Observations and Sample of Recent Trades: MAPTX, MNRPRC, PFLT

Economy: 

I discussed the Federal Reserve's policy 6/19 monetary policy announcement in a comment. 

The Fed - June 19, 2019: FOMC Projections materials, accessible version and Federal Reserve issues FOMC statement (6/19)

Goldman changes on Fed: 2 rate cuts, early end to balance sheet rolloff

Trade war: China raises tariffs on US, cuts levies on other countries

History suggests Fed can’t make ‘insurance cuts’ to keep expansion alive - MarketWatch First, the rate cuts will not cure what ails the economy, including the ongoing trade wars. Second, there are negatives to a rate cut which Wall Street talking heads seem to never notice. It is a fact that household disposable income available for spending goes down. The impact is more severe on the bottom four income quintiles since their savings is largely held in credit risk free investments; they are less likely to hold meaningful risk assets outside of retirement accounts; and are more likely to need additional income to fund spending that is not sourced from more debt. 

5 signs that home prices could be rolling over again - MarketWatch

U.S. consumer debt is now breaching levels last reached during the 2008 financial crisis - MarketWatch

ECB President Draghi Hints at QE Return Just Hours Ahead of Fed Rate Meeting - TheStreet Will a resumption of QE or a continuation of a negative ECB benchmark rate result in higher or lower GDP growth and inflation? That is a legitimate question to ask at this time. 

Canada's inflation rate rose to a 2.4% annualized rate in May. The Daily — Consumer Price Index, May 2019 I do not see how the Bank of Canada can justify cutting its benchmark rate with that kind of inflation number. 

After Trump’s sweeping tax reform, more Americans owed the IRS money - MarketWatch

The probability of a .25% cut in the federal funds rate next month is currently at 100%: 

Probabilities on or before 7/31/19 Meeting

Countdown to FOMC: CME FedWatch Tool The probability of a .5% is not insignificant at 30.2%.  

Debt with negative nominal yields is currently over $13 trillion worldwide. Interest Rates Around the World Are Coming Down. What Investors Need to Know. - Barron's (subscription publication)

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Markets and Market Commentary:

SPX hit a brick wall last Thursday and Friday near 2955, a point where prior rallies have died. 

The SPX rally that started from the late December 2018 low stalled at an intra-day high of 2,954.13 (5/1/19). 

The prior rally to new highs hit a brick wall at an intra-day high of 2,940.91 (9/21/19). 

It remains to be seen whether the latest move will form a triple top in the 2940-2955 range, though some technical analysts are calling one already. 

At a minimum, there is resistance to further upside when SPX moves into that range. Stock Market May Hit Dreaded 'Triple Top'—a Red Flag to Investors | Fortune; see S&P 500 chart; Triple Tops.  

Stocks are now offering the best selling opportunity in 10 years, thanks to the Fed - MarketWatch

Goldman Sachs: Technology stocks are overvalued

Exclusive: Boeing seeking to reduce scope, duration of some physical tests for new aircraft - sources - Reuters

U.S. Steel announced last week that it was mothballing some operations due softening demand. U.S. Steel Idles Plants, and Timing Couldn’t Be Worse for Trump - Market Realist; United States Steel Corporation Provides Second Quarter 2019 Guidance | United States Steel Corporation A few hours after this announcement, Donald made the following statement to the True Believers: “Thanks to our tariffs, American steel mills are roaring back to life. You know that." 

Trump's steel tariffs were costing U.S. consumers and businesses about $900,000 for every job created. Trump’s steel tariffs cost U.S. consumers $900,000 for every job created, experts say - The Washington Post

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MH17 crash investigators say four suspects face murder charges - CNN Russia was responsible for the murder of 298 civilians aboard that flight and will never take responsibility. 

Jamal Khashoggi murder: U.N. investigator calls for probing Saudi officials, Crown Prince Mohammed bin Salman - The Washington Post

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Donald and Iran:  

Iran shoots down US drone aircraft - CNN

If Iran wants to learn about U.S. plans, just read Donald's twitter feed: 

Donald does not explain in his tweets why he found out about the potential death toll a few minutes before the attack was scheduled to be launched. That is just not credible.  

Donald has downplayed Iran's attacks on freighters and its missile attacks on U.S. drones, both operating in international waters. Trump downplays Iran tensions after drone shot down; President Trump Calls Alleged Iranian Attack 'Very Minor' | Time

Needless to say, Demagogue Don continues to spread knowingly false information about the Iran nuclear deal:

Trump’s Iran reversal exposes one of his most dangerous lies - The Washington Post

Obama Didn't Give Iran '150 Billion in Cash' - FactCheck.org

President Trump’s claim that Democrats gave Iran $150 billion - The Washington Post

Will Donald ultimately secure a better deal for the U.S. after abandoning the Iran nuclear agreement? 

Or will he only increase tensions in a tinderbox that will ultimately lead to military conflict? 

All that can be said now is that Trump's Iranian policies are increasing tensions and risks to U.S. interests, and there is no evidence that Iran is willing to even negotiate with Donald.

Iran has now made it clear that it will abandon aspects of the nuclear agreement after Trump rejected it, making it more likely that Iran will proceed with the development of a nuclear weapons program. Iran Says It Will Exceed Nuclear Deal's Limit On Uranium 'In 10 Days': NPR

If the U.S. was still a party to that agreement, it would be easy to secure the agreement of the other parties to reimpose sanctions on Iran in response to any  violation. The U.S. is in no position to rally international support for its unilaterally imposed sanctions after pulling out of the agreement. 

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Trump: 

Hope Hicks refused to answer any questions about her time working in the White House or the Presidential transition before Trump's inauguration, based on Trump's directions communicated through his lawyers. 

She would not answer questions on matters where she gave testimony to Mueller that is publicly available in the Mueller report.  

She even refused to answer questions on the location of her former office in the White House. Trump aide Hope Hicks didn't answer 155 questions during testimony; Hope Hicks Declines to Answer Lawmakers’ Questions on Transition, White House

How Donald Trump silenced the people who could expose his business failures - The Washington Post Just another article exposing Disgusting Don for the fraud that he is. 

Demagogue Don demonizes any news organization that reports facts as the "enemy of the people". Real Americans will want him to serve as President for Life:

Don the Authoritarian refers to the NYT invariably as the the "Failing New York Times" even though that paper's profits are at record levels. Page 20: 2018 Annual Report Cash and short term marketable securities were reported at $623.751 Million as of 3/31/19. 10-Q for the Q/E 3/31/19 

Donald flat out denied media reports that his internal polling showed him behind in key battleground states, claiming that the media fabricated the numbers and the poll did not "even exist".

Donald even claimed that his internal polls showed him ahead in every state surveyed: Trump, without evidence, claims his campaign’s polling shows him ahead in every state surveyed - The Washington Post (6/12/19 article)  

Trump's campaign manger admitted that the media reports were accurate and claimed later that the polls were trying to capture worst case scenarios. Trump did better when the question was about "immigration" or a question that claimed the Democrat candidates wanted free health care for all. 

ABC published the internal poll results that did not "even exist", which showed Donald trailing Joe Biden in battleground states by significant margins. President Trump’s internal polling data from March showed him far behind Joe Biden in key battleground states - ABC News 

Donald has fired his pollsters. Trump campaign says it will fire multiple pollsters following leak - CNN 

In the Alternate Reality of Trumpworld where Donald is both honest and a role model for children, any news organization that reports accurate information that the Duck does not like is a card carrying member of the "Fake (Corrupt) News Media". 

Donald lies and then claims the media is corrupt by rebutting the lie with facts. 

Donald is probably the foremost creator of Fake News in the history of American politics. It is hardly surprising that a pathological liar would claim that anyone telling the truth is a liar. 

Donald' political success proves that lying all of the time is a path to power in the U.S.; and the reasons are easily understood and obvious. Lying works on a population that is not informed, will not seek out the facts, and have less than optimal brain power.   

Trump's proven formula for success is to spew a constant stream of Bull Shit, reality creations, and fear mongering; to undermine institutions necessary for a properly functioning democracy; and to shower voters with personal and divisive ad hominem attacks against anyone, including republican politicians, who criticize his actions, contradict him, or stands up to him in any way.   

Details and accurate information are so boring. Reality creations are fun. 

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Given the parabolic rise in federal government debt and underfunded existing entitlement programs including social security, medicare and medicaid, the new entitlement programs proposed by the Democrats are insanely irresponsible and will end up driving marginal Trump voters back into the GOP's fold in 2020. Both political tribes will share roughly equal responsibility for the financial armageddon that will arrive, with each side contributing to that result in different ways. 

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1. Eliminations: Sold Shares of MAPTX at $27.9:

Recent History:

Quote:  Matthews Pacific Tiger Fund;Investor Overview  (NTF fund at Schwab)

Profit Snapshot: +$665.47

Sponsor's website: Overview - Matthews Pacific Tiger Fund

I have been reinvesting the annual dividend to buy additional shares. 

Recent Annual Dividends:

This fund was included in widespread elimination and pairing of stock mutual funds in 2007. 2007 STOCK FUND DISPOSITIONS

2. Bought 100 MNRPRC at $24.34-Used Commission Free Trade:

Quote:  Monmouth Real Estate Investment Corp. 6.125% Cumulative Preferred. Series C Stock

Issuer: Monmouth Real Estate Investment Corp. Cl A (MNR)-And Industrial REIT

This purchase was made in response to the rapid decline in interest rates and the reinvigoration of the central banks' Jihad Against the Savings Class.  

Issuer Website: Monmouth Real Estate Investment Corporation

MNR.PC Stock Chart

Investment Category: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks

Investment Strategy: Equity REIT Common and Preferred Stock Basket Strategy

I have stayed away from the MNR common stock due to  its lower yield compared to this preferred, overall lack of meaningful dividend growth (quarterly now at $.17 vs. $.15 per share in 2005), concentrated exposure to FedEx, and extremely poor results in its investment portfolio of REIT common and preferred stocks which is beyond my comprehension.

With the recent rapid decline in short term interest rates, I have less desirable credit risk free options to reinvest proceeds from maturing short term bills and CDs.

I have consequently decided to use some proceeds from maturing bonds and CDs to buy securities that have interest rate and credit risks, but provide at least a 4% higher current yield than the 3 month treasury bill. 

I consequently decided to buy this preferred stock after selling in my Schwab account 50 shares at $24.57: Item # 1.D. (2/20/19 Post I still own 50 shares in that account bought at $23.12. Item # 3.B. Bought 50 MNRPRC at $23.12 (12/16/18 Post) 

Security Description: 

MNR SEC Filings
MNRPRC Prospectus
Par Value: $25
Dividends: Quarterly, Cumulative and Non-Qualified
Stopper Clause: Yes (preferred dividend has to be paid in full as long as any cash dividend is paid to the common shareholders)
Issuer Optional Redemption: At par value on or after 9/15/21

As of 3/31/19, MNR "owned 113 properties, of which 62 carried mortgage loans with outstanding principal balances totaling $762.3 million. The 51 unencumbered properties could be refinanced to raise additional funds, although covenants in our unsecured line of credit facility (the Facility) limit the amount of unencumbered properties that can be mortgaged." Page 30 10-Q 

Yield at a Total Cost of $24.34 = 6.29%

Other Sell Discussion: Item 5.A. Sold 100 MNRPRC at $24.85 (1/21/17 Post)(profit snapshot = $71.93).

Last Earnings Report: Monmouth Real Estate Reports Results For The Second Quarter Ended March 31, 2019

ATM Program for MNRPRC:

MNR has an ATM program for this preferred stock which is ongoing:

Page 29 10-Q for the Q/E 3/31/19

The new supply being sold continuously into the market may at times depress the price.

Unrealized Loss in REIT Common and Preferred Stock Investments:

I am dismayed by MNR's decision to use cash to buy other REIT common and preferred stocks rather than to invest in real properties. I would not mind that much if the portfolio was up a lot but MNR has managed to incur an unrealized loss of $51.8 million on a portfolio valued at $177.4 million, as of 3/31/19:

How is that even possible unless the goal is to lose money? I could not find a list of owned common and preferred stocks. 

2. Short Term Bond/CD Ladder Basket Strategy:

$10K in adds

For a brief period, I used some proceeds from maturing bonds and CDs to buy short term  CDs when the coupons were at 2.4%-2.45%. Those rates are no longer available unless the investor goes out more than five years. 

This is a sample of one year CDs currently offered at Schwab and Fidelity: 

Schwab

Fidelity

Schwab sweep account rates as of 6/21/19: 

The Vanguard Prime Money Market fund is one of the highest yielding ones, possibly the highest yielding one available to individual investors. I took a snapshot of its total returns before inflation and taxes:  

A. Bought 2 Bank of Ozarks 2.4% CDs (monthly interest payments) Maturing on 6/17/20 (1 Yr CDs):

Issuer: Operating Bank of Bank OZK Stock Quote (OZK)
OZK | Bank OZK Analyst Estimates
Bank OZK Announces First Quarter 2019 Earnings

B. Bought 4 BMO Harris 2.4% CDs (semi-annual interest payments) Maturing on 7/13/20:

I bought the same CD in two separate accounts:

Schwab 2 CDs

Fidelity 2 CDs

C. Bought 2 Customer's Bank 2.4% CD Maturing on 9/16/19 (3 month CD)-In a Roth IRA account:

Issuer: Operating Bank for  Customers Bancorp Inc. (CUBI)
CUBI | Customers Bancorp Inc. Analyst Estimates
Customers Bancorp Reports Net Income For First Quarter 2019

D. Bought 2 Metabank 2.45% CDs (monthly interest payments) Maturing on 3/12/21 (21 month CDs):

Issuer: Operating bank of Meta Financial Group Inc. (CASH) 

CASH | Meta Financial Group Inc. Analyst Estimates 

Meta Financial Group Announces Results for 2019 Fiscal Second Quarter 

3. Intermediate Bond Basket Strategy:

A. Sold 2 out  of 4 Sovran Storage 3.5% SU Maturing on 7/1/26:

I sold my highest cost two bond lot and kept the 2 bonds recently bought in a Roth IRA at a lower price. Item # 3.B. Bought 2 Sovran Storage 3.5% SU in a Roth IRA Account (3/27/19 Post). I bought those two bonds at a total cost of 95.752 which includes a $4 Vanguard brokerage commission.

Profit Snapshot: +$37.54

Item # 2.C. Bought 2 Sovran Storage 3.5% SU at a TC of 96.985 (8/16/17 Post)

Finra Page: Bond Detail

Issuer: The issuer is now known as Life Storage Inc.  (LSI)-a self storage REIT.
Life Storage, Inc. Reports First Quarter 2019 Results
2018 Annual Report (debt discussed starting at page 53)

Sold at 98.872
YTM at 98.872 = 3.682%
Proceeds at 98.772 after $2 commission ($1 per bond)

This bond is not actively traded and it is unusual for me to see a buyer willing to accept a two bond lot. When I saw a bid for a two bond lot, I consequently quickly decided to hit the bid price and reduce my position by 50%.   

4. Added 20 PFLT at $11.67-Used Commission Free Trade: 

Quote: PennantPark Floating Rate Capital (PFLT) 

Dividends: Monthly, currently at $.095 per share ($1.14 per share annually). PennantPark Floating Rate Capital Ltd. Announces Monthly Distribution of $0.095 per Share 

Last Ex Dividend: 6/14/19

I now own 50 shares in this account. The average cost per share is $11.86: 

Dividend Yield at $11.86 = 9.51%

Dividend Reinvestment: Just turned it on 

PPLT dived in price after reporting that four loans went on non-accrual during the 1st quarter, with net asset value per share sliding from $13.66 (12/31/18 to $13.24. Page 4 10-Q for the Q/E 3/31/19; PennantPark Floating Rate Capital Ltd. Announces Financial Results for the Quarter Ended March 31, 2019  

I have previously discussed those new non-accruals in previous comments. 

In this comment, I mentioned that Hollander Sleep Products, which was one of the 4 non-accrual loans, filed for bankruptcy protection. Hollander Sleep Products Files Chapter 11-CFO This was a pre-packaged bankruptcy where the existing lenders agreed to convert about $166.5M of the $244M debt into equity. I do not know how much the Hollander loan will be written down when PFLT reports second quarter results. The loan had a cost of $10.785+M and was valued at $9.$18+M as of 3/31/19. Page 8 I would simply assume a meaningful write-down. 

During the conference call, the CEO mentioned the loan to Country Fresh which was not then on non-accrual but was undergoing a restructuring. Page 5 The loans to that company were marked down significantly in the last quarter: 

Country Fresh Q/E 3/31/19

Country Fresh Q/E 12/31/18 (1 first lien loan)

The other three non-accruals were Life Core Holdings (first lien); New Trident Healthcare and Quick Weight Loss Centers. For reasons that are far from clear, those non-performing loans were valued at close to cost as of 3/31/19. 

Last Earnings Report: PennantPark Floating Rate Capital Ltd. Announces Financial Results for the Quarter Ended March 31, 2019 

"As of March 31, 2019, our portfolio totaled $961.5 million and consisted of $850.1 million of first lien secured debt (including $121.0 million in PSSL), $27.2 million of second lien secured debt and $84.2 million of preferred and common equity (including $51.5 million in PSSL). Our debt portfolio consisted of 99% variable-rate investments and 1% fixed-rate investments. As of March 31, 2019, we had four portfolio companies on non-accrual, representing 3.2% and 1.5% of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $26.0 million." (emphasis added)

Short term Libor rates are coming down and are likely to fall further, which is why I emphasized above the 99% weighting in variable rate instruments. 

PFLT claimed that undistributed spillover income was about $.3-$.31 per share: Page 4: PennantPark Floating Rate Capital (PFLT) CEO Art Penn on Q2 2019 Results - Earnings Call Transcript | Seeking Alpha

Net Asset Value Per Share History: Relatively Stable for a BDC

3/21/19:   $13.24

12/31/18  $13.66
9/30/18:  $13.82 
6/30/18:  $13.82
9/30/17:  $14.10
9/30/16:  $14.06
9/30/15:  $13.95
9/30/14:  $14.40
9/30/13:  $14.10
9/30/12:  $13.98 

Discount to Net Asset Value (Using $13.24 as of 3/31/19 and $11.67 price=  11.86%

Last Purchase Discussion (made in IB account): Item # 5 Bought 70 PFLT at $12.86 (3/17/19 Post) I own 100 shares in that account with the first 30 shares bought at $12.55. If and when the price goes back over $13, I will probably sell that 100 share lot. The average cost per share in that account is $12.78. I am not reinvesting the dividend. 

Last Sell Discussion: Item # 2.A. Sold 111+ PFLT at $12.99 (2/13/19 Post)(profit snapshot = $52.24).

Annual Report for the F/Y Ending 9/30/18 (risk factor summary starts at page 14 and ends at page 30).

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.