Economy:
Key yield curve inverts to worst level since 2007, 30-year rate under 2%
Key yield curve inverts further as 30-year hits record low
Based on past history, the yield curve inversion is clearly signaling IMO that a recession will arrive within 12 months and that it will be worse than currently expected by most pessimists. The question is whether this signal still works given the extremely abnormal central bank monetary policies maintained for over a decade.
With negative nominal yield bonds moving closer to $17 trillion now, something is amiss in an extraordinary way, with no historical antecedents prior to 2008.
Negative nominal yields suggests that lenders are willing to pay borrowers to just keep their money safe and return it when the bonds mature.
The same conclusion could be drawn about the bonds with nominal positive yields that are so low that inflation will likely devour the purchasing power of the interest payments before taxes.
Johnson to restrict parliament time before Brexit - Reuters This move is thought to make a hard Brexit more likely. Pound plunges as Boris Johnson’s bid to suspend Parliament raises no-deal Brexit fears - MarketWatch
Donald claimed on Monday that China had called his trade negotiator twice wanting to "restart" trade talks. G-7: Trump says China ready to negotiate on trade war; Trump claims serious trade negotiations with China to begin
Trump: “We’ve gotten two calls and very, very good calls. Very productive calls. They mean business. They want to be able to make a deal.”
China's foreign ministry spokesperson said that he was unaware of those calls; and Mnuchin refused to provide any specifics. Trump says trade negotiations with China to resume - The Washington Post
Chinese newspaper editor Hu Xijin: "China didn't change its position"
A Chinese delegation was already scheduled to meet with U.S. trade representatives next month so Donald misled investors by stating that China want to restart the negotiations.
Trump further claimed that the disagreements were overblown.
Trump: "This is the first time I've seen them where they really want to make a deal. And I think that's a very positive step." There is no doubt that China would like to make a deal on its terms.
Trump expressed his belief once again that China is desperate for a trade deal. He represented once again that turning the screws harder and tighter will cause China to cave.
Donald's comments worked last Monday on the ever malleable Stock Jocks who accepted his characterizations as gospel, no matter how many times they get burned relying on Donald's representations.
If similar representations are made in six months after obviously fruitless negotiations, the Stock Jocks will once again rely on Donald's positive spin.
The Bond Ghouls completely disregarded Trump's characterization about the current status of those negotiations, concluding that he was lying as judged by their bond pricing. I certainly would bet my money on Trump being honest about anything. Everyone else can draw their own conclusions.
Maybe there is reason for hope that the trade negotiations will soon end, but it would not be rational to believe Donald is telling the truth.
A more likely explanation for his comments is simply that he wanted investors to buy stocks. The most likely current status of the negotiations is no change from deadlock.
After all, Donald's optimistic and rosy comments last Monday were preceded by Donald calling Xi an enemy, his order for U.S. firms to leave China, and an order to raise tariffs an additional 5%.
Key yield curve inverts to worst level since 2007, 30-year rate under 2%
Key yield curve inverts further as 30-year hits record low
Based on past history, the yield curve inversion is clearly signaling IMO that a recession will arrive within 12 months and that it will be worse than currently expected by most pessimists. The question is whether this signal still works given the extremely abnormal central bank monetary policies maintained for over a decade.
With negative nominal yield bonds moving closer to $17 trillion now, something is amiss in an extraordinary way, with no historical antecedents prior to 2008.
Negative nominal yields suggests that lenders are willing to pay borrowers to just keep their money safe and return it when the bonds mature.
The same conclusion could be drawn about the bonds with nominal positive yields that are so low that inflation will likely devour the purchasing power of the interest payments before taxes.
Johnson to restrict parliament time before Brexit - Reuters This move is thought to make a hard Brexit more likely. Pound plunges as Boris Johnson’s bid to suspend Parliament raises no-deal Brexit fears - MarketWatch
Donald claimed on Monday that China had called his trade negotiator twice wanting to "restart" trade talks. G-7: Trump says China ready to negotiate on trade war; Trump claims serious trade negotiations with China to begin
Trump: “We’ve gotten two calls and very, very good calls. Very productive calls. They mean business. They want to be able to make a deal.”
China's foreign ministry spokesperson said that he was unaware of those calls; and Mnuchin refused to provide any specifics. Trump says trade negotiations with China to resume - The Washington Post
Chinese newspaper editor Hu Xijin: "China didn't change its position"
A Chinese delegation was already scheduled to meet with U.S. trade representatives next month so Donald misled investors by stating that China want to restart the negotiations.
Trump further claimed that the disagreements were overblown.
Trump: "This is the first time I've seen them where they really want to make a deal. And I think that's a very positive step." There is no doubt that China would like to make a deal on its terms.
Trump expressed his belief once again that China is desperate for a trade deal. He represented once again that turning the screws harder and tighter will cause China to cave.
Donald's comments worked last Monday on the ever malleable Stock Jocks who accepted his characterizations as gospel, no matter how many times they get burned relying on Donald's representations.
If similar representations are made in six months after obviously fruitless negotiations, the Stock Jocks will once again rely on Donald's positive spin.
The Bond Ghouls completely disregarded Trump's characterization about the current status of those negotiations, concluding that he was lying as judged by their bond pricing. I certainly would bet my money on Trump being honest about anything. Everyone else can draw their own conclusions.
Maybe there is reason for hope that the trade negotiations will soon end, but it would not be rational to believe Donald is telling the truth.
A more likely explanation for his comments is simply that he wanted investors to buy stocks. The most likely current status of the negotiations is no change from deadlock.
After all, Donald's optimistic and rosy comments last Monday were preceded by Donald calling Xi an enemy, his order for U.S. firms to leave China, and an order to raise tariffs an additional 5%.
Donald was not joking when he ordered all U.S. firms out of China.
Donald believes that his power is absolute and he can do whatever he wants by simply declaring a national emergency.
When leaving for the G-7, Trump made the following statement: "I have the absolute right to do that, but we'll see how it goes." Trump says he has the 'absolute right' to order US companies to leave China
The TV personality Larry Kudlow, Trump's economic advisor and a pretend economist with no academic training in that field, agrees that Donald has this authority. Kudlow Claims Trump Has 'Emergency' Authority To Order Companies Back From China Kudlow routinely makes stuff up. Kudlow's Unsupported USMCA Jobs Claim - FactCheck.org
At least Donald is consistent in exposing his strong anti-democratic and authoritarian nature.
Since the Supreme Court has already been Trumpified, there is no telling how far Donald will be allowed to go as President.
I mentioned in a previous comment that the Stock Jocks would probably classify the foregoing threat as typical Trump bluster and a negotiating tactic in the trade negotiations. However, the fact that he made this threat doubled down, and claimed to have the power to implement it can not be ignored.
Fake News occurs, for example, when the mass media reports what Donald actually said which makes him look foolish and inconsistent. G7 Summit: Trump expresses regret about escalating China trade war, then reverses course and says he wishes he raised tariffs higher - The Washington Post
This latest escalation in the trade war will cause even more uncertainty for American businesses and will consequently contribute to stagnation due to indecision.
Global effort to tax Big Tech is moving forward, official says - MarketWatch
President Trump says US is close to a compromise on French digital tax
Donald claimed at the G-7 that a trade deal with Japan was reached only to be contradicted in that claim by Japan's PM. Trump says Japan trade deal reached, but Abe warns more work remains - The Washington Post
+++++++
Markets and Market Commentary:
I would emphasize that the end game for Brexit is near and Donald will increase tariffs on China's exports on 9/1/19.
Dudley encourages the Fed not 'to play along' with Trump's trade war Ex-Fed official Dudley’s call to block Trump draws criticism | Bond Buyer The FED rejected that suggestion. Fed rejects call to deny Trump rate cuts; Trump keeps up pressure - Reuters
Maybe some enterprising faux blonde TV personality from Fox will ask Donald why the economy needs so much new monetary stimulus, even with interest rates at Great Depression levels, so soon after the massive tax cut which, according to the republicans, would guarantee 3+% real GDP growth until the end of days.
Cramer: 'Be prepared for more pain' and 'be able to buy that pain'
I would emphasize that the end game for Brexit is near and Donald will increase tariffs on China's exports on 9/1/19.
Dudley encourages the Fed not 'to play along' with Trump's trade war Ex-Fed official Dudley’s call to block Trump draws criticism | Bond Buyer The FED rejected that suggestion. Fed rejects call to deny Trump rate cuts; Trump keeps up pressure - Reuters
Maybe some enterprising faux blonde TV personality from Fox will ask Donald why the economy needs so much new monetary stimulus, even with interest rates at Great Depression levels, so soon after the massive tax cut which, according to the republicans, would guarantee 3+% real GDP growth until the end of days.
Cramer: 'Be prepared for more pain' and 'be able to buy that pain'
Recession not on horizon, Fed’s Daly says - MarketWatch Daly claims that the recent .25% cut was not in response to an "impending downturn". The FED wants to call the interest rate cuts a "mid-cycle adjustment", suggesting that the 10 year expansion has another 10 years to run. The FED does not want consumers and businesses to interpret any rate cut as a response to an economic slowdown even if that is the only reason for them. If the FED admitted it was cutting in response to a possible recession or anemic growth, then that admission could contribute to the slowdown.
25 dividend stocks selected for value by an outperforming money manager - MarketWatch
Fund manager who beat 98% of peers so far in 2019 says stay calm and buy stocks The peer class is Asia funds ex Japan.
+++++
Trump:
Delusional Don claims that the G-7 leaders asked him why did the U.S. media hate America so much and why was the media rooting for the U.S. to fail:
Donald skipped the G-7 meeting on climate change and the Amazon fires. He did not want to waste America's energy resources on "dreams". Trump claims to be an 'environmentalist' despite skipping G-7 session on climate change
Trump’s company could save millions if interest rates fall as he demands
Trump's 2,000 Conflicts of Interest (and Counting) - CREW The Trumpsters still cheer Donald at his pep rallies when he claims to be draining the D.C. swamp.
Trump touts his struggling Doral club in Miami as site for 2020 G-7 summit - MarketWatch
Delusional Don blamed the radical left Democrats for a rumor that Donald's Doral club had bedbugs:
The conspiracy was hatched by a guest, Eric Linder, who filed a suit in 2016 complaining about bedbugs.Trump Doral resort settles with guest who sued over bedbug bites | Miami Herald; If the G7 Likes Bedbugs, They’re Gonna Love Trump Doral | Vanity Fair
Delusional Don claims that the G-7 leaders asked him why did the U.S. media hate America so much and why was the media rooting for the U.S. to fail:
Donald skipped the G-7 meeting on climate change and the Amazon fires. He did not want to waste America's energy resources on "dreams". Trump claims to be an 'environmentalist' despite skipping G-7 session on climate change
Trump’s company could save millions if interest rates fall as he demands
Trump's 2,000 Conflicts of Interest (and Counting) - CREW The Trumpsters still cheer Donald at his pep rallies when he claims to be draining the D.C. swamp.
Trump touts his struggling Doral club in Miami as site for 2020 G-7 summit - MarketWatch
Delusional Don blamed the radical left Democrats for a rumor that Donald's Doral club had bedbugs:
The conspiracy was hatched by a guest, Eric Linder, who filed a suit in 2016 complaining about bedbugs.Trump Doral resort settles with guest who sued over bedbug bites | Miami Herald; If the G7 Likes Bedbugs, They’re Gonna Love Trump Doral | Vanity Fair
The 14th Amendment to the Constitution clearly provides that all persons born in the U.S. are citizens. Don the Authoritarian wants to end that constitutional right by executive order. Trump says he is seriously looking at ending birthright citizenship - Reuters
At a raccoon farm in Iowa, 300 raccoons baked in metal cages as the heat went into the high 90s. The raccoons were under severe heat stress and were drooling and panting. The USDA veterinarians confiscated 10 raccoons and planned to seize the remainder for animal cruelty. In the interest of "animal welfare", the Trump administration intervened and had the USDA return the animals to their cages.
Trump (8/22/19): “The doctors were coming out of the operating rooms,” University Medical Center of El Paso says doctors didn’t leave operating room to greet Trump - The Washington Post
It must be nice to live in alternate reality where facts do not matter. Just make stuff up which is a lot easier. Tennessee Abortion Bill Claims a Fetus Can Survive Outside the Womb at Conception - VICE
Planned Parenthood threat: Tennessee man arrested for threatening to "shoot up" a Planned Parenthood in Washington D.C. - CBS News
The NYT published the results of its investigation of one Trumpster's website, WesternJournal.com, that spread disinformation to those who wish to be called "conservatives." In the Trump Era, a Family’s Fight With Google and Facebook Over Disinformation - The New York Times
This website receives an average of 4 million hits per month by publishing a variety of conspiracy theories. It is a very lucrative business for the website's owners.
This is the kind of website that spread the conspiracy theory that Obama was born in Kenya and claimed that he was going to ban criticism of Islam to “please his jihadist ‘masters.’” The former attorney general Eric Holder is covering up a murder. Other claims include such demonstrably false claims that Florida voters voted to impose sharia law and that California was going to ban the bible. Some Fake News Publishers Are Donald Trump's Cronies; Republican figures and clickbait websites have been promoting an anti-Islam fake news company on Facebook | Media Matters for America; The Western Journal - Wikipedia
See generally: Bloodlust-Report-formatted: Anti-Defamation League.pdf
Trump claimed that he was named Michigan's Man of the Year, but no one can find any evidence supporting that reality creation. Trump's Dubious Michigan 'Man of the Year' Boast - FactCheck.org
The evidence does not support this reality creation made by the Duck: U.S.-Japan Trade Deficit Not 'Changing Rapidly' - FactCheck.org
About all that can be said about Donald's honesty is that he lies all of the time about everything. A political leader who lies frequently every day has no reservoir of credibility left. The only rational response is to assume that Donald is lying, deliberately trying to mislead the voters for bad ulterior motives, until there is clear and convincing factual proof that a particular statement made by him is true.
Don the Authoritarian wishes to ban speech that he does no like: Trump challenges court ruling barring him from blocking Twitter users - Reuters
The Trumpster President of Brazil Jair Bolsonaro wants to see the Amazon burn. Brazil’s President Seems Fine With Letting the Amazon Burn | Vanity Fair Bolsonaro is a Trump clone and a fellow climate change denier.
Trump (8/22/19): “The doctors were coming out of the operating rooms,” University Medical Center of El Paso says doctors didn’t leave operating room to greet Trump - The Washington Post
It must be nice to live in alternate reality where facts do not matter. Just make stuff up which is a lot easier. Tennessee Abortion Bill Claims a Fetus Can Survive Outside the Womb at Conception - VICE
Planned Parenthood threat: Tennessee man arrested for threatening to "shoot up" a Planned Parenthood in Washington D.C. - CBS News
The NYT published the results of its investigation of one Trumpster's website, WesternJournal.com, that spread disinformation to those who wish to be called "conservatives." In the Trump Era, a Family’s Fight With Google and Facebook Over Disinformation - The New York Times
This website receives an average of 4 million hits per month by publishing a variety of conspiracy theories. It is a very lucrative business for the website's owners.
This is the kind of website that spread the conspiracy theory that Obama was born in Kenya and claimed that he was going to ban criticism of Islam to “please his jihadist ‘masters.’” The former attorney general Eric Holder is covering up a murder. Other claims include such demonstrably false claims that Florida voters voted to impose sharia law and that California was going to ban the bible. Some Fake News Publishers Are Donald Trump's Cronies; Republican figures and clickbait websites have been promoting an anti-Islam fake news company on Facebook | Media Matters for America; The Western Journal - Wikipedia
See generally: Bloodlust-Report-formatted: Anti-Defamation League.pdf
Trump claimed that he was named Michigan's Man of the Year, but no one can find any evidence supporting that reality creation. Trump's Dubious Michigan 'Man of the Year' Boast - FactCheck.org
The evidence does not support this reality creation made by the Duck: U.S.-Japan Trade Deficit Not 'Changing Rapidly' - FactCheck.org
About all that can be said about Donald's honesty is that he lies all of the time about everything. A political leader who lies frequently every day has no reservoir of credibility left. The only rational response is to assume that Donald is lying, deliberately trying to mislead the voters for bad ulterior motives, until there is clear and convincing factual proof that a particular statement made by him is true.
Don the Authoritarian wishes to ban speech that he does no like: Trump challenges court ruling barring him from blocking Twitter users - Reuters
The Trumpster President of Brazil Jair Bolsonaro wants to see the Amazon burn. Brazil’s President Seems Fine With Letting the Amazon Burn | Vanity Fair Bolsonaro is a Trump clone and a fellow climate change denier.
++++++++
1. SMALL BALL-Electric Utility Stocks:
A. Bought 20 CNP at $27.72 and 10 at $27.39-Used Commission Free Trades:
Quote: CenterPoint Energy Inc. (CNP)
CNP | CenterPoint Energy Inc. Analyst Estimates
SEC Filings
2018 Annual Report
Website: Investor Relations | CenterPoint Energy, Inc., ("CenterPoint Energy, Inc. is an energy delivery company with regulated utility businesses in eight states and a competitive energy businesses footprint in nearly 40 states. Through its electric transmission & distribution, power generation and natural gas distribution businesses, the company serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. . . . The company also owns 53.8 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets."
On the day of my purchase, a 53.8% interest in Enable Midstream Partners LP (ENBL) was worth about $2.868B.
Enable Midstream Announces Second Quarter 2019 Financial and Operating Results, Increases Quarterly Common Unit Distribution
Texas power demand to hit record highs as heat bakes state- Reuters CNP owns Houston Electric that provides electricity to the Houston and Galveston areas (see page 4 10-K for map of retail service territory)
CNP | CenterPoint Energy Inc. Analyst Estimates (as of 8/9/19)
2019: $1.65
2020: $1.79
P/E at $27.72 price Using $1.79 E.P.S. = 15.49
CNP | CenterPoint Energy Inc. Advanced Charts | MarketWatch: The stock was down slightly at my purchase price compared to the $28.22 close on 8/13/18.
Dividend: Quarterly at $.2875 per share ($1.15 annually)
CenterPoint Energy declares regular common stock dividend of $0.2875
Dividend Yield at $27.61 = 4.17%
Last Ex Dividend Date: 8/14/19 (20 before and 10 after)
Dividend Reinvestment: Yes
Dividend Growth History: Positive but slow
The quarterly rate was at $.1825 ten years ago.
Dividend History | CenterPoint Energy, Inc.,
Recent News-Vectren Acquisition: The negative one year price action is probably mostly related to uncertainties created by CNP's acquisition of Vectren.
CenterPoint Energy and Vectren complete merger ("Under the terms of the merger agreement, which was announced on April 23, 2018, Vectren shareholders will receive $72.00, along with a prorated dividend of $0.41145, in cash for each share of Vectren common stock owned as of the close of business on Feb. 1, 2019.")
Vectren Investor Presentation November 2018
Vectren Earnings Release Q/E 9/30/18 ("Vectren Corporation (NYSE: VVC) is an energy holding company headquartered in Evansville, Ind. Vectren’s energy delivery subsidiaries provide gas and/or electricity to more than 1 million customers in adjoining service territories that cover nearly two-thirds of Indiana and about 20 percent of Ohio, primarily in the west-central area. Vectren’s nonutility subsidiaries and affiliates currently offer energy-related products and services to customers throughout the U.S. through Infrastructure Services and Energy Services.")
Brokerage Reports: PT = 12 month price target
Credit Suisse (8/8/19): Outperform with a $33 PT
Morningstar (8/7/19): 3 stars with a $30 FV
S & P (8/8/19): 5 stars with a $31 PT
Recent Earnings Report: (Q/E 6/30/19)
The company reaffirmed its five year annual EPS growth rate of 5% to 7%.
CenterPoint Energy Reports Second Quarter 2019 Earnings of $0.33 Per Diluted Share; $0.35 Earnings Per Diluted Share on a Guidance Basis, Excluding Certain Impacts Associated With the Vectren Merger
10-Q for the Q/E 6/30/19
2019 Guidance: "EPS range of $1.60 - $1.70, excluding certain impacts associated with the merger"
Current Position: 30 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule (next purchase will be in the $26.9 to $27.1 range)
CNP First Mortgage Bonds: I own several Centerpoint Energy Houston Electric general mortgage bonds but may sell them due to their price appreciation and low yields.
I currently own the following:
1.85% due 8/1/21 GM
2.25% due 8/1/22 GM
2.4% 9/1/26 GM
B. Bought 10 Dominion (D) at $74.9-Used Commission Free Trade:
Quote: Dominion Energy Inc. (D)
Closing Price Yesterday: D $77.13 +$0.31 +0.40%
SEC Filings
2018 Annual Report SEC Form l 0-K
Dominion is one of the nation's largest producers and transporters of energy with more than $100 billion of assets providing electric generation, transmission and distribution, as well as natural gas storage, transmission, distribution and import/export services." The company has approximately 7.5M customers in 18 states.
Through its subsidiaries Virginia Electric Power and Dominion Energy Gas, it is the dominant power provider in Virginia.
Dominion recently completed its acquisition of SCANA, a larger power provider in South Carolina. Following that acquisition, Dominion's portfolio of assets included 32,000 MW of electric generating capacity, 10,200 miles of transmission lines, 84,800 miles of distribution lines, 15,900 of natural gas transmission, gathering and storage pipelines and 92,000 miles of natural gas transmission. 10-K at page 8
Investor Relations | Dominion Energy
D | Dominion Energy Inc. Analyst Estimates | MarketWatch
E.P.S. Consensus Estimates as of 8/9/19
2019 = $4.18
2020 = $4.39
PE at $74.9 and $4.39 E.P.S. = 17.06 (high IMO)
Projected 2019 to 2020 E.P.S. Growth Rate = 5.02%
10 Year Chart on Date of Purchase (8/9/19):
The price channel starting in late 2013 has mostly been between $65 to $80 with a lot of chop. This stock was a good total return vehicle starting in 2009 through 2014. Since January 2015, the annual average total return has been less than the dividend yield.
Total Annual Average Total Returns:
3/1/2009 to 12/31/14: +23.36%
1/1/2015 to 8/9/19: +3.31%
2/1/2009 to 8/9/19: 14.16%
DRIP Returns Calculator | Dividend Channel
Dividend: Quarterly at $.9175 per share ($3.67 annually)
Dominion Energy Declares Quarterly Dividend of 91.75 Cents ("This is the 366th consecutive dividend that Dominion Energy or its predecessor company has paid holders of common stock.")
Dividend Yield at $74.9 = 4.9%
Next Ex Dividend Date: 9/5/19
SCANA Acquisition: Dominion Energy Combines With SCANA Corporation - Jan 2, 2019
Broker Reports: PT= 12 Month Price Target; FV = Fair Value
Morningstar (8/1/19): 4* with a FV of $84
S & P (7/31/19): 4* with a $80 PT
Credit Suisse: (8/1/19): Raised to Outperform from neutral while lowering PT to $82 from $83
Argus (6/13/19): Buy with a $83 PT
The foregoing reports are available to Schwab brokerage customers.
Last Earnings Report (Q/E 9/30/19):
Operating earnings of $.77 per share and reaffirmed 2019 guidance for operating earnings of $4.05 to $4.4 per share. GAAP earnings were negatively impacted by expenses related to the SCANA integration and a voluntary retirement program.
Third Quarter Guidance: "Dominion Energy expects third quarter operating earnings in the range of $1.00 to $1.20 per share, compared to third-quarter 2018 operating earnings of $1.15 per share. Positive drivers include growth from regulated investment across electric and gas utility programs, O&M control initiatives, and the contribution from the Southeast Energy Group. The company expects negative drivers for the quarter to include the impact of 2018 asset sales, share issuances, timing of farmouts, and a return to normal weather."
Dominion Energy Announces Second-Quarter Earnings - Jul 31, 2019
10-Q for the Q/E 6/30/19
Current Position: 10 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
I have been buying and selling Dominion senior unsecured bonds. I am cutting back and will use the proceeds to buy the higher yielding common stock.
1. SMALL BALL-Electric Utility Stocks:
A. Bought 20 CNP at $27.72 and 10 at $27.39-Used Commission Free Trades:
Quote: CenterPoint Energy Inc. (CNP)
CNP | CenterPoint Energy Inc. Analyst Estimates
SEC Filings
2018 Annual Report
Website: Investor Relations | CenterPoint Energy, Inc., ("CenterPoint Energy, Inc. is an energy delivery company with regulated utility businesses in eight states and a competitive energy businesses footprint in nearly 40 states. Through its electric transmission & distribution, power generation and natural gas distribution businesses, the company serves more than 7 million metered customers in Arkansas, Indiana, Louisiana, Minnesota, Mississippi, Ohio, Oklahoma and Texas. . . . The company also owns 53.8 percent of the common units representing limited partner interests in Enable Midstream Partners, LP, a publicly traded master limited partnership that owns, operates and develops strategically located natural gas and crude oil infrastructure assets."
On the day of my purchase, a 53.8% interest in Enable Midstream Partners LP (ENBL) was worth about $2.868B.
Enable Midstream Announces Second Quarter 2019 Financial and Operating Results, Increases Quarterly Common Unit Distribution
Texas power demand to hit record highs as heat bakes state- Reuters CNP owns Houston Electric that provides electricity to the Houston and Galveston areas (see page 4 10-K for map of retail service territory)
CNP | CenterPoint Energy Inc. Analyst Estimates (as of 8/9/19)
2019: $1.65
2020: $1.79
P/E at $27.72 price Using $1.79 E.P.S. = 15.49
CNP | CenterPoint Energy Inc. Advanced Charts | MarketWatch: The stock was down slightly at my purchase price compared to the $28.22 close on 8/13/18.
Dividend: Quarterly at $.2875 per share ($1.15 annually)
CenterPoint Energy declares regular common stock dividend of $0.2875
Dividend Yield at $27.61 = 4.17%
Last Ex Dividend Date: 8/14/19 (20 before and 10 after)
Dividend Reinvestment: Yes
Dividend Growth History: Positive but slow
The quarterly rate was at $.1825 ten years ago.
Dividend History | CenterPoint Energy, Inc.,
Recent News-Vectren Acquisition: The negative one year price action is probably mostly related to uncertainties created by CNP's acquisition of Vectren.
CenterPoint Energy and Vectren complete merger ("Under the terms of the merger agreement, which was announced on April 23, 2018, Vectren shareholders will receive $72.00, along with a prorated dividend of $0.41145, in cash for each share of Vectren common stock owned as of the close of business on Feb. 1, 2019.")
Vectren Investor Presentation November 2018
Vectren Earnings Release Q/E 9/30/18 ("Vectren Corporation (NYSE: VVC) is an energy holding company headquartered in Evansville, Ind. Vectren’s energy delivery subsidiaries provide gas and/or electricity to more than 1 million customers in adjoining service territories that cover nearly two-thirds of Indiana and about 20 percent of Ohio, primarily in the west-central area. Vectren’s nonutility subsidiaries and affiliates currently offer energy-related products and services to customers throughout the U.S. through Infrastructure Services and Energy Services.")
Brokerage Reports: PT = 12 month price target
Credit Suisse (8/8/19): Outperform with a $33 PT
Morningstar (8/7/19): 3 stars with a $30 FV
S & P (8/8/19): 5 stars with a $31 PT
Recent Earnings Report: (Q/E 6/30/19)
The company reaffirmed its five year annual EPS growth rate of 5% to 7%.
CenterPoint Energy Reports Second Quarter 2019 Earnings of $0.33 Per Diluted Share; $0.35 Earnings Per Diluted Share on a Guidance Basis, Excluding Certain Impacts Associated With the Vectren Merger
10-Q for the Q/E 6/30/19
2019 Guidance: "EPS range of $1.60 - $1.70, excluding certain impacts associated with the merger"
Current Position: 30 shares
Maximum Position: 100 shares
Purchase Restriction: Small Ball Rule (next purchase will be in the $26.9 to $27.1 range)
CNP First Mortgage Bonds: I own several Centerpoint Energy Houston Electric general mortgage bonds but may sell them due to their price appreciation and low yields.
I currently own the following:
1.85% due 8/1/21 GM
2.25% due 8/1/22 GM
2.4% 9/1/26 GM
I did recently sell a CNP 2.5% SU bond. Item # 3.A. (7/31/19 Post)
The CNP common shares give me a higher current yield plus dividend growth. I am gradually replacing some bonds that I have sold with higher yield common stocks from the same issuers.
The CNP common shares give me a higher current yield plus dividend growth. I am gradually replacing some bonds that I have sold with higher yield common stocks from the same issuers.
B. Bought 10 Dominion (D) at $74.9-Used Commission Free Trade:
Quote: Dominion Energy Inc. (D)
Closing Price Yesterday: D $77.13 +$0.31 +0.40%
SEC Filings
2018 Annual Report SEC Form l 0-K
Dominion is one of the nation's largest producers and transporters of energy with more than $100 billion of assets providing electric generation, transmission and distribution, as well as natural gas storage, transmission, distribution and import/export services." The company has approximately 7.5M customers in 18 states.
Through its subsidiaries Virginia Electric Power and Dominion Energy Gas, it is the dominant power provider in Virginia.
Dominion recently completed its acquisition of SCANA, a larger power provider in South Carolina. Following that acquisition, Dominion's portfolio of assets included 32,000 MW of electric generating capacity, 10,200 miles of transmission lines, 84,800 miles of distribution lines, 15,900 of natural gas transmission, gathering and storage pipelines and 92,000 miles of natural gas transmission. 10-K at page 8
Investor Relations | Dominion Energy
D | Dominion Energy Inc. Analyst Estimates | MarketWatch
E.P.S. Consensus Estimates as of 8/9/19
2019 = $4.18
2020 = $4.39
PE at $74.9 and $4.39 E.P.S. = 17.06 (high IMO)
Projected 2019 to 2020 E.P.S. Growth Rate = 5.02%
10 Year Chart on Date of Purchase (8/9/19):
The price channel starting in late 2013 has mostly been between $65 to $80 with a lot of chop. This stock was a good total return vehicle starting in 2009 through 2014. Since January 2015, the annual average total return has been less than the dividend yield.
Total Annual Average Total Returns:
3/1/2009 to 12/31/14: +23.36%
1/1/2015 to 8/9/19: +3.31%
2/1/2009 to 8/9/19: 14.16%
DRIP Returns Calculator | Dividend Channel
Dividend: Quarterly at $.9175 per share ($3.67 annually)
Dominion Energy Declares Quarterly Dividend of 91.75 Cents ("This is the 366th consecutive dividend that Dominion Energy or its predecessor company has paid holders of common stock.")
Dividend Yield at $74.9 = 4.9%
Next Ex Dividend Date: 9/5/19
SCANA Acquisition: Dominion Energy Combines With SCANA Corporation - Jan 2, 2019
Broker Reports: PT= 12 Month Price Target; FV = Fair Value
Morningstar (8/1/19): 4* with a FV of $84
S & P (7/31/19): 4* with a $80 PT
Credit Suisse: (8/1/19): Raised to Outperform from neutral while lowering PT to $82 from $83
Argus (6/13/19): Buy with a $83 PT
The foregoing reports are available to Schwab brokerage customers.
Last Earnings Report (Q/E 9/30/19):
Operating earnings of $.77 per share and reaffirmed 2019 guidance for operating earnings of $4.05 to $4.4 per share. GAAP earnings were negatively impacted by expenses related to the SCANA integration and a voluntary retirement program.
Third Quarter Guidance: "Dominion Energy expects third quarter operating earnings in the range of $1.00 to $1.20 per share, compared to third-quarter 2018 operating earnings of $1.15 per share. Positive drivers include growth from regulated investment across electric and gas utility programs, O&M control initiatives, and the contribution from the Southeast Energy Group. The company expects negative drivers for the quarter to include the impact of 2018 asset sales, share issuances, timing of farmouts, and a return to normal weather."
10-Q for the Q/E 6/30/19
Current Position: 10 Shares
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule
I have been buying and selling Dominion senior unsecured bonds. I am cutting back and will use the proceeds to buy the higher yielding common stock.
2. Intermediate Term Bond Ladder Basket Strategy:
A. Sold 1 Federal Realty 2.75% SU Maturing on 6/1/23:
Profit Snapshot: $23.63
Item # 1.E. Bought 1 FRT 2023 at a TC of 96.845 (4/1/17 Post)
FINRA Page: Bond Detail
Issuer: Federal Realty Investment Trust (FRT)
Sold at 100.522
YTM at 100.522 = 2.598%
A. Sold 1 Federal Realty 2.75% SU Maturing on 6/1/23:
Profit Snapshot: $23.63
FINRA Page: Bond Detail
Issuer: Federal Realty Investment Trust (FRT)
Sold at 100.522
YTM at 100.522 = 2.598%
I currently own other FRT bonds, including the following owned in a Vanguard Roth IRA account:
B. Sold 2 Digital Realty LP 2.75% SU Maturing on 2/1/23:
Profit Snapshot: +$43.02
Item # 1.A. Bought 2 Digital Realty L.P. 2.75% SU Bonds Maturing 2/1/23 at a TC of 97.849 (4/14/19 Post) I mentioned in that post that I would consider selling this bond in the 99 to 100 range.
FINRA Page: Bond Detail
Issuer: Operating entity for Digital Realty Trust Inc. (DLR) who guarantees the notes
Sold at 100.1
YTM at 100.1 = 2.72%
Proceeds at 100 (after $2 brokerage commission)
3. Early Issuer Redemption:
A. Early Optional Redemption: 5 FEDEX 2.3% SU Maturing on 2/1/2020:
Profit Snapshots: $20.82
3 bonds were bought earlier this year: Item # 2.A. Bought 3 FDX 2.3% SU Maturing on 2/1/20 at a TC of 99.598 per bond (3/20/19 Post)
The 2 bond lot was bought in 2018: Item # 3.H. (2/8/18 Post)
There was a small make whole payment of $1.28 per bond. The short maturities will have small realized gains per bond since purchases are generally made near par value and will not go too far over par value when rates are plummeting due to the short maturity.
B. Sold 2 Digital Realty LP 2.75% SU Maturing on 2/1/23:
Profit Snapshot: +$43.02
Item # 1.A. Bought 2 Digital Realty L.P. 2.75% SU Bonds Maturing 2/1/23 at a TC of 97.849 (4/14/19 Post) I mentioned in that post that I would consider selling this bond in the 99 to 100 range.
FINRA Page: Bond Detail
Issuer: Operating entity for Digital Realty Trust Inc. (DLR) who guarantees the notes
Sold at 100.1
YTM at 100.1 = 2.72%
Proceeds at 100 (after $2 brokerage commission)
3. Early Issuer Redemption:
A. Early Optional Redemption: 5 FEDEX 2.3% SU Maturing on 2/1/2020:
Profit Snapshots: $20.82
3 bonds were bought earlier this year: Item # 2.A. Bought 3 FDX 2.3% SU Maturing on 2/1/20 at a TC of 99.598 per bond (3/20/19 Post)
The 2 bond lot was bought in 2018: Item # 3.H. (2/8/18 Post)
There was a small make whole payment of $1.28 per bond. The short maturities will have small realized gains per bond since purchases are generally made near par value and will not go too far over par value when rates are plummeting due to the short maturity.
4. Short Term Bond/CD Ladder Basket Strategy:
September 2019 Maturities:
SU = Senior Unsecured Bond ($1K par value per bond)
FM = First Mortgage Bond
CD = Certificate of Deposit ($1K par value per CD)-FDIC Insured
MI = Monthly Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
IR: Investment Rate for Treasury Bills Bought at Auction
RI: Roth IRA
Secondary Market: Treasuries Bought at less than par value
Corporate bonds are bought at less than par value.
RI: Roth IRA
Secondary Market: Treasuries Bought at less than par value
Corporate bonds are bought at less than par value.
2 Ryder Systems 2.45% SU 9/3 (bought 9/18 and 11/18)
5 Treasury 2.198% IR 56 Day 9/3 (bought at auction)
3 Treasury 6 MO Bills 2.532% 9/5 IR ( bought at auction)
5 Treasury 2.198% IR 56 Day 9/3 (bought at auction)
3 Treasury 6 MO Bills 2.532% 9/5 IR ( bought at auction)
2 Lake City BK 1.7% CDs MI 9/9 (1 Year CD)
2 Marsh & McClennan 2.35% SU (bought 12/18)
2 Marsh & McClennan 2.35% SU (bought 12/18)
1 BK of NY 2.3% SU 9/11 (bought 11/18)
1 Treasury 1 YR Bill 2.547% IR 9/11
1 Treasury .75% 9/15 (secondary Market)
1 Treasury .75% 9/15 (secondary Market)
3 Nextera 2.4% SU 9/15 (bought 2/18 and 11/18)
2 Nextera 2.7% SU 9/15 (bought 4/18 and 6/18)
2 Customer's BK 2.4% CDs 9/16 RI (3 month CDs)
2 Customer's BK 2.4% CDs 9/16 RI (3 month CDs)
2 Wells Fargo 2.45% CD MI 9/16 (13 month CD)
10 Treasury 28 Day Bill 2.077% IR 9/17 (bought at auction)
10 Treasury 28 Day Bill 2.077% IR 9/17 (bought at auction)
2 AstraZeneca 1.95% SU 9/18 (bought 12/17)
1 Treasury 2.441% YTM 9/19 (secondary market purchase)
2 Bank of China 2.4% CDs 9/19 (3 month CDs)
1 Treasury 2.441% YTM 9/19 (secondary market purchase)
2 Bank of China 2.4% CDs 9/19 (3 month CDs)
1 BP Capital 1.768% SU 9/19 (bought 12/17)
4 Discovery Com. 2.2% SU (bought 1/18 and 2/19)
2 Cornerstone BK 1.7% CDs MI 9/20 (2 year CDs)
3 Bank of East Asia 2.35% CDs 9/23 (3 month CDs)
10 Treasury 28 day Bills 2.098%IR 9/24 (bought at auction)
2 State Bank of India 2.4% CDs 9/26 (3 month CDs)
2 Santander Bank 2.35% CDs 9/26 (3 month CDs)
3 Bank of East Asia 2.35% CDs 9/23 (3 month CDs)
10 Treasury 28 day Bills 2.098%IR 9/24 (bought at auction)
2 State Bank of India 2.4% CDs 9/26 (3 month CDs)
2 Santander Bank 2.35% CDs 9/26 (3 month CDs)
2 NETAPP 2% SU 9/27 (bought 6/18)
2 Kroger 1.5% SU 9/30 (bought 3/17)
2 Wells Fargo 2.45% CDs MI 9/30 (13 month CDs)
6 Treasury 1.75% Coupon 9/30 (secondary market)
1 Treasury 1.375% Coupon 9/30 (secondary market)
1 Treasury 1% Coupon 9/30 (secondary market)
1 Treasury 1% Coupon 9/30 (secondary market)
$79K
A. Sold 2 Kraft Heinz 2.8% SU Maturing on 7/2/20:
Profit Snapshot: +$6.34
Stocks, Bonds & Politics:Item # 3.A. Bought 2 KHC 2020 at a TC of 99.833 (5/8/19 Post)
FINRA Page: Bond Detail
Issuer: Kraft Heinz Co. (KHC)
KHC Analyst Estimates
Sold at 100.3
Proceeds at 100.2
YTM at 100.2 = 2.545%
While I am not currently concerned about Kraft filing for bankruptcy anytime soon, I also do not see any good reason to hang around either. The common stock has become toxic.
B. Bought 5 Treasury Three Month Bills Maturing on 11/21/19 at Action:
1.941%IR
Auction Results:
Schwab's sweep account interest rate is currently at .18%.
C. Bought 10 Treasury 28 day Bills at Auction Maturing 9/24:
IR = 2.098%
Auction Results:
5. Small Ball Commission Free ETFs:
I would just refer anyone interested to my prior discussions of these ETFs.
The international ETFs discussed below have substantially underperformed the S & P 500 over the past 1, 3, 5 and 10 year periods.
E.G. Compare as of 8/2619
Vanguard FTSE All-Wld ex-US ETF (VEU)
with S&P 500 ETF (SPY)
Performance numbers after one year are annual average total returns.
The past may not be prologue but the overall poor performance of the international ETFs will cause me to be exceedingly cautious in buying them.
A. Bought 2 VEU at $48.75 and 2 at $48.34-Commission Free For Vanguard Customers:
Quote: Vanguard FTSE All-World ex-US ETF Overview
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF
Expense Ratio: .09% (3,117 stocks as of 6/30/19)
Last Buy Discussions: Item # 5.C. Bought 3 VEU at $49.62 (5/18/19 Post); Item # 4.C. Bought 10 VEU at $51.75 (5/5/19 Post)
Last Elimination: Eliminated VEU at 50.39 (4/15/19 Post)(profit snapshot = $52.73)
Other Eliminations = +$1,614.39 (snapshots in Item # 2) The largest single gain was a 100 share lot sold in 2010:
Item # 2 Sold 100 of the ETF VEU at 38.6 (6/10/2010 Post)
Total VEU Realized Gains to Date: $1,667.12
International stock ETFs have substantially underperformed the S & P 500 index since I sold VEU on 6/9/2010.
The annual average total return for VEU starting on 6/9/2010 through 8/12/19 was 5.9% compared to 13.95% for SPY.
DRIP Returns Calculator | Dividend Channel
Profit Snapshot: +$6.34
Stocks, Bonds & Politics:Item # 3.A. Bought 2 KHC 2020 at a TC of 99.833 (5/8/19 Post)
FINRA Page: Bond Detail
Issuer: Kraft Heinz Co. (KHC)
KHC Analyst Estimates
Sold at 100.3
Proceeds at 100.2
YTM at 100.2 = 2.545%
While I am not currently concerned about Kraft filing for bankruptcy anytime soon, I also do not see any good reason to hang around either. The common stock has become toxic.
B. Bought 5 Treasury Three Month Bills Maturing on 11/21/19 at Action:
1.941%IR
Schwab's sweep account interest rate is currently at .18%.
C. Bought 10 Treasury 28 day Bills at Auction Maturing 9/24:
IR = 2.098%
Auction Results:
5. Small Ball Commission Free ETFs:
I would just refer anyone interested to my prior discussions of these ETFs.
The international ETFs discussed below have substantially underperformed the S & P 500 over the past 1, 3, 5 and 10 year periods.
E.G. Compare as of 8/2619
Vanguard FTSE All-Wld ex-US ETF (VEU)
with S&P 500 ETF (SPY)
Performance numbers after one year are annual average total returns.
The past may not be prologue but the overall poor performance of the international ETFs will cause me to be exceedingly cautious in buying them.
A. Bought 2 VEU at $48.75 and 2 at $48.34-Commission Free For Vanguard Customers:
Sponsor's Website: VEU - Vanguard FTSE All-World ex-US ETF
Expense Ratio: .09% (3,117 stocks as of 6/30/19)
Last Buy Discussions: Item # 5.C. Bought 3 VEU at $49.62 (5/18/19 Post); Item # 4.C. Bought 10 VEU at $51.75 (5/5/19 Post)
Last Elimination: Eliminated VEU at 50.39 (4/15/19 Post)(profit snapshot = $52.73)
Other Eliminations = +$1,614.39 (snapshots in Item # 2) The largest single gain was a 100 share lot sold in 2010:
 |
| +$862.98 |
Total VEU Realized Gains to Date: $1,667.12
International stock ETFs have substantially underperformed the S & P 500 index since I sold VEU on 6/9/2010.
The annual average total return for VEU starting on 6/9/2010 through 8/12/19 was 5.9% compared to 13.95% for SPY.
DRIP Returns Calculator | Dividend Channel
Current Position: 17 shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule at a snail's pace
B. Bought 3 IEMG at $47.37-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Emerging Markets ETF
Quote: iShares Core MSCI Emerging Markets ETF
Last Discussions: Item # 4.B. (6/8/19 Post); Item # 3.A. (4/7/19 Post)
Expense Ratio: .14%
Sponsor's Website: iShares Core MSCI Emerging Markets ETF
Morningstar Page: iShares Core MSCI Emerging Markets ETF ETF (IEMG)
Current Position: 15 shares
Maximum Position: 50 Shares
Average Cost Per Share: $50.08
Purchase Restriction: Small Ball Rule at a snail's pace
Expense Ratio: .14%
Sponsor's Website: iShares Core MSCI Emerging Markets ETF
Morningstar Page: iShares Core MSCI Emerging Markets ETF ETF (IEMG)
Current Position: 15 shares
Maximum Position: 50 Shares
Average Cost Per Share: $50.08
Purchase Restriction: Small Ball Rule at a snail's pace
C. Bought 5 NORW at $10.84-Commission Free for Vanguard Customers:
Quote: Global X MSCI Norway ETF Overview
Last Discussions: Item # 3.A. (1/27/19 Post); Item # 5.A. (12/23/18 Post) (started small ball program too early in retrospect based on the price decline since my first purchases)
Sponsor's Website: MSCI Norway ETF
Expense Ratio: .5% (while I view that number as high, it is normal for foreign country specific ETFs)
Current Position: 110+ shares
Maximum Position: 200 shares
D. Bought 2 IEUR at $43.15-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussions: Item # 1.B.(6/2/19 Post); Item # 5.A. (5/22/19 Post)
Last Discussions: Item # 3.A. (1/27/19 Post); Item # 5.A. (12/23/18 Post) (started small ball program too early in retrospect based on the price decline since my first purchases)
Sponsor's Website: MSCI Norway ETF
Expense Ratio: .5% (while I view that number as high, it is normal for foreign country specific ETFs)
Current Position: 110+ shares
Maximum Position: 200 shares
D. Bought 2 IEUR at $43.15-Commission Free for Fidelity Customers:
Quote: iShares Core MSCI Europe ETF Overview
Sponsor's Website: iShares Core MSCI Europe ETF | IEUR
Expense Ratio: .1%
Last Discussions: Item # 1.B.(6/2/19 Post); Item # 5.A. (5/22/19 Post)
Current Position: 14 shares
Average Cost Per Share: $45.56
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule at a snail's pace
E. Sold 5 GLTR at $73.67 (Commission free for Vanguard brokerage customers):
Quote: Aberdeen Standard Physical Precious Metals Basket Shares ETF Overview
Profit Snapshot: $29.09
Item # 2.A. Bought 5 GLTR at $67.85 (7/10/19 Post)
Average Cost Per Share: $45.56
Maximum Position: 50 shares
Purchase Restriction: Small Ball Rule at a snail's pace
E. Sold 5 GLTR at $73.67 (Commission free for Vanguard brokerage customers):
Profit Snapshot: $29.09
Item # 2.A. Bought 5 GLTR at $67.85 (7/10/19 Post)
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.
