Wednesday, July 10, 2019

Observations and Sample of Recent Trades: APLE, GLTR, PPLT, PRPFX, SLV

Economy: 
Donald threatened Vietnam since that country is benefiting from American firms moving production from China to Vietnam rather than to the U.S. EU signs new trade deal with Vietnam, as Hanoi benefits amid trade war  

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Markets and Market Commentary: 


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 The Orange King asserted that it was Fake news, originating from liberal Democrats, that "illegal aliens" were being mistreated in DHS custody.


He was referring to a report by the Trump administration's Inspector General. DHS Watchdog Describes Crammed Detention Centers, A Ticking Time Bomb : NPR; Squalid Conditions at Border Detention Centers, Government Report Finds - The New York Times  

 OIG-19-51 - Management Alert - DHS Needs to Address Dangerous Overcrowding and Prolonged Detention of Children and Adults in the Rio Grande Valley

 Demagogue Don has a solution. The "illegal aliens" can go back to their home countries. Trump says immigrants 'unhappy' with detention centers should stay home-Reuters That recommendation suggests that the U.S. government's position is to intentionally discourage illegal immigration through inhumane treatment at border facilities including the deprivation of basic necessities to small children.  

Donald also referred to a well researched NYT and El Paso Times collaborative article about a border facility in Clint Texas as Fake News. Donald blasted Fox for mentioning the article. Hungry, Scared and Sick: Inside the Migrant Detention Center in Clint, Tex. - The New York Times

 This is Delusional Dons's twitter rage rant against Fox: 







Conditions at controversial migrant detention centers will be focus of congressional hearing - CBS News

 U.N. Rights Head ‘Shocked’ by Treatment of Migrant Children at U.S. Border - The New York Times

 Businesses Serving Immigration Detention Under Fire, And Try To Remain Secret : NPR ("CoreCivic and GEO Group spent $1.6 million and $2.8 million, respectively, on political contributions and lobbying in 2018, overwhelmingly to Republican candidates.')

 Trump’s Executive Order Rewards Private Prison Campaign Donors 

 Migrant kids in Arizona report sex assault, retaliation from U.S. border agents

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 Trump called Epstein a ‘terrific guy’ who enjoyed ‘younger’ women before denying relationship with him - The Washington Post When Trump's Labor Secretary Alexander Acosta was a federal prosecutor, he gave Epstein a wrist slap in a plea deal for sex crimes with minors. Trump praises Acosta as he faces growing calls to resign over earlier Epstein case - The Washington Post

 President Trump cannot block his critics on Twitter, federal appeals court rules - The Washington Post (opinion can be found at  The Washington Post) Just another unconstitutional action undertaken by the Duck. 

 Just another unconstitutional act committed by Donald. Federal Judge Blocks Trump's Drug Price Television-Ad Rule : NPR (opinion included in article) This is not a question of whether that policy is a good one. I would be in favor of it. Instead, as with many unilateral actions taken by Donald, the issue is that he exceeded his authority as President in requiring drug makers to disclose prices in TV ads.  

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 Trump and Iran: 

 Donald has accelerated Iran's movement toward acquiring nuclear weapons by withdrawing from the Iran nuclear accord and reimposing sanctions on Iran. 

 Iran has now exceeded the limits for its uranium stockpile provided in that agreement. Iran's stock of enriched uranium exceeds nuclear deal's limit, IAEA says - Reuters 

 Iran has now declared that it will enrich as much uranium to any amount it wants. Iran will start enriching uranium at higher levels after this weekend, Rouhani says - CNN

 Iran news: Tehran breaks Iran nuclear deal limit on uranium enrichment, ignoring Donald Trump warning to "be careful" today - Live updates - CBS News

As to restarting negotiations with the U.S., Iran would "consider" restarting negotiations when the U.S. withdraws its sanctions Iran could consider talks with U.S. only if sanctions lifted, Khamenei permits: minister - Reuters

 My question is when will Donald negotiate a better deal than Obama. The next question is what will happen in the meantime. 

 Trump administration lays broad legal grounds for military strike on Iran - The Washington Post

 Aided by a strong economy, Trump approval rises, but a majority also see him as ‘unpresidential’

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1. Intermediate Term Bond Basket Ladder Strategy: 

A. Sold 2 AT & T 3.4% AT & T SU Maturing on 5/15/25: 

Profit Snapshot: $52.29


FINRA Page: Bond Detail

Issuer:  AT&T Inc. 

Sold at 101.752
YTM at  101.752 = 3.061%
Proceeds at 101.652 (after $1 per bond IB commission) 

This completes my second round-trip for this bond. Item # 1.A. Sold 2 AT & T 2025 SU at 100 (9/18/17 Post)(profit snapshot = $44.34)-Item # 2.B. Bought 2 AT & T 2025 SU at a TC of 97.683 (5/28/17 Post) 

2. Precious Metal ETFs:

 A. Bought 5 GLTR at $67.85-Commission free for Vanguard Customers:

Quote: Aberdeen Standard Physical Precious Metals Basket Shares ETF Overview

 This ETF owns gold, silver, platinum and palladium bullion. This is my first purchase of this ETF.

 Weightings as of 3/31/19: 
Current Position: 5 shares

 Maximum Position: 30 shares

 Purchase Restriction: Small Ball Rule (each purchase has to be at the lowest price in the chain)

 5 reasons why 2019 has been gold’s time to glitter - MarketWatch Note that he views tame inflation as a positive for gold and omits any reference to gold as an alternative to fiat currencies (e.g. hedge against currency devaluations, CB out-of-control money creation) or to the U.S. dollar's value since the U.S. suspended the gold standard in 1933. I view the latter two factors as more important than any of the ones mentioned by Yardeni. What is Gold's "Fair Value"? (4/23/13 Post)

 I decided to sell the recently bought PPLT and SLV positions since the trade war with China did not escalate and those purchases were partially made as hedges to economic chaos resulting from an all out trade war.

 B. Eliminated PPLT-Sold 15 at $79.91 ($1 IB Commission):

Quote: Aberdeen Standard Physical Platinum Shares ETF Overview

 Profit Snapshot: +$55.58


Item # 4 Bought 15 PPLT at $75.99 (6/12/19 Post)

 I will consider buying this ETF back at a price lower than $75.99. 

 Closing Price Yesterday: PPLT $76.73 -$0.32 -0.41% 

 Prior Elimination: Item 3.C. Sold 17 PPLT at $83.75 (4/20/19 Post)

 PPLT Chart (major bear trend)

 PPLT Trading Profits 2006 to Date: $375.94 ($320.66 in prior trades)

 C. Eliminated SLV-Sold 100 at $14.26 ($1 IB Commission):

Quote: iShares Silver Trust Overview

 Profit Snapshot: $40.26


Item # 5 Bought 100 SLV at $13.84 (6/8/19 Post)

 I will consider buying back this ETF at less than $13.84. 

 Closing Price Yesterday: SLV $14.14  +$0.09  +0.64% 

 SLV Chart: Major Bear Market Since topping near $47 after a parabolic spike in 2010-2011

 Prior Eliminations: Item # 3.A. Sold 60 SLV at $15.18-Used Commission Free Trade  (2/6/19 Post);  Item # 3.A. Sold 50 SLV at $16.55  (9/7/17 Post) The trading history shows a bear market pattern where exit and entry points occur at lower prices over time)

 2016 to Date SLV Trading Profits: $321.86  ($281.6 in prior trades)

 Better than a stick in the eye. Better than buy and hold.

 3. Added 40 APLE at $15.6-Used Fidelity Commission Free Trade:

Quote:  Apple Hospitality REIT Inc. (APLE)

 Closing Price Yesterday:  APLE $15.82 -$0.04 -0.25% 

 Website: Apple Hospitality REIT
Hotel Map
APLE SEC Filings

 "Apple Hospitality’s portfolio consists of 234 hotels with more than 30,000 guest rooms located in 87 markets throughout 34 states"

 This brings me up to 150 shares in this account plus shares purchased with the dividends. The average cost per share is at $16.68, with the current position in this account at 161+ shares. Dividend reinvestment has been lowering the average cost per share number since October 2018.  

 Last Purchase Discussion: Item # 1.D. Bought 10 APLE at  $13.88 -Used Commission Free Trade (1/20/19 Post)

 Last Substantive Purchase Discussions: Item # 1.B. (12/5/18 Post); Item # 3.B. (8/12/18 Post)

 Dividends: Monthly at $.10 per share since May 2015 payment, reduced to that penny rate after several cuts (see Dividend History - Apple Hospitality REIT)

 Yield at Average Total Cost Per share of $16.68 = 7.19%
Yield at a TC of $15.6 per share = 7.69%

 Last Ex Dividend Date: 7/1/19  (shortly after this last purchase)

 Apple Hospitality REIT Announces July 2019 Distribution

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

"The Company’s total debt to total capitalization at March 31, 2019 was approximately 28 percent . . . The Company’s weighted-average debt maturities are 5.1 years, and the weighted-average maturity of its effectively fixed-rate debt is 4.1 years at a weighted-average interest rate of 4.0 percent."

 "During the three months ended March 31, 2019, the Company invested approximately $19 million in capital expenditures. The Company plans to continue to reinvest in its hotels and anticipates investing an additional $60 million to $70 million in capital improvements during the remainder of 2019, which includes various scheduled renovation projects for approximately 20 to 25 properties." 

 The continuing necessity for both routine maintenance and renovation capital expenditures is a major negative for hotel REITs. As with other Hotel REITs, Apple does not deduct routine maintenance expenditures to arrive at its cash flow number. 

 And, while the NAREIT definition of AFFO requires a deduction of routine maintenance expenditures, no REIT deducts capital expenditures for renovations that purportedly enhance the property's value from FFO to arrive at AFFO. 

 It is generally debatable whether those expenditures add a $1 or more to the value for each $1 spent. Renovations can lead to higher rents  when leases renew or higher REVPAR numbers for successful hotel renovations. 

 Personally, I think REIT investors generally believe that renovations pay for themselves and then some. 

 Cash devoted to capital expenditures, irrespective of how they are classified, is not available for distribution to shareholders however. 

 The end result for apartment, office and hotel REITs is the dividends exceed the cash left for distribution after subtracting all capital expenditures.  You have to dig to come up with a free cash flow number after all capital expenditures. 

 Part of the cash paid out in dividends consequently has to come from somewhere else. The likely sources would be from increased debt, profits and capital generated from property sales, and/or new equity capital offerings. 

 Profits from property sales are excluded in a standard net income to FFO calculation.  

 Apple Hospitality REIT Reports Results of Operations for First Quarter 2019 

 Last Sell Discussions: 

 Item # 5.A. Sold 50 APLE at $19.6 (12/18/17 Post)

 Item # 6.B. Sold Highest Cost Lot in Schwab at $19.22 (10/19/17 Post)

 Item 2.B.  Sold 100 APLE at $19.43(5/25/17 Post)

 4. Bought $100 PRPFX at $39.57:

I now own 190+ shares. I am reinvesting the annual dividends.

 Quote: Permanent Portfolio Overview

 Sponsor's Website: The Permanent Portfolio Family of Funds

 Portfolio as of 4/1/19: SEC Filing

 Dividends: Paid annually (primarily sourced from long term capital gains)

 PRPFX is a multi-sector allocation fund that will generally maintain its percentage asset allocations in narrow ranges.

Performance has been poor since 2014 primarily due to its asset allocation strategy rather than security selection.

 The bear markets in gold and silver bullion have been a headwind since those precious metals topped out in price about 8 years ago.

 The allocation to natural resource stocks has been a drag since 2014.

 The allocation to Swiss government bonds has been negatively impacted by USD strength against the Swiss Franc.

 The allocations to U.S. treasuries and investment grade corporate bonds have been low yielding investments.

 I view this fund to be primarily a partial response to a possible financial armageddon scenario.   

Last Substantive Discussion: Item # 2.B. (12/21/17 Post)

 I eliminated positions in my Fidelity and Vanguard accounts due to poor performance (see snapshots at Item # 4.C. and Item # 2.B: $898.7 in realized gains plus dividends)

 5. Short Term Bond/CD Ladder Basket Strategy:

 A. Bought 3 Treasury Bills at Auction Maturing on 10/3/19 (3 months):
IR = 2.193%

In the Schwab account, this purchase is simply an alternative to holding cash in Schwab's sweep account which pays close to zero (generally in the .1% to .3% range)

 The probability that the FED will cut the FF by .25% later this month remains at 100%: Countdown to FOMC: CME FedWatch Tool 

 If the Fed wants to assert its independence from Donald, Larry Kudlow,  and the Stock Jocks, maybe the Fed will shock everybody with no rate cut later this month, but will simply wait for more data confirming a slowdown before making a decision at the September meeting. Calculated Risk: Merrill: "Data cools call for July cuts"
Treasury Yield Curve as of 7/9/19
Daily Treasury Yield Curve Rates The one month through 6 month treasury bills have higher yields than the ten year treasury. 

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. 
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4 comments:

  1. TENNINDEPENDENTJuly 10, 2019 at 1:15 PM

    The Ashford Hospitality (AHT) preferred stocks are in a dive mode.

    I currently own 100 shares of AHTPRI.

    The AHT preferred stocks went ex dividend for their quarterly distribution on 6/27 which accounts for some of the decline since I discussed a 50 share purchase at $22.3, a purchase made on 6/18/19:

    5. Bought 50 AHTPRI at $22.3 ($1 IB Commission)
    https://tennesseeindependent.blogspot.com/2019/06/observations-and-sample-of-recent_26.html


    Ashford Hospitality Trust 7.5% Pfd. Series I
    $19.20 - $0.7753 -3.88%
    DAY RANGE 19.16 - 19.94
    52 WEEK RANGE 18.01 - 24.49
    Last Updated: Jul 10, 2019 2:08 p.m. EDT
    https://www.marketwatch.com/investing/stock/aht.pri

    I have previously characterized the AHT equity preferred stocks as high risk.

    During a prior share price meltdown, I picked up 20 shares, using a Fidelity commission free trade, at $18.52 and still own that lot.

    Shortly after that purchase, I bought 50 shares of BHRPRD at $20.02

    Item # 1.A. Bought 50 BHRPRD at $20.02:
    https://tennesseeindependent.blogspot.com/2019/01/observations-and-sample-of-recent_20.html

    I sold those shares yesterday at $25.25 and will discuss the trade later this month. The issuer is Braemar Hotels, another highly leveraged REIT managed by Ashford Inc. who is the external manager for AHT as well. BHRPRD also went ex dividend on 6/27.

    I have not seen anything specific about AHT since I discussed this out-of-favor and deservedly hated Hotel REIT.

    The common shares are continuing to tank after the 50% dividend slash and are now trading near $2.55 per share.

    Ashford Hospitality Trust Inc.
    Last Updated: Jul 10, 2019 at 1:58 p.m. EDT
    $2.55 -0.0769 -2.92%
    52 WEEK RANGE 2.47 - 8.38
    https://www.marketwatch.com/investing/stock/aht

    While cutting the common share dividend by 50% is generally a positive for preferred shareholders, assuming the savings are not incinerated by bad decisions, investors are probably concerned about the signal that cut is sending about credit risk for the preferred shares. There may not be much, if anything left for the preferred shareholders in the event of a AHT bankruptcy.

    It would be a good idea to use the common share dividend savings to buy back preferred shares at significantly discounted prices to their $25 par values. That probably will not happen since the external manager wants to increase the assets under management which increases its fee.

    The preferred shares were highly risky given the debt levels and the secured debt on all properties before that common dividend cut and may be a tad less risky after the cut.

    ReplyDelete
  2. TENNINDEPENDENTJuly 10, 2019 at 4:24 PM

    I did not see any material difference in Powell's testimony today and his most recent statements on monetary policy.

    The Bond Ghouls did see a difference, as reflected in the probability of a .5% cut later this month which went from jut 3.3% yesterday to 26.6% today. The probability of a .25% cut is still at 100%.

    https://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

    The Fed is merely a puppet dancing to the market's tune. The Stocks Jocks and Donald are demanding at least a .25% rate cut this month and the FED will give them one.

    The ten year treasury yield has been ticking up some since it fell slightly below 2%, closing at 2.06% today. The increase in the 10 year treasury yield is not sufficient yet to indicate a dominant directional yield change from down to up IMO. The 3 month treasury bill already reflects at least a .25% cut in the FF rate IMO.

    The USD took a small hit. No dominant trend in DXY is evident, with mostly a range bound movement between 95-98 since July 2019.

    https://www.marketwatch.com/investing/index/dxy/charts

    The decline in the USD apparently sparked some interest in the PMs.

    https://www.marketwatch.com/investing/future/gold

    Aberdeen Standard Physical Precious Metals Basket Shares ETF
    $68.50 +$1.06 +1.57%
    https://www.marketwatch.com/investing/fund/gltr

    ReplyDelete
  3. TENNINDEPENDENTJuly 11, 2019 at 4:18 PM

    I bought 10 IRM today at $29.51 using a commission free trade.

    Iron Mountain Inc
    $29.67 -$2.40 -7.48%
    https://www.marketwatch.com/investing/stock/irm

    The stock tanked in response to a Merrill Lynch downgrade to underperform from neutral and PT slash to $25 from $33. I mentioned in an earlier comment that Wells Fargo had upgraded IRM to outperform yesterday with a $33 price target.

    I do not have access to either of those reports.

    The Merrill downgrade appears to be based in part to the analyst's opinion about IRM's "bold" strategy, consisting of increasing its data service centers and emerging markets businesses.

    Those strategies are risky but they are necessary for growth.

    I personally would not pay any attention to this analysts' opinion that the risks outweigh the long term rewards or even the rewards over a short time frame.

    The other point appears to be the decline in recycled paper prices which is volatile.

    There is a revenue stream from recycled paper that results from IRM's shedding business. The analyst claims that recycled paper prices fell 23% in the second quarter.

    I found five references to recycled paper in IRM's 2018 annual report, and could not find out how significant those revenues are to IRM. The references were brief and involved mostly describing recycled paper prices as volatile. In 2018, prices rose which helped the shedding part of IRM business.

    https://www.sec.gov/Archives/edgar/data/1020569/000102056919000018/irm201810k.htm

    In the 10-Q for the Q/E 3/31/19, the primary reference to recycled paper prices can be found at page 53:

    https://www.sec.gov/Archives/edgar/data/1020569/000102056919000140/irm2019331-10q.htm

    You can find the reference by creating a PDF version and then performing a search. I will create a PDF version on my IMAC by selecting "print" and then clicking "Open PDF in Preview."

    I would not draw a judgment on how a decline in recycled paper prices would impact shedding revenue without knowing whether demand significantly changed up or down, prices for recycled paper outside of the U.S., and the percentage of total revenue derived from selling that paper.

    The most recent press release from IRM is this one:

    https://www.prnewswire.com/news-releases/iron-mountain-expands-data-services-to-support-amazon-web-services-300882889.html

    ReplyDelete
  4. TENNINDEPENDENTJuly 13, 2019 at 9:21 AM

    I have published a new post:

    https://tennesseeindependent.blogspot.com/2019/07/observations-and-sample-of-recent_13.html

    ReplyDelete

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