTM at TC Then at 2.814%
Current Yield at TC = 2.5857%
B. Bought 2 Southside 2.4% CDs Maturing on 6/8/20:
Issuer: Operating bank of Southside Bancshares, Inc. (SBSI)
C. Bought 1 Enterprise Bank 2.45% CD (monthly interest payments) Maturing on 11/27/20- in a Roth IRA Account:
Issuer: Operating bank of Enterprise Bancorp Inc (EBTC)
D. Bought 2 Six Month Treasury Bills Maturing on 11/21/19 at Auction:
IR = 2.407%
Auction Results:
E. Bought 2 HomeStreet BK 2.45% CDs Maturing on 2/28/20:
Issuer: Operating bank of HomeTrust Bancshares Inc. (HTBI)
HTBI Analyst Estimates
HomeTrust Bancshares, Inc. Reports Financial Results For The Third Quarter Of Fiscal 2019
3. Eliminated TWOPRD in a Roth IRA Account-Sold 100 TWOPRD at $25.14:
Quote: Two Harbors Investment Corp. 7.75% Cumulative Preferred Series D Stock
Profit Snapshot: +$3.22
I achieved my objective by exiting the position with a profit after receiving dividends starting in January 2013. This equity preferred stock was initially issued by CYS Investments that was later acquired by TWO. The corporate action referenced in the first snapshot below involved TWO assuming that obligation which also resulted in a name and symbol change.
I discussed this MREIT in a recent comment.
Last Earnings Report (Q/E 3/31/19): SEC Filed Press Release
Dividends Received:
I view this equity preferred stock as being to risky now for my Roth IRA.
I recently sold TWOPRC in a taxable account. Item # 3.A. (5/15/19 Post)
Quote: Two Harbors Investment Corp. 7.75% Cumulative Preferred Series D Stock
Profit Snapshot: +$3.22
I achieved my objective by exiting the position with a profit after receiving dividends starting in January 2013. This equity preferred stock was initially issued by CYS Investments that was later acquired by TWO. The corporate action referenced in the first snapshot below involved TWO assuming that obligation which also resulted in a name and symbol change.
I discussed this MREIT in a recent comment.
Last Earnings Report (Q/E 3/31/19): SEC Filed Press Release
Dividends Received:
I view this equity preferred stock as being to risky now for my Roth IRA.
I recently sold TWOPRC in a taxable account. Item # 3.A. (5/15/19 Post)
4. Intermediate Bond Ladder Basket Strategy:
A. Sold 2 AIG 3.75% SU Maturing on 7/10/25:
Profit Snapshot: +$44.94
A. Sold 2 AIG 3.75% SU Maturing on 7/10/25:
Profit Snapshot: +$44.94
Finra Page: Bond Detail
Sold at 101.646
YTM at 101.646 = 3.428%
As previously discussed, AIG makes me nervous. The YTM for this bond is higher than other Baa1/BBB+ rated corporate bonds maturing at about the same time, indicating that the Bond Ghouls are pricing this AIG close to a BBB rated bond.
Examples: Trade Data Mid-day 5/22/19:
Albermale YTM 3.38% BBB/Baa2 Maturing 12/1/24
AT & T YTM 3.337% BBB/Baa2 Maturing 5/15/25
CBS 3.353% YTM BBB/Baa2 Maturing 1/15/25
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.
I just added a snapshot of the lowest prices paid for the ETFs subject to the small ball purchase restriction. This list is for my internal use and will be consulted prior to making a new purchase. The lowest price purchases of OEF, DGRO and IBB will be mentioned in the next post.
ReplyDeleteI neglected to add this snapshot in Item # 1 when I originally published this post.
As the Bond Ghouls have become more confident that the FED will soon cut the FF rate, the yields for the 3 and 6 month treasury bills have declined in response.
ReplyDeletehttps://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019
The highest yield starting at 1 month through the 10 year treasury note is now the 2 month treasury bill at 2.38%. This indicates to me that the Bond Bookies believe a .25% cut is likely at the Fed's September meeting. The 2 month treasury bill yield is only 1 basis point lower than the 20 year treasury bond which closed at 2.39%.
Both the 3 and 6 month bills closed last Friday at 2.35% yields. I would not be surprised to see the 6 month invert with the 3 month at the auction tomorrow (that is the 3 month will have the higher yield).
For all practical purposes, the yield curve has inverted started with the 2 month bill almost to the 20 year bond.
Inversion is not going to effect the technical reactions... until it's the 2 year and 10 year. The 3mo to 10year was determined to be more indicative, but 2y/10y is the old "and respected" standard. So doesn't matter what works better...
DeleteHello southgent
ReplyDeleteI just finished reading your Sunday blog. . If as you say, economic damage from a trade war is happening now.
If we have an all out economic trade war with China and Mexico as you say we are headed for recession.
I wondered what you thought of this article I have referenced below. The fact that the shadow banking system including BDC's has mushroomed and are even getting loans from the regulated mega banking systemmis very troubling.
In the face of this, the federal government has not practiced restraint, according to this article, and it looks like we're headed for another version of 2008.
I wondered what your opinion of this article was.
Thanks
https://www.greenwichtime.com/business/article/A-new-credit-bubble-gets-ready-to-burst-13911193.php
G: I read that opinion article when it was originally published in the Washington Post:
Deletehttps://www.washingtonpost.com/business/economy/the-shadow-banks-are-back-with-another-big-bad-credit-bubble/2019/05/31/a05184de-817a-11e9-95a9-e2c830afe24f_story.html?utm_term=.b4c466a45223
The author discusses the "shadow banking" system which has two characteristics: (1) there is no regulation and (2) the source of funds come from investors rather than depositors.
I do not find that definition particularly useful since it is too broad and distracts attention from the core problem which is that loans are made in vast amount to borrowers who will not be able to service the debt even during a mild recession, let alone a severe one. Those loans would include loans made by regulated banks and the "shadow banks".
The focus of that article is on non-bank loans to middle market companies that used to receive their funding from banks. Those loans would include for example those made by BDCs.
The size of that market has exploded since the Near Depression and defaults will accelerate during a recession.
Investors in those shadow banks will suffer losses, either in bond or loan defaults, but so will loans made by the regulated banks.
It is not like federal and state regulation will stop bad lending practices as shown in the large number of bank failures during a recession. More than 500 banks collapsed between 2008 and 2015.
I would view the problem simply as the vast amount loaned to companies with low or marginal credit qualities which has exploded since the last recession. Some estimates put the loans to those U.S. companies at approximately $5.5 trillion.
https://www.investopedia.com/why-the-corporate-debt-bubble-may-burst-sooner-than-you-think-4587446
That is an issue as is the normal reaction of lenders to tighten their credit standards during a recession that would send would increase the number of stressed credits and cause defaults due to a lack of credit availability when the companies are stressed by economic conditions.
I realized today...
ReplyDeleteThe tariffs aren't about changing the tariffs. He's up to some deal already made with someone.
He did this already with KJ. He tweeted about rocket sizes and pretended he knew nothing, had never talked with him.
He did know nothing in a real sense, but he'd already made some deal with him, and in his mind knew more than he was letting on.
This is now in manipulative game plan on the US people (as well as whoever else gets hurt that he also doesn't care about.) He has something to do with earning him money, or power (from where he expects to earn money.)
While I have not seen the numbers for money flows into and out of ETFs today, technology stocks continued to pressure the market with both FB and GOOG falling in response to possible government antitrust investigations.
ReplyDeleteAlphabet Inc. (GOOG)
1,036.23 -67.40 (-6.11%)
52 Week Range 970.11 - 1,289.27
Facebook, Inc. (FB)
$164.15 -$13.32 (-7.51%)
52 Week Range $123.02 - $218.62
Amazon.com, Inc. (AMZN)
$1,692.69-82.38 (-4.64%)
52 Week Range $1,307.00 - $2,050.50
Equity REITs and other bond like common stocks continued to buck the downtrend:
Vanguard Real Estate Index Fund ETF Shares (VNQ)
$87.11 +$0.22 (+0.25%)
52 Week Range $71.08 - $88.59
Utilities Select Sector SPDR Fund (XLU)
$58.83 +$0.58 (+1.00%)
52 Week Range 48.35 - 60.27
Oddly, emerging market stock ETFs have been rising the last few days:
Vanguard FTSE Emerging Markets Index Fund ETF Shares (VWO)
$40.87 +$0.23 (+0.57%)
Closed at $39.79 on 5/23
Buyers fleeing the large cap momentum stocks may be diverting funds into U.S. business centric small caps (more into small cap "value"?):
Vanguard Small-Cap Index Fund ETF Shares (VB)
$147.16 +$0.24 (+0.16%)
Today's gain in that small cap ETF came from the "value" stocks with the "growth" stocks being a drag.
Vanguard Small-Cap Growth Index Fund ETF Shares (VBK)
$172.70 -$1.08 (-0.62%)
Vanguard Small-Cap Value Index Fund ETF Shares (VBR)
$124.12 +1.24 (+1.01%)
The health care ETF sector was up:
Vanguard Health Care Index Fund ETF Shares (VHT)
$163.89 +$0.55 (+0.34%)
Higher quality bonds continued to rise in price and fall in yield.
Shares 7-10 Year Treasury Bond ETF (IEF)
$109.22 +$0.74 (+0.68%)
The Bond Ghouls will be shocked when and if the Fake News President negotiates and finalizes relatively soon a favorable trade deal with China and resolves the immigration/tariff issues with Mexico before levying more than a 5% tariff. They are leaning far in the other direction.
Interesting about small cap value gaining. Biotech seems to be gaining too.
DeleteIf the bond folks are too negative and stock jocks are too positive... then a may form around here and meet them in the middle.
*Form a bottom around here.
DeleteLand: Since I am primarily a bond investor now, the significant decline in interest rates makes dividend paying stocks slightly more interesting to me.
DeleteYesterday, the stock market's action was not influenced by tariff war concerns, which is a change, but by the fear that the federal government may at some time in the future launch antitrust actions against major U.S. tech firms. That kind of fear of some far off possible action is not going to deter the Stock Jocks for long IMO.
Mexico has stepped up actions to hinder the flow of illegal immigrants, as documented in a front page story in the NYT this morning. This may only be for show that lasts as long as the threat of more tariffs remains. The borders will remain porous however.
The market IMO does not believe that the new tariffs on Mexico's exports will go into effect except for possibly the first 5% levy which goes into effect on 6/10.
New studies document that the implementation of the threatened tariffs against China and Mexico would offset the tax savings for lower and middle income U.S. households resulting from the GOP's tax bill. Without new tariffs, and focusing on just the ones now in effect, the anticipated impact on the average would be a $800+ increase in prices this year.
"The Federal Reserve Bank of New York estimates that the tariffs cost the typical American household $414 in 2018. That is estimated to increase to $831 per household given Mr. Trump’s recent move to raise Chinese tariffs to 25 percent."
That 2019 estimate includes only 7 months of the higher 25% tariff (upped from 10%) on $200B of China's exports which just went into effect.
The two new studies by the Tax Foundation and the Wharton School of Business found that additional tariffs contemplated, but not yet implemented on exports from China and Mexico, would more than wipe out the lower taxes on lower and middle income households delivered by the GOP's tax legislation.
https://www.nytimes.com/2019/06/03/business/tariffs-trump-mexico-china.html
Tariffs are an invisible tax on American households. Will republicans ever admit that the tariffs levied so far are equivalent to a $800+ tax increase? Trump keeps saying that China pays the tax in a deliberate effort to mislead the public on who actually pays the tariffs.
S&P 500 Index 2,803.27 +58.82 +2.14%
ReplyDeleteThe Stock Jocks do not pay any attention to the Bond Ghouls who have been predicting for weeks that the FED would cut interest rates this year.
All it took for the animal spirits to return was Powell's statement that the FED was prepared to act to sustain the economic recovery. That indicated the FED was prepared to cut rates if necessary. This was news to the Stock Jocks who were apparently unaware of the FF forecasts being made by the Bond Ghouls.
Powell's statement was reminiscent of the one made by Mario Draghi about 5 years ago that the ECB will do whatever it takes.
Will a 50 basis point cut in the FF rate, which deepens negative real rates in short term treasuries, spur economic growth or retard it? That is a good question for central bankers to contemplate more seriously since they still believe negative real rates spur inflation rather than contributing to deflationary forces.
Even if a cut generates some GDP growth, which I doubt, it will not be sufficient IMO to offset the economic drags from an all out tariff war.
The Extremely Stable Genius made sounds today that he expected the new Mexico tariffs to go into effect.
“I think it’s more likely that the tariffs go on, and we’ll probably be talking during the time that the tariffs are on, and they’re going to be paid.”
https://www.nytimes.com/2019/06/04/us/politics/mexico-tariffs.html
Hard to know what the Duck will do since he doesn't know yet and will act impulsively. I believe that it is probable that the first 5% tariff will go into effect next week and possibly near 50/50 for the next 5% on 7/1.
I am not sure why the Stock Jocks heard something different in what China said earlier today. China has been saying for a year or so that it believed that negotiations with mutual respect was the means to resolve trade disputes. Even though China reiterated that time worn statement today, it was interpreted in this latest rehash reiteration as indicating that differences will be negotiated away, even though there was actually no public statement of position changes announced today.
Speculators and traders have been leaning far in one direction as of late: negative on stocks and rip roaring positive on high quality bonds and bond like stocks to a lesser extent. I suspect that a significant part of the stock move today was short covering for those leaning too far in the wrong direction on equities.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/06/observations-and-sample-of-recent_5.html